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Capital Projects: Spending

Volume 833: debated on Thursday 26 October 2023


Asked by

To ask His Majesty’s Government why they issued instructions in February requiring the Department for Levelling Up, Housing and Communities to obtain sign-off from the Treasury for spending on new capital projects, and whether that restriction remains in place.

We continue to work within the delegation approach agreed with the Treasury in February, which involves Treasury sign-off on all new capital spend to ensure shared priorities between departments. However, this does not restrict our levelling-up ambition. Since the decision by HMT, we have announced a substantial capital package in the Spring Budget, taking our overall levelling-up funding to more than £11 billion, plus a recent capital investment of £1.1 billion for 55 towns across the United Kingdom.

My Lords, it appears that this extra layer of bureaucracy is destined to continue, although no explanation has been given by my noble friend as to why it was introduced. I wonder if it is in any way connected with the fact that the department has announced a £1 billion underspend on the affordable housing programme, as well as underspends on the housing infrastructure fund, the brownfield land fund and the brownfield infrastructure fund? In the light of these underspends, are the Government still confident that they will meet their housing targets?

The Government remain committed to fully funding and delivering our programmes to level up communities across the United Kingdom, including the full £11.5 billion budget for the affordable homes programme. In line with usual practice, some of the department’s budgets in 2022-23 were reprofiled into future years to reflect latest delivery plans. While all capital programmes have their own specific causes for delays, the challenging economic environment, including the housing market, inflationary pressures and supply-chain constraints, all contributed to the delivery delays last year. However, we remain fully committed to our housing targets.

Is it not the case that the Government’s announcements on levelling-up funds that will be spent refer to spending after the next general election, so there is no real commitment to new money for the north, as the Government have promised?

Bear with me on the length of my reply to this one, because I think it deserves it. On the contrary, we have already announced and begun to implement many of these projects, including 12 investment zones across the United Kingdom, the rollout of levelling-up partnerships, a further £161 million directly to mayoral combined authorities for 32 regeneration projects in city regions, 30 projects across the UK which will receive funds from the community ownership fund, grants for 16 regeneration projects, and two new trail-blazer devolution deals with direct money going to mayors of the West Midlands and Greater Manchester. Most recently, the Prime Minister has unveiled a further 55 towns that will benefit from a long-term £1.1 billion levelling-up investment. This pace and ambition demonstrate that, whatever the mechanics of government, we are delivering, and will deliver, on our levelling-up priorities.

Does the Minister not agree that although these financial controls are reasonable at a time of great financial stringency, none the less it is crucial that the Government meet their housing targets, bearing in mind how short of housing the country is and how important it is to economic performance as a whole? In which case, does she think that we really must try to get to a greater continuity on housing policy, and that having 15 Housing Ministers in 13 years is not a good start?

I thank the noble Lord for his question. I reiterate that housebuilding is a priority for this Government and we remain committed to delivery—for example, the £11.5 billion affordable homes programme I mentioned earlier. The Government are on track to meet their manifesto commitment to deliver 1 million homes over this Parliament, and, since 2010, over 2.2 million additional homes have been delivered in England, and the three highest annual rates of housing supply in 30 years have all come since 2018.

My Lords, as the Government lost the vote on nutrient neutrality, could my noble friend tell the House if there are plans for it to return in the King’s Speech, because it would be very popular in many quarters?

I thank my noble friend for her question. However, as no doubt she will have expected me to say, I cannot pre-empt what is in the King’s Speech. What I can say is that, as described by my noble friend the Minister during the nutrient neutrality debates, the reforms were placed there to unblock stalled housing delivery and were intended to benefit communities and the environment. However, the necessary amendments to the Levelling-up and Regeneration Bill did not receive sufficient support in this House, as she will know. Nutrient neutrality, and the delays it is causing to housing delivery and the wider need to restore our waterways, remains a government priority. The Government will make a further announcement about next steps in due course.

My Lords, I congratulate the noble Baroness on making a reasonable fist of an incredibly bad job. Is it not true that, when you have to rely on Treasury sign-off for every single capital programme, there will inevitably be built-in underspends? Is it not true that this clawback is the intention of the Treasury, as it has been doing with the apprenticeship levy and much else around skills?

I can specifically say that the new delegation approach has had very little impact on the usual course of departmental business. Most spend needs to be subject to HMT approval. The department has worked closely with the Treasury to ensure value for money and continues to do so.

Can the Minister tell us what percentage of the levelling-up fund has been allocated to those areas most in need in priority 1? Maybe she could explain why many areas which are less deprived have been awarded that funding and other priority 1 areas have therefore missed out.

I will get back to the noble Baroness in writing with the specifics because I think it deserves a very detailed answer.

My Lords, with the urgent need for housing, why have the Government so seriously underspent their allocated housing funding? When will a long-term strategy to settle the housing crisis be resolved? What discussions have the noble Baroness and the Secretary of State had with the Treasury to overcome this additional barrier to solving the housing crisis?

It is fair to say that, with all the projects I have already spoken about, there is a distinct strategy for housing in this country by this Government. The supplementary estimates mean that the underspend is there for everyone to see, and I think it is very clear that the economic environment has impacted much of that spending. The department is doing as much as it possibly can to rectify this.

Does the extra requirement of Treasury authority apply to the devo deals that are done with the metro mayors, or are the Government being open with the metro mayors, as they said they would be, by giving them greater delegation in their budgets?

In the first instance, this applies only to all new spending and all new capital. It does not apply to anything that was previously done before February. HMT is taking a proportionate approach to approving business cases. That means that the new delegation approach has not yet caused any delays to DLUHC’s ability to deliver on levelling up, or, as I understand, our partners’.

My Lords, is it still the case that, when the Treasury computes the cross-benefits of departmental proposals, it does not take account of the benefit and savings accrued to a department other than the one which will own the programme or the capital outlay?

I apologise to the noble Baroness because I do not know the answer to that. I will get back to her in writing.

My Lords, in an earlier answer the Minister used the term reprofiling. Could she assist us by telling the House how reprofiling is defined by His Majesty’s Treasury?

I am not an expert and I am not the Minister for the department, but I will do my best to explain to the noble Baroness. The reprofiling is where the project has been delayed and therefore the money moves on to the next budget cycle. There are certain areas where it is not appropriate for it to be moved on to the next budget cycle. One of those is the Help to Buy scheme, which was coming to an end, and so any underspend was because it was coming to its termination; therefore it was not suitable for that to be reprofiled into the next budget cycle.

My Lords, the Government have been very positive in response to my request that devolved authorities should not spend in reserved areas. Equally, the UK Government should not spend in devolved areas, and yet they are now doing this. Could the UK Government rethink this and make sure they spend only in reserved areas, and that the Scottish and Welsh Governments spend their money in the areas for which they have responsibility?

We have had many questions on why there is not a joined-up strategy for the UK on these policies. I refer to some of the discussions we had yesterday on LURB, where we were talking about how good the working relationship is with the Scottish and Welsh Governments respectively.