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

4. Alignment with Scottish Policy and Other Funding Streams

Scotland has a set of high-level strategic documents that guide the direction of our policy development and spend. These are focussed on inclusive economic growth and include our National Performance Framework, our Economic Strategy, our Programme for Government and our new Enterprise and Skills Strategic Board approach.

Section 4 covers one question from the online consultation:

Question 4: How could the use of future funding add value to other sources of funding focussed on similar objectives in Scotland?

Summary of Main Points

Additionality should remain a core principle of the successor fund.

Strongest support for alignment to Scottish economic and social policy (i.e. when compared to UK or European policy - see Section 5).

Alignment with existing funds requires strong policy alignment at Scottish level 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.
• Reflect the different challenges, needs and opportunities across Scotland's urban and rural areas.
• 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.

There should also be strong alignment to existing funding mechanisms to maximise leverage. It should aim to complement and not duplicate other funding sources.

Question 4: How could the use of future funding add value to other sources of funding focussed on similar objectives in Scotland?

Additionality and Added Value

Many submissions considered that additionality and added value were fundamentally important principles to guide the use of future funding.

The feedback provided by these respondents was largely that the new fund should: "not replace or duplicate existing funding streams, but must add value"; be "additional to core budgets"; and "remain distinct from other funding streams". It should also: "add value to established priorities"; be based on "objective evidence of need within our communities"; and "not be used to replace funds lost through budget reductions, but….add value or services to what already exists".

"Future funding should be awarded on the basis that it should lead to additional impacts to those delivered by existing funding streams. With significant pressure on public finances and in the context of a post-Brexit environment, it is vital that additional economic development funding is focussed on maximising impact on inclusive and sustainable growth".
Scottish Enterprise

"Additionality and added value have been key considerations in the delivery of EU funded programmes and should continue to play a role in setting priorities for use of the replacement funds. The funds should not replace funding already being provided from other sources - but can be complementary to the objectives of other key policies. This will require transparency in identifying the clear additionality of the new fund to complement current funds available to local authorities and other public agencies in Scotland".
Fife Council

Alignment with Key Scottish Policies and Strategies

Secondly, there was wide-ranging reference and support for alignment of replacement funding with Scotland's Economic Strategy and the National Performance Framework (e.g. twin focus on inclusive economic growth and wellbeing), and with regional/local economic strategies.

There was also reference, but to a much more limited extent to: the strategy of the Enterprise and Skills Strategic Board; Programme for Government; National Islands Plan; Fairer Scotland Action Plan; Place Principle; No One Left Behind; Public Health Outcomes; Scottish Energy Strategy; National Planning Framework (NPF4); Climate Act; Communities Act; and Infrastructure Commission Report.

There was very strong support that future funding in Scotland should align with, and be complementary to, existing national and sub-national policies which have shared aims. Here, much of the feedback was in support of the use of funds being "driven by Scottish priorities and circumstances" given the scale of funds likely to be allocated to Scotland.

This was generally considered important in order to:

• Ensure a close alignment with Scotland's approach to regional economic development.
• Reflect the different challenges, needs and opportunities across Scotland's urban and rural areas.
• 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.
• Pursue "territorial cohesion", and encourage "a partnership approach to implementing key social and economic policies".

"Scotland has a set of high-level strategic documents that guide the direction of policy development and spend. Any new fund requires to align with these and support schemes that are strategically significant at a regional or local level in terms of promoting sustainable inclusive growth and to include activity which currently benefits from EU support".
East Ayrshire Council

"Future funding should be aligned with Scotland's Economic Strategy - with links also effected to the five foundations of the UK Industrial Strategy".
Programme Management Office, 'Scotland's 8th City

A few respondents went on to report that the UK Government "commitment to respect the devolution settlement" was welcomed, albeit "it is not clear what, if any, conditions the UK Government will place on this funding". A related point was that the relationship between the UKSPF and other policy mechanisms would, however, "need to be made clear".

Where there was specific reference to wider policies, strategies and other documents within consultation submissions, these are listed in Table 4.

Table 4: Wider Plans and Strategies

Europe 2020 Strategy
UK Government - UK Industrial Strategy
Scottish Government - The National Plan for Scotland's Islands
Scottish Government - Scotland's National Transport Framework
Scottish Government - Scottish Energy Strategy
Scottish Government - No One Left Behind
Scottish Government - Child Poverty Strategy
Scottish Government - Race Equality Plan
Scottish Government - Equally Safe Delivery Plan
Scottish Government - Fairer Scotland for Disabled People Delivery Plan
The National Gaelic Language Plan 2018-23
Infrastructure and Climate Change Plans
Community Wealth Building
Equality and Fairer Scotland Budget Statement 2020-21
Community Planning Partnerships' LOIPs

Alignment with Regional Economic Partnerships

Further, there was acknowledgement within many submissions that to make the biggest difference, the use of future funding should be linked to "a coherent economic development strategy", and its use should "act as a catalyst for place-based interventions".

Many submissions commented that the future funding could be used to add value to the objectives and priorities identified within the Regional Economic Strategies currently being developed by Regional Economic Partnerships across Scotland.

It was reported that such an approach could help maximise the impact of funding, lever in funding from other sources, and act as match funding.

"The support should add value to the delivery of the regional economic development strategies to improve their economic convergence. This would mean that the funding would add value and be complementary to support from partners".
Dumfries & Galloway LEADER Local Action Group

"Public funding will add significant attractiveness to projects due to the strength of covenant enjoyed by the public sector. This can help to leverage in additional funding from either private or other public sources, thus adding scale and enhanced value to, for example, regeneration projects. Public funding can therefore act as the catalyst that will bring forward further private investment and this should be seen as a key opportunity for the use of future funds to replace the ERDF in particular".
Scottish Property Federation

In addition, there was some reference to Regional Spatial Strategies being developed within the context of the National Planning Framework 4 (NPF4), and that the funding should add value to the delivery of the regional economic development strategies of NUTS2 regions.

Alignment with Other Funding Streams

There was a broad acknowledgement that the future funding should be integrated and aligned with other funding streams. It should aim to complement and not duplicate other funding sources in order to "ensure transparency and maximum impact".

"When policies and funding streams are aligned, the impact of activities and programmes can go further and the social and economic benefits can be greater…..alignment can also increase participation".
Universities Scotland

"…we believe there is considerable added value in using funds to better integrate spending between existing funding streams…European funding has been more open to rewarding bids which consider and deliver a wider range of outcomes, across economic, social and environmental fields. This type of approach was previously encouraged and supported in regional programmes, with considerable progress made in 2000-06 programmes. We would suggest that such an integrated approach should again be taken, in light of current thinking on rounded approaches to wellbeing, and to the need to create synergies between areas to maximise the benefits of limited resources".
Zero Waste Scotland

There was reference across many of the submissions to a variety of existing funding streams at a Scotland, UK and European level, including those listed in Table 5.

Table 5: Wider Funding Sources

City Region and Growth Deals
Scottish Government - Rural Tourism Infrastructure Fund
Scottish Funding Council - University Innovation Fund
National infrastructure and net zero investment funding
Scotland's share of the UK Apprenticeship Levy proceeds, including the Scottish Government's Flexible Workforce Development Fund
Community Capacity and Resilience Fund
Scottish Government - Tackling Poverty Fund
Scottish Landfill Tax Credit Scheme
Skills Development Scotland - Employability Fund
Enterprise and skills funding
Fair Start Scotland
Scottish Natural Heritage Biodiversity Challenge Fund
National Lottery Heritage Fund
Rural Development Fund
Business Readiness Fund
Grant programmes that support and protect the historic environment (e.g. repair grant scheme, Conservation Area Regeneration Scheme (CARS)
UK Research and Innovation - Strength in Places Fund
Horizon Europe
Erasmus
Potential successors to existing EU rural development and fisheries funding
Scottish Land Fund

While not mentioned to any large extent, it was suggested that alignment of funding could include: increased co-ordination of project call timelines: the ability to combine funds for single projects (e.g. as match-funding); encouragement of international collaborations; and streamlined reporting and audit processes.

There was wider recognition within many of the responses that current and previous ESIF, including LEADER, had achieved good leverage by requiring match-funding for projects, and made "transformational projects more likely to go ahead and become sustainable". Others felt that it would ensure "commitment from Lead Partners". Many felt that a match-funding model should continue, albeit there was recognition of the operational issues within the current programme around securing and evidencing match-funding or the challenging funding environment facing organisations.

"In order to create a unique programme in the future, which does not duplicate but which offers genuine added value, we would suggest less rigid focus on match funding, with a culture which desires leverage, rather than one which requires match".
University of St Andrews

"Whilst demonstrating additionality is critical fully funded activity may be a consideration where there is no other source of public or private funding for the activity available. The EU model of match funding can add a level of bureaucracy and complications to funding".
Skills Development Scotland

"In past programmes, local authorities had a leading role and were usually the main match funders, but public sector austerity over a prolonged period has impacted on the availability of match funding and the effectiveness of programmes, although higher intervention rates implemented later in programmes have mitigated that to some extent. If that was carried over to a new funding programme, with perhaps 100% funding in some cases dependent on need, that would be very welcome".
Comhairle nan Eilean Siar

"There is also an opportunity to refocus the role of funding programmes towards catalysing projects/ideas rather than gap filling as the funder of last resort. Many of the operational issues encountered in the current ESIF programmes relate to securing and evidencing sufficient match funding and quantifying an estimated gap in funding to demonstrate added value. By allowing funding programmes to act as initial investors to a project, as was the case in earlier programmes, considerations of added value can focus more on the impact of the funding in terms of generating outcomes rather than balancing spreadsheets".
Aberdeenshire Council

Wider Points

A number of wider points were raised around how future funding could be used to add value to other sources of funding focussed on similar objectives in Scotland. The most commonly reported points included:

• Identifying ways in which existing activity can be enhanced or new and innovative activity can be implemented. Among other things, this could include long-term multi-annual approach to funding, support to de-risk project activities, and reducing restrictions on eligible activities.
• Greater utilisation of data and digital technology.
• Fostering collaborations and complementarity.
• Flexibility to work across sectors, policy areas and internationally.
• Fostering international collaborative projects and exchange of experience.