Executive summary

One of the main commitments made by the government since the 2019 election campaign has been to ‘level up’ the UK’s underperforming regions, so that ‘everyone can get a fair share of future prosperity’. According to figures from the Organisation for Economic Cooperation and Development (OECD), the UK has one of the most regionally unequal economies in the advanced world. At a more local level, Britain has the worst inequality among OECD countries, reflecting how differences within regions are even greater than those between them. A consensus has built up that these stark differences must be tackled. Andy Haldane, chief economist of the Bank of England, has challenged the government to address ‘the interlocking issues of productivity, skills and place’ that mean some regions are ‘steaming ahead’ while others have been ‘left behind’.

Since the general election, covid-19 has drastically shifted the government’s focus. In the second quarter of 2020 the UK experienced its largest fall in employment in over a decade according to the Office for National Statistics (ONS). The unemployment rate is close to a 40-year high. As Britain looks to rebuild post-covid, it is more important than ever that the government remains committed to tackling regional inequality and ‘levelling up’ the UK.

The comprehensive spending review (CSR), scheduled to be published this autumn, presents the government with an opportunity to implement one of the cornerstones of its ‘levelling up’ agenda: the UK Shared Prosperity Fund (UKSPF). It is expected that the CSR will announce the size of this fund, revealing how much cash the government will commit to helping areas which have been ‘left behind’ by the affluence of London and the south east.

First proposed by the Conservative manifesto at the 2017 general election, the UKSPF will be the vehicle through which the government will aim to tackle regional inequality and to improve the lives of those in deprived communities. With the coronavirus already worsening inequalities, it is vital that the fund is designed with people and needs at its core. However, there are increasing concerns – especially among charities – that there will be disproportionate focus on infrastructure and capital expenditure.

This paper sets out a series of principles which would ensure the UKSPF is central to the delivery of the ‘levelling up’ agenda by supporting the creation of the social infrastructure needed to tackle regional inequality and to improve the lives of people in deprived communities.

The UKSPF, to be introduced in April 2021, will also act as a replacement for the funding the UK has received from EU structural funds for decades. Communities have benefitted greatly from funds delivered particularly via the European social fund (ESF) and European regional development funding (ERDF) which focus on skills, employability, regional inequality and the low-carbon economy. During the period 2014–2020, these funds saw around £9.15bn delivered to the UK, while estimates suggest that charities received around £258m annually from the EU, around £230m of which went to English charities. Furthermore, current estimates suggest that if the UK had remained a member of the EU, it would have been entitled to €13bn in EU funds during the period 2021–27, a 22% increase on the period 2014–2020 due to rising inequality.

Clearly the funds that have been received from the EU have been vital to the ability of charities to deliver transformative local projects, and a failure to replace this money could cause severe damage to that work. This is made even more urgent because of the vital role charities play in the UK’s communities, meaning they will be needed more than before in the rebuilding effort required in the wake of the pandemic.

However, in the past many charities have reported that EU funding places a significant bureaucratic and administrative strain on them. The UKSPF therefore presents the government with a unique opportunity to design and distribute funds in a far more efficient way, allowing charities more power to exercise their local expertise and play their part in rebuilding Britain’s communities. This opportunity must be seized upon and the voice of civil society heard when designing the fund.

The design principles set out in this paper therefore also take into account the successes and shortcoming of EU funding, as well as the expertise of charities and civil society organisations that have been involved in past programmes.

By designing and delivering the UKSPF following these principles, government would achieve its aim of producing a world-leading fund which begins to tackle the inequalities facing communities across the UK.