England & Wales, Scotland Democracy, devolution and governance , Economy and regeneration

Budget March 2021 and placemaking – towards ever greater centralisation?

Summary

  • The March 2021 Budget has been characterised as broadly extending Covid-19 support whilst pushing the expenditure reductions and tax rises to pay for this back to the Spending Review in 2021/22 and beyond.
  • However, in pursuit of an emphatic UK Government commitment to ‘levelling up’, a number of new plans, policies and programmes were announced.
  • This briefing provides outlines of major place-based announcements – from the ‘Build Back Better: Plan for growth’ through the Levelling Up Fund, Community Renewal Fund, Towns Fund, Freeports to a number of reviews and studies.
  • These present a very large agenda of work for already hard-pressed local authorities and partners at all sub-national tiers in the UK – at a time when they are continuing to grapple with the pandemic, Brexit, and a range of other pressures. However, in the absence of addressing these issues, the centralisation already seen in Government’s response to Covid-19 will probably be enhanced and local freedoms and flexibilities further restricted.
  • This briefing will be of interest and some relevance to LAs across the UK and to intermediate tier institutions and place-based partners in business and third sector. Whilst, obviously, they will wish to respond to the opportunities the Budget has brought forward, if they are concerned about increasing centralisation, as important will be the impending Local Growth and Spending Reviews

Briefing in full

Introduction

The March 2021 Budget was presented by the Chancellor on 3 March 3. This LGIU policy briefing focused on the macroeconomic and fiscal dimensions of the Budget, whilst this swift read characterised the budget as ‘a wasted opportunity’ for local government – notable as much for what it didn’t address (e.g. social care and education, ‘fair funding’ and devolution) as for what it did.

Now, to some extent, the immediate hype and dust has settled, many authoritative commentators (e.g this IFS commentary) have concluded this was something of a ‘status quo’ budget. It extends short term support for the economy as, hopefully, the UK reopens after lockdown. It suggests a medium-term fiscal strategy based on large corporation tax rises, tax threshold freezes, and fairly large cuts in unprotected spending – much of which is as likely not to come to pass as it is likely to be implemented. And it says very little about grand challenges long term policy resetting in the aftermath of the pandemic.

Whilst this assessment applies equally to the local government sector, there is a lot in the budget and related documents about specific places. It provide much for local leadership teams to ponder about place-shaping post pandemic (and, as this briefing suggested, post-Brexit). This Budget briefing, therefore, outlines the specific place-based policies announced and confirmed in the March 2021 Budget, and considers their implications for local government and partners.

Place-based programmes

The major suite of documents with important place-making dimensions – particularly with an economic focus and rationale – are the Budget book itself, the ‘Build Back Better: Our plan for growth’ publication, the ‘Levelling Up fund prospectus’ and its accompanying material, and the ‘Community Renewal Fund prospectus’. This section outlines relevant content in each of these, and also touches on the Community Ownership Fund,  Freeports, ‘Policy Design of the UK Infrastructure Bank’ paper, and a terms of reference for a National Infrastructure Commission (NIC) study on Towns’ infrastructure and regeneration. Intriguingly, in announcing these new approaches the government recognises “the need for an evolution of the way we support local economic growth so it can best support levelling up for the long term.” To that end they announced some sort of resetting of LEP (Local Enterprise Partnership) roles and geographies.

The Budget

The major place-based measures featured in the Budget are eight new freeports in England (with discussions to continue with Scotland, Wales and Northern Ireland Governments about freeports there), Levelling Up, Community Renewal, Towns, and Community Ownership Funds. These are outlined in greater detail in their own sections below.

However, there are a number of other announcements that merit attention in the Budget Book section (2.110 – 2.137) focused on spreading investment across the UK, together with a summary map (Figure 2.1).

The UK Infrastructure Bank will be headquartered in Leeds. Darlington will not only host ‘Treasury North’ – eventually a 750-person multi-department facility – but CPI, a well-respected centre, will develop clinical scale mRNA vaccine manufacturing and a library for mRNA vaccines there.

The Government is accelerating £84.5m investment in three city growth deals in each of Scotland (Ayrshire, Argyll & Bute, Falkirk), and Wales (Swansea Bay, North Wales and Mid Wales) and £105m for the Derry-Londonderry and Strabane deals.

Northern Ireland will also benefit from allocations from a £400m New Deal Fund. Wales will benefit from up to £30m for a Global Centre for Rail Excellence.

More broadly in terms of transport, £50m is provided to support improvements around the HS2 Birmingham Interchange Station and to support regeneration in Solihull. A further £59m is earmarked for construction of five new West Midlands stations, and £40m to reinstate passenger serves on the Okehampton – Exeter line. Just over £40m is provided in capacity funding to prepare consolidated transport funding settlements for all Mayoral Combined Authority areas (EXCEPT, perhaps notably, North of Tyne and Cambridgeshire & Peterborough).

A Modern Methods of Construction (MMC) Task Force will deploy £10m of seedcorn funding from the new MHCLG Wolverhampton HQ. There will be regional cultural investments of £18.8m spread across Carlisle, Hartlepool, Wakefield and Yeovil. Starts are referenced to seven flood defence schemes.

On energy, commitments are made of support in principle for Able Marine Energy Park in Humberside, Teeswork Offshore Manufacturing Centre, Aberdeen Energy Transition Zone, and Holyhead Hydrogen Hub.

Although given significant profile in the Budget Book, possibly the most striking feature about ‘levelling up’ as a generic term at the centre of Government place-based policy is how little money overall is allocated to it.

In the context of how much capital investment government intends to deploy in furtherance of its economic and fiscal goals – at least £100bn in 2021/22 and £600bn over the five year ‘Build Back Better Growth Plan’ period, the total amounts committed to the levelling up strand over this period is around £7bn in the budget book (or under 1.2%).

Of course, other capital spending takes place in places – but not principally driven by ‘levelling up’ goals and purposes. The challenge for Government, assuming it does have a coherent view of what ‘levelling up’ is and what success would look like, is to articulate how and why it thinks it can be delivered with under 1/85th of capital spend.

Build Back Better: Our plan for growth.

The Government plan for growth is a 109-page account of the success of the COVID-19 vaccination programme and a commitment to using £600bn of public infrastructure investment as effectively and decisively to spread opportunity across the whole of the UK. It is, therefore, an explicit foundation for Boris Johnson’s ‘levelling up’ priority. The Chancellor concludes his introduction by stating clearly “Our most important mission is to unite and level up the country: tackling geographic disparities; supporting struggling towns to regenerate; ensuring every region and nation of the UK has at least one globally competitive city; and above all, strengthening the Union” through a programme of investment in infrastructure, skills, innovation, a Green Industrial Revolution and a new ‘Global Britain’ positioning.

There are both themes and specific programme opportunities in the plan that are key considerations in formulating place-based plans and priorities. Despite at least 50 mentions, what ‘levelling up’ actually means and the trade offs between different meanings is, perhaps reasonably, left fairly vague. Redressing regional geographical disparities of education, health, and jobs services outcomes, each nation and region having at least one globally competitive city, regenerating struggling towns are all referenced as goals. Similarly, ‘strengthening the union’ attracts a Union Connectivity Review. The new Global Britain will take advantage of ‘post-Brexit opportunities’. The ‘Shared Prosperity Fund’ is quoted repeatedly as if it already exists, rather than as something that was signposted in 2017 but is yet to be formulated.

What this lack of specificity might do is enable places to frame their own strategies and approaches to challenges such as levelling up, net zero, infrastructure skills and innovation priorities, inter-UK and global relations as values and principles for bidding for some of the many specific policies and programmes in the £600bn plan.

The most prominent of these place-based interventions are outlined below.

Levelling Up Fund

Given levelling up is positioned as the Government’s ‘most important mission’ for their Plan for Growth, it is perhaps slightly odd that the fund that uses the brand is a Transport, MHCLG and Treasury £4.8bn pot (i.e only 0.8% of the Plan’s resourcing) focused mainly on local transport, broadband and flood defence infrastructure.

The fund will be spent over 4 years – £4bn in England, £0.8bn in Scotland, Wales and Northern Ireland. It will be delivered through local authorities. Scotland and Wales Governments will be consulted on but will not determine allocations to their local authorities. The Northern Ireland process will be ‘different’ but is not elaborated.

Bids can be submitted for up to £20m in the first instance, with up to £50m for more extensive transport schemes. The 2021/22 funding round requires proposals to MHCLG by 18 June. There is considerable overlap with the Towns Fund orthodox focus areas of investment (e.g local transport schemes, town centres and cultural assets) for this first round of bidding – with a preference for projects that can begin in 2021/22. Proposals will be appraised against characteristics of need, deliverability, strategic fit (locally and nationally), and value for money. However, it is also made explicitly clear that ministerial discretion will be used to determine Fund approvals. A flat £125,000 capacity funding will be allocated to all eligible LA bidding authorities in the highest priority category. However, this may arrive too late for Round One bids and, therefore, may be used for later years’ bids!

Two of the most complex and controversial elements of the fund have been, firstly, a categorisation process that was undertaken to place LAs in one of three bands that determine their relative level of need for fund resources. Secondly, the role of MPs and how parliamentary constituencies might be used to determine the number and pattern of bids is novel and might have unexpected consequences.

Government published an index alongside the fund’s prospectus which allocates LAs to three categories said to be based on ‘need’. It later published a methodology note that they say determined the banding. Although the fund is open to all areas, the precise use of the banding in determining allocations for successful proposals is not clear. And the banding itself has been criticised for ignoring Government’s own deprivation criteria in favour of a bespoke index which, among others, gives considerable priority to longer distance commuting times by private car to major employment centres and considers commercial and housing vacancy rates. Whilst government argues this is appropriate to the purposes of the Fund, the criteria used totally excludes cultural and heritage regeneration indicators even though that is also supposedly a priority purpose of the fund.

The explicit role of MPs is another element of the allocation of the fund that is unclear and may generate tensions. It is natural and to be welcomed for MPs to be consulted about these types of bidding competitions. There is an expectation that MPs should support one priority bid for their constituency (though such support is said to not be necessary). However, an added complexity arises in that LAs can submit one bid for every MP whose constituency lies wholly within their boundary. But, where an MPs constituency crosses multiple LA boundaries one LA should be designated lead LA for that constituency with other LAs supporting their lead. On top of this complexity is the suggestion that County Councils, Mayoral Combined Authorities, GLA, and unitary authorities with transport powers may also submit one additional transport bid.

Further details and guidance on preparing and submitting first round submissions by 18 June is expected shortly.

Towns Fund

Although not a new scheme, given its close association with levelling up and its position in Government’s place-based thinking, the Budget announcement of 45 new Towns Fund recipients, sharing £1bn of the £3.6bn Towns Fund is important.

The amounts allocated range from £12m in Mansfield to £25m in seven towns including the MHCLG Secretary of State’s Newark constituency, to two ‘exceptional’ £37.5m awards in Southport and Stevenage. Recipients now have 12 months to complete the business cases for projects approved under the awards. The allocations by regions vary from £41m–£46m in South East, South West and (perhaps surprisingly) North East to £211m in the North West.

There has been a critique by some commentators of previous government place-based policies (see previous briefings), and again some have noted in these proposals the predominance of Conservative beneficiaries (the towns comprised parts of forty-seven conservative constituencies and only nine Labour seats).

Community Renewal Fund

The £220m Community Renewal Fund (CRF) has been launched for the financial year 2021/22 only. It is presented, essentially, as a preparatory programme for the UK Shared Prosperity Fund (SPF). The SPF was first announced by Government in 2017 as a replacement for EU Structural Funding and is intended to average around £1.5bn pa from 2022. However, its parameters have not yet been publicly presented, and the Community Renewal Fund is intended to help for a smooth transition from EU Structural Funding to SPF and to build capacity for SPF bid formulation.

The CRF is a competitive bidding process with 100 priority places identified at district level based on five indicators (productivity, skills, unemployment, population density, household income). There are no London priorities, and the core cities are split – with Birmingham, Glasgow, Manchester, Newcastle and Nottingham designated as priorities and Bristol, Cardiff, Leeds, Liverpool and Sheffield not priorities. Arrangements for Northern Ireland are unclear.

Despite district-level priority places, the ‘lead authority’ for these places are unitary authorities, county councils, and Mayoral Combined Authorities. Lead authorities for the 100 priority places will receive £20,000 capacity funding per priority place plus a 2-3% programme management allocation if the bids are successful. Lead Authorities are expected to invite proposals in the priority place from, among others, universities, voluntary and community sector organisations, and umbrella business groups.

It appears £3m per place is the maximum allowable proposal, but if all 100 priorities achieved the maximum this would be above the allocation. Proposals must be submitted by 18 June. They will be assessed against strategic fit with the fund and local priorities, and deliverability in 2021/22. Approvals are expected in late July.

Community Ownership Fund

A £150m Community Ownership Fund bidding round will open by June. Community Groups (not LAs or Parish Councils) will be able to bid for up to £250,000 match funding (or up to £1m exceptionally) for place-based assets (sporting and leisure facilities, cinemas and theatres, music venues, museums, galleries, parks, pubs, post office buildings, and shops are given as examples). Some funding may be available for feasibility studies, capability building and initial running costs. Bidding guidance will be published when the fund opens in June. The fund will be available across the whole of the UK.

Freeports

Freeports were part of the 2019 Conservative Party manifesto and are intended to be global trade and investment hubs stimulating regeneration and job creation as part of the levelling up agenda. Proposals were sought over Winter 2020/21 in England and eighteen bids were received of which 13-14 were considered potentially worthy of designation. After a selection process (for which a decision-making note is available) eight freeports were announced in the Budget – East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth & South Devon, Solent, Teesside and Thames. Freeports will benefit from customs, tax, planning, regeneration, infrastructure and innovation incentives. They will be able to access a share of £175 million of seed capital funding, depending on the submission of an outline business case. Discussions are ongoing with Scotland, Wales and Northern Ireland government about freeport designations in those nations.

Although a key part of the Government’s levelling up approach and also of relevance to the ‘Global Britain’ trade and investment brand, evidence on freeport additionality is contested (see previous briefing). Freeports can displace investment from neighbouring areas, and have also been a device used for money laundering and tax evasion.

Together with the Treasury North and CPI decisions for Darlington, promised further Government support for Teeside Offshore Wind industries, Middlesbrough and Thornaby on Tees Towns Fund awards, and even Hartlepool Borough Hall cultural investment and a specific paragraph in the Budget speech, the Tees Valley Combined Authority mayor can certainly claim considerable Government influence and traction.

UK Infrastructure Bank

The Government published a policy design paper for the new UK infrastructure bank to be located in Leeds. The Bank will focus on two key aspects of Government policy – net zero and tacking climate change, and on local and regional growth. It will have £22bn of financial capacity – £12bn of equity and debt capital and £10bn in guarantee financing. Its primary focus will be on the economic infrastructure sectors covered in the National Infrastructure Strategy, including clean energy, transport, digital, water and waste. It will be able to lend to university projects that generate a return to support regional and local growth. The Bank will also play an important role in supporting and developing early-stage technologies. It will lend to LAs for projects with a similar focus, with an initial rate of gilts +60bps for high value strategic projects over £5m. Details of the start-up phase and initial operating and lending procedures and programmes will follow over spring and summer. A capability to inform and support LAs to bring forward projects will be part of this early operational phase.

NIC Infrastructure Study

Finally, Government has tasked the National Infrastructure Commission with producing advice on ‘how to maximise the benefits of infrastructure policy and investment for towns.” The focus is explicitly outside city centres – specifically towns and suburban centres. The study will look particularly at transport and digital infrastructure in different categories of towns, their links to cities and other towns, impact of Covid-19, deliverability, and the role of the new Infrastructure Bank. The study is due to report by the end of September.

Pulling it all together and the future of LEPs

With so much going on under a broad policy badge of levelling up, Government also recognises “the need for an evolution of the way we support local economic growth so it can best support levelling up for the long term.” Government restates the importance it attaches to business involvement in recovery and representation in local decision-making. To this end it suggests a review of the roles and geographies of LEPs, with terms of reference for the review being worked up for a quick exercise intended to report by Summer 2021.

Comment

Place-based leadership teams analysing the March 2021 Budget in the round may conclude that there is a lot of ‘levelling up’ sound and fury, but what it signifies for the future of their cities, towns and communities is no clearer than before.

LAs, intermediate tiers like Mayoral Combined Authorities, and other key partners, have been given a huge amount to do in addition to their day jobs of mainstream services delivery and continuing pandemic crisis management. Over the coming months, most LAs will also need to seriously participate in a number of recovery planning exercises, stewarding town and city deal funding, establishing freeports, preparing for Levelling Up, community renewal bids and even civil service relocations. They will need to be alert to potential new crises and shocks. Impending ‘LEP/local growth’ and Spending Reviews are important considerations to which they will wish to make relevant and robust contributions.

Delivering any of these tasks effectively in addition to day-to-day leadership and management would be challenging – doing all of them well will stretch capacity and capabilities above and beyond. There is a case for limiting LA ambitions to core roles and functions, uncritically following national government agenda-defining leadership, and responding formulaically to the bidding opportunities and patronage-based rewards handed down from and by them. However, if Budget 2021 is genuinely part of a coherent national plan for future place-making, there is enough in it to make LAs, local, regional and devolved nation partners very concerned.

First, despite the repeated levelling up sound bite, tackling spatial and community inequalities means different things in different places. Nations, regions, cities, towns and communities each have different inequalities challenges and perspectives, and these may have been radically disrupted by Covid-19 and Brexit game-changers.

Nationally, levelling up might be about addressing spatial disparities between London and the Home Counties and the rest of the UK. But within regions, there are city, town and hinterland tensions. Within cities and towns there are issues of neighbourhoods and communities of interest. The point is that setting priorities and allocating resources at each level should not rest with Government and Whitehall – but needs to be devolved and empowered as locally as possible. The fragmentation of place-based investment programmes in the Budget makes this very difficult.

The implicit central government approach entails large numbers of individual competitive bidding-based schemes, covering different overlapping geographies, often led by different agencies, with rather arbitrary and inconsistent decision-making criteria. This type of approach is hugely resource-intensive to plan and manage, extremely complex to synthesise as a place-based strategy, and therefore is likely to be inadequate as they stand to achieve enduring, inclusive, broadly-based place success almost anywhere. The more likely outcome is a strong drift to central government micro-management.

Second, the consistent marginalisation of the devolved nation governments in the UK process, and inception of England inter-tier reviews at Mayoral Combined Authority, LEP, and LA levels is likely to provoke further sub-national conflict (at nation levels) and competition (in England). This is as likely to embed the acute centralisation of pandemic and Brexit management as it is to usher in a new period of liberating devolution and decentralisation.

Third, what looks like the propensity of Government to use place-based policy and programmes for narrow political advantage raises the costs and risks to LAs and partners choosing distinctive visions and values that are not set by or fully aligned nationally. But, the ‘one size fit all’ model will work for relatively few privileged places nationally.

The problem for LAs of being merely recipients of government guidance and largesse is that the March 2021 Budget’s approach to ‘levelling up’ is not all sound and fury – that it actually accurately signals this government’s future approach to the nations, regions, cities, towns and communities of the UK.

If placemaking becomes largely an instrument in and for national political purposes, then the future or our cities, towns and districts will become highly contingent on central government compliance. For those passionate about and committed to their places, the agendas outlined in the last part of this briefing may be intimidating. But if the most credible counterfactual is a downward spiral towards perfunctory field administration, they may be worth the effort.

Related briefings

For more information about this, or any other LGiU member briefing, please contact Janet Sillett, Head of Briefings, on janet.sillett@lgiu.org.uk