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UK fund fails to match EU development money, say Scotland and Wales

The UK government has announced a £2.6bn fund to replace EU development financing post-Brexit but attracted immediate criticism from Welsh and Scottish leaders for failing to match previous levels of EU funding.

Michael Gove, levelling-up secretary, said the new Shared Prosperity Fund would “help spread opportunity and level up the country” and made good on a manifesto promise that the UK government would “match” EU funding levels, but only by 2024-25.

However, the Welsh government said that, overall, the replacement scheme, which allocated £585mn for Wales over three years, would leave it with “less say, over less money”, adding that Wales would receive more than £1bn less than if the UK had remained in the EU.

Ivan McKee, Scotland’s business minister, said the fund was distributed in a way that “undermines devolution”, adding that Scotland’s allocation of £212mn over three years would leave the country £151mn short in 2023 compared with EU funding levels, when taking into account all EU funding streams.

However, the government insisted that the new fund would “match EU funding” in Scotland in 2024-25 and would “remove unnecessary bureaucracy”.

During its EU membership, the UK received an average of £1.5bn a year in structural funds between 2014 and 2020 from Brussels to be invested in training and infrastructure in the poorest areas in England, Scotland, Wales and Northern Ireland.

The Welsh government said it would ‘lose more than £1bn that could have been used to grow the economy and support some of our most disadvantaged communities’ © Matt Cardy/Getty Images

In October, the government announced that the replacement fund would receive £400mn this year, rising to £700mn in 2023-24, and that it would only match EU levels of £1.5bn in 2024-25, the final year of the current spending review.

The government has argued that it only needs to “match” EU funding levels by 2024-25 as the UK will continue to receive its final allocation of EU money until then — an argument that the Welsh and Scottish governments have rejected.

“Despite the manifesto promises made by the UK government, post-EU funds leave Wales with less say, over less money. It remains the case that Wales will lose more than £1bn that could have been used to grow the economy and support some of our most disadvantaged communities,” the Welsh government said in a statement.

McKee noted: “This demonstrates exactly why levelling up means losing out as Scotland will receive considerably less funding than before Brexit.”

Gove confirmed on Wednesday that the UK fund would only match EU funding in 2024-25, noting that previous EU development money had “ramped up and down”.

He said the Shared Prosperity Fund would be better targeted than the EU version using local population data, a broad-based “measure of need” combined with other factors such as unemployment and income levels.

Documents seen by the Financial Times show that even in 2024-25 the English regions will receive £78mn less in real terms than under the EU deal. But pressure groups in the north of England said the funds appeared to have been distributed in a way that protected their interests.

Henri Murison, director of the Northern Powerhouse Partnership pressure group, said the announcement did not look “as bad as it might have been”, suggesting that levelling-up minister Neil O’Brien had “secured a better deal for the north than originally feared”.

Steve Fothergill, economics professor at Sheffield Hallam university and national director of the Industrial Communities Alliance, a body of former coalfield areas, said distribution of the funds initially looked positive for the north.

“The important thing is it basically freezes the distribution across England, which means there isn’t going to be a shift of money to the south of England at the expense of the north and midlands.”

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