The UKSPF is likely to be the major public funded regeneration programme of the next decade and is intended to replace the former European Structural and Investment Funds (ESIF) from January 2021.
The BBC news reports that, alongside the Chancellor of the Exchequer's Comprehensive Spending Review, the government will launch the long awaited UK Shared Prosperity Fund and announce plans to create 22,000 civil service jobs in the North of England.
The move is designed to reassure voters that the government remains committed to "levelling up" the North of England and other statistically poorer regions and that public funding will not diminish once the UK's transition agreement with the European Union ends at 11pm on 31 December 2020.
This is against the particular context of post-Brexit replacing of the former ESIF, which hitherto has been another public funding pot distributed amongst the statistically poorer regions of the UK, as with other European countries. Regions that were previously used to receiving allocations of ESIF will be particularly comforted to see this stream of investment funding renewed and (they will hope) increased.
The major regeneration fund of the next decade
The fund shall "at a minimum match the size of those [EU Structural Funds] in each nation" according to the Conservative Party Manifesto from December 2019.
According to research by CPMR, had the UK remained in the European Union then the UK would have received an allocation of c. €13bn (£11.4bn) in respect of the European Regional Development Fund ("ERDF") and the European Social Fund ("ESF") for the period 2021 - 2027. Therefore, it is reasonable to expect the fund to be in excess of that value between 1 January next year and the 31 December 2027.
Devolved Administrations, Mayoral Combined Authorities and Local Enterprise Partnerships
Although the government has yet to outline its delivery plans for the fund, the expectation is that devolved administrations will play a central role in the delivery of the fund outside England. In England, the Mayoral Combined Authorities are expected to be responsible for holding the funds. In areas without Mayoral Combined Authorities, it is understood that Local Enterprise Partnerships will have an important role in the funding process.
Chance to align new subsidy control rules with the UKSPF
As we put forward to the House of Lords EU Committee in March, there is an excellent opportunity to design the UK's new subsidy control regime to complement the delivery of the UK Shared Prosperity Fund.
As well as helping prevent distortive subsidies, UK subsidy control rules could help coordinate healthy subsidies towards economic priorities, which is important regardless of the outcome of the current negotiations with the EU for a future trade agreement, not least simply to ensure an open and competitive market within the UK. Having a clear set of rules for this provides a level of certainty to the subsidy process which benefits both the public sector and businesses preparing applications for investment support. Further reasons are set out in our article from August 2020 "Should the UK adopt strong or weak rules on State aid?". It is very important that having allocated significant funding to priming the economy the different public authorities charged with delivering this should have clear rules for how they may spend them.
In the context of the UK Shared Prosperity Fund these subsidies would include raising productivity in the parts of the country whose economies are furthest behind, as well as helping imbed the skills and growing the sectors needed for the economy of the future. In so doing the UKSPF offers a great opportunity to push the "levelling up" agenda. Of course, the UK subsidy control rules could incorporate other priorities such as incentivising businesses to invest in measures which reduce carbon emmissions, but it makes sense that the rules are aligned with the UK's major regeneration fund.
An example of current rules which could be harnessed to pursue the aims of the UKSPF is the regional investment aid rules, which favour investments in certain types of activity, eg. manufacturing, in the parts of the country whose economies are furthest behind. Such policies have been shown to be key to giving those areas a competitive boost, precisely to level up the investment decision as against other areas.
New Civil Service Jobs in the North
The Chancellor is also expected to announce c. 22,000 Civil Service jobs will be created in the North of England in the coming years. The exact location of these jobs has yet to be announced, although the Tees Valley is considered to be the front runner for a new Treasury Department.
How many of these jobs will be relocated from the Westminster and other parts of the South East is not yet clear, although it would seem sensible to set up offices in the North to take on the new roles which shall inevitably arise as a result of functions being taken from the European Commission and repatriated to the UK.
The long awaited launch of the UK Shared Prosperity Fund is to be welcomed, although of course the devil will be in the detail. Whilst it is hoped that much of the unnecessary bureaucracy of the European Structural and Investment Funds can be removed, we hope this is not at the expense of having a clear, transparent and well defined fund which delivers value for money and incentivises significant further and sustainable private investment where it is most needed.
DWF Law LLP has exceptional experience in State aid and public funding issues, with members of the team having worked within the European Commission, Central Government, Local Government and with private sector bodies on high profile initiatives. We are on hand if it would be useful to discuss the issues raised in this article or any other issue related to public funding.