Levelling Up and London – Has the capital received more than its fair share

Levelling Up and London – Has the capital received more than its fair share

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Yesterday the government announced how it would spend over £2.1 billion of Levelling Up Fund money, perhaps expecting that for them it would be a good news day. Instead, Rishi Sunak was beset by media accusations that wealthy London and the South East would unfairly benefit while so-called “left behind” areas elsewhere in the country were overlooked. But is London really to get more than its fair share?

The capital has been allocated £151 million in the latest funding round, which is 7.3 per cent of the total. That is a significant increase on the first round of funding, which saw London awarded just 3.8 per cent. Yet the capital’s allocation remains tiny compared both to London’s population and to its levels of need.

Despite the larger amount of money London is again to receive comfortably the lowest amount per capita of any region or nation in the UK – just £17 per resident. That is just over half the equivalent measure for the rest of the UK (£33), and one third of those for North East and North West of England regions.

London’s allocation is particularly low when you consider its levels of need. The capital contains great wealth but also entrenched deprivation. Over one in four (27 per cent) London households are in poverty, compared to just one in five (21 per cent) in rest of the UK as whole. The capital has the highest levels of poverty, of child poverty, and of in-work poverty of any region or nation in the UK. It also has the second highest level of unemployment of any region. If levelling up is to mean anything, it must mean not just closing the gaps between regions, but narrowing the deep inequalities that scar the capital too.

So the Levelling Up Fund has certainly not unfairly favoured London. And at the same time there are some very legitimate criticisms of how the fund works which relate to the wider issue of local and regional government and the concentration of power in Whitehall.

Firstly, the process of allocating the funding is hugely wasteful. As with a number of similar funds, local authorities have to bid to central government for funding. Putting together these bids requires a significant amount of time and resources. Yet out of 525 bids just 111 – or 21 per cent – were successful.

Secondly, the process is the very antithesis of devolution. Rather than councils developing and funding their own projects, decisions about which will proceed and which will not are made by national government ministers. Rather than empowering local communities, the Levelling Up Fund represents what Andy Street, the Conservative Mayor of the West Midlands Combined Authority described as a broken “bidding and begging bowl culture”.

In addition, there is an issue with the quantum of funding. The £2.1 billion is a decent sum, but it is small by comparison with the reductions in funding of local authorities in the past decade. London has seen reductions in revenue of over £600 per person during that period. Local government has experienced among the biggest declines in funding of any department during austerity, and those in London have experienced both the biggest decline in funding and in spending per capita. The most recent local government funding settlement, announced just before Christmas, did deliver a welcome and vitally needed funding boost, but even after this, core spending power of London boroughs will be 18 per cent lower next year in real terms than in 2010/11.

It is understandable that some might be uncomfortable with London benefitting from the Levelling Up Fund, given the significant wealth that exists here. But it is also a deeply unequal city scarred by grinding hardship. Crucially, London lacks the levers to raise funding locally – to capture some of the wealth that does exist – in order to address its own needs.

England is one of the most centralised countries in Europe and until that changes, local government will remain largely reliant on funding decisions from Whitehall. Rather than competing for pots of money for specific projects, further fiscal devolution, both to the capital and to the rest of the UK, would put power in the hands of local communities, enabling them to raise the funds they need to invest and to drive inclusive local growth. 

Joe Dromey is Director of Central London Forward – 20.1.23

This blog was originally published on OnLondon.