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3. POLICY BACKGROUND

The ESF Programme must address the challenges set out in the analysis of the socio-economic background section in the context of a range of policy actions in order to maximise the value added of the Structural Funds. These contexts must be established at different levels to ensure funding not only complements but builds on existing policy at different levels. Specifically, the ESF Programme should fit within and alongside:

• the EU policy context, particularly the Community Strategic Guidelines, which sets the indicative framework for the Cohesion Policy in support of the EU's growth and jobs commitments, and the UK's National Strategic Reference Framework, as specified in Article 25 of the General Regulation, in which the chapter on Scottish Structural Funds goals provides the overall framework for Structural Funds spending in a Scottish context;
• the UK policy context, especially the UK's National Reform Programme, detailing how the UK as a whole is addressing the challenges and targets developed as part of the wider Lisbon agenda, to which the Structural Funds are intended to contribute; and, lastly,
• the domestic policy context in the region.

The diagram below illustrates how these different policy tiers should combine in the Programme.

The following section presents the key links between the challenges identified in the socio-economic background with these different tiers of policy guidelines and actions to ensure consistency of approach. In addition, the section discusses how the experience from previous programmes in the Highlands & Islands have shaped the development and delivery of the current programmes.

3.1 Policy Context

EU policy

Article 23 of the Structural Fund Regulations provides for the Council to establish Community Strategic Guidelines to provide an indicative framework for Structural and Cohesion Fund programmes. The Commission will propose the Guidelines following adoption of the Structural Fund Regulation. Based on the Commission's 2005 Communication on the Guidelines, they are expected to identify three main guidelines for future spending:

• improving the attractiveness of Member States, regions and cities by increasing accessibility, ensuring adequate quality and level of services, and preserving their environmental potential;
• encouraging innovation, entrepreneurship and the growth of the knowledge economy, including new information and communication technologies; and
• creating more and better jobs by attracting more people into employment, supporting the adaptability of workers and enterprises and increasing investment in human capital.

The priorities in this Programme will support primarily the third guideline.

The June 2005 European Council approved the Integrated Guidelines for Growth and Jobs for the period 2005-2008. There are now 24 Guidelines incorporating the previously separate Broad Economic Policy Guidelines and Employment Guidelines.

Priorities 1 and 2 will support the following three guidelines:

17. Implement employment policies aiming at achieving full employment, improving quality and productivity at work, and strengthening social and territorial cohesion

18. Promote a lifecycle approach to work

19. Ensure inclusive labour markets, enhance work attractiveness, and make work pay for job-seekers, including disadvantaged people and the inactive.

Priorities 2 and 3 will support the following guidelines:

20. Improve matching of labour market needs.

23. Expand and improve investment in human capital.

24. Adapt education and training systems in response to new competence requirements.

The most recent Recommendations to the UK, dated 14 October 2004, described the labour market position in the UK as follows:

The UK exceeds all the employment rate targets, including those for women and for older workers. However, concentrations of economic inactivity, and to a lesser extent unemployment, persist in certain communities and amongst particular groups. Productivity levels, especially as expressed per hour worked, remain comparatively low. This is in part due to the prevalence of low skills amongst the workforce, including insufficient basic skills. The gender pay gap remains one of the widest in the EU. The United Kingdom should give immediate priority to:

• ensuring that wage trends do not exceed productivity gains; [Not relevant to OP]
• ensuring that active labour market policies and benefit systems prevent de-skilling and promote quality in work, by improving incentives to work and supporting sustainable integration and progress in the labour market of inactive and unemployed people; addressing the rising number of people claiming sickness or disability benefits, and giving particular attention to lone parents and people living in deprived areas; [Relevant to Priority 1]
• improving the access to and affordability of childcare and care for other dependants, increasing access to training for low paid women in part-time work, and taking urgent action to tackle the causes of the gender pay gap; [Partly relevant to Priorities 1, and 2]
• implementing national and regional skills strategies, with particular emphasis on improving literacy and numeracy of the workforce, the participation and achievement of 16-19 year olds, and low-skilled workers in poorly paid jobs. [Relevant to Priorities 1,2 and 3]

The UK National Strategic Reference Framework provides a reference instrument for drawing up Structural Funds Programmes to ensure that Structural Funds spending is consistent with the Community Strategic Guidelines and the Member State's National Reform Programme for delivering the Lisbon Agenda.

The UK Framework sets out the Government's central economic objective to raise the rate of sustainable growth and achieve rising prosperity and a better quality of life, with economic and employment opportunities for all. Underlying this central economic objective, the Government is committed to:

• raising the rate of UK productivity growth over the economic cycle, improving competitiveness and narrowing the gap with our major industrial competitors; and
• as part of the wider objective of full employment in every region, and taking account of the economic cycle, demonstrating progress on increasing the employment rate.

The ESF will contribute to the Government's strategies to increase employment and raise skill levels.

In March 2005, the European Council agreed to relaunch the Lisbon agenda to focus more sharply on the key priorities of jobs and growth. Subsequently, the new Integrated Guidelines package, endorsed by the European Council in June 2005, identified the key challenges facing the EU as a whole. Member States were then required to identify their own priorities and share best practice in meeting the challenges through National Reform Programmes.

UK policy

The UK National Reform Programme details the challenges currently facing the UK economy, and sets out the Government's strategy for delivering long term sustainable growth, high employment and a fair and inclusive society.

As explained in the UK's National Reform Programme, the Government's overall approach to increasing growth in the UK economy is based on maintaining macroeconomic stability and driving forward lasting improvements focused on employment and the five drivers of productivity: competition, enterprise, innovation, investment and skills.

The Government believes that radical labour market reform aimed at getting more people into employment is key to delivering economic growth and ensuring the long-term fiscal sustainability of the economy. A flexible and job-creating labour market is especially important for competing in today's increasingly global markets. By boosting productivity and employment, it helps ensure that the gains of economic growth go to the many rather than the few.

The National Reform Programme sets out the Government's aim of employment opportunity for all and its aspiration of an 80% employment rate. Getting more people into employment is key both to delivering economic growth and to building a more inclusive society. Policies to promote employment include the New Deals and Pathways to Work. Priority 1 will add value to the employment strategy set out in the National Reform Programme.

With regard to productivity, the evidence for focusing on the five drivers was set out in Productivity in the UK: The evidence and the Government's approach, which was published alongside the Government's Pre-Budget Report in 2002. The National Reform Programme sets out the UK Government's strategy to raise skills levels in the workforce by: increasing participation in education at age 17 from 75% to 90% over the next ten years; ensuring 2.25 million adults improve their basic skills; and reducing the number of adults in the workforce without a level 2 (upper secondary) qualification by 40%. Priorities 2 and 3 will add value to the skills strategy in Scotland.

Scottish policy

The Framework for Economic Development in Scotland ( FEDS)

FEDS, refreshed in 2004, sets the overall strategy for developing the Scottish economy, including its component regions such as the Highlands & Islands. Its vision is:

to raise the quality of life of the Scottish people through increasing the economic opportunities for all on a socially and environmentally sustainable basis.

To achieve this, FEDS has four key outcomes:

• economic growth: with growth accelerated and sustained through greater competitiveness in the global economy;
• regional development: with economic growth a pre-requisite for all regions to enjoy the same economic opportunities, and with regional development itself contributing to national economic prosperity;
• closing the opportunity gap: with economic growth a pre-requisite for all in society to enjoy enhanced economic opportunities, and with social development in turn contributing to national economic prosperity; and
• sustainable development: in economic, social and environmental terms.

Central to these four outcomes is a long-term strategy to improve the productivity of the Scottish economy. As in the wider UK strategy, one of the key factors in this is the generation and full economic use of knowledge; FEDS acknowledges that Scotland needs to adapt to knowledge-intensive global markets rather than the labour-intensive markets in which it has successfully competed in the past.

Workforce Plus - An Employability Framework for Scotland

Published in 2006, the Employability Framework complements UK Government activity promote economic growth and sustainable development, reduce disadvantage and inequality and to end child poverty. The Framework sets a target of assisting 66,000 individuals in seven local government areas of particular deprivation to move off benefits and into employment. The Framework identified a number of areas where more co-ordinated and targeted policy can achieve this:

• interventions at an early stage;
• more client-focused interventions;
• employer engagement;
• support towards sustaining as well as progressing employment;
• more joined-up planning and delivery of services within the public sector; and
• a focus on better outcomes.

The Framework further acknowledges that local employment partnerships are the more effective delivery channel for such employability activity. This approach is reflected in the ESF Programme and the proposed use of local partnerships, as set out in Chapter 6 of this document.

Closing the Opportunity Gap

Closing the Opportunity Gap is the Scottish Executive strategy aiming to prevent individuals and families from falling into and to provide routes out of poverty. It sets two relevant targets to tackle poverty and disadvantage:

• to promote community regeneration of the most deprived neighbourhoods, through improvements in employability, education, health, access to local services and quality of the local environment; and
• to improve service delivery in rural areas so that agreed improvements to accessibility and quality are achieved for key services in remote and disadvantaged communities.

In 2004, this was translated into a set of six objectives with a particular focus on areas of particular deprivation:

• to increase the chances of sustained employment for vulnerable and disadvantaged groups - in order to lift them permanently out of poverty;
• to improve the confidence and skills of the most disadvantaged children and young people - in order to provide them with the greatest chance of avoiding poverty when they leave school;
• to reduce the vulnerability of low income families to financial exclusion and multiple debts - in order to prevent them becoming over-indebted and/or to lift them out of poverty;
• to regenerate the most disadvantaged neighbourhoods - in order that people living there can take advantage of job opportunities and improve their quality of life;
• to increase the rate of improvement of the health status of people living in the most deprived communities - in order to improve their quality of life, including their employability prospects; and
• to improve access to high quality services for the most disadvantaged groups and individuals in rural communities - in order to improve their quality of life and enhance their access to opportunity.

The ESF Programme embodies - directly as well as indirectly - these Closing the Opportunity Gap objectives.

Regeneration Policy Statement

In 2006, Closing the Opportunity Gap was supplemented by the Scottish Executive's People and Place: Regeneration Policy Statement, which states that regeneration is central to achieving the main goal of sustainable economic development. The Regeneration Policy Statement integrates public, private, voluntary and community sector activities to sustainable regeneration. It defines the regeneration challenge for Scotland:

Regeneration is a crucial part of growing the economy and improving the fabric of Scotland… Our aim is to turn disadvantaged neighbourhoods into places where people are proud to live. To turn places that have been left behind into places connected with the opportunities around them. To create areas of choice and areas of connection, rather than inward-looking places excluded from the wider successful Scotland around them. To build mixed and vibrant communities that sustain themselves.

The Regeneration Policy Statement recognises that this can only be achieved through an integrated policy approach that goes beyond investment in the physical infrastructure of these areas: the economic, social, physical and environmental aspects of regeneration requires an integrated approach which 'joins up' planning and delivery across these aspects, so that change is mutually reinforcing. At the same time, it must be an approach based on partnership, as no single organisation can deliver all of these outcomes.

One key instrument to take forward these strategies are the Community Planning Partnerships ( CPPs). The CPPs, one for each Local Authority, set out how the relevant partners at local level intend to combine their activities to achieve regeneration outcomes. The CPPs consist of partnerships of the key partners involved in local regeneration including the Local Authority, voluntary sector organisations, local Health Boards and other relevant bodies

Lifelong Learning Strategy

Life Through Learning, Learning Through Life sets out the Executive's strategy for Lifelong Learning to 2008. It is concerned with post-compulsory education, training and learning and recognizes the need to address the:

• opportunity gap between those who achieve their potential and those who do not;
• skills gap between those in work and those who are not; and
• productivity gap between Scotland and the world's leading economies.

To achieve these strategic aims there is a need to promote work based learning as part of the overall lifelong learning agenda through a two-pronged approach that both encourages individual learners to participate in lifelong learning and employers to support lifelong learning both in and beyond the workplace. The strategy has five goals, creating:

• a Scotland where people have the confidence, enterprise, knowledge, creativity and skills they need to participate in economic, social and civic life;
• a Scotland where a high quality learning experience is delivered;
• a Scotland where people's knowledge and skills are recognised, used and developed to best effect in their workplace;
• a Scotland where people are given the information, guidance and support they need to make effective learning decisions and transitions; and
• a Scotland where people have the chance to learn, irrespective of their background or current personal circumstances.

The strategy underpins the approach being taken to support access to lifelong learning in Priority 3 of the Programme. It has also been enhanced by policies addressing specific issues within this broad agenda. One such is the Adult ESOL (English for Speakers of Other Languages) Strategy. This aims to improve the quality and quantity of provision for all those who need help in this area with a particular focus on asylum seekers and refugees, people from settled minority communities, and migrant workers.

Smart Successful Highlands & Islands

Scottish Executive policy for developing the enterprise sector has been set out in Smart Successful Highlands & Islands, which was refreshed in 2004. The strategy not only lays out the goals of Highlands & Islands Enterprise - the key economic and skills development agency in the Highlands & Islands Scotland region - but acts as a framework for co-ordinating enterprise development policy more widely. It has a vision consisting of four outcomes:

• strengthening communities;
• developing skills;
• growing businesses; and
• global connections.

Under the second of these goals, the strategy will be a key document in framing the goals of the ESF Programme under Priority 2 - EU and domestic activity would be fully complementary in this area.

Other Key Strategies

In addition to these overarching strategies, there are a number of other related policy areas, where Scottish Executive strategies will inform and complement activity in the ESF Programme.

One of the most difficult-to-reach groups of individuals outside the labour market are young people who are 'not in education, employment or training' ( NEET). These are concentrated in seven areas in Scotland which require particular policy interventions, complementing the work being taken forward as part of the Employability Framework and Closing the Opportunity Gap. The NEET Strategy - More Choices, More Chances - which was launched in 2006, aims to achieve this through five priority areas of intervention: opportunities for young people of school age; post compulsory education and training; financial incentives for employment, education and training; removing the barriers to accessing opportunities; and co-ordination of national and local leadership in delivery. The ESF Programme complements the aims and proposed actions under these different priority areas.

A number of other policies are being taken forward for the school sector which will have an impact on young people's employment prospects on leaving school. These are Curriculum for Excellence; with its focus on the four capacities of the individual, Determined to Succeed; which increases awareness of, and enthusiasm for enterprise and entrepreneurship, and the School - College Review; which is aimed at increasing the range of opportunities open to young people.

On the specific issues facing individuals with mental health problems, the Scottish Programme for Improving Mental Health and Well-being aims to improve the mental health and well-being of everyone living in Scotland , and improve the quality of life for people experiencing mental health problems and mental illness. The publication - 'With Work in Mind: The Evidence Base for Change' - sets out the size and nature of the workless client group with experience of mental health problems.

Effective and confident literacy and numeracy skills contribute to closing the opportunity gap in Scotland, including equipping people to fulfil their employability. By 2008, £65 million will have been invested through community learning and development strategies. From 2001 to 2005, over 100,000 new literacies learners have been supported across Scotland. The Big Plus awareness raising campaign, and the Big Plus for Business toolkit to raise employer awareness of workplace literacies has been launched to encourage their staff in developing these skills. It has also been recognised that skills in using a computer are standard for all - that is why the universal offer for Individual Learning Accounts targets ICT skills.

The Scottish Childcare Strategy aims to provide affordable, accessible, good quality childcare in every neighbourhood, supported by Childcare strategy funding from the Executive to local authorities. Childcare has an important role to play in labour market growth and family prosperity by helping people back into work or training as well as supporting childcare enterprises . The Working for Families programme supplements these with further support for parents in disadvantaged areas and groups, supplemented by the childcare element of working tax credit for those on a low income, to get the affordable and flexible childcare they require.

The social economy sector is already delivering a number of employment and training opportunities for the long term unemployed. The success of the sector in this area rests with the experience such organisations have of working with their clients, the confidence that they inspire in their clients and the one-to-one support that they are frequently able to offer. The Scottish Social Enterprise Strategy will set out the social economy as a key area is creating employment and development opportunities for those furthest from employment through helping to make social enterprises more sustainable and competitive. Priorities for supporting the sector in the strategy will complement the focus on the social economy within the ESF Programme.

3.2 Lessons from 2000-06 Programmes

Structural Funds programming in Scotland has always built on the experience of earlier programmes, maintaining the good practice while adapting to new circumstances. In developing the ESF Programme for the region for 2007-13, the lessons of the 2000-06 use of European Social Fund in Scotland were examined from a number of different perspectives. This section summarises the key studies drawing on those lessons:

• the mid-term evaluation update of the 2000-06 programme;
• the study of social inclusion activity supported by ESF for the mid-term updates, conducted by EKOS;
• the 2005 beneficiaries survey conducted by MORI;
• the 2005 report of an internal Value Added Group on how to increase the value added of future Structural Funds programmes; and
• the 2006 Hall Aitken report on options for delivering the Structural Funds.

Mid-term evaluation update of the 2000-06 programme

In 2005, the 2000-06 Highlands & Islands Programme was assessed as part of the mid-term evaluation update of Structural Funds. The update set out a number of conclusions and recommendations that informed the development of the 2007-13 ESF Programme for the region.

As part of the update, programme performance was assessed from a variety of perspectives: an initial analysis of programme data, undertaken by the Programme Management Executive; and two reviews of those analyses, one by the partners themselves through a special stakeholder event, and one by an analytical unit within the Scottish Executive, which considered net impacts, net costs and benchmarks with similar programmes/schemes.

The overall aim of the Programme was to secure the sustainable economic regeneration of the area. An initial analysis of the data for the Programme suggests that progress was good. The clear majority of targets has been exceeded for measures, or at least were well on their way to being met. Stakeholder views on programme performance reflected less the progress of the Programme with respect to its targets than a frustration with the system for measuring performance. Numerous comments were made about the inappropriateness of some indicators to particular measures, difficulties in aggregation across the Programme as a whole, the timespan for suitable results and impacts to become manifest under some measures, the lack of proper account of 'softer' impacts (notably with respect to employability support) and the value of more qualitative, case-study approaches to assessment. These views have been important in informing the development of the 2007-13 evaluation framework.

With regards to net impacts, the Programme was assessed in terms of net employment - not a comprehensive measure of what the Programme was trying to achieve, but a useful indicator that could be aggregated across the different priorities. However, it was difficult to draw strong conclusion on impacts: on a net cost-per-job basis, the figures were difficult to compare given the longer-term focus of many of the measures, particularly those with a focus on capital-intensive projects.

In the thematic areas examined by the update, the Programme showed strong progress. Environmental sustainability and equal opportunities were strongly encouraged by the Programme, with important case-study projects showing how the horizontal themes could be more widely embedded in domestic policy. Similarly, the Programme made important strides in supporting social inclusion with clear success in adding value to projects and supporting job entry for disadvantaged beneficiaries. However, this impact was largely concentrated in particular areas (the Highland area) as well as on particular beneficiary groups, reflecting the sparse and dispersed population and underlying project demand in this policy area.

The update emphasised that the Highlands & Islands Programme was conceived as a transitional programme. The Programme aimed to achieve a key strategic legacy that would not necessarily achieve the goals of full economic regeneration on its own, but provide a strong platform for economic development policy to build on in the period after 2006. The existence of that legacy was already apparent in the review of programme performance above, but much of the achievement would be felt in the Programme's combination of support for critical keystone projects, such as the University of the Highlands & Islands and broadband development. It should also be remembered that the Programme's funding was only a fraction of the total economic development resources available for the region. The same principles have been extended into the development of the 2007-13 Programme.

In addition, many of the conclusions of the ESF Objective 3 mid-term evaluation update and the Equal Initiative evaluation hold true for this region as well:-

• Individuals who remain outside the workforce and inactive face having to overcome multiple barriers to progressing into the labour force. Grouping them by length of time unemployed, age, sex, etc leads to the least effective interventions. This observation in the mid-term evaluation update is backed up by the work in the Employability Workstreams. There is a need to address the person's needs as a whole and employers' perceptions, and to be as flexible as possible in accepting a range of interventions as eligible activities.
• The current Programme tended to give weight to supporting those nearest to employment as they were cheaper interventions for the same output ie. a person into employment. The current Programme's measurements failed to take account of wider impacts, and the long term value of a job for a person with complex barriers to address. There is a need to acknowledge that progress can be slow and soft outcomes and movement towards the labour market must be encouraged, rewarded and sustained over a considerable period. There are few short term interventions for the current client group who may need help and support over a period of years.
• Local variations and labour market needs have to be better catered for. Strategic fit has to be not just at national level, but also has to be based on local partnership plans.
• Projects which encouraged and supported a network involving a range of partners, including economic development bodies, local and national government policy-makers, front line delivery bodies such as health and social services tended to be innovative and focused on their clients' needs. They were more likely to leave a lasting legacy, and to work together again. The EQUAL Development Partnerships ( DPs) were good models of this. The Highlands & Islands area had one area specific EQUALDP and participated in others.
• SME decisions on gaining additional skills, or higher qualifications often had to be driven by national legislation on statutory requirements eg. qualifications for those working in care homes. The decision to encourage workers to improve their qualifications was rarely to enable the enterprise to grow and become more competitive.
• Access to post school education for those not participating could be highly effective where there was a high degree of innovation and flexibility in the approach on offer. Tasters of a non-academic nature, or outside the normal Further or Higher Education buildings were often more welcome eg. learning centers in Housing Association offices or youth clubs.
• The last Programme has seen a significant culture change in the projects in terms of their Equal Opportunities and sustainable development policies. The biggest changes came about because of the need for projects to embed Equal Opportunities and Sustainable Development into the basic framework and planning of every project regardless of which priority it cam under. This was more effective than limiting it to separate priorities, and it will be important to mention the requirement for every project to implement an EQ policy and sustainable development plan.

EKOS social inclusion study

As part of the mid-term evaluation update, a specialist study was commissioned of EKOS Consultants in 2005 to review the effectiveness of social inclusion Measures within the Objective 3, Objective 2 West of Scotland, as well as the Highlands & Islands Special Transitional Programme in the 2000-06 programming period. It made the following recommendations:

• The categorisations of key client groups should be linked to standard statistical sources to enable quantification of the number of individuals being reached by the Programme. This recommendation has informed the development of the monitoring and evaluation indicator framework for the new Programme.
• Project administration requirements should be looked at again in relation to key match-funding programmes, seeking to streamline and complement where possible. This recommendation is being pursued as part of the simplification and streamlining of administrative procedures in the new Programme and will be reflected in the new Guidance.
• There continues to be a requirement for improved strategic co-ordination of ERDF and ESF funding streams. It may be appropriate to use structures such as Community Planning Partnerships to facilitate this discussion at a local level - a recommendation which lies behind the delivery arrangements for Priority 1 in the new Programme.
• Longer-term tracking of individuals would be desirable in order to provide a more realistic time frame for job seekers to achieve results, as well as to demonstrate sustainability of outcomes. Again, the new evaluation and monitoring framework is giving greater weight to tracking outcomes in this way.

MORI beneficiaries survey

In 2005, a GB-wide beneficiaries survey was also commissioned, to follow up individual beneficiaries of projects supported under the ESF programme, who took part in the different EU programmes in 2004. For this research, separate surveys were conducted in England, Wales and Scotland, building on similar work conducted in earlier years. It was conducted by MORI.

The findings showed that in general, expectations beneficiaries had on joining a course were met and often exceeded, with most people reporting that they had developed both 'hard' and 'soft' work-related skills. Indeed, four in five beneficiaries attained a qualification on completion of their course. It is also instructive to note that gains and improvements appeared to be relatively well-focused on key groups of beneficiaries. Non-working entrants - whether they are actively seeking work or are inactive - clearly benefited not only from targeted, skills-based training but also from the development of 'soft' skills relating to their self-confidence.

Furthermore, there was evidence of upskilling among beneficiaries who were employed on entry. This group cited a wide range of skills development, in particular improving practical skills relating to a particular job, as well developing IT and study skills. A key outcome, however, for any ESF-funded training was whether beneficiaries improved their labour market status. From the two stage survey process, it was possible to see a clear and positive move from unemployment to employment for many beneficiaries.

The proportion of beneficiaries in the second wave of research who were employed rose from 32% on entry to 50% at the time of the survey. This represented a 56% increase in employment. While this research was not set up as an empirical evaluation to establish a causal link between attendance on the ESF course and subsequent labour market activity, the majority of those who moved into a new job felt that participation in the course had helped them to do so. The large part of this move towards employability could be traced to those beneficiaries who had been inactive on entry. While most of those who had been employed on entry were still in work at the time of the survey, a quarter of those who were employed at the time of the survey (23%) had previously been inactive.

Moreover, even if they were not moving directly into work, inactive entrants were moving in the direction of work: a third of those who were unemployed at the time of the survey (30%) and nearly half of those in education (47%) had been inactive on entry. This is a major finding of this research - that inactivity is being directly addressed by the ESF in Scotland. It should also be noted, however, that unemployment levels are affected by this move. Rather than falling, unemployment actually rises from entry to leaving a course (from 18% to 29%) and is still higher than at the beginning of the process by the time of the survey (24%). While this rise may be seen as a disappointment, it should be recognised that the 'direction of travel' is a positive one.

The survey concluded that the challenge for the ESF in Scotland was to maintain the increase in employment so that inactive and unemployed beneficiaries were able to make that final transition. This underpins the focus of Priority 1 in the 2007-13 ESF Programme.

Value Added Group: 'Adding Value, Keeping Value'

As part of the preparations by the Scottish Executive for developing Structural Funds programmes for the 2007-13 period, a short-life internal working group was set up in 2005 to draw lessons on the 'value added' of the Structural Funds from the 2000-06 Scottish programmes. The specific objectives of the Group were the following:

• to identify the types of projects that have provided the highest added value in the 2000-06 programmes;
• to consider the characteristics of those projects which have made them particularly successful;
• to define added value in the context of Structural Funds programmes; and
• to assess how best to encourage development of such projects within the regulations governing future Structural Funds.

The Group was drawn from the European Structural Funds Division and the Programme Management Executives for the 2000-06 programmes. It concluded the following.

• In future, a greater premium should be placed on qualitative value added in project selection. This was not to suggest that value added should not have a strong quantitative dimension, but that qualitative value added should be a priority. In practice, this meant that Structural Funds could usefully support pilot, innovative projects - an approach reflected in the eligible activities set out in the priority descriptions below.
• Consideration should be given to providing a greater time limit on project funding in future. If the focus is on supporting qualitative projects, Structural Funds should have the role as a major lever for the early stages of a project's development. 'Repeat' projects or longer-term continuations should be discouraged unless there are strong operational reasons for doing so. As a result, project awards would be for a minimum of two years, though with annually-set targets and reviews.
• Partnership has been a critical factor in supporting value added, particularly when applied in particular ways. Partnership at a local/regional level in project development is important, often acting as 'brokers' for development activity (a role that has been supported through Structural Funds support). Where projects and activities have been developed through a networked, inter-agency approach, project quality appears to have been driven up. The recommended approach particularly underpins the delivery arrangements set out for Priority 2 of the new Programme.
• The continuing promotion of key shared policy goals should continue, particularly the horizontal themes. The Structural Funds have played a pivotal role in promoting equal opportunities and sustainable development as wider policy goals and should continue to do so. This is reflected on the continuing emphasis on the mainstreaming of these two horizontal themes, as set out in more detail in Section 6.3 below.

Value added has also been apparent where funding has been coordinated through a series of activities targeting a common goal. Whether the coordination is of different types of funds ( ERDF, ESF and other sources of EU funding) or different types of projects (through project clusters), their impact is strongest when geared towards a specific development goal. In Structural Funds, these goals have been most readily achieved when defined in terms of local geography (especially through community economic development) or niche sectors (particularly through targeted enterprise development activities). The focused approach is reflected in the targeted nature of the priorities described below.

Hall Aitken: 'Making Every Euro Count'

As part of the preparations for developing the 2007-13 programmes, the Scottish Executive commissioned a report of Hall Aitken Consultants in 2006 with several objectives:

• to identify a series of delivery options for single-stream funding of Structural Funds and other domestic policy resources, based on 2000-06 practice elsewhere in the EU;
• to draw out comparative lessons with a view to setting out options for Scottish delivery; and
• to set out options for Scotland.

On this basis, the report concluded that any approach should achieve as many of the following criteria as possible:

• minimise the administrative costs of operating projects;
• direct funds to where they will make the most difference in terms of economic need, opportunity and delivery capacity and quality;
• build on existing structures, partnerships and systems where possible and be developed with the support of stakeholders;
• shift the focus of effort from project selection to effective delivery and monitoring;
• integrate Structural Funds actions more closely with related domestic policy actions;
• retain sufficient flexibility to respond to changes in need and opportunity during the programme lifetime and ensure that projects address both issues;
• promote the horizontal themes; and
• spread learning and good practice.

The delivery mechanisms for the programmes - set out in detail in Chapter 6 - were developed with these conclusions in mind. They have also been designed to make use of the following range of elements, set out by Hall Aitken as mechanisms that could be used in delivering the programmes:

• small project challenge funds, including a pot for innovation projects;
• single-stream funding;
• area and local outcome agreements;
• competition between single-stream funding bodies;
• a more negotiated decision process;
• thematic partnerships;
• key strategic project competition; and
• specifying major projects.

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