Select Committee on European Communities Report


Memorandum from the Department of Trade and Industry

  130.  The Commission's package, with its three themes of greater concentration, simplification and cost savings, is well considered, and we support the general thrust of the Commission's proposals. We agree with the proposed concentration of the Structural Funds by reducing their coverage from roughly half of the EU15 population to around 35-40 per cent (paragraph 102).

  Although the funds should be targeted to areas of greatest need to concentrate population coverage down to 35 or 40 per cent this could result in some areas which remain eligible within the new Objectives receiving more per capita than they do at the moment. Such per capita increases for certain regions would be unfair while others are facing, in certain cases, quite large cuts. Concentration should stand for the targeting of Funds to the areas of greatest need not only in a fair and equitable—but also in a durable way; ie we should not increase per capita receipts because that could not be sustained in an enlarged EU without putting unacceptable pressure on the budget.

  131.  Cuts in the Structural Funds received by existing Member States are inevitable unless enlargement is accompanied by an increase in the EU Budget Share, which we would not welcome. The important point is to ensure that the cuts are fair. The 75 per cent of GDP criterion for Objective 1 eligibility should be strictly enforced.

  The Government welcomes the Committee's support for containing the cost of the Funds and agrees with the Committee that it is important to ensure that cuts are fair. Member States should face real but equitably spread cuts now in preparation for the future. For Objective 1 however, the application of a strict 75 per cent of GDP criterion would leave question marks over some areas of genuine need. Of course the Commission's proposal for Objective 1 is not simply the strict application of the 75 per cent criterion since it also includes a number of exceptions, for example some specified remote regions and current Objective 6 areas would be eligible whether they met the 75 per cent criterion or not. This demonstrates that GDP criterion is not the only indicator of need.

  132.  The Committee supports calls for a wider range of socio-economic indicators to be used by Member States to designate regions for Objective 2 (paragraph 104).

  The Government welcomes the support of the Committee on the UK's position on Objective 2 criteria.

  133.   It is right for the Structural funds to recognise the particular problems created by the combination of geographical remoteness and sparsity of population, and that the former Objective 6 regions should be absorbed into Objective 1.

  134.   It is essential for the Highlands and Islands of Scotland to continue to receive Objective 1 support, as the somewhat similar regions in Sweden and Finland will under the Commission's present proposal (paragraph 107).

  The Government agrees that remoteness and sparsity of population should be recognised and is proposing a sparse population criterion for Objective 1 to address these areas in the Highlands and Islands.

  135.   We call on the Government to publicise the aims of the proposed new Objective 3 (development of human resources), and to encourage the maximum uptake of funding under this new Objective.

  The draft Regulations state that ESF activity should be based on five policy fields:

      Active labour market policies to combat unemployment.

      Promoting social inclusion.

      Lifelong education and training systems to promote employability.

      Anticipating and facilitating economic and social change.

      Equal opportunities for men and women.

  The UK interprets this to mean that Objective 3 should be able to support the Government's wider policy of lifelong learning by continuing to respond to the needs of those most at a disadvantage in the labour market throughout the country. However, the draft Regulations propose that new Objective 3 would provide national policy framework for human resource development but would itself provide funding for human resource development projects only in areas outside Objectives 1 and 2. The UK is not convinced that the Commission's proposals would enable the ESF to continue to support all those at a disadvantage in the labour market throughout the country and is therefore proposing that new Objective 3 continue to be horizontal, operating everywhere outside Objective 1 areas.

  The Government is committed to publicising all aspects of the Structural Funds post-2000, including Objective 3 and the ESF as a whole. Whatever the outcomes of the negotiations, the Government will ensure that the aims and objectives of new Objective 3 are widely promoted and will seek to achieve maximum uptake of available funds in ways which benefit those people and regions most in need.

  136.   The Committee urges the Commission and the Member States to make every effort to ensure that the bureaucratic procedures associated with EU structural operations are kept to the minimum consistent with effective controls.

  The Committee's recommendation is supported wholeheartedly by the Government. The new Regulations must provide a simpler system for implementation of the Funds, commensurate with proper management and financial controls, and the Government is working towards these goals during the current negotiations.

  137.  We support the calls for a Community Initiative—RESTRUCT—that can be used to deal with new problems of industrial decline.

  The Government is aware of the calls for an industrial Community Initiative called RESTRUCT. A number of local authorities have raised this with the Department.

  The Government's view is that the test for deciding whether or not to support particular Initiatives should be whether they clearly add value to the main Objectives. Experience to date shows that Community Initiatives can be administratively burdensome and sometimes work against a cohesive and strategic approach. Where the main Objectives are sufficiently flexible to address the main issues we believe it is preferable, both administratively and strategically, to use these.

  However, it will not be possible to gauge whether the Initiatives proposed by the Commission or other proposals such as RESTRUCT can add value until we have a clear picture of the way that the main Objectives will be applied in the UK. We are therefore taking the line in negotiations with the Commission and other Member States that the Community Initiatives should not be agreed until after the main Objectives.

  138.  The Commission should have included clear and manageable statistical and operational measurements of additionality as part of its current proposals. We call on the Commission to clarify the application of the additionality rule and to make the requirements more transparent.

  The Government supports the concept of additionality and has given a general welcome to the Commission's proposal on verification, which does provide greater clarity and simplification than the previous regulation.

  139.  The Structural funds and state aids policies have different aims and we consequently see no justification for the proposal that the maps for these policies should coincide (paragraph 111).

  The Government welcomes the Committee's support for the UK's opposition to harmonising the Structural Funds map and State Aids map.

  140.  We do not support the idea of renationalising the Structural Funds.

  The Government agrees with the Committee. However, in order to achieve maximum value for money, the Funds should be used in co-ordination with domestic regional expenditure as part of a strategy to target the individual needs of regions in the UK.

  141.  Cutting the Peace and Reconciliation programme at this critical stage of the Peace process could be little short of disastrous. Whenever the Structural Funds package is finally agreed, the Peace and Reconciliation Programme should be part of it (paragraph 110).

  The European Council at Cardiff expressed its commitment to assisting the peace process. Ministers have had discussions with the Commission and Commissioners about the situation. There is clearly an understanding of the special situation there. The UK Government will continue to press for continued EU support for Northern Ireland which reflects its special circumstances and helps in adapting the region's economy to peace, both economically and socially.


  142.  Those Member States which have joined the single currency should no longer be eligible for Cohesion Fund receipts, although we recommend that these should be phased out in the period up to 2006, as should the Fund itself (paragraph 114).

  The Government agrees with the Committee that Member States which have joined the single currency should not receive Cohesion Funds. We believe the rationale behind the creation of the Cohesion Fund was to help the economic convergence of the four poorest Members of the EU in preparation for their participation in EMU.

  143.  Improved management arrangements must be put in place to bring the financial control of the Cohesion Fund into line with that under the Structural Funds (paragraph 116).

  The Government agrees with the Committee's recommendation to bring the Cohesion Fund financial controls into line with those of the Structural Funds.

  144.  The Commission and the Council should already be considering how the Funds need to be adapted to be effective in the Central and Eastern European Countries.

  The intention is that the regulations currently under consideration for 2000-06 would apply to any new member states joining the EU in this period. Much of the regulations concern financial and administrative procedures which, subject to individual points that the Government has on current drafts, should be equally applicable in acceding countries. It would not be right, for example, for the principles and practice of financial property to be watered down for acceding countries. The Government is pressing for the pre-accession regulations to reflect as far as possible what will be contained in the Structural Funds regulations.

  145.  The 2002 accession target is optimistic; the Commission should be asked to explain its current thinking on what will happen to the Structural Funds if, as widely expected, enlargement occurs later than 2002 (paragraph 118).

  One of the main purposes of Agenda 2000 is to prepare for enlargement. It is right for the Community to set itself an ambitious but realistic target and use that as a working assumption.

  Agenda 2000 will set the framework for the Structural Funds for the period 2000-06. It is likely that the Financial Perspective will draw a clear distinction between funds earmarked for the EU15 and those for accession. The arrangements for the EU15 should then not be affected by the time of accession.

  146.  We support the Commission's proposal to de-commit funds which have not been used within three years.

  The Government has also given its support to the Commission's proposal on decommitment since, as a quid pro quo to the simplified commitments and payments system, it believes this is necessary to ensure rigorous financial control and management.

  147.  Despite its virtuous intention, the Commission's performance reserve proposal would be unworkable, and should be dropped.

  Whilst the Government seeks to promote and reward efficient programming, it has reserved its position on this issue until the position is clearer on how the Commission's proposal might be implemented in practice. The detail available so far leads the Government to believe that the proposal may not secure the desired effect since it could lead Member States to lower standards in order to qualify for the reserve.

  148.  Rather than using the blunt instrument of the 10 per cent performance reserve, increased effort should be made to encourage best practice by Member States. In particular, we recommend an improved evaluation process, including the publication of evaluation reports. Improved financial management may become especially important as part of the preparation for the enlargement of the Union.

  The Government welcomes this contribution to the debate on promoting and rewarding good performance and sees much to commend in it. It will promote alternatives such as these in the continuing debate on the reserve.


  149.  Policies designed to strengthen economic and social cohesion in the Community can only be lasting if environmental considerations are taken into account and seen as an essential part of economic and social development. It would be wrong for Community funds to be spent on programmes that conflict with the agreed policies of the Community (paragraph 125).

  In drawing up programmes and assessing applications for funding the Government supports the principle that spending should not be in conflict with the agreed aims of the Community. The UK has been in the forefront within the EU in taking account of environmental considerations within the Structural Funds. The Government believes that only by considering projects in the context of sustainable development can we be sure that they take proper and balanced account of economic, social and environmental factors.

  150.  We recommend that environmental authorities should be mentioned as key members of the "partnership" in Article 8 of the Structural Funds Regulation on "Complementarity and Partnership". Environmental authorities should be re-introduced into the system as core partners in the Structural Funds at all stages and they should be included in the management authorities for Community Support Frameworks, Operational Programmes and Single Programming Documents (paragraph 126).

  The Committee raises questions on the position of environmental authorities with regard to their standing as members of the "Partnership" and their involvement as core partners at all stages of the Structural Funds. The Government agrees with the Committee that environmental authorities should be included in partnerships; it is UK policy to include them and this will continue. However, as a matter of subsidiarity it should be a matter for a Member State to decide which bodies are involved as members to the partnership or are introduced as core partners in the Structural Funds.

  151.  We also support the idea of a specific linking of environmental protection and improvement activities with employment creation programmes (paragraph 127).

  The Government supports appropriate linking of programmes to improve employability with action to protect the environment, such as those provided by the Environmental Task Force in the Employment New Deal for people aged 18-24. The European Social Fund should, during the 2000-06 programming period, support such national actions.

  152.  We call on all concerned to intensify their efforts to reach agreement on the reform of the Structural funds and Cohesion Fund so the narrow window of opportunity to reach agreement by spring of 1999 is not missed.

  The Cardiff European Council concluded they should intensify their work so that political agreement can be reached on the package as a whole no later than March 1999. With substantial progress at Vienna, the UK Government agrees with this objective and welcomes the Committee's support.

9 October 1998

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