Examination of Witnesses (Questions 20-35)
Mr Donald MacInnes, Mr Phil McVey and Mr Roger Head
8 JANUARY 2008
Q20 Chairman: Is this meant to be a place
where people talk to each other; or are you advocating the funding
actually coming in at the city regional level?
Mr Read: Our main point is not so much the funding
coming in at the city region level. Our main point is that, in
addition to have some objectives and some issues which Europe
would like everybody to engage in, it would be good to have something
by way of vision, framework or perspective at the European level
to which others could then contribute. A level which would then
contribute very effectively with that would be the city region
level. A number of countries have decided to go down that road
and set that up, and funding goes through them; but that is not,
I do not think, the key issue. The key issue at the moment is
the absence of a clear vision for the future of Europe at that
level.
Chairman: The next question I was going to ask
was about the future. We will pass that one by and I will ask
Lord Watson to ask his question.
Q21 Lord Watson of Richmond: I would just
like to follow up on one thing Mr Read has said, because I think
we have got a slight feeling that maybe inadvertently you have
opened Pandora's Box. The truth is, depending on how you interpret
"territorial cohesion" (and this is one of those phrases,
is it not: what does it mean; how does one set of territorial
cohesions relate to another) you may be straying into a huge minefield
which, at the end of the day, is about whether Structural Funding
ought to try and produce greater economic equality, or at least
equality of opportunity between regions. As you know, that is
an entirely unresolved question within the European Union; very
controversial and much more sensitive post-enlargement than it
was pre-enlargement. We are right into the minefield of all minefields
at this point. Therefore, I would like from you a clear definition
of your understanding of "territorial cohesion"; and
to link that, if I may, to the question on subsidiarity again,
which is: by going down this sort of route, and indeed Structural
Funds themselves, are they basically not trespassing on sovereign
decisions by government, but actually creating a situation in
which they insist that decision-making is taken at this level
and not at perhaps a more political level?
Mr Read: Our vision of better balance is set
out here. As I mentioned earlier, of the 100 metropolitan areas
in Europe maybe 20 or 30 are strong (question: what defines "strong?"),
but have a number of collective strengths; but the vast majority
of them have a range of significant weaknesses; they have potential
but significant weaknesses.
Q22 Lord Watson of Richmond: Is the implication
of that, in your mind anyway, that the 20 should somehow help
the 80?
Mr Read: Not at all, but those are just the
circumstances. The question is: is everybody happy with that?
Looking to the future, do they think that situation is likely
to get worse? Is that imbalance likely to increase? What could
one do about it? What would be beneficial to all to do something
about it? The conclusion that came out from this is, looking at
the connectivity of Europe, it is like a spider's web, it is very
radial and there are not too many opportunities to go north, south,
east, west or, indeed, around the periphery. There is the connectivity
issue. Does the periphery need to be connected better to itself?
Q23 Lord Watson of Richmond: You are arguing,
in a way, that as connectivity does not currently exist—this
is not an issue relevant to subsidiarity? One is not taking away
from Member States because they do not do it anyway?
Mr Read: Indeed. It is an issue of connectivity
that has not been resolved as yet. Within that framework, north,
south, east, west and peripheral connectivity being improved,
that the weaker metropolitan areas should cluster together for
collective strength, as they are progressively doing regardless
of European policy. For example, in the Po Valley there is an
initiative of all the Italian cities there to develop their collective
strength. There are similar initiatives around the periphery:
the Saxon Triangle, Dresden, Leipzig and Chemnitz, coming together
for collective strength.
Q24 Lord Watson of Richmond: And here?
Mr Read: Here, the Northern Way and the Midlands
Way would be good comparable examples, exactly. It is that form
of collective action around the periphery, enabled by better overall
communications, which is how we see better overall balance evolving.
In our view, it is evolving in that way on a bottom-up basis.
It would be nice to have some recognition that that is the way
it ought to go from the top as well as from the bottom.
Q25 Chairman: Can I also address Lord Watson's
questions to Mr McVey and Mr MacInnes because we were looking
for a view on subsidiarity from all of you?
Mr McVey: On the subsidiarity question, I have
been working on Structural Funds since 1999 and what has amazed
me in that time is that the governance structures for European
programmes to me demonstrate the principles of subsidiarity more
than almost anything I have worked with in the past; in that we
have local, regional, national and European decision-making decisions
being made at the most appropriate levels. If I think about someone
at the sharp end and the way we have actually worked up the current
European programmes, although they have been done, as I have said,
within the context of European guidelines, what is actually going
to happen with the money is something that is very much determined
at a local level. To take a pragmatic view of perhaps not worrying
too much about where the money is coming from or who owns it,
what we are able to do with it at a regional local level is the
most important factor.
Mr MacInnes: Our experience is similar to that.
We find that the more we talk about subsidiarity the more local
decision-making comes into play, the more then we have a responsibility
for an audit trail for a whole new set of administration of these
programmes. We do find some applicants reluctant to apply for
funding simply because of the burden of administration which is
probably, in part at least, caused by local decision-making, whether
people want to be sure that they have a good audit trail for a
project.
Q26 Lord Moser: At the foot of all this
really is the overall scale of Structural Funds. I wonder whether
you would like to comment, any of you, on the criteria that should
determine the scale of the overall EU budget going to the Structural
Funds; and whether at the present time, in your view, it is adequate
to do the job you think the Structural Funds should do, or too
much or too little? The overall scale?
Mr MacInnes: I suppose our experience from a
customer point of view is that we have many more applications
than we have money available. I imagine if you look at it from
that point of view that there is not sufficient funding. There
may well be other sources of funding for some of these applications;
and some of them might not be appropriate for Structural Funds.
In fact some of the other EU funding programmes may be more appropriate.
Going into the future, I think that would be more and more the
case, with more emphasis on business innovation and research and
development, where these programmes are linked, for instance,
with the big issues of climate change and so on. It may well be
that Structural Funds will become less significant, and that the
other programmes become more significant. We are finding already
there is a strong appetite for applicants to go for framework
programmes for research and development, for lifelong learning
programmes and INTERREG programmes and so on.
Mr McVey: Yes, I am very much on the same lines.
From a regional perspective you would expect us always to say
there is not enough money for the region for these sorts of programmes.
However, there is something about having a limited budget that
gives focus to your activities. It makes you make decisions about
what you are going to spend the money on. Certainly in terms of
developing the current programme, that has been a really good
discipline knowing that there is this limited amount of money
that you want to achieve set objectives with. In terms of criteria
for the future programmes, I guess we would argue for a radical
shift here. There is still unfinished business in terms of the
internal market and parts of the European Union that are lagging
in terms of economic performance. We would still want to see criteria
put in place, for example, for regions whose gross domestic product
is below 75 per cent of the EU average, to ensure there was sufficient
budget for them to improve their economic performance. Similarly
we would want some criteria put in place that would ensure, for
those regions that fall into a bit of a no-man's land between
the criteria for the current convergence programmes and being
at 100 per cent of the EU average for GDP, there was some money
made available for them to address issues maybe to do with skills
shortages or particular issues within their economy around maybe
the take-up of innovation within businesses. For example, we would
want to ensure there was still some Structural Funding available
to enable that gap to be filled. There is an unresolved issue,
not for debate today, in terms of the size of the overall budget,
and the unresolved issue of the Common Agricultural Policy in
terms of more needing to be done from a regional perspective to
ensure more of that money is diverted towards economic development
activities.
Q27 Lord Moser: I am very ignorant about
the process. Somebody in Brussels decides how much you are going
to get for the South West. To what extent is that actually related
to your express needs, to your shopping list so to speak; or is
it just a figure and you have to do the best you can within it?
Mr McVey: The process is primarily at Member
State level with Brussels in terms of determining an allocation
for Member States based on various factors, including gross domestic
product and others. At a regional level the UK Government agrees
the criteria with the Commission, by which it will distribute
money to the regions. That is based upon a mixture of need and
opportunity. For example, in the South West because we have parts
of the region, such as Cornwall and the Isles of Scilly, whose
GDP historically has been much lower than the EU average, we do
receive concentrations of funding to meet that need, as well as
some funding related to opportunities around parts of the region
where there is potential for businesses to be more competitive.
There is a mixture of money based on the need and potential.
Q28 Chairman: Mr Read, do you have any comment
on this bit of it?
Mr Read: No, other than just to reiterate again,
if there was a longer-term vision that had been funded by the
EU that would be the other way of looking at it, rather than trying
to access the need from the bottom up to say, "This is where
we are trying to get to. We think these are the resources required
to get there. We invite you to make use of those resources and
help us realise the goal".
Q29 Lord Watson of Richmond: This Committee
spent a lot of time last year looking at the difficult issues
of fraud within the European Union. I wanted therefore to ask
you one question about audit trails, as you raised the audit trail
question. We listened to a lot of people from the Commission in
particular arguing that the possibility of fraud was really something
which fundamentally focussed in the Member States rather than
the institutions. Therefore I just wonder, in terms of the audit
trail for monies that are granted under Structural Funding, where
does the audit go; what is your reporting line on how the money
has been spent?
Mr MacInnes: There are a number of audit bodies,
from the European Court of Auditors to the DG Regio audits through
to Member State audits and local audits for programmes, so there
is a whole range of levels of audits, and the experience of applicants
is that that audit burden is becoming very heavy indeed.
Q30 Lord Watson of Richmond: So they are
likely to find themselves with audit reporting lines which are
going to regional government in the UK, national government and
Brussels?
Mr MacInnes: Yes.
Lord Watson of Richmond: Thank you.
Q31 Lord Woolmer of Leeds: I suppose a question
for all of you: do you think that the current eligibility tests
for regions to receive support under the Structural Funds are
relevant, fair and appropriate?
Mr McVey: I recognise that I may have answered
this question already in response to the previous question, but
I think that the current tests have delivered for the South West
region levels of funding that have enabled us to make significant
differences to the economy in parts of the region, and that will
continue with the new programmes. It is important—and I
think I have already said this—that there are still tests
in place that enable need to be recognised at a regional level
and a sub-regional level as well. However, that is something for
us as a region to determine. As I have already said, I would like
to see in place tests that do recognise the gross domestic product
of regions in relation to the EU average but also do something
to capture the needs of those regions which, although on the face
of it are relatively prosperous, have within them pockets of real
need in terms of economic performance that lag behind the rest
of the region and Europe.
Q32 Lord Woolmer of Leeds: But do those
tests currently apply? Are you saying they do apply now and you
want them to remain?
Mr McVey: The tests apply and I think, although
enlargement and further enlargement brings further restrictions
upon how the budget can be spread, there is a need to have tests
in the future that would consider some of the issues that are
here at the moment.
Mr MacInnes: From a Scotland point of view,
I expect the two parts of Scotland that have done best out of
the funds would be Highlands & Islands and Glasgow & West
Central Scotland in terms of deindustrialisation and so on. I
think the tests that would apply at that time over the last 20
years have been appropriate and have made a substantial difference
in focusing funds on the areas that needed to be focused on. As
we go forward it is more difficult to know what these tests ought
to be, with more emphasis now on innovation, research and development.
It is not clear that the funding should go, for instance, to the
areas and to the applicants that it went to over the last programme
period, so I think whilst the tests are relevant they also have
to change for the next programme.
Q33 Lord Woolmer of Leeds: So looking to
post-2013, what changes do you fear might happen that you would
not like to see and what changes would you like to happen?
Mr MacInnes: The changes we would like to happen:
again, just more emphasis on workforce development, on innovation,
on research and development, and also on making sure that areas
of local regeneration that need to be regenerated locally are
still done. I think that the big infrastructural projects that
have been funded in the past will not happen in the future in
the same way and there may be a concern that there are still some
of these needing to be done but that they will not be addressed
in the same comprehensive way that they were in the past.
Mr McVey: I think the fear would be that because
of enlargement, because of restrictions on the budget, that there
would be an emphasis just on need which would mean certain Member
States on the face of it might not receive any Structural Funds
in the future, or certainly some regions in the UK might not receive
Structural Funds in the future. To echo what Donald was saying,
there is the need for regeneration in certain parts of the UK
so that somehow needs to be recognised in the criteria. I also
support very strongly the point that Donald was making about the
need for competitiveness-type activities to be supported and criteria
to be in place to support those, so around innovation and research
and development. That certainly is the way forward with much of
the funding.
Q34 Chairman: I think I would like to do
a sweep-up question which is how can the funds become more effective
in supporting other policies to deal with climate change and managed
migration, et cetera, in Member States and regions? I would like
a quick answer from all three if I might.
Mr Read: I can say something about where we
stand on climate change in terms of METREX members. There is a
computer model produced by the Tyndall Centre in East Anglia called
GRIP which enables metropolitan areas to look at their sources
of energy and the emissions that are generated and the source
of those emissions within the metropolitan areas. We have a proposition
going forward under INTERREG at the moment where every metropolitan
area does that. They do an inventory of their emissions and the
sources and then look at various reduction scenarios and come
up with an integrated strategy to do that, which involves all
of the stakeholders—to use the jargon—all of those
who have a contribution to make to reducing emissions, sitting
round the table, which is one of the reasons why you need a decision-making
mechanism at the metropolitan level in order to come up with an
integrated greenhouse gas reduction strategy. After metropolitan
areas have come up with that, relatively quickly and say the way
forward for us is whatever it is—heating in the north, cooling
in the south or whatever—then there would be an issue of
how those strategies could be supported. I think the EU could
say that metropolitan areas should produce mitigation strategies,
assess the extent to which you can deal with those entirely from
your own resources and the extent to which you need supplementary
resources beyond that, either through the Structural Funds or
nationally.
Mr MacInnes: I think there is a case to be made
for the fact that Structural Funds ought not to address these
wider issues. There are other mechanisms or other interventions
which should be used for addressing climate change, immigration
and so on. Structural Funds only apply in certain areas and these
wider issues apply right across the EU, and other interventions
should be used for these. I think particularly programmes like
the Framework Programmes for research and development, where a
lot of money is going into climate change research, should be
used more extensively than structural funds for these wider policy
issues that are around.
Mr McVey: I might have mentioned earlier that
there was huge enthusiasm during the development of our current
Structural Fund programmes for the programmes to not necessarily
address the underlying issues of climate change and migration
but for the funds to be used in a way that recognised that those
are issues, they are there; how can we, through economic strategies
and Structural Funds, gain some economic advantage as a consequence?
Whether that is by ensuring that migrants have the right skills
to contribute to the economy or, in terms of climate change, for
example ensuring that the local economy builds renewable energy
infrastructure, encourages businesses to be more energy efficient
and so on, so practical actions at the local and regional level.
Chairman: Thank you very much. Have I swept
aside any questions that colleagues were waiting to ask?
Q35 Lord Steinberg: I would just like to
ask one. In relation to climate change, which is the "buzz"
situation at the moment, do you not sometimes feel in the allocation
of your funds that too much emphasis is being placed on this,
whereas Britain's emissions are very tiny compared to the rest
of the world and that the money could be used—I know this
is not a popular thing to say—more sensibly in other areas
within the development of your industries that you are interested
in promoting?
Mr McVey: In terms of how the funds are being
applied in the region, although the European Commission were very
supportive of us using them to address climate change issues,
in particular to work towards a low carbon economy, I should make
it clear that was a regional partnership decision, and in Cornwall
and the Isles of Scilly in particular a partnership decision there,
to go in that direction, to recognise that climate change is an
issue and to say, right, in terms of our economy what can we do
with the Structural Funds to address aspects of that issue?
Mr MacInnes: I think climate change is too big
an issue to be addressed through the Structural Funds.
Mr Read: The only comment I would make is that
climate change and energy use are clearly inter-related and most
metropolitan areas are concerned to secure their energy futures,
and if that has to be on a renewable basis, on a local basis,
then that just seems sensible in terms of the cost of carbon fuels
in the future, so taking climate change action by securing renewable
energy resources for the future helps your economy and helps climate
change; it is not a competition there.
Chairman: Thank you all very much for coming.
It is very good of you and we have learnt a lot from you. Thank
you very much.
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