Will the Shared Prosperity Fund help rural communities? 

The Government is creating a UK Shared Prosperity Fund (SPF) to replace structural funding that the European Union previously allocated to the nations and regions of the UK. The SPF was announced in 2017, launched in April 2022 and is expected to allocate funding between October 2022 and March 2025. What might the SPF mean for rural communities? Jessica Sellick investigates. 

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The European Union (EU) provides several funding streams to its Member States. One of these streams, the European Structural and Investment Funds (ESIF), aims to reduce disparities by helping less developed regions to catch up with more developed regions. When the UK was a Member State four funding streams were provided through ESIF: 

  1. The European Regional Development Fund (ERDF): this provides support to small businesses and is focused on research, innovation and moving towards a low carbon economy. 
  2. The European Social Fund (ESF): this focuses on encouraging people into the workforce and also funds schemes such as apprenticeships and traineeships for young people.  
  3. The European Maritime and Fisheries Fund (EMFF): this provides funding to support improvements in fisheries. 
  4. The European Agricultural Fund for Rural Development (EAFRD): this focuses on improvements in farming as part of the EU’s Common Agricultural Policy (CAP).  

For the programming period 2014-2020, ERDF and ESF accounted for two-thirds of ESIF funding. 

ESIF is administered jointly between the EU and Managing Authorities nominated by each Member State. It is the Managing Authorities that produce an operational programme, that is signed off with the European Commission, which then allocates funding to the Authority so they can distribute it. In England, the Departments for Business, Energy and Industrial Strategy (BEIS), Levelling Up, Housing and Communities (DLUHC), and Environment, Food and Rural Affairs (Defra) are all Managing Authorities. 

Because the UK has left the EU, new funding has stopped. The Withdrawal Agreement between the UK and EU included provisions to maintain the existing arrangements for structural funding until the end of 2020. Spending from ESIF lags behind its allocations, so funding remained unspent when the transition period ended. This money can still be paid out, providing the funding was agreed before this point. Furthermore, the EU allows a 3-year window after the close of each of its funding programmes so that this can happen. 

The Government has now created a replacement for ESIF: the UK Shared Prosperity Fund. How has this funding stream been developed; how does it compare to structural funding from the EU that it is intended to replace; and what does it mean for rural communities? 

What is the UK Shared Prosperity Fund (SPF)?  

Back in 2017, the Conservative Party’s Manifesto referenced how ‘we will use the structural fund money that comes back to the UK following Brexit to create a United Kingdom Shared Prosperity Fund, specifically designed to reduce inequalities between communities across our four nations. The money that is spent will help deliver sustainable, inclusive growth based on our modern industrial strategy. We will consult widely on the design of the fund…and [it] will be cheap to administer, low in bureaucracy and targeted where it is needed most’.  

In July 2018, James Brokenshire [then Secretary of State for Housing, Communities and Local Government] made a written statement on local growth setting out headline details: 

  • The purpose of the Fund is to reduce inequalities between communities across the four nations. 
  • The method for doing this is by strengthening the foundations of productivity [as set out in the Industrial Strategy] to support people to benefit from economic prosperity. 
  • The Government will respect the devolution settlements in Scotland, Wales and Northern Ireland so that the Fund works across the UK. 

The November 2020 Spending Review contained ‘heads of terms’ for the SPF. This suggested: 

  • The Fund will cover the main areas of ERDF and ESF. The first part will cover investment in people and skills, communities and place and local businesses. The second part will be targeted at employment and skills programmes for those facing barriers to participating in the labour market. 
  • The first part of the Fund will be allocated based on achieving specific outcomes and agreeing investment proposals. 
  • Some of the Fund will be targeted at places ‘most in need’ across the UK. 
  • The total amount of funding made available will ‘ramp up’ until it matches current EU receipts. 
  • To bridge the gap until the introduction of the Fund, separate funding [known as the UK Community Renewal Fund] has been provided to pilot programmes and new approaches.  

In May 2021, the Government published a prospectus for the UK Community Renewal Fund (CRF). This set out a list of 100 ‘priority places’ and £220 million of funding to help local areas prepare for the SPF. These places were selected based on an ‘index of economic resilience’ developed by the then Ministry of Housing, Communities and Local Government. The index took account of broader aspects of economic development than the GDP per capita used by the EU to classify regions. This means the places prioritised for the CRF differ from those that received high levels of EU funding. In November 2021 the Government published a list of successful bids. While recognising how the CRF is distinct from the SPF in its design, eligibility and duration; the CRF is intended to inform the design of the SPF, and that feedback will be provided to all bidders to assist them in preparing bids for the SPF.  

In the Autumn 2021 Budget and Spending Review £0.4 billion was allocated to the SPF, with a further £0.7 billion for 2023-2024 and £1.5 billion for 2024-2025. The Review described the SPF as a ‘new UK-wide programme to equip hundreds of thousands of adults with functional numeracy skills to improve their employment prospects; ‘support a range of skills and employment focused programmes’; and how the funding will ‘at a minimum match the size of EU funds in each nation’.

How has the SPF money be allocated? 

In February 2022 pre-launch guidance for the SPF was published alongside the Levelling Up White Paper. This described how SPF monies would be allocated mostly through Local Authorities. A formula would be used to allocate funding rather than areas competing for a share of the funding. The funding would be conditional on each area creating an Investment Plan setting out measurable outcomes that Local Authorities are hoping to achieve – and which take account of other funding streams in being clear what the SPF investment would concentrate on. The pre-launch guidance contained three investment priorities aligned to the Levelling Up White Paper: 

  1. Communities and place: initiatives aimed at improving community infrastructure and investing in neighbourhoods. 
  2. Local businesses: improving the number of jobs and the productivity of existing businesses. 
  3. People and skills: promote adult learning and skills provision. The largest part of this strand will be the Multiply Programme, a new UK-wide initiative to equip adults with the functional numeracy skills to improve their employment prospects.  

It is intended that the first two investment priorities and the Multiply programme will be the main focus of the SPF in its first few years. However, in England, places will be able to select people and skills interventions earlier where they meet specific voluntary sector considerations. 

Building on the pre-launch guidance, in April 2022 the Government published a prospectus. This confirmed the funding allocation places will receive, how it will be delivered, and the investment plan process.   

The SPF will be a mix of revenue and capital funding which can be used to support a wide range of interventions under the three themes in ways that build pride in place and improve life chances. Confirming the requirements set out in the pre-launch guidance, the prospectus set out how all places across the UK will receive a conditional allocation from the Fund, but to access the money they will be required to submit an investment plan to Government for approval. Investment plans will need to include three key sections: 

  1. Local context: an opportunity for places to set out their local evidence of opportunities and challenges through the lens of the three investment priorities. 
  2. Selection of outcomes and interventions: a list of interventions places wish to prioritise under each investment priority, from a menu of options. Interventions should be linked to local opportunities and challenges. Where bespoke interventions are included [i.e., those not on the Government’s menu of options] a clear justification will be required. Funding can be used to support interventions through a grant to a public or private organisation, commissioning third party organisations, procuring service provision and/or through in-house provision. 
  3. Delivery: the governance structures and delivery processes that will support the implementation of interventions; a spend profile with outputs and outcomes figures; and information on capability and previous experience of delivering similar funds. 

In England, local government has been tasked with responsibility for developing the investment plans, and for the delivery of the funding thereafter. Where the SPF operates over a strategic geography (i.e., mayoral combined authorities) all allocations will be made at the strategic geography level, including the 4% available for administration. The SPF will operate over District Councils or Unitary Authorities elsewhere. The Multiply Programme will be delivered at the upper-tier or unitary level in England. The prospectus asks lead Local Authorities for either multiply or core SPF to work closely together to ensure that each element of funding works coherently and is aligned. Lead Local Authorities are also required to take account of the Adult Education Budget and remaining European Social Fund investments.

The Government is making £20,000 available per Lead Local Authority, or £40,000 for each Mayoral Combined Authority and the Greater London Authority, in England to undertake initial preparatory work for the Fund, including developing their Local Investment Plans. 

Each place will be required to have a Local Partnership Group to support the development of the investment plan and to oversee how the funding is administered locally. The prospectus outlines the types of groups that should be represented on the Local Partnership Group. These include local businesses and investors, community and faith organisations, voluntary and community sector organisations, social enterprises, strategic bodies, education and skill providers, public health representatives and rural representatives unless there are no rural communities within the area. In addition to a national evaluation, Lead Local Authorities are being strongly encouraged to conduct their own evaluation to demonstrate the effectiveness of the interventions pursued.  

The investment plan submission window is due to open on 30 June and close on 1 August 2022, with first payments expected from October 2022 and final payments in March 2025. Local Authorities are required to complete a pre-registration form before they can access the investment plan platform. 

How does the SPF compare to ESIF?  

The prospectus confirmed the SPF is worth £2.6 billion over the period 2022-2025, including Multiply. Funding has therefore been confirmed for three financial years: £400 million for 2022-2023, £700 million for 2023-2024, and £1.5 billion for 2024-2025. While the Multiply Programme funding will be 100% revenue, the core SPF money has been divided between revenue and capital over this period. In England, for 2022-2023, this will comprise 90% revenue and 10% capital; for 2023-2024 87% revenue and 13% capital; and for 2024-2025 80% revenue and 20% capital. 

The £1.5 billion allocated for 2024-2025 is less than the average amount that the UK received from the structural funds in 2014-2020 (approximately £2 billion). However, the SPF is currently intended to cover ERDF and ESF which together averaged £1.3 billion per year. Replacement funding for farming and fisheries is being developed outside of the scope of the SPF. 

The funding is being staggered across the three investment priorities, with most funding for the ‘people and skills’ priority expected to start in 2024-2025 apart from the Multiply Programme. In practice, this could mean some interventions that would have been eligible for ESF will remain unfunded in the initial years of the operation of the SPF. 

As of August 2021, ERDF and ESF funding to England since 2014 covered 52% of the total cost of projects, requiring projects to find the remaining investment through match funding. While the souring of match funding/leverage will not be required to unlock an area’s SPF allocation (so as to ‘provide flexibility, reduce bureaucracy and tailor interventions to local circumstances’); information on any known or anticipated match or leveraged funding will need to be provided in the investment plan if available at the time of submission. Lead Local Authorities will be required to consider match funding when designing interventions and to provide regular updates on match funding achieved throughout the lifetime of the SPF as part of their reporting responsibilities. 

The 7-year financial framework used by the EU provides areas with certainty over the funding they have to work with; and those in receipt of the funding have a 3-year period at the end of each framework in which to make their last funding claims.    Around half of all public spending in England is allocated as part of Spending Reviews. This is where the Government sets departmental spending totals for the next few years. Reviews may take place every 2-4 years, with the resultant spending plans covering 1-4 financial years. The recent postponement of reviews, and resultant shorter timescale they cover, means that while the SPF will operate over multiple years, the current allocation is only confirmed until 2024-2025. Will these timescales support places to take a longer-term strategic approach to their investment plans?  

What does the SPF mean for rural communities? 

Back in June 2021, the Rural Services Network (RSN) developed a prioritisation framework to support the levelling up of rural communities. This highlighted how the metrics used to prioritise fund allocations often fail to reflect the reality for sparsely population areas and remote communities. For example, the income domain within the Indices of Deprivation (IMD) is commonly used as an indicator of poverty. The data is based on benefit claimant counts rather than employment incomes resulting in a lack of consideration of the sometimes low-income, insecure, part-time and seasonal occupations many rural residents rely upon. Instead, the RSN recommended assessing the standards of living achievable in different locations given local labour market conditions [real incomes] as a basis for the SPF. 

In February 2022, the RSN published its rural lens review into the SPF pre-launch guidance. While welcoming the announcement that all areas would receive an allocation through a funding formula rather than a competitive process, it queried the construction of the formula – will it reflect delivery costs in rural settings? Will the SPF be rural-proofed? They also queried how the SPF could complement other funding streams as many of these already bypass rural areas.  

For allocations in England, the SPF prospectus confirmed that 70% was allocated on a per capita basis, based on Local Authority population size; and 30% using the same needs-based index used to identify the Community Renewal Fund priority places (i.e., data on productivity, household income, skills, and productivity places with lower population density). The full methodology note setting out how allocations have been made is due to be published in May 2022.  

More recently, in April 2022, the All-Party Parliamentary Group for Rural Business and Rural Powerhouse published its inquiry into the rural economy. In indicating how improving skills is critical to addressing the productivity gap, the APPG urged the Government to ensure the ring-fenced funding for rural communities previously provided under the EU Rural Development Programme continues under the SPF. They have also called for Wheels to Work and community transport initiatives to be delivered under the SPF. 

When part of the EU, a wide range of programmes enabled farmers, businesses, local organisations, Local Authorities, voluntary groups and communities across rural England to access funding to support their projects and initiatives. Back in October 2021, the Prime Minister committed to ensuring that Cornwall would get at least the same level of funding it would have received if the UK had remained in the EU. Indeed, Cornwall Council submitted a bid to Government in July 2020 for £700 million over 7-years to match the funding it would have received from Europe. Cornwall has been allocated £132 million from the SPF over the next 3-years, and while welcomed by some commentators – indeed the total allocation for Cornwall and the Isles of Scilly represents the highest amount allocated to any unitary authority in England [£129,549,117 core SPF + £2,452,414 Multiply = £132,001,531]; others have queried if the funding streams becoming available from central Government will lead to the total amount of investment expected.  

While the SPF is part of Government’s attempt to unlock potential across all parts of the UK, will it substantively reach rural areas? How will investment plans developed to access the SPF recognise the opportunities, challenges and interventions needed in rural places? At the same time, it would be a mistake to view the SPF – and Levelling Up more widely – solely through the lens of public monies and public policy priorities. Its success depends upon voluntary and community sector organisations, the private sector, local leaders and residents. How, therefore, can we ensure rural representation and a voice on Local Partnership Groups? 

Government anticipates approving the first investment plans from October 2022 onwards, with the 3-year funding period scheduled to close in March 2025. Will the SPF level up opportunity and prosperity and overcome deep seated [rural] geographical inequalities? Watch this space…

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Jessica is a researcher/project manager at Rose Regeneration and a senior research fellow at The National Centre for Rural Health and Care (NCRHC). She is currently supporting a CRF funded project; helping public sector bodies to measure their social value; and evaluating employability schemes and a veteran programmes. Jessica also sits on the board of a Housing Association that supports older people and a charity supporting Cambridgeshire’s rural communities. 

She can be contacted by email jessica.sellick@roseregeneration.co.uk. 

Website: http://roseregeneration.co.uk/https://www.ncrhc.org/ 

Blog: http://ruralwords.co.uk/ 

Twitter: @RoseRegen