Guidance

Simplification Pathfinder Pilot: technical guidance

Published 31 July 2023

Applies to England

1. Introduction

1.1 What is the Simplification Pathfinder Pilot?

Investing in local places is a central pillar of this government’s Levelling Up agenda. High value and targeted funding can unlock the potential of local economies, leading to visible improvements in places and supporting communities to grow and thrive. We are committed to continually improving the way funding is delivered. By increasing the efficiency of our processes, we can support local authorities to maximise their return on spending.

We have invited a small group of ‘pathfinder’ local authorities across England to pilot a simplified approach to funding delivery. This stand-alone pilot will allow government to understand the impact of a simplified delivery model.

This technical note provides guidance on how the pilot will be established and delivered by the Department for Levelling Up, Housing and Communities (DLUHC) in partnership with local authorities.

1.2 What are the objectives of the pilot?

This pilot will allow government to understand the impact of a simplified and consolidated funding model on the delivery of locally selected capital projects, including how spending flexibility can support local authorities to respond to changing economic conditions.

Pilot local authorities will have greater ability to make decisions locally about moving funding between projects in their funding portfolio. We will devolve decision-making responsibility over 3 in-flight capital funding programmes in pilot areas, increasing local flexibility, and reducing bureaucracy and inefficiency within the delivery process.

1.3 Who is eligible to take part?

Local authorities currently in receipt of funding from 3 complementary capital programmes are eligible to take part in the pilot. These DLUHC funding programmes are:

• Future High Streets Fund (FHSF)
• Town Deals
• Levelling Up Fund round one (DLUHC-only funding)

The 10 local authorities who have been allocated funding from all 3 of these programmes and will be participating in the pilot are:

• Bolton Metropolitan Borough Council
• Calderdale Metropolitan Borough Council
• City of Wolverhampton Council
• Lewes District Council
• Nuneaton and Bedworth Borough Council
• Rotherham Metropolitan Borough Council
• Sheffield City Council
• Stockton-on-Tees Borough Council
• Thanet District Council
• Wirral Metropolitan Borough Council

These pathfinders will initially be in England only, as there are fewer UK-wide capital funding programmes that would be appropriate for consolidation at this stage.

Participation is not mandatory. We will work with local authorities to understand how the pilot could operate within specific local contexts and priorities.

2. How the pilot will be delivered

2.1 Overview of the delivery model

We are piloting the following changes to the way the 3 funds are currently delivered:

• A single aggregate allocation: local authorities’ allocations from each of the 3 individual funds will be aggregated into a single allocation which, subject to assurance, can be managed flexibly across a portfolio of projects.

• An investment plan: a combined set of outcomes and outputs, covering the full portfolio of activity that will be delivered using the aggregate allocation. We will track delivery across this portfolio (as opposed to a project-by-project basis).

• Streamlined reporting: moving away from reporting across 3 different programmes, local authorities will submit one 3-monthly RAG report (focusing on spend and progress) and one 6-monthly delivery report.

• Change management: local authorities will only need to seek approval from DLUHC if they are making a ‘material change’ to their investment plan (see definition in section 2.5).

• Integrated conversation: local authorities will have one main contact in their DLUHC area team for discussions about the pilot.

2.2 Investment plan

To take part in the pilot, local authorities will be asked to complete a light-touch investment plan. This plan will set out how the local authority will use their aggregate allocation to deliver the outcomes and outputs listed within the pathfinder investment framework.

The framework is made up of CDEL-focused metrics that are already used within existing programmes (Future High Streets Fund, Town Deals and Levelling Up Fund round one). We have not included any new or additional metrics to avoid unnecessary complexity and to minimise the burden on participating pilot local authorities.

The Investment Plan will follow a template and will comprise 3 sections:

A. Delivery information – including (but not limited to) an aggregate portfolio-level spending profile, an overview of the proposed consolidated governance structure, and a summary of any proposed changes to projects.

B. Project information – including (but not limited to) project summaries, financial information and an approximate split of the intervention themes each project will invest in.

C. Portfolio outputs and outcomes – in which we will ask local authorities to set out, at the aggregate level, the amount of funding they will invest each year in each intervention theme and the associated outputs and outcomes that will be delivered. The intervention themes are:

• enhancing sub-regional and regional connectivity
• unlocking and enabling industrial and commercial development
• strengthening the visitor and local service economy
• improving the quality of life of residents
• employment and education

Local authorities will continue to use the same (mandatory and non-mandatory) indicators that they have been using to report on local growth funds in the past, but they will also be free to select additional indicators from the Intervention Framework. Local authorities will also be free to continue to use standard or custom indicators on various topics that are not listed.

The local authority should develop their investment plan in collaboration with local stakeholders and should consider how local governance could be used to encourage this collaboration. All plans must be signed off by the Section 151 Officer and any other Senior Responsible Officers (SROs) responsible for delivery of the funding.

Expenditure profiles must be accurate and deliverable. Each place must set out a forecast for the amount of funding that will be invested each year across the identified interventions.

2.3 Payments

Payments will be made using section 50 of the UK Internal Market Act (power to provide financial assistance for economic development etc).

Once an investment plan has been agreed, and subject to local authorities having sufficiently met assurance criteria, an aggregate payment of any remaining funding for 2023-24 will be made to pilot local authorities in the third quarter of 2023-24. Subsequent payments will be made in the first quarter of 2024-25 and 2025-26, subject to satisfactory performance based on regular reporting and, where applicable, the submission of a ‘credible plan’ where the local authority would like to re-profile any underspend from the previous year (see section 2.5).

Prior to receiving the aggregated payment, local authorities will be issued with a grant closing statement which confirms the total payments that have been made to date under the 3 separate programmes.

A new Memorandum of Understanding (MoU) will be issued to participating local authorities and this will supersede all current funding agreements for Town Deals, Future High Streets Fund and Levelling Up Fund round one.

2.4 Monitoring and reporting

The pilot will be testing an approach to reporting that reduces local administrative burdens whilst still providing DLUHC with the required levels of delivery data and assurance. All local authorities will be required to monitor the spend, outputs and outcomes that have been agreed within their investment plan. However, monitoring will be streamlined into 4 portfolio-level returns per year:

1) 3-monthly summary updates (in the form of RAG reporting) focusing on spend and progress.

2) 6-monthly detailed reports on spend and progress, including (but not limited to) forecast underspends, a plan for delivering uncommitted funding, projected delivery of portfolio-level outputs and outcomes, and changes to projects below the change request threshold.

In addition to monitoring, DLUHC will also conduct separate assurance activity, including local authority assurance reviews. These reviews will focus on the assurance processes that local authorities have in place and will follow a similar model as is currently used across the 3 separate funds.

The Department will share specific monitoring questions ahead of the first monitoring return. We expect the first monitoring return to occur in the third quarter of 2023-24.

2.5 Change process and reprofiling spending

We will take a proportionate approach to any changes to pilot investment plans, which means we will not be asking local authorities to submit individual project-level adjustment requests.

Local authorities should seek approval from DLUHC where they are seeking to make “material changes” to their investment plan. A single amendment to funding plans is a “material change” if it involves moving at least £5 million to a different intervention theme or moving at least £5 million between projects in the same intervention theme. This change will be benchmarked against the investment plan agreed by DLUHC or against the position agreed as part of a previous change request.

The aim of piloting this approach is to:

• provide local authorities with the flexibility to deliver effectively in line with local priorities
• reduce the administrative burdens of agreeing all individual changes
• maintain proportionate controls to ensure that funding continues to deliver good value for money

Where local authorities would like to make a material change to their investment plan, they must submit details of the change to DLUHC using a change request template. Local authorities should confirm as part of the request that they have sought the views of key local stakeholders and this must include the Member(s) of Parliament (MP(s)) covering the geography for the proposed change. Where the value of a project is changing, local authorities must have given due regard to subsidy control guidance (see section ‘3.1 Subsidy Control’ for further information on subsidy control appraisals).

If DLUHC is concerned about the size or intention of a particular change, we will discuss it with local authority teams and we reserve the right to reject a change on the grounds it would not secure value for money or meet the objectives of the funding.

Where the local authority has made contractual or funding commitments to a third party or other public body, the local authority will be required to assess if the proposed change will have an impact on their ability to honour this commitment. The Department does not have a role in assessing or arbitrating any third-party agreements or funding commitments that local authorities have entered using funding from the Town Deals, Future High Street Fund or Levelling Up Fund.

The following do not constitute a material change and can be reported to DLUHC in the 6-monthly monitoring returns:

• movement of funding between intervention themes below the £5 million threshold
• movement of funding between projects in the same intervention theme below the £5 million threshold

If changes made fall beneath the thresholds to be considered a material change, the local authority does not need to seek explicit approval from DLUHC. However, DLUHC will review all updates to investment plans provided by the local authority as part of the reporting cycle and regular engagement meetings.

In exceptional circumstances, government may “call in” projects for review, most notably when we are made aware of local disagreement, but also when changes are novel, contentious, or potentially suggesting a fundamental material change to a project (i.e. the outputs that are going to be delivered are fundamentally different, such as transport outputs rather than public realm outputs).

If a local authority wishes to reprofile underspend from one financial year into the next, they need to submit a ‘credible plan’ as part of their end-of-year report explaining the approach, including:

• amount of funds committed and the profile of that spend
• amount of funds allocated but not committed, and the profile of that spend
• plan for the allocation of unallocated funds, key milestones for the commitment of funds and spend profiles
• risk management i.e., confirmation that plans are in place to manage risks relating to project pipeline and capacity

If local authorities can demonstrate a credible plan as set out above, they will receive their next annual payment in full at the start of the financial year. If, however, local authority plans to re-profile underspend are not credible, DLUHC reserves the right to withhold or delay payment from 2024-25 onwards. Remaining funding will be paid out pending demonstration of satisfactory performance.

2.6 Governance, oversight and Town Deal Boards

For the purposes of this pilot, the local authority is the accountable body through which all funding will flow. Within the investment plan, local authorities will need to confirm which Senior Responsible Officers (SROs) are responsible for the delivery of the pilot, including who the designated S151 Officer is. SROs are responsible for signing-off monitoring returns, submitting change requests, and securing value for money from the agreed aggregate allocation.

Building on the positive local role of Town Deal Boards, we require participating local authorities to establish a consolidated governance structure which will oversee the total portfolio of projects.

This board will have no decision-making power but will exercise strategic oversight over pilot activity. Local authorities have the flexibility to set out how a consolidated governance will work for the geographic area and should give an overview of the chosen approach in the investment plan.

Town Deal Boards may be reconstituted or expanded into this consolidated governance structure to give stakeholders, including local MPs, the framework to exercise strategic oversight over the portfolio. To facilitate a transition to a consolidated governance structure, participating local authorities could make the following changes to the scope and membership of existing Town Deal Boards:

• Scope of the board: The pilot board could expand the scope to include all projects across a broader geography or all projects in a particular locality.

• Membership: the core membership and Chair of the board could remain the same, but if you choose to expand the geographical remit, then the number of attendees would increase to reflect the new broader geography. The membership should include a private sector chair, the MPs representing the area, local representatives from business and community, and representatives from all tiers of local government for the expanded geography, if applicable.

2.7 Evaluation

We are committed to reducing the administration burden of funding programmes. DLUHC will conduct evaluation centrally, using data provided by participating local authorities through monitoring returns and bespoke research activities such as surveys, interviews and case studies.

Participating local authorities will not need to carry out a local evaluation as part of the pilot, but we encourage local authorities to conduct reflective exercises e.g. lessons learnt, to help inform the development of their project pipeline. Participating local authorities will be removed from the programme evaluation of Levelling Up Fund round one, Town Deals and Future High Streets Fund.

This evaluation activity will demonstrate how participating local authorities are implementing the delivery model and using the freedoms and flexibilities available through the pilot to progress delivery and achieve outputs and outcomes. DLUHC will also evaluate if the pilot is providing broader efficiencies for the Department to deliver its funding programmes.

Alongside data and insights collected as part of monitoring and reporting, evaluation will also include comparative case studies, interviews and qualitative surveys. Participating local authorities will be asked to participate in the above interviews and surveys, and DLUHC will notify them of the timings of these activities once they have signed up to the pilot.

In parallel with the pathfinder’s evaluation, DLUHC will also still be conducting process evaluations of the Levelling Up Fund and Towns Fund. These process evaluations will provide insight from places who do not have the flexibilities of the pathfinder delivery model and could therefore provide a group to compare efficiencies gained. Findings generated through the pathfinder evaluation could therefore feature as part of the main Levelling Up Fund and Towns Fund evaluation publications.

DLUHC will develop an evaluation plan outlining the approach to assessing the pilot’s effectiveness, including the questions the evaluation will answer and the methods to be conducted.

3. Preparing to take part in the pilot

3.1 Subsidy control

When submitting an investment plan, all pilot local authorities must consider whether any existing or new investment will be used to provide a subsidy and, if so, whether that subsidy will contravene the UK’s international obligations on subsidy control, or the Subsidy Control Act 2022.

The UK subsidy control statutory guidance provides information for local authorities on subsidy control. Under section 79(6) of the Subsidy Control Act 2022, public authorities must have regard to this guidance (so far as it is applicable to the local authority and the circumstances of the case) when giving a subsidy or making a subsidy scheme. This guidance has been issued to help local authorities interpret the UK’s domestic obligations on subsidy control.

If the value of a project is changing, the local authority will need to conduct a subsidy control appraisal. Where the local authority is the direct beneficiary of funding, they will need to work with DLUHC teams to conduct the assessment.

3.2 Meeting the public sector equality duty

In Great Britain, the public sector equality duty under the Equality Act 2010 requires local authorities exercising their functions to have due regard to the need to: eliminate discrimination, harassment, victimisation, and any other conduct that is prohibited by or under the Act; advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; and foster good relations between persons who share a relevant protected characteristic and persons who do not share it.

The ‘protected characteristics’ under the Act are age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.

Participating local authorities have a duty to consider how policies, investment or decisions made within the scope of this pilot affect persons with the nine protected characteristics under the Equality Act 2010.

3.3 Consulting local stakeholders about participation

As the accountable body for all funding, it is for the local authority to decide if they will participate in the pilot. However, engagement and collaboration with local stakeholders is critical to the success of funding delivery, so local authorities will have to confirm that they have consulted with their Town Deal Board(s) and local MPs, before submitting an investment plan.

Where local stakeholders or MPs have concerns about the delivery of outcomes or outputs, the local authority should provide reassurance as to the local governance structures that will be put in place to ensure that funding continues to deliver against local priorities. Local authorities should evidence this consultation when submitting an investment plan to DLUHC.

3.4 Submitting an investment plan

All plans must be signed off by the Section 151 Officer, Leader of the Council and any other SROs with responsibility for delivery.

DLUHC will provide a template for local authorities to use when developing their investment plan. All completed plans should be submitted to DLUHC by 8 August 2023 to this email: Pathfinder.Funding@Levellingup.gov.uk.

Participating local authorities who are unable to meet this deadline should contact their DLUHC Area Lead and email Pathfinder.Funding@Levellingup.gov.uk. Where a different submission date is required, we can adjust this schedule in agreement with the local authority.

3.5 How investment plans will be agreed

We will expect the pathfinder pilot investment plan and spend profiles to be complete, accurate and deliverable. Investment plans will be assessed by DLUHC according to a set of assessment criteria, including deliverability, value for money, strategic fit, as well as geographic distribution of funding.

Where a plan cannot be approved at the first appraisal, we will provide feedback to the lead local authority and work iteratively to secure approval.