DLUHC ducks MPs’ questions on Treasury-imposed spending crackdown

Committee chair says response begs questions about government’s commitment to levelling up
The MPs were frustrated with the response from Dehenna Davison (above). Photo: Imageplotter/Alamy Live News

By Jim Dunton

28 Apr 2023

An influential committee of MPs has said the Department for Levelling Up, Housing and Communities appears to have lost the Treasury’s confidence in its ability to manage capital-spending decisions – based on correspondence with a junior minister.

Clive Betts, who chairs parliament’s Levelling Up, Housing and Communities Committee, said a formal letter of response from junior minister Dehenna Davison contained “little information to dispute the notion that the Treasury no longer appears to trust the department”.

He was referring to Davison’s delayed response to committee members’ March request for details on a new “delegation approach” to DLUHC’s capital spending plans that requires all decisions to have Treasury sign-off.

The imposition of the new regime emerged in February, three weeks after the successful bidders for the £2.1bn second round of the government’s Levelling Up Fund were announced, and two weeks after levelling up secretary Michael Gove announced a £30m funding package for social-housing improvements. At the time, £30m was the largest amount of capital spending the department could approve without Treasury sign-off.

In their March letter, levelling up committee members asked for further details of the “delegation approach” imposed on the department, including the types of capital spending included and the specific concerns the Treasury had raised about DLUHC’s ability to deliver value for money.

MPs also asked what the impact would be on the department’s day-to-day operations and how current and future levelling up funding pots would be affected.

Davison’s response, which was dated 24 April but published yesterday, said there had been “no specific concerns raised by the Treasury about the department’s ability to deliver value for money”. It added that the new regime only concerned programmes or projects that had yet to start.

“There is no change to the decision-making framework for existing capital programmes and projects and no change to the department’s budgets,” Davison said. “We continue to deliver existing projects as planned with our delivery partners. Thus, there is no impact on the Levelling Up Fund.”

Davison did not address queries about the administrative burden posed to DLUHC's operations by the new arrangements; earlier concerns raised by the Treasury; or whether DLUHC would retain control of the amount and final allocations of the Levelling Up Fund . 

Committee chair Betts said Davison’s response did not contain any compelling arguments to counter the belief that HM Treasury had lost confidence in DLUHC’s ability to control its capital expenditure.

“The minister’s letter provides little information to dispute the notion that the Treasury no longer appears to trust the Department for Levelling Up to spend money without Treasury approval,” he said.

“There continues to be questions about the new projects that will be affected and what this says about the government’s commitment to the policy of levelling up.

“We will reflect on these issues in our upcoming committee report on levelling-up funds and [in] making a series of recommendations to government on the allocation, delivery and funding for levelling up.”

The committee is due to publish its report on levelling up funding before parliament’s summer recess.

The first two rounds of the Levelling Up Fund have allocated a total of £3.8bn. In January, Gove told MPs there would be a further round of the fund, which DLUHC describes as being worth £4.8bn in total. Details of bidding for the third round have yet to be announced.

January’s announcement of the successful bidders for the Levelling Up Fund’s second round prompted an outcry from local authority areas that missed out on funding and concerns from MPs about the transparency of the process by which the 111 winning bids were determined.

West Midlands Mayor Andy Street criticised the “bidding and begging bowl culture” that he said the programme exemplified after fewer of the combined-authority area’s bids were successful than anticipated.

Street blamed civil servants for the situation, but rowed back on his comments in relation to officials the following month.

Days after the second round of Levelling Up Fund allocations were announced, it emerged that some local authorities had unknowingly wasted their time and money on bids that would not succeed because of rules ministers subsequently introduced.

The criteria meant local areas that were successful in the first round of the programme would be excluded from consideration in the second round.

While the prospectus for the second round said previous government investment in an area would be factored into decisions, it was not explicitly communicated to potential bidders that they could not win funding in both rounds.

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