Scramble to allocate cash ahead of Brexit
THE prospect of the UK leaving the European Union triggered a scramble to allocate EU cash so Wales would not lose out on its share of billions of pounds in development funding.
The Wales European Funding Office (Wefo) would normally have had until the end of December 2023 to commit and spend £2.1bn. Wefo decided to try to allocate all the cash by March 29 next year – the day the UK is due to leave the EU.
In a report published today, the Auditor General for Wales notes that this left Wefo with “three years and nine months less to commit all of the funding than it did in previous rounds”.
It also highlights how Wales’ low unemployment rate means there is less demand for projects to boost jobs and how the fall in the value of the pound left Wales with more cash to spend.
The Auditor General warns: “If the UK leaves the EU without a deal in March 2019, EU funding to Wales will immediately stop.”
The UK Government pledged to replace funding for projects signed before the UK leaves the EU – spurring Wefo to try and allocate 100% by March 2019.
The report states: “For every 1% of funding that Wefo did not commit, Wales would have stood to lose around £21m.”
However, the pressure has been relaxed by the UK Government’s announcement on July 24 that will extend its funding guarantee to cover the EU budget period to 2020 – a move the Auditor General says “significantly reduces the risks associated with both not committing funding and
under spends in a no deal scenario”.
If there is a withdrawal agreement with the EU the funding guarantee will not be needed. Wales will be able to take part in the funding programme until its end in 2020.
■ What’s stopping funding being committed?
Wefo got off to a “good start” in its efforts to allocate cash and Wales was the “first part of the UK to have its programmes approved by the European Commission”.
However, progress in committing funding has been “slightly slower” than in the previous round. Only 74% of the total EU grant has been committed, compared with 81% in the last round.
The Auditor General has highlighted a series of factors making efforts more difficult. These include:
■ 1. Uncertainty about Brexit Wefo told the Auditor General it had found “some sponsors have not been coming forwards with projects as they are unsure as to whether the funding would be available if their project were to run beyond the point the UK leaves the EU”.
■ 2. There is more money to allocate than expected
The funding available is set in euros. The drop in the value of the pound means that the expected value of the EU funding is now “£132 million higher than first thought”.
■ 3. There is less demand for jobsboosting projects
Wales’ low unemployment rate means there is “less demand for projects to increase employment. It also reports that previous investment”. Wefo argues that its past efforts to boost skills mean “there are fewer people with no or very low skills”.
It is taking time to develop projects to boost the skills of people already in work.
■ It is far from certain what will replace EU funding after Brexit
The UK Government plans to create a “UK Shared Prosperity Fund” but the Auditor General notes there are “very few details” as to what it will look like.
The UK Government is expected to launch a consultation in the autumn.
Today’s report highlights two key questions:
Will the fund will be a single scheme run by the UK Government or will devolved governments will decide for themselves how it is run?
Will the value of the fund match or exceed current EU funding levels – and what rules and requirements will there be for match funding?
The Welsh Government wants funding to be devolved. It has called for EU levels of cash to be provided as a minimum.
A Welsh Government spokesman said: “EU funds have led to significant achievements, creating thousands of jobs, helping thousands of people into work, and thousands more to increase their skills. This is why we have called on the UK Government to fulfil its promise made during the referendum that EU funding will be replaced in full, ensuring that Wales will not be worse off following the UK’s withdrawal from the EU.”
■ What happens to Wefo staff post-Brexit?
The Auditor General argues skilled individuals should be valued, stating: “If responsibility for any replacement scheme is devolved to Wales, we think that there is merit in retaining the positive benefits of rigour in project appraisal and monitoring, and the skills and experience garnered over many years by Wefo staff.
In the event that the replacement programme is not devolved, there is merit in ensuring that Wefo’s expertise is used to strengthen projects and programmes elsewhere in the Welsh public sector.”
Plaid Cymru Brexit spokesman and Arfon MP Hywel Williams said: “Extending the guarantee to cover Wales’ allocation of Structural Funds until 2020 is the very least the British Government must do to mitigate the uncertainty Welsh sectors are facing.
“There is still no clarity whatsoever surrounding the future of funding for Wales post-2020.
“Wales is facing the loss of significant funding with some of our most vulnerable communities being worst hit.”
He predicted a UK Governmentadministered Shared Prosperity Fund would be “an attack on devolution” that “risks depriving our poorest communities of the funds they need”.