Poorest Hit Hardest Again

Poorest hit hardest again

Abolition of UK Shared Prosperity Fund to fund the proposed National Service scheme would be another setback for levelling up

The Conservative’s plan to abolish the UK Shared Prosperity Fund (UKSPF) to help fund the new National Service scheme would hit the poorest parts of the UK most, says the Institute for Fiscal Studies (IFS).

The Tories have estimated that, once fully operational, the National Service scheme would cost £2.5bn a year. They have said £1bn of the cash would be paid for from improved tax enforcement, and the remainder from the Shared Propensity Fund. In effect abolishing the fund, said the IFS.

The IFS explains that the UKSPF was set up following the UK’s departure from the EU. It replaces the regional economic development programmes and provides councils and regional mayors with funding to improve local social and economic outcomes – all part of the ‘levelling up’ agenda. The Conservatives have said that this funding is now only guaranteed until 2028 before it shifts to the National Service scheme.

The problem is UKSPF is a core part of levelling up funding and is targeted at the most economically disadvantaged parts of the UK. That means funding is particularly high for West Wales and the Valleys and Cornwall.

Funding is also significantly above average (£22 per resident) in East Wales, the Tees Valley, Northern Ireland and the North East mayoral area, and is higher in Scotland, the remainder of the North and the Midlands than in the South of England (excluding Cornwall).

The IFS said that how National Service funding would be allocated between military and community service and across the country is not yet clear. To provide all 18 year olds with access to the scheme, funding would presumably be largely distributed based on the number of 18 year olds living in different areas, rather than based on areas’ levels of socio-economic disadvantage.

This means that even after accounting for the spending on local young people via the National Service scheme, economically disadvantaged areas could collectively lose out on hundreds of millions of pounds.

IFS’s stats show that if the scheme goes ahead Wales would be £275m per year worse off, with Cornwall losing £72m and the North East and Tess Valley £46m.

CIPFA’s David Philips told Public Finance magazine he felt the proposal casts further doubt on the party’s commitment to ‘levelling up’. He said: “Abolishing it and channelling funding instead to a new National Service scheme would therefore represent a significant reduction in funding aimed at tackling geographic inequalities.

“Alongside repeatedly delaying much-needed reforms and updates to the local government finance system, this means a significant disconnect between rhetoric on the importance of ‘levelling up’ and actual funding policy.”