UK to lose potential 13 billions euros of development funds through Brexit

New analysis from the Conference of Peripheral Maritime Regions (CPMR) estimates that the United Kingdom would be entitled to approximately 13 billion euros of regional development funding for the 2021-2027 period should it stay in the European Union.

The CPMR carried out a projection of the theoretical share of European Regional Development Fund and European Social Fund + funding for the United Kingdom for the 2021-2027 period if it remained a member of the European Union.

This projection, based on the European Commission’s allocation methodology for the ERDF and ESF+ funds, shows that the UK regions and nations would be entitled to an increase of 22% for the 2021-2027 period, compared to the allocation of 10.6 billion euros for 2014-2020.

This increase can largely be explained by the fact many areas of the UK are falling behind the EU average in terms of regional prosperity.

According to the CPMR projection, Cornwall & the Isles of Scilly and West Wales & the Valleys, the two regions in the UK currently classed as ‘less developed regions’ under the European Commission’s eligibility rules, would still stand to receive a significant share of the UK allocation of Cohesion Policy.

In addition, the regions of South Yorkshire, Tees Valley & Durham and Lincolnshire would also become less developed regions for the 2021-2027 period. All five of these regions would stand to receive EU support in excess of 500 euros per capita for the seven-year period.

The CPMR projection also shows that regional disparities in the UK are increasing. There are significant differences in aid intensity (funds per capita) from Cohesion Policy from one area to another.

The difference between Inner London, the UK’s richest NUTS II region with a regional GDP average of 614% of the EU average, and West Wales and the Valleys, the UK’s poorest with a regional GDP of 68% of the EU average, is particularly striking and a unique case in Europe.

CPMR Secretary General, Eleni Marianou, said:Our analysis provides clear evidence that Brexit would be disastrous for the regional development of UK regions. In CPMR we stand by our UK members and share their concerns on the persistent regional disparities that will be further aggravated.”

Read the CPMR analysis ‘UK entitled to €13bn regional funding if it remains in EU

The CPMR is a European organisation representing the interests of 160 regions from 25 countries from the European Union and beyond. The UK Members of the CPMR include the Welsh Government, several local authorities in Scotland including the Scottish Island Councils, and Cornwall Council and Southend-on-Sea Borough Council in England. It carried out this exercise in the context of the uncertainty of Brexit, and it forms part of a broader body of work carried out by the CPMR on Cohesion Policy funding mechanisms to understand the impact of the negotiations for the benefits of its Members.

Striving for enhanced territorial cohesion

Cohesion Policy is the main EU investment policy which aims at reinforcing economic, social and territorial cohesion in all regions.

The policy is delivered mainly through regional programmes and projects financed by the European Regional Development Fund, the European Social Fund and the Cohesion Fund. Cohesion is therefore at the core of CPMR’s activities.

CPMR advocates for a territorial investment policy to reinforce economic, social and territorial cohesion in all regions based on strong multi-level governance arrangements in partnership with regions and their citizens at its core.

A regular partner of the EU institutions, CPMR participates in the European Commission expert group on Structural Funds, the Network of Territorial Cohesion Contact point meetings and the Informal EU Council on Cohesion, and has a long-standing working relationship with the European Parliament.

CPMR is also a member of the S3 Platform Mirror Group and the Future of Cohesion working group at the Committee of the Regions.

The main areas of are:

  • A reinforced and legitimised role for Regions within Cohesion Policy
  • The role and impact of financial instruments within Cohesion Policy
  • Reducing the administrative burden and simplifying the Policy
  • A well-resourced Cohesion Policy for all Regions

CPMR actions on Cohesion Policy are coordinated by a dedicated working group (the ‘Core Group’).

Towards a new road map for the Scottish rural economy

Towards a new road map for the Scottish rural economy

An Island Perspective – Help Shape the Debate

Amid the Brexit chaos, it is more important than ever for islanders to express strongly their opinion on how future regional policies should be shaped. 

Building on Brexit discussion at our 2018 AGM in Tiree, S.I.F is pulling together an island position paper –  please help shape the debate by responding to  our survey We hope the post and links below will provide a good background for your response! 

https://www.surveymonkey.co.uk/r/DNGDBFF

No real regional policy in place at present

Brexit is actually providing a real opportunity to look at what rural and regional policies really look like in the UK and Scotland.

The conclusion is that in many respects EU Policies have acted as a proxy for UK and Scottish regional policy:  it is fair to say that in the absence of a UK national regional policy, economic development in Scotland both at regional and local level has in large measure been delivered through eligibility for European Structural and Investment Fund (ESIF) support as well as the CAP (Common Agriculture Policy) and the EMFF (European Maritime and Fisheries Fund).

ESIFs include the European Social Fund (ESF), European Regional Development Fund (ERDF) and European Agricultural Fund for Rural Development (EAFRD). Their aim is to reduce disparities between regions in the EU through its Territorial Cohesion Policy.  This policy has the objective of aligning living standards across the various European regions.

About a third of the EU budget goes into these funds: Over the years, this has had a major impact in terms of reducing social and economic disparities.

In Scotland this money currently provides between 10 and 25 per cent of local authority economic development and employability spend. In the case of a less favoured area – a transition status area like the Highlands and Islands – ESIFs have also been a significant driver in transforming the economic and social wellbeing of our region with £1.5 billion invested up to now.

Support to our rural areas

The importance of Common Agricultural Policy ( CAP) funding to the Scottish agriculture sector must not be underestimated, with support payments in 2016 contributing over 65.42 per cent of the total income from farming in Scotland.  For the Less Favoured Area sheep sector such as in the Highlands and Islands, CAP support was 230 per cent of Farm Business Income. The importance of EU CAP Pillar 2 funding through the Scotland Rural Development Programme (SRDP)  was key in creating and safeguarding over 30,000 jobs as well as improving business efficiency, output, quality and competitiveness under the previous programme.

The European Maritime and Fisheries Fund ( EMFF) has provided crucial support for fisheries, aquaculture, the processing sector supporting communities and jobs that depend on them.

The LEADER approach (currently funded from EMFF and SRDP) has also played a unique role in enabling local partnerships to foster innovation and invest in their local development priorities, including local economies. LEADER funding has also fostered collaborative working between Scotland and others across the UK and EU.

So regardless of Brexit or the form of Brexit, it is time to step  back and consider how policies, programmes and funding can better serve the needs of our rural society, rural economy and environment.

A very sketchy UK Shared Prosperity Fund: 

Unfortunately, there has been little opportunity for UK wide joined up thinking on this issue.  Following the UK exit from the EU, the UK Government has announced the setting up of a “Shared Prosperity Fund” to replace ESIFs.

A cross-party group has looked at how the Shared Prosperity Fund could simply replicate the way ESIFs are allocated, with a simplified bureaucracy. But with no regional policy in place, its report pointed out that nearly everything about the Fund is still to be worked out, leaving huge unresolved issues:

  • How much funding will be available?
  • How will it be divided up across the UK?
  • What activities will be eligible for support?
  • Who will take the decisions about how the money is spent?

Discussing the Shared Prosperity Fund at the Scottish Rural parliament last October, North Ayrshire MP Philippa Whiteford pointed out that only 2 per cent of the fund was intended for the rural economy of the UK!

There is still no indication of what proportion of the fund will come to rural Scotland and less favoured areas such as the Highlands and Islands.

A new Scottish Rural Economy Framework 

The consultation supposed to take place in autumn 2018 for the SP fund to be in place by 2020 has yet to be done. There is now a huge worry that at the end of 2020, there will be a funding hiatus, with nothing in place to ensure a smooth transition from EU funds on which the rural economy depends.

However, a lot more thinking has been done in Scotland. Responding to consultation by the Scottish Parliament’s Economy, Energy and Fair Work Committee, Island Councils have unanymously asked that any future funding mechanisms revert back to giving more decision making powers to the regions themselves and the flexibility they feel has been lacking in the last allocation period. In many respondents’ opinion, the centralisation at Scottish government level occurring in the 2014-2020 period has had a negative effect, resulting in less funding uptake  then previously.

Consultation responses to Rural Thinks workshops by the National Council of Rural Advisers (NCRA),  have led to new ideas for a new rural economy framework that would ensure this much needed  transition to a throughly thought-out and appropriately designed  rural policy for Scotland that would support each of its regions appropriately.

3 policy recommendations 

The NCRA report –  a new blueprint for Scotland’s rural economy – outlines how a change in mindset, culture and structure is required and  has 3 recommendations for this to happen.

1/ a vibrant, sustainable and inclusive rural economy can only be achieved by recognising its strategic importance – and effectively mainstreaming it within all policy and decision-making processes.

2/   an interim Rural Economic Framework ( REF) should be developed, aligned to the National Performance Framework.

“The REF will provide a structure to enable transition, including the development and implementation of a new approach and delivery model for rural policy, development support and investment. We have the opportunity to remove the complexity and lack of understanding surrounding rural support by clearly linking it to the achievement of national outcomes: ensuring it is well understood, accepted and celebrated for improving national economic prosperity and wellbeing.”

3/ a Rural Economy Action Group ( REAG) should be created, which has the clout to get things done and set the tone for change. This would be “a mechanism by which we can hold each other to account and maintain the momentum.”

Targeted support for the rural economy

Action 4 of the new blue print is to look at targeted support and the development of credible finance models. Here are the actions recommended:

  • Scottish Centre for Inclusive Growth must assess the credibility of measurement tools for identifying small/micro business activity in the rural economy
  • Ensure equitable access to finance for rural communities and businesses, including a simplified grants system
  •  A Rural Challenge Fund for communities and small/micro-enterprises to be established in 2019, to ensure no hiatus in LEADER, EMFF and other Rural Development Programme funding
  • The National Investment Bank Strategy and Implementation Plan must consider the REF outcomes, ensuring an accessible offering for rural businesses, particularly small and micro-enterprises
  •  Inward investment plans must encourage sectoral diversity, recognising the opportunities for growth in non-traditional rural industries
  • Address the rural gender pay gap by providing female-focused enterprise programmes and support for women returning to the workforce
  •  Develop a strong and adequately financed policy and delivery framework to ensure a sustainable funding position post Brexit.

Read more about the  new rural economy framework

Read more about the shared prosperity fund  

Read more abouthe need for a future post Brexit regional policy.

Read more about of the CPMR’s analysis on losses to the UK regions through Brexit 

UK Shared Prosperity Fund, the view from the All Party Parliamentary group

Report of an initial inquiry into the UK      SHARED PROSPERITY FUND

November 2018

Why an APPG on Post-Brexit funding?

An  All-Party Parliamentary Group (APPG) on Post-Brexit Funding for Nations, Regions and Local Areas was established in Westminster in June 2018. It is chaired by  Stephen Kinnock MP (Lab) and its Vice-Chairs are Bill Grant MP (Con), Chris Stephens MP (SNP), Jo Platt MP (Lab) and Anna McMorrin MP (Lab).

The aim of the group is to help shape plans for the UK funding that is intended to replace the EU funding for national, regional and local economic development that will disappear following Brexit.

At its inaugural meeting the Group initiated an Inquiry to assess the views of stakeholders in the parts of the UK that currently benefit substantially from EU funding.

The aim was to produce a report that could be fed into government at an early stage to try to influence the UK government’s proposals, which were expected to be set out in a consultation in late 2018.

The issue is how will EU funds be replaced

The Conservative manifesto for the 2017 general election promised to set up a new UK Shared Prosperity Fund to replace the EU funds. The intention is that the new Fund will “reduce inequalities between communities across our four nations” and that the Fund will be “cheap to administer, low in bureaucracy and targeted where it is needed most”.

A written statement to Parliament from Secretary of State James Brokenshire MP, on 24 July 2018, confirmed the commitment to the new Fund but added little detail. Nearly everything about the Fund is still to be worked out leaving huge unresolved issues:

  •   How much funding will be available?
  •   How will it be divided up across the country?
  •   What activities will be eligible for support?
  •   Who will take the decisions about how the money is spent?The replacement for the EU funds is entirely a domestic UK matter. It does not depend on negotiations with Brussels. Nor does replacing EU funds necessarily require ‘new money’. In theory there is more than enough available to pay for the Shared Prosperity Fund from the funds that will no longer be paid over to the EU, though there are of course competing claims on this pot.

Who responded to the inquiry?

The APPG has received 80 submissions from an exceptionally wide range of organisations and locations. The list includes local authorities, Local Enterprise Partnerships, the TUC, Mayoral Combined Authorities, devolved administrations and others. Several of the submissions were made on behalf of large coalitions of partners, in the North East for example. The geographical spread includes responses from all four nations of the UK.

APPG recommendations

Overall budget

  • The annual budget for the UK Shared Prosperity Fund should be no less, in real terms, than the EU and UK funding streams it replaces.
  • The UK Shared Prosperity Fund should operate on the basis of multiannual financial allocations of the longest practicable duration.
  • If other existing budget lines were to be included in the UK Shared Prosperity Fund the total budget of the new Fund should be increased by the full value of those additional budget lines, and the present rules on matching finance for projects should be adjusted accordingly.

Allocation across the country

  • For the moment, the UK government should adopt a pragmatic approach and roll forward the four nations’ existing shares of EU funding into the UK Shared Prosperity Fund.
  • the UK government  should recognise that, within the framework of agreed guidelines, the allocation of the funding to local areas within the devolved nations should be a devolved matter.
  • The UK government should deploys a robust formula, using up- to-date statistics, to allocate the UK Shared Prosperity Fund within England.
  • If any element of competitive bidding were to be incorporated into the UK Shared Prosperity Fund it should be marginal to the main formula-based allocation.
  • Sub-regions, most probably revised LEP areas, should remain the basis for financial allocations to areas within England.

Activities to be supported

  • The government’s intention to make narrowing the differences in prosperity across the UK the key objective of the new Fund should be supported.
  • Local partners should be given flexibility to define the types of projects on which the UK Shared Prosperity Fund is spent, so long as the activities remain consistent with the wider objectives of the Fund.
  • Requirements to fund specific activities should be kept to a minimum, but we would also expect the spending plans of local partners to be a balanced portfolio.

Management

The APPG expects the UK government to respect the devolution settlement and therefore any guidelines for the Fund as a whole should be kept at a strategic broad level and agreed jointly between the UK government and the devolved administrations.

  • Within the framework of the agreed guidelines, the UK government should transfer responsibility for the detailed design and delivery of the relevant parts of the UK Shared Prosperity Fund to the devolved administrations and their partners.
  • Reflecting this devolved responsibility, the Fund should be re-branded to reflect the four nations, i.e. UKSPF England, UKSPF Scotland, UKSPF Wales and UKSPF Northern Ireland.
  • There should be a strong emphasis on allowing local partners to define and measure target outcomes.
  • The UK government and devolved administrations should work with local players to seize the opportunity to design a simplified administrative structure that works.
  • The management structures for the UK Shared Prosperity Fund should make greater efforts to engage local authorities.
  • The monitoring and evaluation of programmes and projects should aim to build on the experience with EU funding.

You can read the full report here