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Interest in the UK Shared Prosperity Fund grows as Brexit looms

23 July 2019
Brexit Flags
As Brexit approaches, Public Sector and Private Sector bodies are increasingly calling for the Government to launch a formal consultation on the allocation, design and delivery of the UK Shared Prosperity Fund, which it is proposed shall replace the c.€13bn (£11.4bn) of EU funding which will be lost to the UK as a result of leaving the European Union. The appointment of Boris Johnson as the new Prime Minister means Brexit on 31 October 2019 is much more likely and the need for certainty around future regeneration funding is more pressing. 

The UK Shared Prosperity Fund (also known as the UKSPF) was originally announced as part of the Conservative Party's 2017 manifesto which promised "we will use the structural fund money that comes back to the UK following Brexit to create a United Kingdom Shared Prosperity Fund, specifically designed to reduce inequalities between communities across our four nations". A consultation was expected in 2018 but has been delayed, with Brexit Minister Kwasi Kwarteng MP recently suggesting details may not be available until 2020.

The Northern Powerhouse Minister, Jake Berry MP has championed the UKSPF as a means to empower the regions and devolved administrations, declaring that “the impetus for the investment of the UK Shared Prosperity Fund should come from our regions rather than being directed out of Whitehall". To this end, he has overseen a team of MHCLG and BEIS staff leading meetings with other Central Government Departments and undertaking over 25 informal engagement events with selected organisations including Devolved Administrations, Mayoral Combined Authorities, Local Enterprise Partnerships and charitable organisations.

However the informal information gathering process has only increased the perception that certain interests are benefiting from greater influence over the design, delivery arrangement and allocation than others. Questions have been raised as to whether certain areas such as the North East, North West, Scotland, Wales and Northern Ireland may see a reduction in real terms under the UKSPF compared to their current allocations under the European Structural and Investment Funds. Furthermore, recent statements from Boris Johnson MP during his successful campaign to become the next Prime Minister, have raised questions about the extent to which power should be devolved, with the Conservative Party leader stating that he would prefer that Westminster retained control over the largest and most strategic projects.  

Although today's election of Boris Johnson as Conservative Party leader will undoubtedly bring changes in policy, it is expected that the Government will remain committed to carrying out a consultation, as demonstrated recently by Jake Berry recently writing to Cornwall Council to reiterate that the Government "will consult widely on the design and priorities of the UK Shared Prosperity Fund", emphasising "the importance of providing clarity on the future of local growth funding and the UK Shared Prosperity Fund" and that "The new UK Shared Prosperity Fund will tackle inequalities between communities by raising productivity, especially in those parts of the country whose economies are furthest behind". However the focus of what activities shall be funded may change, with Boris Johnson's first speech as Conservative Party leader mentioning an objective to ensure "fibre broadband will be sprouting in every household". State aid for investment in broadband was a topic of discussion early on in the Conservative Party leadership campaign, with several candidates supporting further investment in this area as a means to increase economic growth and prosperity.

One interesting recommendation for the UKSPF comes from the influential House of Lords EU Internal Market Sub-Committee, whose Chairman, Lord Whitty, has written to Kelly Tolhurst MP, Minister for Small Business, Consumers and Corporate Responsibility at the Department for Business, Energy and Industrial Strategy (BEIS) on a range of subjects including the future of State aid law after Brexit. The letter recommends that the Government should explore ways in which a domestic State aid regulator may take advantage of the interplay between State aid and new funding arrangments, such as the UK Shared Prosperity Fund. An example of such coordination may be to design the funding allocation and conditions of the Government's proposed UK Shared Prosperity Fund to align particular State aid exemptions. Another opportunity would be to take advantage of the discretion a UK regulator would have to design and regularly update the UK regional aid map (which identifies economically underperforming areas which can receive higher levels of State aid).  In developing their recommendations, the Sub-Committee have drawn upon written evidence from Lord Tyrie, Chair of the Competition and Markets Authority (which is positioned to become national State aid regulator in the event of Brexit) and an evidence session involving Jonathan Branton and Alexander Rose from DWF's Public Sector law team.

The Labour Party has set out its own alternative plans to accelerate prosperity by announcing a £250 billion National Transformation Fund ("NTF") which would be based in northern England.  The Shadow Chancellor, John McDonnell MP anticipates the NTF would invest invest the £250 billion on transport, energy systems, communications, scientific research and housing over 10 years.

Uncertainty relating to Brexit and that many of the large national and EU regeneration funds are nearing the end of their funding terms has led to discussion of what should replace them. The Public, Private and Third Sector all have views on future arrangements and their views can help shape a better targeted and more effective regeneration programme for the UK. On this basis, we would welcome the launch of the UKSPF consultation sooner rather than later.

DWF's specialist Public Sector law team has extensive experience of advising on applications for grant funding, including advising the Ministry of Housing, Communities and Local Government on public funding initiatives involving State aid, grant funding and public procurement considerations. If you wish to discuss the fund in more detail please contact Jonathan Branton, Colin Murray or Alexander Rose. Our UK Shared Prosperity Fund group on Linkedin provides a forum for discussions between stakeholders about the design of the fund.

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