DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES

REGIONAL DEVELOPMENT

ECONOMIC, SOCIAL AND TERRITORIAL SITUATION OF THE UNITED KINGDOM

NOTE

DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES

REGIONAL DEVELOPMENT

ECONOMIC, SOCIAL AND TERRITORIAL SITUATION OF THE UNITED KINGDOM

NOTE

Abstract This Note provides an overview of the United Kingdom's economic, political and administrative framework for EU Cohesion policy, as well as of its National Strategic Reference Framework for the period 2007-2013. It focuses in particular on the English regions of London and the South East.

The paper gives also an insight into the United Kingdom's position on the future of Cohesion policy and the role it can play in this context.

The Note has been prepared in the context of the Committee on Regional Development's delegation to the United Kingdom, 14 - 16 June 2011.

IP/B/REGI/NT/2011_02 May 2011

PE 460.046 EN This document was requested by the European Parliament's Committee on Regional Development.

AUTHOR

Dr. Esther KRAMER Policy Department Structural and Cohesion Policies European Parliament B-1047 Brussels E-mail: [email protected]

EDITORIAL ASSISTANCE

Ms Lea Poljančić

LINGUISTIC VERSIONS

Original: EN Translation: DE

ABOUT THE EDITOR

To contact the Policy Department or to subscribe to its monthly newsletter please write to: [email protected]

Manuscript completed in May 2011.

Brussels, © European Parliament, 2011.

This document is available on the Internet at: www.europarl.europa.eu/studies

DISCLAIMER

The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament.

Reproduction and translation for non-commercial purposes are authorized, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

Economic, Social and Territorial Situation of the United Kingdom ______

TABLE OF CONTENTS

LIST OF ABBREVIATIONS 5 LIST OF FIGURES 7 1. KEY FACTS AND FIGURES 9 1.1. Political and governmental structures 10

1.2. The economy 11

1.3. Employment and demographic trends 12

1.4. Regional disparities in the United Kingdom 13

2. INSTITUTIONAL AND ADMINISTRATIVE FRAMEWORK FOR EU COHESION POLICY 15 2.1. Administrative structures until 2010 15

2.2. The new approach of 2011/2012: Intensive Decentralisation 16

3. EU COHESION POLICY IN THE UNITED KINGDOM 2007-2013 19 3.1. Objectives and Funds 19

3.2. NSRF and Operational Programmes 21

3.3. Priorities and Principles of UK Implementation of EU Cohesion Policy 22

3.4. European Social Fund 24

3.5. Special initiatives 25

4. ZOOM ON THE COUNTRY OF ENGLAND AND THE REGIONS LONDON AND SOUTH EAST 27 4.1. Geographical and socio-economic key facts on England 27

4.2. Administrative set up 28

4.3. Regional disparities in England 29

4.4. Geographical and socio-economic situation of the region South East 29

4.5. ESF in England and the South East 33

4.6. Geographic and socio-economic Situation of London 34

5. EU COHESION POLICY AFTER 2013: UNITED KINGDOM'S POSITION 41 CONCLUSIONS 43 REFERENCES 45

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4 Economic, Social and Territorial Situation of the United Kingdom ______

LIST OF ABBREVIATIONS

BIS Department for Business, Innovation and Skills

CFO Co-financing Organisations

DCLG Department for Communities and Local Government

DG Regio Directorate-General for Regional Policy, European Commission

ERDF European Regional Development Fund

ESF European Social Fund

EU European Union

EUR Euro

GDP Gross domestic product

GLA Greater London Authority

IFI International Fund for Ireland

JESSICA Joint European Support for Sustainable Investment in City Areas

LDA London Development Agency

LEP Local Enterprise Partnerships

LGF London Green Fund

NCA National Coordination Authority

NSRF National Strategic Reference Framework

NUTS Nomenclature of Territorial Units for Statistics

OECD Organisation for Economic cooperation and Development

OP Operational Programme

R & D Research and Development

RDA Regional Development Agency

ROP Regional Operational Programme

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RP Regional Programme

SEEDA South East England Development Agency

SME Small and medium enterprises

UK United Kingdom

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LIST OF FIGURES

FIGURE 1 Map of the United Kingdom 9

FIGURE 2 Key Data 9

FIGURE 3 Funds for the United Kingdom in billion EUR 2007–2013 19

FIGURE 4 Convergence and Competitive Objective regions in the United Kingdom 20

FIGURE 5 Attribution of EU funds in the United Kingdom as proposed in the NSRF (EUR) 21

FIGURE 6 ESF Programmes in the United Kingdom 2007-2013 25

FIGURE 7 Map of England (featuring 9 regions of England) 27

FIGURE 8 Location and 9 ceremonial counties of region South East, England, United Kingdom 30

FIGURE 9 City of London and the 32 London boroughs 36

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1. KEY FACTS AND FIGURES

Figure 1: Map of the United Kingdom

Source: maps.com The United Kingdom (UK) consists of England, Wales, Scotland (who together make up Great Britain) and Northern Ireland. It is located in Western Europe, between the North Atlantic Ocean and the North Sea, northwest of France.

Figure 2: Key Data

Area 244 820 km2

Population 62,008,048 (2010)

Population density (per km2) 250,8 (2007)

Official language English

Currency pound sterling GDP per capita (PPS) 112 (2009)

Growth rate -4,9 (2009), 1,4 (2010), 2,2 (2011 f)

Unemployment rate 7,8 % (2010)

Inflation rate 2,2 %

Budget deficit -11,2 % (2009)

Public debt 68,2 (2009) Source: EUROSTAT

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1.1. Political and governmental structures

The UK is a unitary state under a constitutional monarchy. Queen Elizabeth II is head of state of the UK, as well as of 15 other independent Commonwealth countries. The parliamentary government is based on the Westminster system that has been shaped progressively and is a legacy of the British Empire.

The Parliament has two houses: an elected House of Commons and an appointed House of Lords; any bill passed requires royal assent to become law. It is the ultimate legislative authority in the UK since the regional parliaments/assemblies in Scotland, Northern Ireland and Wales are not sovereign bodies and could be abolished by a decision of the UK Parliament. The main chamber of Parliament is the lower house, the House of Commons, which has 650 members elected by universal suffrage and by simple plurality, whereas about 700 people are eligible to sit in the upper house, the House of Lords, including life peers, hereditary peers, and bishops. For elections to the House of Commons, required to be called every five years, the UK is currently divided into 650 constituencies with each electing a single Member of Parliament.

The UK has an uncodified constitution which consists mostly of a collection of disparate written sources, including statues, judge-made case-law and international treaties. As there is no technical difference between ordinary statutes and "constitutional law," the UK Parliament can perform "constitutional reform" simply by passing acts of Parliament and thus has the political power to change or abolish almost any written or unwritten element of the constitution. However, no Parliament can pass laws that future Parliaments cannot change.

Executive power is exercised by the head of government, the Prime Minister and the Cabinet. Prime minister is the Member of Parliament who can obtain the confidence of a majority in the House of Commons, usually the current leader of the largest political party in that chamber. Both Prime Minister and Cabinet are formally appointed by the Monarch to form a government.

The UK's 3 major political parties are the Conservative Party, the Labour Party and the Liberal Democrats, who at the elections of May 2010 won between them 622 out of 650 seats available in the House of Commons: 621 seats at the general election and one more at the delayed by-election in Thirsk and Malton. Most of the remaining seats were won by minor parties that only contest elections in one part of the UK such as the Scottish National Party (Scotland only), Plaid Cymru (Wales only), the Democratic Unionist Party, Social Democratic and Labour Party, Ulster Unionist Party, and Sinn Féin (Northern Ireland only, though Sinn Féin also contests elections in Ireland).

David Cameron, the leader of the Conservative Party, has been Prime minister, First Lord of the Treasury and Minister for the Civil Service, since 11 May 2010. For the first time since 1945, no party gained the overall majority at this election; thus, Cameron formed a coalition government with the Liberal Democrats under the leadership of Nick Clegg which has a solid majority in Parliament.

On 5 May 2011, elections took place in 279 local councils in England, the assemblies in Northern Ireland and Wales, and the Scottish parliament. There was also a referendum across the UK on whether to change the way Member of the House of Commons are elected. The results of these local elections (and the referendum) may have implications on the work of the coalition government. The Liberal Democrats were severely punished and lost control of 9 councils and 695 seats, while the Conservatives exceeded expectations, gaining 4 councils and adding extra 81 seats. Moreover, the change of voting system to

10 Economic, Social and Territorial Situation of the United Kingdom ______the House of Commons, promoted by the Liberal Democrats and rejected by the Conservatives, was rejected by 68 % of the votes.

The Labour party recovered somewhat from the defeat of the general elections and won for example councils in northern England, but lost in other regions such as Scotland where the Nationalists took 69 of the 129 seats to give them the majority of the regional parliament. They already announced a future referendum on Scottish independence and are aiming at full fiscal autonomy from the UK.

1.2. The economy

The economy of the UK - one of the largest in the EU - is increasingly services-based although it maintains industrial capacity in high-tech and other sectors such as pharmaceuticals and cars. The City of London is a world centre for financial services, especially banks and insurances.

The UK has large coal, natural gas and oil reserves and primary energy production accounts for 10% of GDP, one of the highest shares of any industrial state. Agriculture is intensive and highly mechanised, producing 60% of food needs with only 1 % of the labour force. Two thirds of production is devoted to livestock, the other to arable crops.

More than two years after the financial and economic crisis hit, economic policy remains a challenge. The UK entered recession with one of the largest structural deficits in the OECD. In 2009, the general government deficit widened to 11.2% of GDP, and the real GDP contracted by 4.9%, the largest annual fall since World War II. An emergency budget in June 2010 detailed a 5-year programme of very ambitious fiscal tightening, based on a mix of tax rises and major reduction of public spending. Part of this programme is a severe public services reform in the area of health, education and policing. In 2010, the raise of university tuition fees has triggered protest which could spread to other areas of cutting. In 2010, GDP expanded by 1.3 %, while enormous levels of financial sector support remain, as well as record-low interest rates and a fiscal deficit of over 10% of GDP.

The Bank of England periodically coordinates interest rate moves with the European Central Bank, but the UK remains outside the European Economic and Monetary Union (EMU). This gives the UK certain advantages when compared with the fiscal situation facing weak euro zone countries such as Greece, Ireland and Portugal. Sterling’s real trade-weighted value had declined by 30% between mid-2007 and early 2009, but it strengthened in the course of the euro crisis, albeit amid considerable volatility. With an independent floating currency, a central bank with the ability to print fiat currency and the vast majority of its public debt denominated in sterling and with a long maturity, the UK does not face the same budgetary constraints. However, it will be a challenge for the government to reconcile deficit reduction and economic recovery, with policy action in many areas being dictated by fiscal constraints.

Political support has underpinned a return to profitability among UK banks and large bonus payments, but underlying weaknesses persist in the financial sector, given banks’ substantial refinancing needs. Official guarantees to support the sector remain in excess of £500 billion (EUR 561 billion), with taxpayers holding major stakes in two banks, Royal Bank of Scotland and Lloyds. In late 2011 an independent commission will report on proposals to split investment and retail banking activities. The coalition's position on agreeing international co-ordination on substantial bank reform remains to be seen.

As the government seeks to reverse earlier stimulus measures, the economic outlook seems uncertain. The intention is to boost investment in digital technology, low-carbon

11 Policy Department B: Structural and Cohesion Policies ______industry and "green" transport infrastructure in an effort to encourage a rebalancing of the economy away from financial services and public expenditure towards private- sector investment, manufacturing and exports. Some progress can be expected, but with the productive capacity of the economy most likely impaired by the deep recession, public capital spending being slashed, credit availability constrained and key trading partner economies subdued, achieving any significant rebalancing will take time to be realised.

1.3. Employment and demographic trends

Up until the global economic and financial crisis, a growing labour market accompanied the economic growth in the UK. The employment rate in 2005 stood at over 71% of the working age population, with just under 57% of older people and nearly 66% of women in work – some of the highest levels in the EU, surpassing the Lisbon employment targets. Unemployment was comparatively low. One negative feature, however, remained the persistent gender gap in salaries, with women earning 20% less than men.

After the rise of unemployment during the crisis, official labour-market data for the beginning of 2011 offered some moderately encouraging signs, with a fall in the jobless rate to 7.8% (from 7.9% in the previous three months). However, the underlying picture is still of a subdued labour market, with unemployment expected to rise again in the coming months.

Aiming for a long term employment rate of 80% of the working age population, a key challenge for the UK is to draw in people from the margins of the labour market and help them realise their potential: lone parents, people with disabilities, ethnic minorities and older people.

Despite recent improvements the UK still lacks a first-rate skilled workforce: for instance it has fewer well-qualified workers than Germany, the Scandinavian countries or the USA. This means more problems with reading, writing and working with numbers. In 2006, over a third of working age adults in the UK lacked a basic school qualification, while 5 million adults had no formal qualification at all. The UK also has a lower proportion of young people in education and training than other major economies. One of its aims is therefore to attract more 17 year olds into further and higher education, from 75% today to up to 90% over the next decade. This would help to increase the number of young people with an upper secondary qualification.

Expenditure on Research and Development (R&D) is low by international standards. The UK therefore intends to increase public and private R&D investment, building up from the current level of 1.9% of GDP to 2.5% by 2014 which would enable it to keep pace with the better performing economies in terms of R&D investment, such as Germany, Japan and USA.

While the number of people leaving the UK has risen since 1997, the number of people entering has increased more rapidly. Over the past decade net international immigration has numbered 1.5 million, with an average annual increase of around 210,000 in 2004-2006, four times that in the mid-1990s.

The UK was one of only three EU member states fully to open its borders to East European migrants from the 10 new Member States in May 2004. Although this provoked a sharp increase in East European migrants to the UK, a large proportion of such migrants had no intention of settling permanently. Indeed, anecdotal evidence suggests that the onset of an economic slowdown in the UK, allied to the depreciation of

12 Economic, Social and Territorial Situation of the United Kingdom ______sterling, has encouraged many to return to their home countries in 2007-08. In 2007, the government did not feel able to extend the same treatment to migrants from Romania and Bulgaria as to the new EU States in 2004.

Like in all other European countries, declining fertility rates and rising life expectancy have contributed to an ageing of the population. In mid-2006 the average age of the population was 39. The share of retired people, who currently account for 16% of the total population, is set to rise further over the next two decades, reaching 22% by 2021.

1.4. Regional disparities in the United Kingdom

The issue of regional and sub-regional disparities in the UK has been considered as important for many years, especially pointing to a significant North-South divide. Entrepreneurial activity and innovation continue to be focused on the south-east. London and cities in the south-eastern regions are the key drivers of the UK economy with city regions like Bristol, Leeds and Manchester in particular, and some smaller cities.

The poorest regions are Northern Ireland, where economic development has been hampered by political factors, Wales and the north-east region of England, which has the highest unemployment rate in the UK.

Disparities exist among, as well as within, the British regions in terms of wages, productivity, per capita incomes, unemployment and competitiveness. For instance, the economies of 6 of the English regions, in the north, midlands and south west have consistently grown less fast than the UK average. This gap in growth rates is damaging to the UK economy as a whole, as it means that these regions are not fulfilling their potential.

The growth of productivity in the 2 Convergence regions of the UK, Cornwall and the Isles of Scilly and West Wales and the Valleys, remains a cause of concern with GDP per person employed 27% and 13% below the EU27 average.

The Highlands and Islands is the only Phasing-Out region in the UK, a predominantly remote rural region where GDP per head was around 80% of the EU27 average, with slight improvement since 2007.

The major challenges for the future are the fragility of the economic recovery and the possible impact of fiscal austerity. Both are likely to affect the weaker areas within the UK regions more than other parts. Changes in the value of sterling relative to the euro may present further challenges particularly at a time when there is limited flexibility in matching funding.

Beneath the regional level, there is increasing awareness of sub-regional disparities which have been growing strongly. For instance, differences in unemployment rates within regions are greater than differences between regions. Also, significant sub- regional problems relate to output and growth rates which are usually more accentuated within the richer regions. Ongoing urban deprivation continues to pose policy challenges.

These multiple disparities have been reflected in the distribution of the European Regional Development Fund (ERDF) in the UK. Since implementation of Cohesion programmes, there have been no discernable changes in the socio-economic

13 Policy Department B: Structural and Cohesion Policies ______circumstances. The economic crisis and years of poor Euro exchange rate have affected all programmes, with no clear disparities between the regions.

Dealing with imbalances in social, economic and territorial cohesion has long been identified as a crucial challenge for policy makers, as a 2003 report of the committee responsible for Housing, Planning, Local Government and the Regions at the House of Commons illustrates: It provided a list of political measures aimed at improving the impact of regional development policy, including modifications of the assessment of performance in order to take into account indicators such as productivity, employment and unemployment rates, household income and quality of life.

There seems to be a recent resurgence of interest from various departments of the UK government on regional disparities with the objective to foster regional development.

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2. INSTITUTIONAL AND ADMINISTRATIVE FRAMEWORK FOR EU COHESION POLICY

The management and implementation system of Cohesion policy in the UK is currently in transition, since the new coalition government has announced significant changes to the operation and delivery of Structural funding, especially ERDF. These changes concern mainly England, the devolved systems in the other UK regions remain in place (Scotland, Wales, Northern Ireland)

Considering that the completion of this transition is scheduled for spring 2012, at the moment the management authorities and other responsible bodies are still executing their tasks, while at the same time preparing their replacement by new actors. They advise the government on how the future system could be set up and will pass on their knowledge and experience. Therefore, the following chapters present the expiring as well as the planned new system, as far as the latter has been specified by the UK authorities when this Note is drafted (May 2011).

2.1. Administrative structures until 2010

In England, the responsibility for achieving the government’s regional development targets was integrated in the Department for Business Innovation and Skills (BIS). 9 regional ministers were appointed to strengthen the links between the central government and the regions in England. The ministers, heading Government offices, and parliamentary committees were intended to boost the scrutiny of regional development interventions at the central level.

The central government’s presence was strong, driven essentially by the weakness of sub-national government. In fact, the Government Offices in the English regions prepared regional emphasis documents addressed to the Treasury identifying priority areas for government spending in the regions. Their chief task, however, was to implement central government policies. Before the elections of 2010, the last government confirmed the significant policy competences and strategic overview of the Regional Development Agencies (RDAs). The RDAs are councils made up of local business representatives and members of public commissions, appointed by the central government. Although the RDAs were to assume power to set strategic priorities and allocate funding, they had to take central government policy objectives into account and meet performance targets set by central government. RDAs were increasingly seen as crucial to vertical and horizontal co-ordination of Regional policies, as well as having responsibility for managing the 2007-2013 ERDF programmes. Hence, the Business Link network, which provides advice to SMEs in England, was brought under the RDAs to encourage regional rationalisation. Although all these aspects strengthened centralism, the principles of devolved responsibilities exist in the UK. In fact, decentralized elements can be found, but they are asymmetric for political and administrative reasons. Of course there is, since 1999, the directly elected Parliament in Scotland, there are directly elected assemblies in Wales and Northern Ireland and London's assembly and mayor. And even as far as the 8 regions of England outside of London are concerned, the government made efforts to draw sub-regional, urban and local levels into the administration of Regional policy in order to address the different factors of economic growth at the appropriate spatial level. Instruments such as local and multi-area agreements as well as urban or city- region strategies, have been introduced to encourage local authorities to work together on the design and delivery of economic development policies. These were negotiated between the regional Government offices and local partnerships.

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But despite these efforts, the numerous changes in England over the years have created a complex, diffuse system where institutions differ from one region to the next, and the number of administrative levels is not the same in urban and rural areas.

The last plans of the former government aimed at abolishing the appointed regional assemblies by 2010, and at passing their functions to the RDAs, in order to simplify the system and better assess the performance of RDAs, with a clear focus on economic growth objectives.

Also, a Spatial Economics Research Centre and a series of regional observatories were created to support a regional development approach and performance monitoring, a project which could be further developed in the future.

2.2. The new approach of 2011/2012: Intensive Decentralisation

A fundamental change began under the new coalition government after the elections in May 2010. It was decided that the central Government had exerted too much control over local action. Thus, the Government committed itself to a radical shift of power from centralised to decentralised system. Greg Clark MP was appointed Minister of State for Decentralisation with the mandate to progress the coalition government's commitment to giving away power. He will report on progress of his mission to the Prime Minister in the summer of 2011.

Decentralisation and localism are at the heart of the activities of the "Department for Communities and Local Government" (DCLG). Its "Structural Reform Plan" sets out how the Department's activities over the period to 2015 are expected to put decision making in the hands of local authorities, and to make central and local government more transparent.1

The "Local Growth White Paper" of October 20102 approved 24 Local Enterprise Partnerships (LEP), newly created business/local authority partnerships with private sector chairs, likely to have roles around planning and investing in projects such as enterprise support, infrastructure and transport. By the end of March 2011, 31 LEP had been asked to proceed. They will take over many of the RDA's activities. Some functions will remain nationally-led, e.g. business support, innovation, low-carbon economy, but these will take into account LEP capabilities and priorities. Greater control will be given to local communities and the relationships between central government, local government, communities and individuals will be transformed. The White paper includes an annexe of how LEPs will relate to these issues in more detail.

On 13 December 2010, the Localism Bill as the legislative foundation for theses changes was introduced to Parliament.3 It describes six essential actions required to deliver decentralisation down through every level of government to citizens:

1. Decentralisation and strengthening local democracy; 2. Non-Domestic Rates; 3. Community empowerment; 4. A radical re-boot of the planning system including neighbourhood planning; 5. Changes to social housing policies; 6. Devolving powers to the Mayor and London Boroughs.

1 See DCLG Business Plan 2011-2015: www.communities.gov.uk/publications/corporate/businessplan2010 2 "Local growth: realising every place's potential". 3 www.communities.gov.uk/localgovernment/decentralisation/localismbill

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The Bill made clear that the 8 RDAs4 outside London were to be abolished, as well as the London Development Agency (LDA), whose functions and assets will be transferred to the Greater London Authority (GLA). By March 2012, responsibility for economic development and regeneration will be passed onto successor bodies, including LEPs and central Government departments, mainly the DCLG.

For the operation and delivery of the ERDF, the purposes and tasks of the RDA will be taken over by the DCLG where the existing ERDF staff and functions are scheduled to be transferred by the summer of 2011.5 In line with the steps taken in the "Localism bill" to transfer power and functions to the Mayor of London, the GLA shall continue to operate ERDF in London.

No regional ministers were appointed, as the new government plans to boost the role of elected local authorities in supporting local economic recovery and growth rather than through regional or national bodies.

The government has also created a national "Regional Growth Fund" to finance capital projects over the next two years, and a tax scheme to help create new businesses in regions where the private sector was not strong enough.6 Anyone who sets up a new business outside London, the South East and the East of England in the next three years will be exempt from up to £5 000 of employer national insurance payments, for each of their first 10 employees. The scope of the alignment of the application for this new national fund and the ERDF is currently being explored in order to avoid duplication and inefficiencies.

Finally, it has been decided that the existing Programme Monitoring Committees will be restructured as Local Management Committees which shall give local authorities as well as public, private, voluntary and community authorities and businesses more influence on the programmes. Moreover, a Director of the DCLG will chair the Local Management Committees, while a significant figure from the local community should be appointed as a deputy chair.

Further practical details of the reform of the implementation of Structural funds in the UK are currently being worked out with the Programme Monitoring Committees, local representatives and the RDAs. It will be a challenge for the new government to put the new delivery structures into practise as soon as possible, and to ensure as minimal disruption for the projects on the ground as possible.

4 These were: London Development Agency, East of England Development Agency, South East Development Agency, South West Development Agency, North West Development Agency, One North East, Advantage

West Midlands, East Midlands Development Agency, Yorkshire Forward. 5 See also for the following, Formal written ministerial Statement of the Parliamentary Under secretary of State, Baroness Hanham, communicated at the House of Commons by The Parliamentary Under-Secretary of State Andrew Stunell, 3.02.2011.

6 The fund is worth £ 1.4 billion and will operate from April 2011 to April 2014.

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3. EU COHESION POLICY IN THE UNITED KINGDOM 2007-2013

3.1. Objectives and Funds

For 2007–2013, the UK has been allocated a total of EUR 10.6 billion of Cohesion Policy funding:

 EUR 2.9 billion under the Convergence Objective: West Wales and the Valleys, Cornwall and the Isles of Scilly;

 EUR 7.0 billion under the Regional Competitiveness and Employment Objective: East Wales, Lowlands and Uplands of Scotland, Northern Ireland, Gibraltar, East England, East Midlands, London, Merseyside, North East England, North West England, South East England, South West England, South Yorkshire, West Midlands, and Yorkshire and Humberside

 EUR 722 million under the European Territorial Co-operation Objective: Highlands and Islands is a Statistical Phasing-out, South Yorkshire and Merseyside a Statistical Phasing-in region.

To complement the EU investment under the National Strategic Reference Framework (NSRF), the national UK contribution is expected to amount to around EUR 5.2 billion.

2.4 million people (4.6% of the total) live in Convergence regions, 3 million (5% of the total) in Statistical Phasing-in and Phasing-out regions. The great majority, 90.4% of the UK population live in Competitiveness regions.

Figure 3: Funds for the United Kingdom in billion EUR 2007–2013 Fund EU Na

National Objective Fund EU Total Public/ Private ERDF 1,8 1,3/0,5 3,6

Convergence ESF 1,1 0,6/0,2 1,9 Total 2,9

Regional ERDF 3,6 3,7/0,2 7,5 Competitiveness ESF 3,4 5,5/0,02 6,9 and Employment Total 7

European Territorial ERDF 0.7 -/- 0.7 Cooperation7 TOTAL 10,6 9,1/0,9 20,6

TotalSource: DG Regional Policy

7 Each Territorial Cooperation programme includes a minimum of 15% co-financing from each participating Member State.

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Figure 4: Convergence and Competitive Objective regions in the United Kingdom

Source: NSRF of United Kingdom

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3.2. NSRF and Operational Programmes

The UK has 22 regional programmes, 6 under the Convergence and 17 under the Regional Competitiveness and Employment Objective. Of these, 16 receive funding from the ERDF, with 6 programmes funded by the ESF.

The indicative breakdown among the funds of the total Community assistance available is EUR 5.4 billion from the ERDF and EUR 4.5 billion from the European Social Fund (ESF).

Operational programmes covering more than one of the three objectives are not permitted except where otherwise agreed by the Commission and the Member State. Such is the case with the 'England and Gibraltar ESF Convergence, Competitiveness and Employment Programme', which covers two of the objectives.

Figure 5: Attribution of EU funds in the United Kingdom as proposed in the NSRF (EUR)

Operational Programme Fund Total EU contribution

Convergence Objective - EU contribution

OP Highlands and Islands of ESF 52 150 195 Scotland

OP West Wales and the Valleys ESF 833 585 460

OP England and Gibraltar ESF 196 433 940

Highlands and Islands of Scotland ERDF 121 862 392

West Wales and the Valleys ERDF 1 250 378 189

Cornwall and the Isles of Scilly ERDF 458 056 615

Total ERDF 1 830 297 196

Total ESF 1 082 169 595

Total All Funds 2 912 466 791

Competitiveness and employment Objective - EU contribution

OP East Wales ESF 63 597 452

Lowlands and Uplands of Scotland ESF 269 920 942

Northern Ireland ESF 165 777 300

England and Gibraltar ESF 2 893 452 439

Lowlands and Uplands of Scotland ERDF 375 957 844

South East England ERDF 23 706 375

Northern Ireland ERDF 306 833 439

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East England ERDF 110 994 719

North East England ERDF 375 698 920

London England ERDF 181 889 213

West Midlands England ERDF 399 899 930

North West England ERDF 755 754 611

Yorkshire and Humberside England ERDF 583 580 959

East Midlands England ERDF 268 495 983

South West England ERDF 124 658 086

East Wales ERDF 72 451 721

Gibraltar ERDF 5 800 739

TOTAL NSRF Total ERDF 3 585 722 539

Total ESF 3 392 748 133

Total Funds 6 978 470 672

Source: DG Regional Policy

European Territorial Cooperation

With a budget of EUR 722 million allocated under this objective, the UK participates in 13 territorial co-operation programmes:

 5 cross-border co-operation programmes which cover internal EU borders (Wales/Ireland; England/France (Manche); ‘Deux Mers’; Northern Ireland/Border region of Ireland; Western Scotland). This also includes the PEACE III programme (see page 25).

 4 transnational programmes which cover larger areas of co-operation – ‘North-West Europe’, ‘North Sea’, ‘Atlantic Area’, and the ‘Northern Periphery’.

 All 4 interregional co-operation programmes (total budget for all the 27 EU Member States: EUR 443 million): INTERACT II, URBACT II, ESPON/ORATE and INTERREG IV C.

In addition, Gibraltar participates in two transnational programmes:

 South West Europe and Mediterranean.

3.3. Priorities and Principles of UK Implementation of EU Cohesion Policy

The UK has made a strong commitment to align its Structural Funds investment to a limited number of Lisbon-related activities to promote growth and jobs. This shift in priorities is reflected in the NSRF with the investment being geared towards core "Lisbon" activities promoting business development, innovation, skills and employment, and sustainable development.

22 Economic, Social and Territorial Situation of the United Kingdom ______

The allocation of the money is based on 3 overarching priorities and 4 principles to be applied to all UK Structural Fund programmes. Both, priorities and principles, are based on UK specific political choices and experiences with the implementation of EU Cohesion policy.

Priorities

 Entrepreneurship and Innovation Promoting research, knowledge transfer and commercialisation of new products and services, encouraging entrepreneurship and supporting the small and medium-sized enterprise (SME) sector.

 Skills and Employment Building a skilled and adaptable workforce, tackling disadvantage in the workplace and supporting employment opportunities for all.

 Environmental and Community Sustainability Encouraging innovation to support sustainability, ensuring sustainable development, production and consumption, and promoting social and economic cohesion in local economies, including urban and rural areas.

Principles

 Structural Funds and the Lisbon Agenda Ensure that 73 % of all expenditure under the Convergence objective and 83 % of the expenditure under the Competitiveness and Employment objective support the Lisbon Agenda.

 Focusing on market failures Regional policy interventions shall be made where free markets have genuinely failed.

 Environmental sustainability and equality Use of integrated strategies for addressing environmental concerns and respecting the principles of sustainable development, take account of the principles of gender equality, equal opportunities and non-discrimination and incorporate the needs of local communities.

 A working partnership Ensure that effective partnership arrangements are built into the new programmes, including with local authorities, higher and further education sectors, the voluntary and community sector and the private sector.

The following indicative breakdowns illustrate how these priorities and principles are translated into the concrete allocations of resources in the NRSF for the period 2007 - 2013:

 The UK plans to invest EUR 4.5 billion of its Cohesion Policy allocation in innovation to promote research, knowledge transfer and commercialisation.

 EUR 1.8 billion is directed towards encouraging entrepreneurship and supporting SMEs.

 Nearly EUR 400 million will go to the information society aiming to support the wider application and take-up of information and communication technologies in businesses.

23 Policy Department B: Structural and Cohesion Policies ______

Protecting the environment, managing natural resources and combating the negative effects of climate change also rank highly, with planned Cohesion Policy investments worth nearly EUR 1.6 billion.

The UK will spend a further EUR 368 million on investments in accessibility, with a focus on small-scale investments mainly in Convergence regions and remote areas, particularly the island regions.

More than EUR 1.7 billion will be invested in building a skilled and adaptable workforce, in particular by raising levels of skills and qualifications. Programmes should contribute to creating a flexible and inclusive work force, helping individuals to adapt to change, sustaining employment and exploiting innovation. The funds will also contribute to extending employment opportunities, tackling disadvantage in the workforce and help to overcome barriers to the labour market, in particular for disadvantaged groups.

3.4. European Social Fund

The ESF Operational Programmes in the UK aim to remove barriers to employment especially for disadvantaged groups, improve the skills of the workforce, to boost lifelong learning and to reform public administrations where necessary. In particular, they are concentrating on employment measures susceptible to promote the following 5 drivers of productivity: competition, enterprise, innovation, investment and skills.

A key aim is to reduce economic disparities between the UK regions, chiefly by allowing them to identify and maximise the particular opportunities for growth and employment they have, for example in training for tourism where there are national parks or social inclusion measures where deprived areas facing restructuring difficulties are located.

The UK’s countries and regions have each developed their own priorities for their respective ESF programmes, reflecting specific circumstances and levels of EU funding.

There are 6 Operational ESF-Programmes in the UK:

 1 OP for England and Gibraltar,  1 OP for Northern Ireland,  2 OPs for Wales (East and West) and  2 OPs for Scotland (Highlands/Islands and Lowlands/Uplands).

The priorities of these programmes, according to the allocated money in the NSFR, are:

 Removing obstacles to people entering the labour market (disadvantaged people, language, health problems, gender pay gap, young people...), amounting to 33 % of the total sum;

 Improving the skills and adaptability of the workforce and enterprises (knowledge economy, lifelong learning, supporting SMEs, management skills, improve public services), amounting to 30 % of the total sum;

 Improving the social inclusion of less-favoured persons, amounting to 24 % of the total sum.

24 Economic, Social and Territorial Situation of the United Kingdom ______

Figure 6: ESF Programmes in the United Kingdom 2007-2013

Programme Fund EU National Total funding contribution

England and Gibraltar 3 089 886 379 2 958 930 420 6 048 816 799 ESF

165 777 300 248 655 950 414 443 250 Northern Ireland Scotland 322 071 137 380 613 989 702 685 126

Wales 897 182 912 761 468 200 1 658 651 112

Total 4 474 917 728 4 349 668 559 8 824 596 287

Source: DG Regional Policy

3.5. Special initiatives

During the period 2007-2013, the region of Northern Ireland receives funding amounting to EUR 1.1 billion, which comes from 6 EU programmes. Besides the ERDF/ESF and cross-border programmes indicated in the chapters above, there are the following tailored programmes:

PEACE III (2007 - 2013)

The EU has always played a major role in supporting the peace process in Northern Ireland, as reflected in its proposals in 2004 to provide a third generation of the Peace and Reconciliation programme (PEACE III) unique to the region. It is a distinctive EU Structural Funds Programme within the European Territorial Cooperation Objective framework, with an overall goal to reinforce progress towards a peaceful and stable society, and to promote reconciliation in Northern Ireland and the border region of the Republic of Ireland.

Northern Ireland Task Force

An additional important initiative undertaken by the European Commission, the first of its kind, was the setting up of a Northern Ireland Task Force (NITF) in 2007 in order to provide a network of support for the region following the re-establishment of the devolved institutions. With its main aim of promoting the competitiveness of Northern Ireland’s economy, the NITF is supporting the region’s access to, and involvement in, Community policies and programmes in this field.

International Fund for Ireland (IFI)

The EU also contributes to the International Fund for Ireland, an international body established by the UK and Irish governments in 1986.

European Union Solidarity Fund

It was created after the floods which hit Central Europe in summer 2002. It grants emergency aid to Member States and acceding countries in the event of a major natural disaster.

The UK received aid total of EUR 162.4 million to help deal with the consequences of devastating floods in June and July 2007, which caused severe damage to infrastructure, businesses and private households in several parts of the country. Damage was estimated to amount to over EUR 4.6 billion.

25 Policy Department B: Structural and Cohesion Policies ______

To date, the UK has not made any applications to the European Globalisation Fund (EGF). Instead, as part of the Government's response to the economic downturn, it has used ESF to the same effect as the EGF, investing in a combination of services that have proved to be effective in helping workers and areas affected by restructuring.8

8 The EGF cannot duplicate use of other European funding.

26 Economic, Social and Territorial Situation of the United Kingdom ______

4. ZOOM ON THE COUNTRY OF ENGLAND AND THE REGIONS LONDON AND SOUTH EAST

In this chapter, the socio-economic key facts and administrative characteristics of the country England and the regions London and South East will be presented, followed by a short overview of the respective Operational programmes and some landmark projects co-financed by Structural funds in these regions.

4.1. Geographical and socio-economic key facts on England

England shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the North West, the Celtic Sea to the south west and the North Sea to the east. Most of England comprises the central and southern part of the island of Great Britain and includes also over 100 smaller islands such as the Isles of Scilly and the Isle of Wight. England, Wales and Scotland form the territory of Great Britain.

Figure 7: Map of England (featuring 9 regions of England)

Source: www.picturesofengland.com

With over 51 million inhabitants, England is by far the most populous and ethnically diverse country of the UK, accounting for 84% of the combined total. England taken as a unit and measured against international states has the 4th largest population in the EU.

27 Policy Department B: Structural and Cohesion Policies ______

The economy of England is the largest part of the UK's economy. England is a leader in the chemical and pharmaceutical sectors and in key technical industries, particularly aerospace, the arm industry, and the manufacturing side of the software industry. The country is highly industrialised, but since the 1970s there has been a decline in traditional heavy and manufacturing industries, and an increasing emphasis on a more service oriented economy. These are mostly financial and insurance services, the London Stock Exchange is the largest in Europe. Furthermore, 100 of Europe's 500 largest corporations are based in England's capital London. Tourism has also become an important sector.

The financial crisis and the ensuing global economic downturn began to impact on the English economy and labour market in 2008 when, after a strong period of economic growth since 1993, the economy contracted in the second half of 2008 and 2009. The unemployment rate for England rose from 5.8% to 8.1% in 2009, amounting to up to 2 million people. Nevertheless, England still has a relatively low unemployment rate – below the OECD average and the G8 average.

Although employment rates have tended to converge across the English regions over time, there are still considerable regional and sub-regional differences in the labour market. Pockets of unemployment are particularly concentrated in big cities in England, although they can also be found – if somewhat scattered – in a number of rural areas. A persistent problem is the number of people without qualifications, whose employment rate has fallen in recent years. And employment among some disadvantaged groups is significantly lower than the average.

Reflecting the situation in the whole UK, employment growth has not been strong enough to offset the continued increase in the labour force resulting from high levels of immigration. England's rate of population growth has increased since 2000, averaging 0.5% per year. Until the mid-1990s population growth was primarily driven by natural change, but more recently, the main factor behind a growing population has been net immigration. Within England, the populations of London and the east, southeast and south-west of the country have all increased by at least 10% since 1980, whereas the populations of the north-east and north-west have contracted slightly.

The vast majority of the English population is concentrated in urban areas: some 90% live in towns or urban agglomerations, and over 50% live in areas with 100,000 people or more. The population in the south and east of England is expected to continue to rise, placing further pressure on the regions already overstretched transport structure and exacerbating the shortage of housing.

4.2. Administrative set up

The subdivisions of England consist of up to 4 levels of subnational division controlled through a complex variety of types of administrative entities created for the purposes of local government.

The following 9 regions of England, which can be seen in Figure 7, were created in 1994 as Government offices, used by the British Government to deliver a wide range of policies and programmes regionally, but there are no elected bodies at this level, except in London: North East, North West, Yorkshire and the Humber, East Midlands, West Midlands, East, South East, South West and London. These regions are used for electing Members of the European Parliament. After its election in 1997, the Labour party proposed the creation of elected regional governments. After devolution began to take place in other parts of the UK (Scotland, Wales, Northern Ireland), it was planned that referendums for the regions of England

28 Economic, Social and Territorial Situation of the United Kingdom ______would take place for their own elected regional assemblies. The London Assembly was created in 2000. However, when the proposal was rejected by the North East in 2004, further referendums were cancelled and further devolution aborted. Hence, outside London, the regions have very little power and are not accountable to elected representatives – regional authority is placed in the hands of unelected assemblies.

Below the regional level, all of England is divided into 48 ceremonial counties. Each has a Lord Lieutenant and High sheriff who represent the British monarch locally. Furthermore, outside Greater London and the Isles of Scilly, England is divided into 83 metropolitan and non-metropolitan counties which may consist of a single district or several districts. There are 6 metropolitan counties based on the most heavily urbanised areas, which do not have county councils: Greater Manchester, Merseyside, South Yorkshire, Tyne and Wear, West Midlands and West Yorkshire.

The structure of Greater London is similar to the metropolitan counties, but it is not one. In these counties the principal authorities are the councils of the subdivisions, the metropolitan boroughs. Elsewhere, mostly rural areas, 27 non-metropolitan counties have a country council and are divided into districts, each with a district council.

The remaining non-metropolitan counties are of a single district and usually correspond to large towns or counties with low populations; they are known as unitary authorities.

Finally, at the most localised level, much of England is divided into civil parishes with councils (not in Greater London). In the House of Commons there are 532 Members of Parliament for constituencies in England, out of the 650 total.

4.3. Regional disparities in England

Based on the OECD typology, England's territory is classified as predominantly urban (33%) or intermediate (67%), but using other definitions, about 10% of England’s population is considered "rural".

London and the South East are the wealthiest regions of England (and of the UK). At the other end of the scale, the north-east of England, where heavy industrial sectors such as coal, steel and shipbuilding used to be located, have suffered as these industries have declined.

As described for the UK, there can be wide disparities within regions. Much of the south-west, for example, is quite wealthy, but the two counties in the far south-west, Devon and Cornwall, are poorer, with Cornwall and the Isles of Scilly as the only region in England that qualified under the Convergence Objective. The rest of the country of England is eligible for assistance under the Competitiveness and Employment Objective.

4.4. Geographical and socio-economic situation of the region South East

The South East includes the ceremonial counties of Kent, Surrey, East Sussex, West Sussex, Hampshire, Isle of Wight, Berkshire, Oxfordshire and Buckinghamshire. On the subregional level, it compasses 19 county and unitary authorities and 55 districts, stretching around London from Thanet in the East to the New Forest in the West and Aylesbury Vale and Milton Keynes in the North.

29 Policy Department B: Structural and Cohesion Policies ______

Figure 8: Location and 9 ceremonial counties of region South East, England, United Kingdom

Source: www.picturesofengland.com

With 8.3 million people the South East has the largest population of any region of England; more people live here than in Scotland and Wales together. The population density is more than 10 times lower than in London, but in Portsmouth and Southampton reaches similar levels to London.

Over 80% of the South East area is classified as rural, but 78% of population live in areas classified as urban areas. The South East is the largest manufacturing region in the UK, home to around 750,000 businesses and 16 universities, including the University of Oxford. This brings a special opportunity – the power to link research-based innovation with business skills to drive economic prosperity and to promote the key objectives of the EU 2020 strategy. Business opportunities generated by the local hi-tech expertise and innovation are supported by the people of the South East who have above average skills and qualifications. In 2008, the region South East contributed 15.5% of the total GDP to the UK economy which was the second highest (after London with 19.3% of the total). Combined, these two regions accounted for over one third of the UK’s total GDP.

The transport infrastructure of the region is of national and international importance, with Heathrow and Gatwick airports and the major South Coast ports, including Dover, Southampton and Portsmouth as well as the Channel Tunnel access point to mainland Europe and the rest of the world.

The South East has the highest employment rate of any region of the UK, around 77%, and 4.5 % above the UK average (72.5%). The self employment rate of 10.4 % is also higher that UK average, as is the qualification level and high-skills occupation level.

30 Economic, Social and Territorial Situation of the United Kingdom ______

The unemployment rate in the South East is amongst the lowest in Europe. The gender difference in employment rates is also one of the lowest in Europe, while the employment rate of older workers (55-64 years) is among the highest. These are all signals of a relatively inclusive labor market.

Although the South East is one of the UK’s most prosperous regions, there are areas of deprivation. In particular, parts of the coastal fringe of the region, Medway Towns and more isolated rural areas perform significantly below regional and national averages.

4.4.1. Administrative situation of the South East in the context of decentralisation of Cohesion policy

Like other regions in England, the South East has no elected government and few central powers. The headquarters for the region's governmental bodies are in Guildford. The South East England Development Agency (SEEDA) acts as an intermediary body with managing authority functions delegated from the DCLG to manage the South East ERDF Operational Programme 2007-2013. This means that SEEDA is responsible for contracting, managing, monitoring and spending the South East’s ERDF allocation on behalf of the region. As with many organisations, the agency has been affected by the recent recession. It has been working with a reduced budget and has focused more than before on helping businesses through the recession and readying them to take advantage of the upturn from a position of strength.

However, like all English RDAs, SEEDA will close by 31 March 2012, so that its functions will be transitioned back into the DCLG as the national managing authority. Efforts are made to time this change of responsibilities after the completion of the first round of applications in order to minimise disruption for applicants, and to have the second stage of the current programming period start under the new provisions. As closure approaches, staff and organisation have been reduced, up to 140 of the total 220 staff will have left by the start of July 2011, either through transfer to other bodies taking on SEEDA programmes, or through redundancy. Staff numbers will further reduce during 2011/2012 as programmes are handed over or closed. By March 2012 only 5 or 6 staff will remain, who will oversee closing the final accounts after SEEDA has closed.

4.4.2. Operational Programme South-East of England

The OP "South East" runs under the Competitiveness and Employment objective of EU Cohesion policy.

The investment of the ERDF to the programme amounts to EUR 23.7 million for the programming period 2007-2013, with a co-financing rate of 50% the national public match funding amounts to another EUR 23.7 million.

The comparatively stable socio-economic situation of the region allows the authorities to concentrate the ERDF funding on the core objective of the EU 2020 strategy, sustainable growth. The aim of the programme is to promote competitiveness, sustainable production and consumption in South-East England whilst contributing to reducing the region's ecological footprint.

31 Policy Department B: Structural and Cohesion Policies ______

To achieve this aim, the programme has established the objectives of

 raising levels of knowledge and innovation across all business sectors in order to support more resource efficient business practices,

 boosting profitability and long-term competitiveness,

 stimulating innovation and job creation in new and emerging ecologically-driven market sectors and

 reducing the rate of growth of the region's ecological footprint.

It is intended that this will not only deliver positive sustainable development outcomes, but also improve the attractiveness of the region and secure a more competitive economy, with more and better jobs in the regional economy as a whole.

The programme will support more than 1200 business to improve their performance in particular in relation to improved energy and resource efficiency. Another important aim is to reduce road congestion and pollution levels by 10% and to develop and disseminate good practise expertise in these fields.

Concretely, these objectives will be pursued through the following priorities:

 Promoting resource efficient business practices;

 Stimulating innovation for a sustainable economy;

 Encouraging sustainable consumption practices.

There is also financial provision for technical assistance, i.e. for the implementation, monitoring and control of the programme.

4.4.3. Examples of landmark ERDF projects in South East England

Sustainable Marine Transformation and Assessment (SMARTA) project Launched on 1st January 2009, SMARTA is a 3 year project jointly funded by ERDF - (£242 796; EUR 274 838) - and the regional agency, SEEDA. The fundamental aim is to pilot, validate and disseminate an approach whereby marine sector businesses can achieve a combination of economic and environmental performance improvement.

This will be achieved through targeting waste reduction and resource efficient manufacturing through improved product design and production. Benefits will be maximised by stimulating measurable business improvement and promoting best practice and high-value, secure employment, then replicating these benefits within the wider population of marine sector businesses (numbering around 4,000 across the South East region).

Through its work with selected marine companies, the project will enhance the South East’s economy by encouraging the adoption of sustainable design, production and resource utilisation practices.

Retrofit South East

October 2009 saw the launch of Retrofit South East, an 18 month project of low carbon refurbishment at Borough Grove in Petersfield, co-funded with £421 000 (EUR 476 559) by the ERDF.

32 Economic, Social and Territorial Situation of the United Kingdom ______

The project plans to develop a model for low carbon retrofit of social housing that will help to transform businesses and reduce carbon emissions from existing housing stock across the South East region. It will use an exemplar demonstration project of 14 social housing properties in Petersfield, Hampshire, as the centerpiece for an innovative programme of research, training & skills development, dissemination, awareness raising and promotion on the theme of low carbon refurbishment.

4.5. ESF in England and the South East

The England and Gibraltar ESF programme will support relevant policies to increase labour market participation. European funds are often combined with projects under national social inclusion plans in order to strengthen their impact.

Despite the global economic crisis, the objectives of the NSRF remain relevant, in particular the focus on improving the job prospects and skills of people at a disadvantage in the labour market who are the most affected by the economic downturn.

To implement the national priorities, each region has an ESF framework that addresses its particular regional employment and skills needs.

The ESF programme covers the whole of England and Gibraltar (though the priorities 3 and 4 indicated below are supported only in the Convergence area of Cornwall and the Isles of Scilly).

Priorities

 Extending employment opportunities (all English regions) includes training in new skills, helping with applications for jobs, focus on people with disabilities, health issues, lone parents ethnic minorities lacking language skills, older workers and young people not in employment, education or training.

 Developing a skilled and adaptable workforce (all English regions) focuses on upgrading individuals’ skills at basic, low and intermediate skills levels, especially SMEs.

 Tackling barriers to employment (only Cornwall and Isles of Scillly) such as disabilities and health conditions, people with drug and alcohol dependency, carers, women seeking to return to the labour market, the homeless; prepare young people for working life.

 Improving the skills of the local workforce (only Cornwall and Isles of Scillly) Raising workforce and business skills at all levels, encourage employers to support their workers in learning and training.

In the UK, ESF funds are distributed through 'Co-financing Organisations' (CFOs). CFOs are public bodies which bring together ESF and domestic funding for employment and skills so that ESF complements national programmes. The Skills Funding Agency, the Department for Work and Pensions Delivery Directorate and the National Offender Management Service are CFOs across the whole of England. A few Regional Development Agencies and local authorities are also CFOs.

33 Policy Department B: Structural and Cohesion Policies ______

Exemplary ESF projects in the South East

In general, the ESF programme in England's South East supports labour market development and welfare to work in the part of the country that is coming through the downturn less seriously affected than many other areas, but rising unemployment and redundancies have nevertheless had some impact. Some labour markets have tended to be disproportionately reliant on public sector employment, and many of them are poorly served by transport which poses challenges for employment growth and labour mobility.

Project "SOS"

The Simplifying Opportunities for Start-ups (SOS) project, which ran from 2009- 2010, offered specialist support for business start-ups, entrepreneurs and self- employment training in the South East. The objective was to engage long-term unemployed and under-represented groups into pre-business start-up employment and assist them in entering the labour market.

KS4 Pre-Engagement Programme

Another interesting project targeted young people who are not in employment, education or training in the areas of Eastbourne, Hastings and Brighton & Hove along the South East coastal strip. The programme ran from October 2008 to December 2010 and offered a package of support to re-engage them with learning. ESF funding amounted to £412 757 (EUR 467 229)

The programme contained a 10 to 12 week practical skills-based training course with a support worker to help them access and make the most of their learning opportunity. It was a fully funded programme targeting 14 to 16 year olds, who have often been out of formal education for a substantial period of time and who would have difficulty accessing the mainstream curriculum.

4.6. Geographic and socio-economic Situation of London

London, the capital of England and the UK, is the largest metropolitan area in the UK. In July 2007 it had an official population of 7,556,900 within the boundaries of Greater London, up to 14 million within the wider metropolitan area, making it the most populous municipality in the EU.

It has a high population density and a diverse range of peoples, cultures and religions, and more than 300 languages are spoken within its boundaries. The London census of 2001 revealed that after the UK, most inhabitants were born in India, Ireland and Bangladesh, followed closely by other south-Asian, African and European countries of descent.9

The City of London is the main financial district in Europe. London and the adjacent South-East region of England account together for over 30% of UK's GDP and are markedly wealthier than the rest of the UK. According to data from Eurostat, the Greater London area is the wealthiest region in the EU. The wealth of London and the surrounding areas can largely be ascribed to the importance of services in the region, notably business, telecommunications and financial services, which have boomed since the second half of the 1990s. However, the figure for London is overstated compared with adjacent areas because of the number of workers commuting into the capital.

9 Office for national statistics, www.statistics.gov.uk.

34 Economic, Social and Territorial Situation of the United Kingdom ______

The high percentage of commuters brings wealth and income to rural places, but this can also lead to displacement of long time residents who cannot compete for the available housing stock. Since their life remains connected to the city, commuters tend to participate less in the social life of the village, which reduces social cohesion. Their high number also leads to ongoing pressure for better transit systems and on the housing market.

The health of London’s economy is vitally important for the rest of the UK, not only because of the financial resources and skilled people that it attracts, but also because of London’s significant net monetary contribution to the national exchequer and its importance for growth across other regional economies and even the European context.

It has to be noticed, however, that London’s high overall prosperity masks dramatic inequalities within the city. Although London has a significantly higher overall per capita output than other parts of the country, it has the lowest employment rate of all the UK regions. At 70.0 %, the employment rate in London is not only 8.7 % lower than the South East, which has the highest employment rate of the English regions, but is also 4.8 % points below the average rate for England as a whole.

Income inequalities within London, moreover, are vast, and a number of the poorest boroughs in the UK are located in the capital. Especially East London has always been a deprived area. The number of projects set up there in the last few years shows the importance of developing the area: the Olympic park, Crossrail, O2 Arena, and Canary Wharf.

Prospects in the local area are decidedly mixed: being close to the Olympics site the labour market offers more possibilities than other places, particularly in construction, security and hospitality, but competition is tight and growing, and increasingly regulation means applicants routinely need formal certification.

4.6.1. Administrative framework and Structural Fund management

As capital of the UK and England and seat of the Government of the UK, many government departments are located close to Parliament, particularly along Whitehall, including the Prime Minister's residence at 10 Downing Street.

City-wide administration is coordinated by the Greater London Authority (GLA), while local administration is carried out by 33 smaller authorities.

The GLA consists of two elected components: the Mayor of London who has executive powers, and the London Assembly, who scrutinises the mayor's decisions and can accept or reject his budget proposals each year. Since May 2008, the mayor is Boris Johnson. The headquarters of the GLA is City Hall, Southwark. While the Mayor and the London Assembly are elected by Londoners, the staff of the GLA is a permanent body that provides continuity in the ongoing development and delivery of strategies for London. The local authorities are the councils of the 32 London boroughs and the City of London, which covers a small area at the core and is governed by the City of London Corporation (Mayor, Common Council of the City of London, Court of Aldermen). The local authorities are responsible for most local services, such as local planning, schools, social services, local roads and refuse collection. Certain functions, such as waste management, are provided through joint arrangements. Within London, both the City of London and the City of Westminster have city status and both the City of London and the remainder of Greater London are the ceremonial counties.

35 Policy Department B: Structural and Cohesion Policies ______

Figure 9: City of London and the 32 London boroughs

1. City of London 22. Greenwich

2. City of Westminster 23. Bexley

3. Kensington and 24. Havering Chelsea 25. Barking and 4. Hammersmith and Dagenham Fulham 26. Redbridge 5. Wandsworth 27. Newham 6. Lambeth 28. Waltham 7. Southwark Forest 13. Ealing 18. Sutton 8. Tower Hamlets 29. Haringey 14. Hounslow 19. Croydon 9. Hackney 30. Enfield 15. Richmond 20. Bromley 10. Islington 31. Barnet 16. Kingston 21. Lewisham 11. Camden 32. Harrow 17. Merton 12. Brent 33. Hillingdon

Source: Wikipedia

Following the review of GLA powers in July 2006, the management of European Structural Funds was transferred to the Mayor of London, who has devolved the administration of the programmes to the London Development Agency (LDA).

Both entities work in close cooperation at the planning of projects and programmes, as well as at implementing them successfully. They are also preparing together the upcoming transfer of Structural fund management form LDA to the Greater London authority, to be conducted in the framework of the government's decentralisation reform of Regional Policy.

4.6.2 Operational Programme "London"

The total budget of the programme "London" under the Competitiveness and Employment objective is EUR 382 million, with EU investment through the ERDF of EUR 182 million, approximately 2.6% of the total EU money invested in the UK under Cohesion policy 2007-2013.

The programme is structured according to the following 4 priorities:

 Business innovation, research and promotion of eco-efficiency to create sustainable economic growth (26.2%);

 Access to new markets and to financing, particularly for SMEs' (27.1%);

 Sustainable places for business in London's regeneration areas (many in East London) (42.9%);

 Technical assistance to help implement the programme.

Alongside these priorities, the London programme will promote greater innovation, collaboration and environmental efficiency, helping especially small companies who

36 Economic, Social and Territorial Situation of the United Kingdom ______have often major difficulties to access new markets and financing for investment in London.

Also, the ERDF resources will contribute to greater equality by particularly supporting business investment and growth in SMEs that are led by Black, Asian and Minority Ethnic (BAME) people, women and disabled people and which provide employment opportunities to deprived communities.

Another focus of the programme will be in environmental improvements which will help transform those areas of London with the largest scope for increasing job provision and where the additional employment will particularly benefit Londoners from deprived communities such as the East of London. There will be a particular focus on promoting clusters of companies in the eco-efficiency area.

Overall, the London ERDF programme is expected to create 4,000 new jobs and to assist 20,000 businesses. Some 4.500 businesses should see their environmental performance improved. The proportion of ethnic minorities, women and disabled people benefiting from the programme should be 35%, 34% and 5% respectively. In terms of impact, it is expected that London's capacity to generate decentralised co-generated and renewable energy will increase by 20% by the end of the programming period.

4.6.3 Exemplary ERDF Projects in London

One important landmark project in London is the development of the extensive and long-term "Delivery Strategy for the Royal Docks". Located at the intersection of the Thames Gateway and London-Stansted-Cambridge-Peterborough Growth Corridors in East London, the Royal Docks is one of the capital’s largest and most important regeneration opportunities. Covering over 80 hectares, the 3 historic docks, which comprise the Royal Docks – Royal Victoria Dock, Royal Albert Dock and King George V Dock –, were once the largest enclosed docks in the world when built in the mid 19th Century.

Furthermore, the use of ERDF to support the construction of a cross-Thames cable car in between North Greenwich and Royal Docks (Canning Town), two of London’s most deprived areas, is being discussed, as well as the creation and enhancement of accessible and functional green corridors along rivers and through existing public space to ensure that employment sites are well-connected.

Enabled4Growth

The project Enabled for growth, running from 2009 to 2012, has been awarded £663 860 (EUR 751 470) ERDF resources. Business advisors will assess and strengthen the opportunities of over 80 disabled business owners in London, and help them to find financing. The project is expected to create at least 75 jobs.

Built to compete The project will help 140 Croydon-based SMEs to develop key policies and procedures, develop bid and tender writing skills and bring together major buyers with the SMEs of Croydon, all with one thing in mind – to do business together.

The project is funded by London Borough of Croydon and ERDF (£300 000, EUR 339 591) and runs from 2009 to 2012.

37 Policy Department B: Structural and Cohesion Policies ______

JESSICA in London

It is worth mentioning that in London, the "JESSICA" financial instrument has been implemented with success, and authorities intend to increase activities in this area.

The London Green Fund (LGF) is a £100 million (EUR 113 million fund set up to invest in schemes that will cut London’s carbon emission. The fund was launched in October 2009 by the Mayor of London and the European Commissioner for Regional Policy - the first JESSICA Holding fund in the UK.

It is made up of £50 million from the London ERDF Programme, £32 million from the LDA, and £18 million from the London Waste and Recycling Board. The European Investment Bank manages the LGF.

The LGF will provide funding for 2 urban funds that will invest directly in waste and energy efficiency projects. These will be "revolving" investment funds, where monies invested in one project are repaid and then reinvested in other projects.

The scope of the LGF may be expanded in future to include support for medium and large scale decentralised energy systems.

4.6.4. ESF in London

London has been awarded an allocation of £420 million (EUR 475 million) for the years 2011-2013, as part of the England and Gibraltar ESF 2007–2013 Programme.

As for all regions, a specific "London" framework has been produced which sets out how the region will address and support the national priorities. It has been coordinated with the programme of the Mayor of London and is managed in cooperation with his services.

ESF projects across London are mainly supporting Londoners to improve their skills and compete in a tough labour market. This includes support for citizens and London businesses through the economic crisis, and help all Londoners to participate in the economic recovery. People who have never accessed education, employment or training, or whose lives have taken a wrong turn and are looking for a second chance, can obtain financing from a variety of projects.

The 3 priorities of the ESF projects in London are:

 Extending Employment Opportunities  Creating a Skilled and Adaptable Workforce  Technical Assistance and Capacity Building

For the region of London, the following 5 organisations have each secured ESF funding and contribute their own funds to co-finance the programme:

 the Skills and Funding Agency,  the Department for Work and Pensions ,  the London Development Agency (LDA),  the National Offender Management Service and  London Councils.

According to the Mayor of London, the ESF projects started in 2007 have already moved more than 24,000 unemployed Londoners into jobs, education or training and have upskilled 7,000 of London’s workforce. By the time the programme closes, 35,000 people are expected to be in an employment, 40,000 more to be in education or

38 Economic, Social and Territorial Situation of the United Kingdom ______training measures, and 50,000 of London’s workforce will have achieved qualifications.10

Exemplary ESF projects in London

Tomorrow’s People project

The Tomorrow’s People project, running from July 2008 to July 2011 with funding of £3 600 000 (EUR 4 075 097), helps people least likely to find and hold a job in the labour market. Delivered in some of the poorest parts of London, the service works with people who are struggling to make progress, where conventional support has not helped secure a sustainable employment outcome.

Services include pre-employment training, coaching and help to secure accreditation, confidence-building and peer support, work placements and in-work support, all with a focus on an individually tailored approach and supportive, non-judgemental backup.

Skills for Climate Change Project (Newham borough)

The Skills for Climate Change Project in East London, running from May 2009 to April 2012 with ESF funding of £724 000 (EUR 819 547) is identifying skills gaps directly related to climate change and equipping London businesses, mainly SMEs in the construction and building services sectors, to compete in a changing market.

10 Mayor of London, London European Social Fund Regional Framework (January 2011 – December 2013).

39 Policy Department B: Structural and Cohesion Policies ______

40 Economic, Social and Territorial Situation of the United Kingdom ______

5. EU COHESION POLICY AFTER 2013: UNITED KINGDOM'S POSITION

The government of the UK has underlined in its position paper on the 5th Cohesion Report the importance of the "value for money" of investment in EU Cohesion policy which should reflect the "differing needs, capacities and experiences" of each individual Member State.11

While supporting the general political aim of social and territorial cohesion, the focus of Cohesion policy should thus be put on the poorest states because there, EU money can significantly add value to economic development, as opposed to wealthier Member States which have themselves the financial and administrative resources to support investment, including in their less developed areas. In conclusion, "the UK Government believes that the wealthier Member States should not receive Structural and Cohesion Funds in the longer term".12

Acknowledging the implied fundamental change of the policy, the British government proposes that in the shorter term, i.e. 2014-2020, richer states should continue to receive some funding, though at a significantly lower level in order to prepare the transition to a system where prosperous EU States finance their own regional development policy, without requiring Structural funding. This reduction would allow a reduction of the total public spending in Cohesion policy and should become effective from next year on.

According to the UK government, in general, Cohesion policy should support the goals of the EU 2020 strategy, while allowing the Member States more flexibility than in the past when it comes to identify their individual objectives and policies.

The concentration of objectives to the following aspects is favoured by the UK:

 Infrastructure investment,  Support for SMEs,  Innovation,  Improving employability and enhancing skills,  Localised regeneration and community economic development,  Move to a low-carbon economy.

Regarding the management and delivery of Cohesion policy, the concept of conditionality of funding is encouraged by the UK government, especially in the form of performance and result-based conditionality. Macro-economic conditionality, linked to the European Stability and Growth Pact, however, is strongly rejected, since it is considered "external" to Cohesion policy and should be addressed through other political channels.

The UK suggests an increase of the accountability of the Member States for the success of their programmes and a significant intensification of ex ante as well as ex post evaluations which should be based on outcomes, not on outputs. Co-financing levels should be maintained as they are.

The UK government favours the idea to return unused resources to the Member States instead of keeping them within the EU budget and insists that a "performance reserve"

11 See also for the following: UK Government response to the European Commission's consultation on the Conclusions of the Fifth Report on economic and social Cohesion, February 2011. 12 Letter from the Department for Business Innovation & Skills to Dirk Ahner, Director General of DG REGIO, 8.02.2011.

41 Policy Department B: Structural and Cohesion Policies ______should not reward rich Member States for their better established administrative and organisational capacities at the expense of the Member States experiencing problems in this area.

In the context of national efforts to reduce public deficits and public debt, the UK government is of the opinion that the budget size of EU Cohesion policy should reflect these efforts. Therefore, the payment appropriations should not exceed the 2013 level and not increase more that inflation during the 2014 - 2020 period.

London also requires that the charges on the EU annual budget due to significant delays of Cohesion policy payments for the current programming period - which are expected to be become effective after 2013 -, be taken into account in all calculations. As indicated above, the proportion of the budget going to the poorest Member States should rise, whereas the budget for wealthier States should be now reduced, later abolished.

As far as the administration of Structural and Cohesion funds is concerned, the UK government supports further simplification and reduction of administrative burden as well as more rationalisation through streamlining delivery frameworks of Structural funds with agricultural and fisheries funds.

Some regions of the UK have different opinions than the central UK government on some of these issues, as the position paper of the South West region to the 5th Cohesion Report illustrates. The region strongly supports the idea that Cohesion policy should benefit all regions, under the condition that projects are well targeted to the needs of each region.

However, most of the above mentioned statements and requirements of the UK government can be considered as consistent British opinion. In 2008, the European Union Committee of the House of Lords concluded regarding the future of EU Cohesion policy:13

"We continue to support the underlying principle of intervention in the market to counter the uneven distribution of the benefits and costs of the single market, but wish to ensure that this support is delivered in an efficient and effective manner.

We find that the Funds are effective and, in general, fit for purpose. The evidence we received suggests that the size of the funding distributed to the poorest regions under the Convergence Objective is approximately correct. We also heard that the absorption cap in the poorest countries operates at an appropriate level to match the ability of regions to use the funds.

We consider in detail the distribution of funds to richer regions and wealthier Member States under the Competitiveness Objective. We find that objections about the cost of management of the funds are overstated. While we recognise that many Member States would lose funding as a result, we suggest that the future of the Competitiveness Objective should be reviewed during the forthcoming review of the EU budget. The funding and scope of the Convergence Objective, which supports the poorest regions, is appropriate and it should remain."

13 House of Lords, European Union Committee, 19th Report of Session 2007–08, The Future of EU Regional Policy, Foreword, page 6.

42 Economic, Social and Territorial Situation of the United Kingdom ______

CONCLUSIONS

This Note provides a number of insights into the political, socio-economic and administrative framework of the UK, the country of England and the regions of London and South East, with particular focus on the implementation of EU Cohesion policy. The UK in general - and England, London and the South East region in particular -, although being among of the wealthiest regions in the EU territory, face severe regional disparities which require coherent regional and cohesion policy in order to temper inequalities and social exclusion.

Until now, the implementation system of EU Structural funding in the UK has been mostly centralized, with devolved elements in some regions outside England. However, since 2010, a transition to a decentralised, localised system is taking place, scheduled to be finalised in 2012. Traditionally, the UK authorities have been particularly attentive to the question of "added value" of EU Cohesion policy. Towards the end of the 2000-2006 programming period, a study entitled "What Works in Community Cohesion" was commissioned in order to evaluate what methods adopted across programmes had proved successful and what needed to be improved.14

This study found that cohesion funding in the UK needed more explicit evidence of market failure to justify interventions and better strategic alignment with domestic policies, as well as more flexible management systems and the adoption of an approach to mix "safe" activities containing relatively predictable outcomes with more innovative investments. These results attest the UK a highly developed, yet rather self critical Cohesion policy.

Another assessment of UK's implementation of EU Structural funding, this time by the Strategic report on EU Cohesion programmes of March 2010, has indicated that during the first 3 years of the current programming period, the UK has been doing better than the EU-average, with projects selected for 35% of the available funds by the end of 2009. The report also underlined that the UK had especially well done concerning the EU 2020 objectives, by targeting investments in these areas.15 Irrespective of these positive assessments, the UK government has recently expressed a distinctive opinion about the future of EU Cohesion policy, peaking in the claim that in the longer term, the policy should be limited only to the poorest countries of the EU, thus renationalising completely the regional development policy in wealthier EU countries.

This position which is very controversial among Member States will certainly have considerable impact on the ongoing debate about Cohesion policy after 2013. It should be taken fully into account by the policy makers preparing their decisions on the future of the policy.

14 "What works in community cohesion", Research Study conducted for Communities and Local Government and the Commission on Integration and Cohesion, 2007. 15 In many EU countries considerable delays in take-up and implementation of Structural funding had been noticed between 2007 and 2009, due partly to the global economic and financial crisis. In this report, 2 UK projects were highlighted as good examples of implementation: "The Next Generation Broadband" project in Northern Ireland (aiming to deliver access for 85% of businesses to next generation broadband networks by 2011) and "The Better West Midlands" project (providing support and training for workers under threat or notice of redundancy).

43 Policy Department B: Structural and Cohesion Policies ______

The UK has long been one of the strongest advocates of a more performance and result orientation of EU Cohesion policy. Now, there is a consensus that improvements of the efficiency and effectiveness of EU Cohesion policy are at the core and centre of the policy's future.

In the same vein, the clear accountability of responsibilities in the shared management system of Cohesion policy, another claim of the UK's government, is regarded by most as essential for a successful future of the policy.

In fact, these issues, though always important as such, have become even more relevant for the debate of EU Cohesion policy after 2013 against the backdrop of the EU 2020 strategy and the obligation to reduce public spending and national budgetary deficits.

By its experiences and capacities, the UK has indeed a lot to contribute to a successful future of EU Cohesion policy. Its critical position towards several aspects of the current functioning of the policy can - if embraced constructively and balanced with the Lisbon Treaty's fundamental objectives of territorial and social cohesion - help to execute necessary reforms in preparation of the programming period after 2013, in order to secure a strong role of Cohesion policy in the EU policy system.

44 Economic, Social and Territorial Situation of the United Kingdom ______

REFERENCES

 Applica/Ismeri Europa (report for DG Regio), Country report on achievements of Cohesion policy 2007-2013, Expert evaluation network delivering policy analysis on the performance of Cohesion policy 2007-2013, November 2010.

 Department for Communities and Local Government, ‘What Works’ in Community Cohesion, Research Study conducted for Communities and Local Government and the Commission on Integration and Cohesion, London 2007.

 Ex Post Evaluation of Cohesion Policy Programmes 2000-2006 financed by the European Regional Development Fund in Objective 1 and 2 regions. Task 4: Development and achievements in Member States: United Kingdom, 34 p.

 House of Commons, Housing, Planning, Local Government and the Regions Committee, Reducing Regional Disparities in Prosperity, Ninth Report of Session 2002–03.

 House of Lords, European Union Committee, 19th Report of Session 2007–08, The Future of EU Regional Policy.

 Institut universitaire européen de Florence, Etude sur la répartition des pouvoirs entre l'Union européenne, les Etats membres et les collectivités régionales et locales, 2008 (pour le Comité des Régions).

 Mayor of London, London European Social Fund Regional Framework (January 2011 – December 2013).

 Monastiriotis, Vassilis, Sub-regional disparities in Britain: convergence, asymmetries and spatial dependence, London School of Economics, London 2006.

 OECD, Regional Development in OECD countries, OECD 2010.

 OECD, OECD Reviews of Regional Innovation: competitive Regional Clusters, OECD, Paris 2007.

 United Kingdom Government, Letter to Director General Dirk Ahner, accompanying the UK Government response to the 5th Cohesion Report consultation, 8 February 2011.

 United Kingdom Government, Local Growth: realising every place's potential, White paper, 28 October 2010.

 United Kingdom Government response to the European Commission's consultation on the conclusions of the Fifth Report on Economic and social Cohesion, February 2011.

 United Kingdom Government, National strategic report 2009.

 www.bis.gov.uk, BIS (Department for Business Innovation and Skills) and Department for Business, Enterprise and Regulatory Reform

 www.communities.gov.uk/corporate

 www.economist.com

45 Policy Department B: Structural and Cohesion Policies ______

 www.europa.eu/budget/reform/issues/read_en.htm

 www.europa.eu/regional_policy/index_en.htm

 www.london.gov.uk

 www.oecd.org

 www.statistics.gov.uk

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