Examination of Witness (Questions 240-246)
Mr Graham Meadows
4 MARCH 2008
Q240 Chairman: I can see that this
is an important question, I was wondering if we could ask Mr Meadows
to write to us about it because I am dying to get on and ask about
financial matters, but it is sufficiently technical that we could
perhaps ask Mr Meadows to write—you have understood the
basis of the question?
Mr Meadows: Yes. I could probably answer it
in two sentences.
Q241 Chairman: Okay, go.
Mr Meadows: The enlargement from 15 Member States
to 25 Member States lowered the average income per head by 12
percentage points; that is Poland plus the other nine. The further
enlargement from 25 to 27 lowered that average income by a further
two percentage points to give you a total of around 15 percentage
points in the reduction. The 2005 deal was struck on the basis
of 25 Member States—in other words on the basis of the average
income for the EU-15 member states minus the 12 percentage point
drop which resulted from the accession of ten new Member States
in 2004. But I will write and explain it.
Lord Steinberg: Yes, thank you for that answer
but I am not happy about that.
Chairman: We need to move on. Lord Moser.
Q242 Lord Moser: Mr Meadows, we have
talked at some length about how to split the total, poorer versus
richer countries et cetera et cetera; I am interested in the size
of the total cake and your paper is very helpful in explaining
how this is determined and also the order of decision-making—first
the total, then the regions and then the Member States. It reads
like quite a sophisticated process, but in fact it is not very
sophisticated because as you say in your paper everything ultimately
rests on GDP per head. I know enough about that to know that that
is the most important single measurement, but it is by no means
the only one, and I was rather cheered by an aside in your paper
that maybe other criteria should be brought into play. Could you
say something first of all about your view upon the total size
of the cake, which is 0.4 per cent of regional wealth so to speak,
whether you think that is appropriate or whether you think it
could be more or less—the total, never mind the composition—and
then, secondly, whether you are really happy about so much resting
on basically a single macroeconomic figure?
Mr Meadows: In terms of the size of the cake,
when we were negotiating the continuation of the policy the total
figure for the Competitiveness regions started off as a somewhat
political figure . In the negotiations we felt that the figure
was eroded, or reduced to be close to a level at which the basic
policy would have to perhaps be changed. What is my idea about
the size of the cake? In the present structure of the policy,
bearing in mind the effects of this fall of 15 percentage points
in income, there is probably an argument for making the cake slightly
larger. How much larger is something which would need to be determined
by Member States, but 0.4 per cent of Community GDP at the moment
is probably 50 or 60 billion euros short of where one really ought
to be to have a sufficient impact. In terms of other indicators,
the last 20 years have seen the emergence of aspects of the policy
which are of considerable concern which are not captured necessarily
by GDP. I am thinking of some sort of environmental indicators
and things of this sort in addition to the labour market indicators.
Labour market indicators are taken into account in the calculation,
but in terms of the way in which resources are used, either within
Member States or within regions, it appears that there is an enhanced
role which could be given to indicators which reflect degrees
of economic modernisation or reflect environmental concerns, reflect
some social concerns. The difficulty that the Union would have
is that these data do not exist on a regional basis, which is
harmonised. One would be reluctant to use them as a way of actually
allocating resources from the Union to the Member States. Within
Member States it would possible to use them.
Q243 Lord Moser: If I could just
have one follow-up, what you have just said was certainly correct
in the old days and when I was in charge of statistics here I
of course spent much time in Luxembourg, at the statistical office,
but in those days figures were fairly crude and one could understand
this kind of thing being based on average—which I do not
like—GDP per head but hiding many, many variations. I do
not like policies being based on percentages, policies should
be based on actual figures, numbers. Nowadays, as we all know,
statistical systems have become enormously sophisticated and I
have a feeling that somebody in Brussels or Luxembourg is being
rather lazy to go on basing it basically on GDP per head. Using
GDP regional figures does not take advantage of those systems—I
am not talking about Romania and Bulgaria which have less sophisticated
systems, although they will come up—and I would have thought
the time was ripe for the decision-makers to say that these allocations
should be done on a much more sophisticated basis and that countries
that do not yet have the figures to make that possible should
bloody well get them. I find it all a little bit out of date.
Mr Meadows: Right. As I say, the problem is
that the Union requires regional data for all of the Member States
which is harmonised. Only that kind of data is suitable for allocating
finance between Member States and between regions, otherwise people
pay the price for statistical defects. The way in which I would
see other indicators coming into the process in the short tem
would be as a way of trying to give greater insight into the allocation
of EU resources within regions for particular purposes. As these
other databases develop then obviously, as you say, they could
become more and more key in allocating resources in the policy.
Lord Kerr of Kinlochard: I confess I find Lord
Moser's purism is admirable but it does not fit in the Council
of Ministers. The more sophisticated your indicators—Mr
Meadows cites environment, research, innovation and reforms of
the labour market—the more room you are creating for political
argument and fudge. I would not go as far as Mr Meadows goes actually,
there is plenty of fudge already even with the GDP per head criteria
which is reasonably unfudgable.
Chairman: This has been a riveting discussion
but we are rapidly running out of time and I really would like
to arrive at your views upon the increasing burden of financial
management and I would like to ask Lord Woolmer to ask about this.
Q244 Lord Woolmer of Leeds: Thank
you. Mr Meadows, in your original written submission and your
later one you are fairly frank about the costs imposed by the
administrative and financial management arrangements, from the
top down to the bottom as it were, from the staff at the Commission
through to the final project and in your words has earned the
policy a bad name, even amongst those who are benefiting. Can
I ask you two questions about that? First of all, how does the
Commission quantify the cost of administering further funds from
the applicant on the ground, through the management, through the
different layers of regional, national and then Brussels levels?
Has this been assessed and what at the Commission level have they
made of these costs that are being imposed?
Mr Meadows: Has there been an attempt to actually
measure the cost of administering the Funds? I think no, but viscerally
you can see that the cost is rising because of events in the European
Union and the state of public opinion. It is not possible to have
a frank discussion about the way in which financial control and
financial management is evolving. I can give you a very recent
example. In December of last year the European Parliament's Budget
Control Committee refused at that stage to grant the discharge
on Structural Fund expenditure for 2006, because the Court of
Auditors reported that there was an error rate in this expenditure
of something like 12 per cent. This came back a couple of weeks
ago to the same Committee and, in the meantime, to try to show
that it was dealing with this problem the Commission produced
a rather large programme of work that it was going to undertake
to actually give confidence to the Budget Control Committee of
the Parliament. This programme of work now risks to add further
controls. I suggest, therefore, that it would be useful if it
were possible for the Member States, the Commission and the Court
of Auditors to discuss ways of arriving at the level of financial
management which is required in a more cost-effective way. At
the moment, events push the institutions forward in so that no
one can actually stand back and ask "Can we achieve these
ends differently?" We have reached the position where, when
auditors reveal that something is not up to European standards,
it is difficult to say whether something is really wrong or the
standards too high. It would only be right, I think, to allow
ourselves a doubt as to whether in fact controls are being piled
on controls to such an extent that we are demanding too high a
level of accuracy in financial management. The level being imposed
by the Union on the United Kingdom is probably higher than the
level that the United Kingdom imposes on itself. I do not see
any virtue in that. I think it is a question of management and
what I plead for in the notes is that some way is found outside
the formal processes to look at this particular question. At the
moment the regulations are being changed and people are hopeful
that the new regulations will ease matters; the Treaty is being
changed and people are also hoping that will make financial control
easier. My own view, however, is that as long as the present attitudes
which underlie financial control are not changed, or are not given
a chance to reappraise themselves, the new possibilities will
be interpreted in exactly the same way as the old possibilities
and we will not actually escape from the present circumstance.
It is a very thorny question because, of course, one can easily
be accused of looking for lax financial management and allowing
people to make off to Bermuda with large packages of taxpayers'
money and so on, which is of course no one's intention. At the
moment one has the impression that some extra thought is needed,
that the institutions need, under a flag of truce, to be able
to talk about these issues and ask themselves "Are we really
going about this in the right way?"
Chairman: Thank you very much, Mr Meadows. I
am going to allow an extra couple of minutes for Lord Kerr.
Q245 Lord Kerr of Kinlochard: I was
interested in what Mr Meadows said in his paper about a better
mix of loans and grants, that the Union should allocate more of
its funding to recyclable loan funds. This is news to me; could
you explain, Mr Meadows, what you have in mind; how much more,
and how this would fit with the role of the European Investment
Bank?
Mr Meadows: As regions approach the point in
their development when they can sustain their own economic effort,
their needs for investments in basic infrastructure diminish and
they use more of their EU resources to support business in different
ways, for what we used to call "softer" investment purposes.
In these circumstances, it seems suitable for the regions themselves
to decide to use—so it is not something which would necessarily
be enforced from outside—the European Union resources in
recyclable loan funds instead of grants to achieve some of the
objectives that they want to achieve. The advantage would be that
after the period of programming these funds would come back as
the loans were repaid and the regions could carry on using the
funding to pursue the same objectives. Years ago, when I was responsible
in a detailed way for European regional policy in the Federal
Republic of Germany where, Lord Trimble is right, there is a very
large national or regional policy, I discovered—this was
around 1989—that Marshall aid was still being recycled.
These were investable resources which were delivered into the
German economy and used for recyclable loans. You get some impression
from this of the staying power of that kind of instrument as opposed
to grants, which, of course, are necessary for certain purposes
but could be diminished for others. The suggestion I make is that
the Union should negotiate with each of the regions a percentage
of the support coming from the European Union that the region
would feel comfortable in using in recyclable loan funds, the
advantage to the region being that when European Union funding
diminished they would still have the benefit of what they had
in the past. The United Kingdom has done this. The United Kingdom
a few years ago put quite a large amount of funding into recyclable
funds, and this money is still going around. It is a rather good
way of softening for the region some of the funding changes which
take place as regional income rises and they change categories
within EU regional policy. It gives the regions more control over
managing their own economic performance and is therefore a good
thing.
Q246 Chairman: Thank you very much,
Mr Meadows. We have kept you much longer than we should have,
but we do thank you very much for coming and have found this most
helpful.
Mr Meadows: You are very kind; it has been my
great pleasure.
|
