Select Committee on European Union Fortieth Report

EUROPEAN SOCIAL FUND (13531/05, 8219/06)

Letter from the Chairman to James Plaskitt MP, Parliamentary Under-Secretary of State, Department for Work and Pensions

  Your Explanatory Memorandum dated 2 February was considered by Sub-Committee G on 9 March.

  We note that the Government welcomes those amendments that would strengthen the European Employment Strategy and reflect the Lisbon Agenda. We agree with the Government's view that the ESF should be used where it can add value to Member States' policies and increase employment and improve workforce skills. We are also glad to note that the amended proposal includes a simplified delivery mechanism and aims to encourage a more strategic approach to programming.

  In our view, the most important outstanding issue remains the eventual size of the ESF budget and the way it will be allocated in accordance with the priorities outlined. We will want to examine that very carefully in due course.

  To help us prepare for that examination, we would welcome clarification of the Government's current overall policy approach to the Structural and Cohesion Fund and how that might affect the allocation of funding for the ESF and other components. For example, we see that the DTI EM on the original. Proposal dated 1 September 2004 (reference 11606/04) argued that structural funding should only be given to the poorest Member States, presumably even if that meant that the UK would not benefit from the ESF. But your new EM appears to accept that the ESF should support activities to improve the labour market relevance of vocational education and training in all Member States and not just in the poorest ones. We should be grateful if you would clarify this, explain the likely consequences for the UK and let us know what consultations you have had about those consequences.

  We will retain the document under scrutiny pending your reply and further progress reports.

9 March 2006

Letter from Rt Hon Alun Michael MP, Minister of State for Industry and the Regions, Department of Trade and Industry to the Chairman

  Thank you for your letter of 9 March 2006 to James Plaskitt, Parliamentary Under Secretary of State, Department for Work and Pensions regarding the above Explanatory Memorandum. I am responding as the negotiations on the reform of the Structural and Cohesion Funds fall within my portfolio.

  I welcome your support for the Government's view that the European Social Fund should be used where it can add value to Member States' policies and increase employment and improve workforce skills.

  I referred in my letter of 4 February to the agreement reached on the overall EU budget at the December European Council. The agreement means that our regions will continue to receive significant Structural Funds receipts in the next Financial Perspective. It also means that our poorer regions in particular will continue to receive substantial EU funds for regional development. We have been making clear since 1999 that the UK was certain to receive less from 2007, given the need to provide funds for the new Member States, and given the fact that our economic performance has been stronger than many other Member States.

  The Government's original proposals for Structural Funds reform of 2003, as set out in the Department of Trade and Industry's Explanatory Memorandum number 11606/04, would have focused a more limited Structural Funds budget on the poorer Member States, with richer countries financing regional development programmes from their domestic budgets. However, some countries were unprepared to accept such a sharp cut in receipts within the timescale of the next Financial Perspective. The agreement represents a compromise that reflects the range of views amongst the Member States, while ensuring that the new Members receive the very significant levels of funding that they need to catch up with the EU-15.

  As part of the reform negotiations, the Member States have agreed to strengthen the strategic focus of future Structural Funds spending by establishing Community Strategic Guidelines on Cohesion and National Strategic Reference Frameworks, which will set out the broad objectives for future programmes.

  The European Commission published its draft Community Strategic Guidelines on 5 July 2005. This was the subject of the Department of Trade and Industry's Explanatory Memorandum number 10684/05 + ADD/1. This was followed by a Europe-wide consultation on the Guidelines, which ended on 30 September. In our view, the draft Guidelines successfully dentify the contribution that EU cohesion policy can make towards meeting the Lisbon targets and provide a good starting point for discussion amongst the Member States.

  On 28 February the Government launched a consultation on the UK's draft National Strategic Reference Framework. The National Framework will establish the broad priorities for future Structural Funds (including European Social Fund) Programmes in the UK from 2007-13. The consultation document also invites comments on two related issues: the UK Government's proposals for distributing its Structural Funds allocations under the Competitiveness Objective (replacing the current Objectives 2 and 3); and administrative arrangements for delivering the Funds in the UK during the next budgetary cycle.

  I note your concern regarding the eventual size of the European Social Fund budget and the way in which it will be allocated. The Government's current thinking is that the UK's Competitiveness funds should be divided equally between the European Regional Development Fund (for regional development) and the European Social Fund (for promoting employment) at the UK level. We have not yet reached any firm conclusions on the allocation methodology for distributing the two funding streams across the UK's nations and regions. As part of the consultation we are inviting comments on how best to allocate the UK's ERDF and ESF funding, including views on the indicators, weightings, safety nets and ceilings that could be used.

  The Department of Trade and Industry will publish all non-confidential responses on its website after the consultation ends. It will aim to publish a response to the consultation within three months following the close of the consultation on 22 May. This will include a summary of responses, a statement of the positions of the Government and the Devolved Administrations on the issues raised in the light of the responses, and the final UK National Strategic Reference Framework.

  I hope that this clarifies the Government's thinking on Structural and Cohesion Fund reform. I will keep your Committee informed as the negotiations on the reform of the Structural and Cohesion Funds progress.

10 April 2006

Letter from the Chairman to James Plaskitt MP

  Your Explanatory Memorandum dated 18 April was considered by Sub-Committee G on 27 April.

  We note that agreement has been reached at official level on the Presidency compromise text of the ESF Regulation and that the Government welcomes it, believing it to be an improvement on the earlier version.

  We are grateful to your DTI colleague Alun Michael for the useful clarification of the Government's overall approach in his letter to me dated 10 April, including confirmation that the UK will continue to benefit from the ESF, as well as from the European Regional Development Fund, during the next Financial Perspective. We are glad to note that the Government will be carrying out consultations on the best way of handling these funds in the UK.

  I have already written to your colleague Malcolm Wicks confirming clearance from scrutiny of the separate proposals for Council Regulations (references 8216/06, 7177/06 and 8218/06) on the ESF, as well as the European Regional Development Fund and the Cohesion Fund, which include the all-important budgetary aspects.

  In the circumstances, we are also prepared to clear the Presidency compromise text of the proposal for a Regulation (reference 8219/06) from scrutiny, as well as the earlier Commission amended proposal (reference 13531/05) which it replaces.

  Although your EM states that the compromise text was due to be considered for "political agreement" by Council on 25 April, we understand from your officials that it will now be considered by COREPER on 3 May with a view to possible Council consideration on 5 May. We would be grateful if you would report when a decision has been taken by Council.

27 April 2006

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