Loss of key EU funding leaves £100m gap in Department for the Economy's three-year budget

Stormont's economy committee was briefed on the department's proposed budget for the next three years.
Stormont's economy committee was briefed on the department's proposed budget for the next three years. Stormont's economy committee was briefed on the department's proposed budget for the next three years.

THE loss EU funding could cost the Northern Ireland economy hundreds of millions of pounds in lost investment and trigger major cuts to education support for lower income families, a Stormont committee has heard.

The Department for the Economy (DfE) received around £65 million per year from EU funding streams before Brexit.

The UK Government’s new Shared Prosperity Fund was supposed to replace it. But senior officials told the economy committee on Wednesday that hasn’t happened, leaving a £100m gap for core services over the next three years.

Briefing MLAs on the three-year draft budget proposed for her department, DfE’s finance director, Sharon Hetherington said innovation and skills support programmes for young people will likely suffer as a result.

While all Stormont departments have been asked to take a two per cent cut to their baseline budget to fund health over the next three years, she said ‘inescapable pressures’, largely due to the loss of EU structural funding, means the DfE budget will, in real terms, be cut by eight per cent in 2022-23, 11 per cent in 2023-24 and 13 per cent in 2024-25.

She warned MLAs that no soft options are available.

She said the potential options on the table include: a 50 per cent cut in apprenticeship places; the cessation of higher level apprenticeships; a cap on youth training; cessation or reduction in the educational maintenance allowance; and a cut in higher education places.

The budget pressure could also mean city deals progressing at a slower pace.

The committee heard that mitigating the financial shortfall could result in a 59 per cent rise in student tuition fees (an extra £2,650 per year), or thousands of fewer student places.

“There are no options that will not impact on the economy and the lives of the people in Northern Ireland,” Ms Hetherington said.

The senior civil servant also revealed the loss of the European Regional Development Fund will cost Invest NI £23m per year, resulting in “significant reductions in the level of funding for research, development and innovation”.

Based on the economic support agency’s assessment that every £1 spent on innovation results in £5-6 invested in the economy, the finance director said: “Invest NI have estimated that without a solution, there will be a loss of between 4,000 and 6,000 jobs foregone and investment foregone of £430m to £584m.

“Invest NI’s ability to deliver for Northern Ireland and its citizens will be significantly impacted,” she added.

The finance director also said the proposed budget does not contain funding to take forward Stormont’s new skills strategy.

“By not addressing the loss of [EU] structural funding, the proposed budget is really disinvesting in those skills and innovation areas, and this will impact our young people and widen the skills gap and detrimentally affect employment levels,” she said.

Reacting to the departmental briefing, Sinn Féin’s chair of the economy committee, Caoimhe Archibald said the Economy Minister and the DUP must accept responsibility for the funding gap.

“The irony won't be lost on anyone that the Economy Minister, who along with his party championed Brexit, is now complaining of a shortfall in his departmental budget,” she said.

The SDLP’s economy spokesperson, Matthew O’Toole described the loss of EU funding as “devastating”.

“The department is losing more than £100m in core funding from the EU, which dwarves the entire increase in the department’s budget the next three years," he said.

“These numbers aren’t abstractions, they are critical funding for apprenticeships, skills training and economic development."