Select Committee on Work and Pensions Sixth Report

8 Post 2006

107. The current programming period runs to the end of 2006, although some ESF payments under the current programme may continue until 2008 under the N+2(years) rule. In 2004, the Commission is expected to publish its proposals for the next programming period, which is likely to be for the years 2007-13. During the next few years, a number of applicant members will join the EU.[213] One consequence of EU enlargement is that spending plans for EU structural funds under the next programming period are expected radically to alter the level and pattern of structural funds that are currently allocated to existing member states. For example, in the case of the UK, it is possible that after 2006 only Cornwall will receive Objective 1 status and that the coverage for Objective 2 will be greatly reduced, with some reduction in Objective 3 spending. Some transitional assistance may be available to some areas. Mr Lönnroth, (European Commission) indicated that there was a need to concentrate funds on the objective 1 regions, whatever they might be, but also that problems of social cohesion, including problems of criminality, poverty and lone parents, extended across the EU. [214] In describing what happens to the areas outside Objective 1 regions, Mr Lönnroth, said:

    There are two options - presuming that there will be something outside these objectives - one is to take the Lisbon Strategy and the European Employment Strategy and other strategies at the top as an umbrella. The European funding would be based on these themes: managing change, alleviating poverty, pockets of criminality and social exclusion, and then the zoning would be left for the member states. Or you would have the other option which would be to define in advance the regions, including the mountainous areas, the sparsely populated areas and so on and then within those areas there would be a set of criteria which the member states would then fund. I cannot take a stand on this because this is something which the leaders - the political decision makers - will decide at the end by unanimity.[215]

108. The Commission's proposals for the next programming period will be made in the Third Cohesion Report with draft legislation and decisions made sometime in 2005-06. The detailed timetable is set out below:

    "Following the Third Cohesion Report, it is expected that the Commission will move swiftly to publish draft Structural Fund regulations for the next financial period, possibly in early 2004. Negotiations will then begin between Member States and the Commission, with a European Council meeting in the second half of 2005 expected to agree the Structural Fund budget. If this timetable were adhered to, then the process of setting up the next Structural Fund programmes should be able to get underway in 2006 for a 2007 start. The Commission has committed to trying to get a prompt start to the next Structural Fund programmes after the lengthy delays to programmes experienced at the start of the current programme period. "[216]

109. As part of the continuing debate on the future, the UK Government set out its position in "A Modern Regional Policy for the United Kingdom'.[217] In its paper, the Government highlighted "its commitment to a modern devolved and decentralised regional policy". The Paper proposed that a new EU framework for Devolved Regional policy should form the basis of the UK position on reform of EU regional policy. In broad terms, the Government proposes to repatriate regional funding and concentrate funds on the poorer countries of the EU. According to the Government, its proposals were based on the following key objectives:

  • an EU regional policy that fully supports, and adds value to, the ambitious devolution, decentralisation and regional development agenda already being pursued domestically.
  • significantly simpler and more flexible implementation and monitoring arrangements, which are proportionate to the amount of funding available and which allow integration with other policies.
  • EU regional policy that actively supports the EU's agenda for higher productivity and employment and for developing human resources.
  • continued need for strong regional policy in all Member States, which is both fair, and the most effective use of funds, to concentrate the EU's limited financial and administrative resources on the poorest Member States, where they will add most value.
  • ensure that expenditure on EU regional policy, as with other elements of the EU budget, achieves a fair budgetary deal for the UK taxpayer.[218]

110. The Government's consultation document contained no reference to the social inclusion agenda and only a few references to ESF specifically. Mr Philips (LVSTC) told us that apologies for the omission of the social inclusion agenda had been given at meetings. He added:

    "I think that, in a 100-page document, it is more than an apology that is needed not to have mentioned the social inclusion agenda. So one wonders where a lot of the vision is, in terms of the future, on the governmental side; on the voluntary sector side, I think it is a real challenge, because, as we said earlier, we have never had a big stake in the capital investment that goes on through the Structural Funds. We are minor players there, if players at all, where the main contribution has been in the revenue side, the human resources side. Essentially what is happening with the Structural Funds is that they are homing in on social inclusion and the issues of inequality, and the fact of the matter is that we have become a prosperous but more unequal society, and there are major issues there that we have got to tackle. We would see the sector making a major contribution in delivering on that equalising agenda, and we would expect the Structural Funds to come in, across Europe, to address this particular agenda."

111. The consultation period on the Government's proposals ended on 4 July. The Department for Trade and Industry made a brief statement analysing the responses to its proposals on 17 September.[219] A more detailed statement is expected sometime in the autumn and is expected to cover how employment, skills and social inclusion priorities would be incorporated in the new approach. According to the Government's analysis, most respondents commented on the contribution that structural funds had made to particular projects. Many respondents also stated their belief in the added value of the Structural Funds, particularly the way that Structural Funds were operated. The benefits included the use of strategic programming with EU-wide priorities, the value of partnership working and policy innovations that were supported by specific funds (technical assistance, Regional Innovation Strategies, the PEACE Programmes for Northern Ireland). As regards employment, skills and social inclusion, the analysis also stated that many of the stakeholders interested in ESF:

    "asked for more information on how the types of projects funded under Objective 3 or through the European Social Fund in Objectives 1 and 2 areas could be supported under the Government's proposals. Some were not convinced about the Government's commitment to the social inclusion agenda and felt that it had historically been driven by the Structural Funds rather than by domestic initiatives."[220]

112. Relatively few of the written submissions to our inquiry commented on the position of the ESF after 2006. Of the few that did, one commented that enlargement "will inevitably shift the majority of resources to the East" but reaffirmed the need for cities such as London to exploit structural funds to combat unemployment and poverty.[221] Mencap expressed concern that "ESF funding is due to come to an end in 2006".[222] It mentioned that Mencap's Education and Employment services relied heavily upon ESF funding. It called for reassurance that funding from DWP would be made available to replace ESF funding after 2006.

113. It became evident during the course of our inquiry that very little forward planning has been done on what happens after 2006. To some extent, this is understandable given that the uncertainty about the various scenarios that may emerge. However, despite the uncertain future, we did sense a strong belief in the case for a robust regional and employment policy in the UK, regardless of whether the policy is devised domestically or at a European level. Ms Henderson (GOSW) told us:

    "Some of the benefits of European Funds one would not want to lose: one is the fact that it is a partnership approach so it involves lots of people and locks them into a strategy for an area, or a theme. The other advantage is that it is generally cross-cutting, going back to the question you asked a moment ago, we are not looking just at skills alone, or building alone. But, inevitably, there are bits of process associated with European Funds, even though we are mitigating some of them, and match-funding used to be the bugbear but co-financing is helping address that. The other one tends to be the monitoring regime, which sometimes can seem to people rather onerous, though we try to make sure that it is not excessively onerous in relation to the risk."[223]

114. Mr Philips (LVSTC) told us that ESF had been a "very good way of opening up discussions between match-funding bodies, local agencies, on the statutory side and the voluntary sector, and that has been very much valued."[224]Clearly, the details of any detailed proposals from the UK Government and the European Commission will need to be assessed and compared, but we were left in no doubt that public funding will still be needed to support employment, training and social inclusion. Although the ESF grant represents a relatively small proportion of the spending on training in the regions, it still represents, on average, some £500 million of spending in England per year. However, we are concerned that some worthwhile projects may be too dependent on ESF funding, especially those outside the mainstream and that after 2006 they may be left stranded without adequate funding. Of course, projects should do all they can to find alternative funding streams. But Government also has an important role to play. The Minister told us that lessons from ESF should be learned, but that it would be too early to say what transitional arrangements would be in place. [225]The Minister said that while there were some organisations that would find alternative funding, "there will be other organisations for whom .[.]. it is going to come as a bit of a shock ..[..].. and we need to make sure that those organisations are aware first of all that this particular umbilical cord is going to have to be cut after2006."[226]

115. Ms Jane Evans, Head of the European Social Fund Division,, Joint International Unit pointed out to us that the Government's consultation paper offers some comfort in that if the Government's proposals were adopted by the EU, it proposes what is called the net funding approach - that "no country or region of the United Kingdom should lose out as a result of the change." She also pointed out that the DWP and DfES have also indicated their strong interest in ensuring some sort of similar arrangement that reflects the Structural Fund money that comes into their particular policy areas.[227] As regards transitional funding, the Minister told us that " It does not mean that it is not going to be there, but all that can be guaranteed at this stage is that arrangements will be put in place to ease that transition."[228]Although we were told that the Government's proposals contained some comfort about levels of future funding, we are concerned that that they provide a less than full commitment to providing comparable funding and as such are likely to provide only cold comfort to service providers and their clients. The next Comprehensive Spending Review (CSR), which will cover the years 2005/6 to 2007/8, coincidentally includes the final years of the current programming period and the start of the new period. In our view it is essential that the Government reduces the financial insecurity that may blight service providers, especially those in the community and voluntary sector, over the coming years, by using the next CSR to identify the funding that it will make available to support ESF activities, regardless of whether the Government's proposals for reforming regional policy within the EU are adopted or not. Although the decisions determining the next programming period are unlikely to be made before 2005/6, we believe that worthwhile projects, many of which are already in a fragile financial position, should be given greater certainty about their future funding stream. Such projects should not be left without funds in the run up to the new programming period, while negotiations are under way within the EU. As the Minister acknowledged, a factor behind the Government's consultation paper on regional policy was the wish to minimise the effect on the UK's contributions to the EU budget following EU enlargement. While this desire is understandable, we are concerned that the social agenda issues, which were not addressed in the consultation paper, may be neglected. We request that the Government explains the reasons for the omission of the social inclusion agenda from the Government's consultation paper. We also recommend that the Government assures us that work on the labour market and countering social exclusion, which is funded by the ESF, will not be lost under the Government's proposals for the post-2006 regime and that proper transitional funding will be in place in good time.

213   The enlargement of the EU in 2004 will not affect the Structural Fund allocations of the current member states in the 2000-06 programme period. Separate funding has been allocated for accession members. Back

214   Q38 Back

215   Q39 Back

216   Ev 117 Back

217   A Modern Regional Policy for the United Kingdom, published March 2003. Back

218 Back

219 Back

220   Some commented that tackling social exclusion and promoting sustainable development and equal opportunities should be higher up the agenda than they are now compared to economic growth. Back

221   For example, Ev 73 Back

222   Ev 156 Back

223   Q123 Back

224   Q153 Back

225   Q216 Back

226   Q217 Back

227   Q217 Back

228   Q218 Back

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