The pandemic led to a severe recession, followed by a strong recovery. This briefing examines different aspects of the economic impact of the pandemic to date and outlines the key issues for the economic outlook.
When it was a member of the European Union, the UK received about £2.1 billion per year in structural funding, which supported regional economic development, businesses and employment. Now that the Brexit transition period has ended, this funding will tail off over the next few years.
The Government said that it will introduce the UK Shared Prosperity Fund to replace this money, but the Fund won’t operate until 2022. The Government has therefore published details of the UK Community Renewal Fund (UKCRF), which will support investment in “skills, community and place, local business, and supporting people into employment” over 2021/22.
This Insight looks at what we know about this new Fund so far, compares it with the EU funding it’s replacing, and discusses how ‘priority places’ have been calculated.
How much funding and what will it be used for?
The Government’s prospectus for the Fund says that £220 million will be made available in 2021/22. Although this is much less than the total the UK used to receive in structural funding from the EU, the Government intends to use the Fund to top-up the amounts still coming in. Organisations that agreed funding programmes with the EU before the end of the transition period can keep receiving EU payments up to the end of 2023.
There will be four investment priorities for the Fund:
- Investment in skills
- Investment for local business
- Investment in communities and place
- Supporting people into employment
These are like the areas that EU structural funding supported, although the prospectus claims that communities seeking funding can “take a more holistic approach” than before and won’t have to comply with “overly prescriptive funding priorities”.
Some of the money has been earmarked for specific purposes. £11 million will go to Northern Ireland (for its separate system), up to £500,000 will go to Gibraltar, and up to £14 million will be available to help places prepare for the introduction of the UK Shared Prosperity Fund. This leaves around £194.5 million to be distributed across England, Wales and Scotland.
Where will the funding go and how will it be distributed?
The Fund will be given out on a competitive basis. “Lead authorities” for each place (upper-tier local authorities and combined authorities) will invite bids from applicants for a share of that place’s funding pot, which will be capped at £3 million. These bids will be rated according to whether they align with the investment priorities.
Although applicants will be able to bid for funding anywhere in Great Britain, priority will go to applicants in 100 shortlisted “priority places”, selected on the basis of an “index of economic resilience” designed by the Ministry of Housing, Communities and Local Government (MHCLG). These places cover about a quarter of Great Britain in total, and (just as with EU structural funding) they are particularly concentrated in Wales.
There are some differences, however. Comparatively little EU structural funding went to some of the UKCRF priority places, particularly those on the coast in the East and South East of England. This is likely because the regional classification used in the allocation rules for EU structural funding was based on GDP per person, whereas the “index of economic resilience” is based on a series of measures such as productivity, population density and household income.
The final decision on each funding bid will be made by MHCLG. There is no formal role for the devolved administrations, although the fund’s prospectus states they may be consulted for advice at the shortlisting stage.
How does this compare to the Towns Fund?
The allocation process for the UKCRF is notably different to some other funds that have been announced in the last couple of years. In particular, the process that MHCLG used to select towns to bid for the Towns Fund came in for criticism from the Public Accounts Committee. The Committee’s report called the process “not impartial” and criticised the role of ministers in selecting towns.
By contrast, MHCLG has published a full methodology note for the UKCRF, including the statistical measures used, and emphasised that the priority places were selected using only these measures rather than by ministers.
Does that mean the funding is distributed impartially?
Although using statistical measures is by itself no guarantee of impartiality (because MHCLG has chosen which measures to use in its selection process), initial analysis by the Library of the places selected suggests there is no obvious slant towards areas with a Conservative MP.
Around 50% of the population of the UKCRF priority places was represented by a Conservative MP immediately following the 2019 election, which compares with about 58% of the population of Great Britain as a whole. The equivalent figures for people represented by Labour MPs are 37% in priority places and 33% in across Great Britain.
There will still be a role for ministers to play in the UKCRF, as the competitive nature of the UKCRF means that bids will need to be assessed. The published assessment criteria focus mostly on a scoring system, but also include notes how ministers will be involved in the process.
What happens next?
According to the Fund’s timeline, lead authorities could start inviting bids in March, with the shortlist going to MHCLG on 18 June 2021. The successful projects will be announced from late July onwards, with the funding available from that point.
Meanwhile, work continues on the UK Shared Prosperity Fund. An investment framework for the Fund was promised “in the spring” at the Spending Review last year, but the UKCRF’s prospectus seems to have pushed it back to “later this year”. It is currently unclear when this will be.
The UK Shared Prosperity Fund, House of Commons Library.
The Towns Fund, House of Commons Library.
About the author: Philip Brien is a researcher specialising in public spending at the House of Commons Library.
Data and latest developments on interest rates and quantitative easing policy from the UK (Bank of England), Eurozone (European Central Bank) and the US (Federal Reserve).
International Inflation: Harmonised Index of Comsumer Prices data on international inflation rates.