Select Committee on European Union Nineteenth Report

CHAPTER 4: Administration

Administration costs

82.  Open Europe (p 15) quoted figures from November 2003 that the annual cost to the UK Department of Work and Pensions of administering the Funds was £10 million, and suggested that six other departments also involved in the administration faced budgets of the same magnitude. A share in the annual £366 million budget of the Regional Development Agencies (RDAs) was also attributed to the Funds (p 15). We examined Open Europe's suggestion[52] that the cost to the UK of administering the funds is £670 million per year, and dismissed it (QQ 66-72).

83.  We asked the Government and the RDAs about the cost of administering the Structural Funds in the UK. The Minister estimated that, in 2008, the administration costs to central Government and the devolved administrations, above those co-financed by the Funds through Technical Assistance, would be £15.45 million (p 69). The RDAs stated their annual cost of administering the European Regional Development Fund is £11 million. The contribution of the RDAs towards their Regional Representational Offices is £1.5 million (2006-2007) (pp 126-129). This gives the United Kingdom a total administration cost of around £28 million per year, against the United Kingdom's current allocation of Structural Funds of approximately €1.5 billion (£1.2 billion) per annum.

84.  The United Kingdom also contributes towards the Commission's expenditure on administering Regional Policy in its entirety across the EU. In 2008, this is estimated to be €83 million EU wide[53].


Regional Representation in Brussels

Mr Boyfield, consultant economist, was struck by the "profusion" of Regional Representational Offices in Brussels and questioned their "rent-seeking" behaviour (p 43). 264 of the NUTS2 regions have chosen to be represented in Brussels, either directly or through the Regional Representational Offices of their NUTS1 region. These Offices are not part of the EU's institutional framework. They perform representational and advocacy tasks, and promote their region vis-à-vis the EU institutions and other regions. They collect information on funding opportunities and advise their regional authorities as well as the private sector on how to gain access to these funds. The size of these representations varies. There are regions with just one member of staff based in Brussels (e.g. Lubelskie, Poland), and others that have 45 permanent members of staff (e.g. Valencia, Spain). The 12 UK NUTS1 regions (9 English RDAs, Wales, Scotland and Northern Ireland) are each represented in Brussels; the smaller NUTS2 regions do not maintain individual offices.

The degree of success of the Representational Offices also varies. Witnesses told us that they perform a series of useful functions: above all they are very effective in helping their regions take advantage of different funding sources (QQ 8, 292, 322-325, 343). It is clear, however, that decisions on programmes and fund distribution occur in the region and not in the Brussels office. We are grateful to the Polish (Lubelskie and Wielkopolska) and Spanish (Valencia) Regional Representational Offices in Brussels for the valuable information they gave us, and to the East Midlands Regional Development Agency for coordinating responses from the English regions.

Administrative burden

85.  Bureaucracy constitutes a hurdle for those wishing to apply for EU funding. Several witnesses raised this concern: Mr Meadows, former Director General of DG Regio, highlighted this issue as one which gave the policy a "bad reputation" (p 74). Items that we have considered under our scrutiny remit highlight the tension that exists between the need for audit and control of expenditure, and the burden of administration. In particular, following the European Court of Auditors report on the 2006 Budget[54], the Commission and Member States noted that there was some disagreement between the Court of Auditors, the Commission and Member States over the interpretation of the audit and management requirements. Action to provide more guidance and clarification is being taken[55].

86.  The Commission emphasised that they have to strike a balance between calls from the European Parliament for more rigorous auditing and complaints by the regions which find the mechanisms in place far too rigorous, restricting and bureaucratic. Mr Ahner added that the Commission is looking for ways to address the problem of bureaucracy and invited both regions and recipients of funds to table "concrete suggestions" on how the administration of the funds can be made less bureaucratic (Q 284).

87.  We were told that the EU regional policy is run in a very decentralised manner (pp 74, 76 QQ 25, 250). The local and the regional level are extensively involved, not just in administering and spending the funds allocated to them, but also through input into the decision making process at EU and Member State levels. Several witnesses emphasised that there is a dialogue between all levels regarding the design of operational programmes and projects to deliver the Funds' priorities (pp 123, QQ 9, 268). The Government noted that the partnership approach enhanced transparency, cooperation and coordination in the design and delivery of policy (p 58). Professor Bachtler argued that the Commission probably has less influence now than at any time since the expansion of the Structural Funds in 1988 (Q 108).

88.  However, this decentralisation can increase the administrative burden. Some Member States add their own layers of bureaucracy to the Commission's (QQ 285, 314). Scotland Europa told us that the experience of applicants was that the layers of audit bodies involved in the programmes (local, regional, national, European) was increasing the burden upon them (Q 29). This does not mean that obtaining public funds is necessarily more cumbersome and bureaucratic than obtaining private sector investment: the Spanish region of Valencia told us that obtaining funding for their projects from the EU is less complicated than obtaining it from the banking sector in Spain (Q 360).

89.  An underlying theme in the evidence we received was the tension between reducing administrative cost, and maintaining high quality financial management. The evidence we received did not demonstrate that the cost of administration, relative to the total size of the budget, is significant in the United Kingdom. Extrapolation to countries receiving larger contributions from the funds might suggest further efficiencies and we dismiss witnesses' claims that the regional policies are beset by a costly bureaucracy.

90.  We welcome the trend towards the Commission taking a strategic view of policy and the regions drawing up the local spending plans. There does appear to be significant bureaucracy for applicants to the funds; while some clarification is needed, we are content that it is not excessive. We note that the Commission is aware of the balance it needs to strike between control and ease of distribution and that it is actively seeking ways to address the bureaucracy. We support their invitation for suggestions of how the administrative burden can be alleviated, at each of the EU, national and regional level.

52   Should the EU run Regional Policy? Open Europe, December 2007. Back

53   This includes the ERDF, Cohesion Fund, Social Fund and the Instrument for Pre-Accession Assistance which is also administered by DG Regio. Back

54   (OJ C 273) The Court of Auditors have also highlighted (in Special Report 1/2008) the varying quality of information provided to the Commission by project promoters in Member States. Back

55   7210/08 and 7323/08. Back

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