Replacing EU funding streams: The case for future funding for Wales

Published 25/09/2018   |   Last Updated 27/05/2021   |   Reading Time minutes

On 24 September the Assembly’s Finance Committee published its report into the replacement of EU funding streams after Brexit. With Wales receiving £680 million per year from a range of EU funding streams, the Committee highlighted that securing suitable replacement funding is vital for Wales. Its report makes a cross-party case for continued future funding for Wales, with the key issues summarised in the video below.

In an interview by BBC Wales on 30 September, the Prime Minister, Rt Hon Theresa May MP, was asked about the level of funding and devolution of the UK-wide Shared Prosperity Fund that Wales could expect after Brexit. In relation to whether Wales would receive as much funding as it currently does through EU Structural Funds, she said that:

The point of the shared prosperity fund is that we will be looking at issues of disparities between the nations of the UK - disparities within nations and regions and deciding expenditure of money so that we are ensuring that money is being spent as effectively as possible to deliver for people.

The Prime Minister was also asked about the level of control of the UK-wide Shared Prosperity Fund that the Welsh Government would have. She highlighted that a lot of discussion is taking place about how the fund will be structured, commenting that:

I fully recognise the role that the Welsh Government has played and the role that the Welsh Government has played in decisions for Wales. But obviously as we look at the shared prosperity fund across the whole of the UK we want to ensure that we get the right structure and the right processes involved in that so that the money that is being spent is being spent as effectively as possible because it's about delivering for people on the ground.

The current round of EU funding runs until 2020, however the UK is scheduled to leave the EU on 29 March 2019. The Financial Settlement that forms part of the draft Withdrawal Agreement agreed between the UK and EU states that the UK will take part in all EU funded programmes until December 2020, subject to a final negotiated agreement. In the event of the UK exiting the EU under a ‘no deal scenario’, the UK Government has said that it will guarantee EU funding awarded to organisations until the end of 2020.

What EU funds does Wales currently receive?

Wales currently receives EU funding from a number of sources. The main two are Structural Funds which aim to address poverty and reduce regional disparities; and through the Common Agricultural Policy (CAP). CAP funding comes in two elements - direct payments to farmers; and the Rural Development Programme. Wales also receives funding from a number of other sources including research and innovation funding through Horizon 2020; Creative Europe; and the European Maritime and Fisheries Fund.

Figure 1: EU funds received by Wales each year

Graph showing the value of EU funds received by Wales each year

In particular, Wales has received considerably more Structural Funds than the other devolved nations and English regions. This is largely due to the West Wales and the Valleys region having the lowest Gross Domestic Product (GDP) per head of any part of the UK, at 68% of the EU average compared to 611% for Inner London West. The UK has the largest regional economic disparity in GDP per person of any of the 28 EU Member States. Consequently, over the current 2014-20 round of Structural Funds, Wales will receive over four and a half times as much Structural Funds per person than the UK average.

Figure 2: Structural Funds per person received by devolved nations and English regions over the 2014-20 period Graff sy'n cymharu Cronfeydd Strwythurol y pen a geir gan wledydd datganoledig a rhanbarthau Lloegr rhwng 2014 a 2020

What might replace EU funding streams?

The UK Government has proposed a UK-wide Shared Prosperity Fund to replace Structural Funds. To date there is little detail on how this might operate, however it is expected by the Welsh European Funding Office that proposals will be consulted on around the time of the UK Government’s Autumn Statement 2018.

The UK Government introduced its Agriculture Bill earlier this month to authorise new expenditure to provide support for the land management sector once the CAP comes to an end. It also allows for payments to be made during a transition period following the UK’s departure from the EU.

The Bill contains provisions that, when they become law, will provide time-limited powers for the Welsh Government to carry on making payments and introduce new schemes until it introduces its own legislation. The Welsh Government intends to introduce an Agriculture Bill before the end of this Assembly term in 2021. As the first step in taking its proposals for land management support after Brexit forward, the Welsh Government is consulting on these in Brexit and our land.

Future plans for continuing to participate in, or replacing, other EU funding sources such as Horizon Europe research and innovation funding, the ERASMUS+ student exchange programme, and the European Investment Bank remain the subject of negotiations between the UK and EU.

What does the Committee recommend should happen to secure the best deal for Wales?

The Committee has made 11 recommendations in its report, and urges both the Welsh and UK Governments to consider and respond to these. Its headline recommendations include that:

  • The Welsh Government should continue its efforts to ensure that Wales ‘is not a penny worse off’ as a result of the UK decision to leave the EU, and should continue to receive at least £680 million per year plus inflation from post-Brexit funding streams;
  • The Welsh Government works with the UK Government and the other devolved administrations to develop a sustainable long-term replacement for the Barnett formula that allocates funding across the UK based on need;
  • The Welsh Government continues to negotiate with the UK Government to secure at least current levels of funding from the UK-wide Shared Prosperity Fund;
  • The Welsh Government secures responsibility for the administration and management of the UK Shared Prosperity Fund in Wales from its discussions with the UK Government;
  • The Welsh Government negotiates with the UK Government to ensure Wales initially continues to receive its current level of funding after the UK leaves the Common Agricultural Policy; and
  • The Welsh Government works with the UK Government and the other devolved nations to ensure that the UK-wide framework for agricultural support gives the maximum possible flexibility to the Welsh Government to enable it to make decisions that support the specific needs of the Welsh land management sector.

As well as these headline recommendations, the Committee made a number of other recommendations focussing on how the UK Shared Prosperity Fund could operate in Wales; the future of research and innovation funding; the future of the European Investment Bank; the replacement of the European Maritime and Fisheries Fund; and future funding for equality and human rights.

The Welsh Government will consider and respond to the Committee’s recommendations, which will then be debated in Plenary.

Article by Gareth Thomas, National Assembly for Wales Research Service