In recent years, two flagship EU programmes were a lifeline for communities across the UK. The European regional development fund (ERDF) and the European social fund (ESF) poured €10.8bn (£9.26bn) into roads, factories and social inclusion projects including further education colleges and into places such as Wales, north-east England, Cornwall and the Isles of Scilly – paying for everything from carpentry workshops for blind people to an upgrade of Hayle harbour in Cornwall to facilitate an offshore windfarm.
The ERDF sank capital into everything from new roads to university facilities, business hubs and sports centres in economically deprived regions, while the ESF skills training, back to work schemes and other projects helped those “furthest” from jobs.
The two biggest beneficiaries were Wales and Cornwall, which was categorised as one of the poorest regions in northern Europe.
To continue, ministers pledged to match EU funding for the duration of the parliament, setting up the UK shared prosperity fund (UKSPF) last December promising that the government, rather than Brussels, would choose where money was spent – part of the Brexit dividend.
But it hasn’t turned out like that; in Wales, people speak of a cliff edge in funding that has caused “despair” and “disappointment”.
Hundreds of voluntary organisations have had to shut up shop or end support programmes for the most vulnerable in society because of government delays in replacing EU funding, it has emerged.
“The baby has been completely thrown out with the bathwater and it is just having a big impact,” said Matthew Brown, the director of operations at the Wales Council for Voluntary Action (WCVA), which ran the £44m active inclusion fund providing grants to support disadvantaged people into employment.
“Our final projects are coming to an end at the end of December and we’re having to lay off staff because the SPF has not come in time,” he said.
“We are dismantling and moving staff, and closing down stuff that the UK government and local authorities and Wales are going to have to look at rebuilding in the next couple of years.”
The WCVA and the National Council for Voluntary Action were key beneficiaries of ESF and ERDF funds, which together saw nearly €11bn flow into the UK over the last EU funding cycle in 2014-20.
Funds are still flowing at the end of 2022 in Wales, which benefited more per capita than anywhere else in the UK from the EU’s funds.
In December, one of the final sections of the new “heads of the valley” road and rail infrastructure opened, while the EU-funded £15m sports centre is still an eye-catching monolith in the former steel town of Ebbw Vale, where 62%, the highest percentage in Wales, voted to leave.
“We all thought voting to come out we’d get more; better trade rights, lots of different things. But by coming out we’ve lost all the good things we had,” said Daniel, a young man leaving the EU-funded gym.
They wanted jobs, not sports centres, the town lamented back in 2016. The government pledged to keep splashing the cash to replace the EU programmes until 2025 and in December announced £2.6m had been earmarked for its long-awaited replacement scheme, the UKSPF, which would “turbo charge levelling-up” and give “local leaders greater say in how the money is spent”.
But the announcement, welcome as it finally was, was too late for “hundreds of organisations”, said Brown.
Richard Welfoot is the chief executive of Merthyr Tydfil Institute for the Blind (MTIB), one of the charities that worked with Brown and the WCVA and benefited from EU funds – getting a “lifeline” of between £300,000 and £400,000 a year to help those “furthest from the job market”.
If it were not for Brexit, he would be looking at funding plans as far ahead as 2025. Instead, he is scrambling to provide continuity for 2023, with no allocation yet for next year or beyond because of delays in Westminster.
“If this money is not replaced and we have to downsize, it would have a devastating effect not just on our staff but our organisation, because our raison d’être is to employ people with disabilities, people who struggle in the mainstream jobs market, and keep them as productive members of society, which is surely what we all want,” said Welfoot.
The funding delay will also mean future resources are wasted trying to replicate the work voluntary organisations did, said Charles Whitmore, a research associate at the school of law and politics at Cardiff University and lead on the WCVA and Wales Governance Centre’s work on Brexit.
He said: “There’s been no effort at all to recycle the experience, capacity and knowledge. There’s decades of experience there. But it strikes me that the problem that we have with the UK shared prosperity fund is that all that experience is being lost.”
Brown said the organisations that are closing are in “despair”, especially as the demand for support during a cost of living crisis has rocketed. “They can’t believe such vital activities in areas that could not need it more are coming to an end.”
The funding gap is another blow for charities facing rising energy costs and will have a ripple effect on services such as food banks that often piggyback on bigger voluntary organisations that had EU funding. It has led to significant clashes between the Welsh and UK governments.
“The entire approach to the shared prosperity fund has been chaotic,” said the Wales economy minister and Labour Senedd member, Vaughan Gething.
He said not only will Wales be £772m worse off under the new scheme, but the eight-month delay is crippling projects such as those run by the WCVA.
“There is no prospect of the entire annual budget being spent in the remainder of this financial year,” he said.
The UK received the equivalent of £1.35bn a year under the old system. December’s announcement accounts for just under £870m on average a year, but the government has pledged to ramp up the UKSPF funding to £1.5bn by 2024-25.
Gething’s feelings are echoed in Scotland, which claims it will lose out on £337m of investment in the next three years.
The employment minister, Richard Lochhead, said the Scottish had “repeatedly pressed” Westminster for clarity on replacement funds, and the shortfall “demonstrates exactly why levelling-up means losing out, as Scotland will receive considerably less funding than before Brexit as part of the EU”.
Part of the issue is that it is difficult to compare like for like. The UKSPF was the only fund that explicitly replaces EU funding, but Cornwall, for instance, reckons it is getting the equivalent of EU funding when two other government funds are included.
Analysis of the UKSPF allocations by local authority and nation shows there is money for everywhere, not just the deprived areas.
“Every place in the UK has been allocated a share of the UKSPF, with even the smallest places receiving at least £1m. This recognises that even the most affluent parts of the UK contain pockets of deprivation and need support,” the government said in its prospectus.
It added that under the spending plans, “England, Scotland, Wales and Northern Ireland are all receiving at least as much as they did before”, while “local councils and local partners will have the opportunity to adapt each plan to reflect new economic priorities over the period to 2025”.
The top level data on allocations per local authority and country show Wales and Cornwall still on top, but communities north of Birmingham, rather than the south-east of England, benefiting the most after that.
The levelling up minister, Dehenna Davison, said the UK is “taking full advantage” of Brexit and “unlocking billions of pounds of investment to help level up communities and spread opportunity across the UK”.
“The UKSPF will have tangible benefits for people up and down the country, from a young entrepreneur in need of a helping hand to those who want to gain the skills they need to secure a decent, well-paid job.”
She added that the UK government has worked closely with local leaders across the four nations, “giving them a greater say on how the money is spent and ensuring funding is directed to where it is most needed”.
Days after the funding announcement, Cornwall county council was delighted with the split.
“Cornwall has got an extremely large allocation (£132m), the most per head of any local authority in the country and the second highest settlement after London,” said Louis Gardner, a Conservative councillor for Newquay Central & Pentire.
That was the equivalent of £42m a year, compared with £50m a year under the EU programmes, with the remainder easily made up from the government’s rural England prosperity fund and the towns fund, he said.
The big advantage of the post-Brexit scheme, said Gardner, is that it is the council, not a Brussels deprivation metric, that determines where the money goes.
In 2017 and 2018 Cornwall was deemed the “second poorest region in the whole of northern Europe and among the 50 poorest in the entire EU”, with millions of EU money poured into the University of Falmouth, Hayle harbour, business hubs, road and rail services and social inclusion schemes.
In future, the emphasis could be the north and east of the county, said Gardner, relishing the prospect of getting control of the region’s funds: “If you keep calling somewhere deprived, no one is ever going to come and invest there. The EU model kept labelling us as deprived.
“European money was fantastic for Cornwall, don’t get me wrong, but within Cornwall it was very uneven, and this is our opportunity to address the balance.”
In Wales there is concern over the new system of applying to local authorities for funding instead of the Welsh European Funding Office.
“One of the issues is that it is not clear there is any kind of mechanism to try and make sure what the Welsh government is doing to promote community cohesion and community renewal is coordinated with the UK government at all,” said Dan Wincott, a political scientist and the director of governance at UK in a Changing Europe. “It feels like the UK government is trying to compete with the devolved government.”
