Replacement of EU structural funds for Least Developed Regions

The Library’s briefing on the UK Shared Prosperity Fund (SPF) contains background on the EU structural funds and their administration, along with most of the details we currently know about the SPF and some of the issues that will need to be considered in its design.

Recent developments

Since the publication of this briefing, some more information and analysis has come out.

Parliamentary reports and questions

On 14 May 2019, there was a debate on the SPF in Westminster Hall. This debate was led by Dan Jarvis MP.

Responses to Parliamentary Questions – one in March and one in June – suggest that funding to support fisheries will not be covered by the SPF. This will instead be provided by four new funds covering the four nations of the UK.

On 6 June, the National Assembly for Wales’s Senedd Research service published an update on the Shared Prosperity Fund. This included Welsh First Minister Mark Drakeford’s summary of the Welsh Government’s position on the administration of the Fund after Brexit as “not a penny less, not a power lost” – in other words, the Welsh Government is pushing for there to be effectively no change in either the amount of money or the control that they have over its spending.

On 11 June, the SPF was brought up at BEIS questions. There was little new detail revealed – Minister Jake Berry said that decisions on the Fund would be taken at the Spending Review and that there had been 25 official events to meet with stakeholders.

Think-tank analysis

Two pieces of analysis have also been released that look into the effect of Brexit on spending on regional development. The first, published in January 2019 by the Conference of Peripheral Maritime Regions (CPMR), argues that GDP per person has decreased in a number of regions across the UK relative to the EU average. The result of this would be that if the UK were to remain part of the EU during the 2021-27 framework period, a total of five regions in the UK would be categorised as ‘less developed regions’ (up from the current two), and the UK would therefore receive around €13 billion in regional development funding over this period.

The Library has attempted to replicate this analysis, with some success – the latest data indicate that at least six regions could in fact be classified as less developed regions in the next framework period (Tees Valley and Durham, South Yorkshire, Lincolnshire, Cornwall and Isles of Scilly, West Wales and the Valleys, and Southern Scotland). The ‘Outer London – East and North East’ region is also on the borderline for this classification. The amount of funding they could have been eligible to receive may therefore be even higher than estimated in the analysis.

The data also confirm that many regions in the UK have been growing more slowly than the EU average, particularly since 2016. However, this does not necessarily indicate greater regional inequality within the UK, as the trend is also affected by the high growth in the Eurozone around 2016-17.

The second piece of analysis comes from the Communities in Charge campaign, and compares EU funding priorities with those of the UK Government. It argues that the UK Government’s spending on the areas covered by the structural funds – broadly speaking, economic affairs – tends to be skewed in favour of wealthier regions, and that the regions that currently benefit from structural funding could therefore be at risk of losing out significantly if the Government took over the administration of this money.

However, the approach taken in this analysis is questionable. It rightly points out that spending from the Shared Prosperity Fund will be driven by UK Government priorities, which may differ from the EU’s priorities. However, the set of UK Government spending areas it looks at do not accurately represent spending covered by the structural funds. In particular, it includes all spending on transport, which is not a major focus of structural funding. It is also worth noting that the UK Government already does have significant input into the way that structural funds are spent, because it is the Managing Authority for these funds in England and it drew up the Operational Programmes that govern them.

The Library contacted the Communities in Charge campaign with these concerns. Their response was that they agreed that the spending areas they used were not directly comparable – the emphasis of their research was on the potential risks of regions losing out on funding, given the lack of detail currently available about the SPF and the possibility that the UK Government's priorities would be different. Their emphasis was not intended to be on the suggestion that particular areas definitely would lose out.