The Institute for Government (IfG) has just published an assessment of the UK government’s plans to replace EU structural funds – including the EU’s European Regional Development Fund (ERDF) and the European Social Fund (ESF) – with its new ‘UK Shared Prosperity Fund’ (UKSPF).
What is playing out here is an illustration of clear direction of travel since Brexit. For devolutionists or federalists amongst supporters of the Union it should provide a stark and long overdue reality check. For supporters of ‘aggressive Unionism’, it will no doubt cause rejoicing. For independence supporters it should ring (again) all sorts of alarm bells: in post-Brexit UK, armed with the sweeping new powers of the UK Internal Market Act (UKIM) what changes will Westminster (effortlessly) ‘force’ upon us next? Arguably, much of whatever it wishes!
- EU structural funds are allocated to member states on a seven-year budgetary cycle
- in the period 2014–20 the UK was allocated €11.0bn: €5.8bn through the ERDF and €5.1bn through the ESF
- based on EU-determined allocation criteria, in 2014–20, England was allocated €7.1bn (€130 per person); Scotland €940 million (€180 per person); Northern Ireland €510m (€280 per person) and Wales €2.4bn (€780 per person)
- so of the four UK nations, Wales has been by far the most reliant on EU structural funds
- the ERDF has been supporting investment in innovation and research, information technology, SMEs, and the promotion of a low-carbon economy
- the ESF has supported employment-related projects and vocational skills training, including for young people.
The IfG points out that when the UK was an EU member, the devolved administrations led in setting the objectives and guidelines for spend of these EU funds in their nations, in consultation with the European Commission. As the managing authorities for the structural funds, the devolved governments ‘authored their own chapters in the agreement’ between the UK and the EU. (my emphasis)
The IfG provides insights into how Westminster government policy towards devolution has dramatically changed. It recalls: ‘In the explanatory memorandum to the 2014 statutory instrument giving Welsh ministers the power to administer EU structural funds, the coalition government noted 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 Welsh ministers and demonstrates its commitment to regional spending being controlled at a regional level”.
These prior arrangements enabled the alignment of ERDF and ESF expenditure with other devolved priorities and spending in areas like skills, business support and infrastructure. As well as delivering direct outputs and outcomes, in my experience EU funded programmes and projects created and implemented in Scotland also had wider benefits. They facilitated networking, partnership working and capacity/capability building involving the Scottish Government; its economic development agencies; local authorities; universities, colleges and research institutes; intermediary business organisations and individual businesses, notably SMEs.
But the power shift seen today is dramatic. Vaughan Gething, the Welsh minister for the economy, has described plans for the UKSPF as a “deliberate, brutish attack on devolution”. The IfG notes this is one of the reasons why the Scottish parliament and the Senedd Cymru withheld legislative consent for the UKIM Act, which of course the UK government could – and did – disregard.
According to the IfG, the UK government has a strong political rationale for creating the UKSPF as a single UK-wide system under its direct control. Spending money directly in all parts of the UK, including on functions that are primarily devolved is the critical element. Johnson’s government believes that the way to persuade voters of the value of remaining part of the UK is ‘for the centre to take – and be seen to take – a stronger role in delivering public services and supporting the economy in all parts of the UK.’ With this in mind, Johnson’s government is hardly likely to be content with using just the UKSPF to further this goal!
The UKSPF forms part of a new strategy that the IfG refers to as ‘assertive unionism’ fuelled by the powers provided by the UK Internal Market Act. It adds: ‘The UK government has stated that the UKSPF provides an opportunity to “bind together the whole United Kingdom” and showcase the benefits of a UK-wide approach to economic development investment.’ By creating the UKSPF as a single UK-wide funding system, the UK government will make it easier to implement cross-border projects than under the EU system.
Conduct of Westminster government
The IfG’s research offers some damning insights into how Westminster is now acting towards the devolved governments as it implements the UKSPF:
- the IfG reports that devolved governments have said ‘they would be willing to work with the UK government to design alternative approaches to delivering UKSPF spending – but that this offer has not been taken up by the UK government’
- the IfG notes: ‘The Scottish government has said that its engagement is conditional on it being treated as a “full and equal partner in the development and delivery” of the replacement to EU structural funds, a condition that the UK government is unlikely to accept.’
- ‘The UK government was elected in 2019 on a manifesto commitment that spending under the UKSPF would “at a minimum” match structural funds allocations in each of the four nations of the UK. The 2020 spending review’s commitment was more vague: it did not reaffirm the commitment that funding in each nation would be maintained.’
- the IfG argues that it is still not clear precisely which streams of EU funding are due to be replaced by the UKSPF – just the structural funds involving ERDF and ESF or other EU finding streams too e.g. LEADER programme funds for rural development
- it still remains unclear over what length of time funding will be offered. Interviewees in the devolved nations expressed concern that the UK government would be unlikely to match the seven-year funding commitments provided through the EU budget cycle.
The roll-out of the UKSPF will follow the implementation by the Tory government of its £220m ‘UK Community Renewal Fund’ (CRF). This is intended in part to build local partner capacity to apply for UKSPF funding. CRF funding is being allocated via a competitive bidding process administered by the UK government, with the MHCLG as the lead department. The IfG reports that there was no consultation on the CRF with the devolved administrations before it was launched.
What we can ‘look forward’ to!
The report identifies these other key features of Westminster’s plans:
- the UKSPF will operate “UK-wide” with “common branding” for projects that receive support – so even more sightings of the butcher’s apron across the land seem likely!
- the UKSPF will operate UK-wide using new financial assistance powers in the UK Internal Market (UKIM) Act which allows the UK government to spend money in any part of the UK “with powers covering infrastructure, economic development, culture, sport, and support for educational, training and exchange opportunities”
- critically, the IfG states that the Westminster government is not required to consult with or seek the consent of the devolved administrations to spend money in their territories even though the fund will spend money on matters that lie primarily within the responsibility of the devolved governments, such as transport, skills and economic development
- whilst the UK government has stated that the devolved administrations will have a “place within the governance structures” of the UKSPF, the IfG notes that evidence suggests that this is unlikely to be a partnership model in which the devolved administrations share control over how the UKSPF is spent
- ‘As one official noted, “a place in the governance structures’ could mean anything”.’
- it adds that the devolved governments are more likely to play only a ‘consultative’ role, on a par with other stakeholders – such as business and local authorities – with limited powers to determine spending priorities or select projects for support.
And the IfG shares this insight: “There have been regular meetings between officials from the devolved governments and MHCLG, as lead department for UKSPF. However, representatives of the devolved administrations told us that MHCLG had been unable to share almost any information on the plans for the fund, apparently because ministers at Westminster have not authorised officials to work in a more open and collaborative way.“
Prospect of pork barrel politics?
The report catalogues a long list of what it calls the ‘risks’ of these plans. It focuses on risks to the efficiency, effectiveness and economy (value for money) of the activities supported by the UKSPF and other new UK-wide funding streams (e.g. the Levelling Up Fund) on the one hand and the cognate activities funded directly by the devolved governments.
The IfG notes almost complete lack of knowledge and experience within the lead department for the UKSPF, the MHCLG. It reports that the UK government has acknowledged the need for civil servants working on the fund to understand “the particular needs, challenges, opportunities and geography” of the places receiving funding. However, rather than working with existing delivery structures within the devolved administrations, the UK government plans to recruit local officials to oversee the implementation of the UKSPF in different parts of the country.
To add confidence (not!) the IfG refers to an inquiry by the Commons Public Accounts Committee in November 2020 into the MHCLG-administered £3.6bn Towns Fund in England. The Committee was “not convinced by the rationales for selecting some towns and not others”.
When the UKSPF is rolled out with UK government funding going directly to competing local bidders, by-passing the Scottish Government and Holyrood, will we see (probably subtle) ’pork barrel’ politics in the cause of Unionism emerge?
Moreover, we can anticipate a constant stream of Unionist politicians and their allied media glorying in the latest Union flag-labelled project – “look how much Scotland needs Westminster, how much Scotland benefits from it”. (And do we see the financial ‘dependency statistic’ in GERS get ramped up too just to reinforce the message?) But more insidiously, we can anticipate endless demands from Union-supporting interest groups for the Scottish Government to allocate (to shift) its own funding alongside initiatives originating in Westminster – for sensible, value for public money reasons of course! ‘Agency’ can effectively be lost in more than one way.
The fate of EU structural funds post Brexit may seem a minor, marginal matter to some given all that’s going on. However, the aims and attitudes associated with ‘aggressive Unionism’ on display here are likely to be signs of things to come. Outside the EU and with Westminster’s new powers gained from the UK Internal Market Act, what’s coming next?
Institute for Government (2021) The UK Shared Prosperity Fund – Strengthening the union or undermining devolution? IfG Analysis report