Select Committee on Welsh Affairs Minutes of Evidence

Memorandum submitted by the First Minister, National Assembly for Wales

Section 1:  Monitoring And Evaluation of Objective 1



  1.  Monitoring and evaluation of the Objective 1 Programme is governed by European Commission Regulations and the implementation chapter of the Single Programming Document. The framework is provided by the Wales Strategy for Monitoring and Evaluation of Structural Funds. Monitoring is the responsibility of the Programme Monitoring Committee (PMC), working in close co-operation with Welsh European Funding Office.


  2.  Responsibility for the analysis and reporting of the data lies with Research Monitoring and Evaluation Branch of WEFO. The Branch consists of a team of specialist researchers, evaluators and administrators who undertake the ongoing analysis and reporting of the data to the Commission, Partnerships and the Programme Monitoring Committee.


  3.  Monitoring provides programme managers with the means to make informed choices about allocation of resources and intervention methods whereas evaluation takes a longer term view to enable programmes to be modified at an appropriate stage or to influence subsequent interventions. Effectiveness of the programme is measured by assessing the progress of a set of clearly specified and defined indicators against baseline data.


  4.  Financial and output indicators are collected at the project approval and claims stages from individual projects and stored on a computer database which will be linked to a management information reporting facility.

  5.  Regular monitoring reports are produced to inform the management of the Programme. Those required by Commission Regulations are approved by the PMC before submission.

  6.  Commission Regulations require at least 5 per cent of the total expenditure declared by project sponsors of the programme and each fund to be inspected by visiting individual projects. This financial control and audit function is undertaken by a separate branch of WEFO.


  7.  WEFO co-ordinates evaluation in Wales by ensuring that projects are in alignment with strategies and that strategies are in alignment with one another. Evaluation will focus on areas of particular concern and interest identified from the analysis of monitoring data. An in-depth examination of the cross-cutting themes will be undertaken. The role of the partnerships in project evaluation is presently under discussion.

  8.  Dissemination is by a variety of methods, including the distribution of written reports, the issuing of press releases, the creation and maintenance of the WEFO website and organisation of seminars.


  9.  The stages of the evaluation specified by the Commission are the ex-ante, mid-term and ex-post evaluations. The mid-term evaluation will be undertaken by independent contractors, commissioned by WEFO and with the assistance of an advisory group including representation by the Commission. It will inform the allocation of the performance reserve, which operates at the priority level in Wales. WEFO's target for reporting for the mid-term evaluation is 30 September 2003.


  10.  Wales is part of the UK-wide European Social Fund (ESF) and is represented on the UK Evaluation Standing Group which oversees the quality and effectiveness of evaluations and co-ordinates a survey of individual beneficiaries which have participated in ESF projects.

  11.  Wales has been consulted by the DTI on the UK feasibility study on the added value of structural funds.

Section 2:  Match funding from assembly budgets

  1.  The EC Structural Funds Regulations do not stipulate where match funding should originate. In October 2000 it was announced to the Assembly that the following had been made available:

    2001-02  Just under 67 million of new money for match funding from a range of budgets

    by 2003-04  Some 70 million of new money as well as additions to existing Assembly budget lines which lend themselves to match funding.

  2.  Over the four years 2001-02 to 2004-05, some 278 million are available. This can be added to around 90 million per year already in the system [based on information provided to the Assembly from the pre-WEFO organisation, Welsh European Programmes Executive, about funding already in the budgets of public agencies, local government, ELWa and FE colleges as well as the Assembly], giving some 638 million in match funding. It is important to note that expenditure from the Assembly's funding pots is relatively small at this stage, around 8.6 million, which given that these are funds of last resort, only to be accessed when other sources have been exhausted, is an encouraging sign.

  3.  Project sponsors are responsible for finding match funding. Assembly budgets are viewed as "match funding of last resort" in line with Ministers' commitment not to see good projects fail for want of match funding.


  4.  The Chief Executive of WEFO is the structural funds accounting officer. The Permanent Secretary is the accounting officer for Assembly budgets, including match funding lines. Both must be assured that the award of support for any project is founded on thorough appraisal, offers best value for money and satisfies tests of regularity and propriety. The WEFO Chief Executive must also ensure that project approval conforms to EC regulations and that EC grant conditions are met. The Permanent Secretary must ensure resources are allocated in accordance with the Budget as adopted by the Assembly and managed in accordance with the Assembly's Standing Orders. Both Accounting Officers must be concerned to avoid administrative waste.


  5.  Arrangements for future access to and management of the match funding provided directly by the Assembly were endorsed by the Economic Development Committee in December 2000.

  6.  The budget for 2001-02, 2002-03 and 2003-04 for match funding European Structural Funds (Objectives 1,2, 3 and the Community Initiatives) is spread over several pots as set out in the following table.

Current Match Funding Pots





Budget '000

Budget '000

Budget '000

(a) Pathy to Prosperity




(b) Finance Wales




(c) Euro Facilitators




(d) Local Authority Sponsored Projects

(1) 23,725



(e)Voluntary Sector




(f) Food Processing and Marketing




(g) Farm Adaption








Overall Totals





   (1)   Budget for this year includes cover for payments from residual non-match fund schemes.

Section 3:  Preparations for post-2006

  1.  To date, the Assembly Government's early thinking on options for post-2006 has been largely based on the European Commission Second Report On Economic And Social Cohesion, published early in 2001. Three AMs, Mike German, Phil Williams and Christine Gwyther, attended a high level Cohesion Forum in Brussels in May 2001, with officials. Since then, both the European Affairs and Economic Development Committees have received reports on the emerging position.

  2.  The Commission's Third Economic and Social Cohesion Report is due to be published early in 2004. Negotiations on the next round of structural funds take place throughout 2005-06. The Commission announced late in 2001 its intention to issue an Interim Report early in 2002, which we understand will be published on 30 January. Workshops are also planned for the Spring in Brussels to allow Member States to discuss the issues in detail. The Assembly Government is expecting to participate fully in all of these, though it is for the UK Government to coordinate views and develop a UK-wideposition.

  3.  The First Minister wrote to Commissioner Barnier on 17 December offering preliminary views on the Second Report and indicative that the Welsh Assembly Government was keen to contribute to the development of thinking in Brussels and at the UK level. The Government's position would develop over time and will be based on an evaluation of the benefit to Wales of the structural funds programmes. The letter :

    —  noted the potential impact in Wales of any abrupt ending of the structural funds outside a framework which recognised the continuing needs of Wales;

    —  supported the call for simplification of the funds;

    —  expressed a concern that the different Directorates-General of the Commission should redouble efforts to work together on the post-2006 direction of EU policy.

  4.  We are concerned to "seize the day" and make the most of the current programmes while making thorough preparations for what might happen post-2006. Rigorous evaluation of past experience will be an important element. We continue to explore the scope for developing projects and expertise through smaller, innovative programmes.

  5.  By establishing an Assembly Government office in Brussels and membership of the Wales European Centre, Wales is well placed to engage with EU institutions on policy issues at an early date and provides an effective interface between them and the Assembly. The Assembly Government continues to strengthen its participation in Council of Ministers meetings. The Assembly is strengthening its representation on European regional organisations, for example it has recently joined the Conference of Peripheral Maritime Regions (CPMR), and has a full member and an alternate on the Committee of the Regions (COR). The Government is taking a very positive approach to the Enlargement of the European Union and recognises that it presents significant challenges and opportunities for Wales.

Section 4:  Operating aids



  1.  Operating Aids may be tax incentives or assistance provided by other methods. Regionally differentiated tax incentives may be Operating Aids or other types of State Aid.

  2.  Operating Aid is subject to the EC Guidelines on Regional State Aid, as interpreted by the EC's Competition Directorate (DG Comp). Tax incentives are, with the exception of Business Rates, subject to the approval of the Chancellor of the Exchequer. Thus, either one or two hurdles may have to be passed for any particular proposal.


  3.  In general, the Assembly Government's approach has been to deal with Treasury on the tax matters that fall within its purview since it is necessary to persuade Treasury of the need for and appropriateness of a regionally differentiated tax incentive before there is any point in approaching the Commission about it. Once persuaded, Treasury would be responsible for obtaining any State Aid clearance needed from the Commission. Operating aids that are not tax incentives, or those relating to Business Rates, are the responsibility of the Assembly Government and responsibility for securing that they conform to the State Aid rules rests with us. This may require discussions with DG Comp.

  4.  Assembly Government officials have also discussed these matters with different sets of officials representing the other Objective 1 regions. Different approaches have been adopted for different types of scheme. For example, one operating aid (the Interest Rate Rebate Scheme mentioned below), is intended to run alongside all four Objective 1 Loans Funds. In all four cases, this scheme must be separate from the Structural Funds in order to avoid the need for State Aids clearance for the Loan Funds. The idea was developed by consultants employed by Merseyside on behalf of all four Objective 1 Regions, and discussed jointly by the Objective 1 Alliance with DG Competition. On regionally differentiated tax incentives however, the other regions were content for the Assembly Government to make the running with Treasury.

  5.  Not all of the forms of business incentives that the Assembly Government would be interested in bringing in are necessarily defined as Operating Aids. There are occasions when the incentives being considered can more easily gain EC approval under another part of the State Aids rules. For example, the Interest Rate Rebate scheme falls under the de minimis rules.


  6.  The analysis in the Objective 1 Single Programming Document, which has subsequently been confirmed in "A Winning Wales", points to a need to encourage business investment in all its forms: premises; plant and equipment; intellectual property; R&D; and skills, and to encourage enterprise and entrepreneurship. These areas were also identified in a report commissioned from PricewaterhouseCoopers. That report made the important recommendation that tax incentives should not be considered in isolation from other forms of incentives that were devolved to the Assembly. Accordingly, the report recommended changes in Assembly Government programmes of financial assistance to businesses, as well as suggesting areas in which tax incentives could be effective. The Assembly Government has sought to make progress on both fronts.


  7.  The Operating Aids or Fiscal Variations that have been agreed or implemented so far are:

    —  Enhancement of the Rural Rate Relief Scheme;

    —  Stamp Duty exemptions up to 150,000 implemented in many areas of Wales;

    —  Assembly Government programmes of financial support to business to be reorganised from April 2002;

    —  Finance Wales Interest Rate Rebate Scheme to run alongside Objective 1 Loan Fund;

    —  ELWa to provide assistance for training in firms from April 2002.

  Schemes already agreed but still under development are:

    —  Community Investment Tax Credit agreed for next tax year;

    —  SMART Wales programmes to be enhanced from April 2003.

  Measures not yet agreed, but which the Assembly Government or the UK Government are actively pursuing, are:

    —  Scheme for reduced Business Rates for SMEs in Wales B consultation to commence in March 2002;

    —  Enhancement of Stamp Duty exemption to cover all business premises in the designated deprived areas;

    —  Urban Regeneration Companies;

    —  Regional enhancement of R&D Tax Credit;

    —  Regionally based Tax Credit for training in firms.

Rhodri Morgan AM

18 January 2002


previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 22 May 2002