Select Committee on European Union Written Evidence


Memorandum by Professor Daniel Tarschys, Department of Political Science, Stockholm University

THE FUTURE OF EUROPEAN STRUCTURAL FUNDS

  1.  In considering the record of EU Structural Policy, it is important to note its many different motives and objectives. Measured against some of its explicitly stated goals the policy is not convincing at all, but on the other hand there are important achievements in areas that do not figure prominently, if at all, in the official documents. This creates enduring problems for the evaluation industry, but also for politicians trying to make sense of the policy.

A MULTI-PURPOSE POLICY

  2.  European Structural Policy is a prime example of "goal congestion". Some of its objectives serve as criteria for allocation (Objective 1, 2, 3, etc.) but in this context I am concerned only with the more or less formally recognised motives and purposes. These can be grouped into ten different clusters:

    1.  Compensatory measures ("side payments") intended to facilitate agreement on other policy decisions. While the official documents have nothing to say about this motive for the Structural Funds, historians are agreed that it has been important at several junctures in the recent past when well-designed increments were successfully employed to overcome resistance to further steps in the integration process:

    (i)  In the enlargement process, there were often regional pockets of resistance both in the old Member States and in the candidate countries that were encouraged to overcome their doubts through targeted benefits. In the UK case, the method involved to overcome some early objections to accession was the introduction of regional policy in the European Community (pioneered by Lord Thomson).

    (ii)  Objections to the internal market reforms in the 1980's in some Member States were met by the doubling of the funds for Structural Policy (Delors I).

    (iii)  A similar strategy was used to overcome concerns about inequities in the foreseen impact of the monetary union, again through a doubling of the Structural Policy budget (Delors II). This time the additional allocation was not integrated into the structural funds but kept apart as a so-called cohesion fund, a separation and a label intended to underscore that it was only a temporary measure.

    2.  Compensatory measures to offset persistent disadvantages ("juste retour"). Compensation may also be requested by Member States that, rightly or wrongly, perceive themselves to be victims of persistent disadvantages. Structural policy payments is only one way of handling such complaints; budget rebates is another one.

    3.  Distributive justice and solidarity. The wealth and income gaps between different regions of the European Union are considerable, although not quite as considerable as is often claimed.[11] An important motive for Structural Policy is to redistribute resources from wealthier to less wealthy parts of the continent. Well handled, such transfers can give satisfaction to both donors and recipients.

    4.  Visibility and legitimacy of the Union. To many Europeans the EU is but a ceaseless bombardment of incomprehensible rules. A cure frequently prescribed is to offer more visible and down-to-earth evidence of common European investments and initiatives.

    5.  Modernisation and institutional development. The conditionality linked to the various structural programs involves the promotion of financial discipline and the diffusion of modern administrative and managerial standards. Both before and after accession, the funds have been used to enhance the rule of law and the institutional development in many Member States.

    6.  Network-building and Europeanisation. Many activities in the field of structural policy have promoted cross-border contacts and contacts with the European institutions.

    7.  Regional growth, employment and development. Beyond mere redistribution, Structural Policy interventions aim at boosting the long-term capacity for growth and job creation in economically weaker regions. Whether this aim is achieved is very difficult to say. There is ample evidence for the short-term impact of the various programmes and projects but far less is known about the longer-term effects. The quality of most implementation reports and evaluation studies is disappointing.

    8.  Aggregate growth and employment. Some elements in Structural Policy, such as the "missing links" investments in trans-border infrastructural networks, may be beneficial to aggregate growth, but the main pattern of reallocation from more prosperous to less prosperous areas has probably a weakly negative impact on the long-term growth rates of the whole Union. Even the short-term impact is unknown, however, since Structural Policy evaluation reports tend to overlook the opportunity costs involved. Efforts are made to measure "jobs created" and sometimes "jobs maintained", whatever that may mean, but never "jobs destroyed" or "jobs not created".

    9.  Convergence. Inter-state economic gaps have no doubt shrunk somewhat, but the crediting of this highly complex process to Structural Policy interventions should be taken with a grain of salt. Efforts have been made to sort out the contribution of the Structural Funds to convergence, but the differentials highlighted in these studies tend to shrink when more numerous variables and more sophisticated assumptions are integrated into the models.

    10.  Cohesion. If cohesion is taken to mean, as the Commission defines it, "an expression of solidarity between the Member States and regions of the European Union", then any measure should qualify. In the dictionary version, however, cohesion means a "tendency to stick together" (Webster) or a "tendency to remain united" (Oxford). If we understand cohesion to mean a "sense of togetherness", then it seems likely that all EU policies make some modest contributions towards this goal, but it is not self-evident that the Structural Funds are more efficient in this respect than other policies. To find measures that give particular value for money in pursuing the sense of European community, one should probably look to such fields as education, culture, mass media, sports and youth mobility.

EUROPEAN STRUCTURAL POLICY: THE RECORD AND THE PROSPECTS

  3.  European Structural Policy has scored some successes with respect to at least the first six of the 10 goal clusters. The contribution to goal clusters 7, 9 and 10 is much more modest, and to cluster 8 possibly negative.

  4.  The record contains some significant achievements. But what are the prospects for the future? Some tasks assigned to Structural Policy have already been completed. Such results should be gracefully acknowledged but do not necessarily justify continued investments or interventions.

  5.  The basis for the inclusion of any item in the next Financial Perspectives must be well-founded expectations about future impact rather than historical accomplishments. In assessing the prospects, one would have to:

    —  assign weight to the various objectives;

    —  consider whether and to what extent they can at all be successfully pursued by national or European policies; and then

    —  make educated guesses about the possible future contributions by the instruments in the repertoire of European Structural Policy, as compared to other available policy instruments.

  6.  The compensatory measures made to achieve particular decisions (cluster 1) have already served their purpose and do not merit being continued. In some other areas, one should probably expect declining marginal returns from established programmes. Eg, if the most urgent infrastructural investments have already been supported, the next round is likely to be less useful. The same may hold for investments in administrative modernisation.

  7.  As to the grand objectives towards the end of the list (clusters 9 and 10), the slow pace and underlying causal complexity of regional equalisation conspire to make convergence an unsuitable policy goal for the European Union. If the goal of cohesion is understood to mean "the sense of European community", then the present repertoire of instruments in Structural Policy are not so well chosen. If we are serious about this objective, as we should be, then an entirely different set of measures should be considered.

  8.  When the usefulness of an established European policy declines, whether through task completion or changing priorities, there are two principal options at hand: the available resources could either be redirected to other pressing needs, or the policy in question could be redefined and filled with a new substance. There are several examples in the past of such exercises in "retro-fitting", in the case of CAP through the invention of rural development as a partial exit strategy from agricultural subsidies and in Structural Policy through a bundle of measures presented under the label of "lisbonisation".

  9.  While intellectual honesty and considerations of rationality speak in favour of an explicitly recognised transfer of resources towards ascending priorities, the high transaction costs involved in shaping agreements and making budgetary decisions in the European Union will often make retro-fitting more expedient. It is not the best strategy to choose, but at least better than leaving things where they are.

  10.  The budget of the European Union contains both seriously under-funded and seriously over-funded areas. Facilitating a badly needed redeployment of resources requires increased attention to the political and institutional aspects of policy termination through the phasing out of expenditures that have already fulfilled their purpose or cannot be expected to offer satisfactory returns in the future.

30 December 2007





11   The official statistics on regional gaps reflect the gross disparities before taxes, social transfers and public consumption. When such domestic political interventions are taken into account, a substantial part of the intra-national gaps tends disappear. Production disparities are much greater than consumption disparities. Back


 
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