Report

by the Comptroller
and Auditor General

Ministry of Housing, Communities & Local Government

Review of the Town Deals selection process

HC 576 Session 2019–2021 21 July 2020

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Report by the Comptroller and Auditor General

Ordered by the House of Commons
to be printed on 20 July 2020

This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act

Gareth Davies
Comptroller and Auditor General
National Audit Office

16 July 2020

HC 576 | £10.00

This report sets out the facts about the process by which the Ministry of Housing, Communities & Local Government chose the 101 towns in England it invited to develop Town Deals.

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009029 07/20 NAO

The National Audit Office study team consisted of:
Stephen Luckhurst and Andy Whittingham, under the direction of Lee Summerfield.

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Part One

What this review is about

1.1 On 27 July 2019, the government announced the £3.6 billion Towns Fund for England (The Towns Fund). The Towns Fund is expected to support towns that currently do not have the right conditions to develop and sustain strong local economies, recognising that many towns have not benefitted from the growth experienced by cities over recent decades. It aims to provide a selection of struggling towns across England with funding to address issues such as ageing populations, limited regional economic opportunities and lack of investment. The Towns Fund incorporated and built on the £1.6 billion Stronger Towns Fund announced in March 2019.

1.2 The £3.6 billion Towns Fund includes three separate funding strands:

the Ministry of Housing, Communities & Local Government (the Department) has invited 101 towns to develop Town Deals and bid for up to £25 million each, or up to £50 million in exceptional circumstances. Selected towns do not automatically qualify for the funding. Each must put forward a plan for how they will spend the funding and what it will achieve, which must then be agreed with the Department to form the basis of the Town Deal;

a competition for funding for those towns not in the initial selection of 101 towns. Whilst the Department has committed to a further competitive element of the Towns Fund, it has yet to decide upon the focus of this element and ministers have not considered the priorities or criteria to be used to determine how towns will be selected. The Department intends to design the process and any associated methodology for the competitive element of the Towns Fund in due course; and

the Future High Streets Fund, to be distributed to towns and high streets across England through a competitive process. The Department shortlisted 101 towns and high streets in 2019, which are now developing detailed business plans. The Department is currently assessing the first set of these plans.

1.3 This report considers only the process for selecting the 101 towns invited to develop Town Deals. The Future High Streets Fund and the upcoming competitive process for towns that were not selected to bid for Town Deals are outside the scope of this report. The government has not ruled out awarding money to some towns both for Town Deals and as part of the Future High Streets Fund.

1.4 On 6 September 2019, the Department published its selection of 101 towns across England. Each selected town has been invited to bid for up to £25 million, or up to £50 million in exceptional circumstances, from the £3.6 billion Towns Fund to implement an agreed Town Deal. The Department published its Towns Fund Prospectus in November 2019, outlining the bidding process.1 The towns have been invited to develop proposals for Town Deals, centred around the establishment of a Town Deal Board to oversee the development of a Town Deal and its implementation, and a Town Investment Plan setting out plans to increase economic growth. The Department expects each plan to set out the town’s investment priorities to drive growth, with a focus on regeneration, improved transport, better broadband connectivity, skills and culture. The plans should be clearly evidenced and linked to existing local and regional strategies and initiatives. The Department required each selected town to set up a Town Deal Board by January 2020, and to develop a Town Investment Plan by summer 2020. The Department intends to determine the amount of investment for each town, and finalise the contents of a Town Deal, based on the strength of the Town Investment Plans.

1.5 This review describes the process followed by the Department to select the 101 towns. The selection process comprised two stages. First, an initial assessment – scoring, ranking, filtering and prioritising – of all 1,082 towns across England by the Department’s officials (officials) against a range of criteria. Second, the selection of towns to be invited to bid for Town Deals by ministers using the officials’ assessments to guide them. Officials designed a framework for decision-making, intended to support ministers to select towns and record their reasons for selection, recognising that there would be some qualitative judgement in which mix of towns were selected. Officials provided ministers with information on towns in a prioritised and ranked list, and suggestions on other factors they might consider in their selection. Officials later reviewed the ministers’ selection of towns against the required tests set out in HM Treasury’s Managing public money.2 The Department published the list of selected towns without the underlying information to support the selection.

1.6 In response to concerns raised in the media, including by some MPs, over the lack of transparency of the Department’s process by which it selected the towns invited to bid for funding, we set out in this report the process by which the Department selected the successful towns, the results of the selection process and the rationales given for the selected towns. Our review is factual and does not evaluate the selection process or its outcomes. Our review covers:

the criteria, process and sources of evidence used by the Department to assess and rank towns (Part Two); and

the results of the assessments and ranking of towns, which towns were selected and the rationales given for selection (Part Three).

1 Ministry of Housing, Communities & Local Government, Towns Fund: Prospectus, November 2019, available at: www.gov.uk/government/publications/towns-fund-prospectus

2 HM Treasury, Managing public money, March 2018, available at: www.gov.uk/government/publications/managing-public-money

Part Two

The selection process

The selection process for Town Deals

2.1 The Ministry of Housing, Communities & Local Government’s (the Department’s) officials (officials) assessed there were 541 towns across England potentially eligible for Town Deals. Officials took as the starting point all 1,082 towns across England as designated by the Office for National Statistics (ONS). These were defined as built-up areas with a minimum area of 20 hectares (200,000 m2), with individual settlements separated by at least 200 metres, and with a population between 5,000 and 225,000. Towns do not necessarily mirror established administrative areas, such as local authorities. Officials ranked all towns by income deprivation, an indicator the ONS had estimated for all 1,082 towns and published in July 2019.3 The Department regarded income deprivation as the most relevant of the few town-level indicators available at the time. Officials identified the 541 towns with an income deprivation above the median value as potentially eligible for Town Deals.

2.2 Officials scored and ranked the 541 eligible towns across England using a weighted formula across multiple criteria. In each region of England, officials scored and ranked towns based on a formula that combined scores against seven criteria chosen to reflect local need and growth potential: income deprivation, skills deprivation, productivity, EU Exit exposure, exposure to economic shocks, investment opportunity and alignment to wider government intervention (Figure 1). The first four criteria were drawn from official statistics and the remaining three were based on officials’ assessments. Officials differentially weighted the separate criteria to give greater significance to those they determined to be based on more robust data at town level geographically.

2.3 In addition to these seven criteria, the selection process included a regional element, with the aim of focusing funding on the regions with higher need. A town’s prospects are affected by the wider region it sits within. Officials therefore applied a needs-based regional allocation formula which incorporated Local Enterprise Partnership-level (LEP-level) data on: productivity, income, skills, deprivation and rural/urban classification (with rural areas assumed to have greater need). Officials calculated a recommended number of deals, from the planned total of 100 towns, for each of the eight English regions (Figure 2). The Greater London region is excluded because it does not contain towns as defined by the ONS.

2.4 Officials divided the 541 eligible towns into high-, medium- and low-priority groups.

High-priority towns: The Department placed 40 towns in the high-priority group. Within each region, officials categorised 40% of the number of recommended towns as high priority, so that high-priority towns were spread across the regions in proportion to the total number of recommended towns (Figure 2). These towns were those with the highest scores within each region, scored highly across most criteria, and for which officials found that using different formula weightings resulted in only small changes to their scores and rankings. They were not the 40 towns with the highest scores across the whole of England because the aim was to identify high-priority towns in each region of England.

Low-priority towns: Officials categorised 181 towns as low priority either because they were among the 15% lowest-scoring towns in their region or because they were small (fewer than 15,000 inhabitants, or fewer than 10,000 in the South West region, unless they formed part of a cluster of small towns that made up one economic unit).

Medium-priority towns: Officials designated the remaining 380 towns as medium priority.

2.5 Officials made recommendations to ministers regarding their selection of towns from the three priority groups:

High-priority towns: Officials recommended to ministers that all 40 high-priority towns be selected to bid for funding, and that no additional explanation for their selection was required.

Medium-priority towns: Officials recommended that ministers select up to 60 medium-priority towns, depending on how many low-priority towns they chose, to bring the total number of selected towns to 100 (ministers ultimately selected 101 towns). They were asked to provide a brief rationale for their selection in this category.

Low-priority towns: Rather than ruling them out entirely, officials left it open for ministers to select towns for Town Deals from the group of 181 low-priority towns. Officials recommended that ministers choose relatively few low-priority towns and record a strong rationale for any selected.

2.6 Officials provided ministers with additional suggestions on other factors they might consider in their selection. This included:

Disqualifying the largest towns, or towns with a City Deal. Officials suggested that ministers should consider ruling out places which were in principle eligible to benefit from City Deals (another policy for supporting local growth). Officials provided ministers with a list of the 15 largest towns (as defined by the ONS) to illustrate which ones might be ruled out if the largest towns were disqualified.

Clustering towns. Officials suggested that clusters of small, nearby towns that function as a single place could be offered the opportunity to bid for a single, shared Town Deal.

Aiming to spread Town Deals across and within LEPs. Officials suggested that ministers might aim for a spread of towns across LEP areas, in addition to the spread of towns across English regions. It also suggested a mixture of larger and smaller towns within each LEP.

Consulting with mayors on town selection. Officials suggested that in metropolitan areas with directly elected mayors, ministers might want to consult with these mayors before settling on their final selection of towns.

3 Office for National Statistics, Understanding towns in England and Wales: an introduction, July 2019, available at: www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/understandingtownsinenglandandwales/anintroduction

Part Three

Outcome of the selection process

Selection decisions by priority group

3.1 Based on the categorisation by the Ministry of Housing, Communities & Local Government’s (the Department’s) officials, ministers selected towns from all three priority groups. After the Department’s officials (officials) had scored, ranked and grouped towns, ministers selected towns to be invited to bid for Town Deals from within all three groups, including 12 from the low-priority group (Figure 3). In making the selection, ministers set out the rationale used at a regional level for those within the medium-priority group and at individual town level for the 12 towns that officials scored as being low-priority towns.

3.2 The additional guidance provided by officials (set out in paragraph 2.6) was used as follows:

Disqualifying the largest towns, or towns with a City Deal.

The largest towns or towns with a City Deal were not ruled out of the selection process. Of the 15 largest towns in England, 10 were invited to bid for Town Deals. These were: Northampton, Wolverhampton, Bolton, Bournemouth, Norwich, Swindon, Middlesbrough, Milton Keynes, Warrington and Peterborough.

Clustering towns.

Officials suggested joining certain small towns together to be invited to bid for a single Town Deal. Ministers decided not to do so and all selected towns were invited to bid for Town Deals separately.

Aiming to spread Town Deals across and within Local Enterprise Partnerships (LEPs).

Ministers selected towns from at least two and up to six LEPs within each region (listed in Figure 6).

Consulting with mayors on town selection.

It is not clear whether ministers consulted with mayors when making their selection.

Selection within the high-priority group

3.3 Ministers agreed with the officials’ suggestion and selected all 40 towns for Town Deals in the high-priority group. Because the 40 selected towns comprised the highest-scoring towns in their respective regions but not the 40 highest-scoring towns nationally, 49 towns in the medium-priority group had higher scores than the town with the lowest score in the high-priority group – this was Telford, which had the 92nd-highest score nationally (Figure 4). Nonetheless, Telford’s score was high for its region (the West Midlands, where it had the seventh-highest score among the 55 towns) and – by definition of the high-priority group – it scored higher than all of the medium-priority towns in that region.

Selection within the medium-priority group

3.4 Ministers selected 49 towns from the 318 towns that comprised the medium-priority group. Ministers chose towns with a wide range of scores across this group – they did not just select the towns with the highest scores against the Department’s criteria (Figure 5). Towns selected by ministers have a range of individual characteristics not necessarily captured in the Department’s scoring process, such as being a coastal town, or being geographically spread across a region or LEPs. Figure 6 presents the rationales provided by ministers for their selection of towns across each region.

Selection within the low-priority group

3.5 Ministers selected 12 towns for Town Deals from the 183 towns in the low-priority group. Ministers chose towns with a wide range of scores, not just those towns in this group with the highest scores (Figure 7). The lowest-scoring town selected for a Town Deal was Cheadle, which had the seventh-lowest score out of the 541 assessed by officials. When selecting towns from the low-priority group, ministers provided their rationales for each of the 12 towns selected (Figure 8). The reasons given were varied and included criteria that were not used by officials to score the towns, for example poor transport links. A recurring reason ministers gave for selection was a town’s potential for investment or growth.

3.6 Officials reviewed ministers’ overall selection of towns, concluding it met the tests for HM Treasury’s Managing public money.4 Officials acknowledged that the scoring of each town was designed as a guide for ministers and was not the only way to assess eligibility. Officials recognised that some towns would be in similar situations, and a degree of qualitative judgement between picking towns with similar characteristics was inevitable. Ministers’ selections resulted in towns being selected with lower scores than some other towns that were not selected. Officials concluded that the overall selection was acceptable because ministers had selected all 40 high-priority towns and provided a rationale for each of the towns selected from the medium- and low-priority groups.

Distribution of selected towns across regions

3.7 Ministers deviated from the recommended numbers of Town Deals per region, but within a tolerance which officials decided was acceptable. Officials analysed whether the average score for the selected towns deviated significantly from the average expected if ministers had stuck to the recommended numbers of towns per region. Officials concluded that the selection had little impact on overall average score. They also determined that the spread of towns across regions led to a regional distribution of funding that was focused on the regions with higher need, as intended, and was therefore acceptable (Figure 9). The distribution of towns across England is shown in Figure 10.

3.8 Figures 11 to 18 present the selected towns, and those not selected, within each region. The figures present the towns ordered by score and arranged in the priority groups. A web-only appendix available on the National Audit Office’s website presents for all towns the component scores against the Department’s criteria, overall scores and rankings, grouped by region.5

4 HM Treasury, Managing public money, March 2018, available at: www.gov.uk/government/publications/managing-public-money

5 Available at: www.nao.org.uk/report/review-of-the-town-deals-selection-process

Appendix One

Our scope and methods

Scope

1 This report looked at the process by which the Ministry of Housing, Communities & Local Government (the Department) chose the 101 towns in England it would invite to bid for Town Deals. In response to concerns raised in the media, including by some MPs, over the lack of transparency of the Department’s process by which it selected the towns invited to bid for funding, we conducted a review that examined how the Department selected towns to be invited to develop Town Deals and bid for funding from the Towns Fund:

what criteria the Department used to select the towns;

what sources of evidence the Department used to assess towns against the selection criteria; and

which towns were selected, what evidence was used, and what was the result of the assessments against the Department’s selection criteria.

Methods

2 Our fieldwork took place between January and May 2020.

We interviewed officials from the Department who were responsible for the Town Deals selection process.

We reviewed published and unpublished documents produced by the Department, including its spreadsheet for evaluating towns, and records made by the Department’s officials that described the work undertaken by the Department to select the 101 towns from the set of all towns in England.

We created charts and tables showing which towns were selected and how they scored against the Department’s criteria.

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