Brexit Communities Economy

The UK Shared Prosperity Fund: What do we know so far, and what effect will this have on Wales?

We are receiving a number of enquiries about the UK Government’s proposed UK-wide Shared Prosperity Fund at the minute.  This blog answers some of the questions we are most frequently asked.

06 November 2018

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

We are receiving a number of enquiries about the UK Government’s proposed UK-wide Shared Prosperity Fund at the minute.  This blog answers some of the questions we are most frequently asked.

What has the UK Government said about how its Shared Prosperity Fund will work?

The Conservative manifesto for the 2017 UK General Election committed to replacing EU Structural Funds in the UK with a Shared Prosperity Fund.  In a written statement in July 2018 the Secretary of State for Housing, Communities and Local Government, James Brokenshire MP, gave an update on proposals, stating that:

  • The UK Shared Prosperity Fund will tackle inequalities within communities by raising productivity, especially in parts of the UK whose economies are furthest behind;
  • It will have simplified administrative arrangements aimed at targeting funding effectively; and
  • It will operate across the UK. The UK Government says it will respect the devolution settlements in Scotland, Wales and Northern Ireland, and will engage the devolved administrations to ensure the fund works across the UK.

Further details of the UK Shared Prosperity Fund will follow in a consultation by the end of 2018.  Decisions on the operation and allocation of this fund will be made following the consultation, and will be subject to the UK Government spending review to be held in spring 2019.

How might the UK Government’s proposals for the Shared Prosperity Fund in relation to Wales differ to current arrangements?

The Welsh Government currently administers the 2014-20 round of EU Structural Funds in Wales.  In the explanatory memorandum to the regulations it laid giving the Welsh Government powers to do this, the then UK Government stated that:

The Government’s policy on European Structural Funds spending is that it is appropriate for England, Scotland, Wales and Northern Ireland to take responsibility for their own expenditure…

The instrument is politically important in that it shows that the Government is committed to devolving powers, where appropriate, to the Welsh Ministers and demonstrates its commitment to regional spending being controlled at a regional level.

In an interview by BBC Wales on 30 September, the Prime Minister, Rt Hon Theresa May MP, was asked about the level of funding and devolution of the UK-wide Shared Prosperity Fund that Wales could expect after Brexit.  She responded that:

            The point of the shared prosperity fund is that we will be looking at issues of disparities between the nations of the UK – disparities within nations and regions and deciding expenditure of money so that we are ensuring that money is being spent as effectively as possible to deliver for people…

I fully recognise the role that the Welsh Government has played [in relation to Structural Funds] and the role that the Welsh Government has played in decisions for Wales.  But obviously as we look at the shared prosperity fund across the whole of the UK we want to ensure that we get the right structure and the right processes involved in that so that the money that is being spent is being spent as effectively as possible because it’s about delivering for people on the ground.

What powers does the UK Government have to operate a replacement for Structural Funds in Wales?

If it wishes to do so, the UK Government could legislate to unilaterally operate a UK-wide Shared Prosperity Fund in Wales. 

Devolution to Scotland, Wales, and Northern Ireland did not change the fact that the UK Parliament is sovereign and can change the law in devolved areas.  The External Affairs and Additional Legislation Committee’s report into the future of regional policy suggests that if the UK Government wishes to exercise powers relating to regional policy in Wales, it would need to legislate to do this:

The Cabinet Secretary also told us that should the UK Government wish to take control of these powers then legislation would be required at a UK level. This tallies with the legal advice that we have received from our advisers in the National Assembly that, upon leaving the EU, constraints placed upon the Welsh devolution settlement, by virtue of EU law, in the field of economic and regional development in Wales would no longer apply. UK constraints – in the shape of reservations from the National Assembly’s competence relating to aspects of regional policy (for example certain fiscal levers) – will continue to be in place.

What is the Welsh Government’s view on the operation of the UK Shared Prosperity Fund in Wales?

The Welsh Government states that it “vigorously and explicitly rejects” a centralised UK Shared Prosperity Fund, which would be “a direct attack on devolution and would risk depriving some of our most disadvantaged communities of the funds they need to develop economically.”

It believes that it is best placed to lead on shaping future regional policy for four reasons.  These are that it has delivered EU Structural Funds in Wales for the past 20 years; has the presence required across Wales; has partnerships in place across Wales; and is responsible for complementary regional policy levers such as skills and infrastructure.

The Welsh Government has also called for the UK Government “to ensure that Wales is not a penny worse off as we leave the EU.”  The Cabinet Secretary for Finance has said that, if Wales continues to receive current levels of funding, this would then be ring-fenced by the Welsh Government for spending on regional economic development.  In a letter to the External Affairs Committee on 2 November, the First Minister stated that the Welsh Government continues to press for full replacement investment.

What have Assembly Committees and Welsh civil society said about how the UK Shared Prosperity Fund should operate in Wales?

In June 2017, the External Affairs and Additional Legislation Committee published its report on the future of regional policy, with the Welsh Government accepting 15 of its 17 recommendations, and accepting the other two in principle.  In September 2018, the Finance Committee’s report into replacing EU funding streams made a number of recommendations in relation to regional investment through the UK Shared Prosperity Fund.  Some of the key conclusions the Committee drew from the evidence of witnesses such as business organisations, academics and third sector bodies who gave evidence to the Finance Committee’s inquiry include:

  • The Welsh Government should negotiate with the UK Government to secure at least the same amount of funding to Wales through the UK Shared Prosperity Fund as it currently receives through Structural Funds, plus inflation. This should be added into the Welsh Government’s Block Grant;
  • The Welsh Government should negotiate with the UK Government to ensure the Welsh Government is responsible for the administration and management of the UK Shared Prosperity Fund in Wales.  No individual or organisation that responded to the Committee’s consultation or gave evidence called for the UK Government to administer the fund in Wales;
  • That there is an opportunity for changes and improvements to be made to the current arrangements, such as reducing bureaucracy in accessing funding, and greater local and regional involvement in planning and decision making.
  • However, there are some aspects such as multi-year funding, tackling poverty, and mainstreaming equality that should be kept.

To stay up to date with what the Assembly is doing in relation to Brexit, you can follow the new Assembly and Brexit pages.

Article by Gareth Thomas, National Assembly for Wales Research Service

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