Written submission by Highlands and Islands Enterprise. Scottish Parliament s European and External Relations Committee

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1 Written submission by Highlands and Islands Enterprise Scottish Parliament s European and External Relations Committee Inquiry into Scottish Executive s plans for future structural funds programme The Committee has called for evidence on the UK Government s National Strategic Framework and the Scottish Executive s plans for future Structural Funds programmes Highlands and Islands Enterprise (HIE) has already submitted evidence to the Committee on the UK Governments National Strategic Reference Framework part of the Committee s Inquiry and the submission below is HIE s response to the part of the inquiry relating to the Scottish Executive s plans for future Structural Funds programmes The two responses might usefully be read together, but for completeness the context section essential to the understanding of our perspective is now repeated. Context The HIE Network, comprising the core based in Inverness and Benbecula, nine Local Enterprise Companies (LECs) and Careers Scotland locality offices, is the Scottish Executive s economic and community development agency for the north-west of Scotland. The HIE area covers just over half of the landmass of Scotland, yet includes only 9% of the national population. HIE s strategic objectives are set out in A Smart Successful Highlands and Islands which was launched by the Deputy First Minister in June As stated in the National Strategic Reference Framework, the Highlands and Islands qualifies for phasing out or statistical effect funding under the Convergence Objective during the Programme period as it has a GDP per capita above 75% (79%) of the EU 25 but below 75% (71%) of the EU15 average. Although a part of the HIE territory the eastern parishes of Moray 16.7% of the area s total population - falls outside the Highlands and Islands Statistical Effect NUTS II boundary, for the sake of clarity this response is confined to addressing the questions relevant to the Convergence Objective in Scotland. Although it is not clear whether the eastern parishes of Moray will meet the criteria adopted for identifying competitiveness and employment programme eligibility, the reality is that this area, in terms of functionality, forms part of the Highlands and Islands economy and a true reading of their statistics, at the most accurate level of disaggregation, must present a strong case for inclusion in the competitiveness programme. Inquiry Questions 1

2 1. Has the current structure of Structural Fund programme delivery in Scotland been successful? What are the advantages and disadvantages of changing this structure? The Highlands and Islands Special Transitional Programme has been developed and managed by a partnership of the main public agencies and local authorities and the UHI Millenium Institute largely via a challenge fund approach addressing a single programme incorporating ERDF, ESF, EAGGF and FIFG. The advantages of the challenge fund approach have been that active participation of the partnership has been encouraged and a wide range of project proposers has been attracted and given the opportunity to fulfill their aspirations. The considerable downside is that the challenge fund approach has proved administratively onerous and the considerable burden in terms of partners time and expenses and the delay imposed on project approval are not costed, and clearly do not represent optimum efficiency. This and the complexity of monitoring and reporting is an increasing deterrent to positive use of the programme. The single programme structure has provided a practical mechanism to move towards the goal of delivering truly integrated economic development. In particular the partnership has been enabled to make progress towards coordinating the delivery of EAGGF and FIFG actions with that of the lead funds ERDF and ESF. There have been no significant adverse implications of the single programme system, the integrational features of which had been improved from the previous Highlands and Islands Objective 1 programme ( ) and the partners had been looking forward to further progress on integration within the next programme.. 2. To what extent should the delivery of Structural Funds in Scotland link with Scottish Executive priorities? The whole objective in the delivery of European Structural Funds is that it should be consonant with national strategies, build upon them, and add value to them. The strategy text of the next Highlands and Islands Programme must take as its starting point not only the Commission s structural funds guidance and the Lisbon Agenda, but also the Framework for Economic Development in Scotland and its derivative A Smart Successful Highlands and Islands endorsed by the Scottish Executive in June We have the benefit of a whole suite of other Scottish strategies that must also contribute such as the National Planning Framework, the Scottish Rural Development Strategy and the Scottish Sustainable Development Strategy. 3. How can Scotland maximise the reduced amount of Structural funds available? 2

3 Being severely limited in comparison with previous programmes, it is clear that Structural Funds must be both spatially and thematically concentrated. In the context of the Highlands and Islands this means that funds must be directed primarily to growth opportunities in the most disadvantaged areas, except when strategic advantage to the whole area dictates otherwise, and that the focus of the funds must be on those fields where they can produce the most additionality. Structural funding should be directed to problems and opportunities where the limited scale of funding can demonstrably produce true additionality, rather than large scale infrastructural needs which might be left to the national economy. It is just as important that additionality should be achieved in terms of advancing the timing or increasing the quality of a project as by supporting an entirely new project, of course. Perhaps the most operationally efficient way that Scotland could maximise the reduced structural funds available in the Highlands and Islands would be to ensure that progress made towards integration over the life of the last and the current Structural Fund programmes is not dissipated. Already European Commission changes oblige us to cope with separate ERDF and ESF programmes but these two hopefully can be administered together as seamlessly as possible under a single Executive structure. These two can also be related by close liaison to the European Fisheries Fund, for which we understand a separate Highlands and Islands programme is planned, but currently we have no similar prospect of even this limited level of integration with the Single Scottish Rural Development plan being proposed by the Scottish Executive. This is extremely serious given the importance of the primary sectors to the broader foundation of the Highlands and Islands economy and the area s entitlement to a separate allocation of European Funding under its statistical effect designation. We submit that a separate Rural Development Plan is required for our area, or at least a separate sub chapter. 4. What do you think the main priority areas should be for the new Structural Fund programmes from ? In the Highlands and Islands we welcome the accessibility, quality services, innovation, and knowledge economy growth focus provided by the Commission. In particular we welcome the challenge that, to meet the Lisbon Agenda, 60% of support must be spent on research and development, innovation and IT, improving the SMEs environment, sustainable use of resources, human capital and infrastructure. One of the most practical implications of these requirements is that the development of the University of the Highlands and Islands will be absolutely central to the success of the Programme. By way of emphasis, I would refer to the observations made in our earlier response to the element of the Committee s inquiry devoted to the National Strategic Reference Framework which is reproduced here for the Committee s convenience: 3

4 The priorities proposed in the text for the Highlands and Islands Convergence Programme in respect of ERDF are the promotion of economic sustainability, the reinforcement of community sustainability and the development of environmental sustainability. In respect of ESF the priorities are to progress people into sustained employment, to progress people through sustainable employment and to invest in life long learning and support environment. Given the very specific logistical, infrastructural and geographical challenges of the Highlands and Islands, we identify research and development, innovation and the information society as providing a particularly significant catalyst for the general economic growth. For this reason, it is essential for the area to be able to prioritise the completion of the establishment of the University of the Highlands and Islands and the exploitation of its research and development and innovative capacity within the framework of the Programme. 5. What are your views on the Scottish Executive establishing one European Regional Development Fund programme for Lowland and Upland Scotland? No view. 6. If there is one Lowland and Upland Scotland programme, how would you ensure a balance between urban and rural areas? No view. 7. What are the advantages and disadvantages of introducing a system of co-financing for the distribution of Structural Funds? Advantage: The first and principal advantage that the concept of cofinancing must deliver and upon which it must stand or fall - is simplification and the delivery of increased efficiency in cost, human resource and timing that follows. To be adopted the model must provide opportunity to minimise bureaucracy for those running cofinancing funds where they provide match funding themselves, allowing for the streamlining of claims, information on finance and outputs to be managed through the co-financier s existing systems. Although the European Commission regulatory framework and audit function will remain, and therefore the opportunity for simplification is limited, the challenge is for Scottish Executive to explore every available possibility for flexibility in the interpretation of the regulations. Disadvantage: The loss of depth and breadth of partnership which seems implicit in this shift may be more perceived than real, depending on the methodology adopted, and in particular on the retention of a challenge fund element to address the aspirations of the wider stakeholders or to accommodate the unforeseen opportunity or 4

5 challenge. Partner involvement will still be essential to oversee strategy and to exercise supervision through monitoring of outputs and impacts. The significant sub regional differences within the Highlands and Islands must continue to be recognised and the involvement in some way of Community Planning Partnerships and Local Economic Forums in the Programme partnership might help to address this where and when the appropriate capacity can be demonstrated. 8. Do you think that the introduction of co-financing will give current stakeholders access to Structural Funds? It should be possible to satisfy the expectations of non co-financing stakeholders by the retention of a challenge fund element as described above, but again with a simplified administration. Highlands and Islands Enterprise, May