EU funding: Brexit’s other looming cliff edge

Newquay airport Archant

The loss of EU funding used to help poorer parts of the UK has had far less attention than other ill effects of Brexit. But it will soon be hard to ignore the problem.

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It was buried deep in the last Conservative manifesto: a pledge after Brexit to retain the equivalent of a long-standing, multi-billion pound European Union programme for the poorer parts of the UK’s regions and nations. But will it – can it – be honoured on the current scale, if at all?

In scores of cities, towns and communities, so-called EU structural funds have supported countless schemes over nearly 40 years, from ground-breaking scientific and medical research, to new university campuses and colleges, green energy, and more humble business-start-ups, training and social programmes. Hundreds of thousands of jobs have been sustained, and created.

As the spending axe has fallen disproportionately on local councils since 2010, with some losing half of their budgets, these EU funds have become so important to town halls that their representative body in England – the Local Government Association (LGA) – is demanding action from senior ministers. Devolved governments in Cardiff and Edinburgh are becoming restless too.

In a detailed report, the Conservative-led LGA says local areas need the current level of EU funding replaced – £8.4 billions in the current six-year spending round – if hard-pressed councils are to continue delivering economic and social programmes in the face of a tightening Whitehall yoke.

Kevin Bentley, deputy leader of Essex County Council, who heads an LGA Brexit task group, says the future of this wide-ranging EU programme – delivered mainly through a regional development fund – has been a major concern since the referendum. “It’s been used to help set up businesses, create many new jobs, roll-out broadband, and build new roads and bridges,” he says. “And with national funding for regeneration increasingly depleted, many areas have become increasingly reliant on the money.”

Take Cornwall, which ironically voted for Brexit, and has received the highest level of EU regional development support. From 2007 to 2013 alone, it got £634m for a range of projects, including higher-speed broadband. Newquay airport alone received £40m for an upgrade while EU aid elsewhere went to a range of business start-ups, marine technology, geo-thermal energy and the much-heralded Eden project.

Wales, similarly, has benefitted not only from a wide-range of job creation schemes but also from substantial investment in higher education, including £100m for a science and innovation campus at Swansea University through a mix of £40m from EU structural funds and £60m from the European Investment Bank. Understandably, like the LGA, the Welsh Government is alarmed by the absence of any firm commitments – aside from vacuous statements – to deliver replacement programmes for EU schemes post-Brexit.

While the last Tory manifesto promised a Shared Prosperity Fund to replace EU structural funds, the LGA simply noted: “Details have been scarce so far.” Asked what progress is being made on proposed discussions with local councils and devolved administrations in Wales and Scotland, the Department for Business, Energy and Industrial Strategy said simply: “Plans for a formal consultation process will be announced in due course.” They acknowledged that EU structural funds had delivered important economic and environmental benefits to the UK, before adding: “As we leave the EU we will be delivering the UK Shared Prosperity Fund that will be specifically designed to reduce inequalities between communities and across our four nations.”

This strikes at the heart of a dispute between the Welsh and Scottish governments and Westminister. Both Cardiff and Holyrood suspect that, by accident or by design, it is arbitrarily undermining devolved powers over EU programmes by assuming responsibility for a UK-wide replacement fund, whatever its size and scope. The Welsh government insisted: “We have repeatedly made it clear to the UK government that we expect the funding we currently receive from Europe to continue to be available to Wales after we leave the EU and that Brexit must not turn out to be a power grab by Whitehall.”

North of the border, where EU structural funds for the current 2014-2020 period are worth £828m, the Scottish Government voiced similar concerns. Stressing that it had benefitted significantly from EU aid in supporting jobs, delivering infrastructure and sustaining rural communities, a spokesman added: “We continue to push the UK government to ensure that Scotland’s finances are not detrimentally affected as a result of exiting the EU.”

But in England specifically, the LGA’s concern is compounded by indecision over how to finance local government from 2020, when central funding was supposed to be phased out as councils effectively became self-sustaining. A Local Government Finance Bill (for England only), passing through parliament earlier this year, was meant to drive this forward by devolving all business rates back to town halls. But the bill fell in the run-up to the general election and has not been resurrected. As a result, English councils are in limbo.

In the words of one senior figure in local government – “we’re approaching our own cliff edge”. As things stand, central funding for English councils is coming to an end – and some authorities are fighting for financial survival.

In the meantime, the powerful farming lobby, backed by environmental and amenity groups like the National Trust, is making the running with its demands to retain the current level of EU agricultural subsidies after Brexit, albeit perhaps diverted to other countryside and conservation projects – but not, significantly, to equally pressing issues like affordable rural housing and job creation. At present these subsidies deliver around £3bn annually to farmers – around double the level of EU structural funding – with the biggest landowners getting the largest slice.

So far, the lobby to maintain funding for the UK’s more challenging areas, currently receiving EU structural funds, has been more muted. But as it gets louder, perhaps it’s time to change the terms of the debate and ask why landowners are more deserving of handouts than those languishing in towns, and communities in need of renewal. It’s about shared prosperity after all.

Peter Hetherington is a former regional affairs editor of the Guardian and past chair of the Town and Country Planning Association