A £1bn blow to hopes of levelling up

MPs say replacement for EU funding will offer less for regional development

A £1BN post-Brexit annual cut in regional development funding has raised major questions about how the Government will deliver its long-awaited levelling up agenda, MPs on an influential parliamentary committee have warned Chancellor Rishi Sunak.

A Treasury Committee report into October’s Autumn Budget and Spending Review has highlighted that the UK Shared Prosperity Fund is worth just 60 per cent of the EU Structural Investment Fund it is replacing.

The UK Shared Prosperity Fund, which is due to be launched in April, was described in the Spending Review as the “centrepiece” of the Government’s levelling up ambitions and is due to be worth £1.5bn a year by 2024/25.

But the committee’s report highlighted that it is the replacement for the EU Structural Fund programme, which had been worth £2.5bn a year before Brexit. The committee said: “If the new fund is intended to be one of the ‘centrepieces’ of the Government’s ambition, it is surprising that the size of the fund is being reduced to such an extent.

“The Government will need to demonstrate how these reduced funds will achieve their defined metrics for levelling up.”

While the Government has said the new fund “will better tailor funding to local needs across the UK”, recent research has suggested that even when the additional Levelling Up Fund is taken into account, the North of England is due to lose out on up to £300m per year under the new system – double the average cut per head than the rest of the nation.

The Treasury Committee also noted that while the phrase ‘levelling up’ was mentioned 91 times in the Budget and Spending Review,

there is still a lack of detail on how it will be measured and achieved.

It added: “Re-badging existing programmes may not have the impact the Government is seeking.”

The report also questioned whether Michael Gove’s Levelling Up Department will be able to deliver on the Government’s ambitions to tackle regional inequality with its current budget.

“Once the increases in social care funding are excluded, the spending power for this department’s activities are being kept flat or falling. If the levelling up agenda is to be carried out in a sustainable way, it may be that this will need to be reflected in the spending power of the Department of Levelling Up, Housing and Communities.”

Mr Gove is expected to deliver a White Paper next month outlining the Government’s policies for levelling up.

It has been reported that no extra money will be made available by the Treasury for the plans Mr Gove is to outline.

When questioned earlier this month about whether he had enough money to achieve the Government’s ambitions, Mr Gove said he saw levelling up as a cross-departmental effort.

“The amount of public spending already committed in the Spending Review is higher than any government has committed to public spending in history,” he told the BBC. “Those budgets, both in my department but also in the Department for Education, in the DWP, in the Department of Health and so on, are there to be used, deployed and allocated to support levelling up.”

Mel Stride, the Treasury Committee’s chairman and a Conservative MP, said: “With the nation recovering from the pandemic, the Budget and Spending Review were especially important.

“The Chancellor had a difficult job on his hands, balancing calls for increased spending from numerous departments with financing the Government’s net zero and levelling up commitments, all the while getting the public finances under control.

“With inflation rising significantly, concerns about pressure on the cost of living are growing. While the Prime Minister’s ambition to promote high wage growth is worthy, focusing on increasing wages without improving productivity is likely to be inflationary, and risks contributing to a wage price spiral.”

Surprising that size of the fund is being reduced to such an extent. Treasury Committee report on the UK Shared Prosperity Fund.