Shared Prosperity Fund shortfall leaves a gaping hole at the heart of levelling up

22.04.22

By Henri Murison, director of the Northern Powerhouse Partnership

Last week, the Government finally announced the allocations for the Shared Prosperity Fund. The replacement for EU funding will be worth less, with more strings attached and less time to spend it.

Levelling up has had an early test; and it looks like decisions from the Treasury may be the greatest barrier to turning rhetoric into reality.

The UKSPF’s slow ramp up back to previous levels makes it impossible for the promises from the 2019 Conservative Manifesto to be met in this Parliament. Voters were assured that EU funding would be protected: 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.’ 

However, our analysis shows the north of England alone is losing £331m compared to before Brexit – a 34% cut.

At the Northern Powerhouse Partnership, we warned months ago that significant reductions were on the cards, based on the chancellor’s announcements at previous fiscal events. We worked alongside the Joseph Rowntree Foundation and Dr Nick Gray, a researcher at Teesside University’s PACE and now at IPPR North, looking in detail at the promises made by the Government over regional economic development funding – and whether they would live up to reality.

Our concerns were justified: the Government is now spending less on regional economic development than under the Cameron and May governments (2014-2021). The Treasury had promised special treatment for the devolved nations and Cornwall – but it looks like Neil O’Brien MP has managed to secure a fairer outcome, meaning the north has got a better deal than we might have done.

That said, we are still facing serious cuts. Liverpool City Region is losing around £27.5m over the three years of funding, Tees Valley £26.9m, Greater Manchester £52.1m, Cumbria £11.8m, Lancashire £34.1m and the North East £71.3m.

As one of the most regionally imbalanced countries in Europe, parts of the UK – including the north – were big winners of EU structural funding, aimed at raising productivity and addressing entrenched inequalities. However, the cliff edge effect described by the IFS will continue to benefit Cornwall and parts of Wales with far more funding than other areas which are only marginally more prosperous, such as South Yorkshire and Lincolnshire. Failing to correct this fault line of EU structural funding was a big missed opportunity.

Since carrying out our initial research into the potential cuts, I’ve met a huge number of businesses, charities, research projects and grassroots organisations which have benefitted from these funds over the years.

In County Durham, I met Dr David Weinkove and his team at Magnitude Biosciences, a pioneering medical research business supporting clinical trials including into ageing. Their PhD student, who was busy working in the lab when I visited, shared her disappointment that future post-graduates and businesses will miss out as the EU funding, which paid for her placement, runs out.

Henri Murison and Durham Council Leader Amanda Hopgood meet Dr David Weinkove of Magnitude Biosciences

In Lancashire, the deputy vice-chancellor of UCLan told me about their programmes which included helping SMEs across the region attract investment and another which translates innovations from Lancashire’s NHS clinicians to bring them to market.

I’ve met countless young people who have been helped by EU-funded skills programmes and seen first-hand the difference these initiatives have made to their lives (not to mention the huge boost this has added to the local economy). At a time when businesses are crying out for workers, these cuts are both poorly timed and politically problematic for the Government – falling hardest in the so-called Red Wall.

Our concerns don’t end at the lack of money. Funding cycles are now delivered for three years rather than seven, meaning less certainty and more superficial short-termism, rather than long-term strategic thinking. Plus, metro mayors and local leaders will get less of a say over how the money is spent, as all decisions must be run past Whitehall first. This is not real devolution.

The good news (as announced in the Levelling Up White Paper) is that there is no competitive bidding, which will be a welcome change for the regions fed up of being pitted against one another.

Overall, though, it’s a bleak picture.

Most of the blame, it must be said, lies with the Treasury – not DLUHC. Rebalancing our economy cannot and will not be solved by one department alone. It needs to be a cross-departmental, cross-party initiative that has the full backing of the entire cabinet and the involvement of empowered metro mayors if it is to succeed. This was the winning formula that made the Northern Powerhouse so potent when it was launched by the Treasury in 2014.

Spending less in this Parliament on regional economic development will mean less investment to drive up productivity in the regions.  It begs the question, why is the Treasury not more interested in reducing the need for fiscal transfers to less productive parts of the country, such as the north? The long-term health of the UK economy depends on it.

This article first appeared on themj.co.uk

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