Whitehall is set to bypass the devolved administrations and replace European structural funds with a centrally-controlled fund, meaning more than £100m in Scotland will be spent by the UK government on projects normally devolved to the Scottish Parliament. The Shared Prosperity Fund, which replaces European Commission development and social fund grants, will operate UK-wide under new powers granted by the Internal Market Act.
In a letter to Scottish Finance Secretary Kate Forbes, UK Treasury Secretary Stephen Barclay confirmed that the fund would average £1.5bn per year and target 'levelling up' areas in most need. He stated that the fund would use new financial assistance powers in the UK Internal Market Act, which critics say paves the way to bypass devolved administrations. This is the first time the Treasury has indicated it will spend directly in any part of the UK using these powers.
Ms Forbes responded by calling for urgent reassurance that all lost EU funds would be fully replaced, demanding at least £1.283bn for a replacement seven-year programme for 2021-2027. She insisted that control over any new arrangements must remain in Scotland, warning that the change threatens to be a 'significant power grab'. She urged the Chancellor to provide clarity ahead of the Scottish Budget on 28 January.
The move creates fresh friction with Holyrood ahead of the spring election campaign. The Scotland Secretary, Alister Jack, has hinted that much of the spending could be channelled through local authorities and city region growth deals, allowing the UK government to highlight projects of political value. The letter also addressed the Covid contingency fund, with Mr Barclay noting that the majority of pandemic support is delivered through the UK Treasury.
