16 Financial crisis: use of the Structural
and Cohesion Funds to stimulate economic growth and jobs
| (a)
(30230)
16548//08
COM(08) 803
(b)
(30229)
16543/08
COM(08) 813
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Draft Regulation to amend Regulation (EC) No. 1083/2006 on the European Regional Development Fund, the European Social Fund and the Cohesion Fund concerning certain provisions relating to financial management
Draft Regulation to amend Regulation (EC) No. 1081/2006 on the European Social Fund to extend the types of cost eligible for a contribution from the European Social Fund
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| Legal base | (a) Article 161 EC; assent; QMV
(b) Article 148 EC; co-decision; QMV
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| Document originated | (Both) 26 November 2008
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| Deposited in Parliament | (a) and (b) 2 December 2008
(c) 10 December 2008
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| Department | (a) Business, Enterprise and Regulatory Reform
(b) Work and Pensions
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| Basis of consideration | (a) EM of 12 December 2008
(b) EM of 15 December 2008
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| Previous Committee Report | (Both) None
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| To be discussed in Council | December 2008
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| Committee's assessment | (Both) Politically important
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| Committee's decision | (Both) Cleared
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Purpose of the documents
16.1 The Commission says that the primary purpose of these proposals
is to stimulate economic growth and employment over the next year
or so as part of the response of the Member States and the Community
to the global financial crisis. The proposals are intended to
help and encourage Member States to invest in projects in 2009.
To this end, the Commission proposes amending legislation to make
the rules of the Structural and Cohesion Funds simpler and more
flexible.
Background information about the Funds
16.2 The European Regional Development Fund (ERDF) provides grants
towards the cost of projects designed to reduce economic and social
disparities between the regions of the EC. The European Social
Fund (ESF) provides grants towards projects to improve employment
opportunities by, for example, re-training people made redundant
by technological change. The ERDF and ESF are known as the Structural
Funds.
16.3 The Cohesion Fund provides grants towards the
cost of environmental projects and trans-European networks for
the benefit of the Member States with per capita Gross National
Income of less than 90% of the EC average.
16.4 A Regulation of 2006 lays down the rules for
the operation of the Structural and Cohesion Funds between 2007
and 2013.[67]
The European Council's meeting on 11-12 December
2008
16.5 In the Conclusions to its meeting on 11-12 December,
the European Council expressed support for the simplification
of the procedures, and faster implementation of programmes financed
by the Structural and Cohesion Funds with a view to strengthening
investment in infrastructure and energy efficiency.[68]
The European Council invited the European Parliament, the Council
and the Commission to adopt the necessary legislation as soon
as possible.
Document (a)
16.6 Document (a) is the draft of a Regulation to
amend the Regulation of 2006 establishing the rules of the Structural
and Cohesion Funds:
- to make it easier for businesses,
and particularly SMEs, to get financial and technical help from
the European Investment Bank and the European Investment Fund
for the preparation of investment programmes;
- to simplify the definition of eligible expenditure
for the calculation of payments from the Funds;
- to make contributions in kind (such as land)
eligible expenditure, notably for urban renewal projects;
- to enable Member States to receive contributions
from the Funds to the cost of major projects before the Commission
has adopted them (the Member State would have to repay the grant
if the Commission subsequently decided not to adopt the project);
and
- to raise the financial ceiling on the pre-financing
payments the Commission may make in 2007, 2008 and 2009.
16.7 The changes are intended to increase Member
States' liquidity and simplify the grant rules. The Commission
believes that this would encourage and help Member States to invest
in projects at a time when there are acute pressures on their
public finances.
16.8 The Commission estimates that the cost of the
additional payments from the Funds in 2009 would be €6.3
billion. This would be met from the current forecast of under-spending
in 2009 because of delays in preparing and approving projects
in 2007 and 2008. Accordingly, the total budget of the Structural
and Cohesion Funds for 2007-13 would remain unchanged (€277
billion for the Structural Funds and €70 billion for the
Cohesion Fund).
The Government's view on document (a)
16.9 In his Explanatory Memorandum of 12 December
2008, the Minister of State for Employment Relations and Postal
Affairs at the Department for Business, Enterprise and Regulatory
Reform (Mr Pat McFadden) tells us that the Government supports
the proposed amendments. He says that it is essential to maximise
the contribution from the Structural and Cohesion Funds to maintaining
strong, open and stable economies.
16.10 The Minister also says that the French Presidency
would like the Council to complete its consideration of document
(a) by the end of 2008. The European Parliament will then consider
it. The French Presidency hopes that the legislative process will
be completed by February 2009.
Document (b)
16.11 The Commission proposes this draft Regulation
to simplify one of the provisions of the Social Fund Regulation
of 2006.[69]
16.12 Article 11(3) of the 2006 Regulation defines
the costs of action to improve employment and social inclusion
which are eligible for financial assistance from the Fund. The
proposed amendment would make two further types of cost eligible
for financial support:
- lump sum payments for up to
€50,000; and
- flat-rate payments for direct costs calculated
by the application of a standard scale defined by the Member State.
The amendment was recommended by the European Court
of Auditors in 2007.
The Government's view on document (b)
16.13 The Minister of State for Employment and Welfare
Reform at the Department of Work and Pensions (Mr Tony McNulty)
tells us that the Government welcomes the proposal.
Conclusion
16.14 The Commission has not provided any estimates
of the effects the proposals might have an jobs and economic growth.
We do not find that surprising since it will be for each Member
State to reach its own decisions about what use, if any, to make
of the changes to the rules of the Funds if they are approved.
16.15 Nor is it surprising that the Government
has not told us what use the UK would be likely to make of the
changes. On the contrary, the proposals have been made so recently
that it would be surprising if any Member State could make a reliable
assessment at this stage.
16.16 We can, however, understand why the Commission
has made the proposals. They may help generate economic growth
and jobs without additional expenditure by the EC. We also welcome
the proposals for the simplification of the rules of the Structural
and Cohesion Funds. For these reasons, we have decided to clear
both documents from scrutiny.
67 Council Regulation (EC) No. 1083/2006: OJ No. L
210, 31.7.06, p.25. Back
68
European Council meeting on 11-12 December 2008, Presidency Conclusions,
paragraph 11, second indent. Back
69
Council Regulation (EC) No. 1081/2006: OJ No. L 210, 31.7.06,
p.12. Back
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