Levelling up fund: criteria used to prioritise areas for cash 'baffling' and 'odd'

Employment, travel and productivity metrics questioned, and deprivation measures notably absent
Rishi Sunak's constituency of Richmond in North Yorkshire, was marked high priority for funding. Photo: Stuart Boulton / Alamy Stock Photo

The government has published the much-anticipated formula it has used to decide which areas should be prioritised for cash from the Levelling Up Fund, but critics have said a disproportionate weighting on road travel and a failure to include deprivation as a metric have unfairly benefited wealthier and rural areas.

The document, published more than a week after the Budget in which the Treasury announced which areas had been marked as high priority to receive money from the fund, assigns priority status based on three criteria.

The need for economic recovery and growth accounts for 50% of the weighting for the formula; 25% is based on the need for improved transport connectivity; and 25% is based on the need for regeneration.

"While preference will be given to bids from higher priority areas, the bandings do not represent eligibility criteria, nor the amount or number of bids a place can submit," the document says.

"Bids from places in all categories will still be considered for funding on their merits of deliverability, value for money and strategic fit, and could still be successful if they are of high enough quality."

No deprivation ranking

Since the Levelling Up Fund was announced, local authority leaders and policy experts have been calling on the government to reveal its formula for deciding which areas should receive funding.

The allocations attracted particular scrutiny because several areas that were low on the Index of Multiple Deprivation – which the Ministry of Housing, Communities and Local Government says is the "most widely used" index for relative deprication in England – were allocated funding, whereas many more deprived areas seemed to lose out.

Now that the formula has been published, the decision not to include IMD, or any other metric for deprivation, in the calculations, has attracted criticism.

Ryan Shorthouse, founder of the conservative think tank Bright Blue and a former adviser to the Conservative Party, said he was “baffled and concerned” the government had not used the Index of Multiple Deprivation to allocate funds.

“The IMD is respected and it comprehensively captures economic, social, civic, educational and environmental indicators,” he added.

Employment rate

The greatest weighting in the formula is calculated based on areas' need for economic recovery and growth – split equally between productivity, unemployment and skills.

However, Mike Hawking, head of policy and partnerships at the Joseph Rowntree Foundation, noted that productivity was calculated based on the Office for National Statistics productivity rate at a local authority level.

“Local authority boundaries are the wrong starting point for measuring productivity as it doesn't capture commuting and labour market dynamics," he said.

Tony Wilson, director of the Institute for Employment Studies, said it was “odd” that officials had used unemployment rates as a key metric rather than the employment rate – pointing out that while there was a “strong inverse relationship” between the two, they would produce very different results.

Many disadvantaged areas, especially former industrial towns, have both low employment and unemployment rates compared to other areas; whereas younger cities and London tend to rank higher on both metrics, he said.

Transport metrics 'favour English rural areas'

The transport category has sparked particular criticism, with travel time by car given a much heavier weighting (18.8% of the total) than the equivalent for public transport (5.3%).

Several commentators and local leaders have suggested this is the reason why some wealthier areas – including Canterbury and chancellor Rishi Sunak’s constituency of Richmond – were in the top tier for funding, while some poorer towns were not.

Citing these figures, Greater Manchester mayor Andy Burnham said: “Now we know why the Levelling Up Fund prioritised Canterbury and Richmondshire over Salford and Sheffield.” 

Simon Jeffrey, policy officer at the Centre for Cities think tank, said the decision to weight funding based on proximity to jobs was “odd”.

“It's getting to the stage where people who choose to leave behind cities and towns to get the rural lifestyle are getting more levelling-up help, and people actually left behind in urban areas with distressed labour markets and distressed council budgets get whacked again,” he said.

Maria Abreu, a regional economist at the University of Cambridge, said the formula meant rural areas were “automatically given a much higher priority, regardless of how good their infrastructure is, because they require residents to use a car more often than the national average”.

However, this transport weighting only benefits rural areas in England, as the document said data for this category was “unavailable” for Scotland and Wales.

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