18 March 1997
By the Select Committee appointed
to consider Community proposals, whether in draft or otherwise,
to obtain all necessary information about them, and to make reports
on those which, in the opinion of the Committee, raise important
questions of policy or principle, and on other questions to which
the Committee considers that the special attention of the House
should be drawn.
ORDERED TO REPORT
Reducing Disparities within
the European Union:
the Effectiveness of the Structural and Cohesion
Funds
PART 1 INTRODUCTION
1. The Treaty of Rome,
1957, contained in the preamble a commitment to reduce disparities
between the levels of development of the various regions and the
backwardness of the least-favoured regions. At first the main
Community instruments for achieving this were the European Social
Fund and the European Investment Bank. Following the accession
of Denmark, Ireland and the United Kingdom in 1973 another instrument,
the European Regional Development Fund, was established in 1975.
The accession of Greece in 1981 and Portugal and Spain in 1986
led to calls for elaboration of the Treaty commitment. At the
insistence of the poorer Member States, which feared that the
completion of the Single Market would disadvantage them in relation
to the more prosperous states, the word "cohesion" was
introduced into the Treaty by the Single European Act, which came
into force in July 1987, and the funds available for structural
change to reduce disparities were to be doubled. At the Maastricht
European Council in December 1991, faced with a time-tabled advance
to economic and monetary union (EMU), the poorer Member States
sought and obtained agreement that a Cohesion Fund would be established
by December 1993. A protocol to the Maastricht Treaty, the Treaty
on European Union, restricted access to the Cohesion Fund to Member
States with a per capita GDP of less than 90 per cent of
the EU average which had a programme leading to the fulfilment
of the criteria, ("the convergence criteria"), which
would qualify them for entry to EMU. The four states qualifying
were Greece, Ireland, Portugal and Spain, often known as the Cohesion
Four.
2. This brief outline
illustrates that since the inception of the Community, there has
been a treaty commitment to reduce regional disparities and that
at each major development, whether by the accession of new Member
States or by a step change in the process of economic integration
or cooperation, there has been further elaboration of the commitment.
In parallel there has been a growth in the proportion of the
EC Budget and the amount of funds to support this commitment.
3. The provisions setting
out the elaborated commitment are now in the EC Treaty, principally
in Articles 2, 123, and 130a. Article 2 sets out the fundamental
task of the Community as the promotion throughout the Community
of ". . . a harmonious and balanced development of economic
activities . . . a high degree of convergence of economic performance
. . . the raising of the standard of living and quality
of life, and economic and social cohesion and solidarity among
Member States". Article 123 contains the provisions, dating
from the Treaty of Rome, 1957, which establish the European Social
Fund with the aims of facilitating the employment of workers and
"their adaptation to industrial changes and to changes in
production systems, in particular through training and retraining";
and Article 130a states "In order to promote its overall
harmonious development, the Community shall develop and pursue
its actions leading to the strengthening of its economic and social
cohesion. In particular, the Community shall aim at reducing
disparities between the levels of development of the various regions
and the backwardness of the least favoured regions, including
rural areas."
4. On these treaty bases
there has been built over the years a number of policy instruments
to support these tasks. The European Union now has three structural
funds and a financial instrument for fisheries guidance which
acts as a structural fund, as well as the Cohesion Fund, with
which to implement its so-called structural and cohesion policies
to reduce disparities in development. (The meaning of these terms
is further explained in Part 2 of this Report.) Taken together,
these funds dispose of the largest element of the EC Budget after
the amounts devoted to the Common Agricultural Policy (CAP): in
round terms, the CAP takes about one half of the Budget's resources
while the structural policies are taking a gradually increasing
share which is planned to rise to about one third of those resources
by 1999.
5. By the summer of
1996 it was apparent to us that the future shape and operation
of the Union would be affected by a number of strategic decisions
on interlocking issues which will have to be taken over the next
few years. Uppermost in many minds are the decisions about EMU.
In the last twelve months we have published two reports[1]
on these issues. Enlargement of the EU to bring in some or all
of the ten applicant Central and Eastern European countries (the
CEECs) is also a major issue. Decisions on the timing and the
terms of the accession of the applicants, whose wealth as measured
in GDP per capita is well below that of the present fifteen
Member States of the EU, (the EU15), are likely to be under negotiation
by the end of 1997. The pace and the conditions of enlargement
will have profound financial consequences for the future of the
EU's policies, including those for cohesion. These consequences
will be felt by the EU15 as well as by the new Member States.
The regime for the future financing of the EU, with or without
enlargement, also calls for decision before 1999 when the current
financial perspective arrangements expire. Negotiations and expectations
on the overall size of the Budget, the enlargement of the EU and
the impact of EMU, particularly on peripheral or poorer regions,
will form the political context in which decisions on the future
of EU aid for regional development-its structural policies-will
be taken.
6. We thought it timely,
therefore, to hold an enquiry with the following terms of reference:
"To consider the economic
and political purposes of the Structural Funds and the Cohesion
Fund, their effectiveness and scope."
The enquiry was carried out by Sub-Committee
A which received oral and written evidence from a wide range of
interests. Some members of the Sub-Committee made brief visits,
outside the United Kingdom, to Greece and Ireland and, within
the United Kingdom, to Cornwall and Strathclyde. These visits
usefully informed the deliberation of the Sub-Committee although
formal evidence was not taken. The membership of the Sub-Committee
during the enquiry is listed at Appendix 1. Those who gave evidence
are listed at Appendix 2. We are most grateful to those who helped
us in the course of the enquiry, particularly those Ministers,
Commissioners, MEPs, councillors, officials, entrepreneurs, representatives
of the voluntary sector, workers and trainees from whom we heard
evidence or whom we met on our visits.
1
An EMU of `Ins' and `Outs', 11th Report, Session 1995-96,
HL Papers 86,86-I and Preparations for EMU, 2nd Report,
Session 1996-97, HL Paper 18. Back
