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

5. Alignment with UK and EU Policy

The UK Government has said that the UKSPF will be aligned with its Industrial Strategy and will focus on increasing productivity. At the same time, the EU is evolving its Cohesion Policy with a structure of five themes: A Smarter Europe; A Greener, carbon free Europe; A Connected Europe; A More Social Europe; and A Europe closer to citizens, to create a more tailored approach to regional development in order to drive EU investments.

Section 5 covers two questions from the online consultation:

Question 5: 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?

Question 6: What practical value would you see in maintaining alignment with EU Cohesion Policy?

Summary of Main Points

There was a strong degree of support for the Fund to be guided by Scottish rather than UK or EU policy priorities, albeit maintaining some alignment particularly with UK policy at a high level.

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 tactical rather than strategic - to maintain connections and networks, to share information, lessons learned and good practice, and to increase access to other funding or delivery opportunities.

Therefore, in considering the thematic focus of a new fund, it was generally considered that Scottish policy priorities should be the primary driver. This was with a view to ensuring sufficient flexibility to respond to the differences and diversity in and between regions across Scotland.

Question 5: 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?

Alignment at a UK Level

Many responses agreed that the replacement funding in Scotland should "align and complement where possible" with UK strategies and policies at a high level. There was generally considered to be value in adopting such an approach in terms of "consistency in investment and social and economic development across the UK"; to "tackle specific inequalities"; that increased coordination could minimise a "fragmented" approach across UK nations; because the UK and Scottish economies are "closely inter-twined"; or because the UK is our "biggest and closest market".

There were also a variety of comments regarding areas of overlap or cross-over between the UK Industrial Strategy and Scotland's Economic Strategy and National Performance Framework. For example, there was broad support for the importance of "people" and "place" within the Industrial Strategy, and support for its ambitions to "reduce inequalities between communities and places by promoting a sustainable and inclusive economy". There was also some support for a sectoral focus that recognises the specific strengths and opportunities in Scotland.

Wider feedback was that where there are "common interests", there could be value in alignment at this level "to link our focus in areas such as raising productivity or tackling climate change with other UK nations, regions and partners".

"The replacement funds should align and complement where possible with UK and Scottish strategies at a higher level. Both the UK Industrial Strategy and Scottish Performance Framework focus on themes like place. The decision making for how to deliver outcomes for places should then be delegated to the regions who are best placed to know their own needs".
Moray Council

"….the concept of the Grand Challenges contained with the Industrial Strategy is an interesting one, and incorporating 'industries of the future' into the new fund could allow for flexibility and ambition in terms of delivering innovative projects, while avoiding the need to re-write the programme to address emerging opportunities and technologies".
East of Scotland European Consortium (ESEC)

The main reasons for supporting alignment with UK policies, including the UK Industrial Strategy, were that this could help to:

• Ensure that the fund works toward a common set of priorities and aims.
• Leverage funding into Scotland from a range of sources.
• Support the sharing of information, ideas, learning and good practice.
• Leverage economies of scale and potential synergies across regions.
• Encourage participation in UK-wide networks.

Where respondents disagreed that there should be alignment between future funding in Scotland and the UK Industrial Strategy, feedback mainly centred on: criticism of its strong focus on increasing productivity; that it lacked reference to rural development and the issues facing remote and rural areas; that a more holistic wellbeing focus was required; and/or that the Scottish economy was vastly different to the rest of the UK.

"we would see productivity as a secondary priority that should mainly be thought of as a possible means to achieving outcomes around improving health and wellbeing, education and quality employment and reducing carbon emissions and inequality. On face value, we would not want future funding in Scotland aligned with the UK Industrial Strategy with a primary focus on productivity".
Scottish Community Development Centre

"From a Scottish rural development perspective, the proposed alignment with the UK's Industrial Strategy is point of concern as rural development and the issues of rural areas will be a very minor part of that strategy. Given that 98% of Scotland is rural (and 17% of the population) it is essential that rural areas become a major contributor to tackling the climate crisis and that this opportunity is not lost within the larger framework".
Forth Valley & Lomond LEADER Local Action Group

Flexibility of Approach

While there was broad support in principle for alignment with UK policy, many submissions called for "sufficient flexibility to respond to the diverse local circumstances and needs of different regions and communities" in Scotland, and a less "prescriptive" approach.

The feedback from these respondents was frequently caveated with points that highlighted divergence between the UK Industrial Strategy and Scottish policy objectives. Or identified a need "for more detailed consideration of regional conditions and priorities", "to ensure that policy directly reflects the needs and issues of individuals, communities, businesses, and wider society".

"Scotland has distinctive economic, industrial and skills needs, so any alignment should be at a broad level, with enough flexibility built into the scheme to allow funding to best respond to the specific needs of individual regions. This would enable funding to focus on local priorities, whilst ensuring the direction of travel at a UK-wide level is taken into account".
Scottish Funding Council

"….the current UK Industrial Strategy is broadly designed to promote national and regional competitiveness, with funding allocated on the basis of existing competitive strengths rather than performance gaps or need. While UK Industrial Strategy funding is often allocated to particular regions, the objectives appear to be distinctly different…..the practical value of aligning replacement structural funding with the UK Industrial Strategy would appear to be relatively weak (but Scotland should continue to pursue both)".
Scottish Enterprise

"Increasing productivity, however, is just one component in addressing spatial inequalities, and a "top down" focus on productivity and competitiveness is quite different to a focus on addressing spatial inequalities. It may lead to allocation of funds that is not closely linked to spatial need. Furthermore, it is not clear how the focus of the UK Industrial Strategy impacts on the socio-economic challenges present in rural Scotland".
Highlands and Island Enterprise

Many of the respondents that supported alignment with the UK Industrial Strategy also caveated their response or highlighted some concerns. Namely, that the UK Industrial Strategy:

• Was not "sufficiently Scotland specific" and has a "much narrower approach" than Scotland's Economic Strategy. Here, the main point raised was that "inclusive and sustainable economic development", "a wellbeing economy", and the "move to a low carbon economy" should be emphasised as priorities for Scotland. And that future funding should strike a balance between economic and social investment.
• Makes limited reference to rurality, or islands, and how non-urban areas can make a contribution to increasing productivity within the UK - "island-proofed" and "rural-proofed". That future funding would need to meet the needs of rural areas and urban areas, including those regions in Scotland with mixed economies.
• Has narrowly defined sectoral opportunities and does not reflect the importance that local key sectors play in regional economies (i.e. those sectors not identified as a national priority).
• Makes no reference to the role of the voluntary sector within communities in tackling inequalities and improving productivity.
• Has no explicit focus on social capital.

A risk identified by a few respondents was that "we may stray from the core needs of Scotland as a whole, and local and regional economies more generally". The importance of ensuring flexibility to respond to new opportunities and changes in policy focus was emphasised by many respondents.

Alignment with, and Adding Value to City Region and Growth Deals

There was broad support in principle for alignment with the UK and Scotland City Region and Growth Deals, and that the new funding should add value to this investment.

"The new fund should recognise the work to develop new partnerships and establish opportunities for more regional working, for example the development of City Regions. These partnerships are in prime position to influence the priorities for the new fund and ensure complementarity to other activities. The new fund should provide an opportunity to add value to the City Region deals e.g. to develop further Skills Gateways using regional partnerships to meet specific local needs".
Fife Council

"Future funding should not replace but add value to City, Regional and Island Deals and complement the strategic investments envisaged under such Deals. However, this strategic approach between Scottish, UK, and Local Government is still very much in its infancy and as such is not, as yet, a tried and tested model".
Shetland Islands Council

However, some respondents (mainly third sector organisations) highlighted specific concerns based on engagement or experience to date or current coverage of City Region and Growth Deals. The points raised are reflected in the respondent quotes below.

"Involvement in City Deal governance and administration in Scotland has not been easy for third sector organisations, since these are ad hoc structures which merit greater democratic accountability…..We believe that there are significant lessons from Development Partnerships under the 2000-2006 EU EQUAL ESF Programmes in Scotland which should not be lost, since this model was effective in engaging a range of small, specialist social economy organisations in delivery of programme objectives".
Joint Response from SENSCOT, Social Firms Scotland and Scottish Community Alliance

"The City and Regional deals are viewed in disadvantaged communities as exclusive not inclusive".
Scotland's Learning Partnership

"Alignment with the City and Region Deals also presents an issue for rural areas as most are not covered by these deals. Where they are, there is the spectre of rural and urban priorities being in competition for scarce resources and inevitably, in most areas, it will be the rural environment that will have the lesser priority. While there is value in aligning with the City Deals, this alignment alone will exclude most rural areas from future funding".
Forth Valley & Lomond LEADER Local Action Group

A related point made in a few cases was that the UK Industrial Strategy and City and Regional Deals were at an early stage, but that there could be value in building on any lessons learned.

Question 6: What practical value would you see in maintaining alignment with EU Cohesion Policy?

Around one-fifth of respondents did not provide a response to Question 6. Some indicated that they were "not sure", were "not qualified to comment" on this issue, or had "no comment" to make.

Across the remainder of consultation responses, the main gist was that some degree of alignment or "read-across" with EU Cohesion Policy "as much as possible and practical" was considered a logical and sensible approach.

This was generally with a view to: maintaining "cooperative and partnership activities developed over many years"; giving a "collective purpose and strength of voice that otherwise would not be achieved at a domestic UK or Scottish level"; tackling recognised "global challenges"; ensuring a "more equal and inclusive country"; ensuring "continuity"; supporting "future dialogue and co-operation"; and ensuring "a common policy language".

There were a few comments that alluded to the current uncertainty on the nature of the UK's (and Scotland's) future relationship with the EU. Within this context, it was generally considered "prudent" to maintain alignment with EU Cohesion Policy and its overarching principles to help facilitate continued close collaboration with Europe as the future relationship is developed.

The most common benefits and practical value identified for maintaining alignment with EU Cohesion Policy can be summarised as follows.

Firstly, the key themes and objectives of the Scottish Government's National Performance Framework, Economic Strategy and Programme for Government 2019-2020, were all considered to closely align with the long-standing themes and objectives of the EU's strategies and Cohesion Policy. Indeed, there were generally considered to be many areas of overlap (e.g. digital, low carbon).

Maintaining at least some similarity to the EU's five priorities for the 2021-27 period was in the main considered advantageous. Having a continued focus on "strengthening economic and social cohesion by reducing disparities in the level of development between regions", and maintaining the "ethos" of EU Cohesion Policy were considered essential by many respondents. And support for its "strong…regional focus and its desire to ensure cohesion and growth across all parts of Europe". There was some feedback that recognised progress made to date albeit that there was "still much to be achieved".

As with all consultation questions, there were a number of identical phrases across consultation responses that stated "the recognition of NUTS2 less developed regions within the UK in alignment with the EU would be an important contribution to this".

A different viewpoint was articulated as follows:

"However, the bulk of Cohesion Policy funding is concentrated on less developed regions in order to address economic, social disparities that exist between regions. In order to invest in economically successful cities and regions, it may be beneficial to assess how the new fund operates more closely with the UK Industrial Strategy than the EU Cohesion Policy. For a city region that performs well in NUTS terms, Aberdeen has not benefited from previous Structural Fund programmes, and there is an argument that based on the disproportionate economic impact the city region makes, this is recognised in any new funding criteria".
Aberdeen City Council

There was also some reference to the importance of the shared priorities of inclusivity, connectivity and sustainability between the Scottish Government, UK Government and European Commission. And that EU Cohesion Policy complements and supports the UN Sustainable Development Goals and a Just Transition - some mentioned that it would be advantageous to maintain close alignment with this ambition. It was suggested that this could help ensure Scotland remains competitive with European neighbours, and leverage funding from other sources (e.g. European Commission's Just Transition Fund).

Most considered it vitally important to maintain alignment to the territorial cooperation networks and programmes (e.g. on research, education, best practice) should the UK/Scotland choose to join them as a third party. Erasmus+, Horizon Europe, Interreg Europe, European Territorial Cooperation Programmes, PEACE Programme, EU Urban Agenda, European Territorial Agenda, URBACT Programme, the new European Urban Initiative of Cohesion Policy 2021-2027, European Network on Rural Development, and DG REGIO - were all mentioned. Here, the main view was that "alignment with EU priorities would make this more of a possibility".

Many respondents reported that alignment with EU Cohesion Policy would help Scotland continue to "engage, learn from and add value to EU institutions, to the benefit of both Scotland and European partners". The sharing of policy learning, good practice examples, new or innovative approaches, and connectivity to opportunities for partnership working and collaboration were all considered essential.

A few respondents considered it important to "manage expectations" around what could realistically be achieved in terms of ensuring alignment with policy at different levels. The point made was that the value of the UKSPF in Scotland would be "relatively restrictive and will not be able to fund all aspirations". Related points highlighted the importance of adopting an approach that demonstrated additionality, alignment of effort and resources, partnership working and synergies, achieving economies of scale, and reducing duplication.

"It is important that several of the EU's core principles for operation of the funds are sustained - additionality, partnership, targeting, subsidiarity and alignment of effort and resources…. in order to avoid duplication or conflict with other domestic funding, and ensure transparency and have maximum impact. While there should be alignment with other funding streams the fund needs to have its own distinct identity to ensure transparency as well as additionality".
Falkirk Council

Where there was limited (or no) support to maintain alignment with EU Cohesion Policy, this was generally couched in terms that:

• It could add complexity to the process.
• Benefits would be limited or that it would be for political rather than practical benefit.
• Europe's social, economic and environmental problems are too diverse and close alignment could put the Scottish economy at a disadvantage or might not represent the best fit for a Scottish programme.
• Given the likely value of UKSPF in Scotland impact might be best maximised by ensuring a direct focus on Scottish policy priorities, rather than those established at a higher level.
• There would only be practical benefit if Scotland planned to re-join the EU in the future.

A few respondents (primarily those in support of alignment with EU Cohesion Policy) highlighted particular challenges and/or constraints of the EU approach. The main points raised were as follows:

• The focus within the current EU Cohesion Policy on increasing GDP to the exclusion of other metrics might be unhelpful. The point made was that Scottish policy is moving toward measuring wellbeing (i.e. not just measuring success in terms of productivity growth).
• That recent ESIF programmes have not been as effective due to their restrictive nature (e.g. could not fund what the region wanted - transport infrastructure was specifically mentioned). Divergence could allow for activities to be supported which may not otherwise be possible within the Cohesion Policy framework.
• That more recent programmes have been "top down" and overly prescriptive. It was reported that this approach had hindered regional and local flexibility to tailor programmes nationally and locally and to use the funds to best effect.

Aligned to feedback provided to Question 5, there was strong support for an approach that was underpinned by Scottish priorities and circumstances. Here, the feedback centred on the importance of taking into consideration:

• Regional and local economic strategies.
• Being responsive and having sufficient flexibility to respond to local and regional circumstances.
• And that this should be underpinned by a "long-term multi-annual approach" to funding.