European Structural Funds 2014-2020 programmes consultation

Part 3 - Strategy

Partnership Agreement

1. Partnership Agreements are being established in line with the Commission draft proposals for the 2014 - 2020 funding period. The Partnership Agreements will set out how Member States will invest Structural Funds to meet European ambitions. The UK Partnership Agreement will be negotiated with the Commission and to date the Commission have set out the following expectations for Structural Fund investment in a UK position paper:

• Building business competitiveness and innovation;
• Tackling the high proportion of the population with low level or no skills; and
• Make the economy environmentally friendly and resource efficient.

2. Scotland will have its own chapter in the UK Partnership Agreement. This will allow us to set out specific challenges and opportunities in Scotland which might not apply in the rest of the UK; and will allow us to tailor our Operational Programmes to support Scottish Government investment priorities.

3. The Scottish chapter will set out why Scotland needs to use the Structural Funds to address both long-term challenges which could hold-back development, protect and improve our environment and develop future opportunities for growth.

4. This means for the Structural Fund Programmes tying together better skills and business development for greater competiveness and more and better local employment opportunities, focusing on commercialising a world class research base, and using financial engineering instruments to support major infrastructure ambitions as well as business finance.

Question 1 - Are there other areas you think the Partnership Agreement should address?

Thematic Objectives

5. Under the Commission's proposals there are 11 thematic objectives which all European Structural Investment Funds should focus on. These thematic objectives align well with the Scottish Government Economic Strategy and the National Performance Framework, with a strong focus on the low carbon economy; research development and innovation; enhanced digital connectivity; investment in human capital; reducing unemployment and increasing social inclusion.

6. The Partnership Agreement will set out the thematic objectives which European Structural Investment Funds could be invested in to best address Scotlands challenges and outline how the funds will be invested and what their objectives are. These thematic objectives will be agreed with the Commission and their specific detail will be set out in the Operational Programmes.

7. To date, analysis work has been carried out on what the most important thematic objectives for Scotland may be. We have also consulted, through an online survey, road shows working groups, and stakeholder membership of programme monitoring committees and monitoring and evaluation groups, on the broad priorities Scotland needs to address using these funds.

8. While Scotland is performing well in a number of areas in relation to the Europe 2020 targets there is still much work to do particular around research, development and innovation and tackling young people not in education, training and employment.

EU 2020 Target	UK (actual)	Scotland (actual)
3% of GDP to be invested in R&D&I	1.7 %	1.58 % (2010)
Greenhouse gas emissions 20% lower than 1990	-19.1 %	-24.3 %
Greenhouse gas in sectors not covered by ETS 10% lower	-11.9 %
20% of energy from renewable sources	2.9 %	24.1% (electricity)
20% increase in energy efficiency (reduction in energy consumption)	TBA
75% of 20-64 year-olds employed	73.6 % (2011)	73.9 % (2011)
School leaving at less than 10%	15.0 % (2011)	14.5 % (2011)
40% of 30 to 34 year-olds with tertiary education	45.8 % (2011)	53.8 % (2011)
Reduce the number of people at risk of poverty or social exclusion by 20 million ( EU wide)	Increased from 13.5 to 14.2 m	15 %

9. In addition, Scotland has underlying or structural issues which could prevent achievement of Europe 2020. Taking this into account alongside the Commission's Position Paper recommendations it is thought that the following thematic objectives should be invested in for Scotland:

• Business Competitiveness, Innovation and Jobs

Scotland is home to seven of the world's top 200 Universities, and has an excellent reputation for research - but a poor track record in business-to-academia linkages, commercialisation and encouraging business investment. Scotland's stock of business capital is weak as the result of historical under-investment; and business birth rates are low for the population, revealing a lack of entrepreneurial culture. The economy is structurally dominated by micro and small enterprises with relatively modest growth potential and limited export-readiness. There are also a number of barriers to new firm formation and entrepreneurship including skills, innovation and access to finance.

In future, capitalising on a strength in research, renewable energy and other growth sectors such as food and drink will mean addressing the gap between those who achieve high educational attainment (50%) and those who achieve none at all (24%). Scotland needs to develop high-level and mid-tier technical skills to fulfil this future need, as well as to bring those currently low-skilled up. This is distinct from and social inclusion objectives, where we need to help those furthest from the labour market or with lower levels of skills - interventions aimed at competitiveness and innovation should be firmly aimed at supporting growth sectors by providing the human capital.

• Low carbon, resource efficiency and the environment

Scotland has a growing renewables sector and is making progress at meeting emission reduction targets. The Scottish Government views the low carbon economy as a key driver for job creation and sustainable growth, however it is important to recognise that that low carbon not only focuses on renewable energies but also on energy efficiency installations and technology, supply chains and encouraging innovative consumption patterns in SMEs to reduce the environmental impact.

Scotland is recognised for its high value nature and bio-diversity, as well as for its cultural heritage and 'brand Scotland'. This strengthens the opportunities for sectors which depend on that reputation (including the growing food and drink sector), but only if it is well protected and managed to minimise soil and water pollution and to protect species diversity.

Scotland also has large, diverse and productive marine resources, producing the great majority of the UK's seafood and with a quarter of the European offshore wind resource and 10 per cent of its wave power. With these natural resources to build upon we are clearly well placed to respond to the European Commission's challenge that we harness the untapped potential of the oceans to achieve 'blue growth'.

• Local development and social inclusion

Although Scotland has weathered the economic downturn better than some regions in the EU, there are pockets of severe and prolonged deprivation, including complex inter-linkages between health, housing, education, and income; 20% of households are workless; and Scotland has increasing numbers of long-term unemployed and young people unemployed. Other challenges include underemployment with the number of people in part time work having almost doubled because they could not find full time work. One of the most significant long-term threats to sustainable growth in Scotland is the loss of skills due to current unemployment trends.

Reducing the proportion of individuals living in poverty is a key challenge for Scotland. Performance in 2009 - 2010 highlights that 17% of the Scottish population were living in relative poverty and this figure has remained largely unchanged since 2007.

Scotland's geography also adds complexity - whilst the UK has achieved nearly full coverage of broadband, remote rural areas in Scotland have been left behind in the roll-out of next-generation broadband; and there is still a lack of skills in using digital media. In addition, we face a demographic challenge with a rapidly aging population, and with an older population in remote areas - the very areas which also provide the opportunities for renewable energy and specialist food and drink sectors. We therefore need to address both access to, take up of and remote service provision via investment in digital. This will also support SME Competitiveness and R&D&I through access to new markets and partnerships; and could contribute to further drops in GHG emissions.

10. Based on the evidence, and on previous stakeholder consultations, the thematic objectives proposed for Scotland across the ESI Funds are:

• R&D&I;
• ICT;
• SME competitiveness;
• Low Carbon;
• Environmental protection and resource efficiency;
• Labour Market Mobility;
• Social Inclusion; and
• Skills and Lifelong Learning.

11. As a result we will not be supporting the following thematic objectives:

• Climate change adaptation
• Sustainable transport

• Capacity building

Question 2 - Do you think these thematic objectives will best address Scotland's short-term and long-term challenges?

Question 3 - Do you think there are any other thematic objectives which should be addressed?

Operational Programmes

12. For the 2014 - 2020 programming period, and specifically relating to Structural Funds, the Highlands and Islands have been designated as a transition region and the rest of Scotland as a more developed region. However, they share many of the same development challenges and opportunities, and after many years of distinction, may have broadly the equal and proportionate funding allocations. To simplify integration between the Structural Funds and Rural Development and Fisheries Funds, and to better align with national domestic programmes, it is proposed that these regions will form a single unit for the Operational Programmes resulting in there being four Operational Programmes covering ESI funds in Scotland:

• A Rural Development Programme ( SRDP);
• A Social Fund Programme ( ESF);
• A Regional Development Programme ( ERDF); and
• A Maritime and Fisheries Programmes ( EMFF) - coordinated at a UK level but supporting projects in Scotland.

13. While there will be one programme for ESF and ERDF these will clearly set out funding allocations for the transition region, ensuring that projects can continue under the Structural Funds across Scotland.

Integration Strategy

14. Although Scotland will have separate Operational Programmes for each ESI fund, the financial allocations will be made to schemes, programmes and projects through three Scottish Themed Funds:

• Competitiveness, innovation and jobs;
• Low carbon, resource efficiency and the environment; and
• Local development and social inclusion.

15. By using the Scottish Themed Funds we will ensure that we concentrate on interventions which together will have the greatest impact for Scotland, the greatest push towards Europe 2020 targets, and best address the development needs of Scotland. The intention is that activity supported by the 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 genuine long term change in the skills base, in the growth ambitions of Scottish SMEs, in energy consumption, in land use, and in the well-being and resilience of all of Scotlands communities. The diagram below sets out the objectives and a summary of proposed activities of the Scottish Themed Funds can be found in the glossary

Question 4 - Do you think the Scottish Themed Funds will address Scotland's key challenges?

Scottish Themed Funds