Warning prosperity fund could damage trust between UK nations

The UK Government must ensure it does not damage the fragile ties between home nations through the administration of the Shared Prosperity Fund, a new report has said.

The scheme will replace structural funding offered by the European Union, but will be administered centrally by Westminster and not the devolved administrations.

Leaders in the devolved nations have repeatedly raised concerns about the approach – which will be able to spend money in devolved areas – calling for funding to be allocated closer to home.

In its report, the Institute for Government said the fund risks “further damaging trust between the UK and devolved governments”.

It said: “After Brexit, it is legitimate for the UK Government to take a different approach to structural funding and to seek to strengthen the union through UK-wide investment initiatives.

“However, this should be done in a way that respects the devolution settlements and takes into account the devolved governments’ existing role in administering structural funds.

“Failure to do so risks further damaging trust between the UK and devolved governments at a time when inter-governmental relations are already strained.

“This could undermine the UK Government’s key objective of binding the four nations of the UK closer together.”

Akash Paun, a senior fellow at the institute and co-author of the report, said: “There is a clear opportunity to put in place something that is more flexible and less bureaucratic than the EU system, and that demonstrates to voters the value of UK-wide action.

“But the government appears to be proceeding with its plans for the UK Shared Prosperity Fund with almost no meaningful engagement with the devolved governments or other stakeholders.

“Unless they change course and begin to work in partnership, ministers risk undermining their own objectives.”

The think tank recommends clear criteria be put in place on how the funding will be allocated across the country, which should be developed transparently, allowing for stakeholders to identify issues before the funding is launched next year.

Other recommendations include minimising bureaucracy, clarifying how spending duplication will be avoided, and the consideration of a match funding model for at least some of the projects financed through the scheme.

The report also pushed for consultation to be “immediately” improved.

“Regardless of the delivery model the UK Government ultimately chooses to use for the UK Shared Prosperity Fund, it should improve its approach to consultation with the devolved governments as an immediate priority.

“Ministers should authorise their officials to share far more information than has been the case during the policy process so far.”

A UK Government spokesman said: “We reject these conclusions. We will ensure that the Government and its institutions continue to collaborate effectively with the four nations to realise the benefits of working together as one United Kingdom.

“We have been engaging with a wide range of key stakeholders in Scotland and across all parts of the UK since 2016, and this has helped identify the opportunities for UKSPF policy, learning lessons from EU funding.

“We will ramp up UK-wide domestic funding to at least match what the EU currently offers – reaching around £1.5 billion a year.”

Scotland’s employment minister Richard Lochhead said: “The UK Government’s handling of the Shared Prosperity Fund (SPF) continues to act as a significant threat to the devolution settlement and Scotland’s Parliament, as this IfG report concludes.

“The UK Government is now deliberately undermining and putting at risk Scottish devolution by deciding itself how money is spent in areas of devolved responsibility when it should be for the Scottish Government to set its own priorities.

“UK ministers consistently refuse to meaningfully engage with devolved administrations or even provide basic information about the fund, despite the fact that it is due to start in April 2022.

“Earlier this month I wrote to my UK counterpart Luke Hall calling for long-overdue meaningful engagement and expressing deep frustration at the lack of clarity about these vital funds.

“We urgently need reassurance that there will be a full replacement of all lost EU funds and that the Scottish Government will play a full part in this fund’s development and implementation.”