Making it work: the European Social Fund|
CHAPTER 1: Introduction
Aims and objectives of the European
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,
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 ESFit 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
The current legislative basis of the ESF is contained in Articles
162-4 and 175 TFEU (Treaty on the Functioning of the European
2. Within the UK there are separate programmes
for England, Scotland, Wales and Northern Ireland.
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.
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).
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
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.
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".
Related to this, the Commission is required to conduct its own
5. Five priorities for the Structural Funds are
established under the convergence and competitiveness and employment
· 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. (See Chapter
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
Europe 2020 Strategya successor
The ESF is tied into the aims of the Lisbon Strategy
for Growth and Jobs, the successor to which, Europe 2020,
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.
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
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.
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.
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 millionPoland 1,028
9,381 millionGermany 830
8,057 millionSpain 756
6,938 millionItaly 692
6,512 millionPortugal 619
5,395 millionFrance 551
4,475 millionUnited Kingdom 524
4,364 millionGreece 392
3,775 millionCzech Republic 375
3,684 millionRomania 255
3,629 millionHungary 120
1,500 millionSlovakia 112
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.
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. 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. 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 provisionmostly organisational
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.
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.
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".
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.
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".
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. 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."
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).
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
Regulation No 1081/2006, Article 2 Back
The Department for Employment and Learning, Northern Ireland did
not take up an invitation to give oral evidence for this inquiry. Back
Regulation No 1083/2006, Article 3 Back
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"
Article 145 TFEU Back
Regulation No 1081/2006, Article 4 Back
Regulation No 1083/2006, Article 47 (1) Back
Regulation No 1083/2006, Article 30 Back
See www.esf.gov.uk Back
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
European Commission, Draft Joint Employment Report 2009/2010 (COM(2009)674)
p 2 Back
Council Regulation 1083/2006, Annex II Back
See Regulation No 1083/2006, Annex III Back
Regulation No 1083/2006, Article 60 Back
Regulation No 1083/2006, Article 60 (g) Back
Regulation No 1083/2006, Article 65 Back
Regulation No 1083/2006, Article 62 (1)(a) Back
Regulation No 1083/2006, Article 90 Back
Regulation No 1083/2006, Article 15 (1) Back