2 Regional and cohesion policy
| (25423)
—
COM(04) 107
| Commission Communication: Third report on economic and social cohesion
|
| Legal base | Article 159 EC
|
| Department | Trade and Industry
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| Basis of consideration | SEM of 26 April 2004 and the Minister's oral evidence of 4 May 2004[6]
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| Previous Committee Report | HC 42-xv (2003-04) (24 March 2004)
|
| To be discussed in Council | No date set
|
| Committee's assessment | Politically important
|
| Committee's decision | For debate on the Floor of the House, together with the Commission Communication on a new Financial Perspective for 2007-13 (decision reported on 24 March 2004)
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Background
2.1 In February, the Commission published its third report on
economic and social cohesion. It presents the Commission's proposals
for regional and cohesion funding for 2007-13, together with an
assessment of the impact of current policies and spending programmes.
2.2 The Commission proposes three priorities for
the future:
- assistance for the least favoured
regions — those with a per capita Gross Domestic Product
(GDP) of less than 75% of the average of the enlarged EU ("the
EU 25") — and transitional funding for regions which
now receive assistance from the Community's Structural Funds because
they have a per capita GDP of less than 75% of the average of
the EU 15 but which will have more than 75% of the average of
the EU 25;
- promotion of regional competitiveness and employment,
through help for urban areas in decline and rural areas with a
highly dispersed or ageing population and through national programmes
to assist labour market reform and strengthen social inclusion;
and
- support for inter-regional, cross-border and
transnational co-operation to promote joint solutions to common
problems.
Total spending between 2007 and 2013 would be €336.3
billion, compared with €257
billion in the preceding seven years.
2.3 The UK Government argues that the priority for
assistance from the Structural and Cohesion Funds should be the
poorer Member States, principally the new ones, whereas under
the Commission's proposals about 50% of the funding would go to
the 15 "older" Member States. Under the Government's
approach, Member States would agree common principles, but the
richer Member States would finance and deliver regional policy
themselves; EU support would be refocused on the poorest Member
States. Moreover, the Commission's proposals for cohesion policy
are inconsistent with the Government's objective of an EU budget
of 1% of the EU's Gross National Income (GNI). Under the Commission's
proposals, the UK's gross and net contributions to the EU budget
would increase significantly, with a consequent impact on the
resources available for UK domestic programmes.
2.4 When we considered the Commission's report in
March, we concluded that the two key questions that arise from
it are:
- the size of the cohesion budget
for 2007-13; and
- what proportion, if any, of that budget should
be available for support for the more prosperous Member States
(and, following on from that, whether it should be left to those
States to finance and deliver their own regional policies).
2.5 In preparation for the oral evidence she was
to give us in May, we asked the Secretary of State for Trade and
Industry (Ms Patricia Hewitt) for a supplementary Explanatory
Memorandum (SEM) on:
- the likely impact on the resources
available for UK domestic programmes if the Commission's proposals
for cohesion expenditure were adopted; and
- the likely impact on the regions of the UK if
the Government's preferred approach were adopted, compared with
the likely impact of the Commission's proposals.
The Minister's SEM and oral evidence
2.6 In her SEM, on which she enlarged in her oral
evidence to us on 4 May, the Secretary of State told us that it
is difficult to estimate with accuracy the likely level of receipts
that might be available to the UK regions under the Commission's
proposals.[7] This is
because it is not known, for example, what would be the formula
for allocating funds to the less developed regions or what would
be the level of transitional support to regions which have a per
capita GDP of less than 75% of the average of the EU 15 but more
than 75% of the average of the EU 25.
2.7 The Minister also told us that the Commission's
proposals could impose an extra gross cost on the UK of around
€12 billion over the period 2007-13 compared with the package
the Government has proposed. This higher contribution to the
EU budget would have to be found from the UK's total resources
available for public expenditure. A higher contribution to the
EU budget would mean that there was less available for domestic
priorities, including regional development. It is, however, too
soon to say how future UK spending plans might be structured around
higher contributions to the EU budget.[8]
2.8 In her SEM, the Minister added that:
"It would, as now, be for the Devolved Administrations
in Scotland, Wales and Northern Ireland to allocate funding according
to their priorities; responsibility for regional development policy
is entirely devolved. However, large UK contributions in the
context of a fixed public expenditure envelope would affect the
amount available for other domestic spending. This could therefore
affect the Devolved Countries, whose block budget is determined
by the Barnett formula, which reflects changes in the level of
UK Government spending in England."
2.9 Under the Government's proposed approach, the
UK would not be eligible for assistance from the Structural Funds
after 2006. In her SEM, the Minister said, however, that:
"the Government has guaranteed that should its
proposals be agreed, domestic funding will be increased so that
UK nations and regions do not lose out compared with their entitlement
in a system where the current eligibility rules were applied across
an EU of 25. This includes transitional funding according to
the system applied to the 2000-2006 Financial Perspective."
2.10 During the oral evidence session on 4 May, we
asked the Minister to enlarge on the meaning of the Government's
"guarantee". She declined to put numbers on the guarantee
because the EU's new Financial Perspective has not yet been settled
and the Government is in the middle of the Spending Review for
the next three years.[9]
She added that the reference in the SEM to the "guarantee"
meant exactly what it says. The Minister told us:
"We are comparing what we would do with what
would happen under Structural Funds if the current allocation
system and the current percentages, and so on, were applied to
an enlarged European Union. A further reason why we cannot put
figures on that is because the economic performance of the different
regions and the different Member States will change between now
and when we move to the new system. We have not got that future
data yet, we can show the methodology but what we cannot do is
make the calculation because we do not know what the GDP will
be of different regions in different Member States in future years."[10]
2.11 The Minister told us that it was not possible
to quantify what assistance UK regions would receive under the
Commission's proposals because the Commission had not provided
any estimate.
2.12 The Minister also told us that, under the Government's
proposals, funding would be concentrated on Greece, Portugal and
the new Member States; the richer countries would take responsibility
for the delivery of regional policy in line with agreed EU framework
objectives. New rules on state aids would be required.[11]
Conclusion
2.13 We are grateful to the Minister for her SEM
and oral evidence. We note that estimates of the likely financial
effects of the Commission's proposals on the UK's regions and
on domestic spending are not available. We also note that the
Government cannot provide quantification of its guarantee on the
level of support the regions would receive under its proposals.
We regret the absence of such estimates because, in our view,
it significantly hinders comparison of the likely impact on the
UK of the two approaches.
2.14 We remain in no doubt of the importance of
this matter and we confirm, therefore, our recommendation that
the Commission's report be debated on the Floor of the House,
together with the Commission's Communication on the new Financial
Perspective.
6 See HC 574-i. Back
7
Q19 and Q28. Back
8
Q5. Back
9
Q26. Back
10
Q27. Back
11
Q10. Back
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