By Professor Steve Fothergill, The Centre for Regional Economic and Social Research, Sheffield Hallam University
One of the consequences of the UK’s impending departure from the European Union is that EU funding to the UK regions will come to an end. With the Treasury still determined to reduce the budget deficit, there had been widespread fears that the EU monies would not be replaced. But the Conservative manifesto, in particular, has come up with a surprise.
In the present EU spending round, which runs until the end of 2020, the UK had been scheduled to receive a little under £1.5bn a year from the European Structural and Investment Funds. The largest share of this goes to the poorest parts of the UK where it co-finances investment in infrastructure, business support and training. Indeed, for more than thirty years EU funding has been at the heart of UK regional development.
The UK government’s initial response to the Brexit vote in June 2016 was only to guarantee funding for EU-supported projects signed off in the normal course of business by the time of the November 2016 Autumn Statement. This was subsequently revised to a guarantee to fund projects signed off by the time of Brexit, now expected to be March 2019. This still fell a long way short of guaranteeing all the monies previously due by the end of 2020, let alone addressing what might happen further into the future.
The Labour Party was always likely offer a fuller guarantee. On the very day of the Brexit referendum result, for example, the Labour First Minister in Wales, Carwyn Jones, called for the EU funds due to Wales to be fully underwritten. In its manifesto for the 2017 General Election, Labour says: “We will ensure that there is no drop in EU Structural Funding as a result of Brexit until the end of the current EU funding round in 2019/20. As part of Labour’s plan to rebalance and rebuild the economy, we will ensure that no region or nation of the UK is affected by the withdrawal of EU funding for the remainder of this Parliament.”
But the real surprise is the Conservative manifesto. It says: “We will use the Structural Fund money that comes back to the UK following Brexit to create a United Kingdom Shared Prosperity Fund, specifically designed to reduce inequalities between communities across our four nations. The money that is spent will help deliver sustainable inclusive growth based on our modern industrial strategy. We will consult widely on the design of the fund, including with the devolved administrations, local authorities, businesses and public bodies. The UK Shared Prosperity Fund will be cheap to administer, low in bureaucracy and targeted where it is needed most.”
Local authorities across Britain’s older industrial areas, working through the Industrial Communities Alliance, had been calling for the establishment of a UK Regional Development Fund to replace EU funding and on an at least comparable scale. The Conservative’s name for the new fund is different but the principle appears to be the same. Indeed, the Conservative’s new commitment appears rather more open-ended than Labour’s promise.
What this means is that the terms of the debate have now shifted. If the manifestos are to be trusted, the issue is no longer whether EU funds will be replaced but rather how the new UK fund is structured and run. Will the funding really be on the scale previously coming from Brussels? Beyond 2020 that’s obviously not so easy to define. What will be the allocation across the country? West Wales & the Valleys and Cornwall, presently the two biggest beneficiaries on a per capita basis, will clearly have a close interest in targeting but there is also a more general issue of the North-South split of the monies. And will Whitehall try to exercise tight control over how the money is spent or take a hands-off approach?
So whilst the manifesto commitments are unquestionably a step forward for the UK’s less prosperous areas, they still leave an awful lot to fight about in the next couple of years.