Finance and Constitution Committee

Meeting date: Wednesday, June 19, 2019

Official Report 672KB pdf

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Structural Fund Priorities (Post-Brexit Funding)

The second item on our agenda is evidence being given in round-table format on the funding of EU structural funds priorities in Scotland post-Brexit. I welcome our witnesses. A few committee members—Murdo Fraser, Adam Tomkins and Patrick Harvie—have had to go to other committees that are considering legislation this morning. The round-table format is intended to allow for as free-flowing a discussion as we can manage. The session is informal, so witnesses should, please, feel free to join in. If you want to contribute, let me or Jim Johnston, our clerk, know and we will try to get you in as soon as possible.

The discussion will be based around three different themes—a different member will lead on the different elements. We will discuss allocation of funding, process and administration, and outcomes. I ask Emma Harper to kick off the discussion on allocation of funding. The committee has already held a similar session, and we have been around the country—to Paisley, Dunfermline and Inverness—to talk to people who are very interested in EU structural funds. Some of what you tell us will therefore not be new to us, but much of it will be, so we look forward to the discussion. Over to you, Emma.

I am interested in how allocation of funding will work. Earlier in the meeting, Michael Keating said that the funding will not be Barnettised. How will future funding be allocated, and what level of funding should Scotland receive?

That is your starter for 10. Who wants to kick off?

That is a good question. The actual quantum is important. I do not believe that we should have a penny less. That is where I would start.

Do you mean for the whole UK? Do you want to break down what that means for Scotland?

For Scotland, that would mean getting the same as we got from the previous funds. It is very important that we get exactly the same.

The UK Government has indicated that the shared prosperity fund will be about the same size as the existing EU structural funds. My paper shows that that is still a relatively small proportion of total Government spending—indeed, it is relatively small in comparison with the amount that Scotland spends on its own account on economic development and skills development.

I will look first at the UK level. Allocation of the shared prosperity fund will be done similarly to how allocation currently happens. Essentially, it will be done through a needs-based assessment, rather than through the Barnett formula. Based on a needs assessment, Scotland would mostly come out with about its population share. Based on a list of indicators, such as gross domestic product per head or unemployment, Scotland tends not to be that far away from the UK average. That would mean that funding per head in Scotland—I show this in one of the figures in my submission—would be pretty close to the UK average.

One would have to manipulate quite dramatically the way in which need was assessed in order to find ways of giving Scotland a higher proportion than its population share. That would be the case as long as a measure such as GDP per head or unemployment—a standard economic statistic—was used as a basis for the needs assessment.

11:15  

The quantum should absolutely not be less. It is also important to bear in mind the principles of EU funding, such as the level playing field and the cohesion elements. We certainly hope that those would be retained, because they have been immensely beneficial.

Distribution should, of course, be based on need. How need is defined will be the subject of argument, but need has always been the basis of EU cohesion policy, against the principles. Local government very much hopes that acceptable measurements of need can be devised that will enable the quantum to be distributed equitably.

I agree with most of what Malcolm Burr said. Distribution should be based on need. It is important to remember that the Highlands and Islands is a transition region. The Conference of Peripheral Maritime Regions of Europe has produced a theoretical projection that says that, if we were still to be in the EU, we would still be a transition region.

On the measurements that we should use, GDP has been mentioned, but it is a bit of a blunt instrument. We would be looking for measurement of things such as peripherality and rurality. The Islands (Scotland) Bill talks about island proofing. All the islands are inside the partnership’s radius, so we would look for something like that to deal with the Highlands and Islands.

I will add to Roddy MacDonald’s point. The Scottish cities feel quite strongly that the value of the funds should not be reduced. The second point is that the funding should all be money that is not currently available. We know that there are funds available to us at UK and Scotland levels, and we do not want those funds to be absorbed into a UK shared prosperity fund, because that would mean an overall reduction in the funds that are available.

Malcolm Burr and Angus MacLeod talked about need. When we talk about the need for funding, we need to consider the purpose and intention of the funds. For example, we want to encourage innovation, so we need to ensure that the criteria that we employ to determine how we allocate funding take into consideration such factors, rather than just looking at need in the sense that areas that are classed as transition areas should therefore automatically receive that funding.

Angus MacLeod mentioned rural areas; I represent cities. I wholly agree with him that rural areas need to be given consideration, but urban areas also need that. Some of the Scottish cities have been able to work together to identify ways in which they can act as drivers for economic growth. We believe that that creates opportunity. While the shared prosperity fund might have more of the social aspect that we currently see in the European social fund to support areas of need, we also want funding to support areas of growth in a way that is more closely aligned to the European regional development fund programme. We want to ensure that neither aspect is lost in the new programme.

I agree that distribution should be based on need, but how we determine need is another question. Perhaps the national performance framework, for example, could be used to assess need in some way.

Zero Waste Scotland has had European money to accelerate resource efficiency and the circular economy. With that money, we have been able to create a fund and a business service for the circular economy, with business models that are very innovative, not just in Scotland but in the world. They are change leaders, in that respect. Because of the innovative nature of those organisations, change has been slow, but the work is gaining traction. We would want money to continue that work so that we are able to further accelerate the circular economy.

The quantum is a red line for the ICA—Scotland should not get a penny less than it currently gets, adjusted for inflation. Also, multi-annual funding periods are important for consistency and confidence, and to allow the money to bed in, in the communities that we all serve.

Another critical question for our members is when the fund would become operational. It must be fully operational and has to hit the ground running from January 2021, in order to ensure that there is no hiatus in regeneration activity in Scotland.

I certainly agree with just about everything that has been said. Roddy MacDonald’s point about multi-annual funding is hugely important. From the LEADER point of view, most of the rural businesses that we have supported are microbusinesses—small and medium-sized enterprises are our biggest level. They need to know that the support that is out there for them is more than year-by-year. That point is what I most want to press.

I have caught quite a few eyes; I will come back to Emma Harper once we have got round everybody.

I emphasise that the funding is truly transformational, so the security of multiyear planning, which permits proper strategic planning, is essential. Other public sector funding has varied and there is not so much capacity to match fund projects, particularly in local government, so the security of multiyear funding has allowed a bit of strategic planning in an era when the Scottish Government and local government have been on one-year budgets. We hope that all that will change for the next financial year.

The projects are not just transformational, but are part of the fabric of delivery of services to people—in particular, services in development of employability and skills.

I remind everyone that when Theresa May introduced the SPF, her statement was about reducing regional or spatial inequalities. Those have grown in the UK and are bigger than they are in any other European country. Success in her terms will be judged by whether the level of inequalities—measured by, say, income per head—is narrowed by use of the funds.

It seems to me that the size of the funds would not in any way make a significant difference to spatial inequalities, although it is important that, if they funds do have significant effects, they are demonstrable. A significant part of the budget has to be set aside for evaluation so that any genuine additionality from spending public money can be shown.

Where do you think the focus would need to be in order to achieve the aims that were set out by the Prime Minister?

We are talking as if Scotland would be able to determine the formula whereby the different levels of need would be assessed in Scotland. That is not entirely clear; it is possible that the UK Government will take the view that the assessment is down to it, as the EU made decisions on transition regions and so on. That is a very important consideration.

Scotland could do that better, if it were allowed to make the decisions on its own behalf. My paper tries to illustrate the kinds of trade-offs that must be made. You have to decide whether you are going to go into some areas much more heavily—because, for example, they are areas of high deprivation or there is population loss—and trade that off against more mild interventions across a wider area. A lot of trade-offs have to be addressed. It is a multidimensional problem.

So, the quantum might be the same but how it is distributed could change significantly.

Absolutely.

I see that Angela Constance wants to come in. I will come back to Emma Harper later.

Having heard what people have said about ensuring that the quantum is not diminished, I wonder what your views are on the level at which decisions should be made about particular aspects of the funding and whether it should be distributed at a United Kingdom, Scottish or more local level.

When we talk about multi-annual funding, we mean periods of three, seven, 10 or 15 years and so on. The Economy, Energy and Fair Work Committee is scrutinising the Scottish National Investment Bank Bill, and it is hearing from a lot of people about the importance of being patient with investments and having the courage to look to the longer term. What are your views on that?

Finally, how likely is it that the new scheme will be fully operational by January 2021?

There were a heck of a lot of questions in there.

I just thought that I would shove them all in.

You did a good job.

Again, I have to stress that I am speaking from my experience of the LEADER fund, but I think that we have to be careful with regard to the issues that you have raised. We cannot simply measure things on the basis of income per head. After all, life in rural areas is about more than earning money—it is much more about the quality of life.

The other point is that LEADER funding was based on variable scoring developed by the James Hutton Institute, which considered issues such as an area’s population level, remoteness and so on; in other words, a greater emphasis was placed on life in rural communities. I believe that a strong element of the funding should come down to the LEADER local action group system, which is all about local people making decisions on local projects.

Angela Constance has asked a lot of questions, but I will answer the one about the length of time for funding. The current ERDF programme runs from 2014 to 2020 but, in reality, we are looking at extending that to 2023. That is a good period of time, because any new fund takes time to get established. The hope is that we can learn from the experience of previous funding and incorporate that into any new fund that comes up.

The multi-annual aspect is helpful. There has to be a focus on partnerships, because the funding is transformational. That would be better than having individual lead partners looking to individual companies. We need to think about how the public and private sectors can collaborate to come up with transformational projects. A timescale of around eight or 10 years is good, because it means that, when you go out to talk to partners, you can be certain about your funding, which, strategically, is helpful for everyone.

The best means of distribution involves a mix of approaches. There is certainly a place for Scotland-wide programmes, but I have to say that our experience over 30 years is probably that the most effective programmes have been delivered either regionally or locally. There is, unquestionably, a place for national programmes, but I would suggest that there is a place for the regional, particularly in the context of transport and infrastructure. There is also a place for the local—indeed, the Islands (Scotland) Act 2018 now requires any criteria to be island proofed. Culture and heritage, too, benefit from local intervention.

11:30  

We have an opportunity to make a fresh start. Community planning is a lot more developed, and the local outcome improvement plans that we now have should recognise the Scottish Government’s national priorities as well as local priorities. There is a better base for local structures, in addition to the regional and national dimensions.

On Angela Constance’s final question about the level of confidence in the fund being operational from 2021, I would say that there is, quite clearly, very little confidence that that will happen. The current programme, which was not a dramatic change from the previous programme, encountered delays. Given the scale of the change that there might be with a fresh new fund, I genuinely cannot see how it can happen prior to 2021. As has been said, that will create a big problem, because there will be a hiatus between funds and activity will cease, unless funding is made available to continue it.

On the question of levels of accountability and decision making, having seen the impact that the LEADER fund can make at a community level, I think that it is essential to have the flexibility to make decisions at that level. It is less about taking a view that decisions must be made at a certain level and more about determining what we want the fund to deliver and what the most appropriate level will be for the decision making.

In the current programme, a lot of the decision making or accountability has shifted to the lead partner. Some lead partners have taken on almost the role of mini-managing authority, which is a huge burden in addition to supporting delivery and dealing with the compliance aspects.

It is all about finding the right level. Before we came into the committee room, we were talking about the impact at community level. The funds do have an impact at that level, but they are currently so complex that community groups really struggle to get involved. Part of the decision-making process has to be about making the process more accessible for communities where the funding can have an impact.

We will discuss the issue of process and administration in a moment.

On the multi-annual financial framework, we support having a seven-year period, as it would provide stability and enable long-term strategic planning.

As for how far the decisions should be devolved, we would certainly look for them to be devolved to the Scottish Parliament, with further devolution to the Highlands and Islands. Some of our most successful use of European money has involved a Highlands and Islands body; that is lacking in the current programme, which probably has not served us as well as other European programmes have done. We have a lot of expertise and, as stakeholders, look to have some involvement in how the money is used. I am not precious about the name, but I think that there has been some discussion about something along the lines of a joint regional board. That is what we are looking for.

I come back to Emma Harper, who began this conversation.

LEADER funding is really important. At last week’s meeting of the cross-party group on rural policy, we had presentations on what would happen if we lost expertise in making applications. There are people who are very knowledgeable in that regard. LEADER funding has been fabulous for rural areas and contributes £20 million to my area of Dumfries and Galloway. Are you concerned about the transition and a lack of expertise as we move forward?

I completely understand where you are coming from, but I am not sure that I can give you an answer, simply because I do not work at that level.

Losing the expertise of those members of staff who worked through the complicated LEADER process, which Stuart Bews mentioned, has been an absolute nightmare, and it has certainly put people off applying. We have lost a core of staff members who, since the early 1990s, have understood and grown up with countless LEADER programmes. It is a system of funding that has produced some really worthwhile projects and staff skills.

People have talked about 2021, and we need some assurance about what will happen after that. Whether it is LEADER or other programmes in Scotland, there must be some earlier point at which, if we are not clear about the future, there will be an impact on people involved in these organisations. When will the alarm bells start ringing for your organisations? When will you have to say to people, “I am sorry, but we are going to have to issue a 95-day notice”? That is what I am trying to get at. How soon will decisions have to be made before there is an impact on human beings who work in the sector?

The alarm bells are already ringing. We have staff who are looking to their future and where they will go after the LEADER programme finishes in December 2020. At the moment, there is nothing that we can offer our local projects, groups and communities that will fully replace the LEADER process, so the alarm bells are going off right now.

I agree with that.

Perhaps I can highlight as an example our experience of the current European regional development fund programme. Because this was a new fund that Zero Waste Scotland had access to—we had never had European funding before—it took us a couple of years to get used to it. Indeed, it was also new to the Scottish Government and the managing authority. I know that we will go on to discuss administration, but it is important to mention in this context that the systems were still being developed, and the rules were changing. There had been a previous European programme in which staff had been timesheet based, but with the move to 100 per cent allocation, we had to move things around organisationally to ensure that staff working on the ERDF programme were working on it 100 per cent and that that was reflected in our structures.

On Emma Harper’s question about the impact on us, we have staff who work 100 per cent on the European programme, so we want certainty. There is no certainty about what will happen, and the sooner we get that, the better.

We will begin those discussions in this financial year with a view to making unpalatable decisions in the next. That is simply because councils and other partners cannot fill the gaps in a way that might have been possible in years gone by. It is therefore our duty to do this.

The problem is the lack of clarity following the lack of consultation on future and post-Brexit funds. If we knew what the criteria were, we could plan and work towards them in harmony with the Scottish Government and others, and we could work to keep people and give continuity to employees and those who are retained by other organisations. That is the problem here.

It makes me wonder about the scale and number of people around Scotland who will be affected. I do not expect anybody to answer that question just now, but we need to get a grip on that issue and understand it.

There is a principle here that I have not really thought about before. I am sympathetic to the idea of a multi-year fund, but I think that the approach taken in EU funding, in which a budget will be provided from, for example, 2014 to 2020, is so alien to the Treasury that it will struggle to cope with that sort of idea.

At the moment, we have a two-yearly spending review. That is the way that public spending is allocated in the UK. If we want to go outside that framework, a special case will have to be made. I would support it, but it is a function of what will happen post-Brexit with the move from one funding model back to a UK funding model.

That is an important point. Thank you, David.

On the allocation of funds in Scotland, how should we put the funds that we are talking about today alongside all the other funds that local communities and local authorities get? The local government budget is £10 billion, but local authorities have different opinions on who gets a better deal out of that budget and other funds. Some areas that struggle with population growth feel that they are punished by the local government formula and, conversely, some areas benefit.

I am not suggesting that we have a debate about the local government formula or that we change it. I just wonder what cognisance we should take of the other funds that local authorities and local communities are getting, given that we want to tackle poverty and regional inequalities.

Malcolm, you are in the lion’s den with that one.

First, it is a fiendishly difficult job to find a funding formula for the whole of Scotland. However—and I think that this would apply across local government—we cannot simply apply mechanistic formulae such as the Scottish index of multiple deprivation. Good though that is, it does not work for all parts of Scotland. None of these things is perfect, but we need to consider a combination of things including gross value added, gross domestic product, income per head, population issues, remote and rural factors and island proofing.

It is not going to be easy, but the principles of EU cohesion funding should not be lost in the calculation. It is about having equivalence and a level playing field, and about diminishing structural disadvantage—those should always be the main criteria. It is absolutely relevant to look at factors that other funding formulae do not look at, because it is new, additional funding that is there to give equivalence, not to bolster existing funding mechanisms.

There is a conundrum here, though, is there not? I am told that, in some areas, we are now in crisis because of the timescales. How are we going to do all the work to create all those new formulas and put all the new ideas into effect in the timescale available in order to ensure that, if the funds are going to continue, things are seamless as they can be? Trying to reinvent something at this stage is going to be a bit of a challenge. Could the national performance framework come in here by providing an overall focus for what the funds should be about? Should that be the driving force for how we allocate the money?

David, I look to you to help unpick some of that before we move on to the topic of process and administration. I know that it is a big question to resolve in such a short space of time.

I agree with Neil Bibby’s point. There are so many funds out there such as the cities initiatives and a variety of other things. What worries me about it all is this: money is being spent with the best will in the world, but how does it fit and mesh with the national performance framework and the things that the Scottish Government sees as being important overall? I am very sympathetic to the idea of distribution happening at as low a level as possible, which might well be the community level.

If we start with a number of indicators, we end up with huge arguments about how we should weight them. How much weight should we put on, say, GVA per head? If you go down that road, which you certainly can, the geography becomes important. Glasgow does not turn out too badly in that respect, but, clearly, it has areas that are severely deprived. How you determine geographical issues is also important.

11:45  

Aside from income growth, I had thought about deprivation and, indeed, population decline, which I am not entirely sure we are thinking entirely clearly about how to deal with. There was an item on “Good Morning Scotland” about Caithness and the rapid decline in population that it is facing, with the result that public services are collapsing and so on. The importance that I place on the issue is just a personal view, but it seems to me that the population adjustments that are taking place should be somewhere in the mix when we are deciding what to do.

All that suggests that the situation is very complicated.

That is right.

That has been a good opening discussion. We will now move on to the issues of process and administration.

Earlier, Stuart Bews and Lynn Murray spoke about the complexity of the current process. In particular, Stewart Bews touched on how that could constrain the ability of some groups to access the funds. One of the themes that we picked up on in the workshops that we held around the country is the complexity of the process. We are talking about public money, and the public have a right to know that that money is being allocated and spent correctly, which means that we must have a proper compliance check to ensure that that is happening. However, one of the pieces of feedback that we picked up suggests that the process is overly complex and onerous and that, in some cases, people are spending too much time administering the process as opposed to dealing with the groups that they are supposed to be helping. There is clearly an issue there.

With regard to the shared prosperity fund, how could that process be shaped so that it is streamlined and efficient while ensuring that we have in place the correct compliance and monitoring, so that the public are getting value for money and the money is being spent properly?

Thank you for introducing the subject so well, James. That is exactly what we need to hear about. I see that Stuart Bews is eager to comment.

I mentioned this issue earlier, so you will not be surprised that I want to contribute to the discussion.

The disappointment with the programme is that there are limited funds available within it. When you access those funds, you want them to have an impact in your locality and to benefit those individuals who require support. However, we are finding more and more that the compliance requirements are disproportionate to the support that we are trying to provide. Particularly in Aberdeen, we are trying to support individuals who are quite hard to reach. There is not an abundance of people who require support, but the needs of those who do are complex.

In order to satisfy the audit and compliance requirements, we spend a huge amount of time determining whether a person is eligible to receive support. The physical data that we have to hold in relation to that is onerous. Because of general data protection regulation requirements, the conditions regarding how we can hold that data are also onerous. Further, as you can imagine, at the point at which we are supporting the individual, there is yet more documentation that we need to hold. When it comes to the process of submitting a claim, all of that information has to be made available to an auditor, who will then determine whether we hold sufficient evidence and so on. We go through pre-verification checks, and all of our procurement documentation is checked as well.

I am not saying that we are afraid of accountability—absolutely not. To some extent, we appreciate the fact that this is public money and that we should be held to account for it. However, there needs to be proportionality. If the focus is more on accountability and compliance than on delivering support for individuals who require it, something has gone wrong and the balance must be addressed.

That is helpful.

I agree that there definitely has to be proportionality. Our fund is geared mainly to SMEs and, from the start, the managing authority said, “Take risks on the project but not on the record keeping.” It took a bit of time for us to understand the requirements and to make sure that the evidence and records reflected them, as everybody has said.

We wanted our strategic intervention to provide support to community groups, but that proved difficult because the difference between the ERDF and other funds was the need to evidence disbursement. Community groups can prove that they have paid for something because they have a receipt—often, a person has gone to a shop and has the till receipt, which will be the evidence—but the ERDF needs disbursement to be proved. It was really onerous, as was the level of administration that was required to audit a £2.50 receipt—I am exaggerating, but it was out of kilter. There are then however many levels of audit, all auditing the same thing, with each level audited by another, which is also very onerous.

Wow.

My colleagues in the West of Scotland European Forum and in local authorities tell me that the current labyrinthine administrative mechanisms stifle innovation, flexibility and delivery of the programme. It is clear that the new fund offers an opportunity to listen carefully to the people who work with the funds from day to day about the lessons that have to be learned.

We are not saying that we do not want to be audited or accountable, but we do not want auditing and accountability to get in the way of delivering for our communities. That balance is key, and we have not got the balance right just now. The new fund provides the opportunity to see the positive things that have come from European funds and what should be maintained as part of the new order.

Surely to goodness, the current system does not work. I have spoken to people across Scotland, as I am sure you have. I know from personal experience with the LEADER programme in Ayrshire that the staff work hard and engage with community groups as best they can, but those groups find it really hard to cope with the amount of accountability and bureaucracy that are involved in programmes. If we are going to make a step change so that the new fund is better for our communities—which is who it is for—we need to find ways to minimise unnecessary administrative burdens and maintain the ones that are required for legal purposes and scrutiny.

I will be very brief. The approach needs to be more outcome focused. Are the outcomes being achieved? When we talk about aspirational programmes, have all reasonable efforts been made to achieve the outcomes, or have the outcomes been achieved in a different way? The problem with the current system is that it is labyrinthine and ambiguous. There is nothing wrong with a rigorous system; wearing one of my other hats, as a returning officer, I know that the election rules are rigorous and complex, but they are unambiguous. The current system is labyrinthine and ambiguous, and that is what needs to change.

What would a new process look like?

Lessons could be learned from how Audit Scotland goes about its work on auditing outcomes across the public sector, which is proportionate but rigorous.

The comment was made in a previous evidence session that the Scottish Government disburses lots of money to many organisations across the country and there is a normal process for doing so. When the EU funds no longer operate, would it be sensible to default to a system that we already have in Scotland, whereby the Government disburses money and there is an audit process? That would save us from having to reinvent the wheel. I am just throwing the suggestion out there; I am not saying that it is the right solution. What are people’s thoughts?

We make that very point in our submission. We say:

“In order to avoid duplication of process”,

there could be

“the use of the existing internal and external ... audit systems”.

To pick up on other points that have been made, it is important to have clear and consistent rules from the outset. What we are experiencing just now is some retrospective application of rules, which is causing difficulties for some of our organisations.

On the process itself, it would be useful to have a fall-back system, by which I mean a paper-based system, so that we are not relying on a system that depends on broadband access. Some of our LEADER areas are our most remote and rural areas, and trying to fill out application forms online causes people unnecessary stress.

I have been thinking about a comment that David Bell made in the discussion about having a proportionate system. Is there a role for proper evaluation of outcomes as opposed to the monitoring of minutiae and cumbersome verification processes? The Scottish Government introduced a communities fund for small-scale projects—it was a bit of an experiment. The Scottish Community Alliance managed the fund, which was intended to enable small amounts of money to be disbursed at a very local level with minimum bureaucracy if people could demonstrate that they had a solution to a local need. It might be interesting to look at how that work has developed in relation to outcomes.

I am interested in hearing folk’s views on the pros and cons of match funding.

Stuart Bews, I think that the cities have a view on how that could be done better—if I have read your submission correctly.

Sorry, which part are you thinking about?

I am thinking about what you say about how the city deals funding is being used. It would be helpful to hear about your experience, because we have heard a lot—understandably—about LEADER, the rural perspective and the islands and Western Isles.

From the city perspective, we feel that the amount of evidence that is required for payments of disbursements through to bank statements is overly bureaucratic. Where they are in place, the city region deals and the local outcomes improvement plans are very outcome focused. We are outcome focused and trying to deliver in that regard, so it makes no sense that we are asked to present evidence not of our achievements but of how we have spent the money.

Do not get me wrong—we are happy to provide evidence of what we spent the money on to the level that is required. However, we need a balanced approach that takes account of the achievement of our outcomes. Currently, we could totally fail to deliver what we are trying to deliver but that would be acceptable as long as we could evidence everything that we spent the money on and it was all eligible.

Does anyone want to pick up on Angela Constance’s point about getting money into communities?

I understand that, under EU regulation, the Scottish Government cannot exceed an intervention rate of 50 per cent. That appears to be a fact. Alliance Scotland, in consultation with its members, has come to the view that the 50 per cent rate should be adopted as a minimum and not a maximum. We think that that would help communities and community groups to go about their business in a supported way.

The current intervention rate is not helpful. We recommend that, for any new funding system that comes into play outwith the EU, the Scottish Government should give serious consideration to 50 per cent being the minimum and not the maximum.

12:00  

I strongly support that view. I come from a council whose match fund is virtually entirely committed halfway through the council’s term. As public sector funding falls and as the Scottish Government and, hence, local government face capital pressures, the capacity to match fund as we used to do is seriously reduced. Some councils have reserve funds and access to other means, but others do not. The subject needs to be looked at with a view to there being greater flexibility. Roddy MacDonald’s suggestion on the intervention rate would be one way of doing it.

If I may, I will say a few words in response to Ms Constance’s question about outcomes. We had a situation whereby a greater number of people were helped to achieve the outcomes that were the objective of the funding but the original client group was drawn so narrowly that—rightly, in audit terms—we did not meet the criteria. The work helped a very small number of people who were caught within the definition, but a greater number of people benefited from the money. We ended up repaying some of it. I am not criticising anyone who was involved in that process, but that is a relevant point about outcomes. The outcomes were achieved for the community, but the client group was drawn so tightly that I do not think that it would ever have been possible to meet the outcomes with such a narrow focus.

We are going to move on to outcomes but, before we do so, is there anything else that you want to pick up on, James?

No. We have covered that subject well.

I think that Angus MacLeod wants to add a point.

I will be very brief, convener. On Monday, I had a conversation with a colleague who advised me that private match funding had not been written into the current programme. That seems to be an oversight.

We have strayed quite far into the area that Willie Coffey is going to ask about. I ask him to see where he can take the conversation as we begin to bring the session to an end.

I seek the witnesses’ views and thoughts on outcomes in general and on whether there is a fresh opportunity to think about what outcomes there should be. I was interested in Malcolm Burr’s comments about how, in practice, he has found particular outcome definitions pretty restrictive.

Generally speaking, what should the new outcomes be if the funds continue? Should we change the models for what they are and what they are supposed to deliver? Should we apply the Scottish Government’s national performance framework outcomes? Should we expect outcomes to fall out of the shared prosperity fund? What should we do to make things better and truly deliver benefits for the communities that we represent?

My bureaucratic answer has to be that it depends on the criteria for the funding and what the Scottish Government and others can do within those criteria. That is the obvious answer, although it has to be stated. We do not know what the criteria will be. I think that we are all worried about the burden that will fall on us when all of this comes, as we hope it will.

There is a wealth of material out there. You mentioned the national performance framework. There are also local outcomes improvement plans, and a great deal of work is being done through the Convention of Scottish Local Authorities, the Scottish local authorities economic development group and other bodies. We will be pressed for time, but it will certainly not be beyond us to work out outcomes that are suitable for regions and localities.

For example, the focus in my area will be population retention, which is about skills, housing, infrastructure and jobs. In other areas, it may be more about innovation and the infrastructure that supports that—5G and all the rest of it. I do not think that it is beyond us, but it must be focused on outcomes. For example, we will need to ask whether the Western Isles has slowed the rate of depopulation. We have done that, but it is still a concern. When jobs are created—in that regard, I echo Gill Lawrie’s point about microbusinesses that small numbers are transformational—do the people who are employed in them have a place to stay? Those are the questions that need to be asked. In the public sector and the Parliament of Scotland, there is a capacity to derive and define measurable and useful outcomes.

Does anyone else want to come in? Does Lynn Murray want to come in with a Zero Waste Scotland perspective?

I agree. The national performance framework for Scotland is overarching, and any local authority or public sector organisation should link up to it, so in theory it would be a good base. There is a question about how we weight different aspects within the framework—we might need an economist to look at that. I agree that the process should be outcome-based.

Given that economists are being talked about, would David Bell like to contribute?

I generally agree that we could have a set of outcomes that vary between different parts of Scotland but which are still consistent with the national performance framework. My submission mentions population decline, which is a significant concern.

One area that is difficult to measure but which a lot of recent work seems to be moving towards involves trying to maximise the amount of social capital in communities, which is about cohesion. Some work is being done on that. It relates a little to the work on wellbeing, and it is interesting that New Zealand is now seeking to maximise wellbeing rather than GDP. I do not think that the question can be answered off the cuff. Nevertheless, the shared prosperity fund would be an interesting exemplar if we want to have a national conversation about the key elements that fit within the national performance framework with a particular weight that is appropriate for each locality.

Whether the shared prosperity fund operates at a UK or Scottish level—from what I hear from those round the table, the preference seems to be for the latter—we need to discuss and decide on the outcomes that we want before we start to design and create the architecture for delivery. I would like to hear your reflections on that.

I tend to agree with that. In addition, we need to consider how we will evaluate the outcomes. We can have outcomes at different levels. One level of evaluation is considering whether a project achieved the stated outcomes that were written into it at the outset. That is important, but we also need overall evaluations, which are generally undertaken after the event.

For example, I recently saw a paper that looked at regional selective assistance, which is still available in Scotland to support companies that the Scottish Government has, for whatever reason, decided to support. Basically, the argument was that RSA had been a successful policy and that it typically added to growth in particular areas. We have to think about all the outcomes and layer them, and figure out how they fit within the Scottish national performance framework.

From a local authority perspective, there are city region deals and local outcomes improvement plans, and I think that it would be a bad idea to introduce something additional to those. If we used the outcomes that we have as the outcomes that we would like the UK shared prosperity fund to help us to achieve, that would help us to deliver some of the priorities at a Scottish level, too. A fair amount of work needs to be done, but using those existing models would reduce the amount of work, as we would not need to create something new.

A movement away from a reliance on figures, numbers and graphs of all sorts would be welcomed by everyone. A key aspect is about the softer aspects of the discussion, such as how communities can feel involved, what their views are about how funding should be spent in their areas and what is important to them rather than to the people in the county buildings in Ayr or the city chambers in Glasgow. The Community Empowerment (Scotland) Act 2015 is a really interesting piece of legislation because it starts to open up the box with regard to letting people get on with things for themselves. Governments and councils can only do so much. The communities themselves are the X factor that can make a real difference to funding. Therefore, I would like there to be more discussion with people to find out what is happening in communities and how we can help them to spend the money in a way that is fundamentally transformational for them.

I agree that, when we are dealing with large sums of money, we need to be focused on figures and so on. However, there is also the important soft element that involves ensuring that we are not just spending money for the sake of it and saying, “I’ve spent that money and that’s good.” We need to think about how we are spending the money and how we engage with people to ensure that the community gets the optimum benefits from that funding. That is an important consideration with regard to any funding options. It is about what difference the funding will make, where the ownership lies and how the communities are being engaged.

Roddy MacDonald has hit the nail on the head. Again, I stress that I am talking about LEADER funding. At the start of the LEADER programme, we were asked to work through local development strategies, which were policies that were focused on each LEADER LAG area. That involved community consultations with all sorts of groups, including my group, which was workers in Angus, and it brought out a lot of issues at that local level.

On evaluation, it is easy—I place that word in inverted commas—to follow the stated outcomes of jobs created and so on. However, what is missing is a consideration of the social outcomes of projects, because those outcomes take a while to come through and become visible. In the coming weeks, the LEADER groups will be focusing on some of the more long-term gains that have come through the projects, whether they have supported community village halls, tourism facilities, industrial facilities or whatever. We are going to try to evaluate some of those softer things that Roddy MacDonald mentioned. That work is on-going, so there might be something that we can take out of that at a later date.

Building on the local and regional elements of the discussion, the Highlands and Islands European partnership has produced a regional policy position paper that highlights some of the themes that we would like to explore in relation to the new funding and where we would like the region to go. In addition, the convention of the Highlands and Islands has highlighted a number of priorities, which are not too different from the ones that Malcolm Burr talked about—talent attraction, housing, digital infrastructure, physical infrastructure, marine infrastructure and building capacities in communities. We can use the existing documents and the existing organisations to help build on our ideas about what our priorities should be.

A final point that I would make is that I understand that the UK’s shared prosperity fund is linked to its industrial strategy. That sits quite uncomfortably with our part of the world. I do not necessarily see how that fits in with a rural perspective.

12:15  

I am encouraged by what I am hearing. I represent Kilmarnock and Irvine Valley. At any point in the past 10 or 20 years, our indicators have always seemed to be behind the Scottish figures. The same could be said for any community in the Western Isles, for any rural community, for any community in inner-city Glasgow and for other areas of deprivation. If the kind of money, effort and investment that we are talking about is not turning those indicators around, people are entitled to hold us to account and ask why.

I like what I am hearing about localising priorities and ensuring that the money is aimed at delivering what matters for communities in Scotland. If the process gives us an opportunity to let us rethink what the outcomes should be for communities, that is a great service that will deliver results for the people who we represent.

This has been a useful evidence session. We will pull together a report, with the aim of publishing it in the autumn, although that will depend on other things that might be in our work programme. I thank everyone for coming to contribute to our process.

Meeting closed at 12:16.