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UK Economy

Greater openness and transparency required in future funding to reduce regional inequalities

New analysis published today by the Fraser of Allander Institute (FAI) argues that the UK government’s approach to prioritising local areas for resources from the Levelling Up Fund lacks transparency and is difficult to fully replicate.

The FAI analysis also shows that the government’s Levelling Up funding methodology uses indicators inconsistently within different parts of the UK. This means that the needs for transport connectivity in rural areas in Scotland and Wales is not considered, whereas it is for England.

These are among the key findings presented in the FAI’s new paper ‘Let’s level with everyone: How do we identify regional inequalities in the UK?’

The paper looks in detail at the methodology used by the UK government to allocate local authorities to different priority levels of the Levelling Up Fund.

The UK Government have used various indicators, including productivity, unemployment and skills to decide the numbers of priority areas in different parts of the UK. A distinct set of indicators are then used within each nation to allocate local authorities within these priority levels.

The research discusses the challenges of using a set of indicators to capture different types of need in different areas, particularly when we consider the differences in urban and rural areas.

It also tests the robustness of the index to different assumptions, including comparing and contrasting the methodology used for Levelling Up with that used for the Community Renewal Fund, launched by the UK Government around the same time. Both of these new funds were launched in March, in advance of the UK Shared Prosperity Fund, widely considered to be the replacement for EU structural funding, which will be launched in 2022.

Mairi Spowage, Director of the Fraser of Allander Institute, said

“The analysis tests the sensitivity of the Levelling Up methodology to different assumptions. We demonstrate that the current approach is unlikely to be capturing rural disadvantage, particularly in Scotland and Wales, due to the inconsistent nature of the indices in different nations.

“Unfortunately the index was fairly difficult to replicate, undermining the stated commitment to transparency.

“This exercise underlines the importance of a more open consultation on the allocation of the forthcoming UK Shared Prosperity Fund, including a discussion of current data gaps and limitations to identify the people and areas most in need.

In summary, the findings are:

  • Whilst using a range of indicators to assist with allocation of funding is to be welcomed, this exercise demonstrates the difficulty of using a set of indicators to capture the different types of need in different areas;
  • The Levelling Up Fund methodology is not sufficiently transparent – much more must be done in future to ensure that appropriate detail is provided;
  • The Levelling Up Fund methodology is not capturing need for transport connectivity in rural areas in Scotland and Wales, due to the inconsistent nature of the indices in different nations;
  • Given the level of funding at stake and the need for transparency, it is critical that there is a more open consultation on the allocation of the forthcoming UK Shared Prosperity Fund, including a discussion of current data gaps and limitations to identify the people and areas most in need; and
  • Policy makers should pay special attention to areas most impacted by the COVID-19 restrictions, while regional data fails to reflect these disproportionate impacts.

The full paper can be found at fraserofallander.org/publications/lets-level-with-everyone-how-do-we-identify-regional-inequalities-in-the-uk

Authors

Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.

Anton is a Research Assistant at the Fraser of Allander Institute. He is also studying for an M.Sc. in Economics from the University of Edinburgh. His research interests cover environmental and political economics, as well as computational macroeconomics.

James is part of the knowledge exchange team, which involves connecting academia to business, government, and the public. He has a Masters in Applied Economics, a degree in Mathematics, Statistics & Economics and is experienced in working on a wide range of projects for public and private sector clients.

Ben is part of the Knowledge Exchange team within the Institute and has experience working on a wide variety of projects for public and private sector organisations. He has a degree in Economics and is currently studying for an MSc on the Scottish Graduate Programme in Economics.