Memorandum submitted by the Department
of Trade and Industry following the Berlin European Council conclusions
on Agenda 2000 package and subsequent submission of the UK's proposed
areas for Objective 2 for 2000 to 2006
1. The Trade and Industry Select Committee
reported on 17 June 1998 on issues related to the reform of the
Structural and Cohesion Funds. The Committee has asked for an
update on the reform of the Structural Funds, and in particular
on the Government's simplification agenda and the UK's proposed
areas for Objective 2. This memorandum gives details of the outcome
of the negotiation on the Structural and Cohesion Fund Regulations,
following the Berlin Council's agreement and the adoption by the
European Parliament in June.
2. In the Department's memorandum published
by the Trade and Industry Select Committee in its Seventh report
covering Structural Funds, the Government reported that it was
pressing to achieve a fair and affordable outcome to the negotiations,
keeping the total budget for the funds well below 0.46 per cent
of GNP. It argued for consideration of the special positions of
Northern Ireland and the Highlands and Islands, and that Member
States should have flexibility in the use of criteria to define
areas under Objective 2.
3. The Berlin European Council on 24-26
March 1999 successfully concluded a package of key reforms needed
to prepare the EU for enlargement. Part of this package was the
reform of the Structural Funds Regulations.
4. At Berlin, the UK achieved all its main
objectives in the negotiationskeeping the overall Structural
and Cohesion Funds budget down to 213 billion euros (about 10
per cent below the Commission proposal), broken down as 195 billion
euros for Structural Funds including transitional support, Community
Initiatives and innovative actions, and 18 billion euros for the
5. The Government secured the Objective
2 safety net proposed in the draft Regulation. This ensured that
13.8 million people, two-thirds of the UK's existing Objective
2 population, remain covered, thus limiting the reduction which
would otherwise have been indicated by the drop in UK unemployment.
An additional success was that the new Objective 1 areas (that
are currently Objective 1 & 2 or 5b) count towards the calculation
of the population ceiling for the "safety net" but do
not count against Objective 2 for coveragea benefit of
3.5 million people. Objective 2 support for the UK should be worth
some 3.9 billion euros (£2.5 billion) over the next seven
years. The areas that lose Objective 2 and 5b status will be eligible
for transitional funding for up to six years. This funding will
be worth 700 million euros (about £450 million) in total.
6. For Northern Ireland, which will no longer
qualify for Objective 1 status (areas with per capita GDP below
75 per cent of the EU average) the UK secured a special package
of funding worth some 1,250 million euros (about £820 million)
over the next funding period. This package includes a PEACE programme
worth 500 million euros, of which 400 million euros (about £230
million) will go to Northern Ireland to support the process of
securing peace. A special transitional deal for the Highlands
and Islands (which also lose Objective 1 status) provides some
300 million euros (£200 million) over the same period.
7. Three new regions qualify for Objective
1 Status: Cornwall, West Wales and the Valleys, and South Yorkshire,
Merseyside retains its current Objective 1 status. Thus Objective
1 population coverage in the UK increases from 3.5 million in
1994-99 to 5.1 million in 2000-06. They will receive over 4.685
billion euros (around £3 billion) in funding during the period
2000 to 2006.
8. In total, including the transitional
coverage, the geographically targeted Objectives will cover 27
million people in the UK, as opposed to 24 million in the present
9. The total UK allocation from the Structural
Funds for the period 2000-06 is about 16.615 billion euros (about
£10.7 billion) compared to 14 billion euros about £9
billion) for 1994-99.
10. The Committee asked to what extent the
Government's simplification agenda has been achieved. Simplification
has been achieved in a number of areas.
11. The current Regulations were replaced
by a general Regulation which contains most provisions, including
the standard clauses applicable to all funds. The individual Fund
regulations are therefore much shorter.
12. It was not possible, however, to achieve
a procedure whereby each programme could operate as if based on
a single Fund, although Objective 3, and Community Initiatives
will operate on a single Fund basis.
13. The number of Objectives has been reduced
from seven to three. In broad terms Objective 1 stays the same
but subsumes the current Objective 6; current Objectives 2 and
5(b) are combined into the new Objective 2; current Objectives
3 and 4 are now in the new Objective 3. This will mean a reduction
in the number of programmes and hence in the associated bureaucracy.
14. It has also been possible to simplify
the new Objective 2 by allowing the allocation of funding to the
eligible areas to be used solely for ERDF actions. ESF actions
will be funded under Objective 3 which applies throughout the
UK. However, if they wish, local partnerships in Objective 2 areas
may use a minimum of 5 per cent of allocation for ESF funding.
15. The number of Community Initiatives
has been reduced from 13 to four. The Commission's original proposal
was for just three; INTERREG (for cross-border activities) funded
from the ERDF: LEADER (rural development) funded from the EAGGF;
and EQUAL (transnational co-operation to combat all forms of discrimination
and inequalities in the labour market) funded from the ESF. The
European Parliament added a fourth initiative, URBAN (to take
account of specific needs of small and medium sized towns suffering
from significant economic and social conversion difficulties).
16. A further area of simplification is
in the commitments and payments system. Currently commitments
are linked in a complicated way to progress on payments. The new
system will make annual commitments automatic, but decommitment
may follow if programmes fail to meet their spending profile.
17. There will also be simplification in
the verification of additionality. The Commission's proposal to
verify this only three times in the seven year programmes has
been accepted. Currently verification is annual.
18. Another area of simplification is programme
duration. All main programmes will last for seven years and transitional
programmes for up to six years. In the current programming period,
Objective 2 was split into two three year periods. This complicated
19. Finally, the Commission will take financial
decisions on the basis of the priorities in programmes, leaving
the detail on the implementing measures to be decided by Programme
Monitoring Committees. This will allow a degree of flexibility
so that programmes can be amended to meet changing circumstances
without the need for new Commission decisions.
20. Overall, there have been significant
changes which will simplify the administration of programmes without
reducing value for money and financial control.
21. After concluding the negotiations on
the Structural Fund Regulation, the Government conducted a public
consultation on the determination of eligible areas for Objective
2 funding in April and May.
22. In the light of responses to the consultation
document, the Government embarked on identifying UK areas of greatest
need within the population ceiling of 13.8 million using consistent
criteria. In deciding which areas to propose, the Government had
to respect the requirement in the Regulation (EC) No 1260/1999
that areas be sufficiently substantial (which the Commission initially
advised to mean at least 50,000 population for urban and fisheries
areas, and 100,000 for industrial and rural areas).
23. Areas which satisfied the industrial
and rural criteria at Article 4(5) and 4(6) for automatic qualification
amounted to about a third of the population ceiling. The remaining
coverage was achieved by reference to Article 4(7) for urban areas;
4(8) for fisheries dependent areas and 4(9)(c) for industrial
and rural areas that demonstrated need but did not meet the criteria
at Article 4(5) or 4(6). The criteria that the Government used
for qualification under Article 4(9)(c) are set out in the document
URN99/1021 "The Government's proposals for new Objective
2 areas". The criteria were based on levels of unemployment,
in combination with measures of high dependency on industry or
agriculture and a decline in those sectors. For urban areas, the
respective indices of local deprivation were used in England,
Scotland and Wales. Fisheries areas were determined using data
from the Ministry of Agriculture Fisheries and Food and, given
the relatively small size of the fisheries areas, were combined
where possible with coverage under other strands to build a sufficiently
large area of coverage.
24. These criteria were developed in the
light of the responses to the consultation and suggestions of
specific areas for inclusion. All areas received equal consideration
against he criteria whether or not any representatives were made.
In terms of the geographical unit to be used to identify proposed
areas, the consensus from the consultation was that the Government
should use NUTS V (wards) to allow specific targeting of areas
of need. The criteria were designed to ensure, as far as possible,
that the areas identified by regional partners as priorities were
25. The Committee has asked to be provided
with lists of the wards referred to which technically qualified
under the Commission's criteria but which were removed in favour
of coalfield areas and of those which were judged too geographically
isolated to make sense in planning terms, as well as the latest
global figures on allocations. This information is at Annex A.
26. DTI officials have been discussing with
the Commission the proposals for the new Objective 2 areas which
are submitted on 8 October. DTI has provided additional statistical
data to support the proposed areas. A few changes have also been
made to the list of proposed wards in order to meet the requirements
of the Regulation on statistical data and the minimum size referred
to above. The changes were agreed with the Government Offices
in England and the Scottish Executive as being in line with regional
priorities. They are as follows:
TorbayTorwood ward is included;
Southend2 wards are exchanged: Victoria
and St Lukes for Chalkwell and Leigh;
Great Yarmouth1 ward is exchanged: Magdalen
West for Gorleston;
East Staffordshire2 wards are exchanged:
Victoria and Eton for Needwood and Tutbury & Hanbury.
Wards includedSidlaw and Carnoustie West.
Wards deletedColliston and Hayshead.
Wards includedDudhope, Central, Menziehill
Wards deletedWellgate, Baxter Park, Douglas,
Whitfield and Trottick.
Wards includedDawson and Victoria.
Wards deletedToryglen and Crosshill.
Wards includedPart of Pathead ward.
Wards includedKeith, Northern part of
Ward includedJohnstone Cochranemill.
Ward includedFernieger, Part of Fernhill
27. The Regional Policy Directorate-General
in the Commission is now consulting other interested Directorates-General
on the UK's proposals. The Government hopes that this will allow
them to approve the areas in principle before Christmas and give
them formal approval early in January.
28. The four-month timetable for the submission
of draft programmes to the Commission starts running from the
formal approval date. However, the Regulation allows funding to
begin from 1 January 2000 provided that draft programmes are submitted
to the Commission by 30 April 2000.
6 December 1999