51²è¹Ý

1. Scope of changes

What do these changes mean in practice?

We have devolved decision-making responsibility over in-flight Town Deal and Levelling Up Fund (LUF) capital funding programmes, including the Pathfinder pilot, to the local authorities in receipt of these funds, increasing local flexibility, and reducing bureaucracy and inefficiency within the delivery process.

• There is no longer a differentiation between LUF, Towns and Pathfinder capital funding. A single capital pot of funding, the Local Regeneration Fund, has been created that combines these funds.
• There is no longer a requirement to seek MHCLG approval to make project changes. Local authorities will have greater ability to make decisions locally about moving funding between projects in their funding portfolio, cancelling and creating new projects.
• There is no longer a requirement to submit multiple monitoring returns. There is now one single set of outputs and outcomes to report against and one single monitoring return to submit every six months.
• There are no longer different deadlines for different funds. Whilst we expect local authorities to use the flexibilities to unlock and accelerate delivery, all local authorities now have until end March 2028 to spend their funding allocation.

Is the Future High Streets Fund included in these reforms?

No. The Future High Streets Fund concluded in March 2025 and so will not be included in the funding reform programme. Any remaining Future High Streets Fund funding must be defrayed against agreed Future High Streets Fund activity.

Are Capital Regeneration Projects (CRP) or Levelling Up Capital Projects (LUCP) also in scope?

Yes, these projects (also known as LUF Associate projects) are in scope.

My organisation is based in Northern Ireland and is in receipt of LUF funding. Will the reform apply to me?

Local authorities in Northern Ireland in receipt of LUF funding are in scope for the reforms. 

However, in Northern Ireland, LUF funding was also allocated directly to organisations beyond councils. In these cases, we will maintain existing Grant Funding Agreements. Northern Ireland projects with a Grant Funding Agreement are not in scope for the funding reforms.

My local authority was allocated funding through the safeguarded LUF culture projects. Does the reform apply to us?

Projects that were safeguarded following the LUF culture consultation are not in scope for funding flexibilities which means that MHCLG funding cannot be repurposed. Local authorities will however still benefit from the monitoring burden reduction and simplified payments. 

Will the Borderlands Growth Deal be part of the simplified funding process?

No. Borderlands are not in scope for these changes. We will continue to work with Borderlands partners to consider how the principles of simplification can be applied to aid delivery. 

Are the transport LUF projects managed by the Department for Transport in scope for these changes?

No. Grants managed by the Department for Transport will be handled independently.

2. Project prioritisation

Are there any restrictions on what types of project I can spend the funding on?

All projects should provide value for money and contribute to one or more of the government’s missions, with a focus on the delivery of the outputs and outcomes as set out in Annex B of the Technical Guidance.

Can I use the funding to start a completely new project?

It is our expectation that projects already underway will be completed, for the benefit of local residents. In the small number of cases where projects are no longer viable, we expect that councils will use the funding available to invest in the area that originally stood to benefit, so local residents can feel the improvements to their everyday lives that they have been promised.  

Do I need to share a Business Case with MHCLG?

No. Business case development and assurance will take place locally, assured by the S.151 Officer or equivalent (Chief Finance Officer, S.95 or S.54). Local authorities will only need to confirm their project selection with MHCLG within their monitoring return. We will not appraise business cases or have an approval role. 

Do we still need to calculate a BCR to evidence value for money?

We will continue to seek assurance from S.151 Officer or equivalent on the value for money of the overall portfolio of investment but we will not require you to evidence BCR.

What will happen with my current MoU?

A new Memorandum of Understanding (MoU) will be issued towards the end of 2025-26 to participating local authorities. This will supersede all current funding agreements for the Levelling Up Fund, Town Deals, and the Pathfinder Pilot.

Can I use the funding for a discrete phase of a capital project?

Yes. Funding can be used to support specific phases of capital projects and match funding then used to deliver subsequent stages, if that is the local priority.

Can I use the funding to add additional works to an existing project that has not previously received LUF, Towns or Pathfinders funding?

Yes, as long as all projects continue to provide value for money and contribute to one or more the government missions, with a focus on the delivery of outputs and outcomes as set out in Annex B of the Technical Guidance

Can I use the funding to meet a match funding shortfall for a project that is in receipt of other government funds?

Yes, as long as projects continue to provide value for money and contribute to one or more the government missions, with a focus on the delivery of outputs and outcomes as set out in Annex B of the Technical Guidance and is mindful of the attribution of outputs and outcomes across multiple government funding sources.

3. Project delivery

Are there any geographic restrictions on where we deliver projects? Can we deliver a project jointly with another local authority?

Projects must be delivered in your local authority’s boundaries, although there are no restrictions on project location within that area. 

Where an existing LUF funded project is currently being delivered jointly with another local authority, this arrangement can continue.

Can I cancel a project midway through and still be reimbursed for spend to date?

Any MHCLG grant funding spend to date, on projects that are cancelled midway through delivery, will be treated as a ‘sunk cost’ and netted off the remaining funding allocation for each local authority. We would not pay out further amounts as that would take a local authority above its funding allocation.

4. Funding/finance

Is there any more money available?

The government is honouring all existing funding agreements and the funding total for each local authority is based on the existing quantum of their Town Deal, LUF and/or Pathfinders programme. No additional funding is being provided beyond the existing commitments and previously agreed funding profiles (LUF, Towns and Pathfinders combined).

When and how will we be paid?

In 2025-26, MHCLG will make payments in September, based on the latest monitoring returns. MHCLG reserves the right to reduce payments to local authorities where there is significant underspend.

Further information on interim payment plans for 2025-26 can be found at 2.2 of the Funding Reform Technical Guidance note.

When does all the funding need to be spent?

All MHCLG funding needs to be spent by end March 2028. Local authorities are able to make changes to individual project spend and funding profiles as long as the total MHCLG allocation is not exceeded and capital/revenue splits are maintained.

However, we expect local authorities to use the increased flexibilities to unlock and accelerate benefits, ensuring delivery momentum continues rather than pushing spend into future years.

Will I lose the revenue funding that was previously allocated?

We will honour the existing capital/revenue split for each place based on what was previously agreed for places with Town Deals or the Pathfinders pilot.

Where a place is in receipt of a revenue allocation, this can be used flexibly on their revenue programme of activity e.g. moved from one revenue project to another where the need is greater. There is no additional revenue funding available beyond what places are already in receipt of.

What revenue costs can be capitalised?

Decisions on how to manage the funding allocation, including the capitalisation of costs, are a matter for each local authority’s S.151 Officer or equivalent (Chief Finance Officer, S.95 or S.54).

Can any of the money be spent on project management?

Decisions on how to manage the funding allocation are a matter for each local authority’s S.151 Officer or equivalent (Chief Finance Officer, S.95 or S.54).

Will I still be required to report on revenue and capital spend separately?

Yes, at the portfolio level.

Does the project need to be operationally complete by the end of the funding period?

MHCLG funding should be spent by end March 2028 although we accept that some delivery will follow at a later date, for example if the project is being completed with additional match funding.

5. Local governance and consultation

How should we approach consultation?

We recognise that engagement and collaboration with local stakeholders is critical to the success of any funding delivery. We strongly encourage local authorities to consult with key stakeholders, including MPs in their local areas on any proposed changes and in particular changes to the location or projects and/or intended beneficiaries.

Should we retain Town Boards?

We recognise that there are some strong local governance structures that already exist, including Town Deal Boards in some places. Whilst we would encourage local authorities to make use of these, it is for the local authority to decide what governance structure works best for them.

6. Project and programme changes

Will we have to complete a Project Adjustment Request to make changes to our project?

No. The new programme will no longer have Project Adjustment Requests. All decisions on project changes will be taken at local authority level. Whilst we no longer require local authorities to seek approval for changes, we do ask that local authorities tell us what has changed or is likely to change, and why, in the combined monitoring return and in conversations with us in between formal reporting periods.  We would particularly welcome advance discussions on significant changes.

What do I need to share with MHCLG if I am using the funding to deliver a new project, change an existing project or cancel a project?

You will not be required to submit a Project Adjustment Request. Where you have made changes, you should include this in the programme narrative of your performance return and include any changes to outputs and outcomes, together with assurances on value for money and support to government missions.

Can I move funding between projects?

Yes, local authorities will be able to move money between project budgets without submitting a Project Adjustment Request to MHCLG.

7. Monitoring and reporting

When and how do we submit monitoring returns?

We had previously informed local authorities that the next monitoring round would be commissioned for October. However, to give places time to consider how this news may impact projects, we have decided to cancel this round.

The first monitoring reporting round for the combined fund is expected to be in Spring 2026. Communications and guidance on the new tool will be issued nearer the launch date.

Will the level of information requested in monitoring returns be simplified?

Yes. Local authorities will be required to submit accurate expenditure profiles and deliverables as these will continue to inform decisions on payments but at a portfolio level rather than at a project level. There will no longer be a requirement to profile the outputs and outcomes across financial years.

Local authorities will be required to confirm which projects are being funded but we will no longer ask for detailed project level spend and delivery data.

What will the assurance and audit requirements be?

Separate assurance activity, including local authority assurance reviews, will remain in place. 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 three separate funds.

Local authorities will need to retain all relevant documentation for audit purposes as per the relevant clauses in their MoU.

How long will monitoring continue post 2028?

Monitoring will continue for 3 years post closure.

8. Evaluation

Will there be any evaluation requirements?

Participating local authorities will not be required to carry out local evaluations. It will be for local authorities to determine their approach to local evaluation of their projects/ portfolio of projects. Local authorities may therefore wish to continue collecting project level data across a much broader range of metrics for their own local monitoring, reporting and accountability.

We would also encourage local authorities to conduct reflective exercises (e.g. lessons learnt) to help inform the development of their project pipeline

MHCLG 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.

Local authorities will still be expected to take part in MHCLG led evaluations and provide MHCLG with data as set out in their MoU.

9. Subsidy control and state aid

Who will be responsible for ensuring subsidy control compliance?

Local authorities will have the freedom to make decisions about how best to use their consolidated allocation of funding and which projects they want to select to fund without MHCLG involvement. Local authorities will therefore be responsible for ensuring that all new funding decisions are compliant with the domestic subsidy control regime and the UK’s international obligations.

Is State aid still relevant in Northern Ireland?

Article 10 of the Windsor Framework confirms that in limited circumstances state aid remains applicable for measures in Northern Ireland. When making funding decisions local authorities in Northern Ireland will need to determine whether subsidy control or state aid is relevant.

Can we award a subsidy to a new project?

Yes, local authorities may award a subsidy to a new project selected in accordance with the Funding Reform Technical Guidance. It is recommended that local authorities refer to the statutory guidance as part of designing and awarding a subsidy.

Can we invest additional funding into a project that has previously benefited from a subsidy?

Yes, this is possible. But local authorities will need to understand details of any subsidies previously awarded to the project and speak to the relevant public authority to ensure that any terms and conditions will not be breached by the introduction of additional public funding. For example, the cumulation of subsidies may take the project over the current financial thresholds for a mandatory referral to the Subsidy Advice Unit. 

Can we use the Levelling Up Fund Subsidy Scheme to make a subsidy award?

Local authorities can only use the Levelling Up Fund Subsidy Scheme to award a subsidy to a project that was approved through the Levelling Up Fund. If a local authority intends to use their consolidated pot to award a subsidy to a new project, it will be out of scope of the Levelling Up Fund Subsidy Scheme and local authorities must find a different way to make the award.

Is there a Streamlined Route we can use to award a subsidy?

Streamlined Routes are instruments under which subsidies can be awarded. There are currently 3 Streamlined Routes in use. Following a recent consultation, the Department for Business and Trade has committed to creating 2 new Streamlined Routes: ‘Community Regeneration’ and ‘Arts and Culture’. These are expected to be published and available to use later this year.         

Where can we find out more information about subsidy control?

The provides the legislative background. The UK subsidy control regime: statutory guidance provides a detailed framework for designing and awarding subsidies in accordance with the Subsidy Control Act. It is recommended that local authorities seek legal advice as part of the subsidy giving process.

10. Help and support

If I need help delivering a project, is MHCLG able to support?

Each local authority will have a dedicated point of contact within the MHCLG programme team, who is available for conversations on portfolio delivery. Local authorities are best placed to solve any local challenges and we do not intend to offer a ‘one size fits all’ centrally imposed support offer. Local authorities should therefore consider making use of existing local networks and support mechanisms to help with project delivery.

11. Comms and branding

Are there any comms and branding requirements for the programme?

All places should continue to use the for any branding and promotional materials. 

Please also refer to the Technical Guidance.