D. CORRESPONDENCE ABOUT COMMITTEE REPORTS
62. REDUCING DISPARITIES WITHIN THE EUROPEAN UNION: THE
EFFECTIVENESS OF THE STRUCTURAL AND COHESION FUNDS (11TH REPORT,
SESSION 1997-98)
Letter from the Rt Hon Margaret Beckett MP, President
of the Board of Trade, to Lord Tordoff, Chairman of the Committee
I am grateful for the work carried out by Lord Barnett and
his Committee in producing the report. I welcome the report and
the contributions it makes both to the debates on the future of
the Structural and Cohesion Funds across the European Union and
to the question of improving the administration of the Structural
Funds within the United Kingdom.
The debate on the future of the Funds is at an early stage,
and this Government will take the recommendations of the Committee
into account in developing its policy in this area. The Committee
has proposed useful ideas for simplifying and improving the effectiveness
of the Funds across the European Union and we will press the Commission
to give careful consideration to this area when putting forward
proposals for reform. At this early stage of the debate, I will
focus my comments largely on those recommendations affecting the
Funds within the UK.
The Committee's recommendation (para 116) that devolution
of decisions to the regional level should be carried further to
maximise the potential benefits of the Structural Funds identifies
a particularly important point. This is in line with our manifesto
commitment to the creation of regional chambers in England to
co-ordinate transport, planning, economic development, bids for
European funding and land use planning. The legislative proposals
outlined in the Queen's Speech for regional development agencies
will also have a significant impact. These steps will affect the
work and the role of the Government Offices, covered in other
Committee recommendations.
The comments on the need for partnership are also welcome
(paras 115 and 125). This is in line with our general policy,
expressed in our manifesto, on the need for new partnerships between
government and business, fully involving local authorities and
the voluntary sector, to attack long-term joblessness. The Funds
need to complement or supplement national and regional economic
development and employment programmes, rather than cut across
them (para 113). The regional programmes for expenditure under
Objectives 1, 2 and 5b are strategies, drawn up by the English
Government Offices, the Scottish, Welsh and Northern Ireland Offices
in close consultation with local partnerships. Under Objective
3 of the European Social Fund, regional development plans are
to be prepared by July 1997. These will be taken forward by regional
committees and will seek to ensure that provision under Objective
3 meets the needs and priorities of that particular region. We
are also committed to lifelong learning and will seek to see an
Objective 4 programme adopted as soon as possible, taking account
of the need for prior consultation with partners (para 118). The
Department for Education and Employment are working with the Scottish
and Welsh Offices on a plan for implementation of Objective 4,
and will be consulting widely on this plan.
We recognise the important role local authority elected members
have to play in the Structural Funds, and welcome their involvement
(para 117). This is being implemented. In most places this will
be via programme monitoring committees, but Scotland has separate
parallel consultation arrangements which are working well.
Proper targeting of the Funds is important, both in terms
of the size of local areas and in the use of appropriate indicators
of need, both within the UK and across Europe (paras 114, 135
and 136). The UK produces substantial regional and local statistics
which help identify areas with particular needs. Unfortunately,
these are not replicated in all EU countries, and are therefore
difficult to apply across the EU when determining Structural Fund
allocations centrally. In 1996, the Government Statistical Service
consulted widely on a review of areas in the UK used for European
regional statistics, and intends to recommend to Eurostat changes
which it believes would enable the provision of statistics for
more appropriate UK regions and local areas.
We support additionality as a general principle (paras 119
and 120) and note the Committee's detailed comments, as well as
points made by members of the sub-committee during the evidence
sessions. Any test of additionality needs to be understandable
as well as being meaningful in the circumstances.
The Committee called for the prevention of state aids which
harm enterprises in another EU Member State (para 123). We said
in our manifesto that we would pursue tough action on unfair state
aid. The Industry Council on 24 April 1997 called on the Commission
to produce a report on the impact of state aids and Structural
Funds on transfers of enterprises and jobs from one Member State
to another. In the UK, some Structural Funds assistance goes to
SMEs or to private sector projects where cross-border competition
is minimal, but we do not have schemes, such as those in some
other Member States, which use Structural Funds to supplement
national regional aid schemes.
We will continually review how best to improve Structural
Funds administration throughout the UK, and to accelerate projects
approvals and payments (paras 116, 130 and 131). This process
is largely conditioned by the current Structural Funds regulations,
and the sub-committee's impressions from their visit to Republic
of Ireland (para 71) may have been based on the very different
procedures for the Cohesion Fund, which does not apply to the
UK.
For the Structural Funds, the Commission pays money to the
national governments, in tranches, for the entire programme, the
first tranche being transferred almost as soon as the programme
is adopted. Then, before any payment is made to projects, monitoring
committees have to be set up, which then agree criteria for project
selection, make a call for applications, appraise the applications
for value-for-money and approve projects. Only then can projects
submit claims. ERDF payments, following normal Government practice,
are made in arrears. Only in the case of the ESF are project payments
made in advance, because many of the applicants are voluntary
bodies.
Once a properly made-out claim is submitted, payment is made
as soon as possible. This is in line with the Council Regulation
which says Member States . . . shall ensure that the beneficiaries
receive the advances and payments as soon as possible, and as
a general rule within three months of the receipt of the appropriations
by the Member State and provided that the beneficiaries applications
fulfil the conditions necessary for payment to be made".
The introduction of targets by English Government Offices
aims to reduce delays in the project approval process; and a working
party convened by the Scottish Office is looking at ways of speeding
up payment of ESF grants at every stage of the administrative
process. The Scottish Office report was expected to be available
by the end of May. The introduction of a Single Vote for the ERDF
in England this year will cut down some of the cross-Whitehall
administration. The proposed increased delegation of responsibility
and decision making to the Government Offices should also improve
the speed of the decision making process. We will consider how
best to monitor times between receipt of properly made-out claims
and payments; and will seek to minimise delay wherever possible.
We have also recently introduced the option of adopting an
Action Plan approach to implementing programmes in the Objective
1, 2 and 5b areas of England. Action Plans will allow partnerships
to bring together individual projects in a way that reflects regional
priorities, tackles issues in a co-ordinated way and streamlines
bureaucracy.
The committee recommends that, where feasible and suitable,
loans should be employed, whether from the EIB or from other sources
of finance (para 122). The financial returns of a project are
taken into account when assessing the need for a grant. It is
for the applicant to decide and pursue the source of any loan
finance which may complement grants from the Structural Funds
for the project. The Chancellor of the Exchequer is a Governor
of the EIB and will take account of the need to balance security
and risk in EIB activities. The Government will also continue
to encourage the EIB, the EBRD and other banks and institutions
to work co-operatively in Central and Eastern Europe.
As the report says, Member States and Central and Eastern
European countries (CEECs) seeking to join the EU should give
a high priority to the competence and probity of the civil administration
(para 121). We will continue to promote the adjustment in the
CEECs' institutions through support of the EU PHARE programme,
through bilateral aid such as the Know-How Fund and through the
loan of UK Government advisors.
The absorptive capacity of countries and regions is an important
consideration and will need to be taken into account for any new
Member States (para 139). So too will the equity, effectiveness
and stability of arrangements for allocation of the Structural
and Cohesion Funds after enlargement of the European Union.
Early proposals from the Commission on reform of the Funds
and early agreement of new regulations (para 128) would increase
the likelihood of new programmes being properly planned and, unlike
the current programmes, starting on time. It would be desirable
for detailed regulations to be in place by the end of 1998, so
that work could begin on drawing up programmes for implementation
at the start of 2000. Agreement of new Structural Funds Regulations
is likely to be dependent on the conclusion of a number of other
major negotiations however, and will require the involvement of
the Council and the European Parliament, as well, of course, as
the Commission whose role it is to propose new draft regulations.
The timetable is therefore very ambitious. We will do all we can
to progress matters in our Presidency of the Council in the first
half of 1998, if detailed proposals for Member States' consideration
have been made by then.
30 June 1997
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