3 Investment for growth and jobs
| (33219)
15249/11
COM(11) 614
+ ADDs 1-4
| Draft Regulation of the European Parliament and the Council on specific provisions concerning the European Regional Development Fund and the Investment for growth and jobs goal and repealing Regulation (EC) No 1080/2006
Commission staff working papers: Impact assessment and summary of impact assessment
|
| Legal base | Articles 178 and 349 TFEU; co-decision; QMV
|
| Document originated | 6 October 2011
|
| Deposited in Parliament | 13 October 2011
|
| Department | Business, Innovation and Skills
|
| Basis of consideration | EM of 2 November 2011
|
| Previous Committee Report | None
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| Discussion in Council | 16 December 2011
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; further information requested
|
Background
3.1 The European Regional Development Fund (ERDF) is the largest
of the EU's Structural Funds. Its purpose, as described in Article
176 of the Treaty on the Functioning of the European Union (TFEU),
is to "redress the main regional imbalances in the Union
through participation in the development and structural adjustment
of regions whose development is lagging behind and in the conversion
of declining industrial regions." The ERDF is one of the
principal funding instruments for strengthening economic, social
and territorial cohesion across the EU. Article 174 TFEU specifies
that EU cohesion policy should pay particular attention to "rural
areas, areas affected by industrial transition and regions which
suffer from severe and permanent natural or demographic handicaps
such as the northernmost regions with very low population density
and island, cross-border and mountain regions."
3.2 In addition, Article 349 TFEU highlights the
structural social and economic situation in some of the EU's outermost
regions and provides for the adoption of specific measures setting
out conditions of access to EU Structural Funds for these regions.[17]
3.3 In November 2010, the Commission published a
Communication on the future of EU cohesion policy which proposed
a number of significant reforms for the next financial period
(2014-20). These included a greater concentration of EU 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.[18]
The draft Regulation
3.4 The draft ERDF Regulation forms part of a broader
package of measures proposed by the Commission to align expenditure
on the EU's cohesion policy with the Europe 2020 Strategy. It
is intended to supplement the Commission's proposal for an all-encompassing
draft Regulation ("the draft General Regulation") which
would establish a Common Strategic Framework and a set of common
provisions to govern all of the EU's instruments of cohesion policy,
including the ERDF, for the period 2014-20.[19]
It would also establish the total amount of EU resources available
for allocation to the EU's Structural and Cohesion Funds, as well
as the criteria for their distribution between regions across
the EU.
3.5 The draft General Regulation proposes two objectives
for EU cohesion policy:
- Investment for growth and
jobs which would account
for 96.52% of the available resources; and
- European territorial cooperation
which would account for 3.48% of the available resources.
3.6 All Member States and regions would qualify for
support from the ERDF and from the EU's other Structural Fund,
the European Social Fund (ESF), but the levels of support would
vary according to GDP levels. The draft General 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%);
- 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; 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.
3.7 In its explanatory memorandum accompanying the
draft ERDF Regulation, the Commission notes that its proposal
for the EU's next Multiannual Financial Framework for the period
2014-20 makes provision for an allocation of €267 billion
for the EU's Structural Funds.[20]
At least 25% (or €84 billion) would be reserved for programmes
implementing the European Social Fund, leaving a maximum of €183
billion for the ERDF for 2014-20.
3.8 The draft ERDF Regulation sets out the types
of investment which the ERDF may support and includes a list of
investment priorities which broadly mirror the headline targets
and flagship initiatives agreed as part of the Europe 2020 Strategy.
They include investment which seeks to:
- strengthen research, technological
development and innovation;
- improve access to, and use of, good quality ICT;
- enhance the competitiveness of SMEs;
- support moves towards a low-carbon economy;
- promote climate change adaptation, risk prevention
and management;
- protect the environment and promote resource
efficiency;
- promote sustainable transport and remove bottlenecks
in key network infrastructures;
- promote employment and support labour mobility;
- promote social inclusion and measures to combat
poverty;
- encourage education, skills and lifelong learning;
and
- enhance institutional capacity and efficient
public administration.
3.9 Certain activities would not be eligible for
ERDF support. These include the decommissioning of nuclear power
stations, the reduction of greenhouse gas emissions from particular
installations, investment in tobacco and tobacco products, and
forms of support which are incompatible with EU State aids rules.
3.10 The Commission believes that increased targeting
and concentration of ERDF resources should improve "the efficiency,
effectiveness and EU added value of funding."[21]
The draft Regulation would therefore require more developed and
transition regions to concentrate at least 80% of ERDF resources
allocated at national level on three objectives:
- strengthening research, technological
development and innovation;
- enhancing the competitiveness of SMEs; and
- supporting the shift to a low-carbon economy
(with at least 20% ring-fenced for this objective).
3.11 The percentages are lower for less developed
regions (50% for all three objectives, of which 6% must be ring-fenced
for low carbon initiatives) as, according to the Commission, their
development needs are greater and so justify greater flexibility
in determining how to use their share of the national allocation
of ERDF funding to support a wider range of investment priorities.
3.12 The draft Regulation includes a number of provisions
which are intended to address the territorial dimension of economic,
social and territorial cohesion. These include:
- the setting aside of at least
of 5% of ERDF resources allocated at national level to fund sustainable
urban development within cities in order to tackle economic, environmental,
climate and social challenges — the funds would be delegated
to cities and managed as an "integrated territorial investment"
(a new type of instrument proposed in the draft General Regulation);
- the creation of an urban development platform
comprising a maximum of 300 cities (up to 20 per Member State)
to promote capacity-building and networking between cities and
to encourage the exchange of information on urban policy initiatives;
- the provision of up to 0.2% of the total annual
ERDF allocation to support innovative actions (including studies
and pilot projects) in the field of sustainable urban development;
and
- specific provisions on the use of ERDF funds
for the outermost regions listed in Article 349 TFEU.
3.13 An Annex to the draft Regulation sets out a
range of common indicators which are intended to establish a baseline
for measuring the impact and outcome of ERDF funding supporting
the Investment for growth and jobs component of EU Structural
Funds. These provide the basis for establishing targets for ERDF-funded
programmes on such matters as the number of jobs created in assisted
SMEs or the amount of private investment secured for innovation
or R&D projects.
The Government's view
3.14 The Minister for Business and Enterprise (Mr
Mark Prisk) notes that HM Treasury has overall responsibility
for the Government's policy on the EU's Multiannual Financial
Framework, which will determine the overall size of the EU budget
for 2014-20 and the proportion to be made available to support
economic, social and territorial cohesion. [22]
He adds:
"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 Funds] envelope proposed by the Commission
to achieve this."[23]
3.15 The Minister expresses the Government's support
for the overall aims of the ERDF in promoting economic and social
cohesion and "agrees in principle" with the proposal
to concentrate funding on a limited number of objectives. He continues:
"However, the Government feel it is important
that Member States maintain the flexibility to design the most
appropriate ERDF programmes for their territory in order to maximise
the benefit of funds and to achieve the strongest possible outcomes."[24]
3.16 The Government, while recognising the important
role that cities can play in fostering growth, questions the need
to prescribe a minimum allocation of 5% of ERDF resources for
integrated investments in cities and advocates greater flexibility
for Member States. The Government also questions whether the Commission's
proposals to allocate a small proportion of ERDF resources to
innovative actions in the field of sustainable urban development
and to set up a new urban development platform represent value
for money. The Minister indicates that the Government will examine
closely the proposed conferral of implementing powers on the Commission
to make the final selection of cities eligible to participate
in the new platform.
3.17 The Minister notes that the proportion of ERDF
resources ring-fenced for measures to support a low-carbon economy
is significantly lower for the less developed regions, and questions
whether this is appropriate when the intensity of carbon emissions
is generally higher in Central and Eastern European Member States.
He suggests that these Member States "should look to focus
more of their spending on low carbon objectives where there is
a clear case for public intervention."[25]
3.18 Finally, the Minister explains that negotiations
are expected to continue throughout 2012 and that final agreement
is only likely to be reached once the EU's Multiannual Financial
Framework for 2014-20 has been settled.
Conclusion
3.19 We note that the Commission has proposed
a dual legal base for the draft Regulation. Whilst it is
clear that the ordinary legislative procedure (co-decision with
the European Parliament and QMV in Council) applies to Article
178 TFEU, Article 349 TFEU contemplates the use of a special legislative
procedure in certain circumstances, but appears to leave open
the possibility that the ordinary procedure may apply in others.
The Minister's Explanatory Memorandum indicates that the ordinary
legislative procedure applies in this case. We would, however,
welcome a more detailed explanation of the reasons why.
3.20 The Government appears to support the broad
thrust of the draft Regulation, whilst also making clear that
significant reductions are needed in the funding levels proposed
by the Commission for economic, social and territorial cohesion
in order to achieve a real freeze in EU expenditure for the period
2014-20. The eventual size of the EU budget for Structural and
Cohesion Funds will inevitably affect the feasibility of the thematic
objectives and investment priorities proposed for each of the
individual Funds, including the ERDF. We are therefore retaining
the draft Regulation under scrutiny and ask the Government to
provide us with progress reports on the negotiations.
17 The regions identified in Article 349 TFEU are Guadeloupe,
French Guiana, Martinique, Réunion, Saint Barthélemy,
Saint Martin, the Azores, Madeira and the Canary Islands. Back
18
(32199): See HC 428-xi (2010-11), chapter 6 (15 December 2010)
and HC 428-xviii (2010-11), chapter 6 (2 March 2011). Back
19
(33217): See chapter 1 of this Report. Back
20
The current conversion rate is €1 = £0.8731. Back
21
See p. 3 of the Commission's accompanying explanatory memorandum.
Back
22
See (32986) 12478/11 +ADDs 1-2, (32987) 12474/11, (32988) 12480/11,
(32989) 12483/11, (32994) 12475/11 + ADDs 1-3 and (32998) 12484/11:
HC 428-xxxv (2010-12), chapter 1 (7 September 2011). Back
23
See para 19 of the Minister's Explanatory Memorandum. Back
24
See para 21 of the Minister's Explanatory Memorandum. Back
25
See para 22 of the Minister's Explanatory Memorandum. Back
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