North East Devolution and Levelling Up

North East faces 39% cut in levelling up funds – report

The North East as a region stands to lose £65.9m a year of its economic development funding under the government’s plans for levelling up – a cut of 39% – according to a new analysis.

The likely reduction is due to the ending of the Local Growth Fund (LGF), which funded local enterprise partnerships (LEPs) between 2015 and 2021, and the replacement of EU regional funds by the UK Shared Prosperity Fund (SPF) and Levelling Up Fund (LUF) following Brexit.

LGF and EU funding together brought the North East region £168.9m a year for investment in the economy while the new SPF and LUF are expected in the new analysis to bring in £103m.

The report by The Northern Powerhouse Partnership, Teesside University and the Joseph Rowntree Foundation finds ‘many areas that voted for Brexit in large numbers are at risk of losing the most funding once the final round of EU funding ends and the primary funds for levelling up become the SPF and LUF.

‘Overall funding allocated at the recent Spending Review to these two funds is less than was the case under the previous regime of LGF, European Regional Development Funds (ERDF) and European Social Funds (ESF)’.

It adds: ‘The government is planning to spend less on English regional development than previous Conservative governments (2014-21) despite levelling up being a flagship policy. The annual spending of SPF and LUF in England is expected to be around £1.5bn per year. This compares with an annual £2.1bn spend under the ERDF, ESF and LGF.’

The report calculates that in the North East LEP area, spending will fall by about one-third from £123.1m a year to £82.3m, (a drop of 33.1%) and in Tees Valley will be cut by more than half from £45.8m to £20.7m (a fall of 54.8%) – a combined regional reduction from £168.9m to £103m.

The new £103m-a year-estimate is less than half the figure of £237m published by this website on January 3.

However, the earlier figure took account of several other funds in addition to the SPF and LUF, namely the Towns Fund, Future High Streets Fund, Community Renewal Fund and Community Ownership Fund. It was not an annual figure for the whole of the rest of this parliament but a maximum at which funding was expected to peak when the SPF reaches its maximum in 2023-24 (just before a general election). Finally, it made some deliberately optimistic assumptions about the size of the North East’s slice of the nationally available cake.

The Levelling Up White Paper, when eventually published, is expected to include a Funding Roadmap which will presumably give the government’s calculation of how much will be available.