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The £2.6bn UK Shared Prosperity Fund is launched

14 April 2022

In this article we discuss the key aspects of this major new UK public funding programme, including the requirements which fall on the public bodies administering UKSPF, such as the obligation to demonstrate they have "capacity and capability" to manage Subsidy Control and Public Procurement law compliance when submitting UKSPF investment plans. 

The UK Shared Prosperity Fund ("UKSPF") is the UK Government's flagship regeneration programme designed as the post-Brexit replacement for EU Structural and Investment Funds (ESIF), the EU programme of funding towards disadvantaged regions.  

What is the UK Shared Prosperity Fund?

The UKSPF is a major regeneration fund which aims to contribute to Levelling Up by providing financial assistance to capital and revenue projects which boost productivity, pay, jobs and living standards by growing the private sector, especially in deprived areas as well as restoring a sense of community, local pride and belonging, especially in those places where this has been lost.  It is designed to be less bureaucratic than the EU funds it is designed to replace. 

Over the three financial years currently committed, the UKSPF will provide £2.6 billion of public funding to support domestic priorities.  The confirmed funding for 2022-23 will initially be £400 million, followed by £700 million for 2023-24 and £1.5 billion for 2024-25 with the first payments from the UKSPF expected to be made in October 2022, subject to the submission of satisfactory UKSPF investment plans by lead local authorities. 

The UKSPF will be administered at a local level, with lead local authorities receiving an area’s allocation to manage, including assessing and approving applications, processing payments and day-to-day monitoring.

The UKSPF is designed specifically to replace ESIF, as per previous Conservative Part manifesto commitments. It will not negate and will run in parallel to other funding schemes such as the Levelling Up Fund, which recently entered its second funding competition.

What are the UKSPF objectives?

The Fund aims to deliver on each of the Government's Levelling Up objectives, including:

  • boosting "productivity, pay, jobs and living standards by growing the private sector…in those places where they are lagging";
  • spreading "opportunities and [improving] public services…in those places where they are weakest;
  • restoring "a sense of community, local pride and belonging"; and
  • empowering "local leaders and communities [where they are] lacking local agency".

Within this overarching aim, there are three "investment priorities" each with their own objectives, outputs, outcomes and nation specific interventions:

  • community and place: supporting "places to invest to restore their community spaces and relationships and [creating] the foundations for economic development at the neighbourhood-level";
  • supporting local business: enabling "places to fund interventions that support local businesses to thrive, innovate and grow"; and
  • people and skills: helping "reduce the barriers some people face to employment and [supporting] them [into] employment and education" and targeting "funding into skills for local areas to support employment and local growth".

Controversy about UKSPF value

The 2019 Conservative Party Manifesto Government contained a commitment that the UKSPF would "at a minimum match the size of those funds in each nation [of the UK]".  

CPMR have calculated that for the period 2021 – 2027, the UK would have been allocated €13bn (£10.84bn at current conversion rate) of EU Structural and Investment Funding. The UK Shared Prosperity Fund had no allocation in 2021 and has been allocated £400m in 2022-23, £700m in 2023-24 and £1.5bn in 2024-25, thus £2.6bn in total so far.  As a result, concerns have been raised that the UKSPF may not match the commitment made in the 2019 Conservative Party Manifesto. 

Jonathan Branton, Partner and Head of Public Sector at DWF, said: 

"The Government can boost its Levelling Up agenda and deliver on its manifesto commitment by confirming a further £8bn (or thereabouts subject to currency conversion) will be allocated to the UKSPF to be invested between 2025 – 2027. The value of the UK Shared Prosperity Fund is important, but there are also gains to be made by being the funding programme being more nimble and less bureaucratic than the EU Funds.  The delivery of the fund should take forward the positive elements of EU Funds, including a focus upon regional development for more disadvantaged areas and hopefully discard some of the more bureaucratic elements such as several different levels of audit".

Emphasis upon local delivery

Over 300 public bodies have been provided with an allocation of UKSPF ranging from £185,390,561 for the Greater London Authority and £132,001,531 for Cornwall and Isles of Scilly to £1,000,000 for Spelthorne.  Funding has been separated out to identify the element which will be directed to Multiply, the Government's programme to improve numeracy skills.  This will total £559m. 

Unlike the Levelling Up Fund or the Community Renewal Fund, the UKSPF has been allocated via a formula rather than through a competition.  In England, for example, the Department for Levelling Up, Housing and Communities ("DLUHC") adopted "a blended approach to allocate funding" with 70% being allocated on "a per capita basis…based on Local Authority population size" with the remaining 30% using a needs-based index relating to factors such as productivity, household income, skills and productivity.  The UKSPF has been apportioned in this way to help to ensure that "all areas of the UK [receive] an allocation" of funding.  

At a national level, funding allocations "to each nation [have been made to] ensure a real-terms match of EU structural funds".  At a local level, "interventions will be planned and delivered by councils and mayoral authorities across England, Scotland and Wales – ‘lead local authorities'". However, the UK Government will retain "oversight of the Fund" in Northern Ireland.  

Allocations of funding have depended upon the type and origin of each lead local authority.  In England, the lead local authority recipients comprise:

  • mayoral combined authorities, the Greater London Authority and unitary councils (who will each "receive an allocation of core UKSPF funding" as well as Multiply funding); 
  • district and borough councils (who "will receive an allocation of core UKSPF funding only"); and
  • county councils (who, aside from some limited exceptions, will only receive an allocation of Multiply funding). 

The role of awarding funding has yet to be finalised, but is understood to be likely to involve input from MPs and other local stakeholders. 

What types of projects will be funded under UKSPF?

The UKSPF aims to support a broad spectrum of communities "across the country" such that "any organisation with legal status can receive funding to deliver a UKSPF intervention". This includes "local authorities, public sector organisations, higher and further education institutions, private sector companies, voluntary organisations and registered charities".

Funding "can be used flexibly to support" a broad range of interventions including:

  • grants "to public or private [sector] organisations";
  • "commissioning third party organisations" to undertake specific projects;
  • the "procurement of [particular] service provision[s]"; or 
  • to support "in-house provision[s]".

How will UKSPF be delivered?

In England, Scotland and Wales, local government is being given responsibility for developing investment plans for approval by the UK government, and for delivery of the UKSPF thereafter.  Subject to submitting satisfactory investment plans, the lead local authorities will receive an area’s allocation to manage, including assessing and approving applications, processing payments and day-to-day monitoring.

The investment plan, will need to set out how public bodies intend to use and deliver the funding, in particular how they can give confidence that the funding will be properly directed towards local need and delivered in a compliant fashion.  Lead local authorities should "develop their investment plans in conjunction with local stakeholders" which could extend to establishing "a local partnership group" during the application process. 

The majority of investment plans will comprise three key components:

  • local context: with lead local authorities being asked to provide "evidence of opportunities and challenges through the lens of the three investment priorities";
  • selection of outcomes and interventions: "where places will identify the outcomes they wish to target based on local context, and the interventions they wish to prioritise";
  • delivery: the most detailed part of the investment plan which requires lead local authorities to demonstrate:
    1. their approach to delivery and governance including the "structures and processes that will support the delivery of their chosen interventions";
    2. their expenditure and deliverables "including the spend profile for the three years of the [Fund] as well as [the associated] outputs and outcomes figures"; and
    3. their capability and resource "to manage and work on" the Fund.

Although lead local authorities are strongly encouraged to consider the use of match funding, "it will not be a factor in the assessment of each…investment plan".  

Lead local authorities must submit their investment plans via DLUHC's online platform between 30 June and 1 August 2022. A pre-registration form is required to gain access to the online platform. There is limited capacity to provide support interventions commencing from 1 April 2022 noting that "any such interventions will be at risk" until approval is given by the DLUHC.

Emphasis upon Subsidy Control and Procurement compliance in Investment Plans

Each lead local authority will be asked to evidence "their capacity and capability to manage" subsidies as part of the investment plan. Investment plans will only be approved where the public body has satisfied Central Government that they have appropriate processes in place. 

In practical terms, this will involve demonstrating that there is sufficient expertise to identify when a subsidy is present and to compliantly award such funding within the Subsidy Control rules.  The Subsidy Control rules are about to change; there is an interim Subsidy Control regime, which has been in place since 11pm 31 December 2020 but this will soon be superseded by the Subsidy Control Bill which is expected to be finalised by Parliament in late April 2022.  You can register for our forthcoming webinar on the Subsidy Control Act 2022 here.

The Public Procurement regime is more settled, albeit changes are planned.  Many public bodies will have clear purchasing arrangements in place which can be used to give Central Government assurance as to the compliance of awards. The investment plan will need to show not only how the public body satisfies the rules, but how it will review potential awards of funding to establish compliance. 

We have specialist expertise in this area and can advise on the processes needed to demonstrate Subsidy Control and Public Procurement compliance, drawing on our experience of providing such support to Central Government organisations setting up public funding programmes.  The DLUHC plans to publish guidance on the compliance requirements in due course and will monitor compliance during the delivery of the UKSPF.  For interventions affecting Northern Ireland, DLUHC will retain "responsibility for assessing and monitoring State Aid and subsidy control for individual interventions".

Conclusion

The long awaited launch of the UK Shared Prosperity Fund is welcome news – the fund has the potential to make a meaningful difference to many parts of the country.  However, there is a need to scale up the value of the fund in later years to match EU funds lost as a result of Brexit, but also the public bodies aiming to deliver the funding will need to start preparing their investment plans.  This involves working with stakeholders to identify funding priorities but also ensuring that there are appropriate compliance checking processes in place. We have experience of putting such processes in place so can assist Local Government to get their UKSPF investment plans ready ahead of the submission deadline. 

You can register for our forthcoming webinar on the Subsidy Control Act here.

DWF Law LLP has market leading expertise in public funding.  This includes advising Central Government on large capital projects and Local Government on how to deliver public funding programmes. Please free to get in touch with our Subsidy Control lawyers if it would be useful to discuss any of the issues raised in this article or other matters related to public funding. Our UK offices include Belfast, Birmingham, Bristol, Edinburgh, Glasgow,  Leeds, Liverpool, London, Manchester and Newcastle.

Further Reading