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Reducing Regional Funding, and Calling It Levelling-Up

The most important part of addressing regional inequality in the UK is funding. The new UK Shared Prosperity Fund (UKSPF) is due to launch in April 2022. But what the government seem keen to hide is that this is just a replacement for EU structural funding that will soon end.

The EU's European Regional Development Fund and European Social Fund are allocated by looking at per capita GDP by region, and then member state governments have discretionary powers to reallocate some funds between regions. The UK used these powers to reassign some funds from England to Scotland, Wales and Northern Ireland. We also had an agreement for funds to be administered by our devolved governments.

These two funds together support innovation and research, information technology, small- and medium-sized enterprises, employment-related projects and vocational skills training, including youth employment, as well as the promotion of a low-carbon economy.

For the seven-year tranche of funding 2014-2020, the UK received (at current exchange rates) £9.4bn. In the government's November 2020 spending review, they said that UKSPF spending will ramp up to around £1.5bn a year and "at least match current receipts from EU structural funds". Are we okay with that? Well, this is Boris Johnson's government, and even statements that are technically true are deliberately designed to deceive. The two EU funds were contingent on 'match funding' provided domestically. The main source of this was central government, and it amounted to £7.2bn. So, under the EU the regionally-based structural funding was about £2.4bn per year, and the government are going to replace it with something that will increase to £1.5bn per year, while simultaneously giving the impression that they are doing something new.

Don't get me wrong – some of the administrative changes are probably a good thing, with local government getting to decided how funds are spent. But almost everything I hear from ministers is waffle and piffle. For instance, with all the talk of levelling up 'the North' (and previously of the Northern Powerhouse) you'd be forgiven for thinking that Yorkshire and Humberside were amongst the poorer regions. That's hardly true. Yes, there are pockets of deprivation, and transport provision is poor (mainly because the Tories privatised the buses), but the two regions in greatest need, with the lowest per capita GDP, are Cornwall and West Wales.

A good rule of thumb is not to believe a word they say.

Find out more at the Institute For Government.

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