ICAEW.com works better with JavaScript enabled.

Levelling up: is the funding approach right for Wales?

Author: ICAEW Insights

Published: 27 Apr 2022

The first rounds of Levelling Up funding has been announced through the Shared Prosperity Fund. For some in Wales, it represents a considerable loss.

The first round of the Levelling Up Fund provided £120m for projects in Wales. Tim Edds, a government sector lawyer and partner at Browne Jacobson, doesn’t believe this is enough. He specialises in natural environment matters involving assessments of public and administrative law risk, particularly those involving Welsh devolution or European compliance. 

Wales would have received £375m through EU Structural Funds over the same period. “While funding is set to increase over time, Wales in particular is experiencing a significant funding shortfall despite its acknowledged significant needs.”

The Westminster government’s Levelling Up approach seeks to tackle regional and local inequalities by using powers under the UK Internal Market Act 2020, he explains. The devolved administrations in Wales and Scotland have criticised this approach for bypassing the devolved administrations and failing to match levels of funding previously provided through EU funds. “The centralised approach they have adopted risks duplication with initiatives at devolved level, and may result in poor targeting of funds, with a resulting failure to achieve the funds’ stated aims.”

The Welsh ministers have already brought one unsuccessful challenge to the UKIMA, arguing it was not compatible with the devolution settlement. “The court, however, reserved the ability of Welsh ministers to bring a further challenge to the UKIMA when Welsh legislation it conflicts with is in contemplation, meaning a further challenge is highly likely in due course.”

The UK government said that the Shared Prosperity Fund would match the amount of Structural Funds received in each nation at a minimum. The Welsh government has refuted that, saying it will lose £750m between 2021/22 and 2023/24, as the Shared Prosperity Fund will not fully replace Structural Funds until 2024/25. The UK government disputes this.

“More than two years on from the grand promises made by the Prime Minister, it is now clear that Wales is being left with less say over less money,” Wales Economy Minister Vaughan Gething said. “Drift and indecision in Whitehall are costing our least well off communities jobs and projects at the worst possible time. 

“Last year’s Spending Review confirmed that the UK government has broken its promise to replace EU funding for Wales in full and there is no sign that the White Paper will change this.”

The Welsh government’s analysis puts the nation £1bn worse off by 2024. The UK government’s approach to replacing EU funds, it says, means Wales will lose around £750m over three years. This, plus the loss of farm funding of around £242m, results in that overall loss.

“Difficult decisions have already been taken here to protect priorities like our commitment to deliver 125,000 apprenticeships in this Parliament,” said Gething. “Filling a hole left by lost EU funds promised to Wales restricts our ability to support strong proposals that would bolster our economic strengths.”

Gething also criticises the Internal Market Act, which he says is being used to override devolution, stopping decisions about Wales being taken in Wales. “It is not too late to compromise in good faith.”

For lasting change in deprived areas, it’s critical the Welsh and UK governments engage effectively and work collaboratively with local authorities and the private sector to drive change and maximise the opportunity to level up, says Robert Lloyd Griffiths OBE, Director for Wales for ICAEW.

“Joined-up thinking is needed because this can’t be about politics or individual aspirations, it’s about working together to find a way to maximise the opportunity to level up,” he says. “At a recent meeting with Minister O’Brien as Parliamentary Under Secretary of State at the Department for Levelling Up, Housing and Communities and Sue Gray, Cabinet Office Second Permanent Secretary of the UK, I spoke of the importance of good governance and financial propriety; key principles for our members who are rightly keen to make sure that public funds are spent in the most appropriate way.”

Decisions about funding in the nation need to be made on a pan-Wales basis, he says, in a way that avoids duplication and creates long-term shared prosperity. “The financial crisis of 2008 saw the UK and Welsh governments working together with the public and private sectors to encourage and embrace a holistic approach. That’s what is needed again now.”

“Bidding against each other at a regional level won’t benefit the local communities that need investment in infrastructure to improve everyday life with regenerated town centres, better transport and the creation of much-needed jobs.”

Recent articles

Levelling up: making it work

The Levelling Up agenda is hugely ambitious, incorporating everything from infrastructure to education and skills, private investment to public procurement. Many factors must align in order to make a real difference.

Aerial view of suburban residential streets in summer.

Recommended content

Insights Special
Three people in business attire walking up a staircase
Social mobility and inclusion

As organisations struggle to attract the talent they need, there is a business need to widen the talent pool.

Find out more
Insights Special
A container ship at sea
Trade: clean growth and tech

Clean growth and the application of major emerging technologies to existing sectors are two key characteristics of trade in 2022. Add to these levelling up supported by foreign direct investment, and there are exciting future prospects for business and the prosperity of communities globally.

Find out more
Map of UK
UK Business Confidence Monitor: regional

Quarterly analysis on each UK region covering growth, investment, and business confidence.