Rishi Sunak has cancelled plans to hold a second round of Boris Johnson’s £3.6bn towns fund in a move that could anger Tory MPs.

Sky News can reveal that the £300m set aside for a further competition will instead be transferred to the levelling up fund, which has been criticised for slow delivery.

The towns fund was first announced by Boris Johnson in July 2019 and initially supported the development of 100 locations, including former Labour heartlands that turned Conservative for the first time at the last general election.

The fund quickly attracted criticism of “pork barrel” politics after analyses found that the vast majority of places benefitting from the cash were held by Tory MPs.

In November 2020, MPs on the public accounts committee criticised the process by which some towns were selected for funding over others, branding it “opaque” and with “every appearance of having been politically motivated”.

While the government never officially set out a timeline for a second round of the towns fund, statements made by Mr Johnson and the housing ministry – which was responsible for it at the time – suggested places that initially missed out would be given the opportunity to bid for more funding.

Nadine Dorries to ‘prolong pain’ for PM by resigning later – politics latest

A government spokesperson confirmed that the money set aside for a future towns fund had been rolled into the £4.8bn levelling up funds pot “as part of our commitment to streamlining and simplifying our funding programmes”.

The development comes as Tory MPs grow increasingly frustrated with the pace of levelling up and the slow delivery of funding.

‘There will be angry colleagues’

One Conservative MP who spoke to Sky News said the levelling up schemes were not “operating in the way they were envisioned” and blamed the civil service “blob” for the way cash was diverted.

“We all know that these pots were meant to flow to red wall seats, but haven’t,” they said.

“You saw in the budget efforts to create levelling up partnerships rather than levelling up funding, because once the blob gets involved the money ends up in posh seats rather than where people actually want it to go.

“It’s perverse, and so I can see why the government would want to change the delivery models.”

A former minister said the move was “reasonable” as long as a third round of the levelling up fund took place before the next election “to support communities that have put so much faith in us”.

“What wouldn’t be acceptable would be for a delay to mean the promised investment doesn’t happen – which I can’t believe is the intention.”

Another Tory said the move was symptomatic of Mr Sunak not wanting to “make a decision”.

“The government doesn’t want to spend any money at all,” they said.

Read more:
Rishi Sunak denies favouring the South with levelling up funding allocations
Levelling Up department must ask Treasury to sign off on big projects, minister confirms

“Kicking and kicking it back probably helps the government, but it’s a strange old strategy.

“I just don’t see how the government properly functions at this rate. Normally they used to say that you build up your enemies at reshuffles, but they seem to be building up enemies whichever way they turn.

“I imagine there will be angry colleagues.”

The government announced in the March budget that it would inject a further £1bn for a third round of the levelling up fund but a timetable for delivery has yet to be set out.

During a recent debate, Mr Johnson challenged Levelling Up Secretary Michael Gove to “accelerate” the pace of the “now-stalled” Levelling Up Bill, a cornerstone of the party’s 2019 election win which is currently tied up in the House of Lords.

His calls were echoed by a handful of East Midlands Tory MPs, who wrote to Mr Sunak last month urging him to fast-track the Levelling Up Bill – or risk losing the next general election.

“If the government fails to pass this law… urgently, before the summer… our opportunity to seize this chance and deliver tangible, real-world benefits to our constituents ahead of the next general election will be lost,” they wrote.

‘Yet another broken promise’

Lisa Nandy, Labour’s shadow levelling up secretary, said: “This is yet another broken promise from this government to our poorest communities.

“A couple of months ago we found out that just 8% of the levelling up fund has been spent two-and-a-half years after it was announced, and now we learn that ministers have quietly shifted the goalposts on the towns fund.

“This sums up the problem with the Conservatives’ Hunger Games-style bidding system, where local leaders have to go cap-in-hand to Whitehall.

“It leaves communities reliant on a begging bowl in Westminster and helpless when ministers renege on their promises.”

A government spokesperson said: “Levelling up remains a long-term programme of reform that is breathing life into overlooked communities.

“As part of our commitment to streamlining and simplifying our funding programmes, the £300m investment that was set aside for a future round of town deals is now being delivered by the levelling up fund.

“All places have had the opportunity to apply for funding for levelling up projects, with almost £10bn allocated to support around 1,000 projects since 2019.”