It’s rare for Whitehall officials to hand complete control to councils. Schemes that initially appear like a step towards devolution often turn out to have strings attached once the small print has been examined.
And so it was with the Additional Restrictions Grant (ARG) to help businesses hit by the pandemic.
The grant gave local authorities discretion to hand out money as they thought fit but there were soon questions about how civil servants made decisions on the allocations.
One questionable decision was Whitehall choosing to use population statistics to work out how the initial £1.1bn would be allocated among the sector.
Admittedly, this was a hectic time and a fast-moving situation but trust is lost when decisions fail to be explained transparently and Governments U-turn.
Mandarins began by insisting that the ARG would be a ‘one-off payment’ for councils in 2020-21 and ‘will not be renewed’.
All indications at the time were that there would be no further funding and it would be prudent for local authorities to make the grant last until the end of March 2022.
It was not until the middle of June last year that the Government unexpectedly changed its mind and councils were told that to access top-up funding they would need to prove they had spent or ‘made a validated attempt to spend’ 100% of their allocation by the very tight deadline of the end of July.
If local authorities missed this deadline they would fail to qualify for their share of the next £425m, leaving many madly racing to spend the cash.
Frustrated council officers who were already up to their eyeballs dealing with grants were therefore forced to tear up their original plans through no fault of their own.
For some – while announcements of more money are always welcome – the news came too late.
Leeds City Council missed out on £5.6m for being one of more than 20 councils that was not initially given access to top-up funds.
A Leeds spokesperson said: ‘This is clearly disappointing, given the rigorous way we adhered to central Government’s original advice, but we are determined to continue doing everything we can to help the city’s businesses with our available resources.
‘Working to that [original] timescale, we adopted a strategic and careful approach to the use of our resources that saw us distributing 100% of a different fund – namely the Local Restrictions Support Grant (Open), which had an earlier spending deadline of March 31 2021 – before moving on to the ARG allocation, all the while acting as responsible guardians of taxpayers’ money by ensuring that help was finding its way as quickly as possible to the businesses that needed it most.’
Spelthorne BC was left with an unwelcome choice between continuing with its original plan or speeding to spend its existing funds in a matter of weeks to get hold of an additional £830,000.
The council’s economic development manager, Keith McGroary, explained: ‘We could just allocate big chunks of money at businesses to spend it quickly and in an unfocused way in order to access additional funds or hold on to the £2.2m we had in order to best use that money to support our businesses as planned. We took the decision to make best use of the funds that we had and spend public money wisely rather than a race to spend within six weeks, which we may have not met.’
Epsom & Ewell BC had already dealt with all its applications when the announcement came and to make further awards the council would have had to write a new scheme, get it agreed by a committee and re-contact all the firms it previously told would not qualify.
The council just did not have enough time and resources to produce a new scheme while it was also delivering on another mandatory grant scheme that the Government had just initiated.
Today, some £250m funding remains with local authorities, which the Government still expects them to distribute, and the grant was boosted by more than £100m in December to support businesses hit by Omicron – such as those that supply the hospitality and leisure sectors.
Allocations of the latest ARG top-up were prioritised for those councils that have distributed the most of their existing allocations.
This sounds fair but the scheme has handed some councils money they did not need and has penalised others for due diligence.
The decision to use population to distribute the first allocation did not make sense for a number of councils with a relatively low number of businesses as a proportion of its residents.
Despite an ‘intensive marketing effort and a strong initial uptake’ Gosport BC has still not fully distributed its funding from the first tranche while Oadby & Wigston BC – one of the smallest boroughs in the country – also struggled to get the £1.6m it received out of the door.
Southend-on-Sea BC was initially sent £5.3m by the Government and also had plenty left over by the deadline for spending the cash.
The council’s executive director for finance and resources, Joe Chesterton, suggested some businesses did not want the money because they would have to pay tax on the grant.
Mr Chesterton told The MJ: ‘Apart from me wheeling down the high street with a wheelbarrow full of cash people just didn’t want it. It was crazy. We were literally ringing people up and urging them to apply and people didn’t need it. We were really struggling to get the money out the door.’
However, other councils were more frustrated by the Government’s insistence that they had to spend all of their initial allocation before receiving the top-up payment.
A number of local authorities were forced to balance trying to distribute as much of the available funding as possible with their duty to protect the public purse.
This burden of evidence on businesses applying for the funds affected Derby City Council, which had allocated all of its initial £7.4m funding by the mid-summer deadline but was not eligible for the second tranche because it officially had not all been spent.
A council spokesperson explained: ‘To have spent all the initial funding by July 31, numerous grants would have had to be paid up-front without all of the appropriate assurance checks being completed, such as undertaking due diligence on the applications received for our ARG inward investment fund.’
There’s plenty for the Government to learn from the ARG. With businesses inevitably needing more help to get back on track, it’s vital that Whitehall pays attention to what went wrong so it can do better in future.
