In the June 2023 roundup episode of LED Confidential, Mike and David discuss revelations that the UK Shared Prosperity Fund is massively underspent in its first year (listen from 8.55). Using FOI requests, local government researcher Jack Shaw - a fellow at the Bennett Institute found that some councils had spent less than 5 per cent of their UK Shared Prosperity Fund 2022-23 allocations by the end of March 2023, and overall, perhaps as little as a third of the that year’s budget has been spent. Here’s a Q+A based on the episode.
Why should the massive underspending of the UK Shared Prosperity Fund come as no surprise to regular LEDC listeners?
The proximate cause is long delays to Whitehall sign-off of UKSPF investment plans. It’s a feature of all major recent UK funding processes for local economic development, and sadly, one of the regular ‘uninvited guests’ on our show! We saw similar delays of up to four months for other funding streams, including the Community Renewal Fund, and Levelling Up Fund. But the true scale of the challenge has only been revealed through freedom of information requests.
What role should central government play in distributing funds to local government?
However far fiscal devolution proceeds in England, some form of central government oversight of devolved monies is always going to be present, as it is in other countries. However, the current process of requiring government approval for spending plans is both impractical - due to the large number of local authorities and limited civil service resources – and undermining of local right of initiative. The episode discussed how an alternative approach could work. This would be based on agreeing a national framework with basic rules on what UKSPF can fund, allowing local economic development bodies to spend flexibly within that framework, subject to periodic audits to uphold financial probity.
How can the issue of underspending be mitigated in future rounds?
The Trailblazer devolution deals and single settlements may provide a better regime for funding distribution, although these are currently limited to Greater Manchester and the West Midlands Combined Authority area. However, there are still many local authorities facing underspends. New guidance needs to allow for extending the UKSPF timeframe by removing financial-year restrictions and aligning it with local timetables for delivery of programmes.
What are the benefits of longer timeframes for economic development programmes?
Longer timeframes allow for effective mobilisation, operational delivery, and de-mobilisation of funded programmes. EU multi-year financial frameworks, for example, lasted up to seven years. Although going beyond a parliamentary term may be challenging in the UK's constitutional setup, aiming for a full parliamentary term is a reasonable goal.
What issues have arisen in the guidance for districts within Mayoral Combined Authority areas?
Within UKSPF’s prospectus and investment planning guidance, the respective roles of district local authorities and Mayoral Combined Authorities where they co-exist was made unclear by the inclusion of ‘indicative district allocations’. While MCAs are, in theory, the ‘managing’ or strategic authority for compiling UKSPF investment plans in their areas, in practice district authorities played a more strategic role in setting the priorities for the plans than originally envisaged by the guidance. Was this intentional or the result of poor communication? We’ll let our listeners decide!
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