ESIF Programme Monitoring Committee Operational Programme changes paper: May 2021

Purpose of paper

This paper informs members of the proposed revision of the European Social Fund (ESF) and European Regional Development Fund (ERDF) Operational Programmes (OP). The revisions reflect the reallocation of funds into ERDF Priority Axis (PA) 1 to support Scotland response to the COVID-19 pandemic through the purchase of Personal Protective Equipment (PPE) and other medical supplies.

The revisions also reflect the successful force majeure application to the European Commission (EC) ensuring no de-commitment of funds from the programme.

Decisions required

Members are invited to:

• review the proposed revisions to the ESF and ERDF OPs
• confirm that you are content for the revised OPs to be submitted to the EC for final approval

ERDF

The healthcare crisis caused by the COVID-19 pandemic has necessitated a change to the eligible activities within ERDF PA1: 'Strengthening Research, Technological development and Innovation'. This priority will now be modified to allow for the change in ERDF investment priority under article 5(1)(b) ERDF regulation which now covers investments necessary for strengthening the crisis response capacities in public health services.

This would include any operation that ensures an effective response to a public health crisis in the context of the COVID-19 outbreak. Support to the healthcare system includes, but is not limited to, investments in financing health equipment and medicines, testing and treatment facilities, disease prevention, e-health, the provision of protective equipment (such as respiratory masks, gloves and goggles), medical devices, to adaption of working environments in the health care sector and to ensure access to health care provided this support falls within the scope defined in article 3(1) ERDF regulation. This activity and related expenditure will be eligible from 1 February 2020.

The Managing Authority (MA) has utilised a combination of uncommitted funds from PAs within the ERDF programme, and projected savings identified by Lead Partners (LP) through the financial reconciliation exercise, to allocate approximately £40m into ERDF PA1 specifically for the purchase of PPE and healthcare supplies.

A Strategic Intervention (SI) and operation has been developed to target and address the health, social and economic challenges presented by COVID-19. We are collaborating with colleagues from across the Scottish Government, utilising the flexibilities offered by the Coronavirus Response Investment Initiative (CRII+), to support the Scottish Government’s health response to COVID-19 through the purchasing and provision of vital PPE healthcare supplies and support health services across local communities.

The following outputs has been selected as the most appropriate and are based on actual invoices and therefore targets are appropriate and achievable:

• CV1 - value of personal protective equipment purchases (total public cost €): £40m (sterling)
• CV6 - personal protective equipment (PPE) (including disposable masks, eye protection, overalls): 92,640,000 items

The revisions will ensure there is sufficient expenditure for all activities and projects committed within the ERDF programme. However, if approved, the revisions will allow no further scope or opportunities to approve new operations with the ERDF programme, unless further savings are identified and confirmed through the submission of change requests by LPs.

Whilst allocating additional funding to PA1, the MA are also taking the opportunity to allocate additional funds to those priorities currently over-committed (PA3: More Developed and PA5: Transition). In addition, due to the spending cap for PA6 being reached in the most recent declaration to the EC the MA have also allocated additional funding to this priority for both transition and more developed.

The outputs associated with the revised PAs will also be revised to reflect the movements of funds and percentage of change detailed within the tables below. These outputs will be monitored through the completion of the Annual Implementation Reports (AIRs).

ESF

Similarly to PA6 within ERDF, the spending cap has been reached for PA5 in both transition and more developed for the ESF programme. As a result, the MA have allocated additional funding to this priority for both regions. To do this, we have utilised uncommitted funds from other PA within the ESF programme. A breakdown of this is detailed within the table below.

Risks

The proposed revisions to the OP ensures sufficient funds for all current committed activities and projects funded through the ERDF and ESF programme. However, as detailed in paragraph 9, approval of the OP leaves no further flexibility for approving new operations as both the ESF and ERDF programmes are now over-committed.

Broader risks linked to the revision of the OP include the financial performance of the ESF and ERDF programmes and the potential for future de-commitment. To date, the MA has absorbed the past de-commitments of the programme, minimising its impact, whilst ensuring sufficient funding is in place for the continued delivery of projects and activities. However, ensuring the continued availability of funding for those activities will not be possible should the programmes face de-commitment in future years.

Confirmation of the successful outcome of the force majeure application has eased the pressure on the programmes with no automatic de-commitment for 2020. To mitigate the potential for any future de-commitment, the MA recommends that members review their current financial commitments and submit change requests confirming savings. This will allow the MA to re-allocate funds to those PAs that require additional support.

Proposed revisions to the ERDF OP (€)

Priority axis	Category of region	Current	Committed	New allocation	Change	Percentage change
1	Transition	16,854,682	15,465,468	29,401,648,	12,546,966	74%
1	More developed	78,237,877	58,442,015	105,102,253	26,864,376	34%
2	Transition	15,560,636	13,039,352	13,039,352	-2,521,284	-16%
3	Transition	32,166,501	24,448,434	24,448,434	-7,718,067	-24%
3	More developed	105,795,156	109,612,872	109,612,872	3,817,716	4%
4	Transition	22,706,476	16,932,584	16,932,584	-5,773,892	-25%
4	More developed	83,904,354	70,709,223	70,709,223	-13,195,131	-16%
5	Transition	15,854,648	17,343,515	17,343,515	1,488,867	9%
5	More developed	57,148,912	32,898,512	32,898,512	-24,250,400	-42%
6	Transition	2,237,821	2,297,624	4,215,231	1,977,410	88%
6	More developed	6,500,013	7,080,800	13,263,452	6,763,439	104%
Total	Transition	105,380,764	89,526,977	105,380,764	0	N/A
Total	More developed	331,586,312	278,743,422	331,586,312	0	N/A
Grand total	Transition and more developed	436,967,076	368,270,400	436,967,076	0	N/A

Proposed revision to the ESF OP (€)

Priority axis	Category of region	Current	Committed	New allocation	Change	Percentage change
1	Transition	20,139,441	18,876,339	20,139,441	0	0%
1	More developed	119,289,824	130,907,293	119,289,824	0	0%
2	Transition	13,808,154	10,106,317	12,356,726	-1,451,428	-11%
2	More developed	50,850,684	29,100,894	29,100,894	-21,749,790	-43%
3	Transition	28,870,388	29,663,450	29,663,450	793,062	3%
3	More developed	91,248,725	111,841,279	108,606,381	17,357,656	19%
4	Youth Employment Initiative (YEI)	51,014,110	50,036,984	51,014,110	0	0%
5	Transition	1,931,618	2,124,609	2,589,984	658,366	34%
5	More developed	6,316,018	6,199,801	10,708,212	4,392,134	70%
Total	Transition	64,749,601	60,770,715	64,749,601	0	N/A
Total	More developed	267,705,311	278,049,267	267,705,311	0	N/A
Grand total	Transition, more developed and YEI	383,469,022	388,856,967	383,469,022	0	N/A