POLICY BRIEFING. Structural and Investment Fund Strategies in England: Preliminary Guidance for Local Enterprise Partnerships

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1 Structural and Investment Fund Strategies in England: Preliminary Guidance for Local Enterprise Partnerships Author: Andrew Jones, LGiU associate Date: 8 May 2013 Summary The Structural Funds and the Cohesion Fund are the financial instruments of the EU s regional policy. After the Common Agricultural Policy (CAP), they are largest single item of EU expenditure. On 15 April, the Government issued preliminary guidance on the allocation and use of the EU s Structural Funds (referred to from now on as the Structural and Investment Funds or SIF) for the programming period The SIF funds will operate alongside the Single Local Growth Fund that was announced in Budget LEPs will be key delivery agents for SIF. The documents dealt with here set out the underpinning principles of the delivery model. There is also information on thematic objectives and priorities. The final details of the programming period, including exact budgets, is still under negotiation within the EU. More detailed guidance on SIF will be issued by the UK Government after the Spending Review on 26 June. SIF funds are expected to be available by mid This briefing will be of interest to local authority executive members and to senior executive officers in top-tier and district councils working in economic development and to partners engaged in economic development and regeneration, especially members of LEPs. Briefing in full

2 Background On 15 April, the Government issued preliminary guidance on the allocation and use of the EU s Structural Funds (referred to from now on as the Structural and Investment Funds or SIF). An outline model for the delivery of Structural and Investment Funds (SIF) was presented to partners in a series of consultative road shows across the country throughout November and December The purpose of the guidance is to help Local Enterprise Partnerships (LEPs) begin the development of their SIF Investment Strategies. The documents dealt with here set out the underpinning principles of the delivery model with regard to: the role of Local Enterprise Partnerships; allocations and match-funding (the EU requirement to use domestic funding alongside the SIF); national and local governance; and alignment with European Territorial Cooperation (Interreg) programmes. There is also considerable detail on thematic objectives and priorities with indications of what sort of activities are likely to be supported under each heading. The final details of the programming period, including exact budgets, is still under negotiation within the EU which is expected to be complete over the next few months. Further, there will be more detailed guidance issued by the UK Government after the Spending Review on 26 June. In the meantime, the Government wants to maintain a dialogue with LEPs. In particular, it is interested in views on additional freedoms and flexibilities and the role of financial instruments in delivery. LEPs are asked to send their comments and views to: EU.structuralandinvestmentfunds@bis.gsi.gov.uk by the end of May. The Structural Funds: A Brief History The Structural Funds and the Cohesion Fund are the financial instruments of the EU s regional policy. Their purpose is to narrow the disparities in development between the regions of the EU. They amounted to 35 per cent of the EU s planned expenditure between and are the EU s second largest item of expenditure after the Common Agricultural Policy (CAP). The preamble to the 1957 Treaty of Rome gave addressing the economic backwardness of less favoured regions as one of the reasons for establishing the Community. This aim grew in importance with the expansion of the Community to

3 include a greater diversity in economic development among countries and regions. The European Social Fund (ESF) was set up in 1958 to provide assistance to the unemployed, but it was not until the establishment of the European Regional Development Fund (ERDF) in 1975 that the Community had available an effective mechanism for financing regional economic development. The ERDF supported the development of small and medium sized businesses in disadvantaged regions. Resources to support rural development were also provided through part of the CAP. Both the ESF and the ERDF still exist, but the rules for the distribution of funds have altered. Put simply, there have been three phases of EU structural and cohesion funding: : The operation of the ESF (from 1958) and the ERDF (from 1975) : The creation of the Single Market, accompanied by anxieties that closer economic integration and accelerating competition could lead to a worsening in regional economic disparities. New mechanisms were created, targeted on five objectives, with resources concentrated on regions where per capita income was 75 per cent or less of the EU average. The Cohesion Fund was created in 1994 to provide grants for environmental and transport infrastructure projects in Member States whose GDP was below 90 per cent of the EU average. Post-2000: A more concentrated approach with a reduced number of objectives for the structural funds, with stricter enforcement of eligibility criteria. This reflected concerns about the growth of the Structural Funds budget and the need to adapt to the expansion of the EU to include a number of new Member States, mainly from Central and Eastern Europe with per capita GDP well below the EU average. During the period , the share of the EU budget allocated to all regional policies amounted to 348 billion, of which 278 billion was for the Structural Funds and 70 billion for the Cohesion Fund. Three objectives were applied to the financing of structural fund policy from 2007 to 2013 as follows: Convergence: the acceleration of the economic convergence of regions where per capita GDP was below 75 per cent of the EU average (except in the case of Cohesion funding). The Convergence Objective (otherwise known as Objective 1) worked through the ERDF, the ESF and the Cohesion Fund and represented about 81.5 per cent of the resources allocated to the Structural Funds. Regional Competitiveness and Employment (otherwise known as Objective 2): to improve regional competitiveness and employment through the promotion of innovation, entrepreneurship, environmental protection, and the development of labour markets. This objective included regions not covered by the Convergence Objective, and was financed through the ERDF and the ESF, making up to about 16 per cent of Structural Fund spending.

4 European Territorial Co-operation: to strengthen co-operation at crossborder, transnational, as well as inter-regional levels (otherwise known as Interreg, or sometimes as Objective 3). The smallest of the objectives in terms of resources, it is financed by the ERDF and represented 2.5 per cent of structural funds spending. The UK received a total of 9.4 billion in Structural Funds for the period This was split between: The two UK areas entitled to funding under the Convergence criterion (Cornwall and the Isles of Scilly and West Wales and the Valleys), with a budget of 2.6 billion Merseyside, South Yorkshire and the Highlands & Islands received transitional funding because they were entitled to convergence funding in the programme. The largest share, totalling 6.2 billion, received over the programme period was for the regional competitiveness and employment objective, which could be spent in any part of the UK. The final tranche of 0.6 billion was provided for the cross-border and transnational programmes. The Structural Fund spending for the next programming period ( ) is be tied more closely to wider EU economic objectives, as advanced in the EU 2020 Strategy (the successor to the Lisbon Economic Strategy) and the Gothenburg Strategy (on environmental sustainability). This means a greater share of resources is being targeted on research and innovation, entrepreneurialism, and energy and environmental projects related to climate change. In , Cornwall and the Isles of Scilly and West Wales and the Valleys are expected to remain eligible for Convergence funding. There are also transition regions where GDP per capita is between 75 per cent and 90 per cent of the EU average. Transition regions will receive a slightly higher than average intensity of ERDF and ESF and projects in ERDF and ESF can be financed at a maximum rate of 60 per cent. The full list has yet to be agreed, but places within this category in the UK are expected to include Devon, Lincolnshire, East Yorkshire and North Lincolnshire, Shropshire and Staffordshire, South Yorkshire, Merseyside, Lancashire, Tees Valley and Durham, Cumbria, and the Highlands and Islands. A third category is the more developed regions, where GDP per capita is above 90 per cent of the EU average. Most parts of England fall into this category. ESF and ERDF projects are financed at a maximum rate of 50 per cent in more developed regions. The Structural and Investment Funds in England The Structural and Investment Funds available in England are the: European Regional Development Fund (ERDF);

5 European Social Fund (ESF); European Agricultural Fund for Rural Development (EAFRD) European Maritime and Fisheries Fund (EMFF). The Structural and Investment Funds (SIF) for the programming period will operate alongside the Single Local Growth Fund that was announced in Budget 2013 as part of the Government s response to the Heseltine Review. In England, The ERDF, the ESF and part of the EAFRD will be brought together into a Structural and Investment Fund Growth Programme (henceforth referred to as the SIF Growth Programme). The majority of the funding in the SIF Growth Programme will be allocated to Local Enterprise Partnerships (LEPs). The EMFF will not be included within the SIF Growth Programme but will be aligned with it as much as possible and available to LEPs on a competitive basis. Each LEP will lead the development of a SIF Investment Strategy. Depending on the progress of the negotiations over the European Budget for and the regulations governing the use of the Funds, the SIF are likely to be available to LEPs from mid-2014 onwards. The Role of Local Enterprise Partnerships Most of the money in the SIF Growth Programme will be notionally allocated to LEP areas, with LEPs working with local partners to set the direction of the SIF Growth Programme in an Investment Strategy. This will set out local opportunities and challenges, priorities for spending, and planned outcomes. It will form part of the wider economic growth strategy for the area. LEPs will be the key strategic drivers. They will: work with local partners to decide which projects to support help to identify match funding (see below) oversee arrangements for selecting projects or for using co-financing organisations to procure ESF provision, in discussion with Managing Authorities (see below) deliver the milestones and results agreed in their strategy, including making sure that enough money is spent each year to meet annual spend targets involve local partners across the spectrum. Collaboration between Local Enterprise Partnerships The Government wants LEPs to work with each other to deliver a bigger impact, exploit synergies, and achieve economies of scale wherever possible. There is a variety of possible collaborative arrangements, which need not necessarily be between adjacent LEPs. A coastal partnership could collaborate in investing in the offshore energy generation industry; a specific sector supply chain partnership could work together to maximise investment even if they are at opposite ends of the

6 country; two or more neighbouring partnerships with relatively small allocations might choose to collaborate if it means they can deliver larger investments. Support for Local Enterprise Partnerships and Budget Allocations In the 2012 Autumn Statement, the Government announced that LEPs will receive an additional 250k for each of the next two years. They can use this from April 2013 to build the capacity and capability they will need to develop their SIF Investment Strategies. They will get help from local teams from DCLG, DWP, DEFRA and BIS, who will advise on the development and delivery of strategies, including compliance with EU rules. The Government will look further at how Technical Assistance from the programme can be used to support LEPs and local partners to deliver their SIF Investment Strategies in Each LEP area will receive a seven year notional funding allocation. It is notional because LEPs will not actually hold the funds Managing Authorities will be responsible for making payments to the various projects and programmes to be supported. The allocation is for the full term of the Programme, but will be subject to annual review from 2017 onwards. The UK will be obliged to meet EU spending and performance targets throughout and the Government may need to shift allocations around the country in order to ensure funds are spent rather than returned to Brussels. The Government will write to each LEP Chair shortly about its seven year notional allocation for the ERDF and the ESF and to set out any particular local conditions or issues. Complexities might include overlapping LEP boundaries and the treatment of transition regions that are subject to slightly different requirements. Notional allocations will only be confirmed after the European Parliament and Member States have agreed the EU Budget, which is currently expected to over the next few months. Match Funding As stated in the introduction, EU rules require SIF to be matched with domestic funding. Some of this will come from Government, not least through the new arrangements for the Single Local Growth Fund. But the Government wants to see it coming from the private sector too. LEPs, it is stated, with their business leadership, will be well placed to help deliver this. The civil society sector should also become more closely involved. SIF Investment Strategies will therefore need to summarise both local sources of match funding and the government programmes LEPs want to draw on. Further information on sources of match funding will be included in the detailed guidance in June. However, the Government wants LEPs to work with partners especially private sector partners to begin to identify potential sources of match funding now.

7 National and Local Governance The SIF Growth Programme will be overseen by a National Growth Board. This will ensure that money spent through the Growth Programme delivers economic impact, achieves its performance targets and provides value for money. It will also provide oversight of the programme, and so fulfil the role of Programme Monitoring Committee for both the ESF and ERDF Operational Programmes. Managing Authorities are responsible for ensuring that the programme is delivered in line with the regulations and represents good value for money. They take final responsibility and can face financial penalties when the regulations are breached. Government Departments will act as Managing Authorities as follows: DCLG for ERDF DWP for ESF DEFRA for EAFRD They will advise LEPs on how they can spend the money without breaching the EU s regulations. EU regulations require that SIF programmes are prepared, implemented and monitored collaboratively with delivery partners. LEPs will need to develop their strategies with a broad range of economic, social and environmental organisations such as businesses (including social enterprises and mutuals), trade unions, local authorities, civil society interests and networks, equality and non-discrimination bodies, Jobcentre Plus and universities and further education institutes. More guidance on this will be provided. But LEPs, it is stated, might want to consider taking steps now to start involving more partners, whether through working groups, widening their Board representation, or other partner involvement. In Community Led Local Development (CLLD) local communities in small areas bring forward projects to develop their locality. In the current programmes it operates in rural areas as part of the Rural Development Programme for England under LEADER which supports community groups in forming a Local Action Group (LAG). LAGs are given budgets to develop and implement local development strategies. At least l5 per cent of the Rural Development Programme must be spent on LEADER. In the new programme this will continue, but with the difference that LEPs may also choose to put in funding to boost the value of their local LEADER area from the SIF. In the programme community development can be used to deliver structural funds in non-rural areas. Therefore LEPs may choose to put in funding from the SIF to create and support Local Action Groups in non-rural areas, for example in deprived neighbourhoods within a city, a market town and its hinterland or an industrial district.

8 The Government will work with partners to develop more detailed proposals. But initial guidelines for LEPs wanting to consider this approach are that LAGs will propose what sort of area and population should be covered by their local development strategy, though this will be different for each area and may cross LEP boundaries. LAGs should also be represented in the LEP governance structure. Alignment with European Territorial Cooperation (Interreg) programmes Different local areas in England have the opportunity to participate in a range of European Territorial Cooperation (Interreg) programmes. These programmes are funded by ERDF (outside the LEP notional allocations) but are managed and delivered jointly with other member states. They therefore have different development processes and timescales to mainstream SIF programmes. These programmes can make a contribution to LEP SIF Investment Strategies. More guidance on this will be provided later. Likely role of Financial Instruments The European Commission has said it wants Structural Funds programmes to make use of a wider range of financial instruments in The Government's initial views on how this might work are set out below and comments are invited. JEREMIE is the Joint European Resources for Micro to Medium Enterprises. It can be used to fund small and medium sized enterprises through loans, loan guarantees, or equity. As enterprises eventually repay the finance, a revolving holding fund is created, so that more organisations can receive finance. The Government is considering ring-fencing a proportion of the Structural Funds budget, before the distribution of LEP notional allocations, for a national fund to deliver equity together with loan and mixed investments. This would either be a single fund with geographical targets or a sub-national fund-of-funds, which could build on current JEREMIE structures, ensuring effective use is made of existing management structures and legacy funding. Either option will involve local delivery of funds, with funding targeted where the lack of availability of private sector finance is most acute. This approach would also allow significant match funding to be put in place. LEPs views on this proposal are welcomed, including any alternative proposals for local equity funds. The Government proposes two delivery mechanisms for loan funds. They could be set up locally by a LEP using part of its allocation and finding local match funds. Or LEPs could voluntarily pool allocations into a sub-national fund-of-funds, which might be large enough to secure significant match funding at national level. There may also be the opportunity to use financial instruments in other policy areas. For instance, some LEPs may want to set up JESSICAs to establish city level urban development funds (UDFs). JESSICA is the Joint European Support for Sustainable

9 Investment in City Areas, and is another revolving fund. Revolving loan funds, matched with institutional investment, could be used to support retrofitting local social housing developments with energy efficient measures, with a view to creating local jobs, addressing fuel poverty, and boosting demand for green technology. A SIF Investment Strategy will need to provide an assessment of small and medium sized enterprises access to financial markets in the area, including evidence of market failure and the level of demand for investment products amongst small and medium sized enterprises. Where LEPs are proposing to make use of financial instruments in other areas, a similar assessment will be required. Where LEPs wish to set up their own funds, they will also need to identify funding for set up costs, and ongoing management and administrative costs of EU reporting and regulatory compliance. Additional freedoms and flexibilities The Government thinks that the model already offers LEPs a high degree of freedom and flexibilities. Nonetheless, there might be circumstances where more freedoms and flexibilities would deliver better outcomes. Any LEP that feels further freedoms or flexibilities may be beneficial will need to outline: the LEP area(s) to which the freedoms/flexibilities would apply the governance structure and integrated strategy that exists across the area, and political leadership in support of the proposals; the specific freedoms/flexibilities they would want, setting out how these would work and why these would deliver better outcomes at a reduced cost; and the format of any agreement they would seek from Government in relation to these freedoms/flexibilities, whether that be through an Integrated Territorial Investment agreement or other agreement with Government. The Government will consider these on a case by case basis. Policy priorities for the Structural and Investment Funds In 2011, the European Commission published its proposals for new regulations governing the SIF for These are currently being negotiated by EU Member States and the European Parliament. The regulations will establish 11 overall thematic objectives, within each of which there will be more specific investment priorities or measures for each Fund. In order to deliver bigger impacts, the regulations will give priority to a smaller number of these by setting minimum spending levels against them. A set of top priorities for the Growth Programme have been established based on the Europe 2020 goals, the spending levels set out in the EU regulations, and the EU

10 structural reform agenda to deliver growth and jobs (Country Specific Recommendations). These priorities are: Innovation, research and development Support for micro, small and medium sized enterprises The low carbon economy Skills, employment, and social inclusion. There is a lengthy annex in the Government document setting out further detail on each of the thematic objectives, and activities that might be funded under each, alongside a summary of the current requirements in the draft regulations for spending minima. The section below summarises the 11 thematic objectives as succinctly as possible. Thematic Objective 1: Innovation The Europe 2020 ambition is to improve the conditions for research and development, with the aim of raising combined public and private investment levels to 3 per cent of GDP. In the UK the aim is to improve the framework conditions for research and innovation to facilitate greater private sector investment over the period. Activities considered under this objective include building collaborative research networks between enterprises, research institutions and public institutions, supporting small and medium sized enterprises to commercialise R&D, or to bring new products to the market, especially those linked to key enabling and health science technologies. It can also cover physical infrastructure for innovation including incubation space for new enterprises active in innovation linked to research institutions and innovation activities which contribute to low carbon goals, resource efficiency, and protecting the environment, while maintaining a focus on business investment in research and innovation. The final regulations are likely to include conditions which will require governments to demonstrate a more rigorous approach to the selection of innovation activities. Governments will need to demonstrate that a strategic policy framework exists which embeds a policy known as 'smart specialisation. More information on this concept will be included in the detailed guidance. Thematic Objective 2: ICT The EU has set targets under its Digital Agenda for Europe for all premises have access to superfast broadband by 2020 and for 50 per cent of users taking up broadband services with speeds of more than 100Mbps. The UK Government aims to have achieved a transformation in broadband by 2015, with speeds three times faster than in 2010, around 10 million more homes and businesses connected to superfast broadband, and low prices with a competitive broadband market. Activities considered under this objective include promoting the take-up and exploitation of emerging technologies among underserved communities and businesses.

11 Thematic Objective 3: Small and Medium Sized Businesses (SMEs) The UK has a country specific recommendation to improve access to finance for SMEs. The UK Government s Plan for Growth aims to make the UK the best place in Europe to start, finance and grow a business. As a priority the SIF should support this agenda by building the capacity of existing businesses, ensuring they reach their growth potential and supporting an entrepreneurial culture to encourage sustainable new businesses. Activities to consider include ensuring a flexible mix of finance is available for all stages of business development, strengthening local and national supply chains, and ensuring an adequate supply of incubation space and support. Thematic Objective 4: Low Carbon The UK Government proposes that EU funds in England in this thematic objective should be focused on energy efficiency target and on driving jobs and growth in the low carbon economy. Those activities that need to be implemented now to achieve longer term targets will also be supported. Activities considered include support for the job-creation capacity of the low carbon sector, support for the non-domestic sector to develop low carbon technologies and to focus on energy efficiency, and development of whole place low carbon solutions, including heat and cooling networks, urban design, sustainable urban mobility, decentralised and off grid energy systems, community energy solutions, demand management and climate change adaptation measures. Thematic Objective 5: Climate Change SIF could be used to complement and match existing investment in climate change adaptability and mitigation whilst enabling appropriate economic growth outcomes consistent with the National Planning Policy Framework. Other aspects of climate resilient growth will be delivered through integrating adaptation action within the other thematic objectives. LEPs will be expected to ensure their strategies take full account of the opportunities and risks of climate change. Thematic Objective 6: Efficiency Protecting the Environment and promoting Resource Activities to consider under this objective include investment in resource efficiency measures that improve business performance, investment in green infrastructure to support sustainable economic development, promoting innovative technologies that address environmental protection and resource efficiency for businesses and communities, and actions to promote ecosystem services that support growth, and jobs. Thematic Objective 7: Promoting sustainable transport There is insufficient SIF Funding available to make major infrastructure investments under this thematic objective. However, there may be scope to fund some activities, particularly in less developed and transition regions. Examples include improving connections from local transport networks to key gateways linked to the TEN-T

12 (Trans-European Transport Networks), support for the development and implementation of new technologies and systems designed to improve the integration, intermodality and use of local public transport, and localised, small scale non-car transport interventions that link deprived communities to jobs. Thematic Objective 8: Promoting employment and supporting labour mobility The Europe 2020 ambition is to raise the employment rate for women and men aged to 75 per cent. The UK Government wants strategies to focus mainly on the following two ESF investment priorities under the employment objective: Access to employment for job-seekers and inactive people, including local employment initiatives and support for labour mobility; Sustainable integration of young people, in particular those not in employment, education or training into the labour market. There is a very long list of areas where the SIF can help complement these priorities and that also complement UK government programmes but do not duplicate or offer alternatives to them. Examples include providing additional or more intensive support to help people to move towards work, enter work (including self-employment), and to progress in work, additional and innovative approaches to pre-employment training, additional support for long-term unemployed people, including those who have left the Work Programme, and including new approaches to work experience and training, reducing the number of young people not in employment, education or training (NEET), additional literacy and numeracy provision for young people, and innovative programmes for marginalised groups to help bring them to and support them in learning, such as new training programmes and support for young lone parents. Local Enterprise Partnerships that contain areas that are eligible for the new EU Youth Employment Initiative (NUTS2 regions where the youth unemployment rate is above 25 per cent in 2012) will be expected to ring-fence funding from the ESF to support it. Further guidance will be provided when EU negotiations to incorporate the initiative into the ESF regulation have concluded. Thematic Objective 9 - Promoting social Inclusion and Combating Poverty The Europe 2020 strategy has a target of promoting social inclusion, in particular through the reduction of poverty, by aiming to lift at least 20 million people out of the risk of poverty and social exclusion. The UK Government expects strategies to focus mainly on active inclusion, in particular with a view to improving employability, and community led local development activities that support social inclusion. The areas where the SIF can help complement Government programmes but not duplicating or offering alternatives to them, are in providing additional and/or more intensive and flexible support tailored to the needs of people who are furthest from the labour market, tackling barriers to work in troubled families, and tackling barriers to work in an integrated way, including issues such as caring responsibilities, debt, digital

13 exclusion, drug and alcohol dependency, poor educational attainment, access to flexible and affordable childcare, health problems, and homelessness. Thematic Objective 10 - Investing in education, skills and lifelong learning The focus of Europe 2020 in this area are related to educational attainment, reducing school drop out rates, and increasing the number of people attaining tertiary level qualifications. Activities to consider include enhancing access to lifelong learning, upgrading the skills and competences of the workforce, increasing the labour market relevance of education and training systems, improving the quality of vocational education and training, the establishment and development of work-based learning and apprenticeship schemes such as dual learning systems, and additional and innovative approaches to training for the unemployed. Projects should be complementary to existing UK Government spending on skills, adding value and avoiding duplication. ESF will not normally be available to fund skills provision that would be financed by the national system of Government skills grants or loans. Exceptions where a local specific need has been demonstrated, within the ESF priority objectives, will be considered. Thematic Objective 11 - Institutional Capacity This thematic objective is designed primarily for the less developed countries and regions of the European Union that may need additional support to enhance their institutional capacity and improve the efficiency of their public administrations. The UK Government has to consider whether there is sufficient evidence of need to put a case to the European Commission that England should be able to use the Institutional Capacity Objective, or whether capacity building could be addressed under other objectives or through Technical Assistance. It would welcome suggestions from LEPs on this matter. In addition, there are a number of cross cutting issues that need to be considered, including equality, sustainable development, and social innovation. The EU considers embedding these horizontal themes as integral to the effective delivery of all SIF Investment Strategies both at a strategic and project level. More detail on how equality and sustainable development issues can be integrated into SIF Investment Strategies will be provided in the detailed guidance. The ESF should also promote social innovation within all areas falling under the scope of the ESF in particular with the aim of testing and scaling up innovative solutions (products, services or models) to address unmet social needs. LEPs should propose themes for social innovation under the ESF focused objectives (8, 9 and 10) and indicate which types of organisations or partnerships are best placed to contribute to these themes in their areas. The EU regulations governing use of the SIF set minimum levels of spend for certain thematic objectives and investment priorities. Some spending minima vary according to categories of region. Minimum level of spends are not expected to apply to

14 EAFRD, except for LEADER. However, spending minima, including whether a minimum amount of the SIF should be allocated to the ESF is still under discussion. These negotiations are important because the funds allocated to each strategy across England will have to add up to the national spending minimum required for each strategic priority, and each LEP should have regard to the relative priorities set out at national level. There may be LEPs where specific local circumstances make it sensible to select alternative thematic objectives as local priorities. Where this is the case, they should explain their rationale. LEPs need not cover all 11 thematic objectives in their strategies. However, if the aggregated spending totals vary significantly from those required by the EU regulations, the Government may need to work with LEPs to adjust their proposals. Timelines and next steps The Government s Spending Review scheduled for 26 June 2013 is the next key milestone. It will set out departmental budgets for and will determine the size of funding streams transferred to the first Single Local Growth Fund and more detail on the LEPs strategic economic plans. After a period of local planning and preparation, the Single Local Growth Fund will be available to spend from April As indicated, the SIF are likely to start to be available to spend from around mid-2014, a year before the Single Local Growth Fund. Consequently LEPs will need their SIF Investment Strategies to be in place before the negotiations with Government over their full strategic plans for the Single Local Growth Fund are complete. Following the publication of more detailed guidance, LEPs will be asked to submit their first draft SIF Investment Strategies at the end of September Final strategies will need to be submitted to Government in January The timing is driven by the need for the UK to submit a Partnership Agreement to the European Commission before the end of This essentially constitutes the UK s business plan for SIF investment for , and will need to set out how the UK will allocate its share of SIF. The first draft SIF Investment Strategies at the end of September 2013 should therefore include the following elements: an analysis of development needs and growth opportunities with reference to both the thematic objectives a breakdown of proposed spend across thematic objectives from ; a description of the main results expected for each thematic objective; and a description of indicative proposals for any use of Community Led Local Development initiatives or engagement with LEADER.

15 Indicators and Milestones There will be a much stronger framework for performance management in the period than in previous programme periods. Importantly, there will be a big emphasis on making progress towards result indicators, which will be explicit about the change that investments will be expected to deliver. Each indicator will need to include a baseline, showing current levels of the variable in question, and a proposed target for the future. More detail on the performance framework and indicators will be set out in the detailed guidance. Comment Given the somewhat lengthy distillation of the complex delivery mechanisms and regulations governing EU funding set out above, this comment section is kept to a minimum. Two key points to note are, first, the tight timeline for the preparation of SIF Growth Strategies, which need to start now with analyses of key local needs and opportunities and how to address them in ways consistent with the EU s priorities. However, the preparation of these plans must begin under conditions of some uncertainty, given that the EU s negotiations and budget allocations will not be complete until the summer. The size of funding streams transferred to the Single Local Growth Fund will not be known until 26 June. It is also likely that additional partnership arrangements, both within and across LEP areas, will have to be created in order to draw down EU funds. Second, considerable uncertainty continues to surround the issue of match funding. Although it is stated that some of this will come from Government, the guidance has stressed LEP leverage in obtaining private sector and civil society funding. Finding match funding has always been challenging, but there is little indication in these guidance documents that it will be any easier in the programme. On the other hand, there are encouraging signs of a willingness to innovate in developing new financing mechanisms in enterprise support and urban regeneration. Even though the requirement for match funding remains, some of these mechanisms could be the way forward for sustainable economic development. For more information about this, or any other LGiU member briefing, please contact Janet Sillett, Briefings Manager, on janet.sillett@lgiu.org.uk Preliminary Guidance on Structural Funds Here Related Briefings The Government s Response to the Heseltine Report Heseltine Report No Stone Unturned in the pursuit of Growth

16 What s next for Local Enterprise Partnerships? Communities and Local Government Select Committee European Regional Development Fund