Serious concerns in Wales over UK replacement for EU development funding

A Senedd committee has raised concerns about a new UK Government funding scheme and heard jobs could be lost because of it

Serious concerns have been raised about a new funding scheme by the UK Government which politicians warn could lead to job losses.

The Local Growth Fund will see £547m allocated to Wales as a replacement for EU development funding. The money, over the next two years, is the successor to the Shared Prosperity Fund (SPF). However, a Senedd committee has said the new scheme’s £182m a year will be less than the money received under both the SPF and the original EU structural funds.

In his foreword, the cross party committee’s chair, Conservative MS Andrew RT Davies, said there were numerous concerns and the committee had published a number of conclusions.

They include that it is “disappointed with the large reduction in funding received by Wales though the LGF compared to the previous economic development schemes as this means there will be less money to invest in, and support, our most vulnerable communities”. Ensure our latest news and sport headlines always appear at the top of your Google Search by making us a Preferred Source. Click here to activate or add us as Preferred Source in your Google search settings

One of the fund’s requirements is that 70% of funding will be capital spend, with the rest revenue. That is a change from the SPF and has led to criticism.

The Industrial Communities Alliance (ICA) which represents councils in industrial areas, said it could have “tremendous consequences” including the potential for hundreds of job losses in councils. For our free daily briefing on the biggest issues facing the nation sign up to the Wales Matters newsletter here.

Professor Kevin Morgan echoed that, telling the committee: “I fear, with the reversal of the 70:30 split, these people are already being served with redundancy notices”.

Swansea Council leader Rob Stewart said there had been “greater flexibility” in England than in Wales and the Welsh Government‘s own economy minister admitted the Welsh Government would have “preferred to have seen something more akin to the previous SPF”.

Economy minister Rebecca Evans said: “We continue to make that case for a higher proportion of revenue. But those discussions aren’t positive, shall we say. UK Government tells us that the capital focus is very much in line with its industrial strategy”.

There are also concerns about the length of the three-year fund. The ICA said: “You cannot expect local authorities or anybody else—the private sector, whoever—to put in place capital projects in the timescales that are required without considerable investment in capacity and the time to be able to do that”.

The committee said it was “unconvinced” by the UK Government’s justification for differences in the scheme. “We are deeply concerned about the potential loss of jobs and experience that are likely to take place as a result of the move from the SPF to the LGF,” it said.

There were further concerns about the lack of capacity to deliver economic development initiatives at different levels of government and that CJCs – Corporate Joint Committees – would take over running the fund from its second year.

It said that while the Welsh Government would have overall management of the scheme, and play a bigger role in decision making and administration for the new scheme, it had not yet decided the split between national, regional and local funding but that it “proposes to support the four Corporate Joint Committees (CJCs) to lead this work”.

The committee said it was good that the Welsh Government had decision-making powers, but it goes on to say: “As the Welsh Government will need to get sign off from the UK Government through the annual review process prior to the release of funds, we are concerned the UK Government is seeking to exert an unacceptable level of control over the fund.”

The UK and Welsh governments already fund four City and Regional Growth Deals, set up to drive economic growth and create jobs. With the exception of Growing Mid-Wales, the other three growth deals in Wales are delivered by their respective Corporate Joint Committees.

“Last year the committee undertook a ‘health check’ on progress by each of the deals. Following this the committee wrote to both the Welsh and UK Government raising several serious concerns about delivery by the deals,” the report said.

“When pushed by the committee on the performance of CJCs, the cabinet secretary acknowledged ‘there are different views amongst local government about CJCs and the use of CJCs for the Local Growth Fund. However, this is what we have proposed’,” the report sayid

There were further concerns about the money reaching the places it was most needed.

The committee concluded it had “deep concerns” about the CJCs running the regional element of the scheme.

The UK Government responded saying that the difference between England and the devolved nations was reflected in Barnett consequentials.

It says it has given a combined investment of £1.7bn via the four City and Regional Growth Deals (£790m), Investment Zones (£320m), Freeports (£52m), and Pride in Place (£210m).

A spokeswoman said: “We are working in partnership with the Welsh Government to deliver real change for communities across Wales.

“The £547m Local Growth Fund for Wales represents a strong settlement on both resource and capital, with higher per capita allocations than England across both. It is just one element of a wider package of local growth funding, which taken together represents an investment of over £1.7bn for Wales.

“We have been able to protect the existing level of SPF funding for growth funds in Wales.

“The funding mix of the Local Growth Fund enables it to support a range projects that drive growth through both capital and revenue funding, from infrastructure projects to supporting businesses and helping people find jobs and acquire new skills.

“It has been designed with the Welsh Government to ensure local authorities have maximum flexibility in how they use this funding.”