European Regional Development Fund

Written evidence submitted by Nottinghamshire County Council

Summary

The County Council welcomes the opportunity to submit evidence to the Communities and Local Government Committee on the operation of ERDF in England. Our key points can be summarised as follows:

§ Our main experience both in programme management and applicant/recipient roles is with Priority Axis 2 funding, which is geographically targeted in Nottinghamshire

§ Local arrangements covering the former coalfield areas of Derbyshire and Nottinghamshire are robust and long-standing, and partners are able to engage in all stages from initial priority setting through to project selection

§ Creative responses to the fairly rigid ERDF framework have enabled projects such as multi-user routes, public transport improvements and social enterprise support to be funded

§ However there remain some blockages, not least with the regional management tier (DCLG) and their interpretation of EU funding regulations. A live example of this is the difficulty that East Midlands lead authorities are having in securing ERDF to support broadband programmes

§ The transfer of ERDF responsibility from the RDA to a regional DCLG office has had a detrimental impact on the ERDF programme. A lengthy period of inactivity followed the transfer, which left many projects effectively ‘in limbo’ with applications pending appraisal and approval

§ Further efforts should be made at national Government level to align funding streams where possible and practicable to do so. Recent guidance for Regional Growth Fund monies recommends alignment with ERDF, but this is often not feasible due to different funding and application cycles. Further and more formal integration of funding streams (i.e. matching at source) should be considered in future programming periods

1. How, and on what, is ERDF spent?

1.1. In the East Midlands ERDF is spent on promoting economic growth and enterprise development through the use of three Priority Axes. Priority Axis 1 (PA1) is used for increasing commercialisation and / or innovation of small and medium-sized enterprises in the region's priority sectors. Priority Axis 2 (PA2) is delegated to the regions most disadvantaged districts, including the district areas of Ashfield , Bassetlaw and Mansfield in Nottinghamshire. Nottinghamshire PA2 district areas work together with two district areas in Derbyshire to manage all five allocations collectively, in the interests of sharing resources and ensuring strategic priorities are met. Priority Axis 3 (PA3) is used for technical assistance (mainly management of the programme both regionally and locally).

1.2. Calls for applications under PA1 and PA3 are managed directly out of DCLG. For PA2, Calls are made by local partnerships and expressions of interest are assessed by a panel with representation from both DCLG and the local partnership. The results of assessment are then approved at a local level before any proposals are invited to submit full applications. Within the North Notts and North Derbyshire areas, a Joint Executive Group made up of Elected Members from relevant local authorities operates virtually to receive and approve a list of proposals to be brought forward. For projects in all Priority Axes, full applications are then sought from selected EoIs and submitted to DCLG where they are appraised. Subject to successful completion of appraisal, approvals are then sought via the local governance structures for ERDF – in the East Midlands, typically through the Investment Group of the LMC. Contracting after approval is with DCLG; management and monitoring after approval also rests with DCLG.

1.3. PA1 has produced some excellent innovation and knowledge transfer projects, many centred around Universities. In the local area, this includes the University of Nottingham’s Environmental Technology Centre, which assists SMEs to improve their environmental and financial performance by providing them with access to emerging and established technologies, the University’s Institute for Aerospace Technology, a knowledge and technology transfer facility for aerospace innovation in the region, and the Future Factory project at Nottingham Trent University, a product, process and service design centre for sustainable business practice for SMEs, allowing access to services to enhance business competitiveness. These initiatives are accessible to SMEs throughout the County.

1.4. Innovation networks (iNets) have also been funded, each one supporting one of the region’s priority sectors. For example the Healthcare and Bioscience iNet has provided research and development facilities for a sector that is increasingly vital to growth in the region. Nottingham Development Enterprise has developed the Science City SME Energy Programme supporting the local Green-Tech SME sector, facilitating collaborations and joint ventures between SMEs and universities, and providing test beds to pilot products. The County Council also works with NDE to deliver outcomes around the green economy, and part of NDE’s work is to encourage site development focused on low-carbon enterprise in the north of the County.

1.5. PA2 supports enterprise development in disadvantaged areas of the region. For the three eligible districts in Nottinghamshire, this has brought an allocation of £14m ERDF over the period of the programme, delivering projects to support people developing their own business ideas and growing them into viable enterprises. When match funding is taken into account, this represents investment of some £20m over the programming period.

1.6. PA2 has supported a range of local activities, many focused on enterprise development and job growth. Nottinghamshire benefited from regionally provided delivery of business support until the closure of these services in 2011. These were financed through separate ERDF allocations. In future, Nottinghamshire PA2 ERDF will support the delivery of similar services through Nottinghamshire Business Venture and the Prince’s Trust. A scheme to provide pre-start enterprise coaching, delivered by an independent local organisation (LEO), is also already running in Ashfield and Mansfield.

1.7. PA2 also supports the development of space for businesses to start up and grow. Sites and premises has been a focus for development in North Notts, such as a new business centre in Hucknall; a creative industry-targeted development at Worksop Creative Village; new business premises in Mansfield which being well connected into the new public transport interchange, helps to maximise the impact of other, unrelated public expenditure. Also funded was an innovative scheme by Framework Housing Association in Ashfield which integrated business premises into a housing project for vulnerable people, thus helping to tackle employment issues among a hard-to-reach group.

1.8. As well as these typical uses of ERDF, there have been other creative uses in North Nottinghamshire. ERDF support was provided for public transport improvements that increase access to employment sites, and a project was funded to support development of social enterprise and community anchor organisations. ERDF has also improved public realm and constructed cycle routes where these have demonstrable economic impact. This type of activity is limited by the non-Lisbon threshold set for the Programme as a whole at 23% of expenditure, but local examples include the Retford Market Square physical improvement project and the Sherwood Network of Multi-User Routes.

1.9. For the future, Nottinghamshire has committed ERDF support to broadband development to underpin the BD-UK programme in the ERDF eligible areas. This proposal is currently under appraisal. When approved, it will provide better broadband to SME business users in North Nottinghamshire, helping them to realise the benefits of broadband connectivity.

1.10. PA3 also provides a small degree of funding to support the management of the local programme. The County Council has not participated in this activity owing to the stringent management requirements, and the administrative complexities that would be involved in managing a technical assistance programme covering actions by seven different District and two County Councils.

2. Is the taxpayer in England obtaining value for money from the ERDF?

2.1 ERDF acts as an effective way of supporting job creation and enterprise growth projects that may not otherwise see the light of day. In effect the fund is doubled as match funding is brought in either from the public sector, or, increasingly, the private sector.

2.2 Added value of the ERDF also lies in the development of a Local Investment Plan to co-ordinate the elements of the programme with projects working in distinct ways, but linked through the common aim of generating local enterprise growth.

2.3 Links with innovation-based projects funded through the PA1 stream could allow for even more synergy in building the local economy. University knowledge transfer projects in particular feed into the restructuring and realignment of the local economy to provide additional reasons for innovative SMEs to start up and relocate here. For Nottinghamshire, the question is how to ensure such projects cascade their benefits outside the immediate urban location into the wider SME community across the County. We are seeking to work through our network of innovation centres to build relationships with Universities, so the companies working in innovation sectors in North Nottinghamshire can exploit these opportunities.

2.4 Difficulties which affect accessibility of the funds, and hence have an impact on take up, include the specificity of the funds, and the administration requirements.

2.5 Under the ERDF Programme 2007-13, three district areas in Nottinghamshire which are identified as target areas – Bassetlaw, Ashfield and Mansfield – have been allocated £14m ERDF grant. When taking into account the match funding requirement, this represents investment of some £20m. However, it should be noted that this funding has not yet all been committed. Pipeline proposals are in development which, if approved, will take up the remaining funds. Although a substantial amount, £14m is much less than the North Notts area secured in ERDF grant through the previous programmes, when the level of resources was much higher.

2.6 The scope of the funding is very narrowly focused on SME development. Whilst this is partly down to compliance with the State Aid framework, the programming documents contain a list of activities which are eligible, which are in turn related to those specified in the Lisbon Treaty. Only the activities which are listed are eligible. They cannot be amended or added to without reference back to the European Commission. Nottinghamshire County Council believes that greater flexibility and responsiveness is needed in future programmes, with programmes written in such a way as to widen access, not to close it off. For example, the current East Midlands Regional Programme does not provide for broadband infrastructure to be paid for in general, which has led to difficulties in securing ERDF resources to match the BD-UK programme, even though the UK Government has said that it wants this to happen.

2.7 ERDF is possibly the most monitored, audited and evaluated economic development fund available. One of the main issues practitioners have about ERDF is how risk-averse projects have to be. Although this means approved projects are scrutinised and assessed as being good value for money, the level of monitoring and auditing of ERDF projects can sometimes cause severe delays in approvals and this can reduce value for money by increasing costs..

3. Could the funds contributed to, and paid out on, regeneration through ERDF be spent more effectively by repatriating ERDF to the Government in London?

3.1 Superficially this argument has some merit as it would in theory cut out a level of bureaucracy and make the system less of an administrative burden. There is also an argument that it could be more closely aligned to government priorities and strategies.

3.2 However, there is a counter-argument that these funds are effectively ring-fenced by being part of the EU Structural Funds. They have to be spent on the priorities of local economic development and therefore cannot be absorbed into the wider budget where they might be used for other purposes. The priorities of a ‘localist’ approach to economic development also necessitate some level of devolution of strategy.

3.3 For at least the last two programmes, ERDF has been regionally managed, and in the current programme has had further delegation down to local levels for effective local engagement and targeting of expenditure. Nottinghamshire County Council is of the view that these mechanisms enable local knowledge to inform the most effective use of ERDF. The further away from the local level that programmes are managed, the less likely it is that local solutions are prioritised, or even considered.

3.4 The most effective projects are those delivered in line with local need and to this effect we believe we have produced a local strategy for investment of ERDF (the Local Investment Plan) which has brought forward, through a competitive process, a good range of projects tailored to support enterprise development and economic growth. (Incidentally, the lack of a similar regional focus within the European Social Fund has had the effect of making it less responsive to local needs).

3.5 Local management and influence over the funds is important if they are to fulfil the needs of local areas. Although a national model may be being promoted for simplicity, it is important that local influence and decision-making is retained. Also, local allocations ensure that funding is targeted on areas of need, and also enables effective planning within a realistic framework based on funding actually available.

3.6 To illustrate this point, the European Social Fund (ESF) was "repatriated" by the Department for Work & Pensions (DWP) away from local management through the former Learning and Skills Councils. This led to a dramatic drop in smaller community organisations and local authorities being able to draw down ESF to impact on local employment skills issues, as the funding was now focused on large contracts with a national or regional basis. It also reduced ability to align ESF with ERDF activities. So if repatriation were under consideration, we would want issues of access and alignment to be considered in that process.

3.7 Any revisions to structure should also consider the requirement for improved parity / connectivity between the structural funds and UK funding streams. The recent RGF bidding rounds have all referred to the possibility of using ERDF as match funding, but bidding timeframes did not practically allow this. For the future, there needs to be much greater communication between different Government Departments and a shared objective to achieve this.

4. With the abolition of the Regional Development Agencies responsibility for ERDF in England passes to DCLG. What effects are these changes having on the administration, assessment and payment of ERDF?

4.1 The initial disruption of the changes caused significant delays and confusion in the administration of the programme. It particularly caused delays in the appraisal of new project applications and of those already in the pipeline.

4.2 In the East Midlands there has been some continuity as many of the ERDF team transferred over to DCLG. However, there have been a number of top level changes that have been frustrating for local partners.

4.3 The changes in governance structures meant that there was a long gap between the final meeting of the Programme Monitoring Committee and the first meeting of the new Local Management Committee which meant delays to the signing off of projects. Local partners were also previously involved in Priority sub-groups which have been replaced by a single Investment sub-group with less representation.

4.4 Payments have generally continued to be made on a quarterly basis and there have been no reports to Nottinghamshire County Council of problems or significant delays.

4.5 The loss of the Single Programme funds controlled by the RDAs led to a number of projects closing early or not starting as they lost match funding. This has more to do with the deficit reduction programme than the abolition of the RDAs but has significant current and future implications for the programme as projects struggle to find the necessary levels of match funding. The replacements for the Single Programme, such as RGF and GPF, are not within the control or influence of the DCLG staff who operate the ERDF programme (even though those staff do undertake the monitoring of approved RGF projects) and this creates issues over timetabling and general approaches to approval. For example, no effort is made to ensure that bidding timeframes or processes align. We are aware that some RGF bids have been approved with ERDF identified match which there is no prospect of bidding rounds to secure.

4.6 As another example, the County Council has experienced a number of difficulties in securing approval to the broadband project, even though the other Government Department involved has identified ERDF as an appropriate source of match funding. These issues would not necessarily be resolved by repatriation of funds / national ERDF programmes, but require greater coordination and joint working between different Government Departments.

Nottinghamshire County Council

April 2012