‘Negligible’ progress being made by UK Government to replace EU funds in Wales, says committee

In 2017, the UK Government pledged to replace EU Structural and Investment (ESI) funds, currently worth around £375m per year to Wales, with a Shared Prosperity Fund post-Brexit. However, in a new report, the Welsh Affairs Committee finds that, with just three months to go until the end of the transition period, there is still no substantive detail from UK Ministers about their plans and a range of issues remain unresolved.

MPs call on the Government to offer urgent reassurance on the Shared Prosperity Fund and to guarantee that there will be no cliff-edge end to EU funds from January 2021. Their report calls on the UK Government to provide a firm date for when substantive information about Fund will be made available. This includes what it will look like and how it will be funded and administered. The report adds that there should be consultation with all relevant stakeholders about their priorities for the Fund in light of COVID-19, given that ESI funding has already been re-purposed by the Welsh Government to respond to the COVID-19 pandemic.

Given the lack of clarity from the UK Government so far, the Committee also sets out its key priorities for the Shared Prosperity Fund. These include:

1. The size of the funding pot: The funding pot should be needs-based and maintain at least the current size of funding in real terms. While funding should be based on a multi-annual basis, it should be reactive to the health of the economy as Wales, and the rest of the UK, seeks to recover from the COVID-19 pandemic.
2. The length of the funding period: At present, there is a seven-year financial framework system used by the EU which means that areas have certainty over the amount of funding that they have at their disposal. The report concludes that the SPF should be funded via a needs-based formula over a multi-year financial framework to allow a fair allocation and effective planning and delivery. The Committee calls on the UK Government to provide reassurance that multi-year funding will continue and work with the Welsh Government to give serious thought to the potential methods of calculating Wales' funding requirements.
3. The administration of funding: The Committee concludes that whatever role the UK Government plays in the administration of the Shared Prosperity Fund, the Fund should be built upon the principle of cooperation and partnership between the UK Government, the devolved administrations and local government. MPs recommend that the UK Government should work with the devolved administrations and local government to develop a 'memorandum of understanding' that will underpin the operation of the Shared Prosperity Fund. This memorandum should be built around a partnership approach and provide a guarantee of genuine joint working and engagement for all stakeholders, including the third sector.
4. The role of local government and City and Growth Deals: The UK and Welsh Governments should give serious consideration to the role that local government plays in the delivery of the Fund. Both the UK and devolved administrations should seek to learn the lessons of how joint working has been facilitated by and through the City and Growth Deals, and how those lessons could be applied to the Shared Prosperity Fund. In designing the fund, Ministers should consider the opportunities for how these Deals might complement the new funding arrangements.

Chair of the Welsh Affairs Committee, Stephen Crabb MP, said:

“The UK's withdrawal from the European Union and the impact of the COVID-19 pandemic makes this an exceptional time, and unique opportunity, to design a more responsive and adaptable system of structural and regional funding.

“However, more than three years after the UK Government announced its intention to replace EU funds with a Shared Prosperity Fund, there is still no clarity as to what this Fund will look like. This is a simply unacceptable state of affairs. We are calling for the Government to bring forward their proposals and to provide urgent reassurance that there will be no funding cliff edge in January 2021.

“The switch to the Shared Prosperity Fund represents an opportunity to reset and re-evaluate Wales' economic priorities and to develop a new system that tackles the root causes of Wales' economic underperformance. While there are differences of opinion as to how the Fund should be administered, we are clear that the Fund should be built upon the principles of cooperation and partnership between the UK Government, devolved administrations and local government.”