A POST-Brexit funding scheme hailed by the UK Government as a way to help level up Scotland has actually been “unhelpful and has undermined trust” across the Union, peers have said.

The House of Lords select constitution committee said the £2.6billion UK Shared Prosperity Fund (SPF) was a welcome idea but had led to “significant concerns” in the devolved nations.

In particular, the UK Government’s “lack of engagement” with Edinburgh, Cardiff and Belfast about the fund’s design and operation had been counterproductive.

The committee recommended the UK Government give the devolved administrations a “more constructive role”, including over how the money was spent locally.

The Lords’ recommendation to overhaul the SPF is in a report on how to "reset relationships" and build a stronger Union through greater “respect and co-operation”.

The cross-party group said the “current strains” in the Union had to be addressed “without delay" and set out how to improve relations between different layers of government. 

It recommended “significant devolved autonomy”, including tax powers to English regions, and an end to the “top-down mindset” that pervades the culture of Whitehall. 

Designed to replace EU structural funds from this year, the SPF has centralised spending decisions, bypassing Holyrood as part of the “levelling up” agenda.

Last year, Scottish Secretary Alister Jack said transitional funds for the £100m-a-year scheme in Scotland showed “real devolution in practice”.

But the report said: “The Government’s lack of engagement with the devolved administrations on the overall design of the fund is unhelpful and has undermined trust.

“To rebuild trust and partnership, we recommend the devolved administrations and devolved authorities should have a more constructive role in the governance of the fund, including decisions about local priorities and the allocation of funding.”

The peers said they were concerned about the tendency to “devolve and forget”, and said that, despite the Government’s stated commitment to the Union, it needed to set out a “clearer vision” about how it will be shaped in the 21st century. 

It also said the Sewel convention that Westminster will not “normally” impose legislation in devolved areas had been “placed under strain” by Brexit-related laws doing just that. 

It said “constructive relationships and good faith” between all administrations were needed to make the convention work well, and said the UK Government ought not to impose legislation in devolved areas “other than in exceptional circumstances”.

The peers also said new plans for improving relations across the UK would only succeed if accompanied by “a stronger culture of respect, co-operation and partnership between the UK Government and the devolved administrations”, with the Prime Minister playing a “critical role”, including chairing regular meetings of political leaders.

The report raised concerns over the wide-ranging portfolio of Michael Gove – who has responsibility for intergovernmental relations as well as being the Secretary of State for Levelling Up, Housing and Communities.

Mr Gove’s wider responsibilities “risk undermining its focus on this important area”, the peers said.

South of the border, the committee backed greater devolution across England to spread power and boost the economy, and expressed “regret” at the long delay in the UK Government’s Levelling Up white paper. 

Besides “greater fiscal devolution” to English authorities, it also called for a simplification of the multiple funding pots regions and councils have to apply to, using up time and resources.

Committee chair Baroness Taylor of Bolton said:  “The United Kingdom, The Union, marks its centenary in 2022. 

“After the challenges of Brexit and COVID-19 there is a clear need and a clear opportunity to reset relationships between its constituent parts to achieve a better functioning Union. 

“This will help us to keep pace with the rapid changes and many challenges that confront all of us and which every layer of government will have to address in the 21st century. 

“The UK Government needs to articulate a compelling vision and narrative for the UK in the 21st century. We believe a significant culture change is required in Whitehall, including the end of its top-down mindset. 

“Fostering greater respect and co-operation between Whitehall and the different parts of the United Kingdom will be even more important in strengthening the Union. 

“We believe that the Union’s strength historically has been its ability to adapt to changing circumstances. The Union should continue to do so, so it can achieve its full potential in the 21st century and fully demonstrate its benefits to all its nations and regions.” 

SNP MP Tommy Sheppard described the report as “disappointingly one-sided”, saying the committee had “made up their minds that the union was unquestionably a good thing before they even heard their first witness”.

A UK government spokesperson said: “The UK government is committed to working with the devolved governments to deliver for people all over the United Kingdom.

“Our successful world-leading vaccine rollout involved cooperation across the UK, and devolved governments have just been provided their largest real-terms annual funding settlement since devolution over 20 years ago.

"Last week we published a landmark agreement with the devolved governments on ways of working, which includes a Prime Minister chaired council where the Scottish Government, Welsh Government and Northern Ireland Executive can raise any issues to tackle cooperatively.

"This will be based on the principles of mutual respect and builds upon years of existing cooperation.”