Seyi writes…

Since being elected I’ve raised a number of questions at council meetings about how we as a Council can improve our relationship with Europe whether that be applying for EU funding or the council encouraging more young people to enrol on EU programmes such as Erasmus+.

In April the Mayor agreed that in light of the upcoming European Union referendum I should lead on a review with the policy team on the potential impact of Brexit on Newham. Given time constraints due to the EU Referendum purdah (started on 27th May) the review will happen in two parts and I presented the first part of the report to Cabinet on Thursday 26th May. You can read part one of the report below

Part two of the report is dependent on the outcome of the referendum. If we remain in the EU, the second part of the report will look into how we can improve the dis-benefits of Europe for Newham.

If we leave, the report will explore how can we support our businesses/residents and still maintain a good relationship with Europe.

Newham and Europe

On 23rd June the UK Government is holding a referendum on whether it should remain in or leave the European Union (EU). Given the range of arguments playing out on the national stage, this report aims to unpick the impact the EU has specifically on Newham focusing on the key areas of the Council, local residents, and the local economy.

Newham is a place of growing opportunity benefiting from significant regeneration that is bringing with it thousand of new jobs, housing and a changing public realm. Transport infrastructure has improved significantly over the past 10 years with the extension of the Jubilee line, DLR and the future arrival of Crossrail. Stratford alone will have 10 lines running through it by 2018. Employment rates are going up supported by significant investment in Newham’s employment service Workplace and school performance has risen significantly in recent years thanks to strong relationships between schools, the ambition of head teachers and the local authority.

Despite these exciting changes Newham also faces many challenges. The Council has faced some of the worst funding cuts in the country since 2010 which will continue in the coming four years. The borough has a population of nearly 340,000 that is estimated to grow to more than 404,000 by 2030. Newham is hugely diverse with more than 200 dialects spoken. The 2011 Census found that more than half of residents in the borough were born outside of the UK. Health outcomes are poor across many areas including high rates of diabetes, cardiovascular disease and low cancer survival rates, despite having the youngest population in the country. Skills levels and incomes of our residents are low compared to the rest of London and the UK.

To ensure that local people benefit from the changes and improvement happening in the borough the Council has a clear commitment to building resilience which drives everything it does. This mean supporting residents to build the skills and capacities to take up opportunities and negotiate challenges; encourage a cohesive and connected community, and work to ensure there is a sustainable local economy that provides jobs and wider opportunities which can help to improve outcomes across the borough.

Given the wide ranging ways in which the EU works with the UK, influencing areas as far ranging as employment, equality, waste and environment, it is important that Newham is not on the side lines as the national debate takes place.

This report is not intended to influence the way residents vote in the referendum or establish a position on whether the UK should remain in or leave the EU.

Europe and the Council

The EU plays a significant role in the operations of the Council. This ranges  from EU legislation on addressing climate change impacting waste collection and disposal, to rules governing procurement of goods and services, and access to funding.

The Local Government Association (LGA) is represented in Brussels to make sure local councils have a voice in the decision-making process of the EU. Some councils choose to have their own representation, most commonly in regional or sub-regional consortia. Newham currently does not have direct officer representation in the EU.

This section examines the relationship between the EU and the Council, looking across the interlinked themes of policy; finance; and bureaucracy.

EU Policy and Newham

Europe can impose legislation in the UK through two mechanisms. Directives have to be passed into UK law through the legislative process and once transposed remain in UK law unless each is repealed. The second mechanism is regulations which do not require domestic legislation.

Some existing legal structures which impact on the operations of Newham Council include:

Environmental Policy: Waste collection and disposal

Local authorities are required by law to provide a domestic waste collection and disposal service. The regulation that governs the responsible disposal of waste largely derives from Europe. One of the key pieces of legislation is the Waste Framework Directive 2008. This is underpinned by five principles – prevention, reuse and preparation for reuse, recycle, recovery, and disposal to prevent harm to health and the environment and combat climate change.

The Directive includes targets to reuse and recycle 50 per cent of household waste by 2020. The UK is not on track to meet this, despite a 400 per cent increase in recycling rates since the early 2000s. If the targets are missed, the UK Government has made provisions in the Localism Act for any fines imposed by the EU to be passed down to local authorities.

The Landfill Directive impacts on Newham’s operations as it requires the UK to reduce the amount of biodegradable municipal waste sent to landfill. The landfill tax imposed by UK government in 1996 is paid by any company, local authority or other organisation that wishes to dispose of waste in landfill. It is intended to encourage alternative means of waste disposal, such as recycling.

The LGA has called on the government to better support local authorities to meet the targets set by the EU by redistributing landfill tax back to local authorities to pay for infrastructure that can improve recycling rates.

Environmental Policy: Planning and development

Local authorities must adhere to various directives from Europe when undertaking local plans. These include the Strategic Environmental Assessment Directive, the Habitats Directive 1992 and the Environmental Impact Assessment Directive 2011, which are aimed at avoiding unintended impacts of development.

UK Government guidance is limited as to the expected outputs of these measures. This means that local authorities tend to undertake a detailed analysis producing lengthy documents to avoid legal challenge.

Employment Policy: Employee Rights and Protection

The EU has had significant influence over employee rights and employer responsibilities. As with all employers the Council is bound by employment legislation that governs a wide range of protections including minimum paid leave; additional rights for agency, temporary workers and part-time workers; pregnancy, maternity and parental leave rights; the maximum weekly working time; anti-discrimination rules; and equal pay.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 is another area which was adopted to implement the European Acquired Rights Directive. This legislation is important if part or all of a business is sold; there is a takeover of a lease of premises; or if a service is outsourced, or services are brought in-house. If employees transfer under these circumstances they are entitled to their existing terms and conditions even if the new employer has different or fewer benefits in place. The Council as an employer is bound by this duty.

Employment Policy: Safeguarding

Domestic health and safety law is largely governed by the Health and Safety at Work Act 1974 which was introduced prior to any EU legislation. However, EU directives have had a role in expanding regulation in the interest of safeguarding workers. A key directive is the Health and Safety Framework which was implemented through the Management of Health and Safety at Work Regulations 1999. This establishes obligations for employers to evaluate, avoid and reduce workplace risks.

A range of other directives, implemented through national regulations, cover:

• The management of specific workplace risks, such as musculoskeletal disorders, noise, work at height or machinery
• The protection of specific groups of workers, such as new or expectant mothers, young people and temporary workers

The Council again has a duty to consider health and safety as an employer, but also in regards to its enforcement duties, which are shared with the Health and Safety Executive. Local authorities enforce health and safety law mainly in offices, shops, retail and wholesale distribution, hotel and catering establishments, petrol filling stations, residential care homes and the leisure industry.

The EU and Newham Administration

In local authorities an example of practices extensively regulated by the EU is procurement. EU legislation in this area supports a free market for goods and services across all member states. There is a threshold above which all public procurement should follow a set framework involving the publication of tenders and standard procedures.

Evidence suggests that cross-EU public procurement is limited with only an estimated 1.3 per cent of the value of larger UK public sector contracts awarded to countries based abroad in 2009 to 2011. In Newham 171 providers not based in the UK registered on the Council’s procurement portal, but none currently have contracts with Newham.

Councils regularly commission external organisation to deliver services and therefore are regularly in the practice of meeting EU rules on inviting companies to tender for contracts.

The 2014 EU Public Contracts Directive which was implemented through the Public Contracts Regulations 2015 attempt to make the procurement process simpler. These include the online publication of all procurement and contract documents; a “light touch” regime applied to certain social services health, social, education and certain other service contracts; and a reduction in minimum time limits for procurement procedure from 52 weeks to 35.

In 2014, the Communities and Local Government Select Committee in Westminster criticised some Councils for an “over-zealous application of EU procurement guidelines”. It recommended that to address this the LGA and Government should specify what a proportionate approach is to meet EU requirements to better streamline processes.

EU Funding and Newham

EU membership opens access to European Structural and Investment Funds (ESIF), which support investment in innovation, businesses, skills, employment and job creation.  

The ESIF are the EU’s main investment tools, other funds which can be accessed include:

• Horizon 2020 – for research and innovation
• Erasmus+ – for education
• COSME – Competitiveness of Enterprises and Small and Medium-sized Enterprises
• And a range of loan products mostly suited to large scale projects.

The UK receives €10.7bn in European Regional Development Fund (ERDF) and European Structural Fund (ESF) Structural Funding for 2014-20, of which €6.9 billion is allocated to England – excluding the €200m allocated to the Youth Employment Initiative. This amount is then divided into ‘notional allocations’ for the 39 Local Enterprise Partnership areas under which London gets €745.4m.

The ERDF’s stated aim is to support research and innovation, small to medium sized enterprises and creation of a low carbon economy. While the ESF focuses on improving employment opportunities, promoting social inclusion and investing in skills.

Newham does not currently access all of the funding streams outlined above. However, the Council started receiving ERDF money in 1997 and up to 2006 this went towards a number of projects often in the form which required match funding. The earlier rounds saw a contribution through ERDF of around:

• £400,000 to the overall £1.9m spent on Stratford Rail Lands
• £450,000 on Stratford Town Centre
• £3m in Canning Town
• £930,000 on St. Luke’s
• £1.2m on Grassroots and The Hub Community Resource Centres
• £500,000 on The Children’s’ Discovery Centre received; and
• £7m on the development of cultural industries in Burford Road, Stratford

In addition to the capital funding set out above, between 2000 and 2008, £278,000 was spent on various revenue projects aimed at building capacity.

The Council is currently running an ESF programme with a total value of £4.9m which includes EU funding of £2.2m. As part of an agreement with the Growth Borough Unit, this means £2.2m of European funding will go towards helping local people into work, through the Council’s Workplace programme over the next three years.

Strict criteria must be met in order to apply for funding through the programme, dictated by both Brussels and the UK Government.

The ERDF only funds a specific percentage of the total eligible project costs. The remaining match funding (usually around 50 per cent) must be secured by the applicant. For ESF funding, match funding can be met by organisations who are commissioned by the UK Government to deliver the funds, which are known as co-financing or opt-in organisations.  

The main co-financing organisations are the Department for Work and Pensions, Skills Funding Agency, the Big Lottery Fund, and for London the Greater London Authority. All of these have their own priorities and targets.

The LGA has argued that EU funds should be more joined up and locally responsive and has challenged the government to trust local areas to make the right spending decisions.

Europe and Newham Residents

This chapter explores the EU’s relationship with Newham residents, looking in particular at migration and the rights and protections that apply to all EU citizens.  

EU Migration to Newham

The Treaty on the Function of the European Union grants all EU citizens the right to move and reside freely within the territory of Member States. This right relates to UK citizens moving to other member states as well as other EU citizens coming to the UK, and extends to family members of EU citizens regardless of nationality. Freedom of movement is supported by a broader set of rights, including:

• Protection against discrimination on the grounds of nationality for employment
• Co-ordinating social security, so that people do not lose entitlements when they exercise their free movement rights.

Newham is one of the most diverse boroughs in the country, and is home to the third highest number of EU citizens in London according to ONS projections (52,000 in 2014). The ethnic makeup of Newham has remained relatively stable since 2011, with two-fifths of residents from Asian ethnic backgrounds (39%); a similar proportion from White backgrounds (38%); and one-in-five from Black backgrounds (18%). However, the proportion of ‘new’ residents from the EU is rising. Wave 8 of the Newham Household Panel survey found that  one in five residents (21%) have lived in the borough for less than two years, with 40 per cent of ‘new’ residents from a non-British White background – predominantly people from Poland, Lithuania and Romania.

EU Rights and protections for Newham Residents

Alongside freedom of movement, Newham residents currently have a number of other rights and protections that derive from EU law. These include:

Human Rights:

EU law places a number of human rights obligations on members states through the EU Charter of Fundamental Rights. This does not necessarily add to rights that were already in place in the UK, however the EU Court of Justice can hear actions against the institutions and the Member States for breaches of these rights. The government are reviewing the EU impact on human rights in the UK as part of plans to develop a British Bill of Rights.  

Employment protection:

The EU set minimum standards and protections on issues such as: annual leave, maximum working hours for health and safety purposes; agency worker rights, part-time worker rights, collective redundancy, paternity, maternity, and parental leave, and antidiscrimination legislation. A significant proportion of UK employment rights and protections come from Europe. In areas such as health and safety and antidiscrimination this has strengthened existing UK law, although in some areas the UK provides better conditions than the EU’s minimum requirements.

Consumer protection:

Promoting consumers’ rights is enshrined as a core value of the EU in Article 12 of TFEU, and a significant proportion of consumer protection regulation in the UK is derived from the EU. Directives implemented in the UK protect consumers on a range of issues, including unsafe products, unfair practices, misleading marketing practices, and distance selling. The Consumer Programme 2014-2020 has a budget of €188.8 million to support EU consumer policy, supporting national authorities in charge of consumer policy, safety and enforcement. The main priorities for the 2014-2020 programme are:

 

• Safety
• Consumer information and education
• Consumer rights and effective redress

 

• Strengthening enforcement cross-border

Europe and Newham’s local economy

This section explores Europe’s relationship with Newham’s local economy, looking across the interlinked themes of: trade and local businesses; growth and regeneration; and jobs and skills.

EU Trade and local businesses in Newham

The EU is the UK and London’s main trading partner and provides access to the single market:

• 44 per cent of total UK exports go to the EU, accounting for £227bn worth of goods and services and 13 per cent of UK GDP. 53 per cent of the UK’s imports come from the EU.
• The EU accounts for 30-40 per cent of London’s total exports, according to research by London First. GLA figures show that goods exported to the EU generated  £13.4bn in 2013.
• 32 per cent of London businesses export goods, with 80 per cent of these are involved in exporting to Europe.

The EU also impacts on local businesses in a number of other ways:

EU policy and regulation:

All UK businesses are currently subject to a wide range of EU policies and regulations across areas such as product specifications; competition; employment terms; health and safety; and consumer protection. In many cases these are linked to participation in the single market or provide rights to employees and consumers.

Free movement of labour:

Local businesses can employ people from across the EU without the need for a visa or other requirements. National figures show that the retail and manufacturing industries (both major employers in Newham) employ relatively high levels of EU citizens.

A survey of Newham’s Chamber of Commerce on the EU conducted by the Council received 27 responses from local businesses. Of these the majority were based in Newham (18), or elsewhere in London (6). Only one company had their headquarters overseas. The majority (20) were small or medium sized enterprises (SME) with 250 or fewer employees. More than a third (10) had a turnover of less than £100,000, and a third (9) had a turnover of more than £1m.

Two thirds (18) of the companies employ staff who have migrated from elsewhere in the EU, including three companies where EU migrants make up the majority of staff at 50-74 per cent. Reasons that local businesses gave for employing EU migrants focused around the migrants having relevant skills, or being the best candidate for the job.  Only one specifically outlined that the skills required for their jobs were not available in London.

Only six of the respondents trade with countries elsewhere in the EU through imports (4) and exports (4). Three companies had received funding from the EU through European Regional Development Funding, the European Social Fund and through third party funding.

EU Regeneration and Investment in Growth in Newham

Newham is changing rapidly, and looking to make the most of significant regeneration opportunities that will help to boost local growth. By 2025 it is estimated that £22 billion will have been invested in the area, creating more than 35,000 new homes and 100,000 new jobs.

Direct EU investment

European Regional Development Fund funding has been awarded to a number of smaller projects supporting local businesses and local economic growth. Since 2007 across England, ERDF investments have helped 24,767 new businesses to start or move into the local areas and created around 114,889 jobs for local people. Examples of projects working in Newham have included:

• The Innovation for Growth project led by the University of East London (UEL) which saw £320,000 of ERDF funding between 2008-2011.
• The Innovate HER project led by Newham College, which aimed to support 120 women led SME’s from East London to identify and develop innovatory services, products and business models to grow their businesses. The project received £370,000 of ERDF funding between 2009-2012.
• M-Com project, which assisted 12 SMEs from South and East London to access e-commerce expertise at UEL, with £108,902 ERDF funding from 2009-2011.   

Foreign investment

London attracts the most Foreign Direct Investment of any European city, according to research by London First. Forty per cent of the world’s largest 250 companies choose London for their European or global headquarters, with almost half citing access to Europe as the core reason for investing.

EU Jobs in Newham and Investment in Skills

Data from economic and development consultancy TBR cited by Centre for Cities shows that European firms have created more jobs in the UK than any other of the UK’s trading partner countries, with one in five jobs of these in London.

Research by Frontier Economics for London First concluded that EU membership had boosted trade which in turn led to higher productivity and pay rates. The findings suggest that around 29 per cent of real wage growth from 1986 to 2014 is associated with EU membership, equivalent to average wages in London are £3,100 higher than they would be if we were not in the EU.

As noted above, EU funding contributes to employment and skills through funding from both the ERDF and the European Social Fund (ESF). As well as funding that is going towards supporting people into work through Workplace EU funding for skills provision has also been provided to Newham College and other partners in Newham.   

Conclusion

This report explores the relationship between Europe and the Council, residents and the local economy in Newham through key policy areas, funding, residents and local business. Given the wide ranging ways in which the EU works with the UK, this report is intended to give a clearer idea on the specific relationship it has with Newham.

The Mayor in consultation with Cabinet is asked to consider the contents of this report and agree to further work on Europe and Newham following the outcome of the referendum in June.