Examination of Witnesses (Questions 200-219)
Mr Pat McFadden, Mr Andrew Steele and Mr Neil Bond
26 FEBRUARY 2008
Q200 Lord Trimble: This obviously
comes on to something that was suggested to us in other evidence
that we have heard; it has been suggested that it is undesirable
to have discussion of Structural and Cohesion Funds taking place
within the same context as discussion on wider issues and that
quite often the Structural and Cohesion Funds are adjusted in
order to buy support of wider issues, or to affect them.
Mr McFadden: I am not sure that I quite understand
the question. I am not sure that it is undesirable to have discussion
on it; it is a perfectly reasonable issue to discuss. Certainly,
the UK Government's view of the future of these Funds would be
taken in a broader view of what the priorities of the European
Union should be. We referred earlier to areas that we are phasing
out that had support in the past, their performance has hopefully
improved and I completely take the point that Lord Kerr made that
this may be only one factor of many factors in a particular region
or country's economic performance improving. The picture will
change over time and if these Funds are effective, maybe not in
2013 but in the future, some of the countries currently benefiting
from them may not need them in the future.
Q201 Lord Moser: You referred several
times, understandably, to GDP figures. Are these national figures
or do you use regional data also?
Mr Steele: In terms of the qualification for
payments from the Cohesion Fund, which is one of the three European
Structural and Cohesion Funds, it is on a national GNI basis,
which is very similar to GDP. In terms of the regional selection
for the convergence regions, it is on a regional GDP basis.
Q202 Lord Moser: Why the difference?
Mr Steele: The aims of the Cohesion Fund are
aimed specifically at those countries that fall below 90 per cent
of average, whereas the European Regional Development Fund, as
its name suggests, is more focused on the regional level rather
than the national level.
Q203 Lord Moser: Getting back to
the absorption point which was raised earlier, some poorer countries
have rich regions and so to judge them as poorer countries because
they have low GDP per head is rather misleading.
Mr Steele: I can really only explain how the
current system is, rather than what we think it should be, but
that is how the Cohesion Fund is set up and operates.
Q204 Chairman: That brings us very
nicely to the question of what the Government thinks the system
should be. What would be your guiding principles if you are looking
at the whole question of Structural and Cohesion Funds from scratch?
Mr McFadden: We have set them out in the Global
Europe pamphlet and indeed in the written evidence that we presented.
I think there would be three things: the EU added value point;
that EU action should be proportionate and flexible; and the third
point would be sound financial management and stewardship of the
Funds. If we were starting this from scratch, those would be the
three things that we should think about in setting up such a system.
Even if we cannot start from scratch, those are the three things
that should hopefully inform it in the future.
Q205 Chairman: If you applied those
principles, what changes would we see in the system?
Mr McFadden: This goes back to some of the discussions
we have had. You would probably be spending more of this in the
poorer EU Member States, which reflects the discussion that Lord
Kerr and I had about EU added value. You would always be asking
yourself about the long-term necessity of the Funds; we know it
may be a feature of bureaucracy in general, not just these Funds,
that once something gets set up it tends to live forever. Regarding
the question of stewardship, there are issues of simplicity and
there will always be a balance between—this is a generic
regulatory question, I suppose—of asking people to account
properly for the money that is spent, which is an important principle,
and also managing it so tightly that you do not get the benefit
of local knowledge. That is why in this current round of spending
there has been an attempt to get the stewardship into three levels
of the European Union, the strategic approach of the European
Union, the national reference framework at the national level,
and then the implementation at the more regional level.
Q206 Chairman: In paragraph 8 of
your written evidence, on the second of those principles, the
Minister told us that expenditure is just one of a number of policy
levers, alongside co-ordination, shared best practice, legislation
or regulation. Which are the most important of the non-expenditure
policy levers and do you think that balance is right at the moment,
or needs to change? You made the point that spending is not the
only thing.
Mr McFadden: Yes, I understand the question.
It is a good question about regional policy—what else is
important? Governance is important; accessibility and transport
are important; I believe local and environmental factors are important
in regional policy and effectiveness, in other words, creating
a good physical environment and a good business investment environment;
and we would also stress, and have done as a Government, capability
and skills to compete. There are a number of things which are
not purely investment and expenditure but which are certainly
helpful to you if you want to succeed as a region.
Q207 Lord Maclennan of Rogart: I
have a particular question about the compatibility of the guidelines
and these principles that you have been outlining, with the objectives
set out in the regulations for the current period, the third objective
in the current period is to promote European territorial co-operation,
to strengthen cross-border transnational interregional co-operation.
Are you able to say which of those integrated guidelines deals
with that issue? It seems to me that if you leave these matters
simply to national reform programmes, you will not necessarily
get that integrated territorial co-operation across borders.
Mr McFadden: For example, in the second point,
there is a reference to legislation and regulation. That can be
a critical friend or foe in terms of encouraging greater cross-border
territorial co-operation. There are many unseen barriers that
we know about. The battle for a single market is not quite fully
won, and if we want to see more cross-border trade and cross-border
co-operation, there is a substantial regulatory agenda, which
may not be quite our main subject today, but it is substantial.
Q208 Lord Maclennan of Rogart: You
would not see Cohesion Funding as being part of the weaponry to
deal with this?
Mr McFadden: Cohesion Funding can be, but following
on from the Chairman's question about non-financial instruments,
getting the regulatory balance right is critical to economic growth
and jobs, it can help you or it can hinder you. Hopefully, this
Government can be a good influence in encouraging the EU to pay
close attention to the regulatory environment.
Q209 Lord Steinberg: I am sure you
would agree with me, Minister, that the whole format and shape
of the European Union has changed a lot over recent years and
will continue to change in the future, and that we will have more
so-called "weak countries" entering the EU in time.
Bearing that in mind, and bearing in mind that the strong must
always help the weak, is the Government satisfied that the current
budget that they have in relation to this, are they happy with
this, bearing in mind also that budgets are usually best-guess
estimates and can go wrong quite easily. Is our Government happy
about the current size of the budget?
Mr McFadden: There are two points there. We
have been strong supporters of enlargement; we think it has been
good for Europe, economically, politically, culturally.
Q210 Lord Steinberg: Pardon me, but
I think this Committee agrees with that position.
Mr McFadden: Yes, I am sure. I got that from
your question. Under both the last Government and this Government
we are supporters of enlargement. Your question is that enlargement
brings with it a number of countries which have been poorer in
the past, so is the budget up to the job, which I suppose goes
back to the question that Lord Trimble asked me a few minutes
ago. There will always be a discussion about the EU budget and
I suspect it would be unwise of me to comment too closely—I
can feel my Treasury colleagues watching over my shoulder even
though they are not in the room—if I commented too freely
on what I thought the size of EU budget should be in the future.
That will be the subject of much negotiation.
Q211 Lord Steinberg: Pardon me for
interrupting you your flow, but I am just asking about the current
EU budget.
Mr McFadden: Is the current budget up to the
job? I am sure people will always argue that they want more. Our
view, as you know, was that we would have liked to have seen less
of the current EU budget spent on agriculture and more on other
priorities. In terms of the Structural Funds, maybe that would
come into that, but we have the budget we have; we will have to
do the best job that we can with it and as for the next round,
that is for another day.
Q212 Lord Maclennan of Rogart: Minister,
is it your judgment and that of the Government that the Structural
and Cohesion Funds are being sensibly and effectively applied
and what kind of criteria of success do you have in judging what
is going on across the Union?
Mr McFadden: The criteria of success are economic
and we will have to judge the success by the performance in the
future of those regions that are receiving help from these Funds.
We want to see the raising up of the regions that are poorer;
an increase in their capability and that contributing to an overall
better performance for the EU in the future. Remember, the Lisbon
goal was for Europe to become the most successful and competitive
transnational economy by 2010. That is a very ambitious goal and
this expenditure is supposed to help in some way towards it. So,
that is how we will have to judge it.
Q213 Lord Maclennan of Rogart: With
respect, that is a sort of "rolled-up" application of
the criteria to many different factors. What I was trying to get
at, you have mentioned in another context, regulation and the
single market, and all those things might contribute to the economic
turnaround, but are there criteria that you can apply to the application
of the Structural and Cohesion Funds, in particular, within the
areas where they are being deployed?
Mr McFadden: The Funds have different aims.
For example, in the European Social Fund, one of the aims is around
skills and the capability of individuals, so you would judge that
as to whether that expenditure has had an impact for them and
an impact in the regions in which it is applied. In this country,
it works through Job Centre Plus and others. It depends on the
Fund and the aims of the Fund. I am not trying to duck your question
but these Funds have some quite specific aims.
Q214 Lord Maclennan of Rogart: Are
you satisfied that the Commission can do the necessary appraisal
of whether these micro aims are being achieved, or do we ourselves
look at them?
Mr McFadden: If you are looking at how effective,
take that example we have just been talking about, the European
Social Fund expenditure will have been in say, the East Midlands
region. I am not sure the Commission is always going to have that
detailed level of knowledge; that is going to have to be done
closer to the ground.
Q215 Lord Maclennan of Rogart: By
whom?
Mr McFadden: In that case, I would say by the
regional body administering the Fund.
Q216 Lord Maclennan of Rogart: But
that is a self-serving body and they, as you pointed out in the
context of Yorkshire, would always be making the strongest case.
Is there any external critique?
Mr McFadden: There is stewardship of RDA expenditure.
Mr Steele: There is an increased emphasis in
the current, relatively new, round of Funds on evaluation of the
impact, focusing not only on the direct outputs which have tended
to be in terms of jobs or start-up of new businesses, but also
looking at the real economic impact of the Funds and trying to
adjust for the other factors which are clearly important also
in terms of regional economic growth.
Q217 Lord Steinberg: This goes back
to an earlier point. We were told at a previous meeting that some
countries find it very difficult to measure, and to evaluate what
happens in the regions within the country because of poor statistics.
Is that a worry for you? It has been mentioned and I understand
it.
Mr McFadden: It is a worry, but it is probably
a fact that capability certainly differs from country to country.
We talked earlier about the value of these Funds beyond the—I
should not say pounds, shillings and pence, as I will be wrong
on two counts—actual sums of money and improving institutional
capability and project management and a number of other things
is part of all this. Of course, there will be different statistical
and data collection capabilities, but that would be true even
in the EU 15, not just in the new Member States.
Q218 Chairman: Before we turn to
the last question, is it not the case that most Objective 1 regions
that were Objective 1 regions even in the 1980s, are still Objective
1 regions and if that is the case, does that not appear to show
that it has not been the kind of success that one would have hoped
for?
Mr Bond: I am aware that this is something that
Open Europe referred to in their evidence, but the comparison
they make was not entirely accurate. Of the regions that were
nominated in 1989, which was approximately 44, half of them now
still have coverage by successors to Objective 1, ie, the Convergence
objective, and half of them have not. They were referring to regions
in a particular year and they picked the middle year of the last
financing round that was still receiving support from the funding,
but that also meant that you counted those regions that were getting
transitional support because they had moved over three-quarters
of the EU average, and that included, in the UK, Northern Ireland;
it included southern Ireland including Dublin, so there were some
areas of substantial population. If you would like them, we can
provide the actual figures on that.
Chairman: That would be extremely helpful
to us, rather than take time today.
Q219 Lord Kerr of Kinlochard: May
I take you back, Minister, to added value. Supposing the Structural
and Cohesion Funds did not exist. Would UK regional policy be
very different? What would we be doing differently; and are there
things we would not be doing at all?
Mr McFadden: I do not think, in policy terms,
we would be doing a huge amount differently. In geographical terms,
you might not see the benefit which those regions of the country
that have the largest share of the expenditure may be getting
at the moment if these Funds had never existed. I do not think
that they have changed our policy, but they will have had some
beneficial impact on the geographical distribution of money to
the regions that have benefited from them.
| 
