Future of regional aid funding for Wales unclear after meeting between Welsh and UK ministers

Martin Shipton

The future of post-Brexit regional aid to Wales remains unclear following a meeting between Economy Minister Rebecca Evans, UK Housing, Communities and Local Government Minister Alex Norris and Welsh Secretary Jo Stevens.

Last week Nation.Cymru revealed there were concerns that Wales could lose out badly from 2026, when a new arrangement for distributing such aid to the nations and regions of the UK is introduced.

There has been speculation that the Labour UK Government will revamp the distribution of regional aid from 2026, giving money directly to local authorities in England. Such a mechanism could trigger “Barnett consequential” payments to Wales, Scotland and Northern Ireland, with the amount of money for each country determined by a population-based formula.

Funding cut

If that happened, Wales could face a huge funding cut. Before Brexit most of Wales qualified for the top level of EU aid because of its relative poverty.

West Wales and the Valleys received three successive seven-year tranches of top level aid, totalling billions of pounds. Since leaving the EU, Wales has continued to receive a higher allocation because of its greater social need.

As a result of the recent speculation, Plaid Cymru peer Carmen Smith raised the issue in the House of Lords with Lord Khan of Burnley, one of the UK Government ministers responsible for regional aid.

Addressing him in the House of Lords, she said: “At present, Wales gets 23% of the Shared Prosperity Fund. If the SPF is included in local government funding in England, this risks money being redirected through the Barnett formula. Will the Minister agree that a needs-based formula is better than a population-based formula for funding?

Lord Khan responded: “I understand the noble Baroness’s point. However, we have to recognise that there were no plans from the previous government for the funding going to the devolved governments. We have brought in a transitional year to prepare for post March 2026. All these conversations are yet to be had. I cannot make any particular comment on them, but I will come back to the noble Baroness once we finalise our proposals for after March 2026.”

Respect

Lord Khan added: “This Government is committed to restoring relationships with devolved governments and showing the utmost respect to the devolution settlement. We are working closely with the Welsh Government to discuss our commitment to restore decision-making on structural funding to representatives of Wales.

My noble friend will be pleased to hear that my colleague, Minister Alex Norris, will meet his ministerial counterpart in the Welsh Government this week to discuss this very important issue.”

In fact, the meeting concerned took place last Wednesday – the day when Baroness Smith raised the issue in the House of Lords.

We asked what had transpired at the meeting. A spokesperson for the Welsh Government said: “A meeting took place on December 4 between the Cabinet Secretary for Economy, Energy and Planning [Rebecca Evans], the Parliamentary Under-Secretary of State at the Ministry of Housing, Communities and Local Government [Alex Norris] and the Secretary of State for Wales [Jo Stevens].

“The meeting covered UK Government plans for a transition year (2025-26) of the Shared Prosperity Fund (SPF) following its confirmation on October 30 (Autumn Budget) that £900m would be available UK-wide to support a SPF transition year ahead of a new approach post-2026.

“We understand the UK Government expects to publish national allocations and individual allocations for local authorities for 2025-2026 this month to provide planning certainty for local authorities and other beneficiaries. The transitional year is a matter for the UK Government.

“Preparations for post-2026 were also discussed, with a commitment made by both governments to work together on a new approach which respects devolution in Wales and does not bypass the Welsh Government or Senedd. As part of this, the Welsh Government is committed to working with partners across Wales and drawing in lessons learned from the SPF, EU funds, our Regional Investment Framework for Wales, and our work with the OECD (the Organisation for Economic Co-operation and Development]. Funding for a new post-2026 approach will form part of the second stage of the UK Spending Review due to report in late Spring.”

‘Beyond worrying’

Baroness Smith told Nation.Cymru: “It’s beyond worrying that the Labour UK Government can’t even commit to keeping the same level of regional funding as the Tories did. That should be the absolute bare minimum.

“We should remember that, under EU regional funding structures, West Wales and the Valleys got the highest level of regional funding available across the whole of Europe. That was to reflect the poverty and deprivation we sadly still have in Wales under Westminster.

“The idea that regional funding might, in future, be handed out based on population share completely misses the point of what regional development funding is for.

“If Labour now thinks that post-industrial areas of Wales don’t need extra support to deal with the unique challenges they face, then they’re in even more troubled political waters than they already seem to be.”