A £4bn “levelling up fund” will be set up to support infrastructure growth in the North of England and other regions outside London, with £600m made available in 2021/22, according to the Chancellor.
A review of the Treasury’s Green Book to balance project funding decisions away from London and the South East, and the creation of an infrastructure bank, to be based in the North of England, were also included in the Chancellor’s announcement on Wednesday.
Rishi Sunak delivered a sobering overview of the country’s finances in his Spending Review for the next 12 months, including record peacetime borrowing levels of £394bn, and unveiled measures aimed at helping the UK economy recover from the shock of the pandemic.
Schemes that fall under the levelling up fund’s scope include roads and traffic reduction measures, railway station upgrades and initiatives to improve high streets and town centres.
Local authorities must bid for funding and be able to demonstrate that the projects will have “real impact” and can be delivered during the current parliament, Sunak said.
The fund will be run by the Ministry of Housing, Communities & Local Government and the Department for Transport. They must have the support of local MPs.
By investing in a broad range of local projects valued up to £20m each, Whitehall said it hopes to “drive growth and regeneration in places in need”, in particular areas that have received less Government investment in recent years than others.
Critics said the fund would be insufficient to offset the impact the pandemic has wrought on a country in the midst of its biggest economic contraction in 300 years. Shadow Chancellor Anneliese Dodds slammed the Conservatives’ approach to levelling up, claiming the fund would fail to put power in the hands of local authorities.
“So much for handing back control,” she said. “This is about the centre handing out support in a very top-down manner.”
In addition, Sunak announced reforms to the Treasury’s Green Book financing system, used to assess which projects across the country should receive Whitehall funding support. For years, critics in the North have claimed that the Green Book methodology has skewed investment towards projects in the South by evaluating them on a benefit-cost ratio that does not provide the full picture in terms of the potential regenerative benefits.
In its Spending Review 2020 report today, the Treasury said the Green Book had “often failed to properly consider how a proposal will deliver the Government’s policy ambitions, including levelling up”.
The reforms are intended to ensure that people “in all corners of the UK get their fair share of our future prosperity”, Sunak said.
National debt is predicted to reach 97.5% of GDP by 2025/26, and unemployment will soar to 7.5% next year from its current rate of 4.8%, Sunak said in his announcement. He admitted that the economic emergency is “only just beginning”.
As well as the levelling up fund, Sunak outlined a National Infrastructure Strategy, which aims to boost transport and digital connectivity across the UK to help drive economic recovery through £100bn of capital spending in 2020/21.
The strategy includes plans to create an infrastructure bank, to be based in the North of England, that will launch next spring, according to the Treasury. The bank would co-invest alongside private sector investors, using loans, guarantees, equity and hybrid products, but the Treasury did not state where it would be based.
An expected reform of the country’s planning system, as well as investments totalling £5.2bn in flood defences and £1.9bn in electric vehicle charging infrastructure and grants for zero emissions vehicles, were also included in the Chancellor’s stimulus package.