European Structural Funds 2014-2020 consultation document

PART 3: FURTHER DEVELOPMENT OF THE STRATEGY, GOVERNANCE AND DELIVERY ARRANGEMENTS FOR EU FUNDS

CONTEXT FOR PLANNING 2014-20

6. In October 2011, the European Commission ( EC) published their proposals for the 2014-2020 funding period. The Commission proposed that the European Structural and Investment Funds ( ESI) ³ should be closely aligned with the Europe 2020 goals of smart, sustainable and inclusive growth, and closely aligned with each other.

7. In 2012, the European Commission set out its expectations for the UK on the key target areas it expects Structural Fund investments in the 2014 - 2020 programme. These are:

• Building business competitiveness and innovation
• Tackling the high proportion of the population with low level or no skills, and promoting social inclusion and combating poverty
• Developing an environmentally friendly and resource efficient economy

8. The Commission's proposals align well with the Scottish Government Economic Strategy and the National Performance Framework. This is very helpful, as we also have to address national challenges, and lessons learned from 2007-13, as part of designing the new programmes.

9. EU funding does not exist in a vacuum, and with the limited amount of funding Scotland receives, it is important that the Fund priorities align with national policy and domestic funding. However, the point of the funds is also to achieve longer-term structural change, to do and try things that domestic funding does not always have space for. That means it is important to find the right niche for the EU Funds, rather than to have them replicating what is already done elsewhere.

10. A number of other challenges also need to be addressed:

• The large number of small projects means fragmented outputs and limited impact from the funds. The gradual shift towards more strategic projects ( SDB's and CPP's) have shown a change in this - but some of the outcomes still need to be more ambitious to have a significant impact on Scotland.
• Small organisations are not, broadly speaking, well-equipped to manage the audit burden required to draw down EU funds. Allowing multiple small separate projects draws a huge resource requirement both for individual organisations (whose time could be better spent delivering high quality outcomes) and the Managing Authority and Audit Authority.

• It is difficult to ensure compliance for actual costs - and there is broad support for a significant move towards simplified costs. This should allow a better focus on monitoring outcomes and impacts of the funds, rather than the current focus on financial performance.
• Outcomes and outputs have to be relevant to what you want to achieve (e.g. measuring whether an SME has an e-commerce strategy is not the same as measuring whether they are using it or gaining benefits from it). We will never quite be able to measure long term outcomes within a programme period, but we need better proxy outputs that actually tell us what is being achieved.
• IT systems need to be more flexible to allow gradual changes to long-term strategic programmes, to help with high-quality monitoring of outcomes, and to ensure compliance with e-cohesion.
• Programme guidance and support needs to be ready in time for Programme launch and be clear, e.g. national rules, compliance systems.
• Horizontal themes were not as seriously treated in 2007-13 as mainstreaming them should have ensured. Horizontal themes should continue to have a dual approach (mainstreamed and specific projects) and should be considered both as part of planning the programmes and of assessing any applications.
• Evaluations and communications work better when they focus on telling the story of EU Fund achievement, rather than simply meeting regulatory requirements. This suggests a more qualitative approach on both, and a more consistent approach in terms of ongoing and constant evaluation of what the programmes are delivering.

Strategy

1. With the focus on Europe 2020, there has to be a tighter focus on investment areas which drive sustainable economic growth such as low carbon, higher skill levels, research, development and innovation to address the challenges presented by the economic downturn. Equally there is a requirement, as part of EU 2020, to address employability, environmental protection and rural development interventions. These priorities have been reaffirmed both through the consultation response; and through the Shadow Strategic Delivery partnership process.

2. Proposals for how Scotland could use structural funds to meet the EU 2020 targets, and address the identified needs in Scotland, were developed in three strands, by three shadow Strategic Delivery Partnerships:

• Competitiveness, Innovation & Jobs - Smart Growth
• Environment, Low Carbon and Resource Efficiency - Sustainable Growth - and;
• Local Development and Social Inclusion - inclusive Growth

3. This was to ensure that activity supported by EU funds is coherent and complementary and minimises duplication of funding and delivery arrangements. The objective of the Scottish Themed Funds is to collectively support the genuine long term change Scotland needs to meet the aspirations of Europe 2020.

4. The shadow SDPs are the cornerstone of planning for the new programmes. They are responsible for shaping major, strategic proposals that closely align with Europe 2020, the Scottish Government Economic Strategy and the National Performance Framework. These proposals will in turn steer the selection of the investment priorities and define the outcomes we want to see the funds deliver in order to deliver measureable impacts against Europe 2020 targets.

5. Each SDP has had a balance of a range of stakeholders across the ESI funds, as well as geographical balance across Scotland. They have included key agencies, local authorities, business representatives, the third sector and Scottish Government Policy areas.

6. The shadow Strategic Delivery partnerships have worked well in proposing, challenging and recommending a set of proposals which meet the regulatory requirements, as well as being ambitious about what Scotland can achieve. Although the membership has fluctuated, and the lines of demarcation between 'smart, sustainable and inclusive' are not yet settled, it is likely that these partnerships or something like them will continue to have a role in monitoring the day-to-day progress of the strategic interventions.

7. Neither the shape nor membership of the SDPs is settled beyond this 'shadow' exercise. It has been valuable in learning about working across four ESI funds and four sets of stakeholders, and has provided good substance to evaluate in light of the comments and responses to the May consultation.

8. We proposed a single Partnership Agreement Monitoring Committee ( PAMC) with specific functions around overseeing the strategic direction of the Programmes and their contribution to the Partnership Agreement Strategy and EU 2020 targets. This PAMC is likely to have an additional role in the early phases of endorsing the approach in the Partnership Agreement and evaluating the balance between different interventions. In addition, it will need to develop sensible communication and decision making lines with the overall UK committee for the Marine and Fisheries Fund and the management arrangement for the Common Agricultural Policy.

9. It is likely that a shadow PAMC will meet before the Operational programmes are finalised, and that this will be a tightly defined body of no more than 25 stakeholders across all four ESI Funds, chaired by Scottish Government's DG Enterprise, Environment and Digital. As with the SDP's the final membership is not yet settled, but it is clear that members will need to be in a position to understand progress within an array of strategic interventions; and challenge the organisations leading them on their performance.

Delivery

10. Managing strategic interventions through lead partners has some very specific advantages for Scotland:

• It gives us the tighter focus required by the Commission
• It gives us up-front agreement on what outcomes and impacts the programmes should achieve
• It ensures funding stability (Funds and match) in the long term for important areas of work; and
• It manages the audit burden at a higher level, allowing smaller organisations to focus on what they do best - delivering quality outcomes.

11. The role of the Lead Partner is similar to the one currently taken by Strategic Delivery Bodies and will be a critical one in the delivery of future Structural Funds including:

• managing the performance of all delivery partners against agreed outcomes defined in either a contract or grant arrangements (or both).
• verifying the full value of all financial claims and ensuring that expenditure is properly defrayed on eligible activity. This should include a review of all supporting documents before payment is made.
• retaining a full and transparent audit trail for expenditure incurred at all levels of the strategic intervention.

12. Many of the strategic interventions proposed have a 'natural home' in terms of lead partner, but it is important to emphasise that these have emerged as a combination of organisations putting forward proposals themselves; and being asked by others to do so. The Interventions listed in Part 5 are the result of an extensive series of discussions and negotiations as to what should be included, what was additional, the likely results, the levels of ambitions, and the available match funding. Stakeholders should be encouraged to speak to each other about how to engage with these interventions, and to help the Lead Partners shape them as we move towards delivery.

13. The proposals include responses to specific responses in the consultation - for example including activity on Sustainable Transport and a more concerted focus on social inclusion and combating poverty.

14. In the case of Sustainable transport, the SDP's collectively did not feel there was enough activity to merit a separate thematic objective, and that the activity did not fit within the possible investment priorities given in the regulations. This activity is therefore proposed as part of the Low Carbon Economy thematic objective.

15. For Social inclusion and combating poverty, discussions are still underway with a range of partners on the right role for the Funds, but it is clear there needs to be a strong third sector delivery component to this in order to effectively reach and target those individuals, families and communities most affected.