What Scotland Gets From the EU - What Will Replace it after Brexit?

22nd January 2019

No one yet knows what the full impact of leaving the EU will be but there will be many consequences depending Deal or no Deal and much more.

Here are a few points on what happens now.

All EU Member States make contributions to and receive funding from the European Union budget. This process is governed by an agreement called the Multi-annual Financial Framework (MFF). The current framework covers seven years, from 2014 to 2020.

Scotland's public sector makes an annual net notional contribution to the EU budget of £455 million (based on a four year average). This represents roughly 0.6% of total public sector expenditure for Scotland in 2017-18. Money that comes directly from the EU to Scottish organisations in the private sector (including universities) is not included in this calculation.

Funds received from the EU's budget are of broadly two types: pre-allocated and competitive. Finance in the form of European Investment Bank Group lending is also significant and distributed outwith the EU budget.

Common Agricultural Policy (CAP) is by far the largest source of EU funds. Over £500 million a year comes to Scotland from the CAP in the form of direct payments to farm businesses and rural development funding. Following Brexit, short-term guarantees have been provided by the UK Government to replace most CAP funds until 2022, but no commitments have yet been made to replace CAP funding in the long term.

Structural Funds in Scotland are worth up to €941 million across the EU budget period for use in economic development. To make full use of these funds, they must be legally committed to projects in Scotland by the end of 2020. Half of Scotland's potential structural funding is uncommitted at present. Following Brexit, the UK Government has provided short-term guarantees and proposes a UK-wide replacement fund in the longer-term.

Common Fisheries Policy is co-financed in Scotland through the European Maritime Fisheries Fund (EMFF). Scotland is allocated 44% (€108m) of the total UK figure and £42 million - over 80% of the Scottish allocation - has been committed to projects so far.

Competitive funds are awarded directly by European Commission to organisations and include significant research, innovation and education exchange programmes. Since 2014, €533 million of Horizon 2020 funding, €65 million of Erasmus+ funding and €58 million of Territorial Cooperation funding has been secured by Scottish organisations.

The European Investment Bank Group provides finance outwith the MFF 2014-20 in the form of loans. Since 2016, the EIB has signed loans worth €2.0 billion to projects in Scotland.

Will the Government replace this funding?

The Government has made a number of assurances guaranteeing funding. They have stated that structural and investment fund projects signed before the UK leaves the EU will continue to receive funding (from the Government if not from the EU) so long as they "provide value for money and support domestic strategic priorities".

Agricultural funding will also be protected, with Environment Secretary Michael Gove promising that "the amount we allocate to farming support - in cash terms - will be protected throughout and beyond this period right up until the end of this Parliament in 2022." This commitment is UK-wide and includes rural development schemes. The UK Government envisages an "agricultural transition" from 2020 where current farm payments are maintained but revised and then replaced with new approaches. In England, the Government is consulting on transition options towards a system which pays farmers for "public goods" such as environmental enhancement.

The 2017 Conservative Manifesto said that "we will use the structural fund money that comes back to the UK following Brexit to create a United Kingdom Shared Prosperity Fund, specifically designed to reduce inequalities between communities across our four nations." No further details on this Fund have emerged, although the Government's Industrial Strategy and several Parliamentary questions have confirmed that the Government intends to consult on what the Fund should look like later this year.

There have been some suggestions that the Government could also create its own replacement for the European Investment Bank, if its preferred option of a continuing relationship with the Bank was not acceptable to the EU. However, Werner Hoyer, president of the EIB, has described this as an "enormous challenge", saying it would take "at least a decade" to get such a bank to the requisite size.

Browsing the EU Funding portal for Scotland will perhaps let you see much more at https://www.funding-portal.eu/

Much of what happens impacts across many sectors but is perhaps not so visible to the man in the street. It will however impact everyone one way or another when we leave.

More UK government information can be found at -

https://www.gov.uk/government/publications/european-social-fund-esf-grants-if-theres-no-brexit-deal/european-social-fund-esf-grants-if-theres-no-brexit-deal

Funding from EU programmes guaranteed until the end of 2020

https://www.gov.uk/government/news/funding-from-eu-programmes-guaranteed-until-the-end-of-2020

European Structural and Investment Funds programme guidance

https://www.gov.uk/government/publications/european-structural-and-investment-funds-programme-guidance?tm_source=89ca4431-d71a-4fc5-bb79-ec470cf99ec5&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate