Government urged to consider allocations of regional funds post-Brexit

How funds for current EU-based policies should be transferred to the nation’s devolved governments post-Brexit has been considered by leading University of Stirling economist, Professor David Bell, in a parliamentary report.

The report, Brexit, EU Area-based Policies, and the Devolved Governments, highlights that more than 80 per cent of the money received by the UK from the EU in 2015, excluding rebates, was allocated to policy areas controlled by the devolved governments. However, their role in the distribution of these funds post-Brexit, is yet to be determined.

Devolved governments

Professor Bell of Stirling Management School, said: “Since the EU referendum, the post-Brexit future for agricultural, regional and rural policies in the UK has been hotly debated, but the role of the devolved governments in relation to these policies has been largely overlooked.

“Even if the UK government decides to continue with area-based policies, important decisions must be made about the allocation of responsibility for their design, administration and evaluation. Repatriating the policies to the UK will pose many political and economic challenges.”

Crucial negotiations

As the UK government begins negotiations with the EU on a number of areas that could dismantle or redesign exciting policies linked to specific locations within the UK, Professor Bell outlines three possible approaches to the funding distribution.

He suggests government officials consider adopting the Barnett formula to allocate the funding or look to create a new set of objective statistical measures, agreed by the four constituent nations, to determine a base allocation.

Another possibility is to agree a shared level of support for policies based in the devolved nations and then transfer an equivalent amount of tax revenues to those governments.

Disrupted relationships

Professor Bell said: “Using the Barnett formula would be a fairly straight-forward option, however, if agriculture and regional spending is cut back in England by the UK government, the devolved governments would come under pressure to follow suit.

“Coming up with new criteria for base allocations is an objective and transparent technique and might achieve better economic and social outcomes for the UK as a whole, however, it would be inconsistent with other funding allocation arrangements.

“The idea to transfer equivalent tax revenues would give devolved governments a greater deal of autonomy, but budgets would not be ring fenced and could become threatened by governments’ other priorities.”

The report concludes that conflicts around funding decisions post-Brexit have the potential to disrupt the relationship between different levels of government within the UK and should not be underestimated.