EU Structural and Investment Fund (ESIF)

18 March 2016

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ESIF Funding – how does it work?

The European Commission (EC) supports the economic, social and environmental needs of Member States through funds (grants) and financial instruments (loans and equity investments). The EC sets objectives for each of the funds and financial instruments for each spending round. The current spending round funds projects in Member States between 2014 and 2020, with the ability to spend funds allocated before 2020 through until 2023.

This new generation of EU Structural Funds are quite different to past programmes in terms of their policy drivers, management and delivery structures.  The reform of Cohesion Policy agreed jointly by the European Parliament and the Council of Ministers at the end of 2013 brought in major changes in the way that ERDF and ESF programmes are run.  There is a closer alignment with the overarching Europe 2020 Strategy, an increasingly ambitious focus on performance and results, stronger partnerships, investment strategies and closer alignment with the European Rural Development Programme.

The ERDF Programme for England was agreed by the EC on 24th June 2015.  The England ESF Operational Programme was submitted to the EC in July 2014 and following discussions was re-submitted at the end of July 2015 and should be formally adopted by the end of September 2015.  

The UK has been allocated €16.4 billion in total EC funding and has set up a single European Structural and Investment Funds (ESIF) Growth Programme for the 2014-2020 funding period.  The Growth Programme will combine three separate European Funds – the European Regional Development Fund (ERDF) for which the Department of Communities and Local Government (DCLG) will be the UK Managing Authority, The European Social Fund (ESF) for which the Department of Work and Pensions (DWP) will be the UK Managing Authority, and part of The European Agricultural Fund for Rural Development (EAFRD) for which the Department of Environment, Food and Rural Affairs (DEFRA) will be the UK Managing Authority.  

The Growth Programme Board will oversee the implementation of the ESIF Programmes in England and a national ESIF Programme Monitoring Committee (PMC) has been established.  At a local level LEPs have been given a notional allocation of ESIF funding, and will have an advisory role to help plan and prioritise how ESIF funds are spent in their area.

Match Funding

All ESIF projects must match the EC funding either through Whitehall department funds, Local Authority funds or money from other private and third sector bodies.  Securing match funding can be challenging - the introduction of opt-in match funders such as UK Trade & Investment, Manufacturing Advisory Service and the Big Lottery Fund will hopefully help with this issue.  Opt-in funders have agreed to match the ESIF funds for projects which are working towards a common goal.  

For projects without opt-in agreements, it is envisaged by the Government that local match funding could come from Local Authorities, the LEPs, Further and Higher Education and the voluntary and community7 sectors.  At least 50% match funding will be required for ESIF bids located in Tyne & Wear and Northumberland, and 40% in Durham and Tees Valley.  The match funding requirement in Durham and Tees Valley is lower due to these areas of the North East being ‘transition regions’ because their GDP per head of the population is only 75-90% of the EU average.  

North East England – ESIF Programme 2014–2020 Resource Allocation

Together the ESIF and JEREMIE (Joint European Resources for Micro to Medium Enterprises).  Programmes will bring a total regional investment worth around £725 million into the North East over the 2014-2020 programming period.

What Can ERDF and ESF Be Spent On?

The European Regional Development Fund aims to strengthen economic and social cohesion in the European Union by correcting imbalances between its regions. The Department for Communities and Local Government (DCLG) is the Managing Authority for ERDF. Money from the ERDF is used across four key areas:

• Innovation and research;
• The digital agenda;
• Support for small and medium-sized enterprises (SMEs);
• The low-carbon economy.

Depending on the development status of each EU region, it must allocate a proportion of their ERDF monies into projects that meet these key priorities as well as a certain percentage to low-carbon economy projects.

The European Social Fund is Europe’s main instrument for supporting jobs, helping people get better jobs and ensuring fairer job opportunities for all EU citizens. It works by investing in Europe’s human capital – its workers, its young people and all those seeking a job. The Department for Work and Pensions (DWP) is the Managing Authority for ESF.  

In debates around ESIF Programmes in the European Parliament, the Socialists and Democrats (Labour’s political group) ensured that a substantial amount of funding was ring-fenced for the ESF to help deliver inclusive growth by combating poverty and unemployment in innovative ways.

The ESF funds projects in the key areas of:

• Strengthening employment and mobility
• Better education
• Giving a chance to all including fighting marginalisation and promoting social enterprise
• Better public services.

ERDF and ESF funds have been allocated between ten “thematic objectives” in an agreement between the EC and the managing body within UK Government.  The England programme will cover the following objectives:

1.    Research and innovation
2.    Enhancing access to, and use and quality of, ICT
3.    Enhancing the competitiveness of SMEs
4.    Supporting the shift towards a low carbon economy in all sectors
5.    Promoting climate change adaptation, risk prevention and management
6.    Preserving and protecting the environment and promoting resource efficiency
7.    Sustainable transport in Cornwall and the Isles of Scilly
8.    Sustainable transport in transition regions
9.    Promoting social inclusion and combating poverty and any discrimination
10.    Sustainable urban development
Under each thematic objective, EU regulations define a number of more specific investment priorities.  

These investment priorities are combined to form what are known as priority axes which set out priorities on which the Programme will be spent.  In addition, European money must also meet requirements around equality and sustainability.

The European Agriculture Fund For Rural Development (EAFRD) includes priorities such as the rural business growth fund, strategic economic infrastructure and tourism. The Government’s objectives for the EAFRD Programme in England are to:

-    Improve the environment including helping to ensure that by 2021 the natural environment is improved as set out in the Natural Environment White Paper
-    Increase the productivity and efficiency of farming and forestry businesses, in order to improve their competitiveness and reduce the reliance of farmers and land managers on subsidies
-    Promote strong rural economic growth
-    6.4% of rural development spending in 2014 to 2020 will be directly available to LEP areas through the Growth Programme.  A further 8% of total rural development funding will be focused on growth through support to farming productivity through the LEADER initiative.  

There will be five LEADER Programmes across the North East region (Durham Coast and Lowlands, North Pennine Dales, Northumberland Coast and Lowlands and the Northumberland Uplands).

The Youth Employment Initiative (YEI) supports projects to boost youth employment in the regions of the EU that have the highest levels of youth unemployment.  Half of the YEI budget comes from ESF and eligible regions are those where youth unemployment is higher than 25%.  In the UK five regions are eligible which includes the North East – County Durham and Tees Valley.

The European Investment Bank is a major co-financer of financial instruments such as the JEREMIE Fund.  Financial instruments deliver equity, loan and mixed investments to areas and increase the efficiency of EC funds through levering in additional public, private and third sector investments.  

The North East benefitted from one of only three JEREMIE programmes delivered in the UK 2007-2014.  JEREMIE supports venture capital and loan funds for micro-enterprises and SMEs and a second programme is planned with a regional allocation of £160 million.  JEREMIE is managed by North East Finance:

http://www.northeastfinance.org/

How To Apply For Funding  

The ERDF and ESF application processes are completed online.  Potential applicants need to register on the online system to submit an application which is made available when specific calls for applications are released.  The call will specify the activity and the location, and may set out specific criteria like the size of projects or the amount available.  There is a 2-stage process – an outline application – also known as an expression of interest, and a full application – also known as the full business case.  Detailed guidance relating to ERDF, ESF and EAFRD including open calls, the application process, selection criteria, assessment and appraisal process and contract management can be found at:

https://www.gov.uk/england-2014-to-2020-european-structural-and-investme...

 

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