Finance and Constitution Committee

Meeting date: Wednesday, June 12, 2019

Official Report 692KB pdf

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Structural Fund Priorities (Post-Brexit Funding)

Our second agenda item is the taking of evidence in round-table format on the funding of EU structural fund priorities in Scotland post-Brexit. I welcome our witnesses to the meeting.

Before we start the discussion, one member from each of our recent structural funds workshop visits will provide a brief summary of how they felt that their session went. I invite Alexander Burnett to give us a quick reflection on the session in Inverness.

The convener, Patrick Harvie and I went to Inverness. I thank the clerks, the parliamentary outreach team and SPICe for all their assistance. I also thank all those who attended. It was a very valuable session, and we were pleasantly surprised by the volume and depth of the information that we received. The first learning point was that, with or without Brexit, a major overhaul of the funds is due. Therefore, regardless of other events, the committee is doing a valuable piece of work.

A lot of negative points were made about the administration and bureaucracy, much of which seems to have been created in Scotland, as a lot of it is not replicated in other EU countries. A lot of positive suggestions were made about how future programmes and objectives could be improved on, particularly in relation to there being more input from those who are closer to the delivery of the funds. Finally, and most importantly, setting aside the negative points and the suggested improvements, nothing should detract from the hugely positive benefits that such funds have brought.

Thank you. I invite Adam Tomkins to cover how his group felt about its trip to Paisley.

Four members of the committee went to the Paisley round-table event: me, Tom Arthur, Emma Harper and Neil Bibby. As with Alexander Burnett’s experience of the event in Inverness, it was excellent. The range of questions that we explored in the time that was available gave the committee exactly what it needed to know, in particular from listening to people on the ground level who have direct experience—35 years of it, in some cases—of applying for and processing structural funds-related projects.

We talked at length about what structural funds are for, the strengths and limitations of the current sets of schemes, how they are administered and processed and what should replace them, regardless of whether the United Kingdom leaves the European Union.

There was a lot of concern about the requirement for match funding, which was considered to be a significant brake on otherwise valuable projects, as it meant that funding for those projects could not be applied for. There was a great deal of concern about the bureaucracy that is involved in applying for funding and then, once it has been obtained, claiming it. There are current problems with how that is—or is not—working in Scotland.

During the inquiry, we will certainly need to look at the information technology problems that the Scottish Government is responsible for. There are also concerns about the extent to which structural funds replicate funding that is available in other areas.

It seems as though one problem is that there are fashionable issues to fund—skills training for 16 to 19-year-olds and social care for the elderly are good examples. There are good reasons why they are fashionable, but other areas fall through the gaps. The range of issues that the funds cover was certainly a feature of our discussions.

In relation to how the outreach worked, the length and structure of the meeting, the brief that we had from the clerks and the number, range and expertise of people in the room were excellent.

There were three criticisms of the event: the room was too hot, the coffee was too weak and the biscuits were too few.

Those are severe criticisms. James Kelly will cover what happened in Dunfermline.

Murdo Fraser and I attended the workshop in Dunfermline. Like the other workshops, it was well run by the clerks and the Parliament outreach staff and, consequently, we found the session very informative.

Three themes came across in the workshop. On the current funding arrangements, people were positive about the European structural and investment funds and their impact. The policy outcomes from an EU, UK and Scottish Government perspective were consistent—they involved helping businesses to create jobs, raising awareness of and helping to meet climate change targets and, in some communities, helping with social inclusion.

On the process, from a positive point of view, people considered that multiyear funding was good and that the LEADER programme worked well in getting funding quickly to those who had applied for grants. However, there was a good deal of frustration about the process—it was overly complex, the audit requirements took a lot of time and there was an element of duplication, because a lot of groups already had to satisfy their own audit requirements in relation to the use of public money. The filling out and auditing of timesheets that had to be done to claim for staff resources was quite a big issue, which resulted in staff not allocating all their time to the project that they were working on. As was the case at the other workshops, there was criticism of the IT. It was also considered that the communication in and about projects was poor.

Taken together, the lessons learned are that people are keen for multiyear funding to continue and for that to be allocated at a Scotland level; a much simpler process must be put in place to manage the allocation and the administration of the money; there has to be better communication in projects; and, because information about the funds is not reaching all the places that it could, people—especially in, for example, rural communities—must be made aware that they can apply for that money.

We had a very good workshop, and important lessons came out of it.

I thank members for giving us a flavour of the discussions. I hope that those who are involved in today’s round-table discussion understand just how deeply we are going into the topic and how seriously we are treating it.

The round-table format is intended to allow, as far as possible, a free-flowing discussion—those who have been involved in such discussions will know what I mean by that. If you want to contribute, just catch my eye or that of Jane Williams, the clerk, and we will make sure that you get to say your piece.

The discussion will be based around three themes: the allocation of funding; process and administration; and outcomes. To kick off each part, I will ask an MSP to introduce it and we can get into a free-flowing discussion and exchange of views that will be valuable to the committee.

Tom Arthur will kick off the process.

11:00  

The first area that the committee is interested in exploring is the allocation of funding, as the convener said. With the proposed UK shared prosperity fund, there is the potential for a tabula rasa and for us to begin again and do something completely new, or we can mirror existing arrangements. Should we move to a system that centrally administers the fund and which is run by the UK Government, should we try to replicate what we have at the moment, or should we look for new and more bespoke opportunities to meet local needs and demands? The committee is keen to hear your views on how funding should be allocated, who should administer it, and what the criteria and decision-making process should be. I open up the discussion to our guests—we are keen to hear your views.

Dugald Craig looks like a man who is ready to give us some thoughts.

On the administration of funding, the starting point should be the Government white paper that says that one of the reasons for repatriating funds is so that we can increase subsidiarity and devolve funding to the devolved nations. It is obvious from that that the funding should be administered at least at the devolved nation level.

We in Scotland have taken a silo approach to funding up to now. Countries such as Wales and Latvia have looked at all the European funds together to see how they can work in harmony to achieve various objectives, but we have not taken that approach. It is a bit like a black art, which is one of the reasons why there is a communication problem. There is a lot of funding available, but a community group or education group that has a really good idea might never get funding to help it implement that idea if it does not happen to know about the funding streams that are available. The way funding is handled in Scotland means that even if you happen to know stuff about it, you tend not to have a medium through which to share that. We all found that when we were sitting in the other room, waiting to come into the committee room—we all know different things about different areas of funding.

It will be important for the future that there is coherence across all the funds. I do not think that the committee should look at the European structural and investment fund alone; it should look at the whole range of European funding that will be repatriated, what the Scottish share will be and how it can all be harnessed.

Thank you for that first contribution. Kate Still’s organisation submitted a useful paper. Would you like to reflect on some of that, Kate?

I echo quite a lot of what Dugald Craig said. We want to see a more collaborative approach. It is really quite difficult for the third sector to be able to align at a local level when the organisations do not necessarily know about all the funds that are available and what is happening at that level.

We want to keep the principle of devolving the funding, which should represent streams from across the different programmes and not just the structural funds. There should be a sense of the Scottish Government holding accountability, but regional partnerships and organisations should also be working together, and local, community-based organisations should have much more access to funding. At the moment, it is difficult for community-based and third sector organisations to engage effectively in the processes.

I want to pick up on some of the points that Kate Still made. For us, there is something interesting about how we get the balance right. From most of the evidence that I have seen—and this is certainly our position—there is a sense that it would be far more practical and sensible for the Scottish Government to manage the funding. In terms of economic development, that would align better with current functions.

There is also a lot of interest in greater community decision making on European funding. The issue for us is about how to get the balance right. One the one hand, the LEADER fund is an important source of economic development support for businesses in rural communities in particular, and the LEADER action groups take quite a different approach to developing their strategies compared to what happens with elements of structural funding. That is seen as a positive, but if there is too much local decision making, we have noticed that there can be a tendency to duplicate, with everybody coming up with their own scheme when there might already be a national programme or service.

We think that the balance has to be somewhere between there being an element of national control by the Scottish Government, which can provide oversight and a strategic framework, and more local input into how funds are spent, because we recognise that there is a demand for that.

I echo that. There is an opportunity to reset the way in which funds are managed in light of experience, which involves frustration as well as benefit.

Form needs to follow function. We agree that it makes sense for the Scottish Government to oversee what is going on and for the funds to be targeted at the outcomes that are decided at a Scottish level—we will deal with the issue of outcomes later. The way in which those funds are managed should be designed around the benefit that is being sought. There is no one-size-fits-all approach that will deliver that. There must be a local approach, a regional approach and a national approach. It would make sense not to rule out any of those at this stage but to see which would be the best way to deliver the benefits that we are seeking, in light of the experience that we have had.

Your organisation will have seen a range of the things that can happen. Dugald Craig made a point about creating more synergy between the funds that currently exist. Is that the experience of Scottish Natural Heritage?

Very much so. In terms of our experience of managing a fund and the experience of applicants to our strategic interventions in relation to the European regional development fund, we can see that there is a challenge in accessing and identifying other potential sources of funding. It seems that most applicants have to conduct that exercise independently, which means that they reach different answers and are often unaware of funds that similar groups elsewhere in the country manage to access.

I very much recognise the picture that people are painting. The complexity of what we have at the moment is not helpful. There are not only the European funds; there is also the growth deal money and the funds that are to be managed under the National Infrastructure Commission and the Scottish Futures Trust. All those funds have a related function, but, at the moment, the picture appears to be unnecessarily fragmented, which is unhelpful with regard to delivering the benefits.

The main concern for the Equality and Human Rights Commission is around ensuring that there is no regression in terms of equality and human rights and the funding that that area receives. We recently published a report on the matter. As part of that research, we interviewed various stakeholders across Great Britain. Some of the things that we were told have already been mentioned today, including the importance of long-term funding. We were also told about the importance of devolving the funding and the decisions around it to an appropriate local level. It is important to have a UK-wide strategy, with broad priorities, but there are also local priorities, which might be Scottish priorities or priorities that are based on the issues in the local communities that the funding goes to. Setting local priorities will allow the needs of marginalised groups and people who share protected characteristics to be targeted.

My points will build on what Nora Uhrig has said. For us, the starting point is that the issue is about people in communities. The funding represents a really important and stable resource over a period of seven years. As James Kelly quite rightly pointed out, it enables us to have something that is slightly more independent from the immediate policy requirements of any level of Government. It is a really important resource for people who are supported by the third sector and others, and it is really important that we keep that money and that we make sure that an allocation comes through to replace it specifically and directly.

The key point that I would like to make is that there is not actually a Brexit dividend, as far as I can tell. The Institute for Fiscal Studies and others have all said that there will be no money coming back from Brexit, as there will be a net cost. What that really means is that any allocation will be top-sliced from existing UK resources, including the Scottish block grant, and any money that comes through and is pooled at the UK level will be at the expense of other resources.

The default, then, is that if there were no UK-based replacement such as a shared prosperity fund and the UK Government decided to spend money on a devolved priority such as health, that would be Barnetted across to the Scottish block grant. However, if the UK Government decided to have some central fund, we would be pushing for a fair share of that to be allocated to Scotland.

For us, the key starting point is that any resources that replace the European funds and their function must be fully accountable to the Scottish Parliament, because of the need for policy coherence and alignment with all the existing policy areas that closely relate to the functions of LEADER, the ESF and other such programmes in Scotland at the moment.

What size should the pot be and what timescale should it cover? The current programmes last for seven years, which brings us back to the point about long-term funding. Ruchir Shah has raised the issues, but I want others to have the chance to tell us about the scale of what will be available and over what term the money in such programmes might be spent.

On the scale of funding, I think that we should seek the funding that is required to meet the challenge that we face and get the benefits that we want. Obviously, we would argue for more funds in order to deliver more benefits, but I do not think that there is much that we can offer to that debate, which will happen at national and UK level.

As for the longevity of the funding, experience of the current schemes shows that providing security to applicants and maintaining the longevity of funding commitments are critical to delivering benefits, and a more annualised approach will have real risks with regard to the efficiency of the process and the confidence of applicants in applying for funding and being able to deliver benefits.

The scale of the funding is one of the reasons why I have made a plea that we do not focus just on structural funds. If the UK Government is going to repatriate all the money that it contributes to all the European programmes, we and the other devolved nations should be pushing for a proportionate share that is no less than a population share of the amount. In my submission, I have listed all the other programmes that we need to look at to ensure that we get our share. There is no point in not doing that.

However, my concern is that that argument could be undermined by the poor performance with regard to structural funds. It would be easy for someone to tell us, “You’ve been getting this or that amount of money, and if you’re going to give about a fifth of it back because of the way you’ve been managing it, do you need all of it anyway?” We need to be very careful about that.

I agree with Ross Johnston about the longevity of funding. Annualising things is no way to approach the issue, and I think that there should be a term of, say, five or seven years, because that will allow us to set longer-term objectives and give projects some security that they will be able to get to the end of what they have planned.

Longevity is important, but so are responsiveness, flexibility and agility to meet changing conditions. We need programmes that do not lock us into things. For example, unemployment might be low just now, but we do not know what the impact of a post-Brexit world will be, and we have to ensure that the programmes are flexible and responsive to such changing conditions.

This might not be a particularly helpful response, but, for us, this is another one of those questions where a difficult balance needs to be struck. I take the point about longevity, because as customers or end users of the service, we know that it takes a really long time to build awareness among the small business community about a scheme that might be available. Indeed, such schemes often end just as people start to realise that they exist.

We understand the point about longevity but, similarly, we have criticised how we offer business support, whether it comes from European funding or core funding.

11:15  

Historically, we have been terrible at being agile enough to respond to economic situations. I remember some of the discussions that happened after the recession around how to repurpose European funding. It was a long and painful process to turn around a product so that it would be available to businesses to support the rapid change in economic circumstances. Therefore, we need a framework that enables us to respond more quickly to what businesses need.

There is a broad degree of consensus among contributors that the funds should be administered from Scotland. How should those repatriated funds, as Dugald Craig characterised them, be devolved from the UK Government to the respective nations? What formula should be used—should it be based on population share or Barnett, or should there be a needs-based formula? How should the UK Government devolve that pot of money to the devolved nations?

The European Union currently uses a mix of approaches to allocate the funding. As well as needs, it takes into account things such as GDP. We have outlined the fairest approach, which would be, at its core, population based. As others have suggested, there might be some adjustments on top of that, but basing the core on population would be helpful, because that could apply equally to a centralised pot—say a Treasury fund such as the UK shared prosperity fund. A population-based share of that for Scotland would be 8.4 per cent. By default, the approach would apply equally if there was no centralised pot and we defaulted to using the existing system, which would be the Barnett formula—I am assuming that the money is not redirected at tax cuts or anything like that.

That population base should be at the core of any allocation formula. However, once the money comes to Scotland, the key thing, which goes with the allocation, is that, if the Scottish Government is administering the funds or is the managing authority, as it is now, the accountability for how those funds are used should run directly and solely to the Scottish Parliament. At the moment, accountability can be a bit loose. There can be accountability to the European Commission and to the UK Government. That situation is not good for transparency, participation and openness in how the resource is delivered. If the Scottish Parliament has the key accountable body role, that will bring more trust into the way that funding is allocated.

I endorse Ruchir Shah’s comments about the Parliament being ultimately responsible. The Scottish Government’s decision to take the management of structural funds in house was poor. In my paper, I have been trenchant in my criticism of the way in which the programme is run. Accountability must come to the Parliament, because a siege mentality has developed in the department that runs the funding. There is no longer any partnership. A decade ago, Scotland was praised for its partnership working. The partnership working model was presented all over Europe because of the way that Scotland managed funds. That has now gone. The people who manage the funds are no longer our partners. We feel as though they are tax inspectors who have come to look at us. They are not there to help us; they might think that they are, but they are not. The Parliament must take control of the funding, rather than the funding being controlled by a Government department.

It is like the old saying, “I am from the Government; I am here to help you.”

Yes, it is.

That was not the point that I was going to make.

I go back to Ruchir Shah’s point about wanting the allocation of funds to be population based. Would that not put a cap on the amount of money that would come to Scotland? Historically, we have done better than our population share from structural funds. If it is based on population, could we lose out?

Yes, we addressed that in our submission. We said that

“Better targeting and alignment of funding to the people and communities our sector supports is more important”

than having slightly less money than we currently have through European funding. We could have a system in which more money, or the same money, comes to Scotland, but the way that it is allocated actually means that less money reaches people and communities. We would rather flip that the other way around.

Anyone can answer this question. Why should allocation of funding be based on population rather than on need? If the purpose of shared prosperity funds, structural funds or whatever we want to call them is to address need in areas of multiple deprivation—which is certainly what we heard from our group in Paisley, in Renfrewshire—why should the allocation have anything to do with the number of people who happen to live in a nation or region of the United Kingdom? Why should we not focus on need?

We advocated a combined approach, including a needs-based approach, that looked at what we want to tackle as priorities. With the end in mind, we thought about the equalities measures that would ensure a smarter, greener and safer Scotland.

We want there to be full funding rather than match funding, because that has been a nightmare in relation to allocation and underspend. People cannot work out where the match funding will come from in advance of a project, which is creating a huge barrier. People are searching for the match funding and trying to ensure that it is clean. Organisations almost need to carry out an audit of whom they collaborative with in order to put the package together.

We want there to be a needs-based approach that is fully funded. We proposed an approach using Barnett plus 10 per cent, but we debated other options. The most important thing is that the money goes to the people who need it. We cannot afford to send money back to the EU when we have people who really need it.

I reiterate what Kate Still said. We have not looked at the specific formula that should be used. For us, it is about the money reaching the people who need it most, such as marginalised groups. As has been said, a lot of the stakeholders we talked to mentioned issues in finding match funding and the administrative burden that is linked to the current funding.

During our research, a Scottish stakeholder said that, if there is a hard Brexit, there will be an increase in the number of people in marginalised groups and an increase in the number of people who require such funding. When thinking about allocation, we should take into account that the current need might change, depending on the outcome of Brexit.

That is a very interesting perspective, given the organisation that you represent. From an equalities and human rights perspective, you do not have an argument against the formula being based on need.

As I said, we have not looked at the formula specifically; we have looked at ensuring that the funding that is currently available for equalities and human rights issues stays in place. As Ruchir Shah pointed out, a different formula might be used across the UK that would allocate less money to Scotland, but using the money in a different way might allow it to reach more people. We do not have a position on the formula per se.

We are beginning to drill down into areas relating to process and administration. Given that we are already in that territory, does James Kelly want to get us into that discussion?

Sure. One of the things that surprised me at the Dunfermline workshop was how cumbersome and complex the process and administration of applying, allocating and managing funds is. We are talking about public money, so we need methods for monitoring and ensuring accountability. That must be balanced against the need for audit and compliance processes not to be too complex and the need to prevent the duplication of work in other areas. How can we learn the lessons from the process that we have used previously, which has attracted an element of criticism and frustration, to put in place a new, streamlined process that speeds up the allocation of money to local groups and ensures transparency in how the money is managed?

The good news is that a huge amount of literature and research that has learned a lot of lessons from the past is now available to show what a good funding programme would look like, so that will not be a problem. We can certainly share some of that information with the committee.

The view that the current system is bureaucratically burdensome—except when there is an intermediary that provides a grant scheme to take that burden away—is definitely shared by everyone to whom I have ever spoken who uses European resources or funding. As members can imagine, the fact that 27 other countries in the European Commission are involved is why we have a burdensome system in place. Without their involvement, we will not have to do things in quite the same way, of course. We have the opportunity to reduce the burden and administrative requirements and make the process much more open, transparent and streamlined. Information on how to do that is available, and we can share that with the committee.

Like many of the respondents, I have been very critical of how things have been handled. That criticism is not restricted to some of the programmes that are managed in Scotland. The UK seems to take a gold-plating approach, which makes things a little more burdensome than they are elsewhere. However, there are lots of examples of good practice out there, and we should look at them.

We could look at examples of good practice from the past and fine tune them so that we can use them. I hope that there is still a legacy that we can learn from, or some knowledge of previous iterations of the programme, which seem to have been managed in a more streamlined, transparent and less cumbersome fashion. As I said, there are good examples in Wales and Latvia, and we can look at what is being done in those places. I understand that the UK Government and the Scottish Government have been looking at what is happening in Switzerland, as it works on a bilateral basis, but I urge members to look not only at that example. If you speak to the Swiss Government, it will tell you that the approach is great, but if you speak to the Swiss institutions, they will give you a different picture. It is not as complicated as the things that we are trying to do, and there are other examples that we should learn from.

We have argued for a governing body or managing agent body to represent the third sector, which could be based on previous partnership approaches that we have had in Scotland and which could involve people who know about and work with the sector and support capacity building in it.

All the technical assistance that used to support partnership working in the past has been removed from the current programmes and replaced by an incredibly difficult audit and compliance regime that passes on the burden of cash flow and underwriting a lot of the activity of the third sector, which ultimately does not get paid for that, because drawing down the funding has become so complex. We would argue for more collaborative approaches and a real sense that managing the funding is a collaborative, transparent and open decision-making process.

I echo that. The burden and complexity of European funding are well known, and we must try to move away from that model while maintaining rigour and transparency. We must not throw the baby out with the bath water.

On the other elements of how the funds are administered, advice, support and capacity building are important, and they can get lost. They need to be part of the thinking about any future scheme, as they are also needed to deliver the benefits; it is not just about the money. They are often overlooked, or they come in at the last minute. As Kate Still said, some advice and capacity have been lost from the sector that we work in, to the detriment of what we have been trying to achieve.

There are choices in administration relating to challenge funds and co-production. A challenge fund approach might be more appropriate for generating innovation and new ideas if we are looking to be more innovative and there is no established expertise. However, if we are seeking to fund and support well-established aims and organisations with capacity and a track record, a co-production approach would be much more appropriate. In the particular areas that we are working in, on the basis of our experience thus far, it would have been better for us to go down a co-production route, but we have gone down the challenge fund route because of the design of the scheme. We have learned from that. It is another element of how a scheme is administered. You need to choose the right scheme design to deliver the aims that you want, and choosing between a challenge fund and a co-production approach is one element of that.

11:30  

A theme at our meeting in Inverness was that, if we were starting with a clean sheet of paper, assuming that there was some sort of fund, whatever it looked like and however it was distributed, why would we need to look at how other European countries are managing funds? To avoid duplication, why would we not use the current funding models that the Scottish Government uses when it funds bodies for other purposes, which I understand are not as cumbersome and would streamline the process? That might be the view only in the Highlands and Islands, but would it be possible to do it in that way?

In my submission, I comment that a lighter touch is taken in managing a lot of other public funds, which should also be applied to these funds.

Although I do think that we can learn from experience elsewhere, unfortunately, for years and years, the message here has been not that we should learn from that experience but that the bogeyman will come and get us if we do things in another way. There is always a big baddie somewhere who gets blamed for the rule that is in place when, in fact, it is a self-imposed rule. As long as learning from experience does not get turned around and subverted into some excuse for not having transparency—

But, in your experience, is the process of how the Scottish Government manages its own programmes—those that are currently tied to the Commission in terms of the rules that are followed—less bureaucratic? Does that process allow for the co-production that we are talking about in how the funds are distributed?

The LEADER programme has been excellent. It has been very much a bottom-up approach, pioneered in the Republic of Ireland and then replicated elsewhere. In Scotland, there has been a good version of that, which has worked well and in which there is a lot of trust. That is not a European structural fund programme but it is within the remit of the committee, and there are things that we can learn from it.

We definitely do not want to replicate how the managing authority in Scotland is currently running the structural funds or the methods that are used there. However, there are other funds that the Scottish Government and others run that are good examples to follow.

A key point is that we have an excellent national performance framework that sets out Scottish national outcomes. We should use that to frame this work.

There is always an opportunity to do things differently and to learn from experience. I am aware that, as well as the 2014 to 2020 programmes, there were earlier programmes that we can learn lessons from. My memory is somewhat rusty, but I think that there were some issues that led to a change that is reflected in the current programme. It is important that we learn all the lessons that we need to learn from our own past as well as from international best practice.

Let us look at how this all hangs together. We have delivery bodies, lead agencies and the managing authority, which is currently the Scottish Government. I am not necessarily arguing against this, but, if the Scottish Parliament, as opposed to the Government, was the ultimate accountable body, how would it work with, for example, a third sector, broader partnership body? The Parliament can hold the Government to account and be very specific and pressing, but how would the Parliament hold organisations external to this place to account? Bear in mind the fact that, as well as the need to strip out bureaucracy and deal with needless bogeymen, there is a need for some level of scrutiny and accountability of what, at the end of the day, will be public money.

And who would scrutinise the Parliament on that?

The voters.

The voters. Sorry—who wants to answer Angela Constance’s question?

I will have a go, but it might not be the correct answer.

We will need to have a body that manages the funding in some way, and there are plenty of examples of how different bodies can run things. That body could be accountable to the Parliament for what it did, and it could be entrusted to meet certain standards, for which it could subsequently be called to account. The Parliament would not have to ask every project what it was doing; that body could be responsible for doing that. The Scottish Further and Higher Education Funding Council does that with all the funding for the colleges and universities. A similar model could be used in this context.

Hmm. [Laughter.]

I am not suggesting that the funding council model would be the right model to use.

I am less anxious about the issue. If, ultimately, the Scottish Parliament is the accountable body rather than the European Commission or whatever, even if the funds sit within the Scottish Government, the system will still work, because it will be possible to scrutinise things fully.

We have made it clear that third sector organisations, alongside others, should be trusted to run funds themselves. Of course, those organisations would be commissioned by the Scottish Government. There are already examples of the third sector being commissioned to run funds by the Scottish Government. The key thing is that, when it comes scrutiny, the route will be through the Scottish Government to the Scottish Parliament rather than through the Scottish Government to the European Commission or to some other body, with all the muddiness that that involves as regards who is accountable. Having a clear sense of accountability to the Scottish Parliament will free us up to bring in resources and lots of agencies, which will have a clear route in, through the Scottish Government, to the Scottish Parliament.

We have a model for the Erasmus+ programme whereby the managing authority is the UK Government’s Department for Education but the programme is run under contract by the British Council and Ecorys. All the operational decisions about running the programme on a day-to-day basis and all the verification and audit procedures are handled by that agency, but it reports to the Government department, which reports to Parliament. We could take the same approach here.

I echo what has been said. For many years, we ran such models. Right back at the beginning of structural funds in Scotland, we had partnership organisations that reported directly to, and were accountable to, Government here but had professional expertise in supporting partners and managing the funds.

On the subject of the monitoring and evaluation of funds, we found that the data that was available on equalities in Scotland was very weak, whereas there was data available for Wales and England, through the DWP, that we could use in our research. Our report includes nice maps of Wales and England, through which we provide more information on the beneficiaries of the funds and which protected characteristics benefited the most, but we could not do that for Scotland because the information was not available. We and the stakeholders we talked to stressed the importance of addressing the administrative burden that currently exists, but there is also an argument to be made for focusing on collecting and monitoring the right data, and protected characteristics are key in that respect.

From a business user perspective, we can comment only on the funds that benefit businesses. One concern that we have is that, if we start with a blank sheet of paper—let us assume that a new agency is set up to manage the funds—we must not lose sight of the many lessons that we have learned about how we currently manage funding and programmes for business.

On the negative side, there has recently been an inquiry into business support in Scotland and we know that there are issues to do with how we manage a national framework project that is delivered locally when it comes to understanding who is accountable for that if things do not go the way that we all expect them to. I am keen that whoever has a role in managing the funds understands the lessons that have been learned in other areas of Scottish Government activity.

On the plus side, I understand that, on the back of the enterprise and skills review, Scottish Enterprise is completely revamping how it delivers grants to businesses and has put a lot of thought into how to get the process to work, from a business approaching it to the granting of an award. We would want that knowledge and all the work that has gone into that to be carried over to the way in which the funds are deployed in the future.

That is useful.

I want to ask about the issue that Nora Uhrig raised to do with poor data on certain issues. As a member of Parliament, I have tried for a number of years to find out information about my constituency, but I very rarely get it, and I am sure that the same applies to colleagues. I get information and data pertaining to local authorities and so on, but I rarely get information relating to my community, which I am elected to Parliament to represent. Is there a job of work to be done to collect data on a constituency or regional basis in Scotland so that we can properly reflect the outcomes that we are interested in achieving?

Emma Harper has a question as well, so I will let her ask it before we go back to the panel.

Funding is complex. I have an interest in the common agricultural policy, which the Scottish Government currently manages, but there will be changes to that. We have major differences in Scotland, as 85 per cent of the land here is less favoured area, and we have pillar 1 and pillar 2 funding. It is all very complicated. This might be a question for Dugald Craig or Ross Johnston. How should funding for rural areas and for farmers and food producers in Scotland be managed?

Wow—that is quite a big question. We have a couple of minutes to reflect on what Willie Coffey and Emma Harper have said. Does anybody want to pick up on any of that?

On Emma Harper’s point, a whole separate body of work is being done on that by the Government and various organisations such as mine, with lots of reports being gathered that are being led by other ministers. I am happy to talk to Emma Harper after the meeting to explain how we are contributing to that complicated picture that she has set out.

A number of years ago, the organisation that I work for submitted information to various Government departments on how a Scottish national funding agency could be set up and administered. The thinking was that anyone from any sector who had an idea could go to that agency to find out what levels of support would be available and what programmes would be appropriate. At the moment, it is a guessing game. We need to get away from that so that folks who need the money or who can use it usefully can get it.

We tend to think about there being rural funding and then enterprise and economy funding, and we have not been terribly great at seeing the rural economy as part of the economy and enterprise funding. Notwithstanding all the positives about LEADER, there might be an opportunity to bring the funding a bit closer to existing economic development and enterprise approaches. There could be better coherence and alignment, rather than the funding sitting off to one side.

My point was more about data collection. Obviously, projects that are funded by EU funding have different reaches and cover different areas. It is about collecting that data and creating a system that properly shares it and makes it easier for organisations and parliamentarians to access and to see who are the beneficiaries in the local community and where the needs are that are supposed to be met.

We will move on to outcomes. I apologise to Patrick Harvie but, as is usual for the person who asks the last question, a lot of the areas that he was going to ask about have been covered. We have already covered some of the issues on outcomes, but we will have about 10 minutes on that and then see where we get to.

It is inevitable that there is some overlap between the themes that we are talking about, but I have been asked to kick off the discussion on how to achieve flexibility in the way in which the funds or replacement funds are managed to achieve the best outcomes for Scotland.

I am not sure whether this happened in the other workshops but, certainly in the discussion in Inverness, some people talked about the UK shared prosperity fund’s remit which, from the limited amount that we know about it, is to

“tackle inequalities between communities by raising productivity, especially in those parts of the UK whose economies are furthest behind.”—[Official Report, House of Commons, 24 July 2018; Vol 645, c 77WS.]

11:45  

Some people were concerned that the focus on productivity, although that is important, might close down the opportunity to address social or environmental issues or the human rights issues that were mentioned earlier or, indeed, inequality within—as opposed to between—communities.

There is also the point that Ruchir Shah made about the submission from the Scottish Council of Voluntary Organisations, which mentions the national performance framework and the Scottish national outcomes. Although people might have views about whether they are correctly framed, they have achieved some degree of consistency over time, and they have tended not to become political footballs too much. Is that the right approach for how we frame the outcomes that we want to achieve? How do we ensure that Scotland has the ability to set that framing, rather than being constrained by the remit of the UK fund? Are there other approaches?

Given that Patrick Harvie mentioned Ruchir Shah, I invite him to reflect on that first.

The national performance framework is the right framework. The reason for that is simple: this iteration of the national performance framework and national outcomes is specifically backed by, and linked to, the sustainable development goals, which are probably the closest thing that we currently have to a strategy for a more positive planet, given everything else that is happening around the world. It has absolutely the right kind of focus. It covers human rights and equality aspects, as well as the link to the responsibility for tackling climate change. It is a really good framework for us to use, because it has a lot of trust from a whole range of people and sectors, as well as international credibility, because it is now integrated with the sustainable development goals.

Would anyone else like to reflect on whether it is the right model and, if not, on what else we could use?

It is the model that we follow and work to as a public body. It is a very helpful framework for us when we are deciding on our priorities. However, regardless of what framework one is working to, there are a couple of options for how to deliver outcomes. There is the option that is in the current system of having horizontal themes, in which all the money is to be spent and delivered in a way that complies with common principles, such as fairness, equality, human rights, sustainability or inclusiveness—the phrase of the moment is inclusive and sustainable economic growth; there is the option of designing a scheme that includes such fundamental principles, in which all the money needs to demonstrate either that it complies with them or that it is not having an effect that is contrary to those aims. Above that, there can be targeted funds that deliver specific outcomes. It is important to remember the relevance of both options to delivering the framework of policy outcomes that the money is trying to achieve; they both have a role.

There is a certain coherence about all that in relation to where we are. Do any witnesses have a different view, or any other ways in which we could achieve the outcomes for the country that we want?

I will just emphasise the comparison between what is being discussed here and the limited amount that we know about the UK plans and the remit of raising productivity and tackling inequalities between communities. Does that give enough flexibility? Obviously, it is not too late to influence the detail of that when it is designed. Would that give enough flexibility, or do we need to encourage a different and broader approach?

That is a good question.

We need to encourage a broader approach—that remit could become quite narrowly defined over time. The national outcomes are great and people have bought into them and into a smart sustainable future. However, we cannot forget the needs of communities and people—in particular young people, who are frightened about the future in terms of Brexit. They need to feel that the services that are being designed put them at the centre, as well as thinking about the programme requirements. There needs to be a sense that the satisfaction of the beneficiaries—the people and communities at the centre of this—with the whole system is taken into account and drives the system.

Nora Uhrig was nodding her head—does she want to add something?

We found that it is particularly difficult for smaller and on-the-ground organisations to apply for funding, because of the administrative burden and other issues that have been mentioned.

What Kate Still said makes a lot of sense. If her point is taken into account, it will become easier for organisations that are a bit smaller, and which previously thought that it was not an area that they could get involved with, to engage more. Through that, we will reach more marginalised groups and people with protected characteristics.

I think that there is a general consensus around that, given what I am hearing around the table. As nobody else wants to make any particular points that have not been raised today, or that they want to ensure go on the record, I will bring this very useful session to a close. Although it was slightly shorter than expected, we got a lot of good information in a short space of time, which has given us a good idea of the architecture and map that we will need in order to deal with the topic in the future.

I am sincerely grateful to all our witnesses for coming along this morning. The session will help to draw information together for our report, which we will produce some time in the autumn; hopefully, witnesses will see some of their input reflected in that report. In the meantime, I will now suspend the meeting to allow for the changeover of witnesses.

11:51 Meeting suspended.  

11:56 On resuming—