CONSULTATION ON THE REFORM OF THE EU STRUCTURAL FUNDS

In response to the joint Treasury, DTI and ODPM, March 2003, paper - A Modern Regional Policy for the United Kingdom. From the ESRC Devolution Programme Project Team on Devolution and European Policy Making in the UK

Professors Martin Burch and Simon Bulmer and Dr Ricardo Gomez (Department of Government, University of Manchester), Professor Andrew Scott and Dr Caitriona Carter (Europa Institute, University of Edinburgh), and Dr Patricia Hogwood (Department of Politics, University of Glasgow).

1. We adhere to two broad principles in respect of regional policy. First, that there should be greater commitment to regionally focused and controlled funding (whatever the source) to help address the persistent and worsening disparity between the richest and poorest UK countries and regions. Second, that regional policy should be simple in administration and, as far as possible, devolved to the level at which delivery takes place.

2. We welcome the commitment to a comprehensive regional policy and the recognition that an effective national economic development policy has to be significantly decentralised. We agree with much of the diagnosis contained in the consultation paper but not, as it stands at present, the key prescription to 'repatriate' the Structural Funds to member states. Especially welcome is the emphasis on administrative reform of the Structural Funds and the proposal to achieve some relaxation of the state aids regime.

3 We recognize that enlargement poses particular problems in relation to the continuance of EU funding. In an EU of 25 member states the extent and distribution of funding to the UK is bound to alter and on the basis of the present criteria is bound to fall. We also recognise that to maintain present funding levels in an enlarged EU would involve an increase in the overall Structural Funds budget and in the UK’s contribution to this.

4. We are concerned in particular about four aspects of the White Paper.

5. First, there is a lack of clarity about the level of funding on which the proposed guarantee is to be based. In the consultation paper it is stated that: -

We would…guarantee that, by increasing the UK Government spending on regional policy, UK nations and regions receive a level of resources which ensures they do not lose out from the UK's proposals on Structural Funds reform, for example from transitional funding they would have automatically received from the application of the eligibility criteria to EU25 instead of EU15. (para 4.16)

It is not wholly clear as to how the calculation is to be made. It seems that it will not be based on maintaining present funding, but on what funding would be under present criteria if applied to an enlarged EU of 25 member states. However, the exact amount involved is not spelt out in any detail. Even though there are imponderables in making any calculation, some reasonable attempt should be made to either provide one or a range of estimates. Ideally these should be computed across all EU regions as well as all member states. There is also a lack of clarity about whether these proposals take into account match funding. These matters need to be clarified, as it is hardly feasible to offer a guarantee when the exact nature of what is being guaranteed is not specified. Put simply, how much cash will actually be assured?

6. In addition to the amount involved, we are concerned about the content and enforceability of the guarantee. It has to be recognised that 'repatriation' (or 're-nationalisation' as some refer to it) raises problems for Wales and Scotland and some of the English regions. Involvement in EU funding programmes has provided benefits to local areas and opportunities for local actors to develop a regional approach to development. These benefits and opportunities were not inspired by or indeed encouraged by central government. Sensitivity to this reticence about the reliability of central government needs to be fully understood at the centre. Yet even if central government's word can be trusted, there is no certainty of delivery because the guarantee as presently set out is too general and too weak. This is for the reasons already given in para 5 above as well as the difficulty of ensuring a six year commitment to funding when central government operates three year spending programmes interspersed with a 4 to 5 year electoral cycle.

7. Also no mention is specifically made of ESF funds. In the 2000-06 round, more funds were available across the EU under Objective 3 than under Objective 2 and transitional Objective 1. Measures aimed at improving skills and employment opportunities are regarded as key drivers of regional productivity. They will also be integral to the success of the Lisbon agenda. Where do they feature in the reform proposals and do the UK government see them as a separate item for negotiation?

8. Finally, as the consultation paper suggests, the UK proposals are unlikely to prove acceptable to all EU members states and are thus unlikely to be carried through as the basis of Structural Funds reform. Of course it would not be sensible at this point for the UK to reveal its fallback negotiating position. However, we believe it should be based on seeking simplification of the administration of funding, flexibility in its application, subsidiarity to nations AND regions and fairness to all. Such an approach would contain at least five sets of initiatives.

• Simplification of the administration of the Structural Funds should be a key objective. Across the EU, organizations involved in ERDF and ESF projects are calling for changes to the regulations and to the management of the funding programmes. The proposals are an important contribution to the debate about this issue.
  
• The proposal for a broad EU regional policy framework at EU level reflecting the Lisbon agenda is one we fully endorse. This should be constituted in such a way as to allow significant input from the regional level in terms of the actual package of funding applications adopted in each area and their implementation.
  
• Changes in state aids rules to allow more flexibility should be a central component of any reform package. Regions which no longer qualify for Objective 1 status may subsequently lose a range of exemptions from state aids rules depending on the outcome of the state aids review process. If governments are to be able to effectively target future regional aid, some relaxation (or derestriction) of the state aids regime is essential. We fully support the proposals on this point.
  
• Reasonable transitional funding should be available for those regions likely to lose funding. If the negotiations on Structural Funds reform do not result in renationalisation of regional policy, the provision of a financial safety net should be guaranteed through the EU.
  
• Any reform should bring clear benefits to the new member states. The consultation paper is unequivocal about the need to concentrate resources on the accession countries. Ensuring that the negotiations over future EU regional policy ensure effective financial assistance to the new entrants should be an objective of all the existing member state governments.