Negotiations broke down between the Welsh and UK governments over the Shared Prosperity Fund when it became clear that cash would be diverted away from Wales’ poorest communities into more prosperous areas, we can reveal.
The UK Government has published the funding formula that will be used to distribute money to Welsh local authorities for its replacement for EU structural funds for the poorest regions of Europe. Wales receive £585 over the next three years but there is an angry row over whether that is enough to replace the money that would have been provided by the EU. See more on that here.
Instead of the money being allocated to areas that have a Gross Value Added per head (a measure of economic output) of 75% of the EU average, the funds will be distributed much more widely. The formula will see:
- 40% of the cash will be allocated on a population basis;
- 30% will be allocated in line with a formula used by Westminster to fund projects under the earlier Community Renewal Fund (CRF); and
- 30% will be allocated in accordance with the Welsh Indices of Multiple Deprivation.
You can see more on how the Community Renewal Fund worked here. It was criticised for an opaque selection procedure which saw 100 regions chosen to benefit with little explanation of why. Some of the poorest areas of Wales were excluded while wealthier areas like Richmond in Yorkshire, where Chancellor Rishi Sunak is the MP, were included.
The Welsh Government had suggested that 30% of the cash should be allocated on a population basis and 70% in line with the Welsh Indices of Multiple Deprivation - which would have seen the money go to the poorest areas of Wales - but this was rejected by UK Ministers.
In practice, the Welsh Government believes that millions of pounds that would have gone to the poorest communities in the Valleys and some coastal areas will instead go to more prosperous areas that happen to vote Conservative.
Economy Minister Vaughan Gething issued a statement which said: “Since 2016, the Welsh Government has worked intensively to create the strongest possible model for post-EU regional investment in Wales, called our Framework for Regional Investment. This has included co-production with stakeholders, a public consultation, and a project to integrate international best practice with the OECD.
“During this time, we also made frequent attempts to engage with UK Ministers on these plans. However, it was not until this month that the UK Government offered a meaningful negotiation in order for the SPF prospectus to be published ahead of the local government pre-election period.
“Despite this unfeasible timetable, we attempted to create a partnership approach to this Fund that respects the devolution settlement and aligns with the clearly expressed wishes of people and organisations in Wales on how post-EU funding should be invested and delivered.
“Although there has been some movement, the funding plans set out by the UK Government do not reflect the distinct needs of Welsh communities. We are concerned that too little will reach those communities most in need. The Welsh Government proposed an alternative formula which would distribute funding more fairly across Wales according to economic need, but this was rejected by the UK Government.
“The proposed role of the Welsh Government also falls short of a genuine co-decision making function essential to maximising investment and respecting devolution in Wales.
“On this basis, it has not been possible to endorse the approach the UK Government is taking on this Fund and we cannot support their decision to redirect economic development funds away from those areas where poverty is most concentrated in particular. This regressive decision is compounded by the dramatic reduction in the funds Wales would have received had the UK Government delivered its pledge to replace EU funds for Wales in full.
“We have made it clear to the UK Government that this has implications for the role the Welsh Government is able to play in the next steps of delivery and implementation and the commitment of our resources.”
