Leaving the EU risks exacerbating regional inequalities, but it might also provide an opportunity to rethink the Government’s approach to regional funding, according to one think tank.

While the UK is a member of the European Union, it benefits from investment, in the form of European structural and investment funds (ESIF), which supports local projects, particularly outside of London.

In the event that the UK leaves the EU, these funds will be replaced — according to the current Government — by the Shared Prosperity Fund (SPF) which will concentrate on tackling regional inequalities.

The think tank IPPR has published a report warning that the loss of ESI funds could exacerbate inequalities between the North and the South as well as between the South East and other areas such as Cornwall and the west of Wales.

However, the report — entitled Regional Funding After Brexit — also argues that Brexit could provide an opportunity to rethink the relationship between London and the rest of the country.

‘Despite the uncertainty, leaving the European Union also brings an opportunity: a chance to redesign regional funding and create sustainable and inclusive regional economies,’ the summary explains.

IPPR argues that the Shared Prosperity Fund could distribute money according to different calculations to those currently used by ESIF.

The amount of ESI funds allocated is calculated using gross value added (GVA) per head, which is the value added in a region divided by the resident population of that region

IPPR argues that while this measure can shed light on inequality, it does not provide ‘adequate insight into poverty or quality of life.’

As an alternative, the report proposes that the Shared Prosperity Fund adopts ‘a dashboard of economic well-being indicators, including measures such as GVA per head, disposable income levels, and the RHPI [Regional Human Poverty Index], to help better capture regional inequality.’

The think tank’s study of regional funding also recommends further devolution in the wake of Brexit.

It notes that EU structural funds are ‘partially administered locally’, but it calls for combined authorities to be given responsibility over their SPF budget and the power to manage contracts and evaluate projects.

‘Combined authorities are the sensible model for this as they already have responsibility for many of the place-based elements of industrial strategy, including economic development, regeneration and local transport services,’ it says.

The report also recommends that communities be given the powers to shape decisions over investments in their localities and regions.

The Shared Prosperity Fund should also be designed to support an ‘inclusive economy’ agenda, the IPPR says.

This means that the fund should go towards large, regional infrastructure projects, but it should also invest in social infrastructure or community spaces.

It also recommends that for this neighbourhood level funding, local areas should ensure that communities have direct control over where the funds are directed.

Finally, the report proposes that the Government should encourage regions to experiment with new and innovative approaches to using the funds, such as through supporting local community wealth building and alternative models of economic governance, e.g. community-owned businesses and cooperatives.

Responding to a report by IPPR on the Shared Prosperity Fund, Cllr Kevin Bentley, Chairman of the LGA’s Brexit Taskforce, said: ‘Brexit cannot leave local areas facing huge financial uncertainty as a result of lost regional funding.

‘The clock is ticking and we are running out of time to put in place a successor investment programme that works for local communities and businesses.

‘Councils know their communities best and it is important that the Shared Prosperity Fund gives local areas more power and control over how funding is allocated and spent.

‘Without a clear timetable of action, there is a risk that billions of pounds of investment into our communities will be lost and local areas and economies will be denied desperately-needed funding.’

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