Replacement for the European Structural and Investment Funds (ESIF) Post-EU Exit in Scotland: consultation report

Executive Summary

Introduction

This Executive Summary presents an overview of the findings of the consultation into the Replacement for the European Structural and Investment Funds (ESIF) Post-EU Exit in Scotland. It presents the key messages from the main strand of activity - the Scottish Government's online consultation which ran from 5^th November to 2019 to 12^th February 2020. The online consultation was supplemented by regional and thematic events, the findings of which are presented in the main document.

The expert Steering Group that managed and oversaw the consultation will now consider the findings, and provide recommendations to Scottish Ministers on the issues for further consideration and the next steps. Scottish Ministers will use the findings to inform ongoing dialogue with the UK Government about the successor fund - the UK Shared Prosperity Fund (UKSPF) - and to ensure they are equal partners in its development.

155 responses were received to the online consultation.^[1] Most contributors were public or third sector organisations, many of which have prior involvement with ESIF either as beneficiaries or as part of the administrative architecture delivering the funds. Few private sector companies, or representative bodies, took part. Within the public sector cohort (the largest group) local government was particularly strongly represented, although the consultation did attract a diverse range of public and third sector organisations.

It is worth noting that the consultation process took place in the weeks and months immediately prior to the coronavirus pandemic. Since then, the world has obviously changed. The economic and social consequences of the pandemic, while not yet known, will clearly be very significant. The implications of this for the future replacement for ESIF are not known. The scale of the investment that will be needed to support economic recovery and resilience post coronavirus will dwarf that of the future replacement for ESIF, but the priorities for a future fund are likely to be affected.

Strategic Aims

While the consultation identified some common themes in relation to the proposed aims of the new fund, there was also considerable diversity and range. There was a call for the new fund to have a broader remit than previous ESIF programmes, particularly in relation to inclusive economic growth, wellbeing and social and environmental objectives.

A number of common principles for the new fund were identified, namely:

• There should be continued engagement with stakeholders to ensure a smooth transition and a participative process for setting up the new arrangements.
• Core principles, aims and objectives should be broadly similar to previous ESIF programmes, expanded to include wider social objectives. While a new fund does not need to simply replicate the current programme, there was broad support for the previous focus of the European Regional Development Fund (ERDF) and European Social Fund (ESF).
• Additionality should remain a core principle of the successor fund. There should be strong alignment to existing funding mechanisms to maximise leverage. The UKSPF should aim to complement and not duplicate other funding sources.
• The focus of the UKSPF on addressing disparities in regional economic performance was also supported for Scotland. A consistent view, however, was that Gross Domestic Product (GDP) is too narrow a measure of regional inequalities/disparities, and that a more sophisticated approach would be required. Spatial inequalities would be best addressed through a place-based approach and regional/local priority setting - given that priorities will vary at regional and local levels.
• Related European funds that target rural development,^[2] while not within the scope of this consultation, were felt to be relevant when considering the strategic aims of a new fund.

The question of geography was a consistent theme throughout the consultation responses. While there was general agreement that some form of national framework would be needed, and that this should align to Scottish policy priorities and the National Performance Framework, there were mixed views on the geographic level at which a fund should intervene. Among other things, there was no consistent view on how "regional", "sub-regional" or "local" should be defined in a geographic sense.

In considering the thematic focus of a new fund, Scottish policy priorities were considered to be the primary driver. The strongest support was for alignment to Scottish rather than UK or EU policy priorities, given the scale of funds likely to be allocated to Scotland, and to:

• Ensure a close alignment with Scotland's approach to regional economic development.
• Ensure sufficient flexibility to reflect and respond to the different challenges, needs and opportunities in and between regions across Scotland.
• Achieve the largest social and economic impact across Scotland.
• Recognise the inherent differences between Scotland's (and its regional) economy, and other parts of the UK.

In particular, the UK Industrial Strategy was frequently considered to have too narrow a focus on economic outcomes such as productivity, and EU Cohesion Policy too broad. Even amongst those that supported greater alignment with these policies, this was often to maintain connections and access to other funding or delivery opportunities.

It was considered essential that the approach to monitoring and evaluation was developed in parallel to the design of the new fund, and provided evidence of success, effectiveness and impact. There was strong support for the use of logic models, and for the use of a broader range of quantitative and qualitative measures to evaluate the impact of the new fund and to assess additionality. Economic measures were considered important, but not sufficient, and there were calls for a wider range of social and environmental measures relating to areas such as wellbeing, carbon reduction, income inequality, community capacity building and health/mental health. Measures of success should align to the National Performance Framework.

Monitoring and evaluation should be simplified and proportionate. Processes and systems should avoid complexity and bureaucracy (compared to the current ESIF programme), and should make use of existing systems of data collection and reporting, where possible. In terms of evaluation more generally, there was support for evaluation to identify lessons learned and to improve project delivery (i.e. process evaluation), and for the meaningful involvement of communities and beneficiaries in the evaluation process to better understand impact and the difference made (i.e. outcome evaluation).

Governance structures for future funding

There was broad support for a local focus, devolved responsibility, and for funding to be allocated using a fair, flexible and transparent methodology, with clear and objective criteria. A methodology that was responsive and sensitive to regional and sub-regional needs was considered essential.

There was near universal support for longer-term funding to enable sustainable change to be planned, programmed, achieved and evaluated. Many felt that the current seven-year period worked well. The importance of building in opportunities to undertake a review and refresh of priorities and to reshape delivery was emphasised.

Flexible and long-term funding were also considered essential in order to:

• Provide certainty, continuity and sustainability.
• Encourage applicants to try new things or "break new ground".
• Be open to risk and innovation.
• Be able to make an impact on inclusive growth.
• Address and respond to changes in economic circumstances.

There was support for partnership and governance structures for the successor programme to be prioritised as an early task to minimise any delays and allow timely and effective delivery. Partnership working on all levels was considered key to the successful delivery of the future funding programme. There were strong calls for:

• Greater delegated authority to an appropriate level.
• Further devolution of any national funding.
• A more decentralised approach at a regional level.

There was very strong support for governance arrangements to be based on a principle of subsidiarity, and using existing partnership structures operating at a regional and local level where possible. It was suggested that this could minimise costs, maximise efficiency, and avoid creating new, parallel mechanisms. There was reference to Regional Economic Partnerships, Community Planning Partnerships, and at a more local level to the structures for LEADER funding.

There was strong support for regional/local accountability and management of funding and local priority setting within a broad national framework. Such an approach could support a territorial perspective and increased transparency and accountability in decision-making processes. A delivery model and structure that is flexible, simple and straightforward in terms of its funding streams, processes, systems and administrative arrangements would work best. As well as making use of, learning the lessons from, and/or building on existing regional and local partnership structures.

Previous ESIF programmes achieved good leverage by requiring match-funding for projects. But there was recognition that this requirement can constrain the ability of organisations to bid for ESIF and of the ongoing challenges in leveraging funds given the current financial climate.

The clear message was that the new fund should be significantly less bureaucratic and burdensome, and more proportionate to the level of investment sought. Accessibility, addressing barriers to participation, and capacity building support were all considered crucial.