10 Economic and social cohesion
| (a)
(25864)
11606/04
COM(04) 492
(b)
(25856)
11688/04
COM(04) 495
(c)
(25853)
11636/04
COM(04) 493
(d)
(25854)
11637/04
COM(04) 494
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Draft Council Regulation laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund
Draft Regulation on the European Regional Development Fund
Draft Regulation on the European Social Fund
Draft Council Regulation establishing a Cohesion Fund
|
| Legal base | (a)Article 161 EC; assent; unanimity
(b)Article 162 EC; co-decision; QMV
(c)Article 148 EC; co-decision; QMV
(d)Article 161 EC; assent; unanimity
|
| Document originated | 14 July 2004
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| Deposited in Parliament | (a) 28 July 2004
(b) 26 July 2004
(c) and (d) 23 July 2004
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| Department | (a), (b) and (d) Trade and Industry
(c) Work and Pensions
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| Basis of consideration | (a), (b) and (d) EMs of 1 September 2004
(c) EM of 5 August 2004
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| Previous Committee Report | None ; but see (25423) COM(04)107: HC 42-xv (2003-04), paras 38-69 (24 March 2004)
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | (All) Not cleared; further information requested
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Introduction
10.1 In March we considered the Commission's Third Report on
Economic and Social Cohesion.[22]
It assessed the current economic and social situation in the enlarged
EU and the impact of the Community's present cohesion policies;
it also set out the Commission's proposals for cohesion policy
and expenditure for 2007-13. We recommended that the Commission's
report be debated on the Floor of the House, (together with the
proposals for the EU's Financial Perspective for 2007-13), and
the debate took place on 15 June.[23]
10.2 The purpose of these four draft Regulations
is to give effect to the Commission's proposals for the objectives,
financing and management of the Structural and Cohesion Funds
during the next Financial Perspective.
Background
10.3 Article 2 of the Treaty establishing the European
Community (the EC Treaty) lists among the Community's tasks the
promotion of "economic and social cohesion and solidarity
among Member States".
10.4 Article 146 EC establishes the European Social
Fund to improve the employment opportunities of workers in the
internal market, including helping them to adapt to industrial
change.
10.5 Article 158 EC provides that "the Community
shall aim at reducing disparities between the levels of development
of the various regions and the backwardness of the least favoured
regions or islands, including rural areas". Article 159
EC says that the Community is to support the achievement of these
objectives through, among other things, the Structural Funds.
10.6 The Structural Funds currently comprise:
- the European Regional Development
Fund (ERDF), established by Article 160 EC "to redress
the main regional imbalances in the Community through participation
in the development and structural adjustment of regions whose
development is lagging behind and in the conversion of declining
industrial regions";
- the European Social Fund (ESF), established
by Article 146 EC "to improve employment opportunities for
workers in the internal market and to contribute thereby to raising
the standard of living";
- the guidance section of the European Agricultural
Guidance and Guarantee Fund (EAGGF); and
- the Financial Instrument for Fisheries Guidance
(FIFG).
10.7 For the period 2000-06, the distribution of
the Structural Funds is primarily related to three aims:
- Objective 1— to promote
the development and structural adjustment of regions whose per
capita Gross Domestic Product is less than 75% of the Community
average and remote regions (such as the Azores and the most northern
areas of Finland and Sweden);
- Objective 2 —to assist regions seriously
affected by industrial decline; and
- Objective 3 — to combat long-term unemployment
and facilitate the integration into working life of young people
and people excluded from the labour market outside Objective 1
regions.
10.8 The Cohesion Fund, established under Article
161 EC, provides financial contributions to environmental projects
and trans-European transport infrastructure networks. Financial
assistance from the Cohesion Fund is available to Member States
with a GDP of less than 90% of the EU average (currently Greece,
Ireland, Portugal and Spain are receiving support from the Fund).
10.9 The total budget for the Structural and Cohesion
Funds between 2000 and 2006 is €257 billion.[24]
Access to the Funds is dependent on the Member State providing
matching funding.
Document (a)
10.10 Document (a) (the draft General Regulation)
makes general provisions for the ERDF, ESF and Cohesion Fund.
The Commission's explanatory memorandum says that it is necessary
to reform the current Structural and Cohesion Funds arrangements
so as to respond to the enlargement of the EU, globalisation,
technological development, an ageing population, higher immigration
and higher unemployment. The explanatory memorandum also says
that the Commission considers that the administration of the Funds
needs to be reformed to encourage a more strategic approach; to
decentralise responsibilities to partnerships of Member States
and regional and local authorities; and to improve and simplify
the management and monitoring arrangements.
10.11 The total budget for the ERDF, ESF and Cohesion
Fund between 2007 and 2013 would be €336.1 billion (excluding
the EAGGF and FIFG). The Funds would contribute to the achievement
of three objectives:
- Convergence
(funded from the ERDF, ESF and Cohesion Fund);
- Regional competitiveness and employment
(funded from the ERDF and ESF); and
- Territorial cooperation
(funded from the ERDF).
10.12 The aim of the Convergence objective
would be to speed up economic growth and employment in the least
developed regions by, for example, investment in infrastructure
projects. 78.5% (€264
billion) of the total budget of the three Funds would be allocated
to this objective. Regions with a per capita Gross Domestic Product
(GDP) of less 75% of the average GDP of the EU would be eligible
for "Convergence" assistance from the ERDF and ESF.
Regions with a per capita GDP of more than 75% of all the Member
States but with less than 75% of the average of the 15 older Member
States (the EU 15) would be eligible for decreasing transitional
support from the ERDF and ESF. Member States with a per capita
GDP of less than 90% of the EU average would be eligible for convergence
assistance from the Cohesion Fund.
10.13 The aim of the Regional competitiveness
and employment objective would be to provide funding from
the ERDF for regions not eligible for Convergence assistance in
order to deal with the difficulties caused by industries or urban
areas in decline and rural areas with highly dispersed or ageing
populations. Funding for employment programmes would be available
from the ESF. 17.2% (€58 billion) of the total budget would
be allocated to this objective
10.14 The aim of the European territorial cooperation
objective would be to strengthen cross-border cooperation
through local initiatives to promote joint solutions to common
problems. Funding would come from the ERDF. 4% (€14 billion)
of the total budget would be available for this objective.
10.15 The Council would set Community-wide strategic
guidelines on economic, social and territorial cohesion. The guidelines
would define the framework for intervention from the Funds between
2007-13. Each Member State would be required to draw up, and get
the Commission's approval of, a "national strategic framework".
The national frameworks would cover 2007-13 and be consistent
with the Council's guidelines and show the links between the
Community's priorities and those of the Member States. Member
States would send the Commission an annual report on progress
in implementing their framework documents; and the Commission
would make an annual report to the European Council on the implementation
of the Community's strategic guidelines.
10.16 Member States would be required to present
the Commission with operational programmes for projects related
to the three objectives. The Commission would check that the operational
programme was consistent with the strategic guidelines and national
framework and could, if necessary, ask the Member State to revise
its programme. National programmes could be revised from time
to time, if necessary.
10.17 The draft Regulation sets out the responsibilities
of the Commission and Member States for evaluating the Community's
strategic guidelines, national strategic frameworks and operational
programmes. It also sets out their responsibilities for the management,
monitoring and control of the Funds.
10.18 The draft Regulation specifies the following
maximum contributions (as a proportion of total public expenditure
on activities co-financed by the Funds and Member States) which
the Funds may make:
- 85% of the public expenditure
co-financed by the Cohesion Fund;
- 75% of the public expenditure co-financed by
the ERDF or ESF under the Convergence objective;
- 50% of the public expenditure co-financed by
the ERDF or ESF under the regional competitiveness and employment
objective; and
- 75% of the public expenditure co-financed by
the ERDF under the territorial cooperation objective.
The Government's view on document (a)
10.19 The Minister of State for Industry and the
Regions and Deputy Minister for Women and Equality at the Department
of Trade and Industry (Jacqui Smith) tells us that the Government
remains opposed to the Commission's proposals to:
- increase the budget for the
Structural and Cohesion Funds from €257
billion for 2000-06 to €336.3
billion for 2007-13; and
- split the use of the Funds broadly 50:50 between
the new and old Member States, with a significant amount of funding
allocated to the richer Member States and regions.
10.20 The Minister notes that the Commission proposes
that the total EU budget for the next Financial Perspective should
be equivalent to 1.24% of the Community's Gross National Income
(GNI). In December 2003, however, the Prime Minister and the leaders
of France, Germany, Austria, Sweden and the Netherlands called
for the average EU expenditure in 2007-13 to be stabilised around
current levels and not to exceed 1% of the EU's GNI. The Minister
says that:
"The level of funding available for the Structural
and Cohesion Funds will therefore need to be consistent with this.
At the same time, other [Member States] have questioned the justification
for a 50:50 split of funding between old and new Member States.
It is therefore likely that there will be significant modifications
to the proposal during the forthcoming negotiations on the draft
Regulations."
The negotiations are expected to continue until late
2005 or early 2006.
10.21 The Minister says that the Government believes
that:
"the Commission's proposals for the use of the
Funds (which would ensure a 50:50 split of funds between [the]
old and new [Member States] and the continued recycling of EU
funds between net contributors to the EC budget) fail to focus
EU resources on key priorities and on areas where EU intervention
is genuinely likely to have an added value in comparison [with]
national measures."
10.22 The Government does, however, welcome the Commission's
commitment to increase the strategic focus of the Structural
and Cohesion Funds and its commitment to simplify the delivery
of programmes, although the Government would like simplification
to go further and for Member States to be given greater flexibility
to deliver programmes that reflect local needs.
Document (b)
10.23 The draft Regulation on the European Regional
Development Fund (ERDF) makes detailed provision, within the requirements
of the proposed General Regulation, concerning the purpose and
management of the Fund and the assistance it may provide.
10.24 It defines the purpose of the ERDF as contributing
to the financing of assistance towards the reinforcement of economic,
social and territorial cohesion by reducing regional disparities
and supporting the structural development and adjustment of regional
economies. The ERDF would contribute to the financing of:
- productive investment;
- infrastructure;
- other initiatives (such as the development of
venture capital, loan and guarantee funds, neighbourhood services
and exchanges of experience); and
- technical assistance.
10.25 Under the Convergence objective, the ERDF would
support programmes aimed at the modernisation and development
of regional economic structures, and in particular:
- research and technological
development, innovation and entrepreneurship;
- development and application of information and
communication technologies;
- the environment (for example, investments in
air and water quality, control and prevention of pollution, and
the rehabilitation of contaminated land);
- prevention of and preparations for natural and
technological risks;
- tourism;
- transport investments;
- energy;
- education (investment to increase the attractiveness
and quality of life in the region);
- health; and
- direct aid to investments in small and medium-sized
enterprises contributing to creating and safeguarding jobs.
10.26 Under the regional competitiveness and employment
objective, the ERDF would support projects to, for example:
- promote regional research and
development and innovation and entrepreneurship;
- stimulate investment in the
rehabilitation of contaminated land; in energy efficiency and
renewable energy production; and in promoting clean public transport;
and
- strengthen secondary transport networks outside
major urban areas and promote access to and use of information
and communication technology by small and medium enterprises.
10.27 Under the territorial cooperation objective,
the ERDF would concentrate assistance on:
- development of cross-border
economic and social activities through joint strategies to, for
example, encourage entrepreneurship, improve access to transport
and develop joint use of health and education facilities;
- transnational cooperation in, for example, water
management, access to energy and transport networks, the promotion
of maritime security and flood protection, and the creation of
networks for research and technological development; and
- the exchange of experience.
The Government's view on document (b)
10.28 The Minister tells us that the document does
not raise the major policy issues that arise on the draft General
Regulation. The Government will be examining the provisions of
the draft ERDF Regulation to ensure that they are in keeping with
its wish to ensure greater simplification and compliance with
the requirements of subsidiarity and proportionality.
Document (c)
10.29 The draft Regulation on the European Social
Fund supplements the proposed General Regulation with proposals
specific to the ESF.
10.30 It provides that assistance from the ESF would
be available only in support of the Convergence and regional competitiveness
and employment objectives. The purpose of the ESF would be to
strengthen economic and social cohesion by supporting Member States'
policies aimed at achieving full employment, improving the quality
of work and productivity, promoting social inclusion and reducing
regional employment disparities.
10.31 The ESF would have four broad priorities:
- increasing the adaptability
of workers and enterprises (for example, by ensuring access to
training for low-skilled and older workers and the promotion of
innovation and entrepreneurship);
- increasing access to employment for job-seekers
and economically inactive people, preventing unemployment, prolonging
working lives and increasing the participation of women and migrants
in the labour market;
- reinforcing the social inclusion of people at
a disadvantage and combating discrimination; and
- supporting reforms in employment and inclusion
by, in particular, promoting the development of national and regional
networks.
In addition, under the Convergence objective, the
ESF would support:
- investment in human capital
by, for example, promoting reforms of education and training systems,
and increasing participation in education and training; and
- strengthening the capacity and efficiency of
public services at national, regional and local levels.
10.32 The draft Regulation requires Member States
to ensure that action supported by the ESF is consistent with
the implementation of the European Employment Strategy.
The Government's view on document (c)
10.33 The Minister of State at the Department for
Work and Pensions (Jane Kennedy) tells us that, if the Government's
preferred approach to the Structural and Cohesion Funds in 2007-13
were adopted, the United Kingdom would not receive financial support
from the ESF since the assistance would be concentrated on the
poorest Member States and the richer ones would fund their own
activities.
10.34 The Minister says that the Government welcomes
the proposal in the draft ESF Regulation to maintain the relationship
between the ESF and the European Employment Strategy.
Document (d)
10.35 The draft Regulation establishes the Cohesion
Fund to strengthen the economic, social and territorial cohesion
of the Community in the interests of promoting sustainable development.
The Fund would assist investment by eligible Member States in
trans-European transport networks, environmental protection, energy
efficiency, renewable energy and transport projects.
The Government's view on document (d)
10.36 The Minister for Industry and the Regions and
Deputy Minister for Women and Equality at the Department of Trade
and Industry (Jacqui Smith) reminds us of the Government's objections
to the Commission's proposals for the size of the budget for the
Structural and Cohesion Funds. She adds that, as the United Kingdom
is not eligible for support from the Cohesion Fund, it is unlikely
to be directly affected by the provisions of the draft Cohesion
Fund Regulation. Nevertheless, the Government will examine the
draft to ensure that it satisfies the requirements of subsidiarity
and proportionality and is consistent with the Government's aim
of greater simplification.
Conclusion
10.37 The documents contain no surprises: they
faithfully give effect to the Commission's original proposals,
on which we have previously reported.
10.38 The outcome of the negotiations on the Commission's
proposals will have significant effects not only on the size of
the budget for the Structural and Cohesion Funds in 2007-13 but
also on the priorities of the individual Funds. We also note that
the Government is still considering the details of the draft Regulations.
We ask the Government, therefore, to keep us informed of the progress
of the negotiations and of the views it reaches when it has completed
its examination of the drafts. Meanwhile, we shall keep the documents
under scrutiny.
22 See headnote. Back
23
HC Deb, 15 June 2004, cols.702-748. Back
24
Including €22 billion for the accession states before their
accession and another €22 billion for structural assistance
to them in 2004-06. Back
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