Brexit and Economic Development - European Movement
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Brexit and Economic Development

Following the vote for Britain to leave the European Union the future of the European Structural and Investment Funds programme has been called into question. These programmes total 17.2billion Euros from 2014 to 2020 and provide funds to support schemes that help local areas to grow in disadvantaged areas in Britain. There are over 1,000 individual schemes.

 

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The funds support investment in innovation, businesses, skills and employment and create jobs and include the:
• European Social Fund that focuses on improving employment opportunities, promoting social inclusion and investing in skills by providing help that people need to fulfil their potential
• European Regional Development Fund that supports research and innovation, small to medium sized enterprises and the creation of a low carbon economy
• European Agricultural Fund for Rural Development that supports rural businesses to grow and expand, to improve knowledge and skills and to get started.

Cornwall receives the largest European Union funding allocation in relation to its size at £500million. London, Northeast England, Scotland and Wales are also significant beneficiaries.
Schemes include:
• A £20.5million scheme to support the shift towards a low carbon economy in Cornwall
• £ £175million scheme for enhancing equal access to lifelong learning for all age groups sponsored by the National Training Federation for Wales
• A £45million scheme called ‘Evergreen’ to develop, retain and exploit excellence in Greater Manchester’s Science, technology and Innovation sectors

These European programmes will continue until Britain leaves the European Union and, if the withdrawal agreement is ratified, during the transitional period.

Brexiters argue that after Brexit these programmes could simply be replaced with United Kingdom government programmes. The United Kingdom government proposes to replace them with a ‘Shared Prosperity Fund’ about which little is known. However, many of those involved in managing these programmes doubt that all the funding will be replaced, and I think they are right to be sceptical.

In November 2018, the United Nations published a report prepared by Professor Alston, on poverty in the United Kingdom. It concludes that United Kingdom ministers are in a ‘state of denial’ about poverty and that despite Britain being one of the world's richest countries levels of child poverty are ‘staggering’. Commenting on social divisions, Professor Alston said that:"The era of connectivity and the era of social media makes it much less sustainable to have this dramatic difference between people living the high life, a higher life than has ever been lived before, and at the other end, people who can't afford a tin of beans, can't afford the seventh meal of the week." Professor Alston found that among experts in the media, think tanks, Parliament and organisations such as the National Audit Office there was ‘close to unanimity’ that Britain was not doing enough to combat poverty. However, this contrasted with the attitude of government that was focused on reducing welfare dependency.

He also warned that the poor would ‘bear the brunt’ of the expected impact of Brexit on the United Kingdom economy and said the fall in the value of the pound had already cost low-income families £400 a year. He said that: "Ministers with whom I met told me that things are going well that they don't see any big problems and they are happy with the way their policies are playing out… It was clear to me that the impact of Brexit on people in poverty is an afterthought. “The poor will be substantially less well off than they already are… It is the most vulnerable and disadvantaged members of society who will be least able to cope and will take the biggest hit.”

This confirms that the United Kingdom is a country with significant inequalities between social groups and geographical areas, that poverty is widespread, but that (unlike the European Union) the United Kingdom state does not recognise these problems. An interesting piece appeared in ‘i-news’ in January 2019. It revealed that Britain will lose around £11.4billion in European Regional Development Funding from the European Union after Brexit. Britain would have been entitled to a 22% increase in support from the European Union under the budget plans for 2021-2027, up from the £9.3billion that the United Kingdom receives in the current 2014-2020 budget. The increase in funding would have been because many areas of the United Kingdom are falling behind the European Union average in terms of regional income. This has been exacerbated in recent years by Britain’s widening wealth gap between Greater London and places including Scotland, Wales, Cornwall and Northeast England that are among Europe’s poorest regions.

While the European Union is addressing this regional inequality and would do more if Britain remained in the European Union, an interesting piece in the ‘Guardian’ also published in January 2019, illustrates the approach of the United Kingdom government. A report by ‘Centre for Cities’ finds that deprived northern regions have been the worst hit by the austerity that has been imposed by the United Kingdom government and states that: “Austerity cuts have fallen hardest on deprived communities in the north of England, which are enduring the highest poverty rates and weakest economies… The poorest areas have borne the brunt of council spending cuts. Local authority spending has fallen nationally by half since 2010, with areas such as Liverpool, Blackburn and Barnsley facing average cuts twice that of their counterparts in the more affluent south.”

So, I am not confident that the United Kingdom government will be willing to continue to provide the same support for economic development in Britain after Brexit for two reasons:
First, it is generally agreed that after Brexit, public expenditure will reduce. This will be because of lower growth and tax revenues and / or a policy of reducing the size of the state.
Second, while economic development is central to the objectives of the European Union it has never been considered so important by the United Kingdom government. I remember working in the Western Isles and being told by an elderly resident that it had been the European Union that had funded ALL the infrastructure including roads and electricity and that such investment had NEVER been funded by a United Kingdom government. I also remember working on the European programmes in the West Midlands and West Cumbria in the 1990s when it was the European Union that wanted to regenerate those areas while the United Kingdom government placed bureaucratic obstacles in the way.

If regional development and regeneration is to continue after Britain leaves the European Union, there will need to be a significant cultural shift in the United Kingdom government and that does not look likely. It appears to me that the policy of successive United Kingdom governments has been to increase geographical inequalities in wealth, income and power; whereas it has always been
the policy of the European Union to reduce them. It is therefore ironic that voters in areas that have been ‘left behind’ decided to protest by voting to leave the European Union. If we are serious about economic development and reducing inequalities we should remain in the European Union, support the European Structural and Investment Funds programme, and make fundamental changes to the approach of the United Kingdom government to regional development.

 

Adrian Waite is a member of European Movement and a supporter of the People's Vote campaign. He is also an accountant who has worked in local government to strategic director level and has worked on economic development and European programmes including in Staffordshire and West Cumbria.