The UK Government recently set out its long-awaited plans for the Shared Prosperity Fund, and announced the second round of the Levelling Up Fund.
There are long-standing disagreements between the Welsh and UK governments about funding and the role each government should play in allocating it. The Senedd’s Finance Committee aims to shed light on these issues over the coming weeks.
How will the Shared Prosperity Fund work?
The Shared Prosperity Fund (SPF) is the UK Government’s replacement for EU Structural Funds. On 13 April the UK Government published the prospectus for the SPF. It will invest in:
- communities and place;
- supporting businesses; and
- people and skills.
The SPF is funded until March 2025. The UK Government is using powers from the Internal Market Act 2020 to provide funding to local areas across the UK. This has been described by the Minister for Economy, Vaughan Gething, as “an assault on Welsh devolution”.
The Welsh Government’s role in delivering the fund will be smaller than under EU Structural Funds, although the precise role it will play isn’t yet clear. The Welsh Government has been invited to be part of a UK-wide ministerial forum to support delivery of the fund. The UK Government also wants devolved governments to be involved in developing investment plans.
The SPF has two elements:
- funding allocated directly to local places, and
- the UK Government’s Multiply programme to improve adult numeracy.
The UK Government wants the SPF to be delivered at regional level in Wales, across the four City and Growth Deal areas. It will work with the Welsh Government and Welsh Local Government Association to develop arrangements for this ahead of the deadline for submitting investment plans, with the intention that a lead local authority in each City and Growth Deal area submits a plan on behalf of the region.
Lead local authorities must submit their investment plans to the UK Government between 30 June 2022 and 1 August 2022. The UK Government will approve investment plans from October 2022, and approval is needed before any funding is provided.
Is Wales getting the same amount of funding as with EU funds?
This is one of the key areas of disagreement between the UK and Welsh governments.
Between 2022-23 and 2024-25, Wales is allocated £585 million through the SPF. The UK Government says the allocations deliver its “commitment to match the previous EU funding from the European Social Fund and European Regional Development Fund”. The UK Government has published details of how it has allocated funding to each UK nation.
On 4 May, the Welsh Government published analysis arguing Wales is receiving less funding from post-Brexit funding arrangements than it did with EU funds. It states Wales would have received over £1.4 billion in EU Structural Funds from 2021-22 to 2024-25, but will receive £632 million through the SPF and the Community Renewal Fund over this period, a shortfall of £772 million.
The UK Government says previous EU programmes “ramped up and ramped down”, and that its funding commitment will be met by a combination of EU funds from the 2014-20 programme (through which Wales will continue to receive EU funding until the end of 2024) and investment through the SPF.
But the Welsh Government believes there’s a shortfall up until 2024-25. It says the SPF allocations should fully replace EU Structural Funds in each year up until 2024-25, rather than the UK Government including remaining funding from the previous round of EU Structural Funds in its calculation. It argues this because the funding allocation for each round of Structural Funds was additional to any remaining funding committed to projects under the previous round of funding.
How much funding will each local area get?
The SPF provides funding for local areas across the UK to “help people access opportunity in places in need”. There are different approaches to allocating funding in each UK nation. In Wales, 40% of funding is allocated by population, 30% by the needs-based index previously used for the Community Renewal Fund, and 30% using the Welsh Index of Multiple Deprivation..
At City and Growth Deal level, local authorities within the Cardiff Capital Region have been allocated £279 million until 2024-25, with £138 million going to local authorities within the Swansea Bay area, £126 million going to North Wales and £42 million going to Mid Wales.
Figure 1: Total Shared Prosperity Fund allocations to Welsh local authorities, 2022-23 to 2024-25
Source: UK Government, UKSPF allocations
What’s been the reaction to the latest announcements?
The Welsh Government doesn’t endorse the approach the UK Government is taking with the SPF. It doesn’t believe the proposals reflect the needs of Welsh communities or respect the devolution settlement.
The Institute for Fiscal Studies stated the UK Government’s approach is a “missed opportunity” to provide greater support to areas that received relatively little support from EU funds despite experiencing considerable deprivation.
Wales Fiscal Analysis believes that the UK Government’s approach may shift funding away from local authorities in West Wales and the Valleys to those in East Wales, a point also made by the Institute of Welsh Affairs. The IWA welcomed the UK Government’s intention to distribute funding regionally, but called its plans “a deliberate retrenchment of devolution to Wales”.
What’s the latest with the Levelling Up Fund?
The UK Government also announced that round 2 of the Levelling Up Fund will open for applications from 31 May 2022 until 6 July 2022. This will support projects investing in transport, regeneration and culture. Most of the investment will be in local projects with a value of up to £20 million, but authorities can submit bids of up to £50 million for large transport or culture bids.
The Levelling Up Fund takes a different approach to the SPF. Local authorities must bid competitively to the UK Government for funding, which is allocated according to assessment criteria. Local authorities can submit one bid for each parliamentary constituency wholly or partly within their boundaries, and one further transport bid.
The UK Government will seek advice on projects from the Welsh Government where appropriate around delivery and alignment with existing provision, and local authorities are encouraged to consult with Members of the Senedd when preparing bids.
Wales will receive at least 5% of the total allocation for this round of the fund. Projects in Wales were awarded £121 million funding (7%) out of a total of £1.7 billion allocated across the UK in the first funding round.
Figure 2: Allocation to Welsh projects in round 1 of the Levelling Up Fund
Source: UK Government, Levelling Up Fund: first round successful bidders
What’s next?
The coming months will see local authorities putting together investment plans and bids to relatively tight timescales, and we’ll find out the outcomes of these later this year.
The Finance Committee’s work will help us understand the different opinions on levels of funding and the roles different organisations will play in allocating the funds. Resolving these differences of opinion is likely to be more challenging.
You can watch the Finance Committee’s evidence sessions on Senedd TV.
Article by Gareth Thomas and Owen Holzinger, Senedd Research, Welsh Parliament
