Brexit Economy Finance

The UK Shared Prosperity Fund: What are the latest developments and key issues?

On 11 June the Assembly will debate the UK Shared Prosperity Fund. Since the Conservative manifesto for the 2017 UK General Election committed to replacing EU Structural Funds in the UK with a Shared Prosperity Fund, organisations have been anticipating further information on how this might work. 

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06 June 2019

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On 11 June the Assembly will debate the UK Shared Prosperity Fund.

Since the Conservative manifesto for the 2017 UK General Election committed to replacing EU Structural Funds in the UK with a Shared Prosperity Fund, organisations have been anticipating further information on how this might work. 

Wales receives over four and a half times as much Structural Funds per person than the UK average during the 2014-20 round.  Therefore, the decisions to be made on the UK Shared Prosperity Fund will be of particular importance to Wales. The key points are whether Wales continues to receive current levels of funding, and how much control the Welsh Government will have over how funding is spent in Wales.  The First Minister, Mark Drakeford AM, has set out the Welsh Government’s position as follows:

Brexit: Not a penny less, not a power lost.

What do we know about how the UK Shared Prosperity Fund might operate in Wales?

The UK Government has not yet set out the details of how the UK Shared Prosperity Fund will work, and it is not yet clear how much funding Wales will receive, or what role the Welsh Government will play in its administration.  It was originally planned that there would be a consultation by the end of 2018, but this has been delayed.

In July 2018, the UK Government Secretary for State for Housing, Communities and Local Government, James Brokenshire MP, set out an update on proposals, including that the fund will tackle inequalities within communities by raising productivity, especially in parts of the UK whose economies are furthest behind.  The fund will seek to simplify administrative arrangements, and will operate across the UK.  The UK Government states that 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.

In March, the Secretary of State for Wales, Alun Cairns MP, wrote to the Assembly’s External Affairs and Additional Legislation Committee regarding the UK Shared Prosperity Fund.  In his letter, he stated that:

As Secretary of State, I am working to protect Wales’ interests and to ensure that Wales benefits from the greatest degree from the UK Shared Prosperity Fund…I am particularly keen to consider how organisations at the local level, including local authorities, can have the greatest influence over spending decisions under the UK Shared Prosperity Fund.

In response to a Westminster Hall debate on 14 May the UK Government Parliamentary Under-Secretary of State for Housing, Communities and Local Government, Jake Berry MP, provided an update on the latest developments on the UK Shared Prosperity Fund.  He stated that the consultation on the fund will start ‘very shortly’, and that:

  • the existing model of EU Structural Funds is excessively bureaucratic, and does not target many of the UK Government’s priorities;
  • the UK Government must consult on the UK Shared Prosperity Fund prior to the Comprehensive Spending Review which is scheduled for 2019; and
  • the UK Government has engaged with more than 500 stakeholders at 25 events, including the devolved administrations.

What have the Welsh Government and Assembly Committees said about the UK Shared Prosperity Fund?

The Welsh Government has set out its proposals for regional investment in Wales after BrexitIt is opposed to a centralised UK Shared Prosperity Fund, and suggests that a UK-led approach would potentially mean less funding for the poorest areas in Wales and would not respect the devolution settlement given that economic development is a devolved area.

Instead, the Welsh Government proposes ring-fencing funding for regional investment so that it is spent on economic development.  It would ensure that funding is targeted at areas most in need; would ensure that this funding is allocated using a rules-based mechanism; develop a people and place-based model of regional economic development; and devolve power beyond Cardiff Bay so that local and regional areas have greater responsibility for planning and decision making.  Our previous article on regional investment after Brexit sets out the Welsh Government’s proposals in greater detail.

The Counsel General and Brexit Minister has set out his concerns about the lack of information available about the UK Shared Prosperity Fund.  In evidence to the External Affairs and Additional Legislation Committee earlier this week, he stated that the Welsh Government has no clarity on the timing of a consultation or whether a Comprehensive Spending Review will take place that would provide details of how much funding will be available.

In March, the First Minister expressed concern that the Secretary of State for Wales is seeking to bypass the Assembly in the design of the UK Shared Prosperity Fund:

And I think it’s as clear as day that the Secretary of State would wish to bypass the National Assembly for Wales. And he thinks that the way to do it is to dangle small amounts of cash in front of hard-pressed, cash-strapped local authorities and others, and say to them, in a way that I do not think bears examination, that the way that he would like the shared prosperity fund to work would mean that money would go straight to them and bypass the National Assembly.

We have also published two previous articles that set out the views of the Assembly’s Finance Committee on replacing EU funds, and the Welsh Government’s response to these.  The Finance Committee made a cross-party case for future funding for Wales, recommending that the Welsh Government negotiate with the UK Government to secure at least current levels of funding from the UK-wide Shared Prosperity Fund.  It also called for the Welsh Government secure responsibility for the administration and management of the UK Shared Prosperity Fund in Wales.

What is the view beyond the Senedd?

In the Finance Committee’s report on replacing EU funds, Welsh organisations expressed strong support for the position that Wales should not be worse off as a result of the UK Shared Prosperity Fund replacing EU Structural Funds.  Organisations expressing this view included academics, third sector bodies, local government, and business representative organisations.  Similarly, there was support for the Welsh Government managing and administering the UK Shared Prosperity Fund in Wales.  No individual or organisation who gave evidence to the Committee called for the UK Government to administer the fund in Wales.

Beyond Wales, the Scottish Government has expressed similar views to the Welsh Government on levels of funding and devolution of administrative arrangements.  It wrote to the UK Government in February expressing its concern about the uncertainty around future funding arrangements, and stated that:

We are absolutely clear that we expect the value of the funds to remain at least the same and that we retain the ability to design and operate them in line with the best interests of Scotland.

The House of Commons’ All Party Parliamentary Group on Post-Brexit Funding for Regions, Nations and Local Areas published its report on the fund in November 2018.  This recommended that:

  • For the moment, the UK Government should roll forward the four UK nations’ existing shares of EU funding into the UK Shared Prosperity Fund.
  • Within the framework of agreed UK-wide guidelines, the allocation of the funding to local areas within the devolved nations should be a devolved matter, as should detailed design and delivery.

While there is less consensus on how the funding should be allocated across the different parts of the UK, a number of bodies have recommended that the devolved administrations manage the UK Shared Prosperity Fund.  The Joseph Rowntree Foundation states there should be no reduction in the freedoms by which the devolved administrations manage regional development money under the fund.  Similarly, the Institute for Public Policy Research highlights that European Structural Funds were devolved, and that devolved administrations should have the freedom to decide what to spend funds on as their constitutional right determines.  The Federation of Small Businesses considers that changing the arrangements so that the UK Shared Prosperity Fund would undermine progress made in business support, and that administrative arrangements should be devolved.

Article by Gareth Thomas, Senedd Research, National Assembly for Wales