In amongst the shocking stories of the war in Ukraine and the latest revelations on Partygate, you could be forgiven for having missed the Government’s recent announcement of how it intends to replace former EU development funding with a new UK Shared Prosperity Fund (UKSPF).
The way this fund works though, will have profound implications for raising economic prosperity and wealth in our most deprived areas. Announced as a commitment in 2017, it has been a long time in the coming.
How does it measure up? Well for me there are three key tests of this. Firstly, does it honour the commitment to match the scale of EU funding? Secondly, will it be effective in delivering the Government’s ambition of levelling up the UK? Thirdly, will it advance the devolution agenda and allow local authorities to take back control? Whilst there are some positives in the Government’s proposals, I’m afraid that on each of these key questions I find them wanting.
Let’s start with the scale of funding. The Government has set out a three-year funding programme starting with £400m in 2022/23, rising to £700m in 2023/4 and then £1.5bn in 2024/25. Only in the last year does it match in real terms the EU structural funds. The Government argue that this allows for the winding down of current EU funding but I’m afraid that this a pretty obvious sleight of hand. EU funding would have had an ‘overlap’ across programmes so the practical effect of the Government’s proposals is that the available funding is reduced by almost a half. Not a great start. No wonder so many of the metro mayors have expressed their unhappiness.
Equally important though was that EU funds were committed for seven years, with the prospect of the continued funding for the most deprived areas of it going beyond this date. This gave precious certainty and the ability for regions to plan long term and do the big things, for example the creation of the Advanced Manufacturing Park in South Yorkshire. A seven-year budget would have taken us to the Government milestone of 2030.
Another concern about the use of the funding in the early years is the extent to which it will be able to be used to tackle the substantial skills deficits post Brexit, something highlighted by the group Communities that Work.
Moving on to levelling up, the funding allocation follows a similar distribution as that of EU funding but with a rather odd minimum sum of £1m for each local authority. This not only spreads the ‘jam’ very thinly but also, as the Institute for Fiscal Studies points out, is a missed opportunity to address weaknesses in the way EU funding was allocated and changes to the economy in different parts of the economy since those allocations were made. Equally serious for me is the failure to look afresh at the scale of sustained long term investment that will be needed to truly rebalance our economy over the next 30 to 50 years. In the independent UK 2070 Commission that I chaired we argued for at least a tripling of the level of structural funds. Arguably, with the damaging impact of COVID this should be higher still. The chancellor would no doubt point to the already high levels of government spending and deficit. However there is no other meaningful way out of this other than with higher, more sustainable and more equitable economic growth.
Another missed opportunity in the announcement is to truly join up policy and funding across government. The Levelling Up White Paper rightly made great play of the ‘system weaknesses’ in the way we do things in the UK. It is not obvious how the Government’s proposals for the Shared Prosperity Fund will address these.
Finally, the impact on devolution. The Government has promised that bureaucracy will be slashed. As someone who was closely involved in the administration of the South Yorkshire EU Funding Programme, I can see the attraction if this is to genuinely be delivered. However the EU ‘bureaucracy’ worked in a different way, with an intensive focus on the development of the Single Programme Document bringing together all of the different sources of funding and then greater devolution of decision making for all but the larger and more complex projects. To be approved, the sub-regional programmes had to be rooted in an analysis of the regional economy and developed with genuine community engagement. Those involved in the Merseyside Objective 1 Programme, such as Professor Ian Wray of the Heseltine Institute, have argued that this rigorous approach was critical to its success. The Shared Prosperity Fund risks replacing the programme control of the EU at sub regional level with individual project control by the UK Government at individual council level. It will take an enormous effort to curb the micromanaging instincts of Whitehall and manage the fund in a genuinely devolved way.
Let me finish on a positive note though. The funding can and will do some genuine and lasting good in some economically disadvantaged areas, the more so if the decisions are made as part of local inclusive growth strategies. There is still much to play for and time to put flaws right. Rebalancing the UK economy is a marathon not a sprint.
Lord Bob Kerslake chaired the UK2070 Commission and is a former head of the Civil Service
@SirBobKerslake