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Replacing European Structural Funds in Wales after Brexit

Published Monday, January 27, 2020

This House of Lords Library Briefing contains a selection of material relevant for the forthcoming question for short debate on the replacement of European Structural Funds in Wales after Brexit on 5 February 2020.

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The UK was allocated €10.6bn from the latest European Structural Funding cycle, which covers 
2014–20. Wales was eligible to receive around £2.1bn (€2.5bn) of this. The UK Government has committed to protecting the funding from this current cycle. When the UK leaves the EU, it will no longer be eligible for future funding. The 2019 Conservative Party manifesto stated that the Government will set up a UK Shared Prosperity Fund to ensure that the people of the UK do not lose out from the removal of EU funding.

European Structural Funds are divided into two funding streams:

  • The European Regional Development Fund (ERDF), which aims to strengthen economic and social cohesion by correcting imbalances between its regions; and
  • The European Social Fund (ESF), which supports jobs and workers across Europe.

According to the Wales Audit Office, Wales was allocated around £1.2bn (€1.4bn) from the ERDF and £800m (€936m) from the ESF in the 2014–20 cycle. This funding goes towards projects such as: connectivity and urban development; renewable energy and energy efficiency; youth employment and attainment; and technical assistance.

On 24 July 2018, the former Secretary of State for Housing, Communities and Local Government, James Brokenshire, made a statement to the House of Commons which set out the Government’s plans to develop a UK Shared Prosperity Fund to replace European Structural Funds. In a debate in September 2019, the Minister for the Northern Powerhouse and Local Growth, Jake Berry, further stated that the UK Shared Prosperity Fund would respect the devolution settlement and that additional information would be given at the next comprehensive spending review, due to take place in 2020.

Some observers have raised questions over the method that may be used to allocate funding through the UK Shared Prosperity Fund. For example, the Institute for Fiscal Studies has argued that using the Barnett Formula, which is currently used by the Treasury to allocate funds to the devolved administrations, may result in a reduction of funding to Wales.

Lords Library notes LLN-2020-0031

Author: Sally Dray

Topic: European Commission

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