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

1. Introduction

This report presents the findings of the consultation into the Replacement for the European Structural and Investment Funds (ESIF) Post-EU Exit in Scotland.

A link to the consultation document is provided below.^[3]

Background

Scotland has been a major beneficiary of the ESIF since 1975 with an estimated investment of £4 billion between 1975 and 2006, and a further £820 million for the period 2007-2013.^[4]

Under the current 2014-2020 programme, Scotland has benefited from over £780 million through the European Regional Development Fund (ERDF) and the European Social Fund (ESF).^[5]

The Funds have played a vital role in reducing inequalities across different parts of the country for over 40 years through significant investment in job creation and a sustainable and healthy economy and environment. They have also provided substantial investment for key Scottish Government policies such as Modern Apprenticeships and the Low Carbon Infrastructure Transition Programme.

Now that the UK has left the European Union (EU) it will no longer receive ESIF. ESIF are seen by many as a valuable part of Scotland's regional development policy, and their loss could have a significant impact upon job creation and business activity.

This could have a significant impact on the ability of local authorities, community groups, funding bodies and enterprise and skills agencies to deliver the kinds of initiatives that will drive inclusive economic growth and promote wellbeing and cohesion in communities across Scotland.

The UK Government has committed to rolling out a successor programme to the ESIF, called the UK Shared Prosperity Fund (UKSPF). At the time of reporting, limited information about this programme has been released, including on the scale, objectives or allocation of funding.^[6]

Scottish Ministers have made clear their wish to be actively engaged in the design of the UKSPF, and have set out five "red lines" on the replacement funding. These are that:

• Scotland should not lose out financially compared with the current level of funding that it receives from the EU.
• The devolution settlement must be respected and the UK Government must make no attempt to take back powers that the Scottish Government has rightfully executed to date.
• The Scottish Government must be an equal partner in development of the UKSPF.
• The current level of flexibility in allocation of funds should not be reduced.
• The replacement scheme should be operational in time to be implemented in early 2021, so that our stakeholders do not suffer difficulties as a result of funding gaps.

It is against this backdrop that Scottish Ministers committed to undertaking a consultation on a successor programme to the ESIF.^[7] The consultation sought views on how any replacement funding could best meet the needs of citizens, businesses and communities in Scotland.

The findings will be used by Scottish Ministers to inform ongoing dialogue with the UK Government about the UKSPF, and to help shape and inform the design and operation of any future programme in Scotland.

A Changing Context

The consultation process took place in the weeks and months immediately prior to the coronavirus pandemic.^[8] Since then, the world has obviously changed.

The economic and social consequences of the pandemic, while not yet known, will clearly be very significant. Governments are already committing massive investment to support businesses and individuals as much as possible through the immediate crisis, but recovery will be long and challenging.

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.

There is likely to be a very different fiscal and economic environment in Scotland. However, if anything this makes future funding more rather than less important, even if the priorities may have to change. All that can be done in this respect is to keep matters under review as the circumstances become clearer in time.

Report Structure

Section 2 presents details of the consultation methodology and limitations.

The online consultation contained fourteen open-ended questions, and sought views on two distinct aspects of the successor programme:

• Strategic aims.
• Governance structures for future funding.

Section 3 to Section 6 relates to the strategic aims of a successor programme, and covers Question 1 to Question 9 of the online consultation:

• What are the main aims that this funding should seek to achieve?
• How could funding be used most effectively to address spatial inequalities between areas and communities in Scotland?
• Geographically, at what level would the priorities for funding be best set?
• How could the use of future funding add value to other sources of funding focussed on similar objectives in Scotland?
• What practical value would you see in future funding in Scotland being aligned with the UK Industrial Strategy and other spatially-differentiated UK economic policies such as the City and Regional Deals or the Industrial Strategy's sectoral approach?
• What practical value would you see in maintaining alignment with EU Cohesion Policy?
• How could we best evaluate the success of this new fund?
• What relevant parts of the National Performance Framework should this funding be targeted towards?
• Which specific aspects of the monitoring and evaluation framework from European Cohesion Policy do you consider would be beneficial to retain for any new fund?

Section 7 relates to governance structures for future funding, and covers analysis of the responses to Question 10 to Question 14 of the online consultation:

• What approach should be used to allocate the funding at programme level - including the most effective duration of the programme that would better support the identified priorities?
• What would be the most appropriate partnership and governance structure to achieve the strategic objectives of the future funding?
• What would be the most effective delivery model to ensure maximum leverage of funds from public and private sectors to regional investments?
• What capacity-building or other support is needed to ensure the ability of local partners and communities to participate in the programme?
• What can be learned from the design and delivery of the current and previous ESIF programmes in Scotland?

Section 8 captures some of the wider points raised that did not directly relate to the online consultation questions.

Finally, Section 9 presents a summary of the main findings from the regional and thematic events which were held to supplement the online consultation.