European Standing Committee C
Tuesday 23 March 1999
[Mr. Bill O'Brien in the Chair]
Reform of the Structural Funds
[Relevant Documents: European Community Document
No. 5750/99, and amended draft Council regulation on
the European Social Fund. European Community
Document No. 11882/98, the Commission's Annual report
on the Cohesion Fund for 1997.]
The Chairman: Before I call hon. Members to speak,
I draw their attention to the clock, which is incorrect. We
will therefore use the annunciator for time-keeping.
10.30 am
The Parliamentary Under-Secretary of State for Trade and Industry (Dr. Kim Howells): I welcome the
opportunity to speak in this debate, which will cover the
reforms of the European structural and cohesion funds and
the European regional development fund regulation.
Tomorrow and on Thursday, the Berlin council is
expected to achieve agreement among the Council of
Ministers on the Agenda 2000 package. In light of that, it
is important that we have an opportunity to review our
position on the reform of structural and cohesion funds.
Hon. members will be aware that the structural and
cohesion funds dossier has been the subject of on-going
scrutiny since the publication of the Commission's
proposals in March 1998 and the Agenda 2000
communication in July 1997. The report produced by the
Select Committee on Trade and Industry in June, which
the House debated in October, was especially useful in
underlining some of the salient issues in the reform of
structural funds.
Those issues include containing the costs of the funds
and the need for flexibility for member states selecting
eligible areas under objective 2. They also include the
treatment of the United Kingdom's sparsely populated
regions and increased simplification. I have just spent two
and a half days on a crash course reading this stuff, so I
can say that nothing is simple about structural funds.
Clearly, there is a need for more subsidiarity in
applying and administering the funds; we want fewer
objectives, less bureaucracy, broader partnerships, a
simplified system of payments and improved monitoring.
That will ensure that performance reserve rewards good
performance.
Cohesion funding is another serious issue. It is difficult
to reconcile member states' continued receipts with
joining the single currency.
On 16 February, my hon. Friend the Minister for Small
Firms, Trade and Industry, and the Under-Secretary of
State for Scotland, my hon. Friend the Member for
Western Isles (Mr. Macdonald) appeared before the
European Scrutiny Committee. It was clear then that hon.
Members were concerned by many of the issues that I
have just described. As at least some of those issues are
likely to be on the agenda at Berlin, it might be helpful if
I make a few introductory comments before answering
questions.
The Government have consistently set debate on reform
of structural funds in the context of affordability and
fairness. Reform should be affordable for all member
states, and should be fair to all existing and future member
states. It must deliver a durable outcome, which does not
carry unmanageable future costs, either in the next
programming period up to 2006, or beyond that into an
enlarged European Union.
Affordability must be set in the context of current
spending and the prospect of an enlarged Union.
Inevitably, that means that, at some point, the current 15
member states must expect to sustain a reductions in
coverage and receipts. Clearly, those reductions must be
fair. The distribution of funds and cuts in population
coverage must be proportionate across member states, as
matters such as need are relatively equal.
The Commission's proposals would increase funding in
real terms. That seems unnecessary if as is likely the
proposals achieve cuts in the number of areas receiving
funding. The Select Committee on Trade and Industry
pointed out that that could mean
"more money for fewer people".
That cannot be right or fair under the reformed structural
funds.
Any discussion of the proposals at Berlin is likely to
polarise, with northern or net contributor countries
seeking to set the budget at current levels, and recipients
of the cohesion fund Greece, Spain, Portugal and
Ireland wishing it to be set at the level proposed by the
Commission, or even higher.
Several issues in the overall settlement are of great
importance to the United Kingdom. Under objective 1, it
is likely that four areas could qualify Merseyside, south
Yorkshire, Cornwall and west Wales and the valleys on
the basis of the criterion of 75 per cent. of average
European Union gross domestic product. The UK is
continuing to press for the inclusion of Northern Ireland
because of its special circumstances, and to give effect to
the Cardiff council's commitment and the Vienna
council's endorsement to assist the peace process. The
challenges ahead for Northern Ireland, as it moves from
conflict to peace, require sustained EU and domestic
funding.
We have argued consistently for a sparsity of
population criterion to address the needs of areas such as
the highlands and islands to allow them to be treated on
a par with regions in similar circumstances, such as those
in Finland and Sweden. At present, that criterion stands
at eight persons per square kilometre. The UK wants that
to be raised to 10 persons per square kilometre. I believe
that in the highlands and islands the population density is
nine per square kilometre.
On objective 2, there are two key issues. The first, and
most important as funding is withdrawn, is the safety net.
Mr. Stephen Hesford (Wirral, West) rose
The Chairman: Order. We will take questions after
the Minister has made his statement.
Dr. Howells: Thank you, Mr. O'Brien. I was not sure
whether to give way.
The safety net is the most important key issue because
it secures the two thirds of existing coverage. Hon.
Members will remember that the safety net was included
in the draft regulations in addition to other
unemployment-based criteria to help the UK in particular
as well as several other member states. Without it,
coverage in those countries would have been cut
disproportionately. In the absence of fairer criteria, we
have strongly supported the Commission's proposed
safety net, and shall continue to do so. We shall not
tolerate any attempt at this stage to undermine its
integrity.
The other point of vital interest to the UK is the amount
of flexibility that member states have to choose their own
criteria for designating eligible areas. The safety net
should allow maximum flexibility, but we must ensure
that the framework that is eventually agreed allows us to
apply local and national indicators effectively.
The debate is also about the cohesion fund and the
European regional development fund regulation. The UK
view on the cohesion fund has been that it is difficult
to justify countries that have joined European Monetrary
Union continuing to receive money. The fund's original
purpose was to assist member states in which gross
national product was below 90 per cent. of the EU average
to prepare for EMU. If they meet at least part of the
criteria, the case for continuation is lessened. If funding
is to continue, there should be a strategy for phasing it
out for recipients that are likely to meet the second
criterion 90 per cent. of average EU GNP during the
next programming period.
The European regional development fund regulation is
one of three implementing regulations for the structural
funds, and sets out the kinds of activities that the fund can
support. It fits below the general regulation for the
structural funds, which is the key regulation, because it
establishes the eligibility criteria for each objective and
all the administrative procedures that the commission,
national Governments and local partnerships must apply.
Their application has been one of the important issues for
the reform discussions, and of particular interest to the
United Kingdom, which is why we dealt with it during
our presidency. Simplification making the funds more
effective and better value for money and subsidiarity,
which is the bringing of decisions closer to those whom
they benefit, have been the defining issues. They may
have some resonance for hon. Members. That is a context
in which we have been keen to ensure the involvement of
local and regional partners.
The negotiations have been particularly long and
complex. Despite recent events, it is likely that the Berlin
council will reach conclusions on the key issues. The
European Parliament will then have a critical role in the
final determination of the package. It has provided
valuable input already, such as by supporting simplication
and the safety net, and in questioning the performance
reserve as originally proposed. It will have powers of
co-decision over the European social fund and European
regional development fund regulations as a result of the
ratification of the Amsterdam treaty.
The German presidency has indicated its determination
to conclude the negotiations on time. It has the
Government's support in bringing this element of the
negotiation to a close. I hope that our debate will confirm
the Government's intention of helping to achieve an
affordable, fair and durable outcome.
Mr. Michael Jack (Fylde): On a point of order,
Mr. O'Brien. The Minister's opening remarks conveyed
the complexity of the matter before us, and I mean no
criticism by saying that he has taken quite a long time
over them. May the length of time available for
questions be extended to reflect that?
The Chairman: No. I have to advise the Committee
that questions will continue until 11.30, after which we
shall proceed to debate. Time for the latter would be lost
if we ran over on questions.
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