UK Government betrays Scotland with massive cuts to post-EU funding

Scotland voted to remain in the EU. The UK government promised our EU funds would be matched - but they were slashed first by the Tories and now they are being slashed again by Labour. Jobs are being lost, growth is being slowed, communities are struggling - whilst England gets a better deal.

It is becoming clearer and clearer that post-Brexit “replacement of EU funding” really means nothing close to the investment that Scotland was promised would be protected. Instead of stable seven-year investment cycles, Scotland is enduring a twisty-turny sequence of Westminster-manipulated programmes that are leaving local authorities and third-sector organisations short-changed and forced to cut jobs.

Now Labour’s failed replacement for the Tories' failed replacement for EU funding comes with a sting in the tail - nothing for the rural areas, a lot less cash for cities, and a model for Scotland that is significantly different and less flexible than what England is getting. 

From EU funding cycles and long-term planning, to Westminster’s broken promises 

2020: Scotland is forced to leave the EU on Jan 31 2020. 

At that point, Scotland was still receiving EU funding streams, which are planned on seven-year cycles, delivered annually. 

Scotland received about £183 million a year in various EU structural funds. (That does not even count the fact that Scotland punched above its weight in winning grants for research and innovation through its world-class University sector).

Scotland did well in funding terms - partly because the EU specifically recognises the challenges that rural areas with low population, infrastructure and a long way from markets face. The EU calls that “peripherality”. The UK does not recognise or weight for this. 

2022:  The UK Conservative government introduces the “Shared Prosperity Fund”

In 2022, Michael Gove, who was Levelling-Up Secretary, introduced a new Shared Prosperity Fund. He claimed it would make good on a manifesto promise that the UK government would “at a minimum match the size of these funds in each nation”. 

Scotland was allocated an average £70 million a year over three years by the UK Shared Prosperity Fund - (It was a total of £212 million for the whole three years but the money was not evenly split). That fell far short of a replacement as the Scottish Government pointed out at the time. 

Also, instead of going through Holyrood so it could be spent in line with the democratically expressed preferences of the Scottish people, it was doled out directly by Westminster so they could claim credit in a politicised way.  This UK Shared Prosperity Fund (UKSPF) is due to end on March 31, 2026. 

2026: UK Labour government replaces failed SPF with the “Local Growth Fund”

Earlier this month, Scottish Secretary Douglas Alexander announced that from April the UK Government will invest £140 million in five Scottish regions through the LGF over three years - so down again from £70 million to £46 million per year (although again it will not be spread evenly). But only around 30% of the new fund can be spent on operational costs - that puts the squeeze on wages which means job losses. 

No money for rural Scotland

The leader of Comhairle nan Eilean Siar Council, Paul Steele, said the decision to cut the area out of the funding completely will hurt island communities that are already struggling. He said: “Our islands have seen continued erosion in what was previously available to us through EU structural funds. It is essential for us to receive continued revenue funding through the successor to Shared Prosperity Funding, this new Local Growth Fund, to allow these services to continue.” 

Argyll and Bute council leader Jim Lynch said: “The approach that the UK Government has taken in progressing the eagerly-anticipated UK Shared Prosperity Fund replacement means that our communities risk losing out on vital growth potential and improved living standards. This is worrying and unfair. We are therefore joining our fellow Highlands and islands local authorities in calling for a rethink, and a fairer, more realistic approach to allocating these much-needed funds. Our communities deserve better.” 

A further 500 jobs to go on top of what those already lost

This long collapse in the funding that Scotland got from the EU is just one of the many ways that Scotland has suffered from Brexit- the loss of economic opportunities, workers, regulatory security and so on has been well covered here.

But even the areas that are getting money from the UK’s unsatisfactory replacement fund are having to make hundreds of people redundant. Glasgow, for example, is getting a cut of one third compared to what it got last year under the SPF, and only a third of the £60 million it will receive over the next three years can be spent on operational costs - the rest has to go on infrastructure. 

An assessment by the Industrial Communities Alliance (ICA) said this shift, combined with a reduction in overall funding in all but one Scottish region, “takes a sledgehammer” to existing employability, business support and training programmes that are labour-intensive and cannot be sustained through short-term capital grants. It calculates more than 500 jobs will go across Scotland. 

A better model for England

The contrast with England is stark. In Greater Manchester, for example, the LGF allocation in 2026–27 is split £24 million revenue and £8 million capital, meaning three-quarters of the funding can be used for day-to-day programmes. That is completely different from what the Scottish cities are being allowed to do. 

The Herald reported last week that a senior Glasgow Council source said: “The questions we urgently need answered are why this funding deal hammers Scottish businesses, third sector groups and employability schemes while our peers south of the border are spared, and what role the Secretary of State for Scotland has had in this.

“Either Douglas Alexander fought to retain the support for getting people in our hardest-pressed communities into work and he’s lost. Or he’s prioritised photo opportunities which he reckons can help Labour politicians save their skins. Either way, it’s rank incompetence and our communities suffer. The Secretary of State must wake up to the fact that his decisions are going to be damaging businesses and putting people out of jobs.”

Conclusion

Scotland voted as a nation to remain in the EU. It was able to attract funding, both for research and innovation, and to support areas most in need of help. This money was invested in partnership with the Scottish government and local authorities and it was awarded on seven-year cycles, allowing strategic planning and continuity. 

Since being dragged out of the EU against our will, we have seen a net loss of funding support. The Conservatives never met their manifesto promise to replicate EU funding.

But even the money they handed out has not been replicated by the UK Labour Government. They have taken a high-handed approach without consultation with the Scottish Government and they have chosen to exclude the Highlands and Islands, and other rural areas from the funding. As well, they have structured the funding differently and unfairly in Scotland compared to England.

An independent Scotland could do better. It could be back in the EU, treated as an equal partner and able to access funding on stable, long-term cycles. 

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