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


CHAPTER 5: Future of the ESF

The policy landscape

154.  The European Commission launched Europe 2020, the renewed Lisbon Strategy, in March 2010 (see Box 1) and later this year it plans to consider how to revise its whole cohesion policy, including the ESF. Later in 2010, the EU's budget is due to be reviewed in advance of deciding the new financial framework for the period 2014-2020. Against that background we therefore consider in this chapter the future policy orientation of the ESF and its position within the EU budget, including its future alignment with the European Regional Development Fund (ERDF).

Future policy orientation

155.  According to some of our witnesses, sustainable development and green growth should be central to Europe 2020. The Welsh Assembly Government drew our attention to its response to the Commission's consultation on Europe 2020 in which it suggested that Europe 2020 provides a fresh opportunity to develop a strategy built around a central position for sustainable development from the outset. It emphasised the benefits of developing existing green jobs and stimulating new ones (Q 315). Similarly, the Scottish Government suggested that green growth should be among the priorities in the medium and long term in order "to raise prosperity, increase opportunity for all, and ensure sustainable and low-carbon growth" (p 167).

156.  Looking at how the priorities of Europe 2020 might be translated into the future ESF, a consistent theme throughout our evidence was the increasing importance of green skills. The Learning and Skills Council (LSC), the Government Office for the North West, Lincolnshire County Council, the Mayor of London and London Councils all agreed that green technology was an important sector for future growth, employment and ESF investment (QQ 26, 170-1, 347, pp 4, 194). According to COSLA, the ESF would have an important role to play in this agenda for three reasons: first, it could provide training to people who could not find their way in the old economy; second, it would thus demonstrate additionality; and third, it could help the wider economic development and modernisation of the regions (Q 253).

157.  Some of our witnesses pointed to specific actions that might be taken in order to develop green skills. The Government Office for Yorkshire and the Humber observed that one area for green skills training might be in the construction industry, particularly installation of new, green equipment, such as solar heating and water storage and retention systems (Q 171). Lincolnshire County Council suggested that the ESF could be used for retraining of existing professionals, for example teaching plumbers to use and install photovoltaic panels (Q 347). It was noted by the Convergence Partnership Office for Cornwall and the Isles of Scilly that existing traditional industries, such as agriculture, food processing and tourism, needed to modernise by becoming greener. The low carbon agenda must therefore be "pushed across all parts of the economy" rather than being placed in a policy silo (Q 171). The South West Regional Development Agency gave the example of a community seeking to develop its own energy supply company. The ESF could ensure that local people were being equipped with the skills to work in the new businesses, including working with the hardest to reach to ensure that they get on the pathway to economic growth (Q 119).

158.  Looking more generally towards the future spending priorities for the ESF, we have noted that there might continue to be a tension between support for higher level skills and support for lower level skills and the hardest to reach (see Chapter 2). The LSC emphasised that judgments would continue to be made on the balance to be struck between targeting those with the greatest need and investment in the economy for the medium and long term (Q 26). Meanwhile, in calling for a greater focus on higher education in the ESF post-2013, Higher Education European Funding Services Limited referred back to a European Commission paper in December 2008[28] which indicated that, over the subsequent decade, jobs requiring high levels of education would grow significantly, at the expense of jobs at the lower end of educational attainment (p 19). The Minister acknowledged that there was already a slight shift towards higher level skills and that this would continue but that it would still be necessary to develop lower level skills, including amongst the disadvantaged groups that could be helped through the ESF (Q 394).

159.  Finally, in considering the orientation and role of the ESF, we were interested to hear from the Commission that Europe 2020 would require "much more pro-active labour market policies" from Member States, with more intervention from Brussels but co-ordinated through mechanisms such as the ESF, which should have a "significant role" (Q 205).

Future financing of the ESF

BOX 11

The Budget Review and the UK Rebate

The December 2005 agreement on the 2007-13 EC budget stipulated that the Commission should "undertake a full, wide ranging review [of the budget] covering all aspects of EU spending, including the Common Agricultural Policy (CAP), and of resources, including the UK rebate, to report in 2008/9"[29]. The Commission issued a consultation paper in 2007[30] as part of that preparatory work and a further paper is expected later in 2010. Future spending on the Structural Funds, including the ESF, is likely to form an important element of these discussions alongside the UK rebate and CAP reform. Under the rebate, two thirds of the difference between the UK's contribution to the EU budget and its share of allocated expenditure are reimbursed. As regards the countries that acceded in 2004 and 2007, it was agreed that the UK would contribute fully to their costs apart from the CAP and that the rebate should reflect this agreement.


160.  It is within the context of the forthcoming Budget Review (see Box 11) that we considered the future financing of the ESF. The UK Government stated that they would like to see a phasing out of Structural Funds, including the ESF, in the richer Member States post-2013. In arguing their case, the Government asserted that, "where Member States have the institutional structures and financial strength to develop and pursue their own policies, they should be enabled to do so within a common EU strategic framework". The Government acknowledged that this would necessitate consideration of whether and how to sustain employment and skills provision that is currently financed by the ESF in the richer Member States (p 217). The Minister was unable to be more precise about how this might be achieved. Indeed, he admitted that, by definition, the programmes were additional to what could otherwise be done. Nor was he able to explain how other Member States were likely to respond in the course of negotiations (QQ 396-8, 401). We noted too that a common UK negotiating position ought ideally to be established through discussions between the Government and the devolved administrations and that the Welsh Assembly Government did not agree that Structural Funds should be phased out in the richer Member States (Q 407).

161.  In our most recent consideration of the Government's policy on the future of EU regional policy,[31] in 2008, we took a nuanced position in reaction to the Government's policy. The report, which focused on the ERDF and Cohesion Fund rather than the ESF, concluded that future funding "should be concentrated in the poorest regions" and that "richer Member States should remain responsible for the majority of their own regional funding".

162.  Among our witnesses, we detected little support for the Government's position. A recurring defence of the status quo was the value of the guarantee of funding over a seven year period, which was a benefit of EU schemes over national schemes. The latter, by contrast, might be amended as priorities shift or governments change at short notice. This guarantee of funds over a multi-annual period was described by the South West Regional Development Agency as rare, or even unique, and by COSLA as a form of "insurance" (QQ 122, 257). The Convergence Partnership Office for Cornwall and the Isles of Scilly added that the ability to plan over a seven year period gave a sense of purpose and confidence to economic regeneration (Q 174).

163.  Witnesses were concerned about how the ESF would be replaced. Even the Minister acknowledged that, due to the unpredictability of politics, priorities at a national level could change and thought "the effect is that these people we care about who do suffer disadvantage get less good provision" (Q 376). The Convergence Partnership Office for Cornwall and the Isles of Scilly emphasised that if "renationalisation" was to be the chosen option, one needed to be clear whether the replacement would deliver the same results (Q 174).

164.  An argument expressed by several witnesses in opposing the Government's policy was that unemployment did not respect national boundaries. The LSC argued that "the artificial boundaries of nation states do not define where unemployment hits and affects people ... resource should follow need, as opposed to resource following geographical boundaries" (Q 28). The Commission illustrated this point when it reported that the unemployment rate in Brussels, the third richest region in Europe, was more than 20% (Q 223). London Councils emphasised that, "whatever happens we will continue to have large pockets of population that need detailed intensive help and support to enable them to play their role in society", a view shared by the Welsh Assembly Government, the University of Sunderland and the Convergence Partnership Office for Cornwall and the Isles of Scilly (QQ 69, 174, 317, 356).

165.  The role of the ESF in encouraging innovation and the generation of new ideas that might not otherwise come to fruition was also emphasised (QQ 122, 257). Similarly, CEFET (Co-ordinating European Funding for the East Midlands Third Sector) commented that it would be easier to make the case for all Member States to retain access to funding if those funds "were seen to be thematically targeted at something that was not done by the mainstream, doing some different rather than doing more of the same" (Q 107).

166.  The Commission also pointed to the legal status of the ESF. The European Social Fund is founded on the EU Treaty (Articles 162-4 TFEU) and the content of this part of the Treaty was not amended substantively by the Lisbon Treaty (Q 220). The Treaty applies equally across the European Union and does not restrict the application of the ESF to the poorest Member States. It was considered too that social exclusion needed to be tackled as an expression of EU solidarity (Q 223, 226).

167.  Within future financing discussions, the Commission noted that there was a strong case to reinforce the ESF in the next programming period, not least in the context of the financial crisis which had left the EU in particular need of labour market intervention (QQ 208, 215).

Future alignment of the Structural Funds

168.  Cohesion policy was built on two key strands of intervention, explained the Convergence Partnership Office for Cornwall and the Isles of Scilly: one based on people and the other investing in more competitive business. The former would generally be supported by the ESF and the latter by the ERDF (see Box 12) (Q 174). Witnesses gave examples of how the ERDF and ESF were effectively aligned within current programmes. In Cornwall, the ERDF had funded higher education buildings and research capacity, while ESF had enabled some money to be spent on postgraduate research (Q 110). In the Highlands and Islands, ERDF had been used to support renewable energy infrastructure and research while the ESF had supported renewable energy skills development (Q 315).

BOX 12

European Regional Development Fund (ERDF) and alignment with the ESF

The operating provisions of the ERDF are governed by the same Regulation as the ESF, but the ERDF has a separate Regulation (1080/2006) laying down its scope. Under the Regional Competitiveness Objective (covering most of the UK), projects should focus on:


·  innovation and the knowledge economy;


·  environment and risk prevention; and


·  access to transport and telecommunications services of general economic  interest.


Furthermore, the ERDF Regulation includes a recital emphasising that there should be synergy between support granted from the ERDF and support granted under the ESF and other Funds.


169.  The Welsh Assembly Government, COSLA and the South West Regional Development Agency advocated the creation of a "mono fund" of European investment (QQ 125, 259, pp 73, 175). The South West Regional Development Agency explained that structures had been specially created in South West England in order to try to bring the two together (Q 126). The Welsh Assembly Government thought there was a need to integrate the ERDF and ESF more closely because while the ESF would provide the skills for employment, it was important that the corresponding job opportunities existed, and that was where the ERDF could assist. Both COSLA and the Welsh Assembly Government drew attention to the differing operating rules applying to the Funds. We heard that this was a particular concern for local government, which found it burdensome to deal with different systems (QQ 260, 314).

170.  Other witnesses agreed that there was a need for greater alignment but questioned whether the solution was a mono fund. The Commission emphasised that any mis-alignment between the Funds would not be solved simply by "lumping together all EU funds into one single department and then continuing as we have been". Rather, policy co-ordination at EU, national, regional and local levels was necessary (QQ 243-4). The Government also argued against a mono fund, explaining that there was merit in the ESF's distinct labour market focus and its ability to complement employment and skills strategies. Instead, the focus should be on creating the appropriate regional structures (QQ 410-1).

171.  The Scottish Government, West Midlands Leaders Board, the Convergence Partnership Office for Cornwall and the Isles of Scilly, the Government Office for the North West, the European Trade Union Confederation (ETUC) and Slovak government all argued for greater integration at the EU, national and local levels, but not for a single fund (QQ 175, 180, 314, pp 244, 247, 249, 252). The Slovak government was keen to ensure that projects could be jointly financed by the two Funds and the Government Office for the North West would support an inclusion in the EU-level framework of an expectation as to how delivery should operate at the local level in a joined-up fashion (Q 182).

172.  Local government representatives mentioned the link with JESSICA (Joint European Support for Sustainable Investment in City Areas), a scheme offering loan capital for urban development primarily from the European Investment Bank. London Councils, Lincolnshire County Council and COSLA argued that JESSICA too ought to be aligned more closely with the ERDF and ESF. Both JESSICA and the ERDF lacked grants for training and employment, and for this reason it would be useful to link them with the ESF (QQ 352-3, p 147).

Conclusions and recommendations

173.  We agree that the EU's new Jobs and Growth Strategy should drive the future direction of the Structural Funds, including the European Social Fund. The extent to which the ESF and the Commission are able to assist in co-ordinating pro-active national labour market policies, as advocated by the Commission, is likely to be a political choice driven by the economic health of Member States.

174.  The focus of Europe 2020 and the ESF should appropriately be on sustainable development as the development of the low-carbon economy is likely to be an important element of the EU's future economic growth. We therefore recommend that, when designing priorities for the European Social Fund in the 2014-20 period, the appropriate contribution of green skills across the economy, in terms both of greening existing jobs and professions and developing new skills, should be recognised and supported.

175.  Over the course of the 2014-20 period, we recommend that the limited resources of the ESF continue to be focused on assisting the hardest to reach and least skilled into work or back into work. In some instances, a regional skills analysis might suggest that there is a need to increase the proportion of funding devoted to skills at level 3 and beyond. Where resources permit, the ESF may have a role in this type of assistance as long as additionality can be demonstrated and as long as the ESF continues to meet the needs of the hardest to reach and least skilled.

176.  The Government advocate an end to the availability of Structural Funds in the more prosperous Member States, including the UK. This policy raised concern among most of our witnesses. Opponents of the policy favoured the certainty of a multi-annual budget, considered that unemployment does not respect national boundaries and were worried about what would replace the ESF given its provision is, by definition, additional to existing national programmes and practices. We note the Commission's view that the ESF should in principle be available throughout the EU, and, like the Commission, consider that the ESF is a concrete expression across the EU of Europe's solidarity with its citizens.

177.  We were unconvinced by the arguments presented to us by the Government and we were particularly disappointed to note that the Government have no plan as to how the ESF should be replaced in the UK specifically. Undoubtedly, the focus of the ESF ought to be the less prosperous Member States. However, unemployment does not respect national boundaries and, in the particular context of the economic downturn, we do not support withdrawal of the ESF from the UK and other more prosperous Member States without a clear indication of what would follow in its place.

178.  We note too a lack of consensus between the UK Government and at least one of the devolved administrations. We therefore draw the Government's attention to the importance of involving the devolved administrations as fully as possible in discussions seeking to establish a common UK negotiating line on the future of the ESF.

179.  We are not convinced that alignment of the ERDF, ESF and other Funds is best achieved by creation of one single Fund; each Fund has particular objectives which ought to be retained. We recommend that the Funds be strategically aligned according to overarching policy priorities such as the development of a low carbon economy.

180.  The systems for processing the respective Funds should not differ and alignment between them would be facilitated by approximating the administrative requirements, timetable and scheduling, and operational liaison for each Fund. We recommend that the Government review these arrangements before the start of the next programming period, and in the post-2013 period, with a view to operational simplification at the local, national and EU levels.


28   COM(2008)608 16.12.2008 Communication from the Commission, "New Skills for New Jobs"  Back

29   Council of the European Union, Financial Perspective 2007-13, 19 December 2005, 15915/05, p. 80 Back

30   "Reforming the Budget, Changing Europe-A Public Consultation Paper in View of the 2008/2009 Budget Review", Communication from the Commission, 12 September 2007, SEC (2007) 1188  Back

31   19th Report (2007-08): The Future of EU Regional Policy (HL 141) Back


 
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