THE UK Government’s plan to use a new post-Brexit fund to strengthen the Union could end up doing it more harm than good, a leading thinktank has warned.

The Institute for Government said the UK Shared Prosperity Fund (UKSPF) “risks damaging trust between the UK and devolved administrations and undermining the UK government’s key objective of binding the four nations of the UK closer together”.

It urged the UK Government to consult Cardiff, Edinburgh and Belfast properly, clarify spending, and involve the devolved nations in the governance of the scheme.

The Scottish Government recently warned the fund would "bypass the rightful decision-making powers of
Scottish Ministers and the Scottish Parliament”.

The UKSPF is designed to replace two EU funding streams from next April because of Brexit, but the Institute said details were still vague and the system was over-centralised.

It said there was a particular need for clarity on how it would work in Northern Ireland in case it failed to respect its different communities.

The UKSPF is supposed to replace the European Regional Development Fund, which supported investment in business and research, and the European Social Fund, which supported employment and skills projects.

Between 2014 and 2020, Brussels allocated just over £9billion to the UK under the two funds, of which £4.6bn has yet to be spent.

With money based on income, employment and population density, over the last seven years England received roughly £110 per person, Scotland £150, Northern Ireland £240 and Wales £660.

The devolved administrations decided where and how money was spent, with the UK Government responsible for England only.

However the new “UK-wide” fund would bypass the devolved governments, with money going directly to councils and businesses.

The goal is to cut bureaucracy and speed up the process, but also “bind together the whole of the United Kingdom” by showing the financial benefits of being in the Union.

But the Institute warned the plan could “backfire”, and ministers had “basic questions” to answer when they issued details in the autumn.

It said it was perfectly legitimate for the UK Government to take a different approach after Brexit, but it was marginalised the devolved administrations, who saw the change as “an unwelcome encroachment” on their previous control the EU predecessor funds.

Report co-author and IfG senior fellow Akash Paun said: “There is a clear opportunity to put in place something that is more flexible and less bureaucratic than the EU system, and that demonstrates to voters the value of UK-wide action.

“But the government appears to be proceeding with its plans for the UK Shared Prosperity Fund with almost no meaningful engagement with the devolved governments or other stakeholders. Unless they change course, and begin to work in partnership, ministers risk undermining their own objectives.”

SNP Employment Minister Richard Lochhead said: “The UK Government’s handling of the Shared Prosperity Fund continues to act as a significant threat to the devolution settlement and Scotland’s Parliament, as this IfG report concludes.

“The UK Government is now deliberately undermining and putting at risk Scottish devolution by deciding itself how money is spent in areas of devolved responsibility when it should be for the Scottish Government to set its own priorities.

“UK Ministers consistently refuse to meaningfully engage with devolved administrations or even provide basic information about the fund, despite the fact that it is due to start in April 2022.

“Earlier this month I wrote to my UK counterpart Luke Hall calling for long overdue meaningful engagement and expressing deep frustration at the lack of clarity about these vital funds.

“We urgently need reassurance that there will be a full replacement of all lost EU funds and that the Scottish Government will play a full part in this fund’s development and implementation.”

A UK Government spokesperson said: “We reject these conclusions. We will ensure that the Government and its institutions continue to collaborate effectively with the four nations to realise the benefits of working together as one United Kingdom.

“We have been engaging with a wide range of key stakeholders in Scotland and across all parts of the UK since 2016, and this has helped identify the opportunities for UKSPF policy, learning lessons from EU funding.

“We will ramp up UK-wide domestic funding to at least match what the EU currently offers - reaching around £1.5 billion a year.”