PARLIAMENTARY DEBATE
UK Shared Prosperity Fund - 12 September 2024 (Commons/Commons Chamber)

Thank you, Madam Deputy Speaker, for the opportunity to hold my first Adjournment debate in this House. I sought this debate because I am conscious that the forthcoming Budget is rapidly approaching and I wanted to raise with Members and Ministers the issue of the cliff edge for funding of the UK shared prosperity fund. Any future funding of the UKSPF is of course a matter for the Chancellor, but I would like to use the debate today to discuss the merits of the fund, how we can learn from the experiences of implementing it over the past few years, particularly in local government, and the approach to local growth funds under the new Labour Government.

We know that the Government’s top mission is to boost economic growth across the UK. It is my firm belief that a new, improved version of the UKSPF could make an important contribution to that while also supporting local communities and boosting regeneration efforts. I thank the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the hon. Member for Nottingham North and Kimberley (Alex Norris), for his attendance today; I know that he cares strongly about local growth and supporting community cohesion, and I look forward to hearing his response at the debate’s conclusion.

The UKSPF was introduced as the domestic replacement for the European structural and investment fund after Brexit. The previous funding provided by the Conservative Government did not match the European structural and investment fund but did provide local authorities with some devolved funding to support local priorities, with particular emphasis on regeneration, business support and skills.

The UKSPF began in December 2022 and is due to end in March 2025. Although it is by no means perfect, I believe it has had a broadly positive impact and I would like to draw on my own experience as a former Medway council cabinet member responsible for distributing the UKSPF. Feedback from Whitehall to officials at the council has been that Medway council’s approach was considered best practice, and hence I am keen that the Minister hears about our experience. I know he is a big supporter of local government and evidence-based policy making, and no doubt he will wish to hear from other Members of this House who also have direct experience of the UKSPF.

In Medway, we used our UKSPF allocation to support local community groups, businesses and charities, which we considered best placed to recognise what their areas needed in order to thrive. Rather than a top-down approach, we asked communities what they needed and functioned as the facilitator to make things happen, using the UKSPF. The feedback we received was that this approach was empowering for local communities and brought people together. An SPF network was established that created a mutually supportive community that led in later years to joint bids for community projects.

The UKSPF’s potential to support broader regeneration efforts to revitalise our town centres is significant. In Medway, small pots of money delivered significant economic and social benefits. One of the ways I was particularly keen to use the UKSPF was to help our town centre forums host high street events, on the basis that this would bring in thousands of extra visitors and benefit local businesses.

A notable example of this is the Chatham Chinese new year festival, held earlier this year in what is now my constituency. I was the biggest such celebration in the UK outside London and led to an approximate 25% increase in footfall on Chatham High Street. The festival was free to attend and saw a parade, street food, a market, traditional dancers and martial arts masterclasses. The Chatham town centre forum partnered with the local Chinese association, the shopping centre, Medway Youth Council, and local schools and charities to deliver the event. Feedback from residents and vendors was unanimously supportive. Materials purchased using the UKSPF will enable the event to run for future years without further financial support from the council, so the UKSPF will leave a lasting impact. This is important because we want schemes like the UKSPF where possible to deliver longer-term benefits.

I will briefly turn to a few other ways that we used the UKSPF to support longer-term improvements in Medway. We offered small feasibility funds—pots of as little as £5,000—to help groups demonstrate that an idea would work. They could then use that proof of concept to go on to attract funding from other sources to make it happen. We helped community groups, such as the Chatham Intra Cultural Consortium, to transition into a charitable incorporated organisation, or CIO. Achieving that new structure means that it can bid for other sources of funding and is less reliant on financial support from the council. That means it can continue its incredibly important heritage work.

Helping groups to get on a more financially sustainable footing is particularly important in the context of years of constrained local government finance. We also used the UKSPF to provide grants to help businesses to grow by purchasing modern technology and equipment. For instance, a gift business specialising in handmade travel keepsakes was able to use the grant to invest in a new fibre laser machine, which significantly enhanced the business’s productivity and efficiency, allowing it to handle larger orders. We also funded net zero audits and green grants for local businesses that wanted to reduce their operating costs by making their premises more energy-efficient, and we helped them get those green certificates that are now needed to bid for many contracts.

Does my hon. Friend agree how important the SPF is to areas, including Truro and Falmouth in Cornwall, that lost their funding under the European regional development fund and the European structural fund when we came out of the EU under Brexit? Does she agree how fundamental it is that there is some sort of replacement fund for that?

I absolutely agree, and I will be making the case for that replacement fund later. I thank my hon. Friend for her contribution.

In my constituency, more than 30 local businesses have so far been supported under these UKSPF-funded programmes to reduce their costs, to grow their business and to contribute to helping us reach net zero. We would not be able to do that without this replacement funding for the EU structural funds.

I am conscious that in this final funding year the focus of UKSPF spending is on people and skills. It will be important for Ministers and others to assess the impact that these projects have on helping economically inactive people into good-quality training and work. The examples I have given are just a snapshot of how local councils across the UK have used the UKSPF. Overall, I consider that the UKSPF has worked well in my constituency, and I understand that it has worked well in others too, which is great to hear. It has delivered the economic growth and regeneration aims that this new Government are committed to boosting further.

Despite those successes, there have been challenges with the UKSPF, and it is appropriate that we consider them now, as the existing funding cycle comes to a close. Broader feedback from local authorities to the Local Government Association has highlighted a number of issues. The first is short timescales from Whitehall. Local authorities were given just three months to develop UKSPF investment plans in collaboration with local stakeholders. We need to give people more time to get the right approach and to put more emphasis on long-term strategic planning. The LGA has proposed that any future version of the UKSPF considered by the Government should adopt a six to eight-year funding cycle, and I would certainly endorse that approach.

We also need to reflect on the impact of single-year funding. The annual funding allocation of the UKSPF often led to local authorities commissioning services for just 12 months in order to manage the financial risk. For some projects, that is perfectly appropriate, but for those local areas using the UKSPF for business or skills support, for example, it made it more difficult to address some of the longer-term issues and inequalities in our communities.

Another issue is central Government restrictions. The requirement that skills be addressed in year 3 was an unnecessary restriction. We should trust local authorities to collaborate with their local partners in order to address community needs without such restrictions. I also consider that there is scope to improve and streamline the UKSPF reporting process, which some feedback has indicated was overly bureaucratic. It is of course important that the Government receive assurance that funding has been spent appropriately and used effectively. A fine balance will need to be struck in future.

Finally, I am aware that there were some delays in getting money out the door to local authorities to fund agreed projects. It is important that that, too, is considered by the new Minister for any future approach to local growth funding.

I will return to the immediate challenge that we face: the expiration of funding to support the UKSPF at the end of March 2025. Without continued funding of some sort, the types of initiatives that I have highlighted will struggle to continue or be replicated. I am not aware of any existing funding that would help fill the gap. For longer-term services such as business support and employability programmes that rely on establishing trust and employing staff, the cliff edge is of particular concern. Providers are likely to see staff leave as contracts get closer to their end dates, putting at risk efforts to support businesses and help people get back into work and stay in good, stable employment.

For those reasons, I join with the LGA to urge the Minister to work with the Chancellor to include an additional one year of flexible revenue funding for the UKSPF in the forthcoming Budget. The LGA has suggested that such funding should equate to the value of year 3 of the UKSPF programme. I ask the Minister to consider that as part of his discussions with the Chancellor. Doing so would remove the immediate cliff edge and give Ministers time to consider what the new Government’s approach to local growth funds should be. As I have set out, I consider that longer term allocations are needed alongside a more flexible and lighter-touch national framework that supports even greater local decision making. That would also give time to assess the full outputs of the UKSPF and what improvements can be made for a future replacement fund.

I am pleased to say that the outcomes achieved by Medway council already exceed those set out in the original UKSPF investment plan submitted to Whitehall some years ago. That data, alongside data from lots of other local authorities, should be available to Ministers and could provide a valuable steer on what approaches proved successful and what did not work. I am really confident that by learning from the past and working in partnership with local government to deliver a more flexible, longer-term funding scheme, the new Government could provide a real boost to local economies and communities that goes beyond far beyond anything that we have seen in the current UKSPF funding cycle.

It is a pleasure to respond on behalf of the Government to the excellent speech of my hon. Friend the Member for Rochester and Strood (Lauren Edwards). I am conscious that when I spoke in closing for the Government yesterday, my contribution lasted an unlikely 48 minutes. I am delighted—not least because my voice is a little on the cusp—that the rules of the House will prevent such a reoccurrence.

I congratulate my hon. Friend on securing the debate and on the strength of the case she made. It is clear from what she has said just now and previously—I am similarly grateful for the question she asked me at oral questions last week—how strongly she feels about the UK shared prosperity fund as well as the work she did in Medway and the impact she made with the fund. There is clearly an awful lot to learn from the Medway example, and I look forward to doing that when we meet again shortly after the conference recess.

I am grateful to the Minister for giving way and to my hon. Friend the Member for Rochester and Strood (Lauren Edwards) for securing this really important debate. Scotland has been a beneficiary of the shared prosperity fund to the tune of £212 million since 2022, over £70 million of which has come to my home city of Glasgow. Does the Minister agree that that is a demonstration of the Union dividend, which Scotland and the nations and regions of the United Kingdom enjoy by being part of this Union? Does he further agree that the shared prosperity fund is an important vehicle for bringing equity to the regions and nations of the United Kingdom?

My hon. Friend makes an important point. The United Kingdom Government are ambitious for growth across all of the United Kingdom. Ours is a four-nations commitment, and we look forward to working closely with colleagues in Scotland, in all strands of local growth funding, to ensure that people across Scotland —and in Wales and Northern Ireland—get the benefits of growth and that dividend of which he speaks. On the particular point about the UK shared prosperity fund, I agree on its effectiveness and will talk about its future, as I know colleagues are keen for me to do.

I too thank my hon. Friend the Member for Rochester and Strood (Lauren Edwards) for introducing this important debate. Councils across the country, including in Derbyshire, have faced appalling cuts over the last decade, and the UKSPF has been one of the few points of light in what has been a very dark decade for local authorities. I warmly welcome the new Government’s commitment to offer councils a three-year funding settlement, but can I encourage the Minister to lobby the Treasury to see what more it can do for local authorities, because the important services they provide are on the cusp of being inaccessible to people?

My hon. Friend makes an important point about the health of local government. Like many colleagues, I am a veteran of local government, and I am very conscious of the pressures it is under. As we design a new model for local growth, I am also conscious that local authorities will be at the heart of making it effective. If they do not have the capacity because of those pressures, that will be a limiting factor on our success, and I am very mindful of that.

I have seen at first hand the good work that the UKSPF has done in my constituency, and I appreciate why there is such interest in its future. It has helped to support organisations that are addressing unemployment and providing training, such as the Bestwood Partnership and Evolve, which have made a huge difference to our community. It has also backed community projects such as the Kimberley community garden, allowing its members to redevelop their site and continue important community outreach work. So I understand very strongly why there is such interest in the fund.

As my hon. Friend the Member for Rochester and Strood said, future funding is a matter for the Chancellor and the Budget—of course, we have the ongoing spending review, and the budget on 30 October. I appreciate the frustration that comes with that answer, but I am afraid that that is where we are at the moment. However, that does not prevent me from addressing a number of the points that my hon. Friend made.

It is one of the beauties of the electoral cycle and of our democracy that a change election brings in colleagues with a lot of different experiences. My hon. Friend talked about the impact that the £3.3 million from the UKSPF has had in Medway and about what she did to design the work involved, and I am keen to learn from that. It is good to hear how the funding has supported growth in high streets and towns, increasing footfall, supporting local businesses and regeneration in the town centres of Chatham, Rainham and Gillingham, and addressing local challenges and, crucially, opportunities alongside community leaders. It has also supported projects such as Emerge Advocacy, which supports young people struggling with their mental health, and Mutual Aid Road Reps, which was formed during the covid pandemic to combat loneliness and isolation. Those hugely significant projects reach people who are often the hardest to reach, and the UKSPF has backed them.

Similarly, and very attractively, as my hon. Friend said, the fund has made sure that there have been great events in Medway, such as the Chinese new year festival, Easter celebrations, heritage awareness events and the Intra Lateral arts festival. There are lots of great things, and the model in Medway shows that putting local people in charge and letting them set local priorities yields great results, including a significant increase in town centre footfall and a greater sense of community. When my hon. Friend says Medway is a model, there is a lot of evidence for that, and I look forward to hearing about it.

My query is about the current version of the shared prosperity fund. Some of the capital projects going on at the moment are time-limited to the end of March. Some will not be finished by then, but local authorities are rushing to complete them and spending more money because they are worried that some of it—the current money, not the future money—could be clawed back. Will the Minister confirm that that will not be an issue with those existing projects and that that money will not be clawed back, so those projects can be completed?

I am grateful for that intervention. As my hon. Friend knows, I have inherited 15, 16 or 17 strands of local growth funding, all at different stages, with the decisions made, in many cases, many years ago. We are trying to make the most sense of them and get the best value out of them. With regard to the projects she mentions, I encourage my hon. Friend to help her local projects to engage with my officials, so that they can give clarity on precisely what the timelines are in the context of what may well be discussed as part of the Budget. I am very happy to work with her to make sure that that happens.

Turning to some of the challenges to the UKSPF mentioned by my hon. Friend the Member for Rochester and Strood, we have to start with the future of the programme. Local authorities, right hon. and hon. Members, and organisations across the country that deliver projects have rightly been seeking clarity on what comes next. My mailbag is very full, and we are giving the matter full consideration. We recognise the hard work undertaken—it is important that that is stated from the Dispatch Box—and we recognise the challenges that time poses. Organisations traditionally funded in annual cycles constantly have to put hard-working members of staff on 90-day redundancy notices. That puts pressure on people who then perhaps seek other work, because it does not suit them and their life—and why would it? We understand that those cliff edges are not a good thing. They are at the forefront of our minds as we think about the future.

I, too, congratulate my hon. Friend the Member for Rochester and Strood on securing this debate and thank her for doing so. This is such an important moment. We heard from my hon. Friend the Member for Glasgow South West (Dr Ahmed) about the importance of the UK shared prosperity fund for his area. I was really glad to welcome the Deputy Prime Minister, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), to my constituency during the general election campaign, where she saw the need for that funding. Fife has benefited greatly from more than £13 million from the fund in recent years. In my constituency, that includes projects such as Step On, which is run by LinkLiving with Raith Rovers Community Foundation. It provides targeted help for young people to improve their mental health.

Order. I remind Members that interventions must be short.

It also helps employability and, crucially, access to work. Does the Minister agree that such cross-UK funding is hugely important for areas like mine, where inequality is an issue?

I am very grateful for that intervention. I think I can probably speak for most colleagues when I say that the general election was, in many regards, quite a tricky one this time, but one of the few sources of joy was my right hon. Friend, the Deputy Prime Minister’s battle bus, which seemed to reach admirable distances up and down the country, including to Fife. I know, from having spoken to her, how much she enjoyed that visit. The model my hon. Friend the Member for Cowdenbeath and Kirkcaldy (Melanie Ward) mentions is a great example of the impact being made on people’s lives across Fife and in many different parts of the UK. We are very mindful of that.

I want to address the challenges mentioned by my hon. Friend the Member for Rochester and Strood. She started with timescales. Certainly, the tiny run-in in year one is not an example of good practice, and is something we would always seek to avoid. I do not think that the Government of the day thought it was a good idea, but I think they rather found themselves a victim of circumstance. We absolutely hear that point.

My hon. Friend mentioned the Local Government Association’s desire for a six to eight-year funding window. Again, I understand that very well. I have to say that that is quite challenging. Governments generally budget on a three-year cycle and often decisions are made on a one-year cycle. We have talked about wanting to give more certainty and a longer time period. I cannot commit to six to eight years, but I can commit to that principle. She mentioned the impact of single-year funding, and as I said, we very much understand that.

On my hon. Friend’s point about central restrictions and monitoring, that is one of the points on which the new Government intend to diverge from the old one. My view is that we need to give communities up and down the UK the tools and resources to use their expertise to improve their community within the framework set by the Prime Minister and his missions for the country. They are the experts in this case, not Ministers. We want a lighter touch on monitoring, and we want to be less directive on what the funding is for. UKSPF is actually a very good example of that, relative to other local growth funding, but I hear some of the challenges on that. They are important design challenges that I think we can engineer out as part of any future local growth funding programming.

Our model of local growth is reflected in the conversations we have had with local authorities and communities up and down the country. We know there is a desire to move to a more allocative settlement, with fewer beauty parades and a stronger focus on deprivation and need. We know there is a real desire for a lighter touch on monitoring, which can become a cottage industry in itself, and that is our view, too. Growth is at the heart of the things that will shape our future and growth. With local growth funding, the clue will be in the name. We want to ensure that the projects chosen by local communities drive growth.

Of course, we must see the fiscal picture in the context of the inheritance left by the last Government. This morning my hon. Friend penned an article on a well-known Labour-leaning blog, and what I took from that was the mutual desire of this Government and local government to reset the relationship to make it a better partnership, and to drive better outcomes. That will, I think, lead us to a more positive place. If local authorities are in the room and fully engaged, they may be able to use their creativity to combine funds with other funding streams, so that the money can go further. The shared prosperity fund has been a good model, but we will make changes, particularly in relation to short-term timescales and reducing some of the burdens. I have mentioned the importance of resetting the relationship with local government. Notwithstanding what we will be discussing on 30 October, those principles will guide everything we do to promote local growth.

We, as a Government, are committed to growth across the United Kingdom. We were elected on a manifesto that stressed the need to adopt a partnership approach with local authorities and an intention to stabilise the funding system, and we are going to do that. We are working closely with local authorities, stakeholders, the Scottish Parliament, the Senedd and the Northern Ireland Executive and will continue to do so, to ensure that there is a smooth transition to a new funding regime. I look forward to visiting Northern Ireland on Monday to talk further to colleagues who are interested in the UKSPF.

My hon. Friends are rightly seeking certainty. I know that they want that as soon as possible, and we have at least a bit of a pathway towards it, because, as always, important announcements will be made in the Budget statement and the ongoing spending review will shape the future. We hear the strong messages that my hon. Friends have conveyed. It has been brilliant to hear about the excellent work done in Medway and in other parts of the country, and I am keen to work with colleagues as we go forward to shape local growth funding.

Question put and agreed to.