Guidance

Simplifying the funding landscape for local authorities

Updated 10 January 2024

Introduction

The Levelling Up White Paper set out our ambition for a simple and streamlined funding landscape. High value and targeted funding can unlock the potential of local economies, creating visible improvements within places and communities. We are committed to continually improving the way this funding is delivered and unleashing the potential of our coastal, rural, and urban areas across the United Kingdom.

Selecting the right methodology for new funds is not a linear process, as different funding objectives means there is no ‘one-size-fits-all’ answer. Following the Levelling Up White Paper commitment to streamline the local funding landscape, this plan sets out our ambition for increasing the effectiveness and efficiency of the current funding system. By reducing administrative burdens, this plan will support local authorities to maximise their return on spending, generating the best outcomes for communities.

We have already taken steps to streamline existing processes and simplify funds into larger pots that can be invested across local strategic priorities:

• the Levelling Up Fund, launched in March 2021 (jointly managed by HM Treasury, the Department for Levelling Up, Housing and Communities (DLUHC) and the Department for Transport) uses a new cross-departmental approach to local investment. By taking a holistic view of the infrastructure needs of a local place, the fund is improving the everyday experience of communities across the UK

• the UK Shared Prosperity Fund (UKSPF), launched in April 2022, replaced several bureaucratic EU programmes with a single allocative fund. The multi-year programme gives places greater flexibility and control over investment and places can use their UKSPF allocation to invest in projects funded by other programmes

• the Rural England Prosperity Fund, which succeeds elements of the EU Rural Development Programme for England, has been integrated within, and delivered as part of, the UKSPF in England. This has simplified the funding landscape and reduced burdens on local places

• the Levelling Up Fund’s Local Authority Assurance Framework has streamlined assurance activity and processes. The framework created a single reference point for local authorities in receipt of funding

• as part of the trailblazer deeper devolution deals, we have committed to giving Greater Manchester and West Midlands Combined Authorities (MCAs) multi-year, single departmental-style settlements at the next Spending Review. This will bring together fragmented local funding streams, giving the trailblazer MCAs the flexibility they need to deliver for their areas

We will now build on this work, in 3 phases:

1. Immediate simplification of existing funds and communication.
2. Establishing a new Funding Simplification Doctrine.
3. Reforms to be implemented at the next Spending Review.

Scope

This plan focuses on funding that government provides local authorities including county councils, district and metropolitan borough or city councils, unitary councils, and mayoral combined authorities (MCAs). Government delivers a broad range of policy outcomes and objectives through local authorities, so a range of solutions will apply to different parts of the system:

• the immediate simplification changes (phase 1) will simplify the delivery of existing funds. Funding that is in scope of the immediate plans includes all funding that goes from DLUHC to local authorities for the purposes of supporting local economic growth

• the Funding Simplification Doctrine and future reforms (phase 2 and 3) will consider all funding that is made available exclusively to local authorities by central government, explicitly excluding funding within the Local Government Finance Settlement and services that are mandated by statute such as:

  • funding for schools
  • children’s and adult social care
  • the police
  • fire and rescue authorities (including those that are part of a county council or unitary authority)
  • public health

In this case, central government includes all UK government departments and arm’s-length bodies. Local authorities, in this case, refers to any tier of local government (including MCAs and the Greater London Authority but excluding police and crime commissioners).

Phase 1: Immediate simplification of existing funds

Increasing the efficiency of the system and reducing administrative burdens will have good outcomes for both local authorities and central government. Building on the changes detailed above, we are striving to make every stage of the funding delivery process smooth and easy to navigate. Phase one of our plan includes measures that will deliver immediate improvements to the landscape:

• we are simplifying the project adjustment request (PAR) process for the Levelling Up Fund, Town Deals and Future High Streets Fund. This will give authorities with an allocation from one of these funds more flexibility over how they can spend funding

• the government has invited 10 local authorities to take part in a Simplification Pathfinder Pilot, testing the streamlined delivery of capital funding by giving greater spending flexibility over three existing local growth funding allocations

• DLUHC will publish a new framework to simplify the Department’s approach to monitoring and evaluating funding, maximising the effectiveness of our monitoring and evaluating activity while minimising the burden on places

• DLUHC will rollout a new designated departmental funding glossary page to make sure all bidding terminology has a consistent explanation to support authorities in any funding application process

• DLUHC has simplified its funding communication and guidance by publishing a central register of departmental local growth and place funding, which complements the new Cabinet Office ‘Find a Grant’ platform

Simplifying project adjustment requests

Alongside this plan we are publishing guidance on a new project adjustment request (PAR) process for the Levelling Up Fund, Town Deals and Future High Streets Fund. This new process will devolve a greater degree of decision making to local authorities, giving them more flexibility to change projects and supporting authorities delivering funding.

Going forward, authorities will have the freedom to make output, outcome and funding changes within individual programmes up to a threshold of 30% without needing to seek departmental approval. More complex change requests above the 30% threshold will still need departmental approval, but DLUHC will aim to communicate a decision within 20 working days. To speed up decision making, we are also allowing S151 Officers to verify that projects remain good value for money, rather than this being reviewed centrally by DLUHC analysts.

More information can be found in this supplementary guidance on project adjustment requests.

Simplification pathfinder pilot

We have invited 10 ‘pathfinder’ local authorities to pilot a simplified approach to funding delivery in the current Spending Review period. This stand-alone pilot will allow government to understand the impact of a simplified funding model on delivery across a portfolio, including how spending flexibility can support local authorities to respond to changing economic conditions. These pathfinders will initially be in England only, as there are fewer UK-wide capital funding programmes that would be appropriate for simplification at this stage.

Within this pilot, government has delegated decision-making responsibility over three in-flight DLUHC capital funding programmes to local authorities, reducing bureaucracy within the delivery process. These three funds are the Future High Streets Fund, Town Deals, and DLUHC funding from round one of the Levelling Up Fund.

Pilot authorities will have greater ability to make decisions locally about moving funding between projects in their funding portfolio. They will submit a single, combined report on outputs, outcomes and spend data on a quarterly basis across their funding portfolio. Delivery insights will be gathered from participating authorities to inform evaluation.

Simplifying monitoring and evaluation

The government is committed to evaluating key policies and to building better and more efficient public policy interventions as laid out within the DLUHC evaluation strategy published 18 November 2022. High quality evaluation of policy interventions allows for systematic learning of ‘what works’, ‘what doesn’t work’ and ‘why’. This evidence provides greater accountability for our spending decisions and enables evidence-based policy making.

However, monitoring and evaluation activities place a burden on local government and there is opportunity to change this, whilst strengthening the quality of our insights. Simplification of our monitoring and evaluation does not mean doing less; it means being more efficient, consistent, and strategic in how we design our monitoring and evaluation. This will complement a drive to avoid the gold-plating of legal duties (such as the public sector equality duty).

DLUHC will simplify monitoring and evaluation activity across some existing and all new local growth funding programmes, with a view to expanding this approach across other areas of government funding where appropriate. We will:

• publish monitoring and evaluation guidance in a central location on GOV.UK: this will make it quicker and easier for places to find the relevant guidance

• remove the requirement for places to conduct local-led evaluations in most situations: DLUHC conducts evaluations of its local growth programmes and recognises that mandated local-led evaluations have imposed disproportionate burdens on local authorities for the additional insight produced. Central evaluations have better data access and capability to conduct robust impact assessments, and so can deliver quality place-level insights within central department-led evaluations. As such we will focus on strengthening central evaluations, reducing local burdens while ensuring that insights are targeted and deliver value

We will also embed the following measures into the design of any new funding programmes:

• develop data burden reduction principles: these principles will ensure that any data requests are proportionate and add value

• make better use of existing and alternative data sources, such as from the Single Data List, to reduce the burden on areas: there are increasing opportunities for data to be centrally collected, for example through administrative datasets. Utilising data which is centrally held will improve consistency while reducing the burden for local authorities

• ensure data submission frequency is consistent wherever possible

• rationalise the number of output and outcome monitoring indicators, reducing duplication: currently there are over 400 indicators in use across DLUHC local growth funds

• reduce the amount of paperwork that recipients of funding have to complete to access grants

While monitoring and evaluation simplification will align requirements, there are times where a one-size-fits-all approach is not desirable. For example, mayoral combined authorities often have greater capacity to deliver evaluation and may be in receipt of larger settlements. In these instances, we will work with authorities to design bespoke arrangements which may go beyond the commitments set out above.

Streamlining application and reporting processes

DLUHC is working with local places and organisations to build an improved digital funding service which will reduce the administrative burden for organisations accessing departmental funding by streamlining the process for submitting data and information to government.

Towns Fund, Community Ownership Fund and Night Shelter Transformation Fund are already using the service and in the coming months it will be rolled out to other funds.

Improving fund communication and guidance

DLUHC has published a dedicated page on GOV.UK detailing all funds that promote local economic growth and place that the Department is delivering or that we have committed to delivering in this Spending Review period. This page will be updated with information on a fund-by-fund basis. This means local government, business and third sector organisations will be able to visit one website to find out key information on the departmental funds that promote local economic growth, complementing the new Cabinet Office find a grant platform.

Alongside both of these online data sources, DLUHC is publishing a glossary of funding terms to support prospective applicants in navigating application processes.

Streamlining section 31 grants in the Local Government Finance Settlement

In addition to local growth focused changes, government is delivering complementary work to streamline the local government finance landscape, focused on reducing the number of individual section 31 grants that are allocated outside of the main Local Government Finance Settlement.

As part of the 2023/24 Local Government Finance Settlement, the government announced proposals to roll four government grants into the wider settlement, worth £239 million. Further information can be found in the final Local Government Finance Settlement documents.

Phase 2: Establishing a new funding simplification doctrine

To embed the government’s commitment to funding simplification, a new doctrine will be established with the aim of assessing suitable distribution methodologies for new funding streams. The doctrine will be implemented in 2024.

This doctrine will consider all new funds that are made available exclusively to local authorities by central government, but explicitly excludes funding within the Local Government Finance Settlement and services mandated by statute such as:

• funding for schools
• children’s and adult social care
• the police
• fire and rescue authorities (including those that are part of a county council or unitary authority)
• public health

In this case, central government includes all UK government departments and arm’s-length bodies, and local authorities refers to any tier of local government (including MCAs and the Greater London Authority but excluding police and crime commissioners). Ongoing and in-flight funding programmes are out of scope.

Using the right allocation methodology

The doctrine will acknowledge the valuable contribution of competitions to driving value for money and identifying the best projects for certain programmes. We will continue to deploy competitions where they make sense. But we will also encourage use of allocative approaches where they can best achieve specific outcomes while minimising demands on local authorities. At the core of this doctrine is the government’s commitment to value for money, which will drive decision-making on the most appropriate choice of funding mechanism. This will also guide our approach to robust accountability and monitoring frameworks across our funding streams.

Whilst the doctrine guidance will pay particular attention to allocative distribution methods, the specific distribution methods will vary for each new fund and will be decided by individual departments.

The use of ‘allocative’ funding distribution methods does not imply a universal allocation to all local authorities. Rather, it puts the onus on the government to present clear and transparent methodological justifications for the determination of allocations to places. Just as with competitive bidding processes, allocation can result in some places receiving funding and others not. Similarly, allocation can be dependent on certain outputs and outcomes being delivered.

How the doctrine will work in practice

The doctrine will promote:

1. Building from existing programmes: where practicable, new investment should be delivered through an existing funding programme rather than creating a new funding programme (for example, the Rural England Prosperity Fund being delivered through UK Shared Prosperity Fund).

2. Selecting a distribution methodology that best achieves funding objectives: if an activity cannot be delivered through an existing programme, consideration should be given to the use of allocation. The option that is best placed to target a specific type of funding or set of desired outcomes and would deliver better value for money should be chosen.

3. Testing: prior to deployment of any new funding stream, government departments should consider feedback from a selection of councils and/or local authority associations.

4. Data: in any case, monitoring data requirements should be aligned to existing ones where possible, working with local authorities to design a monitoring regime that provides insights and enables robust evaluations without needlessly creating bureaucracy.

Phase 3: Reforms to be implemented at the next Spending Review

The government will work with local partners across the UK to consider future simplification reforms. Our vision is to explore better join up across interconnected policy areas and investment programmes, reducing burdens for local authorities and fund bidders.

As part of the trailblazer deeper devolution deals, the government has committed to give Greater Manchester and West Midlands Combined Authorities multi-year, single departmental-style funding settlements at the next Spending Review. These settlements will be agreed directly with government through a single process and will cover their funding for devolved policy areas, including local growth and place, local transport, housing and regeneration, adult skills and retrofitting buildings to drive decarbonisation^{[footnote 1]}, for the duration of each Spending Review period.

The single funding settlements will give the trailblazer MCAs the flexibility and independence they need to deliver for their areas while providing assurance of MCA performance through a single outcomes-based accountability framework. The government’s ambition is to roll this model out to all areas in England with a devolution deal and a directly elected leader over time.

Scotland, Wales and Northern Ireland

In Scotland, Wales and Northern Ireland, the UK government will continue to work with local authorities, the Devolved Administrations and other local bodies to assess the impact of UK-wide funds and how they align with local priorities. Together, we will consider how lessons learned on streamlining the funding landscape in England can be applied in the rest of the UK.

Implementation

This document sets out the immediate steps that we will take to support effective delivery, and navigation of the current system. We will continue to engage with local authorities on all aspects of funding simplification and delivery.

Local authorities should continue to deliver programmes and projects in line with existing applicable funding terms and agreements. We will not retrospectively alter the delivery of individual funds or fund elements as part of this simplification programme except where explicitly communicated directly to affected local authorities (for example, participants in the Simplification Pathfinder Pilot).

DLUHC will communicate new funding opportunities and updates on our progress in implementing simplification reforms through the Departmental local authority bulletin.

1. Covered by the pilot agreement to devolve retrofit funding set out at paragraphs 208-214 in the West Midlands deal; and paragraphs 212-218 in the Greater Manchester deal. ↩