Examination of Witnesses (Questions 1
- 19)
WEDNESDAY 7 MAY 2003
MR KARL-JOHAN
LÖNNROTH AND
MR PAUL
VANDERMEEREN
Q1 Chairman: Can I call the Committee
to order and welcome Mr Karl-Johan Lönnroth, Deputy Director
General, and his colleague Mr Paul Vandermeeren, the UK ESF Desk
Officer, at the Directorate General for Employment and Social
Affairs at the European Commission. Gentlemen, you are both very
welcome and I apologise again for keeping you waiting. We are
setting out on a new and strange adventure for us in tackling
structural funds from a European point of view. The Committee
has come to realise in terms of the whole employment policy across
the United Kingdom that structural funds—ESF in particular—are
an essential component. We would like to learn more about that
and how the policies are working out at Commission level as well
as at United Kingdom level. We are very grateful to you for joining
us this afternoon to set the scene so that the inquiry can proceed
from here. It would be very helpful to the Committee if you could
just take the opportunity, Mr Lönnroth, to provide a little
bit of an overview from your perspective and then we can move
on to a series of lines of questioning.
Mr Lönnroth: Chairman, ladies
and gentlemen, thank you very much for your welcoming words. I
am just wondering whether the delay produces more or less critical
questions to us. This is the first time I have appeared before
a Committee at the House of Commons and I hope I will behave properly.
Q2 Chairman: I will protect you,
I promise.
Mr Lönnroth: If you allow
me I will say a few words by way of introduction on the role of
the European Social Fund and structural funds in general in the
European construction. I will make five points very briefly. My
first point is to emphasise the basic task of the European structural
funds as underpinning and implementing the provisions of the treaty.
There is a provision in the treaty on economic and social cohesion
as a basic objective of the European Union. The rationale of the
structural funds is to promote a harmonious development, the elimination
of disparities—regional or social—and thereby enhance
the solidarity among the member states and among the citizens
of the European Union. The second point is that I would like to
highlight the structural funds and in particular the Social Fund
as an essential element in the means of action that the European
Union has at its disposal. There are four, and only four, means
of action. You know the traditional community approach, legislation,
regulations, directives and so on, which try to establish minimum
standards in Europe. Then we have the open method of coordination
which is about benchmarking, exchange of good practice, the management
by objectives at the European level, of which the European Employment
Strategy is a prime example. Then we have the financial instruments
which underpin the strategies and the objectives of the Union.
Finally, we have some supporting actions, research, promotion
and networking, dissemination of information. Those are the four,
and only four, means of action of the European Union. The structural
funds, including the Social Fund, are an essential element of
that. The third point is that the European Social Fund is part
of an architecture of a range of funds that could seem to you
superficially rather complex. There are actually four funds: the
Regional Fund—I will not give you the exact names—which
basically funds the infrastructure defined broadly; you have the
Fisheries and the Agricultural Guidance and Guarantee Fund; and
you have the European Social Fund. These funds participate in
varying degrees to promote what we call "objectives".
We have three objectives which are not really objectives but a
way of structuring the European Union territory in a particular
way. We have objective 1 which is composed of regions most lagging
behind; those regions where the GDP per capita is 75% or
less of the Union average. We have objective 2 which are regions
normally experiencing problems in restructuring, industrial regions
in decline or similar types of regions. Then you have objective
3 which is actually covering regions outside objective 1 which
I just mentioned. Beyond that you have the community initiatives
which basically deal with trans-nationality, development of new
ideas across Europe in a trans-national way. In the social area
we have a community initiative which is called EQUAL which is
also part of the European Social Fund. The particularity of the
European Social Fund is that it covers all of these objectives;
it is working under all areas across the whole Union because it
has, as a basic objective, the development of human resources
which is based on a national strategy. The second particularity
of the European Social Fund is that it is the only fund which
focuses on the individual. The ultimate beneficiary—if I
can use that word because it is a complex term—is the individual.
We want to be at the service of those who have the most difficulties
in society and the labour market. The fourth point I want to make
is that the European structural funds have an increasingly strategic
nature. Previously they were perhaps considered as being apart
from the objectives and the strategies, but now—in particular
the European Social Fund—it is the community means to support
the European Employment Strategy because that is the strategy
where, through an open method of coordination, the EU tries to
provide more and better jobs. Secondly, the European structural
funds—in particular the Social Fund—promote what we
call the Lisbon Agenda (which the leaders of the European Union
agreed in the year 2000 in Lisbon, that is why we call it the
Lisbon Agenda) where full employment is one of the objectives
which has been agreed. In this sense the structural funds try
to promote these objectives by giving Community added value to
the actions. My final point is about enlargement. We are faced
with ten new member states—and perhaps later on beyond that
number—and that, of course, will change the framework within
which these funds operate because of the sheer increase of disparities
within the Union. In the future we have to reflect how we design—or
redesign—the funds. However, what I want to say is that
the human resources, human capital, is perhaps even more important
to develop in the candidate countries than it is in the current
Union. The objective of promoting the social objectives of the
Union will be an even greater challenge than before, but it has
implications in terms of how the funds will be structured in the
future. We are now in the process of trying to discuss this and
by the end of this year the Commission will come up with the proposal
on how this new challenge should be taken into account. We have
brought with us a set of brochures which have just come out from
print two weeks ago. I hope they will help this Committee in understanding
not only the basic structure of the funds but also provide some
good practices which I think you are interested in country by
country. We have 15 brochures, one per country. They all have
a map; they explain how the fund operates generally and how it
operates in the country concerned. This is about the social fund,
not about the structural funds in general. In the brochure there
are a couple of examples of good practice in terms of substance;
not in terms of management but in terms of substance. I hope this
will be helpful. They are at your disposal. If you want more of
those we will be happy to send them. I have one set for you.[1]
Q3 Chairman: That is very kind and
we appreciate it very much. You are right to anticipate that that
was one of my next questions, the question of whether you felt
that you did have a remit as a Commission of establishing and
sharing best practice. Thank you also for that excellent concise
introduction to the subject. Before we move on to the method of
allocation of funding, may I ask you some supplementary questions?
Firstly, that edifice of policy which you have just described
to us is the European dimension. What does the text book say is
the relationship with nation states' national employment plans?
How do they sit together? Where is the point of contact? How are
they integrated? Could you just say briefly how that is supposed
to happen?
Mr Lönnroth: The structural
funds have, at their base, five regulations which are applicable
across the member states. There is a general regulation which
was adopted in 1999 which actually establishes the general framework
for the management and financial circuits across all these funds.
Then there is one regulation per fund: one for the regional fund,
one for the social fund, one for the fisheries and one for the
agricultural guarantee fund. In the second article of the regulation
of the social fund it is stated that one of the objectives of
the fund is the first and to promote the European Employment Strategy.
The fund is about human resources, better labour markets, inclusion
and equal opportunities for all, specific action for women, vocational
training and skills and so on. The article says that the fund
or the actions of the fund should implement the national action
plans of the member state. There is a regulatory requirement that
this is done. If you are looking for best practice—we can
perhaps go into that later on—my view is that the objective
3 plan in England is a good example of how the link between the
national action plans, employment strategy and the social fund
can be done. We have used that in a committee which I chair. We
have a European Social Fund Committee which gathers all the member
states plus the social partners. For the benefit of the candidate
countries we have had presentations on how this linkage has been
done. England—or the UK in general—has been used as
an example of best practice.
Q4 Chairman: So they get high marks.
Mr Lönnroth: They get high
marks on this, yes.
Q5 Miss Begg: Moving on to the allocation
of funding, I understand that the Structural Funds Regulation
does not specify what proportion of the objective 1 and 2 allocations
should be funded by the European Social Fund and the contribution
is determined when each programme is drawn up and agreed by the
Commission. Could you outline what the procedure is for agreeing
the European Social Fund contribution to objectives 1 and 2?[2]
Mr Lönnroth: I am sorry we
have a lack of time here because it is a bit complicated. What
happens in general is that first of all we have the regulation
which establishes the policy areas within which the social fund
operates. On the basis of that the member state is or was requested
to put up a development plan. In that development plan they were—the
UK among others—requested to state how the eligible actions
would be implemented and how they would be linked with the national
priorities of the country (in this case the UK). Then we examine
those plans, we see if they comply with the regulation, and on
the basis of that the member state presents to us either Single
Programming Documents (SDPs) or a Community Support Framework
(CSF, in the case of the UK) where they look at additionality,
how effective it would be, what would be the expected impact of
the measures, how the strategy is articulated across the priorities
and so on. The Commission is then supposed to adopt or agree on
this because we, as the guardian of the treaty, have to see whether
the programmes actually comply with the regulation. After that,
the member state provides us with the proposal for the actual
programme (the so called OPs[3]).
In the programme there is a description on which priorities the
money will be put and how it will be divided across the country.
At the end of the day it is a discussion between the member state
and the Commission as to the weight of the European Social Fund
and the priorities across the various policy fields of action.
When that has been agreed then the member state is required to
provided what we call a programming complement which is not adopted
by the Commission but which includes the actual action to be undertaken
by the member state. In this case, on the basis of an agreement
between the UK and us, we take the figures (for the European Social
Fund we have a total amount of 7.5 billion euros—I do not
remember the exact equivalent in pounds, as we talk euros—plus
400 million for the Community initiatives) and they are divided
in such a way that England has 4.7 billion euros for six years.
The objective 2 areas have half a billion—500 million—and
the objective 1 areas—Cornwall and Wales and parts of Scotland—have
two million. That is an agreed distribution between the UK and
the Commission. By the way, ESF is a rather high part of the whole
structural funds in the UK; it is about half of the total funding
for the structural funds. It is a relatively big share out of
the 16 billion or so which you have at your disposal.
Q6 Miss Begg: There is a perception,
if you take the UK global sum, that the UK does not do as well
as other countries. We are a net contributor to the EC budget
but we seem to get a comparatively low share of the EC expenditure.
To what extent is the UK's allocation of the Social Fund fair
or proportionate to the scale of the seriously disadvantaged areas
and groups that we have that require assistance?
Mr Lönnroth: That is always
a difficult question, what is fair and what is not fair. I think
in order to avoid too much debate on that, the basis for the allocation
is a set of criteria which has been established by the Commission
after consultation with the member states. They are objective
criteria. For the total area they include first of all the GDP
criteria. What are the areas where the GDP is under 75%? Then
on objective 2 we have the criteria that they should not have
on average more than 18% of the population of the European Union
as a whole. The UK has a bit more, but we take the average. The
ESF allocation is based on objective criteria like the employment
rate, unemployment rate, the share of women in employment, the
skills levels and so on. We try to be objective in this.
Q7 Miss Begg: Can I ask about the
figure of 75% of GDP and how that was arrived at? I know that
my colleague from the Highlands, while they did qualify for objective
1 for a long time, they just went over the 75% and suddenly all
of the support. Why 75%? Why was that the base line?
Mr Lönnroth: That is a question
I am afraid I cannot answer really. I think it is a political
decision. It could be 75%, it could be 60%, it could be 80%. That
is a criterion which has been there for a long time. When we now
discuss the future of the funds we have the same discussion. Should
this criterion somehow be raised or decreased. There is no unanimity
across the member states on this. We have stated that basically
we should stick to this criterion. This creates some difficulties
for the future but maybe you wish to go into that a bit later.
Q8 Miss Begg: Do you have any comparative
figures for the proportion of the UK population that live in the
geographical areas that qualify for objectives 1, 2 and 3 compared
with other EU member states?
Mr Lönnroth: We do in our
brief. The UK total population in objective 2 is 24%. The EU average
has to be 18, but there is room for negotiation on this. We arrived
at 24% living in these areas of industrial decline. If you compare
this with Germany, Germany has only 13% living in the objective
2 areas. The coverage of objectives 1 and 2 totally in the UK
is 32% for this current period. In other words, 32% of the population
of the UK lives in the areas of objectives 1 and 2, and the rest,
of course, live in the other areas. That is a little bit less
than in the previous period.
Q9 Chairman: It might be helpful
if you could send us the up to date figures. Could we get access
to a copy of that?
Mr Lönnroth: Yes, of course.[4]
Q10 Miss Begg: Do you have the comparative
figures of how much money came out of the funding allocation in
proportion?
Mr Lönnroth: Yes. The UK
total funding is 8.5% of the total funding. That is actually the
sixth biggest programme in the European Union.
Q11 Chairman: If you have any figures
on that, that would be very helpful as well.
Mr Lönnroth: Yes, we do have
the figures.[5]
Q12 Miss Begg: How successful do
you think the UK is in claiming eligible funds?
Mr Lönnroth: Can I pass on
that question. It is not for me to judge who is successful or
not in political terms. I think our objective is to judge the
results. Whether the UK manages to improve the employment situation
of those who are disadvantaged, that is the key criterion; not
whether you were successful or not in getting money.
Q13 Miss Begg: Do you know if the
UK has ever not taken up its full allocation of European Social
Funds in any one year? If so, how much was the shortfall and were
there any reasons for the shortfall? Again, the impression is
that sometimes it might be difficult to actually draw down the
funding because of the difficulty in getting match funding and
whether that is a problem in some countries.
Mr Lönnroth: I think this
is one of the benchmarks too, if I may say so, as far as objective
3 is concerned. I am talking now about objective 3 which is the
human development programme outside objectives 1 and 2. If you
look at the use of the funds the UK actually comes out quite well.
If you look at this year 2003 for instance, we are now in mid-May,
the fifth month, and England has already claimed 90% of the funds
which are allocated to it in the instalment of 2001. Generally
the UK does quite well in claiming the funds. It is a bit technical
perhaps, but we have this rule which is called n+2. That
is to say when a programme is agreed you have to claim the funds
at least two years after the adoption otherwise there is an automatic
de-commitment. So far, for the current programme, UK has not had
any problems with this.
Q14 Chairman: Does that mean that
they have claimed all the money?
Mr Lönnroth: Yes, indeed.
Q15 Chairman: Have you got notes
about that historically? It is very important to us at the beginning
of this inquiry to know that we are successfully taking advantage
of what is available. If you have any notes on the historic data
on that they would be very valuable to have.
Mr Lönnroth: We do have notes.
I can furnish you with a copy of them. There is a little bit of
variation across the regions. Some have claimed a bit more and
some have claimed less, but the average is 90% for this year.[6]
Q16 Mr Goodman: I want to ask some
questions about monitoring ESF funds. You were making the point
at the start that ultimately some of the beneficiaries of the
programme are individuals. How do you ensure that the ESF funds
that go down are spent in accordance with the Structural Funds
Regulation?
Mr Lönnroth: We have a rather
elaborate monitoring and auditing system. The Commission, at the
end of the day, is responsible for the proper use of public money
at the Community level. That means we are going to be accused
by the European Parliament and the Court of Auditors if you cannot
spend all the money or you do it in the wrong way. Therefore we
have set up a rather complex monitoring and evaluation system.
What we do is that we try to look at how the monitoring and auditing
systems work in the member states and then it is up to the member
states to set up and implement their monitoring system. We look,
together with the member states, at how that works. We have regular
check-ups and we issue recommendations and comments to them if
it does not work. In terms of the UK, also here I would present
a rather positive picture because the UK has set a rather elaborate
set of indicators which are partly indicators on programme efficiency,
partly on how the control systems work, on the management system,
and on how the funds are being used. If you look at the beneficiaries
(we can give you the figures if you wish), 50% of the beneficiaries
of social fund programmes are in work after leaving the programme.
That is a relatively good figure when you think that we are focussing
on those at a disadvantage in the labour market. We have 88% of
the beneficiaries who are given training or some form of course
who are actually completing their courses. About 40% have increased
their qualifications through the structural funds. Then we have
a set of surveys where we ask about satisfaction. In 2001, 80%
said that ESF funded courses met their needs, so they are relatively
happy with this; 55% of participants felt that they improved their
computing skills or their IT skills which is a key area. This
should be looked at with the background that 35% of participants
in the ESF funded courses had no prior qualifications whatsoever.
We feel that it is effective. The previous funds, from 1994 to
1999, we did an ex-post evaluation and generally it was felt that
those who were at the most disadvantaged benefitted more if they
were in ESF funded courses than if they were purely nationally
funded. Of course, this is anecdotal evidence but we feel that
the ESF has value added.
Q17 Mr Goodman: These means of measuring
the outcomes for the individuals, are they a way of ensuring that
the programme is in line with the Structural Funds Regulations?
Mr Lönnroth: Yes. Beyond
that they are also a means of ensuring that the UK, at the end
of the day, will get the 4% of the funds which we have left in
reserve. We have what we call a performance reserve. That is what
we use to squeeze the member state a bit to perform better. The
indicators are being used for the purpose of us being able to
release the performance reserve to those programmes which have
performed better than others.
Q18 Mr Goodman: So you have your
teams working with the national teams that monitor the programmes
that are delivering the service on the ground. How do you carry
out this monitoring which you have to do to ensure that standards
are set without over-burdening the beneficiaries, the programmers
themselves who try to help the individuals?
Mr Lönnroth: We try to focus
more on how the monitoring systems work and it is then up to the
member state to set up the particular way in which they monitor
the actual beneficiaries. This is perhaps something which you
will have to put to the DWP when you interview them, but it seems
to me that the DWP have set up a system whereby they monitor the
co-financing institutions who then have their own audit system
so we do not have a double auditing. We try to have a kind of
stratified system of monitoring so that we do not over-burden
the promoters.
Q19 Mr Goodman: Does that seem to
you a successful system compared to other systems that national
governments are using elsewhere?
Mr Lönnroth: I think it depends
pretty much on the way the programme is organised. I hesitate
in using other member states as examples, but maybe I will do
it in this case. I think it is a question of how many projects
you have and how the actions are actually organised. Sweden is
a country where they have a relatively small programme—much
smaller than the UK—but they have done it differently from
the UK. They have set up 36,000 projects where they give money
to individual enterprises for these enterprises to enhance the
skills of the labour force. That is, intellectually speaking,
a very nice idea, that you give money directly to the enterprises
and they then improve their skills. However, 36,000 projects are
extremely difficult to control. Therefore we are, at the Commission,
trying to tell the member states to cluster, to have a more strategic
approach; have bigger programmes where you can really see the
priorities inside the programmes, whether they meet the community
objectives. Those are not only more effective, but they are easier
to control because they are fewer. Therefore, we would rather
focus on having this kind of stratified approach than going into
each individual thing and we would rather control the beneficiaries
than the individual projects. It is in the Regulation that 5%
of the eligible expenditure has to be controlled in order to make
sure that the system works. UK complies with that, by the way.
1 A selection of ESF brochures was circulated to Committee
members. Back
2
Please refer to supplementary note provided by the European Commission
(ESF 19) at Ev 9. Back
3
Operational programmes. Back
4
Please refer to the supplementary note submitted by the European
Commission (ESF 19K), at Ev 10. Back
5
Please refer to the supplementary note submitted by the European
Commission (ESF 19K), at Ev 10. Back
6
Please refer to supplementary note provided by the European Commission
(ESF 19D) at Ev 14. Back
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