The UK government’s levelling-up department is set to spend 25 per cent — or nearly £2.5bn — less on regeneration projects this year than planned, blaming housing market turmoil and delays in delivery.
New figures provided to MPs and seen by the Financial Times show almost all of the unspent cash relates to capital spending on housing or housing-related projects, such as cleaning up industrial land for development and providing loans to developers or potential homeowners.
It includes £1bn originally intended for new affordable homes this year.
A budget update from the Department of Levelling Up, Housing and Communities blames “market conditions” affecting housing development, “economic volatility” and “delivery delays” for the intended changes to capital expenditure originally signed off by MPs.
The Labour party accused the government of “a new level of incompetence”.
The levelling-up department is responsible for allocating billions of pounds in regional regeneration funding, meant to boost “left behind” areas of Britain.
The spending shortfalls come after the FT revealed that the Treasury had banned DLUHC from any new spending on capital projects without its clearance due to concerns about value for money.
The department’s latest figures, known as supplementary estimates, outline how spending at the end of the financial year is likely to differ from the budgets originally agreed by parliament.
They show DLUHC intends to spend £2.42bn less on capital projects in 2022-23 than originally planned. While movements in budgets are commonplace at the end of the financial year, two government officials said the sum involved was unusually high.
Of that, £1bn in unspent money from the Affordable Homes Programme is largely being pushed into future years. Overall, £700mn in capital grants is now earmarked for some point before the next spending review — likely to take place in 2024 — and £500mn is now budgeted for after that point.
A further £1.2bn originally budgeted for financial transactions relating to housing will also go unspent this year, again “driven by delivery delays” and “uncertainty in the housing market”. This includes loans to developers via the Home Building Fund and support for first-time buyers under the Help to Buy programme.
Shadow levelling-up secretary Lisa Nandy called the underspend “a new level of incompetence” from the government, accusing the Conservatives of having “crashed the economy, sent mortgage costs spiralling” and “pushing the supply of new affordable housing off a cliff”.
“This will only exacerbate the housing crisis,” she said.
The DLUHC said it remained “fully committed” to its levelling-up programmes, including the £11.5bn Affordable Homes Programme.
“Re-profiling funding into future years from original estimates enables effective delivery of multiyear programmes,” the department said.
“Surrenders and reprofiling are a normal part of government finance, providing departments with flexibility to manage their pressures between years and government with the ability to target funding in areas that need it,” DLUHC added.
Separately, a Freedom of Information response provided to Jack Shaw, a researcher at the think-tank IPPR, showed that spending worth £500mn, or 20 per cent of the department’s Towns Fund will be delayed until 2025-26. The fund was set up in 2019 to provide localised regeneration projects such as community centres and swimming pools.
The department’s levelling-up white paper last year indicated the fund would all be spent by the end of 2024-25, although DLUHC said it had always intended to finish the programme the following year.
Shaw said the government’s “centrally managed approach” to such funds “isn’t working”, adding: “The government needs to change course and empower combined authorities and local authorities, who are better placed to co-ordinate investment across the footprints they’re elected to represent.”
The department said £2.35bn in Towns Fund cash had been committed, including to some projects that were already open such as a new police training centre in Skegness.
Financial profiles had been “dynamic from the outset”, it added.
