Why the SNP is blaming councils for up to £370m in unspent European Union funding

The Scottish Government is being accused of wasting £450 million of European funding

Has the Scottish Government wasted hundreds of millions of pounds of European funding?

That has been the allegation put to Deputy First Minister Kate Forbes, who on Thursday in a ministerial statement to the Scottish Parliament blamed smaller partner groups for not using all of the money.

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The Scottish Government is reportedly set to hand back 28 per cent of European structural and investment funding it was given in the past six years after being unable to spend the money on economic and anti-poverty projects. It was originally reported that as much as £450 million would have to be returned to Brussels after a failure to allocate the cash to key projects. However, that figure following independent analysis is understood to be closer to about £369m. However, First Minister John Swinney has insisted “almost all” EU funds will be spent by SNP ministers.

Quizzed on the matter at Holyrood following First Minister’s Questions, Ms Forbes said 60 per cent of the money that had been allocated by the Scottish Government from the funding pot went towards projects run by councils.

She said the rest had been “largely [given] to public bodies such as NatureScot, Skills Development Scotland, who delivered excellent green infrastructure and skills training programmes respectively”. The senior minister added: “The burden of implementing, delivering and agreeing the projects lies with our partners. At every turn, we have encouraged our partners to spend their allocations of EU funding and to meet the delivery targets. Unfortunately in some cases projects did contract.”

However, Liz Smith, the Scottish Conservative finance spokeswoman, said: “Despite Kate Forbes’s attempt to bamboozle and evade the issue by claiming that the accounts haven’t been finalised, it’s very clear that an enormous amount of money which should have been spent in Scotland has been handed back to the EU by the SNP.”

She added: “We are used to the SNP’s financial incompetence and their terrible record on transparency, which has repeatedly been called out by independent analysts. And, as usual, they have attempted to blame the pandemic or local government and draw misleading comparisons with the rest of the UK.”

Scottish Labour deputy leader Jackie Baillie last week described the situation as a “scandal” - but the SNP has said the deadline to spend the money is still months away. Cosla - the umbrella body for Scotland’s councils - said it was unable to comment due to the pre-election period.

But who is correct over the state of funding? The Scotsman has tried to get to the bottom of it as follows.

What is the claim?

The Sunday Times claimed £450m of funding from the European Commission has not yet been allocated by the Scottish Government. This would be around 28 per cent of the total funding allocated to Scotland.

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Ms Baillie said the money should have been spent on economic and anti-poverty projects, adding: “This is simply a scandal and it happened when Kate Forbes was finance secretary.”

On the other hand Ms Forbes claims the deadline to spend this money is still months away and the total underspend will not be as high as £450m. However, she did not provide an alternative figure. She also says the underspend won’t be much worse than the unspent funds in the rest of the UK.

What is this funding?

Despite the UK having left the EU, there are still European accounts still to be completed.

The European Commission allocates funds to EU member states and devolved administrations to fund projects relating to the commission’s objectives. In the past this has been used to upgrade roads and bridges in the Highlands and islands, regenerate industrial areas, and pay for training programmes in deprived areas.

Hundreds of millions of Euros came to Scotland through this funding during the 2014 to 2020 European multi-year budget. However, the UK was a net donor to the commission, so it paid in more than it received.

How does this funding work? 

After being allocated the funds from the European Commission, EU member states work with their local government to spend the money. This money is then claimed back from the European Commission.

The rules on this were tightened back in 1999 after funding scandals led to the European Parliament forcing commission members to resign and introduce rules for a more rigorous audit trail of spending.

The Scottish Government did not adapt to these new regulations fast enough and the commission suspended some payments until it was able to get better auditing standards in place. The suspension began in 2018/19 and was lifted in 2022.

What numbers do we have to go on?

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Now bear with us here - but the Scottish Parliament Information Centre (SPICe) has published some figures it received from the Scottish Government. It suggests €941m [£791m] was initially allocated, but €158m [£133m] was not being used, so the allocation from the European Commission was reduced to €783m [£659m].

Of this, two-thirds has been claimed - leaving €294m [£248m] unclaimed. A Government source says this is largely due to the coronavirus pandemic, when it became impossible to spend funds on social and training projects.

The SPICe blog said: “The Scottish Government has told SPICe that it is continuing to work with the European Commission to explore ways to ensure it is able to use as much of the funding allocated to Scotland as possible.”

There's another €144m [£121m] the Scottish Government could in theory spend, meaning unless the commission extends the deadline for allocating these funds, the remaining unclaimed funds could be as high as €438m [£369m]. The Government says 82 per cent of the funding has already been committed and it will follow the European Commission’s audit rules.

What has Kate Forbes previously said?

Ms Forbes stood in for John Swinney at FMQs last week, as Mr Swinney was attending D-Day commemorations in Normandy.

She denied the Government was returning £450m of funds, saying ministers would spend as much of the money as possible by 2025.

She said: “The SPICe report also indicates that £450m is not one that they recognise. Final expenditure figures will not be known until the programme formally closes in 2025.

“To have spent all the money a year in advance, I think, would raise questions itself. We do not expect the final figure to be markedly different from elsewhere in the UK or indeed from previous programmes. Our commitment is to spend as much of the money as possible.”

What could be the fall-out?

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There is now pressure on the Government to limit this underspend as much as possible - but they will need to do it quickly, as the rules mean this has to happen before the end of March 2025.

That is still a good few months away, so Scottish ministers do still have time on their hands. But should there be any underspend at all, even if it is on a par with the underspend in other areas of the UK, it is fodder for the opposition parties.

The SNP has consistently campaigned against Brexit and sets itself up as a pro-European party. This will surely be thrown back in their face if they don’t spend vital money given to them by the European Commission.

Ms Forbes has previously proved she is good at numbers as Nicola Sturgeon’s finance secretary - she’ll need to prove this once again now with these EU funds.

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