12 Economic and social cohesion
| (a)
(25864)
11606/04
COM(04) 492
(b)
(25856)
11688/04
COM(04) 495
(c)
(27217)
13531/05
COM(05) 523
(d)
(25854)
11637/04
COM(04) 494
(e)
(27413)
8216/06
—
(f)
(27414)
8218/06
—
(g)
(27422)
8219/06
—
(h)
(27412)
7177/06
—
|
Draft 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
Amended draft Regulation on the European Social Fund
Draft Regulation establishing a Cohesion Fund
Draft Regulation laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund — Presidency compromise
Draft Regulation on the European Regional Development Fund
Draft Regulation on the European Social Fund (ESF) — Presidency compromise
Draft Regulation establishing a Cohesion Fund — Presidency compromise
|
| Legal base | (a) and (e) Article 161 EC; assent; unanimity
(b) and (f) Article 162 EC; co-decision; QMV
(c) and (g) Article 148 EC; co-decision; QMV
(d) and (h) Article 161 EC; assent; unanimity
|
| Deposited in Parliament | (e) (f) and (h) 12 April 2006
(g) 11 April 2006
|
| Department | (a), (b),(d), (e), (f) and (h) Trade and Industry
(c) and (g) Work and Pensions
|
| Basis of consideration | (e), (f) and (h) EM of 11 April 2006
(g) EM of 18 April 2006
|
| Previous Committee Report | (a), (b) and (d) HC 42-xxxii (2003-04), para 10 (13 October 2004)
(c) HC 34-xviii (2005-06), para 11 (8 February 2006
(e) to (h) None
|
| To be discussed in Council | (e) to (h) 25 April 2006
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Introduction
12.1 In March 2004, the previous Committee considered the Commission's
Third Report on Economic and Social Cohesion.[24]
It set out the Commission's proposals for cohesion policy and
expenditure for 2007-13. It was debated on the Floor of the House
in June 2004.[25]
12.2 In October 2004, the previous Committee considered
the first drafts of four Regulations (documents (a), (b) and (d)
and the previous draft of document (c)) 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.
12.3 The Government told the previous Committee that
it was opposed to two aspects of the Commission's proposals:
- First, the Commission proposed
that the budget for the Structural and Cohesion Funds should be
increased from €257 billion for 2000-06 to €336.3 billion
for 2007-13. The proposed budget was inconsistent with the view
of the UK government and the governments of five other Member
States that the EU's total budget for 2007-13 should not exceed
1% of the EU's Gross National Income.
- Second, the Commission proposed that financial
assistance from the Funds should be allocated broadly 50:50 between
projects in the new and older Member States, with a significant
amount of the money going to the richer Member States and regions.
12.4 The previous Committee decided to keep the first
drafts of the Regulations under scrutiny pending progress reports
on the negotiations and the settlement of the budgets of the Structural
and Cohesion Funds.[26]
12.5 In February, we considered document (c), a revised
draft of the Regulation to establish the European Social Fund
for 2007-13. It incorporated the amendments the Commission proposed
in the light of the European Parliament's first reading of the
draft Regulation.[27]
The Government welcomed the amended draft.
12.6 Documents (e) to (h) are revised drafts of documents
(a) to (d) and supersede them.
Legal background
12.7 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".
12.8 Article 158 of the EC Treaty 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 says that the Community is to support the achievement
of these objectives through, among other things, the Structural
Funds, which include the European Regional Development Fund and
the European Social Fund. Article 161 requires the Council to
define the objectives and organisation of the Structural Funds
and the general rules applicable to them.
12.9 Article 160 of the EC Treaty provides that the
European Regional Development Fund (ERDF) is intended "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". Article 162 requires the
Council to take decisions to implement the ERDF.
12.10 Article 146 of the EC Treaty establishes the
European Social Fund (ESF) "to improve employment opportunities
for workers in the internal market and to contribute thereby to
raising the standard of living".
12.11 The Cohesion Fund, established under Article
161 of the EC Treaty, provides financial contributions to environmental
projects and trans-European transport infrastructure networks.
Document (e)
12.12 Document (e) ("the General Regulation")
contains general provisions for the ERDF, ESF and Cohesion Fund.
12.13 It provides that the total budget for the three
Funds for 2007-13 would be €307.6 billion. The annual commitment
appropriations would rise from €42.8 billion in 2007 to €45.2
billion in 2013.
12.14 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 co-operation
(funded from the ERDF).
12.15 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 transport, energy,
health, education and environmental infrastructure projects. €251.3
billion (81.7%) of the total budget of the Structural and Cohesion
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.) 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.
12.16 The aim of the Regional competitiveness
and employment objective would be to provide funding from
the Structural Funds for regions not eligible for Convergence
assistance in order to deal with the difficulties caused by, for
example, industries or urban areas in decline and rural areas
with highly dispersed or ageing populations. €48.7 billion
(15.8%) of the total budget of the Structural and Cohesion Funds
would be allocated to this objective. Financial assistance would
be given to regional programmes for, for example, R&D and
innovation, the rehabilitation of contaminated land, public transport
and telecommunications.
12.17 The aim of the European territorial co-operation
objective would be to strengthen cross-border co-operation
through local initiatives to promote joint solutions, such as
flood prevention and investment in cross-border transport infrastructure,
to common problems. €7.5 billion (2.4%) of the total budget
would be available for this objective.
12.18 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 a "national
strategic reference framework". The national framework would
cover 2007-13, be consistent with the Council's guidelines and
show the links between the Community's priorities and those of
the Member State. The Commission and Member States would have
duties to provide annual reports on the implementation of national
frameworks and progress towards achieving the Community's objectives
for competitiveness and employment.
12.19 Document (e) sets out the responsibilities
of the Commission and Member States for the management, monitoring
and control of the Funds. It also specifies the maximum proportion
of the cost of a project which may be met from the Funds.
Documents (f) and (h)
12.20 The revised drafts of the Regulation on the
European Regional Development Fund and the Regulation to establish
the Cohesion Fund supplement the General Regulation by making
detailed provision on the purpose and management of the two Funds
and the financial assistance they may provide.
The Government's view on documents (e), (f) and
(h)
12.21 The Minister of State at the Department of
Trade and Industry (Malcolm Wicks) tells us that Member States
have now reached agreement on all but some small technical details.
Documents(e), (f) and (h) keep to the original aims of the Commission's
proposals, including decentralising responsibilities to Member
States and simplifying the arrangements for managing the programmes.
12.22 The Minister says that:
"The European Council of 15-16 December
2005 agreed the next EC budget for the 2007-13 Financial Perspective.
As part of the package, the Member States reached agreement on
future Structural and Cohesion Funds spending for the 2007-13
budgetary cycle … The agreement is subject to an Inter-Institutional
Agreement with the European Commission and the European Parliament."
12.23 The Minister notes that the Government had
argued that continued financial assistance from the Funds to regions
in the richer Member States might not provide sufficient added
value to justify Community action. He adds, however, that:
"The Government has been unsuccessful in
fully convincing the Council of this view, but welcomes the fact
that, as a result of the December European Council agreement,
a greater proportion of Structural Funds will now go to the new
Member States, and that the new Regulations will improve the added
value of spending by the Funds.
"The ten new Member States together with
Bulgaria and Romania will receive a total of €158 billion
in Structural Funds, a more than 250% increase in their Structural
Funds receipts from an average of €7 billion per annum during
the 2004-06 period to an average of €19 billion per annum
in the 2007-13 period. The older EU Member States (the EU 15)
will face reductions in spending compared with current levels."
12.24 The Minister tells us that the agreement on
the budget for the Funds and the amendments to the provisions
in the draft Regulations about management of the Funds represent
a significant improvement on the Commission's original proposals.
He gives example, such as:
"The Commission originally proposed that
it should exercise strong and discretionary powers of financial
control, allowing it to make judgements on withholding funds based
only on doubts and suspicions. The UK has succeeded in limiting
this discretion and ensuring a greater reliance on evidence, while
supporting moves towards discipline and best practice in financial
management."
Similarly, the Government has succeeded in simplifying
the requirements for national strategic reference frameworks and
in avoiding a requirement for Member States to obtain the Commission's
approval of national frameworks.
12.25 The Minister says that the UK will receive
about €2.6 billion in Convergence funding for its poorest
regions. Cornwall, West Wales and the Valleys will receive full
Convergence funding, while the Highlands and Islands will receive
phasing-out funding. The UK will also receive €6.2 billion
in Competitiveness funding for other regions. South Yorkshire
and Merseyside will receive phasing-in funding. The Government
will agree with the Commission how the UK's remaining Competitiveness
funding should be allocated. Finally, the UK will receive €0.6
billion in Co-operation funding; again, the allocation will need
to be agreed between the Government and the Commission.
12.26 Figures for the precise amounts that UK regions
will receive are not yet available.
Document (g)
12.27 The revised draft Regulation on the European
Social Fund supplements the proposed General Regulation with proposals
specific to the ESF.
12.28 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.
The Government's view on document (g)
12.29 The Parliamentary Under-Secretary of State
at the Department for Work and Pensions (Mr James Plaskitt) tells
us that, since we considered document (c) in February, further
amendments have been agreed between Member States at official
level. They have been incorporated in document (g). He says that
the amendments clarify and improve the draft Regulation but do
not have significant policy or financial implications. They include,
for example, an additional reference to the Community's Integrated
Guidelines for Growth and Jobs and changes to make the text on
indicators and reporting arrangements consistent with the provisions
of the General Regulation.
12.30 The Minister says that the Government welcomes
document (g). It focuses the European Social Fund on supporting
Member States' policies within the framework of the European Employment
Strategy and the Lisbon Strategy for Growth and Jobs. He adds
that it "will allow ESF funding for the UK to be used to
add value to our domestic employment and skills strategies".
Conclusion
12.31 We clear documents (a) to (d) because they
have been superseded by the Presidency's revised drafts of the
Regulations.
12.32 We share the Government's view that the
revised drafts clarify and improve the Regulations without introducing
significant changes to the policy or financial arrangements. We
welcome, for example, the omission from document (e) of the requirement
for Member States to obtain the Commission's approval of their
national strategic reference frameworks.
12.33 We note that the budgets for the Structural
and Cohesion Funds cannot be finally settled until an Inter-Institutional
Agreement has been reached between the Council, the Commission
and the European Parliament. We are, however, content to clear
documents (e) to (h) on the understanding that scrutiny would
be re-opened if the inter-institutional negotiations were to lead
to a significant revision of the budgets agreed by the European
Council last December.
24 See (25423) COM(04) 107: HC 42-xv (2003-04), para
38-69 (24 March 2004). Back
25
HC Deb, 15 June 2004, cols.702-748. Back
26
See (25864) 11606/04: HC 42-xxxii (2003-04), para 10 (13 October
2004). Back
27
See (27217) 13531/05: HC 34-xviii (2005-06), para 11 (8 February
2006). Back
| 
