European Standing Committee B
Tuesday 9 December 1997
[Mr. Barry Jones in the Chair]
Agenda 2000: Structural and Cohesion Funds
10.30 am
The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): I welcome this scrutiny debate on the structural and cohesion fund elements of Agenda 2000. Before I go any further, it might help Committee members if I explain the scrutiny arrangements relating to the document.
Agenda 2000 covers the medium-term future of the European Union in the years 2000 to 2006. One key element of that will be the prospect of EU enlargement. Another key element will be the future financing and expenditure of the EU and the question of reform to the two largest elements of that expenditure--the common agricultural policy and the structural and cohesion funds.
The Government submitted four explanatory memoranda on the document: one from the Foreign Office on enlargement issues; one from the Treasury on future financing; one from the Ministry of Agriculture, Fisheries and Food on reform of the CAP; and one that I produced on structural and cohesion reform. The Select Committee on European Legislation recommended for debate the memoranda from the Treasury, from MAFF and from the Department of Trade and Industry. We are this morning examing the DTI memorandum. Tomorrow, the Treasury memorandum will be considered and European Standing Committee A will examine the MAFF memoradum. That will enable the House of Commons to consider each of the key elements of the propsals before they are discussed at the Luxembourg European Council on Friday and Saturday.
Between them, the structural and cohesion funds take up one third of the EU budget. They are the principal European financial instruments for promoting economic and social cohesion and for regional policy. The funds face major changes roughly every six or seven years, and the discussion is starting on changes to the funds for the period from 2000 onwards. The last major changes to the regulations governing the funds occurred in 1993 and came into effect in the programmes that started in 1994. There are currently 30 main programmes operating across the United Kingdom. Those programmes will continue until the end of 1999, by which time the regulations will need to be reviewed. The European Commission published its suggestions for the reform of the funds in its communication Agenda 2000 on 16th July. It is likely to produce detailed legislative proposals in the spring of next year. When it does, we shall provide a further explanatory memorandum, and there will be a further opportunity for parliamentary scrutiny.
The EU faces significant changes over the next decade, particularly if it is to enlarge to include new member states from central and eastern Europe. The CAP needs to be reformed, and the EU's structural policies need to adapt to the changed circumstances.
In approaching the question of reform of the structural and cohesion funds, the Government believe that the new arrangements need to be fair to all Member States--especially to the United Kingdom and its regions--that they need to be affordable and durable, and that they need to be simpler and more efficient.
The United Kingdom is the second largest net contributor to the EU's finances. We are net contributors to the cost of the funds. That means that we need to pay close attention both to the total cost of the funds and to our receipts.
The Government strongly support EU enlargement. That will enhance security and stability of central and eastern Europe and boost the UK's trading opportunities with that rapidly growing market. It will also bring the EU wider political and economic benefits and meet the applicants' aspirations to fulfil their historic destiny. However, the accession of poorer countries will have significant implications for the finances of the EU.
As the Commission recognises, the overall EU budget must be contained within its current share of gross domestic product. With enlargement, that will mean that the structural funds will have to stretch further and that all existing member states will have to accept a significantly lower level of receipts in the next century. The UK's net contribution will rise on enlargement--we accept that that is the necessary price of bringing countries into the EU. However, we cannot accept the UK's net contribution moving even further out of line.
We set out our beliefs about what the fundamentals of reform should be in the explanatory memorandum. Those beliefs are as follows:
``The overall cost of the Structural and Cohesion Funds should be contained below 0.46 per cent. of EU GNP, both before and after enlargement.
The Funds' effectiveness should be improved, and substantial administrative simplification is needed.
The reform of the Funds should be durable, and fair to acceding new Member States.
All existing Member States should expect cuts in their receipts if costs are to be contained.
While recognising that there will be a drop in receipts, the new regime should be fair to the UK in comparison with other Member States.''
I will explain what we understand by fairness. The UK is the fourth or fifth poorest member state in the EU, in terms of GDP per capita, but, as we understand them, the Commission's proposals will not make us the fourth or fifth largest per capita recipient. Therefore, we are not convinced that the Commission's ideas for distributing the funds are fair, and we are discussing how to establish a fairer system with the Commission and with other member states.
We do not presently know how individual regions or localities will be affected by this reform, and we will not know until the Commission puts forward detailed proposals and they have been negotiated in the Council of Ministers and approved by the European Parliament.
In the negotiations on the future of the funds, the Government will aim to protect the interests of the United Kingdom as a whole. We are still developing our detailed approach at this early stage, and we will take account of points raised in Committee today and those raised by others.
The Chairman: We now have until 11.30 am at the latest for questions to the Minister. Members are reminded that questions should be brief and should be asked one at a time. All Members are likely to have ample opportunity to ask several questions.
Mr. Fallon: Will the Minister explain why, in paragraph 10 of the explanatory memorandum, she says that countries will be eligible for the cohesion fund whether they join the third stage of EMU or not? On page 20 of the document, we are told that eligible countries will be the following:
``Member States whose per capita GNP is less than 90 per cent. and which take part in the third phase of EMU''.
That discrepancy was identified by the Select Committee itself. Which of those formulae is correct?
Mrs. Roche: I cannot see a discrepancy in that context. Some room exists for different interpretations--the hon. Gentleman will know that the Government interpreted the proposals in one way, while the Select Committee thought that countries that joined the first wave of EMU might still be eligible for the cohesion fund. We believe our interpretation to be correct, but we will seek clarification on that point.
Mr. Hopkins: I am pleased and reassured by what my hon. Friend has just said about the implications of Britain's net contributions, subject to changes in the structural and cohesion funds. My hon. Friend says it is difficult to say how Britain will be affected in any detailed way at this stage. Will she assure us that studies will be undertaken to ascertain how we will be affected, both under different headings and in terms of our overall net contribution? Will she attempt to ensure that, whatever changes take place, Britain is treated equitably in comparison with other member states?
Mrs. Roche: I thank my hon. Friend for those remarks. I can give him an absolute assurance on his questions. We will probably not see the Commission's detailed proposals until the spring, but we are already emphasising to the Commission the broad underlying principles that we want for the funds. I was in Brussels last week, and I took the opportunity to reinforce the points that I have made to relevant Commissioners about the approach that the United Kingdom would take. I can give my hon. Friend the assurances that he seeks.
Mr. Fallon: Do the Government agree with page 13 of the document, where the Commission says that policies on pensions and health care systems should be co-ordinated across Europe and that a new regulatory framework for pension funds may be justified at European Union level?
Mrs. Roche: Those are matters for my colleagues at the Department of Health and the Department of Social Security. The hon. Gentleman will get a suitable and coherent answer if he addresses his question to them.
Dr. Ladyman: Point 7 of the Minister's explanatory memorandum of 19 September refers to geographical targeting of objective 2 funds. Will the Minister expand on that? Does it mean that high unemployment or deprivation in a particular area will not be the deciding factor in whether objective 2 funding is made available?
Mrs. Roche: We want to consider the situation in the round and to see what the overall effects will be. We are in the early stages of negotiation, and, as I said to my hon. Friend the Member for Luton, North (Mr. Hopkins), we do not yet know what the final position will be. We want to consider several factors. We believe that gross domestic product has to be considered a more effective measure than unemployment in the existing economic situation. Unemployment tells us something about current economic cycles, but gives a picture that is not perhaps as rounded as it might be. Unemployment can help member states to target funds at regions or areas, but GDP is a better way of considering the complete picture.
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