Select Committee on Work and Pensions Sixth Report

1 Introduction


1. The aim of the European Social Fund (ESF) is to develop the labour market and human resources in a number of policy areas, such as encouraging lifelong learning, equal opportunities and entrepreneurship. [1] The focus of the ESF is on preventing and combating unemployment, promoting training and integrating into the labour market those at risk of social exclusion, including disabled people, members of ethnic minorities, ex-offenders and the homeless. In short, the ESF seeks to improve the employability of individuals by providing financial support to people and projects across the EU. As Mr Lönnroth, Deputy Director General at the European Commission, told us, the ultimate beneficiary of the ESF is the individual. He said:

"We want to be at the service of those who have the most difficulties in society and the labour market."[2]

2. Although member states remain responsible for their own employment policies, the ESF, as the EU's main employment instrument, has a distinctive role in supporting national employment policies. While the ESF promotes projects that counter social exclusion, it is important to note that the ESF does not support social welfare projects. Instead, the ESF is part of a strategic framework through which the EU seeks to improve the workings of the labour market and to achieve one of the EU's strategic goals: to become one of the "most dynamic and knowledge-based economies in the world."[3]

3. The ESF has funding of €60 billion for the seven years to 2006, and is able to support a range of projects throughout the EU including:

  • Education and vocational training projects
  • Schemes to promote and encourage employment and self-employment
  • Initiatives to generate new sources of employment
  • Improvements to national, regional and local employment services
  • Schemes to foster links between the worlds of work, education and research
  • Innovative measures and pilot projects to create work in local communities.

4. Mr Lönnroth, described the distinctiveness of the ESF. He said:

    " The particularity of the European Social Fund is that it covers all [three structural fund] objectives; it is working under all areas across the whole Union because it has, as a basic objective, the development of human resources which is based on a national strategy. The second particularity of the European Social Fund is that it is the only fund which focuses on the individual. The ultimate beneficiary - if I can use that word because it is a complex term - is the individual." [4]

5. During our inquiry into the ESF, we witnessed at first hand some good examples of projects. In our report, we describe these projects and discuss some of the criticisms of the ESF that were reported to us. Despite the ESF's relatively large budget and the undoubted success of a number of organisations that have benefited from financial support from the ESF, it became evident to us during our inquiry, that there was scope for improvement in some aspects of the way in which the ESF was administered. In our view it is essential that the ESF's distinctive contribution is not lost as a result of excessive bureaucracy surrounding ESF or by a failure of the Government to provide appropriate transitional funding at the end of the current programming period. We believe it would be timely for the Government to weed out some of the management layers and excessive bureaucracy that surrounds the ESF and stifles service providers. We are especially interested to safeguard the role played by ESF in helping vulnerable people to get back into the labour market. In our view, the interest of the final client is at risk of being lost amidst a bureaucratic quagmire.


6. The Committee launched its inquiry into the European Social Fund on 13 February of this year. The deadline for submissions was 2 April. We received 21 memoranda from individuals and organisations. The list of appendices gives the details of those organisations that have submitted evidence and the written evidence is published with this report. The submissions fall into three distinct categories. The first group includes various government bodies/agencies, including DWP,[5] Learning and Skills Council (LSC) (local and national) and some Government Offices (GOs).[6] The second group includes some support organisations for voluntary and community (V&C) groups, many of which are involved in countering social exclusion. The third group includes a few memoranda from individuals who have particular complaints about rejection or late payment of grant.

7. We heard oral evidence from representatives of the European Commission, Learning and Skills Council, V&C organisations and Government Offices (London and Yorkshire and the Humber). We also took oral evidence from Chris Pond, Parliamentary Under Secretary of State, Department for Work and Pensions. We wish to record our thanks to all those individuals who helped the Committee.

8. From the outset, we have been interested in investigating the policy and management of the ESF, looking for examples of good practice and opportunities for improvement and assessing the implications for the UK after the end of the current programming period in 2006. In terms of the background information on the structural funds generally and the ESF in particular, much of the written evidence, as expected, was descriptive and generally non-controversial. However, a number of organisations, especially project sponsors from the voluntary sector, expressed serious reservations about the new system of co-financing that has been introduced in England. The case for and against the system of co-financing became one of the dominant themes of the written evidence. We decided to concentrate on this aspect since it falls within the responsibility of the DWP and hence the remit of this Committee. It also has a bearing on a number of other concerns about ESF, especially the role of the community and voluntary sector organisations and the level of administration that organisations are expected to shoulder. Throughout the inquiry we were keen to focus on how ESF functions at the micro-level, especially the way in which ESF projects are selected, managed, administered and audited. We decided to visit a number of service providers to see and hear at first hand what service providers themselves felt about the ESF. We were pleased that a number of witnesses provided helpful case studies illustrating their work.[7]

9. We have marshalled a great deal of evidence on ESF.[8] However, we were mindful that the mid-term evaluation would provide the most comprehensive body of knowledge about the workings of the ESF in the UK and throughout the EU.[9] However, at the time of writing little is known about the results of the evaluation. The UK Government is expected to publish its findings later in the year and the Commission is expected to publish the results from all EU member states sometime early in 2004.

10. We wish to record our thanks to those individuals and organisations that generously shared their experience and expertise with us. We hope that this report and the supporting evidence will go some way to raising the profile of the ESF and encouraging the sharing of best practice to the benefit of individuals wishing to improve their access to the labour market.

1   The ESF was created in 1957 Back

2   Q2 Back

3   Lisbon European Council Conclusions, March 2000 and also see EC Treaty Articles 146-148 on the ESF Back

4   Q2 Back

5   The Department for Work and Pensions took over policy responsibility for ESF from DfEE in the Machinery of Government changes following the General Election in June 2001. Back

6   There are 47 local LSC and nine Government Offices in England. Back

7   Material on selected projects is published with the evidence.  Back

8   The Commission and Government bodies produce a large amount of information on the ESF in the form of programming documents, guidance, and newsletters.  Back

9   The mid term review provides the opportunity for programmes to be adjusted in the light of mid­term assessment and for the performance reserve to be allocated. Member States would submit their reviews of their use of structural funds in line with European Commission's guidelines. The Minister told us that the Commission has made it clear that only fairly marginal changes to existing programmes are likely to be approved. (See Q 215) The Commission's mid-term review guidelines were expected to be published sometime in April 2003, they were delayed and not adopted until 28 August, a delay of four months. Meanwhile member states continued with their evaluations. (See Q213) The DTI is responsible for co-ordinating policy on the future of structural funds. Back

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