EU replacement funding 60% shortfall

Scotland is missing out on more than £300 million in European support under the UK Government’s replacement funding programme.

As the first payments are made to local authorities through the UK Shared Prosperity Fund, Employment Minister Richard Lochhead said Scotland is suffering from a 60% shortfall in financial help.

The UK Government promised its UK Shared Prosperity Fund would replace in full all EU funding lost to Scotland after Brexit. But it has only allocated £212 million to Scotland over a three-year period, when EU funding would have been worth around £549 million over three years – a shortfall of £337 million.

The new fund is distributed exclusively through local authorities, excluding national, community and Third Sector groups, risking the loss of the services which these organisations provided. The UK Government has also taken sole responsibility for use of the funds; previously the Scottish Government allocated EU funding to ensure the needs of Scotland’s people and communities were properly met.

Mr Lochhead said:

“EU structural funds have made a real difference across the country, helping more people into work and delivering new skills through better training and support. This welcome contribution from the EU has been eradicated by Brexit and the UK Government’s replacement for EU funding has fallen far short in both the quality and quantity of what is required.

“The UK Government has ignored the devolution settlement and failed to recognise the authority of the Scottish Government in devolved areas. This replacement for EU funding ought to be fully devolved, allowing funding to flow to regions and communities in line with shared Scottish policies, designed to best serve Scottish needs.

“Shared Prosperity has also left local authorities racing against the clock to spend their funding by March, or face losing it and see their plans reduced to tatters due to the UK Government’s delay in only now agreeing the allocations.

“The approach taken thus far by the UK Government is against the principles of partnership working and risks diluting Scottish Government efforts to transform the economy and support families and sustainable public services during this cost of living crisis.”

Background

The UK Shared Prosperity Fund sees Scotland allocated £32 million in 2022-2023, £55 million in 2023-24 and £125 million in 2024-25. Even the third year of funding delivers less than Scotland received before the UK’s EU Exit.

The Scottish Government has calculated £162 million per year would be needed to replace the European Regional Development Fund and European Social Fund, increasing to £183 million per year when LEADER funding and the EU Territorial Cooperation Programmes are added in.

Shared Prosperity funding is allocated over three years but delivered as single year payments and any underspend must be returned by local authorities to the UK Government at the end of each year.

EU funding has supported infrastructure projects and community initiatives across the country since the 1970s, with Scotland receiving and delivering more than £6 billion. Transformational projects, such as the University of the Highlands and Islands and the European Marine Energy Centre in Orkney, have brought significant benefits to businesses and communities.

Projects previously supported by European Territorial Cooperation grants have included a scheme using video technology to help dementia patients stay at home rather than go into residential care, and a scheme developing tools powered by zero emissions hydrogen.