European Regional Development Fund

Written evidence submitted by the Local Government Association

1 Summary

1.1 The Local Government Association (LGA) is a voluntary membership body and our member authorities cover every part of England and Wales. Together they represent over 50 million people and spend around £113 billion a year on local services. They include county Councils, Metropolitan District Councils, English Unitary Authorities, London Boroughs and Shire District Councils, along with Fire Authorities, Police Authorities, National Park Authorities and Passenger Transport Authorities.

1.2 We welcome the opportunity to respond to the DCLG Select Committee Inquiry into the functioning of the European Regional Development Fund.

1.3 Councils have a long and successful history of engaging with the European programmes for economic and skills development, using them to turn the lives of people and places around - and are keen to continue this.

1.4 While the institutional landscape has changed recently with the emergence of Local Enterprise Partnerships (LEPs) and the abolition of Regional Development Agencies (RDAs), councils remain one of the key drivers of growth. Councils' continued work on economic growth is therefore vital.

1.5 We have built this submission around the questions posed by the committee inquiry, and from our response would like to emphasise the following key messages:

1.5.1 European Regional Development Fund provides valuable support to local projects that would not otherwise exist.

1.5.2 Every place has different opportunities and barriers to growth; and Local Government has a long history of using ERDF to turn their places around - playing a range of managerial, administrative, strategic, and supporting roles.

1.5.3 The transition of management for ERDF following the abolition of Regional Development Agencies has gone relatively well; although there is some concern around the availability of match-funding which has affected many projects.

1.5.4 It is now certain that England will have ERDF from 2014-2020, and so we want to focus on making sure that investment delivers the best possible outcomes for local economies.

2 How and, on what, is ERDF spent?

2.1 The European Regional Development Fund has primarily aimed to revitalise economies through investing in capital assets and infrastructure, supporting small and medium sized businesses, and funding innovation in key sectors.

2.2 ERDF is allocated to areas based on their level of deprivation assessed by their GDP level of the EU average. These areas, categorised by the EU as NUTS II, are sub-regional and generally mirror County or City boundaries, although overall programmes have been run regionally (previously managed by the Regional Development Agencies).

2.3 Councils access and use ERDF to achieve positive change for their communities. Examples can be found in our report More than Money: maximising the value of EU funds.

2.4 Generally speaking, the priority areas for investment can be relevant to most places given their broad nature. However the needs between local economies differ – for instance the growth opportunities in Leicester, Blackpool and Newcastle will vary significantly.

2.5 The trick is to give local partners at the level of functional economic areas the scope to tailor ERDF investment to deliver against their longer term ambitions for the place. The abolition of the Regional Development Agencies and move towards the 2014-2020 programmes provides a critical opportunity to establish ERDF programmes that – in line with government policy - better respond to the needs of functional economies.

2.6 The European Commission’s proposed regulations for the 2014 – 2020 ERDF programmes place greater emphasis on the need for the programmes to be more locally responsive, including a stronger role for local authorities and more tools making it easier to delegate funding to local areas.

2.7 Local Government has played a variety of crucial roles in ensuring communities and businesses benefit from ERDF, this includes: managing and delivering some local elements of ERDF, strategically leading and shaping ERDF investment plans, accessing ERDF to run projects (including the provision of match-funding), and supporting local businesses and third sector organisations to access the funds. Councils are keen to continue playing this variety of roles in the future.

2.8 ERDF also funds participation in the nine European territorial cooperation programmes, such as Interreg. These programmes enable partners in England to work in cooperation with European partners in the pursuit of joint objectives. Councils, together with universities, are generally most active in these programmes.

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

3.1 Yes. But there is always scope to better improve the efficiency and outcomes from ERDF. To achieve additional value for money, ERDF should: be locally relevant, deliver EU added-value, join-up with other investment streams in an area, and be managed effectively. We look at each of these briefly below:

3.1.1 Locally relevant – ERDF must fund projects that are relevant to the needs of communities and businesses, contributing to the prosperity of their areas. Councils, as locally accountable agencies with agreed strategies for developing their economies, are perfectly placed to help ERDF achieve this. Over-prescription of spending priorities and management decisions at the EU and national level must not militate against this, local partnerships must be free to lead and shape spending in their area.

3.1.2 Deliver EU added-value – ERDF can offer a range of additional benefits that domestic funds generally do not. We have explored these in some detail in More than Money: maximising the added value of EU funds, arguing added value can include: stable seven year programming periods, new partnerships, innovation in spending, and funding for projects that would not otherwise exist.

3.1.3 Join-up with other investment – It is crucial that ERDF fits with other national and local investments seeking to achieve similar objectives within places. This reduces duplication, and will be important for ensuring there is sufficient match-funding available to draw down ERDF investment. Furthermore, matching capital investment from ERDF with revenue spending from other programmes is valuable, for instance allowing local authorities to match ERDF funded job creation activity with skills provision to train-up local people to take those jobs.

3.1.4 Efficient management – EU programmes can be plagued by administrative complexities and burdens, with EU auditors coming down heavily on instances of financial mismanagement. Effective management of ERDF is important for delivering value for money, but it is critical that ERDF Managing Authorities do not focus on efficient administration to the detriment of flexible responsive spending meeting the needs of communities.

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

4.1 No, while the funds are far from perfect, they guarantee local areas a stable level of investment over seven years – this would not be the case if funds were repatriated.

4.2 Either way, negotiations in Brussels now make it certain that England will continue to have ERDF from 2014 – 2020, and discussion should now focus on how to make that investment work best for businesses, communities, and economies.

4.3 It is well accepted by Government and partners that the national economy is made up of a series of local economies, with few clear patterns between northern and southern areas or between urban and rural areas, the latest EU GDP statistics show that England has the widest disparity between rich and poor areas in the whole of Europe [1] - a one-size fits all model cannot address the disparities between areas.

4.4 ERDF must therefore be taken as part of the wider devolution of economic development policy which is beginning to give Local Enterprise Partnerships and Cities new tools to support growth. But as part of this, it is likely that different local authorities and their partners will want to engage with ERDF in different ways, depending on; the allocation of ERDF to their area, their ambitions and administrative potential, and on the economic strategy for their place.

4.5 We believe Government should invite local areas to consider how they might best engage with ERDF from 2014-2020, so that a future delivery model can be designed in a way that balances local influence over spending with the proportionate administrative demands of the programme at local and national levels.

4.6 In essence, Local Authorities may seek to play five general roles, including:

4.6.1 Managing local elements of ERDF – Local Authorities, as individuals or in groups, are well placed to deliver local elements of ERDF as part of a wider local economic strategy for their sub-regional economy, which may include a Town, City, County, or group of Counties. Local partners must have the opportunity to explore whether (and how) sub-regional management is realistic, and to pursue it if so.

4.6.2 Locally shaped priorities and objectives – local partners must have the opportunity to influence the spending of ERDF in their area so that it fits with the local economic strategy for a place; this can be achieved through day-to-day influence over administrative teams, project sign-off responsibility, seats on management and oversight committees, and in negotiating and agreeing the new ERDF programme.

4.6.3 Accessing programmes to deliver projects – Local Authorities will be a leading agency in accessing the programme to deliver projects in their area, often providing match-funding to draw it down, and will often be partners in bids from other partners. In those places where the ERDF is responsive to local priorities, Local Authorities may be content to access ERDF in this way with minimum involvement in programme management.

4.6.4 Innovating with ERDF investments – Councils are well placed to use ERDF in new and innovative ways, for instance in establishing revolving funds such as JESSICAs and JEREMIEs. This will be increasingly important in future programmes, so too will be greater link up with European Investment Bank initiatives.

4.6.5 Supporting businesses and third sector organisations to access ERDF – Councils help promote and support the development of bids for ERDF from other groups, and can access Technical Assistance funding to set up units that can do this more thoroughly. Local agencies should continue to be able to provide this function, ensuring high performing local business and third sector organisations are supported to grow by ERDF.

4.7 There are all sorts of different ways that ERDF can be delivered, while still contributing to local ambitions for each place. In our report, EU Funds and Place Based budgets, we set out one approach whereby ERDF might be spent in a way that helps address government’s major public service objectives, that is to achieve better value for money, to be more effective, and to be driven by communities.

4.8 We set out an ambitious but achievable approach, which first joins up the delivery of the main EU funds (including ERDF, the European Social Fund and the European Rural Development Fund) into a set of single programmes at the sub-national level, and then offers local partners the opportunity to manage local packages of EU funds as part of a joined-up local development budget.

5 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?

5.1 The abolition of the Regional Development Agencies sparked one of the largest mid-programme changes to ERDF in its history. We were supportive of Government’s focus on trying to implement reforms with minimum disruption to spending on projects, while taking opportunities to give local areas greater influence over spending with a commitment to making the future 2014-20 ERDF programmes far more locally driven.

5.2 The general approach pursued by DCLG has been to maintain the regional ERDF management teams, but moved into the department’s organisational structure, and reforming the membership of the newly named Local Management Committees. There have also been steps taken to harmonise some administrative processes between the different regional programmes. Generally speaking, the administrative transition has gone well.

5.3 However many projects fell through or were put at risk by the withdrawal of RDA match-funding, the cuts have also increased concerns that there are insufficient resources to draw down the remaining funds left in the ERDF programmes. An LGA survey revealed that over two-thirds of respondent councils were not confident about the availability of match-funding for the ERDF remaining in their regional programme, over half had projects or potential projects which had either fallen through or were at risk of doing so.

5.4 Government has sought some measures to attract match-funding, from the Regional Growth Fund for instance, but over the next year or so it may become apparent that some elements within programmes are not meeting their spending targets due to an unavailability of match-funding. If the circumstance arises we would urge government to consider what is necessary to ensure all ERDF funds are drawn down during this critical time for local economies, because we cannot afford to return this investment to Brussels.

6 Final comment and further information

6.1 We welcome the DCLG Select Committee’s inquiry into the functioning of ERDF. We would be pleased to follow up with partners on anything offered in this submission, and would be happy to offer oral evidence to the committee.

6.2 Further information on reports referenced in this submission can be found online at http://www.local.gov.uk/eu-funding, including:

6.2.1 More than money: maximising the value of EU funds

6.2.2 EU funding survey on council involvement with future EU funds

6.2.3 EU funds and place-based budgets

Local Government Association

April 2012