Memorandum by Keith Boyfield, Keith Boyfield
Associates
It came as a surprise to me when writing Eutopia:
What EU would be best and how do we achieve it? [1]which
I co-authored with Tim Ambler of the London Business School, to
discover just how large a proportion of the overall EU budget
was accounted for by regional funding of one sort or another.
Along with the CAP, structural funding represents by far the largest
slice of EU expenditure over the seven year time period 2007-13.
Following enlargement of the EU to 27 member states, competition
for these funds will become even more intense.
1. What should be the objective of
the EU's Structural Funds? How can the Funds become more effective
in supporting public policies in Member States and regions? What
mechanisms of delivery could make the policy more performance-based
and more user-friendly?
This question assumes at the outset that EU Structural
Funds are a good idea. In our Eutopia study (see above)
Tim Ambler and I questioned the whole purpose of structural funding.
Essentially, this policy goal is open to the criticism that it
is bribing citizens of the EU with their own money. As we observed,
a great deal of waste and fraud with regard to the EU budget could
be saved if funds were not being sent to Brussels and back again.
We argue that it makes more sense for individual member states
to apply their own funds to agreed EU programmes. Only surpluses
or shortfalls should move into and out of Brussels. Furthermore,
it makes far more sense for wealthier member states to address
economic development in their own economically troubled regions.
However, there may be a good case for the EU
supporting economic development in certain accession states. But
it would be wiser to do so on a specific, targeted basis and not
one that involves supporting economic development in relatively
wealthy member states.
2. Do structural funds meet the principle
of subsidiarity? Could the same cohesion objectives be met through
repatriation of the distribution of these funds?
Subsidiarity can be defined as the right of
any member state to legislate in any area not specifically reserved
for the EU. Structural funds essentially act as an additional
source of funding to support regional development in various parts
of the EU. As such, they serve as "bolt-on extras" to
the funding already available from national governments and the
private sector. In terms of subsidiarity, EU structural funding
represents an alternative source of funding, which can raise tensions
with member state governments. What is more, there is every incentive
for regional governments of one form and another to apply for
these EU structural funds, particularly where their goals may
be at odds with their own central governments. When one visits
Brussels these days, one is struck by the profusion of representative
offices housing the representatives of various EU regions: Scotland,
Wales, Greater London Authority, Bavaria, Liguria, Catalonia,
etc. Economists might refer to this as "rent-seeking behaviour".
In practice, European regions are lobbying for as much of the
available European Structural Funds as possible. This lobbying
activity can be expensive and wasteful; it can also trigger tensions
with other regions and member state governments.
As argued in my response to the first question,
I believe it makes more sense for member states to address their
own regional development issues. Accordingly, I would support
moves to repatriate the distribution of regional funding, albeit
such a move might well provoke resistance from regions within
the EU that have poor relations with their own member state government.
This is a crucial political point that appears to have been overlooked
by many in the past.
3. What impact has enlargement had on Structural
Funds, and are any changes necessary to meet the challenges of
further enlargement?
Enlargement has made competition for structural
funds considerably tougher. The fact that many accession states
have lower GDP per capita figures than the EU 15 also adds to
the demand for greater structural funding.
Moves to further enlarge the EU will only add
to these demands for larger expenditure on regional development.
When deciding on whether to enlarge the EU, existing member states
and their citizens will need to recognise these pressures. Those
who believe the purpose of the EU is to act as a catalyst for
greater economic prosperity across Europe will be relatively relaxed
about these implications, but suffice to say that the EU has not
always been perceived as an engine that drives economic prosperity.
Those who question the purpose of the EU and its role in creating
greater wealth will inevitably be suspicious about moves to expand
the EU and spend higher amounts of taxpayers' money on regional
development schemes in the remoter parts of Europe.
4. How will the EU's commitments on combating
climate change manifest themselves in the distribution of Structural
Funds for the post-2013 period? How will the response to other
challenges facing the EU economy (eg migration, growth of the
service sector) shape future policies?
As yet I have not undertaken any study of the
EU's commitments to combat climate change and their influence
on expenditure in the post 2013 period, so it is better that I
make no response to this question at the moment. As for other
challenges facing the EU economy in the post 2013 period, one
could write several books and still not adequately answer the
issues involved. One point is worth highlighting however: the
primary aim of the EU is to establish a single market in goods
and services. Fifty years after the EU was first established,
it remains the case that the goal of a common market remains some
way off, particularly in the area of services.
5. What criteria should guide decisions on
the proportion of the EU budget to be allocated to Structural
Funds?
As set out in my answer to the first and second
questions, I remain sceptical as to whether regional funding by
the EU is a good thing in the first place, particularly where
it involves financial support in relatively wealthy member states.
I believe EU regional funding should be fundamentally overhauled
and reduced, targeting schemes that may have merit in the poorer
accession states.
The EU budget process is excessively lengthy
and complex. It invariably ends up being resolved in one last
minute summit where decisions on matters of huge importance are
often taken in the early hours of the night and as part of some
complicated, Byzantine horse-trading session.
It must also be pointed out that the EU budget
making process involves setting ceilings in terms of individual
member states' GDPs. Since the ceilings are set way ahead of actual
expenditure, and since it remains uncertain what rate of economic
growth individual member states will enjoy, the whole process
is seriously flawed. What is more, the Commission fails to spend
the annual amount it is given (In 2001 it was left with a surplus
of €15 billion, €7.4 billion in 2002, €5.5 billion
in 2003 and €2.7 billion in 2004).[2]
6. Are the relative eligibility tests for
regions to receive support under the EU's Structural Funds relevant,
fair and appropriate? Should they remain in place after 2013?
Is it appropriate that they are discussed simultaneously with
wider agreements on allocating EU budget spending?
As yet I have not undertaken any detailed study
of these eligibility tests so I would prefer to miss out a response
to this question. I suspect that these tests are discussed simultaneously
with wider agreements on allocating EU budget spending as part
of the horse-trading that characterises spending by the EU throughout
Europe. Those member states that receive relatively little by
way of funding will inevitably complain; those that do relatively
well will support the process.
7. What would be the effect of linking the
availability of Structural Funds with compliance to Broad Economic
Policy Guidelines?
In a word, salutary.
9 January 2008
1 Published by the Adam Smith Institute in 2006. Back
2
Eutopia: What EU would be best and how do we achieve it? Adam
Smith Institute, 2006, page 36. Back
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