Chapter 4: Use of EU funding and initiatives
in the UK |
61. This Chapter considers how EU funding is
managed in the UK and suggests possible improvements to its effectiveness.
The structure of EU funding in the UK is set out in Box 5 below.
EU funding in the UK
|Expenditure for the 2007-13 European Social Fund (ESF) programme is to be completed by the end of 2015. The next programme will run from 2014-2020 and the funds available under this programme will need to be spent by 2022. Under these multiannual programmes, Member States present national strategic reference frameworks and negotiate regional operational programmes with the European Commission in order to tailor activities to the specific situation in the respective Member State or region. For the Youth Employment Initiative, Member States have to submit a Youth Guarantee Implementation Plan. Once approved, these are adopted as Council Decisions.
Within the UK, there are separate programmes for the ESF and the European Regional Development Funds (ERDF) in England, Scotland, Wales and Northern Ireland. Management of the ESF funds in Scotland, Wales and Northern Ireland is devolved. The UK Government have said that from 2014, they have brought together the ESF, ERDF (and part of the European Agricultural Fund for Rural Development) in England, to form a single European Growth Programme.
The ESF and ERDF are organised according to 'funding rounds' which are referred to as 'programmes' and run for seven years. The Youth Employment Initiative will be allocated using the same mechanism as the ESF and ERDF,and is expected to be worth 194 million to the UK. Expenditure must be completed by 2018.
The Regulations governing the ESF and ERDF dictate that Member States must contribute national 'match funding' to programmes. The level of match funding varies among Member States and between objectives and is set out 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 and the Skills Funding Agency (SFA) under the co-financing system. Under this system, co-financing organisations (such as the SFA 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.
For the 2014 to 2020 funding period, Local Enterprise Partnerships (LEPs) made up of local business and civil society organisations, will have responsibility for presenting strategies to the UK Government outlining how they intend to allocate the ERDF, ESF and (where eligible) Youth Employment Initiative funds in their area, in the context of their wider economic strategies. 39 LEPs cover the whole of England. Local areas have considerable discretion about the composition of LEPs, provided they are chaired by a business person and at least half their members are from the private sector. LEPs are not specialists in the area of youth unemployment and draw in expertise from their wider membership. The EU funding plans submitted by them will therefore vary in the extent to which they use the ESF to target youth unemployment and how much of a priority they see the issue as being in their localities.
UK Government position on the Youth Employment
62. The European Commission anticipates that
Member States will use the Youth Employment Initiative funding
to set up Youth Guarantee schemes.
As indicated in Chapter 3, the UK Government expressed concern
about the Recommendation for a Youth Guarantee. They confirmed
that since the Recommendation for a Youth Guarantee was non-binding,
they would not offer a guarantee, but would instead offer "tailored
support to young people based on their needs".
63. As already outlined, the core of the Government's
argument against a Youth Guarantee related to the specific situation
in the UK, where they said that 80 per cent of 18-24 year olds
claiming Jobseekers' Allowance stopped doing so within six months.
The Minister of State for Employment said that since most young
people came off benefits after six months "it would be inappropriate
to put the support in earlier."
We found this rationale to be problematic because it did not address
whether the young people who had stopped claiming benefits had
done so because they had found suitable employment, education
or training; nor did it address the situation of young people
who were unemployed but not claiming benefits. Indeed, the Government
"The numbers that we quote with some glee
about the [Job Seekers Allowance] off-flows do suggest that most
people who get on to [Job Seekers Allowance] leave, and leave
for a positive outcome, very quickly. There is not the same success
with people who we are not in touch with, and they tend to be
people who are not looking for work
There is a set of positive
flows, which most young people go through and find jobs across
a range of industries. There is then a smaller group who we mostly
have not got hold of, who are there for a long period of time."
64. The TUC expressed dissatisfaction with the
UK Government's decision not to use the Youth Employment Initiative
funding to set up a Youth Guarantee. It said that the UK Government
was the only Member State government to express such a clear opinion
against the Youth Guarantee. Richard Exell, Senior Policy Officer,
TUC said that: "The only explanation I have seen [for the
Government not supporting the Youth Guarantee] is that it was
not invented here. That is a very depressing reason for not going
ahead with [it]."
Professor Martyn Sloman, Visiting Professor of Management,
Kingston Business School, said that it was unclear whether the
Government's response to the Youth Guarantee "reflects underlying
Euro-sceptism" or "unease over the approach". He
said that the "Youth Guarantee should be seen as an opportunity
not an imposition".
65. As at 15 January, of the 20 Member States
expected to benefit from the Youth Employment Initiative funding,
only the UK Government and two other Member State governments
had not submitted their plans as to how they would spend the funds.
On 21 January, Commissioner Andor told us that the UK was the
only Member State not to have submitted its plan.
The Government submitted their plan for spending the Youth Employment
Initiative funds on 3 March 2014, over two months after the deadline.
In their plan they said that, while they strongly supported the
aim of the Youth Guarantee (to reduce youth unemployment), they
did not plan to introduce it in the UK for the reasons discussed
in Chapter 3 (paragraphs 53-54) and paragraphs 62-63. The
Government's plan described how their current initiatives met
the key elements of the approach detailed in the Recommendation
for a Youth Guarantee. The European Youth Forum and Pervenche
Berès MEP, the Chair of the European Parliament Committee
on Employment and Social Affairs, expressed surprise at the Government's
delay in submitting a plan for spending the Youth Employment Initiative,
given the amount of money available and the need to consult on
how it should be spent.
66. We regret the UK Government's delay in
submitting their plan setting out how they will spend the Youth
Employment Initiative funds. We are also disappointed with the
Government's lack of support for the European Commission's Recommendation
for these funds to be used to set up a Youth Guarantee. We recommend
that the Youth Employment Initiative funds should be used to pilot
a Youth Guarantee scheme in the five areas expected to benefit
from the Youth Employment Initiative.
Interaction between current UK
Government funding and EU measures
67. It was not within the remit of our inquiry
to scrutinise domestic policy, but we considered UK measures in
order to understand how they interact with EU initiatives. It
is the UK Government's duty to manage both EU and national funding
to ensure that, together, they provide the maximum possible support
to young people. Therefore, one of their objectives should be
that EU funding can 'add value' to the substantial body of funding
and programmes available at a national level and, "make sure
ESF is filling the gaps."
68. The Government's main current initiatives
to address youth unemployment in the UK are outlined in Box 6.
UK measures to address youth unemployment
|The Youth Contract was launched at the beginning of April 2012 and is the UK Government's flagship scheme aimed at reducing youth unemployment. It aims to help young unemployed people prepare for work and find long-term employment. The Government said that the Youth Contract has the capacity to provide 500,000 new opportunities for 18-24 year olds. The six key elements of the Youth Contract are:
· Funding for 160,000 "wage incentives" schemes, over three years, worth up to £2,275 each for employers who recruit an 18-24 year old who has spent six months or more on benefits. "Wage incentive" payments are made to the employer after the young person has been employed with them for six-and-a-half months.
· An extra 250,000 work experience or sector-based work academy places.
· More time with Job Centre plus advisers.
· An opportunity to be referred to a careers interview with the National Careers Service.
· An investment of £150 million over three years to support the most disengaged and disadvantaged 16-17 year olds by supporting them to get back into education, onto an apprenticeship scheme or into a job with training.
The Work Programme was launched in June 2011 and supports those who have been Not in Employment, Education or Training (NEET) for a long period of time. The Government are investing £3-5 billion in the Work Programme. Most young people are referred to the Work Programme after claiming Job Seekers Allowance for nine monthsrather than 12 months, as is the case for claimants aged over 25. Around 28 per cent of those referred to the programme are young people. 18 providers have been selected to deliver Work Programme contracts across the UK. These so-called 'prime' providers have assembled supply chains involving smaller specialist and local organisations.
The Work Programme gives these providers freedom to provide individually tailored help to those on the programme. The providers are paid by results: they can claim a job outcome payment after a participant has been in a job for three or six months (depending on the young person's situation) and are paid more for supporting groups that are "harder to help" into work. Providers can then claim sustainment payments every four weeks for up to two years.
Source: UK Government, written evidence
69. The UK Government's plan for implementing
the Youth Employment Initiative in England featured their existing
policies to support people into work, including the Work Programme
and Youth Contract measures.
Professor Sloman referred us to a Government statement that
the UK's Youth Contract broadly met the underlying aims of the
EU's Youth Guarantee and that the Youth Contract would form part
of their plan for spending the Youth Employment Initiative.
70. We are not convinced by the UK Government's
argument that the Youth Contract meets the aims of a Youth Guarantee.
The Youth Contract has as its focus the financial bolstering of
the demand side (for example, via wage incentives for employers)
in order to create work experience opportunities for young people.
The Youth Guarantee is focused on individuals and commits to finding
them a suitable placement within four months. This in turn differs
from the Work Programme, which focuses on finding sustainable
job opportunities for those referred to it.
71. We also received evidence indicating a lack
of support for the Youth Contract. WORKing for YOUth, an organisation
that works with multinational employers to address youth unemployment,
said that "in the private sector they know [the Youth Contract]
the problem is that it was underinvested
in at the beginning. It only aimed to get 50,000 young people
into work after its first year, when 250,000 people were out of
work at the time".
Although the wage incentive section of the Youth Contract has
the potential to help 160,000 young people over three years, the
UK Government's figures showed that from the launch of the Youth
Contract in April 2012 up until November 2013, only 10,030 wage
incentives were paid to employers who had taken on an unemployed
young person. The data did indicate an increase in take-up of
the scheme, with 65,500 "job starts" over 18 months.
WORKing for YOUth said that the Youth Contract's lack of success
had meant that it had not "captured the imagination"
of the private sector.
Professor Sloman said that it was difficult to understand
why the Government were putting forward the Youth Contract, which
he referred to as "one of the least successful of the recent
plethora of initiatives", as a plan for spending the Youth
Employment Initiative funding.
72. We recommend that the UK Government reconsider
their decision to use the Youth Employment Initiative funding
to bolster existing domestic initiatives, including the Youth
Contract. They should instead implement a pilot Youth Guarantee
in the five areas which will receive the Youth Employment Initiative
funding. The Youth Contract is focused on addressing the longer-term
structural issue of a lack of entry-level opportunities in the
youth labour market. The Youth Guarantee's focus on stemming the
post-2008 increase in youth unemployment would therefore complement
rather than duplicate the work of the Youth Contract.
Gaps in UK funding provision
73. It is unclear how much coordination exists
between the provisions made by local civil society organisations
and funding from the UK Government or EU. Youth Unemployment UK
Community Interest Company (CIC) was critical of the support available
centrally for young jobseekers, but said the support available
from the voluntary and youth sector was encouraging and was achieving
good results. However, it said that there had been "no integration
and little leverage" of the various types of support available
and that "there are a raft of measures" to support harder-to-reach
young people, but that graduates and other young people moving
from education to work do not have access to the same level of
support. The Association
of Graduate Careers Advisory Services (AGCAS) agreed with this
view and said that "there is probably insufficient congruence
between efforts directed at NEETs and those which could be deployed
to move graduates from 'underemployment'
into graduate level employment."
It said that a link between the two was important in order to
avoid graduates creating a "blockage" to entry-level
jobs, thereby exacerbating youth unemployment.
74. The UK Government acknowledged that "the
system" in the UK was geared up to focus on "the most
disadvantaged young people". They said that "in general,
the UK policy is not to help those who need the least help, it
is to help those who need the most help".
They said that the focus was on disadvantaged people who were
long-term unemployed, with the expectation that other people will
find a job soon enough, without government assistance.
75. The funding available at UK level is largely
focused on disadvantaged or long-term unemployed young people,
rather than other young people who might also be struggling to
find appropriate and sustainable work. We agree that the majority
of the funding in this area should be focused on those young people
who are the hardest-to-reach.
76. We note that highly skilled young people
who are 'underemployed' can create a blockage to entry-level jobs
for other young people. We recommend that the UK Government use
some of the European Social Fund to introduce ways of assisting
highly skilled young people to access the labour market, for example,
through improved careers advice or support for entrepreneurship.
This would complement their use of the majority of government
and EU funding to target those disadvantaged young people who
may be harder-to-reach.
Local control over EU spending
77. We received a substantial amount of evidence
to suggest that there was a need for the UK Government to devolve
further EU funding in the area of youth unemployment to local
authorities and bodies.
THE VIEW OF LOCAL AUTHORITIES AND
LOCAL ENTERPRISE PARTNERSHIPS
78. Birmingham City Council said that local authorities
needed to have greater influence in commissioning support and
services to address youth unemployment in their areas. It pointed
out that the current management structure of the ESF in the UK,
where projects are co-financed through bodies such as the SFA,
meant that UK Government contracts were awarded to large national
providers who had no local presence and were often poor at connecting
with local harder-to-reach young people.
The Council agreed with the Greater London Authority's view that,
as a local authority, it was not easy to "find your hardest-to-reach
It said that the best way of finding and helping these young people
was in consultation with local specialist charities, which "perhaps
specialise in drug addiction or an ultra-local approach from a
79. Birmingham City Council, the Local Government
Association and the Buckinghamshire Thames Valley LEP said that
young people and local businesses found it easier to engage with
localised funding providers. Local agencies could provide a "single
and give young people a chance to contribute to what works.
DELNI said that in their experience, a local approach could better
engage businesses in youth unemployment schemes, empowering them
to take leadership over training.
80. The Gilfillan Partnership, a research and
evaluation organisation for skills and employment, was concerned
that local decision-makers could be as remote as central government
from understanding the realities for unemployed young people,
if they did not involve "people working with the most disengaged
people on the ground fully in designing their programmes".
It said that such engagement was important, in terms of enabling
LEPs to gain an understanding of what had been successful before,
but that this did not appear to be happening because of the pressure
LEPs were under to submit their spending plans to the UK Government
on time. It suggested that a possible solution to these problems
might be the production of a practical guide for LEPs and similar
bodies, providing examples of how certain issues had previously
been addressed and with contact information for people and organisations
who had built up experience in tackling youth unemployment.
THE UK GOVERNMENT'S VIEW
81. The UK Government acknowledged that the structure
of support in the UK had been too centralised in the past.
They said that the move to localism was still work in progress
and that they were in the process of consulting local authorities
and writing guidance about how devolution of powers in this area
should be structured.
Lord Heseltine signalled a note of caution in this respect,
as he reflected on the extent to which the Government had taken
forward the recommendations in his report, No Stone Unturned:
in pursuit of growth
that there should be a greater devolution of powers to local government.
He said that "giving up the reins of power is not an attractive
thought for anyone who holds the reins. The Government have gone
further than any previous Government. I much admire that but they
could go a lot further."
Timescales for spending EU funds
82. Witnesses had mixed views on the usefulness
of the timescales associated with EU funds, which are based around
seven year programmes (see Chapter 4, Box 5). Birmingham
City Council said that, although European funding programmes worked
in seven year cycles, they had mainly been used to support short-term
projects that last two or three years. It said that a longer-term
approach would allow local authorities to develop relationships
that are more productive with business and local organisations.
Prospects, an organisation that provides services (including the
UK's Youth Contract) to young people, agreed with this view and
said: "sometimes just as the programme becomes embedded and
is producing good results, we stop, we re-commission, we tender
again and we come up with a different model".
In response, the UK Government said that the seven year cycle
is problematic, because it did not match the three year spending
review cycle at a domestic level.
Youth Enterprise and Unemployment, an organisation that runs an
EU funded e-learning programme, also said that fund allocation
in the UK should be longer-term, as short-term interventions were
useful as pilots, but did not address long-term and generational
issues such as youth unemployment.
83. We conclude that the current system of
managing EU funding in the UK is too centralised and over-reliant
on very large-scale, standardised contracts. We believe that this
has resulted in provision which is insufficiently tailored to
local needs and which makes ineffective use of local civil society
organisations, local authority experience and specialist knowledge,
particularly in relation to services for harder-to-reach young
people. It also prevents proper engagement with young people and
local businesses. We therefore welcome the UK Government's commitment
to introduce greater localisation into the allocation of funding
and their undertaking to give additional freedoms and flexibilities
to Local Enterprise Partnerships. We urge the Government to ensure
that this local approach is carried through to the finalised programme
guidance and recommend that they consider full devolution of responsibilities,
including programme management and delivery, to those local authorities
and Local Enterprise Partnerships who see a need for it in their
84. We recommend that the UK Government and
local authorities produce written guidance to help Local Enterprise
Partnerships and other relevant bodies to build quickly an understanding
of what has previously been successful in the area of provision
for young unemployed people. This should be based on robust evaluation
and experience and should be disseminated widely.
85. We recommend that local authorities and
Local Enterprise Partnerships use the seven year cycle connected
with EU funds to complement national measures, which are often
two or three years in duration, by funding longer-term projects.
These would provide sustainable solutions for young people and
businesses that need more targeted support, and help overcome
the current situation where provision is short-term and continually
changing. The UK Government should ensure that the terms of their
agreement with local authorities and Local Enterprise Partnerships
enables them to use the funds in this way.
112 We contacted all of the devolved administrations
requesting evidence. We received written evidence from the Welsh
Government, and oral evidence from the Northern Ireland Executive.
UK Government Back
Regulation (EU) No 1304/2013 Back
Regulation (EC) No 1080/2006 Back
Q 1 Back
Regulation (EU) No 1304/2013; Regulation (EC) No 1080/2006 Back
The Skills Funding Agency is an executive agency of the Department
for Business, Innovation & Skills. It is responsible for giving
colleges, training organisations and employers the funding to
help young adults, the low skilled, and the unemployed to get
the skills they need for employment. Back
COM(2013) 144 final Back
UK Government Back
Q 239 Back
Q 9 Back
Q 82 Back
Professor Martyn Sloman Back
European Commission website, Press release, 15 January 2014 Back
Q 192 Back
Q 150; Q 213 Back
Q 5 Back
UK Government (July 2013), Youth Contract Wage Incentive Payments-experimental
statistics, Department for Work and Pensions, p.3 Back
UK Government website, 'Managing the work programme'; Since Job
Seekers Allowance is only available to unemployed persons aged
18 and over, 18 year-olds who have already been unemployed for
six months previously are referred to the Work Programme at the
three month point in their claim. Back
UK Government Back
Professor Martyn Sloman Back
Q 106 Back
UK Government (February 2014), Youth Contract Official Statistics,
Department for Work and Pensions Back
Professor Martyn Sloman Back
Youth Unemployment CIC Back
Underemployment refers to an employment situation that is insufficient
in some important way for the worker. In the context of youth
unemployment, underemployment usually refers to holding a part-time
job despite looking full-time work or where the employee has education,
experience, or skills well beyond the requirements of the job. Back
Q 8 Back
Birmingham City Council Back
Q 45 Back
Q 40 Back
Buckinghamshire Thames Valley Local Enterprise Partnership Back
The Gilfillan Partnership Back
149 Ibid. Back
Q 241 Back
The Rt Hon the Lord Heseltine of Thenford CH (2012) 'No Stone
Unturned: in pursuit of growth' Department for Business, Innovation
and Skills Back
Q 259 Back
Q 36 Back
Q 53; HECSU Back
Q 245 Back
Youth Enterprise and Unemployment Back