A HM Treasury spokesman said areas ‘most in need’ would be given preference but other bids could still be successful if they were ‘exceptionally high quality’.
The Levelling Up Fund is aimed at boosting town centres and high streets, small transport projects, and upgrading local cultural assets.
A category system, unveiled by the Chancellor in the Budget, places Sheffield and Barnsley lower than the Chancellor’s own constituency of leafy Richmondshire in North Yorkshire.
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The move prompted a furious letter from Sheffield City Region Mayor Dan Jarvis who accused Rishi Sunak of ‘making a mockery of the government’s commitment to levelling up’ by favouring affluent areas. He also demanded to see the allocation formula.
The Tories were also criticised this week after it was revealed 40 of 45 places sharing £1bn from the Towns Fund are represented by Conservative MPs, including Stocksbridge which received £24m.
In November, the Public Accounts Committee, criticised an earlier round of the £3.6bn Towns Fund as ‘opaque‘ and ‘not impartial’ after a number of areas in marginal seats in the last General Election were chosen for investment despite scoring a low rating on criteria set by the government.
Mr Jarvis said: “It beggars belief that the Chancellor’s relatively affluent Richmond constituency is considered to be in greater need of levelling up investment than Barnsley and Sheffield.
“It’s yet again proof that this Government’s actions are levelling South Yorkshire down – pushing our region and some of the poorest places in the North to the back of the queue for investment.
“I'm pushing the Chancellor and the Treasury to publish the allocation formula immediately. They must dispel any notion that this is a repeat of the Towns Fund fiasco.”
He added: “At such a critical moment for our divided country, when families and businesses across the country need investment and support, we cannot afford to get this wrong. I hope you will look again at these decisions.”
The Treasury spokesman said they placed areas into categories based on the need for economic recovery and growth, improved transport connectivity, and regeneration.
The categories formed only part of the criteria for assessing bids.