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Stronger Towns Fund could struggle with scale of problem

Blackpool Town Hall - credit Betty Longbottom

A plan to invest £1.6bn of government funding in a new scheme aimed at tackling economic decline in predominantly northern and Midlands towns that have fallen behind the rest of England has been criticised as a bung for wavering Labour MPs to vote for the Prime Minister’s unpopular Brexit deal.

That is an interpretation officially denied by MHCLG. Speaking on Radio 4’s Today programme on 4 March, communities secretary James Brokenshire said: "This funding is there regardless of the outcome … there is no conditionality," he said.

But whatever the government’s motives, the more practical question is, how much of an impact will the fund actually have on these declining towns, and will it be supplemented by other schemes once EU structural funds dry up. Meanwhile, MHCLG’s ambition for the fund is strong: "It will be used to create new jobs, help train local people and boost economic activity – with communities having a say on how the money is spent."

Full details of the new fund have yet to emerge, but the government has announced £1bn will be allocated using a "needs-based formula"’ that has yet to be revealed. Already, more than half (£583m) has been allocated to towns across the North with a further £322m allocated to communities in the Midlands. It is unclear as yet how these regions were selected.

The largest recipient will be the North West, with £281m, followed by £105m in the North East and £197m in Yorkshire and Humberside. The Midlands will also benefit particularly, with £212m and £110m for West and East Midlands respectively. The least to benefit will be the more prosperous South West (£33m), (South East (£37m), and East England (£25m).

In these areas, communities "will be able to draw up job-boosting plans for their town, with the support and advice of their Local Enterprise Partnerships", adds MHCLG.

The remaining £600m "will be available through a bidding process to communities in any part of the country", it says. This could include regions of Scotland and Wales, and Northern Ireland. Northern Ireland has already received £1bn previously as the widely-publicised price demanded by the ruling DUP for its confidence and supply agreement backing Theresa May’s vulnerable administration, but could be hit hard by cross-border trade fallout from Brexit.

Communities secretary James Brokenshire stressed the new fund "builds on more than £9bn in City and Growth Deals we have delivered since 2010 to help hard working people reach their full potential and to build an economy that works for everyone". That equates to an investment rate of around £1bn a year, compared to £229m a year in the case of the Stronger Towns Fund up to 2026. What is not clear is whether the City and Growth Deals will continue at previous levels alongside the new fund, or be replaced by it, leading to a shortfall.

The scale of impact of the Stronger Towns Fund ultimately depends on the extent to which, not only City and Growth Deals continue, but also whether the large volumes of funding from EU structural funds will continue in some alternative form post-Brexit.

These are complex, made up of the European Social Fund (ESF), focusing on skills and employment, the European Regional Development Fund (ERDF), targeting research and innovation, the low-carbon economy and small to medium sized enterprises, and the European Agricultural Fund for Rural Development (EAFRD). In the UK, these are bundled into the European Structural Investment Fund (ESIF). Funding of €13bn was agreed with the European Commission for the period 2014-20, with £2.34bn already allocated up to 2017 alone.

There is considerable uncertainty over these funds. If there is a negotiated Brexit deal, these programmes will continue to be funded up to 2023, with no clarity on a replacement thereafter, but if not funding will end abruptly once the current ESIF period finishes in 2020.

In the event that both EU funding and City and Growth Deal funding streams dry up without compensatory measures, the Stronger Towns Fund would struggle to hold back this wider deflationary impact, though in reality it seems likely other funds would have to be set up to preserve economic stability.

Many of the hardest-hit towns have also faced deep-seated financial crises as a result of sharp spending cuts through years of austerity, and could face further pressure in the forthcoming spending review.

Against these losses, and of course any negative impact from a hard Brexit or No Deal, the Industrial Strategy is allocating industry-specific funding for strategic developments and research in some of the hardest-hit English regions. But whether the government formulates a deeper and wider response to unequal growth across regions post-Brexit remains to be seen. Proposals for a UK Shared Prosperity Fund are being developed in the background, but details are not yet available.

Another key debate is over the extent to which public funding should be channelled directly through Local Enterprise Partnerships, meaning elected councils are effectively bypassed.

Responding to the launch of the Stronger Towns Fund to boost growth post-Brexit, an LGA spokesperson said: "Councils must be given the tools and resources to get on with the vital task of leading their communities in creating jobs, building infrastructure and boosting growth."  The spokesperson added: "Local government in England faces an overall funding gap of £8bn by 2025. The Spending Review will therefore be make or break for vital local services and securing the financial sustainability of councils must be the top priority."

For its part, MHCLG told D&I that "the Government will set out further detail on how the funding from the Stronger Towns Fund will be allocated and delivered in due course". It also pointed out that another initiative, the UK Shared Prosperity Fund "will be a programme of investment designed to tackle inequalities between communities by raising productivity", that that "engagement events have been held across the UK and we will build on these conversations by consulting widely on the design of the UKSPF".

On EU structural funding, it said: "The Government recognises the funding certainty places need and has therefore agreed to honour the EU’s commitments to the UK through structural funds under both a deal and no deal scenario." It has yet to comment on plans beyond these commitments.

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