 Fy enw i gael i gael i'r 16 ymgyrchu gyda gwych yn gyffredinolaethau Llywodraethau Ffair Work Cymru o 2018, i gael i gael i gael i'r gyllidol o'r gael oedden nhw, oedden nhw i gael i'r cyflogol o'r cyflogol cysyllt. Fy enw i gael i'r Cymru oedd yn cymwyntio'r ddyn Lockhart, ac ymlaen i oddi'r Menwyr i'r cyffredinol o'r Cymru oedden nhw i'r 3 ym 4 yn cyfynchol. Are we agreed? Yes. Thank you. Now this morning, we have our European structural and investment funds inquiry. We started with a panel of witnesses and if I might welcome them this morning, I welcome to Ian Scott, Chief Financial Officer of Scottish Enterprise, Martin Fairburne Chief Operating Officer at Scottish Funding Council, Carol Buxton, Regional Development Director, Highlands and Islands Enterprise and Gordon McGinnis, director of industry and enterprise networks skills development Scotland. The sound will be operated by the sound desk so no need to press any buttons. Don't feel you have to come in on every question but simply indicate by raising your hand if you want to come in with a contribution and indeed you can submit evidence in writing after the session if there's something that you want to cover more fully or weren't able to deal with specifically during this session. If I might start by asking the panel first of all if you have specific instances in Scotland of structural funds, European structural funds being of assistance in supporting what we refer to as inclusive growth and I appreciate there's been evidence of the committee giving different definitions of that so perhaps you could indicate specific examples where you feel that there has been specific benefit of that nature and also whether this has resulted in structural or groundbreaking changes that will result in long-term benefit rather than simply a temporary blip as it were. I don't know who would like to start. Carol Buxton. Okay, thank you. Well I think probably as you're all aware the Highlands and Islands have benefited hugely from European fundings for several decades. I think some specific instances that you mentioned has been high's ability to invest in infrastructure across the region over the period and particularly in some of our more peripheral parts for example EMEC, the European Marine Energy Centre up in Orkney has benefited from European structural funds as has the European Marine Science Park in Dunstaffnidge in Obann and provision of business infrastructure across the region which has helped support some of our key sectors in those cases obviously renewable energy and marine sector. I think as well our ability to increase levels of support for example the recruitment of graduates by businesses across the region we've given higher levels of support to businesses in more fragile and peripheral areas and in those cases it has very much helped to address kind of regional disparity across the region. Ian Scott. Yeah, the European funds is a core part of the Scottish Enterprise business plan each year. We see that business plan being comprehensive across inclusive growth areas. The three main areas within that plan of investment, innovation and internationalisation are all areas that get supported by significant amounts of European funding and it covers a huge range of the products that we deliver to companies that helps with the growth in the economy. Our experience over the past few years has been more focused on the inclusive end of the equation so through the Youth Employment Initiative funding and developing Scotland's workforce under the Youth Employment Initiative very much focused on the aftermath of the recession and tackling youth unemployment and in terms of impact there well youth employment statistics are higher than they were before so that has been positive. Other forms of structural funds convener have been kind of in the same area as Carol has been touching on particularly around about innovation and working with businesses and creating partnerships with universities in that area. Early days and some of that stuff yet so. Gordon McGinnis. It's me I think that what we've done in this current programme through the Foundation apprenticeships is seeking to create that long term change. There's been a new model that's been developed. We've worked hard in partnership with colleges and local authorities through the school system so it's really creating a much enhanced vocational experience for young people within the workplace and creating different pathways so there's been a real focus in that and I think that's new activity that's built on international best practice and we'll focus to try and grow that. We started modestly in 2014 in 1719 I think we'll have around 1200 young people in that and we'll build that to 5000 and that creates I think new models of working we've done good work and say for example the islands where it's creating better linkages between school and local employers I think in terms of inclusive growth there's a a lot within that model that's going to be beneficial in the long term. Right, thank you. Questions from Gillian Martin. Yes, I really want to focus in on the youth employment initiative and developing Scotland's workforce. I've got submissions here that's actually not for this committee but the education committee from colleges Scotland around that and it says here that if you take 2017-18 it had 24.7 million for both those projects to do employability programmes in colleges. I just really want to hone in on what you're looking for by way of a replacement for that. We've got this proposed shared prosperity fund so I guess my question directly is to Martin Faber, what are you looking for that to deliver specifically around when you've been able to plan long term these programmes, colleges Scotland have been able to rely on that funding coming to them, so an opportunity for you to say what you want. Okay, first of all just in terms of clarity on the numbers that 24 million quid that you're referring to is the totality and includes our match funding so the actual contribution in terms of European funding is 14 million out of that. Secondly, looking forward as indicated at the beginning quite a lot of that is around about as you touched on youth unemployment. With youth unemployment coming down that would have meant in the future if the types of initiatives rolled forward they would have probably reduced anyway. I think that this is one where we need to rethink the type of impact we want on the economy and where certainly we are beginning to turn our mind to as you begin to maybe get to post recession and we begin to think about the other kind of impacts that are going to be hitting on the economy is the established workforce in the economy and thinking about maybe retraining, re-skilling for all the sorts of new things that are coming along not just digital but we can see impacts on other elements of the Scottish economy. Is the workforce ready for that? Probably not. What can the public sector do in order to support businesses in that territory? Gordon might have something to comment on that area as well. You are right that it is still early days in terms of what that shared prosperity fund would look like. The Scottish Government is seeking further dialogue with it at a UK level. I think that there needs to be a recognition of the demographics within the workforce and the number of young people leaving school is signal 10. You would expect probably a reduction in the number going through further and higher education as well as looking at the modern apprenticeship programme. To the future and some of the work that we have done in our jobs and skills report does indicate a stronger focus on re-skilling and up-skilling people as jobs change through either automation or just through impacts like Brexit and potentially some of the opportunities that arise for people there. One of the things that I was looking at when you were asking about clarity about the shared prosperity fund, how that would be delivered and how much of that would be delivered to various regions of Scotland, how would you like to see that delivered and who would you like to see managing that replacement funding? I think that there is a bit of a common theme, not just in submissions from our organisation and people like College of Scotland and University of Scotland looking at other submissions as well, that there is opportunities that whatever type of arrangements we have in the future in terms of Scotland being able to decide on priorities and arrangements for managing those funds, there is an opportunity to make them more relevant to different parts of Scotland. Carol could probably talk a wee bit more about that in terms of the Highlands and Islands, but I think that that is true across Scotland. Also our colleagues in Lanarkshire and Glasgow region would say the same thing. You see that coming through the submission from the colleges partnership. Bluntly, part of that is looking at how we can simplify how the funds are managed because, certainly I can speak for my organisation, the administrative cost of managing a relatively small amount of money compared to the totality that we are funding is very disproportionate. I can understand how that has arisen given that we are talking about funding that is ultimately designed to work across Europe and therefore you have to take that into account and design a way that is going to work across Europe. If you are looking at how we manage it in Scotland, then we can maybe more look to build on our existing arrangements for how we manage a variety of programmes rather than just continuing with the existing arrangements. Do you think that there is a need for increased funding for tackling some of the issues that you have around employability in the changing landscape? Particularly, I am thinking about my area of the north-east of Scotland, where we are a potential transition from fossil fuels to other types of energy. I worry that it might not be as regionally developed as that, and it might just be a case of coming from the UK Government that might not take into account that regional aspect of what we need in programmes that are specifically developed in order to change a sector. I think that the number of issues that you are looking for are strategic use of it. I hope that that will be as much evidence-based as we can. We have spent a fair amount of time working with partner organisations to produce things such as regional skill assessments and then work with partners around developing regional skill investment plans. The plan for the north-east indicates that the requirement for diversification and a shift in highlighting other areas such as tourism and food and drink is an area for development. To your original question, I think that Government, particularly at a Scottish level, needs to undertake a bit of due diligence in terms of the impact of funds being withdrawn. If you look at a third sector and I guess there is someone from SCVO in the second panel today, funds for much of that work through the austerity programme have become really tight, so I think that undertaking a degree of due diligence in terms of where will the funds be removed from and then taking some sort of assessment in Scotland has obviously done a lot of work in the inclusive growth model. People like a third sector play into that in a big way, so I understand where we are coming from, what the potential impacts are, so that we are not, if I want to better term, thrown a baby out of the bathwater and that there are good programmes there that we seek to maintain. Some of those, as well as thinking about the strategic intent, long term, of what you are trying to do and move away from some of the annuality that has been in a number of the programmes and get to some longer-term investments. Can I ask you, in the context of European structural investment funds, how you would describe your relationship with local authority partners and, indeed, third sector organisations, specifically when it comes to deciding strategic interventions? My answer is relatively short. In the main, we are running a national programme through colleges. On the ground, we would look to individual colleges to work with local authority partners and third sector organisations in order to make the best use of the money that is available, and we would do that through our outcome agreement process. However, in terms of us ourselves, our contact with the local authority sector would not be as direct as it would be rightly at the level of our individual colleges. In the Highlands and Islands, which is a transition region, as you know, we have the Highlands and Islands European Partnership, which is our UHI and all our local authority partners. We did work together during the development of the programme. We have the Highlands and Islands territorial committee, which has been established to look after the current programme. Our engagement with the third sector has probably been a little bit less through the funds that we are managing, but through our community development activity as an organisation, we have quite a significant engagement with the third sector in terms of our community and social development remit. From a managing authority point of view, we have created the strategic delivery partnership in that way of the agencies. The third sector has come together to discuss those future programmes, the shape of those, so there is dialogue at that level for ourselves. From an operational point of view, for government, we manage the national third sector fund, so that is for larger third sector organisations that work across a number of local authority areas, and that means that they can come into a more strategic bid rather than applying in at individual local authority levels, which would obviously carry more administrative burden and fragment some of their activities. We work with government and third sector SEVO to shape and develop the national third sector fund. At a community planning level, away from just structural funds, the dialogue around how funds will be used and the shape of those, and how they would complement national programmes that Martin described, will take that to a local level either through local employability fund forums or just at community planning. First, to reiterate what Gordon said, our involvement in the creation of strategic interventions at the highest level is working with other partners to do that in some areas leading. Some of that work with Scottish Enterprise is involved with that. On a day-to-day basis about the use of the funds, our closest interactions probably through the business gateways are managed by the local authorities generally to make sure that the clients can access the products that are supported by the funds that we manage as well, so we do that on a day-to-day basis. In the evidence that we have received, there are pretty compelling requests from a number of different local authorities that they would like to be involved much earlier on in the process. If they were, they would make better decisions more relevant to their communities. Do any of the panellists disagree with that sentiment? That is helpful. When it comes to third sector organisations, they are pretty critical of how things have gone so far. The words are a lack of transparency, very concerned at a rate of decommissioned funds, audit trail programmes, a lack of urgency and pace. Are those criticisms that you would recognise? I have been involved in European structural funds in one way or another for 30 years. There is always tensions and that kind of list that you read out, Kezia, that we have recognised from past times. I think that this programme had got off to a slower start. The issues between the managing authority and the Scottish Government team and the UK team in clarity around the rules and regulations have anoclon effect. Our programmes and the foundation apprenticeships were probably later started with structural funds within them. We started in Pathfinder activity without that. That has anoclon effect on the delivery chain. The national third sector fund was similar. I think that there was an input from SEVO around the claims process. We have worked hard both with the managing authority to fully clarify terms and conditions. Over the last three or four programmes, we have seen that the programmes will be taken actions to de-risk the programmes for managing authority in terms of making them much more stringent in terms of evidence and rules. That has been painful experience in the past through things such as the European Court of Auditors reclaiming resources. Where we are now with a set of guidelines that we have developed over a period of number of programmes, some of the client groups that the national third sector fund will work with are vulnerable. The evidence requirements in terms of evidence across a range of factors will probably be difficult to assess. We have worked with organisations and developed focus groups to try and iron out any of those issues. The list of items that you have read out, I would recognise, could be applied to the last three or four programmes, but they are current just now. For the third sector in particular, the requirement of dependency on European funds because of the way in which the funding environment becomes all more critical. As I indicated earlier, we are running something that is slightly different, but we have done very similar to what Gordon Gordon is describing in terms of trying to de-risk. Particularly for the youth unemployment end of things, we have moved to trying to, as much as possible, to base that on our existing processes, about how we count students and so on and do funding. That has made it simpler, and I would argue in terms of our work with colleges more transparent and more straightforward for our college partners. Looking to the future, in terms of what I was saying earlier about how we might want to use such interventions, if you are looking at the wider workforce, that becomes more complicated again just by its very nature. Therefore, I would really hope that we could work hard to find different ways in managing those programmes. Otherwise, I think that we would find ourselves going backwards again in terms of the administrative burden and just not achieving then what you were seeking to, you know, the impact that you were looking for. So danger of a double whammy, if we are not careful, and therefore we should really be thinking, I think, quite differently if we are looking at different types of area that we are going to be operating in. I am sorry, Carl Box. I am sorry, I was really just recognising what colleagues have said. The approval process has been quite complex and quite slow at times and similarly with the claims process, so we can recognise the challenges that you stated. Thank you, that is appreciated. I mean, I am looking pretty closely here at the Scottish Council for Voluntary Organisations submissions. You know, Gordon, you say that there are always tensions, but those are pretty serious. I mean, it says here that SEVO offered advice to SDS about how the funds should be managed. That advice was not taken and what you ended up with was, in their own words, a huge, complicated, staff-heavy, unnecessary administrative process which has caused financial hardship for organisations. I mean, that is a bit more than a little bit of tension. I do not know how to spoke with our manager on Friday around these things. I do not recognise the description that SEVO provided to us in their commentary there. I think that a lot of the criteria that we have got here is to satisfy the managing authority. If we do not have systems in place to sort that, the claims are returned because they are incorrect and it just delays things further. We have spent a lot of time and effort and additional staff to try to resolve those issues and get the actual payment process into a better position in terms of turnaround times for that. If you do not recognise those criticisms and we are going to hear from SEVO in the next panel session, what questions do you suggest I put to them? From our position of being a strategic body to implement it, if we need to get to a position where we can get claims in that are correct and that we can process, if we put claims forward that are rejected and it does not do ourselves any favours, it does not do the delivery organisations any favours either. I think that we have seen a gradual improvement in the process and it is one that we continue to work on. Andy Wightman, you are following up on that. It has been drawn to our attention that 22 million euros of funding has been lost to the programme last year that has been returned to the EU. What are the broad explanations for that? In broad terms, why has that happened? First of all, in terms of SFC-funded programmes, I do not think that we have decommitted anything yet, but we can certainly see the pressures that are there in terms of identifying the original target number of young people that we are looking with our colleges to work with, just the trend of youth unemployment coming down. Gordon was touching on that in terms of demographics. It is more difficult for ourselves on our colleges to reach the targets that we are looking to meet. I do not know to what extent that is. Something similar like that is true in other areas, but certainly that has been a challenge for us. My mind is really a question for the managing authority, rather than an individual agency. I know that there have been exchanges to Mr Brown, the minister, in terms of some of the spend around the allocations that have been made to the south-west of Scotland. Those were probably made in good faith at the start of the previous programme, but unemployment levels have changed quite dramatically. Therefore, it becomes difficult to align what the original intent had been of the programme to the current or to that existing labour market conditions at the time. There is an issue, I think, around the flexibility or agility in funds. We tend to be, when we look at it, at funds that can get locked into a constrained environment. Unless you leave sufficient time to both make those changes and then come up with a plan B that provides effective use for the funds, not just for the structural funds but for the match fund that is required to be set against it. My short answer would be that it is a taller question for the managing authority to reflect on. Okay, moving on. Scottish Enterprise, in your evidence, you say that the aspiration for the 2014-20 programme was for a simplified administrative regime, but then in your comments on the future prosperity fund, you say that we need to learn from the administrative complexity of current and past programmes. Is the current programme actually being simplified or not? You seem to be implying in the one hand that it has been. On the other hand, there is a lot more work to be done. I think that our submission was trying to point out that the intention was to simplify it, but our observation is that we have ended up something equally as complex and potentially more complex. I mean, there was great intentions at the start to try and make the funding output related, as opposed to expenditure and input related. We felt that that was a really good way forward. I think that the intention was to have unit prices for certain types of outputs, and we believed that that would have simplified the overall issues that Gordon alluded to earlier on about trying to get evidence for Europe. We would have welcomed that, and we put a lot of work into trying to do that, but at a fairly late stage in the process, it was decided that that would not be the way forward, although we would keep that in there and would bring in the old way of looking at the expenditure input side of things. We believe that it has actually become more complex because of that. We would certainly suggest that we look forward to trying to implement the original intention out of the programme to make things output related. It would be simpler for our clients and customers to submit evidence to claim the support that we give to them, and it should be simpler for us to be able to manage that as well. The overall process would be most straightforward. In general terms, the programme is designed to reduce regional disparities. Looking at it from the outside, it would appear that it should have been outcomes-focused from the beginning. A lot of people who have been engaged in this seem to have been tied up in administrative knots about expenditure and claims and all the rest of it, with very little focus on the structural outcomes of those programmes. A colleague of mine will ask a question later on how we evaluate that, but would that be a fair assessment? Broadly speaking, yes. If I can use a particular way to illustrate that from our experience, we have moved to the unit cost approach that Ian was describing. In other words, we are more interested in how many students are benefiting rather than expenditure related to the programmes. First of all, that is simpler for our colleges to manage. We think that we are probably okay in terms of being able to reclaim the money from managing authority in Europe and so on. However, there has been another side that has been expenditure-related, particularly in relation to student support funding. That is more difficult to do on an output basis in terms of just the administration that we are going to want to look at how much funding has gone straight into people's pockets. However, given the nature of the students that we are seeking to support, you can just imagine that pulling together the evidence and verification for that is much more challenging. We are beginning to come to the conclusion that we probably need to not have as part of our next programme and seek to support those students in different ways. That illustrates the point that Ian is getting at. You can look to focus more on outputs. Are we benefiting in my case students in particular areas or particular challenging backgrounds? However, when it comes to the more targeted type of support for individual students administratively and audit in terms of European programmes, that is extraordinarily challenging. If we are going to do stuff like that in the future—that is what I was touching on earlier—let us look at it as an opportunity. We might need to think about that quite differently about how we can make sure that we have the impact, but it is also not burdensome. In terms of tackling regional disparity, in previous programmes, we have, for example, the Highlands and Islands, which I can speak about, had a separate programme. This time, it was a single Scottish programme, although there was flexibility within the transition region, for example. However, flexibility is not always enough. If there is a specific regional base programme, it allows you a greater amount of flexibility in identifying what appropriate outputs or interventions might make. For a small country, Scotland is very diverse and the different regions have very much different needs. Are those various needs well catered for in the present structural funding programme? I think that there has been an attempt, yes, but just referring to my previous answer, when there were specific regionally focused programmes, I think that probably that was easier to look at at the disparity. The Highlands and Islands, for example, suffers from low levels of population and is quite challenging in geography. In the past, we have had a little bit more flexibility to specifically address some of those issues than we have had in a single national programme. The flexibility, particularly looking into the future, to look at specific regional challenges is important. In terms of inclusive growth, it can mean many things to many people. However, there is absolutely a geographic and a place-based aspect to the area where you are specifically looking at challenges related to geography in place. You said at the moment that there is a lack of flexibility. I do not think that there is as much flexibility as there was in the past. In our region, the Highlands and Islands and the current programme has a ring-fenced pot of funding. We also have slightly higher intervention rates at times, for example, and the ability to do some different things. For example, in our part of the programme, we can invest in specific pieces of infrastructure that are centrally based, and we have done so far. For example, we have directed some funding towards a joint venture partnership with Orkney Islands Council around a research and innovation centre up in Stromnes, but there has probably not been quite as much flexibility as there was in the past for making those decisions. Sorry to focus a little bit on the Highlands here, but if you had that flexibility, what would you do? In previous programmes, we have had a little bit more leeway to invest in businesses of scale and maybe have more flexibility through the timescale of the programme to reflect on changing environments. As Gordon mentioned earlier, things do change the landscape, the environment that we are operating in changes. If you have the flexibility to react to those changes, it makes it an awful lot more easy to direct the funds where they really are needed. The current programme, as Carol said, is a single Scottish programme, so the straight answer would probably be no. We do not recognise that the current programme has tackled those regional issues, but looking forward, one of the outcomes of the enterprise and skills review about the new approach to regional economic partnerships should be a great opportunity for all partners to be able to work together to look at the specific needs of the various regions across Scotland. Certainly, we are looking forward to the creation of those, and we will even be looking to pilot some new approaches initially in the south of Scotland and maybe in the Ayrshire partnership, but we will do that across all those regional partnerships going forward. Should funding become available in the future, we would suggest that the regional economic partnerships would be a good mechanism for making the decisions and input into how that should be allocated across the country. Do the rest of the panel have a view? Our activity in this programme is calling on a really focused on individuals, and those will be tailored to the requirements of local labour markets across foundation apprenticeships, modern apprenticeships and graduate levels. We will be looking at the make-up of the business base and where there is some pressure and where there is demand from industry. A lot of the work that has been done around graduate apprenticeships have been around working with industry, coming forward, setting up technical education groups to then design the qualifications, so that is the regional slant that we would apply to us. I think that my main observation would be that, if we begin to look to a set of arrangements that are greater specifics about different areas of Scotland, that naturally makes it a more complicated programme. I would be very worried from our perspective—I am talking about the types of things that we would run—about how that would work. I am sorry to sound like a broken record, but if we continue the existing level of administration and audit that is associated with the programmes, that would make them very difficult to run. If we are looking at greater focus in different regions, we have to rethink our thoughts within Scotland—as you say, it is a small country in the future—about how we run those initiatives. Surely to heavens we have got an opportunity to do that in a different way, which then makes it more impactful. How are the programmes evaluated? Is there a way to improve the evaluation process? If I can kick off on that one, we have been running as a lead organisation programme. Actually, for quite a short period of time, it is one of the past few years, so it is only now that we are beginning to look at the evaluation end of it and we are beginning to plan that now. From our end, given how we have designed the programmes to be around about focusing on levels of opportunity for students in particular areas of Scotland, I suspect that the evaluation will be relatively straightforward. You will be able to look at fairly hard numbers in terms of impact and so on. As I said, given that we are relatively new to this area, we are not undertaking evaluations yet. As regards the evaluation of the programme overall, I would suggest that there is a question for managing authority to do that. For the three main areas that I have outlined that we receive funding for across investment, innovation and internationalisation, we run our own evaluations of that type of activity within Scottish Enterprise, which are published on a regular basis. Looking at the activity itself to see whether it is impactful, we would do that ourselves, but for the programme as a whole, that would be a managing authority question. I think that, just as you touched on it, the managing authority has set up a monitoring and evaluation group that draws in partners. Probably the activities there have been impacted by Brexit, because I think that it is changing the direction of the programme. There is a kind of midterm review being undertaken there. For ourselves, we have focused on the foundation apprenticeship that was published last year to take on early evaluations or early learning and insights, and I am happy to share that with the committee. I suppose that you are just touching on what Gordon said. There was a mid-term review undertaking, but given the relatively slow start to the programme, it was relatively early in terms of some of the delivery. The key issue for me would be in the flexibility within the programmes to react or flex to some of the outputs of those evaluations. If things are not working, how can you then readjust activity or operations to reflect that? That seems to be a common theme—flexibility and the lack of flexibility. Is that all the way through? Cross the board? Are there any exceptions? From Martin Shelbur. I can see you nodding, but I am not sure if that goes on to the record. Mr Beattie said that there are any exceptions, so at that point, not really. The fundamental is that, in our territory, the programmes that we are running with, in essence, are designed in the recessionary period, so that is what we are still running with. The economy is different now, and if we were designing it now, we would do it in a different way. We have an opportunity to do so. I think that I probably have one example that I could offer up. There was the low-carbon and active travel challenge fund, which, in the initial stages, the criteria around that did not really fit the Highlands and Islands in terms of small communities and large distances. For phase 2 of the programme, those have been amended a bit, which hopefully will make it more attractive to some projects coming from the Highlands and Islands, but I think that, in general, that is one example that I could give. I have already touched upon this morning about the UK Shared Prosperity Fund. I want to ask you a number of questions about it. The first is, in order that we have a smooth transition from the existing European funds to the UK Shared Prosperity Fund, when does that fund have to be in place and operational? It is that inability to leave a long silence that gets me into trouble. I suppose that the glib answer would be as soon as possible. We have the Government guarantees in place, which gives some comfort, but what we would be aiming for is a seamless transition so that there is no gap between the programmes that we have guaranteed and the beginning of the next one. I do not know about colleagues on the panel. We do not have an awful lot of detail on the Shared Prosperity Fund as yet. I think that there is a consultation starting in the autumn time, and obviously we are very keen to be involved in that and how that develops. There is no hiatus between being able to develop programmes and interventions that move seamlessly from the current period with the Government guarantees into the next phase of funding, which would be critical. Coslove has already highlighted that, when they had discussions with civil servants in the summer of 2017, that no work had begun on the Shared Prosperity Fund, what impact would it have on the various projects that are supported by European funding? There is this gap, and it has been suggested that it has to be by Professor Steve Forthengill that the Shared Prosperity Fund needs to be fully in place by the end of 2020, and yet we are in a situation where, according to Coslove discussions, no work could be done up to the summer of 2017 on it. What impact would that have on the Shared Prosperity Fund if there is a delay? Gordon MacGinnis, Mark McFerr, I think that maybe comes back. Gordon, to Gillian, to the point of made that in terms of doing a due diligence exercise, what is currently being funded and what is critical would be the impact of that, not being there. It is particularly relevant, I think, into the third sector. Most programmes that will run should be additional activity, so if there is activity running that are fundamental to how systems operate, then you could potentially put a question mark, because should that be getting funded from structural funds or anything that comes after it, or should it be mainstream funding? I think that invisibility of what is currently funded, what would be at risk of disappearing, would be a key part of that work to be done. For ourselves, we will have a clear stop point in terms of taking young people into foundation and graduate apprenticeships, and we would be hoping to have dialogue with Government around how those will be funded in the longer term. Given that there has been an indication that the fund has to be in place by 2020, and we have already mentioned that the consultation will not take place until autumn 2018, I mean, you know, does that fill you full of hope that we're actually going to achieve the deadlines that are in place? Bear in mind, we're not even starting the consultation process. Martin Fairburn? Well, in some ways that's no different from normality in terms of European funding, to be honest with you. It's not helpful, you know, there's no doubt about that. In terms of, if I just use 16-17 academic year, that is supporting around about 4,000 full-time equivalent students in particular areas of focus. However, as I said, going forward, that was going to change anyway. So the consultation and the share priority fund are potentially very useful, but it's not just about continuation of existing stuff rolling forward, that would actually be bad. And therefore, the closer it gets to the wire, that makes it even more difficult to maybe rethink the sorts of things we want to do to have most impact. So it is difficult, as I say in some place, no different from normality, unfortunately. My final point on it is, at the time of the fund's announcement, it was stated that the UK Government would consult with the devolved administrations about how to spend it, which tends to suggest that they might not necessarily devolve the administration and the evaluation, et cetera, to that. Would that create any difficulties, bearing in mind, that we've got these structures in place already? Ian Scott? Yeah, it would potentially create the same difficulties that I was alluding to earlier on with the complexity of the administrative arrangements around it. If it was devolved, we would look to the Scottish Government to use the current structures that are in place to administer that, and it would make it much more straightforward for us and our customers out there. New system would need to recognise the different structures that are in Scotland. The education system, how that operates, is radically different from down south, of seen in the past, with the anglicentric programmes that came from the Department of Work and Pensions that were designed without much reference to things like Scottish index and multiple deprivation or how some of the Scottish Government funds were released. There needs to be an ability to match the strategic intent that the Scottish Government has. Partners' Government have done a lot of work around the inclusive growth model, how that impacts at a local level. We will have our own welfare system, so if there are issues that are targeted around supporting an employee, that needs to be able to align to the Scottish system for the want of a better term. Continuing from that, as we consider the future, on how the UK should be allocating funding around the UK, and on how, assuming that Scotland has some control over that, should we be allocating funding within Scotland? Would we do it in population? Would we do it on GDP? Is there one simple measure, or does it have to be a mixture of measures? I would say a mixture of measures. I said in one of my previous answers that GDP is one measure, but if we are looking at addressing disparity and encouraging inclusive growth, I think that there are other aspects that you have to look at. Population, in terms of density, but also demographics. I am sorry, but I do focus on the Highlands and Islands. Gordon mentioned earlier about young people. We need more young people in our region, and I think that the ability to look at how we can attract and retain young people is very important. I would very much say a mix of measures rather than focusing on one. If I can press you on that, I mean, even within the Highlands and Islands, I think that the picture is quite different perhaps from some of the remote islands. Should that be a decision on how the money is spread around the Highlands and Islands? Should that be decided in the Highlands and Islands, or should that be decided externally and kind of imposed? I think that what we have said previously is that place-based decision making is very good, looking at specific challenges. We have the Highlands and Islands as a region, but within that, as you quite rightly point out, there are quite significant sub-regional differences, and the ability to make decisions that address those, which delivers equity overall, is very important. I think that the ability to make more regional decisions is probably important. I mentioned regional partnerships earlier on. I think that their role is to look at the detail of what the funds are actually used for in those regions. I would certainly say that that has been devolved. Clearly, that would be a role for the Scottish Government in deciding the split of funding or resources across those regions. I would agree with other panellists that a range of measures would be appropriate for that. What about within the UK? Scotland gets a fair share at the moment. Should that continue, whatever our percentage is? Wales gets a very big chunk, presumably because of need. Is that share within the UK reasonable? My understanding is that Scotland gets more than a fair share at the moment. It deserves, but it is a higher rate than other areas of the UK at the moment. Because of need, I would continue that forward. Obviously, it needs to be in the main area for allocating funds in the first place at a national level and then within Scotland thereafter. Also continuing, as we think about the future, I wonder if you can give me one or two things that you think in the present system we should continue with, because they are good and one or two things that are not so good. I think that I have already got a bit about the bureaucracy in the audit. That would be one of the things that we could trim down on. We have had evidence, which I am trying to get my head round, that, on the one hand, people like the idea of a long-term commitment, so we know where we are going for 10 years or 15 years. On the other hand, people want a bit of responsiveness, and if there is a problem in Aberdeen, then we can do something with that. I find it a bit hard to see how that would tie in, so maybe you could give me your thoughts on that as well. Mr Faber, you are very perceptive. You are absolutely spot on. There is that tension there. I think that it could at least be ameliorated by us having, both at the Scotland level and at the regional level, more natural flexibility in the planning and delivery of the programmes. Part of the issue here is that you are trying to design something across the whole of Europe, so naturally that takes a longer lead time to get in place. Once the programme is running, you can be talking about maybe 10 years or so from the initial conception of it. If you are running things more locally, at the Scotland level and then regionally, then naturally that timescale will be shorter because you are dealing with things more in the country. I hope that that would improve. I think that, as Martin said, if we can use the structures that are in place, those structures can be flexible in the way that we apply the core funding that we get at the moment, which has been said earlier on is much more substantial than the current European funding side of things. The one thing that I would keep would be the partners working together on what the strategic imperatives are in the first place. I think that that has worked very well in the current system, coming up with strategic interventions, and I would certainly continue through on that. As Martin said, the smaller scale of Scotland compared to trying to meet the needs of the whole of Europe should allow us that fleet of foot, if required, going forward. I think that the timescale in terms of visibility about funding and certainty of funding in the longer term is very useful, but retaining that regional ability to flex that to address specific needs. I think that there is a balance to be struck. Mr McGinnis, what are you wanting on that as well? I would keep what we have within the funds just now, the ability to innovate and innovate at scale, so I would hope that any new funding mechanism would enable that across partners and encourage partnership working. I think that we could do more learning from the investments that have been made in this programme and in the past. A lot of good work around equal opportunities, gender, diversity and the help of people with disabilities, that type of thing. More learning from the activities that we have undertaken. We will probably need to think about the issues around match funding of programmes, because that tends to make complications, particularly in the financial environment or a cleaner allocation of resources. Do you mean that you would just give the grant to somebody and expect them to have to match fund it? I think that there will always be a case for co-financing, but the match funding criteria in the current format makes it overly complicated, particularly if a partner is down the delivery chain and it has been highlighted in some of the feedback that has been noted in the evidence. The question that I am going to ask most of you has touched on it throughout the session so far, but I wonder if each of you could concentrate on how we can assure accountability and transparency in future programme design will also reduce bureaucracy. In our case, a large chunk of whatever we would be doing would be around about delivery of courses for young people in the college sector and in the university sector. We have a very well-established many years system for both allocating places and funding, and then ensuring accountability coming back up the line. I am quite confident in terms of being able to use that approach in terms of learning and teaching in the future. As indicated earlier, we have been trying to focus on using that established approach in relation to the money that we are allocating. Some of the wider stuff that we are on the edges of getting into with European funding around about innovation is working with universities and colleges and business to help that territory. That is a bit more challenging because that is less easy to have hard measures for in terms of outputs. That is one of the areas that we need to think quite carefully about going forward if we do not just replicate the type of approaches that have been used in the past, if we are to get the right balance between getting the impact on the ground and ensuring accountability back up the way, particularly in terms of impact and output. I am just one last thought on that in terms of impact and output and things like innovation. We maybe need to decouple the accountability at the individual organisation level. What you are looking for for the individual organisation is to deliver the activities that you asked for, but then when you are looking at overall evaluation then it is more at the national level, as is an organisation, partner organisations, to say, what was the impact on the economy, which would be a bit more difficult to associate with the individual organisation, but you can maybe certainly see something at the broader programme level. I come back to what a few of us have said earlier with the current structures that are in place and using those more. Over the first three years of the current European programme, we should receive around £56 million of funding, but that is going towards an overall expenditure of about £900 million of funding that goes through Scottish Enterprise. I feel that we are as a countable and transparent on the rest of the funding in there, as we are on the European side of things, but the bureaucracy is an awful lot less, so if we could in some way allocate funds into the existing system that we have in there with clear priorities, all agreed by partners, and then hold us accountable to that as a whole, as opposed to specific pots of funding, I think that that would reduce the bureaucracy side of things without reducing the transparency and accountability. I think that I would agree with Ian in terms of some of the structures that are in place and which have robust accountability and governance processes, and we should make the best use of those. On the kind of development aspect, I think that future development involving regional partnerships, which Ian has touched on before, other regional bodies and all our stakeholders, which we work with across our remits to inform the development of those programmes, is quite important in terms of transparency and understanding of the direction of travel across the piece. In any future programme, it is going to be a different dynamic if it is around the shared prosperity fund, the European player, the register role, but you are going to have the UK Government probably setting out some of their priorities. The dynamic of that initial piece of strategic work changes rewined 15 years ago, and we will hear from Malcolm in the next session partners from a ground level built what they call things like a single programme document. You might always agree with your final product about everybody and the opportunity to contribute into that. It was a very open and transparent process and I think that there is merit in that approach. On accountability, there will be a different dynamic. A lot of the accounting procedures are coming through the European Commission, so you would be hoping for a simplified process there that should be overly complicated to agree procedures and guidelines for expenditure. Jimmie Hawker, Johnston. Thank you very much, convener. Good morning to the panel. Firstly, to Carol Buxton, there is no need to apologise for foasting on Highlands and Islands issues. As a Highlands and Islands entity, it is always good to hear. A lot of the issues that I wanted to talk about were related to the regional aspects, and that has been covered at length. I was going to look at the wider regional economic policy and how it will look going forward in Scotland. What are the roles for your organisations and how that may fit in with the new shared prosperity fund? There is very little detail on what the shared prosperity fund will be, the focus of it and how much it will be in it and how it will be dispersed. Speaking with colleagues in the Scottish Government, it is equally frustrated that it can lack of progress. For us, from a skills perspective, the work that we are doing with partners around regional skill assessments is to understand what is happening within a regional economy, what the demographic profile looks like, what the key industrial sectors are, where there will be growth and where we might face a challenge in terms of automation. That evidence base will be there, and that is what we would look at as we move forward. Where are the opportunities for economic growth and a modern investment and we do want to skew some of that? Where are the hard areas of deprivation that we have with the information that we have? There will not be a medical cure there, so more intensity of work can bring in different solutions to that. I do not know what the shared prosperity fund will bring in terms of instruments and vehicles, but what we have got and have developed is a sound evidence base to judge those future actions on. I think that what we have got is an opportunity to really engage and try to influence the development of that fund and how we can look at regional needs and the evidence to support that to ensure that whatever comes next reflects the different challenges across Scotland. We are a small country and we have said that, but there is quite a lot of disparity across that. The opportunity to influence the development of that fund is something that we need to grasp. In terms of the future direction of regional economic policy, that is not my expert subject, but I will say in general terms that there are two angles. First of all, in relation to people not in the workforce or finding it difficult to be in the workforce, there is a lot of focus in the past few years, particularly around youth unemployment. I am not saying that that is solved, but it is certainly different now. The groups that we need to now focus on are really hard to get and to help into employment, so that is going to change the nature of that kind of connectivity. The second territory is back to what we have touched on before, which is the changing nature of the economy and the very crude terms, automation and so on, but it is a much wider set of impacts. That is different in not just each broad area of Scotland, but as Carol has eloquently emphasised, even different within each of those regions. Therefore, we need to become maybe more laser focused in the sorts of programmes that we have going forward. Iain Scott? Iain Scott-Murray I touched on that earlier. I would want whoever is looking at how the shared prosperity fund is allocated to do it in the simplest way possible, and to me that would be looking at a high level across the main regions of the country and then allow that to be devolved down to the areas that can actually understand the local economies, the regional economies and put mechanisms in place to help support those. I would expect an allocation to be given to Scotland and Scotland to look at how they would do that across the regional partnerships and let the regional partnerships go on and decide what are the right things in their economies to make a difference. Recognising the importance of the European structure investment funds at the moment, the new system going forward, the key thing is to get rid of those issues that we face in terms of flexibility and the like and ensuring that there is kind of co-operation and collaboration in terms of doing that. We will thank all the members of our panel for coming in this morning. I will now suspend the meeting to allow a change over witnesses for our next panel. Good morning again and welcome to our second panel in our inquiry into European structural and investment funds. First of all, I welcome Alison Kerns, head of the European unit at the Scottish Council for Voluntary Organisations, Malcolm Leitch, economic development manager at Glasgow City Council for Scottish Cities and also Dr Seraphine Pasos Fidal, head of the Brussels office for COSLA. Welcome to all three of you and we look forward to hearing your contributions to this morning's sessions. If I might start off with a question that I put to the last panel, which is about the—if you have specific examples of the European structure and investment funds being used to promote in Scotland what is referred to as inclusive growth, then you might want to give us your own understanding of the definition of that term, which is slightly eluded, I think, a number of people. I don't know who would like to go first. Malcolm Leitch. Thank you, convener, for the introduction. Inclusive economic growth—I know that you had a session with the Cabinet Secretary last week on the definition, so I don't want to do that. It's important, however, to be aware that at European level, inclusive growth is one of the three pillars of cohesion policy along with sustainable growth and smart growth, so it's very much woven in to the current European structure fund programmes in Scotland. Scotland's cities and, indeed, most local authorities apply that in practical terms through a number of strategic interventions on which they lead. All the Scottish cities and most local authorities do lead employability pipelines, and what we've heard a lot in the earlier session about the fall in unemployment, the very welcome fall in unemployment that's happened over the last few years. We still have a lot of issues here about economic inactivity, particularly in some of the more built-up areas of the country. Dealing with economic inactivity, as much as lack of employment remains a really important focus for our employability offer within Scotland's cities and more generally in local authorities. The other interesting thing, a bit of a novelty in the current programmes, which wasn't quite so explicit in previous European programmes, was the commitment to spend a good chunk of money from the European social fund programme on trying to address issues of poverty and social exclusion. Again, Scotland's cities and most, but not all, Scotland's local authorities lead interventions designed to get people engaged in economic life in their communities. I'll add to that, more on the demand side, through the various business competitiveness interventions that are delivered through the business gateway geography in Scotland, it's very much about trying to create local job opportunities that expanding businesses in our areas will create if they're given the right type of support at the right time. Finally, just to end on a particular city's dimension, obviously we've heard the preamble to the report talks about the restrictions within which we must work in terms of what we use European structural funds for in a region such as Scotland in European terms, but one of the things we've been quite innovative again through the Scottish City's Alliance is a very small intervention dealing at the smart communities, so looking at things that will improve the quality of life, improve public services in Scotland cities, through for example initiatives to roll out for the smart lighting, smart waste and smart delivery of a range of people-based public services. We've used Scotland cities and indeed many other local authorities to the max that we feel possible that our shared objective of pursuing what we understand to be inclusive economic growth. If you want to start with something that did exactly what I said on this particular tin, the third sector division within the Scottish Government delivered a programme called the social economy development programme within this programming period. It did two things. It looked at social innovation within civil society and it looked at growth within social economy and third sector organisations to deliver on social policy in their communities. If we parked one side how long it took for the programme to come into place and how very little money that they had to deliver on this programme, the programme was really good and is beginning to deliver some real benefits. I congratulate them on what they came out the other end on this and it's still on going. It's looking at grassroots innovation in communities and smaller organisations. It's looking at investing in the growth of organisations that work on poverty, financial inclusion and employability in those communities. That's a very good example of hitting the inclusive growth nail in the head in terms of what was the policy ambition from the commission in terms of the investment in social policy and the themes and what this programme is supposed to deliver. It's very sad that they have such little money to spend on those objectives, the third sector division that is. It was 100 per cent funded on eligible costs. It's completely oversubscribed. There are so many projects that are able to have been funded and fit for purpose, fantastic, would meet the outcomes and would accelerate spending in this programme, but the third sector division don't have enough money themselves to have matched to it, but this was definitely a very good programme that focused on innovation within the sector and within growth. Dr Pusall Sfyddan. Perhaps the biggest context that should be said and not commented yet is that local authorities are responsible for living about one third of the youth structural fund spend in Scotland, which is a very significant sharing. I hate to think that historical is the highest ever. Of course there are issues that will be discussed later, but in terms of inclusive growth, perhaps something that is not appreciated here in Scotland, but part of my work involves a lot discussing with colleagues from other countries, is this of the CPP employability pipelines. This is a system of continued support for job seekers from the moment they are away from the market to the moment they are actually employing and post-employment. This is interesting because it's very unique and you don't see that in most other countries. Actually, the back history of that is that they actually have to re-engineer some of the assumptions that the way the rules were operating. That was actually not even this period, it was already in the previous period, because the rules were not meant to actually provide that continuous level of support through different stages of the job seeking application. However, as I say, one of the positive things in Scotland is that in nonwithstanding some of the constraints that come from national or European rules, this is one of the examples that you might actually re-engineer things to actually make sure that you do something innovative in this case on inclusive growth. All right. Thank you. I will turn now to questions from Gillian Martin. Thank you very much. Good morning panel. I'm actually looking at the COSLA submission here. I'm particularly interested in some of the detail that you put around the legal certainty of the existing programmes under Brexit. I noticed that you have particular asks of the withdrawal bill with regard to guaranteeing replacement for EU structural funds. I wonder if you can elaborate on that. Yes. The three elements there. The first is that as we know the Treasury and then the Scottish Government had the issue guarantees for the continued of the EU funds, the current EU funds, even after Brexit day to be spent and to basically have the natural conclusion as if we had remain in the EU. That is absolutely correct. However, perhaps you will hear in further stages of this inquiry differing evidence, but to understand it, that's not a legal guarantee. That's just a political commitment that will have a political weight, but still these structural funds are basically based on law. The operational programme of Scotland is a contract. It's a legally binding contract between the UK and the UK and the EU. Therefore, that level of legal certainty is necessary. What happens is that we were looking for when the withdrawal bill was tabled that the same way that includes some issues related to agriculture, there will be a separate agriculture bill, there will be the same level of legal certainty in terms of ensuring clear in black and black over white in the withdrawal bill that the current funds will be continued. Even as you mentioned, perhaps providing a strong indication of the future because interestingly enough, the withdrawal bill is about the future, what happens after the Brexit day, not what happens now in the transition period. However, that didn't happen. So our biggest hope of the moment to ensure that legal certainty that will reassure project managers and delivery bodies is that the withdrawal agreement, which is essentially in spite of its name, will be a treaty between the UK and the EU for managing the aspects of withdrawal that has very little provisions in articles 129 and 128 to give legally binding guarantee that the current funds will be spent as of normal, as if it were normal, being this bilateral treaty between the UK and the EU that will have legally binding effect in the UK. Therefore, that will be the level of certainty that we will wish. So one extra reason to make sure or to hope that the withdrawal agreement is agreed on time, thank you. In terms of what that means to the other panellists and the people that you represent, this uncertainty about replacement funding for EU structural funds, what does that effectively mean for your planning? Obviously, in terms of the financial, the cash, there are lots of sector organisations that are delivering on quite key policy areas on behalf of the Scottish Government, whether that is employability or around combatting poverty or social inclusion type activities. Obviously, there is the potential for there to be a hiatus, a gap, an issue before what is currently now and what comes next. There are issues around the direction of travel for some of those social policy areas, where they are going, because we are not talking much about it. There are genuine issues about participation and what comes next for the sector in terms of what they are leading on those policy areas. There are some quite big questions, not least the actual potential for skills and organisations to no longer be able to continue what they are doing. In terms of inclusive growth, the suggested replacement for the EU structural funds is, remind me of it, one of my colleagues will remind me of it, the UK Government has got the shared prosperity fund. Has there been any indication of inclusive growth being one of the tenants of that new fund? We are involved at a UK level with what we call our sister councils, Wales Council and NCV in England, Nick Van Northern Ireland and quite a grouping of third sector organisations that are operating predominantly in England and have maybe some of the bigger employability contracts direct from DWP. We have been involved in a group with them for some time talking about the shared prosperity fund, which originally started with conversations with the appropriate, with DECSU and DCMLMS and all the people who are responsible for now and the next steps. As far as our grouping is concerned and the conversations that we have had so far, the conversations are about no regression on the status quo in terms of not losing any focus on what the investment priorities currently are in terms of social policy. The line that we are holding is the same for all of them and they have quite a lot of support within various Government departments for that and indeed are having conversations as if that is the way forward certainly with DWP and others. In terms of the UK shared prosperity fund, the only public statement that we have in any detail is a paragraph from the Conservative Party manifesto from the general election this time last year. It makes some right noises about doing something for inclusive growth and for communities left behind, which is great, but I am afraid that until we get some more substantive proposal coming out from the UK Government, it will be very difficult to see to what extent those aspirations, which I think most people would sign up to in this chamber here this morning, will be actually translated into practical action on the ground, so we have to await the elaboration of how the UK Government would expect those inclusive growth activities to be in the UK shared prosperity fund to be delivered on the ground in practice. Dr Passos did not want to come in, I think, at that point. Just very supplementary here. On the issue of how the definition of the UK shared prosperity fund, I mean, there are again three levels. One is the political commitment, which is the manifesto. The second is the policy conception, which to the extent that the people who are currently doing structural funds are involved, which is our understanding. The intention is to continue the good elements of the structural funds. There is a final element, which is the senior management of the ministries and the ministers themselves agreeing with that initial recommendation. That is going to be what will have to be played out in the next months before the consultation comes out. I just wanted to finally ask you, in your submission, COSLA met with DEXU on this and had discussions with them. What was the outcome of those meetings? Yes, we had met DEXU, DWP, CL, GM base in different stages and different levels of seniority as well over the last year or so, year and a half. Of course, we can confirm that they are working on this, but the problem is, coming back to the analogy of three levels I mentioned earlier, that there's a lot of preparatory work, but until the big political issue of Brexit, like the big framework of the questions unions and other things, are away from the desks of the entry of the cabinet, it's quite unlikely that ministers will discuss that in detail. Briefings have been prepared for them and so on, but they have not, to our understanding, a discussion yet as what, as whether they, how they want the, you can just share prosperity fund to go forward. However, one thing that it was clear to us, and I think we mentioned that in our submission, is that they will be keen to have outcome based results. I mean, it's not getting fixated about keeping the structural funds under a different name and finance exclusively through domestic roots. They will be keen to look into more of outcome based and the general, how it fits with the general picture of the number of strategies that the UK government is developing. The second element which we are concerned, and we don't have that at all in the, in the submission, is the fear that we might see in the defining what the UK church prosperity fund is and how it is govern, I mean, administer or even organize a replication of what we have in terms of returning powers from the EU and the apport of assuming of those powers by way of the withdrawal bill and the continuity bills. We can easily see the similar tension prepared out here. We, we are, and we are quite explicit in our submission that we think it does not want to be, would be helpful and it's better to actually keep a system, but in terms of the vision of responsibility between the UK and the Scottish government, there's not to be similar in this aspect of what we have in the structural funds, which I have to say from a comparative perspective, that the UK government has been exquisite in terms of letting Scotland do their own thing, much more than any federal government, be that the German federal government, the Austrian, or any other member state has different devolved systems in itself. So, hopefully, unlike the return powers issue, we can have a more stable arrangement in terms of the governance of the UK church prosperity fund. Thank you. Right. Just before we move on to questions from Kezia Dugdale, Malcolm Leitch, you mentioned the, when asked about inclusive growth at the outset, and inclusive growth might be something that sounds like a good idea to a lot of people, but something that's more difficult to define, you commented that the European structural funds have that as one of the basis. What is your understanding of the definition of inclusive growth for those purposes? Well, again, I don't think that the EU has a single fixed definition of what constitutes inclusive economic growth. It's maybe like an elephant, everyone knows what it is, but finds it very difficult to describe. It's about improving opportunities for engagement in economic life for all members of the community, and indeed for communities that have been left particularly vulnerable as a result of some of the processes of industrial change that we heard earlier on from our colleagues from the Hines about the impacts of demographic change, for example. We also have pressures on cities arising from demographics, so the whole point is to make sure that the growth first of all has to take place, but it has to be the degree of equity, equity amongst communities, equity on a place-based approach. I think that that's the European Union's philosophy of what would be constituted inclusive economic growth. That's helpful. I'm not sure that this elephant is one that we all know what it is and I think that it's possibly something that we all struggle to come to terms with, but that's very helpful to have those comments. I'm just looking at the written evidence in comparing the Scottish cities written evidence to SCVOs. You basically don't say the same thing, but in very different language, if I might say. The Scottish cities talk about the requirement for the simplification of the processes, need to consider the requirement for match funding, require a degree of flexibility, meanwhile SCVO, when you really go for it and say that this is frustrating, is it just a language question or is SCVO rapidly more exasperated than Scottish cities discuss? Can I perhaps start off? Obviously Alison will no doubt give her perspective on the points that were raised in the SCVO submission. It's important that the Scottish city submission is very much looking towards the third set of questions that you're posing of what follows after, albeit that needs to be informed by what's happened before. The view was taken by a lot of other organisations and not just SCVO would draw attention to some of the pressure points that have characterised the delivery of the current programmes. I'm thinking, for example, of some of the points made by the Scottish local authority economic development group in its submission, so it's not to pretend that some of these challenges in delivery, the issue of match funding, which has really been a very important constraint in delivering the programmes that we've got don't exist, but the focus on the Scottish cities was tended to be more on how we could learn from that in terms of getting to a better simplified framework moving forward. Just before a big analysis, and I'm desperate to hear from you Alison, I mean, if I can say to you, Malcolm, it might be better if you'd been blunter, because had I not read SCVO's submission, I wouldn't necessarily have got that vibe, so to speak, from your organisation, but Alison... Well, I mean, I guess we're not constrained by anything, and yes, you're right, it is a high degree of frustration. This is probably my third programming period of structural funds with the sector that we've come to from objective one status and we're getting progressively worse when nothing's getting better, and this particular programme has been hugely characterised by frustration. I would say that we've started off with offers of help to be supportive, to offer expertise and advice, and we're met with brick walls, radio silence, down another tunnel, offering good guidance, offering advice from other parts of the UK and from around the world for good practice, to help to accelerate spending the programme, guidance on rules that are blockages, and trying to articulate the picture that what happens on the ground affects the politics in a big P and the politics in a small P and policy and outcomes, and it's very much characterised. We've arrived at a place where planes speak as we're at the business end. This is the end of it, so there are massive implications for what comes next for Brexit, so we need to be very clear, and obviously we are a membership organisation and we have to represent and advocate on behalf of our sector and our members who are as equally frustrated, and if you look at all the programmes over the last three from 1999, there is a decreasing amount of participation in the fund from the third sector, and largely that is around interpretation of rules and barriers put in the way to their participation and spending the money. We have a risk averse administration process that's become more and more risk averse and it's been administered rather than have a strategic ambition or strategic ownership. There seems to be no policy ownership but it feels like it's locked away in a broom cupboard, and to a certain degree even some of the officials or not are struggling because they're drowning in terms of trying to, over the years, trying to have this seen as a chance to get ownership right across Government. Our submission is the last pitch, it's plain speak, this is where we're at. I think you came into the room, if I'm correct, after I put some of what's in your submission directly to Skills Development Scotland, so you won't have had the opportunity to hear the response and you should look at the official report because I'm going to paraphrase it, but it basically went along the lines of you, SCVO, are crap at your paperwork and that's the reason for why everything's delayed and frustrated. I can't imagine you'd accept that as a rationale. No, we wouldn't accept that at all and we have countless evidence, not just from ourselves, from other parts of the sector who are waited weeks and months with no response. We've asked for organisation charts that there's no customer management system, there's no CMS, there's no system to manage this. There absolutely would not accept that and in fact, if the third sector division were asked, I would hope and like to think that they'd say that the programmes that they've been implementing are going well and doing well. It's a case of what system they put in place or what terms of programme that they put in place. The Skills Development Scotland programme required the sector to bring their own match to deliver employability. That's horrific pressure. Then there was a question over which match and most of the organisations that are delivering in that programme are using Skills Development Scotland match funding. That's bonkers. It should have been top-sliced, globally managed and a 100 per cent eligible cost fund. They've been trying to fit a square peg into a round hole. To me, it's just about project management. There are very poor project management and whilst we have heavily criticised that, because right at the start we said to them, you have £30 odd million to spend on an employability fund. Top-sliced this, create a fund to make it easy for yourselves, to minister like the third sector division have done, albeit it's hard because there is some new learning, which was also overestimated by the Scottish Government that managing authority. The skills and knowledge required by various government agencies and departments to take this on, hence it took nearly two years before a penny was spent. We suggested this at the start, but it was just completely ignored. I could tell sense that they couldn't do anything about it. There didn't seem to be anywhere to go to make this happen for them. Their staff have been struggling, struggling hugely to administer a programme that requires the sector to bring. Where is the sector getting matched to deliver employability currently nowadays? It's really difficult. That's what happened with local authority provision. It's why it's not been spent, because they've been procuring and saying that voluntary organisations delivering on employability have to bring their own match, but they haven't got it. We haven't got it. Therefore, you create a system where money is coming from somewhere else and money is coming from theirs. They have to manage those two things instead of where they could have managed all the money, simply and easily. I advise them to have looked at what the third sector division did, albeit it took them a long time to get there, but the programme that they've put in place is good. I've got two more brief questions, convener. If I could just focus them on SCVO's submission, because I think it's important to draw out some of the detail that you've identified, because the whole point of this is about learning how it can be done better than it has been so far. In your submission, you talk about the problems to such an extent that they've imposed financial hardship for the organisations involved. Can you tell us a little bit more about that? I appreciate that. There are some sensitivities there, but an example. In previous programmes, there used to be, and there still is, right across the EU, it's just something that we've chosen to do, advanced payments, so you can do up to 30 per cent, that's a percentage of advanced payments, so there's cash flow available for organisations. As it stands right now, they have to spend their money, evidence it and then get some money back. What's happened during this process is that guidance has changed, participant guidance around evidence, eligibility or things like that, so you've got issues about rules, so therefore they've spent some money on activities that they can't claim that back for that particular individual, but that's a very operational issue. There are cash flow issues about how there always has been, and that's gotten worse because there's no advanced payments, but there's advanced payments in other parts of the UK. There is also, in the current programme that we have, good practice, again, I'd say, around the third sector division, there's some other programmes that I don't know, I believe the staff around the green infrastructure has been quite good as well, there's been some good activity in there, but I'm less familiar with that. There's tends to be no conversations about what's working well for beneficiaries and for applicants. I've heard what you've said about best practice existing elsewhere in the system in terms of the third sector division and the way that that's managed, but is there a more fundamental problem here? Are SCS the right agency to be operating a fund like this in the first place? I know that we've pointed them out, but they're not really the bad guys. They were handed a fund that they thought were going to be administering, and I think that it's been an eye-opener and quite a shock for them. Who are the bad guys? The Managing Authority, who are Scottish Government... Scottish Government are the bad guys? They're, for want of a better expression, I wanted to say that they weren't necessarily just the only thing that's good. That's just one particular programme that could have been done better within this whole thing because of the way that they've managed it for themselves. Is it more fundamental than the agency that does it? Yes, the whole... I would say that they would probably have had quite a lot of times when they have struggled to get guidance and support from the Managing Authority also. Move on to question from Fulton MacGregor, or later on then we'll come to Fulton MacGregor. Sorry, move to Andy Wightman then. Thank you very much, convener. Just a brief follow-up to Kezia Dugdale's line of questioning for Alison Kerr. You said that since you've been involved in 1999, over three programmes, things have steadily got worse. Given that direction of travel and given the risk averseness and given what we heard from the previous panel about the administrative complexities in the system, it sounds like you wouldn't want another programme like this. Certainly not in terms of how it's administered and managed. There would be no need for a programme to be managed this way. There are clearly lessons to learn, which I think some of my colleagues will get down to it a bit later. The Scottish cities, in your evidence, you say that a loss of structural funds would have a significant impact on the ability of local authorities to deliver services. Can you give us some examples about what that impact might look like? Obviously, there are a lot of unknowns in this particular equation, but if we were going from structural funds to zero, for example, it would have quite a major impact on a lot of city and, indeed, more broad local authority economic development activity. The impact is very difficult to be absolutely precise, but EU structural funds support accounts for probably somewhere between 10% and 25% of local authority economic development and employability spend. The sudden withdrawal of that would have a material impact—a significant adverse impact—on the ability of local authorities and cities to deliver a range of economic development services to their communities. Okay, that's fine. Are there any other than employability? Yes, poverty and social inclusion, business support and what I alluded to briefly at the start, will be able to try to do things differently by using innovation and technology to provide better services for the communities that we represent. Okay, thanks very much. Witnesses, I've raised the question of the 22 million that's had to be handed back. I think that the Scottish local authorities economic development group alluded to a number of reasons for that. Without getting into the specifics of that money, what are the lessons we can learn about how to design a programme like this such that people are not having to hand money back? There are particular blockages in different parts. If you see the programme in a continuum, there is a pace of starting and implementing a programme. While it is in operation, there are national rules that are created—within a European framework, but there are additional national rules created, which we have also provided evidence and guidance and recommendations on some of those rules over the years that are blockages for money going out the door. Even if you have the rule, there is interpretation of the rule. The interpretation of the rule can be very narrow, depending on the particular official that is interpreting that rule, or the understanding of what is organisational development or organisational growth. There is not a good independent arbitration service around some of those issues. There are blockages in the system that have prevented the money from being spent. I think that it is important to understand the full plumbing of how the system funds are drawn down from the European Commission in terms of those programmes. It is not just a matter of committing the money, which is really important. Indeed, the Scottish record of having just under half the programmes committed by the end of 2016 was not too bad and was broadly comfortable to pair other programmes across the EU. No particular issue was getting money approved. The sticking point has been being able to flush the spend that is taking place in the ground through the system and getting it paid out. Only once the Scottish Government has paid the lead partner can they declare that to the commission. It is the basis and declaration to the commission that will determine whether the so-called N plus 3 target will be met or not. Another factor is when you are claiming the money. It is not just how much we have spent, it is all the information related to performance and the beneficiary information that is required. It is a major task to put in a claim on an IT system that is not yet totally fit for purpose. Even if we get this up, the logistical thing of getting a claim in as part of the management control system to which the Scottish Government has committed itself with the European Commission. Before any payment is made, it has to verify a sample of the transactions that were claimed, typically about 20 per cent. That is both an expenditure verification through to bank statement and it is also a verification of outputs. For example, to check whether the individuals who were being claimed as part of a submission were actually eligible. That takes time, and it will be a quite significant period of time for a claim to be physically uploaded. It will be verified by the Scottish Government and then paid. If we are trying to look ahead beyond Brexit, we would certainly all want a rather less cumbersome system, because the implication of that has been that the Scottish programmes, both at ERDF but more particularly the ESF, did not make their so-called N-plus-3 targets in 2017, and that would be a feature for every succeeding year of the programmes. It was not a one-off. If I just to complement all this, to contextualise on a bigger picture, I mean, what we have with structural funds and I was involved from the very outset of actual programme design, the very moment of initial ideas, and we had a problem, and as I said, that was involved in the drafting of the regulations in Brussels. So, we had in Scotland a number of paradox or contradictions. We have, on the one hand, the tension between openness from the Scottish Government to partner with local authorities and others in a perhaps more ambitious and comprehensive way that it has ever been attempted in previous programmes, but at the same time, a wish to control and to make sure that everything fit into places, and that's obviously inevitably attention. Then the second dilemma is being paradox is you have the Scottish Government being at both, at the same time, a rule maker, that's why, for instance, these national rules that they have designed, and then in many ways, mostly a rule taker. And the problem with these rules coming from Brussels is that they are, it's not that they are, as we said earlier in the previous session, for the whole of Europe. It's not even that. I mean, I'm in the middle of that and essentially it's entirely transactional. Why there's 20% on social inclusion and not 25% is sometimes not based in real or 30 or whatever. It's not really based on any factual issues or purely transactional things. Then trying to translate that into the reality of the ground is difficult at best times. And then the issue related to the other aspects is the tension between once again innovation and control because, for instance, as is mentioned in some of the evidence submitted to this inquiry, the Scottish Government has been very proactive at the very beginning wanting to introduce simplified course options, basically to simplify outcome-based policy, like less bureaucratic way and just paying by results and so on. That was not possible because they were not reassured that the guidance and the ideas being spelled out from Brussels were clear enough. And I sympathized with that because I was also involved into that. It is true in some other parts of Europe they have gone ahead, nevertheless, but it's understandable that if you're trying to be innovative but the innovation framework you are giving is not clear cut, you will have problems with that. And this is not to disqualify or to dismiss any irresponsibility the Scottish Government might have, but it's this complex system thing that end up in the situation where we have. And I believe something that we can infer from the submission we got today for this session in the 20 or so submissions is that it's pretty consistent. People make emphasis in the tone, but actually if you see from the Scottish Government agencies to local authorities to the civic actors, the understanding of where the problems are is pretty consistent, which is, I think, context with our previous inquiries. Just coming back on something that Alison said about the rules and the interpretations of the rules and what officials say, over the past years have you attempted to escalate any of these concerns beyond the official to hold ministers to account? Yes, we have. We've provided evidence to other committees about the programme. We've written letters to the minister responsible, Keith Brown. We've met over the issues that were in the letters about the management of the programme and the interpretation of rules and a host of issues, not least the lack of pace and urgency in the programme starting, to spending money, to implementation. Yes, so it's all out there on record what we've... And broadly speaking, have you had a sympathetic response? We've always been met and heard. I would say that the comments I will read them later, Kezia, is an illustration of the adversarial combative defensive relationship that's established around this process that we don't have in other areas or in other parts or, indeed, with other funders, whether it's any of the big trusts or the lottery or anybody that we engage strategically with on these issues. We just don't have that same combative adversarial pushing away of other voices within the process. That's a good illustration of how this relationship is characterised for our sector and ourselves with the structural funds. We've always been met and listened to. We've not always had a reply or acknowledgement or been responded to, and certainly one of the rules in particular that we wanted to have changed around staff time to allow smaller organisations to have staffing costs covered took best part of probably about 18 months to two years to be changed and then it was never communicated out to anybody and it's still actually not implemented although it was agreed at a joint programme monitoring committee quite some time ago. It's still not been implemented. Okay, and I've got a final question for representatives of local authorities here. In COSLA's submission, you talk about the interreg programme, the interregional co-operation across Europe, and you mentioned earlier in your evidence that you were in negotiations with the UK Government to try and get things like structural funds put on a legal basis in the withdrawal bill. Can you say something more about the conversations you've had with the UK Government about programmes like interreg and your ability, which is a very small programme of course, but your ability to be able to carry them forward after Brexit? As I said earlier, we have had a number of conversations and exchanges at different levels and specifically on interreg, we even had shared with them a number of evidence we have collected or have elaborated thanks to the support from our colleagues from non-U members like Norway or Iceland that's playing very clear legal simplicity how it is entirely possible for the UK to opt into these programmes. It will be UK money spent in the UK, but to cooperate with others, so that money does not go away. There are no legal issues in terms of the European Court of Justice and so on, so it is for the UK to do and it's really not cumbersome. We even doubt the estimate of how much it was. I don't remember the top of my head, but for an economy of the UK, it's minimal compared to the money that's not going to be sent to the EU anyway, but it will have a significant effect in terms of ensuring that these partnerships develop. After all, we are still going to be part of the European continent and the people who like to learn from and work with will still be most, in most cases, our neighbour countries and communities. That's why we are urging them to, and the UK government including a ministerial level and a particular ministerial level, to include interreg opting as one of the programmes that they should put as their negotiation items. At the moment, the UK government, as you know, has already formally suggested that they will be open to contributing to the Horizon Research programme and Erasmus, but not some of the other programmes could be interested. At least, what we are asking at the moment is for them to actually put that as one negotiation item, because the way negotiations are going or the way the calendar negotiations is, unless the UK formally put that as a negotiation item, that conversation cannot happen because the EU, Barnier, we met Barnier, I was in the room, he was very open to say, well, of course, I was, he was previously, as he said, a regional policy commissioner, and of course I will be keen that the UK and Scotland will continue having access to inter-territorial cooperation programmes, but it's up to the UK to actually request that, and the UK has not just done that, and without that, the EU cannot react. At the moment, it's still even coy on the other programmes, let alone on requests that have not yet been put on the table. Right, we've on to Colin Beattie. Some of the panel probably heard me referring to Scotland as a small country, but with very diverse areas within it, and diverse needs. So, I'll ask the same question. Are these needs, sometimes unique needs, such as the Highland Islands and so on, well-accounted for in the current range of structural funding programmes? Dr Bassels, if you don't mind. A typical question for a typical expected answer depends on who you ask, but more seriously speaking, if our colleagues from local authorities, practitioners and experts, are to be believed, they will like, of course, a system that is more decentralized than it is at the moment, in a way that, at the moment, there's a Scottish-wide programme, for instance, on structural funds. And previously, until 2014, there was a separate Scottish Highlands and Islands programme, which, as been mentioned earlier, there will be very much skiing across the Highlands and Islands region. But actually, you go back to the previous period, until 2007, there will be even different parts of Scotland having their own separate programmes. The East of Scotland, the Highlands and Islands, the West of Scotland and so on. So, of course, there will be an expectation that anything coming in the future will be as centralized as it was a long time ago. One of the reasons why the programme has become more and more Scotland-wide, so to speak, is because the European Commission will not welcome to get a proposal that doesn't provide value for more in terms of the... I mean, the Scotland, like many other developed countries, has getting less and less from the European funds. So, that justifies less the management terms having separate programmes, and they will rather have something more consolidated. But if you ask local authorities, they will like a system that is local or at least as regionalised as it is feasible in terms of cost-effectiveness. Thank you. I think that the short answer to your question is no. I think that there has been... This is the least specially differentiated European structural fund programme that I can recall and have been in this game longer than Gordon, who talked to us 20 years. I have been in this game sadly for 30 years on that. It is not just about the Highlands Lowlands, important though that is. I think that there are a number of regional economies within Scotland, as indeed your call for evidence makes explicit. I was actually very heartened to hear the remarks on your first panel about perhaps moving forward, if you get the decentralisation to using some of the emerging regional economic partnerships. Not just in the south of Scotland, that is clearly a bit of a pathfinder about their existing institutional infrastructure already in place in the highlands lands, but there are a lot of natural functional economic areas developing in Scotland. That is perhaps one of the opportunities that we are moving forward to have a more regionally sensitive series of interventions to promote. That is a way to go rather than the somewhat centralised thing that we have. People tell me that the current structure of some of the things that we can spend money on in the European is not particularly suit rural areas. Other people say that it does not suit the more urban areas. It is in a sense that it pleases nobody fully that the current system of doing it. The spatial element is very, very much diminished from previous programmes. For example, there is no urban regeneration priority in this programme. The predecessor programme is going back to several cycles of EU funding. That is a bit of an issue on that. However, there is a real opportunity to look at the future and to see how we can get properly regionally differentiated menus of support to assist the inclusive growth in all Scotland's regions. In the previous panel, Carl Buxton seemed to emphasise quite strongly about the need for flexibility, which was not there. When I asked the panel, is that across the board, they seemed to be fairly conforming to the fact that it was. Does that panel agree? Yes, you need to be able to respond to changing political contexts and environments in a longer programme period. Things will change whether it is issues around migration or financial crisis. A longer-term funding programme needs to be able to respond to that and do that. However, your previous question about whether the programme is meeting the needs of the whole of the region. Obviously, the short answer is no, because we are not spending the money. The reasons why it is not meeting lots of needs is that there are issues within how the programme is set up in Scotland. For our sector, we are struggling to access the programme in Highlands and Islands. There are very few third sector organisations that have European structural funds money because of the nature of how it is being implemented. It is quite risky for smaller organisations, which the Highlands and Islands particularly and border regions and other regions are characterised by small to regionalised organisations. We did offer quite a few suggestions as to how some of those things could be met and not least the very good examples that are happening within local government around participatory budgeting and how participatory budgeting programmes could have been put into as part of the mix and a much-funded co-finance by local authorities, so that they were bigger participatory budgeting pots. However, it goes nowhere. The issue of ownership and strategic ownership and ambition is one of the blockages of how we manage to reach the vision that probably lots of people have and want to achieve. There are lots of people on the same page with that, but there is a real challenge for us to turn that into achieving it. Dr Fonso Siwdown. Thank you. Very briefly, the structural funds, as the name says, is structural. It is about long-term big societal ambitions for Europe, the UK and Scotland. Anything replacing that should actually focus on big societal ambitions or big societal challenges. What we don't need to replicate learning from the lessons we have had so far is the level of rigidity that we had, so it shouldn't be possible once there are constraints not coming from a new external regulatory framework, a new regulatory framework to have more flexibility and built on the programmes. So the short answer would be strategic objectives, permanent objectives beyond the government of the day, in which it would be the challenge. So I make sure I agree on a framework that actually no matter who is empowering in London or in Scotland, people can sign up over the course of several parliament terms and spending reviews, but then having inbuilt operational flexibility, which in many ways that was lacking here in the structural funds at the moment. On that, how are current and previous programmes evaluated and how could that evaluation process be improved? What I know of the previous programmes is that I think they use their technical assistance budget to procure evaluation before and after and some bits are evaluated during it. It's been different for each programme. It's quite a dated way of evaluating programmes given the very many different, live, on-going ways of evaluating and using different technologies and different way in methodologies. We've got some great universities in Scotland who are using some really fantastic ways of doing evaluation and we don't feature it in this programme. The snag of the EU evaluation just takes for a start. We're spending money now, but the results of the spend that's currently being incurred in terms of results won't perhaps become apparent for a number of years. You might have to work with someone for maybe two years before he or she gets into a position where she or she can take up regular paid employment. The system at the moment is very good at capturing outputs, what money is buying in terms of numbers of participants, number of businesses supported, number of intelligent street lighting columns installed, etc. It's much more difficult to get what the impact has been in terms of improving the performance of either the local or national economy. It's one of the bugbears for evaluators and it's not really, to be perfectly honest, confined to European funds. They probably have the European funds because it takes so long within the programming cycle to get them up and running. You're always paying evaluators having to try and play catch-up. Very often we've only got the results of the whole series of evaluations on the 713 programme I think last year, so halfway into the... We've only got the formal validation of what really worked in 713 halfway through 2016, for which time we're already busily trying to deliver the 14 to 20 programmes. There's a timelike issue that's making evaluation and having evaluators that really make a difference in the ground work. Just to highlight further how the system of view evaluation works, at the moment there are officials in Brussels heavily drafting the regulations for the next programming period was post 2020, which regulation will be tabled on the 28th of May, and they have only been used to put partial evidence, initial evidence of the current programme, and mostly, as Mark just mentioned, from the previous programme. That's because of the way the reporting is done. That's not to say there's not valuable information there, but in terms of how we should measure things in the future, like moving forward, but coming from the experience of the structural funds, when the regulation, the commission last time round was looking to make it, as they say, results-based policy, cohesion policy, we actually were urging them, why don't you look at something like the single outcome agreements or outcome-based policy delivery that we have in Scotland to actually roll out in terms of domestic policies. We even have to try to get evidence from other countries, and an interesting thing is that in the rest of Europe there is very even lack of notion of what an outcome is, the way that we perhaps in Scotland understand it more readily than they do. So try then to convince the European Commission as this, since there is something that is not clearly properly understood outside the UK, at least in Europe. However, moving forward, because in the UK people tend to understand that at a policy level what an outcome is, and because outcome-based policy making is already part of the landscape and the liberal landscape, is something that we can actually build on, and I think that something that will be less bureaucratic than some of the frameworks that we have inherited from Europe. Regarding the UK Shared Prosperity Fund, what discussions have your organisations had with the UK Government about its introduction? Very limited, it's a short answer to that, and certainly nothing I would constitute as being a formal discussion. Glasgow is actually a member of the UK core cities network, and it's now called, I think, the Ministry for Housing, Communities and Local Government, OZN. It's just straight from DCLG. It had some, I would call it, sounding board type discussions in the summer of 2017, but they were very, very preliminary, very open and more. The civil servants are very much more, I would say, in receive mode than transmit mode on that, so we're just kind of flesh out what the lie of the land was, where the priorities may lie, and this is, as I said, an informal discussion at the middle-ranking civil servant level, so nothing a long, long way from ministers. I think that, as the previous panel said, the trigger will be getting some ministerial, UK ministerial thing to a proper consultation with a proper set of parameters. Just, of course, DCLG, or whatever it's now called, isn't actually the leadiness that's still, it's bees, it's the Department for Business and Industrial Strategy, that's the lead department for the portfolio in terms of UK shared prosperity fund, so they're the key people, and these are the key ministers that we would hope as Scottish stakeholders to be able to interact with fairly quickly, to get this UK shared prosperity fund set up, and as the previous panel said, red to run, as the European funds tail off. What about other organisations? What discussions have they had? Well, first of all, I think that we're way off the pace in Scotland on this, and we should be much more on the front foot and deciding what we think should be in the shared prosperity fund, but I'll kind of come back to that. In terms of the conversations that we're having, we have been relying really quite a lot on our colleagues in England and Wales, who, as I mentioned earlier, we're involved in a UK network with our colleagues on the shared prosperity fund, and they are talking with officials in various government departments as if this fund will go ahead. There will be a shared prosperity fund because it's been announced, whether it's seen as the successor fund is another matter. They're talking about largely stuff around the European social fund, what it currently funds and what things that are good that they'd like to keep going forward. They have had very tentative conversations about who might manage the money, how the regions will play a part in England, and I don't mean the leps, just how regions and communities will play a part. They've had some sort of conversations. They've managed to secure a one-day inquiry at Westminster on some of those issues, and they're in a fairly strong dialogue with DWP and others that are involved in the sort of nationally administered ESF in England. We've been relying quite heavily on them for the conversations about what's happening with the shared prosperity fund. I know that there is a lot of politics to go, but in terms of if they're a successor fund, that is the name of it and there are conversations around it. I do feel that we need to be much more—we need to app the pace for all of us and say that this is what we think it should look like. We might have different views on that, but we need to have those views put forward much more robustly and quickly about what that should look like and what are the main policy areas that we definitely and absolutely want to make sure aren't removed, the levels of investment. We can say all of those things because we know what we want, but we need to have some more conversations and ideas about what the shared prosperity fund might look like. Then we go off for another six or nine months and decide that we don't like it and this is what we want. I will agree with that. We shouldn't get fixated with the consultation and defined by the terms of the questions of the consultation. We should have an idea here in Scotland, each sector but also Scotland as a whole about what we like, that policy framework and the funding framework to look like and how far it should depart from the current frameworks we have from the EU. We have, as mentioned, a number of discussions from primary secretary to ministerial level to senior officials. As I say, they are keen on looking at outcomes and they are keen on making that fit with UK government long-term plans, but having said that, this is a negotiation. It is like the distribution of powers between Scotland and the UK level, regards to powers that come from the EU. It is a matter of negotiation. In Scotland, in the Scottish tent, we should actually have a... We are standing in our discussions, we have discussions bilaterally, sometimes with our peers from other parts of the UK, our equivalent organisations there, but we are standing in that. We also have a discussion here in Scotland about what sort of framework we would like. Even before, if possible, the consultation comes, so we can have a common understanding here and we are talking across each other when that consultation starts. That includes, of course, having a conversation with the Scottish Government. In terms of that formal consultation, I accept the point that we should have the discussion here so that we know what to feed into that formal consultation, but the factor that has been delayed to the autumn of 2018, and the Scottish Cities Alliance said that the consultation and discussion should take place as soon as possible. What impact is that going to have on the process being delayed? Impact, yes. Just to respond to that, one of the points that has come across quite regularly in the discussion this morning has been the need to be a seamless transition between the European funds start to tail off after 2020. The new UK shared prosperity fund needs to crank up on that. Otherwise, if it is dreadful last minute, Russia is at a risk that funds may not be spent as effectively as they could, the degree of buying in terms of stakeholder participation, which I think was a theme raised in a number of responses to this conference. We need to do this properly. We need to get the right suite of stakeholders involved so that there is much better degree of buying to what Scotland can do with the UK shared prosperity fund than perhaps as a case in development of the structural fund programmes for 2014 to 2020. Building those relationships and working as stakeholders together is not something that has been done overnight, and it requires a degree of resource commitment, not just in terms of money but in terms of staff time of the right sort to be able to sort of drive that process. We get at the end of it a UK shared prosperity fund in Scotland that actually delivers for stakeholders and for the ultimate people we're trying to serve, which is our communities. An early start, don't underestimate the time it takes to start this whole new thing because very much EU regional policy has acted as a proxy for UK regional policy over the last several decades so that it's a major change required and no-one should underestimate the challenges that are putting together a whole new regime, not just funding but also a regulated regime to have that in place so that there's a smooth transition and there's not a stop and delivery of the support that our communities need. Just to be clear, does that mean at the end of the current funding programme 2020, or the fact that you mentioned N plus 3, which means that it can come up to 2023? At what point should this shared prosperity fund kick in? We would say that most of the organisations, and this would say that it really needs to be ready to start to be open for business on 1 January 2021 after that. Realise that it will probably take some time to come out because you're absolutely right. Existing if the current arrangements continue, yes, activity approved in 2020 can continue to be delivered in 2021 and 2022 and possibly into the early months of 2023, but that's going to be a declining basis. You can't approve anything new, so it's basically wind up time for existing projects. This is another point that's given up. Of course, the UK shared prosperity fund, we don't necessarily always be rolling forward what we've done before, it's a scope to think through what we can do differently, what sort of innovative approaches to employability in the light of the changing labour market, for example that we heard our colleague from the Scottish Funding Council talk about earlier on this morning, so it's been able to have that radical rethink of what the Scottish economy and its constituents regions need for the 2020s, and really now is a good time to start that discussion. In the early work that we have been doing, and taking the previous period as a comparison, we are already getting close to the wire to ensure that there's no gap. Regardless of the UK timescales in Scotland, we should start as soon as possible, really. The emerging potential crisis, there is about a gap, because there will be one, because even with the current programmes, there are gaps from one programme to the next, and that's a fairly set process with a framework to work within and guaranteed funds coming, and it still takes two years for us to get off the starting block on it. There needs to be some mitigation, urgency in dealing with that, and I would hope that we wouldn't be looking at, when we're just waiting for successor funds, that there's not some sort of mitigation put in place or some kind of hiatus funding or some kind of programme of support that bookends the two things, and also that the successor fund is not just a rolling forward of the status quo. Okay, and just my final point is, when the fund was announced, it was stated that the UK Government would consult with the devolved administrations about how to spend it, not necessarily suggested that it would be administered from Scotland, and the causal evidence that was given to us says, we do not welcome the possibility that Brexit might mean an increase of powers of the UK Government in local economic development in Scotland. Could you maybe highlight what your concerns are? Yes, I mean, this is a double, thank you. This has double levels as well. One is the economic policy. I mean, we would like to change the current economic framework unnecessarily because of Brexit, but secondly, it has a political constitutional level that will be a change in the balance of power between the Scottish Government and the UK, Scottish level and the UK wide level as a result of Brexit. Us is happening or is happening a number of other u-return areas. Therefore, we will viking that the status quo in terms of, as I said earlier, a quite exquisite respect from the UK to let Scotland do their own things or to speak, agreeing the broad priorities of course with the UK Government, but broadly dealing with Scottish approaches, innovative Scottish approaches, letting Scotland fail as it has happened, it is the right thing, and I can give you a resume apart from the practical and political why it happens. If you look at other federal states in Europe, or let's say states with high levels of decentralisation or devolution, you will see that structural funds have been managed part of it by, part of the regional allocations have been managed by the regional government and very often also part of that same regional allocation has been managed by the national government. That is a result of madness, a result of basically making investment that cancels each other and is simply not good. The system, one of the good things of structural funds is actually that level of relation between the two levels we have had so far, and as I said, in addition to political, legal and practical reasons, it actually makes sense to avoid that there are basically investments and decisions that basically are contradicted with each other. We don't necessarily, in principle, we don't have any issue with a UK-administered grant scheme or programme that comes next as part of any sort of suite of arrangements. For example, if there was a proposal for a UK civil society fund that was for active citizenship and it was co-designed and co-managed by civil society across the UK and was done in the best possible way, we don't have an issue with that because that might be the best thing for communities and for the sector and for civil society. In principle, we don't have an issue with where governance and management of different things to cover different policy areas take place. Would that necessarily reflect the regional needs for Scotland or the economic sector? It can do. There are some fantastic funders that operate in Scotland that are UK funders, whether they are things like the Esme Ferbburn Trust or the Robertson Trust. There are some really terrific funders that really know how to manage funds and work with their stakeholders and have a real proper co-production, joint ownership of the policy areas and manage and deliver funds, and really good governance and implementation. If that is the case, we don't have an issue with it. There are obviously other aspects around some of the things that have been in the current funds, around regional development, whether it is building infrastructure or bridges or things, that might need a different approach, whether that is going to be in a successor fund or not. For us, the issue is about maintaining the focus on the priorities that it currently has, which is around the social policy areas. Perhaps briefly, if I may, Malcolm Leitch, before we move on to further questions. We are slightly pressed for time at this stage and there are other three members of the committee who would like to put some questions, so perhaps Malcolm Leitch in response to that last question and we'll move on to the next question. I think that we would say that it would be a poor situation whereby a set of EU-imposed rules were just replaced by an almost equivalent set of UK Treasury rules in terms of how the UK shared prosperity fund, so that would not be something that would particularly favour. Just to very quickly distress what Seraphon said earlier, by and large with previous structural fund programmes going back many, many years, the Scottish Office initially and more recently the Scottish Government have had a considerable discretion to the deployment of those funds in their patch. What we have is a suite of operational programmes. They form part of what is called, in the current jargon, a UK partnership agreement to which there is a Scottish chapter that was effectively written by the Scottish Government on that. The tradition has been very much a very loose scrutiny of the structural funds by UK departments but part of the dynamic is of course that if the money is coming from the Treasury out with Barnett then perhaps there will be some reporting requirements. The he who pays the piper calls the duty issues that need to be squared in, I would have thought, negotiations directly between the UK departments and the devolved administrations but certainly I do not think that there has been no demand from my firm to have the UK shared prosperity fund micromanaged from Whitehall. If you were here before I am going to ask similar questions, focusing then on the money should the total that the UK spends on structural funds or whatever the successor funds are to be the same as they are spending at the moment or is coming in from Europe or is that a reasonable amount? Perhaps more importantly, how should that be spread out? We have suggested that it could be population Barnett was mentioned, it could be GDP, it could be an employment, it could be a range of things or it could be a mixture, so how should that be done? Mr Leitch? The easy question first, I think a number of submissions made it clear that regional economic despars in the UK haven't narrowed over recent years so it seems to be somewhat counterintuitive if the money available for regional development was cut from the current levels that European structural funds provide. As a number of things I'm thinking for example for ICA Scotland said in its submission that the baseline should be what currently comes to the UK through EU structural funds but I would emphasise that that is the baseline, not the maximum. In terms of how it is allocated, Scottish City said, one of the defects of the EU system is that it is very much allocations based on a very rigid application of one variable GDP per head at one spatial unit, that's the so-called nuts level 2 and surely if we're moving to a UK system we can get a more sophisticated approach that will identify areas coherent labour market and economic areas where we can target the money more effectively than some of the anomalies that arise from the application of that EU formula. So there are opportunities there to look at other things, to look at how we might use things such as the Scottish index of multiple refrigeration if we get a devolved sum of money from this to spend according to Scottish poverty so that we're much better equipped to identify how we can bring needing opportunities together at regional level within Scotland. Obviously there's a broad issue about the allocation of the fund and one of the reasons why a lot of respondents feel that the Barnett approach is the greatest particular situation in Wales. Wales currently gets in excess of 20 per cent of the UK take of structural funds. That's a reflection of the very depressed conditions, particularly the former mining and steel areas in south Wales. However, you'd have to be careful what you wish for in terms of looking at that, because relative to many parts of Northern England, most parts of the Scottish economy haven't done too badly in recent times, so you'd need to look at that very carefully before suggesting any sort of allocation formula that might be used. Just to echo, as I said earlier, Scotland in particular has had a good track record in identifying problems with the multiple ways of multiple tools such as the Scottish index of multiple refrigeration, or, for instance, in rural areas, the social economy performance index. This is something that was developed homegrown in Scotland to allocate a new rural development fund across Scotland. Once we do away with some sort of rules from the European Union, which, as I said once again, is very transactional and some of them don't make any sense here, creating geographies like some of the ones that mentioned earlier, like the Nats areas, that in reality they don't make much sense in the Scottish geography. That will be an opportunity to actually use this in a way more sophisticated policy mechanism we already have in Scotland for some policy areas, aiming for some of the structural funds. With regards to the allocations across the UK from any replacement funding, clearly we all agreed that, and I think it's consensus across everybody who came in to give evidence today that the allocation should be baseline. It's an element with the Barnard formula and makes sure that this is not a fact. The current fiscal framework, but it's actually added on top of that, as it is currently case with the structural fund. I think that this is where the real risks are in this whole area, and that's why we need to get on the front foot with what it is that we want and the policy areas that we want to protect or enhance in a successor fund. We've got lots of evidence across the whole of Scotland in various sectors about to justify certain areas for investment. Obviously, for us, a big focus would be around continuing all the social policy elements that are within the current structural funds. Can I just press you on the actual money? What's SCVO's view on that? Well, absolutely no regression on the money, and that's where the risk is, because at the moment we are not spending what we were originally awarded and we are handing money back. If, for instance, you go down a Barnard route potentially, the Treasury is looking at now what claims are going in and what we're spending, they could easily say, well, it's not additional. You're not spending it. And what does SCVO think? How should we allocate it on GDP or a mixture or what? We should basically keep, argue for the amount of money that we've been allocated, possibly more. There'll be battles within that because London, for example, doesn't do very well and within the structural funds because of the current GDP calculation that's used to allocate funding. They will rightly want to have any potential like for like replacement that comes in, will want to have a share of that money because they've done very badly. And, you know, you can't argue that they have every right to argue for some more of it because they've done badly out of it. Are you saying that you would accept that Scotland gets a smaller percentage than we're getting at the moment? No, I would not. I would say that we argue for that. We have the current allocation for us. It's what the policy areas are, and that's the area that we want to keep the focus on, which is around social inclusion, it's around combating poverty, it's addressing inequality, it's employability, and somebody mentioned earlier about how the challenges are now in terms of having higher employment that there are people who are much more further from the labour market that are needing help. Now, this current programme really isn't addressing that, but that's because of the match that's available for that provision. I still really want to focus on the money. If London was to get a bigger percentage, presumably that would automatically mean that Scotland got a smaller percentage. Or have you got some formula that would ensure that Scotland got the same amount that we're getting just now? The current formula, I guess, or the current argument is that this is what's been allocated over the years based on a current calculation. We would want no regression on that as a starting point, but if the shared prosperity fund, for example, targeted some big social policy areas, there is an opportunity for us to argue for more. It's about getting the policy areas, and justifying those policy areas and potentially arguing for more investment in those areas. We have lots of evidence to support staff around financial inclusion, about combating poverty, around financial inclusion employability and a range of those issues. We could argue within a global pot that we could argue for more investment than we've currently had in this programme. For us, it's about getting on the front foot with what we think the investment priorities should be, and we have evidence to support those, and then, I guess, no regression on the current allocations. I'll leave it at that, thanks. I'm just going to ask the same question to the panel's response that I've asked at the previous panel. I appreciate that it's something that you've brought into your previous answers, but how can we assure accountability and transparency in future programmes without reducing bureaucracy? I think that it's trying to get it right at the start in terms of engaging with stakeholders. There's a great opportunity here, if we've got almost two years before the UK shared prosperity fund kicks in to start now, engaging with stakeholders right at the start, because if you get that, in the past, we've had programmes at the EU that have been created by plan teams, so people from all sorts of sectors getting together trying to think through the issues, looking at where the evidence of what was needed lay, and then coming up with programmes as appropriate. We didn't always get all our ways in, because sometimes EU rules came in and ring-fenced allocations to certain things that came from EU regulations had to be accommodated, but one of the things that we would do better is to get that transparency and get that buy-in, start working from first principles and making sure that everyone, all the relevant stakeholders are meaningfully engaged right at the start and are meaningfully engaged right through the process. I think that that was perhaps one of the learning points from the process of putting together the 14-20 structural fund programmes. Having the experience of the very long process of drafting the current programmes here in Scotland, clearly there was lots of opportunities for engaging, and we had lots of strategic engagement, but sometimes the goalposts were moved, as we were having the discussion. That is quite difficult then, particularly when you're trying to represent the views from a variety of other colleagues to input into. So we should be clear from the start about what it is that you're trying to achieve, what is basically what the UK, for instance, wants to do with the transport perspective fund beyond these first principles that are being mentioned, and having a proper discussion here in Scotland in terms of what we want to achieve, but in a way that everybody knows everybody's agendas, and I'm clear from the outset what we are trying to prepare to bring to the table rather than just giving opinions, is actually what we can actually deliver based on existing capacities and experience. Being very clear from the outset how the process of development and priorities will happen, who will be involved in each stage of the process, who will be part of some of the process, and nothing else. Having a clear understanding of the system, of the development of the priorities from the outset, otherwise, as I say, we risk moving the goalposts, or there is a changing minister, or a problem between London and Edinburgh, and having a problem in terms of the development of the programme. So these things should be clear from the outset so that we can actually adapt and influence accordingly. There are real issues of transparency in this process, and there has been. There are occasions where money shifted out of priorities without any communication or any understanding by stakeholders how that money was shifted right at the start, and other issues around transparency. There are lots of great examples of whether there are funders out there that operate really good programmes, that are transparent, that involve stakeholders, that operate in Scotland that we can learn from. It is about what model you put in place to manage and implement the funds and the governance. It is a clean sheet, potentially, going forward. Who has the governance in the management of any successor grant fund is entirely up for debate and grabs. There are lots of very good examples of how funds are managed across the UK, across Scotland, in a very open and transparent way. Bits of Scottish Government are doing that very well. Bits of local government trusts. There are lots of parts of Scotland that are managing funds in an accountable and good governance way. How do you think that all those good practice examples could be brought together into one place? Scottish Government is part of the open government partnership, which is a global initiative around open governance and government. There are very good processes and models for how you do open government through that initiative. We are part of a pioneer project on that. We could look at the Scottish Funders Forum and you could talk to range of people about and organisations about how you do transparent grant schemes. Recognising a lot of areas that I would cover have already been covered in your previous answer, so I am just going to look at recognising that we need more details on the replacement proposals. Martin Fairbent said from the last panel that we need a simpler system, the current system is very time sensitive. You said that many groups are struggling to access the programme in the highlands and islands. If we don't get regression in terms of funding, if we are able to improve on the issues that we have just mentioned and improve the flexibility and improve on the system, do you think that the new prosperity fund could be a real positive going forward, particularly in some of the regional areas such as the highlands and islands? Absolutely, of course it could. There are lots of ifs to that and lots of politics to go to it, but yes, of course it could. Potentially it is a new, it is a clean sheet with an equivalent amount of money, £800 million or whatever, potentially, and for us to design the investment areas and who manages what bit and where it goes. Yes, of course, there is opportunity in that. There are very much is, and that is why I have said several times that we need to get on the front foot with what that should look like. I agree that there are real opportunities with the UK-shared prosperity fund to avoid some of not just the technical rigidities that we have heard a lot about today, but also some of the policy rigidities that have characterised some of the European structural funds. As you know, in our part of Scotland, the lowlands and uplands area, 80 per cent of the ERDF, has to be spent on either the research and innovation, the SME competitiveness or the low carbon economy. That might be fine as far as it goes, but it gives very little room for manoeuvre in terms of how funds are allocated. With UK-shared prosperity fund, there might be some very hard choices to be made between the focus and the balance between place-based activities, people-based activities or business-facing activities, and those won't be easy decisions to make. At least, with the UK-shared prosperity fund and, hopefully, a considerable amount of devolution to Scotland, those will be issues that will be discussed as a conclusion come to within the Scottish family, and that will certainly be in advance on having to follow the sort of EU rulebook. Indeed, we potentially face opportunities to actually totally rethink how we do long-term economic development and socio-economic development across the UK and Scotland in particular. The question is whether they will be having, we will have that fresh thinking rather than just thinking what it is, because administrations and bureaucrats like to certainly innovate from what they already know. Ideally, this is the moment, perhaps the first time in 40 years, that we can actually think some of these frameworks in a way that is not possible before. So it is very much a matter to actually have in that open thinking. What really bothers me in a way is that the reason why structural funds exist and they are valuable in many ways is because they are not subject to the electoral spending cycles, of national spending cycles, because they are foreign law, foreign law. They are supernational, a lot to be more precise, and the UK, whatever they feel about the structural funds, they couldn't change it. We saw that in the last period when government changed from Labour to Conservatives. They had to actually deliver what has been agreed. How we can actually retain that in the UK, in Scotland, binding parliaments and governments beyond the future of governments and parliaments? How they can actually be legally done in a way that is both constitutionally appropriate and actually effective in getting that security? That is one of the key elements. We have to see how the shared prosperity fund or any fund will work in order to be structural as the structural funds are at the moment. All right. Thank you very much to all three of our witnesses. I realise that we have gone a bit beyond the time that you probably were told was scheduled, so I hope that that has not caused any inconvenience or reflection on the interests that we have had in our discussion with you. Thank you again very much. I will now suspend the meeting and move into private session.