CHAPTER 4: Flexibility of the ESF|
Overall flexibility of the Fund
118. Several witnesses commended the flexible
nature of the ESF (QQ 20, 112, 183, 310, 311). The Convergence
Partnership Office for Cornwall and the Isles of Scilly saw the
advantage of this in allowing organisations "to pilot new
ways of doing things; it drives innovation" (Q 183).
The Department for Work and Pensions (DWP) and the Scottish Government
highlighted the pan-EU nature of the ESF's flexibility, which
enabled Member States to address different labour market needs
(pp 159, 207, 208).
119. The Commission was optimistic that the ESF
enabled projects "to develop flexible and tailored support."
The mid-term evaluation update for Scotland found widespread agreement
among stakeholders that the flexibility offered by the ESF programme
was vital in responding to the needs of target groups at risk
of drifting away from mainstream provision (p 117). The Welsh
European Funding Office (WEFO) said that with a focus on outcomes,
the means of achieving them needed to be flexible (Q 310).
120. However, others highlighted downsides to
flexibility. The Scottish Government thought it had "a very
tricky balance to secure between due diligence and ... flexibility
or giving the organisations sufficient scope to implement projects"
(Q 282). The Minister warned that, especially during a recession,
flexibility should not allow ESF money "to drift off into
those people who are much closer to the labour market" (Q 374).
121. Making a case for limited flexibility, the
Convention of Scottish Local Authorities (COSLA) warned that the
long-term economic development perspective of the Structural Funds
limited the potential to proceed with radical changes during the
present financial period (p 147).
122. Several examples were given of the flexibility
of the ESF, most notably following the changed labour market and
economic circumstances resulting from the recession (see Box 9).
As the Commission noted, social, economic and political contexts
change and, particularly following the financial crisis, "policies
need to be adapted" (Q 196, p 141). The Learning
and Skills Council (LSC) highlighted the Commission's proposal
to move to a grant process as "a flexibility opened up ...
as part of their response to the economic downturn". Using
this process, the LSC reported that it would not have to use open
and competitive tendering (OCT) or provide evidence of actual
costs where standard scales of unit cost or formula funding were
used. This would speed up the process, allowing it to allocate
funding to preferred suppliers more quickly, which would "benefit
everybody involved in ESF" (QQ 6, 30). The West
Midlands Leaders Board agreed that the flexibility to use grants
in addition to OCT was welcome and had helped it to respond quickly
to economic changes (p 252).
Commission's proposed changes in response
to economic challenges
Following the onset of the crisis, the Commission
proposed a series of legislative and non-legislative changes to
help Member States' programmes respond more quickly and effectively
to the related challenges. These included:
· Amendments to Regulations to provide an
additional advance payment to ease cash flow at the start of the
· Amendments to Regulations to extend the
types of costs eligible for ESF support.
In addition, there is a further proposed amendment
pending to introduce a temporary EU-wide option to allow all Member
States to request ESF payment reimbursements from the Commission
at 100% during 2009 and 2010, thus doing away with the need for
national co-financing during that period. We heard from the Government
that there was strong opposition to this amongst Member States
123. The Response to Redundancy programme (see
Box 10) was highlighted as another example of policy level flexibility
within the ESF. This was put in place "rapidly" to respond
to the economic downturn and, according to the LSC, had "already
had significant impact" (QQ 14, 384, p 2). We heard
that "there have been other flexibilities announced as well
which predominantly benefit other Member States more than the
UK" (Q 30). For example, as described in the Commission's
Draft Joint Employment Report,
Italy had used the ESF to widen the coverage of unemployment benefits,
Austria had extended potential ESF participants to include all
age groups and Portugal had increased support for entrepeneurs.
Response to Redundancy
The Response to Redundancy programme was introduced
as an LSC and DWP combined response to the financial crisis. It
aimed to minimise time spent on benefits and was available either
from day one of unemployment or while people were under notice
of redundancy (p 214). The LSC thought the programme was
thus "preventing people becoming an added burden to the state
through unemployment and enabling them to become contributors
through returning to employment swiftly rather than continuing
their progression into long-term unemployment" (Q 20).
By way of example, the LSC cited the case of a man
who had spent years working in the scaffolding industry before
he was made redundant. He had no formal qualifications and therefore
experienced difficulty in finding another job. He was referred
by Jobcentre Plus to one of the LSC's ESF Response to Redundancy
programmes in the North West where he achieved a construction
industry scaffolding record certificate part 1, which was what
prospective employers had been looking for. As a result, he was
able to secure a job with further training (Q 14).
124. At a devolved level, we heard from the Scottish
Government that as a result of the changing economic climate it
had already amended its programme and had a second amendment pending
which would allow money to be shifted into its employment priority
(Q 277, pp 158, 166). ScotAction was cited as a particular
example of the policy level flexibility of the ESF. This programme
was brought forward to respond to a sudden surge in unemployment
amongst young people and in redundancies of young apprentices
before they had completed their training. It gave employers £2,000
to take an apprentice on part-way through their training and came
through "very, very quickly; literally within weeks".
Other programmes followed, all of which the Scottish Government
reported to be successful, addressing "a very urgent need"
and showing "the flexibility of ESF" (Q 311).
125. COSLA was less positive about policy changes
and thought that Commission reforms to the Regulations (see Box
9) would have a limited impact on the current programme in Scotland
because half of its ESF funds were already committed (Q 249).
126. The Welsh Assembly Government also negotiated
some changes to its programme following the recession, such as
moving from a 70/30 to a 50/50 split between the hardest to reach
and the short-term unemployed. It highlighted the Pro-Act programme,
which responded to calls from employers to help keep people in
employment, for example through re-training. Pro-Act had already
supported over 181 companies, to the benefit of more than 8,300
workers, "people who may well have lost their jobs if it
had not been for the flexibility that we have with the European
Social Fund" (Q 309, pp 119, 173). Nevertheless,
the Welsh Assembly Government thought that its existing programmes
had "been remarkably flexible and able to respond to immediate
short-term crises with some speed" (Q 283, p 173).
127. The Scottish Government, while positive
about the ESF's flexibility overall, drew attention to potential
downsides. Changes to rules mid-way through programmes could lead
to charges of inequitable treatment between applicants, and it
was hard to maintain a full audit trail until closure where requirements
changed from year to year (p 164).
128. On the other hand, many of our witnesses
criticised the ESF for being insufficiently flexible to respond
to external stimuli such as the recession. The Mayor of London
and London Councils warned that "without flexibility in changing
conditions we risk causing projects to fail" (p 194).
Some witnesses, such as the West Midlands Leaders Board and the
LSC, highlighted that they were "still constrained by having
to meet the target set out in the operational programme",
which was proving more difficult in the light of the recession
(QQ 22-3, p 252). The LSC suggested that funding would
be better aligned over the long term if targets and allocations
could be varied and, together with COSLA, called for the ability
to move funding between projects and priorities with more flexibility
(pp 1, 2, 4, 148). The Welsh Assembly Government praised
the recent introduction of limited cross-fund flexibility and
suggested that identifying and sharing best practice in this area
was a clear opportunity for the Commission (pp 170-1).
129. The Government also called for Managing
Authorities to have the flexibility to vire a certain amount of
funding between priorities without the need to amend Commission
decisions (p 215). However, the Commission thought that programmes
in need of changes would be accommodated by its fast track procedures
and thought there was "no need to modify any Commission rule"
130. As witnesses highlighted, "different
regions have different needs" (QQ 51, 183, p 87).
There was consensus about the importance of ensuring flexibility
for regions in the ESF, with London Councils highlighting the
concept as "crucial" (Q 324, pp 72, 194).
The Minister also recognised that a regional view was necessary
in order "to identify the need and be able to deploy resources
accordingly" (Q 400).
131. Several witnesses were critical of the level
of regional flexibility under the ESF. Off the Streets and into
Work and the University of Sunderland suggested that there had
been an erosion of the flexibility for regions to decide what
was most appropriate. The University of Sunderland thought that
this was "going to restrict the ability of the region to
use ESF to move forward and compete globally" (QQ 37,
44, 45, p 250).
132. London Councils highlighted a tension between
effective central management of the programme and local flexibility,
"you clearly need to focus in on things that look at the
national picture but also recognise the flexibility needed to
address particular issues that affect perhaps rural areas as opposed
to city areas and vice versa" (Q 325). Furthermore,
the Mayor of London and London Councils did not think the particular
needs of the region were always considered and wanted greater
co-ordination between the Government and the regional administration
(p 194). The Government recognised that they had "to
find a right balance between national priorities and a national
response to a national recession and local flexibility and tailoring"
133. Many supported the call for greater flexibility
for regional decision-making and "much more flexibility amongst
ourselves to decide what is most important" (QQ 43,
112, 144, 309, p 24). The West Midlands Leaders Board thought
its "region would benefit from the introduction of increased
flexibilities in the funding parameters within Priority 1."
It suggested that "the ability of a region to determine the
percentage allocation for NEETs and adult provision would ...
enable ESF to be more responsive to prevailing conditions"
(p 252). The South West Regional Development Agency and the
South West Regional Employment and Skills Partnership thought
that increased flexibility in moving funds from one part of the
region to another would be welcome, such as with the LSC's Response
to Redundancy programme (p 72). (See Box 10).
134. Others painted a more positive picture of
regional flexibility. We heard from the Welsh Assembly Government
that the objectives for the ESF as a whole had been sufficiently
flexible for it to design tailored programmes to meet distinctive
needs not only for Wales, but also at a sub-regional level. In
particular, it highlighted the ability to change the balance of
funding within its convergence priorities without the need for
Commission approval (p 169). The Convergence Partnership
Office for Cornwall and the Isles of Scilly was similarly content,
believing that it had "had the flexibility ... to use the
European Social Fund across that whole pathway of employment and
skills", though it should be noted that due to its convergence
status, the region has its own individual programmes, whereas
in the rest of England regional plans are subsets of the national
programme (Q 156).
135. The benefits of regional flexibility could
also be seen from the phasing-in regions in the English programme
and the Welsh convergence programme which were granted more flexibility
"to take account of the fact that they were moving away from
Objective 1" (Q 151). In South Yorkshire, the decision
had been taken to invest heavily in schools, in supporting children
from 14 onwards (Q 151).
136. The Minister thought the ESF provided reasonable
flexibility to support regionally defined priorities but stressed
that the Government were "starting to create the coherence
that we need to make this somewhat easier for regions to find
out about." He stressed that in England "the regions
decide". It was the Government's hope and expectation that
"the regional ESF committees would make sure that they have
a fit between their priorities and what the overall regional economic
priorities should be" (Q 363).
137. We heard that all government provision had
a consultative process built in "which enables local partners,
skill boards, whatever it is, really to do their utmost to ensure
that when it is applied our provision does meet local specifications
and local requirements, the needs of local labour markets"
Speed of response
138. Commenting on the increased funds available
following the revaluation of the euro, Higher Education European
Funding Services Limited highlighted "the time it was taking
for money to get from their [the Commission's] bank account down
to actual projects, something like 14 months" (Q 64,
pp 19, 35). The Convergence Partnership Office for Cornwall
and the Isles of Scilly was "not sure the 14 months is entirely
right" and was more understanding of the reasons for delay,
suggesting that "with all European programmes it always takes
a while to get it sorted out and it just comes with the territory"
(Q 165). Looking to the future, COSLA called for payment
processes to be "greatly simplified" in order that projects
could be "quickly delivered on the ground" (p 147).
139. We heard from many witnesses that adapting
the ESF to improve its flexibility could incur significant delay.
It was the Scottish Government's experience that changing the
programme "was a very slow process", this despite the
fact that the Scottish Parliament and Scottish ministers were
extremely supportive of making changes. However, it was "hopeful
of getting a much quicker response from the Commission" with
its second request and was positive that the Commission had tried
to respond with a simplified process to get those changes through
140. The Commission acknowledged the delays in
the tendering process of some of the ESF funds in the UK but suggested
that this was "a domestic problem" and highlighted that
it had shared its concerns with the DWP (QQ 232-234, p 142).
For its part, the Commission felt it had been "forced by
the crisis to make sure that money gets to the beneficiaries quickly"
(Q 229). The Third Sector European Network (TSEN) agreed
that the Commission had "done a lot in terms of flexibility,
in terms of getting this money spent quickly now". It was
more critical though of the DWP for being "much slower at
getting those monies on the ground" (Q 104).
141. The Minister agreed that "the Commission
have been really helpful in trying to get us the money and get
it to where it is needed" but explained that procuring new
provision usually took 18 months and that "part of that is
around the European procurement rules". He also suggested
that "we do need to take a little bit of time to get it right,
however urgent the situation is in terms of dealing with the recession"
142. Given the potentially lengthy nature of
securing programme revisions, the DWP reported that "programmes
usually build in flexibility to respond to changing circumstances
without having to re-negotiate their Commission decisions"
(p 211). While the Commission agreed with the latter point,
it contrasted the Government's view that revisions could be lengthy
to agree with its announcement at the outset of the economic crisis
that if Member States wanted to make changes to their programmes,
it would introduce a fast-track procedure to ensure that they
were adopted quickly. As at 14 January 2010, the Commission had
modified 12 Operational Programmes in response to Member States'
requests (Q 208, p 119, 120, 143).
The financial crisis and the
flexibility of the ESF
143. Witnesses were split over the extent to
which the recession either showed the existing flexibility of
the ESF or highlighted the need for changes to the Fund to ensure
greater flexibility in future. The Government came down on the
former side, stressing that existing ESF provision was able to
respond to the downturn and help those who were coming onto the
labour market. They thought "things look as though they are
remaining broadly stable in terms of our contractors delivering
against their job outcome targets" (QQ 379, 387, pp 207,
213). The Commission agreed that "the ESF is currently proving
to be a valuable and flexible source of funding in times of crisis",
as did the Mayor of London and London Councils and the Welsh Assembly
Government which cited the "considerable flexibility offered
through both the ESF priorities and the design of the Welsh programmes"
that allowed it to respond to a changing labour market "without
taking away from the important medium-term goals" (pp 123,
144. Many witnesses were concerned that the hardest
to reach were particularly affected by the recession as funds
were diverted towards the more recently unemployed and those under
threat of redundancy. European Structural Funds Voluntary Organisations
Northern (ESFVON) thought that at a time of recession the ESF
did "not work as well because the jobs are not there and
will lead to the focus shifting towards those who are more able
to achieve those outcomes for the primary contractors" (Q 104).
The TSEN agreed that "people furthest from the labour market
in an economic recession are probably going to be pushed even
further back". However, it felt "straitjacketed"
because primary contracting arrangements were, it suggested, cumbersome
and lengthy (Q 104).
145. Presenting a contrasting view, the Government
Office for Yorkshire and the Humber thought that "that sort
of flexibility and that additional money meant that we were able
to continue providing a focus on the most disadvantaged but we
were also able to put in place special measures to respond very
quickly to people who were being made redundant or were under
threat of redundancy" (Q 158). However, the Government
Office for Yorkshire and the Humber qualified this by highlighting
that the one area where it was supporting fewer people than it
was expecting to at the outset of the programme was among the
economically inactive (Q 160).
146. The Government recognised the risk that
in a recession "the queue just gets progressively longer,
so that those who are furthest from the labour market do not just
get a bit further from the labour market, they get a lot further."
However, support for the recently unemployed could at least mitigate
against this (Q 380).
147. The Government Office for the North West
reported its experience that graduates were also having difficulty
in finding work as a result of the recession, which in turn affected
the less academically qualified as the graduates moved into lower
level jobs (QQ 161-2). The Scottish Government agreed that
as a result of the more competitive labour market it was "much
more difficult for people who are starting from quite a long way
away from the labour market to actually make it into jobs"
(Q 280). This point was echoed by the Mayor of London and
London Councils, which informed us that "many providers have
reported difficulties in achieving their targets as job opportunities
are in short supply" (p 194).
148. Turning to the future, the Convergence Partnership
Office for Cornwall and the Isles of Scilly stated that "we
do not know how the economy will perform over the period to 2015
and the situation is bound to vary both over time and geography
necessitating ongoing flexibility in delivery" (p 86).
The Commission agreed that the challenge post-2013 would "be
to ensure that the ESF has both the capacity and the flexibility
to respond to the needs of all citizens, and achieve the objectives
of the Treaty, i.e. full employment in an inclusive society"
(p 121). COSLA called for more flexibility in terms of adjusting
timescales and targets to take account of the changing economic
environment (p 147).
Conclusions and recommendations
149. We recognise the need for a Fund that is
sufficiently flexible to respond to external factors such as changes
in domestic policy and the recent recession. However, there is
a balance to be struck between flexibility and the need for co-financing
organisations and project providers to remain accountable and
for the project to remain within the rules and the authorisations
made under them. It is also important to avoid unnecessary or
unwelcome derogations of funding.
150. We note the wealth of responses that have
been introduced as a result of the changed labour market and economic
circumstances and we commend the Commission's efforts to ensure
that where necessary, changes to programmes were delivered on
the ground as quickly as possible. We are concerned by the delay
experienced in the UK in money reaching programmes following the
release of extra funds due to the revaluation of the euro. We
recommend that the Government, working with the Commission, conduct
a full review of the situation in order that this does not hinder
the ability of the ESF to respond quickly to rapidly changing
circumstances in future. The Commission should share the findings
of the review with other Member States in order to facilitate
learning across the EU.
151. Our witnesses' views differed as to the
effect of the recession on the ability of providers to deliver
the original targets set for programmes. The rapid onset of the
recession and the changes this has necessitated in the ESF in
the UK demonstrate that a multi-annual programme such as this
must be cast with sufficient flexibility from the outset to cope
with unforeseen and rapid changes in the economic and employment
environment. We recommend that the Government monitor closely
how providers' ability to deliver their targets has been affected
as we hopefully move into a period of economic recovery. It is
vital that Member States and the Commission use the opportunity
provided by the recession to learn valuable lessons about how
the flexibility of the ESF can be improved in future, as also
about where it is working well.
152. The ability to alter programme targets
and move funding between projects and priorities with greater
flexibility is desirable. We recommend that such flexibility be
integrated into the operating rules and that the Government advocate
this approach in discussions on the future of the policy.
153. Priorities for the use of the ESF will differ
between regions across the European Union and within Member States.
Regional flexibility, allowing for the different economic profiles
of regions, is therefore essential for the efficient and effective
delivery of the ESF. We recommend to the Government that in
future, there should be real and substantive opportunity for regional
priorities to be built into the programme while recognising the
national and European nature of the Funds. We consider that there
is room to address this in the next phase of the 2007-13 programme
and in any new programme after that date.
27 2009/2010 (COM (2009) 674 final) pp 7-8 Back