Friday, 15 February 2013

Northumberland Loses Twice in the Next EU Funding Round

Northumberland Loses Twice in the Next EU Funding Round

With the release of the projected UK distribution of EU Grant funding (NUTS 2) for 2014 - 2020, Northumberland Labour Group are extremely concerned that the County loses out,not once, but twice.

In a report from the Industrial Communities Alliance it is expected that the UK Coalition Government will attack the funding used to offset deprivation and increase life chances for people living in the most deprived areas and steer £1bn  towards the rich areas of the South East of England issuing funding on a population and not a needs basis. It is expected that the North of England will lose £500M in this round of funding.

In Northumberland they have been hit with a double whammy as they have been tied in with the Tyne and Wear Authorities and labeled a 'more developed region' and offered £110 per head of population. Whilst Durham and Tees Valley has fallen into the transition Authorities bracket and will receive an average of  £260 per head of population.

Northumberland is the 'most sparsely' populated area in England and was attacked by the coalition Government because of its sparsity in the recent round of funding as the Government raised the floors and lowered the ceilings of the grants to ensure the area was almost zeroed.

Northumberland Labour Group Leader, Grant Davey said: "This shows that the Conservative led and Liberal scaffolded coalition Government are only interested in protecting their votes in the South East and don't even give a jot for the two seats they currently hold in Northumberland.
These grants that assist with easing the costly burdens of delivering services and infrastructure in difficult to manage areas are being denied to the people of Northumberland at the correct rate. Whilst the people of the Tyne and Wear Authorities have good public transport links and an excellent highways network that is being extended to assist speedy travel throughout Tyne and Wear we have an ever deteriorating and never growing set of out of date stock and problems that this Government is deciding to sweep under the carpet and ignore."


This note provides estimates of the possible distribution of EU funding across the UK in the forthcoming 2014-20 spending round.

The calculations are based on the assumption that the UK government “passes through” the funding to each area on the basis of European Commission formulas.  Though no decision has yet been taken, this approach has been suggested by UK officials at recent consultation events.  It differs significantly from the way funds were allocated in the present 2007-13 round.

The consequence of this possible new approach would be to divert around €1bn more in funding to southern England at the expense of the rest of the country.

Basis of the estimates

All the local and regional figures presented in this note are estimates by the Alliance Secretariat.  The calculations involve a number of successive steps resting on data and assumptions about:

  • The scale of the overall EU budget
  • The share of funding coming to the UK
  • The allocation of funding between sub-regions within the UK

Comparisons are then made between the funding allocations in the present 2007-13 spending round and the estimates for 2014-20.

The overall EU budget

The EU budget for 2014-20 was finalised by the Council of Ministers at their summit in Brussels on 7-8 February 2013.  Subject to ratification by the European Parliament, this is the budget that will be implemented.

Across the EU as a whole, the Structural Funds budget – which covers regional economic development – is divided as follows:

            Less developed regions (sub-75% of EU av. GDP per head)              €164.3bn
            Transition regions (75-90%)                                                                        31.7bn
            More developed regions (90% +)                                                                49.5bn

Each NUTS 2 region across the EU is allocated to one of the three categories on the basis of GDP data for 2007-09.  Two UK NUTS 2 regions (West Wales & the Valleys and Cornwall) qualify as ‘less developed regions’ and eleven as ‘transition regions’.
Share of funding coming to the UK

The European Commission will hand over pots of money to member states for each of the three categories of region.

The financial allocation is determined by a complex formula, based on population, regional and national GDP, unemployment and other factors.  These calculations, which will be undertaken by the Commission using NUTS 2 data, are not easily replicated.

The outcomes in the present 2007-13 spending round do however offer a useful guide.  In the 2007-13 round, the UK allocations per head were about two-thirds of the EU average, reflecting the lower GDP figures and greater development needs in other member states.  If this two-thirds proportion is maintained – which seems reasonable – and taking into account the UK population in each of the three categories, the overall allocations to the UK for 2014-20 will therefore be:

            Less developed regions                 €2.8bn = €1,150 per head
            Transition regions                            €3.3bn = €260 per head
            More developed regions                 €5.1bn = €110 per head

These figures are necessarily approximate.

Allocation between parts of the UK

The Commission requires the money for each category of region to be spent within that category.  The local allocations, however, are a matter for member states.

For 2014-20, UK government officials have spoken of “passing through” the funds to different parts of the UK on the basis of European Commission formulas.  This potentially gives the Commission’s complex calculations a key role.

As a guide, a simplified version of the Commission’s calculations for the UK would be as follows:

  • That each less developed region is allocated €1,150 per head (the UK average figure – see earlier).  Cornwall and West Wales & the Valleys are not far apart in terms of GDP per head, so a broadly similar allocation between the two might be expected.

  • That each transition region is allocated funding on a sliding scale, from €420 per head at 76% GDP to €160 per head at 89% GDP (giving a UK average of €260 per head – see earlier).  GDP per head is the main factor the Commission takes into account in its calculations for transition regions.

  • That more developed regions are allocated an average of €110 per head (again the UK figure – see earlier) but with an adjustment to reflect differing levels of prosperity.  The Commission uses seven indicators for this purpose.  The illustrative figures presented here assume that the financial allocation to each NUTS 2 region rises or falls by 10 per cent for every one percentage point increase/decrease in unemployment relative to the UK average (measured using Eurostat data for 2011).

The resulting allocations to NUTS 2 regions are as follows:

Less developed regions
Cornwall                                €620m            W Wales & V             €2180m

Transition regions
Tees V & Durham                €460m            Cumbria                      80m
Lancashire                            €350m            Merseyside                €470m
E Yorks & N Lincs                €200m            S Yorks                      €350m
Shrops & Staffs                    €410m            Lincolnshire              €240m
Devon                                                €210m            Highlands & Is          €120m
N Ireland                                €410m

More developed regions
N’land & Tyne & Wear        €180m            Cheshire                     90m
G Manchester                       €340m            N Yorks                        80m
W Yorks                                 €290m            Derbys & Notts         €240m
Leics                                       €170m            H’ford, Worcs & W   €110m
W Midlands (met)                 €380m            East Anglia               €210m
Beds & Herts                         €170m            Essex                         €170m
London                                  €970m            Berks, Bucks & O     €180m
Surrey and Sussex              €220m            Hamps & IOW           €160m
Kent                                        €190m            Gloucs & Wilts          €220m
Dorset & Somerset              €110m            East Wales                €110m
E Scotland                            €200m            SW Scotland             €280m
NE Scotland                           30m

The purely illustrative basis of all these figures must be emphasised.

In practice, the Westminster government looks likely to make financial allocations to LEPs in England rather than to NUTS 2 regions, which would require detailed adjustments to the figures where LEP boundaries straddle more than one NUTS 2 region.

Allocations between the ‘more developed regions’ within Scotland is a devolved matter.  Current plans are that that there will be a single programme, covering all the relevant areas in Scotland, rather than individual NUTS 2 financial allocations.

More or less than in the current round?

The first part of the attached table shows the allocation of ERDF (European Regional Development Fund) and ESF (European Social Fund) monies by region in the UK during the present 2007-13 spending round.

The second part of the table shows the estimated allocation of funds between the regions for 2014-20, based on the figures and methods described in this note – in other words, assuming that the UK government simply “passes through” the money without imposing any steer of its own.

The crucial comparison is between the share of funds (outside the Convergence regions) going to each region in the two spending rounds.

The final column shows the extent to which each region would gain or lose, compared to its share of funding in 2007-13.  There are some stark figures here:

  • The North of England, in total, could lose €500m

  • Scotland could lose €300m

  • The South of England, in total, could gain nearly €1bn

The figures for individual regions are as follows:

            South East                                        gain  €440m
            South West (ex Cornwall)              gain  €220m
            London                                              gain  €160m
            East of England                               gain  €140m
            East Midlands                                   gain    €30m

            West Midlands                                  lose    €20m
            Wales (ex W Wales & Valleys)      lose    €50m
            North East                                         lose    €80m
            Northern Ireland                               lose  €130m
            North West                                        lose  €190m
            Yorks & Humber                              lose  €220m
            Scotland                                            lose  €300m


The clear conclusion of this analysis is that if EU funds are simply “passed through” to UK regions and sub-regions, there is likely be a major shift in resources for economic development to the south of England.

It has long been recognised that the Midlands, North, Scotland and Wales have more acute development problems than most of the South and are therefore in need of greater financial support for regional development.  The post-2008 recession has if anything widened these regional disparities.

In the 2007-13 round, the UK government took the reasonable decision to prioritise the parts of the country with the greatest development needs.  The ESF funding, for example, was allocated using a formula based on worklessness and skills needs.  This resulted in around £350m more funding going to the Midlands, North, Scotland and Wales than would have been the case if the allocation had been based on population alone.  ERDF funding also prioritised these areas: within England, for example, the North was allocated 52% of the available funding.

The calculations here suggest that simply “passing through” funding on the basis of European Commission formulas will not deliver this strong and necessary geographical focus.

The key problem is the allocation of funding among the UK’s ‘more developed regions’, which account for almost half the anticipated funding.

Next steps

A final decision has not yet been taken on the distribution of EU funding between the different parts of the UK.  This leaves an important opportunity for lobbying.  The primary target needs to be the Westminster government, in whose hands these decisions largely rest.

The Westminster government needs to be persuaded to break with the Commission’s allocation formulas, which do not adequately reflect the divergences in local economic well-being across the UK.

Given the trends in regional economic well-being since the financial crisis, there is little obvious reason why the allocation of EU funds across the UK in 2014-20 should not broadly mirror the distribution of funding in the previous spending round.

Alliance Secretariat
13 February 2013

The Industrial Communities Alliance is the all-party association representing local authorities in the industrial areas of England, Scotland and Wales

No comments:

Post a Comment

Note: only a member of this blog may post a comment.