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FUTURE PRIORITIES AND FINANCIAL ALLOCATIONS

Priorities within the Programmes

18. As set out in the Scottish chapter of the NSRF we are putting forward one ERDF and one ESF programme for the Highlands & Islands area in the 2007-2013 period. The draft ERDF Operational Programme is attached at Annex E. The Draft ESF Operational Programme is attached at Annex F. We are proposing three overall priorities for each programme.

19. The overall vision of the ERDF and ESF Programmes for the Highlands & Islands area is of prosperous, inclusive and self-sustaining communities, where the unique cultures, traditions and environments are enhanced and the region makes a distinctive contribution to Scotland, the UK and the EU competitiveness through supporting people, places and prosperity. We propose that Priority 1 supports enterprise development, concentrating on innovation, research and development as well as addressing barriers such as the availability of development finance. Priority 2 - Sustainable Communities - recognises the distinctive problems arising from the sustainability of communities across such as peripheral and sparsely-populated territory. Priority 3 has been designed to address the deficiencies in key infrastructure needs in the region, such as higher and further education. As a whole, the Programme has been developed in line with the Framework for Economic Development in Scotland, Smart Successful Highlands & Islands, the Regeneration Policy Statement, the Green Jobs Strategy, the Scottish Sustainable Development Strategy and other key Scottish strategies.

20. The overall vision of the ESF programme is to contribute towards sustainable growth in the size and skills of the Scottish workforce within the context of the Lisbon strategy. The priorities have been designed to complement key Scottish policies in this area, particularly the Workforce Plus (Employability) Framework, the Regeneration Policy Statement, the NEET Strategy, Smart Successful Highlands & Islands and Life through Learning: Learning through Life - the Scottish Lifelong Learning Strategy. The focus of Priority 1 will be on those groups facing particularly severe employability challenges to entering the Labour market and staying on work. Priority 2 will focus on improving the quality of the Scottish skills base with a particular focus on ensuring sustainable employment and progression for vulnerable groups and offering support for entrepreneurship growth. Priority 3 will underpin efforts under these priorities by increasing access to post-school learning by developing innovative approaches to participation in learning and training.

21. These priorities have been developed, first and foremost, on the basis of the socio-economic analyses of the Highlands & Islands area. The analyses, which are included in the draft Operational Programmes, examine the underlying challenges in the Highlands & Islands economy in contributing to the achievement of the EU's Lisbon Agenda targets. Key strengths, weaknesses and opportunities facing economic development in the Highlands & Islands area through the programming period are identified. They have also been designed in the context of the eligibility criteria and Lisbon earmarking focus set out in the Structural Funds regulations and the CSG.

Question 1: Are there any additional socio-economic factors to be considered - and which Structural Funds can address - in assessing the
strengths, weaknesses and opportunities of Highlands & Islands?

Question 2: Do the proposed priorities for the 2007-2013 ERDF programme in Highlands & Islands address the strengths, weaknesses and opportunities of the region?

Question 3: Do the proposed priorities for the 2007-2013 ERDF programme in Highlands & Islands show appropriate coherence and concentration?

Question 4: Do the proposed priorities for the 2007-2013 ESF programme in Highlands & Islands address the strengths, weaknesses and opportunities of the region?

Question 5: Do the proposed priorities for the 2007-2013 ESF programme in Highlands & Islands show appropriate coherence and concentration and should they be configured differently?

Proposed Allocation of Funding between Priorities

22. The Operational Programmes also set out proposed financial allocations between the proposed priorities. These are set out in Tables 1 and 2 below. The allocations have been calculated on the basis of a number of factors. First of all, funding for the Convergence Objective in Scotland (ie. in Highlands & Islands) is fixed by the EU at €158 million for 2007-2013, but the Member State can propose how to divide funding between ESF and ERDF. For the Highlands & Islands, the Executive is proposing that two-thirds of the funding is allocated to the ERDF Programme (approximately £70 million) and one-third to the ESF Programme (approximately £35 million). This reflects a balanced between the historical ratios between ERDF and ESF funding in the region as well as a recognition of the need for a minimum size of programme to be effective.

23. With regards to determining funding within Programmes, the proposed allocations also take account of the requirement for 'Lisbon earmarking' outlined above which requires 75% of activities to directly contribute towards Lisbon in the Competitiveness Objective and 60% in the Convergence Objective.

Table 1.

Table 2.

24. For the ERDF programme, in order to meet the requirements of Lisbon earmarking, it is proposed that a significant share of resources (30%) are directed towards Priority 1 which will fund Sustainable Enterprises. 25% of funding will go towards Sustainable Communities activities under Priority 2, with 45% going towards Sustainable Infrastructure.

25. For the ESF programme 40% of resources would be will go towards Priority 1, which will direct funding towards increasing the workforce and 40% to investing in the workforce. 20% will go towards supporting Lifelong Learning.

26. The proportions of funding do not take account of Technical Assistance - ie. the share of the programme budget which can be used to improve programme performance, management, effectiveness and delivery. This will account for approximately 3% of the programme and applies to both ESF and ERDF.

Question 6: What are your views on the proposed balance of funding between priorities for the future ERDF programme in Highlands & Islands?

Question 7: What are your views on the proposed balance of funding between priorities for the future ESF programme in Highlands & Islands?

EU Structural Funds Policy

27. The priorities have been developed within the framework of the CSG, which place a strong focus on the Lisbon Strategy for Growth and Jobs, particularly on the promotion and development of knowledge, research and innovation and human capital. The Guidelines identify three main priorities for future spending:

• improving the attractiveness of Member States, regions and cities;
• encouraging innovation, entrepreneurship and the growth of the knowledge economy; and
• creating more and better jobs

We have also been guided by the new Structural Funds regulations which, as outlined above, are more prescriptive in terms of eligible activities than in past Structural Funds periods and which contain strict requirements for complying with the Lisbon Strategy objectives.

Scottish Domestic Policy

28. It is important that the priorities are aligned with existing domestic policy in Scotland which, in many respects, closely follows EU priorities. With reduced levels of Structural Funds and a new policy environment in Scotland following devolution it is necessary to ensure that Structural Funds programmes are closely aligned with domestic funding streams so that full use can be made of the reduced EU funding available to Scotland. This is a new opportunity, as previous Structural Funds programmes were developed before many of the Executive's key common strategies were in place. At the same time, such funding has to be clearly additional to what already takes place domestically and must demonstrate clear added value.

29. There is a clear fit between the CSG and Scottish Executive priorities as set out in strategies such as the Framework for Economic Development in Scotland, Smart Successful Highlands & Islands, the Regeneration Policy Statement, Workforce Plus (Employability Framework), Closing the Opportunity Gap, the Green Jobs Strategy, the Scottish Sustainable Development Strategy and other relevant strategies.

Question 8: Do the proposed priorities outlined in the draft Operational Programmes focus sufficiently on the right priorities in Scottish domestic policy?

Horizontal Themes - Environmental Sustainability and Equal Opportunities

30. The CSG and the Structural Funds regulations also place a strong focus on sustainable development. This is reflected in the UKNSRF which identifies both environmental sustainability and equal opportunities - two key elements of a sustainable development approach to improving economic growth - as key horizontal themes for future Structural Funds programmes. Building on the extensive experience of mainstreaming these themes in past Structural Funds programmes, these key themes have been integrated into the Operational Programmes across all eligible activities and throughout all programme processes, taking account of discussions with key stakeholders at workshops on equal opportunities and environmental sustainability held in April and May 2006. The Executive's commitment to sustainable development derives from the Scottish Sustainable Development Strategy. It has also taken account of the SEA on the ERDF programmes. Similarly, our commitment to equal opportunities reflects the Scottish Executive's Equality Strategy - Working Together for Equality. This Equality Strategy has been fully integrated into the design of the Scottish Structural Funds programmes.

Question 9: What are your views on how the principle of environmental sustainability has been integrated into the Operational Programmes?

Question 10: What are your views on how the principle of equal opportunities has been integrated into the Operational Programmes?

Complementarity with Other Funding Streams

31. The Operational Programmes also need to demonstrate full complementarity with other relevant EU funding streams. While this is a regulatory requirement of the EU, it is also important that EU funding programmes complement each other so that important synergies can be developed. With the reduction in the levels of funding coming to Scotland it is critical that these programmes are not considered in isolation but in co-ordination with other EU funding streams such as the European Territorial Co-operation Objective and EU support for agriculture and fisheries through the new European Agricultural Fund for Rural Development and the European Fisheries Fund. There are also potential new opportunities for Scotland in the European Solidarity Fund, the newly-established Globalisation Adjustment Fund - both of which are supported by the European Investment Bank - and the Seventh Framework Programme for supporting science, research and innovation. Scotland will also have potential interest in two other funding streams operated by the European Investment Bank: the JEREMIE and JESSICA Initiatives. JEREMIE will provide a mechanism for setting up revolving loan instruments for providing development capital to enterprises while JESSICA will provide for long-term revolving funding for enterprises in disadvantaged communities.

Question 11: What are your views on how the Operational Programmes will ensure complementarity between Structural Funds and other EU funding streams?

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