Making it work: the European Social Fund - European Union Committee Contents

Making it work: the European Social Fund

CHAPTER 1: Introduction

Aims and objectives of the European Social Fund

1.  The European Social Fund (ESF) is one of the EU's main Structural Funds and has been in place for over 50 years. Its aim is to improve employment opportunities for workers in the internal market. Two EU Regulations provide the framework for its governance, the first of which applies also to two of the other Structural Funds,[1] and the second of which is specific to the ESF and its current programming period, which runs from 2007 to 2013. As this second Regulation makes clear, there is still a strong emphasis on the original aim of the ESF—it must be used to contribute to the priorities of the EU as regards strengthening economic and social cohesion by improving employment and providing more and better jobs. It is also intended to support Member States' policies aiming to achieve full employment and quality and productivity at work; promote social inclusion, including the access of disadvantaged people to employment; and reduce national, regional and local employment disparities.[2] The current legislative basis of the ESF is contained in Articles 162-4 and 175 TFEU (Treaty on the Functioning of the European Union).

2.  Within the UK there are separate programmes for England, Scotland, Wales and Northern Ireland.[3] In England, the focus of the ESF programme has been narrowed further to support two key priorities: extending employment opportunities and developing a skilled and adaptable workforce (p 209). Each English region develops its own regional ESF framework.

3.  The ESF is part of EU cohesion policy, which concentrates on reducing inequalities between different regions of the EU. Under this policy, the ESF contributes to two main objectives: the convergence objective and the regional competitiveness and employment objective.[4] The former promotes growth and job creation in the least developed Member States and regions thereof; Cornwall and the Isles of Scilly and West Wales and the Valleys are the only such regions in the UK. The latter applies to all remaining areas of the EU to help its regions and people anticipate and respond to change in order to strengthen the regions' competitiveness and attractiveness as well as to improve employment prospects. The UK also has two "phasing in" regions (Merseyside and South Yorkshire) and one "phasing-out" region (the Highlands and Islands) all three of which currently receive funding to ease their transition from convergence status to funding under the competitiveness and employment objective (pp 208-9).[5] Convergence, "phasing in" and "phasing out" status provide for a larger amount of funding and increased spending flexibility than with the competitiveness and employment objective.

4.  Evaluation of ESF projects is a requirement of the Fund. Included in this is an assessment of the contribution of ESF-supported actions to the implementation of the European Employment Strategy[6] and to the EU objectives in the fields of social inclusion, non-discrimination and equality between women and men, sustainable development, and education and training in the Member State concerned.[7] The aim of these evaluations is "to improve the quality, effectiveness and consistency of the assistance from the Funds and the strategy and implementation of operational programmes".[8] Related to this, the Commission is required to conduct its own strategic reporting.[9]

5.  Five priorities for the Structural Funds are established under the convergence and competitiveness and employment objectives:

·  Increasing adaptability;

·  Enhancing access to employment;

·  Reinforcing social inclusion;

·  Enhancing human capital; and

·  Promoting partnerships for reforms.

6.  In addition to the objectives highlighted above, the ESF provides for a certain amount of "Technical Assistance" to finance the preparatory, management, monitoring, evaluation, information and control activities of the programme, together with activities to reinforce the administrative capacity for implementing the funds, at both a national and a regional level.[10] (See Chapter 2)

The context of our inquiry

7.  The economic crisis has hit employment across the European Union hard. Unemployment is forecast to keep rising across the EU in 2010 to a level of 10.3%, up more than three percentage points on 2008 levels. This alarming economic background and the development and publication of Europe 2020 formed an important backdrop to our inquiry into the effectiveness of the European Social Fund.


Europe 2020 Strategy—a successor to Lisbon

The ESF is tied into the aims of the Lisbon Strategy for Growth and Jobs, the successor to which, Europe 2020[11], has just been published by the Commission. The Europe 2020 strategy is expected to have a similarly influential position in the European political landscape over the next ten years, guiding policy making and setting the political, strategic framework for future engagement on economic, skills and employment issues, and will therefore be important for the future orientation of the ESF. It puts forward three mutually reinforcing priorities: developing an economy based on knowledge and innovation; promoting a more resource efficient, greener and more competitive economy; and fostering a high-employment economy delivering social and territorial cohesion. These are summarised as smart growth, sustainable growth and inclusive growth.

Our rationale

8.  Our objectives for this inquiry were threefold:

·  To assess the effectiveness of the ESF, both in meeting its objectives and in responding to the challenges raised by the financial crisis;

·  To establish whether the policy priorities of the ESF need to be amended in the context of the economic recovery and the imminent adoption of Europe 2020 (see Box 1); and

·  To make recommendations on the long-term role and functioning of the ESF, within the context of the EU Budget Review.

9.  We have therefore concentrated mostly on the medium- to the long-term. Much of our attention has focused on the English programmes, and certain of our conclusions will apply to the ESF in England or the UK only. But we have also explored elements of the Welsh, Scottish and Northern Irish programmes and many of the issues we have examined have implications for the ESF across all Member States.

10.  There are a number of factors which will have an impact on the development of the ESF. The recent introduction of the successor to the Lisbon Strategy for Growth and Jobs, Europe 2020 (see Box 1); the Budget Review is expected to take place later this year, in advance of the next Financial Perspective (2014-2020) and ESF programming period; there is an ongoing review of cohesion policy, and, as we have already mentioned, there is the economic downturn and its consequences. Included in this is the Commission's response, with a series of legislative and non-legislative changes to help Member States' programmes respond more quickly and effectively to the economic challenges (see Box 9). We accordingly considered that an inquiry into the ESF was timely and would be well placed to inform future developments of the ESF.[12]

Facts and Figures

11.  The cost of the ESF 2007-13 programme is €76 billion, out of a total EU budget of €862 billion. The UK will receive €4.5 billion, of which €196 million is ring-fenced for Cornwall and the Isles of Scilly as England's only convergence region. West Wales and the Valleys convergence programme receives €834 million. Of the UK total, €3,090 million is allocated to England and Gibraltar; €322 million to Scotland; €897 million to Wales (including the aforementioned amount for West Wales and the Valleys); and €166 million to Northern Ireland (pp 208-9, 218). Structural Funds, including the ESF, are allocated among Member States according to a complex formula negotiated between Member States at the same time as the seven-year multi-annual financial agreement. Allocation takes into account population; unemployment; levels of education; population density and regional prosperity.[13] Within the UK, money has been allocated among the nations and regions according to a formula based on employment and skills criteria (p 208). See Box 2 for a list of Member States' allocations under the current programme.


ESF Allocations, 2007-13 programme in descending order (figures shown to the nearest million)

€9,707 million—Poland      €1,028 million—Lithuania

€9,381 million—Germany      €830 million—Netherlands

€8,057 million—Spain      €756 million—Slovenia

€6,938 million—Italy        €692 million—Sweden

€6,512 million—Portugal      €619 million—Finland

€5,395 million—France      €551 million—Latvia

€4,475 million—United Kingdom    €524 million—Austria

€4,364 million—Greece      €392 million—Estonia

€3,775 million—Czech Republic    €375 million—Ireland

€3,684 million—Romania      €255 million—Denmark

€3,629 million—Hungary      €120 million—Cyprus

€1,500 million—Slovakia      €112 million—Malta

€1,185 million—Bulgaria

Rules and Regulations

12.  ESF funding rounds are called programmes and usually run for the lifetime of the Financial Perspective. Expenditure for the 2007-13 ESF programme is to be completed by the end of 2015. The next programme will begin in 2014. Under these multi-annual programmes, the Member States present national strategic reference frameworks, following which operational programmes (OPs) are negotiated with the Commission in order to tailor activities to the specific situation in the respective Member State or region. Once approved, these OPs are adopted as Council Decisions. Across the European Union, there are a total of 117 OPs (Q 208).

13.  The Regulations governing the ESF dictate that Member States must contribute national match funding to programmes, the levels of which vary among Member States, and between objectives, as indicated in the relevant Regulation.[14] In England, most of this match funding comes from employment and skills programmes managed by the Department for Work and Pensions (DWP) and the Learning and Skills Council (LSC) under the ESF co-financing system (p 210).

14.  Previously, the burden was always on ESF applicant organisations to source and supply their own match funding for projects, in a process known as direct bidding. However, the mechanism of co-financing is now another approach at Member States' disposal (p 210). Under this system, co-financing organisations (such as the LSC in England) identify the match funding before going out to open and competitive tendering amongst the organisations that will deliver the projects on the ground. In this way they can also ensure that the ESF complements domestic programmes and is used to purchase additional provision in order to extend coverage, address gaps and complement domestic programmes. For example, in England the ESF is used to extend coverage to people who would not otherwise be eligible for programmes such as the Flexible New Deal or Train to Gain and to fund more intensive support for the most disadvantaged jobseekers and learners (p 210).[15]

15.  England uses co-financing almost exclusively, while Scotland and Wales have retained the direct bidding system. In Northern Ireland, projects under Priority 1 (working with those furthest from the labour market) are offered a 25% match funding contribution from the Department for Employment and Learning and are required to source the remaining 35% match funding themselves, or can secure it from other sources, for example New Deal and the Disability Advisory Service.[16]

16.  Much of the co-financing in England is done through the LSC (which will transfer to the new Skills Funding Agency during 2010, see Chapter 5) and the Jobcentre Plus programme, delivered locally by the DWP. There are some additional co-financers, notably the National Offender Management Service (NOMS) which delivers provision throughout England, and in individual regions, for example the London Local Authorities. A small amount of direct bidding still exists in England, for example the Innovation Transnationality and Mainstreaming (ITM) programme, which supports innovative, experimental provision focused on issues such as climate change and social enterprise. In some regions small "community grants" exist for highly specific, targeted provision—mostly organisational capacity building.

17.  Each Member State has a Managing Authority (the DWP in England), with responsibility for managing and implementing the OPs in accordance with the principle of sound financial management. In addition, the Managing Authority's responsibilities include: ensuring that projects are selected correctly and comply with the applicable rules during their lifetime; verifying that projects are delivered and that the declared expenditure is correct (this can include use of on-the-spot checks); and preparing and submitting to the Commission annual and final reports on implementation.[17]

18.  In the UK, Managing Authority responsibilities have been devolved to the Scottish, Welsh and Northern Irish authorities, although the DWP retains overall responsibility. In England, the ESF is in turn administered on a regional basis (including individual arrangements for the Cornwall and Isles of Scilly convergence programme), via Government Offices for the regions working in collaboration with regional co-financers.

19.  Throughout the UK, the current 2007-2013 programme is being delivered in two phases. A first tranche of provision was commissioned at the beginning of the programming period, which will be completed during 2010/11. A second tranche of provision will be obtained during 2010 for delivery during the remainder of the period. In addition, further ESF funds were made available to the UK in the latter part of 2008 as a result of the devaluation of the pound against the euro. This was added to the programme via additional commissioning activity in 2009, specifically targeted on responses to the emerging economic downturn (see Chapter 4).

20.  The Managing Authorities are overseen by a national ESF Monitoring Committee and have a duty to guide the work of the Monitoring Committee and provide it with the documents required to monitor the quality of the OPs' implementation, in the context of the latter's specific goals.[18] The Monitoring Committee's main task can be summarised as to "satisfy itself as to the effectiveness and quality of the implementation of the operational programmes".[19] This includes periodic review of progress towards achieving the specific OP targets. Monitoring Committees' powers include the ability to propose to the Managing Authority any revision or examination of the OP that is likely to secure attainment of the Fund's objectives or to improve its management, including its financial management.[20]

21.  Audit requirements and responsibilities are a significant part of ESF funding. Each OP has an audit authority, responsible for ensuring that audits are carried out "to verify the effective functioning of the management and control system of the operational programme".[21] In addition, the authority must ensure that the audits comply with internationally accepted standards, and there is a duty on organisations to retain records for a certain number of years after a project's completion.[22]

22.  One of the main requirements underpinning all of these rules is the need to comply with the principle of additionality. This is an overarching principle and dictates that "contributions from the Structural Funds shall not replace public or equivalent structural fund expenditure by a Member State."[23] That is, Member States cannot simply use Structural Funds to substitute for domestic spending on activities they had already decided to carry out. In the case of the ESF, they must demonstrate that the projects supported are truly additional. This principle is monitored by the Commission in addition to the Member States themselves.

23.  Finally, while Member States have responsibility for implementing the programmes and helping to ensure that the funds are managed and spent according to the rules, Article 317 TFEU makes clear that the Commission retains overall responsibility for all Community expenditure. Therefore the Commission is responsible for checking the management and control systems within Member States (p 211).

Our inquiry

24.  While the ESF was the focus of our inquiry, our evidence touched on other Structural Funds, most notably the European Regional Development Fund. The Committee reviewed cohesion policy in its report The Future of EU Regional Policy (19th Report Session 2007-08, HL Paper 141). Other reports relevant to the Budget Review are The Future of the Common Agricultural Policy (7th Report Session 2007-08, HL Paper 54) and Adapting to climate change: EU agriculture and forestry (8th Report Session 2009-10, HL Paper 91).

25.  The members of our Social Policy and Consumer Affairs Sub-Committee (Sub-Committee G) who conducted the inquiry are listed in Appendix 1, showing their declared interests.

26.  We are grateful for the written and oral evidence that we received for our inquiry; the witnesses who provided it are listed in Appendix 2. In particular, we are grateful to Step Up and Tomorrow's People Trust, which allowed us to conduct site visits, and to those witnesses who gave evidence in person. Our notes on the site visits can be found in Appendix 3. Particular thanks go to John Bell, Policy Editor of the ESF Works website, who was our Specialist Adviser for this inquiry. His interests are listed in Appendix 1.

27.  The Call for Evidence we issued is shown in Appendix 4, and the evidence we received throughout is printed in a companion volume to this report.

28.  We make this report to the House for debate.

1   The European Regional Development Fund and the Cohesion Fund Back

2   Regulation No 1081/2006, Article 2 Back

3   The Department for Employment and Learning, Northern Ireland did not take up an invitation to give oral evidence for this inquiry. Back

4   Regulation No 1083/2006, Article 3 Back

5   For "phasing out" regions, the transition takes place over the full seven year length of the programme rather than over the first four years, as is the case for "phasing in" regions.  Back

6   Article 145 TFEU Back

7   Regulation No 1081/2006, Article 4 Back

8   Regulation No 1083/2006, Article 47 (1) Back

9   Regulation No 1083/2006, Article 30  Back

10   See  Back

11   COM (2010) 2020-the Commission Communication on the Europe 2020 Strategy was due to be considered by the European Council on 25-26 March 2010. Back

12   European Commission, Draft Joint Employment Report 2009/2010 (COM(2009)674) p 2 Back

13   Council Regulation 1083/2006, Annex II  Back

14   See Regulation No 1083/2006, Annex III Back

15 Back

16 Back

17   Regulation No 1083/2006, Article 60 Back

18   Regulation No 1083/2006, Article 60 (g) Back

19   Regulation No 1083/2006, Article 65 Back

20   ibidBack

21   Regulation No 1083/2006, Article 62 (1)(a) Back

22   Regulation No 1083/2006, Article 90 Back

23   Regulation No 1083/2006, Article 15 (1) Back

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2010