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Six Key Challenges Facing DLUHC

12 min read

Harry Banton, Dods Political Intelligence Principal Political Consultant, identifies half a dozen key challenges Secretary Of State Michael Gove and his ministerial team must contend with.

Decentralising power

Experts have long argued that the UK is one of the most centralised advanced democracies, and that putting certain powers and resources in the hands of elected local leaders could deliver better outcomes for communities. But handing more responsibilities and funds to regional officials is a significant structural change that cannot be rushed and is not risk free.

Devolution has most commonly been framed as a policy method through which successive governments have sought to strengthen the Union. However, the government’s Levelling Up white paper published in February puts the opportunity of devolution at the heart of its drive to tackle economic inequality, with a pledge to allow every part of England to have a deal with powers at or approaching London and a long-term funding settlement. The paper’s second chapter, titled Systems Reform, makes big promises about the devolution of power to local decision makers and how this can be “transformational” to local economies.

However, if powers are given to authorities without the infrastructure and capabilities to deliver, and without the funding necessary to administer new responsibilities, then taxpayers could suffer. In the worst case scenario, mismanagement by the devolved authority could lead it to face financial problems and even collapse. Croydon council in southeast London went effectively bankrupt in 2020 after property investments and a weak financial position left it unable to handle the financial shock from the pandemic. Negotiations over new devolution deals must be thorough and assessments of councils’ capacity for expansion into these new areas must be accurate or taxpayers will pay the price.

There is also the question of accountability and transparency. If powers are further devolved to local decision-makers then there must be appropriate accountability for how public money is spent and this must be accessible for residents, particularly where elected local leaders are concerned. The white paper acknowledges that this will be a huge undertaking and pledges to establish a new independent body that will oversee this process. Whilst there are risks, there are also opportunities. Increasing accountability and standardising data collection across the country could enable better informed policy making for future governments and enable a more granular understanding of how regional inequalities are formed in the country, but this requires sensible policymaking and parliamentary scrutiny of this process will be essential.

Allocating levelling up resources

For the government’s levelling up agenda to work the department needs to be able to accurately assess where there is the greatest need for investment, efficiently channel the resources for that specific purpose, and effectively gauge the impact of the interventions with recognised metrics. Reports have suggested some wealthy areas have received more of the initial levelling up money per capita than more needy areas, triggering accusations of pork barrel politics. The government has denied this, saying reports do not take into account the money that will be spent in future.

Allocation of the Towns Fund, the Community Renewal Fund, the Future High Streets Fund and even the Community Ownership Fund—all parts of the Levelling Up Fund--have been based on a competitive bidding process. Local authorities have said the development of projects and business cases is a time-consuming and expensive process with no guarantee of success. They also argue that it exacerbates existing inequality because the councils in the poorest areas, who are most in need of levelling up, are the least able to submit bids for funding. The government has provided additional funding to help with the costs associated with bidding for funds, but in the case of the Community Renewal Fund this was only available to the most in-need areas.

The timing of the bidding and disbursement of funds must also be as predictable as possible to enable local authorities to plan properly. When the government delayed the announcement of successful bids for the Community Renewal Fund in 2021, one council officer at the time told Dods that it had created uncertainty, leading some people to pay for projects themselves and others to abandon them because they could not wait any longer.

The UK Shared Prosperity Fund, designed to replace structural funds the UK received when it was a member of the EU, promises to form a central pillar of a centralised and streamlined funding system, but it remains to be seen how effective this will be. The fund, details of which were announced alongside the levelling up white paper, aims to provide £2.6bn for local investment by March 2025 with all areas of the UK receiving an allocation according to a funding formula rather than competition.

Preserving the Union

As well as being at the core of the government’s economic policy, DLUHC is also tasked with a key role in defending the integrity of the UK after the divisive Brexit referendum breathed new life into separatist movements.

In Scotland, Scottish National Party (SNP) First Minister Nicola Sturgeon has argued that Scots should have another opportunity to vote to leave the union next year after the country was taken out of the EU “against its will.” Polls show support for independence has eased back since last year but remains strong among young voters. In Northern Ireland, post-Brexit trade arrangements—the so-called Northern Ireland protocol--have created fresh political turmoil. The Irish nationalist Sinn Fein party could feasibly become the largest party in Northern Ireland as well as the Republic of Ireland after Northern Ireland Assembly elections in May.  And in Wales, nationalists Plaid Cymru have been bolstered by an alliance with Welsh Labour.

With Neil O’Brien taking on the ministerial responsibilities for keeping the country together as Minister for Levelling Up, the Union and Constitution alongside Gove’s cross-cutting responsibilities for levelling up, DLUHC will be at the heart of future constitutional struggles.

The Prime Minister’s “muscular unionism” aims to tackle the threat posed to the union by demonstrating the tangible value that the union provides to its citizens. However, prominent figures have criticized this strategy, with former prime minister Gordon Brown arguing that seeking to foster a UK-wide sense of nationalism ignores the historic underpinnings of the union, as a “family of nations”. One of the core challenges lies in integrating the devolved nations into national programs, but also investing in them.  Johnson views levelling up as an attempt to close the “productivity gap” and areas of Scotland, Wales and Northern Ireland are amongst the least productive in the UK.

Gove takes on the building industry

Gove’s push to force the housing industry to pay to remove dangerous cladding from buildings and protect leaseholders from those exorbitant costs has put the government on a collision course with the home builders. The move marks a significant turnaround from the approach of previous housing minister Robert Jenrick who wanted leaseholders to be responsible for costs if landlords and developers could not find the required funding for cladding remediation.

The cladding crisis has been a highly politically charged issue since the Grenfell Tower tragedy in 2017 when a fire in the high-rise London block of flats killed 72 people. Under Gove’s leadership, DLUHC has held several roundtables with key figures from the industry and demanded it contribute £4bn towards cladding remediation, fund and undertake all remediations on buildings they have developed and provide government with all data on fire safety defects for buildings built in the last 30 years. In mid-February Gove went even further by announcing that developers and manufacturers that do not help fix the cladding scandal could be blocked from the housing market, new powers for cladding companies to be sued, and further protections for leaseholders.

Extracting billions of pounds in reparations from the private building sector will not be straight forward, especially in the wake of the Covid crisis, and it remains to be seen how this process will proceed. So far, Gove has tried to cajole the industry, urging companies to contribute willingly to cladding remediation costs or face unspecified punitive legislative action. But reports suggest he may not have the power to enforce new costs or taxes on the building industry and its suppliers, and DLUHC may need to provide the funding if companies refuse to pay up. Protecting leaseholders may prove popular with some voters but going toe-to-toe with the industry may be counterproductive at a time when the government wants companies to build more homes (more on this below) and help boost the economy.

300,000 new homes per year?

The 2019 Conservative manifesto pledge to “continue our progress towards our target of 300,000 homes a year by the mid-2020s” may have allowed the government some wiggle room to fall short when the next general election rolls around by 2024. But the building industry has warned the target is already looks out of reach due to shortages of materials, staff, and transport.

The surprise Liberal Democrat victory in the Chesham and Amersham by-election highlighted voters’ concerns that the government’s planning reforms could lead to more homes being built in rural areas. Johnson has said the government was set on reforming the planning system to cut down on what he referred to as the “newt counting” regulations which stifled rapid development. Since then, Gove has been keen to emphasise the role that brownfield sites can play in home building. But while some experts say that projects such as the Brownfield Land Release Fund, which aim to turn derelict land into thriving communities, can provide some uncontroversial wins, it will not be enough to shift the national landscape.

The planning system is also not the only reason for the slow rate of homebuilding in the UK. The construction industry has been loudly protesting that without the boost to the labour force provided by the EU’s freedom of movement, the industry could struggle to meet demand, especially as the government’s new skills pathways might not be able to meet the need for several years. It also remains to be seen how the government’s efforts to get the construction industry to foot the bill for the cladding crisis will affect development plans.

Environmental concerns could also complicate Gove’s house building ambitions. Last year’s Environment Bill stipulated that all new developments need to provide a 10 percent biodiversity net-gain after a two-year transition period and the government’s Future Homes Standard—which includes energy efficiency requirements for new homes--will also shortly kick-in. With the built environment accounting for around 40 percent of the UK’s total carbon emissions, the construction industry is likely to be asked to continue to play a role in supporting the drive to net zero in ways which may not be compatible with the government’s home-building targets.

The ministry of “jam tomorrow”

Policy aside, unlike more traditional and longstanding ministries, DLUHC also faces a challenge to establish itself as a bona-fide government department capable of instituting significant change over the long term and crucially, beyond election cycles.

Up until the government published its white paper, levelling up was a political slogan in search of a policy. Before that, the phrase was elbowed into all manner of government statements and initiatives to the point where it meant many things to many people, but nothing in particular. The genesis of the idea can be traced back to the Boris Johnson’s 80-seat majority in the 2019 general election after winning over several long-held Labour areas in England—the so-called Red Wall—due to a range of factors including Brexit, demographics, and uninspiring Labour leadership. As a result, the Conservatives are under pressure to bring economic opportunity and prosperity to what Johnson referred to in his first speech as prime minister as the forgotten people and the left behind towns – and pledge “level up across Britain”. The Labour party has recognised the importance of the inequality agenda and developed a shadow levelling up team.

The government’s progress on this new front has been slow, though that may be understandable given the Covid crisis. DLUHC itself has only existed in name since late 2021, when Johnson reshuffled the cabinet and made Gove the Secretary of State responsible. Gove has a reputation for policy dynamism, but the number of policy balls the department is meant to juggle is substantial. DLUHC may have grown out of the Ministry of Housing, Communities & Local Government, but it is expected to play a role in a wide range of other briefs from economics to education and health. However, many of these policy areas already have their own dedicated and more established ministries with ministers who may not be so keen to have Gove on their patch.

In the white paper the government set out its levelling up ambitions with 12 “missions” to be accomplished by 2030, including increasing productivity across the UK, boosting local transport connectivity, and increasing education standards and 5G broadband coverage. However, the proposals were not accompanied by a significant financial package. Experts have pointed out that previous large-scale efforts at national economic rebalancing, such as in post-unification Germany, were supported by massive financial transfers to poorer regions from wealthier ones.

It remains to be seen if the government can tackle inequalities without big spending. But even if money is thrown at the issue, levelling up programmes are likely to be slow to bear fruit. The missions also face substantial headwinds from factors outside the government’s control, including the damage and disruption caused by the Covid pandemic and the cost-of-living crisis. Setting targets for 2030, well beyond the next general election, means for many voters levelling up will feel like a classic case of jam tomorrow, a promise of things that may never come. That presents an existential challenge for a department born of a slogan. Whether political parties deliver or not on their slogans, the slogans themselves are periodically ditched in favour of new ones. Will the department survive if it fails to make sufficient progress?

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