Examination of Witnesses (Questions 280-299)
Mr Dirk Ahner, Mr Nicola De Michelis, Mr Eric Dufeil
and Mr Pascal Boijmans
6 MARCH 2008
Q280 Lord Woolmer of Leeds: One last
question on this. In relation to the study that you are doing,
that you will send us the terms of reference of, it will not look
at the overall proportion of cost right through from the project
level to the regional authority level to the Member State level.
There are certainly one or two regional authorities in the United
Kingdom which have commented to us that when you take all of that
it is really pretty substantial. That raises this question: in
some countries, and this is just a fact of life, it is not an
adverse comment on countries that do not meet this criteria, the
experience and processes of management, systems and so on are
well-established, financial management systems, and in principle,
again I think in business terms, one would not run a parallel
process of systems, one would say, "If your systems meet
our satisfaction we are not going to duplicate those". Is
there not room for this in some countries? I am obviously thinking
of the UK where our Regional Development Authorities, for example,
have to go through all kinds of hoops in relation to grants of
finance from the UK Government. Is there not room for this to
have a simple way of dealing with things? That is not to say it
is not proper and appropriate, and what have you, but are you
not able to sign off in some countries saying, "If you do
it the way you do it, we agree with your systems", that will
simplify things?
Mr Ahner: My colleagues may correct me, but
my impression is that is the way it is done. I will repeat what
you said. You said, if in a Member State or a region there is
a system which corresponds to the requirements of the European
system—
Q281 Lord Woolmer of Leeds: I did
not say that. I said which you would accept is as robust and as
good as you would want. It is not the same.
Mr Ahner: As long as it fulfils the requirements
which we make there is no problem. If you go across Europe, in
Germany they have 60 different systems which are working because
they were in the regions' existing systems which they have partly
adapted and could use as they were. As far as a number of rules
that we have with respect to how Community money has to be managed
and controlled, which by the way are rules that have been decided
unanimously by all Member States, we do not see any problem. I
remember in Spain we had a very, very long discussion with the
Spanish authorities because of the separation of the management
and the control functions. We finally accepted their system after
they could show us that their system, although optically it did
not correspond to what we expected, fulfilled the same functions
that we expected them to do. As far as I see it, where the problem
often comes is the requirements at EU level, rightly or wrongly,
are so rigorous that what is done at the Member State level does
not correspond.
Q282 Lord Woolmer of Leeds: We took
evidence from Graham Meadows, the former Director General, and
in his written evidence he said the following: that a black spot
of present European regional inclusion policy is the growing administrative
and financial burden being passed on to project sponsors. These
burdens earn the policy a bad reputation, even amongst direct
beneficiaries.
Mr Ahner: Absolutely.
Q283 Lord Woolmer of Leeds: You would
not have thought that from what you have said to us so far.
Mr Ahner: I would agree with Graham, but the
question—
Q284 Lord Woolmer of Leeds: "There
is nothing that needs to be done is my impression", you said.
Mr Ahner: I did not say nothing needs to be
done. The point is we formulate and define requirements which
have to be respected at the EU level. These requirements are decided
by our Member States and we have to make sure, that is our work
at the Commission, that these requirements are respected. For
the final beneficiary that can sometimes create a lot of problems.
I would completely agree with Graham that this damages the image
of the policy. Part of the problem is if we were allowed to have
a looser system we could be much more flexible. The point is when
it comes to the point of putting our regulations on the table,
what we often see is that in our countries, for whatever reasons,
the Court of Auditors want there to be a certain safeguards and
control levels within the system. What is true, as far as I understand
it, is a number of national systems are less rigorous in their
requirements than the EU systems and we have to ask ourselves
seriously are the EU systems too rigorous in their requirements.
Once we have the rigorous requirements, and there is a national
system already in place, although it is not exactly the construction
we would have liked to have seen but it responds to our requirements,
then we say, "Please go ahead". I do not see a conflict
between the two. The real question remains—I am sorry, I
am a little bit exercised on this because I have just come out
of a discharge procedure in the budget where we had a lot of discussion
with the Court of Auditors and the European Parliament where we
were told, "With what is on the paper and the regulation,
you, Commission, are not rigorous enough. You must do much more
and put much more pressure on Member States". When we see
these different echoes, we have to strike a balance. I personally
would agree with Graham and say the balance is perhaps too much
on the rigorous side. When we prepare the next legal framework
I think we will have to have a serious look at what can be simplified.
That is a problem for me. Whenever I go to the Member States and
the regions and I meet entrepreneurs, the first thing I hear is
it is an awful lot of red tape and bureaucratic. I ask them regularly,
"Please come with concrete suggestions. Tell us exactly what
did not work well and how you think it could work better".
I have done it four times and until now I have got no response
back, it stays at this level, you go there and speak with them
and they say it is awful. I am prepared to go, with the agreement
of my Commissioner and the Commission, of course, to the Council
and say, "Here in our regulation we have something which
is stupidly complicated, let's change the regulation". My
real problem at the moment is I need to know exactly where it
is too bureaucratic or if it is just a general impression. I am
still waiting. Each time I meet these people and I say, "Please
come" and they all promise, so perhaps I will get something
this year, "Please come and tell me exactly where".
I am prepared to change this. This is not the problem.
Q285 Chairman: The difficulty is
the response, the intuitive business response, does tend to favour
repatriation of funds, "Don't let's have the EU in this at
all, we will do it. We will contribute our bit to the poorer nations".
There is very considerable acceptance, there is no problem at
all in the United Kingdom about accepting that funds should be
going to the new countries in the EU and very considerable difficulty
with facing what they see as an extra layer of bureaucratic requirement
on top of national bureaucratic requirements. We are kind of used
to dealing with national bureaucratic requirements. This fuels
the whole idea of a policy of repatriation. I do not think you
are ever going to get a terrific amount of sense from asking businessmen
what could be simpler, you just have to simplify. The simplification
has to be done centrally. No businessman can ever define what
is wrong with the system.
Mr Ahner: Yet you must be told. You can discover
things where we have said, "This is relatively complicated,
why have we done this? What was the reason? Is it really needed?",
but you need feedback which goes beyond the simple feeling of
"This is all too bureaucratic". Let me make one more
point. Sometimes I have the impression, and also in my former
work in the field of Agricultural Policy, that only partially
you add the Community layer to the national layer and it goes
the other way round, there is a Community layer and at the national
level layers are added to this because the Community layer is
a perfect opportunity to put national layers on it.
Q286 Lord Trimble: I think we suspect
that happens too. I wonder if I could move to something slightly
different. We had an interesting discussion earlier about the
impact of the funds on Spain and we are also very much interested
in the experience in Poland and I wonder if you could take us
through that.
Mr Boijmans: In general Poland is in the situation
where Spain was 20 or 30 years ago and mirrors the developments
that Spain went through. If I could start with factual information.
For the new programme period Poland is the largest recipient of
Structural Funds and Regional Funds, almost 20 per cent of the
budget which is slightly more than €67 billion. It is a lot
more than even Spain is receiving during this new programme period.
To take you through the negotiations and what we have been negotiating
for this new programme period, one of the first things is that
Poland is a Member State still with a very high unemployment rate
which is decreasing rapidly, partly due to immigration to some
of the other Member States. It still has a very large agricultural
sector which is under restructuring. The GDP per capita, the income
per capita, is still one of the lowest in the European Union.
Taking that as a starting point, it means that quite a lot of
investments have to take place in basic infrastructure in Poland.
Nevertheless, Poland committed itself to the objectives of the
Lisbon Strategy to create growth and jobs and to have a more forward
looking strategy than purely building only roads and sewerage
plants. It has allocated almost 64 per cent of its budget to Lisbon-relevant
areas of expenditure, which is quite high taking into account
the size of Poland, the size of the budget and the situation Poland
is in. As you know, Poland was not obliged as a new Member State
to do this but they did this on a voluntary basis. If we look
at the three main areas of investment for the new programme period,
transport is one. Almost one-third of the budget goes to transport
infrastructure but in a wider sense, not only roads but also railways,
airports and public transport. We believe that is justified because
there is a big backlog in Poland in transport investment even
if you take Poland within the context of the new Member States.
For example, Warsaw is one of the very few capitals which cannot
be reached by motorway. If you travel by Berlin to Warsaw it is
not possible to do that by motorway, only parts are motorway.
A large part of the investment goes into trans-European networks
and, as I said before, not only motorways but also railways. The
second largest area of investment is research and development
and innovation and entrepreneurship and that is contributing to
the Lisbon Strategy. Poland has the objective that 1.5 per cent
of its GDP by the end of the next programme period should go to
research and development. At the moment they are still at 0.5
per cent, so there is still a lot of work to be done. There are
certainly some areas of excellence within Poland, not only in
Warsaw but in other regional capitals, for example Poznan and
Wroclaw, which is one of the candidates for the European Institute
for Technology. They are trying to promote this image of research
and development. This is wider than only research and development,
this budget also goes into business support where the strong focus
is on small and medium-sized enterprises. Of direct support, 70
per cent should go to SMEs. The budget is also available for foreign
direct investment but we have put a clause into the programme
that where it is relevant the money will not be used for delocalisation,
it will only be used for foreign direct investment for new investments
in new plants. The third largest area of investment is the environment
where the major part of the budget goes to those investments which
help Poland to meet its obligations in the acquis communitaire
for the environment. A large part goes to water treatment, not
only sewage treatment plants but water supply. More and more areas
are being supported by other areas in the environment in the area
of solid waste treatment and nature preservation. Those are the
three most important areas of investment under this new framework
for this new programme period. Looking at the strategy within
Poland, the territorial cohesion, you can make a very big divide
between east and west Poland. It is a bit crude to divide but
that explains the situation best. Next to Warsaw, which is the
largest city and where a lot of investments are concentrated,
you can see regions in the western part of Poland around Wroclaw,
around Poznan, and I understand you will meet a delegation from
Wielkopolska this afternoon, which is one of those regions which
is catching up very quickly and attracting a lot of foreign direct
investment where unemployment is decreasing very rapidly. The
other part of Poland, the eastern part, bordering Belorussia and
the Ukraine is in a totally different situation where there is
still a very strong share of employment in the agricultural sector
where people are losing their jobs and it is very difficult to
create alternative employment because there is some growth but
not as strong as in the western part of the country. That is the
reason why there is one special programme for eastern Poland.
We have four national programmes in Poland, 16 regional programmes,
one for each region, and for the five poorest regions in eastern
Poland we have a separate programme on top of that. The idea of
this programme is to develop flagship projects, projects which
really distinguish themselves whilst supported under the national
and regional programmes. To give you one example: there is a project
of €300 million which is being prepared to introduce a broadband
network in those five eastern regions which would reduce their
natural handicap of being on the outside of the European Union.
One of those five regions is Lubelskie, the other delegation you
will meet this afternoon, so you will have a comparison of two
different regions. Next to all these financial investments and
concrete investments in infrastructure, one effect of the Structural
Funds which should not be forgotten is the indirect effect which
it has on the administration. A large part of the money now goes
to strengthening the administrative capacity, so Structural Funds
can be used for this, but also, for example, because of the Structural
Funds Poland has decided to create a new Ministry for Regional
Development which will be the central co-ordinator for all investments
related to Structural Funds, ERDF, European Social Fund and also
the Cohesion Fund. It has helped to strengthen the co-ordination
within Poland between these different sector policies where, for
example, the people in the transport sector do not communicate
with the people in the environment sector. This is not a directly
measurable effect but it is certainly an important effect which
is a result of the large amounts of money available for Poland.
We are trying to do a lot with the Cohesion Fund project but also
the major projects in the new programme period to give more support
to project planning, that is the final beneficiaries, municipalities
or other public bodies, and train them to better plan their projects
and develop them quicker so that they can be implemented faster
and absorb the money faster, because that is the ultimate target,
to absorb the money which is allocated to Poland. I would like
to mention these two side-effects of the Structural Funds which
have an important impact on the administration of Poland.
Q287 Chairman: Thank you very much,
Mr Boijmans. I am always relieved to see that so many of the capable
Poles working in England at the moment have started to go home
because the prospects have got better. Mr De Michelis, I appreciate
we have not heard much from you. Would you like to add anything
on any of this?
Mr De Michelis: Maybe just a word on what Pascal
said on the impact of the policy. Since Poland has just received
funds for a couple of years it is very difficult to assess what
the impact has been. We are running a number of impact assessment
models that estimate what the likely impact of this policy will
be over the next 15 years. We use different models to avoid being
too constrained by one single format. All of these models suggest
that particularly for Poland the impact will be between three
and five per cent of additional GDP over the period and the creation
of about half a million jobs in Poland because of Structural Funds.
That is compared to a scenario without Cohesion Policy. Obviously
all these estimates have to be taken with caution, like all models,
but they at least give an order of magnitude.
Q288 Chairman: I should have asked
before, and I meant to, do you use inward investment as a measure?
When I was in regional policy we used to add it up by thinking
how much private sector investment we had generated.
Mr De Michelis: Yes. If you are interested,
over the next few weeks we will be producing very detailed sheets
explaining all the different effects on the basis of these models.
This suggests that the private investment mobilised because of
Cohesion funding inflows is on average about five per cent, so
there is five per cent additional private investment over the
15 year horizon.
Q289 Chairman: I think we may have
exhausted you all, but we are most grateful for your time and
the information.
Mr Ahner: It was a pleasure, thank you very
much.
Q290 Chairman: We shall see the Commissioner
at the end of the day.
Mr Ahner: She will be delighted.
Q291 Chairman: So we can ask her
a few things. I have met her before and she is a very capable
person. Thank you very much, this has been most interesting and
we feel much better briefed for our meeting with the Polish and
Spanish representatives.
Mr Ahner: Enjoy them. Have a very successful
day in Brussels.
Chairman: Thank you so much, Mr Ahner. Thank
you all.
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