May. 12, 2023 at 10:37 am

Newport warns of Shared Prosperity Fund challenges in light of council’s financial outlook

May 12, 2023no commentNo tags

Newport City Council will find it difficult to achieve full expenditure within the remaining two years of the Shared Prosperity Fund (SPF) programme because of its “challenging medium term financial outlook”.

That’s according to the council’s chief financial officer Meirion Rushworth, who warned in comments to a cabinet meeting held on 10 May that the council should avoid projects where it risks having to “fund the completion of the scheme from within its own, already constrained, resources”. Such projects include those that could fall outside the scope of the timings of the government funding, which runs for two more years, or projects that risk overrunning and would therefore require additional council funding.

The SPF programme was introduced by the UK government as a key part of its levelling up agenda, replacing previous regional funding received from the European Union. It is a tripartite fund focused on three core priorities – ‘Community and Place’, ‘Supporting Local Business’, and ‘People and Skills’. There is also an allied and separate allocation to support adult numeracy called ‘Multiply’.

Newport’s core allocation is £27m with an additional £5.4m to invest via Multiply. The total £33m funding allocation for Newport is broken down into a yearly allocation; 12% in Year 1 (2022/23), 24% in Year 2 (2023/24) and 64% in Year 3 (2024/25). The authority said it was “in the challenging scenario of establishing systems, capacity building and delivering more than a third of the SPF activity in the 2023/2024 financial year due to the rollover of unspent funding from Year 1”.

“By virtue of the scale of sums involved, it will be challenging to ensure full expenditure is achieved within the remaining two years of the programme,” said Rushworth in a report presented at the cabinet meeting.

SPF Year 1 at Newport City Council. Click to enlarge. Source: Newport City Council

“Therefore, robust governance and management arrangements will be required to avoid foregoing the funding that has been made available. Part of these arrangements will involve accurate forecasting and monitoring of budgets and, where necessary, timely reprofiling of funds to ensure the pace of delivery can be maintained and expenditure maximised.

“The risk of not being permitted to carry forward unspent funds from Year 2 to Year 3, as per the current UK government advice, adds to the need for effective programme management, to ensure spend is incurred in line with the current profile. In light of this risk, projects should only be commenced where there is confidence that the spend will be incurred within the relevant year, as any delays could result in the council having to fund the completion of the scheme from within its own, already constrained, resources, should UK government not be able to accommodate the financial impact of any delays.”

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Newport’s investment plan for 2023-25 lists more than 40 projects, of which some may give rise to ongoing revenue budget consequences. “Taking into account the challenging medium term financial outlook facing the council, this presents a risk that further pressure could be added once the SPF grant funding comes to an end, but this is not quantified/estimated,” said the report. “Cabinet needs to be cognisant of this risk when considering approval of the programme and proposed schemes contained within it.”

Rushworth recommended delaying the commencement of any individual projects until the longer-term revenue consequences are quantified and funded, if acceptable, from a recurring funding source. He also recommended developing and setting an overall financial framework for the SPF programme, and implementing a comprehensive review procedure to ensure that projects would not be financially damaging.

A summary of funding by priority at the council. Click to enlarge. Source: Newport City Council

In a report shared at the cabinet meeting detailing progress on the SPF programme, the council said it was working alongside regional partners and the Welsh Local Government Association (WLGA) to identify mitigations that enable the UK government to cover the maximum possible support to eligible projects from the near total loss of delivery in Year 1 of the programme, and agree on the steps to reconfigure local investment plans to ensure local areas do not lose investment due to the overall delay in proceeding. To this end, the council said the UK government recently agreed to allow Year 1 funding allocations to be rolled over into Year 2.

A Shared Prosperity Fund oversight board and delivery group structure has been set up to oversee the management and performance of the local investment plan and the delivery of projects which span multiple service areas and external providers.