3 The role of the Department |
28. The Department for Communities and Local
Government (DCLG) is the designated Managing Authority for all
ERDF programmes in England. Its main role is to ensure that the
programmes are delivered and conform to the European Commission's
regulations, and it is also responsible for reporting to the Commission.
The devolved administrations take responsibility for their own
29. England is divided into ten Operational Programme
areas; there are nine Regional Competitiveness and Employment
programmes plus the one Convergence programme in Cornwall and
the Isles of Scilly.
Map 2: ERDF Operational Programme areas in England,
30. Each Operational Programme has its own priorities
and funding allocation, and is led by a Local Management Committee.
These committees consider applications, award grants, oversee
investment, guide the programme, and assess progress. They draw
their membership from government departments, local authorities,
educational institutions, environmental organisations, the voluntary
and private sectors and members of the business community.
Day-to-day management is carried out by DCLG staff in local
Programme Delivery Teams, except in London where this is performed
by the Greater London Authority's European Programmes Management
Unit. Until July 2011 Regional Development Agencies were responsible
for this management role.
The transfer from Regional Development
Agencies to DCLG
31. The Coalition Government stated its intention
to abolish Regional Development Agencies (RDAs) in June 2010,
and in February 2011 Baroness Hanham, Parliamentary Under Secretary
of State at DCLG, announced the new governance arrangements for
The ERDF is currently delivered by teams in the regional
development agencies. Following our decision to abolish these
agencies and encourage local communities to come together to form
economic partnerships that make sense for them I have concluded
that, in order to maintain compliance with the regulations and
spending momentum, we should transfer the existing ERDF staff
and functions into my department by the beginning of July.
We want to encourage local communities to make use
of the ERDF. This is more likely to happen if ERDF teams continue
to be located close to the places they serve so they are on hand
to offer support and advice to projects. So I have decided that
we must aim to locate the ERDF teams as far as possible in their
existing towns or cities.
32. We wanted to establish if the transfer of
responsibilities from the RDAs to DCLG had been managed well.
The picture was mixed, but on the whole the transition appears
to have gone relatively smoothly. Dr José Palma Andrés,
Director in Regional Policy at the European Commission, said that
the transition had been "well managed" by DCLG, and
the Local Government Association noted that "generally speaking,
the administrative transition has gone well".
DCLG's decision to retain staff from the RDAs' local ERDF management
teams was widely praised as an important way to preserve local
knowledge, and to prevent the programme becoming too London-centric.
Birmingham City Council noted that:
The retention of the teams administering ERDF from
the RDA and transferring to DCLG has overall worked well and is
welcomed. This allowed continuity at a critical time in delivery
and any alternative would have lost momentum.
33. The Greater Manchester Combined Authority
Having the DCLG team based in the region offers significant
added value and understanding to the holistic economic development
of the city region, as opposed to having a remote team based in
London who does not understand the economic issues of the locality
on the ground.
34. A number of organisations commented, however,
that staff numbers had fallen following the transfer, and that
this was having a negative impact on delivery. Birmingham City
Council noted that, while the transition process itself was handled
The remaining DCLG-ERDF teams are quite small; they
previously drew support from officers across the RDA which they
now don't have and response times to getting projects assessed
can be slow which then has knock on impacts on achieving spend
and results. We are concerned that there are not enough staff
resources in place given their new role in monitoring regional
35. The impact of the staff reductions appears
to vary across England. Linda Edworthy, representing the Chief
Economic Development Officers' Society (CEDOS), said that:
When talking to our colleagues in some areas, such
as Norfolk, East Riding and Derby, there has been a significant
reduction in the level of staffing from the transfer from the
RDAs across to CLG [...] Some areas feel that it has had a negative
impact, whereas in other areasfor example, in the north-east
of Englandthere has been no real change. Thirty-one staff
transferred from the RDA to CLG, and in terms of the processes
there has been no real change.
36. Leicester City Council was one of the organisations
that told us they had experienced delays as a result of the transfer
from RDAs to DCLG:
The initial disruption of the changes caused significant
delays and confusion in the administration of the programme. It
particularly caused delays in the appraisal of new project applications
and of those already in the pipeline.
Since January 2011, the Local Management Committee
(LMC) did not meet until December 2011 and has only met once since
then. This has meant no projects have officially been approved
for over a year.
37. The Centre for Process Innovation also noted
that the time taken for payments to be processed had increased
because of the additional checks required by DCLG over and above
what had been needed previously:
While it is acknowledged that DCLG are responsible
for ensuring ERDF is spent in accordance with the rules, and some
level of checking of claims is prudent, the level of scrutiny
each claim is subject to, and the length of time taken to process
each claim, is disproportionate to the value of the checks performed.
While we did receive some queries from the RDA, the volume of
questions and the length of time taken to process claims in order
to release payment has increased significantly.
38. We found support for the
manner in which DCLG has managed ERDF in England following the
decision to abolish the Regional Development Agencies (RDAs).
Significantly, the decision to transfer former RDA staff to DCLG
and leave them located in the regions has smoothed the transition.
Where there was criticism it was that the transition had, in some
areas, caused delays, particularly in approving new projects.
We recommend that DCLG review arrangements for approving projects
in those areas where delays have been reported.
39. According to evidence from the West Midlands
Councils the culture of the programme has also changed, with the
result that more innovative projects might be less likely to be
approved for funding:
The major change has been a loss of flexibility.
When the programme was the responsibility of the RDA projects
that were regarded as risky but had the potential to deliver major
benefits were more likely to be funded. With responsibility passing
to DCLG the programme has become more conservative.
40. It is not clear whether this change can be
attributed to a more risk-averse culture at DCLG, or is a consequence
of the need to spend ERDF budgets more quickly as deadlines approach.
Linda Edworthy said that:
Coming towards the end of the programme, there will
inevitably be a focus on the delivering of outputs, which again
tends to lead to projects that can be delivered quickly, and,
maybe, perhaps less innovative schemes. But we have had some comments
from Lincolnshire and Torbay. They have experienced the change
having an impact in terms of less consideration of innovative
41. ERDF is particularly useful
for innovative projects which, because of the lack of alternative
funding sources, might otherwise be unable to proceed. We urge
DCLG to ensure that novel projects are supported, and not put
at a disadvantage in a rush to get ERDF money spent on more straightforward,
but potentially less beneficial, projects.
Making best use of England's ERDF
42. The funding allocated to each of the ten
Operational Programme areas in England (see Map 2) for the 2007-13
ERDF round must be contracted by the end of 2013 and spent by
the end of 2015, otherwise the money will not be available. Baroness
Hanham confirmed that it was not possible for unspent ERDF allocations
to be transferred from one region to another.
Any unspent money will go back to the Commission, although under
the terms of the UK's rebate agreement, two-thirds of that money
will in fact be returned to HM Treasury.
According to figures provided by DCLG, contracts had been signed
to spend some 63% of England's total ERDF allocation by January
2012, over 70% of the way through the 2007-13 period. Table 4
shows the regional pattern, with only 54% of funding for Yorkshire
and Humber contracted compared to 73% in Cornwall and Isles of
Scilly (the only area receiving Convergence funding). If received
applications for funding are also included the overall figure
for England rises to 93%, but there is no guarantee that these
projects will receive approval to proceed.
Table 4: ERDF 2007-13 funding commitments in England
||% contracted or applied for
|Yorkshire and Humber||54
|East of England||71
|Cornwall and Isles of Scilly||73
43. DCLG is confident that all ERDF funding will be spent
by the deadline of the end of December 2015. Baroness Hanham assured
us that "we do not expect to hand back money to the EU; we
expect it to be spent".
DCLG explained that it had taken steps to increase the rate of
spend after taking over from the RDAs because of the risk that
funds would go unspent:
At the time of transfer, the programme was at risk of missing
some of its spending targets. However under DCLG's direct management,
all individual ERDF programmes achieved their annual 2011 spending
targets, ensuring that the money has been spent for the benefit
of local communities and not returned to the EC unspent. The Department
has managed the programme closely to raise rates of spending where
necessary (such as in the Yorkshire and Humber, where programme
spend accelerated from around £5 million per month in June
to over £20m per month in November and December).
44. Despite the recent increase in spending, and DCLG's confidence
in meeting the spending targets, many organisations who submitted
evidence were concerned that funding would indeed go unused. Their
main concern was the availability of match funding, without which
ERDF projects cannot proceed. We have been concerned about this
issue for some time. Last October, in our report on Regeneration,
we expressed our concern that match funding was proving difficult
to find and we urged the Government to help bidders locate it
to allow projects to go ahead and ensure all of England's ERDF
allocation would be spent:
We are pleased that the Minister is committed to spending "every
single penny" of England's European Regional Development
Fund allocation. However, a significant sum remains uncommitted
and there are doubts about whether the necessary match funding,
much of which has previously been supplied by the Regional Development
Agencies, can be found. We recommend that the Government set out
proposals for working with local partners to identify sources
of match funding, with a view to ensuring that all remaining European
Regional Development Fund money is spent.
45. It would appear that securing match funding remains a
key challenge for organisations wishing to make use of ERDF. According
to a recent survey carried out by the Local Government Association:
over two-thirds of respondent councils were not confident about
the availability of match-funding for the ERDF remaining in their
regional programme [and] over half had projects or potential projects
which had either fallen through or were at risk of doing so.
46. In England, ERDF can only provide funding for up to 50%
of a project's value (75% in Convergence areas), leaving the remaining
50% to come from other sources. The ongoing economic downturn
has meant that match funding (both public and private) has become
harder to secure. The main source of match funding had, until
July 2011, been the RDAs, who had used their own budgets to support
ERDF projects. Once
responsibility for ERDF was transferred from the RDAs to DCLG
this source of match funding was lost. The Industrial Communities
Alliance pointed out that:
The sources of matching finance have all but dried up: the RDAs
have been wound up; Local Enterprise Partnerships (LEPs) don't
have significant funding streams of their own; local authorities
have little cash because their own funding is being cut and other
public sector bodies - the university sector for example - are
also facing reduced budgets.
47. We received evidence of projects being delayed or cancelled
because of match funding problems.
One example came from Leicester City Council:
The loss of the Single Programme funds controlled by the RDAs
led to a number of projects closing early or being withdrawn as
they lost match funding such as Leicester's Science Park project.
This has now been re-submitted but a 12 month delay whilst it
sought new match funding has meant that potential job opportunities
have been lost.
48. Baroness Hanham assured us, however, that there was match
funding available and that it was up to project backers to find
Our experience now is that there are really quite a lot of areas
for match funding. There are a number of bodies and the Government
have a number of pockets now for match funding. The difficulty
with match funding is people going out and finding it [...] Mark
Prisk from BIS and I sent out a letter to local authorities a
little while ago reminding them of where the various budgets or
the various elements that can be used for match funding were.
There is a Growing Places Fund. We have Business Coaching for
Growth, broadband, the Coastal Communities Fund, the Technology
Strategy Board and the regional growth fund. Then there are the
universities and private funding. Where there is a project that
has a lot of support behind it and is seen to be something that
is really worthwhile, the funding, on the whole, can be found.
49. While we take some reassurance from Baroness Hanham that
the Government is taking steps to address the problem, many organisations
are still struggling to find match funding. The shortage of match
funding options, together with the urgent need to contract and
spend all the ERDF money by the relevant deadlines so as not to
lose it, increases the risk that the value for money of projects
may not be as high as they could otherwise be. We asked Baroness
Hanham whether weaker projects might be approved if stronger projects
were unable to secure match funding:
I guess the answer is yes; if you cannot get money, you probably
cannot put forward your best projects.
50. We are concerned that the
lack of availability of match funding remains a serious impediment
to the success of ERDF in England, almost a year since DCLG assumed
responsibility. We are concerned that the Government does not
seem to appreciate fully the problems caused by the shortage of
match funding. This problem, together with DCLG's sensible desire
to see all the ERDF money spent by the end of 2015, increases
the risk that value for money will suffer.
REGIONAL GROWTH FUND
51. Following the closure of the RDAs Ministers
frequently recommended that organisations should use the Regional
Growth Fund (RGF) for match funding.
RGF supports businesses in England through grants and loans, and
is worth £2.4 billion between 2011-12 and 2014-15; it is
administered by the Department for Business, Innovation and Skills.
We heard that access to RGF was problematic. Derbyshire County
Council said that:
An initiative to align ERDF to support projects applying
to the Regional Growth Fund was launched in 2011 across the 5
former coalfield Priority Axis 2 areas. It was agreed to commit
20% of the ERDF area's allocation to support the delivery of RGF
proposals. This commitment equated to £2.8m of funding from
the 5 authorities - averaging £560,000 per area.
Although projects seeking both Regional Growth Fund
and ERDF were submitted and endorsed, none have been able to proceed
due to difficulties in aligning the deadlines and the delays in
processing and agreeing the RGF applications.
52. We also heard that securing match funding
from RGF had been difficult because it had different objectives
to ERDF. Linda Edworthy explained that:
the principal aim of the Regional Growth Fund has
been to push money out directly to individual businesses for them
to improve and grow their own individual business. That is not
what the objectives of the European Regional Development Fund
are generally about.
53. The decision-making processes of the two
funds were dissimilar, making it even harder for projects to make
use of both funds.
Decisions on RGF bids are made centrally by a group of Ministers,
chaired by the Deputy Prime Minister.
Decisions on bids for ERDF funding are made locally, usually by
Local Management Committees, in a variety of approaches tailored
to the priorities of the local area, including the use of open
bidding rounds, or non-competitive selection where only one organisation
appears suitable to deliver the project.
54. The Government's Local Growth White
Paper, published in October 2010 stated that the Government would
"encourage alignment of RGF with ERDF, where the aims of
bids are eligible for support from both Funds".
However, Baroness Hanham noted that the RGF was still not sufficiently
aligned with ERDF:
We have been quite disappointed in the regional growth
fund. We had none at all in the first round. I think I am right
in saying that 10 projects went forward in the next round, of
which three so far have been agreed. I would like to see much
more coming out of the regional growth fund because, after all,
it is all working in the same directionto get businesses
up and running and to achieve growth. We are looking hard to see
how we make sure that they fit the regional growth criteria.
55. One option we considered would be for the
Government to set aside part of RGF budget specifically to provide
match funding for ERDF, which Baroness Hanham considered "a
DCLG did not support it, however, when it provided supplementary
written evidence, noting that 93% of the ERDF budget had already
been contracted or has been applied for, leaving only £200
million needing match funding:
In view of the range of other central Government
and public and private sector sources available, we do not consider
that it will be necessary to top slice funding from the Regional
Growth Fund to make up the outstanding £200m.
Furthermore, it is already possible for the Regional
Growth Fund to be used as match funding for ERDF without the necessity
While DCLG is correct to state that RGF money is
available to act as match funding for ERDF, the evidence we received
indicated that, in practice, it was extremely difficult to make
use of it.
56. We recommend that the Government
reconsiders its decision not to set aside part of the Regional
Growth Fund (RGF) budget to provide match funding for ERDF. We
conclude that the Government needs to demonstrate greater strategic
oversight in aligning funding streams, both in the short term
and from 2014 onwards, to ensure that all the resources available
are being used in a coherent way.
33 Ev 41-42 and "Management of the 2007-13 ERDF
programmes", www.communities.gov.uk/regeneration Back
HL Deb, 3 February 2011, col 86WS Back
Q 18 and Ev 29, para 5.2 Back
Ev w83 Back
Ev w58 Back
Ev w83 Back
Q 15 Back
Ev w8, paras 4.1-4.2 Back
Ev w96, para 126.96.36.199 Back
Ev w23 Back
Q 99 Back
Ev w4 Back
Adapted from Ev 46 Back
Q 96 Back
Ev 43, para 12 Back
Communities and Local Government Committee, Sixth Report of Session
2010-12, Regeneration, HC 1014, para 111 Back
Ev 29, para 5.3 Back
Ev w4 Back
Ev w4 Back
For example, Ev w13 [Nottingham City Council], para 4.5 and Ev
w87 [One East Midlands], para 3.3 Back
Ev w8, para 4.6 Back
Q 101 Back
Q 106 Back
Q 115 Back
For example, HC Deb, 9 May 2011, col 1032W Back
Ev w23 Back
Q 25 Back
Ev w8 [Leicester City Council], para 4.7 Back
"Regional Growth Fund" at www.bis.gov.uk/policies;
as well as the Deputy Prime Minister, the group is made up of
the Chief Secretary to the Treasury and the Secretaries of State
for: Business, Innovation and Skills, Communities and Local Government,
Transport and Environment Food and Rural Affairs. Back
"Applying for ERDF funding" at www.communities.gov.uk/regeneration Back
Department for Business, Innovation and Skills, Local growth:
realising every place's potential, Cm 7961, para 2.34. Back
Q 102 Back
Q 103 Back
Ev 47 Back