Brexit and the land of unforeseen consequences
After the debate, the vote, the turmoil, the confusion and the uncertainty, it’s time to get practical.
I’m personally still of the view that the UK would have been better off remaining in the European Union, but equally of the view that we are now where we are. The responsibility of government is to determine and negotiate the will expressed in the referendum and to deliver it.
I want to talk, in this article, about something much more nitty and gritty. European Structural and Investment Funds (ESIF). Those of us that have spent years using this funding to deliver support and help in local communities or to invest in and regenerate local economies, know exactly why this is so important.
Show me the (EU) money
ESIF funds are allocated to EU member states every seven years – ‘with the aim of reducing economic and social inequalities between regions and nations.’ Our latest allocation – originally scheduled to run until 2020, but now potentially cut short as Brexit takes place – is €6.2billion, or around £5billion (at recent exchange rates.)
Let’s keep this in perspective. It’s a lot of money, but not an enormous amount in government spending terms. We spend around £30billion on in-work benefits, around £90billion on pensions and over £115billion on the NHS.
But, in its context – funding to support employment, reduce poverty and deliver economic development, it’s a good chunk of change. Between July 2012 and June 2015, DWP spent around£1.5billion on the Work Programme – which, in that time, helped over 700,000 long-term unemployed people back into work and around 430,000 of them to stay in work. So, £5.1billion goes a long way – well spent and well delivered.
Money well spent?
When you look at the range of social and economic impact ESIF supports, it’s a massively significant stream of investment. You can find a whole load of examples on the ESF website: http://ec.europa.eu/esf/main.jsp?catId=46&langId=en.
Projects supporting young people, ex-offenders, small business start-ups, women suffering from domestic violence, families in crisis and hundreds more have supported hundreds of thousands of people in this country – often without them ever noticing the European Social Fund plaque on the wall.
Very significantly, ESIF money is targeted. This means that those regions in the UK which are the poorest and suffer the most disadvantage (technically, have the lowest GDP per capita), such as Cornwall, West Wales, Tees Valley and Merseyside receive proportionally more support through ESIF funding than ‘more developed’ regions, such as London and the South East.
If you want the full low-down, the Sheffield Political Economy Research Institute has produced an excellent paper that explains in detail how the funds work and where they are spent.
This is significant. The 'less developed' sub-region of West Wales and the Valleys receives €2.006m of the €2.413m of funding earmarked for Wales. The South East region receives €286m - meaning that Wales is allocated over eight times the amount of structural funding in absolute terms. In addition, the funding per capita is significantly higher in the 'less developed' regions.
The paper also makes the important point that ESIF works through the 'logic of additionality... member states cannot therefore use these funds as an excuse to cut domestic funding and so structural funds provide net investment to regions.'
They conclude that that: ‘Analysis of regional distribution of EU structural and investment funds suggests that the possible implications of Brexit would vary across the UK’s constituent regions and nations, which experience significantly different economic and social inequalities and have a high degree of variation in their economic performance.’
Basically, ESIF funding has been providing a heap of support to our regional economies for many years – and it’s been providing the most support to those areas that need support the most. Areas such as the North East, Merseyside, South Yorkshire, Northern Ireland, and others, have been receiving targeted help to boost their local economies, support their residents and attempt to redress the inequality of opportunity and outcome they suffer compared to other parts of the UK.
There’s no counterfactual – but you could build a very strong case that these inequalities would be much more sharply felt in the absence of ESIF. And we might be about to find out.
Brave new world?
Outside of the EU, we will no longer receive ESIF – it could be gone as early as 2018. The Chancellor has recently confirmed that any ESF activity already being procured will be funded through until 2018, which is a positive step. But, what happens beyond that?
This is potentially a disaster – for communities and economies that need support and hope and the organisations and projects that provide that support, who rely in large part on ESIF to fund their services.
But, ah, I hear you say – we were net contributors to the EU. We’ll get our £8.5billion back and spend it on those lovely social programmes you talked about – and economic development as well. Okay, well, until someone confirms it, I’ll believe it when I see it. You remember the £350million per week for the NHS, right? That £8.5billion we ‘get back’ is going to get burned through pretty quickly.
In a world in which spending on social impact programmes is already in retrenchment – for example, the level of investment in supporting the unemployed back to work will significantly decrease in the next few years – the loss of ESIF becomes more than a double whammy. It becomes even more than that for those areas of the country that are struggling the most. Even if some form of replacement funding were mooted, what’s the guarantee that it would be similarly targeted?
We need a way forward
There’s currently no commitment to continuing to work to reduce the inequality between regions and communities in our nation. My view is that that growing inequality is part of what drove the decision to Brexit and is fuelling the current unsettled, unpleasant, unstable public mood. Government are sitting absent-mindedly on top of a ticking time-bomb.
There has been some progress from government in getting the current round of ESIF funding delivered. We welcome this. There has been no view from government on what – if anything – will replace the ESIF, post-Brexit. They need one. Now.
Executive Director, ThinkWinDo