Thank you, convener, and good morning, committee. This is my first appearance in front of the committee in my new role, and I hope that it will be the first of many. Thank you very much for the invitation to contribute to the European structural and investment funds inquiry and for the provisional findings that your work has already produced.
The European social fund and European regional development fund programmes have provided significant funding to Scotland for more than 40 years to promote economic development and cohesion. Going back to the 1970s, Scotland received funding for a wide range of activity, including, for example, road improvements in Ayrshire and new water supplies on the Scottish islands. Now, the European Union’s aims of smart, sustainable and inclusive growth towards the Europe 2020 targets, and the Scottish Government’s sustainable, inclusive growth ambitions, as set out in the national performance framework, neatly align. The programmes support a number of the Scottish Government’s priorities.
Skills Development Scotland and the Scottish Further and Higher Education Funding Council use funds from the ESF towards meeting the aim of a well-equipped workforce, with some 17,000 individuals receiving skills training. That is in addition to other programmes that are working to contribute to alleviating poverty and increasing social inclusion by providing support to 15,000 individuals, including those in low-income households, lone parents and those not in work.
The ERDF programme supports investment in 16,000 small and medium-sized enterprises to grow and create jobs and opportunities, and it aims to support 500 organisations to develop low-carbon processes and technologies to facilitate Scotland’s transition towards a low-carbon economy.
In May, when the committee took expert advice from a number of organisations, it was stated that the programmes support between 10 and 25 per cent of local authority economic development and employability spend. I am sure that members will agree that the programmes’ significant contribution to economic development in Scotland cannot be overestimated.
However, the process is not without its challenges. The programmes come with significant audit and compliance requirements. The European Commission has issued around 6,000 pages of rules via three regulations, eight implementing acts, nine delegating acts and more than 100 pieces of guidance. The Commission requires that all expenditure that is claimed complies with those rules. Failure to do so can result in serious penalties. We have experienced problems in the past where non-compliance has been identified, resulting in funding being reduced.
The Scottish Government, as a responsible managing authority, works hard to support those who apply for and receive those funds by distilling the complexity of and clarifying understanding of the compliance and audit process to avoid risk and maximise the positive outcomes that are provided for Scotland. That is achieved by carrying out thorough checks and regular reviews of guidance and processes, and always seeking opportunities to simplify the process where possible.
In the committee’s provisional findings, it identified value in programmes that are based on needs-driven funding and good practice from current and previous programmes and which are directed at people and places. The United Kingdom Government has also recognised the value of those programmes and the contribution that they have made. That is demonstrated in its commitment to replace them with a shared prosperity fund. It has acknowledged that it will engage with us and counterparts in Wales and Northern Ireland and respect the devolution settlements, but, to date, there has been no detail from it on how it intends to take that proposal forward.
The EU exit was not Scotland’s choice, but we will work with the UK Government to avoid and mitigate the worst effects for Scotland. That includes ensuring that repatriated powers are transferred to the Scottish Parliament along with a sustainable funding package and any proposed replacements for the ESF and ERDF programmes.
The aims of the programmes add distinctive characteristics such as a longer timescale beyond a single year or even a parliamentary session; the recognition of regional development, particularly in the Highlands and Islands; and partnerships, including those between Government, public bodies and the third sector. Those characteristics remain a good starting point for future programmes.
As members know, we do not want a rigidly bureaucratic programme; we want to simplify the management of the programmes where possible, in line with public finance standards, to ensure that funding is spent appropriately and audited proportionately. By aligning the strengths of the programmes with Scottish policies and priorities, including the national performance framework, the economic strategy and the enterprise and skills review, we need to strike a balance between compliance and complexity that will maximise the impact of future programmes on Scotland.
I am happy to answer any questions from the committee.