Select Committee on Work and Pensions Minutes of Evidence


Examination of Witnesses (Questions 100 - 119)

WEDNESDAY 21 MAY 2003

MS JANE HENDERSON, MR PHIL MCVEY AND MS ALISON BIDDULPH

  Q100  Andrew Selous: Have you ever detected from any of the smaller voluntary and community organisations that the level of financial management and audit that you need to have over them is burdensome or intrusive at all; is that a common complaint you get from the voluntary sector?

  Mr McVey: It might have been a complaint we received pre-co-financing from small organisations, in fact, I suspect that pre-co-financing there were some very small community organisations that were not engaging with ESF because of that issue. But I think Jane referred earlier on to the fact that we do now see new organisations that were not previously benefitting from ESF actually picking up ESF funding through the Learning and Skills Councils, six in Devon and Cornwall spring to my mind immediately, and I am sure there are examples from Alison's perspective as well.

  Ms Henderson: In fact, one of the umbrella bodies in the South West, SAVAGE, has actually commented that things have improved greatly, as the Fund has developed, and has given praise for quick turnaround, so I think things are improving, never perfect, but I think we are going in the right direction.

  Ms Biddulph: Voluntary and community sector organisations in my part of the country have welcomed the opportunity of co-financing, because actually it has solved for them a difficult problem of match funding. The LSC, or indeed Jobcentre Plus, can provide that at source; and in a recent study commissioned by the West Yorkshire LSC to evaluate the effectiveness of co-financing, 94% of the people who applied for funding said they would apply again, which is a pretty high success rate.

  Q101  Mr Dismore: I want to go on to the issue of co-financing with you, and perhaps you can give us a snapshot of how it actually works in your own individual regions?

  Ms Biddulph: In Yorkshire and the Humber, the Objective 3 co-financing approach, which covers West Yorkshire, North Yorkshire and the Humber, the co-financing approach—

  Q102  Mr Dismore: And East Yorkshire?

  Ms Biddulph: The East Riding, East Yorkshire; we call it the Humber now. We operate our co-financing approach, we monitor it through our Regional Committee, and we have a separate co-financing sub-group, again involving co-financing organisations and regional partners, such as our Regional Development Agency, and the voluntary sector forum, and local authorities. They actually look at the management and implementation of co-financing, they agree and provide recommendations to the Committee on the share of resources that should be allocated through co-financing, and they put recommendations to the Committee and then the Committee takes a monitoring and overseeing role, and at each Regional Committee meeting we will take reports from the respective co-financing organisations on how they are performing. That is the role in relation to the Regional Committee. Also we have a role as a Government Office to ensure that co-financing is implemented properly. We observe all the relevant co-financing appraisal processes and selection of the bids to ensure that there is fair play, also, following the selection of bids, we go out and we inspect a sample of successful and unsuccessful projects to ensure that the projects that are being funded are fulfilling the aims of their original proposal to the LSC and that they remain eligible, and, indeed, we look at the unsuccessful ones as well. That describes briefly some of the ways in which we organise and monitor co-financing in this region. Does that answer your question?

  Q103  Mr Dismore: It answers that part of my question, yes; does anybody have anything radically different?

  Ms Henderson: Yes; one or two little variations.

  Mr McVey: I was just going to mention in terms of actually where we are with co-financing that as well as the LSC, on which there has been a lot of attention, because we have Jobcentre Plus now operating as a co-financing organisation across the region, and also we have two local authorities in Wiltshire and Swindon operating as co-financing organisations, but the process and the way we are carrying things out is pretty much along the same lines as Alison. And we are just at this stage now, going through a series of annual review meetings with the local Learning and Skills Councils to assess progress over the past year.

  Ms Henderson: I think I am right in saying that also we sit by invitation on the co-financing organisations' tendering panels.

  Mr McVey: We do.

  Ms Henderson: So we get a view of the types of projects that are coming through as well.

  Q104  Chairman: It is an important question for us that Andrew Dismore is asking. Just help me; where does the money come from, do you get a per capita allocation in Yorkshire and the Humber, wherever that covers, do you expect the national ESF cake divided by a percentage, or what, does the money fall out of the sky? How do you get your hands on the money?

  Ms Biddulph: The ESF money is allocated to us nationally, according to a formula and framework that was devised at the beginning of the programme; that framework is being reviewed currently as part of the mid-term evaluation process.

  Q105  Mr Dismore: Where does the co-funding money come from?

  Ms Biddulph: The co-funding money comes via the co-financing organisation, from domestic sources of funding.

  Q106  Mr Dismore: So, in the case of a local authority, will it come from the local authority's general funds, or will the local authority get money from central government to spend on co-funding, for example?

  Ms Biddulph: Can I ask my colleague from the South West to answer that, because they have local authority co-financing organisations; currently, I do not.

  Mr McVey: It might be helpful just to say what the specific example is that it is working in, and, I am sorry, I cannot remember if it is Wiltshire or Swindon, we can clarify later.[5] They are co-financing projects that are specifically about helping people with disabilities to get back into the labour market, and the co-financing money is coming out of existing social services budgets, so it is not additional money, but it is the ESF that, of course, is the additional money that is helping them to make extra interventions with people.


  Q107  Mr Dismore: Where does the LSC money come from?

  Mr McVey: The LSC money comes out of the LSCs' national allocation.

  Ms Henderson: That is by design, because when the ESF was set up on this programme it was meant to complement national programmes, so it fits nicely with the European conception.

  Q108  Mr Dismore: One of the suggestions we have had is that voluntary and community organisations, especially working with hard to reach groups, potentially are losing out through co-financing because of the way that it is channelled through these bigger organisations, and I think one of you made a comment about having to deal with a relatively small number of groups now, or organisations, rather than a whole plethora of them. Is the implication of that that smaller groups are now finding it harder to access ESF money?

  Ms Henderson: Certainly, it is not our experience, just to be clear what I meant to say earlier, I might not have been clear; that instead of having lots of different projects we have now fewer actual projects, but that does not mean necessarily there are fewer organisations involved. What we are finding is, it is the more grass roots types of community organisations that are being discovered through the consultation process co-financing has generated, and some of them are coming on stream for the first time. I think Phil mentioned that there are six in Devon and Cornwall who are now in the game, as it were, that were not involved before. If you look at the figures, and I will ask Alison for these, they show that the share of funding going to the voluntary sector is at least as high as it was before co-financing. I do not know if you have got them to hand.

  Ms Biddulph: I have some figures from the Yorkshire and Humber region that suggest, in North Yorkshire LSC, both the actual share and success rate of bids have improved within the voluntary and community sector. North Yorkshire, like the South West, is an area that has a strong rural dimension, deep rural areas, difficulty in accessing services, and there was a lack of skills and capacity especially within that sector to access funding, and in the latest bidding round from North Yorkshire over half the community and voluntary organisations who applied for funding were successful. And North Yorkshire was an area in the past where many of the notional or indicative amounts that we had set aside for North Yorkshire were not taken up; that is no longer the case.

  Q109  Mr Dismore: But, going back to my original question, what about the smaller groups, the ones working with difficult, hard to reach clients, and you may have a different configuration but as a result of that configuration you may even be spending more on voluntary and community groups, but is the configuration different so those sorts of people are losing out?

  Ms Henderson: No. I think we can give you a number of examples which show precisely the opposite, projects which are reaching out to people with mental health problems, to disaffected young people, and so on. We could give you a note or we could mention some of them now.

  Q110  Mr Dismore: I think, if you will give us a note, that will be fine?

  Ms Henderson: We will do that.[6]

  Ms Biddulph: Can I say that very much the emphasis and what we are trying to fund is not just groups but our aim is on the end beneficiary and target beneficiary, and we are finding that, through co-financing, Learning and Skills Councils are able to use their money and their ESF money actually to connect the most disadvantaged groups to employment-creating opportunities. I think round about 35% of people who enter ESF have no formal qualifications and yet the ESF element is able to reach out and provide them with support.

  Mr McVey: I think, if I might just add, in closing this question, earlier we were talking about Learning and Skills Councils but Jobcentre Plus, of course, are coming on now as a co-financing organisation, and the early evidence is that, in particular, they are reaching those groups we are talking about. For example, in London, the latest co-financing bidding round, 66% of the allocated funding from Jobcentre Plus is going to community and voluntary sector organisations, so it seems to be reaching right down.

  Ms Henderson: It might also be worth adding that there is a capacity-building element to the budgets of most co-financing organisations; in our region, we insisted that there should be such an element, which varies between 4% and 12% of the budget, depending on the LSC in question. So we are trying to generate capacity out there.

  Ms Biddulph: The same is true of our region as well.

  Q111  Mr Dismore: The original idea was that ESF spending should be additional to existing programmes, or programmes that would have happened anyway; and I think there is a risk, through co-financing, that ESF programmes become submerged or subsumed into existing programmes, and, bearing in mind what you were saying about the sources of funding, that seems to me to be a potential risk. To what extent can you assure us that ESF programmes are in addition to what would have happened anyway, rather than simply substituting ESF money for what would have been, effectively, government spending anyway, and from what source of government?

  Mr McVey: I think probably fully to answer the question I would have to trawl all through the project selection process, which is something I think we do not want to do this afternoon, but certainly the project selection and appraisal process and the way that our Regional Committees are fully engaged in selecting how ESF should be used in the region is the first check, if you like, to ensure that that is not the case, followed later on by the monitoring process that happens, and Jane talked about visiting individual projects and seeing what is happening on the ground. But certainly it is one of the key first checks on any application for ESF to ensure that it is additional to what otherwise might happen.

  Ms Henderson: The essence is, the ESF programme actually requires the Fund to be used in support of national programmes, so what we are looking for is the added value on that which we know those programmes would normally offer. So it is extra support, it is reaching people who would not be reached, it is engaging groups that are not engaged or are not well catered for; and I can assure you that the Regional Committees are pretty astute and sharp in looking for any evidence of people just trying to substitute for the normal funds in the main programmes.

  Ms Biddulph: The ESF element must be fully auditable as well on the European requirements and regulation.

  Q112  Mr Dismore: So each of you can give us an absolute assurance that none of the ESF money is being substituted for what would have been mainstream funding?

  Ms Henderson: I think my answer stands for itself.

  Ms Biddulph: Yes.

  Mr McVey: Yes.

  Q113  Mrs Humble: Can I ask you about the mid-term review that is taking place this year, and I just wonder how Government Offices' experience of ESF is being fed into the process of the mid-term review?

  Ms Henderson: This is Objective 3 we are talking about here.

  Ms Biddulph: The Objective 3 evaluation is taking place at the level of England, and it follows a number of strands. It is being co-ordinated by the DWP Analytical Services Division, who are independent of the ESF operation. They have pulled together a number of strands, as I said, and Government Offices are involved in the steering groups for those different elements. There is an overall Evaluation Standing Group, it is called, which actually monitors and oversees progress of the evaluation. It is expected to report in September, and there will be an opportunity for the Committee to look at the findings and consider the recommendations, and the final report will be sent to the Commission in December. The mid-term evaluation provides an important opportunity to look at how the programme is performing and whether there have been any key strategic changes that have taken place, for example, in the labour market, since the start of the programme in 2000.[7]


  Q114  Mrs Humble: Can I ask you a follow-on. I understand that there is a thing called a performance reserve, this is 4%; is that having an effect upon you, does it incentivise you in the sort of work that you are doing?

  Ms Henderson: It means that we have to try to achieve our outputs, yes, certainly, and that is what we would want to do anyway, but it always helps. What we do not know, of course, is just how the performance reserve will be allocated, so that keeps the incentive particularly sharp. We think that, as far as we know, the UK is on target to meet the requirements of getting the UK share of the performance reserve, but then it will need to be allocated at national level, and we are awaiting guidance from the Commission on that. And clearly we will want to look at the mid-term evaluation when that concludes and consider what that implies for the way funds are distributed in future.

  Q115  Mrs Humble: Has that affected in any way though the way that you have used ESF funds so far, the fact that this 4% is being held out there?

  Ms Henderson: Apart from focussing attention on outputs, I am not sure.

  Ms Biddulph: I would only reiterate what Jane says. We have had a major challenge in implementing the new system of co-financing and getting performance underway anyway; this would be the icing on the cake, really. I would not say it is distorting or diverting our energies and resources.

  Mr McVey: I think what it has done is added to something I said earlier on, actually, about ensuring that we work really fully with projects to help them deliver the outcomes that they want to deliver with their ESF, and has put even more emphasis on the monitoring and support of projects and knowing where we are with the programme.

  Q116  Chairman: Could you just confirm for me that the performance reserve of 4% would be unlikely to be awarded to any nation state that had underspent significantly; is that your understanding of the rules?

  Ms Henderson: I think so, but I am not an expert on this.

  Ms Biddulph: It is a difficult question to answer at this stage because we are still waiting for firm guidance from the European Commission. Certainly, on Objective 3, we are very confident of our spend position and feel well placed to access funds.

  Q117  Chairman: But are you not tied umbilically to the nation states of Scotland and Wales, in terms of the performance review, because, presumably, from a Commission point of view, it is a national question whether you qualify for a performance reserve bonus or not, and were it to be the case, perish the thought, that our colleagues in Wales and Scotland were not as efficient, if that is the way of describing it, at making use of the Funds then we might all get dragged down by poor performance in other parts of the United Kingdom?

  Ms Henderson: Chairman, to be honest, I am not sure we are the right people to be asked that question, but I am sure we could get the Department for Work and Pensions to give you an answer to that.

  Chairman: Sure; it is just of interest to me, in passing.

  Q118  Miss Begg: This is just a quick question about EQUAL. I know that the EQUAL initiative is not applying in the UK, but, from your perspective, is there a distinctive contribution made by EQUAL, or has what it is doing already been undertaken in the UK under the Objective 1, 2 and 3 programmes that we are carrying out already? I presume the reason we are not doing a full EQUAL initiative here is because it has been a judgment by national government?

  Ms Henderson: You are quite right, this is not a programme Government Offices actually run, so we are not as close to it as we are the others, but we are making an effort to keep in touch with it and draw learning from it.

  Mr McVey: Firstly, we did do some work with voluntary and statutory organisations prior to the programme starting to identify how we might learn lessons from EQUAL once projects actually got up and running, because, clearly, it is testing new ways of working, new ways of helping people who are disadvantaged back into the labour market. It is probably too early for me to say whether or not the things that are being carried out are all things that might not always be done, because we have yet to move to the dissemination stage, which is the stage where projects start to share the activities. But what we will be doing in the region is identifying the sorts of activities that have begun in the region with EQUAL partnerships, even though they are not necessarily just working in the region, and seeing how we can share that into the Objective 1, 2 and 3 programmes as they move into the second half of the programme.

  Q119  Mr Stewart: I would like to ask about some bigger picture issues. You will know that the programme period runs out in 2006, we have also got the influence of enlargement in the EU, with the ten new accession countries. The sort of landscape I would predict post-2006 would be we will see a massive run-down in Objective 1 areas, with the possible exception of Cornwall, a reduction in Objective 2, albeit with some traditional support, and a reduction in Objective 3 as well, apart from some community initiatives. So it is going to be a big hit on ESF, and there will be a big statistical effect with the ten new accession countries, because their GDP, by and large, is much lower than ours, and, as you know, Objective 1 is roughly 75% of average European GDP, Poland has about 40% of average GDP, so the statistical effect will mean a massive reduction in Objective 1. The Commission have predicted 37 million Europeans will lose Objective 1 post-2006; this is a real shock to the UK economy, and indeed the European economy. What is your view on this, would you agree with my assessment of the landscape, or, if not, what is your assessment of that?

  Ms Henderson: The first thing to say is that when people went into the current round of Structural Funds they knew this was going to happen, so I would not say any of the programmes in my region would be surprised to know that money was going to be very much less, if it continued, and indeed that we were not preparing for that eventuality by trying to mainstream what we are doing and build capacity. I think the way ESF runs is very helpful in that way, it is building capacity in co-financing organisations who will continue afterwards. But, of course, as I am sure you are aware, the Government has launched a consultation on the UK position, putting forward a suggestion that, you might say, the wealthier countries look after their own regional needs, though with an underpinning guarantee from the Treasury, but either way it is going to mean a lot less money. So, yes, to that extent, I agree with your analysis.


5   Please refer to the supplementary memorandum submitted by the Government Office for the South West (also on behalf of the Government Office for Yorkshire and The Humber) (ESF 20), at Ev 54. Back

6   Please refer to the supplementary memorandum submitted by the Government Office for the South West (also on behalf of the Government Office for Yorkshire and The Humber) (ESF 20), at Ev 54. Back

7   The mid term evaluation is over seen by the Evaluation Standing Group who monitor the progress and quality of the research. The Evaluation will be completed by September 2003. The National Programme Monitoring Committee will then consider the findings and identify whether any changes to the Programme are needed in the light of this work. Back


 
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