European and External Relations Committee

Meeting date: Tuesday, December 13, 2011

Official Report 545KB pdf

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European Union Structural Funds

For item 2, I welcome all our stakeholders to our round-table discussion on horizon 2020. I am hoping that we can have a free-flowing conversation, but if people want to get in, they should give me a nod. If we work things through the chair, everyone will get their say. I hope that people will comment on others’ contributions as we go along. [Interruption.] Despite the weather, I think that we should be fine in this room—it is pretty structurally sound. Perhaps structural funds are the right topic to be discussing this afternoon.

This item is scheduled to finish at 3.30 pm, which gives us a little bit less than an hour and a half for a proper discussion. First of all, what do members and stakeholders think have been the strengths and weaknesses of the 2006 to 2013 programme? [Interruption.] The clerk has just reminded me that I should first get everyone at the table to introduce themselves. I also draw everyone’s attention to the written evidence that we have received from people who are not present, which is very important to the discussion.

I am the committee convener.

I am the European Union funding manager for Scotland Europa, which is a membership organisation and part of Scottish Enterprise.

I am the deputy convener of the committee.

I am a principal officer with Glasgow City Council and my duties include co-ordinating the work of the west of Scotland European forum.

I work for the East of Scotland European Consortium, which is a membership organisation that is made up of representatives from local government.

I am a Scottish National Party MSP for Mid Scotland and Fife.

I am from the West of Scotland Colleges Partnership.

I am an assistant secretary with the Scottish Trades Union Congress and am mainly responsible for economic and industrial policy.

I am an SNP list MSP for South Scotland.

I am head of European development at the University of the Highlands and Islands and am also representing the Highlands and Islands European Partnership.

I am the head of the Brussels office for the Convention of Scottish Local Authorities, which is the national voice of Scotland’s 32 local authorities. As European policy manager, I co-ordinate at European level cohesion policy in the Council of European Municipalities and Regions, which is the European local government umbrella organisation.

I am a Conservative MSP for the Highlands and Islands.

I am MSP for Glasgow Anniesland and a member of the committee.

Again, I welcome everyone to the discussion. I invite members and stakeholders to comment on the previous programme’s strengths and weaknesses and any lessons learned that we can take forward to ensure that we have a better experience in the next funding round.

I guess that someone has got to start the ball rolling.

The committee might want to reflect on the fact that the programmes that we moved to in the 2000 to 2013 period represented quite a major change from what we had been used to with regard to European structural funds for the previous 20 years. That was not because there was less money around; instead, there was quite a radical shift in what the money could be spent on and in the programme areas, with, for example, all of Scotland south of the highland faultline being lumped into one area. In that respect, it has been very much a learning curve and certain points of the exercise have been a source of considerable frustration at times. We might well elaborate on this over the course of the afternoon but we have had some good pointers on how we might manage whatever money we get out of the next round as effectively as possible.

Picking up on some of the things that Malcolm Leitch has mentioned, I think that it was a very different programme, and it has given us the opportunity to test some different strategic delivery models in a number of ways. We have learned quite a lot as a result of that process. We are in the process of evaluating how some of those models have worked, and there has been an evaluation of how the community planning partnership models have worked. We will find that useful as we go forward into the next programme, which is likely to be even more focused on strategic impact.

I agree with Lesley Cannon’s view that the strategic development bodies represent a significant advance on the previous situation, with much more strategic thinking. However, we need to find ways of allowing them to be more flexible within their operations. There are lessons that we can learn from the model that we have developed.

The community partnership pipelines have been an excellent development, but we need to refine the current situation, which involves lots of different approaches. There are considerable administrative costs involved in some of them, whereas others do not have any administrative costs at all.

We have started the process of unit costing in the education sector. We worked with the Scottish Further and Higher Education Funding Council to develop unit pricing. UHI has developed a unit pricing model as well. The financial engineering instruments that we have developed are an example of fairly good practice, and we should try to expand them to align them with the Scottish Futures Trust’s ambitions.

Those are the positive aspects. The main weaknesses involve audit. We have made significant progress, but we have some way to go. We ought to be focusing our attention on improving the standards of audit, so that we reach the European Commission’s gold standard.

We are all very much aware of some of the weaknesses that we have had in the current programming period. A lot of those are evident when we consider the recommendations in the written submissions that have been given to the committee. It is quite encouraging to see that, broadly, people from a range of different sectors across the country are all saying the same things. The new programming period presents us with some critical opportunities at a time when we face a great deal of economic challenges. It is important that we get the approach right.

We have to be honest about the weaknesses in some of the current programmes. There have been some excellent individual projects, but there have been some structural problems with how the programmes have been delivered. As has been outlined, we have an opportunity to change the focus a little bit. At the moment, there is a danger that the programmes are becoming process driven. We are spending too much time on administration and on ensuring that the paperwork is up to date. That has to be done—there is no question about that—but the balance needs to be right. We need to have more of an output-driven approach. That is one of the key weaknesses in the current programme.

On the strengths, we have tried a lot of new approaches and have learned a lot of lessons through what we have done with the strategic delivery bodies and the community planning partnerships. Some good things have come out of that. The Highlands and Islands has two strategic delivery bodies: the UHI and Highlands and Islands Enterprise. In the first three years, we learned quite a lot. To be honest, we made a few mistakes in the approach, because it was new to us all. However, at the halfway period, we have taken a long, hard, critical look at that and said that there are things that we could be doing better and that we need to have a more strategic focus. We have changed a lot of the approaches, and that is already having an impact.

As has been said, we should consider what is working well and use some of those lessons. Many of us around the table have been involved in discussions about practical solutions to some of the administrative aspects of the issue. If we get that right, we will be able to drive home some of the big, strategic projects that we need.

14:15

I appreciate the point about unit pricing—that is a welcome development. It is important that we establish that early so that we have a clear benchmark. I am interested in finding out how that affects student income in Scotland, not only for Scottish students but for students from the rest of the United Kingdom, Europe and outwith Europe. How does that affect them, if at all?

Obviously, I can speak only from our experience in the Highlands and Islands. The outcome is not directly on individual students per se. The additional funding is for an additional number of students and makes no difference to an individual student.

However, the funding makes a tremendous difference to our capacity to deliver. It means that we are not putting under threat a lot of the resources that we have for provision in a wide range of subjects and the wide range of levels that students can study at. That is particularly relevant for us in the Highlands and Islands because, once we start to fall below minimum numbers of students, particularly in the more remote colleges, we do not have the option of saying, “Well, we’ll put the course back on next year when the numbers are better.” The additionality of the ESF means that we can fund more student places and underpin our course provision across the piece.

Therefore, we are looking at more students being funded rather than additional funding for individual students. However, it is an important point, and we need to follow through with the unit pricing model. So far, it looks as if it is working well, and it is a good pointer for future programmes.

I return to the issue of simplification. There is no doubt that the current programme has been innovative in the spatial targeting. The use of community planning partnerships is a unique feature that we find hardly anywhere else in Europe, and we have done some research with our European colleagues on that. The use of spatial targeting indicators to define the problem areas is also robust if we compare it on a European scale.

We have seen the need for further simplification during the programme. With some of the colleagues around the table, we have undertaken work on that and given evidence to the Scottish Government and the European institutions on the need to simplify the programmes further.

Without entering into the issue itself, I think that the key area to look to in the future is something that has been repeated in several of the submissions that have been made for today’s meeting: the need to ensure that the rules and practical implementation arrangements are agreed from the outset and do not change. That is basic but, for a number of reasons, difficult to achieve. We hope, and there are good prospects, that that will happen this time. We are keen to see that happen.

Another issue to look to for the future is that, under the new proposals, in theory at least, there will be less of an emphasis on the regularity of expenditure—all the classic audit and output-based methodologies—to ensure that the funds deliver. At the moment, this is a proposal and it is not clear how it will be realised, but in theory there is an issue of making the policy delivery outcome based. There are a number of instruments in the regulation that foresee that.

As Scotland uses the single outcome agreements for domestic policy purposes, it already has something that it can adapt for the new system. It may also be able to help other countries in Europe and show leadership in this methodology. Although it is an experimental domestic approach, it is far more advanced than anything that anybody else has attempted. It is something that we have compared with our colleagues and, as I say, we are looking forward with it.

Witnesses have talked about the strengths of what has existed between 2006 and 2013. In the 1980s and 1990s, the Highlands and Islands benefited enormously from structural projects such as causeways and bridges that undoubtedly brought prosperity to islands that were dying on their feet. I do not think that many people on those islands would want to go back to when they did not have such things. Now that the Highlands and Islands has transitional funding, will there be any money for such large structural projects? For example, the Scottish Government wants to dual the A9 and the A96. I know that a lot of the A96 is not in the Highlands and Islands, but some of it is, and it will require some enormous projects that will need huge capital funding if it is to be dualled in its entirety. Do you think that that can be produced by European structural funds nowadays?

The short answer is that it is most unlikely. It is not so much to do with the core eligibility of transport infrastructure in a place such as the Highlands and Islands; it is just down to the expense of undertaking major road-building projects in relation to the overall size of the likely budget. As Mr McGrigor rightly indicated, such projects are very expensive.

I remember from my days with Strathclyde region getting lots of large capital grants for major road building round the motorway network in the Glasgow area, for example, so I have some experience in that regard. However, the trajectory of Scottish programmes, whether in the Highlands or the Lowlands, has been progressively to move away from basic infrastructure towards activities that, as the European Commission would view it, are more directly linked to economic development; it is a move away from expensive transport, water and sewerage schemes and towards direct ones, even on the capital side, such as site preparation and industrial unit provision.

That is the logic as you progress up the league table in Europe; the range of measures becomes less capital intensive, or less large-scale capital intensive, and moves more towards smaller-scale capital and revenue-type expenditure. That underpins, for example, the Commission’s proposals to increase the proportion of ESF the higher up in the development trajectory you go.

Do you see that as a strength or a weakness?

One of the points that we have certainly made in the west of Scotland is that we must be careful when looking at the Commission’s proposed list of priorities that the programmes have some scope for local discretion and ensure that there is a mix of activities that will best meet EU 2020 targets for more sustainable, inclusive and smarter growth. The mix of measures will not be the same in the Highlands and Islands as in other parts of the UK, far less other parts of the EU. We certainly hope that when the Commission comes out later this month with further narrative on what the priorities mean and what it wants to be funded in the new programmes, there will be scope for bottom-up discretion so that what can be funded meets the development aspirations of the region concerned.

I have a brief point on the situation in the Highlands and Islands. Mr McGrigor made a good point when he referred to transition status. That is crucial for the benefit of the Highlands and Islands. It will mean that we get an additional amount of funding per capita that will allow us to do a lot more than we could otherwise do. It is an important deal for the Highlands and Islands and we would appreciate the committee’s support on it.

Transition status is also important for the wider Scottish picture because it would mean that we would receive additional funding instead of having to work within a Scotland-wide funding budget and package. That would also allow us to concentrate on Highlands and Islands priorities and to look at what we need in that part of the country, which will be different from those elsewhere, within a single Scottish programme, which would be welcome. However, as Malcolm Leitch said, that still has to be within the realms of what is affordable and has absolutely to be in the realms of what is outlined in EU 2020. One of the key points at this stage is that we align what we propose to do with any funding that is available, whether transition funding or not, and ensure that we align that with the match funding that is available. That is one of the major weaknesses in the current programmes.

I want to ensure that I fit everyone in. I am conscious that we have touched on the Highlands and Islands and the west of Scotland. Perhaps Ingrid Green would like to come in at this point and we will follow up with Stephen Boyd. All our invited guests will then have had a shot and we can elaborate a bit more.

My biggest plea to the Scottish Government and those influencing the debate is that we should build as much flexibility as possible into how we draft future programmes, not only in terms of themes. As we are a more affluent area in terms of overall gross domestic product, the geographical targeting has been an issue in our ability to access funds. However, there are areas of deprivation at NUTS II—nomenclature of territorial units for statistics—and NUTS III level and below that, at ward level, in more affluent regions. When we were looking to develop region-wide projects we found it really hard to develop some projects, for example on renewable energy, because we were able to do that only with rural areas and we had to take out the urban areas, which does not always make sense from an economic development perspective.

If we have flexibility in the programmes, we can cope with change. Responding to the economic recession was difficult because we were tied into a certain programme.

Linda Stewart and Ingrid Green have made most of my comments for me. I very much echo Linda’s views on how important it is that the Highlands and Islands retains transitional region status, and Ingrid’s comments on flexibility.

I was reading the evidence session that the committee had with Mr Swinney at the start of October. There was an interesting exchange between Mr Swinney and Mr McGrigor about the Western Isles. Mr McGrigor was talking about the causeways that had been built in the past through structural funds. The cabinet secretary suggested that in future it might be more the case that renewable energy research projects are funded. If we can, it is important that we retain the flexibility to do both. I can think of numerous small-scale infrastructure projects around the Highlands and Islands that would help to maximise employment opportunities in renewable energy. An example would be small road improvements in the Berriedale braes to improve access to Caithness. Numerous projects around ports and harbours will also be very important.

I am sure that much of that will be funded through the Scottish Government’s renewables infrastructure plan, but there is certainly scope there for the ESF to pick up bits and pieces.

The negotiations are taking place against the backdrop of a lot of uncertainty, not least given what happened at the weekend. The on-going euro zone debt crisis and the current debate on how we strengthen economic governance are taking place against attempts to negotiate a budget deal in a severe economic and financial climate. It is pretty much anybody’s guess what European structural funding will be available for the UK and for Scotland. We have to be realistic about the pot. We have already seen a 50 per cent reduction from 2007 to 2013, from £1.1 billion—or was it £1.6 billion?—to £500 million, and it is obvious that the amount available will be a lot less next time around.

What would be your top three priorities in the negotiations? What are your red lines and what do you really want to happen as we go forward?

Our priority would be to say that it is time to start looking beyond structural funds. We did not think that we would get the programme that we are about to get. We have been talking about exiting structural funds and finding alternative funding sources. Now is the time to stop hiding in the corner and looking at our toes and to start moving out into the middle of the room and looking up and out. There are 200 pots of funding in Europe; the European structural funds, funding for agriculture and funding for fisheries are only three of them, and they are not even the most significant. The connecting Europe funds will be quite considerable. There are huge opportunities for transport infrastructure in the cohesion and territorial funds. We have not even looked at the detail of those yet, because we spend too much of our time thinking about structural funds.

The lifelong learning programmes, which are decentralised in the UK, are managed largely in England. The management fees for running them are £5 million a year. If responsibility for those funds alone were devolved, that would amount to £0.5 million a year to manage those programmes in Scotland, never mind the grants that would follow from the improved awareness, education and relationships that would result from that. That would be my priority.

14:30

To come back to the question, perhaps I can draw on my experience as someone who works mostly in Brussels. The disconnect between the high-level discussions and the discussions on the budget or the regulations is striking. It is funny, because the discussions go on without really being affected by the bigger, more existential argument, which, in terms of financial importance and the amount of money involved, is of far more far-reaching importance than the EU budget discussions. It is unclear how it will all end.

However, it is clear that member states and MEPs are working on the assumption that there will be a budget, there will be a deal and there will be a programme. That is the scenario—we cannot predict the future, so we have to work things out. To our surprise, the discussions in both institutions are going faster than expected, particularly in council. That is why it is important to have a clear view of what we want for the future.

As far as what we would like to see at the end of the programme is concerned, there are three headlines. The first is integration. It is clear that the possibility exists to have synergies between the different European programmes in Scotland. The notion has been floated of having a single programme for Scotland that could combine rural, maritime and structural funds. That is a welcome idea, but it remains to be seen how it could be operationalised, which will not be easy. The Commission will make further proposals towards the end of this year or early next year.

Secondly, the priorities must be workable. The Commission has provided a menu of priorities that point the way forward, but it is still unclear, for example, how the rural development priorities will be included. The Commission has further work to do on that.

The final headline relates to outcomes. As I said, there is a clear need to show that the priorities respond to outcomes. That will force colleagues around the table and elsewhere to do some hard thinking. They will have to participate in discussion to ensure that each stream of funding—whether structural, rural development or fisheries funding, or funding from other funds—makes sense. It would not make sense for the funding of the same activities to be replicated by several funds. That is not what the current reform of structural funds is about. Ensuring that each stream of funding makes sense will require very hard thinking from all of us.

To pick up on Morag Keith’s response to Aileen McLeod, I agree that we must start looking at what other funds can deliver outcomes for Scotland and, therefore, at what we should focus an integrated domestic European funding programme on. We need to work much smarter in looking at territorial co-operation, the horizon 2020 funds and things such as the life environment programme and the culture programme, where we have not performed as well as we might.

We have started to do some work with the partners, most of whom are represented around the table, on analysing Scotland’s uptake of territorial co-operation and working out, in Scotland’s case, what type of activity seems to lend itself best to that. We are continuing to look at that with a view to developing opportunities to encourage people and partners to get involved in such activity so that we can focus the domestic programmes on the more critical regional issues. I think that we would all welcome a joined-up framework for rural development and structural funds in the coming programme.

I am finding the debate very interesting, and I thank you all for coming along and putting forward your views. Following on from a comment by my colleague Aileen McLeod, I agree that we are living in interesting times—as ever—and we wait to see what will happen tomorrow, never mind next year. That is certainly true for the overall budget. The UK is clearly arguing for a decrease in the EU budget; that is certainly where the member state is coming from on that issue and others.

I am sure that everyone around the table would support transitional funding status for the Highlands and Islands. It would be helpful to be kept informed about that so that we can play our role in trying to ensure that that happens and that everyone is happy with the calculation of the NUTS threshold this time round.

Important points have been made about other funding streams in the EU. The written submission from the West of Scotland Colleges Partnership makes the point, on page 21 of our briefing paper, that it would be important to

“develop a Scottish Funding Strategy that would set out Scotland’s ambitions across all EU Programmes and ensure that the Structural Funds Programmes do not support projects that could and should be better served by other funding sources”.

I think that that means within the EU framework, and doing it that way is key. To pick up on Lesley Cannon’s point, that is where we are at now, and it is where we should be going in the years to come. Perhaps we can have a more detailed debate on that today if there is time.

Ingrid Green made an interesting point about the rural-urban distinction. Again, it would be helpful to have more examples of how that causes difficulty for people on the ground and more information on what could be done about the issue.

I issue a wee warning to Lesley Cannon: if you call yourself an EU funding manager, a lot of questions are liable to be directed to you by everyone. I will ask a couple of questions based on the Scotland Europa written evidence. The first relates to

“increased interest and commitment to enhancing Scottish uptake of Territorial Cohesion ... Funds”

and

“the need for a ‘pan-Scotland’ approach”.

Is that being co-ordinated here in Scotland? A number of the organisations represented here have a significant interest in that issue, as do many others. Is there any such co-ordination? I imagine that Scotland Europa might be very involved in bringing those bodies together to ensure that, on the changeover to the 2014 to 2020 period, everyone is ready to take a pan-Scotland approach. That is particularly important because the territorial cohesion funds will enable Scotland to have stronger links with other areas in Europe that have similar needs and aspirations. I hope that that is not too long a question.

The submission also mentions a commitment to a move from grants to loans, which would no doubt make an awful lot of people panic. Can you give us any further information about that?

I will bring in Hanzala Malik, then I will let Lesley Cannon answer those questions. I am sure that Morag Keith will want to come back in on the west of Scotland issue.

I will pick up on a comment about the structural fund that exists in England but not in Scotland. Can such a fund be used only in a specific, limited territory, or is it for UK-wide use?

Those funds are decentralised. They are European funds, but some of them get decentralised to a member state. Up to now, the UK as member state has decided that the funds would be managed across the whole of the UK. We have argued for some time that we should devolve responsibility for the Scottish element of those funds, not least because we believe that we need to start looking at a legacy for Scotland, and the skills for running those programmes should be in Scotland. Those programmes will go on for much longer than the structural funds.

In essence, the UK awards contracts that allow the programmes to operate across the UK. However, you will understand that the education and training systems in England are completely different from those in Scotland. In the past six or seven years, we have had to fight for the right to access some funds, because the interpretation was that we were the same as English colleges, although we are not—we deliver higher education. We had many difficulties that, with Aileen McLeod’s help, we eventually overcame. We would not have had those issues if Scotland had responsibility for managing the funds and exploiting them better for Scottish organisations.

How do we support you to access the funds so that there is parity across the nation?

The Scottish Government needs to ask the UK Government to devolve responsibility for the funds.

Does Morag Keith want to answer the earlier question?

Yes, I do. The point that I was trying to make was that structural funds should not support projects that would be better served by other funding sources. I have a specific example on which I hope others, particularly Lesley Cannon, will comment. The Government recently announced the rural broadband project, which has £68 million of funding from the UK Government broadband delivery UK resources and £50 million of funding from the Scottish Government digital fund moneys. The structural funds division has identified a further £25 million that could be aligned with that from European regional development fund priority 4. The project is a huge advance on anything that we have done before, so I do not criticise it at all. However, the £25 million from the ERDF can be spent only on supporting small and medium-sized enterprises. The project is about delivering high-speed broadband across all rural areas, so it is likely that about 10 per cent of it will affect SMEs. It presents a significant audit challenge to separate out the part of the project that relates to delivering high-speed broadband and the part that relates to delivering it to SMEs.

As I understand it, the Scottish Government’s ambition for rural broadband is to link with Ireland and the Scandinavian countries, as they have made better developments than we have. Ultimately, the aim is to link to the hub in Amsterdam, which will avoid London and allow us to link to the most up-to-date hub. To me, that absolutely cries out for territorial cohesion funding. We could have had a split across four of the territorial Interreg pots and had a really good project that allowed us to bring in all the partners that the Government has ambitions to join up with. I do not suggest that it would be easy but, with the right expertise, ambition and strategic direction, that is a way in which we could better exploit what is available to Scotland.

The committee will certainly bring that to the attention of ministers. I invite Lesley Cannon to answer some of the questions. I hope that she has managed to—

Retain them all? Yes, I have.

Morag Keith gives a particularly good example of a situation in which we needed to sit down together and think strategically. One big theme that came through in all our written evidence is that, if there had been more engagement in the development of the operational programme from the outset and if we had been clear on the objectives that we were trying to achieve across the patch with structural funds, we would have known who was engaging and who would need to deliver against those objectives. That is certainly what we need in the future. We need to build into that development things such as the broadband project, where a different source of funding would deliver a better and bigger impact for the match funding that is available in Scotland.

14:45

Coming back to Mr Kidd’s question, I should say that Scotland Europa intends to be much more proactive in bringing organisations together, identifying opportunities across the range of funds and helping people to engage in some of these partnership projects. Under the current programmes, Scotland is eligible to bid into a pot of about €1.8 billion; to date, we have drawn down €35.8 million across 91 or so projects. There is significant activity, but the most funding that we have accessed has been from the cross-border programme, which is the newest one to us. Our analysis indicates that access to a national contact point for a programme tends to lead to greater activity in the area. All of these programmes have their own national contact points, a number of which are located in England. We have established a network of territorial co-operation—in other words, the national contact points—and we will bring those contacts up here at least every quarter to give people access to experts and to allow them to start developing programmes more effectively. There is a lot that we can do and the Government is supporting us in that process.

As for the move from grants to loans, others around the table have already pointed out that Scotland has very good practice in the use of structural funds through not only the Scottish Investment Bank but the local authority west of Scotland and east of Scotland loan funds. In an environment where structural funds are shrinking, we want an element of them to go into recyclable funds to ensure that the money comes back to the bottom and we can continue to use it in the future. However, in the current economic climate, we will always be required to deliver some programmes that contain an element of grant funding to help companies to continue their innovation and growth aspirations.

The Commission seems to be saying that the move towards having a set of common rules for the five funds will reduce the complexity of applications. However, as Ingrid Green pointed out, flexibility is required. Why do the applications have to be so complex? I cannot see how there can be one application for five different funds. Would it not have to be pretty complex? Why can we not simplify the existing applications?

Secondly, as Linda Stewart made clear, the administration of programmes rather than the applications—or, indeed, both—should be simplified. After all, we want everything to be as simple as possible. However, the system must be flexible with regard to what is needed for the different areas. If the Commission really wants one set of rules for applying for the five different funds, will such a move actually make things simpler?

The territorial co-operation programmes will, for the first time, have their own separate regulation, which should in theory mean common rules for eligibility of spend and so forth. However, what will probably happen is that each of the programmes will go away and develop its own programmes and application forms. As a result, even though the rules will be the same, there will be differences. That applies to all programmes; even with the regional programmes, there are different interpretations of the same rules. I suppose that brings us back to the old adage and to ensuring that there are proper plan teams and that stakeholders can relay their practical experiences in the planning and drafting of programmes. It is quite basic: it is all about managing authorities speaking to one another.

A number of important areas have been mentioned. We simply have to address all this. We all know that significantly less funding is likely to be available in the next programming period. At the same time, we face an economic situation in which we need the funding more than ever before. We will have to do some good thinking about how we can add value to what the structural funds and, importantly, the wider aspect of EU funding can do best for Scotland.

We all accept that there has to be a fair amount of transparency in programme and project administration—the forms that need to be filled in and the resource that is needed to take account of what is happening with what is, when all is said and done, public funding. However, we are trying to get across the message that the process needs to be a bit simpler and one way of doing that is by trying to move the Commission towards common application forms. That will be difficult—every director general to whom I have spoken in the Commission agrees that we need to have one simplified form, but they say that it should be the form that they use and that the others will have to change. Let us face it: we have a job on our hands.

Within that, it is important that we argue for consistency. There is a very serious issue underneath this. Let me tell you the experience of one of the smaller colleges in the University of the Highlands and Islands network over recent years, in one of our more remote island communities. The college had been doing a tremendous amount of really good additional work with ESF funding. We knew that the work was additional and that it would not have happened without ESF funding. When it came to gathering in all the required evidence of that work having taken place, the capacity was not there—there was not sufficient resource to gather all the work, to fill in the forms and to ensure that everything was there.

I find that unbelievable. The college had a history of delivering extremely well; it was performing well, making a difference to its community, and providing jobs and new courses for students, yet because the bureaucracy was so difficult, it was impossible to deliver. Its response was to say, “This is not for us; we will back off now, because it is too much of a risk.” We cannot afford to be in a position where that happens.

Again, we can look at some of the new approaches that are being taken; for example, there is the flat-rate costing methodology, taking a more strategic approach in advance, planning what is being done, and having pipelines for projects. In that way, things can be bulked up so that additional resource can be put into running some of the project administration centrally and the benefit can trickle down. What matters on the ground is the delivery of really good projects—that is what we are all about today and that is the one factor running through all the submissions.

I agree with everything that Linda Stewart said, but the real issue is not so much the complexity of the application form and process—although improvements can always be made—but post-approval compliance. That is where the problems really start to mount up and the requirements on us are onerous, including keeping documents for ridiculously long periods of time to a ridiculous level of detail. Those are the issues that put off some smaller organisations: it is not so much filling in the forms as the compliance requirements—what needs to be done once the project has been approved—that have acted as a brake on activity in a number of cases. That includes a number of organisations, as Linda Stewart said, that are opting out of the ESF process altogether.

A number of years ago, I managed a £500,000 ESF project that was all done on hard copy rather than electronically. I see a number of heads nodding—people know how difficult that was. Some of the box ticking is done online now, which is much better. There are resource implications for such projects. Our project was funded by Strathclyde Regional Council and we managed to tap into the Scottish Council for Voluntary Organisations and the work that it does in supporting organisations, especially at reporting stage and at monitoring stage. Our project used to shut for six weeks at pre-application stage and everybody would focus on that, then at quarterly monitoring it probably took a week to prepare everything.

I do not know whether there is any such network now. The support that I got from the SCVO at that time was critical; without it we would have withdrawn from the process. Do the stakeholders have any idea about where that network is and how it operates?

That is exactly what we do. That is what our organisation is and always has been; it is a partnership of the colleges and we provide them with overall expertise. If a member of staff is ill or leaves, we can build the capacity of new people to take over. There is an element of that in all of the membership organisations, but it is not universal.

I was interested in the comment that was made at the horizon 2020 discussion about whether we can do things better for other people. On the way in, we said that if you want to know whether we are doing things well, you should ask not someone who does really well from the fund but someone who cannot get to the table. You should ask Strathclyde partnership for transport, which has very good projects but has consistently not had the capacity to have an EU expert to guide it through the complexities of the process. You should ask the housing associations, which are eligible to come to the table but have not been able to do so because everyone else has 20 years’ experience on them. Such organisations should be delivering projects, but they need more help. The expertise exists and the help is available, but we need to link things up.

You said that the approach is not universal and that you support colleges, somebody else supports social enterprise and so on. Does a more strategic approach need to be taken? Is that our responsibility? Is it everyone’s responsibility? Who should co-ordinate it?

We are fortunate that our organisation has a board that is very good at looking at things from a strategic point of view. We helped the STUC to write a bid for its learning fund and we have worked with UHI on unit pricing. We also worked with the funding council to deliver its unit pricing model. We managed to be allowed to work in that way, but we are all public sector organisations and we all work for the same paymasters.

You asked whether that is your responsibility. Yes. It is time for us to look upwards and outwards and to be strategic.

I will pick up on that theme. As a membership organisation, we are responsible within Scottish Enterprise for all its compliance and monitoring, so people in Scotland Europa have that expertise and we try to use it as much as we can for stakeholders around the table and for organisations that benefit from funds.

We are moving into the cross-border Interreg programme, because the complexity of compliance is a level above what we experience in the structural funds programme. We are therefore actively going out and helping people with the claims and monitoring process, because they need that support now. We must all bring our expertise to bear when we see pockets in which people need more experience.

Linda Stewart spoke about a college giving something up because the process was too complicated and bureaucratic. How could the rules and procedures be altered to ensure that that does not happen again, or does not happen so often? Would that involve the people who write the rules being brought over to see what they are doing wrong? Is that approach too simple?

It is all very well writing the rules, but we come to the wretched issue of interpretation. You can have an interpretation of rules and eligibility that you are happy with and which someone from the European Commission looks at and is also happy with, but two years later someone from the European Court of Auditors can say that they are not happy with it. That is a frustration.

I think that that is happening in the fishing industry.

15:00

It is striking a chord. We need a bit more up-front clarity when it comes to defining what we are allowed to spend the money on. If the rules were not changed halfway through, that would be helpful. One of the downsides to the process has been the retrospective changes to the interpretation of national rules on eligible expenditure. That is really unhelpful to all sorts of organisations, not just those in the third sector.

It is important to be aware of the direction of travel that Scotland is moving in. Instead of having a large number of small projects, we are moving towards having a small number of large projects, some of which will be frameworked through the strategic delivery body and community planning partnership pilots that we have been using in the current programmes. The trick will be not so much to try to get people to apply as to think of a new role for the third sector, for example, in the broader strategic framework projects and CPP arrangements. There are good examples in the ESF-funded parts of the community planning partnerships, and the lowland and upland Scotland programme area, where funds have been set up exclusively for small, local, third sector organisations to deliver employability-related stuff. The beauty of those projects is that the bureaucracy is not heavy, and that it is retained by the lead body—in those cases, the local authority. Also, the match funding comes at source, so they do not have to find the match.

That has been an effective way for small, local, voluntary and third sector organisations to access European structural fund support without their having to go through the application process. The activity is part of a wider framework that another organisation or lead partner has decided to pursue on behalf of the grouping in the area. That is a way of broadening access to the funds without encouraging more people to fill in application forms. There is a bit more subtlety to it than that.

That is very interesting. We have had some approaches from third sector organisations that are really keen to get involved. If we had included them all today, we would have had a much larger round table. We are looking into facilitating a feedback session for those organisations. At lunch time, I was at the social enterprise cross-party group, where much the same things were being said. There are probably opportunities there, too.

I wonder whether Stephen Boyd could give us a wee bit of input on this. I do not know whether you know about it, because different people handle different things. Morag Keith mentioned the support that the STUC received for its learning programme, and I wonder how you feel that that benefited you, and how it could support us in learning more about best practice in taking forward some of these issues.

I am probably the worst person in the STUC to ask about that. A lot of what Morag Keith said resonates on a wider level. The STUC was lucky, in that we had a range of partners on whose experience we could draw, once we had decided that it would be appropriate to use ESF funds to support our wider learning work. I appreciate, however, that that would be more difficult for a smaller organisation without those partnership mechanisms. Our experience in running various Scottish Government project-funded work has probably also made it easier for us to do that kind of project-based activity.

So “experience” is the key word.

We talked about the strategic delivery models that have been used in Scotland. The Commission’s proposal talks about the development and investment partnership contracts. It states:

“For the Partnership Contract and each programme respectively, a MS shall organise a partnership with the following partners:

(a) competent regional, local, urban and other public authorities;

(b) economic and social partners; and

(c) bodies representing civil society, including environmental partners, nongovernmental organisations, and bodies responsible for promoting equality and non-discrimination.”

It is therefore very much about multilevel governance. What should those partnership contracts look like in Scotland? Could our strategic delivery model be utilised through the development and investment partnership contract?

The consultation on putting learners at the centre is a good starting point. That will allow all the agencies that are delivering for the 16-plus agenda to come together and create a single regional plan, which will fit with the CPPs, and agree on the outcomes and achievements.

As Serafin Pazos-Vidal pointed out earlier, we have some really good examples of that type of working together and we are getting much better at it. The review of CPPs indicates that although some lessons have to be learned, there is some really good work out there. We have made significant investment in that respect and we should just keep going, because we are nearly there.

When the committee visited Brussels the other week, we met members of the European Commission’s directorate-general on regional policy, who were certainly impressed with the idea of using CPPs in the strategic delivery models.

We are not just interested in all this; COSLA and a few other colleagues were very much involved in persuading the Commission to express what is set out in the article in these particular draft regulations that relates to the partnership principle. Although it falls slightly short of our original proposal, it is nevertheless very significant.

We believe that, in comparison with other member states and countries, the partnership element is significant to Scotland and we think that the EU rules on encouraging member states and managing authorities to organise proper partnerships not only with public institutions but with the wider set of stakeholders are essential.

Interestingly, the article in question applies not only to Scotland but to the UK as a whole; in other words, it says that the UK Government should involve Scottish organisations and certainly the Scottish public sector, including local authorities, in setting wider priorities. That is important, because with the new generation of EU rural and structural funds the Commission is putting in place a much more stringent set of conditions for member states and, subsequently, the devolved parts of those states. The UK will be under serious pressure to ensure that not only the Scottish but the UK-wide priorities for EU 2020 are right, because they will be delivered across the whole of the member state. As a result, the article needs to cover not just Scotland but the whole of the UK. The question, though, is whether it will survive the negotiations. I understand that it has been amended a number of times in the Council of Ministers, but we will see what comes out at the end.

I am keen to hear people’s views on the issue of local development, which I note is the subject of about 20 articles in the part of the regulations that applies to all funds: rural funds, structural funds, the social fund and the maritime fund. That is a great breakthrough. Over the years COSLA and a few colleagues from other countries have been making a lot of noise about—and huge progress on—this matter with the Commission and we are very happy that it has been proposed at last. Of course, the challenge is to ensure that what has been proposed is delivered on the ground and that local partnerships can bring together different local authorities and local partners to define local priorities that make sense. It is a great idea, but we are still working on it. Indeed, two weeks ago on 29 November, we had a seminar with the Polish presidency, the Commission and the Parliament’s key rapporteurs to ensure that the proposal goes forward. As I say, however, I am very keen for the committee to convey its support for this measure, because that will greatly benefit not only Scotland but the whole EU.

I agree very strongly with Serafin Pazos-Vidal. Indeed, as Morag Keith pointed out, Scotland already has some very good examples of feeding into the partnership contract, and we should look at using and developing that work.

Given that we have spent a lot of time discussing some of the problems in the current programming period, I should perhaps note that what has been very good has been the increased willingness to work together directly with DG regio and DG emploi officials. With regard to earlier comments about changing rules, the fact is that sometimes we want the rules to change. In changing economic circumstances, for example, we need a little bit of room for manoeuvre. That can be a good thing if the discussion is two way and we have been very pleased with our involvement in that discussion over the past few years of the current programme. Colleagues in the structural funds division have been willing to take our views into consideration and to consider how we can move things positively. If we have more dialogue in future, we can perhaps cope a bit more with any changes.

To return to an earlier point, that is where the committee has an absolutely crucial role in setting out the starting point and the context within which the rules and changes can be monitored. That will mean that, if we reach a point at which the bureaucracy is unbearable—as it is right now—we can do something a bit more strategic about it, rather than just moan about how dreadful it is that we have another form to fill in, as we tend to do.

Thank you. We have covered that subject pretty well.

I have experience of the European social fund. The priorities that have been set for that are promoting employment and labour mobility; investing in education, skills and lifelong learning; promoting social inclusion and combating poverty; and enhancing institutional capacity and efficient public administration. When I was first involved with that funding 20-odd years ago, we came up with fairly elaborate plans to attract some of the money, but we perhaps did not get the outcomes that we planned. Are those the right priorities for Scotland? If not, what would be the right priorities? Alternatively, only some of them might be right or they might need to be enhanced. Are there any other ideas that we can put out there?

This meeting is timely because, last Friday, we had a meeting of our CPP network, which is delivering the programmes. We talked briefly about the new European social fund and about the discussions at a helpful event that our colleagues in COSLA arranged at the end of October. We considered the specification, although there are only bullet point headlines at the moment. By and large, we do not see any particular gaps between what the regulations say we should spend the European social fund on and what we want to spend it on, certainly in the lowland Scotland area. The fund seems to be specified reasonably broadly and in a way that will allow us to accommodate the type of employability and labour market training provision that, certainly from our perspective in the CPP network—which is a network not just of local authorities—we are reasonably comfortable with.

As ever with such things, the devil will be in the detail, to use that well-worn phrase. That is why the communication that the Commission intends to put out imminently on the Community strategic framework will be interesting, as it will allow us to find out what the Commission means by some of the headlines on the thematic priorities that relate mainly to the European social fund. I say “mainly” because we do some interesting things with ERDF money that fall into some of those areas, such as job brokerage. At present, that work is funded in the lowland Scotland area through the community planning partnership system. Therefore, it is a bit false to say that labour market training is something that only the ESF deals with. There is a role for the ERDF beyond the obvious ones such as that on hardware. In the past, much of the ERDF money has gone into improving the vocational training offer in various parts of Scotland. ERDF revenue funding is available that can make a big contribution to some of the social inclusion activities that are listed in that menu.

Does Morag Keith want to comment? The college sector has a strong link to the ESF through employability, particularly given the backdrop of the current economic situation and low economic growth. Also, does anybody have a watching eye on the impact on some of the programmes of the welfare reforms that are coming?

Not least of the issues is the scale of budget cuts that colleges face.

The policy that is outlined in “Putting Learners at the Centre—Delivering our Ambitions for Post-16 Education”, which is set within the CPP model, is perfect for the ESF programme. The ESF programme could not be better designed for Scotland. I make a special plea that we should recognise that Scotland is leading policy on the issue and that there are opportunities for us in the social innovation programme, which in effect sits beyond the structural funds. We could lead pilot activities under that programme that would then feed into our ESF domestic programmes.

We envisage that the ESF programme will be aligned towards the 16-plus agenda and, in particular, the guarantee for all for the most disadvantaged groups, which absolutely sits within what the Commission envisages for the programme. In the 20 per cent most socially excluded areas, there is an expectation that we will target Roma, which needs to be understood, but in essence, ESF could not be better designed for the Scottish model.

15:15

It is clear that the European social fund will play a major and increasing role in countries or regions that face challenges such as Scotland faces, not just because that makes sense but in response to several interdepartmental peace deals—namely, between DG emploi and DG regio. The role of the ESF in countries and regions such as Scotland will be much more prominent.

As you know, there is expected to be a ring fence, whereby 52 per cent of structural funds that come to Scotland will go towards European social fund activity. In discussions with colleagues we thought that such an approach is probably welcome, although of course local authorities that have made more use of the ERDF than the ESF might be more reluctant to think that. However, there appears to be a step in the right direction, given the logic of the broader policy.

The priorities are broad enough to be workable and have been largely welcomed. As you know, many of the priorities under article 9 of the general regulation—there are about 11 priorities and about 36 sub-priorities—are heavily earmarked as regards the ERDF. The ESF is a bit more flexible; we have to choose from four but we can more or less work around them. The approach is welcome—ideally, it would be good to propose such an approach for the ERDF, but in any case it is workable for the ESF.

There is still room for manoeuvre, because, as Malcolm Leitch said, there is not necessarily clear demarcation between the priorities and sub-priorities that are allocated to the ESF and what the ERDF is currently doing or might be doing in future, crucially in relation to social inclusion. That has to be refined.

The good news is that the Commission admits that the constitutional framework proposal was a bit rushed, so there will be a consultation in early January. I am sure that colleagues around the table will contribute to the consultation and try to refine where the limits lie for some of the sub-priorities.

We have to consider the appropriateness of the thematic objectives in the context of the current economic situation. We are a fairly unequal country at member-state level and inequalities have been exacerbated by the mini-depression that we are living through, in a spatial and a social sense. Traditionally, this nation spends very little of its GDP on active labour market interventions—far less than other EU member states. If the thematic objectives change, we could quickly lose the ability to intervene through ESF and the impact could be dramatic. In the course of the recession, various interventions in Scotland that were supported by European funds have made a tremendous difference, particularly in keeping young people in jobs and apprenticeships.

I echo what Stephen Boyd said. The broad parameters are fine and suit Scotland extremely well. We need to start looking at how we prioritise within the parameters, because the money will not be there to do everything. There is a difficult piece of work to be done on how we prioritise and how we maximise whatever funding can come through to support the areas that we are considering.

I make a couple of observations from a Highlands and Islands point of view on the European social fund proposals so far. Work remains to be done on access to education and training, to ensure that our more remote communities have access to the kinds of opportunities that more urban areas have. As we consider the labour market requirements of emerging sectors, we must ensure that we tie up skills and development to wider opportunities for Scotland.

For example, we cannot look at ESF work on renewable energy in isolation. We have to follow through with what is happening at national level. We also have to look at what is happening within ERDF. For example, within the Highlands and Islands transitional programme, we might want some more investment in infrastructure to support renewable energy, so we must ensure that our ESF money is working in the same way and supporting that investment. That has to go right through from basic level training—a lot of construction skills and so on will be needed—to postgraduate level and some of our research initiatives, and possibly on to horizon 2020 funding.

On Linda Stewart’s point, the other week I had the great pleasure of visiting some young apprentice engineers who are dealing specifically with the installation and maintenance of wind turbines at the Whitlock energy collaboration centre of Carnegie College. It is a very impressive project. I am not sure whether it received funding from any European stream; it is the kind of project that we should be looking at in terms of those funding streams. As the young people said themselves, the project is a career for them. It gives them an opportunity in life and they are very excited and enthused about it.

At the start, the convener mentioned something that you as practitioners will all recognise as being important. Whatever regime is in place, as it is being rolled out, discussed, debated and decided upon, it is crucial that we are all ready to go at the right time. I appreciate that it is difficult to plan when we are not entirely sure of the framework that will be in place, but I guess that you have a broad idea. How are you looking towards that date? What would you like to see happening in other agencies, including the Scottish Government?

As Malcolm Leitch said earlier, we have been encouraged by the fact that the Government seems to be engaging with stakeholders much more proactively in planning for the next round of European programmes. We have been working with the Government to find opportunities to get stakeholders together to look at what we have learned from the previous programme and at what the new and more focused funding programme means for Scotland.

Recently, we all participated in the annual structural funds event. We looked at what we have learned and at what our focus and delivery mechanisms will need to be. A series of engagement activities will take place during the next 12 months at which we can collectively offer input to the priorities, themes and delivery mechanisms that should maximise the opportunities for Scotland to utilise best the likely match-funding mix.

Lesley Cannon has outlined some of the key issues. We all welcome the fact that there has been a lot more engagement this time round. We have been doing a bit of work with all the key agencies in the Highlands and Islands European Partnership, which encompasses all seven local authorities, HIE and UHI. We have also been working with some of the wider stakeholder groups, including the voluntary sector, environmental groups and so on.

We have had a lot of good discussion on how to plan for what is coming. We have a lot of ideas and a lot of good and bad experiences of what has happened in the current programme to feed in. We are happy to continue doing that, but we are also aware that it is good to be part of the wider Scottish debate. UHI is a member of Scotland Europa and we have been grateful for the opportunities that that has given us to be in the discussion.

Tomorrow we will have an important discussion with officials from the Scottish Government structural funds division. They have asked us to outline our plans and have given us the opportunity to say where we are in the debate and what will happen next. For example, when we are considering lobbying with other transition or potential transition regions at UK level and across the EU and member states, we can align with what is happening at Scottish Government level so that the message is consistent and we have a better chance of getting the right outcome.

I suggest two approaches. First, we should plan to use the underspend on technical assistance, so that we can properly evaluate what has worked and roll it out—particularly the simplifications—as far as we possibly can. We must look at where our weaknesses are—in tendering, for example—and begin to learn from those experiences. Secondly, we should not forget that there are two years left for the existing range of programmes, and that there are significant underspends in many of them, including the territorial and other EU programmes.

You mentioned apprenticeships. There is a new programme based around mobility of apprenticeships, which provides a European exchange that will enhance the experience for apprentices. There are many new opportunities, and we should try to begin them now, as we have two years in which to do so. Even though we do not know the detail of the programmes, we could put in practice the models, approaches and methodology and have them ready to roll out as soon as the programme starts.

As a sector, in the east of Scotland, we have been looking at priorities as our starting point. It is important that we move towards working with other sectors to see where we can align priorities and positions.

I agree with Morag Keith’s point about technical assistance. For instance, the JESSICA—joint European support for sustainable investment in city areas—programme was launched yesterday. It is a new financial engineering initiative for urban regeneration. However, we do not have any practical experience of how the programme works because it is only one day old, so we will have to look to the Welsh, who are currently delivering it in the UK.

Looking to the future, we are moving towards a much more results-based approach in outputs. It would be useful to have technical assistance to carry out research on that in a raft of areas. That is very important: it is an underused budget, and we should make the most of it. Scotland has been really innovative in trialling financial engineering and, with regard to the Commission’s proposals for local delivery mechanisms, we have such mechanisms in place already in the form of CPPs and other delivery bodies such as Scottish Enterprise and UHI. We are in a strong position, but we do not have a lot of information about some areas that it would be good to explore.

I am conscious of the time, and I am extremely conscious of the weather; I want everyone to get home safely. If anyone wants to mention anything that we have missed, please do so now. If any of you go away from the committee and think that you should have said something or that we missed something, please do not be shy about writing or e-mailing to let me or the clerks know. We will have a quick few minutes for a wash-up session if anyone requires it.

I missed out one thing when I was talking about rural broadband. If we had organised it across the territorial cohesion programmes—there is still an opportunity to do so—we could have got up to £100 million, which is four times what you have got for Scotland. The supply of fast-speed broadband to rural areas and rural people is eligible for 50 per cent funding. That is the potential difference if you examine and exploit the different types of funds that are available, although I am not saying that it would be easy or that it is a walk in the park.

We heard that one loud and clear. Lessons learned are very important, because they allow us not to make the same mistake twice. I hope that we will look at that.

I thank you all for your participation. We have found the meeting to be extremely informative, and there are a number of strands that we can take forward in our committee report.

Please accept our offer: if you think that we have missed anything, or if you go away and have a conversation with your colleagues and think, “I should have said that”, please let the committee know. We are keen to gather the ideas and experiences of everyone out there so that we can take them forward in some of those areas by taking a team Scotland approach and punching above our weight.

15:29 Meeting suspended.

15:38 On resuming—