Documents considered by the Committee on 15 December 2010 - European Scrutiny Committee Contents

6 The future of cohesion policy



COM(10) 642

+ ADDs 1-14

Commission Communication: Conclusions of the fifth report on economic, social and territorial cohesion: the future of cohesion policy

Commission staff working documents: Conclusions of the fifth report on economic, social and territorial cohesion

Legal base
Document originated9 November 2010
Deposited in Parliament17 November 2010
DepartmentBusiness, Innovation and Skills
Basis of considerationEM of 30 November 2010
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


6.1 This is the Commission's fifth report on cohesion policy and the first to be adopted since the Lisbon Treaty entered into force on 1 December 2009. While that Treaty did not change the essential objective of EU cohesion policy — promoting harmonious development across the Union by reducing regional disparities — it enlarged its scope to include measures strengthening territorial as well as economic and social cohesion. Successive enlargements of the EU have significantly increased regional disparities against a variety of social and economic indicators. EU cohesion policy seeks to reduce these disparities by supporting regional development programmes which promote:

·  Convergence — increasing the competitiveness of the least-developed regions (those where the GDP per head is less than 75% of the EU average) through higher growth, productivity and rates of employment;

·  Regional competitiveness and employment — promoting competition and improving employment opportunities in regions not covered by the Convergence objective; and

·  European territorial cooperation — strengthening cooperation across borders and between different levels of government (central, local and regional).

6.2 EU cohesion policy is implemented through the Structural and Cohesion Funds which, together, account for more than one third of the EU's budget. The Funds comprise the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund and amount to €344 billion for the period 2007-13. Most of the Funds (€212 billion for 2007-13) are earmarked for programmes supporting the Convergence objective. The remaining Funds are divided between the Regional Competiveness and Employment objective (€55 billion) and Territorial Cooperation (€7.8 billion). The Cohesion Fund provides €70 billion to support investment in transport and environmental infrastructure in the (currently) 15 Member States with GDP per head of less than 90% of the EU average.

The Commission Communication

6.3 The Communication is a consultation document which sets out the challenges facing EU cohesion policy in light of a deep economic crisis, rising unemployment and poverty, and the need to switch to a low-carbon economy. It draws on a comprehensive analysis in an accompanying Commission staff working document (ADD 1) of the contribution made by EU cohesion policy to promoting competiveness and convergence between EU regions, improving well-being and reducing exclusion, and enhancing environmental sustainability. That analysis provides the basis for proposing a number of significant reforms to cohesion policy which, if agreed, would take effect in the next financial period (2014-20). The Commission invites responses to its ideas for reform by 31 January 2011 with a view to preparing legislative proposals for a new framework for Structural and Cohesion Funds later in the year, after the EU's next Multiannual Financial Framework has been agreed.

6.4 The Commission emphasises the need for future EU cohesion policy to concentrate resources on Europe 2020 objectives and targets (more jobs and sustainable and inclusive growth), strengthen governance, and focus on delivering better results. The Commission proposes the following reforms.


6.5 The Commission says that the reform of cohesion policy should "steer the policy decisively towards results and enact the reforms needed in order to achieve results, while cutting red tape and simplifying the daily management of the policy."[26] The Commission proposes:

·  the adoption of a common strategic approach translating the targets and objectives of Europe 2020 into investment priorities for the Structural and Cohesion Funds, as well as the European Agricultural Fund for Rural Development and the European Fisheries Fund;

·  a development and investment partnership contract based on the common strategic approach which would include the investment priorities, the allocation of national and EU resources between priority areas and programmes, the coordination of EU funds at national level and any agreed conditionalities and targets which have to be achieved. The contract would only cover cohesion policy instruments, but could be extended to other policies and funding instruments;

·  the adoption, as now, of operational programmes which would be the main management tool and include clear and measurable targets for achieving national targets agreed within the Europe 2020 framework; and

·  aligning the production of annual reports with the governance cycle established for Europe 2020 targets so that the contribution made by cohesion policy can be assessed.

6.6 The Commission suggests that there should be a greater thematic concentration of financial resources on a smaller number of priorities which would be explicitly linked to Europe 2020 priorities and would be likely to have a more tangible impact. Member States and regions receiving smaller amounts of cohesion funding might be required to devote all their financial allocation to two or three priorities, and certain priorities would be made obligatory. Member States and regions would nevertheless retain sufficient flexibility to fund innovative projects, and some expenditure might be ring-fenced for specific target groups or experimental approaches (for example, local development).

6.7 As well as strengthening links between EU cohesion policy and the EU's 2020 Strategy, the Commission also proposes introducing more economic conditionality to make the disbursement of cohesion funding conditional on implementing certain reform measures identified in the development and partnership contracts and in the operational programmes agreed with each Member State at the beginning of the programming cycle. In addition, funding from the EU budget could be suspended or cancelled for those Member States that fail to comply with the EU's Stability and Growth Pact.

6.8 The Commission suggests that levels of co-financing should be reviewed with a view to introducing differentiation in the amounts contributed by the EU and from national funds to reflect, for example, the level of development in a Member State or region, the extent of EU added value and the type of action. The Commission also proposes setting aside a limited share of the cohesion budget to establish a performance reserve at EU level. This could be allocated, after a mid-term review, to those Member States or regions showing the greatest progress towards achieving Europe 2020 targets and objectives; or it could be used to support innovative actions, experimentation and networking.

6.9 The Commission says that future EU cohesion policy should be based on more effective monitoring and evaluation systems, by establishing at the outset clear and measurable targets and outcome indicators and requiring Member States to undertake on-going evaluations of the performance of each programme. The Commission advocates greater use of "financial engineering instruments" (for example, loans and venture capital) in combination with grants as a means of increasing resources for investment.


6.10 The Commission says that the inclusion of territorial cohesion to supplement economic and social cohesion requires a new focus on "the role of cities, functional geographies, areas facing specific geographical or demographic problems and macro-regional strategies."[27] Future EU cohesion policy should include "an ambitious urban agenda" in which city authorities play a greater role in designing and implementing urban development strategies. There should be greater flexibility in the design and management of operational programmes to allow sub-regional entities, such as groups of towns or of river and sea basins, to take the lead. The governance of EU cohesion programmes should involve "actors of change" within Member States and mobilise local and regional stakeholders, social partners and broader civil society. Cohesion policy should strengthen "local development approaches" by supporting, for example, active inclusion, social innovation and regeneration schemes for deprived areas.


6.11 The Commission proposes a number of changes to strengthen financial management and control and to reduce administrative burdens. These include:

·  a requirement that national authorities responsible for managing cohesion policy programmes present an annual management declaration, accompanied by annual accounts and an independent auditor's opinion, which would strengthen accountability and provide the basis for a periodic clearance of accounts;

·  developing a more results-based approach by, for example, making payment of the EU contribution to a programme conditional on attaining certain outputs or results;

·  simplifying the administration of EU Funds by agreeing common rules on key elements;

·  providing greater flexibility to design and implement complex programmes and projects while maintaining financial discipline; and

·  strengthening quality control by introducing a system of accreditation for authorities managing operational programmes.


6.12 Finally, the Commission makes the case for all regions and Member States to be eligible for cohesion funding because cohesion policy "underpins the growth model of the Europe 2020 Strategy including the need to respond to societal and employment challenges all Member States and regions face. The policy supports such development with a clear investment strategy in every region by increasing competitiveness, expanding employment, improving social inclusion and protecting and enhancing the environment."[28] However, levels of support would continue to be differentiated to take account of differing levels of economic development. The Commission suggests that a new "intermediate category" could be introduced to ease the transition for regions moving from a less to more developed status (or vice versa). This category would include regions currently eligible for funding under the Convergence objective but whose GDP per head is likely to exceed the qualifying threshold of 75% of average EU GDP.

6.13 The Commission proposes to retain the current eligibility threshold for the Cohesion Fund so that only Member States whose GDP per head is lower than 90% of the EU average qualify. The Commission suggests that the European Social Fund should be more closely aligned with the Europe 2020 Strategy, with funding promoting the attainment of Europe 2020 targets and objectives.

The Government's view

6.14 In his Explanatory Memorandum of 30 November, the Minister of State for Business and Enterprise (Mr Mark Prisk) says that the Government welcomes the Communication "as it displays progressive thinking regarding the translation of the Europe 2020 ambition into concrete delivery. The Government is keen that maximum value is realised from EU funds during the current climate of fiscal consolidation through alignment and strategic integration."[29] The Government particularly welcomes:

·  greater thematic concentration of financial resources to achieve a critical mass of EU and domestic investment to drive growth and promote employment;

·  greater use of financial engineering instruments, such as venture capital loan funds, to enable Member States to align EU investment with domestic public investment;

·  a stronger emphasis on evaluation to measure the impact of EU investment and to demonstrate the transparency and accountability of EU funds, while ensuring that monitoring and evaluation systems are proportionate and do not impose excessive administrative burdens;

·  a more flexible geographical approach to future programming which is in line with the Government's "new approach to local growth, shifting power away from central government to local communities, citizens and independent providers;"[30]

·  simplifying the administration of Structural and Cohesion Funds by harmonising eligibility and other rules; and

·  taking a less prescriptive approach to traditional regional boundaries and stimulating economic growth on the basis of "variable functional economic areas."[31]

6.15 The Minister expresses the Government's "principled objection to proposals for contractually binding 'conditionality' to be applied to funding." He says that there should be "no punitive link between Member States' entitlement to Structural and Cohesion Funds (which is structural) and the effectiveness of Member States' institutions and macroeconomic policies, which should be addressed through other established channels and which, in any case, would be challenging for others to measure." The Minister also questions "proposals for top-down targets or the ring-fencing of funds for specific types of intervention" as he says that the Government believes Member States should have "greater freedom to ensure that the Structural and Cohesion Funds both support their own policies and are aligned with their own delivery mechanisms."[32]

6.16 The Minister indicates that the Government will produce a formal response to the Commission's consultation by the end of January 2011. He anticipates that preparations for new draft Regulations establishing a framework for the Structural and Cohesion Funds from 2014 onwards will begin early in 2011 and that proposals are likely to be published in the second quarter of 2011.


6.17 The purpose of the Communication is to launch a public consultation on the future of EU cohesion policy from 2014 onwards while also highlighting the Commission's ideas for reform. The Communication and the voluminous supporting material prepared by the Commission emphasise the important contribution that cohesion policy can make to achieving the targets and objectives set out in the Europe 2020 Strategy while also reducing social and economic disparities between regions within the EU. We note that the Minister accepts the broad thrust of the Communication while expressing a "principled objection" to the introduction of any additional, binding economic conditionality applicable to Member States' entitlement to Structural and Cohesion Funds. We note also that the Government intends to produce a formal response to the Commission's consultation. We should be grateful if the Minister would provide us with a copy. In the meantime, the Communication remains under scrutiny.

26   See paragraph 2, page 3 of the Communication. Back

27   See paragraph 3.1, page 7 of the Communication. Back

28   See paragraph 5, page 10 of the Communication. Back

29   See paragraph 23 of the Minister's Explanatory Memorandum.  Back

30   See paragraph 27 of the Minister's Explanatory Memorandum.  Back

31   See paragraph 28 of the Minister's Explanatory Memorandum. Back

32   See paragraphs 30 and 31 of the Minister's Explanatory Memorandum.  Back

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