1 EU Structural and Cohesion
Funds
| (33217)
15243/11
COM(11) 615
+ ADDs 1-4
| Draft Regulation of the European Parliament and Council laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1083/2006
Commission staff working papers
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| Legal base | Article 177 TFEU; co-decision; QMV
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| Document originated | 6 October 2011
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| Deposited in Parliament | 13 October 2011
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 2 November 2011
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| Previous Committee Report | None
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| Discussion in Council | 16 December 2011
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee C
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Background
1.1 One of the objectives of the European Union is to "promote
economic, social and territorial cohesion, and solidarity among
Member States."[1]
Successive enlargements of the EU have significantly increased
differences in levels of development against a variety of economic
and social indicators. The EU's cohesion policy seeks to reduce
these disparities by using the EU's Structural and Cohesion Funds
to provide targeted financial assistance to Member States and
their regions. These Funds account for more than one third of
the EU's budget and amount to €347 billion for the period
2007-13.[2] They comprise
the European Regional Development Fund (ERDF), the European Social
Fund (ESF) and the Cohesion Fund.
1.2 The current objectives of EU cohesion policy
are set out in a Regulation adopted in 2006.[3]
Most of the Funds (€212 billion for 2007-13) are earmarked
for programmes supporting the Convergence objective. This objective
seeks to increase the competiveness of the least-developed regions
(those where GDP per head is less than 75% of the EU average)
through higher growth, productivity and rates of employment. The
remaining Funds are divided between the Regional Competitiveness
and Employment objective (€55 billion), which promotes growth
and employment in regions not covered by the Convergence objective,
and the European Territorial Cooperation objective (€7.8
billion) which encourages cross-border cooperation. The Cohesion
Fund provides nearly €70 billion to support investment in
transport and environmental infrastructure in the 15 Member States
(not including the UK) which currently have a GDP per head of
less than 90% of the EU average.
1.3 In November 2010, the Commission published a
Communication on the future of EU cohesion policy which highlighted
the challenges facing the EU in light of a deep economic crisis,
rising unemployment and poverty, and the need to switch to a low-carbon
economy. It proposed a number of significant reforms to EU cohesion
policy which, if agreed, would take effect in the next financial
period (2014-20). These included a greater concentration of resources
on the objectives and headline targets set out in the Europe 2020
Strategy on jobs and growth, a clearer focus on delivery and results,
stronger economic conditionality, and more effective monitoring
and evaluation systems.[4]
The draft Regulation
1.4 The draft Regulation is one of a package of measures
proposed by the Commission to align expenditure for the EU's cohesion
policy with the objectives and headline targets set out in the
Europe 2020 Strategy.
1.5 The draft Regulation is based on Article 177
of the Treaty on the Functioning of the European Union (TFEU)
which provides for the adoption of EU Regulations to "define
the tasks, priority objectives and the organisation" of the
Structural and Cohesion Funds as well as "the general rules
applicable to them and the provisions necessary to ensure their
effectiveness and the coordination of the Funds with one another
and with other existing financial instruments." It would
repeal the 2006 Regulation and establish new objectives for EU
cohesion policy during the next financial period from 2014-20.
1.6 The draft Regulation proposes the creation of
a Common Strategic Framework ("CSF") to govern the EU's
existing Structural and Cohesion Funds (the ERDF, ESF and Cohesion
Fund) as well as the European Agricultural Fund for Rural Development
(EAFRD) and the European Maritime and Fisheries Fund (EMFF). These
funds are referred to collectively as the "CSF Funds"
and Part Two of the draft Regulation sets out the common provisions
which apply to all of them. Part Three of the draft Regulation
establishes the general provisions which apply only to the ERDF,
ESF and the Cohesion Fund. More detailed provisions for each of
the CSF Funds will be included in separate Regulations.
1.7 The Commission says that its proposal follows
a process of extensive consultation with stakeholders, including
Member States, regions, social and economic partners, academics
and international institutions which indicated that there was
a need to:
- focus on fewer, more strategic
objectives which are in line with the Europe 2020 Strategy;
- concentrate resources on developing the conditions
for sustainable development and growth;
- improve coordination between the different Funds
and other EU policies and financial instruments and ensure that
they complement each other;
- set clear and measurable targets and improve
monitoring and evaluation systems; and
- seek to reduce administrative costs and burdens
while also minimising the risk to the EU budget.
1.8 The Commission notes that its proposal for the
next EU Multiannual Financial Framework suggests a total allocation
of €376 billion for economic, social and territorial cohesion
for the period 2014-20, broken down as follows:
- €162.6 billion for the
less-developed regions;
- €53.1 billion for the more developed regions;
- €38.9 billion for in-between (transition)
regions;
- €11.7 billion for territorial cooperation;
- €68.7 for the Cohesion Fund;
- €0.926 billion for outermost and sparsely
populated regions; and
- €40 billion for a new transport, energy
and ICT Connecting Europe Facility.[5]
This global figure does not include financial assistance
under the EAFRD and the EMFF for rural development and fisheries.
Part Two of the draft Regulation — common
provisions applicable to the CSF Funds
1.9 The draft Regulation sets out a number of common
principles which underpin the provision of CSF Funds and identifies
eleven broad thematic objectives which the Funds are intended
to support. The principles include a commitment to:
- work in partnership with a
broad range of stakeholders in order to develop, implement, monitor
and evaluate national programmes which are financed by CSF Funds—the
Commission may produce a European code of conduct to provide guidance
on implementing the partnership principle;[6]
- promote gender equality and prevent discrimination
on grounds of sex, race, ethnic origin, religion or belief, disability,
age or sexual orientation; and
- ensure that CSF Funds are used for sustainable
development and to protect and improve the environment.
1.10 The thematic objectives are all designed to
support the EU's Europe 2020 Strategy and focus on investment
in education, research and innovation; ICT; competiveness; resource
efficiency and the transition to a low-carbon economy; sustainable
development; employment and labour mobility; social inclusion
and measures to tackle poverty; and more efficient public administration.
Suggested priority actions for achieving these objectives will
be set out in separate Regulations establishing specific rules
for each CSF Fund.
1.11 In order to provide a more strategic framework
for implementing the thematic objectives, the Commission says
that it will propose a Common Strategic Framework which will highlight
the "key actions" which each CSF Fund is intended to
support. This Common Strategic Framework will provide the basis
for each Member State to develop its own Partnership Contract,
agreed with the Commission, setting out how it intends to use
CSF Funds to achieve the thematic objectives. The Partnership
Contracts will, in turn, provide the framework for the development
of operational programmes containing detailed information on how
EU Structural and Cohesion Funds are to be utilised in a given
region.
1.12 The draft Regulation includes a number of conditionality
provisions which are intended to create incentives for Member
States to establish the necessary policy, regulatory or institutional
conditions at a national level to ensure that programmes supported
by CSF Funds deliver the Europe 2020 objectives and targets. So,
for example, Member States must ensure that their Partnership
Contracts are consistent with the EU's integrated guidelines on
economic and employment policy. They must also include a "performance
framework" establishing clear and measurable targets for
different stages of the programming period.
1.13 Attainment of these targets is linked to the
introduction of a new "performance reserve." The draft
Regulation specifies that 5% of the total allocation for each
Member State (by category of region and by Fund) must be set aside
and then allocated, following a mid-term performance review, to
programmes which have successfully met their targets. A failure
to meet the targets set out in each Member State's performance
framework may lead to a suspension or cancellation of payments
from the CSF Funds.
1.14 In addition, the draft Regulation seeks to establish
a much closer linkage between EU cohesion policy and economic
governance, on the grounds that sound economic policies are essential
to ensure that CSF Funds are spent effectively. So, for example,
the Commission may ask a Member State to amend its Partnership
Contract to bring it into line with recommendations issued within
the framework of the EU's broad economic or employment guidelines
or excessive deficit procedure, and may suspend CSF payments if
a Member State fails to do so. In some cases, some or all of a
Member State's CSF payments must be suspended until it has taken
effective action to correct macroeconomic imbalances. However,
any suspension of payments must be "proportionate and effective"
and take into account the economic and social circumstances of
the Member State concerned.
1.15 The power to suspend payments is complemented
by a provision enabling Member States to request an increase of
10% in the EU's contribution to their CSF programmes if they are
experiencing temporary liquidity problems and are receiving assistance
from one of the EU's financial support mechanisms.
1.16 The draft Regulation includes provision for
CSF Funds to support community-led local development involving
coalitions of local action groups, and seeks to simplify and streamline
rules concerning eligibility for CSF Funds, financial management,
and monitoring and evaluation of the use of CSF Funds. It also
proposes greater flexibility to invest CSF Funds in a broader
range of innovative financial instruments, as a means of leveraging
additional sources of funding.
Part Three of the draft Regulation —
general provisions applicable to the European Regional Development
Fund, the European Social Fund and the Cohesion Fund
1.17 Part Three of the draft Regulation focuses specifically
on the objectives of EU cohesion policy, as implemented through
the EU's Structural Funds — the European Regional Development
Fund (ERDF) and the European Social Fund (ESF) — and the
Cohesion Fund, and includes provisions on the geographical coverage
of support, financial assistance, monitoring and evaluation, and
management and control systems.
1.18 The draft Regulation proposes two objectives
for EU cohesion policy:
- Investment for growth and
jobs, to be supported
by all three Funds, and accounting for 96.52% of the available
resources (€324 billion); and
- European territorial cooperation,
to be supported exclusively by the ERDF, and accounting for 3.48%
of the available resources (€11.7 billion).
1.19 All Member States and regions would qualify
for support from the ERDF and ESF, but the levels of support would
vary according to GDP levels. The draft Regulation identifies
three categories of regions:
- Less developed regions
with a GDP per capita of less than 75% of the average EU-27 GDP
— these regions would receive the bulk of EU funds (just
over 50%, or €162.6 billion);
- Transition regions
with a GDP per capita between 75-90% of the average EU-27 GDP
— these regions would receive around 12% of EU funds (€38.9
billion); and
- More developed regions
with a GDP per capita above 90% of the average EU-27 GDP —
these regions would receive just over 16% of EU funds (€53.1
billion).
1.20 A safety net provision seeks to ensure that
regions which are eligible for assistance under the Convergence
objective in the current period (2007-13), but whose GDP per capita
exceeds 75% of the GDP average across 27 Member States, would
receive a Structural Funds allocation for 2014-20 equal to at
least two-thirds of their 2007-13 allocation.
1.21 The draft Regulation proposes ring-fencing a
proportion of Structural Fund resources for allocation to the
ESF, with the proportion rising from 25% for less developed regions
to 52% for the more developed regions to help tackle "social
polarisation" resulting from the economic downturn.[7]
This is intended to ensure that at least 25% of the EU's cohesion
policy budget — or €84 billion — is allocated
to the ESF. This figure would include €2.5 billion for the
EU's "food for deprived people" programme which is currently
funded under the EU's Common Agricultural Policy.
1.22 The Cohesion Fund would account for 21.19% (or
€68.7 billion) of available resources and would continue
to support Member States whose gross national income (GNI) per
capita is less than 90% of the EU-27 average. The draft Regulation
proposes ring-fencing €10 billion of this sum to help fund
transport infrastructure projects under a new Connecting Europe
Facility.
1.23 The draft Regulation maintains the principle
of co-financing, with better-off Member States expected to make
a higher contribution (50%) than poorer Member States (15%). The
Commission also intends to cap Structural and Cohesion Fund receipts
at 2.5% of a Member State's GNI, not least to make it easier for
Member States to absorb structural funding and raise the necessary
co-financing.[8]
1.24 The draft Regulation includes detailed provisions
on the content and adoption of operational programmes which implement
the Funds at a regional level and which should be based on a model
to be developed by the Commission. There is flexibility to combine
the Funds in multi-funded programmes in order to harness resources
to Europe 2020 objectives and national and regional growth plans.
1.25 The Commission proposes two new instruments
— joint action plans and integrated territorial investments
— which seek to gear funding towards the achievement of
specific outputs and results and to provide integrated funding
for challenges affecting particular functional economic areas,
such as cities. The draft Regulation also seeks to simplify and
streamline rules on eligibility for funding and to ensure that
financial management and control provisions are proportionate.
The Government's view
1.26 The Minister of State for Business and Enterprise
(Mr Mark Prisk) notes that the draft Regulation establishes common
provisions for all of the CSF Funds, which include the European
Agricultural Fund for Rural Development and the European Maritime
and Fisheries Fund, and says that the Government will raise with
the Commission the need to include additional legal bases to cover
the specific objectives of these two funds.
1.27 The Minister explains that the budgetary aspects
of the draft Regulation will be considered as part of a much broader
negotiation on the EU's overall budget for the period 2014-20.
He continues:
"At a time of major fiscal consolidation
for Member States, we need to see similar budget discipline at
the EU-level. The maximum acceptable expenditure increase through
the next Multiannual Financial Framework overall is a real freeze
in payments. Significant reductions are required to the overall
SCF [Structural and Cohesion Fund] envelope proposed by the Commission
to achieve this."[9]
1.28 The Government's longer term goal is for richer
Member States to fund their own regional policy but the Minister
recognises the need for transitional arrangements and accepts
that all regions should receive funding for the period 2014-20.
He adds, however, that the focus of funding should be on poorer
Member States and the burden of reductions should fall on richer
ones.
1.29 The Government supports the inclusion of provisions
on proportionality, sound financial management and the lessening
of administrative burdens, but believes that there is scope to
do more. The Government also welcomes the emphasis placed on the
principle of partnership, provided that it is sufficiently flexible
to reflect national rules and practices and differing institutional
and constitutional arrangements across Member States, but questions
the need for a Commission code of conduct on the grounds that
it might impose excessive requirements on Member States.
1.30 The Government broadly welcomes the Commission's
attempts to create a framework providing "a clear line of
sight from strategic priorities in the EU 2020 Agenda to the national
and regional level" while emphasising the need to ensure
that the development of a Common Strategic Framework and individual
Partnership Contracts with each Member State does not generate
excessive bureaucracy or burdens.[10]
The Minister notes that "the separate
processes and timeframes for developing the
Common Strategic Framework, Partnership Contract and Operational
Programmes will need to run concurrently" if programmes are
to start promptly in 2014, and that too much over-specification
of detail "at the top of the strategic tree" may result
in delays.[11]
1.31 Turning to the development of operational programmes
to implement CSF Funds within the UK, the Minister explains that
arrangements will need to be consistent with "the new economic
development landscapes in England, Scotland, Wales and Northern
Ireland." He continues:
"Economic development and the management
of European structural funds are devolved functions for Scotland,
Wales and Northern Ireland; all of which have separate programmes
for Government and economic development approaches. England's
new approach features the introduction of bottom-up Local Enterprise
Partnerships and greater roles for cities, and national programmes
for employment and skills. The Regulations, including provisions
for the Partnership Contract, will need to contain sufficient
flexibility to reflect these considerations. The UK believes the
Partnership Contract has to be at Member State level to reflect
properly the connection to National Reform Programmes, the Country
specific recommendations and the integrated guidelines for Employment."[12]
1.32 The Minister says that the Government will examine
closely the Commission's proposals for macroeconomic conditionality,
but is clear that any conditionality related to the Excessive
Debt Procedure cannot apply to the UK as Protocol No. 15 (which
sets out the UK's opt out from the single currency) disapplies
the Treaty provision authorising the Council to sanction a Member
State which has failed to take effective action to reduce its
deficit.
1.33 More generally, the Government will seek to
ensure that conditionality provisions respect the principles of
subsidiarity and proportionality, especially in areas such as
education and employment in which competence rests primarily with
Member States. The Government will also consider whether provisions
conferring powers on the Commission to adopt delegated or implementing
acts are appropriate.
1.34 The Government questions the feasibility of
redistributing the 5% performance reserve to the best performing
programmes at a relatively late stage in the programming cycle
(after a review in 2019). The Minister suggests that the proposal
to ring-fence part of each Member States' Structural Fund allocation
to fund ESF programmes may make it harder to base investment decisions
on a thorough assessment of the needs of Member States and regions.
He sees little added value in the Food for Deprived Persons Programme,
doubts whether it fits with ESF objectives, and believes that
the aims of the Programme can be better achieved by Member States.
1.35 The Minister notes that the proposed new Joint
Action Plans are optional and supports the focus on payment by
results but suggests that the process for developing the plans
may be too complex and bureaucratic. He considers that the proposed
integrated territorial investment instruments offer interesting
opportunities for more strategic programming, but adds that their
use should also be optional.
1.36 Finally, the Minister says that the Government
will launch a further consultation on the draft Regulation and
the various sectoral Regulations accompanying it. The Minister
expects negotiations to continue during 2012 and indicates that
final agreement is only likely to be reached once the EU's Multiannual
Financial Framework for 2014-20 has been settled.
1.37 The Minister's Explanatory Memorandum is accompanied
by a check list which provides a preliminary assessment of the
draft Regulation's implications for the UK. This suggests (on
the basis of the latest GDP figures for 2006-08) that only one
UK region — West Wales and the Valleys — will be categorised
as a less developed region for the period 2014-20 as its GDP per
capita is less than 75% of the EU average. Nine UK regions have
a per capita GDP between 75% and 90% of the EU average and may
therefore be categorised as transition regions. These are Cumbria
(90%), Devon (90%), South Yorkshire (89%), Shropshire and Staffordshire
(89%), the Highlands and Islands (88%), Merseyside (83%), Lincolnshire
(83%), Tees Valley and Durham (82%), and Cornwall and the Isles
of Scilly (76%). Those with a lower GDP per capita would receive
proportionally more of the budget for this category of regions.
All the remaining UK regions would be categorised as more developed
regions.
1.38 In determining the final categorisation of regions
for the 2014-20 period, the Commission is likely to use more up-to-date
GDP figures which could mean that some UK regions — especially
those close to the boundaries for transition regions — could
move to a different category. The check list notes that, in comparison
with structural funding for 2007-13, per capita funding is likely
to increase from €187.9 to €193.9 for less developed
regions (West Wales and the Valleys) during 2014-20 but to decrease
from €105.6 to €70.4 for transition regions. Per capita
funding for more developed regions is likely to increase from
€21.4 to €25.5.
1.39 The check list indicates that the UK is likely
to remain a net contributor to EU cohesion policy during the period
2014-20. EU Structural Funds will contribute a maximum of 50%
of eligible expenditure in more developed UK regions, 60% in transition
regions and 75-85% in less developed regions, with the remaining
funds to be provided from other public or private sources. Whilst
evidence to date indicates that Structural Funds have been very
successful in raising match funding, the current economic climate
may constrain the ability of Member States and private sector
bodies to continue to do so.
Conclusion
1.40 Under the Commission's proposals for the
next Multiannual Financial Framework, EU expenditure to support
the objective of economic, social and territorial cohesion would
continue to account for approximately one third of the EU's total
budget for the period 2014-20. It is, therefore, not surprising
that the Government believes that significant reductions will
be needed in the level of expenditure proposed for EU Structural
and Cohesion Funds in the draft Regulation if the objective of
an overall real freeze in payments is to be achieved.
1.41 Whilst the Government welcomes efforts to
concentrate funding on the strategic priorities identified in
the Europe 2020 Strategy, to simplify the operation of the Funds
and to reduce administrative burdens, it clearly has reservations
about the Commission's proposals to apply increased conditionalities
to the receipt and use of Structural and Cohesion Funds and highlights
the risk that too much top-down control may reduce the flexibility
available to Member States and regions to make investment decisions
based on an assessment of need.
1.42 We welcome the fact that the Government intends
to consult fully on the draft Regulation and accompanying measures
and look forward to receiving further information on the outcome
of that consultation. However, we think that a debate in European
Committee is merited at this stage in order to consider the size
of the budget proposed in light of the current economic climate,
as well as the concerns highlighted in the Minister's Explanatory
Memorandum.
1 See Article 3(3) of the Treaty on the European Union.
Back
2
The current conversion rate is €1 = £0.8731. Back
3
Council Regulation (EC) No 1083/2006, OJ No. L 210, 31.07.2006,
pp. 25-78. Back
4
(32199): see HC 428-xi (2010-11), chapter 6 (15 December 2010)
and HC 428-xviii (2010-11), chapter 6 (2 March 2011). Back
5
See p. 6, para 4 of the Commission's explanatory memorandum. Back
6
Article 5 of the draft Regulation identifies the following partners:
regional, local, urban and other public authorities; economic
and social partners; and representatives of civil society, including
environmental and non-governmental organisations, as well as bodies
responsible for promoting equality and non-discrimination. Back
7
See p. 11 of the Commission's explanatory memorandum. Back
8
See (32994), HC 428-xxxv (2010-12), chapter 1 (7 September 2011)-Commission
Communication, A Budget for Europe 2020-Part II, Policy Fiches,
p. 24. Back
9
See para 24 of the Minister's Explanatory Memorandum. Back
10
See para 28 of the Minister's Explanatory Memorandum. Back
11
See para 29 of the Minister's Explanatory Memorandum. Back
12
See para 30 of the Minister's Explanatory Memorandum. Back
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