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Treasury’s EU cash pledge fails to guarantee transport projects

Andrew Forster
31 August 2016

Councils and devolved administrations have criticised the Government’s funding guarantee for projects part-funded by the EU, saying it doesn’t go far enough and fails to guarantee key transport projects, including the Metro public transport programme in South East Wales. 

The Government’s position on EU funding in the aftermath of the country’s Brexit vote was announced at the weekend by Chancellor Philip Hammond. The detail is set out in a letter from David Gauke, chief secretary to the Treasury, to David Davis, the secretary of state for exiting the EU.

Says Gauke: “In the short-term, I can confirm that the Treasury will give an assurance that all multi-year projects administered by Government with signed contracts or funding agreements in place, and projects to be signed in the ordinary course of business before the autumn statement [in November], will be fully funded, even when these projects continue beyond the UK’s departure from the EU.

“In the medium term, the Treasury will work with departments, Local Enterprise Partnerships and other relevant stakeholders to put in place arrangements for considering those ESIF (European  Structural and Investment Funds) projects that might be signed after the autumn statement but while we still remain a member of the EU.”

Gauke promises further detail  ahead of the autumn statement.  

The Local Government Association says billions of the £5.3bn of EU regeneration funding for local areas in England in 2014-2020 has yet to be allocated. Areas put forward proposals to the Government, which then decides what projects to fund. 

“Cornwall and the North East of England have both only received 20 per cent of their EU funding allocations so far and Birmingham has only received 25 per cent,” said the LGA.  

Julian German, Cornwall Council’s cabinet member for economy and culture, said: “Following the Chancellor’s statement on European funding, I estimate that Cornwall and the Isles of Scilly could lose out on £350m of funding that would have helped our residents and local businesses.”

Welsh first minister Carwyn Jones said: “This guarantee only covers about half of the regional funding due to Wales and does not provide the long-term certainty needed, which was promised ahead of the referendum. We need a ‘full guarantee’ that funding will continue for our existing EU programmes to 2023.”

The Treasury statement provides no reassurance for phase two of the Metro public transport project in South East Wales, which is due to be delivered between 2017 and 2023. This includes electrifying some/all of the Valley Line railways; capacity enhancements on some lines; new stations; and, possibly, converting some heavy rail lines to light rail operation (the Ebbw Vale, Maesteg, and Vale of Glamorgan lines are expected to remain heavy rail). Bus rapid transit is also proposed, with a network focused on Newport.

Electrification of the Valley Lines is expected to cost £325m,  funded by £125m from the UK government, £94m from the Welsh Government, and £106m from the European Regional Development Fund (ERDF).

The Welsh Government currently has projects worth around £375m in detailed development, which could be eligible for ERDF?or European Social Fund assistance before 2020. This includes three transport projects: 

  • a project to double more than  seven miles of the Ebbw Vale line between Cross Keys and Aberbeeg, with additional platforms at Newbridge and Llanhilleth,  increasing frequencies on the line  from hourly to half hourly. The project is in the £25m-£40m price range (this is part of the £77m Metro phase one project)
  • Port Talbot integrated transport hub – a bus interchange next to a rebuilt Port Talbot Parkway station (the latter is being separately funded). Cost: under £5m.
  • A40 Llanddewi Valley to Penblewin improvement – this involves constructing 2km of new highway to the north of  Llanddewi Velfrey and 2.5km of improved highway west of Ffynnon Wood. Cost over £40m.

The Scottish Government has earmarked £28.6m of European Regional Development Funds for transport projects between 2014 and 2020. So far, £13.9m has been allocated to Transport Scotland’s ‘Low carbon travel and transport programme’, which runs to the end of 2018, and is delivering active travel hubs for walking and cycling routes; refuelling facilities for low carbon vehicles; and a national smart integrated ticketing scheme. 

A spokeswoman said the remaining £14.7m earmarked for transport was “unlikely to be able to be agreed by the autumn statement”.  

Northern Ireland’s finance minister Máirtín Ó Muilleoir said: “Prior to the referendum, the European Union had agreed to contribute over €1.2bn to Structural and Investment Fund programmes in the North scheduled to run between 2014 and 2020. 

“While the decision to honour letters of offer issued up to November will help some applicants for EU funds, it will leave a question mark over scores of other vital projects and means potentially up to £300m of future funding is in peril.”

Asked about the impact on transport projects, a spokeswoman for Northern Ireland’s Department for Infrastructure told LTT: “The minister is assessing the likely impacts on his department, however it is likely to have severe implications for some projects.”

The Welsh Government is pressing for a long-term adjustment to its funding formula from Westminster, to take into account the loss of EU finds. Said Jones: “We have made clear to the UK Government that there is now an overwhelming case for a major and immediate revision of the Barnett formula, to take into account Wales’ needs arising from EU withdrawal.”

EU research ‘still open to UK’

The Government has sought to reassure UK universities and businesses about their involvement in EU-funded research projects following the Brexit vote.

David Gauke, chief secretary to the Treasury, said: “Partner institutions in other EU countries have raised concerns about whether to collaborate with UK institutions on EU funding projects, such as universities and businesses participating in Horizon 2020, and some UK participants are concerned about longer-term participation. 

“The Commission have made it clear that the referendum result changes nothing about eligibility for these funds. UK businesses and universities should continue to bid for competitive EU funds while we remain a member of the EU and we will work with the Commission to ensure payment when funds are awarded. 

“The Treasury will underwrite the payment of such awards, even when specific projects continue beyond the UK’s departure from the EU.”

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