1998 REPORTS ON THE STRUCTURAL AND COHESION
FUNDS
(a)
(20605)
12011/99
COM(99) 467
(b)
(20606)
12012/99
COM(99) 483
|
Structural Funds — tenth annual Report by the Commission (1998).
Annual Report on the Cohesion Fund (1998).
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| Legal base:
| — |
| |
| Documents originated:
| 15 October 1999 |
| Forwarded to the Council:
| 18 October 1999 |
| Deposited in Parliament:
| 4 November 1999 |
| Department:
| Trade and Industry |
| Basis of consideration:
| EMs of 9 November 1999
|
| Previous Committee Report:
| None |
| To be discussed in Council:
| No date set |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Not cleared; further information requested
|
The Annual Report on the Structural Funds
6.1 Since 1995, each Annual Report on the
Structural Funds has had a special theme. In the case of this
Report, for 1998, the theme is local development.
6.2 To clarify what is meant by local development,
the Commission identifies a number of "key concepts":
- geography: the area
is usually small enough for it to be possible to mobilise the
people in it by appealing to their shared sense of history, identity,
culture and economic interest;
- employment opportunities generated from new activities
which depend on local resources. These are often closely
linked with local traditions and surroundings;
- the integration of different sectors of
activity and co-operation between different local socio-economic
groups, which can in turn lead to the creation of new activities.
Support should not be confined to sector-by-sector measures, but
should give priority to multi-sector operations;
- a bottom-up approach to decision-making,
linking development more effectively to local interests than the
old top-down designs;
- most partners are local and represent,
for instance, local politicians, businesses, public bodies, and
civil servants; and
- ensuring that local development is sustainable.
6.3 The application of these principles
is facilitated by network co-ordinators.
6.4 The report draws attention to the preparation
of the new Regulations for the Structural Funds as one of the
major events of the year. These Regulations comprise one covering
the general provisions (an amalgamation of the old Framework and
Co-ordinating Regulations) and one simplified Regulation for each
Fund (European Regional Development Fund, European Social Fund,
the Financial Instrument for Fisheries Guidance and the European
Agricultural Guidance and Guarantee Fund (EAGGF)). Apart from
the EAGGF Regulation, which was adopted on 17 May[27],
these were all adopted on 21 June 1999[28].
6.5 In its general review of implementation,
the report notes that 1998 was a year of consolidation and faster
implementation of programmes. The last few programmes under the
existing Regulation were adopted. Also, 25 new assistance packages
were adopted during the year, under various Objectives. A major
event, the Commission says, was the adoption of the Objective
4 Single Programming Document (SPD) for the UK (1998-1999), now
in its first year of implementation[29].
The European Social Fund (ESF) will contribute 275.4 million euro
(£176 million) to this programme.
6.6 The report, which runs to 204 pages,
then deals with the implementation of programmes under each Objective,
the implementation of Community Initiatives, innovative measures
and technical assistance, before presenting a lengthy country-by-country
survey.
6.7 On Objectives, the report states
that only 68% of commitment appropriations under Objective 4 and
47% of payment appropriations had been used by the end of 1998,
making it one of the Objectives which was lagging furthest behind.
The report says that this delay was partly due to the fact that
the SPD for the UK, one of the main beneficiaries, was not adopted
until 1998. There were what the Commission describes as "worrying"
delays with two other major beneficiaries, France and Italy, whose
payments amounted to only 3% of appropriations. Italy made no
commitments in 1998.
6.8 It notes that a decision was taken in
1998 to reallocate finance among the Community Initiatives,
the main feature of which was a "substantial" net increase
of 100 million euro (£63.93 million) in assistance for the
Peace programme in Northern Ireland and a corresponding reduction
in assistance for some other Initiatives.
6.9 Amongst innovative measures and technical
assistance, the report provides an example of a local development
pilot project which is expected to be a new source of employment.
300,000 euro (£191,790) was to be provided from the European
Regional Development Fund (ERDF) to part-fund a partnership between
the medical authorities and the regional administration in Sligo,
in Ireland. One strand, social aid for the elderly, was expected
to result in 40 part-time jobs. The other, to train instructors
in child-care, was expected to result in 120 jobs for qualified
social workers.
6.10 The country-by-country surveys deal
with events in each Member State under each Objective, with the
major events highlighted first. The major achievements highlighted
in the UK included:
6.11 Objective 1 (promoting the development
and structural adjustment of the regions whose development is
lagging behind): An ESF-funded project in Northern Ireland
involving all 26 District Councils aimed at promoting small-business
activity by training people to run them. Another programme in
Northern Ireland, Pesca, has provided funding for more
than 40 projects for social and economic regeneration in three
villages, all heavily dependent on fishing.
6.12 Objective 2 (converting the regions,
frontier regions or parts of regions seriously affected by industrial
decline): Eight projects to assist the regeneration of the
Craigmillar district of Edinburgh, where traditional industries
are in decline or have been shut down, have been provided with
2 million euro (£1.28 million).
6.13 Objective 5(b) (facilitating the
structural adjustment of rural areas): The closure of the
nuclear power station in Transfynydd in Wales led to 600 redundancies.
The local residents decided to work out their own solution, under
the aegis of a "Community Council", and secured part-financing
from the Structural Funds of 136,000 euro (£87,000) to development
tourism in the area. This supplemented funding from the UK public
sector and the nuclear industry.
6.14 Further chapters cover:
- evaluation and analysis of the impact of the
Structural Funds;
- budget implementation, financial checks and verification
of additionality;
- co-ordination with other financial instruments;
- compatibility and complementarity with other
Community policies; and
- inter-institutional dialogue, dialogue with the
Economic and Social Partners, information and communication.
6.15 The report acknowledges that 1998 was
a year in which Member States increased the speed of using the
appropriations in both national-initiative programmes and programmes
under the Community Initiatives. By 31 December, 80% of the total
assistance available had been committed and 61% had been paid,
in line with the financial perspective for 1994-99.
6.16 Mid-term evaluations were conducted
during 1998 under Objectives 1 and 6[30],
resulting in the Mid-Term Review.[31]
The evaluations were undertaken with a view to gaining a better
understanding of the true effectiveness and impact of the Structural
Funds in the beneficiary regions, and to indicate where to make
necessary adjustments to programmes. Following a recommendation
in the mid-term report, adjustments of funding allocations within
programmes were made. Italy, Spain and Greece transferred Funds
between programmes within the Community Support Framework under
Objective 1, in the order of 400 to 700 million euro (£256
million to £447.5 million).
6.17 In 1998, the Commission's anti-fraud
unit (UCLAF)[32]
launched 40 new investigations into fraud or suspected fraud.
Investigations uncovered a number of irregularities, such as business
networks set up by proprietors in order to obtain Community funding,
or deficiencies in the selection criteria, management and project
monitoring in Member States.
6.18 However, the report says:
"Member States notified
to the Commission under Regulation (EC) No. 1681/94 some 407 cases
of irregularities or fraud in 1998 involving a total of 42,838,000
euro. These figures show an increase in the number of irregularities
notified compared with previous years, while some Member States
are fulfilling their obligations under the legislation only in
part. However, it should be noted that the amounts involved are
shrinking (irregularities totalled 55.9 million euro in 1997)
and that the irregularities notified do not necessarily involve
fraud, since fraud entails proven intent.
"Significant progress was noted in 1998 regarding
application of Article 5 of that Regulation, which requires
Member States to notify the Commission in each case of the action
taken following the detection of an irregularity. There are, however,
still some notified cases which have not been followed up, although
they have already been closed at national level."
The Government's view
6.19 In his EM on this document, the Minister
for Trade (The Rt Hon Richard Caborn) says that this report has
no direct policy implications.
The Annual Report on the Cohesion Fund
6.20 The Cohesion Fund supports large scale
transport and environment projects in those Member States whose
GNP is less than 90% (at purchasing power parities) of the Community
average over the period 1993-99. The Cohesion Fund Regulation
runs until the end of 1999. The beneficiaries are Spain, Portugal,
Greece and the Republic of Ireland. The Fund helps them to meet
Community environmental Directives and develop transport projects
of common European interest, the latter forming part of, or connecting
with, Trans-European Networks (TENS).
6.21 The Commission found that all four
beneficiaries had complied with the conditionality principle,
which obliges them to adhere to the Council recommendations on
the conduct of fiscal policy. The Commission was, therefore, able
to continue to finance them from the Fund. Ireland was not in
a position of excessive deficit, so no decision was required in
that case. By May 1998, Spain and Portugal were no longer in a
situation of excessive deficit, the Commission notes.
6.22 The 1992 Edinburgh European Council
agreed to provide 15.15 billion ECU, at constant 1992 prices,
for the Fund over a six year period. At the end of 1998, 81% had
been committed. The balance of expenditure between transport and
environmental projects was close to the target of a 50/50 split,
with transport accounting for 49.9% and the environment 50.1%.
6.23 In 1995, a study was commissioned from
the London School of Economics on the socio-economic impact of
the Fund. This was due to be published in 1998 but it has still
not materialised.
6.24 Monitoring and verification visits
became more frequent in 1998, with the Monitoring Committees in
the four beneficiary countries meeting ten times. No case of fraud
was reported to the Commission anti-fraud unit (UCLAF). The Commission
notes that discovery and reporting of fraud is the responsibility
of the Member States and that it provides 300,000 ECU to Member
States for technical assistance in combating fraud. Six applications
were received from three of the Member States (Spain, Greece and
Portugal), totalling 175,600 ECU.
6.25 The final version of the document covering
the new rules on eligibility for expenditure was published in
1998. Exploratory seminars were offered, but taken up only by
Ireland and Greece.
The Government's view
6.26 In his EM of 9 November on this document,
the Minister notes that:
"The Council decided,
in the context of Agenda 2000 in May 1999, that EMU-ins should
remain eligible for the Cohesion Fund, but that financial allocations
to each of the recipients should be adjusted to take account of
their progress towards the 90% of GNP eligibility threshold.
"The absence of any cases of fraud being reported
to the Commission causes concern. The Commission should stress
to the countries concerned the importance of reporting fraud cases
and should review the adequacy of the countries' anti-fraud procedures."
Conclusion
6.27 These documents report on the Structural
and Cohesion Funds under Regulations which will be replaced from
2000 by new Regulations. Nevertheless, there are several points
which we ask the Minister to clarify before we clear the documents:
(a) why the UK's Single
Programming Document (SPD) was not adopted until 1998;
(b) the Commission says that some cases of
irregularities have been closed at national level but still not
followed up. From the context, we take this to mean that the Member
States have not reported the outcome of their investigations to
the Commission. Could the Minister tell us what action the Commission
is taking to remedy this situation? Does he consider that the
Commission has sufficient authority in this regard?
(c) what steps has the Government taken to
impress on the Commission the need to review the adequacy of the
anti-fraud procedures of the Cohesion States and the importance
of reporting fraud cases? Has the Government any reason to believe
that some cases exist which have not been reported? What action
has the Commission taken? If this has proved ineffective, what
action is the Government prepared to take in the Council?
27 (19028) 7073/98; see HC 155-xxvi (1997-98), paragraph
1 ( 29 April 1998). Back
28 (19027)
COM(98) 131; see HC 34-xii (1998-99), paragraph 2 (10 March 1999);
(19804) 5480/99; see HC 34-xii (1998-99), paragraph 4 (10 March
1999); (19862) 5750/99; see HC34-xii (1998-99), paragraph 18 (10
March 1999). Also, Official Report, European Standing
Committee C, 23 March 1999. Back
29 Objective
4 was intended to facilitate the adaption of workers to industrial
changes and changes in production systems. Back
30 Objective
6 was for assisting areas of low population density. Back
31 (19779)
5189/99; see HC 34-x (1998-99), paragraph 3 (16 February 1999). Back
32 The
Commission adopted UCLAF's 1998 Annual Report on the protection
of financial interests and the fight against fraud on 16 November. Back
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