Select Committee on Work and Pensions Sixth Report

2 Background

11. A basic objective of the European Union, as reflected in successive Treaties, is the elimination of economic and social disparities across the EU member states. The European Council of Lisbon of 23-24 March 2000 set a new 10 year strategic objective for the European Union: to become "the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion".[10] It is within this European context that the EU seeks to "regain the conditions for full employment, and to strengthen regional cohesion in the European Union".[11] One of the ways in which the European Commission seeks to achieve this is through the work of its four European structural funds: the European Social Fund (ESF), the European Regional Development Fund (ERDF), the European Agricultural Guidance and Guarantee Fund (EAGGF) and the Financial Instrument for Fisheries Guidance (FIFG). These funds provide financial support for employment and training (ESF) infra-structure projects (ERDF), agriculture or rural development (EAGGF) and fisheries (FIFG).

Structural Funds

12. All four Structural Funds are governed by an overarching Structural Fund regulation, which lays down general provisions including priority objectives, criteria for geographical eligibility and financial provisions.[12] Each fund also has its own specific regulation. In the case of ESF, this is Regulation 1784/99 of the European Parliament and Council, which, amongst other things, sets out the purpose of ESF (i.e. employability and labour market related matters).[13] The structural funds contribute, in varying degrees, to promoting what are loosely called Objectives. For the current programming period (2000-06) there are three Objectives:

  • Objective 1 promotes the development and structural adjustment of regions whose development is lagging behind. These are defined as regions whose per capita GDP is less than 75% of the EU average. Objective 1 regions receive the most generous funding levels: up to 75% of the total project cost [14]
  • Objective 2 supports the economic and social conversion of areas facing structural difficulties. Objective 2 is funded by only the ERDF and ESF. Funding in Objective 2 areas is up to 50% of the total project cost. [15]
  • Objective 3 supports the adaptation and modernisation of policies and systems of education, training and employment.[16] Objective 3 is funded solely by the ESF. Funding in Objective 3 areas is up to 50% of the total project cost.

13. As the Deputy Director General (Mr Lönnroth) told us, these are not truly objectives, but simply a particular way of classifying territory in the European Union[17]. Beyond these objectives, the EU also provides further European funding from the structural funds for specific Community Initiatives.[18] These Community Initiatives support the development of new ideas across Europe. The community initiative that relates to the social and employment field is called Equal. Equal is also funded from the European Social Fund and is also the subject of this report.

14. The priorities and budgets for all four structural funds and the Community Initiatives are agreed on a multi-annual basis, or for entire programming periods that may last six or seven years. The current programming period covers the seven years: 2000-06. The next programming period is expected to cover the period 2007-13. When the Commission publishes its mid-term evaluation of structural funds in early 2004, member states will have an opportunity to make some adjustments to their current programmes.

Financial allocation

15. The total financial allocation for the four Structural Funds for 2000-06 throughout the EU is €183,564 million with an additional €11,500 million available for the four Community Initiatives and innovative actions, making a total of €195,000 million for support for structural operations for the period 2000-06. This financial support for structural operations accounts for nearly one third of the EU budget.

16. The UK has been allocated €16,100 million, or 8.5% of the total budget for the four structural funds for the current programming period (2000-06).[19] Of the UK's total allocation from all four structural funds, 45% (amounting to €7,200 million), is channelled through the ESF.[20]

17. The ESF in the UK represents a more significant element in preventing and combating unemployment than is the average in the EU. According to estimates by the European Commission, the percentage of public expenditure on active labour market policies in the UK is 14.6% compared with an EU average of 8.1%.[21] Although these figures are broad estimates and do not include some relevant public expenditure such as adult learning programmes, they serve to underline the relative importance of the ESF as a source of financial assistance for improving training and job opportunities in the UK.

18. As noted above, during the 2000-06 programme period, £4,467 million (€7,200 million) is available from the ESF in Great Britain. This includes £962 million for Objective 1, £323 million for Objective 2, £2,940 million for Objective 3 and £241 million for Equal. In Northern Ireland, £274 million is available from the ESF, of which £174 million is allocated to the Objective 1 transitional programme, £93 million to the EU Programme for Peace and Reconciliation (PEACE II), and £7.25 million to Equal. Objective 3 funding is available in all areas except those covered by Objective 1.

19. The European Commission has provided some useful statistical data, which are reproduced in the evidence. These show that, amongst other things, when expressed in 1999 prices, the average annual support from the ESF for the UK for the programming period 2000-06 is €2,234 million, or 8.5% of the EU total, which is the sixth largest programme of the EU.[22] This compares with €2,022 million or 8.4% of the EU total for the previous programming period (1994-99). Overall, the UK is expected to receive a 10% increase in real terms over the two programming periods, although its share of the financial resources has remained fairly constant.

10   Presidency Conclusions, Lisbon European Council, 23 and 24 March 2000. Back

11   Ibid Back

12   Council Regulation No. 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ L 161, 26. 6. 1999, pp.1-42) Back

13   Q 3 Back

14   Objective 1 is funded by all four Structural Funds. Back

15   ODPM leads on Objective 1 and Objective 2 areas in England  Back

16   It also provides a 'policy frame of reference' for all Structural Fund activities to develop human resources. Back

17   The classification of the various parts of the UK are available on the DTI website. Back

18   The Community Initiatives are Interreg, Urban, Leader and Equal. Back

19   Figures for each member state are shown in Ev 11 Back

20   Including Equal Back

21   Communication on European Social Fund support for the European Employment Strategy, Com (2201) 16 final/2 Back

22   Q10 Back

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