North 'set to lose out on £300m' as regional economic funding drops after Brexit

While the European Regional Development Fund, European Social Fund and Local Growth Fund saw an annual £2.1bn spent in England, their post-Brexit replacements of the Shared Prosperity Fund and Levelling Up Fund will be worth just over £1.4bn.

The biggest cuts in spending are expected to fall in the North, new analysis for past allocations and projected future spending has found.

The analysis from the Northern Powerhouse Partnership (NPP), PACE at Teesside University and the Joseph Rowntree Foundation (JRF) looked at allocation to date of the Community Renewal Fund (the forerunner to the SPF) and LUF in order to forecast future funding, if they were distributed in the same way.

In Tees Valley – one of the most deprived regions in the UK - annual funding would be cut from £46m to £21m per year, a reduction of £37 per person per year.

In the Leeds City Region funding would fall from just over £149m per annum to under £72m, a cut of £78m per year which equates to £33 per person.

NPP and JRF are urging Government to at least ensure that no region will be worse off under new levelling up funding than they had been before we exited the EU. For this to happen the allocation of levelling up funds for regional development must be improved. If it mimics the distribution of money so far then places in need of levelling up will be worse off.

They also stress that centralised competitive bidding for pots of money will undermine the levelling up agenda, and funds should instead be devolved to a subregional level where they could be spent more effectively by metro mayors.

In 2018, northern metro mayors including Ben Houchen, Andy Burnham, Steve Rotheram and Dan Jarvis urged Whitehall to devolve control over the new funding streams to local leaders.

Henri Murison, of the Northern Powerhouse Partnership, said: “This shows in pounds and pence the gap between rhetoric and reality on the levelling up agenda and broken promises on retaining regional investment post Brexit.

“Many of the places that stand to lose out the most under the current funding formula are the ones most in need of serious investment. This requires an urgent strategy rethink to ensure these areas are levelled up, not down.

“At the very least, Government needs to keep its word on matching EU funding. This must not pit regions against each other through competitive bidding but should instead be devolved to metro mayors, who can invest funds more effectively in areas such as skills.

“This is vital to helping us compete in the industries of the future, as well as being a key step towards unlocking future prosperity and achieving net zero.”

Katie Schmuecker, Deputy Director for Policy and Partnerships at the Joseph Rowntree Foundation said: “The Government was elected on a pledge to level up, but this new analysis shows this Government plans to spend less on levelling up via regional development than Theresa May or David Cameron’s administrations.

"What is more, if the planned expenditure is distributed in the same way as the Levelling Up and Community Renewal Funds to date, many parts of the north are at risk of significant drops in funding in future.

“Lack of progress in levelling up the country means geographic inequalities in quality of life persist. Levelling up should be about building better opportunities so people and their families can thrive.

"To truly level up the UK, the Government must use its White Paper to focus support on the areas that most need it.”

The research was raised in Parliament with Levelling Up Secretary Michael Gove on Monday by Sheffield MP Clive Betts, who said the drop represented a "significant cut".

Mr Betts said: "I'm sure the Secretary of State will agree that the success of levelling up will depend to a large part on how much money is available and how it's distributed.

"When you also take into account the cut in his own department's funding which have hit the poorest local authorities the hardest, when he produces his Levelling Up White Paper, will he produce a comprehensive list of spending per head by region for each government department and show how the policies he's advocating will actually change that level of funding for the benefit of the poorest areas which have suffered most in the last 10 years?"

Mr Gove said he would "gently contest" the argument that the poorest areas of the country have suffered the most in the past 10 years.

But he added that Mr Betts had made an "important point" about the importance of transparency around funding decisions.

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