Improving Public Funding Allocations to Reduce Inequality

This project aims to propose more effective ways of allocating public funding in England to reduce geographical inequalities.

Background

Persistent and widening geographical inequalities across the UK present a critical policy challenge, attracting intense academic, political and policy attention in recent years. These inequalities are manifest across multiple dimensions – from economic productivity and household incomes through health outcomes to educational attainment and air quality and public infrastructure and service provision – and in different ways within and between areas.

These multifaceted issues and their varied spatial expression create a complex web of interconnected economic, social, and environmental challenges. The root causes of these geographical inequalities are deeply structural and multifaceted. Such spatial disparities are a drag on national economic growth, generate costs for public service provision to ameliorate their negative impacts, and leave economic potential untapped and social needs unmet across the UK.

The UK's highly centralised governance system has struggled effectively to address its longstanding geographical inequalities. This centralisation has often resulted in standardised and top-down policy approaches and ineffective public funding allocation that fail to account for the distinct characteristics, challenges and potential of regions, cities and local areas across the country. As the devolved nations have sought to exercise their differential powers and resources, the situation is further complicated by asymmetric devolution arrangements within England, creating a patchwork of governance structures, capacities and resources.

In recent years, the effectiveness of local, regional and urban development initiatives seeking to reduce geographical inequalities has been hampered by national government’s extensive use of short-term, competitive, and fragmented public funding mechanisms. This approach has meant already stretched combined and local authorities must constantly try to navigate a complex and changing funding landscape and compete for resources, leading to inefficient utilisation and allocation and difficulty in planning long-term and strategic interventions. The problems are particularly acute in areas lacking the institutional capacity to interpret funding opportunities, formulate strategic plans, and develop competitive funding bids, which ends up reinforcing existing geographical inequalities. Many local authorities are also facing severe financial constraints in delivering their statutory services that severely limit their ability to invest and support local development. How public funding is allocated is integral to efforts to reduce geographical inequalities. More effective deployment of public funding in turn helps support more socially and spatially equitable growth and tax revenue generation as well as reducing the costs and inefficiencies of geographical inequalities.

The election of the Labour Government in the UK in July 2024 is a potential inflection point in addressing these long-standing challenges. The English Devolution White Paper published in December 2024 aims to strengthen and streamline subnational governance and funding structures in England. While there is recognition of the need for growth across the country and its regions, the proposals are missing a more comprehensive approach for addressing geographical inequalities. Instead, the current vision is focused on prioritising national economic growth and generating tax revenues to refurbish public services; an emphasis which has historically disproportionately benefited major urban centres and especially London and the Greater South East. Despite mentions of driving and igniting growth across the country, disquiet has grown that national government is again focusing its scarce public funding resources upon places with the most immediate potential for economic growth and relatively neglecting elsewhere in the country. Improving the allocation of public funding for reducing geographical inequalities is therefore a pressing policy issue, both to enable more places across the country to contribute to national economic growth and renewal, and to advance broader national agendas for stability, investment and reform.

To contribute to this debate and help address these complex challenges with a particular focus on England, this project seeks to answer five fundamental questions:

What funds and funding allocation approaches exist in the UK, and how do they interact at different institutional levels and geographical scales?
How do funding approaches impact opportunities to utilise funding in places to best meet local needs?
What are the implications of devolution for the allocation and use of funding in place?
How can funding allocation better align with the priorities of people in place?
What are the options for policy reform to improve funding allocation in England?

By addressing these questions, the project aims to propose more effective ways of allocating public funding in England to reduce geographical inequalities.

Funder/client: ESRC

Timescale: 01 June 2024 – 31 March 2025

Contact

Project Lead: Dr Charlotte Hoole (c.hoole@bham.ac.uk)

Project Support: Stuart Mitchell (s.mitchell@bham.ac.uk) and Sarah Jeffery (s.jeffery@bham.ac.uk)

Objectives

Our project objectives are to gain insights on:

Existing funds and funding allocation approaches in the UK across different institutional and geographical levels.
How different funding approaches impact how funding is utilised in practice.
The successes and failures of English devolution in supporting more effective funding allocation.
The diverse experiences of actors beyond government in funding allocation decisions, to promote a more equitable process with fairer outcomes for people and places.
Actionable lessons for government and other relevant stakeholders to guide improvements to funding allocation mechanisms.

The Team

The project brings together a highly experienced interdisciplinary team from the Universities of Birmingham, Bristol, De Montfort, Newcastle, Nottingham, Plymouth and Sheffield, together with the National Centre for Social Research and Metro Dynamics.

Charlotte Hoole from City-REDI, University of Birmingham is the Principal Investigator. She is joined in the leadership team by eight Co-Investigators (Sheela Agarwal, Sarah Ayres, Jon Burchell, Ceri Davies, Jonathan Davies, Anne Green, Daniel Mutibwa, Andy Pike), Mike Emmerich and James Gilmour. Abigail Taylor and Sanne Velthuis are Research Fellows on the project.

Project Advisory Group

The Project Advisory Group (PAG) is made up of academics, policymakers from different levels of government, and practitioner experts from the private and third sectors. Their role is to provide advice to the project team on how best to design and execute the research so that it has maximum value and influence.