Levelling Up Fund Round 2: explanatory note on the assessment and decision-making process
This sets out the decision-making process for selecting successful bids to Round 2 of the Levelling Up Fund, in line with the approach set out in the Levelling Up Fund Round 2 prospectus and technical note.
1. Purpose
1.1. The purpose of this document is to set out the assessment and decision-making process for selecting successful bids for the second round of the Levelling Up Fund (LUF). The process that was followed by officials and ministers was in line with the approach set out in the LUF Round 2 prospectus (published March 2022) and LUF Round 2 technical note Note (published April 2022) and is detailed below.
2. LUF bids received and gateway stage of assessment
2.1. A total of 529 LUF bids with a total value of £8.8 billion were received on or before 2 August 2022 and were assessed in line with the three-staged approach set out in the LUF Round 2 technical note.
2.2. Bids were first assessed by officials from the Department for Levelling Up, Housing and Communities (DLUHC) against the published pass/fail gateway criteria set out under sections 3 (for Great Britain) and 4 (Northern Ireland) of the LUF Round 2 technical note. Alongside this assessment DLUHC and DfT officials also undertook a subsidy (or in NI where applicable state aid) risk assessment for each bid.
2.3 Sixteen bids did not pass one or more of the gateway criteria. The programme’s Senior Responsible Officers (SROs) agreed that although a further 6 bids were considered a Financial Due Diligence high-risk these could be managed with mitigating measures through the grant funding agreement and subsequent monitoring. Additionally, one bid was withdrawn by an applicant. At the end of the gateway review stage, 512 bids remained with a total value of £8,633 million.
3. LUF assessment, moderation and shortlisting
3.1. The remaining 512 bids were assessed and scored by officials against the published criteria set out in the Prospectus and the technical note (Sections 3 and 4). These criteria covered strategic fit; deliverability; economic case; and, in Great Britain, the characteristics of place was also reviewed and scored. The assessment scoring against these criteria in Great Britain combined for a score out of 100, and 75 for Northern Ireland (where characteristics of place was not scored).
3.2. Depending on the theme of the bid, it was either assessed by officials from DfT or DLUHC (or a combination), with input from the Department for Digital, Culture, Media & Sport (DCMS), as appropriate. Assessing officials were supported by counterparts in the Offices for the Secretaries of State for Wales, Scotland and Northern Ireland in assessing bids from those nations. Officials in the devolved administrations were also invited to contribute to the assessment process on bids from Wales, Scotland or Northern Ireland.
3.3. Samples of bids were selected by officials to moderate scoring to ensure consistency across thematic priorities, scoring criteria and across assessing teams. Assessments were selected for moderation using a predominantly targeted approach, taking account of various risk areas identified by DfT and DLUHC. The targeted methodology was based on trends picked up in Fund-level analysis or any issues specifically raised by assessment teams for review. The sample also included a number of assessments selected at random as a control. Moderation panels consisting of official representatives from across assessment teams, reviewed the rationale behind scores awarded and ensured that the assessment guidance had been applied fairly and consistently.
3.4. Once final scores were confirmed and quality assured, (but before ministers had sight of the scores of individual bids), the Chancellor of the Exchequer, the Secretary of State for Levelling Up, Housing and Communities, and the Secretary of State for Transport decided that the Great Britain shortlist would (in line with the approach set out in the LUF technical note) comprise bids that scored the highest overall, and which scored at least average (at least 12.5/25 or above) on strategic fit, value for money and deliverability. The overall ‘cut off’ score for shortlisting was drawn at 73.75/100, removing the lowest quarter (25%) of bids by value (£), providing a high bar for quality, whilst providing ministers scope to determine how best to apply the published “wider considerations” (outlined in the LUF Round 2 technical note) to ensure a fair geographic and thematic distribution of bids from the 250 Great Britain bids shortlisted. As set out in the LUF Round 2 technical note, a minimum score which equated to a benefit cost ratio (BCR) of ≥ 1 was applied to the value for money sub criterion of the economic case assessment to ensure the benefits (monetised and non-monetised) and costs of all shortlisted bids were at least equal.
3.5. The same ministers also decided that the Northern Ireland shortlist would consist of bids that scored the highest overall, and those that scored at least average or above (i.e., at least 12.5/25) on strategic fit, economic case and deliverability. The shortlisting ‘cut off’ was drawn at 42.5/75 – again to strike a reasonable balance between quality and the geographic and thematic distribution of bids. As set out in the LUF Round 2 technical note, a minimum score which equated to a benefit cost ratio (BCR) of ≥ 1 was applied to the value for money sub criterion of the economic case assessment to ensure the benefits (monetised and non-monetised) and costs of all shortlisted bids were at least equal.
4. Ministerial decision-making
4.1. The Chancellor of the Exchequer, the Secretary of State for Levelling Up, Housing and Communities and the Secretary of State for Transport met with officials from their departments to discuss the Great Britain and Northern Ireland shortlists. Officials from the DCMS together with representatives from No. 10 also attended the meeting in an advisory capacity. The objective of the ministerial discussion was to agree how some or all of the published wider considerations should be applied to the Northern Ireland and Great Britain shortlists to drive the provisional selection of bids to fund. It was noted for the record that none of the decision-making ministers had any conflicts of interest to declare. In accordance with the prospectus and technical note, ministers considered officials’ assessments of the bids, taking account of the published considerations outlined in the LUF Round 2 prospectus and technical note. Ministers also took note of the departments’ assessment of any subsidy control or state aid risks associated with particular bids. The Chancellor of the Exchequer reaffirmed that the target quantum to be allocated for this round was £2.1 billion, which had been agreed before the meeting.
4.2. In reference to funding advice prepared by officials, Ministers discussed the Northern Ireland shortlist first. As the government is committed to levelling up all of the UK, the Prospectus stated that at least 3% of the total UK allocation over the first and second round would be set aside for Northern Ireland subject to a suitable number of high-quality bids coming forward, with potential for total funding to exceed this amount. Ministers agreed to prioritise a ‘fair spread of projects across Northern Ireland’. To achieve this they:
- agreed to fund up to one successful bid (the highest scoring) per local authority area in this round;
- that all large culture bids (over £20 million) would not receive funding on the basis (as set out in the LUF technical note for the second round) that large culture bids would only be “funded on an exceptional basis to ensure the Fund’s focus on investing in smaller scale, local projects and the consideration of fair spread across NI”.
4.3 As a result, and following a further quality assurance process by officials, 10 bids in Northern Ireland were provisionally selected equating to 3.4% of the value of bids selected in this round. This equates to 3.16% of the total UK spend across rounds one and two, exceeding the commitment set out in the LUF prospectus. Ministers approved the selection of bids without adding or removing bids from the funded list.
4.4 In reference to funding advice prepared by officials and turning to the Great Britain shortlist there was a large volume of high-quality bids in this round, and a target quantum of £2.1 billion to allocate in total (including Northern Ireland). As detailed in the prospectus, at the third stage of the decision-making process, ministers had discretion to make funding decisions on the basis of additional considerations. Ministers agreed to apply the additional considerations of ensuring a fair spread of approved projects across Great Britain and considering investment from the first round to ensure the Fund reaches as many local authorities as possible across the first and second rounds. To achieve this, ministers took the following sequential decisions:
- ministers took account of which local authorities had received funding in the first round, noting that this would help maximise the geographical spread of investment across rounds one and two – in line with the following wider considerations (“Taking into account other investment in a local area, including investment made from the first round of the Fund to encourage a spread of levelling up funds across places” and “Ensuring a fair spread of approved projects across Great Britain within, and between, individual nations and regions, and between rural and urban areas”;
- then each local authority was capped at one successful bid (the highest scoring) in round two, noting that this would also help to focus resources for delivery in a challenging economic environment; then
- the highest-scoring projects remaining in Scotland and Wales were funded to ensure a fair spread of projects within Scotland and Wales until the minimum public commitments of 9% and 5% respectively over the first and second round were met; and
- the highest-scoring projects remaining in Great Britain were funded until funding any more projects would have exhausted the funding available for Great Britain or resulted in multiple projects with the same score being treated differently.
4.5 At this stage, there were two International Territorial Level (ITL)2 regions of Great Britain which had not received any funding in the second round, despite having bids on the shortlist. Again, prioritising the additional consideration of ensuring a fair spread of approved projects across Great Britain, including within individual nations and regions, ministers agreed to fund the highest-scoring bid (excluding local authorities which had already received investment in round one, as before) from each of the two ITL2 areas.
4.6 To bring the total outlay in Great Britain back within budget, ministers agreed to de-select a handful of lowest-scoring bids across the North West, London, and Wales, as these were the regions and nation that significantly exceeded their guided allocation, taking into account historical regional investment from 2017-2021 Footnote 1 .
4.7 Ministers also noted that this selection resulted in a reasonable thematic split.
4.8 Ministers agreed to announce any bids with potential subsidy risks on a provisional basis and work with local places to assess the scale of the risk and develop mitigations (rather than exclude those bids entirely).
4.9 As a result, and following a further quality assurance process by officials, 101 bids in Great Britain were provisionally selected for funding: 80 in England (80.88%), 11 in Wales (10.33%) and 10 in Scotland (8.79%). Ministers approved the selection without adding or removing bids from the funded list.
4.10 Across the UK, 111 bids were provisionally selected at a value of just under £2.09 billion.
5. Consideration of the equalities impacts of provisional ministerial decisions
5.1. Ministers subsequently received equalities analysis for the list of places they had provisionally selected for funding compared with the list of places not selected. After ministers had considered the impacts of their provisional decisions on equalities, further to the public sector equality duty (section 149 of the Equalities Act 2010) and, in the case of Northern Ireland, the additional requirements of Section 75 of the Northern Ireland Act 1998, they were content to confirm their decisions.
6. Announcement and next steps
6.1. Details on the bids selected to receive funding from the second round of the Levelling Up Fund were published on GOV.UK on 19 January 2023. Written feedback will be offered to unsuccessful applicants to support future applications to levelling up funds.
Footnote
(1) Guided allocations for each region were determined on a per capita basis and then adjusted based on historical funding levels (in line with the additional consideration ‘taking into account additional investment’) using published PESA data from 2017-2021. There were 3 regions where the provisional funding selection significantly exceeded the guided allocations – North West, Wales and London – so the lowest-scoring bids from any one of these regions were deselected until the provisional selection was back within budget. ↩