Inquiry into the Scottish Executive’s plans for the future structural funds programmes 2007-13: National Strategic Reference Framework

The South of Scotland Alliance submitted the following written evidence to the Scottish Parliament European and External Relations Committee inquiry on the UK Government's national strategic reference framework:

Question 1: Do respondents agree with the assessment in the draft NSRF of the economic strengths and weaknesses of the UK’s nations and regions?

The Alliance welcomes the recognition in England of structural economic weaknesses and associated poor social conditions in some rural areas and that generally non – commuting population tend to have low wages. (Para84) However, it is noted with regret that the analysis in the Scottish chapter made no comment on the same phenomenon north of the border.

The Scottish chapter should make reference to rural within the section of development disparities, weaknesses and potential, in particular, noting that there is a need in rural Scotland to diversify and grow the economic base, increasing productivity levels to at least the Scottish average, raise wage levels and raise skill levels. The reference should also note that whilst rural areas generally face the same types of economic challenges and problems in the emerging global knowledge economy as the rest of Scotland, there are a number of circumstances peculiar to rural areas which make economic development opportunities and needs different to those in urban areas particularly in relation to the economic challenges in small towns which are key economic drivers for many rural areas. These differences should be taken into account when designing and designating priorities.

Question 2: Do respondents agree with the proposed priorities for future Convergence and Competitiveness programmes in England, Scotland, Wales Northern Ireland and Gibraltar?

The Alliance welcomes the recognition of the distinct rural and urban dimensions outlined in two of the three proposed ERDF priorities in Scotland, namely “promoting community regeneration” and “environmental sustainability and rural development”. However, they also expressed some concern at the proposals.

The Alliance considers that the “supporting innovation and entrepreneurship” priority places undue emphasis on the commercial spinout opportunities from higher educational institutions. Innovation is broader than just the spin off from academic establishments and occurs in further education and businesses themselves. Also rural areas such as the South of Scotland where the academic base has not yet developed significant research capacity will need major investment prior to being able to make a significant contribution to such a priority. This would include investment in hard infrastructure including roads, rail, and air communications, information technologies, water and sewerage together with suitable commercial and industrial properties as these provide the context for support for innovation and entrepreneurship.

The Alliance is concerned about “environmental sustainability and rural development” priority. This is because of its twin focus on environmental issues and rural development did not appear to create a coherent priority.

The Alliance is strongly of the view that this priority should be replaced by two priorities with the creation of a separate rural priority which encompasses rural economic development in its widest sense. This would help to support traditional industries and develop the economic potential of the regions’ cultural and natural heritage as outlined in the proposals, but would also support the development of new industries in rural areas. (See response to Question 5)

There is a real danger that the proposed “environmental sustainability and rural development” priority for Lowland and Upland Scotland’s competitiveness programme will focus on waste reduction or energy savings with resources going to urban rather than rural development.

Question 3: Do respondents agree that the proposed priorities include a sufficient focus on the Lisbon Agenda?

It is considered from a rural perspective that the focus on competitiveness as stated in the Lisbon Agenda does not go far enough. All areas of Scotland and the UK need to contribute to the Lisbon agenda. This means that both urban and rural areas have an important contribution to make. There is a need to harness the energies, opportunities and strengths of people, communities, businesses, local economies and public institutions towards this end. To improve the competitiveness of rural areas, effective rural development measures are needed which can develop harness their potential. This is elaborated further in the Local Government Rural Network’s research document on the Competitiveness of Rural Areas which is attached.

Question 4: Do respondents agree with the proposals in the NSRF for ensuring consistency between structural funds Programmes and other EU policies and funding streams, in particular spending under the European Agricultural Fund for Rural Development and the European Fisheries Fund?

The Alliance welcomes the importance placed on co-ordination between ERDF, ESF, EAFRD and EFF as stated in the draft Community Strategic Guidelines but questions how this would be delivered in practice in Scotland and across the UK. It is vital that opportunities are taken to pilot innovative regional delivery mechanisms in order to ensure the effective co-ordination of delivery of programmes. The South of Scotland is willing to test these mechanisms as the region has already a very good track record of managing European programmes including the South of Scotland Objective 2, LEADER and PESCA programmes. The South of Scotland Alliance’s South of Scotland Competitiveness Strategy 2007 – 2013 provides the basis for use and delivery of EU Structural Funds in the South of Scotland.

Question 5: Do respondents agree with the proposed architecture for future programmes?

The Alliance is disappointed at the proposal for a single ERDF programme for Lowlands and Uplands of Scotland and is concerned at the difficulty in achieving the commitment of locally based partners to input to such a programme’s decision taking. The regional aspect of decision taking is considered to have been a fundamental component in the success of the current Scottish regional programmes.

ERDF Priority 1 Supporting innovation and entrepreneurship – The Alliance considers that this “priority places undue emphasis on the commercial spinout opportunities from higher educational institutions. Innovation is broader than just the spin off from academic establishments and occurs in further education and businesses themselves. Also rural areas such as the South of Scotland where the academic base has not yet developed significant research capacity will need major investment prior to being able to make a significant contribution to such a priority. This would include investment in hard infrastructure including roads, rail, and air communications, information technologies, water and sewerage together with suitable commercial and industrial properties as these provide the context for support for innovation and entrepreneurship.

ERDF Priority 2 Promoting Community Regeneration - should make reference to developing and diversifying small towns in their role as economic drivers and service centres for rural areas.

ERDF Priority 3 (see response to Question 2) Environmental sustainability and rural development – as mentioned in the response to Question 2 this priority needs to be made into two.

It is considered that Environmental sustainability should be a priority on its own as in the English chapter. It is appropriate to both rural and urban areas.

The Rural Priority should focus on providing assistance to rural communities endangered by the contraction of traditional sources of employment and believe this should be done by:

• diversifying the economic base focusing on non traditional sectors, e.g. knowledge intensive business activity, renewable energy, bio-energy and developing key local growth industries and priority industries;
• developing & promoting quality of life locations;
• linking in rural SMEs to city region and R&D networks;
• supporting sustainability of fragile remote or rural communities and in particular maintenance and developing the growth potential of small towns which are the economic drivers of local economies;
• supporting and encouraging networking between businesses, between communities and between both;
• supporting the development of community led economic initiatives particularly where it will help reverse regional out-migration and ensure economic sustainability;
• measures to address property market failure - development of sites for economic, social & environmental purposes, direct support to SMEs for re-location or expansion;
• maximising land-based assets to best sustainable economic advantage - capitalising on natural resources and concentrating on growth sectors - tourism, green tourism, adventure sports, renewable energy, bio-energy technologies;
• developing tourism and cultural assets and strengths and,
• encouraging urban/rural linkages - maximising benefits of connections to city regions and other economic centres and in line with metro region development.

For a more expansive list please see the measures contained within the priorities of the Alliance’s South of Scotland Competitiveness Strategy 2007-2013.

Question 6: Do respondents agree that the UK’s Competitiveness allocation should be divided equally between ERDF and ESF at the UK level?

The Alliance believes that such a judgment should be made on the basis of regional and local priorities. In rural areas the vital importance of business and community development infrastructure and support means that ERDF is more important than ESF.

Question 7: What are respondent’s views on how best to allocate ERDF Competitiveness funding across the UK’s regions?

The Alliance urges that the distinct challenges of economic development in rural areas be recognised and the suggested that population density should continue to be an element used to allocate funding, as should GDP measurement. There is also a need for measures on the degree and strength of economic diversification such as dependence on primary, manufacturing, public sector and local services and population imbalance such as elderly dependency ratios.

The Alliance notes the concern expressed across rural Scotland at the use of the Scottish Indices of Multiple Deprivation (SIMD) to allocate some funding. It welcomes the finding by the Finance Committee of the Scottish Parliament that:

• “There is a need to recognise that a majority of individuals and families who are deprived in Scotland do not live in the 15% most deprived communities, although there is no doubt that deprivation is most concentrated in these predominantly urban areas. Deprivation exists in rural as well as urban areas, but unlike urban deprivation, rural deprivation cannot be tackled by focusing investment on areas where deprivation is concentrated. Despite the inclusion of an access domain, the SIMD is not suitable as a basis for allocating resources to tackle rural deprivation.” (Para 166) http://www.scottish.parliament.uk/business/committees/finance/reports-06/fir06-05-04.htm#Conclusions

There is a need for an additional formula which reflects the economic and social needs and challenges in rural areas.

The general approach being taking goes against the fundamental premise of Regional Policy in the UK which focuses on the needs of regions experiencing particular economic problems and challenges. For this reason the Alliance queries the logic of removing the current targeting of funding to areas designated as being most in need through the full Objective 2 (41% of the population of Lowland and Upland Scotland). The proposal is to remove the present use of spatial and regional targeting and instead to spread the lower level of funding in the 2007 – 2013 across the whole region.

Question 8: What are respondent’s views on how best to allocate ESF Competitiveness funding across the UK’s ESF programmes?

As for the allocation of ERDF funding, the Alliance urges that the distinct challenges of economic development in rural areas be recognised and the suggested that population density should continue to be an element used to allocate funding, as should GDP measurement. As mentioned in answer to Question 7 there is a need for measures on the degree and strength of economic diversification such as dependence on primary, manufacturing, public sector and local services and population imbalance such as elderly dependency ratios.

The Alliance also notes as mentioned above the concern expressed across rural Scotland at the use of the Scottish Indices of Multiple Deprivation (SIMD) as outlined above for allocating resources to tackle rural deprivation.” (Para 166)

The ESF priority proposals seem appropriate, but could benefit from clarity as to the extent to which spatial targeting is to be used, but they should be adjusted to ensure that the three priorities also:

• support work with skills & needs of the under-employed in rural areas such as - women, older workers, returnees, migrant workers;
• promote modern working practices in rural businesses with regard to training and flexible working;
• encourage good localised LMI shared across partners to ensure understanding of rural labour market - match supply & demand;
• address the barriers to training/employment e.g. delivery of training in remote/peripheral locations & support to encourage people to stay in rural communities while training (childcare, transport);
• support for management & leadership skills, specifically encouraging creativity & innovation culture; and,
• encourage skills development in social enterprises

For a more expansive list please see the measures contained within the priorities of the Alliance’s South of Scotland Competitiveness Strategy 2007-2013.

Question 9: Do respondents have views on how to improve co-ordination between Structural Funds and domestic spending within England, Scotland, Wales and Northern Ireland?

The Alliance recognises the need to ensure co-ordination of funding from a range of sources, including European funding. However, the Alliance stresses that the diversity of challenges in different types of areas across the country need to be recognised both in domestic and Structural Fund investments.

The proposed approach to addressing regional disparity in England is noted. In Para 55, the Government’s belief that “the best way to overcome regional disparities…is to allow each region and locality the freedom, flexibility and funding to exploit indigenous sources of growth” was welcomed as was the reference to Regional Economic Strategies. The North West England Economic strategy differentiates clearly between its development strategy for the city regions of Manchester, Liverpool, Central Lancashire and the strategy for rural Cumbria. Also the draft economic strategy for the North East of England recognises the need for “a clear rural programme, primarily focussed on market towns and rural service centres”. The economic development strategies for Scotland are not so clear as regards rurality.

The South of Scotland Alliance’s South of Scotland Competitiveness Strategy 2007-2013 presents a way forward for the effective co-ordination between Structural Funds and domestic spending.

Question 9: Do respondents have views on how to improve co-ordination between Structural Funds and domestic spending within England, Scotland, Wales and Northern Ireland?

The Alliance recognises the need to ensure co-ordination of funding from a range of sources, including European funding. However, the Alliance stresses that the diversity of challenges in different types of areas across the country need to be recognised both in domestic and Structural Fund investments.

The proposed approach to addressing regional disparity in England is noted. In Para 55, the Government’s belief that “the best way to overcome regional disparities…is to allow each region and locality the freedom, flexibility and funding to exploit indigenous sources of growth” was welcomed as was the reference to Regional Economic Strategies. The North West England Economic strategy differentiates clearly between its development strategy for the city regions of Manchester, Liverpool, Central Lancashire and the strategy for rural Cumbria. Also the draft economic strategy for the North East of England recognises the need for “a clear rural programme, primarily focussed on market towns and rural service centres”. The economic development strategies for Scotland are not so clear as regards rurality.

The South of Scotland Alliance’s South of Scotland Competitiveness Strategy 2007-2013 presents a way forward for the effective co-ordination between Structural Funds and domestic spending.

Question 12: Do respondents agree that greater use of single stream funded mechanism would be beneficial in Scotland?

The Alliance considers that there may be some potential to streamline some of the bureaucratic systems through single stream funding, but noted that research recently carried out for the Scottish Executive by the consultants Hall Aitken concluded that overall financial savings were unlikely and that the implementation of single stream funding in other countries, including England had led to considerable upheaval and discontinuity and a long lead in time. No examples were found on a successful system of single stream funding.

Indeed the Scottish model of delivery of EU Structural Funds has been recognised as a model for the rest of Europe and the South of Scotland Objective 2 European Partnership is a unique example of a long term cross boundary partnership between public agencies for the delivery of European funded programmes.

The Alliance notes that the success or otherwise of single stream funding was highly dependent on the choice of organisation used to channel this funding and queried whether such organisations would have the administrative capacity and skills in place in time for the start of the new programming period on 1 January 2007.

The Alliance questions how regional priorities could be reflected within any single stream funded programmes and is concerned about the practicability of implementing a new system in the short timescale available.

The Alliance is concerned that the needs of urban areas would dominate nationally delivered single stream funded programmes and questioned the additionality of structural fund investment in single steam funds which were very closely aligned to national domestic programmes. The Alliance also queries how regional priorities would be addressed and also how reactive programmes could be to changing regional circumstances.

The Alliance notes that a particular strength of the current delivery mechanisms in Scotland had been the creation of strong regional partnerships which included representatives from a range of local agencies and other organisations and felt that single stream funding risked undermining their further development.

Also the experience of the Lowland Scotland Objective 3 programme shows that there is a need to devolve the delivery of ESF to local delivery systems. This is because rural areas tend to be peripheral to the main thrust of such national programmes and this can be shown by the relative share of resources that they have received from the Objective 3 programme.

There is a need for local programmes to deliver local priorities within a national and European policy context. This provides for local accountability and local ownership.

As mentioned above it is the South of Scotland Alliance’s view that the South of Scotland Competitiveness Strategy 2007 – 2013 presents the way forward for the use and delivery of EU Structural Funds in the South of Scotland.

15 May 2006

Douglas Scott c/o Scottish Borders Council Council Headquarters Newtown St Boswells Melrose TD6 0SA Tel: 01835 825155 Email: dscott@scotborders.gov.uk

Tony Fitzpatrick c/o Dumfries and Galloway Council Council Headquarters English Street Dumfries DG1 2DD Tel: 01387 260101 Email: tony.fitzpatrick@dumgal.gov.uk