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New Levelling Up Fund applications will be tested for compliance with the Subsidy Control rules

14 April 2021
The £4.8 billion Levelling Up Fund is the Government's major regeneration initiative of 2021, providing grants to support capital investment projects across Great Britain.

The Government's Levelling Up Fund prospectus expressly states that the Subsidy Control compliance of bids will be tested as part of the appraisal process.  Therefore those involved in designing applications for grant funding need to factor Subsidy Control compliance into the design of their projects and articulate how the relevant rules are met. 

Chancellor Rishi Sunak announced the Levelling Up Fund in the 2020 Spending Review stating that the public funding "will invest in local infrastructure that has a visible impact on people and their communities." The announcement forms part of a wider range of measures to help support the UK economy including the long-term National Infrastructure Strategy as part of the Government's "infrastructure revolution", and the Towns Fund.  These regeneration initiatives are intended to help the country "Build Back Better" after the COVID-19 pandemic.

The Ministry of Housing, Communities & Local Government ("MHCLG"), HM Treasury and the Department of Transport will jointly oversee the £4.8bn funding programme with at least £800m being allocated for investment in Scotland, Wales and Northern Ireland.  The deadline for the first round of applications is Friday 18 June 2021, although bids may be submitted sooner.  

All areas in the UK are able to access the Fund. Specifically, in Great Britain: (i) unitary authorities (including metropolitan borough councils), London borough councils and district councils in two tier areas in England; and, unitary authorities in Scotland and Wales are eligible to submit bids; and (ii) county councils with transport powers, combined authorities, mayoral combined authorities and the Greater London Authority (GLA) are eligible to submit one transport bid; and unitary authorities in Scotland and Wales, and unitary authorities in England with transport powers are able to submit one additional bid which must be for transport.

What are the aims of the Levelling Up Fund?

The Levelling Up Fund is open to all local areas in the UK but is focused on providing investment in places where it "can make the biggest difference to everyday life, including ex-industrial areas, deprived towns and coastal communities."   Funding will be prioritised for areas which have the most significant need referenced by a priority category.   

In the first round of funding, the Levelling Up Fund will also prioritise projects which will be able to demonstrate investment or "begin delivery on the ground" in the 2021-22 financial year. 
The fund will focus on projects that require up to £20m in funding, though the UK Government has also confirmed that there is scope to accept bids above £20m and below £50m for transport projects. The funding could be used by local authorities to invest in:

  • Transport projects (such as new or existing cycling provision, enhanced public transport facilities or structural maintenance to local road networks); 
  • Regeneration and town centre investments (such as regenerating leisure and retail sites, removing derelict buildings or improving public high streets parks and green spaces); or 
  • Cultural investment (such as acquiring and refurbishing cultural heritage sites or upgrading or creating new cultural and creative spaces including sports facilities, art venues, theatres and libraries).

The role of Local Authorities and MPs in the Levelling Up Fund

Local authorities are permitted to submit one bid for funding per Member of Parliament whose constituency lies wholly within their boundary.  Therefore, local authorities will need to work closely with Members of Parliament to identify priorities and work up compelling cases for intervention. 

Local areas have been categorised into different areas which has in some cases been controversial and been the subject of challenge.  Further information about the fund (the prospectus) can be found here

The importance of getting Subsidy Control right in Levelling Up Fund bids

The Levelling Up Fund is a competitive fund.  Therefore, bids which do not satisfy all the criteria are unlikely to receive funding.  In this regard we note that 6.9 of the Prospectus states "All applicants must also consider how they will deliver in line with subsidy control (or State Aid in Northern Ireland) as per Government guidance as well as all other relevant legal obligations such as procurement. This will be tested as part of the appraisal process and monitored thereafter".

The Subsidy Control rules are the new legal requirements that apply to the award of subsidies in the United Kingdom with effect from 11pm 31 December 2020. 

There are five core considerations which a public body must take into account to satisfy the Subsidy Control rules, these being:

  • the EU Trade And Cooperation Agreement ("TCA");
  • the Northern Ireland Protocol;
  • the Withdrawal Agreement;
  • the WTO rules; and
  • other trade agreements which the UK has entered into.

It is in the interests of both the funder and the applicant to ensure that all the legal requirements are correctly satisfied.  Failure to do so may result in the funding being recovered following a legal challenge, or in this case a strong bid being rejected for funding. 

Lower value awards may be able to fit within the thresholds set out at Article 3.2.4 of the TCA, which allows 325,000 Special Drawing Rights of subsidy to be awarded in a three year period (ie. approximately £340,000 at current conversion rates).  Subsidies outside this threshold may still proceed by satisfying a six part substantive test known as the Common Principles (at Article 3.4 TCA).  DWF can advise on how to comply with the Subsidy Control rules. 

Public Funding can help Great Britain 'Build Back Better' after COVID-19

The £4.8bn Levelling Up Fund is one of several new funds designed to help regenerate the country after the Covid-19 pandemic, this includes:

  • The £220m UK Community Renewal Fund, which shall help put in place preparations for the UK Shared Prosperity Fund, which is due to launch in 2022;
  • The Welcome Back Fund helping communities recover from the pandemic;
  • The UK Community Ownership Fund, empowering communities to protect vital community assets in their area by providing funding to take ownership over them, in support of the social wellbeing of local communities;
  • The Plan for Jobs, which builds on DWP’s Jobcentre Plus network, offering tailored support to help people find work, including through Youth Hubs, Restart, and Kickstart. The Plan for Jobs will support longer term recovery from the unprecedented economic impact of COVID-19;
  • The Freeports programme, which is intended to create areas of growth by offering incentives for relocation;
  • The UK Infrastructure Bank, which will provide financing support to local authority and private sector infrastructure projects from Leeds.  It will include an advisory function to help with the development and delivery of projects. 
  • The Towns Fund, providing £3.6 billion to drive the economic regeneration of deprived towns and deliver long-term economic and productivity growth. 

Conclusion

The £4.8bn Levelling Up Fund can make a meaningful difference to the communities which win funding.  However as a competitive "challenge" fund, it is all the more important to prepare properly in order to maximise chances of success in allocation.  This includes designing the bid to clearly meet the Subsidy Control rules. 

DWF has exceptional experience in public funding issues, including setting up programmes of support which satisfy government guidance, advising upon how to compliantly procure services and satisfy the Subsidy Control rules. Members of our Public Sector team having worked within the Central Government, Local Government, the European Commission and with private sector bodies on high profile public funding initiatives. This means that we are a safe pair of hands when it comes to managing issues such as this. Feel free to get in touch, if it would be useful to discuss any of the issues raised in this article or other matters related to public funding.

Further Reading

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