The UK risks losing up to £731m of EU aid for initiatives to help people find jobs, at a time of fast rising unemployment, because of delays in securing approval from the government for the projects.
The Local Government Association revealed that 24 per cent of England’s entitlement from the European Social Fund has yet to be allocated to training schemes and projects to tackle unemployment, with just months remaining of a programme that runs until the end of 2020.
The disclosure came as the Institute for Fiscal Studies, a think-tank, expressed concern that the government had failed to finalise plans for a UK fund to replace EU aid for poor areas after the Brexit transition period.
The government has drawn down 76 per cent of England’s entitlement under the ESF, worth £2.3bn, meaning £731m is left to be claimed.
Private and public sector bodies are invited by the government to bid for money from the ESF for initiatives to help people find jobs.
But the LGA said that projects worth £500m on a combined basis were being held up because of the need to secure approval for them from the Department for Work and Pensions.
Unclaimed money from the ESF reverts to Brussels unless the government allocates money to projects by the end of the year.
Kevin Bentley, chair of the Local Government Association’s EU exit task force, said: “The government needs to make sure the remainder of this fund reaches the local communities that need it desperately following the devastating economic impact of Covid-19.
“As the country looks towards how we bounce back from Covid-19, this funding is more important than ever.”
The DWP said it would secure the £731m outstanding under the ESF.
“ESF-funded programmes are able to spend funds through to 2023 and we expect to allocate all of the fund later this year, supporting at least 2.3m people by improving their skills and getting them into work,” it added.
Councils are also worried about the lack of details about the government’s proposed UK Shared Prosperity Fund, which is intended to replace EU aid targeted at poor areas.
The report published on Monday by the IFS concluded that ministers had failed to outline the funding priorities for “levelling up” underperforming areas through the SPF.
It said that “four years after the Brexit vote, it is high time we had some idea of the government’s intentions”.
Research undertaken by the IFS suggested that Cornwall, which has six Conservative MPs, was likely to be the biggest loser from the advent of the SPF because it received far more EU money than similarly deprived areas as a result of its output per person falling just below an “arbitrary” threshold of 75 per cent of the average in the bloc.
Cornwall receives EU aid of €144 per person, over seven times more than Lincolnshire and South Yorkshire, despite having almost the same level of deprivation, according to the IFS.
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The think-tank said there was scope to “rationalise regional funding systems” in ways that were likely to benefit urban and former industrial areas of northern England because they perform badly on a wide range of regional indicators.
David Phillips, an associate director at the IFS, said that although EU funding was a small part of total government spending, it was the biggest source of money explicitly focused on the government’s levelling up agenda.
It was “disconcerting” that the SPF was still not finalised, he added. “With limited time left, one option the government could consider would be to continue with existing EU funding allocations for one more year,” said Mr Phillips.