Budget 2021: Analysis of the government’s levelling up and community investments

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A dizzying array of funds with similar names were announced at the budget this week, many which fell under the banner of their ‘levelling up’ agenda.

We need to keep pushing for communities and the change they can make when they are trusted to take the lead.

– Nick Plumb Policy Manager

At the Budget this week, government made a raft of announcements, many of which fell under the banner of their ‘levelling up’ agenda. A dizzying array of funds with similar names were announced. Some were new. Others an extension or rebranding of already announced schemes. So, what is being introduced and what will be the impact for community business?

Government has sought to group three of these announcements together: the Community Ownership Fund (COF), the Levelling Up Fund (LUF) and the UK Community Renewal Fund (UKCRF). The work of developing and managing these funds is led by the Ministry of Housing, Communities and Local Government, often the most important department for community businesses and the community sector more broadly. So, let’s dig into the detail.

The Community Ownership Fund

The Community Ownership Fund makes £150m available for communities across the four nations of the United Kingdom to help them buy or take over local community assets at risk of being lost, to run as community-owned businesses. This is something for which the community sector has long been campaigning. It was in the Conservative’s 2019 election manifesto but more recently, there were concerns that it had dropped off the government’s radar. This Budget put paid to those concerns.

At the moment, there is less detail on the COF, compared to the other two funds. I suspect this reflects the shorter period that officials have been working on the COF. With less detail announced at this stage, this also means there is  still opportunity to influence how it might be designed and delivered. Power to Change, and others across the community sector, have in recent weeks been making the case for a well-considered COF and will continue to do so.

There are several elements which we’ll be focusing on, as we work with government to ensure the fund has the impact we know it can:

Securing a balance between capital and revenue funding. Our experience tells us that most successful community ownership projects require roughly a 25% / 75% split between revenue and capital funding. A decent amount of revenue funding is necessary to help groups get their ideas off the ground. Without it, projects risk stumbling at the first hurdle and any investment potentially wasted. The government has made a commitment that there will be some of this support, but the balance is still up for grabs.

Ensuring the ‘match funding’ approach doesn’t exclude groups.. Again, the detail on how match-funding will work has yet to be finalised. How much will groups have to raise independently to access up to £250,000? Will community groups be able to use a range of sources to raise the initial amount? Will crowdfunding and community shares play a role?

We would like to see all of this and more. Flexibility will be key. Our experience running community ownership funding schemes in recent years tells us that community shares work well for some groups, but less so for others. We worry that a blanket match funding requirement may lead to the exclusion of some groups that have less experience navigating funding mechanisms, often in more deprived places. This element of the fund requires careful consideration and should draw on the experiences of the community sector in how to reach and support these groups.

The first bidding round for the COF will open by June 2021. A full bidding prospectus will be published alongside this, which will be the key reference document for communities in developing and submitting bids. We will be feeding into this process and aiming to influence the prospectus, so it learns from our grant making experience.

The UK Community Renewal Fund

This UK Community Renewal Fund (link to prospectus) provides £220 million to help groups ‘prepare for the launch of the UK Shared Prosperity Fund in 2022’. It aims to support ‘people and communities most in need’ across the UK to pilot programmes and new approaches and will invest in skills, community and place, local business, and supporting people into employment. Bidding will be led by local authorities or combined authorities, where they exist. (This was announced at the Spending Review, last year and, so, isn’t new money.)

Funding will be allocated competitively. The government has identified ‘100 priority places based on an index of economic resilience’ to receive capacity funding to help them co-ordinate their applications. The index considers productivity, household income, unemployment, skills, and population density. Each of these places will receive capacity funding to help them invite bids locally and appraise these bids. Each lead authority will receive £20,000 per priority place.

90% of funding available through the UK Community Renewal Fund is revenue funding. Previously, we have heard officials speak about this and the Levelling Up Fund in the same breath – with the latter providing capital funding and the former, revenue. Where lead authorities can make compelling bids to both funds, and identify how the two bids are linked, this may provide a route through which these funds can increase their impact.

Lead authorities will have to submit their project shortlist by Friday 18 June 2021. So, over the next few months, the lead authority will invite local stakeholders – including community sector organisations – to submit proposals, which they will then shortlist, before submitting their overall proposal to government. Each authority will be able to apply for up to £3 million. Individual project costs shouldn’t exceed £500k.

The Community Renewal Fund is an interesting precursor to the UK Shared Prosperity Fund, which will replace EU Structural Funds from 2021. We have been campaigning alongside Locality, Plunkett Foundation and Co-ops UK to put Communities in Charge of the UKSPF. The delivery mechanism laid out here certainly doesn’t do that, but it has a welcome focus on place and provides a basis through which government can gain a sense of the impact of community-led activity. The campaign argues that a quarter of the fund should be devoted to community-led partnerships, where in many instances community organisations are the accountable body for the funding.

The Levelling Up Fund

The £4.8 billion (up to 2024 – 25) Levelling Up Fund will invest in infrastructure that ‘improves everyday life across the UK, including regenerating town centres and high streets, upgrading local transport, and investing in cultural and heritage assets’. It is a capital fund.

The centralised, competitive bidding process is complicated further still, when compared to the UKCRF. It is based on a system which involves local authorities gaining support from the local Member of Parliament for their proposal. There is also an index which affords certain places a priority. The Levelling Up Fund Index ranks every local authority across England, Scotland and Wales and groups them into one of three priority categories. The methodology for the index hasn’t been released yet, but the priority group a place finds itself in will impact the likelihood of their being successful.

As with the UKCRF, capacity funding will be available to the local authorities ‘most in need of levelling up’. A flat £125,000 of capacity funding will be allocated to all eligible local authorities in England. What amounts to ‘eligibility’ isn’t clear. This capacity funding will be given to all local authorities in Scotland and Wales.

One of the priorities for the fund is Regeneration and town centre investment.. This strand of the funding may be able to provide support for buildings and spaces that community businesses operate in. However, this would require proactive prioritisation of this by a supportive local authority.

It seems this fund, of the three outlined, will have the smallest amount of community involvement. Bids are submitted by the local authority, who ‘should consult a range of local stakeholders.’

When the Chancellor announced this fund at the Spending Review last year, and his foreword for the LUF prospectus he talks about the ‘infrastructure of everyday life’. Whether this funding reaches into the communities and neighbourhoods that are building social infrastructure from the bottom up, remains to be seen, At this stage, the signs would suggest not.

What next?

At this budget, we had a Chancellor talking about the importance of place and rebalancing our economy in favour of communities which have been ‘left behind’. They use the language of place and community and may well go on to support many organisations in the community sector, especially the COF. This is all to be applauded.

However, as is always the case with government policy, the detail matters. While all these funds, on the face of it, are about rebalancing our economy and political system, they all, to varying degrees, have Westminster control at their very heart. There is still a debate to be won, on the power of community-led activity. This work has been ongoing for many years. These new funding announcements are a step in the right direction, but more importantly, a reminder of what a mismatch between rhetoric and reality looks like. And a reminder that we need to keep pushing for communities and the change they can make when they are trusted to take the lead.