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

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).

Policy flexibility

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 programmes;

·  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 (pp 214-5).

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,[27] 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.

BOX 10

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" (p 143).

Regional variation

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" (Q 386).

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" (Q 385).

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 (Q 281).

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" (QQ 383-4).

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, 174, 192).

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

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