Northern regions lose out on levelling up funding post-Brexit

03.02.22

Every region in England except Cornwall risks seeing funding halved post Brexit, analysis of the Shared Prosperity Fund (the replacement for EU Structural Funds) in the Levelling Up white paper has found.

If devolved nations are protected as promised, that means less money for the English regions, with the north of England bearing the brunt of the cuts.  

Eight out of ten of the areas that stand to see the biggest cuts per person are in the north of England, with the Tees Valley standing to lose the most, equivalent to roughly -£19 per person a year.

The 2019 Conservative Manifesto stated that the UK Shared Prosperity Fund would “replace the overly bureaucratic EU Structural Funds – and not only be better targeted at the UK’s specific needs, but at a minimum match the size of those funds in each nation.” 

The Autumn Budget “reaffirm[ed] that total funding through the UKSPF will at a minimum match the size of EU Funds in each nation and in Cornwall, each year.”

The top ten English regions which saw the biggest drop in funding

Our previous analysis, based on bidding processes, is now no longer a likely scenario due to the fact we are now set on course for a more needs-based analysis after announcements in the Levelling Up White Paper today. This means the outcomes will more closely reflect how EU funding was previously distributed. 

Overall, the government is planning to spend less on English regional development than was the case under Theresa May or David Cameron (2014-21) despite levelling up being regularly touted by Conservative ministers as a flagship policy.

Our research with PACE at Teesside University and the Joseph Rowntree Foundation (JRF) compared annual allocation of EU funding (European Regional Development Fund and European Social Fund 2014-2020) with annual allocation of the Shared Prosperity Fund if it were to be allocated in similar proportion as the EU funding.

NPP and JRF are urging Government to at least ensure that no region will be worse off under new levelling up funding than they had been before we exited the EU.

In 2018, northern mayors including Ben Houchen, Andy Burnham, Steve Rotheram and Dan Jarvis urged Whitehall to devolve control over the new funding streams to local leaders.

Henri Murison, director of the Northern Powerhouse Partnership, said: “We agree wholeheartedly with Ben Houchen. People in Tees Valley and many other more economically deprived regions of the country, particularly here in the north, have been sold down the river.

“It means less investment for skills, infrastructure, entrepreneurship – everything the government claims to stand for.  

“Michael Gove today presented a serious plan for levelling up – but there’s simply not enough funding from the Chancellor to back it up.

“Protecting promises to the Union must not come at to the cost of helping those in the north of England, and will only sow division further. We share the mission of the Levelling Up department and Metro Mayors to drive up northern productivity.”

Katie Schmuecker, Deputy Director for Policy and Partnerships at the Joseph Rowntree Foundation said: “We welcome the wide-ranging set of missions and targets set out in the White Paper but as ever, the proof will be in the delivery. The lack of new funding announced today is a real concern, and this analysis demonstrates why.

“Some of the worst-off areas will see a significant drop in funding for regional development compared to what they previously received under the EU Structural Funds. More needs to be done before the reality of these plans meets the rhetoric.” 

Methodology

Instead of assuming a seven-year period for the SPF, we looked only at the confirmed funding in the latest 3-year spending review and calculated what that would be on an annual basis compared with previously available funding (also calculated on an annual basis)

We looked at

• Annual allocation of EU funding (European Regional Development Fund and European Social Fund 2014-2020

compared with

• Annual allocation of the Shared Prosperity Fund if it were to be allocated in similar proportion as the EU funding

We have assumed that the devolved administrations and Cornwall and Isles of Scilly have their annual SPF funding protected at the same cash level as their previous EU funding allocation.

We used Local Enterprise Partnerships as the geography because that is what the UK government used for ERDF/ESF. Their doing so again allows us to make the comparison between the two funds (we have made one or two assumptions where boundaries have fluctuated but nothing that changes the substantive conclusion).

Government has assured the devolved administrations and Cornwall & Isle of Scilly that their EU funding levels will be protected. To allow for this, we assumed the absolute minimum or three years’ equivalent (three sevenths) of the amount they were allocated of EU money for 2014-2020.  E.g. Cornwall and Isle of Scilly were allocated around £71.5 billion PA of EU funds, therefore we’ve allocated them the same amount of annual SPF.

We have then divided the remaining Shared Prosperity Fund between the remaining English regions using the % share they received of the EU funds.

Next, we have compared this potential per-year funding for English regions with the per-year allocation of the previous EU funding

We’ve calculated this per-person using the latest ONS mid-year population estimates

EU funding was allocated in euros. We have converted this to £ using the same exchange rate used in the levelling up white paper (page 127)

Sources

For the EU funding allocations, we used the original regional allocation of EU funds in the Secretary of State’s Letter in 2014

https://www.gov.uk/government/publications/eu-structural-funds-uk-allocations-2014-to-2020

Data on SPF funding is taken from the Autumn 2021 spending review and Levelling Up white paper

https://www.gov.uk/government/publications/autumn-budget-and-spending-review-2021-documents

https://www.gov.uk/government/publications/levelling-up-the-united-kingdom