This guest post is written by Robert Tinker, Policy and Partnerships Officer at the Joseph Rowntree Foundation (JRF).
The divisions exposed in Britain’s vote to leave the EU told a story of diverging opportunities between people and places. In the aftermath of the result, the Prime Minister made a bold pledge – to create a country in which no one and no place is left behind.
Recently, JRF has explored the role of the UK Shared Prosperity Fund, the government’s proposed successor to the EU Structural Funds, in contributing to the Prime Minister’s commitment. Our research and analysis, combined with stakeholder consultation, suggest this policy should be developed with four key principles in mind: funding which is additional; targeted; devolved; and flexible.
The first principle means that money matters to the success of the UK SPF. Simply put, the quantity of resources received from the EU Structural Funds, in addition to local funding from national government, has made an impact on outcomes in deprived localities. This doesn’t mean that every pound has been spent as effectively as possible. But outcomes would have been less positive in the absence of the EU Structural Funds. It is therefore essential for the government to ensure that the level of funding committed to the UK SPF does not fall below that received in EU Structural Funds (approximately £1.2bn plus match funding between 2014 and 2020).
Analysis of the UK’s recent experience suggests that targeting regional funding according to levels of deprivation ensures the highest return on each pound of EU Structural Funds invested. To reflect this, JRF’s second principle is that funding from the UK SPF should be targeted according to the yardsticks that matter for people’s living standards – the number of jobs in a place and the earnings of the least well off. Areas that are far behind the national average on both of these variables should be the number one priority for funding in the UK SPF.
The need to ensure each pound of money is spent as wisely as possible also underpins JRF’s third design principle for the UK SPF. It goes without saying that in a country whose regional economies are as diverse as the UK’s, effective solutions will not be delivered from the centre. It is virtually impossible for Whitehall to design policies which work for Birmingham, Bradford and Blaenau Gwent together. Instead, devolution should take centre stage.
Local Enterprise Partnerships are the bodies responsible for local economic growth in England. Where they can demonstrate high standards of financial stewardship and a commitment to inclusive growth, funding from the UK SPF should be devolved to this level. The seven Mayoral Combined Authorities and the Greater London Authority, whose governance arrangements are more mature, should receive funding automatically and immediately. In the UK, Westminster should continue to use the EU practice of devolving responsibility for regional funding to Scotland, Wales and Northern Ireland.
Finally, devolution to the sub-national level should go hand in hand with flexibility over the way in which funds are spent. Anecdotal evidence from recipients of EU funding suggests that currently bureaucracy stands in the way of the most worthwhile solutions. There will be no point to greater local control if restrictive rules over the use of EU funds are simply replicated at the domestic level. In the future, flexibility to combine money from UK SPF with other streams of local growth funding should be a cornerstone of the new fund.
Flexibility should also extend to varieties of funding available and selection of local delivery partners. A mixed economy of short-term grant funding alongside longer-term loan finance could help places to tackle entrenched problems while remaining responsive to newly emerging needs. Ensuring the participation of organisations from the voluntary sector will also be important to the continuation of small scale interventions which are often more effective at supporting the hardest to reach.
The next major milestone in the design of the UK SPF is the government’s official consultation on this policy. In the coming months JRF will use the analysis presented in its report to make the case for a UK SPF focused on promoting inclusive growth.
Rob Tinker is Policy and Partnerships Officer at the JRF.
Rob's current areas of research include post-Brexit regional policy and local growth policy. Prior to joining JRF Rob spent two years as a post-graduate student at University College London. His other research interests include economic geography, inequality and living standards.