Elected Officers – urgency procedure
London Councils' response to the BIS Item no:
informal consultation on the delivery of
EU Structural Funds in England
Report by:
Dianna Neal
Date:
23 April 2012
Telephone:
020 7934 9819
Summary
Job title:
Head of Economy, Culture and Tourism
Email:
[email protected]
The Department of Business, Innovation and Skills (BIS) is carrying
out an informal consultation on how it should deliver EU Structural
Funds during 2014-2020. This report summarises the main points of
London Councils proposed response.
The full response is attached.
Recommendations
Elected Officers are asked to agree the written submission as
attached by noon on 26 April 2012 prior to the closure of the
consultation.
Response to the BIS informal consultation on the
delivery of EU Structural Funds in England
Summary
The Department of Business, Innovation and Skills (BIS) is carrying out an informal consultation on
how it should deliver EU Structural Funds during 2014-2020. Structural Funds include the
European Regional Development Fund (ERDF), used to improve regional and local economic
competitiveness and the European Social Fund (ESF), used to train and support unemployed
people to get a job1. Under the current funding programme for 2007-2013, the UK receives £6 bn
of ERDF and ESF; of this, London receives £561 million.
The consultation will shape the how the programme is delivered. Currently, the Mayor of London
manages and administers ERDF and ESF programmes in London and agrees the priorities for
funding with government.
The European Commission is proposing the following changes to how the funds are governed:

Greater focus on fewer objectives so that the funds have scale and focus to make an
impact;

Geographical flexibility in the boundaries for programmes, with options for an enhanced
role for local partners and cities;

The chance to integrate programmes operationally and strategically and to streamline
administration.
The London Councils European Service has helped to develop a proposed response to the
consultation. The key points in London Councils response are:

Local government needs to be directly involved in the development of the government’s
partnership agreement with the Commission about how it spends EU Structural Funds;

In London, there should be regional programmes for EU Structural Funds. London
boroughs need to be involved directly as equal partners in the process of developing and
negotiating these programmes, given the economic differences across London. Reflecting
local priorities will result in better integration of EU funds with other public and private
1
They also include the European Agricultural Fund for Rural Development (EAFRD) and the European
Maritime and Fisheries Fund (EMFF) but London does not qualify for this funding.
investment. London boroughs can draw together packages of funding and other support
that will mean better targeting of EU funding and greater impact;

London Councils welcomes the allocation of 5% of funding for integrated urban programme
at local level. London Councils and the Mayor should agree what these programmes are,
which then should be managed and delivered locally;

The Commission’s Common Strategic Framework has provided the basis for simplifying
audit requirement. National government needs to simplify its audit rules around structural
funds and harmonise these between ESF and ERDF;

The government should match fund ERDF at source and extend results-based funding to
ERDF;

The government should pilot pooling ERDF and ESF funding, plus other funding or
investment, as part of the urban programme.
A copy of the full response is attached.
The consultation closes on Friday 27 April 2012.
Recommendations
Members are requested to approve the response to the consultation attached.
London Councils’ proposed response
Introduction
London Councils welcomes the opportunity to provide initial views on the various delivery
options for the four EU structural funds – the European Regional Development Fund (ERDF),
European Social Fund (ESF), European Agricultural Fund for Rural Development (EAFRD)
and the European Maritime and Fishers Fund (EMFF).
London benefits from ESF and ERDF and our response will consider those funds. Local
government is a critical partner in the development, delivery and oversight of ERDF and ESF
programmes in London, as it does in the rest of England.
London’s ERDF programme is managed by the Greater London Authority (GLA) as an
intermediate body: the only programme in England still managed on a regional basis. This
reflects the unique position of London as a city with an elected Mayor and Assembly. Local
government is represented on the ERDF Local Management Committee, which is chaired by
the Mayor, and similar arrangements apply to the regional management of the London
European Social Fund (ESF) programme. The ERDF programme is overseen by the ERDF
Local Management Committee with representatives from UK Government departments, the
European Commission, the GLA, local government and other sectors.
The management of ESF in London rests with the Mayor, with the GLA responsible for
managing the programme in partnership with the Department for Work and Pensions. DWP
has overall responsibility for ensuring that ESF regional frameworks meet the priorities and
targets of the National Operational Programme (OP) and the development and management
of London’s ESF Regional Framework is carried out by the GLA. The GLA European
Programmes Management Unit (EPMU) is responsible for the development and management
of the London ESF programme. All co-financing organisation (CFO) activity is monitored and
approved through the Regional Committee (which has membership similar to the ERDF
committee) to ensure that it meets the objectives and targets of the ESF regional framework.
Key principles
London Councils welcomes the introduction of a stronger partnership contract that is focused
on meeting Europe’s targets for growth and jobs for 2020, and agrees with the Commission’s
aim of increasing coherence between policy objectives and investment. We strongly
welcome the introduction of the Common Strategic Framework as part of the Commission’s
commitment to achieving increased coherence between funds.
We welcome the stronger commitment to a partnership approach proposed by the
Commission. Local government must be involved directly in developing the partnership
contract to ensure that effective multi-level governance is integral to the process; and
involved directly as equal partners in the process of developing and negotiating programmes.
Employment and skill levels vary quite significantly across London. There are clusters of
businesses across London with different sectoral needs and potential. Structural fund
programmes need to reflect and respond to these differences, so that they can be targeted
and add value. Programmes that reflect both regional and local priorities allow for much more
effective integration of EU funding with other public and private investment, maximising the
impact of funds and aligning services. They allow organisations to develop packages of
support at a local level or across boundaries, targeting investment and drawing on local
knowledge and services. London boroughs are crucial in drawing together these packages of
support.
Within governance arrangements for ESF and ERDF in London there are two sectors with a
direct, democratic mandate: the Mayor and the London boroughs. Each level of governance
must have an equal role to play in the development, implementation and oversight of ESF
and ERDF programmes. We want to see a strengthening of the local government role in the
London ESF and ERDF committees, to ensure that decision-making is shared equally
between the regional and local levels of governance.
Objectives/themes
1. Which of the Commission’s objectives for the Common Strategic Framework (CSF) funds
most align with your organisation’s own objectives and plans?
The EU budget, Fifth Cohesion Report and CAP 2020 all focus on achieving the Europe
2020 objective of smart, sustainable and inclusive growth and this is helpful in clarifying a
vision for the future. We welcome the focus on a number of clear objectives: London’s
ERDF programme has been relatively small and the programme’s impact may be
reduced if activities are spread too thinly over a large number of objectives.
The broad objectives set out in the CSF generally reflect the policy priorities of London
local government for skills development, energy efficiency, renewable energies, SME
competitiveness and innovation. However, within London the salience of each priority will
vary according to local conditions, challenges and ambitions, as well as economic and
social changes during the seven-year programming period.
In order to translate broad objectives into interventions that have measurable and positive
impact on specific opportunities and challenges, it is essential that funding priorities are
flexible enough to balance EU, national and local ambitions and to take account of
economic, environmental and social changes during the programming period.
We are therefore concerned that programme priorities set at national level, with centrally
set priorities, will not reflect opportunities and challenges across London. A ‘one-size fits
all’ approach would not be effective. It can lead to inappropriate objectives, activities and
targets and consequently little or no impact. A national programme will also make it more
difficult to integrate ERDF and ESF programmes with other regional and local economic
development initiatives. It is therefore crucial that London’s regional and local government
be directly engaged in the development of the partnership contract. London boroughs
have an important role in strategically planning for and delivering economic growth at the
local level and beyond their boundaries, working with other boroughs.
2. Are there certain CSF objectives which might be more suited to thematic, issue-based
programmes? If so, why, and what mechanisms would be required to ensure sufficient
local flexibility and involvement in decision-making and strategic guidance?
We particularly welcome the Commission’s proposals to develop integrated urban
policies with greater delegation to local level and for a minimum allocation for integrated
sustainable urban development. We are also pleased to see that the Commission
proposes that Member States form partnerships with regional and local authorities in the
development of the partnership contract and therefore the selection of areas to receive
urban funding. The integrated approach is particularly welcome in its support for the
integration of ESF and ERDF funds to support interventions in education, employment,
social inclusion and capacity.
Clear and transparent criteria must be developed for government’s selection of areas to
receive the ring-fenced funding and, given the essentially local nature of the
interventions, local government must be closely involved in developing those criteria.
An allocation of 5% of funds for integrated urban actions will, in London, provide funding
for relatively small and therefore essentially local interventions. A city-wide approach is
therefore not appropriate. An effective approach is for London Councils in association
with the Mayor to consider proposals for integrated sustainable urban development in
local areas, regardless of borough boundaries, to allow for innovative approaches. These
programmes should be managed and delivered locally.
Geography and local focus
3. Where does you organisation see opportunities for more localised place-based
programmes or projects within programmes and for which Funds of combination of
funds? How would this improve outcomes?
If structural fund interventions are to be effective, it is essential that they are developed
and implemented at the level at which labour, housing and transport markets operate.
They also need to bring together funding for different aspects of economic development
together, for example, innovation, access to finance and enterprise support; aligning skills
and employment funding to enterprise support for small businesses. Many borough
economic priorities cut across these different objectives.
In common with other large urban areas, London has to face spatial fragmentation, with
significant variations in the opportunities and challenges facing them. A flexible
geography is therefore essential in responding to specific challenges and there is a
critical role here for local as well as regional government in London. Localised
programmes may well cross borough boundaries while focusing intensive interventions
on relatively small but high-density areas and London boroughs working together offer an
effective way of achieving an integrated approach to local challenges. London boroughs
have a long and productive history of working together. Examples include six London
boroughs working as the ‘Host boroughs’ to make sure their communities benefit from the
2012 Olympic and Paralympic Games; Wandsworth and Lambeth working together on
the Nine Elms development and central London boroughs collaborating in the
development of the Central Activities Zones through Central London Forward.
We welcome proposals for community-led local development as a development tool that
will support integrated, bottom-up responses to local challenges, stimulate innovation and
build capacity and support multi-level governance. Clearly, local government is key to the
success of such initiative, providing local knowledge, links to existing initiatives and the
ability to pull together local actors and develop local action groups through its community
leadership role. This local, bottom-up approach will be important in delivering social
inclusion alongside economic growth – an important aspiration in London where some
communities do not benefit from its economic opportunities.
Streamlined administration
4. What key things need to change in the way the Funds are currently used in order to
reduce the administrative burden involved, whilst conforming to EU management control
requirements?
The CSF, in providing a single guidance and harmonisation of rules for several funds,
increased flexibility, increased proportionality and the clarification of rules to improve legal
certainty, has provided a basis for simplifying the management of funds.
However, the Commission alone cannot achieve the level if simplification required.
National government has a key role to play in ensuring simplification is achieved by itself
harmonising rules between, for example, ESF and ERDF programmes. This is made
particularly difficult with management of funds in England being allocated to different
government departments.
A balance must be found between accounting fully for public investment and
proportionality in the requirements of monitoring, reporting and auditing.The UK public
sector cannot afford to spend a disproportionate amount of time administering funds and
reporting to several different auditors; and the complexity of financial management
systems is a key issue for the ERDF programme.
While accounting fully for the use of public funds is clearly essential, the ERDF
programme in particular demands huge amounts of public time to manage unnecessarily
complex auditing arrangements, often as much through UK departmental audit
requirements as EC demands. The demands are increased by changes in requirements
during the programming period, making it extremely difficult for beneficiaries to develop
audit-proof procedures. The resource required by projects and managing authorities to
provide evidence for the methodology used for very small amounts of money is
significantly out of proportion to the sums involved. This represents very poor value for
money for the taxpayer and discourages important partners from participating in
programmes.
In our view, providing match funding at source for ERDF as well as ESF will reduce such
complexities: this approach has simplified the administration of ESF and made it simpler
to account fully for both ESF and match funding. We are also in favour of flat rate funding
to cover overhead costs: this has operated efficiently and effectively in the
Competitiveness and Innovation programme. Equally, results-based funding has
operated effectively in ESF programmes as well as strengthening performance
management: we would like to see an extension of this approach in the ERDF
programme in London.
Integration/joining up across funds and between outcomes
5. Are there specific combinations of funds, or elements of funds, which lend themselves to
operating in a more integrated or aligned way? If so, what kind of complementary
measures and outcomes would you want to see?
Combining ESF and ERDF funds to provide for integrated urban development, or
community-led local development, will offer an opportunity to combine funds to address
local challenges effectively. Integration with new funds to support research and
innovation in the Horizon 2020 programme will integrate a number of current funds, and
value would be added if these could also be integrated with ESF and ERDF at local or
regional level.
We believe this would add significant value to EU investment in local areas. However,
combining or integrating ESF and ERDF has proved very difficult, partly as the result of
separate and different accounting, reporting and monitoring requirements not only at EC
level but in the different government departments that manage the funds. Unless
significant changes are made at that level, it is difficult to see how combinations of funds
can work except in specific interventions such as the proposed urban approach. We
welcome the opportunity to pilot innovative approaches to integrated sustainable urban
development and the ability to pilot new approaches, possibly pooled with other funding,
linked to achieving locally relevant agreed outputs and outcomes but with flexibility on
how the funding is spent. This would build on the concept of community budgeting and
payments by result.
Another option is to consider how innovative EU financial tools, such as JESSICA and
JEREMIE which are ‘revolving funds’ and investment from the European Investment
Bank (EIB) could work alongside and add value to domestic funds such as business
support initiatives, ERDF and other domestic revolving funds.
6. Where does your organisation see opportunities for using some of the options proposed
by the Commission to promote more localised and coordinated programmes, such as
Joint Action Plans, Integrated Territorial Investments and Community-led Local
Development?
The urban development and ITI approach allows the concentration of resources in an
integrated way to deliver a full range of measures to address the multiple challenges
facing specific areas of London. It allows for interventions at the appropriate territorial
scale – in our view, in London, this is neighbourhood level – to develop new and
innovative solutions.