Post-Brexit structural funds

Context

Following the UK's departure from the EU, it will lose access to the European Structural and Investment Funds (ESF).

If the UK remained in the European Union, the Conference of Peripheral Maritime Regions (CPMR) estimates that it would be entitled to about 13 billion euros of regional development funding (under the EU Cohesion Policy) for the 2021-2027 period.

The UK Government has announced that in its place, it will introduce a UK Shared Prosperity Fund, which will be delivered by the UK Government.

It has announced a consultation on its draft plans, which have been subject to delay and are are still awaiting publication (as of May 2019)

Summary of proposals

The best way forward would be to focus on governance and accountability, transparency of finances & delivery, and much better participation in programmes as follows.

• The Scottish Parliament must be the authority to which all replacement funds for Scottish post-Brexit structural funds is accountable.
• Future planning and delivery of post-Brexit funds must be done transparently, following Open Government principles
• In Scotland, engagement in the funds should be framed within the National Performance Framework as linked to the Sustainable Development Goals.
• Third Sector, not just public sector bodies, should be allowed to be appointed as delivery agents for post-ESF funding.
• In order to improve participation, any future funds need to be simple, streamlined, and reduce duplication of effort.

See below for potential programmes that Scotland could take forward.

Analysis

We are developing the following analysis and proposals on the basis that the Scottish Parliament becomes the authority for post-Brexit structural funds.

Theme	Key developments and analysis	Proposal
Governance and accountability	SCVO along with many of its members collaborated on a response to the Smith Commission in 2014, setting out our view that, "the entrenchment of the powers of the Scottish Parliament is a necessary development for devolution which can provide added confidence in the parliament’s work and its future". Any additional resources that the UK Government allocates to departmental spending in the name of post-Brexit, will be subject to Barnett consequentials, and will therefore be within Scottish Parliament oversight anyway. For example, if the PM decided to invest £x billion into the NHS, then a Barnett based share of this will simply be added to the Scotland block grant. Any resources that the UK Government invests in a post-Brexit Shared Prosperity Fund, will require a formula for allocation to nations and/or regions of the UK. It is unlikely that this will match the levels available through the Barnett formula, and is likely to be less. It may follow a population based share, needs-based share or something in between. Using a GDP measure could increase income inequality, needs-based could reinforce dependency, match funding would not work for our sector, and competition might favour the slickest applications over need. It’s a knotty problem and one that cannot easily be resolved. The UK Government will position the Shared Prosperity Fund to tackle disparities in productivity between regions. This is effectively a UK cohesion fund, in the same way that ESF supports EU cohesion. This edges us closer to policy convergence which is likely to rub against devolution. One of the big losses of Brexit on ESF, will be the longer term funding programming period of seven years which sits across parliamentary timescales, and helps avoid the short-term politicking around fund decisions between political parties in the run up to elections.	Scottish Parliament must be the ultimate authority for any post-Brexit structural funds in Scotland, in order so stay coherent with devolved policy.
Transparency of finances and delivery	The PM was called out by the Office for Budget Resposibility for trying to link future payments to the NHS and other public spending to a Brexit ‘dividend’. Transparency of post-Brexit finances, in particular where there might be disinvestment in existing areas of spend, will be critical to the credibility of the UK Shared Prosperity Fund. Scottish Government has a large underspend in its overall ESF allocations, which is regarded as being due to unnecessarily overdone bureaucracy. European Commission is requesting a return of some or all of this money. Scottish Parliament has approved the National Outcomes and National Performance Framework, which was developed openly by Scottish Government with strong input from civil society, and has been built upon the Sustainable Development Goals.	Future planning and delivery of post-Brexit funds must be done transparently, following Open Government principles In Scotland, engagement in the funds should be framed within the National Performance Framework as linked to the Sustainable Development Goals.
Participation in programmes	Scottish Government has only allowed public sector bodies to be lead agents for ESF funds. However, the Welsh Council for Voluntary Organisations, a third sector body, is currently is a lead agent for delivering £75 million ESF in Wales, so it's clearly possible. The design of ESF means that several levels; Europe, UK, Scottish Government and local authorities, all have a hand in adding to the design, and therefore the rules, requirements and bureaucracy attached to the funds. This creates a very top down fund, with limited opportunity for participation in design by people and beneficiaries of the funds. Many in our sector who receive European funding have used LEADER funding for rural community development – were this to come to an end, it is not clear from where support for rural development beyond the farm gate would come from. There is a danger that funds delivered UK wide and perhaps even Scotland-wide might be accessible only to larger bodies in order to make it administratively easier for centralised funding arrangements.This could disadvantage third sector which tends to operate at a smaller, more local scale.	Third Sector, not just public sector bodies, should be allowed to be appointed as delivery agents for post-Brexit funding. In order to improve participation, any future funds need to be simple, streamlined, and reduce duplication of effort.

Priorities for the fund

The following is what we would propose to the Scottish Parliament for the design and delivery of the fund.

The priorities should be openly developed with Scotland's people and communities, including civil society organisations, and framed within Scotland's National Performance Framework.

The Scottish Government should adopt the principle of non-regression in environmental law and policy, and this must apply to the criteria surrounding the use of Structural Funds.

It makes sense for funding priorities to align with the National Performance Framework, and the Sustainable Development goals, which many of our sector supports. These priorities have already been developed, so making good use of them would be sensible.

Potential programmes	Purpose	Scottish Government Strategies
Community capacity Fund	Dedicated capacity building fund for third sector organisations and community-based initiatives such as care and repair, befriending, arts/sports, lunch clubs, mens sheds etc.	Volunteering strategy Social enterprise strategy
Employability Fund	Support for people contribute confidently to society as workers, volunteers, carers, activists, learners	Leave no one behind (2018)
Tackling poverty Fund	Tackling health inequalities (incl. mental health), digital participation, gender equality, support for marginalised and vulnerable people	Fair work convention Fairer Scotland
Rural development Fund	Diversification, rural community service development (including village halls), tackling isolation	Land use strategy
Industrial readiness fund	Preparing for the 4th Industrial revolution, with a focus on re-skilling for greater automation and low-carbon economy, infrastructure, and digital services.	Just transition (2018)