Select Committee on European Communities Eleventh Report


PART 1  INTRODUCTION

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


 
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