Examination of Witnesses (Questions 140-159)
Mr Keith Boyfield, Ms Florenica Ahumada Segura and
Dr Robert Leonardi
19 FEBRUARY 2008
Q140 Lord Maclennan of Rogart: May
I follow up this point about the rich and poor, or relatively
rich and relatively poor? Your written statement again speaks
about it making more sense for Member States to address their
own regional development issues. That could allow the relatively
rich simply not to have a regional development policy. That is
an option, but is it conformable with the overall objectives of
the Union of trying to spread the benefits of the market from
the city state that you are talking about throughout the whole
population of countries? And is it not also the case that the
contraction of the proportion of the budget devoted to structural
aid in the richer countries, which Dr Leonardi mentioned, has
reflected the lessening of the need of the greater countries and
not simply the growth in the need of the convergence countries?
Would that be reasonably true?
Dr Leonardi: If you look at the distribution
of CAP funds they are going towards the richest countries.
Q141 Lord Renton of Mount Harry:
Which funds?
Dr Leonardi: The CAP, the market mechanism.
There it is going to France, it is going to Germany, it is going
to Italy and going to the UK. So the CAP funds go to the opposite
people, vis-a"-vis the cohesion, and that is why we had the
budgetary battle in 2005, 2006—you might remember that—because
there was the feeling that the attempt to lower cohesion funding
was exactly detrimental to the interests of the new accession
countries, and instead the guarantee of CAP funding up until 2013.
There was a guarantee to the bigger countries and the richer countries
that they would get theirs because the other thing is that CAP
has had no impact in reducing regional disparity because of this
mismatch—the richer you are the more money you get.
Chairman: I think it is reasonably clear to all of
us that something has to happen to the CAP Fund, but I strive
to keep my mind firmly on the structural funds.
Q142 Lord Maclennan of Rogart: Dr
Leonardi, is it your view that it would be acceptable European
Union policy to effectively say that regional disparities in the
rich countries are not something that the Union ought to be involved
in; it is marginal to the interests and they should consequently
be repatriated?
Dr Leonardi: No because it varies in terms of
some countries are interested in this and others are not interested
in this. Therefore, to leave whole swathes of regions that may
be suffering I think needs to become a concern of the overall
European Union. I think that the European Union provides a check
to make sure that there is a more equal distribution, but in many
countries there is not this orientation. We see this again in
Ireland, in Portugal and in Greece. There the use of the funds
have been very good, have promoted convergence but disparities
have increased within the countries.
Mr Boyfield: If I could add very quickly, I
do not think it is any business of Brussels really, the way in
which these things are done by the Member States, in other words
the richer states if they are repatriated; it is up to the electorate
when they vote in elections, and if the Scots want to do their
own thing and go independent, then let them.
Chairman: I think that possibly follows from repatriation.
If I may, I would like to move on to consider what is to be done
with structural funds in the future, not what has been done in
the past. Lord Renton.
Q143 Lord Renton of Mount Harry:
I think, Chairman, that that is the point on which we should now
concentrate rather than the past. Personally, I do not think there
is going to be very much change. I think that the cohesion fund
will continue to exist; I think that the richer countries would
never actually allow themselves not to get anything from it at
all because it would be impossible to sell that politically. If
we look at the 2008 EC budget which has just been approved, there
is actually no change in the figure for the cohesion fund. It
started at €46.8 billion and it remains at €46.8 billion.
I think realistically that is likely to continue. Therefore, looking
slightly more at the minutiae, accepting that there are new countries
coming in that are very much poorer, or there is migration, the
service sector is growing, there is all the worry about climate
change, what changes to the funds do you think may be necessary
to deal with these new problems, which were not there ten years
ago, etcetera?
Dr Leonardi: One thing is that migration has
become a European-wide problem. In terms of now, we live it as
a Northern European or Southern European or Western European phenomena
but all predictions are that in Central and Eastern Europe we
are going to have in five years a mopping up of the unemployment
levels.
Q144 Lord Renton of Mount Harry:
A mopping up?
Dr Leonardi: A drastic reduction in unemployment
levels, and therefore the need to either repatriate their nationals
who have emigrated from Romania, Poland, etcetera, or to import
labour from the Ukraine, Belarus, Russia. Therefore, migration
is a very, very important thing and it has not been dealt with
adequately. You see it clearly in the cities because in the cities
we have a growing phenomena of migrant communities not being well
integrated or not integrating into the general society and therefore
creating points of conflict with the resident populations; and
leading to a decline in the physical infrastructure, the abandonment
of education and increased crime and terrorist-type activities.
Therefore, it is something that has not been adequately addressed
because that was not on the remit at the beginning, and I think
that needs to be introduced into the remit much more. Secondly,
I think that we have to be much more sensitive to the environment.
In many of these Central and Eastern European countries—but
we saw it also in Portugal and Spain and Greece—development
is considered to be good no matter what the costs, and therefore
in the middle to long-term we see the negative impacts of these
types of developments, especially coastal developmental, river
development and so forth. Therefore, we have to be much more sensitive
to the environmental impact of projects. So even though Environmental
Impact Statements are required for large infrastructure projects
I think that they need to be also introduced for medium sized
projects and an overall consideration for the development programmes.
Q145 Lord Woolmer of Leeds: Within
that context particularly do you see the EU over the next three
or four years specifically putting structural fund money substantially
into climate change projects?
Dr Leonardi: It could. This really requires
a consensus among the Member States to say, "Okay, we want
to change the objectives," and that is part of the legislative
process at the European level, and Member countries do have a
role in initiating these types of policies. I would not discount
it at all; I think if the UK were to raise this banner and carry
it forward then many other countries, Sweden and other countries
in Western Europe, would readily support that.
Q146 Chairman: We posed a question
in terms of potential further enlargement and indeed I guess you
are answering it in terms of enlargement because enlargement will
lead to more migration.
Dr Leonardi: We get migration without enlargement.
Once the States come in there is an ability to stabilise migration.
That is what I am arguing for Central and Eastern Europe. The
flows that we have seen from Poland I think will stop and will
reverse in the coming years, but we have on the eastern side of
the European Union borders with the Ukraine, Belarus, Russia,
and I think these areas do have employment problems and therefore
are readily capable of providing extra labour, to say nothing
of the southern Mediterranean area because they have the ability
to go into all European countries—not just the southern
European countries, but we find significant Moroccan and Tunisian
groups in Holland, in Denmark, in Sweden and in other places.
Mr Boyfield: Can I just say one thing? Is the
migration not already happening? If you go around London there
are a heck of a lot of Ukrainians, Turks and other immigrants.
They might be illegal or whatever but the catering industry would
not operate without a lot of these people.
Chairman: What we are trying to nail down is
whether structural funds will be any contribution to dealing with
these problems.
Q147 Lord Renton of Mount Harry:
This is a difficult one, I know. Do you think it is possible to
add more specific criteria to guide decisions on the proportion
of the EU budget to be allocated to structural funds? It follows
on in a sense from what you are saying.
Dr Leonardi: It is perfectly possible. I think
that for the management of migration, if you think of the European
Social Fund it was created in 1958 in order to exactly respond
to that issue of migration of southern Italians to France and
to Germany, and therefore it was seen as a fund to educate them,
to integrate them and then to protect them in terms of their job
rights. So I think that the social fund could be brought back
to its original purpose and more focused on the management of
migration problems. But in this new round of cohesion policy,
2007 to 2013, there is a possibility of proposing projects within
city centres, so about two per cent of the funds are earmarked
for metropolitan types of initiatives in the various Member States.
But there is a certain amount of denial on the part of Central
and Eastern European countries; they state flatly that they do
not have a migration problem—now. I think that they will
have a migration problem within five years.
Chairman: If I could just have a pick on this
because it is quite important. It seemed to us when we tried to
prepare what we were thinking about structural funds that with
any luck they would increase, Lord Renton, perhaps only as the
proportion of CAP goes down. There is some scope in terms of the
European budget.
Lord Renton of Mount Harry: Of course it is
a very relevant point because with climate change, does it come
out of the CAP budget, or whatever?
Q148 Chairman: The other point that
the European Commission keeps making is that indeed it is policy
to link the priorities for some funds with the Lisbon Agenda,
something to do with competitiveness. Do either of you in fact
support that?
Dr Leonardi: Yes.
Mr Boyfield: It is a bit like saying are you
in favour of not beating your wife; the Lisbon Agenda is just
a long wish list which seems to have so far appeared elusive in
terms of achieving those targets. Can I also be a bit of a cynic
again about the regional development funds? Although they are
there for laudable reasons—and I am not saying that in places
like Caithness and Ross they might not have had an impact—there
is this perception amongst a lot of people in Europe that they
are a kind of slush fund, and that the Member States come together
at these summits and they work out basically how much they are
prepared to pay to two big items in the EU budget, which comes
to something like 90 per cent of the overall budget at the moment—that
is the CAP and these regional development funds. They look on
the development funds, it strikes me, as a bit of a sweetener—one
keeps reading these press reports that at three o'clock in the
morning at the Brussels summit in December 2005 when the British
and the Germans were trying to persuade the Poles to agree to
some particular item they said, "We will give you another
100 million Euros for your subway development—
Q149 Lord Renton of Mount Harry:
But it was ever thus.
Mr Boyfield: It was ever thus and actually,
as you were saying, I am also of the opinion that we are not likely
to see any radical changes; we can come up with various criteria
to do with particular fashions the moment like climate change,
and some of these might well be laudable, but you can ask yourself,
I guess, how far is the European Commission really a repository
of expertise and experience in climate change? My experience of
working with the European Commission is that they are often very
good at acting as a switchboard of advice, and they will put people
in touch with the experts in Europe and all that is very positive,
but I am not really entirely sure what added value they provide
for the money that is spent on them.
Q150 Lord Renton of Mount Harry:
Climate change has to be an EU problem because it is not a single
national problem.
Mr Boyfield: I absolutely agree with that.
Q151 Lord Renton of Mount Harry:
It just has to be a continental and global problem.
Mr Boyfield: But you could also have voluntary
cooperation amongst the Member States. Switzerland presumably
is concerned about climate change and presumably voluntarily goes
along with a lot of the very fine initiatives from the EU.
Dr Leonardi: Can I respond to that? In terms
of the Lisbon Agenda, the difficulty with the Lisbon Agenda is
that we have the open method of coordination as a way of achieving
these, and the open method of coordination has still to be proven
as effective, as an effective way of managing these policies and
achieving the goals because at the end there is no compliance
mechanism; there is just blaming and shaming and that is it—you
cannot take money away or you cannot give money. So where the
Lisbon Agenda has been effective is where it has been integrated
into the cohesion policy. Therefore, for the convergence countries
it has become a very important objective as part of the overall
objective of reducing disparities, so the Lisbon Agenda has been
given teeth by the cohesion policy. Secondly, the allocation of
money in the cohesion policy is not based on everybody putting
in a bid and being able to use their political weight to get it
because the allocation of funding is done on the basis of a formula
that is proposed by the Commission and agreed by the Council of
Ministers. Therefore, once the formula is in place the budget
can increase, decrease or whatever in terms of the allocation
that is determined by that formula; and these types of things.
Secondly, all of this has to pass by the European Parliament,
and therefore the Member States in December 2005 agreed on 1.0
per cent of GDP and the Parliament did not accept it; then the
compromise of 1.07 per cent. Therefore, we should not at all believe
that Member States can do whatever they want in terms of these
financial arrangements because there are strict rules.
Q152 Lord Maclennan of Rogart: On
the formula and on the initiative for change you did earlier say,
Dr Leonardi, that if there were a consensus the objectives could
be enlarged.
Dr Leonardi: Yes.
Q153 Lord Maclennan of Rogart: But
I wonder if that is actually consistent with or allowed for within
the formulae? The formulae are macroeconomic in a way but the
problems sometimes appear to be micro problems. For example, the
shoe industry in Italy has been so threatened by China that a
whole area is really at risk. But could the formulae allow a sensitive
response to that kind of national or regional problem?
Dr Leonardi: Yes, it can because here we are
talking about an area that is not going to be a major beneficiary
of the cohesion budget, it is not part of the convergence objective;
but it is part of that leveraging structure where the shoe industry,
say in Tuscany, can be a focus of it and therefore the Tuscany
government can say, "I want to put the money that I receive
from the EU on this as a way of then leveraging the private equity
that is necessary." And that is the only way they are going
to do it because in many of these situations had the private sector
been in a position to take care of the problem it would have taken
care of it already. But we still have these lingering problems
and so they need a certain amount of focus from the public authorities
to make sure that everyone is on board in terms of the regional
officials, the local officials, the banks, the entrepreneurs and
the representative associations of the entrepreneurs.
Mr Boyfield: Can I quickly add something? I
was talking to a very prominent private equity guy last week,
who was telling me that he has invested quite a lot in Wales in
recent years, and there is now quite a thriving consultancy business
out there in directing private equity firms and other investors
in terms of what is leveraged from the European Community. Next
week I am going to Munich to the Super Return Private Equity conference
and I notice that there are some sessions there on what you might
be able to do with the European Commission in terms of investing
in particular regions of Europe. That is a very interesting thing
to follow.
Chairman: This is of course evidence of leverage.
Q154 Lord Woolmer of Leeds: Could
you remind me what the current eligibility tests are for regions
to receive funds under the EU's structural funds. Do you regard
them as fair, relevant and appropriate and should they remain
in place after 2013?
Dr Leonardi: There is one criteria and that
is 75 per cent or less of the EU average.
Q155 Lord Woolmer of Leeds: Just
that one?
Dr Leonardi: Just that one; 75 per cent or less
of the EU average. Now we have 27, but when the calculations were
made for 2007-13 we had an EU of 25 and therefore we did not take
into account the weight of Romania and Bulgaria, which have lowered
the average in terms of the absolute number for the EU average.
So that is the only measure. But in the allocation of funds, once
you qualify, then you have population, unemployment levels, activity
rates in terms of what percentage of your population is in employment;
and also introduced in 2003 was the ultra peripheral position
to take into account the Azores, the Canary Islands, in terms
of these others that did not have big populations and therefore
required more funding. But those were the criteria in terms of
the allocation. One last point, the absolute level of development
of the country as a whole is taken into consideration. So under-developed
regions in a wealthy country such as Italy, the UK or France receive
less than a poor region in a poor country.
Mr Boyfield: Sweden, I think.
Dr Leonardi: There it is a special situation
for Sweden and Finland because in those areas the qualification
is that they have to have less than one person per square kilometre.
Mr Boyfield: The Tundra Belt.
Q156 Chairman: Do you feel that these
are about the right criteria or would you make a change?
Dr Leonardi: This is the only criterion that
is uniform throughout the EU and therefore it is EU-defined, it
is not nationally-defined, and the problem that we get with nationally-defined
parameters is that each country—and one example is unemployment—defines
it differently; therefore, in one place part-time work is employment
and in other places part-time work is unemployment. So unless
we have a uniform, a homogenous definition throughout the EU then
it is difficult to accept anything else.
Q157 Lord Woolmer of Leeds: So your
answer is that there are tests for allocation, but in applying
those tests actually the data and the definitions that individual
countries apply differ?
Dr Leonardi: Yes.
Mr Boyfield: I would go along with that.
Q158 Lord Woolmer of Leeds: So what
if anything do you think should change?
Dr Leonardi: If we could guarantee the definition
of unemployment is the same throughout the EU, if we could guarantee
that there is not under or over reporting because that also is
another matter, and if we were to have those guarantees across
the EU 27 then I would also add unemployment and activity rates,
then they could be used for the allocation of funds once eligibility
is established. But unless we have homogenous definitions of criteria,
it is very difficult to change the present system.
Mr Boyfield: I really endorse that but ultimately
the 75 per cent figure is an arbitrary figure. I was looking at
The Times yesterday about the GDPs of some of these candidate
countries in the former Yugoslavia and some of them have very,
very low GDPs and very high unemployment rates. Inevitably I think
we are going to see more funding going to these candidate states,
and that is not necessarily a bad thing.
Q159 Chairman: I think that must
be right. I am conscious that we have not asked one of our witnesses
anything. Ms Segura, would you like to say anything about any
of this? What is your research subject about which you would like
to speak?
Ms Segura: My knowledge about this particular
topic is not very deep but what I have seen so far is that the
cohesion funds have had a very good intention coming from the
European Union in order to leverage these regions that are in
different circumstances. I think if the management of the funds
by the Member States were more rigorous they could actually have
a better impact in this area. I think a lot of money, as far as
I can see, is spent in administration and the management of these
funds when allocated. This is my point of view at the moment.
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