European Social Fund Contents

1The European Social Fund

1.The European Social Fund (ESF) is a vastly important resource. It provides £500 million per year of funding, helping people in some of the UK’s most disadvantaged communities.1 The programmes it funds deliver employment and skills support to people who are poorly served or neglected by mainstream provision. This includes disabled people, offenders and prison leavers, the long-term unemployed and people with multiple barriers to work. When the UK leaves the EU, the Government will have to decide how to sustain this support. In 2016, the Chancellor of the Exchequer announced that Government would continue to fund existing ESF programmes scheduled to finish after Brexit.2 Beyond that, the future is uncertain.

Box 1: Examples of ESF-funded programmes

The Bad Boys Bakery is a working bakery located in Brixton prison. It is run by Working Links and co-financed by the National Offender Management Service and the ESF. It provides skills training and work experience to offenders, improving their chances of securing a good job on release. It has led to a dramatic cut in reoffending rates. On average, 47% of ex-offenders reoffend within twelve months of release from prison. For participants of Bad Boys Bakery, that figure is just 3%.3

Aim4Work supports adults in London who are unemployed and have common mental health conditions. The service is based on the principles of the Individual Placement and Support model, recognised for its effectiveness in supporting people with mental health conditions into sustained employment. Individuals eligible for the programme can self-refer or come through clinical channels, Jobcentre Plus or local authority services. Aim4Work is delivered by Shaw Trust and its partner organisations: City and Hackney Mind, Resources Plus, the Bromley by Bow Centre and the South West London and St Georges Mental Health NHS Trust.4

The Single Parent Employment Pathway, managed by Gingerbread, supports single parents into employment, education and training in the Liverpool City Region. Individual advice and guidance sessions with a support worker help each participant to identify their needs. They are then offered opportunities including volunteering, “Job Clubs” including CV writing and interview skills, and skills and educational support. The project exceeded its targets with 210 single parents taking part by January 2017. Forty of those found employment. By the end of the project in 2018 Gingerbread expect that 460 single parents will have taken part, with 40% moving into employment and 60% going onto further training.5

2.The Government has committed to a “UK Shared Prosperity Fund” (UKSPF) which will serve a similar purpose to the existing European Structural and Investment Funds (ESI—of which ESF is one).6 The 2017 Conservative manifesto suggested the UKSPF would be “cheap to administer, low in bureaucracy and targeted where it is needed most”.7 But detailed design proposals have not been forthcoming.8 Witnesses told us that the UK has an “absolutely world-class” employment support industry.9 Properly utilised, that industry could play a key role in boosting productivity and addressing skills gaps when the UK leaves. The current ESF is bureaucratic, inhibiting its effectiveness and efficiency. Freed from these constraints, the UK could seize the opportunity Brexit offers to build a truly word-leading successor to the ESF.

The need to act now

3.Above all else, witnesses told us the transition between current and future funding must be seamless and immediate. The “nightmare scenario”—for service users, local authorities, Local Enterprise Partnerships (LEPs) and support providers—is a gap in funding.10 Graham Parry of Groundwork, a provider, gave a stark warning of the consequences of a gap. He explained: “you will lose infrastructure, you will lose knowledge, you will lose delivery, you will lose support for clients and you will lose organisations”.11 Brian Bell, of provider Working Links, emphasised existing expertise that has taken a “long, long time to develop [ … ] will go quickly if we are not careful”.12 The impact on beneficiary regions could be “catastrophic”, with some areas “hit very hard”.13 This scenario would have serious implications for Britain’s ability to implement an improved replacement, severely damaging and weakening the organisations that must be involved in delivering it. Elizabeth Chamberlain, Head of Policy at NVCO—a representative group for the voluntary sector—cautioned that failure to replace the fund would lead to “serious consequences [for] our country’s agenda for economic growth and social cohesion”. She urged Government to take “swift action”.14

4.The Department told us that the Government plans to hold a public consultation on the future of the ESF “later this year”. It did not commit to a timeframe. In the meantime, however, it assured us that “urgent attention” is being devoted to the issue of a replacement.15 Sam Windett, Head of Policy at ERSA—the trade body for employment support providers—explained that time is of the essence in designing a new system. This is especially so if a gap in provision is to be avoided and if the replacement is to really address the ESF’s current weaknesses. She explained: “the issue we have in designing a world-class system is time [ … ] the Government has to get on with it if we are going to have something set up after”.16

A separate, single pot

5.The ESF is one of five separate ESI funds, and the only one of these dedicated to employment and skills support for disadvantaged groups.17 It is not yet clear whether there will be separate pot for this kind of employment support in the UKSPF (as the current ESF provides) or whether all five ESI funds will be amalgamated into one. Witnesses including Shaw Trust, a current provider of ESF-funded and mainstream employment support, told us that a “ringfenced fund” for non-mainstream employment support must be maintained.18 This would mitigate against crucial employment support resources instead being directed to other purposes, such as infrastructure or business facilities.19 This kind of investment is undoubtedly important for local growth. It serves a very different purpose and constituency of people to ESF, however. Beneficiaries of that fund are often some distance from the labour market. They require intensive support to help them move closer. Witnesses feared that failing to protect ESF-type funding for hard-to-reach groups would result in a missed opportunity to address current skills gaps and productivity challenges.20

6.People with complex needs often require multiple types of support to get them ready for and into work. Steve Hawkins, Chief Executive of Pluss, a specialist disability employment support charity, explained that they help people with an “awful lot” of issues in addition to physical and mental health problems. He listed:

Rural isolation, for example, where people are further away and require additional support, whether it be housing issues, transportation needs, training or confidence building, a whole range of things that need to be addressed fundamentally before they are in a position to sit in front of an interview panel and secure a job.

7.ESF currently effectively supports some holistic, integrated programmes. We heard, however, that reconsidering how and where funding is held could make it easier to deliver this kind of support. Normally, ESF will only pay 50% to 80% of project costs.21 National co-financing organisations therefore match the cost of funding. The Department for Work and Pensions is one of the largest current co-funders. It co-funds projects focused on employability and sustaining employment. Large amounts of co-funding are also provided by the Skills Funding Agency (skills training) and the Big Lottery Fund (projects that tackle poverty and promote social inclusion). We heard this approach—with parts of the budget being held by different bodies and orientated to different outcomes—produces silos and insufficient flexibility to deliver the “truly wrap-around support an individual would need”.22 Working Links’ Brian Bell suggested a future fund should “lift the commissioning up to a level where they can join the funding together”.23 Graham Parry agreed, telling us that “multidisciplinary agencies [ … ] who wanted to deliver across the whole spectrum of need” had previously proven a good location for funds.24 The Department told us that the question of whether the fund could be held by a single non-departmental public body is one it is currently considering. It does not, however, have a “definitive view” on this yet.25 We heard wide agreement that a “single pot” of post-ESF funding, allocated largely according to local needs, offered the best way forward.26

Flexibility and planning

8.Allocations of ESF funds are based on whether an area or region is designated by the EU as “more developed”, “less developed” or in “transition”.27 Since 2014, Britain has chosen to allocate the funds to Local Enterprise Partnerships—LEPs. Each LEP receives a notional allocation—a hypothetical amount it can draw down on a project-by-project basis—depending on the development status of the region it is in.28 This targeted allocation of funding is intended to help boost growth and productivity in less developed areas, and to improve social cohesion. The spend per head in each region therefore varies widely. Combined ESF and ERDF spending per head in the South East is €19 less than the national average, for example. In Wales, it is €87 more.29 We heard it is important that a successor to the ESF retains its local focus, allocating funding according to need to ensure that all local economies have the resources to grow and prosper post-Brexit. The Local Government Association explained the benefits of localised funding, which offers:30

Maximum flexibility to target need and tailor provision, to stimulate growth in local areas and contribute to the national economy supporting responsiveness to local need and allowing tailoring based on local expertise.

9.Local control over funding priorities can also help enable small, specialist organisations to benefit from funding. A working group of employment support and voluntary organisations led by ERSA and NVCO concluded that these organisations are a key part of engaging “traditionally hard-to-reach groups” who national programmes struggle to reach. They argued that “disadvantaged groups often know and trust local service providers”, while such organisations often have a strong, nuanced understanding of the challenges these communities face.31 A “mixed economy”, comprising complementary localised funding under a wider, national or regional “umbrella” of programmes helps ensure that no person, or community, is cut off from support.32 Accordingly, Groundwork London explained that one of their greatest fears was that a successor would:33

All get subsumed into … Nationally run programmes, where a small number of people are deciding what is needed out there in very disparate communities for people with very disparate lives.

10.The range of different challenges local areas can face mean it is important that a successor provides a blend of short-term and longer-term funding. Stella Manzie CBE, interim Chief Executive of Birmingham City Council, suggested quick, responsive “fire-fighting” capacity should be built in. The ESF has proven in the past to be an important resource in responding to local crises. She gave the example of the collapse of MG Rover in Birmingham in 2005.34 The Council was able to put together a taskforce to support 6,000 newly unemployed workers, with ESF a “critical factor and catalyst” in this response. As a result of marshalling this resource quickly and effectively, 90% of the affected workers moved into other work, training or education.

11.Stella Manzie also explained, however, that as well as fire-fighting, ESF allows for strategic planning, tackling structural weaknesses and skills deficits in local economies. It is not a “fly by night” fund.35 It is currently allocated in seven-year cycles. Although the ERSA/NCVO working group defined “long term funding” as three years or more, other witnesses suggested longer blocks were preferable.36 Lloyd Broad, Head of European Affairs at Birmingham City Council, explained up to ten years might be advantageous.37 This would allow the time to build lasting delivery partnerships, provide financial certainty to providers and ensure continuity of support for service users. Sandra Rothwell, Chief Executive of Cornwall and Isles of Scilly (CIoS) LEP suggested that administrative savings would result from longer funding cycles. She told us that “if we are designing something that every one or two or three years we have to keep reinventing [ … ] that is expensive if nothing else”.38

Reducing bureaucracy and ensuring value for money

12.The Department told us it will prioritise minimising bureaucracy and creating an administratively simple programme in designing ESF’s successor.39 This is much needed. The ERSA/NVCO working group said ESF bureaucracy has prevented providers delivering support programmes to their full potential.40 Witnesses complained of “absolutely enormous” “lengthy” and “time-consuming” stacks of paperwork that have a real impact on their capacity to deliver support face-to-face with clients.41 This presents a problem for small, specialist organisations in particular. Pluss’s Steve Hawkins told us that “whether you are a two-man organisation or a 2,000-person organisation” the bureaucratic requirements are the same. For smaller organisations, “the overhead burden can be really, really high”. In some cases, it is “prohibitive”.42 ERSA’s Sam Windett told us such organisations provide crucial expertise in supporting people with complex circumstances. This requires a “plethora” of specialisms. The Department, too, recognised that these organisations are “uniquely placed to get the best results” for people using ESF provision. Yet current ESF arrangements make it difficult for the organisations that have this expertise to access funding.43

13.Existing co-financing organisations have strong networks and experience of funding both large and small projects. We heard that the Big Lottery Fund, in its pre-ESF “Talent Match” programme, struck a good balance between ensuring accountability for funds and limiting the bureaucratic burden on providers.44 Features that had worked well included:45

14.Replacing ESF would be no small investment. In 2007 to 2013, the previous tranche of funding, the total value of EU and national matched funding was €8.6 billion.46 Yet despite the large sums of money involved, we heard that there is insufficient emphasis on value for money, and a lack of attention paid to learning from the programmes that are delivered. Witnesses told us a successor should require greater emphasis on ensuring good returns on its investments.47 We also heard that the fund has great potential to act as a “test bed” for new, innovative programmes. Learning from those programmes could be disseminated, and used in improving mainstream, large-scale support.48 This opportunity to systematically learn is currently being missed because ESF’s bureaucratic structures are heavy on process and light on evaluation. ERSA explained that there are “inordinate amounts of paperwork [ … ] but very little evaluation and comparison of the diversity of projects”. The result is a thorough audit trail, but without the means to measure programme outcomes and value for money.49 Sandra Rothwell suggested this might be accounted for in the “technical assistance” used to run a successor fund. She proposed it “does not need a lot of funding”, but is “essential to understanding that added value” that ESF-type investments can bring.50

15.The UK has a historic opportunity to design a truly world-class successor to the European Social Fund. It will be free to design employment support funding entirely in its national interests: plugging skills gaps, boosting productivity and lifting up disadvantaged communities. Its replacement fund could be the envy of Europe. But time is not on the Government’s side. It must act now to guarantee certainty for providers and communities and avoid a potentially disastrous interruption in funding.

16.The European Social Fund has real strengths. It also has weaknesses that a UK successor must address. Retaining a separate budget within the UK Shared Prosperity Fund (UKSPF) to support disadvantaged communities and groups is essential. This budget should remain separate but complementary to national provision, funding both long-term strategies for local areas and “fire-fighting” responses to local crises. The new fund should remove the siloes that prevent truly wrap-around, holistic support reaching communities and individuals. It must also pare back the inordinate time-consuming paperwork that accompanies the current fund. At worst, this prevents small, specialist organisations, that have so much to contribute, participating at all. At best it is a drain on resources that would better be spent delivering innovative, life-changing and productivity boosting support.

17.We recommend the Government proceed urgently with detailed design of a successor to the European Social Fund so that there is no gap between existing and new funding streams. This should include:

a) establishing a new arm’s length body, or creating an arrangement with an existing one, to hold the fund’s budget, dovetailing existing funding streams so programmes can meet effectively all of their participants’ needs;

b) retaining a separate fund within the UKSPF for employment support. The separate fund should focus on innovative projects that offer work opportunities and skills development to disadvantaged groups (for example, disabled people) in areas of clear economic and social need.

c) ensuring flexibility of local funding mechanisms for both longer-term (with funding cycles of at least seven years, as in the current fund) and short-term programmes; and

d) reducing overall bureaucracy for providers enabling them to focus on what really matters: value for money, building understanding of “what works” in employment support, and fostering new entrants.

These features are vital to the success of a replacement fund. But they would also have wider political resonance. They would show Government is committed to joined-up policymaking and breaking down silos, enabling better use of public money to meet clearly defined policy goals. We recommend the Department set out how it will meet these objectives, and a timetable for doing so, in response to this report.

3 European Commission, Brixton prison bakery to expand, January 2015

4 Shaw Trust, Aim4Work, March 2018

5 Liverpool Local Enterprise Partnership, Single Parent Employment Pathway, January 2016

9 Q29 (Brian Bell)

10 Q26–29 (Graham Parry, Brian Bell, Steve Hawkins, Richard Clifton), Q31 (Stella Manzie), Q42 (Sam Windett and Elizabeth Chamberlain). LEPs are non-statutory partnerships between local authorities and businesses. There are 39 LEPs in England and Wales, which often group together and/or split local authority boundaries. Current ESF funding is notionally allocated to LEPs.

11 Q26 (Graham Parry)

12 Q29 (Brian Bell)

13 Q31 (Stella Manzie)

16 Q58 (Sam Windett)

17 The other funds are the European Regional Development Fund (for infrastructure), the Cohesion Fund (infrastructure and investment in less developed countries), the European Agricultural Fund for Rural Development (for resolving challenges specific to rural areas) and the European Maritime and Fisheries Fund (for sustainable fishing and coastal communities).

18 Q25 (Richard Clifton, Steve Hawkins), Q63 (Elizabeth Chamberlain), Q58 (Sam Windett)

19 Q58 (Sam Windett)

20 Q18 (Brian Bell)

22 Q34 (Lloyd Broad)

23 Q18 (Brian Bell)

24 Q18 (Graham Parry)

26 Local Government Association, Beyond Brexit: future of funding currently sourced from the EU, July 2017; ERSA and NVCO, Future employment and skills training for disadvantaged groups: a successor to the ESF, December 2017; Q58–59 (Sam Windett, Elizabeth Chamberlain), Q34 (Lloyd Broad)

27 Less developed regions have GDP per person of less than 75% of the EU average. Transition regions have 75%-90%, and more developed regions have over 90%.

29 Ayres, S. and Brien, P., UK funding from the EU, House of Commons Library briefing paper 7847, January 2018

30 Local Government Association, Beyond Brexit, p.14; Q34 (Sandra Rothwell, Stella Manzie)

32 Q19 (Richard Clifton)

33 Q26 (Graham Parry)

34 Q31–32 (Stella Manzie and Lloyd Broad)

35 Q34 (Stella Manzie)

37 Q40 (Lloyd Broad)

38 Q37 (Sandra Rothwell)

41 Q40 (Sam Windett), Q51 (Kayleigh Wainwright), Q22 (Richard Clifton)

42 Q21 (Steve Hawkins)

43 Q52 (Sam Windett). See also: Q18–22 (Richard Clifton, Brian Bell, Steve Hawkins, Graham Parry), Q35–39 (Stella Manzie, Sandra Rothwell), Q48 (Elizabeth Chamberlain)

44 Q22–23 (Graham Parry), Q46 (Sam Windett)

45 ERSA (ESF0001)

47 Q49 (Sam Windett), Q38 (Sandra Rothwell)

48 Q18 (Richard Clifton), Q8 (Graham Parry)

49 Q38 (Sandra Rothwell). See also: Q48–49 (Sam Windett)

50 Q38 (Sandra Rothwell)

Published: 4 April 2018