Select Committee on Welsh Affairs Minutes of Evidence

Examination of Witnesses (Questions 20-39)



  20. In the case of Merseyside, we have heard it is eight to ten weeks on average from proper application to approval; would that be similar in the other two examples?
  (Mr Bayly) Eight to12 is what we tell partners we will be aiming for. Our best is five. As John says, very good projects can go through briskly. We have certainly had ones that have taken a lot longer and, as John says, a lot of that is to do with not having got the pre-application process right. In terms of our own processes there are two points worth adding. We do have a peer group structure for inputting into the appraisal process. The partnership initially wanted it but was worried about whether it would delay things. 73 per cent of projects go through it first time and it is a useful input in the "being cruel to be kind" point that we talked about earlier, so we find that useful. The second point I wanted to go back to was John's concern about the development of a project. Whether I talk to people who put together small community projects or Tim Smith who sponsored the Eden Project, the consistent message one gets is that the most difficult stage is taking a vision and turning it into a coherent project. Once it is a project with a coherent business plan, making an application for grant is relatively straightforward. So we did put a lot of effort into trying to grow capacity—and I have talked about our strategy group and I have talked about the task force to help people with that—and I think it has been helpful, but I still do not think in our programme management that it is working as well as would be ideal. We are continuing to focus on improving help to people who have got a really sparky idea but have not got the resource to turn it into a coherent project, which is an important ingredient in programme management.

  21. Taking on board the changes that you are making in South Yorkshire, do you think that you have got the application system as simple and straightforward as possible in each case? Secondly, and related I guess, do you think that your potential applicants understand the system well enough.
  (Mr Flamson) Very good questions. If I answer the second question first, I think people, certainly in Merseyside, understand the processes that they need to go through, but they are starting to raise questions now as to whether the decision-making process, as they would see it, is artificially elongated by the very partnership that we have. In other words, the pre-application stage in their terms (this is partners speaking) may take too long. They are reasonably satisfied that once an application is lodged with the Government Office as a formal application that it will be turned around in reasonable time and that if there are some things wrong with it then it will be delayed; they understand that. I think the questions that we are having within our partnership—and only the other day I was discussing this with local authority chief executives—is how do we shorten that period? That in itself is a big question because you have to answer that question by saying whose responsibility is it? Whose responsibility is good project development? Is it the responsibility of the project sponsor to convert some of their ideas into credible propositions that will cut the mustard whether they are applying for a European grant or going to a bank manager. I think that is a big issue and I think that people need to be mature about that and they might say, "Yes, we do think the project sponsors have more responsibility than hitherto has been acknowledged in that area", and as a partnership we have been asking whether partners are putting sufficient attention into the project development stage. I will give a very short example of that. My regional director and I were asked by local authority chief executives "How could we help you better with increasing the pace of the programme and the spend conversion?" And we said,"Put more effort, more staff into the project development and project management stage. That is how you could help us." I think that is a message that needs to be understood by quite a range of partners.
  (Ms Yates) For my part, I would say that within the programme directorate in South Yorkshire there are 40-46 staff engaged on this pre-project activity work that we have been talking about and that has paid a lot of dividends. I have a discrete other group that deals with formal appraisal of the application forms in order to make sure that there is a degree of independence and neutrality in their assessment. As an example of have we got it right, I would say that, again coming back to the review that we did in the summer asking partners whether they felt that what we were doing was fit for purpose now, one of the suggestions was that we needed to move away from registration of interest forms, for example. In one area of the programme where we are looking at infrastructure developments in key sites, three large swathes of South Yorkshire where we have got overarching plans, we took the decision that we did not need to look at individual projects at early stages within those plans because if the plans stood up to independent scrutiny, they were assessed by external consultants, then why do we need to go through this extra layer of bureaucracy to test out every single jot and tick of a particular idea because we need to get on and start formally approving some of the schemes? I would say that we constantly have to look at timescales, complexities, how well people understand what the trip wires are, and do our best to minimise all of that. At the end of the day it is equally frustrating for us if something takes several months to get approved as it is for the people waiting for the answer.
  (Mr Bayly) If you came to Cornwall and you stopped people in the street and asked those questions, you would get a very wide range of answers and it would depend a bit on their contact with the programme. For people who are reasonably regular applicants the process is well bedded down, but that distinction matters to us because we have a disproportionate number of projects coming to us from people who are only ever going to make one application for European grant in their lives so using that application as a training programme is not satisfactory. And I think for those first-time comers there probably still is a lack of clarity. They would certainly say that had been their experience as they approached it, I suspect. A lot of it is to do—and John touched on this—not so much with the process of filling in a form but what we are trying to do through the programme. The fact that we are asking people, "What are we buying from you for Cornwall out of your project?" is a concept that they are not expecting. They are looking at this as simply a funding mechanism for their vision rather than a two-way contract. I think that affects the way that people come at the programme. Once we have got that established as the ball-game, then the dialogue flows more easily.

Dr Francis

  22. What criteria are employed to ensure that the application assessment systems are consistent across the whole of the Objective 1 area?
  (Mr White) In terms of consistency I should first say that the regulations require the project selection criteria to be agreed by the programme monitoring committee, which obviously requires input from a wide variety of partners to ensure, hopefully, consistency. What do you mean exactly by consistency? Do you mean within a region?
  (Mr Flamson) Within a region as opposed to between regions?

  23. Within a region.
  (Mr Flamson) As Gary says, the PMC oversees the project selection criteria it will use at that appraisal stage. There are lots of other things in terms of commissioning and the strategic fit which influence an application, which tend not to be called project selection criteria, and that tends to be how you influence the generation of projects, the strategy that you have, the single programming documents, the programme complement, the commissioning framework sometimes that people would produce saying "we need projects in this measure or that measure", so you get a lot of that direction that goes on at a pre-application stage. In our case, what we are also doing, particularly with cross-cutting themes such as equal opportunities, environmental sustainability and ICT, is trying to identify minimum quality thresholds in respect of those themes in guidance to applicants to say your project needs to be at a certain level of quality for us to even consider it, but that, again, would be approved by the PMC. Then in terms of the project selection criteria themselves we have two sets, one for ERDF applications and one for ESF, and I think that there is a commonalty in terms of the type of things that we would look at and you would expect to be looked at. I think where the discretion comes in is the degree to which people articulate the strategic fit within the project selection criteria and in some cases the degree to which they weight or score cross-cutting themes, and it is a big debate the partners have to ensure consistency and fairness and also to ensure that people understand what they are going to be judged against when they submit an application. So it is taken very, very seriously and it is also reviewed. We have just undertaken a review of our ERDF project selection criteria (we had a review of our ESF some months ago) so it is not a "once and for all" thing, we are constantly looking at it.
  (Ms Yates) I would say that for the test about financial viability and value for money that we have to apply to project, the wording may be different but the sentiments will be the same. What will be different will be the criteria that apply as a result of our individual strategies because there is discretion for partners to introduce their own test and their own checks and balances for projects. I guess the key areas which are set out in the small brochure that I sent—track record, viability, deliverability, readiness to proceed—would be very strong elements in all of our frameworks for assessment.
  (Mr Bayly) In process and structure terms there are really three levels to this. There is a rules level and we all have guidance on appraisal and scoring systems to apply to the appraisal of individual projects. The second level is around expertise. Our secretariat is structured to align with the five priorities in the programme, so the appraisal officers who are focusing on a particular priority are actually quite small in number and you can quite quickly build up expertise because they are talking about projects the whole time so there is a focus pool of expertise in the appraisal process. Then there is the oversight level and all our projects, except the ones that are large enough to go to the PMC itself, go to a single working group, and that has within it the chairs of all the peer group appraisal teams, so there is an oversight process that brings things together, and I think those three working together create quite a resilient framework.

Chris Ruane

  24. To what extent has the private sector been involved in the development of Objective 1 strategy within your areas? Has the private sector taken the lead, been an equal partners or been lagging behind? Are you happy with the role that the private sector has played in your region? Perhaps for Cornwall and South Yorkshire—I am not sure how many cows there are on Merseyside—thinking about the rural firms and farms as well.
  (Mr Bayly) If I can kick off because I trailed our interest in this earlier. I will pick up on both industrial small businesses and the agricultural and fishing industries as well which are significant to us. It was very clear at the beginning that the private sector was very anxious to be involved and to have ownership in the programme and actually was very suspicious that what they would be faced with would be a hugely bureaucratic public sector controlled process. They said very early on that they would like there to be a task force focusing on the small business agenda. Likewise, the farming and food interests said that they would like a task force focused on that. The two sectors were in slightly different positions. We are very fortunate that even before the Objective 1 programme had become a possibility for Cornwall the Cornwall Agricultural Group had come into existence which was creating a forum through which all the farming interests in Cornwall were speaking with a single voice.

  25. What was that called?
  (Mr Bayly) The Cornwall Agricultural Group (CAG) and it was natural to look to them to form a task force focusing on the agricultural and food agenda, and that includes both the private sector farmers, food producers, but also the HE and FE sectors and the NFU and so on, so it is a very inclusive group. And I think it is fair to say that the opportunity to develop that group became one of the drivers of our thinking on growing task forces. It was the first into existence, it was the first to begin to deliver a serious strategy, and the first to get into serious project sponsorship. It has been a very useful beacon to turn to as an exemplar for others. On the industrial and commercial side, the problem was greater. The private sector representative bodies are not heavyweight in Cornwall and were very open about that, but in a similar way they had built a forum which brought together the CBI, the Federation of Small Businesses, the Institute of Directors, the Chamber of Commerce, and they asked to be recognised as a task force. We asked them to develop a strategy and that took quite a lot of time and quite a lot of investment of effort in partnership with them from the Objective 1 Partnership Office (which supports the strategy group I described) so it is a conscious investment in capacity building, but we now have a task force strategy which is focused on supporting high growth small businesses which is itself leading business support groups and helping projects, and which has the RDA, Business Link, Small Business Service and Cornwall Enterprise (which is a local county council enterprise group) within it, which is defining the priorities for Business Link activity in Cornwall, for example. And for me that has been a very positive journey over the last 18 months. It took quite a lot of hard work and we invested that, in recognition that Cornwall would not have the advantages that some regions have of natural spokespeople for the private sector.

  26. Can you give any numbers of the successful private sector projects and are you personally satisfied with the level of private sector involvement for your area?
  (Mr Bayly) I am rather impressed by both the quality and level of engagement in what is a very small business community. We are talking about people engaging here who are frequently one-man bands. A very nice example is a major IT project in Cornwall focusing on broad band which has been promoted by the private sector where they brought in BT as a partner, which is focusing on upgrading the exchanges and helping to develop coherence of demand in broad band in Cornwall, an excellent project, which I think would not have progressed in the way it did if we had not had full private sector engagement.
  (Ms Yates) For South Yorkshire I would like to give an example of an initiative we call Invest for Growth, a 10 million programme of business support activity and grants to individual companies to do a variety of things, but the end result is that for every 1 of European money that we give we have a demonstrated 10 increase in sales. That scheme is administered by the Business Link in South Yorkshire but the way that applications come forward and ideas are examined is done entirely by employer-led committees, private sector groups, who undertake peer review basically, and will give a price and accept or reject applications that come forward, and that is entirely run by people from within the business community.

  27. Can I ask you again, can you give us approximate numbers of successful private sector projects in your area? Are you personally satisfied with the level of private sector involvement?
  (Ms Yates) The number of projects that come through the Invest For Growth scheme, because that is the main way we are targeting business support so far, I would hazard a guess, with 181 projects in total running in the programme, that we are up to 50 coming through Invest For Growth. It is one of our quickest, biggest wins really. Certainly the majority of the jobs in the 1,000 jobs target that we were getting close to at the end of last year are going to come via that scheme. You asked about rural businesses. We are funding a rural enabling body through Objective 1 in South Yorkshire and that will be the conduit for projects that come forward from rural business and individual farmers, giving advice and impetus to their ideas. We are looking at having an Invest for Growth Rural scheme, a business-based grants scheme, specifically for agricultural business.

  28. How have you found the response of the farmers and rural business communities? Have you needed to jolly them along?
  (Ms Yates) Using Euro speak, the AGGF element of Objective 1 in South Yorkshire is very small. We have certainly engaged colleagues in DEFRA, the Rural Development Service and ADAS and we have made as many people aware of what we are doing as possible so that we can pass on the advice. I think you always have to work hard at communicating and we will probably find at the end of our programme that there were far too many people who did not know we were there, but I am confident that the people who need to know and will give advice can pass that on where it is appropriate.
  (Mr Flamson) We engage in different ways. You need to define the private sector because I think you have different challenges with different sectors. It can be sub-divided between the businesses themselves (those who were making the money and which probably do not have much time to engage in committees or anything), those who are business representative organisations (whether it be the CBI or a Chamber of Commerce), and then those who are providing services to businesses, some of which are publicly funded like the Small Business Service companies, and our engagement tends to be different depending on who they are. I think, secondly, when one looks at the engagement of the private sector—and I think this is an issue that the European Commission is concerned about in the UK—what do we mean? Do we mean people putting forward grant applications or do we mean people engaging in driving the investment policy and strategies of the partnership? I suppose in the case of applicants, the Merseyside experience has been that there has been low demand and the access to those particularly small and medium enterprises is through intermediary organisations, so it is a very vital part of our strategy to work with the new SBS company, which is Greater Merseyside Enterprise, to work with the universities, and sometimes to work with some of the large companies like Ford Jaguar to get through to their supply chain, or to work with the big banks, and it is out of that we get schemes that are of direct benefit to the SME community, whether it be a Merseyside Special Investment Fund that could have hundreds of applications, or working with Ford Jaguar to create a learning centre which is a partly a training centre for some of its suppliers as well as the local community, or working with the universities, say, in the bio-pharmaceutical sector in looking at incubator schemes as well as research and eventually training schemes. So it does differ and we have found that getting through to the SME community means that you sometimes have to engineer the apparatus. In terms of the management of our programme some of the big businesses group together and they contribute 35,000 a year to the management of the programme. They are like the FTSE Club of Merseyside under a North West business leadership team. In addition to that, we fund a private sector co-ordinator who is located in the Liverpool Chamber of Commerce but whose job is to bring together the groups to which Richard was alluding to try and get a bit more focus and homogeneity in the private sector's approach. We also fund what we call "sector champions", for example in the ICT field or the automotive field, business talking to business, to help generate ideas, and some of that is bearing fruit, particularly in areas like the bio-pharmaceutical or digital areas where Merseyside is particularly strong on computer games software and the like. It is getting what our business colleagues would call the "business intermediaries" right and also getting the business products, whether that be finance, advice or property, right. Without those two things, the SME community, no matter how willing, cannot take advantage of the benefits of the programmes.

Mrs Williams

  29. Is there any difference in the success rates of larger projects backed by larger businesses and smaller projects emanating from the SME sector?
  (Ms Yates) If I make a stab at that. It sounds a bit of a platitude but it may be too soon to be able to tell because the large infrastructure projects take a very long time to come forward, and whilst we have approved integrated development plans in South Yorkshire, we have identified priority schemes, we will not see action on the ground and cranes and bulldozers for a while yet. It is just the nature of large capital schemes, frustrating though it may be, that the visual evidence is not there, whereas small grants to companies resulting in stories in the newspaper about an extra five or six jobs in an individual company can be a weekly occurrence.

  30. It may be easier for Mr Flamson to answer because of his past longer experience.
  (Mr Flamson) I think we are at a very critical time in terms of business support in the UK. Are we talking about direct grants and subsidy to businesses or are we talking of investment in businesses through equity or loans, the Merseyside Special Investment Fund, or are we talking about access to high quality services, such as the application of best practice in product design or marketing or application of new technologies and, critically, how much are businesses prepared to pay for top quality services, whether they are part-funded by European monies or not? I actually think we have a business development agenda as much as we have a European funded agenda. I do not mean to side-step the question because what we are finding is that individual businesses are saying, "Okay, what is the product?" If we had a group of small and medium enterprises here they would say, "What is it I can get from this programme?" They understand start-up grants but European programmes are not like mini regional selective assistance schemes. It is not as if we are giving lots of small grants to a range of businesses. In the main, certainly for the Merseyside programme (and I cannot speak for others) we are doing that through a business intermediary. That means if you are a company you may get a high-quality training scheme through a university or management development programme at a lower cost than if you had bought that in other ways if it had not been funded through European funding, so you are getting services that are of direct benefit to your business. In the same way, of course, you are getting access to premises if new factories or incubator schemes have been created. Or you are getting access to contracts that are emerging out of some of the bigger developments. So it is a whole range of business opportunities, but the key is that our primary access to small and medium enterprises is through intermediaries like Greater Merseyside Enterprise or the universities or the Chamber of Commerce or, indeed, through local authorities or developers who are providing them with finance, with property or with advice. We are very much an investment fund backing these intermediaries.
  (Mr Bayly) I think it may be worth saying in Cornwall that there are some specific circumstances which may have parallels with parts of the Wales in that although GDP per head is very low, unemployment (though in places is significantly above the national average) is not up with the worst in the UK, so the challenge is not so much job creation per se as creating quality jobs that have higher value added and pay better. We do not have big business so this is inevitably a small business agenda. So what the task force's strategy is interested in is how you grow more intellectual capital, how you foster research that can be spun into the higher growth business start-ups, the sort of incubation and innovation strategies and investments that will support that. That very much takes you into the territory that John is talking about in wanting intelligent intermediaries that can work the interface between higher education and between private sector pools of intellectual capital and the public sector bodies like Business Link to make the connections and foster that agenda.

Mr Williams

  31. I think you have all outlined how small businesses and small business people are involved in your programmes. When we talked to the Federation of Small Businesses in Wales they told us pretty emphatically that their members have difficulty participating in the programmes basically because of the difficulty of attending those meetings and the fact that there was no compensation for loss of earnings. Have you come across that problem and how have you dealt with it, if you have?
  (Mr Bayly) We have. The FSB said exactly that us and we decided that we would pay an attendance allowance to people from small businesses. It is a unique feature for small businesses and it is an allowance of about 11 an hour for people who come to the more formal parts of the Objective 1 process. We also pay their travel and subsistence. That was brought to us as a problem and we did specifically address it, recognising that in that sense Cornwall is a bit unique in its industrial structure.
  (Mr Flamson) We have not experienced the problem in terms of people wanting reimbursement. The issue of how programmes like ours interface with small companies, hard-pressed companies, busy companies, is voiced regularly and consistently and well by the Federation of Small Business's representative within our government structures, and I think that is very helpful because it is keeping the spotlight on a group of customers that often gets missed when one is looking at stakeholder interest. I think there is a big communication challenge over what are the right methods of communicating in a cost-effective way that can engage businesses? Also, it is about getting the right messages over to people because sometimes SMEs do not like to hear the message "No, you cannot have a grant directly for your business." "No, we cannot spent this money on a list of five things that you think will prosper the economy." Whatever our personal views this is the context in which we are operating, but then it becomes a more mature discussion when you say, "What is it then that you would spend our money on as an SME that would help your bottom line or help your company survive or grow?" I think that is where we get real value from the likes of the Federation of Small Businesses and the Chamber of Commerce because they say, "What you should be doing is . . ." and that is precisely the route we then use in constructing contracts with people like the SBS company or like the university, saying we need management development training of this sort, we need access to finance. It is informed very, very strongly but I think it is something that needs to be kept under constant review in terms of customer feedback in terms of whether it is working.
  (Ms Yates) I would certainly agree with all of that. I think the word "involvement" means different things to different people. At one extreme, involvement means being the recipient of funding. When I begin to describe the decision-making structure, the way that the programme works, the average length of time we can spend at a partnership meeting, that can be a big turn off and I do not think that being involved is what people really mean. Knowing about and understanding how the programme fits in with other sources of advice and support for companies is important, and that is where we do need to have very close connections with Chambers of Commerce, with the Federation, and other representative groups for companies. But I certainly would not recommend wholesale involvement in our programmes because it would drive people to distraction.

Mrs Williams

  32. How would you say the Objective 1 programme is accessing private funds for projects, which form an important part of the overall financial plan for implementation of the programme?
  (Ms Yates) Are you specifically talking about private sector match funding or more generally?

  33. In general. In your particular region are you currently on target in accessing private funds for the implementation of the programme?
  (Ms Yates) We are not not on course and the financial tables just have to be worked at all the time and we have to collect in the cocktail of funds across projects, initiatives, priorities and, indeed, programmes as a whole. I think what is slightly more difficult is working at the public sector match funding where, quite commonly, our analysis shows across the programmes that we have got plenty of it but it may not always be where we want it to be. Particularly when we are dealing with business and giving support to existing or new companies, programmes can struggle to identify where the appropriate match funding is, be it public sector or private sector, but we have a variety of ways of doing that. If we know that we have got sufficient in our areas to cover the general array of activity, then mechanisms such as looking at regional selective assistance across the sub-region, to see how much is going on eligible activity in South Yorkshire for example, and counting that at high level as match funding which we know is coming into an area, is one way.

  34. Is that a huge problem?
  (Ms Yates) It is not proving to be, although there have been a couple of projects where we have had to work hard and be flexible and creative about how we are going to apply match funding but, no, we have no show stoppers, no project that has got to the point of approval or claim where they have not been able to demonstrate that they have got funding in place.
  (Mr Flamson) I think it is relatively straightforward if you are dealing with large property developments and you know that a developer is coming along with a certain amount of private sector cash and there would be public funding alongside. Where it becomes more difficult is in the area I come back to when you are dealing through intermediaries with a group of SMEs and you get into the area of charging. What is it that an SME is bringing to the table to complement the European funding, whatever the nature of it, whether it be the start-up of a company, whether it be access to a training or management development scheme, whether it be access to a best practice programme bringing in the best advice from the world, I think some of that is still unproven as to the levels to which we would get that private sector investment in. The early indications, and that is the point Sylvia was making, are not concerning us on the private sector investment, but it is getting the tie-in of the public sector matched to the right programmes. That is more of a problem than the private sector.
  (Mr Bayly) So far as Cornwall is concerned, it is worth saying that the partnership thought when it was developing its strategy and developing its single programming document that getting significant prime sector match funding out of the Cornish economy was going to difficult and our aspirations in our programme complement and financial tables are quite low. One or two quite significant projects like the development of the application of special investment funds for Cornwall are going to make a significant contribution to that. We, like colleagues, have not seen this as a significant trip wire in the programme.

Adam Price

  35. One of the key issues of interest in Wales, as you know, has been the issue of match funding. Can you give us an overview of the position regarding match funding in your own areas where, particularly, the sources of match funding are in different proportions and the application process as well and whether you have some pre matched funds that enable that project?
  (Mrs Yates) If I can start off with that phrase used earlier we are not "the only kid on the block", that is an important one. Compared to other domestic expenditure in our regions this is a small proportion. I think the challenge is to allot the boxes because the match funding from a whole variety of sources, merely hundreds of sources, can be there in total but it is not always where you want it at the right time to fund some of your aspirations in a programme. Certainly in South Yorkshire we have done a number of analyses and charts and tables that show which government programmes, how much, where they are located and what we are doing that matches with that kind of activity. When it comes to individual projects the reality is that there has to be match funding demonstrated, evidenced when a project is approved, and it certainly has to be in place when a claim is made. The way we can do that does not always mean it is down to an individual project applicant, typically a small community based organisation, having to knock on the doors of six or seven agencies trying to collect penny packets of cash. There are other ways we can look at, for example, co-financing. In South Yorkshire I think we were probably doing this first. Working with the Learning and Skills Council we have awarded 85 million for activity that we want to see, but we deliver the education skills, the training elements of our programme, which will then unblock similar amounts of money in the South Yorkshire Learning and Skills Council coffers. It means that for individual European Social Fund Projects sponsors do not have to go and seek the match, it is there, we have done that. An example in the business world, I was starting to refer to earlier, is by looking at the amounts of regional selective assistance that comes into South Yorkshire and counting it almost as a pre-virtual match that enables the investment growth scheme that I was talking about, the 10 million Business Link Project, to proceed. Action plans are another way of unlocking match funding, where you can brigade groups of projects together in an area and look at, for example, the amounts of single regeneration budgets in your neighbourhood, renewal funding and count that as matched. The difficulty comes between cash match and virtual match, are you talking about additional money, are you talking about the amounts that are evidenced to show that the public is contributing to the good in a given area. That can be difficult when you get down to small grant based schemes, typically in the community public development arena, key funds and global grants, and activities like that. One has to work very hard, I think, creatively, but within the rules, making sure that we maximise the vast amounts of other domestic funding regimes that exist.
  (Mr Bayly) I think it is fair to say that at the front end of our programme there were a lot of partners worrying about this agenda at a theoretical level. The Prime Minister visited Cornwall at the time the programme was launching and said the government has not got Objective 1 for Cornwall status in order to let the programme fail. Ministers made it clear if there were good projects that lacked match funding they wanted to work to find solutions. Government Offices were tasked to help to coordinate the process that Sylvia Yates has been describing. It is fair to say so far that we have not found quality projects that we have not been able to help partners to find match funding for. That is not to say that you cannot construct a theoretical problem. If we encounter a real problem we will work on it. We have done and we have found solutions. As yet it is certainly not a show stopper.
  (Mr Flamson) I would echo a number of the points that have been made. When you look at a programme as a whole and you say, will there be enough public investment match funding in this area to match the European fund most people would say yes in each of our areas, that is what was signed up to. It is the assigning of that to the strategies or the sub-strategies that you want to implement, that is what creates the sort of programme management challenge. Two things that are, I think, particular to Merseyside, we have not yet embarked on a co-financing project with the Learning and Skills Council or anybody else but we are in active discussion with the Learning and Skills Council, so it may well be that we will use that. However, we may use the co-financing project more as a strategic procurement tool to drive the demand related ESF provision as much as we would use it to find the match funding. It would be a tool that is available to the programme. Where we have a challenge, I think, and I was alluding to it before, is in that whole sort of business development priority that we have, because the partners have set quite an ambitious target. 40 per cent of our European funding is in what we call Priority 1, which is our developing businesses, that is a large sum of money, 40 per cent of anybody's programme going into what people would see as business support and business development areas. It was always going to be a challenge and it is proving to be a challenge. Trying to tie up projects with regional selective assistance on what the Regional Development Agency is doing or what the higher education institutions are doing is a problem. It becomes increasingly a problem if your partnership is trying to direct the investment. If you just open the doors and say, come to me with your match funding and we will look at a grant, that is one thing, if you say, no, this is what is needed for the economy, and some people then are reluctant or may not want to play ball then you have a partnership challenge. That is what we are facing, it is not critical at this stage but how do we identify the public match funding within that business measure that can properly be allocated to business development projects because some monies are quite small and a small business service company might only be a turnover of 5 million a year and you have a couple of hundred million pounds that you are looking at overall? It is the scale of that challenge that faces us on the business side which is our match funding issue. In other areas it is not a problem, whether that be the ESF side through the Learning and Skills Council voluntary sector or whether it be the property side, where the money is coming forward from the Regional Development Agency or the local authorities. It is the business development side.

  36. It is not so much a match funding problem in terms of large scale infrastructure projects, there are other obstacles.
  (Mr Flamson) That is because the Regional Development Agency in the northwest deserves credit because it is trying to tie its investment strategies in specific locations within Merseyside to our investment strategy. We are now in discussion with them saying, can we take this one stage further and look at combining those monies, a bit like co-financing, so we can make it clearer and easier for potential applicants, because we both have the same objectives. I do not think it is on that side, the infrastructure side, it is more on the business side.
  (Mrs Yates) I echo that in South Yorkshire with Yorkshire Forward.

Dr Francis

  37. Can I follow that up with a more specific question, at what stage does a project need to demonstrate that it has the necessary match funding. We understand that in Wales projects must demonstrate they have the necessary match funding actually before they are finally approved?
  (Mr Bayly) In Cornwall that is the case. We will appraise a project before full evidence is in place but projects are not approved until match funding is guaranteed.
  (Mr Flamson) Likewise. That is one of the reasons why some things have been delayed in the past. People submit applications, they will tell the world that my application is being delayed when in effect they have not given sufficient evidence that the match funding is in place.
  (Mrs Yates) The same which you would expect. Sometimes with longer term projects we may take a phased approach to match funding and look at how much is available in the years one, two and three. If it is a case of knowing there is more in year one then we will still proceed with the caveat that years two and three need to be covered, and work towards doing that with a project rather than hold back and not fund for the entire life-time of the project. We will take the judgment that that is still is a vital thing to do.

  38. Wales is not unusual. Do you think the common approach is a sensible one?
  (Mrs Yates) Without knowing the detail, it does not sound to be dissimilar.
  (Mr Bayly) If I can make an explanatory point, one of the things we are all concerned about, given the provision of N plus two, is that we do not want to approve projects which then may sit around for a long period of time and do not start. We want to ensure that at the point where projects are approved they are ready to go ahead.

Mr Williams

  39. We understand in Sweden the Objective 1 partnerships include members who are in a position to offer match funding, so they can acting as a one-stop shop for ESF money and match funding. Does this system operate in any of your regions?
  (Mrs Yates) I think what I was describing with the Learning and Skills Council co-financing comes close to the Swedish model, but I have no appreciation really of what happens in that Member State. I think what I described sounds exactly like that.
  (Mr Flamson) Another way that you could get close to that on individual projects or programmes is to have a joint commissioning exercise. We are doing that with the Regional Development Agency over some social enterprise so that when we invite bids we jointly invite them so you are almost guaranteeing by the very process of inviting them that you have your act together as joint funders. I think that that is a model we want to explore a bit more.
  (Mr Bayly) The co-financing framework in England is one which in principle is open for a number of bodies to come forward with proposals on, it is not just for the Learning and Skills Council it is also for the Employment Service, the RDAs and possibly the Connexions service.


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