Government plans to replace EU development funding with the UK Shared Prosperity Fund (UKSPF) are a “missed opportunity to reap a dividend from Brexit and improve policy” according to the Institute for Fiscal Studies (IFS).
In England, the UKSPF will be allocated through local enterprise partnerships (LEPs), and each LEP will receive the same in real terms as it did under EU funding. Within each LEP, an index of need will then be used to allocate funding to each local authority.
But the IFS’s analysis suggested that undesirable features of the EU funding regime – such as a cliff edge in the allocation formula – are replicated in the UKSPF. This means that funding is skewed towards the two poorest regions of the UK – Cornwall and the Isles of Scilly and West Wales and the Valleys
David Phillips, IFS associate director, said that the government had “simply replicated an inequitable and poorly designed EU funding regime”. He pointed out that under EU funding, Cornwall received eight times as much funding per person as South Yorkshire, despite the latter being only slightly richer.
“By promising that each nation and each LEP area will receive the exact same as under the EU system, the government has missed an opportunity to design a more rational funding mechanism that spreads money more evenly across the UK’s poorer regions,” Phillips said.
“Funding will continue to be skewed towards Cornwall and West Wales and the Valleys, and many other relatively poor regions of England (such as Lincolnshire and South Yorkshire) will lose out as a result.”
He added that the government’s approach did not account for changes in populations since the previous EU funding allocations were set. For example, Cumbria’s population grew by just 0.3% between 2013 and 2020, while the population of Coventry and Warwickshire is estimated to have grown by almost 10%.
The IFS analysis concluded that, rather than “taking back control”, the government had chosen to “stick to an arbitrary, poorly designed, out-of-date funding allocation mechanism”.
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