The closing date for this consultation is 27/04/2012

Transcription

1 1 Partnership Agreement: Delivery of Structural Funds, Rural Development Funds and Maritime and Fisheries Funds in England: Informal Consultation Document. Response Form You may respond online or by using this response form. The online version is linked to the consultation website The Department may, in accordance with the Code of Practice on Access to Government Information, make available, on public request, individual responses. The closing date for this consultation is 27/04/2012 Name: Corine Meier Organisation (if applicable): National Housing Federation Address: Lion Court, 25 Procter Street, London WC1V 6NY Please return completed forms to: Steve Cross Department of Business, Innovation and Skills 1 Victoria Street 4 th Floor Spur London SW1H 0ET Tel: Fax: structuralfundsnegotiations@bis.gsi.gov.uk Please tick a box from a list of options that best describes you. X Business representative organisation/trade body Central government Charity or social enterprise Individual Large business (over 250 staff) Legal representative Local Government Medium business (50 to 250 staff) Micro business (up to 9 staff) Small business (10 to 49 staff) Trade union or staff association

2 2 Other (please describe) The National Housing Federation represents 1200 not-for-profit housing associations in England. Our members are not-for-profit social enterprises that provide two and a half million affordable homes and neighbourhoods services to over five million people. In 2011, the turnover of our members was over 12.5 billion, with an annual expenditure on maintenance of 3.6 billion 1. Last year, they built 43,636 new homes 2, and employed 155,491 staff 3. They are community organisations that invest in their neighbourhoods and whose services benefit one in ten of the population. For example our 2008 Neighbourhood Audit showed that they invested 435 million, two thirds from their own resources, in neighbourhood facilities and services like community centres and training. 4 They have accessed ERDF, from the % regulations amendment for energy efficient refurbishments and ESF for training, education and employment projects in this programming period. The National Housing Federation welcomes the opportunity to take part in this consultation and outline our thoughts on priorities and governance arrangements for the next EU programming period Our response was drafted with our members feedback. Question 1: Which of the Commission s objectives for the Common Strategic Framework Funds most align with your objectives and plans? (Page 9) Comments: The National Housing Federation supports the following three objectives in order of preference - for the use of ERDF and ESF post We believe that these objectives fit in well with the UK Coalition Government s priorities and offer the best opportunity to maximise the impact of European investment to drive the UK economic growth and promote economic recovery: Objective 4: Supporting the shift towards a low-carbon economy, particularly in the housing sector One of the key actions that ERDF can support under this objective is investment in the wider use of Energy Performance Contracting in the public buildings and housing sectors. The Green Deal, the Coalition Government s flagship refurbishment initiative that will be implemented from the Autumn of 2012 onwards fits this description. ERDF from 2014 onwards, could be used to support the implementation of the Green Deal, either by providing grants to help households living in social housing who are more likely to be in or at risk of fuel poverty to benefit from it, or as a JESSICA low-cost loan or guarantee, to ensure social housing providers can access low-cost finance to fund a Green Deal. Both these measures would make subsidies (grant or lower cost loans) available to social 1 TSA Global Accounts, HCA figures 3 RSR returns, Neighbourhood Audit, 2008

3 3 housing tenants in or at risk of fuel poverty, many of whom underheat their homes, with the result that the possibility of energy bill savings is limited, even after energy efficiency improvements are carried out. This makes the Green Deal difficult to implement in many instances without subsidies. Prioritising this objective would enable the UK to meet the EU 2020 target of a reduction in greenhouse gas emissions, lifting people out of poverty and increasing employment rates. Indeed, the Green Deal has been favoured by the Coalition Government as a means to kickstart the economy, with the Department of Energy and Climate Change (DECC) estimating that the initiative is likely to sustain 100,000 jobs by 2015, rising to 250,000 when it reaches its peak. With the Commission s proposed regulations allowing the combination of structural funds, ERDF could be used under this objective alongside ESF to support the upskilling of the workers carrying out the Green Deal. Apprenticeships could also be financed by ESF as well as employment-related initiatives specifically targeted at the unemployed. Prioritising this objective also offers the advantage of making use of other existing sources of funding (Green Deal finance or ECO) as match-funding to ERDF, allowing the Government s initiative to go further and for European funds to work as a lever for it and complementing it. It is also possible to use ERDF in this instance as a JESSICA guarantee fund, attracting further low-cost, longer term investment that would provide cheaper Green Deal for client groups in or at risk of fuel poverty, such as social housing tenants. Please see annex I for suggestions on the various possibilities of using ERDF alongside ECO and the Green Deal. Thanks to housing associations ability to provide scale, their experience in the delivery of large projects such as improvements through the Decent Home Standard, and their existing expertise in green refurbishment, DECC sees a leading role for our sector in kick-starting the Green Deal initiative. Our members have already accessed some ERDF funding in the current programming period from the 4% regulation, where managing authorities have released the funds for that purpose. They are successfully delivering refurbishment projects such as REECH in the North West, a 15million project that will refurbish over 3,500 hardto-treat properties in the Merseyside area. As social enterprises committed to their neighbourhoods, they have also accessed ESF and successful projects include Cumbria Cohesion, run by Impact Housing, a 800,000 ESF programme to be delivered over three years. The project provides work-based training in recycling, energy efficiency and renewable energy to 310 people. Housing associations previous experience of accessing structural funds, alongside their expertise in green refurbishment and of dealing with client groups who are often unemployed and in receipt of benefits, would make them ideal delivery partners for such an investment programme. Objective 9: Promoting social inclusion and combating poverty The Federation believes that ERDF under this priority should be used as support for the physical and economic regeneration of deprived urban and rural communities (etc.), which reduces the spatial concentration of poverty, including the promotion of integrated plans where social housing is accompanied notably by interventions in education, health including sport facilities for local residents and employment. The conclusions of the recently published Department of Communities and Local Government Committee (DCLG) Sixth report outlines the need for more regeneration funding to be made available, now that Housing Market Renewal Funding (HMR), so-called Pathfinder funding, has been withdrawn. The Committee

4 4 even identified the need for government to produce a national regeneration strategy and to look at using European funding better to support it. Ensuring that European funds are used for this priority will enable the provision of much-needed funding to support rounded, place-based regeneration strategies, including improving existing housing, building new homes and tackling the economic, environmental, climate and social challenges affecting urban and rural communities. Match-funding could be provided by bidders or by the Regional Growth Fund, although the competition for the funds would need to be timed to coincide with the availability of ERDF under this priority. ESF in this instance, could be used to complement ERDF for integrated projects that allow a focus on places (through house building and refurbishment) and people (via upskilling, apprenticeship and training) to be put together. Housing associations, where finance has been available, have shown willingness to match-fund regeneration activities, and have delivered them successfully. One such example is the regeneration of Claedon Park in South Tyneside. The project is an award-winning 100m regeneration initiative of a 1920 council estate, delivered jointly with South Tyneside Council, South Tyneside Homes, Isos Housing Association and private Developer Bellway. Funding is split between 25% public grant and 75% partners input. The deprived estate was completely transformed in line with its vision of securing modern mixed tenure housing, accessible to a range of incomes, providing employment and training opportunities to the people of the borough, integrating infrastructures such as a PCT and community facilities, using architecture to create safer and sustainable neighbourhoods. The regeneration was delivered in conjunction with residents, and employment initiatives as well as careful planning of the scheme enabled several residents to get the required training to work in the area local shops for example. In a questionnaire in 2010, the number of households who reported receiving benefits had reduced by nearly 10%, and satisfaction of the residents with their environment had doubled. With their expertise of regeneration, green refurbishment work and employment schemes, housing associations would be the best partners to deliver such projects and ensure investments benefit local communities. ESF could also be used to support the creation of social enterprises, which alongside physical regeneration are an excellent means of fostering creativity, innovation and local employment. The Aspire Group, a social business which includes Aspire Housing, which owns and manages 9,000 homes, 1500 garages and 120 shop units, Enterprising Future, their social enterprise arm and corporate charity the Realise Foundation turned the issue of empty homes in lowdemand areas into a positive, by buying 41 of them with the help of a Homes & Communities Agency grant and refurbishing them as part of their youth refurbishment programme. The scheme, run by their social enterprise arm PM training, which operates across 4 boroughs and provides 1800 learning opportunities each year, offers local young people, many of whom are among the furthest from the jobs market, the chance to join a construction apprenticeship. PM apprentices and young learners are employed to carry out work such as stripping out existing fittings, plastering etc. and also work for specialist contractors. The properties once improved are offered for rent as social housing. The training offers a fantastic opportunity for the apprentices to improve their chance of finding work and is a cost-effective way of bringing back empty homes into productive use, improving the local neighbourhoods and boosting house prices and demand for neighbouring properties. The Aspire Group is developing this model further to broaden its range of social enterprise activities, for example it is looking to maximise the opportunities in green retrofit programmes such as external cladding, financed through the ECO, by developing apprenticeships and employment opportunities for local people.

5 5 ESF in this instance could be used either as a starter grant for social enterprises or as a belowmarket JESSICA loan for those that are looking at expanding, creating a revolving fund and making EU funding accessible for these types of enterprises in the long term. Another type of social enterprise particularly useful in areas under regeneration are credit unions, or social businesses that provide small loans to those who do not have access to mainstream credit facilities and are paying extremely high rates of interest on loans from subprime lenders and are at risk of falling prey to the loan sharks. One such social enterprise is My Home Finance Limited (MHF), a Community Development Finance Institution established by the National Housing Federation. It serves financially excluded individuals; that is to say people who cannot access credit from mainstream sources. MHF operates across the West Midlands with ten high street shops offering small-sum credit, basic bank accounts and savings accounts to customers in the area. The initial phase of the business has been funded by the DWP, housing associations and Wates Giving. A credit line has also been secured from the Royal Bank of Scotland. The demand for MHF s services has been huge, with nearly 8,000 loans made by the end of 2011 and 46% of borrowers taking up savings accounts. It is now seeking to expand in the North West and North East and looking for additional sources of finance. The social enterprise is expected to break even within five years of existence (2016). For these types of enterprises, start grants to enable them to get to the break-even stage quicker is essential. And access to low-cost loans going forward would enable them to thrive and be sustainable in the long-term. ESF could play both of these roles in these instances. Another priority that should be developed under this objective is enhancing access to affordable, sustainable and high-quality services, including health care and social services of general interest. In the EU and in England, ageing is a fast-growing societal challenge with almost 10 million people expected to be over the age of 65 by 2015, i.e. one fifth of the population in England. At the same time, the economic climate for developing homes and services to enable people to continue to live independently into old age is changing dramatically, with cuts being made to both capital and revenue budgets. Older people need to be able to live healthy, active lives or risk being marginalised. Housing associations already have a strong and positive reputation in meeting their needs within their housing and services, but with a third of all general needs tenants already over the age of 65, the sector needs to continue to plan strategically and innovatively to cater for their needs. ESF in this instance could be used to fund e-services ICT projects- to help older people access services and stay in their homes longer. Such projects have been developed by housing associations, and in particular Nottingham Housing Community Trust who is part of an EU project called HOST that looks at using ICT technology to enable their older residents to access services and remain independent for longer. Similarly, ERDF under the heading targeted infrastructure investments to support the shift from institutional to community based care could be used to create housing stock that is fit-for-purpose for this population. Good housing and related preventative services make a fundamental difference to health and wellbeing and have a critical contribution to make to the value and effectiveness of the health and care systems. Good design helps older people to live more independently for longer. Services such as handy person schemes, gardening and decorating allow people to maintain their homes and avoid the difficulty of having to find a contractor and the fear of having a stranger in the home. This can delay people s need to move to more specialist older people s housing. Investing in adequate services and homes to enable older people to remain independent for as long as possible will therefore also create an additional market for services, and employment, which in turn could be funded by ESF. These types of services for older people could be commissioned by a consortium of services providers to social enterprises, providing enough

6 6 scale for them to thrive. Social enterprises in turn would provide local employment to the community they operate in. Focusing on these priorities under objective 9 will help England hit the EU 2020 aim of lifting people out of poverty, into employment and will support social innovation. Objective 8: Promoting employment and supporting labour mobility The UK s unemployment rate was at 8.4% as at March , the highest it has been since The number of unemployed people aged 16 to 24 is increasing to reach 1.04 million over the last quarter. Based on the above, ensuring objective 8 is one of the partnership agreement s priorities is essential. Whist the government is rightly concerned with ensuring public support is targeted where it has greatest impact, the Commission is keen for investment programmes with fewer priorities so that the impact of the funds is maximised. We suggest that objective 8 would be best achieved where it is combined with capital investment in the low carbon economy (through energy efficient refurbishment and via the Green Deal in particular) and physical regeneration funding. This would require objective 8 to be aligned with objectives 9 and 4 and for different funds, ERDF and ESF to be accessible at the same time to allow for an integrated programme to be developed. ESF in this instance could be used for local employment initiatives, upskilling and apprenticeships in the low carbon economy or in sectors of relevance within the region under regeneration. Housing associations have successfully delivered employment initiatives previously. For example they were key partners in the delivery of the Future Job Funds programme with upwards of 3,000 young people directly employed within the sector in just 18 months. The Federation is now exploring with its members the possibility of arranging a large-scale apprenticeship scheme and will submit a bid to the UK Commission for Employment and Skills for a one-year project initially, worth 3.8 million, which will support 845 young people into apprenticeships within the social housing sector. The potential of combining ERDF and ESF funding to promote the low carbon economy and enable an entire industry to prepare for the new market has already been demonstrated by Impact Housing with both their Greenways to work project and Cumbria Cohesion project. Although the combination of ERDF and ESF is not allowed within this programming period, they managed to access separate pots of both funds and ensure the projects work alongside each other to maximise impact. Whilst ERDF-funded Cumbria Cohesion project aims to deliver a 22m ( 7.5m ERDF) investment in a programme of external wall insulation and renewables in hard to treat properties in the region; The ESF Greenways to Work project provides training and advice in domestic energy efficiency, livewires recycling modules, renewable energy installation training in PV, solar thermal and heat pumps and the first external wall insulation accredited training scheme in the UK. The external wall insulation programme has now begun on site, and the Lakes College West Cumbria through Impact s Greenways to Work ESF programme, is offering on site training and accreditation to skilled plasterers and construction staff. In addition, a cohort of out-of-work residents from across three social housing providers in West Cumbria are receiving a full College course in external wall insulation, including basic construction skills and thermal efficiency. This cohort will be ready for employment as the ERDF programme accelerates. The whole programme not only helps provide local jobs but enables an entire industry to gear 5 Office for National Statistics, Labour Market Statistics, March 2012

7 7 up to the low-carbon economy. Indeed, because Cumbria is a scarcely-populated rural area, businesses do not have sufficient volume or access to markets to enable local companies to compete with OJEU-sized companies from outside the locality. In sectors that depend on high turnover but have low profit margins (such as the insulation market), Cumbrian companies are unable to compete as they cannot afford to invest in associated skills when the local market is perceived as being so small. An input of subsidies and large-scale refurbishment projects, such as in this instance, caters for the problem, and enable local companies and local people to invest in the new technology. Question 2: A. Are there certain Common Strategic Framework objectives which might be more suited to thematic, issue-based programmes? (Page 11) A Yes All three objectives we have suggested are suited to thematic issue-based programmes, with objectives 4 (low carbon economy and social housing retrofit) and objective 9 (regeneration) providing the themes under which investment for objective 8 (employment) should be aligned. B. If so, why? Comments: Our proposal for objective 4, investing in the low-carbon economy and in social housing retrofit in particular, appears suited for a thematic, issue-based programme. Indeed, it is a not just a priority at EU level the Commission is keen for at least 20% of ERDF to be ring fenced to it-, but also within England, with Government putting a policy (Green Deal, ECO) in place to ensure the initiative is successful. This means that match-funding will be available across England and could be channelled nationally to make the ERDF pot for capital investment go further, such as by matching it to ECO funding, or using it as a guarantee to attract private investments at a lower rate and on better terms to help the Green Deal work better in social housing and for those in or at risk of fuel poverty. It is one of the areas of potential growth identified by this government, with DECC mentioning employment figures linked to the Green Deal topping 250,000 when it reaches its peak. This investment priority is an opportunity to channel both capital and soft skills investments to ensure that regions gear up their manufacturing, supply chains and workers to the delivery of the low carbon economy. Because it is a priority that has the potential for employment creation, and upskilling of both businesses and workers, it is important that funding for both capital investment and for soft skills/training can be invested in conjunction. A thematic approach would ensure this happens. Objective 9 is another investment priority that would benefit from a thematic approach. Indeed, regeneration of deprived areas is at its most successful when capital investment, such as with the building of new affordable homes, is combined with the provision of business support, training and upskilling of the people living in the area targeted. In this case, it is essential that ERDF and ESF can be easily accessed at the same time and a thematic approach would allow for this to happen.

8 8 C. And what mechanisms would be required to ensure sufficient local flexibility and involvement in decision-making and strategic guidance? Comments: The Commission regulations proposals rightly aims to ensure limited structural funds go as far as possibly by encouraging Member states to identify fewer priorities. The Federation believes that the current consultation and planned consultation early next year once BIS proposes a Partnership Agreement, would ensure enough local and stakeholders involvement into the strategic selection of priorities. Whilst the set of priorities should be set at national level with input from local stakeholders, and the funds possibly initially held nationally as well to attract further investors and increase their size (if it is a guarantee for instance, see annex I for examples), some of the mechanisms proposed by the Commission could then be used to devolve the actual implementation of the priority, and the management of the funds including selection of the projects and the overseeing of the delivery of the projects locally, in order to ensure that local specificities are taken into account. The problem of the current governance arrangements with an integrated programme delivery is that they are separate for different funds. For example ERDF is managed by a team within CLG regionally, with scrutiny and decision-making processes held regionally by the Local Management Committee (LMC), a group of stakeholders in the region. ESF on the other hand is managed nationally by a few selected agencies, such as DWP. In both cases, the ESFmanaging authorities and the LMCs were able to set their own investment priorities, with input from stakeholders. This has led to diverse investment programmes that might not be compatible with the Commission s requirement for fewer priorities to maximise impact. In addition, whilst ERDF is managed locally by the LMCs, the committees are not open and accessible to all key stakeholders housing associations despite being key businesses in the regions, and asking for a seat, never get one. The composition of the LMCs would need to be reviewed in order to ensure they include the expertise and key stakeholders linked to the priority. As for the national management of ESF by DWP, it excluded local delivery partners as in the case of their workless families programme, which allocated contracts to large contractors on their employment-related services framework. This delivery structure is not compatible with ensuring that each region uses investment under a priority to stimulate the local economy, as the large often national contractors allocated the funds will simply ensure they can cover their costs and allow for a margin, to the disadvantage of the local, smaller yet no less effective services providers. In either case, there is a need for open transparency of how the funds are managed, who is accountable for them, who makes decisions over who receives them, and how to ensure sector representation on the decision-making committees. We propose that whilst the overall priorities are set nationally and funds initially held nationally to attract further investors and increase the size of the funding pot, the implementation of the programme is then delegated via the Community led local development mechanism proposed by the Commission, in each of the region that qualify as NUTS 1. The programme would include a relevant amount of ERDF and ESF and its management devolved to a constituted body that is accountable for it, the so-called local action groups in the Commission s Common Provision Regulations. Local authorities or housing associations would be able to play this role or constituted partnership of consortia including housing associations, local authorities and

9 9 various key stakeholders such as LEP, which are able to receive and manage funds. However, should the managing body not be a consortium, it is important that the management of the fund is overseen by a new refreshed steering group or LMC, which would include the key stakeholders under the priority. For example under the low-carbon economy priority, LMC members should include local authorities, housing associations, business representatives and a representative of any active LEPs. A similar arrangement could be held under our proposed objectives 4 and 9. Both investment priorities would include objective 8 as well. As for the actual mechanism used, we are proposing Community led local development, but have already made a submission to the Commission and MEPs through our European Federation CECODHAS-Housing Europe to question the difference between Community led local development and integrated territorial investments as both mechanism do not appear to be much different from one another. Question 3: A. Where does your organisation see opportunities for more localised placebased programmes or projects within programmes and for which Funds or combination of Funds? (Page 11) Comments: See response to question 2 b. Our proposed priorities 4 and 9, which would be applicable for ERDF and ESF and drive the delivery of priority 8. B. How would this improve outcomes? Comment: Having one delivery body managing the funds and implementing the programmes would allow for integration of the funds and for place-based integrated investment programmes, such as the ones we have suggested under priorities 4 and 9. The fact that local stakeholders will be involved would ensure that the key needs and specificities of the regions are addressed and that investment would benefit local people and businesses, unlike a national programme with delivery allocated to national contractors. The national priority setting would ensure that fewer priorities are in receipt of funds, and that the priorities selected fit in with the priorities and existing paths for growth already identified by the government, in receipt of investment which can provide match-funding and be supported by policies. Question 4: What key things need to change in the way the Funds are currently used in order to reduce the administrative burden involved, whilst conforming to EU management control requirements? (Page 11) Comments:

10 10 Administration of the funds under the current programming period has been very bureaucratic and has made accessing the funds very difficult. Housing associations, in trying to put together projects to managing authorities that have made use of the 2009 legislation amendment and have had bidding rounds for social housing retrofit projects have come across the following issues: As the legislative amendment came half way through a programming period, the EU programme teams were unsure of how to deal with it and concerned about falling foul of Commission s regulations. This has led to delays in the negotiation processes for projects. In some regions, these have lasted over 18 months, with the delays having dramatic consequences for the bidders in terms of resources and costs. In all cases, there has been a strong focus by the programme teams to respect Commission regulation to the letter, sometimes to levels that might not even have been needed or required by the Commission itself. Indeed, following the regulation amendment, the Commission has always made it clear that they were very keen for member states to redirect the 4% to social housing retrofit and that they would make things simpler for managing authorities to do so, by speeding up any operational programme review for example. However, we came across the following problems: o Managing authorities ruled that Feed in Tariff (FiT) revenues were not a compatible source of match-funding for ERDF. This was despite ERDF regulations allowing for an element of revenue-generation for renewable projects and for projects involving Services of General and Economic Interest (SGEI) providers. Commission regulations are the same across the countries so it is unfair that in France, bidders were allowed to match-fund ERDF with FiT revenues. o Managing authorities worried about state aid and in some regions did not allocate projects to housing associations, as they considered them as private enterprises. In fact, housing associations are services of general and economic interest (SGEI) providers and as such are exempt from state aid notification, and allowed, as per the EU treaty, to receive state aid to pay for the provision of their service of general and economic interest. Again, state aid was never an issue in France. o Although the legislation states that the funds should finance actual refurbishment, in reality, few managing authorities allowed for the funds to be spent on capital investment, leading to ERDF funding research projects rather than actual capital refurbishment ones. o Managing authorities insisted on incorporating the new priority within the target requirement of their existing programmes that were drafted for different outcomes and in a different economic situation. This has led to funds coming with impossible targets such as the creation of over 40 new jobs for each 1million invested, in existence three years after the end of the project. o There have been instances where EU auditors working for CLG have thoroughly investigated a relatively small ( 300,000) project, and spent months and resources questioning definitions used for outcomes. Project deliverers have had to comply with a schedule of very heavy reporting.

11 11 Access to the funds (ERDF/ESF) has been difficult, with some ESF programmes going directly to prime contractors on national frameworks and very little involvement of notfor-profit local organisations, despite the promises of the Merlin standard. Because of all of the above, the National Housing Federation welcomes the focus in the Commission s regulatory proposal for simplified, lighter- touch regulation and would be in favour of common reporting requirements and processes to facilitate access across several funds to bidders. We would also recommend that priorities are agreed at the start of the programme, and that concerns such as state aid are discussed directly with the Commission at the outset of the negotiation processes. Support and technical assistance should be provided to fund managers to ensure that they understand fully what the regulations entail and what the Commission s requirements are. Monitoring that is results-orientated is better than process-driven, provided that the results are attainable (not the 40 new jobs after three year of finishing the project per 1million we came across in some regions), and broad enough. Payment on performance though might disadvantage smaller organisations who do not have enough cash to sustain themselves until the end of the project. It is much better to carry on payment on a regular basis but monitor the project based on results expected. View on performance linked payment? What s our view? Question 5: A. Are there specific combinations of Funds, or elements of Funds, which lend themselves to operating in joined-up programme arrangements? (Page 12) A Comments: Yes Under the priorities we have suggested before, ERDF and ESF in particular as well as convergence funding where it is available. However the mechanisms proposed by the Commission to facilitate this approach such as the Joint Action Plans do not appear entirely suitable as they cannot support investment in infrastructure, according to the Commission s Common Provision Regulations. This means that the very idea of integration and joined up delivery would not be met. We have already put a submission to the Commission regarding this through our European Federation CECODHAS- Housing Europe. If the Joint Action Plan can also support infrastructure investment, it would be a good option as it supports a results-orientated approach. The lump sum payments could be provided to a housing association to deliver specific projects linked to the low carbon economy and social housing retrofit or regeneration (provided it can support investment in infrastructure). B. If so, what kind of complementary measures and outcomes would you want to see? Comments:

12 12 If the Joint Action Plan was an option to invest in infrastructure as well, it could be used for social housing retrofit and outcomes could include number of homes refurbished and number of jobs kept, created and people trained for example. The beneficiary could be a housing association or a consortium including housing associations, local authorities and LEP representatives. The process for allocating the funds and for designating the beneficiary would need to be open and transparent. Question 6: Where does your organisation see opportunities for using some of the options proposed by the Commission to promote more localised and coordinated programming, such as Joint Action Plans, Integrated territorial Investments and Community-Led Local Development? (Page 11) Comments: Community-Led Local Development can be used for both priorities 4 and 9 to allow for integrated programmes within national priorities to be delivered locally for the benefit of the communities.

13 13 Question 7: Are there any other specific points you wish to be considered which are not covered by the other questions (Page 12)? Comments: Structural funds can be used in the form of financial engineering mechanisms, where ERDF or ESF can be used with match-funding as lower cost loans or as guarantees to attract further sources of investment at better rates and with longer terms. The Federation would like to encourage the use of structural funds as financial engineering to be looked into as priorities and programmes are established. This presupposes though that the fund manager would operate on a not-for-profit basis or take a small margin to cater for their management of the fund, otherwise the benefits of a lower rate would be lost and the fund would not provide anything different from products offered by usual lenders. The JESSICA funds would also need to be set up to match existing policies and funding. For example, if we want low-cost loans to allow social housing providers to deliver Green Deal for their tenants, then the terms of the loans need to tie in with the terms of Green Deal finance. At present our experience of JESSICA funds in the UK has not been that positive in that the cost of the loans and the terms have neither been that competitive, nor taken into account existing policies. Structural funds can be used to lever private investment and as priorities are agreed, it would make sense to approach investment partners such as the European Investment Bank (EIB) and the Green Investment Bank whilst setting up investment programmes. The Housing Finance Corporation (THFC) has recently announced it is in the process of securing 100 million of EIB funding for social housing retrofit. Going forward, if ERDF was to be used as a guarantee, which the regulations allow for, it could help lower the cost of any finance, including EIB finance, improve its term and be used under our suggested priority 4 as funding to enable social housing tenants or those in or at risk of fuel poverty to be able to afford the Green Deal. Please use this space for any general comments that you may have, comments on the layout of this consultation would also be welcomed. The Federation thinks that the Commission s Common Regulations Provision includes good ideas, but regrets that they are presented in a complicated, sometimes confusing manner. For example proposed mechanisms for involving local stakeholders appear to be similar. We would be keen for BIS to support our suggestions to the Commission on merging Community Led Development and Integrated Territorial Investments and on enabling Joint Action Plan to invest in infrastructure.

14 14 Annex 1: our proposals on how to use ERDF alongside Green Deal policy funding under priority 4. ERDF and the Green Deal proposals for making use of the fund as a grant or a financial mechanism 1. ERDF as a grant ERDF is usually provided as a grant, which requires 50% match-funding, unless the funds are in a convergence region, which then only require 25% match-funding. Match-funding needs to be finance that is available at the time of bidding and can t be earnings planned in a few years. ERDF in this case would function like ECO, to enable retrofit projects within the social housing sector that might not stack up financially through the Green Deal mechanism only to become financially viable. It could work to ensure the Golden rule Plus (where Green Deal charge plus energy bills is say 25% less than what the bill was before), a proposal aimed at those in or at risk of fuel poverty so that they feel that they make financial savings now. The pros: There have been previous projects which have worked on a comparable basis. The cons: Grants mean that the money available is finite. Critical success factors The investment priority needs to be agreed at national and local levels at the start of the programming period. The criteria for application of the funds need to be simple, and focus on outcomes, i.e. retrofit projects, not require specific outputs that are administratively heavy to demonstrate and might divert funds to monitoring the grants or reporting on it. State aid concerns need to be discussed upfront. Housing providers and local authorities are considered by the EU treaty as Services of General and Economic Interest (SGEI) providers, and benefit from state aid exemptions.

15 15 ERDF as a grant CLG/ managing body HAs or Local authority ERDF 1mio Retrofit project worth 2mio Green Deal finance /ECO/own funds 1mio

16 16 2. ERDF as a JESSICA mechanism ERDF matched with cash or land can be used as a below-market rate loan. The mechanism is called JESSICA. The advantage of such a mechanism is that the fund becomes revolving and monies that come back can be reinvested again. Once the funds have been invested once, the money is cleared of all regulations and the whole JESSICA amount could be used for social housing retrofit. The loan is on a 100% basis. The mechanism requires a fund manager. The fund manager will add a cost to the loan (rate) to cover its costs and make a profit, which will impact on the rate of the loan. The rate is based on the European Commission interest rate regulations so that it is state aid compatible. It will depend on the rating of the borrower and the risk of the project to the fund manager. The loan could be devised so that it lasts 25 years to tie in with the Green Deal. Access to the loans is through an open competition. Projects that meet the criteria would be selected by the Fund manager. The European Investment Bank (EIB) is usually involved in these funds when they are over 50m. For funds below this value, an independent fund manager could be appointed directly by the EU programme team, or for even smaller amounts, the loans could be managed directly by the EU programme team. The process for setting up these funds depends on the ERDF/ESF regulations and is signed off in the UK by the CPRG committee which includes representatives from HMRC, CLG and BIS. The pros JESSICA could provide below-market loans which would enable housing providers to benefit from cheaper finance to deliver the Green Deal. JESSICA monies revolve so the fund could provide a never-ending source of finance. In addition, once the funds have been invested once, they are stripped of any regulation, which means that more money could then be reinvested to support the green retrofit drive. JESSICA mechanisms do not count as grants, therefore schemes such as Feed in Tariffs (FiT) or Renewable Heat Incentives (RHI) are compatible with it and do not cause state aid concerns. The cons Match-funding in cash, land etc. is required to form a JESSICA pot. Approaches could be made to other financial institutions such as the EIB or Green Investment Bank. Fund managers will require securities against loans this is not ideal for social housing providers who operate in an environment where grant for new homes has been drastically reduced and they need to borrow more to build new homes. Critical success factors Agreement over the investment priority and the financial mechanisms need to be made at the start of the programming period. The UDF manager needs to be non-profit, or an organisation that will not pass on high administrative costs onto the lendee. The cost of the finance needs to be advantageous. The criteria for accessing the funds need to be flexible enough.

17 17 JESSICA as below market rate loans CLG/managing body Holding fund UDF HAs or Local authority ERDF loan pot (JESSICA) Retrofit project worth 3mio with 2mio Green Deal ECO

18 18 3. JESSICA as a guarantee JESSICA can also be used as a first loss guarantee fund to leverage additional lower cost finance. It would enable social housing providers to access finance without providing assets as security. The ERDF regulations allow for JESSICA to be used as a guarantee but match-funding is still required. Match-funding is needed on a pari-passu basis, i.e. the matching finance needs to be on the same terms and conditions as ERDF, or an average between ERDF and the matched finance needs to be used. The guarantee would also need to be managed by a fund manager who might also charge for the management of the guarantee fund, which will impact on the cost of the finance. A not-for-profit finance manager would therefore be preferable. There is no state aid issue provided the recipient of the Green Deal is a social housing tenant. There is likely to be a state aid issue if the RSL or local authority were the only ones who could use the guarantee fund and used it to provide owner-occupiers with competitively priced Green Deal in comparison to other large Green Deal providers who do not have access to the guarantee. The pros A guarantee fund means that asset securities will not be required, making it a better option for social housing providers. This could work like the retrofit revolving guarantee fund which Radian researched as part of their ERDF project and which our Welsh colleagues are trying to implement: The ERDF amount is never actually spent so could keep on being reused. The ERDF amount working as a guarantee can leverage additional finance to a ratio of 1:15-1:20. The guarantee would unlock additional finance in the retrofit sector. The cons Match-funding needs to be found to match the ERDF amount used as a guarantee. Critical success factors The priority and approach need to be agreed at the start of the programming period. The fund manager needs to be not-for-profit to pass on the benefits of lower cost finance. The cost of the finance needs to be advantageous. The criteria for accessing the funds need to be simple and flexible. A national pot bringing in all the relevant ERDF amounts from the different regions and enabling them to get back the amount of finance generated on a percentage basis would be a more efficient way of making ERDF go further. State aid issues need to be addressed upfront with the Commission. As long as the beneficiaries are SGEI tenants and the social housing providers who access the below-market rate finance are not using it to compete on the open market against Green Deal providers that don t have access to the source of finance, this is state aid compatible.

19 19 CLG EU team Holding fund UDF Retrofit project worth 2mio with 1mio Green Deal HAs or Local authority Fund worth m JESSICA guarantee 10m,1-15/1;20 ratio Retrofit project worth 2mio with 1mio Green Deal Retrofit project worth 2mio with 1mio Green Deal Retrofit project worth 2mio with 1mio Green Deal ECO

20 20 Thank you for taking the time to let us have your views. We do not intend to acknowledge receipt of individual responses unless you tick the box below. Please acknowledge this reply- Yes At BIS we carry out our research on many different topics and consultations. As your views are valuable to us, would it be okay if we were to contact you again from time to time either for research or to send through consultation documents? Yes Crown copyright 2011 You may re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. Visit write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or This publication is also available on our website at Any enquiries regarding this publication should be sent to: Department for Business, Innovation and Skills 1 Victoria Street London SW1H 0ET Tel: If you require this publication in an alternative format, enquiries@bis.gsi.gov.uk, or call URN 12/642RF