Highlands and Islands Scotland: European Regional Development Fund 2007-2013: Structural Funds Operational Programme

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3. POLICY BACKGROUND

3.1 Policy Context

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

  • the Community Strategic Guidelines, which sets the indicative framework for the Cohesion Policy in support of the EU's growth and jobs commitments;
  • the UK's National Strategic Reference Framework, as specified in Article 27 of the General Regulation, in which the chapter on Scottish Structural Funds goals provides the overall framework within which the ERDF Programme must fit;
  • the UK's National Reform Programme ( NRP), 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 array of domestic policy initiatives available in the region.

Figure 2 illustrates how these different policy tiers should combine in the Programme.

Figure 2: Hierarchy of strategic objectives

Figure 2: Hierarchy of strategic objectives

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. It will form the basis of the priority structure set out below. The socio-economic analysis considered the region from three perspectives: the enterprise sector; communities; and basic provision of infrastructure (especially relating to accessibility). The following section shows how the existing policy framework addresses these issues currently. In addition, there are three cross-cutting strategic themes which will inform all aspects of the Programme - equal opportunities, environmental sustainability and social inclusion. These are treated in Chapter 8.

Enterprise, RTD and innovation

EU Level

Article 25 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. Based on the Commission's 2005 Communication, three main Guidelines for future spending have been identified:

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

Within the Community Strategic Guidelines, there are several Guidelines where the challenges identified in the socio-economic analysis feature strongly.

  • Facilitate innovation and promote entrepreneurship. The Guideline notes that there is a widespread need to encourage entrepreneurs to set up enterprises as well as to provide a support environment for their start-up and growth. This maps most clearly onto the first key Programme challenge, which highlights the barriers and lack of incentives for entrepreneurs in the region and the problems faced by businesses more widely.
  • Moreover, an environment that encourages the replenishing of the enterprise base with new firms and provides support for those enterprises with strong growth potential is a key source of regional competitiveness. Indeed, the Guideline notes that " [The co-financing of investments in innovation] should be the main priority in the regions covered under the Regional competitiveness and employment objective".
    • Programme challenge 1: Entrepreneurship and support for growing enterprises was identified in the socio-economic analysis as a key area for intervention in the region.
    • Programme challenge 2: The sustainable use of the region's natural and cultural assets could also help to underpin actions in support of the Guideline, 'Strengthen the synergies between environmental protection and growth'.
    • Programme challenge 3: The need to increase the innovation capacity of the region's enterprises was highlighted in the socio-economic background.
    • Programme challenge 4:Investment in the region's key research centres should complement support to improve innovation rates in enterprises.
  • Improve access to finance. One aspect of the support environment for growing enterprises is the financial resources available to growing enterprises. The Guideline acknowledges that Cohesion Policy can contribute to regional economic growth by improving access to private equity and venture capital. As with the first Guideline, again, there is a clear link to Programme challenge 1, where access to finance is one of the issues hindering new firm formation and survival in the region.
  • Increase and improve investment in RTD. The Guideline outlines the importance of strengthening co-operation amongst enterprises and research centres, supporting RTD undertaken by businesses and developing the overall RTD capacity of the region. Programme challenges 3 and 4 in the socio-economic background points to the low levels of RTD investment in the region's economy.

In addition, the Guidelines recognise the distinctiveness of rural development challenges: as the document notes, " cohesion policy can also play a key role in support of the economic regeneration of rural areas". It specifies the importance of Structural Funds support for services of general economic interest that can improve conditions in rural area, an integrated approach to supporting tourism and the development of development poles in rural areas, particularly around economic clusters based on local assets. As the Highlands & Islands region is chiefly characterised as a rural economy, all the Programme challenges reflect this need for distinctive action in a rural context.

UK and Scottish Levels

The UKNational Strategic Reference Framework (as required by the General Structural Fund Regulation, Article 25) provides a reference instrument for drawing up Programmes to ensure that Structural Funds spending is consistent both with the Community Strategic Guidelines and the Member State's National Reform Programme for delivering the Lisbon Agenda. In the UKNSRF, there is a dedicated chapter to Scotland.

Overall, 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. In Scotland, the primary aim is to contribute to the sustainable economic growth of the region through improvements in productivity while addressing social inclusion and environmental sustainability needs.

The Scottish chapter sets out the challenges and sets of priority actions for the ERDF Programme under the Convergence Objective. Low firm formation rates and deficiencies in the knowledge and innovation system are recognised in the NSRF as the key needs for Scotland as a whole. It is acknowledged as a priority action for the ERDF Programme.

As part of the goal of promoting productivity growth, the UK's National Reform Programme emphasises the need to improve entrepreneurship and access to finance, particularly for businesses. With respect to RTD and innovation, the importance of addressing the challenge is reinforced in the UK's National Reform Programme. The UK Government's overall approach to encouraging national economic growth is based on improving productivity performance through an integrated series of policy measures. One of the main drivers of productivity is the capacity to generate and make full economic use of science and innovation. In pursuit of this goal, the National Reform Programme highlights the need to encourage greater private and public investment in RTD - particularly in the enterprise sector - as well as investing in a research base that is responsive to the economy, not least in sustainable industries such as renewable energy. It has set the goal of increasing UK public and private investment in RTD to 2.5% of GDP by 2014. In addition, the Programme has an aspiration of achieving an 80% employment rate.

The UK approach is echoed in Scotland. The goal of improving RTD and innovation performance and improving new firm formation rates in Scotland is central to the Scottish Government's major strategies supporting economic development. The Framework for Economic Development in Scotland ( FEDS), refreshed in 2004, sets the overall strategy for developing the Scottish economy. 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 public and enterprise sector in 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.

It will be seen in Chapter 8 below that the enterprise development objective in the Highlands & Islands is consistent with the programme's horizontal themes, especially the key environmental sustainability dimension. The Scottish Green Jobs Strategy outlines how Scotland should seize the business opportunities and advantages arising from sustainable development with a view to creating a vibrant, low-carbon economy and the country being a location for green enterprise. This would be achieved through a combination of support for the economic opportunities arising from a commitment to environment sustainability - such as renewables technologies and economic efficiencies arising from waste-recycling - as well as more general information-raising and skills improvements in mainstreaming environmental issues into economic activity. In this context, there are significant opportunities in the Highlands & Islands.

The role of the developing University of the Highlands & Islands for the region's RTD capacity has also been recognised in the Science Strategy for Scotland, which acknowledges the potential importance of the institution to improving the region's research infrastructure.

On the role of renewable energy, the Securing a Renewable Future document by the Scottish Government sets out Scotland's approach to meeting its renewable energy commitments, particularly a target of 40% of its electricity needs from renewable sources by 2020. For rural areas, the forthcoming National Transport Strategy will set out Scotland's plans through three strategic outcomes: improving journey times and connectivity; reducing emissions; and improving access and safety. Both strategies suggest a number of areas where complementary support from Structural Funds can have a more strategic impact. Similarly, with respect to ICT and communications infrastructure, A Smart Successful Highlands & Islands discusses the importance of anticipating future change in telecoms technologies and working towards improving the speed and capacity of the existing infrastructure in the area.

Lastly, the Scottish Government tourism strategy - A New Strategy for Scottish Tourism - identifies the key role that the sector has in rural areas such as the Highlands & Islands, where the cultural and natural assets of the region require some further investment and support for full sustainable commercial use to be made.

Another major strategy that will shape the policy context for the Programme is A Science Strategy for Scotland, published in 2001. Among its objectives, the strategy recognises the importance of maintaining a strong science base fully connected to UK and international activity and funding sources as well as increasing the effective exploitation of scientific research to strengthen Scottish businesses. Both have been identified as key challenges for the Highlands & Islands. At the time that the Programme was being developed, a new version of the science strategy was under preparation.

The socio-economic analysis identified tourism as a key sector for the region. Structural Funds activity in support of tourism should complement the 2006 Tourism Framework for Change strategy while demonstrating clear added value. The strategy sets out a range of targets, including the coverage of tourism businesses that have been quality-assured and making use of e-business and a Tourism Innovation Group and local networks of businesses, Local Authorities and other bodies will encourage the development of innovative ideas, practices and products among tourism operators. One of the instruments of the strategy is the creation of local Area Tourism Partnerships to identify important local challenges for the sector and work with local businesses, culture/heritage organisations, Local Authorities and other bodies to share best practice and identify key actions to take forward. Structural Funds-supported projects in support of tourism should take account of the priorities and actions set by these Partnerships and show the value added of EU funding.

For the region, cultural policy is another significant policy area of which account needs to be taken because of the importance of the cultural industries to the region's economic growth. Scotland's Culture set out in 2006 national and local planning frameworks for the development of cultural assets within Scotland as a whole. This includes commitments by Local Authorities to include cultural development in the community planning process and the creation of a new cultural agency, Creative Scotland, to take forward national goals and projects. Within the Highlands & Islands, Bord na Gaidhlig - the Gaelic Development Agency, set up in 2003 - has a particular role in encouraging development projects for making full economic use of the region's linguistic and cultural assets.

Finally, The National Plan for Gaelic will also inform development of education and training opportunities and developing full economic benefits from the regeneration of the 'Gaidhlig' language and culture. This important linguistic and cultural sector has been recognised in successive independent studies as a significant economic driver, ideally suited to take advantage of the fast growing opportunities within the area of new media, due to the convergence of cultural content and new technologies, along with a world-wide rise in demand for cultural products. The cultural sector is recognised as one of the fastest growing economic sectors in the EU.

Highlands & Islands Level

The Scottish Government's policy for economic development through the enterprise sector in the Highlands and Islands is set out in A Smart Successful Highlands & Islands, which was also refreshed in 2004. The strategy sets the framework for development within the Highlands & islands through five critical factors:

  • population: recognising the importance of increasing the number of people living, studying and working in the region;
  • place: building on the strong quality-of-life arising from the region's natural assets;
  • productivity: addressing the productivity challenge of the region;
  • pay: increasing the low earnings levels throughout the region; and
  • prospects: contributing to the long-term sustainable growth of the Highlands & Islands.

The document has a vision consisting of four outcomes:

  • strengthening communities: by creating community assets, building local capacity and leadership, and enhancing natural and cultural heritage;
  • developing skills: by improving the operation of the labour market, giving the best start to all young people, developing those already in work and reducing economic inactivity;
  • growing businesses: encouraging a culture of enterprise and more businesses of scale, increasing innovation and the commercialisation of research, fostering success in key sectors, and using e-business to create business advantage; and
  • global connections: increasing business involvement in global markets, making the region a globally-attractive location, improving connections to the rest of the world and encouraging more people to live, study and work in the Highlands & Islands.

As part of the third outcome, the challenge of increased commercialisation of research and innovation is explicitly defined with the need to increase levels of research and development spending as central to improving the regional economy, particularly in the context of a region with limited indigenous sources of RTD. In this context, investment in key growth industries and in the development of the UHI and its network is seen as a priority. The strategy also notes the particular difficulties in developing and sustaining entrepreneurship and the importance of increasing the pool for new businesses in the region. Lastly, the use of e-business to increase business advantage is explicitly targeted in the strategy, recognising the importance of the region's enterprises taking full advantage of distance-reducing technologies to develop markets and access innovation.Given the strong links between specific industries and business RTD investment, the industries fostered in the Highlands & Islands will have a major impact on the region's RTD performance. These industries have been set out in the socio-economic analysis above. The strategy also sets out the goal of ensuring the UHI acquires university status and develop its teaching and research capacity and its role as a wider catalyst for economic growth. This approach also comes through in the mission statement of the UHI where, amongst others, it aims to develop innovative approaches to learning and teaching which will enable all students to acquire the personal and professional capabilities needed to empower them as life long learners and to contribute to the well being of their communities. The UHI also aims to establish an information and communication technology infrastructure and to expand its research capability to advance knowledge, support student learning and contribute to social and economic development. Further work will be done to bring learning opportunities into remote areas through the development of community learning networks, developing a unique model for university level provision, specifically tailored towards the needs of the Highlands & Islands. Particularly significant here is the progress made towards 'Taught degree awarding powers' with a decision on full university title expected towards the start of the new programming period . Community sustainability and access and communications EU LevelThe sustainability of remote and disadvantaged communities can require a combined and sustainable economic, physical, social and environmental transformation of areas. In a Lisbon perspective, it is essential that all areas can contribute to the jobs and economic growth agenda. The Community Strategic Guidelines recognise the distinctiveness of these challenges. It is explicitly noted that within the Structural Funds, "actions supported [should] include measures to promote entrepreneurship, local employment and community development". This is recognised in the two key challenges associated with community regeneration:

  • Programme challenge 7: supporting enterprise development - including entrepreneurship and local employment growth - in fragile communities across the region;
  • Programme challenge 8: improving the infrastructure underpinning the sustainable economic development of fragile communities; and
  • Programme challenge 9: addressing the transport and telecommunications bottlenecks that remain in the region, especially those causing particular development challenges to fragile communities.

Moreover, as already noted, the Guidelines highlight the importance of addressing the specific challenges of rural economies such as the Highlands & Islands.

UK and Scottish Levels

Community sustainability is further underlined by the National Strategic Reference Framework which points to community economic development as an important element of the Structural Funds strategy in Scotland, particularly through the priority action for 'Reinforcing community sustainability'. Moreover, other infrastructure needs were recognised with particular respect to transport and broadband connectivity within the priority action, 'Improving economic infrastructure'.

The National Reform Programme recognises that community sustainability is an important foundation to economic growth in different regions and requires an integrated policy approach. The NRP makes special reference to Closing the Opportunity Gap, the Scottish Government strategy aiming to prevent individuals and families from falling into and to provide routes out of poverty.

Closing the Opportunity Gap is the Scottish Government 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:

1. to increase the chances of sustained employment for vulnerable and disadvantaged groups - in order to lift them permanently out of poverty;

2. 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;

3. 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;

4. to regenerate the most disadvantaged neighbourhoods - in order that people living there can take advantage of job opportunities and improve their quality of life;

5. 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

6. 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 ERDF Programme embodies - directly as well as indirectly - these Closing the Opportunity Gap objectives. The strongest links are through the fourth of these objectives and key Programme challenges 3 and 4.

In 2006, Closing the Opportunity Gap was supplemented by 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.

Key instruments have been established to take forward these strategies. The Community Planning Partnerships ( CPPs) - one for each Local Authority area - set out through Regeneration Outcome Agreements 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.

As a devolved matter, the infrastructure needs of the region have been identified through a number of strategies. Overall, the rural nature of the area is addressed by the Executive's strategy for rural development, Rural Scotland: A New Approach sets out several major objectives for the development of rural areas: developing a strong and diverse rural economy; harnessing traditional strengths with an appetite for change in order to provide opportunity to young people; building a rural Scotland where everyone can enjoy a decent quality of life; developing a rural Scotland where people enjoy public services that are accessible, high-quality and with the greatest choice; and maintaining a rural Scotland where the natural and cultural heritage flourishes in all its diversity.

Similarly, development would take place within the context of the Scottish Sustainable Development Strategy, which shares with the UK the common aspiration:

to enable all people throughout the world to satisfy their basic needs and enjoy a better quality of life without compromising the quality of life of future generations

The strategy has four sets of principles:

  • sustainable consumption and production: achieving more with less by reducing the inefficient use of resources, considering the impact of products and materials across their whole life-cycle and encouraging people to take into account the social and environmental consequences of their purchasing choices;
  • climate change and energy use: securing a profound change in the way in which energy is generated and used and reducing greenhouse gas emissions.
  • natural resource protection and environmental enhancement: protecting natural resources by developing a better understanding of environmental limits and actively improving the quality of the environment; and
  • sustainable communities: creating communities that embody the principles of sustainable development locally

These four principles have informed the development of the ERDF Programme. For example, sustainable consumption will be reflected in a commitment to funding and promoting greater 'greening' of enterprises and compelling projects to consider the consequences of their procuring choices. The active support of renewables would take forward the commitment to climate change and energy use. Natural and environment resource protection would be reinforced by supporting projects that give such objectives strong economic development grounding in making full sustainable economic use of environmental assets.

Economic infrastructure needs have been set for Scotland as a whole. The Infrastructure Investment Plan, Building a Better Scotland, provides a framework for spending up until 2008 in areas such as higher and further education, infrastructure in support of community economic development, healthcare and water provision. The new National Planning Framework provides a framework for significant infrastructure investments and economic development and recognises the need to address key areas such as higher and further education, transport and renewable energy. The Programme has taken account of the areas where such spending is taking place and identified the key areas of additionality where Structural Funds can provide clear added value.

The National Transport Strategy sets out the transport priorities for Scotland, recognising the role that transport has to two of the sets of Programme challenges identified in the socio-economic analysis: promoting economic growth by building, enhancing, managing and maintaining transport services, infrastructure and networks to maximise their efficiency; and encouraging social inclusion by connecting remote and disadvantaged communities and increasing the accessibility of the transport network. The latter aim is particularly relevant in the Highlands & Islands, where accessibility issues are acute. The Strategy states that the development of transport infrastructure needs to take place within a sustainable development framework, minimising the environmental impacts of developments and encouraging the use of more sustainable forms of transport.

Highlands & Islands Level

A commitment to strengthening communities features strongly in A Smart Successful Highlands & Islands, setting out a commitment to creating strong and vibrant communities that have the capacity to retain population, encourage young people to return and attract in-migrants. Strong and vibrant communities with sustainable communal assets are seen as central to underpinning economic development throughout the region. It is reflected in the positive targeting promoted by the strategy, recognising the need to balance supporting the important role of Inverness as a driver for the region with the importance of distributing economic benefits across the Highlands & Islands. Within the strategy, there are two types of priority area: 'fragile areas', which are those with economic and social structural problems leading to long-term economic decline; and 'regeneration areas', which are those experiencing short-term economic shocks resulting in sudden employment losses.

The Programme also complements the plans of local authorities from the area. The Highland Community Plan, which was drawn up by a partnership of key agencies and in wide consultation with public, private and voluntary sector organisations and local communities, puts the emphasis on developing sustainable communities. An important component is the development of prosperous communities and the plan highlights, amongst other things, the need for investment to widen and strengthen the economic and skills base, improvements to infrastructure and the environment, increased research activity, support for traditional industries, developing a quality tourist destination and giving local communities control over the use and management of natural resources.

Other examples of complementing aims are evident in the various economic development plans drawn up at the local level, applying not just to the infrastructure challenges for the programme but community sustainability as well. For example, the Orkney Islands Council's Corporate Strategic Plan 2005-08 - seeks to encourage and harness individual and community enterprise, to ensure that development is sustainable in economic, social and environmental terms and to maintain and develop the existing industries and the diversification of the island's economies.

Similarly, Shetland Island Council's Economic Policy Statement states that the Council's main aim through the provision of economic development services is " to maintain and enhance prosperity in Shetland by enabling businesses, communities and individuals to attain their full economic potential". This is reinforced within subsequent Operating Principles of 'Social Inclusion', with the aim of promoting an inclusive society, and 'Sustainable Development' whereby the Council will endeavour to find sustainable solutions for economic development.

Similar concerns are evident in the Structure Plan of Moray Council where the aims are to promote economic growth and development, spreading the benefits of that growth across the community. Special emphasis is placed on underpinning development by promoting sustainability and protecting and conserving the valued elements of the natural environment, in part by the use of energy efficiency and the use of natural resources in a sustainable manner. Addressing key elements of these plans can be enhanced through selective and considered use of Structural Funds.

3.2 Lessons from 2000-06 Programming

Structural Funds programming in Scotland has always built on the positive experience of previous programmes, maintaining the good practice while adapting to new circumstances. In developing the ERDF Programme for the Highlands & Islands region for 2007-13, the lessons of the previous use of European Regional Development 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 updates of the programme for 2000-06;
  • the report of an internal Value Added Group on how to increase the value added of future Structural Funds programmes; and
  • the Hall Aitken report on Structural Funds delivery options, 'Making Every Euro Count'.

Mid-term evaluation update

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 ERDF Programme for the region.

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.

Financial take-up of some of the measures had been sluggish for some of the areas where the socio-economic analysis identified remaining challenges to the economy - for example, renewable energy as a result of the slow development of appropriate projects. By the end of the programming period though, there had been full take-up of the relevant measures, suggesting the need for better project planning and coordination to ensure that the relevant projects are likely to come forward to absorb the funding.

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 UHI and broadband development. The same principles have been extended into the development of the 2007-13 Programme.

Value Added Group: 'Adding Value, Keeping Value'

As part of the preparations by the Scottish Government 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.
    • The importance of an innovative approach to projects is reinforced in the priority descriptions in Chapter 4.
  • 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.
    • This conclusion will be reflected in the new guidance to be issued to applicants and in the priority descriptions in Chapter 4.
  • 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.
    • Chapter 7 sets out the role of partnership in delivering parts of the 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 three horizontal themes, as set out in more detail in Chapter 8.

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 in Chapter 4.

Hall Aitken: 'Making Every Euro Count'

As part of the preparations for developing the 2007-13 programmes, the Scottish Government 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 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 7 - 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:

  • single-stream funding: this principle lies behind the use of Strategic Delivery Bodies, as set out in Chapter 7;
  • area and local outcome agreements: the encouragement to a partnership-based approach to deliver the Programme as set out in Chapter 7 reflects this;
  • a more negotiated decision process: the projects to be carried out by the Strategic Delivery Bodies will be negotiated with the Managing Authority and the Programme Monitoring Committee; and
  • thematic partnerships: in line with the second and third bullet points, projects will be encouraged to develop partnerships and show thematic complementarity in the supported activity.