European Committee
3rd Report, 2002
Report on the Inquiry into the Future of Cohesion Policy and Structural Funds post 2006
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3rd Report, 2002
Report on the Inquiry into the Future of Cohesion Policy and Structural Funds post 2006
European Committee
Remit and membership
Remit:
1. The remit of the European Committee is to consider and report on-
(a) proposals for European Communities legislation;
(b) the implementation of European Communities legislation; and
(c) any European Communities or European Union issue.
2. The Committee may refer matters to the Parliamentary Bureau or other committees where it considers it appropriate to do so.
3. The convener of the Committee shall not be the convener of any other committee whose remit is, in the opinion of the Parliamentary Bureau, relevant to that of the Committee.
4. The Parliamentary Bureau shall normally propose a person to be a member of the Committee only if he or she is a member of another committee whose remit is, in the opinion of the Parliamentary Bureau, relevant to that of the Committee.
(Standing Orders of the Scottish Parliament, Rule 6.8)
Membership:
Irene Oldfather (Convener) Ms Sarah Boyack Colin Campbell Denis Canavan Helen Eadie Mr John Home Robertson (Deputy Convener) Mr Lloyd Quinan Nora Radcliffe Ben Wallace Committee Clerking Team:
Clerk to the Committee Stephen Imrie
Assistant Clerk David Simpson EU/02/R3
European Committee
3rd Report 2002
Report on the Inquiry into the Future of Cohesion Policy and Structural Funds post 2006
The Committee reports to the Parliament as follows—
1. As part of its work programme for 2002-2003, the European Committee agreed to undertake a short Inquiry into the future direction of the European Union’s (EU) Cohesion Policy and the Structural Funds.
2. This report comes near the midpoint of the current six-year programme of expenditure from these Funds. This tranche of funding is set to end in 2006. Consequently, the European Commission is considering the nature of funding regimes for the next block of Structural Funds. This consideration includes questions of how the Funds should be disbursed, against which objectives and to what level of funding. This review is not just about improving the management of the Funds but also a root and branch consideration of the EU’s regional development policy.
3. The raison d’être of such a radical rethink is of course the enlargement of the Union. With up to thirteen new Member States set to join the EU within the next few years, the current fifteen Member States have begun a rethink of both the means of governance in the EU and the corresponding budgetary requirements to fund initiatives such as the Common Agricultural Policy, regional development etc1. The message is clear, many existing Member States do not wish to see the Union’s budgets increase significantly with the entry of the poorer and less well- developed states of Central and Eastern Europe. A rethink of the Union’s objectives, including its cohesion and regional development policies, is therefore a necessity.
4. This report is not intended to provide definitive conclusions on how the new regime for regional development should be organised. This is because the current debate in the UK and in the EU is continuing and will not be concluded until 2004
1 “Agenda 2000. Volume 1: For a stronger and wider EU”, “Volume 2 : The challenge of enlargement”, European Commission”, Office for Official Publications of the European Communities, 1997. cat. no. CB-CO-97-379-EN-C and CB-CO-97-380-EN-C, Luxembourg.
SP Paper 618 1 Session 1 (2002) European Committee, 3rd Report 2002 or 2005 at the very least, However, this report and the Inquiry do provide some pointers towards the direction of any reforms that should be proposed.
5. This report consists of the following sections:
• An introduction to the Structural Funds • Key issues in the current debate • Conclusions and recommendations
6. In addition, Annex A contains the submissions of evidence received by the Committee whilst Annex B contains extracts from the minutes of the relevant meetings of the European Committee and from the Official Report.
2 European Committee, 3rd Report 2002
INTRODUCTION TO STRUCTURAL FUNDS
European Structural Funds
7. It has long been recognised that, throughout the EU, there exist differences and disparities between countries and regions in terms of their level of wealth, economic development and social cohesion. To address these anomalies, the EU implements a major set of initiatives, commonly referred to as the European Structural Funds, which support national regional policies in the weakest regions and in national and regional labour markets. These Funds are the second largest item of EU expenditure. The Funds comprise four main financial instruments: the European Regional Development Fund (ERDF); the European Social Fund (ESF); the European Agricultural Guidance and Guarantee Fund (EAGGF); and the Financial Instrument for Fisheries Guidance (FIFG).
8. Most of the European Structural Funds are implemented through regional development programmes. Whilst it is primarily the responsibility of the Member States and regions to define their priorities for development, the part-financing of programmes by the European Union requires that account also be taken of Community priorities in order to promote the Community’s objective of economic and social cohesion.
9. Prior to 2000, the European Structural Funds were split into six ‘objectives’ to which the Funds contributed individually or collectively. These objectives were:
• Objective 1: to promote the development and structural adjustment of regions whose development is lagging behind; • Objective 2: to help the conversion of regions or areas seriously affected by industrial decline; • Objective 3: applicable throughout the UK, to combat long-term unemployment and to facilitate occupational integration of the young and those deemed to be ‘socially excluded’; • Objective 4: applicable throughout the UK, to help adapt the workforce to changes in industrial and production systems; • Objective 5: 5(a) applicable across the UK, to assist the modernisation of agricultural and fisheries structures, and 5(b) to promote the development of fragile rural areas; • Objective 6: to promote the development of regions with an extremely low population density (the remote Arctic areas of Sweden and Finland).
10. For the period 2000-2006, the main Funds have been streamlined. They are now being individually and collectively targeted into three rather than six main ‘objectives’, namely:
• Objective 1: to promote the development and structural adjustment of regions whose development is lagging behind the EU average.
3 European Committee, 3rd Report 2002
Eligible areas are: (a) those regions (at a set of regional classifications known as NUTS Level 22) whose Gross Domestic Product (GDP) per head, measured in purchasing power parities over a three-year period, is less than 75% of the EU average; (b) former Objective 6 areas; and (c) certain remote regions. • Objective 2: to support the economic and social conversion of areas facing structural difficulties, particularly areas undergoing socio- economic change in the industrial and services sectors, declining rural areas, urban areas in difficulty and depressed fisheries- dependent areas. • Objective 3: to support the adaptation and modernisation of policies and systems of education, training and employment. It will fund assistance outside the areas covered by Objective 1 and provide a framework for all measures to promote human resources in each country.
11. Within Scotland, the Scottish Executive is the ‘Managing Authority’ for the Funds. To this extent up until the Cabinet reshuffle of November 2000, Mr Jack McConnell MSP, was the Minister with responsibility for European Structural Funds, and ultimately accountable within the Scottish Administration. His portfolio was taken up by Mr Angus MacKay MSP as the new Finance Minister in the Scottish Executive and thereafter by Mr Andy Kerr MSP. The Managing Authority has the overall responsibility for supervising the implementation, ongoing management and effectiveness of the programme.
12. In line with the guidelines for the new programming period (2000-2006), a partnership concept continues to be applied to the disbursement of the Funds. These partners will, in effect, manage the day-to-day implementation of the various plans for expenditure, co-ordinated by programme management executives in the Highlands & Islands and in Western, Eastern and Southern Scotland.
13. The European Committee has already inquired into, and reported on, the new administrative arrangements for the implementation of Structural Funds in Scotland and the roles and responsibilities of the different actors in the process3.
Reform of the Structural Funds and the new context for Scotland
14. The context for the reform of the Structural Funds in 1999 was provided by Agenda 20004. This document was the European Commission’s response to the 1995 Madrid European Council request for a composite paper on the implications of enlargement, opinions on each of the applications for membership of the European Union and an analysis of the European Union’s financing system. Given
2 Level 2 NUTS (Nomenclature of Statistical Territorial Units) units are generally at province level, for example, Regierungsbezirke (regions - Germany), or groups of counties, for example, Hereford & Worcester or Warwickshire (UK) level 3 European Committee, 2nd Report (2000), “Report on European Structural Fund Programme Management Executives and their relationship with the Scottish Executive” (EU/00/R2), Scottish Parliament, Edinburgh. 4 Ibid., para. 3.
4 European Committee, 3rd Report 2002 this remit, only a small part of the document was directly concerned with changes to the Structural Funds.
15. In practical terms, the emphasis on ‘concentration’ was arguably the most significant element of the Structural Fund changes proposed in Agenda 2000, at least as far as the UK is concerned. There were two elements to the notion of concentration in this context: first, a ‘consolidation’ of the budget allocation to the Structural Funds for the 2000-2006 period; and second, a reduction in the assisted area coverage of the spatial policy objectives from 51% to 35-40% of the Community population. These proposals were broadly carried through into the draft Structural Funds Regulation adopted by the Commission in March 19995.
16. The global budget for the Structural Funds is ELOOLRQIRUWKHVHYHQ\HDU period 2000-06. This compares with the original Commission proposal of billion (1999 prices) and the ELOOLRQ SULFHV DOORFDWHGRYHUWKHVL[\HDU period 1994-99. Over the period 2000-2006, therefore, Structural Funds spending is set to decline as the transitional provisions for regions losing assisted area status take effect.
17. With respect to the coverage of the EU assisted areas, Objective 1 coverage falls from 24.6% of the Community population to 22.3%. However, the addition of the Objective 1 phase-out regions takes coverage to 25.7% of the Community population for six out of the seven years of the planning period. The coverage of Objective 2 falls from 25.3% of the Community population to 18.2% in 2000, although it rises again to 19.1% in 2006 with the inclusion of certain Objective 1 phase-out regions.
Allocation of Funds to the UK
18. The allocation of Structural Funds among Member State countries and regions was agreed at the Berlin European Council Special Summit in March 1999 and was based on two sets of allocation criteria: the criteria for determining the population of the eligible regions (who should qualify); and the criteria for allocating funding to those eligible regions (how much they should receive)6.
19. For Objective 1 regions, the definition of eligible areas was based on a strict application of a threshold criterion – regions had to have a GDP per head of less than 75% of EU average. By contrast, the process for allocating finance was more complex. The underlying philosophy was that the level of assistance should be related to the size of the regional development disparity in relation to the Community average, while taking account of national prosperity and levels of unemployment.
20. The result was that average annual per capita financial allocations for Objective 1 regions vary widely across the EU from SHUKHDG 3RUWXJDO WR SHUKHDG 6ZHGHQ 7KHDQQXDODYHUDJH 8. SHU FDSLWDILJXUH LV ,Q addition, the Berlin Special Summit agreed various special provisions for certain
5 “Proposal for a Council Regulation (EC) laying down general provisions on the Structural Funds, Official Journal of the European Communities”, No. C 176; 9 June 1999, Brussels. 6 “The Allocation of European Structural Funds at EU Level”, Briefing Paper to the European Committee by Fiona Wishlade, European Policies Research Centre, University of Strathclyde
5 European Committee, 3rd Report 2002 regions, including a 'special phasing out programme’ for the Highlands & Islands totalling PLOOLRQ
21. For Objective 2 regions, the area designation methodology was complex and based on the principles that overall coverage should be reduced while ensuring that cutbacks were equitable. Two parameters were set: a ceiling on coverage of 18% of the EU population; and a floor on the losses of any single Member State (not more than one-third of the 1999 combined Objective 2 and 5b population).
22. Within these parameters, the Commission laid down a population ceiling for Objective 2 for each Member State based on various criteria, principally unemployment and employment structure. Within these ceilings, each Member State proposed a map of eligible areas based on a mix of EU and national criteria; maps were negotiated individually with the Commission and approved. With respect to funding allocations, only the eligible population appears to have been taken into account. Consequently, the Objective 2 allocation is a standard figure of almost SHUKHDGSHU\HDUIRUDOO0HPEHU6WDWHV
23. For Objective 3, the allocation among Member States was based principally on the eligible population, weighted by the employment situation (25%), youth unemployment (20%), long-term unemployment (15%), male/female disparities in employment (15%), education and training levels (15%) and poverty (10%).
24. In overall terms, the UK allocation of the Funds is basically unchanged as a proportion of the total. For the period 1994-99, the UK received 8.4% of the Structural Funds (excluding Community Initiatives and Innovative Actions). For 2000-06, the corresponding share is 8.5%. In financial terms, this represents an annual average of PLOOLRQ DW SULFHV IRU FRPSDUHG ZLWK an annual average of PLOOLRQIRU
Funding Levels in Scotland
25. Over the 2000-2006 period, Scotland has been allocated Structural Funds of PLOOLRQ £1,094 million) by the EU. Table 1 sets out the allocation of Funds to the UK and to Scotland as well as Scotland’s share of the UK total for each of the Structural Fund Objectives and Community Initiatives.
Table 1: Structural Funds in Scotland, 2000-06
Scotland UK programmes Scotland’s % share P £m P £m % Objective 1 (H&I Special Programme) 300 194 6,019 3,883 5.0 Objective 2 807 521 4,138 2,670 19.5 Objective 3 481 310 4,568 2,947 10.5 Community Initiatives 105 68 940 606 11.2
Total 1,693 1,094 15,665 10,106 10.8 Source: Scottish Executive
6 European Committee, 3rd Report 2002
The debate on reform
26. With enlargement, the EU’s population will expand by up to 29% more people but at the same time add only 6% greater GDP. Coupled with the relatively lower economic prosperity and development of most regions in the new Central and Eastern European states, regional development funding was clearly high amongst the Community’s objectives requiring a rethink.
27. The drop in EU average GDP per capita that results from the enlargement process means that with current regulations and an overall budget of up to 0.46% of EU GDP for regional development funding, the levels of national receipts from the structural funds would be markedly different with many parts of the current EU Member States no longer eligible. As an example, Merseyside currently qualifies for Objective 1 money with a GDP lower than the current trigger threshold of 75% of the EU’s GDP. However, in an enlarged EU its GDP would rise to between 80% and 85%. In relative terms, the region may be more prosperous but in real terms, the problems will still remain.
28. Amongst all of the EU’s regions currently in receipt of funds, Scotland is far from the least well developed. Consequently, Scotland as a whole and many other parts of the UK will be at the forefront of meeting the challenges of any changes to the funding regimes.
29. In a private meeting held as part of the Committee’s annual visit to the EU institutions (March 2002), a senior official in the European Commission was clear that the status quo was not on the table post 2006 and that radical reforms were under consideration. Speaking at a major EU conference in Inverness (May 2002)7, Michel Barnier, the EU commissioner for regional policy, said that in the future the lions share of funds (Objective 1 funds) would be concentrated in the new Member States. However, he also indicated that8:
“At the same time there are a number of problems in various parts of the EU. For that reason I wish to see a European policy for these area, a policy which is more decentralised and better targeted than it is at present.
My personal position is that just because countries like Poland, Estonia or Hungary come into the union, problems in Scotland or Andalucia will not disappear miraculously. The union needs to address these problems also.”
30. He has also indicated a personal preference for a greater role for the nation state in regional development rather that a more centralised operation. Whilst indicating that the Commission had not yet reached any firm conclusions, he told a visiting delegation from the UK’s Local Government Association that current Commission thinking was for each Member State to be given a financial allocation and a ‘menu’ of priorities, from which it would be able to decide which areas should receive grants according to national or regional needs.
7 European Mountain Convention, 16-18 May 2002, Inverness 8 Commissioner Barnier, as reported in Business AM, 17 May 2002.
7 European Committee, 3rd Report 2002
31. The core questions covered in this report relevant to the current debate would appear to be:
• What should be the principles and objectives of a regional development/cohesion policy from 2006 within the context of an enlarged EU? • What type of policy should exist? • What budget should it have and how should this be allocated between Member States and between regions? • How should the system be governed and implemented?
32. Each of these questions is addressed in more detail below
8 European Committee, 3rd Report 2002
KEY ISSUES
What should be the principles and objectives of a regional development or cohesion policy?
33. The current round of structural funds covers the period 2000 to 2006. As is the norm, progress is reviewed annually and, in particular, at the midpoint of each round of funding. This time though, the added pressure resulting from the enlargement process is making the review of future funding rounds and procedures infinitely more acute.
34. In May 2002, the European Commission held an event that marked a significant milestone in the planning for new funding rounds. This Forum, held in Brussels, pulled together many of the key actors from across the EU to discuss the detail of the Commission’s 2nd Progress Report on Economic and Social Cohesion9. This report posed ten key questions. First amongst these is the question of what exactly are the principles governing the application and implementation of cohesion policy and structural funds?
35. Currently, the purpose of such funding is to help reduce disparities in regional development. In doing so, such funds must adhere to four key principles. These are:
• Compatibility • Programming of economic assistance • Additionality on the part of Member States • Partnership in the design and implementation of regional economic assistance measures
36. An essential question is therefore, post 2006 which, if any, of these principles should continue to govern the implementation of Community intervention in regional development funding? Alternatively, which new principle(s) should be adopted?
37. Certainly on the question of additionality, the European Commission has been making it very clear that demonstrating “added value” is critical and will be more so in any future funding round. Being able to show that a project would not have otherwise gone ahead without Community funding and that it has had a demonstrable impact will be crucial in future funding regimes.
38. In their submission to the Committee, Campbell Christie and Andrew Scott, are quite explicit that, “the four underlying principles of the structural funds must be retained, and developed, during the post-2006 funding period”10. This was a view endorsed by Laurie Russell, Chief Executive of Strathclyde European Partnership,
9 “Second report on economic and social cohesion”, European Commission, Brussels 10 Written evidence submitted to the Committee
9 European Committee, 3rd Report 2002 on behalf of all the European Partnership bodies in Scotland11. He went on to say that12:
“For me, targeting is the most important principle; it is not new, but I stress its importance for the longer term. The transition programmes— such as those that exist in the Highlands and Islands—should target certain geographic areas and one or two policy issues such as sustainable development or equal opportunities.”
39. As a response to the Commission’s annual progress reports, the UK’s Department for Trade and Industry (DTI), the lead department in the UK for such matters, began a process of consultation on the reforms post-2006. This has included a series of visits between April to June 2001 to English regions, Northern Ireland, Scotland and Wales. Attendees included officials from central and local governments, programme monitoring committee members and representatives of regional development agencies or their equivalents.
40. According to the DTI’s website13, which summarises the outcome of these visits, a broad consensus on the objectives and principles for the future is emerging in the UK. This consensus includes views that:
• The development of effective partnerships had been a very positive outcome with individuals and organisations from a wide range of interests working together. • The structural funds often provided the critical funding element in a portfolio of funds for a particular project, without which the project could not have happened. They could also be used for innovative or experimental projects which were hard to fund from other sources. They had been useful in some areas, through measures to promote the business case for sustainable processes amongst SMEs, in tackling environmental pollution from diffuse sources. • There was significant political value in having eligibility status (even though it was an admission that that part of the UK was facing structural difficulties) and this was seen as something that local politicians had ‘won’ from Brussels – a funding stream independent of central Government. • Objective 1 brought with it tier 1 Assisted Area status which was probably even more valuable than the structural funds themselves. • The 6-year funding cycle of the structural funds was seen to be more useful than the annuality of national schemes in terms of planning projects. It also gave a degree of protection against political change (though there was the danger that a dependency culture became established).
11 European Committee, Official Report, Col. 1500, 7 May 2002 12 Ibid. 13 http://www.dti.gov.uk/europe/future.html
10 European Committee, 3rd Report 2002
41. As indicated above, demonstration of “added value” is likely to be a core principle in any future regime. Moreover, at a more general level, it is clear that the link between funding levels and performance (of projects and programmes) needs to be strengthened. This implies a greater emphasis on evaluation, monitoring and assessment of impact. To this extent the Committee was encouraged to learn of the significant efforts being made by the Scottish Executive and the various partnerships to improve their evaluation/assessment regimes and improve the knowledge and quality of information on the impacts that Scottish projects are having (both in the short- and long-term). This type of information will be absolutely essential both in highlighting success stories and in terms of supporting any arguments to be made on the future direction of policy. It will also be useful in terms of encouraging a focus on ‘exit strategies’ within current funding rounds by ensuring the limited funds are targeted towards what works.
42. The Committee would like to see also a greater emphasis being given to the issue of environmental sustainability within the structural funds. In line with recent comments made by the First Minister, we believe that regional development funding can play a significant part in achieving environmental justice. We also believe that it should also contribute to safeguarding and protecting the nation’s heritage. We therefore support the calls made by Scottish Natural Heritage and the Scottish Environmental Protection Agency (SEPA) to this effect. We also support the calls made by SEPA to give consideration as how the successes made in mainstreaming environmental issues can be transferred into future programmes and through knowledge transfer to the candidate countries in Central and Eastern Europe.
What type of policy should exist?
43. A number of themes emerge from this question. First, should there be a re- nationalisation of regional development policy. Second, what should become of the different Objectives and Community Instruments in any new programme of funding, especially post-enlargement?
Re-nationalisation?
44. According to the DTI, the evidence from its series of meetings is that there is almost universal agreement across the UK that to lose the ability to support the work currently funded by the structural funds would be a major blow. On the other hand, there was widespread recognition that under the current rules, eligibility for Objective 1 and 2 funding would be lost from much of the UK after 2006 (Objective 3 currently applies across the whole EU outside Objective 1 and transitional Objective 1 areas). There were different opinions about whether the UK should try to negotiate for continued receipts or to forego the structural funds if the Government agreed to provide funding itself – the question of ‘re-nationalisation’.
45. The logic for the re-nationalisation approach is as follows. In the near future, there will be a major shift of structural fund resources to the regions of Central and Eastern Europe following enlargement. Therefore, given the economic situation in these areas, the legitimate claims that such regions have for substantial financial support from the EU after 2006 will need to be met. It is argued, as a consequence, that for the more prosperous Member States in the current EU-15, it
11 European Committee, 3rd Report 2002 would be more efficient for structural funds to be given up and instead regional economic policy to be delivered at Member State level through “domestic” budgets.
46. The view from the Commission as expressed so far is confusing. On the one hand the commissioner has indicated he is considering a regime whereby each Member State is given a financial allocation and a ‘menu’ of priorities and then left to its own devices to determine which areas should receive grants. However, on the other hand, the Commission has been explicit in defending the need for a Community programme. As always, the devil is in the fine detail.
47. On the question of whether regional development funding should simply be passed back to the Member States, most (but not all) organisations the Committee consulted are clear that this would be a detrimental step. We noted the comments made by the East of Scotland European Consortium (ESEC) that14:
“There is also a need to recognise that Regional Policy is intertwined with other EU policy areas such as Employment, Social Justice and Rural Development, to name but three. As such there continues to be a need to promote policy articulation and in order to achieve this, the Commission will continue to have an important role in Regional Policy development.”
48. In its submission of evidence, the West of Scotland European Consortium (WoSEC) states that15:
“While the Consortium understands the appeal of this reasoning, it has serious reservations about such an approach since: a) the scope for Member States to undertake regional economic development is in any event limited by the Treaties’ requirements on competition and state aids. These are required since otherwise a wasteful “subsidy” war could be initiated which would likely be regressive in impact – wealthier regions could offer higher subsidies; b) in effect the burden for paying for EU enlargement would be borne by the less prosperous parts of the richer Member States; c) there would be a paradox in that severely disadvantaged areas within otherwise prosperous member states would not be able to access structural funds whereas wealthy areas in the lagging regions of poorer Member States could; d) the transnational aspects to regional economic development could not be supported. For example the current round of Community Initiatives, especially INTERREG were devised in part to enable co-operation and the transplanting of innovative approaches to economic development across the EU; and
14 Written evidence submitted to the Committee 15 Written evidence submitted to the Committee.
12 European Committee, 3rd Report 2002
e) structural fund intervention in the deprived areas within EU member states is a demonstration of the relevance of the EU, not just in the communities directly assisted but to the wider population. In summary, the Consortium believes that the responsibility for economic regeneration needs to be shared and involve the EU, the Member State, devolved administrations and regional actors (including local authorities).”
49. Others, such as Clackmannanshire Council stated that16:
“The current debate on the future Regional Policy appears to be centred around its “re-nationalisation”, at least for those areas outwith the Objective One areas. Even without considering the relative costs and benefits of that approach itself, the presence of such a debate signals the possible acceptance of at least two tiers of regional policy and a willingness to consider separate approaches to the resolution of the extreme poverty in the Accession Countries compared with instruments addressing pockets of relative disadvantage with the existing Member States. It is strongly recommended that a dual approach be taken to regional policy in recognition of the different needs of the existing Members compared with those of the Accession States.
“Re-nationalisation” of regional policy itself offers an opportunity to extend this dual approach and enable each Member State to react to the precise needs of their poorer regions. However, whilst the devolution of regional policy to Member States may accord with the general principle of subsidiarity and may also enable greater levels of responsiveness to local needs, any such move must be contained with a strict guiding framework reflecting the economic and social objectives of the Union and containing indicative priorities for action and a per capita budget allocation to the poorer areas. In management and administrative terms, this approach appears to be a logical progression from the lead taken in Scotland of programme operation through Management Executives but, if adopted, some minimal regulation and policing of “re-nationalised” elements of domestic regional policy would still be required to be undertaken by the Commission to ensure compliance with the framework. In any event, it is important to ensure that the policies and forms of initiatives to be implemented at the Member State, regional and sub-regional levels are developed in full partnership with all relevant representative bodies including, in Scotland, the Scottish Parliament and the local authorities.”
50. Although not explicitly mentioned by many, at the core of the debate on re- nationalisation is the question as to whether in any scheme left exclusively to the Member States, the central governments or perhaps more importantly their finance
16 Written evidence submitted to the Committee.
13 European Committee, 3rd Report 2002 departments, would be keen to carry on funding regional development programmes of this type. According to the DTI, in its consultations so far17:
“There was not a consistent view among roadshow participants on whether national or EU funding was preferable but many doubted whether HM Treasury would agree to provide compensation for loss of EU funding (as the German Federal Government has recently agreed to do).”
New types of regions
51. In Scotland, WoSEC has suggested that a future regional development policy should be built around three types of regions. First, newly joined regions lagging behind relative prosperity of others. Second, regions whose progress still lags after enlargement but whose relative GDPs breach the 75% (of EU average GDP) criterion as a consequence of the new Member States joining. Third, regions with specific structural problems such a peripherality, urban deprivation or natural handicaps. In summary, the consequence of the above is a continuation of the current Objective 2 funding in some shape or form.
52. This continuation of Objective 2 in some form or another is a view shared by others. That is not to say that the funding regime as stands should simply be replicated post 2006. A refocusing of exactly how Objective 2 type funding can be delivered would still be possible. For example, should Objective 2 funds be available across whole regions or is it better to target support at ward-level within an area in terms of eligibility. This is a question dealt with in more detail in later sections of this report.
53. In relation to Objective 3 funds, the views being expressed are that it remains a valuable initiative. However, according to the evidence presented in the DTI’s consultations, there are suggestions that the funding is thinly spread, poorly co- ordinated with expenditure in Objective 2, and should perhaps be concentrated rather than available nation-wide.
54. For the third type of region identified by WoSEC - regions with specific structural problems – the evidence received by the Committee is very favourable to supporting funding for these types of areas. This may be partly a defensive strategy in terms of recognising the loss of Objective 1 funds in Scotland post- 2006. However, there are more rational arguments being put forward that closer consideration should be given to funding on this basis. This was a view strongly expressed by Scottish Natural Heritage when giving oral evidence to the Committee18. Its view was endorsed by Dennis Malone of Highlands and Islands European Partnership who told the Committee that19:
“As I said in respect of post-2006, the local partnerships, the local authorities and Highlands and Islands Enterprise are considering a
17 Ibid., para. 40. 18 European Committee, Official Report, Col 1521ff, 7 May 2002 19 Ibid., Col 1503.
14 European Committee, 3rd Report 2002
more focused approach to funding to target islands and mountainous areas and areas of sparse population. I suspect that that, perhaps combined with a more targeted approach under our objective 3 programme, which might apply in the Highlands and Islands, and investment in rural development through CAP or agriculture and fisheries will deliver a package. However, the shape of that package remains to be seen.”
What of the other initiatives and instruments in the structural funds?
55. The structural funds Regulation also makes provision for operations of Community interest, carried out at the initiative of the Commission. These operations supplement those implemented under the priority objectives, the so- called Community Initiatives (CIs). The Community Initiatives concentrate on promoting (i) cross-border, transnational and inter-regional co-operation (Interreg) (ii) rural development (LEADER+), (iii) economic and social regeneration of cities and urban neighbourhood in crisis (URBAN) and (iv) development of human resources in the context of equal opportunities (EQUAL). The Commission lays down guidelines describing for each initiative its aims, scope and appropriate methods of implementation.
56. In relation to the CIs, few comments were made in the evidence submissions to the Committee. Clackmannanshire Council did make reference to its view that20:
“The increasing emphasis on transnational project work through the Community Initiatives is to be welcomed as a valuable tool for the transfer of good practice in regional development and one through which the Accession Countries will particularly benefit.”
Whilst also suggesting that some reforms of the Interreg programme may be required to ensure that due recognition is given to the extreme variations in the geographical characteristics of regions throughout the EU and that no region is placed at a policy disadvantage as a consequence. Its view is that the emphasis on cross-border infrastructure and related activity immediately, and by definition, particularly acts against the peripheral Member States and should be relaxed whenever a State or region has no land borders with another Member.
57. The East of Scotland European Consortium also referred to the CIs, particularly Interreg. We noted their views that within the context of diminishing funds, Scotland should not be disadvantaged by technical constraints embodied in the Community Initiatives
What budget should structural funds have and how should this be allocated?
58. The question of the budget for regional development was put into its starkest terms in the evidence presented by Philippe Cichowlaz from the Conference of Peripheral and Maritime Regions of Europe (CPMR). He told the Committee that21:
20 Written evidence submitted to the Committee 21 European Committee, Official Report, Col. 1541, 21 May 2002.
15 European Committee, 3rd Report 2002
“On the budget, we made calculations at the beginning, but things are moving all the time. If we do not respect the 4 per cent ceiling that I mentioned, enlargement should cost about ELOOLRQ D \HDU RYHU WKH next period. The cost of objective 1 for the EU 15 is about ELOOLRQ with ELOOLRQIRUSKDVLQJRXW7KHFRVWRIREMHFWLYHIXQGLQJVKRXOGEH between PLOOLRQDQG PLOOLRQDFFRUGLQJWRWKHLPSRUWDQFHRIWKH project.
Given those assumptions, the maintenance of a budget of 0.45 per cent would not allow us to fulfil those needs. However, the Commission claims that, if there were reduced aid for the candidate countries, it would be possible to stay within the threshold of 4 per cent. Nevertheless, it seems to us that that the budget might realistically increase to 0.55 per cent, which would meet the needs of enlargement and of the current regions of the EU and would allow us to deal with a greater number of problems than we do at present. With less money, we cannot see how we could deal with more problems in a much larger territory.”
59. He reminded the Committee of the impossibility of considering the question of how much of the Community’s budget is available to fund regional development and cohesion policy without considering the Common Agricultural Policy (CAP). The CAP is also undergoing a process of review, but decisions are unlikely to be taken in advance of the necessity to agree a new regime and budget for structural funds given that the reforms are further complicated through their links with the World Trade Organisation’s (WTO) agenda. However, CAP expenditure is by far the largest item in the Community’s global budget and exceeds regional development funding to a significant degree.
60. Reform of the CAP, especially an emphasis away from funding production towards funding rural development (pillar one to pillar two), is something that many submissions highlighted as providing the opportunity of increasing the resources available for regional development as monies become available as a result of reforms elsewhere. We agree with the Convention of Scottish Local Authorities (CoSLA) who told us that a new equilibrium between CAP rural development measures and structural policy is needed22. However, the complexity and political ramifications of such a process should not be underestimated.
61. This is perhaps why some such as the RETI consortium (Régions de Technologie et Industrie) have simply called for increased budgets for structural funds through a raised contribution from the Community budget for regional development post 2006. This is a view shared by Campbell Christie and Andrew Scott in their submission where they also point out the need for more funds if the Union’s Lisbon strategy is to be realised. In their submission, the two authors question the ability of the candidate countries (for entry to the EU) to absorb the levels of funding being suggested for them. Whether this is an argument for a re- allocation back to the current EU-15 in the event of underspend is unclear.
22 European Committee, Official Report, Col. 1517, 7 May 2002.
16 European Committee, 3rd Report 2002
62. In some Member States, most notably the Netherlands, Sweden and to a lesser extent Germany, the reported position on new budgets for regional development is quite clear. The previous Dutch government has called quite simply for the end of Objective 2. The German government is reported to have stated that some 10% of key funds remain with the EU-15 with the rest to be targeted at the new countries. Countries such as Spain on the other hand want the continuation of regional development funding within current as well as the new Member States.
63. How this conundrum will be resolved is unclear. If budgetary ceilings remain in place and there are no significant reforms to the current mechanisms for allocating funding, or if there is no reallocation from other Community budgets such as CAP, it is difficult to see how the current Member States could continue to benefit from both Objective 1 and some form of Objective 2 funding. This is contrary to the clear view being expressed in Scotland and in the UK that it seems unfair that their poorest regions might be penalised through reduced levels of funding in the future as a result of enlargement.
64. Resolving this thorny question is perhaps central to the way forward for the post-2006 regime. Coupled with decision-taking on such issues as the need to consider the use of more than the 75% trigger (of EU average GDP) as the main criterion for Objective 1 funding in the future23, these are decisions Europe’s leaders are going to have to tackle in the near future. Increasing the transparency of the allocation process and/or increasing the decentralisation of decision-making could be key reforms for the next round of funding.
65. Squaring the circle on the budget will also have to take into account the calls made by many giving evidence to the Committee that full transitional funding will need to be available for any regions no longer eligible for Objective 1 and/or Objective 2 funds in any new programme. This could be coupled with the continuation of the principle of the ‘safety net’ adopted in the current round being carried forward in 2007.
How should the funds be managed?
66. Most observers have indicated that reform of the current system is essential. Simplification of the bidding process is vital to stimulate an increased number of high-quality proposals. This should be tied to a review of the complexity of the administrative and payment requirements. In evidence submitted to the Committee, the DTI stated that24:
“… greater efforts must be made to simplify the Funds and remove unnecessary bureaucracy whilst retaining proper financial control.”
67. Whilst it is important that financial irregularities are minimised or eliminated we are concerned at the views expressed by some that the current regime is becoming, “a bit audit crazy”25.
23 Perhaps to include a look at new criteria of relative employment rates, prosperity etc. 24 Written evidence submitted to the Committee. 25 European Committee. Official Report, Col. 1494 and 1495, 7 May 2002.
17 European Committee, 3rd Report 2002
68. However, as the DTI itself recognises, it plays no direct part in the co- ordination and management of the Funds within Scotland. It has been the policy of the current and previous UK Governments to devolve responsibility for the Funds to the regions and nations of the UK.
69. The debate about the nature of the new funding regime post-2006 should not be dissociated from the wider debate on the Commission’s Governance White Paper26 and indeed the future of Europe debate. In its White Paper, the Commission makes reference to the possibility of increased direct relationships between it and ‘regional governments’ in some form of ‘tri-partite contract’ along with the Member State. The aim is to increase the level of decentralisation and adherence to subsidiarity. How would this idea sit if the re-nationalisation agenda were to be achieved? The success of decentralisation of structural funds was a theme stressed by the First Minister in a recent speech in Brussels on EU Governance27.
70. As highlighted earlier, there appears to be agreement in most submissions that Objective 1 will continue much in the same way (if not in the same areas and regions as are currently eligible) post 2006. With regards to Objective 2, however, the situation is not so clear. In previous sections, the issue of ‘scrap versus continuation’ for Objective 2 has been presented. However, reform of this particular Objective is also a possibility.
71. Some observers have recognised that the Objective 2 as an instrument may be too blunt. This was a view expressed during the DTI’s consultation on the future of the Funds. This was particularly exacerbated by a funding regime that can leave one side of a street eligible and one side not. There are questions to be addressed as to whether a successor to the current Objective 2 can be made more effective across a wider geographical area, perhaps by giving Member States or regional governments a greater say in selection of eligible areas but done so in a more transparent manner.
72. Other administrative reforms might include:
• a reconsideration of the so-called ‘N+2’ rule28 • replacement of the system of one-off grants with one of revolving funds • increased attention to be paid to the use of venture capital funds, capacity building and emphasis on durable outputs from successful projects
73. The Committee also heard calls for greater flexibility within any new funding regime. The ability to respond to unexpected economic or other forms of external asymmetric shocks has been suggested by some as an important element of any
26 “European Governance: A White Paper”, European Commission, COM(2001) 428, 25 July 2001, Brussels 27 Speaking at a seminar organised by the Scottish Executive EU Office, 6 June 2002, Brussels 28 A rather crude formula whereby allocations of funds remaining unspent after 2 years after the year in which they were budgeted for may be returned to the Commission. This cannot be appealed against
18 European Committee, 3rd Report 2002 new funding package. Disasters such as foot and mouth or large-scale industrial collapse of key sectors of the economy can have a devastating impact on regional economies and regional development. The possibility of such a scheme was recognised by Philippe Cichowlaz from the Conference of Peripheral and Maritime Regions of Europe, when he told the Committee that29:
“You refer to an instrument for use in reaction to sudden catastrophes and crises. That could be imagined under either of the first two scenarios [abandonment of Objective 2 or the ‘toolbox approach]. Some people are thinking about that. Under the first or second scenario, one could imagine a structural intervention in the case of a crisis or catastrophe. The only difficulty is that nobody has taken a position on the instrument because there is a big difficulty determining the indicators that should be taken into account to define a structural crisis. How should it be managed with the national budgets? Will the political negotiation be compatible with leaving the European Commission, which would give aid to crises on a case-by-case basis, large room for manoeuvre?
There are two types of argument. Some say that we can always keep a small instrument for such intervention. Those who are against it think that it is better to prepare for the future than to keep the money to answer the problems of the past. That is probably not a good way of ensuring that the regions can act as the fire brigade in a crisis situation. It is a delicate matter.”
29 European Committee. Official Report, Col. 1544ff, 21 May 2002
19 European Committee, 3rd Report 2002
CONCLUSIONS AND RECOMMENDATIONS
74. The debate on the future of the EU’s regional development funds is only just beginning. Decisions are not likely to be reached until at least 2003 or 2004. However, given the importance of such funds to Scotland it is critical that a debate is started in Scotland now in order to provide an insight into the views of the key players at this stage.
75. This report does not provide definitive conclusions to all the questions raised in the ongoing discussion about how the funds should be structured, financed and managed after 2006. Neither does it claim to be the last word on the subject. It does, however, from a Scottish perspective point to a very clear direction that the debate should follow.
76. The conclusions are also presented knowing that utimately, decisions on future budgets for regional development cannot be disentangled from discussions on reform of the Common Agricultural Policy and indeed on the whole question of reform of the EU institutions.
The need for debate
77. The Committee has been pleased at the positive responses made by the organisations and individuals it consulted that its efforts to stimulate a debate are timely and welcome. The Committee has been encouraged to note that both the Scottish Executive and the UK Government are currently considering how to respond to the question of regional development and the future of structural funds after 2006. The Committee recommends that increased efforts are made by both the Scottish Executive and UK Government to accelerate their consideration of the issues and to issue a public statement on their preferred solutions in due course. Any consultations on the subject should be done in as open, transparent and inclusive fashion as possible so as to encourage dialogue across Scotland and the UK on this important subject. This consultation should also include the European Committee.
Principles of reform
78. The Committee notes the divergence of views on whether regional development funding should no longer be an activity funded by the European Union but should be ‘re-nationalised’ as a responsibility of the Member States. Whilst recognising the merits of some of the arguments for such a regime, the Committee recommends that from 2006 any future initiatives for regional development retains an emphasis on EU involvement.
79. The Committee is not convinced that leaving decisions on regional development in the hands of central governments and their finance departments is the way to proceed. We agree with the representative from the Conference of Peripheral and Maritime Regions when he told the Committee that, ”Some people
20 European Committee, 3rd Report 2002 advocate a rationalisation of policies. If policies are abandoned, there will be a necessary national transfer of budgets for the same amount. There is no guarantee that there will be the same solidarity at the national level”.
80. However, we recommend that very careful consideration be given to reform of the various strands of regional development funding. In particular we recommend that the Commission and the Member States look closely at redefining how they fund redevelopment of regions suffering industrial decline, perhaps in a more focused form. The Commission and the Member States should also give consideration to including a new type of region defined by its peripherality, its urban deprivation, population density or its natural or physical handicaps.
81. We recommend that the four principles that currently define the structural funds – partnership, programming, additionality and compatibility – be retained and re-emphasised in any future funding programme.
82. The Committee would also like to see a greater emphasis being given to the issue of environmental sustainability within the structural funds. In line with recent comments made by the First Minister, we believe that regional development funding can play a significant part in achieving environmental justice. We also believe that it should also contribute to safeguarding and protecting the nation’s heritage. We therefore support the calls made by Scottish Natural Heritage and the Scottish Environmental Protection Agency (SEPA) to this effect. We recommend the Scottish Executive give its response on how environmental sustainability and protection of our natural and cultural heritage can be re- emphasised in future programmes.
83. We also support the calls made by SEPA to give consideration as how the successes made in mainstreaming environmental issues can be transferred into future programmes and through knowledge transfer to the candidate countries in Central and Eastern Europe. We endorse the call made by Laurie Russell (Chief Executive of Strathclyde European Partnership) that Scotland has expertise and knowledge to share and there is certainly a need in Central and Eastern Europe for the skills we have.
Funding regional development after 2006
84. The Committee recognises the conundrum facing Europe’s leaders who wish to rein in spending whilst at the same time enlarging the EU to take in up to thirteen more countries as members. However, we do not see why the poorest regions in the EU’s current Member States should be the ones penalised by the enlargement process by the sheer fact that in relative terms their prosperity has increased with the inclusion of other less developed areas. The structural problems in nations such as Scotland and its regions will not have gone away. Comparisons of relative GDP may show Scotland to have become richer compared to Central and Eastern Europe but the structural problems will not have been resolved. In short, after enlargement of the EU, Scotland may be relatively better off but in real terms the situation will not have changed. Indeed, the balance of peripherality from a geographic perspective will have changed. Some of the
21 European Committee, 3rd Report 2002 evidence received by the Committee indicated that certain applicant states may have difficulty in absorbing funds and this should be investigated.
85. We therefore recommend that serious consideration is given to increasing the relative share of Community budgets available for regional development. This might be done by increasing the proportion of finance available for regional development in the EU’s overall budget, through savings elsewhere through reform of the Common Agricultural Policy, such as a shift in the CAP from subsidies for production towards rural development, or through other reforms to the system of allocating structural funds. Structural funds represent one of the few possibilities for the citizen of Scotland to see at first hand, in their local environments, the presence of the EU and the positive impact it can have. Given the debate over the future reform of the Union and the question of reducing people’s disenchantment with the EU, increased budgets for regional development seems a small price to pay.
86. We also recommend that a new instrument is brought forward in any future funding regime that can help a region respond to asymmetric shocks to its economy, whilst being consistent with EU law. This may include the result of disasters such as foot and mouth, large-scale industrial closures, environmental disorders etc.
87. We recommend that the programme of transition funding (for both Objective 1 and 2) and the safety net be continued in 2007.
Managing the funds
88. We recommend that reconsideration be given to the method of allocation for funding to regions successful in securing Objective 2 status. The current system of ward-level allocations can leave one side of a street eligible and one side not. The Committee is concerned about the problems this can cause.
89. We recognise that the current debate on the future of regional development and cohesion policy cannot and should not be dissociated from the wider debate on the future governance of the European Union and the question of subsidiarity. We recognise that structural funds are perhaps the most decentralised of all the Union’s initiatives. We call upon the Commission to give consideration to increased levels of decentralisation to regions and nations such as Scotland in any future programme. We re-emphasise the recommendation made in previous reports for Scotland to be amongst the lead nations/regions in the EU to take forward the idea of a closer, direct working relationship with the European Commission in the management of the structural funds and in other policy areas through tri-partite contracts along with the Member States. We recommend that the Executive makes all efforts to ensure Scotland is amongst the pathfinders in any initiatives for closer links between this EU institution and the implementation of Community obligations. We call upon the Scottish Executive to secure a face-to-face meeting with a senior representative of the European Commission to present the case for Scotland being in the vanguard of such new bilateral relationships.
22 European Committee, 3rd Report 2002
90. Finally, we agree with CoSLA that in order to have the greatest impact it is necessary for all the players in Scotland to concentrate lobbying activity in the UK and Brussels during September to November 2002. This is the period during which most work will be done on the 2nd Interim Report into the Structural Funds. Influencing this report is crucial in terms of getting off to the right start.
23 European Committee, 3rd Report 2002 - ANNEX A
ANNEX A
SUBMISSIONS OF EVIDENCE
Campbell Christie and Andrew Scott Clackmannanshire Council Convention of Scottish Local Authorities (CoSLA)* Department of Trade and Industry (DTI) Eastern Scotland European Partnership ** East of Scotland European Consortium (ESEC) Highlands and Islands Partnership Programme** Philippe Cichowlaz, Conference of Peripheral and Maritime Regions (CPMR)** Scottish Environment Protection Agency (SEPA) Scottish ESF Objective 3 Partnership** Scottish Natural Heritage (SNH)* Strathclyde European Partnership** South of Scotland Alliance South of Scotland European Partnership** West of Scotland European Consortium (WoSEC)
* provided both written and oral evidence ** provided oral evidence only
24 European Committee, 3rd Report 2002 - ANNEX A
Campbell Christie and Andrew Scott
1. Introduction
The Economic and Social Committee’s Sub-Committee was been established to consider the economic and social cohesion strategy for the European Union after 2006 when the current structural fund Regulations expire. Its remit is to consider at greater length the issues raised in our Opinion on the Second Cohesion Report (CES 529/2001). The ultimate purpose of this work is to ensure that the expertise available within the Economic and Social Committee is positioned to make a significant contribution to the cohesion debate as that debate unfolds over the next few years.
2. The Structural Funds in Context
Since 1988, the EU structural operations have been guided by four principles: concentration of effort, programming of economic assistance, additionality on the part of member states, and partnership in the design and implementation of regional economic assistance measures. Successive reports by the Commission - the most recent being the Second Cohesion Report - have established that the measures implemented by the structural operations have made steady progress in narrowing the economic and social disparities between the EU regions. Unsurprisingly, the convergence gains have been most marked in those regions eligible for assistance under Objective 1 of the structural fund regulations. While per capita income in the EU’s richest regions remain significantly higher than that recorded in the poorest regions, the data does show that per capita income in the EU’s poorest regions has moved closer to the EU average since 1988.
The impact of the 1988 reforms have been considerable, particularly with respect to the EU’s least favoured regions where significant gains in economic cohesion have been achieved.
With respect to economic cohesion, as measured by regional disparities in per capita income, the structural funds have achieved considerable progress in meeting their aims. The data presented by the Commission in its Second Cohesion Report reports that per capita income in the EU’s three poorest member states (Greece, Portugal and Spain) has risen from 68% of EU average in 1988 to 79% in 1999. Nonetheless, even if economic convergence continues at this rate, the Commission estimates that it will take a further 20-30 years for the gap between these countries and the EU average to be eliminated, such is the long term nature of this process.
Social cohesion, as measured by changes in regional unemployment, has proven to be a more difficult problem to address. Notwithstanding the strong job creation experienced by the Union since the mid-1990s, which has seen the rate of unemployment decline from over 11% to around 8%, regional disparities in unemployment widened over the course of the 1990s following from the reduction which occurred in the high employment growth years of the late 1980s. As the Second Cohesion Report notes, unemployment in regions where rates were lowest averaged 3% in 1999 (much the same as in the early 1970s), it averaged 23% in regions where rates are highest (much higher than in the early 1970s). The first progress report on economic and social cohesion reports that whereas the employment rate in the EU’s top 10% of regions averaged 77.2% in 2000, it stood at only 46% in the bottom 10%.
One bright spot has been the slight decline in the number of people classified as long term unemployed (those unemployed for more than one year) which has fallen from 49% to 46% of the total unemployed between 1997 and 1999. However, as with other aspects of unemployment, long term unemployment varies markedly across the EU ranging from over 60% in Southern Italy, a number of Greek regions and in Belgium to under 20% in some regions in Austria, the UK and Finland.
The level of long term unemployment is particularly difficult to reduce, even during periods of relatively robust economic growth. Unemployment among young people is a further feature of the EU labour markets. In Spain, Finland and Italy youth unemployment was over 30% in 1999, while in some regions of Italy and Spain it exceeded 50%.
25 European Committee, 3rd Report 2002 - ANNEX A
Developments in EU labour markets indicate the challenges that remain if the EU is to meet the employment targets set at the Lisbon Summit two years ago. At that time, the EU set the objective of raising the employment rate to 70% by 2010 (from 63.8% in 2000), and to increase the number of women in employment to 60%.
Indisputably EU economic and social cohesion policies are central to the realisation of the Lisbon employment targets. EU structural policies are a key mechanism for enhancing the economic growth potential in the lagging and industrial declining regions and thereby raising the employment creation possibilities in those regions.
Over the short term a number of concerns remain with respect to sustaining progress towards greater economic and social cohesion.
First, maintaining a high rate of job creation depends on the continuation of relatively strong economic growth in the EU economies. The downturn in the USA economy, coupled with the economic aftershocks from the 11 September terrorist attacks, have adversely affected the EU economies such that forecasts of economic growth over the next year have been revised downwards. Current data suggest that EU economic growth in 2001 was 1.7% compared to an initial forecast of 3%.
Second, despite the high level of unemployment, labour shortages recently have emerged in many EU economies. This points to the emergence of a “skills gap” which can best be addressed by forward-looking policies designed to match the skills of the workforce to the changing circumstances of economic development.
Third, concerns are expressed by some over the lack of flexibility of EU labour markets which it is argued act as a disincentive to firms hiring additional labour in the fear that they may not be able easily to down-size once economic conditions change. This produces a situation in which the job-creation element of EU economic growth is below that recorded in, for instance, the USA economy.
Fourth, regional disparities in unemployment may increase should the incidence of sectoral economic shocks increase, a particularly strong likelihood in regions with a heavy dependence on agricultural activities. Further reforms in the Common Agricultural Policy shall, inevitably, produce further job losses in that sector and this will be bound to widen social disparities between those regions and the EU average.
All of the factors noted above highlight the continuing need for strong structural fund policies to be applied within the disadvantaged regions of the EU.
Progress towards greater economic and social cohesion at the EU level represents the EU’s principal effort to address problems of poverty. Although the EU effort through the structural funds is only one small element in the overall package of measures targeting poverty - most of which are national measures - it remains the case that the economic activity-promoting and job creation aspect of the structural funds are a visible and effective element in the broad fight against poverty across the EU.
Among the primary factors linked with low incomes on a persistent basis are unemployment, low educational attainment, and a high incidence of economic dependency within the family. While other, demographic factors are also significant and lie beyond the scope of EU policy, it is to be expected that continued economic growth and higher levels of employment may reduce the proportion of people with low income. It is in this environment that the EU structural funds are most likely to contribute effectively to the fight against poverty and social exclusion.
It is clear from this overview of the context and achievements of the structural funds that they remain a central aspect of EU policies aimed at raising the rate of economic growth, promoting employment, and fighting social exclusion in the less advantaged regions of the EU. It is also evident that a considerable amount with respect to economic and social cohesion remains to be achieved within the regions of the EU.
26 European Committee, 3rd Report 2002 - ANNEX A
But the significance of achieving a greater measure of economic and social cohesion can be seen by considering not only the positive gains that accrue to EU society as a result, but also by reflecting on the consequences of not enhancing cohesion. In that event, that is where EU economic and social cohesion policies are scaled down, the material welfare of the marginalized and excluded groups in society is likely to deteriorate and this may well undermine the present degree of political solidarity across the EU. As the current debate on “governance” makes clear, the EU has to demonstrate its relevance to the fundamental needs of its citizens. Any weakening in the EU efforts to achieve greater economic and social cohesion is bound to damage the credibility of the EU as a political and economic system capable of meeting the aspirations of the ordinary citizen.
3. The Broad Challenges Facing EU Economic and Social Cohesion Policies
A key element in the forthcoming debate over the future of the structural funds will be the rationale for maintaining or enhancing the role of the EU in the delivery of economic and social cohesion policies. It is the view of this Committee that the EU should retain its central role in the design and delivery of structural funds. Not only will this ensure that the successes achieved by the structural activities thus far will be consolidated and further progressed, it will also be appropriate in the context of the challenges to economic and social cohesion that are likely to emerge in the future.
Enlargement. The forthcoming enlargement of the EU will bring within the Union up to 10 countries characterised by extremely low levels of per capita income, severe unemployment problems, and profound economic backwardness. And while membership of the EU will, of itself, improve the economic prospects of these countries - through enhanced trading opportunities and via foreign direct investment - in the absence of positive economic assistance as is available through the structural funds it is highly unlikely that the economic catch-up process will be sufficiently rapid to meet the legitimate aspirations of the citizens of these countries. Moreover, the benefits of the structural funds extend beyond their financial aspect and include additionally key economic development lessons that have been learned since their reform in 1988. It is essential that the EU retains the ability to oversee regional economic development efforts to ensure that best-practice techniques are applied to the new member states.
Globalisation. Inevitably the phenomenon of globalisation will continue to intensify. This is likely to have two effects on the EU in the context of the activities of the structural funds. In the first place it is set to change the structure of EU employment in all productive sectors as global corporations adjust their sourcing policies in the light of the new opportunities that will arise from the progressive liberalisation of international trade in both goods and services. Accordingly, the EU may well find the challenges of economic adjustment - the challenges to economic and social cohesion - progressively increasing over time. Second, the share of corporate investment occurring within the EU may fall as both domestic and foreign corporations move to exploit more profitable investment opportunities elsewhere. To the extent that EU outward investment increases, and/or inward investment decreases, the challenge to employment and income growth within the EU will increase.
In this context, and given the relative weakness of individual member states to devise policy capable of redressing consequent economic imbalances (particularly the smaller member states), the provision of a collective and coordinated cohesion effort at the EU level will become increasingly important.
Core-Periphery Imbalances. If we are to consider enlargement and the process of globalisation together, there is an acute risk that the overall economic consequence will be to exacerbate the centre-periphery dynamic within the EU as a whole. This is a topic which the Committee has discussed before, and the Committee notes that it is one that has been explicitly recognised by the Commission in the Second Cohesion Report.
Economic dualism is often used to describe an economy characterised by a prosperous, high employment and dynamic economic core which is flanked by a slow growing, high unemployment and economically sluggish periphery. In effect, this describes a situation in which two distinctly different (and potentially divergent) economies co-exist within a unified economic
27 European Committee, 3rd Report 2002 - ANNEX A territory. The problem in such cases is that, left to themselves, market forces are more likely to consolidate than to reverse the process that leads to economic dualism. The risk is that economic dualism will undermine the longer term productive potential of the area as a whole in that it destroys the productive and competitive potential of the periphery. It might also produce an unacceptable divergence in economic and social cohesion.
While there are benefits to companies from locating within the central economic area, the aim of economic and social cohesion policies is to increase the relative attractiveness of the peripheral regions. This is not best achieved by imposing restrictions on the location decisions of corporations, but rather by continuing to develop and apply policies which raise the competitiveness of the peripheral regions - investing in human capital, modernising economic infrastructure (communications and transport systems), and undertaking measures that raise the general amenity of the locality (research and educational facilities, improving the environment, etc.).
The compelling argument supporting the further refinement and further development of EU structural policies is that the economic benefits of globalisation and enlargement will, otherwise, be enjoyed only by a few central regions within the EU. At the same time, the many peripheral regions (including the very disadvantaged mountain areas and island communities) are set to lose - not necessarily in absolute terms, but certainly in relative terms. While the spatial dispersion of economic activity across the EU has not altered significantly over the past 20-30 years, the combined effects of European monetary union, enlargement to the CEECs and the rapid acceleration of globalisation is almost certain to lead to an increased concentration of economic activity over the next decade or so. Consequently, there is a strong case for extending structural actions at the EU level to meet these new and potentially dramatic challenges.
Macroeconomic Stability. Progress towards economic and social cohesion will be made considerably easier against a background of macroeconomic stability and sustained economic growth. It is argued that the combined effect of European monetary union and the Stability and Growth Pact (SGP) will be to deliver this stability and, accordingly, that the long term economic growth prospects of the EU will be enhanced. However, there is an ever-present risk that macroeconomic policy will not be suitable for all member states at all times, a risk that will increase with enlargement. In the event of an asymmetric shock impacting unevenly across the EU, economic stability may be jeopardised within a few countries in order to maintain stability for the majority.
To date, the EU has not developed any economic policy instrument explicitly geared to stabilising the levels employment and/or income at the level of the member state or the region. Given the “one-size-fits-all” nature of Euroland monetary policy and the SGP-imposed constraints on stabilisation policies in member states (i.e. restricting the size of the budget deficit), the demands on EU structural policies may intensify over the medium term. As they presently exist, these funds are ill-equipped to respond to sudden disturbances in employment or income levels within member states. This may lead EU citizens to question the role of the EU in contributing to, or failing to respond to, unexpected economic disturbances.
While the Lisbon conclusions and the open-method of policy coordination have much to commend them, ultimately the EU may need to consider a higher commitment to structural actions (and possibly extend these to include a stabilisation function) in order to provide discretionary assistance to member states or regions experiencing economic problems that cannot be adequately combated by a combination of a single monetary or constrained national fiscal policies.
European Social Model. The European social model and the social market economy remain central elements in the economic and social arrangements of the European Union. By providing for the participation of all actors in the economic and social decision-making process, these arrangements serve to advance the principles of solidarity and social inclusion among the citizens of the EU. Crucially, the European social model is the principal framework for fighting poverty and social exclusion within the EU member states. Any steps to radically change these arrangements risks damaging cohesion and placing additional burdens on EU structural actions.
28 European Committee, 3rd Report 2002 - ANNEX A
At the same time it is important that the arrangements of the European social model do not adversely affect the operation of EU labour markets or stifle the enterprise culture that is necessary to fuel the process of economic growth. Employment, and so private and public sector investment, remains the main weapon in the fight against social exclusion and poverty, especially among groups in society which traditionally find difficulties in finding employment - especially women, the young, and the long term unemployed. EU labour market policies should, therefore, be consistent with a vibrant market-based economy capable of meeting the challenges of intensified international competition.
Therefore it is important that, where necessary, reforms to EU labour market practices continue where this will deliver higher levels of employment and progress the aim of economic and social cohesion. Ultimately this will permit EU structural actions to concentrate fully on regions most in need of support. This view is consistent with the conclusions to the Lisbon Summit where the Heads of State and Government committed themselves to modernising the European Social Model.
Monetary Union. Although monetary union will provide considerable economic advantages to the EU, there remains a risk that in the absence of greater geographic mobility of labour and/or a widening of regional wage differentials, regions subject to adverse economic shocks will experience difficulties in combating a resultant increase in local unemployment. At the same time, the constraints imposed on national fiscal policies by the Stability and Growth Pact might impair the ability of national governments to assist the “shocked” region. In this context, structural funds may have a greater role to play in the future than has been the case thus far.
4. The Future of Economic and Social Cohesion Policies
It is clear that a wide range of challenges confront the EU economy and society, and that the discussion concerning the future of the structural funds post-2006 has to be framed accordingly. To help consider our response to these challenges, it is useful first to consider five underlying questions that have to be addressed in the forthcoming policy (and political) debate, viz.:
Are we, as the EU, prepared to commit ourselves post-2006 to sustaining the efforts we have made since the policy and financial reforms of 1988 to achieving a greater degree of economic and social cohesion across the Union as a whole?
Are we willing to continue with the same underlying approach to economic and social cohesion post-2006 as that which has prevailed since 1988; an approach which is built upon the four principles of concentration, programming, partnership and additionality?
How can we incorporate the lessons learned from the past in the design and implementation of future cohesion policies - that is, best practice arrangements?
What role is to be played by the Commission in future cohesion policies? Are we to retain the current arrangements, with the Commission jointly managing the design and implementation of the policy along with Member States, or are Member States to acquire an enhanced role in this policy process?
What role is to be assigned to the economic and social partners in any reformed arrangements for the design and implementation of cohesion policies?
Cohesion in the future. Economic and social cohesion is a Treaty obligation for the European Union, and should not be compromised by short term considerations. It has long been the view of the Economic and Social Committee that this implies that Member States should be prepared to finance an EU budget to the extent that is required to achieve this goal. This may require a revision to the ceiling on structural fund expenditures as a share of total expenditure set at the Berlin summit. Moreover, it is clear that the employment objectives set out in the Lisbon summit are consistent with, and may be promoted by, EU structural fund activities - particularly those measures specifically designed to improve the economic competitiveness of the backward regions and those regions experiencing industrial decline.
29 European Committee, 3rd Report 2002 - ANNEX A
Regions with low levels of per capita income require considerable fiscal transfers to allow for similar levels of private and public consumption within, and between, Member States. If we are to avoid long-term dependency, arrangements must be in place to ensure the poorer regions have the conditions required for their economic development and to ensure their population has access to a similar quality of public services which other regions enjoy.
The implication here is that EU structural actions post-2006 must be properly financed, appropriately targeted and properly managed, if they are to continue to be successful. The current ceiling on the global total of structural funds that may be applied to a Member State (of 4% of national GDP) may need to be revised in the light of the extent of the regional economic development needs in the applicant states. At the same time, of course, it is essential that these countries have the capacity to absorb structural fund assistance in economic development programmes that contribute positively to regional economic development, and which do not distort local labour and/or capital market conditions.
The four principles of economic and social cohesion. On the basis of the evidence presented by the Commission - both in the Second Report on Economic and Social Cohesion and the First Progress Report on Economic and Social Cohesion - the Economic and Social Committee takes the view that the four underlying principles of the structural funds must be retained, and developed, during the post-2006 funding period.
Of these four principles, it is the future of concentration that is likely to be the most controversial. Given the challenges of enlargement, there appears to be an emerging consensus - which this Committee shares - that Objective 1 of the structural funds be retained post-2006 and not only for the candidate countries. However, the 75% per capita GDP threshold for Objective 1 eligibility may have to be revised upwards to ensure that regions currently eligible for assistance, and whose need will continue beyond 2006, are not rendered ineligible due to the statistical effect of enlargement, which will lower the EU average per capita GDP level and thereby push some current beneficiaries above the eligibility threshold.
In the ensuing review, particular attention should be given to the special needs of the EU’s island, mountainous, sparsely populated and ultra-peripheral regions.
Also, the future of Objective 2 will require to be considered. Since the Agenda 2000 reforms, Objective 2 includes not only industrial areas in decline, but also urban areas, rural areas and areas dependent on fisheries. This Committee considers that the Objective 2 category of support should be retained, although the degree of support (e.g. the rate of assistance from the structural funds, the definition of eligible projects) may have to be revised.
The case for continuing to recognise Objective 2 territorial support rests not only on the continuing economic development problems that are likely to confront those regions eligible for support. It is also based on a recognition that EU structural funds represents a key device for retaining domestic regional policy support, and for engaging private finance in the regional economic development effort. Further, EU policy is an important mechanism for Member States to incorporate “best-practice” approaches to regional economic development within their own policies. In both these respects, EU structural policies provide considerable value-added to Objective 2 regions.
It is also essential that the EU commitment to human resource development through the horizontal measures under Objective 3 of the structural funds remains a priority. It is through these measures that the EU will be able to raise the rate of employment and economic growth over the long term and achieve the aims set out at the Lisbon summit.
Best practice techniques of regional economic development. As implied above, the EU structural policies and their accompanying Regulations offer scope for disseminating best- practice regional economic development policies throughout the Union. While no single approach is likely to work in all Member States due to differences in local economic conditions and potentials, nonetheless the Commission has at its disposal considerable evidence on what approaches work best and least efficiently. It is in the common interest that the Commission
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utilises this information in designing the post-2006 structural fund Regulations and in the administrative measures accompanying these regulations.
An example of this will be the lessons learned from the economic development of the new German Laender, and the relevance of that experience to the CEEC applicant countries.
Role of Commission. To what extent should the role of member states governments - both national and sub-national - change in the design and delivery of the structural fund programmes? The Committee remains convinced that ultimate oversight of the structural funds at the EU level is an important aspect in the success that the funds have had to date, particularly in the Objective 1 regions. As we have stated above, not only is the Commission able to exercise responsibility for the disbursement of common funds, it has a crucial role to play in ensuring that regional development programmes are consistent with the aims and objectives of the funds and that best practice techniques are used by all recipient authorities.
Pro-active regional policy on physical and human capital under the aegis of the structural funds is indispensable for the catching-up of poorer regions. This requires the ongoing evaluation of efficiency and of long term impacts, and the focus of evaluation should not principally be on short term employment gains. The Commission is the only realistic organisation capable of undertaking this task.
Subsidiarity. At the same time, there is a clear need for full and effective subsidiarity in the design and management of structural fund programmes. This points to a full and active participation by sub-national governments and the economic and social partners and not - at least not solely - a greater role for national authorities. The Committee sees no merit in any proposal that effectively returns control over the structural funds to member state governments, as was the case prior to 1988.
Indeed, it is likely that the need for tighter common rules governing the structural funds will be necessary in the future. This may take the form of a greater degree of conditionality in the uses to which the funds may be put, and more detail with respect to the outcomes (or rates of return in employment and growth terms) that the funds are expected to generate. In a situation of greater demands being placed on (possibly more) limited resources, it is vital that the returns to the application of the funds are maximised.
Modulation of assistance. The Committee would ask the Commission to consider greater modulation in the rates of assistance available under the structural funds, particularly with respect to Objective 1 regions. Since it may not be possible to fund totally the greater structural fund demands within an enlarged EU, it may be necessary to involve the private sector (and private sector finance) more fully in regional development activities. One method for so doing is to encourage, within the terms of the post-2006 structural fund Regulations, a greater reliance on public-private sector partnerships where this is both possible and contributes to the objectives of EU policy. It is likely that this will be more appropriate in, for example, current Objective 2 regions, and less appropriate in Objective 1 regions within the candidate countries.
Role of national policies. Structural fund measures will work best where these are accompanied by the reform of national policies and practices that either fail to exploit, or suppress the scope for, regional economic growth. National policies play a more important role, and it is unrealistic to expect EU actions to offset the impact of national policies which serve to widen regional economic and social disparities.
Within the macroeconomic policy framework of European monetary union member states retain control over domestic budgetary policies, although these are subject to the restrictions imposed by the Stability and Growth Pact (SGP). This Committee has expressed concern before that the SGP should not become a framework for deflationary policies in the EU, as there is a risk that it might do especially during periods of cyclical downswing as is being experienced at the current time.
During those periods the social expenditures of government rise whilst tax receipts fall, and this can result in an increase in the public sector deficit close to - or above - the 3% of GDP ceiling imposed by the SGP. In this event, governments are required to lower public spending and/or
31 European Committee, 3rd Report 2002 - ANNEX A raise levels of taxation, both of which will exacerbate the economic downswing leading to greater pressure on economic and social cohesion. It is therefore important that member state budgetary policies typically are in balance, or surplus, to ensure that there is sufficient fiscal flexibility to permit counter-cyclical policies to be followed during an economic downswing. Otherwise the aim of economic and social cohesion will become considerably more difficult to achieve.
The development of national educational resources broadly defined is central to the cohesion effort across the EU. In the absence of adequate education and training, the returns to EU structural actions are likely to be lower than potentially is possible. This Committee considers that greater attention should be given to the development of national education and training policies, and human resource development generally, in the preparation of regional economic development plans, and the integration of this with actions financed under the structural funds, in order to maximise the benefits from EU regional policy. This is especially important within the Objective 1 regions, where there tends to be under-investment in educational resources.
In addition, the Committee urges that greater attention is given to the delivery of education and training within eligible regions. If the economic development potential of individual regions is to be exploited, it is essential that there is sufficient involvement of both the private and the public sector in delivering education and training, much of which occurs within firms and other non- state actors.
The conclusions to the Lisbon European Council introduced the idea of a new, “open” method of policy coordination between member states, the aim being to ensure a coherent approach between member states with respect to the strategic aims of the Union. This Committee regards economic development policies as an instance where the “open” method can be applied. Not only will this encourage the dissemination of best-practice economic development policies, it will also contribute to the delivery of coherent economic development strategies both within and between Objective 1 and 2 regions. Further, extending the “Open” method to regional policies is fully consistent with the principle of subsidiarity.
Enlargement. Enlargement will alter radically the context within which EU cohesion actions operate. Enlargement will increase the territory of the EU by over one-third; the population by 36%; but will only add some 5% to the wealth of the EU. After 2004 the EU will comprise up to 10 new member states with a per capita income of below one-half of the current EU average. This will present fundamentally new problems of cohesion to the EU and will result in intense pressure to considerably increase the resources applied to EU cohesion policies.
Arguably one of the key issues that yet has to be resolved is the capacity within the candidate countries to effectively administer the structural funds as required by the relevant Regulations. It is therefore essential that the Commission devotes resources to assisting these countries prepare the required procedures and administrative arrangements ahead of enlargement.
Transition Issues. The challenges of enlargement are not only financial. Beyond that, it is likely that some regions currently in receipt of support under the structural funds will no longer be eligible for assistance. This raises not only both political problems; it also involves potentially considerable economic difficulties for regions that remain under-developed and unable to generate sustainable employment on a sufficiently large scale.
This Committee has taken the view that it would be wrong automatically to graduate-out of structural fund eligibility any Objective 1 region unable to meet the criterion of achieving self- sustaining economic growth and employment opportunities but which nonetheless records an average per capita income above 75% of the EU average.
In that event, the Commission should introduce appropriate phasing-out arrangements, or should raise the eligibility threshold beyond 75% in order to meet the legitimate needs of the under-developed regions of the EU as a whole. While the 75% threshold was chosen in 1988 as appropriate to the economic conditions of the EU at that time, there is no virtue in retaining that threshold in the face of the scale of change that will follow this prospective enlargement. It is essential that a discussion of the resolution to this problem takes place in good time. There are
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many important issues at stake in this matter, and the Commission and Member States should aim to reach a consensus position which best meets the needs of the Objective 1 regions.
5. The Future Cohesion Debate.
It is clear from this report that the economic and cohesion policies of the EU will face a number of difficult challenges over the next few years. It is also clear that the structural funds lie at the heart of the EU’s efforts to narrow the economic and social disparities between the regions and the citizens of the EU. Accordingly, it is the Committee’s view that the discussions concerning the EU’s future cohesion policies should begin now. Certainly it would be inappropriate for these discussions to be compressed into a short time-frame whereupon the likelihood would be that financial considerations rather than economic and social ones would dominate the outcome.
If this Committee is to play a full part in these discussions then it is important that it utilises its expertise within the EU institutional structure - namely exploiting the close ties it has with the economic and social partners, and engaging fully with all stakeholders at both the national and sub- national level.
To this end, we are convening a number of “hearings” at which individual experts or groups from around the EU and from within the candidate countries can make presentations to the Committee focusing on the way forward for the structural funds in the context of current and likely future developments. In the light of these deliberations, the Committee will be concluding with a series of policy recommendations which will contribute to the ongoing debate.
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Clackmannanshire Council
The request by the European Committee to submit views on the future of Cohesion Policy and Structural Funds in the period following the current Programmes is welcomed. As a local authority area which is deemed to be fully eligible for the purposes of Objective 2 funding almost in its entirety (only one out of twelve wards is “transitional”), Clackmannanshire arguably has a greater interest than most other authorities in the development of regional policy beyond 2006. Whilst we welcome the process of enlargement, we are equally keen to ensure that the priority needs of the less-developed regions of the existing Member States are not neglected.
Although enlargement will improve Scotland’s relative prosperity compared with other Member States, its absolute level of performance will be unaffected, at least in the short to medium term whilst trading adjustments related to the new opportunities take place. The existing sectoral and structural weaknesses – acknowledged by the fact that 85 % of Scotland is eligible for some form of regional policy interventions from the EU (either through fully eligible Objective 2 support or through the transitional programmes) - will remain and will still require to be addressed. At the very least, a form of transitional aid should be allocated to the existing fully eligible areas reflecting the precedent set in the current programming round. However, and as put forward by the Alliance for Regional Aid, this should be complemented by the adoption of a further “safety net”, again reflecting the precedent set for the 2000-06 period.
The current debate on the future Regional Policy appears to be centred around its “re- nationalisation”, at least for those areas outwith the Objective One areas. Even without considering the relative costs and benefits of that approach itself, the presence of such a debate signals the possible acceptance of at least two tiers of regional policy and a willingness to consider separate approaches to the resolution of the extreme poverty in the Accession Countries compared with instruments addressing pockets of relative disadvantage with the existing Member States. It is strongly recommended that a dual approach be taken to regional policy in recognition of the different needs of the existing Members compared with those of the Accession States.
“Re-nationalisation” of regional policy itself offers an opportunity to extend this dual approach and enable each Member State to react to the precise needs of their poorer regions. However, whilst the devolution of regional policy to Member States may accord with the general principle of subsidiarity and may also enable greater levels of responsiveness to local needs, any such move must be contained with a strict guiding framework reflecting the economic and social objectives of the Union and containing indicative priorities for action and a per capita budget allocation to the poorer areas. In management and administrative terms, this approach appears to be a logical progression from the lead taken in Scotland of programme operation through Management Executives but, if adopted, some minimal regulation and policing of “re-nationalised” elements of domestic regional policy would still be required to be undertaken by the Commission to ensure compliance with the framework. In any event, it is important to ensure that the policies and forms of initiatives to be implemented at the Member State, regional and sub-regional levels are developed in full partnership with all relevant representative bodies including, in Scotland, the Scottish Parliament and the local authorities.
As you will be aware, the Scottish Executive is lead partner in a Twinning Covenant with the Czech Government to deliver Structural Funds support. Through this, links have been established between 3 Scottish Structural Fund programme regions and the 3 Czech regions. (Scotland participates in other such covenants but not as lead partners). The continuation of these Convenants beyond their current expiry date this year is to be encouraged. This will ensure that the regional capacity-building process offered by the Covenant is not disrupted prior to full Membership being achieved and will assist in maximising the effectiveness of regional delivery within the participating Accession States.
The increasing emphasis on transnational project work through the Community Initiatives is to be welcomed as a valuable tool for the transfer of good practice in regional development and one through which the Accession Countries will particularly benefit. Recognition has been given within INTERREG to the particular problems of the sparsely populated peripheral regions through the Northern Periphery Programme but concern should be expressed at the particular barriers to movement faced by citizens of islands (including the mainland of the UK). Whilst sea-based
34 European Committee, 3rd Report 2002 - ANNEX A communications can be assisted under INTERREG, it is likely that any economic gain made by the islands’ economies as a consequence will be more than offset by the improvements to cross- border, land-based transport infrastructure that can be supported on mainland Europe but which, by accident of geography, would not be assisted in Scotland. It is necessary to ensure that due recognition is given to the extreme variations in the geographical characteristics of regions throughout the EU and that no region is placed at a policy disadvantage as a consequence; the emphasis on cross-border infrastructure and related activity immediately, and by definition, particularly acts against the peripheral Member States and should be relaxed whenever a State or region has no land borders with another Member.
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Convention of Scottish Local Authorities
1. I would like to begin by commending the Committee for this excellent initiative. It is important that the Scottish Parliament is initiating a broad public debate on the kind of cohesion policy we want for Scotland and for Europe as a whole. Moreover it is important that these discussions are underway now as is it not too early for us to begin seeking alliances across Europe in order to promote our objectives in the Post 2006 debate. Of course in order to do that we need to draw clear lessons from the past and current operation of the structural funds in Scotland and to use these to inform our future strategies. (comment on PME’s presentation?).
1.1 I am speaking today on behalf of COSLA but more specifically as Chair of the COSLA Task Group on Regional Policy and Enlargement. This group was convened in March of this year and contains representatives of the four regional consortia and a cross section of members and officers from across local government. We submitted a response to the Committee’s call for evidence but I am aware that it was received late and thus there was no opportunity for it to be discussed. I will base my comments today on the contents of that paper.
2. Firstly I would like to pose two questions? Should there be a European regional policy outwith the Accession Countries and those regions in most need after 2006? If so, then what shape should it take? These questions are being posed to us by the European Commission and we need to be in a position to come up with good answers, at least to the first one, by the end of the month.30
2.1 Our starting point in answering this question must be the Future of the EU itself as the two debates are intertwined. How many times do we have to be reminded that people do not often perceive any real benefits from the EU? From the Irish ‘No’ vote to the support for Le Pens anti- European stance it is clear that there is a need to demonstrate the positive aspects of European integration. The funding of projects at a local and regional level creates an important connection between local actors and European policy development. It is a visible and positive manifestation of our membership of the Union.
2.2 In the context of the ongoing debate on good governance in the European Union it seems equally important to connect local authorities and other public bodies with the ‘top-down’ policy making taking place in Brussels and in Member State capitals. A recent good example of this is the ‘Acting Locally for Employment’ initiative which seeks to inform the process of coordinating national employment strategies. However, EU regional policy remains the greatest driver in terms of promoting local engagement in European policy making and transnational cooperation. It has raised awareness of the European dimension. It can and should continue to play this role.
2.3 There are of course many other political and technical arguments for the maintenance of a regional policy for disadvantaged areas within otherwise comparatively wealthy Member States. Economic and Social Cohesion is an important cornerstone of European integration and disparities of wealth within Member States are not declining. There is naturally some concern that the incorporation of new Member States will shift the economic and political centre of EU gravity Eastwards and accentuate Scotland’s peripheral position.
2.4 Furthermore the structural funds have provided the impetus for a broad range of innovative approaches to economic development. Many of these approaches may not have been tackled in the absence of E.U support. Often the sums involved may not be enormous, for example Leader and Urban have been hailed as success stories for their innovative approaches to community involvement, and the fact that they are highly visible.
2.5 Finally the cooperation which takes place under programmes such as INTERREG, EQUAL and the Framework Programme for Research and Technolological development, to name a few, play an important role in disseminating best practice at local and regional level and exploiting synergies in addressing common challenges.
30 27/28 May European Commission Seminar and Workshops on Added Value. UK Delegation includes officers from the Executive and Scottish local government.
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3. At this point I hope I have gone some way towards convincing you that Europe needs a regional policy outwith Objective One! If not then there is of course the additional argument that if we do down the road of a strict 75% of GDP rule and no regional policy beyond this then more or less the only areas eligible will be in the Eastern Europe, some parts of Spain, the ultra-peripheral regions and Cornwall.
3.1 So what shape should a post 2006 regional policy take? Of course all we can do at this point is review the discussions that have been taking place. What is clear is that we need to stop thinking in terms of Objective One, Two and Three. The debate on future options is very broad as you know. It ranges, to mention a few, from ‘polycentric development’ to the ‘menu driven approach’ to ‘regional competitiveness’ and gives us much food for thought. I would like to very briefly refer to some approaches which are currently being floated by various organisations in an effort to influence the direction of the debate.
3.2 The ‘menu driven approach’ has cropped up repeatedly in discussions with the Commission. It has been suggested that the EU could accompany restructuring in areas affected by EU policies. 31Structural assistance could also for example serve to underpin the Lisbon agenda but it could be up to Member States and regions to decide how and where to allocate funding from a European menu. In order to avoid this being renationalisation under a different name however there would need to be an overarching framework within which all actions would operate.
3.3 The CPMR have proposed that detailed consideration be given to the use of ‘regional competitiveness’ as a means of designing a future cohesion policy. There is work underway in the European Commission on this in the context of reports on the Lisbon agenda.
3.4 A more controversial issue surrounds the question of flexibility or room for manoeuvre in the EU’s competition policy. The Commission maintains that it alone has competence in this domain. A review is not due until 2004. Nonetheless with tighter budgets the arguments of wealthier Member States and regions for greater scope in granting domestic regional aids, in return for focusing all EU structural funding in the East and the new Objective One, may gain momentum. Many of the regions arguing for this are regularly at the receiving end of Infraction procedures for granting illegal state aids and there is a valid argument that such an approach would result in unfair competition.
3.5 Finally the ‘polycentric approach’ to sustainable development, championed by the European Spatial Development Perspective (ESDP), and it’s main tool INTERREG, may also an important element of the debate. Local authorities in relevant parts of Scotland are eligible for four INTERREG IIIB Programmes and for the West Zone of INTERREG IIIC. The question here is not about the practicalities of using the ESDP as a means of distributing scarce regional funds. The ESDP is still seen by Member States as predominantly intergovernmental cooperation and major difference between planning processes and concept persist. Despite these arguments there may be benefits of using the ESDP and its Spatial Visions to inform programming.
4. In conclusion
A successful enlargement of the EU will benefit Scotland. It will also increase disparities within the EU and make us appear wealthier in comparative terms.
It is important that we engage in the debate on Post 2006 at an early stage and that we are ready to put forward proposals of our own rather than adopt a ‘wait and see’ policy. Alliances are being formed between local and regional governments and their networks and we must be ready to place this debate firmly in the context of the Governance White Paper and the Convention on the Future of Europe. This time around regional funding negotiations will be much more difficult in the context of enlargement, than during previous budgetary negotiations.
31 An example of this could be industrial restructuring to address the effects of EU commitments in trade agreements. It would be fitting for the EU to support regeneration and reconversion for instance in areas dependant on textiles adversely affected by the forthcoming international trade accord on textiles.
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This makes it all the more important that we identify our allies and influence the direction of the debate in the early stages. COSLA is pursuing this actively and we welcome the support and assistance of the Scottish Parliament.
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Department of Trade and Industry
Future of the Structural Funds
1. The Department of Trade and Industry (DTI) is the lead Department on the European Union’s Structural and Cohesion Funds, which aim to reduce economic and social disparities within the European Union. The DTI plays no direct part in co-ordination and management of the Funds within Scotland. It has been the policy of successive Governments to devolve to the English regions, and as appropriate to Scotland, Wales and Northern Ireland, the responsibility for identifying their own programme needs and implementing them after agreement with the European Commission.
2. The debate on the future of European cohesion policy after 2006 is still at an early stage and very few national governments have so far committed themselves to a particular position.
3. Alan Johnson, Minister of State for Employment Relations and Regions attended an Informal Ministerial Meeting on Regional Policy which took place at Namur in July 2001. The Minister explained that the UK Government’s view is that there needs to be a fundamental review of the Structural and Cohesion Funds. He said that the next reform of the Funds must ensure that they contribute better to the Lisbon agenda of improving Europe’s competitiveness and modernising its economies. In addition, improvements are needed in both the effectiveness of the Funds and the means to evaluate their impact and added value. Also, greater efforts must be made to simplify the Funds and remove unnecessary bureaucracy whilst retaining proper financial control.
4. It is likely that any conclusions on the overall size of the Funds post 2006, or on the detailed rules that will govern them, will only be reached in the context of the wider debate on the next financial perspective that will need to be brought to a close in 2005/2006. DTI intends to use the time available to consult widely within the UK, including with Scotland and the other Devolved Administrations, about what the Government’s approach to the future of the Funds should be.
Regional European Funds and Devolution Directorate Department of Trade and Industry.
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East of Scotland European Consortium
About the East of Scotland European Consortium (ESEC)
1. The East of Scotland European Consortium (ESEC) welcomes the opportunity to respond to this consultation exercise on behalf of its members. ESEC’s members are the councils of: Aberdeenshire, Aberdeen City, Angus, Clackmannanshire, Dundee City, East Lothian, the City of Edinburgh, Falkirk, Fife, Midlothian, Perth and Kinross, Stirling and West Lothian. Aberdeenshire and the City of Aberdeen joined the Consortium in 2001 and 2002 respectively testifying to the growing relevance the Consortium has assumed over the last year.
2. The ESEC area is rich in its diversity and the Consortium represents areas which experience a range of problems. The area hosts 3 of Scotland's 4 largest cities, the largest fishery in the UK, good arable land but extensive remote and upland rural areas. There are also places that continue to feel the economic shock of industrial restructuring. Hence issues such as urban deprivation, rural development, and the future of the Common Agricultural and Fisheries policies are keenly observed within ESEC and we therefore feel well placed to contribute to this discussion.
3. ESEC's key strategic role is to promote and represent the common European interests of its members and more specifically in this instance to influence emerging EU policy and legislation as it affects Local Authorities in Eastern Scotland. In addition, ESEC works closely with other networks who share common interests and positions.
Introduction
4. The East of Scotland European Consortium welcomes the open call by the European Committee into the future of Cohesion Policy and Regional Policy post 2006. It is important that Scotland continues to engage in the debate as well as broadening and deepening it.
5. Local Authorities have a key interest in this debate as over 50% of EU legislation directly affects local government, which, as the most extensive provider of services at the local level, has a vital implementation role and an ability to effectively disseminate information at that level. Unfortunately, EU policy and legislation, particularly during development stage, has been subject to negative media coverage and a distortion of the facts. In our experience, Regional Policy, delivered through the Structural Funds, is the most positive experience of the European political and administrative role for many its citizens and provides the most visible counterweight to the antagonists.
6. The East of Scotland European Consortium embraces the challenges and opportunities that EU enlargement will bring to the current 15 Member States. Not only will Europe grow in size and population but its focus of attention will inevitably shift to restructuring Central and Eastern Europe. ESEC recognises that a significant amount of funds will be required to assist in achieving the aims of cohesion across an enlarged Union.
7. With enlargement the EU's overall average GDP will significantly drop. Scotland will be amongst the more wealthy regions in an enlarged European Union. ESEC is aware that although the overall relative position of the Scottish economy is improved, serious sectoral and structural weaknesses remain in comparison to the rest of the UK and EU15. Although much good work has been done locally, the on-going management of redressing structural weaknesses needs to be continued.
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Cohesion and regional policies after 2006
8. ESEC recognises that a range of options exist for the delivery of Regional Policy in the future and that each of these have their own merit. One option that is currently being promoted is the re-adoption of Regional Policy development by the Member State for areas outside Objective 1. While this may be workable in some areas and provides the promise of some administrative benefits, for other member states, such as Spain or Greece, whose territories may include both Objective 1 & 2 areas in the future, this may result in confusion and division. Would it be possible, or desirable, to allow a multi-pronged approach to the development of Regional Policy in order to satisfy competing preferences? Would it contribute to cohesion? There is also a need to recognise that Regional Policy is intertwined with other EU policy areas such as Employment, Social Justice and Rural Development, to name but three. As such there continues to be a need to promote policy articulation and in order to achieve this, the Commission will continue to have an important role in Regional Policy development.
9. Whatever the degree of input and direction from the Commission, the UK Government or the Scottish Parliament in the development of future Regional Policy, ESEC and its constituent authorities advocate acknowledgement of the roles of government at all levels in this process, in particular, that of Local Authorities, not only in implementation, but the benefit that this ’ground level’ experience brings to policy development. We would seek a partnership approach in this in order to foster greater ownership and co-ordination.
• Different models of Regional Policy management exist, but whatever means is ultimately selected, it is important to retain a European dimension to ensure that this remains systematic and interlocked with complementary policies.
• All levels of government have a stake in the effective development and delivery of regional policy. This process has begun encouragingly with the Scottish Parliament’s open call and we welcome involvement as this debate deepens and propose that policy and implementation mechanisms will be developed on a collaborative basis.
10. The needs of the accession states and the current members, who are the main recipients of Structural Funds at present, have to be balanced. The continuing existence of structural challenges within the EU15 has to be accepted and the objective to achieve cohesion through the development of regional economies rather than regression towards a lower common denominator should be vigorously pursued. However, this needs to be achieved within the reality of constrained, but not non-existent, budgets. It is important therefore, to ensure that funding which is available is used effectively.
11. For Scotland, the way forward could be through the establishment of an ‘Integrated Regional Development Fund’. This could provide a co-ordinated mechanism for the targeting of remaining Structural Funds and funds which may become available through national initiatives. Co-ordination at a sub-member state (Scotland) level and programming at the sub-regional level could deliver a broader, yet more cohesive approach to regional development. This integrated policy framework would be developed in close consultation with the Commission, thereby stressing the European dimension of regional development.
12. Some EU programmes already offer useful models, i.e. LEADER +, ESF Objective 3 and RDR although the latter’s potential has not yet been fully realised. Local Authorities are heavily involved with the delivery of projects and would continue to remain key stakeholders in this process. A good example of local accountability can be found in the delivery of the LEADER+ Programme. Within a co-determined framework at Scottish level, the Local Action Groups are in charge of implementing the LEADER strategy on the ground. Local Action Group representatives also feed back at the Scottish Executive level. Thus, all levels are contributing mutually to the democratic process. This has led to a greater sense of ownership by "people on the ground".
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13. This kind of successful cooperation between the sub-national and the sub-regional levels should also be placed into the wider context of the governance debate, which strongly underlines current European thinking - it is good governance put into action with clear, tangible results and for the benefits of all stakeholders involved.
• Scotland’s economic position has greatly improved with vital assistance from the Structural Funds. Nevertheless, some challenges remain and these should continue to be tackled in order to pursue sustainable cohesion.
• Existing policies should be reviewed with the aim of creating a broader, more cohesive policy framework.
• Within the context of decreasing budgets, an "Integrated Regional Development Fund" should be considered to maximise the efficacy of available funds.
• Examples of good practice should be considered and borrowed from to improve local ownership and accountability in future.
• The significance of the Governance agenda should be recognised in this process.
14. In consideration of the broader cohesion agenda, ESEC supports the concept of balanced spatial development as set out in the ESDP. There is recognition that with enlargement and a drive towards wider cohesion, the geographic nucleus of Europe will shift with the accompanying threat of further peripheralisation of those areas already at the territorial margins of Europe. The instrument which has been developing over a number of years to address these spatial issues, is the INTERREG Community Initiative. This is seen by some in mainland Europe as viable alternative to mainstream Structural Funds post 2006. While this may provide options for many, Scotland’s lack of land borders with other member states currently limits the range of activity that may be undertaken and the amount of funding available to it. INTERREG should not be seen as a single alternative to the current system of funding but nevertheless, could play a more significant for Scotland in future if reconfigured. ESEC recommends that strategic discussions take place with the UK Government and with stakeholders in Scotland to bring forward proposals as to how to level this playing field in future programmes, in the interests of balanced spatial development.
• The Community Initiatives cannot be seen as the sole response to continuing structural challenges.
• Within the context of diminishing funds, Scotland should not be disadvantaged by technical constraints embodied in the Community Initiatives.
• The UK Government should support moves to make the initiative more relevant to Scotland and the rest of the UK in future programmes.
15. We feel that these comments have been made in the spirit of progressing the discussion and in recognition of the ephemeral nature of current conditions and opinion. We would welcome the opportunity to contribute further to this iterative debate and once again thank the European Committee of the Scottish Parliament for this opportunity.
42 European Committee, 3rd Report 2002 - ANNEX A
Scottish Environment Protection Agency
Introduction
1 This submission to the above inquiry focuses on activities to mainstream sustainable development within the European Structural Funds implementation process in Scotland. It details the Scottish Environment Protection Agency’s functions in relation to the European Structural Funds and provides an overview of activity currently being undertaken to promote sustainable development within the context of the Structural Funds in Scotland. Against the backcloth of impending enlargement of the European Union, the submission goes on to identify a number of issues that it may be advisable to address within a Scottish context as regards the pursuit of sustainable development.
SEPA and the European Structural Funds
2. The main aim of SEPA is the delivery of an integrated system of environmental protection across Scotland in such a way as to contribute to the Scottish Executive’s goal of sustainable development. This, in turn, resonates strongly with what the Treaty of Amsterdam identified as an important role for the European Union’s financial instruments in pursuing sustainable development. It stated:
The Union’s financial instruments are required to work, simultaneously and in the long term interest, towards economic growth, social cohesion and the protection of the environment; in other words sustainable development.
The importance of this role is further emphasised by the regulatory requirement32 that sustainable development and equal opportunities be mainstreamed as horizontal themes across European Structural Funds programmes for 2000-2006.
3. Moreover, as the Scottish Executive’s paper, Sustainable Development and Structural Funds Programmes in Scotland: Key Messages, notes:
…the text of the Regulation on Structural Funds places a particular emphasis on protection and improvement of the environment in the context of sustainable development. Consequently we can expect to have to give particular emphasis to the extent to which our approach to sustainable development meets environmental concerns when assessing overall performance on sustainable development in the Scottish programmes.
4. The contribution of competent environmental authorities such as SEPA, regarding the pursuit of sustainable development, has been formally recognised by successive regulations governing the implementation of the European Structural Funds. Indeed, it is due to the linkages between environmental protection, economic growth and social cohesion that SEPA (along with Scottish Natural Heritage) has played an important role in the implementation of European Structural Funds in Scotland over a number of years. The terms of this role are set out in an agreement with the European Structural Funds Division. In essence, it requires SEPA and SNH to contribute advice on strategic issues concerning the planning and delivery of the European Programmes in Scotland, including Programme policies, plans, reviews and delivery mechanisms. Consequently, SEPA provides representation on a range of European Partnership Committees throughout Scotland. The Agency has also provided a funding contribution towards sustainable development mainstreaming activity at the local level within a number of these Partnerships. Furthermore, SEPA has developed a joint initiative with SNH to fund a European Partnerships Officer, located within its Corporate Office. The European Partnerships Officer’s role is to provide sustainable development mainstreaming advice and assistance to the various European Partnerships, the Scottish Executive and other interested parties.
32 Article 1 of Council Regulation (EC) No. 1260/1999.
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Cohesion Policy, the Structural Funds and Sustainable Development in Scotland
5. The recently published 2nd Cohesion Report by the European Commission identified the pursuit of economic and social cohesion and protection of the environment as complementary objectives. A key challenge facing an enlarged European Union after 2006 will focus on how it continues to balance these objectives in the face of competing demands on the part of accession countries. In turn, this has potential implications for the future of the Structural Funds in Scotland as regards provision of resources in the post 2006 period. Specifically, there is uncertainty as to the level and targeting of Structural Funds resources within Scotland after the current programming period ends.
6. In the face of such uncertainty, it may be advisable to consider what insights can be drawn from current activity in relation to mainstreaming sustainable development within the Structural Funds. The remainder of this submission does this and goes on to highlight some issues which may require consideration after 2006.
7. The European Structural Funds have been acknowledged as a useful test-bed for mainstreaming sustainable development principles. There are at least two reasons for this. Firstly, there is a diverse range of projects (encompassing social, economic and environmental aspects) which the Funds are collectively able to embrace. Secondly, there is a strong partnership element associated with the implementation process. This element can (and does) enable robust linkages to be made between various aspects of sustainable development within project contexts.
8. There is evidence that European Partnerships in Scotland are committed to addressing the issue of mainstreaming sustainable development within the context of the European Structural Funds. Indeed, each of the Partnerships has mechanisms in place to assist in the mainstreaming process. Most obviously, these include the local horizontal themes forums convened by the various Programme Management Executives (PMEs) and designed to act as a focal point for co-ordinating and advancing the mainstreaming agenda within Partnerships. In turn, this agenda has generated a range of activities designed to promote the concept of sustainable development within projects financed across the spectrum of the European Structural Funds. Such activities have included:
• the production of a range of sustainable development guidance; • awareness raising events and training programmes in sustainable development for a variety of audiences including project applicants, PME staff and Advisory Group members; • the establishment of sustainable development forums within the Programmes, engaging key partners.
9. The benefits of such initiatives inevitably emerge incrementally. However, a number of Partnerships report greater understanding regarding the relationship between sustainable development and project management amongst advisory groups and applicants. In turn, this has led to the generation of projects which display a greater affinity with the principles of sustainable development than was the case in previous European Programmes. Moreover, there is now a reservoir of good practice sustainable development case-studies held by Scotland’s European Partnerships on an individual basis. These include:
• The incorporation of environmental sustainability elements into training and learning packages;
• Minimising the environmental impacts of construction projects through use of brownfield sites;
• Encouraging social inclusion by linking environmental projects to community development.
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10. These initiatives are welcome and indicate a heightening of awareness as regards the theory of sustainable development and its translation into project practice. However, there is still a need to ensure that interested parties continue to be supplied with adequate support to enable them to make informed decisions in this regard. Moreover, European Partnerships should retain and, where appropriate, exercise powers of sanction (for example, in the form of refusal to fund) in instances where sustainable development principles are demonstrably not being incorporated into project applications.
11. In addition to the above, it would be useful to develop an increasingly sophisticated set of tools for monitoring impacts in relation to projects which have been financed within the context of the Structural Funds in Scotland. This, in turn, would be beneficial in generating data from which to draw lessons in relation to Programme implementation and applying these lessons to either successor programmes or other policy environments designed to enhance cohesion.
12. If, as seems likely, Scotland is faced with reduced levels of resources derived from the Structural Funds after 2006, it would be advisable to consider the structures through which sustainable development can be pursued at the regional level. Moreover, it would also be worth exploring how experiences regarding mainstreaming sustainable development in relation to the Structural Funds could be transferred and applied to potential replacement structures. Finally, Europe-wide comparative analysis suggests that Scotland provides a useful case-study in how to address sustainable development in an effective way within the Structural Funds. As such, it would be useful to explore ways in which to share the Scottish experience with accession countries as appropriate.
45 European Committee, 3rd Report 2002 - ANNEX A
Scottish Natural Heritage
Summary of Key Points
1. Cohesion policy should take greater account of environmental variation across the EU and its implications for development.
2. The themes of urban, rural, and natural handicaps are likely to be those of most relevance in Scotland in the future.
3. Cohesion policy should help to address the question of environmental justice in areas of degraded environment.
4. Mechanisms for the support of cohesion need to be better integrated, in particular by developing closer links between the EU Structural Funds (ESFs) and the Rural Development Regulation (RDR) of the CAP.
5. Cohesion in policy should also support the delivery of policies for the environment and natural heritage, including EU policy for protected areas of high biodiversity value through the sustainable development of areas of natural handicap.
ESFs and the natural heritage
SNH has responsibilities for securing the conservation and enhancement of the natural heritage, and fostering its understanding and enjoyment. SNH is now involved in ESF programme committees at all levels, as well as acting as an adviser to the Scottish Executive on aspects relevant to the natural heritage. The main relevance of the Funds to the natural heritage is as follows:
• they can help to ameliorate poor environmental conditions and recreational opportunity for people mainly in urban and industrial areas (environmental justice); • they contribute to funding in rural areas for the enhancement of the natural heritage and the facilities to enjoy it; • they assist infrastructural and business development that may have environmental impacts, both positive and negative.
For these reasons SNH has taken a strong interest in the ESF Regional Programmes, and has particularly contributed to the incorporation of sustainable development as a key theme in all the current Programmes. This is important both from the point of view of promoting the interests of the natural heritage, and limiting the potential negative impact of certain types of development. In support of this SNH and SEPA are jointly funding a project officer who is working with the Programme Executives and other partners to promote a wider understanding of the environmental dimension of sustainable development and the contribution that these programmes can made to it. The partnership structure associated with the ESF measures in Scotland provides a good opportunity to make practical progress on this issue, and will provide valuable experience which can be applied to other development programmes.
Cohesion policy
EU cohesion policy and the EU Strategy for Sustainable Development should be mutually supportive. The Strategy recognises that economic growth, social cohesion and environmental protection must go hand in hand, so in our view a clearer environmental purpose should be included in the main cohesion policy.
The Commission alludes to the introduction of environmental accounting measures in the Cohesion Report, but does not expect to make rapid progress in developing these. It has also taken steps to ensure the mainstreaming of sustainable development within ESF Programmes. These steps are welcome, but there is a need to develop a clearer view of how EU cohesion is influenced by environmental factors.
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It is evident that across the EU there is a range of environmental conditions, from degraded areas to those with high quality natural resources. The latter are key areas in the context of EU environmental policy, particularly the Natura 2000 network of areas protected under the Habitats and Birds Directives. Development opportunities at both ends of this spectrum are constrained, and as cohesion is about balanced territorial development it should surely address the regional development issues that arise from these environmental considerations. With appropriate assistance both types of area can play a part in European development, and can contribute their special qualities. Scotland includes areas at both extremes, from the post-industrial legacy of despoiled environments in the central belt to certain parts of the Highlands and Islands where over 50% of a local area may be protected under Natura 2000.
The most relevant themes for the future of the Funds from the natural heritage point of view thus coincide with the three themes most likely to provide funding in Scotland post-2006: natural handicaps in remote, maritime, and mountainous areas; the diversification of rural areas; and urban issues. These are considered in some detail in the latter half of this paper.
Integration
A further aspect of cohesion policy that is important at both EU and Scottish levels concerns the link between the CAP and ESFs, and the associated co-ordination of work within the European Commission by the Agriculture and Regional Directorates, and within the Scottish Executive by the Rural Development Department and the ESFs Division. One of the main themes of the Forward Strategy for Scottish Agriculture is the need to strengthen the links between agriculture and other elements of the rural economy. This will involve administrative and institutional changes at the Scottish, UK and European levels so as to achieve effective internal co-ordination.
We have recently made a submission33 to the Scottish Parliament Rural Development Committee Inquiry into Integrated Rural Development, in which we strongly advocated more integration of rural support, including that provided through ESFs and CAP. The Highlands and Islands Transitional Programme has led to some degree of integration of EAGGF and ERDF expenditure through the joint programming process. But outside the Highlands and Islands the Executive has not adopted a joint programming approach, with the result that there is little co-ordination of Objective 2 measures with the RDP and its related state aids. As the Rural Development Regulation becomes an increasingly important strand of EAGGF support in rural areas, and the role of the ESFs declines, it will be important to maximise the benefits by integrated planning and delivery. There are already examples of other EU member states taking such an approach, particularly in France. The proposal in the Forward Strategy for Scottish Agriculture for a system of land management contracts offers the opportunity to develop a substantially better-integrated framework of support.
Urban needs
Substantial parts of urban Scotland suffer from the legacy of an environment damaged or polluted by heavy industry. These areas are often associated with low environmental quality and social deprivation, poor access to open space, low incomes, low rates of access to private transport, high unemployment, and a failure to attract new businesses. Such communities are characterised by a high level of social exclusion. The role of low quality environments in creating and perpetuating this situation has been recognised as requiring attention - the environmental justice agenda.
ESF programmes have played an important role in regenerating such areas in the past, and should continue to do so. Scottish Executive social inclusion indicators, coupled with information that still needs to be gathered on environmental quality, can provide pointers to targeting investment.
SNH has established two major programmes that help address such issues. The Greenspace for Communities programme aims to enhance the green environment close to where people live, and to do so by working closely with local communities. Paths for All aims to establish path networks around towns, facilitating access and recreation, travel without vehicle, and healthier living. Both are practical approaches with special relevance to urban areas with a degraded environment. Work of this type generates social and economic benefit through training schemes and local employment
33 Available at http://www.snh.org.uk/pdfs/strategy/rural/IRD_enquiry.pdf
47 European Committee, 3rd Report 2002 - ANNEX A in projects, but also in the long term by creating the more attractive environments which attract good quality housing and business investment.
The sustainability of urban areas depends crucially on energy use, transport patterns and waste management. A high priority is attached to securing more sustainable practices in each of these areas in urban areas, and the Scottish Executive has developed indicators which will enable these to be tracked in individual urban areas. It would be appropriate for the ESFs to invest in those areas where developing sustainable practices presents an opportunity to overcome current economic and social barriers, making an area more marketable for future business.
Rural diversification
There has been a belated recognition that the rural economy, and rural communities, are much less dependent on agriculture than they used to be. As a result there is widespread acceptance of the need to target rural support at a wider range of businesses and services, and to move agricultural support towards payment for non-market social and environmental benefits. CAP reform has moved in this direction through the creation of the “second pillar” of support, channelled through the Rural Development Regulation (RDR). The RDR is welcome, but it is at an early stage of development at both EU and national levels and many improvements could be made to it. SNH will continue to contribute to this important aspect of rural policy and practice.
The RDR is an important contributor to cohesion, but the needs of many rural areas are unlikely to be met by the RDR alone. ESFs can play a complementary role, for instance in the development of rural towns, rural infrastructure, and rural training. We are not certain to what extent rural Scotland is likely to be an EU priority under this theme, but wherever rural ESF Programmes are available they could play a positive role. To do so they should be based on a sustainable development approach, and should be integrated with other rural support measures.
Natural handicaps
This definition could come to be the most relevant for ESFs in rural Scotland. SNH is a member of Euromontana, which promotes the interests of mountain regions and has commissioned research on an EU definition of mountain areas. The research suggests that the difficulties of climate, communications, etc. must be defined by a variety of physical criteria. If this is done, rural parts of Scotland both north and south of the central belt could qualify as mountainous. In addition the remoter parts of mainland Scotland and the islands are also prime candidates for classification as remote, archipelagos, or islands. All these categories would be consistent with the concept of natural handicap, and cohesion policy could lead to special assistance being made available to them.
Scottish areas of natural handicap, correspond closely with the areas of highest natural heritage value. They are the location of high densities of Natura 2000 sites, and thus contribute strongly to EU policies for habitats and species. Sustainable management of these areas offers opportunities for employment and rural development linked to the management and enhancement of the natural environment, and with the associated tourism and recreation. It also imposes strict development criteria. From this point of view, cohesion policy has an important role to play in these areas, and could assist them to play their full part in delivering environmental benefits for society as a whole.
The EU policy for areas of natural handicap is actively evolving. If the end result is special assistance for such areas, and if it is planned and delivered on the basis of sustainable development, in tandem with the RDR, then the result could be of significant benefit to Scottish rural communities and their natural heritage. We would welcome that, and we plan to contribute further to the policy debate.
Conclusions
• The ESF partnership approach and treatment of sustainable development as a horizontal theme have been important innovations and have assisted the integration of environment with social and economic issues.
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• However there is still a need to bring environment out more strongly as a cohesion issue, and to define ESF criteria that will identify environmental extremes: degraded areas, and areas with responsibilities for the management of Europe’s best natural heritage.
• There is a need for further progress to align the RDR and the ESFs in a more integrated approach to rural development.
• The outlook from 2006 is that rural, urban, and natural handicaps are the most relevant cohesion issues from a Scottish perspective.
• The urban theme is important for its relevance to environmental justice - there is scope for this to be addressed through ESF investment, which could include investment to develop existing natural-heritage related schemes such as paths around settlements and urban greenspace.
• Under the rural theme there is a particular need to integrate the RDR with other types of rural development and policies for the rural infrastructure.
• Policy for areas with natural handicaps is currently under development, driven at the EU level by the prospects for enlargement. There is scope for a new approach to these areas more closely linked to their high quality natural heritage and the delivery of the EU biodiversity, social and environmental policies.
49 European Committee, 3rd Report 2002 - ANNEX A
South of Scotland Alliance
Introduction
1.1 This paper sets out the views of the South of Scotland Alliance on the future of the European Union’s Cohesion Policy and Structural Funds to the European Committee of the Scottish Parliament. The South of Scotland Alliance comprises Dumfries and Galloway Council, Scottish Borders Council, Scottish Enterprise Dumfries and Galloway and Scottish Enterprise Borders.
1.2 The paper outlines:
• The general significance of European Cohesion and Structural Funds policies for the development of rural areas • The importance of European Structural Funds for economic development in the South of Scotland • The justification for continued European regional and rural assistance to rural areas • The needs of the South of Scotland
European Cohesion and Structural Funds policies for the Development of Rural Areas
2.1 Over the years European Cohesion and Structural Funds policies have provided considerable benefits to rural areas such as the South of Scotland. The benefits are that they have:
• Given strong recognition to the need to address the economic problems and challenges of rural areas. This has considerably raised the profile of rural development issues. • Taken a robust and view of the factors that cause structural economic difficulties in rural areas. They have recognised that economic fragility is not just measured by unemployment but also covers factors such as an out-migration of young people, sparsity of population, population loss, low wages, a relatively low Gross Domestic Product per head, and a narrow range of industries. • Involved the promotion and implementation of ‘an evidence based’ medium term programme approach to development based on robust monitoring and evaluation systems. Partnership, inclusion and sustainability have been at the ‘heart’ of this approach. This approach has considerably strengthened economic development mechanisms in rural areas such as the South of Scotland. • Taken a holistic approach to rural economic development through supporting programmes related to community development and the environment as well as business development.
In brief there has been far greater awareness of the development needs of rural areas by European Regional Policy compared to National Regional Policy.
European Structural Funds and the South of Scotland
3.1 The benefits of the Cohesion Policy and Structural Funds can be seen in the South of Scotland. The region gained access to significant resources from the European Structural Funds programmes from 1994 onwards. This funding has come from:
• The Borders and Dumfries and Galloway Objective 5b Programmes 1994 - 1999. • Community Initiatives 1994-1999 such as the Leader 11, Retex, Rechar and Pesca Programmes, and more recently. • The South of Scotland Objective 2 Programme 2000 - 2006, the Lowland Scotland Objective 3 Programme 2000 - 2006, and the Leader + programme.
3.2 The Structural Funds have been used to support many economic development and vocational training projects undertaken by public agencies such as Councils, Enterprise Companies,
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Tourist Boards, Further and Higher Education institutions and a range of voluntary bodies. Indeed EU funding accounts for significant proportions of the annual budgets of the Enterprise Companies and Tourist Boards as well as the economic development and regeneration budgets of the Councils.
3.3 The types of projects supported have included:
• Business support schemes such as marketing, exporting, financial and technological initiatives • Business infrastructure projects including the provision of business premises and sites and improvements to industrial areas • Tourism development projects such as improvements to visitor interpretation and information, and the enhancement of tourist attractions • Environmental support including access, interpretation and habitat improvement projects • Training projects such as the provision of training facilities, guidance support and schemes involving the improvement of the skills of employees, the unemployed and socially excluded • Community Development projects such as enhancing the capacity of community and voluntary groups through training and advice
3.4 It is the breadth of initiatives assisted by European funding that makes this type of support both innovative and central to the development of the South of Scotland. The mix of projects and inter-relationships go considerably beyond the traditional ‘trickle down’ interventions of approaches to economic development.
3.5 It is estimated that the Dumfries and Galloway and the Scottish Borders Objective 5b programmes 1994-1999 alone created over 200 jobs and assisted over 5000 businesses. This has made a considerable positive economic impact on the South of Scotland and has assisted in overcoming difficulties experienced in the agriculture, textiles and electronics sectors during that period.
The Need for Continued European Regional and Rural Development Assistance to Rural Areas such as the South of Scotland
4.1 It is vital that European Cohesion Policy and the Structural Funds continue to take account of the development needs of rural areas such as the South of Scotland. These rural areas aim to improve their local economies and to maintain a balanced population by providing a reasonable range of job opportunities.
4.2 These rural areas are relatively distant from the economic influence of cities. A map produced by the Dutch Spatial Planners for the European Commission’s first policy statement on Spatial Planning in 1997 entitled ‘European spatial development perspective - First official draft’ indicated that a large part of England was included in the economic sphere of city areas. However there were significant rural areas in Scotland including most of the South of Scotland outside of these spheres.
4.3 The development of a sustainable local economy in a rural area can be more difficult than in city areas. This is because cities are considered to be the main motors of economic growth in the market economy. Cities generate large amounts of economic activity and have a diversified range of employment including higher paid service jobs in sectors such as financial services and research and development.
4.4 Due to the greater range and type of industries in cities, they are much less exposed to economic downturns, in particular industrial sectors, and changes in the business cycle. For example, if one industry experiences difficulties, there will be others that remain stable or enjoy an upturn in profits.
4.5 In comparison, many small towns and villages in rural areas have a limited number of businesses and some depend for employment on only one major industry. The result is that when businesses undergo economic difficulties resulting in job losses, there are few if any alternative job opportunities for the unemployed. These problems are compounded by the
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dependence of many small and medium sized enterprises on the agriculture and fishing which are undergoing serious structural changes.
4.6 Also rural businesses tend to be in a difficult competitive situation because of limited local markets, exposure to take over, and a relative lack of business services.
4.7 This concern has been backed up by research carried out by the Federation of Small Business (FSB) in 2000. The FSB was concerned that there was no specific small business definition of rural and remote areas. The study identified a need by small businesses to access a significant number of diverse wholesale businesses on a face to face basis. The wholesale businesses that were identified as essential were those that supplied goods and services to small business on a regular or emergency only basis. The findings were that small businesses located in rural areas more than 25 miles from city areas were at a competitive disadvantage in accessing such services. This included much of rural Scotland, including a large part of the South of Scotland.
4.8 The difficult competitive situation for businesses in rural areas is highlighted by market failures in the provision of business premises and sites by the private sector, as shown in the South of Scotland. It is thought the main reason for this lack of private sector activity is the relatively low levels of demand, which increases the risk of high void rates and generally lower rates of return.
4.9 Other economic issues that are common to the rural areas include:
• A high dependency on primary employment such as agriculture and fishing • A relatively low proportion of employment in services • Low wages • Low investment per head • A relatively low Gross Domestic Product (GDP) per head • An ‘imbalanced’ population resulting from the out-migration of young people • A high elderly dependency ratio • Population loss in certain communities
4.10 Finally, rural areas are very sensitive to global economic and other external factors such as rapidly changing world trading conditions and the problems in agriculture, including those that have arisen from BSE and the Foot and Mouth Disease outbreak. This means that the assumptions made when preparing European Programmes such as Objective 2 are no longer accurate. It is becoming increasingly evident that long-term and substantial public and private investment is required to support the development of rural areas.
The Needs of the South of Scotland
5.1 The rural economic issues outlined above are clearly evident in the South of Scotland. They are as follows:
• Narrow range of industries – The relatively high proportion of employment in manufacturing including textiles, rubber and plastics, food and electronics. • Primary sector dependency – Around one fifth of the GDP is linked to agriculture and there is a significant dependency on fishing in some local communities such as Eyemouth. • Relatively low employment in services – An under-representation in service employment particularly banking and finance. • Low wages – The South of Scotland is amongst the ten poorest paid areas in Great Britain. • Low investment per head – Average manufacturing capital expenditure per employee is estimated at only two thirds the Scottish average in 1997. • Low GDP per head - Compared to the Scottish average of 100, the GDP per index of head in 1998 was 79 in the Scottish Borders and 88 in Dumfries and Galloway. This compares with above average levels in the city and some of the conurbation areas around Edinburgh, Glasgow and Aberdeen.
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• Out-migration of young people - The highest rate of loss of young people in Scotland, after the Highlands and Islands. • High elderly dependency ratio – The South of Scotland has the one of the highest proportions of people over 65 in Scotland. • Population loss – Parts of the South of Scotland are experiencing a loss of population. These areas include the Western Dumfries and Galloway, Upper Nithsdale, and the Hawick area.
5.2 These issues are currently being addressed by the Council, Enterprise Agencies and other partners in the South of Scotland with the assistance of European Structural Funds programmes. However as mentioned above it is a long-term process. The development focus of the South of Scotland must be to create strong local economies. To carry out this task continued access is required to the EU Structural Funds.
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West of Scotland European Consortium
INTRODUCTION
The West of Scotland European Consortium welcomes this opportunity to express its initial views on the future of EU Cohesion Policy after 2006.
In its workplan for 2000-2003, the Consortium identified the topic of EU Regional Policy as its top priority. This includes activity related to the future operation of the Structural Funds as well as the delivery of the current programmes for which the West of Scotland is eligible.
Accordingly the Consortium has played an active role on this matter, particularly in the period since the publication of the Second Cohesion Report in January 2001. Part of this work has involved analysing the current economic situation of the West of Scotland in comparison to the rest of Scotland, the UK and the EU. Most of the data for this analysis is derived from the Second Cohesion Report and the Commission’s Progress report on Economic and Social Cohesion, published on 31st January 2002. This analysis is attached to this report.
THE RATIONALE FOR COHESION POLICY WITHIN THE EU
The commitment to reduce economic disparities within the European Community/Union dates back to the original Treaty of Rome in 1957. This legal commitment has strengthened in the period since then, notably with the adoption of the Single European Act in 1986 and the Maastricht Treaty of 1992. In the context of these treaty changes the structural funds have been created and their budgetary significance grown considerably.
After agriculture, expenditure on Cohesion policy is now the most significant element of the EU budget and accounts for nearly one third of total EU planned spending over the 2000-2006 period.
The main factor influencing the debate about the structural funds after 2006 is the prospective enlargement of the EU, particularly to include the countries of Central and Eastern Europe. As agreed at the Laeken European Council in December 2001, a target date of 2004 has been set for the accession of up to ten new Member States. The Consortium recognises the economic and other benefits to the whole EU arising from a successful enlargement and would wish to confirm its support for this process.
As the Commission’s reports indicate, an expansion of this kind will markedly widen regional economic disparities within the EU, since almost all the applicant countries, in particular those of Central and Eastern Europe, are much poorer than those in the current EU. In face of this situation, it would be perverse indeed if the EU were to give lower priority (and share of relative budgetary resources) to cohesion policy in the period after 2006 than under the current financial framework.
THE ROLES OF THE EU AND MEMBER STATES
Clearly there will be a major shift of structural fund resources to the regions of Central and Eastern Europe following Enlargement. Given the economic situation in these areas, this is logical and the Consortium recognises the legitimate claims that such regions will have for substantial financial support from the EU after 2006.
This had led to the issue of the so-called “renationalisation” of regional policy being raised. It is argued that for the more prosperous Member States in EU 15, it would be more efficient for structural funds to be given up and instead regional economic policy to be delivered at Member State level through “domestic” budgets.
While the Consortium understands the appeal of this reasoning, it has serious reservations about such an approach since: a) the scope for Member States to undertake regional economic development is in any event limited by the Treaties’ requirements on competition and state aids. These are required
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since otherwise a wasteful “subsidy” war could be initiated which would likely be regressive in impact – wealthier regions could offer higher subsidies; b) in effect the burden for paying for EU enlargement would be borne by the less prosperous parts of the richer Member States; c) there would be a paradox in that severely disadvantaged areas within otherwise prosperous member states would not be able to access structural funds whereas wealthy areas in the lagging regions of poorer Member States could; d) the transnational aspects to regional economic development could not be supported. For example the current round of Community Initiatives, especially INTERREG were devised in part to enable cooperation and the transplanting of innovative approaches to economic development across the EU; and e) structural fund intervention in the deprived areas within EU member states is a demonstration of the relevance of the EU, not just in the communities directly assisted but to the wider population.
In summary, the Consortium believes that the responsibility for economic regeneration needs to be shared and involve the EU, the Member State, devolved administrations and regional actors (including local authorities).
THE DEFINITION OF AREAS ELIGIBLE FOR ASSISTANCE
In his speech at the conclusion of the Cohesion Forum in May 2001, Commissioner Barnier outlined a possible framework for designating eligible areas for structural fund assistance after 2006. He envisaged support is envisaged for three types of area.
Firstly there are regions whose development is lagging very far behind the EU average. These will primarily but not exclusively be located in the new Member States.
Secondly there are regions within the EU 15 whose convergence with EU averages after Enlargement will be apparent rather than real. This situation will arise because an expansion from EU 15 to EU 25 is expected to lower average GDP per head (the Commission’s preferred indicator of economic health) by around 13 percentage points. This will mean that many regions whose GDP/head is between 60% and 75% the EU 15 average (the latter being the current threshold for “Objective One” status) will have a GDP in excess of 75% in the context of EU 25, even though there is no actual improvement in economic performance.
Finally there are areas which face specific structural problems associated with:
• urban deprivation; • fragile rural economies; • physical features (population sparcity, insularity, mountainous terrain etc); and • industrial reconversion.
No part of the West of Scotland European Consortium area is presently eligible under Objective one and it so it is very unlikely that any part of the region (using the Commission’s “NUTS 2” classification) will fall into either of the first two categories of region. The primary area of interest for the Consortium lies therefore in the third type of region.
If the practice from previous structural fund reforms is maintained, it is likely that the geographical units used to determine eligibility for this third type of region will be smaller than the NUTS 2 classification. However based on the experience of the preparation of the current Western Scotland objective two programme, there are benefits in planning assistance for eligible areas in a wider regional context.
It is also important to note that, at this lower geographical level, comparable data across the EU are not generally available.
For this reason the Consortium supports the concept of “indirect zoning”. This would mean, in effect, that Member States should be given the responsibility for selecting areas. However this selection should be undertaken in a transparent manner according to clear indicators
55 European Committee, 3rd Report 2002 - ANNEX A for which comparisons are possible within the Member State and which are capable of verification.
In the absence of any alternative proposal there would have to be a population ceiling established for each Member State – as happened with Objective Two coverage for the 2000-2006 period. In addition the principle used on that occasion of the “safety net” should be maintained. This would limit the extent of cuts in eligibility and would mean that the burden of reduced coverage would not be borne disproportionately on one Member State (or small group of Member States). The actual level at which the safety net would be placed need not necessarily be the same as that used for the 2000-2006 period.
In terms of the “mix” of types of area (rural, industrial, urban etc) to be identified this should also be entrusted to the Member State (with the active participation of the devolved administrations in the UK context). There should be no prescribed proportions set at either Member State or EU level. This contrasts with the current objective two regime, in which the Commission set percentages, albeit “indicitavely”, at EU level for population coverage the four strands of Objective two.
TRANSITION ARRANGEMENTS
Another innovation of the 1999 reform was the introduction of transitional support for those areas that no longer met the relevant eligibility criteria. It was argued that a sudden cessation of assistance could undermine the impact of past support and not enable “exit strategies” to be implemented. Clearly there should be evaluations of the effectiveness of such support under the current programmes but the logic for such support remains the same. Accordingly, the principle of transitional funding should be retained for the period after 2006 for those areas which were eligible for the full 2000-2006 programming period and which do not meet the criteria for assistance for the subsequent period. The length of the transition period and the intensity of funding would of course not necessarily be the same as is currently the case.
THE FUTURE OF OBJECTIVE THREE
The Consortium notes that the greater part of the debate on post 2006 Cohesion Policy has focussed on those structural funds which are geographically targeted. However more resources are allocated to Objective three (which operates throughout the EU with the exception of current and transition Objective One regions) than to Objective two in the 2000-2006 period. Objective three assistance is primarily used to support the objectives of the European Employment Strategy and the National Employment Action Plans.
EU Enlargement will greatly increase the pressures on the resources available for cohesion. Accordingly, there needs to be a debate, informed by evaluation data, on the relative effectiveness (in terms of economic impact and visibility) of the spatially targeted interventions typical of Objective two or the target group (eg long term unemployed) approach used in Objective three.
SIMPLIFICATION
Each successive reform of the structural funds has had the avowed intention of simplification but in practice the process has become much more complex and bureaucratic. One option that should be explored is the merging of the structural funds to create one fund governed by one regulation. To some extent this approach is being piloted under the current set of Community Initiatives: for example under the European Social Fund financed EQUAL Community Initiative activities normally funded by the European Regional Development Fund can be eligible for ESF assistance.
MONITORING AND EVALUATION
The debate on the structural funds has hitherto focussed on issues of resources and eligibility criteria and it is simply not realistic to expect this situation to change over the coming years. However it is important to pay attention to other issues. As well as discussing how much money
56 European Committee, 3rd Report 2002 - ANNEX A should be allocated to the structural funds and where these should be spent, consideration also needs to be given to the uses to which they are put.
In this connection, the Consortium is aware that the UK Government wishes to evaluate the impact of structural Funds programmes as part of the preparations for the post 2006 negotiations. The Consortium welcomes this proposal insofar as it leads to improvements in programme quality and delivery, not just in the UK but in the wider EU. Indeed the lesson learnt may be valuable for regions in the applicant countries. The Consortium would be concerned however if the purpose of these evaluations was to justify the cessation of structural fund assistance in Scotland and the wider UK. Rather the aim should be to learn lessons for future programmes.
OTHER EU POLICIES
The Cohesion Report rightly points out the other EU policies also have an impact on economic and social cohesion within the EU. These include the Common Agricultural, Research and Development, Environment and Transport policies. The CAP is, in expenditure terms, by far the most significant of these and it will be important for Scottish interests to make a full input in the parallel debate on the CAP reform required by EU Enlargement.
However the Consortium would like to draw particular attention to the EU’s competition and State Aids policy. As the Second Cohesion Report states:
“Given its effect on the regional distribution of economic activity and income, the control of State aid will remain a key instrument of Community cohesion policy…. Strict control of State aid should therefore be regarded as an essential complement of Structural Funds support for the less favoured regions.” (page 80)
The current arrangements for “national” regional aid also cover the 2000-2006 period and a new regime will require to be put in place after 2006. In essence there are two issues: a) geographical coverage; and b) aid “intensities” (ie the maximum proportion of project funding that can be publicly subsidised.
Over the 1998-2000 period there was a review of the assisted area map in the UK (and indeed in the other Member States of the EU. Regions falling below the 75% per capita GDP threshold were automatically eligible and the remaining coverage was subject to a population limit set out by the European Commission. This was calculated by using a complex formula. The two economic variables used were GDP per head and unemployment at the “NUTS 3” geographical level. The final population threshold was derived by comparisons both within the Member State and in relation to the overall EU average.
The application of this formula led to an overall population limit being set of around 28% in the UK (including the Objective One regions) in comparison to the 38% under the previous map. A reduction of about one quarter was therefore required and in July 2000 the new assisted areas map for the UK was approved by the European Commission. In Scotland coverage fell from about 64% to 48% population – a cut of around one quarter (interestingly this was much less severe than the reduction in Objective two coverage which went down from 74% to 40%. In the West of Scotland, the whole region was eligible under the Assisted Area map AND regional structural fund programmes up until 31st December 1999. This has now fallen to about 68% and 54%[excluding transition areas] population coverage respectively).
In the context of an enlarged EU the application of the existing formula to determine overall population coverage would result in a further and significant reduction (due to lower average EU per capita GDP). This would impose severe constraints on the capacity of the UK Government, and the Scottish Executive, to deliver regional policy.
The current regime also cut the permissible “intensities” of assistance for all types of eligible region. What is important for the post 2006 period is that the differential between the rates of
57 European Committee, 3rd Report 2002 - ANNEX A assistance available in the EU’s poorest areas and those applicable to assisted areas elsewhere should not be allowed to widen.
In summary the Consortium considers that the future operation of EU Regional State Aids policy to be as important for economic development and regeneration in the West of Scotland as the structural funds. It urges the Scottish Parliament European Committee to monitor closely the activities of the Scottish Executive on this matter.
TECHNICAL ASSISTANCE
The Consortium supports the initiative of the Scottish Executive in making links with regions in the applicant countries, for example the twinning covenant with the Czech Republic on structural fund programmes. It draws attention to the activities carried out by the Strathclyde European Partnership (the body responsible for managing structural fund programmes in the Wet of Scotland of which all WOSEC authorities are members). These were featured in the recent SCDI publication “Business Guide to EU Enlargement”. The momentum of this type of activity should be maintained and extended over the coming years
(a) to include the local partners (especially local authorities) responsible for project development in addition to the Scottish Executive and Programme Executives; and (b) to use these links proactively to stimulate trade development opportunities for Scottish companies.
CONCLUSION
The Consortium considers that a realistic approach should be taken to this issue. As previously indicated, it is almost certain that the financial resources available from the structural funds in the UK will be much reduced after 2006, and the Consortium accepts the logic underpinning this development. Nevertheless, based on the economic analyses, it is clear that large parts of the West of Scotland suffer from long term structural weakness which justify a coordinated response (and resources) from the EU, the UK Government/Scottish Executive and the regional partners. As locally accountable, democratically elected bodies, the key role of local authorities within regional and local partnerships needs to be recognised.
The Consortium will continue to seek to influence this debate within Scotland, the UK and the EU over the coming years. It will do so both in its own right and in partnership with other bodies with which it shares common interests. The Scottish Parliament European Committee will have a key role in this debate and the Consortium looks forward to continuing dialogue as decisions are taken on these important matters.
Paper Two
THE WEST OF SCOTLAND ECONOMY IN THE EUROPEAN CONTEXT : UPDATE POSITION
Purpose of Report: to summarise the key conclusions of the European Commission’s communication on progress on economic and social cohesion, with a particular focus on the West of Scotland.
1.0 Introduction
1.1 At its meeting held on 24th April 2001, the Consortium noted the main points contained in the European Commission’s Second Report on economic and Social Cohesion that had been published on 31st January 2001. The report to the Consortium covered both the policy issues relevant to the debate on EU regional policy after 2006 together with a statistical analysis of the West of Scotland economy in the EU context.
1.2 Developments, at both EU and UK levels, on the policy issues surrounding this debate have been the subjects of regular reports to the Consortium over the past year.
58 European Committee, 3rd Report 2002 - ANNEX A
1.3 On 30th January 2002, the European Commission published a communication entitled “First Progress Report on Economic and Social Cohesion”. The purpose of this document is twofold:
(a) to summarise the responses made to the Second Cohesion report, including those made at the Second Cohesion Forum that took place in May 2001; and
(b) to update the regional economic analyses contained in the Cohesion Report.
1.4 In addition, following the Laeken European Council of December 2001, it now seems possible that up to ten countries may be in a position to join the EU in 2004 (it being accepted that Romania and Bulgaria – the two poorest applicant countries – will not be in a position to join the EU until some time after 2006). Thus preparations for EU Cohesion policy for the next period may have to be made in the context of an EU of 25 members.
2.0 Responses to the Second Cohesion Report.
2.1 The Commission’s communication provides an overview of the responses made, both from other European Union institutions and from the contributions made by individual regions and European networks (including the RETI resolution, in the drafting of which the Consortium played the lead role), to the Second Cohesion report.
2.2 Among the points made in the responses have made the following:
(a) EU enlargement will increase the need for Cohesion policy; (b) A “two tier” application of Cohesion policy (ie one for the present EU 15 and another for the applicant countries) is unacceptable; (c) Many responses have advocated an increase in EU resources (from the current 0.45% of EU GDP) allocated to Cohesion policy. Others have argued for savings to be made through concentrating assistance solely on the least developed regions and the strict application of the 4% GDP limit on structural fund transfers at member state level – the so called “absorption capacity” threshold; (d) The greatest priority should be given to those regions which are lagging both within the current EU and the applicant countries; (e) It is widely accepted that the “direct” identification by the Commission of eligible regions outside Objective One is not feasible; (f) “No region must see its structural fund support suddenly cut. There should in any event be a safety net, and an adequate phasing out system.” (Committee of Regions’ opinion); (g) Other EU policies, in particular those relating to agriculture, transport, energy, competition and research and development have a significant impact on cohesion; and (h) There is a need to simplify the procedures associated with structural fund programmes.
3.0 Regional Economic Trends and the Impact of Enlargement
3.1 The Commission’s communication also updates the statistical data contained in the Second Cohesion Report. As the Cohesion Report indicated the process of convergence is a long term one and major changes should not be expected to be observable on a year on year basis.
3.2 The main findings of the analyses include:
(a) the very high concentration of activities in a triangle formed by North Yorkshire, Hamburg and the Franche Comte; (b) the process of convergence is continuing at Member State level, although the situation within Member States is mixed;
59 European Committee, 3rd Report 2002 - ANNEX A
(c) the expansion to 27 Member states would more than double the gap between the richest and poorest 10% (in terms of population) of regions. (d) the expansion from EU 15 to EU 25 would lower average GDP per head by around 13 percentage points; (e) if the current 75% of EU average GDP/head criterion for Objective One status were to be applied to EU 25, 65 regions (containing a population of 112 million) would qualify. These would include 29 in the current EU (45 million population); and (f) employment is expanding in EU 15 but contracting in most of the applicant countries.
4.0 The Position of the West of Scotland
4.1 The Commission’s Communication provides data on a number of indicators for the 211 “NUTS 2” regions in EU 15, as well as for the regions in the applicant countries. However there are significant data gaps in the latter case. Nevertheless it is worth noting that only two of the regions of Central and Eastern Europe (Prague in the Czech Republic and Bratislava in Slovakia) plus Cyprus have a GDP per head above 75% of the EU15. One region in Hungary has a GDP per head just below the 75% level the remaining regions and member states show much lower levels.
4.2 The West of Scotland is covered by the “South Western Scotland” NUTS 2 region. This includes the twelve member authorities of the Consortium with the addition of Dumfries and Galloway. It excludes those parts of Argyll and Bute and North Ayrshire Councils lying within the Highlands and Islands Enterprise Area.
4.3 Table One summarises the results for the West of Scotland in comparison to those contained in the Second Cohesion Report: In all cases the change indicated is from the previous year’s data, as published in the Cohesion Report.
TABLE ONE - WEST OF SCOTLAND - KEY ECONOMIC INDICATORS
GDP/HEAD UNEMPLOYMENT EMPLOYMENT PATENT (EU15=100) RATE (2000) RATE (2000) APPLICATIONS (PER (1997-99) M POP) (1998-2000) WEST OF 93.1 9.4 64.5 49.4 SCOTLAND (Change) (+2.7) (-0.2) (+1.8) (+6.6) SCOTLAND 98.6 7.1 69.5 77.7 (Change) (+0.9) (-0.5) (+1.0) (+11.8) UK 102.2 5.6 72.2 112.0 (Change) (+1.3) (-0.5) (+0.6) (+17.4) EU 15 100.0 8.4 63.8 140.7 (Change) (0) (-1.0) (+1.0) (+21.3). Sources: Second Cohesion Report and Commission Communication Com (2002) 46
4.4 It is also possible to “rank” the West of Scotland in a “league table” of EU 15 NUTS 2 regions for these indicators. Table Two summarises the results of this exercise.
TABLE TWO : COMPARATIVE WEST OF SCOTLAND POSITION - EU and UK Contexts
West of Scotland GDP/head Unemployment Employment Patents per million pop. Position (change) Rate (change) Rate (change) (change) UK 20/37 (+2) 3/37 (+1) 31/37 (+3) 31/37 (+0) EU 102/211 (+15) 66/211 (+14) 106/207*(+13) 146/211 (+1) *No data available for the French Overseas Departments Sources: Second Cohesion Report and Commission Communication Com (2002) 46
60 European Committee, 3rd Report 2002 - ANNEX A
4.5 Table Three gives some examples of comparable regions with respect to these indicators both within the UK and in the wider EU
TABLE THREE : EU and UK Comparitor Regions
GDP/head Unemployment Employment Patents per million pop. Rate Rate UK West Yorkshire Northumberland/ Inner London South Yorkshire Tyne and Wear EU Weser/Ems (D) Brunswick (D) Limousin (F) Navarre (ESP) Friesland (NL) Aragon (ESP) Carinthia (O) Nord Pas De Calais (F) Sources: Second Cohesion Report and Commission Communication Com (2002) 46
4.6 It must be emphasised that great care needs to be taken in comparing trends over as short a time period as one year. Nevertheless it is possible to draw some tentative conclusions.
4.7 It would appear that the West of Scotland economy made some progress in converging with Scottish, UK and EU performance, since changes in both per capita GDP and employment rate were greater in the West of Scotland.
4.8 Nevertheless, in terms of GDP, the faster growth of the UK economy over recent years has resulted in an improved position being achieved by the West of Scotland in comparison to other EU regions. Within the UK the current level (91.1%) is in line with the historic trend. Indeed it is lower than that observed for the 1994-96 period (91.3%).
4.9 The West of Scotland continues to exhibit one of the highest rates of unemployment (ILO measure) within the UK and in fact the gap widened, in comparison to both the UK and the EU, in 2000. Unemployment rates in the West of Scotland are over one and a half times higher than those for the UK as a whole. In comparison with the EU average there is a full percentage point difference.
4.10 The West of Scotland has a reasonably high employment rate by EU standards. The main reason for this is that there is a much higher degree of female participation in the UK than in most other EU countries (65.2% as opposed to54.3%). In the UK context, the employment rate in the West of Scotland is low. Although the gap narrowed somewhat in 2000, this could be due in part to the very high employment rates (in excess of 80%) found in some parts of the South of England. In such areas there is very little scope to increase employment rates.
4.11 The data on patent applications is published to try and assess the innovative capacity of a region. On this indicator the West of Scotland performs poorly within a member state which performs poorly. Within the EU there is a clear “North South” divide in this activity; high levels are found in Germany, the Netherlands and Scandinavia, and very low activity recorded in Greece, Portugal and Spain.
4.12 Another means of assessing the entrepreneurial capacity of a region is to examine the numbers of firms, as measured by VAT registrations. Although no data is available on a European level, recently released information suggests that the West of Scotland performs poorly in comparison to the rest of the UK and the gap has actually widened over the past five years. Annex One gives further details on these trends.
5.0 Conclusion
5.1 In many respects the West of Scotland is, in European terms, a fairly average region. However with the likely expansion of the EU in 2004, it will become one of the expanded
61 European Committee, 3rd Report 2002 - ANNEX A
Union’s more prosperous areas. However there is a substantial body of evidence to support the contention that, within the UK, it is one of the structurally weaker regions, particularly with regard to the labour market and, more qualitatively, in its “entrepreneurial culture”.
ANNEX ONE
VAT REGISTERED BUSINESS 1996 -2001
TABLE 1 : BUSINESS REGISTRATIONS : WOSEC AUTHORITIES 1996-2001
AUTHORITY 1996 STOCK 2001 STOCK NOS. PERCENTAGE CHANGE CHANGE Argyll and 3,325 3,210 -115 -3.4% Bute East 2,500 2,490 -10 -0.4% Ayrshire East 1,845 1,785 -60 -3.2% Dunbartonshire East 1,540 1,405 -135 -8.8% Renfrewshire Glasgow 11,085 10,060 -1,015 -9.2% City Inverclyde 1,100 1,095 -5 -0.4%
North 2,430 2,480 +50 +2.0% Ayrshire North 4,545 4,900 +355 +7.8% Lanarkshire Renfrewshire 2,935 3,095 +160 +5.4%
South 2,635 2,605 -30 -1.1% Ayrshire South 5,640 5,880 +240 +4.2% Lanarkshire West 1,205 1,320 +105 +8.7% Dunbartonshire TOTAL 40,785 40,325 -460 -1.1% Source: Nomis, February 2002
62 European Committee, 3rd Report 2002 - ANNEX A
TABLE 2 : COMPARISONS WITH OTHER AREAS
1996 2001 Stock Nos. Change Percentage Stock Change West of Scotland 40,785 40,325 -460 -1.1% Rest of Scotland 77,000 78,365 +1,365 +1.8% Scotland 117.785 118,690 +905 +0.8% Great Britain 1,547,190 1,609,485 +62,295 +4.0% Source: Nomis, February 2002
TABLE 3 : VAT REGISTRATIONS PER 1,000 INHABITANTS 1996-2001
1996 2001 West of Scotland 17.9 17.8 Rest of Scotland 27.0 27.5 Scotland 23.0 23.2 Great Britain 27.1 27.7 Source : NOMIS, February 2002
ANALYSIS
The data indicates that, in contrast to the Rest of Scotland and Great Britain as a whole, the stock of businesses in the West of Scotland actually fell between 1996 and 2001. This took place at a time of falling unemployment and rising employment.
Within the region, the fall was particularly substantial in Glasgow and East Renfrewshire, in the former case by nearly 10%. In contrast the stock of businesses grew markedly in Lanarkshire and Renfrewshire. This may be due in part to developments such as the Lanarkshire Enterprise Zone and Braehead and also to population movements within the region.
As table three indicates the gap between the West of Scotland and other part of Great Britain is widening, even once the region’s falling population is taken into account. The fact that the region is still losing population may itself be considered as an indicator of economic weakness.
63 European Committee, 3rd Report 2002 - ANNEX B
ANNEX B
EXTRACTS FROM THE MINUTES AND OFFICIAL REPORT
EUROPEAN COMMITTEE
MINUTES
6th Meeting, Session 1 (2002)
Tuesday 23 April 2002
Present:
Irene Oldfather (Convener) Dennis Canavan John Home Robertson (Deputy Convener) Helen Eadie Colin Campbell Sarah Boyack Ben Wallace Nora Radcliffe
Apologies: Lloyd Quinan MSP
The meeting opened at 2.00 pm
Inquiry into the future of Cohesion Policy and Structural Funds post 2006: The Committee considered the written evidence submitted so far as part of this Inquiry. The Committee agreed to take oral evidence at subsequent meetings from a range of bodies.
64 European Committee, 3rd Report 2002 - ANNEX B
EUROPEAN COMMITTEE
MINUTES
7th Meeting, Session 1 (2002)
Tuesday 7 May 2002
Present:
Irene Oldfather (Convener) Dennis Canavan John Home Robertson (Deputy Convener) Helen Eadie Colin Campbell Sarah Boyack Ben Wallace Nora Radcliffe
The meeting opened at 2.03 pm
Inquiry into the future of Cohesion Policy and Structural Funds post 2006: The Committee heard from—
Laurie Russell, Strathclyde European Partnership Ltd Gordon McLaren, Eastern Scotland European Partnership Ltd Donald MacKinnon, South of Scotland European Partnership Dennis Malone, Highlands and Islands Partnership Programme Christine Mulligan, Scottish ESF Objective 3 Partnership
The Committee adjourned at 3.17 pm and resumed at 3.24 pm
Councillor Christine May and Tom Sullivan, Convention of Scottish Local Authorities John Thomson and Chris Miles, Scottish Natural Heritage
65 European Committee, 3rd Report 2002 - ANNEX B
EUROPEAN COMMITTEE
MINUTES
8th Meeting, Session 1 (2002)
Tuesday 21 May 2002
Present:
Irene Oldfather (Convener) Sarah Boyack John Home Robertson (Deputy Convener) Nora Radcliffe Ben Wallace
Apologies: Colin Campbell MSP, Dennis Canavan MSP, Helen Eadie MSP and Lloyd Quinan MSP
The meeting opened at 2.07 pm
Inquiry into the future of Cohesion Policy and Structural Funds post 2006: The Committee heard from–
Philippe Cichowlaz, Conference of Peripheral and Maritime Regions
The Committee adjourned at 2.58 pm and resumed at 3.03 pm
The Committee also considered further submissions of evidence from Clackmannanshire Council, and Campbell Christie (Convener of Scottish Civic Forum and Member of the Economic and Social Committee of the European Union) and Andrew Scott (Europa Institute, University of Edinburgh). The Committee agreed to bring forward its draft report to the next meeting.
66 European Committee, 3rd Report 2002 - ANNEX B
EUROPEAN COMMITTEE
MINUTES
9th Meeting, Session 1 (2002)
Tuesday 18 June 2002
Present:
Irene Oldfather (Convener) Sarah Boyack John Home Robertson (Deputy Convener) Nora Radcliffe Colin Campbell Helen Eadie Dennis Canavan Lloyd Quinan Ben Wallace
The meeting opened at 2.04 pm
(in private) Inquiry into the Future of Cohesion Policy and Structural Funds post 2006: The Committee discussed and amended its draft report. Subject to minor alterations, the Committee requested that the Clerk make the necessary arrangements for the publication of the report.
67 European Committee, 3rd Report 2002 - ANNEX B
Extracts from the Official Report for the following European Committees are set out below: 23 April 2002, 7 May 2002 and 21 May 2002. The relevant item at the meeting of the 18 June 2002 was held in private. Official Reports are not taken of committee meetings or parts of meeting held in private.
credibility both to the work that we are trying to do and to the conference’s work. I would European Committee warmly welcome the committee developing a relationship with the conference. Tuesday 23 April 2002 The Convener: That is a good point. (Afternoon) Mr John Home Robertson (East Lothian) (Lab): It is difficult to comment on the Col 1448ff COSLA paper, given that we received it only today. However, I go along with the The Convener: Our first item is convener’s suggestion of inviting the consideration of the evidence that we have partnerships to give oral evidence. It might received so far on our inquiry into structural be appropriate to invite COSLA to take part funds post-2006. Our intention was to start a in the same meeting. debate in Scotland and to prepare a report The Convener: That is a sensible over the next few months. We have received suggestion. a number of written submissions—today the clerks have circulated submissions from the Sarah Boyack (Edinburgh Central) Convention of Scottish Local Authorities, the (Lab): It is clear that a debate is going on. Department of Trade and Industry and Although I would not say that everyone is Clackmannanshire Council. Further hedging their bets, I acknowledge that submissions are coming in from Highland regional policy could go down a number of Council and one or two others. I noticed that different routes. It would be quite useful for we have not received any submissions from the committee to discuss that subject. The the partnerships. Do they intend to submit best way of doing so would be to invite those anything? Did we write to them? organisations that have sent submissions— some of which are lengthy and useful—to Stephen Imrie (Clerk): We contacted the talk to us about the issues, which go to the partnerships but have yet to receive anything heart of the discussions that we had in from them. I will chase that up and find out Brussels. In Brussels, we heard how the what they want to do. debate on regional policy is being directed at The Convener: I am happy to take European level. comments from members about the content The Convener: I was interested in the of the submissions. Perhaps we should try to submission by Scottish Natural Heritage. In agree a way forward. I suggest that we take relation to cohesion policy, SNH made a some oral evidence—the partnerships are number of points about natural handicaps. key players and would be a good starting After 2006, the European Commission will point. I have some comments on the move towards targeting funding. It will be no submission from Scottish Natural Heritage, surprise if money is targeted on but do members have any comments to mountainous, island and remote regions. make first? SNH suggests that the southern uplands may Helen Eadie (Dunfermline East) (Lab): qualify for such assistance. The submission Perhaps we should take evidence from the contains a number of ideas. We do not want Conference of Peripheral Maritime Regions to raise expectations too much, but as SNH of Europe, which is another Europe-wide has gone to considerable trouble to make the player: I used to be on its bureau and have a case for funding for areas with natural high regard for its office bearers. Given that handicaps, it might be helpful to balance the the conference’s main emphasis is on partnership approach and the COSLA peripherality, its input could be valuable. For approach with the approach taken by SNH. those who do not know, I should explain that We may want to take on board the point the conference has been in existence for that Helen Eadie made about hearing from about 30 years. If we were to call witnesses the Conference of Peripheral Maritime from the conference, we would add a lot of Regions of Europe, which would give us a
68 European Committee, 3rd Report 2002 - ANNEX B
European perspective on the issue. When I was last in Brussels, the CPMR asked me whether it could make a presentation to the committee at some point. Our inquiry into the future of cohesion policy and structural funds provides us with a timeous opportunity to hear that evidence. I know that the CPMR has already made a presentation to the National Assembly for Wales. Do we agree to ask the clerks to proceed as recommended? We will have to take evidence over a couple of meetings, perhaps beginning at our next meeting. If we include the CPMR among the bodies from which we would like to hear, the process may take a little longer than that. Members indicated agreement.
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European Committee examples are mainly from the west of Scotland’s programme, but they provide an indication of the types of projects that Tuesday 7 May 2002 structural funds support. (Afternoon) A number of programmes are operating throughout Scotland in the period up to the Col 1483ff end of 2006. The Highlands and Islands programme will finish a year earlier than that, The Convener (Irene Oldfather): because it is a programme of transition from Welcome to the seventh meeting of the objective 1 status. The other programmes will European Committee in 2002. I have not operate until the end of 2006. Before that received apologies from any members, but I date, we must commit funds to individual understand that Sarah Boyack may be a little projects. Spending can take place for another late. two years after the end of 2006. However, we expect the next set of programmes to run The first item on our agenda is to hear from the beginning of 2007 onwards. evidence from a range of bodies that are involved with European structural funding. I The figures that we have provided illustrate welcome the witnesses to the meeting. First, that Scotland still receives significant funding Laurie Russell will provide us with an benefit under objectives 2 and 3, and through overview. After that, the other witnesses will the Highlands and Islands objective 1 make short opening statements. transition programme. We are very short of time today, so without Over the past 12 or 13 years, we have further ado I ask Laurie Russell to make his managed structural funds in Scotland presentation. through the programme executives. The executives are involved in a range of Laurie Russell (Strathclyde European activities to implement the programmes. Partnership): I will begin by introducing my Someone asked me whether the slide that is colleagues. Gordon McLaren is from Eastern on-screen now was intended to reflect the Scotland European Partnership. Until today, fact that we are totally confused, very busy, Christine Mulligan was acting chief executive or trying to do everything at the same time. In of the Scottish ESF Objective 3 Partnership; fact, it is intended to reflect the range of her successor, Brian Wright, is sitting in the issues in which we are involved—projects, public gallery. Donald MacKinnon is from preparing for audit, preparing annual reports South of Scotland European Partnership. and preparing documents that will be Dennis Malone is from the Highlands and submitted to the committee, to the Scottish Islands Partnership Programme. Executive or to the European Commission. In my presentation today, I will remind the The programme management system was committee of how structural funds operate in first set up in Strathclyde in the late 1980s. Scotland, and of the functions that the The other programme executives were programme executives have in order to established in 1994. We have experience of ensure that the programmes are running every kind of programme that the implemented effectively. I will finish by European Commission has supported, highlighting some issues to which we may including objective 1, objective 2, objective 3 want to return in the long term, as well as and former objective 5b programmes. I am some issues that affect the current structural sorry for using European jargon. The funds programmes. programme executives deal with both the European regional development fund and the The structural funds are used for three European social fund. The Highlands and basic activities: investing in small and Islands Partnership Programme also deals medium-sized enterprises; investing in with the agriculture and fishery funds. In people—training and skilling people to addition, the executives are involved with the enable them to enter the labour market or to various Community initiatives for which improve their position within it; and investing Scotland has been eligible under previous in places to create competitive locations in programmes. Scotland. Investing in places involves providing sites and premises for businesses, With the exception of Dumfries and environmental improvements, tourism Galloway European Partnership, we are all facilities and, in some cases, transport and set up as companies limited by guarantee. I other infrastructure improvements. The have provided the committee with an
70 European Committee, 3rd Report 2002 - ANNEX B overview of the membership and board set- improvements to the processes. It was up of Strathclyde European Partnership. The intended that a further review would take programme executives are established by place in 2003, but I do not think that any the main public sector agencies that are decision has been made on how that will take involved in economic development. Normally, place. those include councils, Scottish Enterprise Most of the programmes involve a and local enterprise companies, and college significant number of organisations in partnerships. Strathclyde and the other partnerships. The programmes in the east, programme executives have also co-opted the Highlands and Islands, the west and the board members from the voluntary sector objective 3 programme each involve about and other agencies that are involved with 200 organisations, which includes the main partnerships. public sector agencies that are involved in The role of programme executives is economic development. The programmes primarily to focus on all aspects of projects, also include the third sector—the community from the development phase, during which groups that have played a prominent role in we advise potential project applicants on the the structural fund programmes over the eligibility rules and help them to develop a years. project, through to the management of the I will finish with two slides on the issues project application appraisal process, that affect the current programmes, which whereby we carry out technical assessments might lead us into some of the issues that we on the project applications that we have should think about in the longer term. First, received. Those applications are then judged the new European Commission financial against selection criteria by various rules, which go under the term “N+2”, are partnership committees, which come to a fairly crude financial penalties for regions that view about which projects should be have not spent their structural fund supported. allocations two years after the year that the We also track the progress of projects. We funds were budgeted for. In Scotland, we track the financial progress of projects as have not yet got to the end of a two-year well as their performance against the targets period without spending the money, but we that were stated in the applications. We also run the risk of the money’s being have a role in helping to prepare automatically sent back to the European programmes, developing policy and Commission if it is not spent within that time. promoting and publicising the programme That applies throughout Europe. Therefore, and projects. We also liaise with the we now operate under a much more crude European Commission, the Executive and and draconian financial system. Parliament. Secondly, Scotland’s regional programmes In late 1999, Jack McConnell, who was work with core eligible areas and with then the minister responsible for the transition areas. That is proving to be quite structural funds, set up an independent difficult because the areas are designated committee to review how the structural funds ward by ward. That has added to the were managed in Scotland. The committee complexity of certain kinds of projects. included Councillor Christine May, who is Thirdly, it is my view that the European here this afternoon, and was chaired by Lex Commission has gone a bit audit crazy. It is Gold. That committee endorsed the current driven by an audit mentality under which it processes and procedures. Although it found constantly makes checks. Its permanent that the processes were quite complicated, it assumption is that agencies are either recognised that significant added value could making mistakes or trying to fiddle the be brought to the process of selecting systems, which I do not think is the case. projects by having a series of advisory groups that bring together people from Fourthly, complexity has got worse despite different agencies and different parts of the the fact that we always try to simplify the eligible regions. It also recognised the value structural funds. Fifthly, in some parts of of having programme executives that were Scotland and in some kinds of projects, we dedicated to one purpose—the have found that project applications have implementation of the structural fund been slower than in previous programmes. programmes. We have also generally tightened up the eligibility criteria to focus structural funds on As one might expect, the committee also certain kinds of activity. made some recommendations on
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The final slide examines what we might and necessarily requires a flexible approach. lose should Scotland fail to receive structural Also, structural funds offer in a limited way funds beyond 2006. First, we would lose the the opportunity to be more innovative and to focus on regions in Scotland, and on regional test new approaches but, to an extent, that is economic planning and regeneration. becoming constrained by the new rigid and Secondly, flexible co-finance and flexible audit-orientated approach of the budgets for economic development projects Commission. That is unhelpful, and it is have been mentioned. Although structural disappointing for us. We have to deal with funds are consistent with Executive policy, that. they are slightly more flexible than the Complexity has been introduced in the new mainstream budgets of the main economic programmes. In the east of Scotland, where development agencies. we have a large transition population that is Thirdly, currently we have partnerships in slightly bigger than the eligible population, which every agency has equal status, so the map is complex. We must operate on a representations from small voluntary postcode basis, which removes some organisations are as important as flexibility and makes the process even more representations from larger organisations. rigid, which is difficult. That said, I point out Fourthly, resources are currently targeted on that we in Scotland argued collectively— areas of economic need. The structural funds through all the different public sector attempt to bring up to the norm the parts of agencies—for transition coverage during the Scotland that are lagging behind. Fifthly, the last reforms, so we cannot complain too structural funds provide a clear example of much, because the funding maps would have how Europe operates on the ground. The been even smaller had we not done that. tens of thousands of people who go through Nonetheless, it means that we are in a sense training programmes that are funded by the managing two separate budgets within the European social fund are aware of that— programme structure. Europe means something to them. Finally, it Laurie Russell pointed to some of the is important that we share our knowledge operational difficulties that we face. There and experience of the structural funds, in has been a slowing down in the number of particular with the accession countries. As applications. We are not able to determine the committee knows, Scotland has an exactly what is behind that, but there are increasingly strong record in working with the issues about available co-finance throughout accession countries. We hope that that will the public sector. We must recognise and continue in the longer term. acknowledge the complexity and the The Convener: That was a helpful bureaucracy of the process, which we have background report, which contained a lot of tackled seriously recently. Some of the interesting and useful information for the outcomes of that work will be welcomed committee. Before we get to questioning, I positively by all concerned. However, we invite Gordon McLaren, Christine Mulligan, must be alive to the extent to which people Donald MacKinnon and Dennis Malone to might start to disengage, which would be make short opening remarks. unfortunate. Gordon McLaren (Eastern Scotland Laurie Russell pointed out some of the European Partnership): I endorse Laurie’s positive benefits of the structural funds. The overview of the situation regarding the wider policy effects of structural funds are implementation of the current programmes. It very beneficial—the funds are about more is clear that there are a number of issues. than money. For example, we led on some We are dealing with a different European key policy areas—we call them the horizontal Commission, which is less engaged and less themes—such as sustainable development constructive in terms of the day-to-day and equal opportunities, and we have management and implementation of developed good practice in those areas. The structural funds programmes. idea is that we will cascade that good practice through organisations. We will do Increasingly, the implementation of that not just in the context of structural funds, programmes is audit driven and bound by but more broadly in order to change people’s regulations, which makes life more difficult. approaches and behaviour. I hope that, in the As we all recognise, implementing structural longer term, we will change the culture of fund programmes—or any regional economic how economic development is conducted development—in whatever region of throughout the country. Scotland is difficult for a variety of reasons,
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The Convener: Thank you. I will try to dependent on cashmere, that Stranraer is keep our questions until later, but I cannot over-dependent on transport or that Dumfries help but comment that I am a bit shocked is over-dependent on the rubber and plastics and alarmed to hear about the problem with industry—we need urgently to diversify and complexity. One of the principles that was to achieve higher average wages. We have a supposed to underline previous reforms of very low gross domestic product, a sparse the structural funds was simplification. From population, out-migration of young people what you say, we are making things more and low wages. I am sure that Dennis complicated rather than simplifying them. Malone will also refer to those issues. Christine Mulligan (Scottish ESF The similarities between the rural south of Objective 3 Partnership): I endorse what Scotland and the rural north are what we the previous witnesses said. However, keep on coming up against. My team and I despite the complexities of the objective 3 are responsible for managing the structural programme, which deals only with the funds—both the European social fund and European social fund, about 800 applications the European regional development fund— are made every year, the majority of which which are useful in addressing those come from the voluntary sector. On problems. complexity, one of our greatest concerns is The only other thing that I will say is that it that all the projects need support, but we are must be recognised that rural development being stretched more and more so that we must involve not only economic can give them that support. development, but social and environmental Our management of the projects also faces development. That is something that the other problems that arise because we cover structural funds’ focus on horizontal themes all of lowland Scotland and therefore deal helps to emphasise. I am not saying that the with a diverse population and a diverse main agencies do not do that already—I just geography. That said, our committees are want to emphasise the point. exploring the possibility of bringing some Dennis Malone (Highlands and Islands flexibility to the programme by examining Partnership Programme): I have only a how we manage the funds to ensure that we couple of points to add because most things support the projects that are of the highest have already been mentioned. One of the quality and have the greatest need. The interesting aspects of the Highlands and capacity-building part of the programme is Islands Partnership Programme is the being stretched more and more. That work continuing emphasis on investment in covers not only building capacity in order to infrastructure, and particularly in information deliver European programmes, but assisting and communications technologies. That is an organisations to diversify and to look for important component. The other important other sources of funding. Therefore, we are thing about the Highlands and Islands bringing in exit and continuation strategies, Partnership Programme is that it is already in which will be key over the next few years. transition, which is reflected in the significant Donald MacKinnon (South of Scotland tapering-off of funds under certain priorities European Partnership): I will put a slightly and measures. We are already managing more positive slant on the structural funds. In that transition, the effect of which is more the south of Scotland area, we view them as competition for less money, so we must augmenting the sources of finance that are attempt to ensure that the partners are already available to agencies to address working much more collaboratively. serious economic structural difficulties. I am My final point is about what will happen sure that we have the same complexities and post-2006. Some of our funds run out post- bureaucracy, but we must overcome those 2005 and others continue to run into 2006 in difficulties so that we can address the specific areas. For example, the regional economic fragility that was brought so development fund will still apply in the islands sharply into focus last year by the foot-and- in 2006, but not elsewhere in the Highlands. mouth crisis in the south. That fragility arises That presents us with the additional problem from over-dependency on agriculture of managing a tapering flow of funds. throughout the south of Scotland but, within individual communities, there are particular The Convener: It is interesting that Dennis dependencies in particular towns on Malone mentioned more competition, particular industries. There is an urgent need whereas Laurie Russell said that his area to diversify the economy. It does not matter was experiencing a bit of a slow-down. I whether one says that Hawick is over- know that committee members have some
73 European Committee, 3rd Report 2002 - ANNEX B detailed questions that they would like to put, links with Sweden and Norway. but before they do that I would like to ask all I imagine that locations such as the the witnesses to do a little crystal ball gazing Highlands and Islands will continue to benefit on what will happen after 2006. Will there be from assistance provided through the an emphasis on transnational projects after national objective 3 programme. Our ESF 2006? If so, how will Scotland gear up to programme is built into the traditional that? financial envelope. We in the Highlands and Laurie Russell: The European Islands will have to compete with the rest of Commission has, over the past two or three Scotland, and I suspect that there will be years, supported the accession countries by further assistance for agriculture and twinning them with existing member states. fisheries. Scotland has been involved in leading the It is a little bit too close to the bone to say project with the Czech Republic, and some of that funds will stop. There will be some us have been involved in twinning covenants additional funding. The question is how it is that have been led by London-based managed and targeted. The funding might be Government departments. Strathclyde a bit more focused in particular areas, unlike European Partnership is involved in such the present generic programmes. covenants with one of the Polish regions and with Romania. We have expertise and Donald MacKinnon: The most important knowledge to share and there is certainly a question for rural Scotland is what happens need in most of the accession countries for to the common agricultural policy and the tie- the kind of agencies that we take for granted in with the structural funds. The CAP is far in Scotland, which can come up with more important than structural funds in terms economic development projects. There are in of pounds per head of population, so if we those countries few equivalents of Scottish are trying to keep our eyes on all the different Enterprise, the voluntary sector or local balls bouncing in the air, I would say that the development companies to do project CAP is more important. development and implementation. Gordon McLaren: Transnational activities There are opportunities for the public will continue to be a priority. They have been sector to assist the accession countries, a priority throughout the various reforms, but which could have a spin-off for industry in there has not been the level of activity that Scotland. If we develop good relationships, the Commission might have wished. The they can be exploited by private industry and more that regions work together and the public sector. There are also exchange good practice, the more that the opportunities for us to work under Commission will want to continue to promote programmes such as INTERREG—which I that work. At the moment, collaboration is know is on the committee’s agenda for taking place through a number of initiatives, later—but that has limits. Most interregional, and there will be opportunities to collaborate international and transnational projects take on a thematic basis across a range of key quite a bit of time and effort to set up, and we policy areas. must be careful that the results that they The Convener: We turn now to the produce are worth it in the long run. We must be careful about which projects we get into, principles governing regional policy. but there are opportunities that we have not Helen Eadie (Dunfermline East) (Lab): I yet exploited fully. note Laurie Russell’s comment about the The Convener: Would that support a Commission having “gone a bit audit crazy”. I recognise that all officials in the public sector request for transitional payment? Should we are caught up with audits, best-value continue to seek transitional help post-2006, or will that requirement end after 2006? initiatives and lots of paperwork. We should Dennis Malone said that his area is have probity and high standards, but it is a question of getting the right balance. The particularly affected. comment was not lost on me. Dennis Malone: We are in transition. I I apologise for this long preamble. My know that the public sector partners in the question comes down to the principles that Highlands and Islands are considering opportunities relating to sparsity and island govern Community intervention. The first is and mountainous locations. Some of those Community actions being taken in partnership. They should complement or opportunities would build on the experience contribute to the corresponding national of the northern periphery programme and the operations, and should be drawn up in close
74 European Committee, 3rd Report 2002 - ANNEX B consultation with national bodies. because the volume of funds has reduced. It does not seem such a long time since the The second principle relates to beginning of the programming period, but we programming, which covers the organisation, are now almost into the mid-term evaluation. decision making and financial processes that The planning phase takes a long time are involved in the various stages of because a lot of consultation and negotiation implementing joint action by the Community are required to reach a consensus about the and member states on a multinational basis. programme areas to which the funding A third principle is additionality. To achieve should be devoted and what the funding a genuine economic impact, the appropriated should be used to tackle. We cannot do funds may not replace public or other everything, much as we would like to. The structural expenditure by the member state. planning process has started in earnest. The fourth principle is compatibility. If we can carry on our work post-2006— Operations that are financed through there is a big question mark about that—we structural funds or the European Investment will use the mechanisms and approaches Bank should conform to the other rules in the that we have developed to target resources Treaty of Rome, in particular those on in the wisest and most effective way. That competition, environmental protection and will mean hard choices. People will have to the promotion of equality between men and accept that the resources can go towards women. only certain activities from the broader spectrum of what is possible. The funds will Post-2006, which of those principles, if any, limit the choices. should continue to govern Community intervention in regional development The Convener: Laurie Russell said that funding? Which new principles should be the new financial regulation—N+2—is crude. adopted? Is not it more efficient if money must be spent within two years? Why is the regulation Laurie Russell: In general, we agree with crude? Does not it tighten up efficiency, all those principles and want them to which the voluntary sector should welcome? continue. The structural funds have always been additional to national budgets and have Laurie Russell: From a European had to be consistent with national and perspective, it might be seen as efficient to Community policy. Increasingly, there is little insist that member states must spend the difference between the Scottish Executive’s allocated resources within two years, but that and the European Commission’s policies. system does not build in flexibility to allow for Structural funds help to implement policy difficulties with spending within the period. better and more quickly and sometimes in a With previous programmes, we have had more targeted way. I have no disagreement more discretion to transfer resources with those principles. between the years of the programme. In Scotland, we have a good record of spending The principle of targeting is important the allocation by the end of the programme. I throughout Scotland. My colleagues have do not think that the regulation was brought spoken about the different kinds of targeting in for areas such as Scotland, but we have that the structural funds have supported in made use of the flexibility of being able to rural communities and in urban ones, through shift money between the years of a social inclusion partnerships for example. For programme. me, targeting is the most important principle; it is not new, but I stress its importance for One difficulty with the current programme, the longer term. The transition which had finance available to it from the programmes—such as those that exist in the beginning of 2000, was the overlap with the Highlands and Islands—should target certain previous programme. Members will recall geographic areas and one or two policy that spend could continue for two years after issues such as sustainable development or the end of the period for which funds had equal opportunities. been allocated. That meant that the 1997-99 programme could spend on projects until the Gordon McLaren: We must use the end of 2001. The overlap meant that the structural funds as an additional funding allocation for many agencies was tied up in source and as an opportunity to join up, align existing projects, especially with capital or add value to what we do in other areas. projects in economic development. Targeting has taken place in the current programming period, but we must target far The national lottery and the Millennium more than has been done in the past, Commission also had an impact. At the end
75 European Committee, 3rd Report 2002 - ANNEX B of the 1990s, more funds were available for among agencies and between sectors that capital projects, which were also eligible for have never worked together in the past is an structural funds. Some co-finance issues indication of the added value of structural exist, particularly in Scottish Enterprise, funds and the way in which we operate. where less flexible finance is available in the I mentioned the policy effects. We are all local enterprise companies. If all those signed up to social inclusion, environmental factors are considered together, we might sustainability and equal opportunities. The need a bit more time to spend the structural EU dimension to some of those key policy funds allocation within the programme than areas, which we are all addressing, has been we have been given under the new financial fundamental and has played through the rules. structural funds. The Scottish partnership If the funding is not spent after two years, it model offers opportunities. We are a is lost. That cannot be appealed against. If dedicated resource. We can help to raise the European Commission faced pressure awareness and can organise training from several member states, it might relax workshops on how those issues can be the rules but, at present, a cut-off date tackled, with an economic development operates. The system is crude. perspective. We must not forget that the programmes are for economic development, Nora Radcliffe (Gordon) (LD): What does first and foremost. Such issues can play added value mean? Gordon McLaren said strongly, if we get the system right. Those that some activities would have to be are the strong policy effects and wider targeted because of an expected emphasis benefits of the structural funds. We do not on added value. Will you expand on that and impose those as a condition. The aim is to give examples of its effect? improve and to do things better than before. Gordon McLaren: The Commission I hope that that is helpful. describes it as Community added value, so it acknowledges that alongside the additional Nora Radcliffe: That was a helpful resources is the prospect of producing wider explanation. benefits. I want to move on to another issue. The Nora Radcliffe: When you say threshold for deciding whether a region is “Community added value”, do you mean eligible for the main strand of funds has European Community added value? always been GDP being 75 per cent of the European Union average. Will that change Gordon McLaren: Yes. The move from the post-2006? European Community to the European Union can cause confusion. Dennis Malone: The 75 per cent threshold was applied to regions that are eligible for Nora Radcliffe: Benefits will be objective 1 assistance. In 1994, the Europewide. Highlands and Islands just managed to Gordon McLaren: The added value is squeeze into that category. I suspect that the wider, as it relates to the Community. That threshold will significantly alter with the involves wider benefits through the broad emergence of new member states. When principles of partnership programming, which member states with lower GDPs are brought was a new approach to regional development in, the position of other states, such as in many member states. Partnership has Scotland, will increase significantly in probably evolved to a greater extent in comparison with the average. The Scotland than it has in some member states, Commission must address that issue post- but they are moving in that direction. 2006 to determine eligibility. The idea of programming—developing a Colin Campbell (West of Scotland) programme over time and developing (SNP): What should happen to regions such priorities within that—has added value to the as Highlands and Islands that receive process. People have worked in different transition funding, assuming that they are no ways. It could be argued, cynically, that they longer eligible? Will that be the end of such do that just to access the funding, but given funding? What about regions that are the various reforms that have taken place, currently in receipt of full objective 2 funding? some of the processes are deep-seated and Should they receive transition money post- part of wider practice. Partnerships emerge 2006, if they are no longer eligible? in many forms at different levels in Dennis Malone: I will refer to objective 1 programmes. The level of collaboration funding. The full area is currently in
76 European Committee, 3rd Report 2002 - ANNEX B transition, which is reflected in the phasing- not relevant to you? Who applies to you? out arrangements across the financial table How many applicants apply directly to you? and the management arrangements for How many applicants go through the local tapering levels of assistance. As I said in authorities or other agencies? respect of post-2006, the local partnerships, The Convener: Perhaps in answering that, the local authorities and Highlands and the witnesses could tackle a point that was Islands Enterprise are considering a more raised earlier. Whereas Dennis Malone is focused approach to funding to target islands finding that there is a lot of competition, and mountainous areas and areas of sparse Laurie Russell is finding that applications are population. I suspect that that, perhaps slowing down. Is that a regional thing or is it combined with a more targeted approach to do with the difference between objective 1 under our objective 3 programme, which and other programmes? Do you have any might apply in the Highlands and Islands, views on that? and investment in rural development through CAP or agriculture and fisheries will deliver a Laurie Russell: I suspect that each package. However, the shape of that programme is quite different. Perhaps we package remains to be seen. could all give you a flavour of the position. Colin Campbell: The package is unlikely In western Scotland, 72 to 75 per cent of to be comparable. applications are approved. We are getting sufficient applications to meet the overall Dennis Malone: I suspect that the programme commitment. Our programme is package is not likely to be comparable. split roughly into three parts: support for Colin Campbell: Should regions that are in businesses, competitive locations and receipt of full objective 2 funding receive infrastructure projects and social inclusion. transition money post-2006, if they are no We are getting sufficient project applications longer eligible? for social inclusion and almost enough for business development support. We are Laurie Russell: At the moment, it is slower in receiving applications for capital difficult for us to answer such questions, as funding. the whole debate about how structural funds will operate is just beginning. That is why we Approximately 30 per cent of applications are here today and why the committee is come from local authorities, 30 per cent beginning to debate the issue. A lot must come from the Scottish Enterprise network happen before we reach conclusions on such and the other 40 per cent comprises issues. At the moment, we can offer only our applications from further education colleges, personal views on whether it makes sense to higher education, area tourist boards, various have a transition programme. I think that it local development companies and the does and that the idea of tapering and voluntary sector. The two main sectors are phasing out support is sensible. It would also Scottish Enterprise and local government, be sensible to consider how to replace the followed by further education. structural funds. If there is no further support, Gordon McLaren: The east of Scotland can we do something at a Scottish level and programme is achieving a reasonable set up some kind of regional regeneration commitment across the three priorities, but budget to replace the benefits that the there is a discernible slow-down. We are regions have received from structural funds? picking up signals that suggest that there There are many such questions that we might be difficulties ahead in committing the should discuss over the next few years as programme. We have built a significant level the debate takes place at a European level. of spatial targeting into the programme. In Donald MacKinnon: For most of rural some respects, it is similar to the programme Scotland, the key issue is what is happening in the west of Scotland, because we target to the CAP, rather than reform of the ERDF strategic locations and community economic and the ESF. Whatever happens in respect development, or the social inclusion priority. of structural funds must be responsive to that We also factored in an overlay in terms of major change. the locations for targeting strategic sectors Ben Wallace (North-East Scotland) across the programme area, recognising that (Con): I want to return to the current there were some major growth sectors. It programme and ask about current issues. was interesting that, when we undertook the How many of the applications that you planning, one of those growth areas was receive are rejected, including those that are optoelectronics. There has been a worldwide
77 European Committee, 3rd Report 2002 - ANNEX B slow-down in that sector and the West However, we recognise that not all the Lothian area has suffered badly with closures funding comes from voluntary organisations and redundancies. The problem is probably alone and that such projects also have a high cyclical but it might be some years before we percentage of local authority and local come out of it. Other sectors are fairly slow in enterprise funding. The Community Fund and proposing projects. other bodies play a large part in match funding those projects. So far, the business The major sectors again include local development parts of our programme have authorities and the enterprise network. been underbid and we are trying to increase Further education has been quite significant the number and quality of bids in that area. because of a range of training infrastructure projects. The programme focuses on Dennis Malone: I want to address the assistance to SMEs. It does not train convener’s question about competitiveness. individuals per se but focuses on the extent Our problem in the Highlands and Islands is to which FE is targeting support for SMEs. the competition for the European social fund The funding available for that is pretty much part of our programme. Each year, we are exhausted, so it will tail off in the coming overbid by about £2 million on a £7 million years. There is also a reasonable level of programme, which means that we have to voluntary sector participation through social turn down about a third of the applications inclusion priority 3. that we receive for the social fund. Of course, that third brings with it an element of co- We are seeing indications that there are finance, and we just do not know what that difficulties with the map of the eligible area in co-finance is then used to fund. the east of Scotland: it is patchwork. Some of the bigger organisations are considering their We have also tried to make the Highlands position because the area coverage limits and Islands programme more strategic by how much ERDF they can draw down. The being a little more prescriptive, particularly in targeting of SMEs then means that they have relation to transport and ICT. The monitoring to reduce further the grant rate. committee is almost making decisions in advance about the type of projects that it There is also an optimum threshold below wants, which largely are those that reflect the which the amount of administration involved Scottish Executive’s priorities. In a sense, we means that it is not worth bidding. We are are trying to ring fence funding in advance of uncomfortable with that. We do not know it to those high-priority projects coming through be a fact but we think that an element of that our process over the next three or four years. is starting to come in. That is not helpful in the longer term. Donald MacKinnon: In the three rounds of the south of Scotland programme, we have The Convener: Thank you. allocated approximately 45 per cent of the Did Ben Wallace have another question? finance available. As with all the other area partnerships—apart, perhaps, from the Ben Wallace: I just wanted to hear about Highlands and Islands Partnership objective 3. Porgramme—the main agencies are Christine Mulligan: We have a large concerned about whether discretionary number of applicants for objective 3. At the finance will be available to match European moment, after the first and second rounds, funding. At the moment, we are trying to approximately 60 per cent of applicants have aggregate by asking all partner bodies about received funding. The other 40 per cent their expected spend profile and about come into a number of categories. Those projects that could be augmented by with a lower quality of bid are not approved. European structural funds. We expect to However, in the social inclusion and report back on that to our management employability parts of the programme, we committee in June. often receive bids which are of sufficient Ben Wallace: I am aware that the quality but for which we do not have enough European social fund covers pretty much the funding. As I said, our committees might be whole of Scotland. Have you found that the keen to consider—perhaps in the mid-term areas that are not picking up objective 2 review—moving the funding percentages funding are more proactive in applying for the about to meet the demand highlighted in the social fund? Are deprived areas not as able first half of the programme. to prepare successful bids? Those who live Voluntary sector applicants account for in better areas might well be able to receive about 40 per cent of our programme. better assistance, or certain local authorities
78 European Committee, 3rd Report 2002 - ANNEX B might provide more help with such bids. As a interested in devising projects and seeking result, people might be excluded because of funding for them, whether through European where they live, which is something that structural funds, lottery funding or whatever. happens with lottery applications. Do you find Could the partnerships not adopt a higher that that is a problem? profile? Are you allowed to advertise or produce user-friendly leaflets that explain in Christine Mulligan: No, we do not find simple terms that the money is available for that. There are not many such areas. We do people to help their community? Could you not find that they are very proactive in not do more in that respect? making bids. That is linked to the co-finance issue. The most excluded areas are receiving Gordon McLaren: We all have a match funding through the social inclusion communications action plan and we are funding, the partnerships and the Community charged with the responsibility of publicising Fund. However, the issue is the capacity to the available structural funds. We do that in a apply and deliver. I am happy to say that that variety of ways. We all have websites and we is improving, and we are seeing more produce leaflets and newsletters, but we do partner-driven bids coming from those areas. not take out press adverts. There is a good In our view, that is a better approach to level of awareness of the funds in the applying for funding and seems to be making programme areas. it easier for projects to be successful. On the issue of voluntary sector Nora Radcliffe: I am interested in a remark organisations and communities, you are right that you made about what happened to the that it is important that we reach the parts match funding that was available for bids that that other funding streams do not always did not go ahead. Does that finance go to the reach. However, because of the method of same sorts of projects, in a more limited way, targeting that we have to employ, that is or does it just disappear back into the pot to difficult. In the east, through the partnership, be used for something entirely different? Has we have insisted on a level of engagement anybody done any work on that? Do you throughout the designated communities. think that such work would be valuable? They have to go through a process involving all the local actors in the communities, who Dennis Malone: We have not undertaken have a say and an opportunity to start to any research specifically on that. I suggest identify what the priorities should be for those that projects might still proceed, but at a areas. There is a co-financed genuine significantly lower level, depending on the partnership-building process in the targeted priorities of the respective training areas even before projects are submitted. organisations. The local authorities take a lead on that Nora Radcliffe: I was just interested to because they have a lot of contacts, but we know where the money went. pay for an independent facilitator to bring everything together. There is a genuine The Convener: That brings us neatly to ownership of the process within the the balance of priorities between EU issues community. and regional issues. Some awareness raising goes on at Dennis Canavan (Falkirk West): I have a community level. I accept that more could be supplementary question about the slow-down done but, again, the issue is one of in applications. Gordon McLaren referred to resources. To an extent, we rely on the situation in the East of Scotland partnership organisations to raise European Partnership area. Could the awareness, but there are limitations on what partnership not be a bit more proactive in they can do. However, there is a good level raising awareness of the European structural of publicity and raising of awareness about fund money that might be available to help, what is available in the areas. especially in the voluntary sector? In areas of deprivation—to which Ben Wallace The issue is co-financing. I dare say that referred—people may have problems in there are good project ideas, but the issue is preparing an application or may not know how we can bring them forward and finance that the money is available. A lot of people in them. In the broad spectrum of organisations, the voluntary sector in various parts of finance is more of a constraint and more of a Scotland have probably never heard of the hurdle than the level of awareness. partnerships. I know that some people in Dennis Canavan: My second question local authorities are at pains to go out into relates to the level at which decisions are their communities to try to get people made on regional development funding. We
79 European Committee, 3rd Report 2002 - ANNEX B hear a lot about the principle of subsidiarity, and the Loch Lomond visitor centre. In each but is that principle being correctly applied in case, the Commission listened to the regional funding? How much of the decision recommendation. making should be at European Union level The European Commission formally and how much of it should be at member becomes involved only for projects that are state level? For example, should the EU seek over PLOOLRQ $V 'HQQLV 0DORQH VDLG to fund areas that are undergoing industrial every other decision is taken within the decline or should it focus mainly on programme area. The responsible minister is infrastructure funding? Are far too many of required to endorse the recommendations the decisions being taken higher up the tree that come from the programme area. instead of at the member state or even sub- member state level? Dennis Canavan: Do the decisions on the boundaries and the map have to be Dennis Malone: We are slightly ahead of submitted to the Commission for approval? Is the objective 2 programmes, because the there not a case for saying that the regional programme in the Highlands and Islands assistance map should be roughly the same started slightly earlier. Therefore we have as the objective 2 map? had the benefit of being able to reflect in a bit more detail, which is what we have done. Gordon McLaren: I will have to be careful what I say. There is an absolute logic in what Next week, we will present a report based you say. To be fair, we are being rather on that reflection to our monitoring critical of the Commission. When the committee. The report will highlight the fact objective 2 map was being drawn up, roughly that our strategic context for operating contemporaneously with the review of the programmes is much stronger than it has assisted areas, the Commission argued that been hitherto. The work that the Scottish we should have the same boundary. That Executive has done over the past 18 months would make sense. The UK position—not the has given a much broader context to the Scottish position—was to resist that. That led application of structural funds, which has to delays in drawing up the objective 2 map allowed us to develop the process of and to the two maps having different subsidiarity much more effectively. boundaries, which has added to the In the Highlands and Islands, the initial complexity of the different aid thresholds appraisal of projects that are submitted to the under state aids. In retrospect, we would programme is undertaken by advisory have all preferred the boundaries to be the groups, which consist of technical experts same—that would have been simpler. from the local partnerships. Those advisory Laurie Russell: There was a strong groups ultimately make the recommendation political argument for having different to the local management committee, which boundaries, because regional selective comprises members and officials of the local assistance focuses on businesses and on partnerships. That recommendation is made where businesses are located, whereas the within the context set by the monitoring political view from the Executive was that committee and the Scottish Executive. structural funds should focus on communities There is every case for arguing that in greatest need. As members know, subsidiarity is being applied stringently in businesses are not usually in the same area Scotland. as communities. There was a political reason for the decision. Laurie Russell: I will add a bit of factual information. Only very large projects—those The Convener: That seems a valid point. that have a total cost of over PLOOLRQ²JR Sarah Boyack (Edinburgh Central) outside Scotland for a decision. In previous (Lab): I will follow on from the key issue that programmes, the threshold was PLOOLRQ Dennis Canavan raised, which is the but it has gone up for the current programme. Commission’s idea that programmes will be In the previous programme in western renationalised and the member state will Scotland, there were only three projects that decide centrally on an allocation of money required that the decision be taken by the and priorities according to a set menu. What European Commission. The Commission’s would be the impact on Scotland? When we decision was based on a recommendation went to Brussels a few weeks ago, that was from the management committees in certainly on the Commission’s agenda. What Scotland. The three projects were the implications would renationalisation have for millennium link, the Glasgow Science Centre Scotland, given that in the eyes of the
80 European Committee, 3rd Report 2002 - ANNEX B
Commission we are a constitutional region? the ground. We are keen for the witnesses to To what extent have you thought about that? start thinking about the issue as well, Have you examined the Scotland Act 1998 to because we are conscious that we will have see what the implications would be for us in to engage with it over the next few months. terms of who would take the final decisions? The Convener: I had one other question, The Convener: That is a fairly big but I am reluctant to mention it. I will throw it question. out there and perhaps you could give us written information on it. I understand that the Laurie Russell: Sarah Boyack is right that programming period to 1999 throughout renationalisation will be one of the key Scotland was underspent by about 1 per cent debating issues over the next few months. of the budget. Have you identified reasons We were at a meeting with the Executive this for the underspend, perhaps relating to morning and as far as we are aware there is complexity, and have we sorted that out in no UK line on what view we should take. The the 2000-2006 programming period? Department of Trade and Industry has commissioned a consultancy study—it is Laurie Russell: At the end of any being carried out by two Scottish consultants: programme, thousands of projects in the European policies research centre at the Scotland have to produce their final University of Strathclyde and Alex Fraser accounts, claims and audited accounts. Associates—to consider the added value of Agencies store up their underspends. They structural funds. It comes down to whether do not tell us that they have not spent their member states can implement regional policy full allocation of funds until the end of the to the same extent as the structural funds programme, at which time it is too late to have done over the past 15 years. reallocate the funds. That is why the expenditure always comes in a bit below the The view in the 1980s when the structural commitment level to some projects. funds started was that there was a closer alliance between local authorities and others You are right that there was a dip in Scotland and Brussels than there was with throughout Scotland between the final level London. It is not for me to judge whether that of commitment to projects and the has changed. However, we can point to the expenditure level that came out when we added value that has come from the examined the final claims and audited European Commission funding regional accounts. That exercise is not quite complete policy and economic development. There is a so we do not have accurate figures, but we case to be made for continuing that. The expect them by the end of the month. We debate has just started and we need to hear expect expenditure levels to be a couple of the arguments from both sides. percentage points below the commitment levels. If I were to make a suggestion to the committee, it would be for it to seek evidence That has been a standard experience from John Bachtler, when the research that throughout the life of the structural funds. I he is carrying out on behalf of the DTI is suspect that it is the same in other projects of complete. That would allow the committee to that nature and is not unique to structural consider the information that comes out of funds. We get round it by trying to allocate the research. slightly above the level that we expect to spend. The Convener: Thank you. We have already spoken to John Bachtler and we are The Convener: Thanks very much. I thank trying to arrange a time for him to come to everyone for coming along. We have had a the committee. I understand that the National very informative session. We are inviting Assembly for Wales has been considering written submissions until September and we the issue and is keen to keep the look forward to receiving any written programmes at Community level, rather than submissions that you want to send. We will renationalising them. We would certainly take a short break to have a change of want to consider that in our deliberations on witnesses and allow Laurie Russell to sort our report. out his technology. Sarah Boyack: The issue of funding Meeting suspended. comes up. Who would be responsible and On resuming— whose budget would the funding come out of? We also have to consider the point that The Convener: I formally reconvene the was made about the visibility of Europe on meeting. I welcome Councillor Christine May
81 European Committee, 3rd Report 2002 - ANNEX B and Tom Sullivan from the Convention of in the EU, it seems equally important to Scottish Local Authorities. We have received connect local authorities and other public COSLA’s written submission. I understand bodies with the top-down policy making that that Councillor May would like to make some happens in Brussels and member state opening remarks. capitals. A recent good example of that for the committee to consider might be the Councillor Christine May (Convention of acting locally for employment initiative, which Scottish Local Authorities): For the sought to inform the process of co-ordinating committee’s interest, I also chair the lowland national employment strategies. EU regional Scotland objective 3 partnership. Quite a lot policy remains a great driver in promoting of what I heard earlier and many of the local engagement in European policy making committee’s questions were relevant to the and transnational co-operation. It has raised debate that we have been having in the awareness of the European dimension and it objective 3 partnership and to the should continue to play that role. discussions that COSLA is having. Obviously, other political and technical I will base my remarks on our written arguments exist for the maintenance of a submission. I will be as brief as I can. I regional policy for disadvantaged areas. welcome the initiative that the committee is Economic and social cohesion is a major taking. It is right that we should start the cornerstone of European integration and debate and be part of the discussions that disparities of wealth within member states are going on across Europe. I heard with are not declining. There is concern, as the interest the comments on transnational co- committee has heard, that the incorporation operation. I know that the Executive is of new member states will shift the economic already building links with major regional and political centre of gravity towards the Parliaments throughout Europe. That is to be east and accentuate Scotland’s peripheral commended. In this debate, we should build position. on that relationship. The structural funds have provided the COSLA has a task group on regional policy impetus for a broad range of innovative and enlargement, which I chair. When the approaches to economic development, group met in March, we agreed on the among them the partnerships from which the submission that we have sent to the committee heard earlier. The issues may not committee. have been tackled in that way and those The first thing that we asked and that I ask partnerships may not have been built up in the committee is whether there should be a the absence of that European funding. For European regional policy, outwith the that reason, there is benefit in the accession countries and those regions most continuation of some pan-European focus on in need, after 2006. If there should be one, regional development, although the sums what shape should it take? The European involved may not be enormous. The benefits Commission is asking us those questions. of some of the smaller funds, such as We need to produce answers and that can INTERREG, obviously outweigh the value of be done only after we have debated and the fund. They are highly visible, as folk see considered all the issues. the logo. The starting point must be the future of the Such schemes play a role in disseminating European Union, so the two debates are best practice. People can see something that intertwined. How many times do we need to is the product of ideas in their local be reminded that the people often do not community going all the way to Brussels. perceive any real benefits from membership Again, that demonstrates positive aspects of of the EU? We have been reminded of that European membership. by the Irish no vote in the referendum and I would argue that those aspects alone the success of Le Pen and others. There is a demonstrate that Europe needs a regional need to demonstrate the positives of policy outwith objective 1. If there is no European integration. The funding of projects regional policy and we apply strictly the at a local and national level by the use of criterion that only those regions with a GDP structural funds has been a clear and per head that does not exceed 75 per cent of obvious way of demonstrating to our the European Union average are eligible for communities the benefit of membership of objective 1 status, Scotland will be excluded the EU. from that. In Britain, only Cornwall will be just In the context of the debate on governance about eligible. We may get away with
82 European Committee, 3rd Report 2002 - ANNEX B arguments based on ultraperipherality and The polycentric approach is championed sparsity of population in small regions, but from the perspective of European spatial those would be so small as to make the development. Its main tool is INTERREG. impact of objective 1 status negligible. We need to ask whether it would be worth having more small funds like INTERREG. What shape might a post-2006 regional What benefits would those have? What form policy take? Today, the committee has might they take? What themes might they considered a number of models. We must support? stop thinking about objectives 1, 2 and 3, and start thinking more imaginatively and A successful enlargement would benefit creatively. The debate is broad and involves Scotland. Laurie Russell has talked about the polycentric development of a menu-driven twinning arrangements between the approach. Sarah Boyack has already accession countries and us, which are all to mentioned that. Regional competitiveness is our benefit. However, enlargement will also important. If we think about the increase disparities and make us seem possibilities and issues arising from a menu- wealthier in comparative terms. This is the driven approach and a focus on regional start of a debate and it is important that we competitiveness, that will help us to move the engage in that. Local authorities are anxious debate forward. to do so alongside the committee, so that we can put to the UK Government and Brussels The idea of a menu-driven approach a Scottish position that is supported by the cropped up repeatedly in discussions with different levels of government here, with their the Commission. It is suggested that the EU various competences, and that reflects the could accompany restructuring in areas that ways in which those levels of government are affected by its policies. Structural interact with communities. We do not want to assistance could underpin the Lisbon return to the sort of last-minute horse-trading agenda, but it could be for member states that took place in the past. Our nerves were and regions to decide how and where to shattered at the end of that process, which allocate funding from a European menu. That would be much harder to justify this time would ensure that pan-European regional round, given that we know well in advance themes are retained, but would allow much that enlargement is coming. more local flexibility. There would have to be an overarching framework, or we would end Let us identify our allies across Europe and up with renationalisation under a different in the UK, and work together to reach a name. common position, if possible. I am happy to answer any questions that members would The Conference of Peripheral Maritime like to ask. Regions of Europe has proposed that detailed consideration be given to the use of The Convener: You are right to say that regional competitiveness as a means of this is the start of a debate. On this occasion, designing a future cohesion policy. Work on we have begun to debate the issue of that is under way in the European structural funds at an early enough stage in Commission, in the context of the Lisbon the process. Sometimes we are told that we agenda reports. More controversial is the are too early or too late. I hope that this time issue of the flexibility of EU competition we have pitched things just about right. From policy. As members will know, the what you have said, it would appear that you Commission maintains that it alone has the agree. competence to act in that area. That position How could Scottish local authorities and is not due to be reviewed until 2004. partnership projects prepare for the move However, with tighter budgets, the arguments away from dependence on structural funds of wealthier member states, including the towards more transnational projects that will United Kingdom, and regions for expanding take place after 2006? Has COSLA the scope of domestic regional aid in return discussed that issue? for allowing all EU structural funding to be focused on the east may gain momentum. Tom Sullivan (Convention of Scottish That idea is worthy of more detailed Local Authorities): We have had some consideration. Many of the regions that are discussions, on INTERREG in particular. At currently arguing for such an approach are the end of last year, we held a seminar in the subject of reports for infraction, so it Haymarket on councils’ engagement with could be argued that it would result in fairer that project. As a result, a number of councils competition and fewer reports. have begun to identify suitable partners in other member states. In the past, our
83 European Committee, 3rd Report 2002 - ANNEX B approach was more scattered; we would do a Councillor May: Indeed. partner search to find out who wanted to do a The mid-term review of the current round of project with us, rather than identify structural funds is designed to show how well beforehand the areas of best practice that we we have done, halfway through. We are wanted to learn about. The process has now measuring our performance against the begun, although not at a national level. objectives that we set, which were improving Recently, local economic forums have the capacity of the work force and improving begun to identify transnational strategies, the lot of SMEs. Once the mid-term review is and that approach should be encouraged. complete, we will have a better idea of where For any transnational programme, there must need will most likely persist post-2006. It be well-developed local partnerships—it would be better to start from there and then would be pointless for councils to work on tie our work into the various strategy their own. Such partnerships are different in documents. If we consider “A Smart, different parts of the country. COSLA is not Successful Scotland: Ambitions for the trying to lead this in any way. Enterprise Networks” and the emphasis that Scottish Enterprise puts on clusters, we can Councillor May: One area for see a relationship between, on the one hand, transnational projects that merits some work that has been done in the Lothians on serious thought is energy. The north-east of giving support to clusters and, on the other Scotland is eligible for funding in a hand, areas where there could be programme that includes Norway and parts transnational partnerships. of Russia. There are serious possibilities there that we should consider. That is a different way of looking at things, but it might allow us to focus more on the The Convener: John Home Robertson has areas of structural need in Scotland. Such some questions on priorities. areas will persist. It is impossible to imagine Mr John Home Robertson (East Lothian) that all the areas that currently suffer (Lab): Polycentric? Spatial objectives? I am percentage unemployment levels in the high afraid that some of us do not speak the teens will have resolved their problems by language. 2006-07—they will not. We must think a bit more out of the box. Does that mean I am the MSP for East Lothian and I was polycentric? Well, yes. It fits nicely with the previously the MP. We have received cluster model, which already exists in terms precious little—apart from some RECHAR of the national enterprise agency, and which funding—because we have not qualified for is also being developed with the local years. Such issues are a sore point in some economic forums. Perhaps it is about getting parts of Scotland. Every time that a local together all the bits of our policies—social company comes up with a bright idea and and economic—in Scotland, then seeing wants to expand, it moves somewhere else, where we need to argue for support. which means that local people have to travel further and further to work. There has been a Mr Home Robertson: But it will be terribly distorting effect in some areas and things difficult to work up objective criteria to make could probably be done better. that stick in Scotland. I agree with you that we all have problems and we all want to I read with envy stories about objective 1, achieve the same things, but if we compare objective 2 and objective 3. You slid round our problems with the problems in Poland, it the question of prioritising, but I would like to will be difficult to work up criteria—polycentric try to pin you down. Objective 1 covers or otherwise—to ensure that we continue to depressed economies, objective 2 covers get something out of the cake. That is going structural difficulties and objective 3 covers to be rather difficult, is it not? That is what we the modernisation of education, training and are trying to do here. employment. Would you like to have a stab at prioritising those areas? Councillor May: We should not compare apples with pears, and that is what we would Councillor May: Rather than having a stab be doing. Instead, we should take a slightly at prioritising objectives 1, 2 and 3, I want to different approach. Somebody made the begin from a different point. point earlier that we should not forget reform Mr Home Robertson: You sound like a of the CAP and fisheries policy. Let us not politician. forget the need to move from supporting production to supporting the rural infrastructure. That was tried previously, but
84 European Committee, 3rd Report 2002 - ANNEX B we did not succeed. Let us see whether we round—the current round—and on what we can take a better stab at it this time. know from our better labour market information, which is being pulled together, Mr Home Robertson: I endorse that view. largely because of the Scottish Executive’s Dennis Canavan: I want to press you on demand that we should have common the point that John Home Robertson made measures throughout Scotland. about objective criteria. Is it all that The Convener: You are right. I recall that impossible to draw up a set of objective COSLA raised the difficulty of collecting criteria and to apply them to member states statistics throughout the EU. One would think or regions within member states? Whatever that it would be straightforward to measure you think of the 75-per-cent-of-GDP rule, at homelessness or child poverty levels, for least it is measured and applied objectively. It example, but there are huge difficulties in is above board and people can see it doing so. In the last round, we got across to operating. Is it impossible to take criteria the European Commission the fact that it is such as unemployment and deprivation in important that we start to collect such data different member states, regions, or even now, so that, five years on, we will be able to parts of regions in member states, to put in place other objective indicators of measure them accurately according to some poverty and deprivation. universal European Union definition, and then to decide, on the application of those Sarah Boyack: I have a question for criteria, whether areas are eligible for Christine May. In your opening remarks, you assistance? made a point about state aid. I think that the West of Scotland European Consortium You referred to horse-trading, and there made the same point in a submission to the are all sorts of allegations of political committee. I interpreted it as a trade-off: if we intervention. I know of areas in my do not get regional money, we can slacken constituency that are more deprived than the rules on state aid. To what extent is that other areas, yet the less-deprived areas a kite that you are flying and to what extent qualified for objective 2 whereas the others have you thought it through? Would the did not. That caused all sorts of local exemptions from the existing state aid rules difficulties. There are similar national and be blanket or negotiated? Where are you international difficulties within the European coming from? I know that a lot of Union. I cannot for the life of me understand infrastructure can be built, such as roads and why we cannot draw up a list of objective railways, and that ferries are covered by criteria and apply them fairly and state aid. Have you thought about that or are transparently throughout the Community. you just kicking the idea into the discussion Councillor May: You would think that it at an early stage? would be possible, but as far as I am aware, Councillor May: That kite has a tail a mile GDP is the single criterion that can be long—it is literally floating up into the air— measured on a common basis throughout the because work is being done on it in various current member states. In addition, because centres throughout Europe. However, it is the accession states will be using the same very much a kite: I have not thought it criteria to measure GDP, it will be a common through. I have not even considered in any measurement. Other measurements are not great detail, for example, what the financial comparable between the EU member states. impact of complete repatriation might be on That is the difficulty of using measures of Scotland. We should consider that before we deprivation and, for example, come to a definitive view on what to present unemployment—as Dennis Canavan will as Scotland’s point of view. I do not know know from his previous life, unemployment is whether some or all schemes should be measured in different ways in member exempt, under what circumstances they states. should be exempt and where the trade-off I agree that we should be looking for would come. I would need to do a lot of work objective criteria. I was suggesting to John on that. Home Robertson that we should not make Ben Wallace: Ronnie Hall, the chef de comparisons with the accession countries, cabinet in the regional policy directorate- given that GDP will probably remain the only general in the Commission, talked about consistent indicator. We should look for other some of the member states pushing for a objective measures, but they should be change in the rules on state aid. If some based on our experience of meeting the repatriation were to happen, at what level objectives that were set in the 2000-06
85 European Committee, 3rd Report 2002 - ANNEX B should state aid come back to us? Would you particularly affect southern member states. want it to come to local authorities rather We might give further consideration to that. than into the UK Government or the Scottish Councillor May: I return to the general Executive? If those were the options that you point. If one had an overarching European were given, where would you like it to go? strategy that contained elements of That would help to define the type of state discretion, one would want to examine the aid and how to give it. Obviously, a local detail of the scheme before deciding with authority or the Scottish Executive could not which sphere of government that discretion give state aid to British Midland Airways or should lie. The appropriateness of the ScotAirways, but it might be able to support decision-making body—the subsidiarity areas that are more deprived or in need of a principle—would come into play. That is boost. worth considering. Councillor May: Tom Sullivan will Ben Wallace: Given that the DTI will be comment first, then I will answer the political heavily involved in discussions about reform bit of the question. at the Commission, have you had Tom Sullivan: COSLA was not trying to discussions with the DTI or with your float the state aid kite at all: we were just counterparts in the English local authorities? drawing attention to the fact that it was there. Councillor May: No. The COSLA group It has come more from Germany than from has met only once and you have our this side of Europe. It is a very dangerous document. We have not undertaken road to go down. We have noticed, discussion on a pan-UK basis, although I am particularly in the Committee of the Regions, aware that meetings are taking place. We that a number of German Länder have been have not got into the detail and we have not outspoken about state aid. They want greater been to the DTI. flexibility. I point to the fact that many of those Länder flagrantly flout the state aid The Convener: We are short of time, so I rules. Some Spanish regions do the same. thank the COSLA witnesses for coming along and for providing a written submission. We Do we want to go down that road? We are taking evidence until September. We cannot open up that question easily because appreciate and welcome COSLA’s it is the explicit competence of the European contribution to the present debate and to Commission. It is not up for review, and I do previous debates on structural funds. We not see why the Commission would want to hope that we will continue to have dialogue open it up. It must be discussed with on the matter during our inquiry. ministers with responsibility for industry. We have to be aware of it. Certain exemptions I invite the Scottish Natural Heritage already exist under the structural funding witnesses—John Thomson and Chris policy: a region with objective 1 status has Miles—to take a seat. We have invited all our higher ceilings for state aid. It is too early for witnesses to make a short opening us to get into such debates. statement, but I hope that you will forgive us if we go straight to questioning, as we are The Convener: Last time round, COSLA running short of time. We have your argued for a pot of money to be set aside for submission, which we discussed at some use in crisis—for example, flooding—or if a length at an earlier committee meeting. We region had been hit by an asymmetric shock were quite impressed with a number of your to its regional economy, which did not affect suggestions, although we wondered whether the rest of Europe. Is that something that you you were flying kites on some issues. Would might argue for this time around, to avoid you be happy if we proceeded straight to Council of Ministers meetings sitting day and questioning? night to reach agreement? Might there be some support for that in other regions in John Thomson (Scottish Natural Europe? Heritage): Yes, although I would appreciate having an opportunity at the end to pick up Tom Sullivan: It was in the context of any points that I wanted to make that did not economic and monetary union that the point arise in questions. about members of the euro receiving an asymmetric shock was raised last time The Convener: That would be fine. You around. Such a measure would have support made suggestions on natural handicaps and from other member states—certainly in pointed out that wider areas of Scotland relation to crisis intervention, for example in might be included in a future programme of cases of drought or flooding, which the European Commission. What led you to
86 European Committee, 3rd Report 2002 - ANNEX B those conclusions? common conditions. You might argue that there is not much similarity between the Alps John Thomson: I echo what some of the and the outer isles, but the conditions there previous witnesses have said about the need can in fact be expressed in a rather similar to examine together the future of the way, which allows the building up of structural funds and the CAP. In particular, partnerships. we must consider the development of the second pillar of the CAP—the rural Mr Home Robertson: We have been development regulation—which starts to discussing objective criteria in relation to spread the benefits of CAP spending beyond other aspects of structural funds. What kind the land-managing community into the wider of objective criteria could you establish to rural community. measure peripherality—which is an awful word—or mountainous terrain, for example? I make that point because the idea of You have just cited a comparison between disadvantaged areas is already present in the Alps and the Western Isles. If you are to the CAP, in the form of less favoured areas, do that, you need to work up some which account for 84 per cent of Scotland. comprehensible criteria. Can that be done? Even in an enlarged EU, those areas would probably remain among the most John Thomson: There are things that can geographically and climatically be done in relation to the potential disadvantaged areas in the Community. That productivity of soil and so on. I accept that provides at least one relatively objective that is not addressing the whole of the criterion for targeting EU funding in the agenda that you want to address, but it future. highlights some issues. My colleague, Chris Miles, might want to add to that. If we link that to the fact that a significant proportion of those areas are also designated Chris Miles (Scottish Natural Heritage): for their natural heritage importance under Another factor is density of population, which European directives, we have the makings of is similar in the areas cited. In Scotland, a strong case for some geographical there are areas with significantly low targeting, which reflects both natural population densities, which creates serious disadvantage and the importance of the problems for those areas in addressing rural environment to the wider community. development issues in particular. The Convener: Have you had any The Convener: I imagine that you would discussions on this matter with the European find considerable common ground with Commission? Are there regions that take a Scandinavian countries on the issue. similar perspective to ours in advancing Chris Miles: I think so. There are already arguments such as those that we have been links on natural heritage issues between us discussing? and Scandinavian countries, which are John Thomson: I would not say that we engaged in similar projects. have had discussions with the European The Convener: Would that be compatible Commission specifically on this topic. One of with the ideas that will be presented on urban the issues on the Commission’s agenda is funding? the future management of the sites in the NATURA network and how that network is to John Thomson: Although we said in our be funded. As I have indicated, that is submission that we think there is an relevant to at least part of the rural area of argument for special treatment for Scottish Scotland. urban and peri-urban areas from an environmental standpoint, I suspect that it We are aware of a number of initiatives in may be a bit more difficult to state that train in other member states. For example, Scottish urban areas are particularly highly we are studying the future of the remote and deprived in European terms. One thought mountainous areas of Europe, which I think that occurred to us—although this is not Dennis Malone of the Highlands and Islands strictly within SNH’s remit—is that Scotland’s Partnership Programme mentioned. A very bad health record, even taking into conference at which some of those issues account the health records of eastern will be explored will take place next week in European countries, is well known. Our Inverness. There are certainly opportunities initiatives in and around cities aim to provide for at least parts of Scotland to make more opportunities for people to walk, for common cause with other parts of the EU on example, which contributes to improving the the basis of what are at least relatively health of the nation. Therefore, health might
87 European Committee, 3rd Report 2002 - ANNEX B be an area that you could pick up on. in the first place, but more broadly, because However, that is outside SNH’s immediate we feel that the EU’s encouragement of terrain. partnership working at the regional level and of community involvement has enabled the The Convener: We were very impressed programmes to be as constructive as they by the creative approach that you took in have been. We do not want the situation to your submission. Do you have any indication retreat into the more centralised and slightly of how much of Scotland might be covered ghettoised approach that was characteristic by some of the suggestions that you have of national programmes in the past. made, particularly with reference to the southern uplands and the Highlands? The Convener: Your comments were interesting and we will include in our report John Thomson: We do not have a precise some of the suggestions that you made. estimate. I suppose that we could start with Thank you for your written submission and the proportion of Scotland that is likely to be for coming along today. covered by the Natura 2000 network of environmental designations, which is approaching 10 per cent. The Community has a special stake in the future of those areas, but most people would acknowledge that the special environmental areas go a long way beyond those areas. It would not be difficult, using environmental and disadvantage indicators, to put together a pretty convincing case that up to 50 per cent of the country should be covered. The Convener: We are nearly out of time. I invite John Thomson to make any concluding remarks. John Thomson: Many of the issues that we wanted to bring out have been raised already. I echo some of the points that were made by the representatives of the European partnerships about the recent experience with the evolution of European policy. For example, we were strongly in favour of the establishment of the rural development regulation. We still believe in that as a way forward, but we have been slightly taken aback by the relative inflexibility of its application. The combination of the audit- crazy approach at the European level, which has been mentioned, and the need to put together a programme quickly in Scotland probably meant that there was less opportunity for discussion or the application of imagination in the implementation of the rural development regulation. We discovered that some of the benefits that came in the past from the objective 5b programmes, which took an integrated approach, were beginning to be lost with the divergence of the rural development regulation and the structural funds. We want those two to be put back together through the partnership working at a regional level that has characterised the structural funds until now. We are keen to retain the European dimension, partly for the narrow reason that Europe got the environment on to the agenda
88 European Committee, 3rd Report 2002 - ANNEX B
European Committee I am a director in the CPMR’s general secretariat and I have been in charge of regional policy for five years. I will present a Tuesday 21 May 2002 résumé of the position that our political bureau and our general assembly took at our (Afternoon) most recent general assembly, which was in 2001. That proposal was presented to Col 1528ff Commissioner Barnier, other commissioners and states around Europe. Afterwards, if The Convener: We will now take evidence members agree, I can give some information for our inquiry into the future of structural about the negotiations. I will do my best to funds post-2006. I welcome Philippe answer all your questions on the subject. Cichowlaz to the meeting and thank him for travelling so far to join us. The witness continued in French (simultaneous interpretation). In the debate Bienvenue en Ecosse. Nous avons attendu on the future of regional policy, the European avec impatience votre visite et l’avis de la Commission has often insisted on the CRPM sur ce sujet important. Dans quelques requirement to think about the European instants je vais vous donner la parole. Union’s needs before one broaches budgetary elements or methodologies. When Je vais continuer en anglais pour mes we made our second proposal on the reform collègues. of regional policy, we organised it into four The CPMR is well known throughout strands. First, what are the foreseeable Europe and the committee wishes to have needs for the social, economic and territorial not only a Scottish perspective on structural cohesion of Europe at the horizon of 2007? funds, but a pan-European view. I am sure What policy could we promote to meet the that Philippe Cichowlaz will be able to give needs and challenges? What budget is an overview of how other regions in Europe necessary to meet those needs? What kind are tackling the question of structural funding of governance of the European Union is post-2006. needed to guarantee the success of the political project? I understand that Philippe Cichowlaz will give an overview of the CPMR as an When the gross domestic products of the organisation and will talk a little about regions of the EU 27 are analysed, they regional development and how that debate is show five stages of regional convergence, unfolding throughout Europe. Stephen Imrie broadly speaking. One category of regions has a few instructions on how to use the had GDPs in 1999 that were an average of machines that relay the interpretation. The 40 per cent below the Community average. committee seems to be extending Those regions are mainly the outermost information technology to its limits with our areas that will be covered by enlargement, videoconferencing and simultaneous such as the Baltic states, Hungary, Bulgaria interpretation. and the most northern areas of Poland and Slovakia. It will take at least two generations Stephen Imrie (Clerk): Members should for those regions to achieve a reasonable have the necessary equipment for listening to and acceptable state of development and to the interpretation. If you are an English catch up. They lag behind. speaker, you should listen to channel 2. If you are a French speaker, you should listen There is a second category of regions to channel 3. If you have any problems with whose GDP is between 40 per cent and 75 the equipment, please indicate that to a clerk, per cent of the EU average. Those regions, who will try to resolve the problem for you. such as the east of Poland, the Czech Republic and Hungary, are mostly in central The Convener: I assume that everything is Europe and will be part of the EU after working okay and that Philippe Cichowlaz enlargement. However, some current regions can hear the interpretation in French. of the EU will remain eligible, including a few Philippe has the floor. Greek regions, some regions in southern Philippe Cichowlaz (Conference of Italy, some in Spain and Portugal and some Peripheral Maritime Regions of Europe): I of the ultra-peripheral regions. It will take one thank the committee for its kind invitation. I or two generations for the economic am sorry, but I will speak later in French, to performance of those regions to catch up. ensure that what I say is clear, because the The third category of regions in the EU 27 subject is difficult.
89 European Committee, 3rd Report 2002 - ANNEX B comprises those regions that are at the third of the European territory. We should not stage of development and whose GDP is 75 have separate criteria for the candidate per cent to 100 per cent of the Community countries. average. Again, there is a great disparity of However, we need to take into account the situations among those regions. The majority regions that, statistically, will no longer be will be peripheral regions, some of which will eligible for structural funding. We know that be only mechanically or statistically above 75 eligibility for the post-2006 period will be per cent of the EU average. A large part of calculated on the basis of a Europe of 25 Scotland will fall within that category. member states and will not include Bulgaria Each of those regions will have its own and one other region. However, we also specificities. In the south of Europe, many know that about 15 regions will no longer be such regions will depend on a mono-industry, eligible because of the mechanics of which will mainly be tourism or activities that enlargement. In other words, those regions are linked to agriculture or rural development. will be ineligible not because of improved Some mono-industrial regions that have not economic performance but because of the completed their reconversion will be part of statistical effects of enlargement. that category as well. There will be some A second question that relates to objective regions with accentuated peripherality, 1 regions concerns the relevance of especially in northern Europe. One can maintaining a 4 per cent ceiling of imagine that those regions will take at least Community aid. That question is more one generation to reach a level of important than it seems as it has competitiveness that is equivalent to repercussions for the amounts that will be European standards. given to regions with objective 1 and Another category of regions includes those objective 2 status. The capacity to co-finance whose GDP is between 100 per cent and 130 those regions is so low that expenditure per per cent of the Community average. Again, inhabitant will be much lower than it was for those regions contain a large diversity of regions of previous accession countries—the situations. For example, the capital cities of figure might have been more than IRU the peripheral regions, such as Madrid and the regions of the south of Europe, but there Porto in the south of Europe, fall within that might be only LQ WKH QHZ UHJLRQV ,Q category, but so do some northern European other words, aid per capita will be much cities. Some central and intermediary regions lower than it currently is. A central question is with an industrial tradition have great poverty whether there should be a cohesion fund for but are not remote regions in their respective the poorest enlargement countries, even if countries. there is 100 per cent co-funding for structure and transport, for example, to maintain Conversely, the wealthiest regions in European cohesion. Should we maintain that Europe are those whose GDP is above 130 ceiling, which was suitable but which will per cent of the Community average. Those perhaps no longer be suited to the new regions are the most competitive in Europe situation? That debate is on-going. but some of them are confronted with environmental problems, transport We are trying to promote a new objective 2 congestion and difficult social situations in policy for territorial cohesion or regional the city centres. Solving those problems will competitiveness. Aside from the enlargement be part of the rebalancing of areas in Europe. regions and the few regions that will remain eligible, there are still problems relating to According to which rules should all that be competitiveness at European level that need balanced? The proposal that we are working to be resolved. An objective 2 policy that is on is to pursue the policy of objective 1 for more structured and European than it regions in the first and second categories—in currently is would be more sustainable than a other words, those whose GDP is below 75 phasing-out solution, which would lead in per cent of the EU average. For the regions 2013 to a total end of regional policies under in the third, fourth and fifth categories, we objective 1. The policy should take into aim to reinvent the policy for objective 2. The account regional handicaps. European new policy would be widely different from regions are not equally competitive. We think today’s policy. I shall return to that point later. that a new objective 2 status should apply On the maintenance of a single set of particularly to low-density areas, islands and criteria to determine which regions are areas with altitude or relief problems. Some covered by objective 1, it seems important studies are being carried out in that respect that we have one set of criteria for the whole at European Commission level. We are
90 European Committee, 3rd Report 2002 - ANNEX B inclining in the direction of a specific Observation Network programme, and the instrument or perhaps a bonus for regional Commission has launched a couple of policy. studies to find out whether new territorial criteria should be used within the future How can a new objective 2 policy be better regional policy framework. linked with present Community initiatives that involve trans-border, transregional and Some work on the issue has already been interregional co-operation, for example? A carried out in the sixth interim report on the new objective 2 policy must be simplified— situation of the regions. I have produced a that is necessary for its survival. The zoning colour-coded map that shows the main system must be simpler and there must be competitive weaknesses of the European simpler criteria. Everybody should agree to regions, which should give members an idea leave aside intraregional zoning and leave of the priority that could be given to some of the regions with the opportunity of organising those regions. As members will notice, their territorial policies. Projects should be Scotland features prominently in that map. simpler. Currently, there is a criticism that Greater knowledge of the regional situation administration costs are greater than the is another prerequisite for the scenario that I amounts that are involved in projects, so have outlined. In addition to the ESPON work should there be a limitation on the number of programme, the development of the projects? Should projects have a maximum European spatial development perspective size? Perhaps we should limit the number of and the capitalisation of Community projects that cost from WR initiatives, we must improve our knowledge of and perhaps the new objective 2 policy the polycentric scenarios that the ESDP should be more structured. favours for more balanced territorial The third simplification should be to ease development in Europe. the implementation of objective 2 by giving Such a structure would allow us to greater powers to the final beneficiaries, in envisage a European project for all the particular to the regions that would be territories. Even if the funding is more charged with implementation under the symbolic than anything else, it is important Commission’s control. For new objective 2 that all European citizens benefit from it. funding to be more efficient than before, it Moreover, we must reinforce the role of the should be linked to stronger sectoral policies regions in implementing policies to ensure on transport, competitiveness, research and greater legibility of the added value of the development, innovation, restructuring and Community. Another virtue of such an the economy. architecture would be the spatial visions for There are still some question marks over better governance, particularly in relation to objective 3 funding. As education and sectoral policies. training policies are a major feature of On the budget, we made calculations at the regional competitiveness, perhaps objective beginning, but things are moving all the time. 3 should be territorialised and merged with If we do not respect the 4 per cent ceiling objective 2. Indeed, the Commission is that I mentioned, enlargement should cost studying that possibility. The other question about ELOOLRQD\HDURYHUWKHQH[WSHULRG is how we can integrate objective 3 into The cost of objective 1 for the EU 15 is about objectives 1 and 2 and still enable the ELOOLRQ ZLWK ELOOLRQ IRU SKDVLQJ RXW regions to implement programmes in co- The cost of objective 2 funding should be ordination with national policies. between PLOOLRQ DQG PLOOLRQ Three prerequisites must be met in such a according to the importance of the project. scenario, the first of which is the Given those assumptions, the maintenance progressiveness of Community aid to ensure of a budget of 0.45 per cent would not allow that a concentration of regions is eligible for us to fulfil those needs. However, the stages 1 and 2 of objective 1 funding. There Commission claims that, if there were must be variation in the intensity of reduced aid for the candidate countries, it Community aid in accordance with simple would be possible to stay within the threshold criteria of regional competitiveness. Such of 4 per cent. Nevertheless, it seems to us criteria have not been used before and could that that the budget might realistically include accessibility, innovation and research increase to 0.55 per cent, which would meet and development potential. However, we the needs of enlargement and of the current have a year in which to define those criteria regions of the EU and would allow us to deal within the European Spatial Planning with a greater number of problems than we
91 European Committee, 3rd Report 2002 - ANNEX B do at present. With less money, we cannot Subsidiarity and solidarity are indissociable see how we could deal with more problems concepts, which, although they sometimes in a much larger territory. seem to be in conflict, should not be separated. There is often a strong debate Discussions on the budget cannot be about the German position. The Germans dissociated completely from discussions on advocate more subsidiarity, but without the future of the common agricultural policy, emphasising solidarity, whereas it seems to which might give us more margin for us that the two go hand in hand. manoeuvre. Similarly, the discussions cannot be separated from the discussion of In conclusion—if you will allow me a further Community credit, for which the Berlin minute—I draw your attention to a specific Council ensured a ceiling of 1.27 per cent of point on objective 1. Discussions on objective EU GDP for the budgets. The difference 1 are mainly of a financial nature, but we find between providing 0.55 per cent of GDP and a common voice at European level on the providing 0.45 per cent for objective 1 and 2 need to make an increasing effort for the would allow us to fulfil an ambitious regional candidate countries. The main question mark policy. Similarly, the issue cannot be is over the future of objective 2, which is separated from the general debate on directly of interest to the committee. There widening European integration, which will be are five types of regions, which are more or mentioned at the next intergovernmental less clear, according to the various positions conference. The debate is political and goes that have been taken by the national way beyond the problems of regional Governments. policies. Some net contributors no longer want A lot of progress is still to be made on objective 2—Germany, the Netherlands and governance in relation to sectoral and Sweden, for example. That is the stated regional policies, both by the Commission position of the national Governments of those and by member states. Sometimes, the countries, but it is not necessarily the position impact of Community policies goes against of their regions. The eastern Länder support the impact of territorial coherence. That the maintenance of objective 2, because they applies, for example, to research and could be beneficiaries if objective 2 remains. development and transport policies. We do a The northern and central regions of Sweden lot of work on transport and we believe that are also of that opinion. In the Netherlands, the trans-European network is not very the situation is more difficult. Most of the ambitious because it does not favour the territorial actors are keen on territorial outermost regions. Other policies that have policies and have great knowledge of the an impact are those on competition and programmes, but the views of the territorial taxation—it would take too long to discuss authorities and those of the Ministry of them, but future zoning will be extremely Finance do not necessarily coincide. important in the new negotiations. Other Some contributor countries—Belgium and examples are the policies on education and Finland—are in favour of pursuing objective training—we saw the effect of objective 3— 2. We do not know what the position of the and the environment. countries that receive cohesion funding will We hope that the white paper on be. They will defend objective 1 for sure, but governance in the European Union will do they want objective 2 to be phased out— ensure some virtuous principles for the we are thinking of Spain in particular in that governance of the European and national category—or do they want a longer-term frameworks. Two measures are required for objective 2? The situation is not clear. that. First, we must improve the programming The enlargement countries have a lot to do links between European, state and regional with objective 1, but they have not taken a levels. In that regard, we are considering position. Three borderline countries—the UK, tripartite contracts, by which, in a given France and Italy—will be important in the territory, each of the main partners would negotiations. They are rich countries, but agree a negotiated objective. To improve have diverse regional situations and have no efficiency, Europe should capitalise on official position. We hope that the new Prime national experiences of involving territorial Minister of France will pursue the path that authorities. There should be greater co- he chose when he was a member of the ordination between the various tiers of CPMR. Italy seems to be mainly in favour of government on the framework of policies with pursuing objective 2. At the moment, the a territorial impact. British Government does not seem to be in
92 European Committee, 3rd Report 2002 - ANNEX B favour of pursuing objective 2. regions and that would be the end. We are calling for something more structural and—as The issue that will arise—and I am thinking the word “structural” implies—long term. of Scotland—is that it is important to know how the discussions will take place around You refer to an instrument for use in the abandonment or otherwise of objective 2 reaction to sudden catastrophes and crises. regions. Some people advocate a That could be imagined under either of the rationalisation of policies. If policies are first two scenarios. Some people are thinking abandoned, there will be a necessary about that. Under the first or second national transfer of budgets for the same scenario, one could imagine a structural amount. There is no guarantee that there will intervention in the case of a crisis or be the same solidarity at the national level. catastrophe. The only difficulty is that nobody The debate will take place around those has taken a position on the instrument questions. Thank you for your attention. because there is a big difficulty determining the indicators that should be taken into The Convener: That was a comprehensive account to define a structural crisis. How and informative presentation, with a great should it be managed with the national deal of information. Many of the ideas, budgets? Will the political negotiation be thoughts and suggestions were new to us, compatible with leaving the European although other witnesses have come before Commission, which would give aid to crises us to give us their ideas. Please forgive us if on a case-by-case basis, large room for in the questioning we go over some of the manoeuvre? things that you talked about, but there is a lot to deal with. There are two types of argument. Some say that we can always keep a small One idea that you did not mention—it is instrument for such intervention. Those who being discussed in some regions in Europe are against it think that it is better to prepare and it was certainly discussed at the last for the future than to keep the money to round of structural fund negotiations—is that answer the problems of the past. That is of a policy instrument or a structural fund probably not a good way of ensuring that the instrument to deal with asymmetric shocks to regions can act as the fire brigade in a crisis regional economies. Have you come across situation. It is a delicate matter. that idea? Is there any support for that? As you are aware, policy instruments and The Convener: We are having a little structural fund instruments tend to be interference on our headphones, although we inflexible. can still hear the interpretation. Perhaps the technicians could look into that while we For example, we have had experience of discuss further questions. Before I open the major flooding in Scotland. Some regions in questioning to my colleagues, I welcome to Finland were affected by the collapse of the the committee the ambassador of economies in the Soviet Union, which led to Luxembourg to the United Kingdom, His high unemployment. Those things happened Excellency Joseph Weyland. We are very to regional and local economies. Have you pleased to have him with us and appreciate come across any arguments on the idea of the interest that he is taking in our an instrument to deal with such policy committee. issues? Sarah Boyack (Edinburgh Central) Philippe Cichowlaz: (simultaneous (Lab): I found your presentation interesting. interpretation) You are absolutely right. The You showed on the slides a predicted idea of such an instrument falls within the amount of money that would be required to discussion of the future of objective 2. There run an effective regional policy and a are three scenarios. One is purely and simply predicted amount of money that would be that objective 2 be abandoned. Another required to run a really good regional policy. scenario is that we support a toolbox that Will you tease out the distinctions between would consist of seven or eight different the levels of effectiveness of regional policy? initiatives—such as an urban initiative, an You also made a connected point about the initiative for the islands and an initiative for common agricultural policy. Did I read you innovation—which would be offered to the correctly by thinking that you were floating regions or states. They would be able to the idea that there might be scope for choose from the toolbox according to the reallocating funds at the European level, national criteria for eligibility or the type of which might involve the CAP? If so, how action required. There would perhaps be realistic is that, given the different member some benchmarking among the various
93 European Committee, 3rd Report 2002 - ANNEX B states’ interests in the CAP? We are maintaining a level of aid of 0.45 per cent because we are integrating within Philippe Cichowlaz: (simultaneous Community aid the instruments for pre- interpretation) A reallocation involving the accession of the eastern European countries. CAP is a delicate subject. It will depend not The budget that served the EU 15 in 1999 so much on Community negotiations as on will serve the EU 27 from 2006—we will negotiations within the World Trade maintain a budget level of 0.46 per cent of Organisation. If it is decided to reduce GDP when we move to an EU of 27 progressively support for prices, as was members and more after 2006. discussed in previous rounds of WTO discussions, particularly those that took place It will be difficult to answer greater needs in Doha, the Europeans will have to do the with a budget that is not increasing even same. Support for prices is the main pillar of slightly. Commissioner Barnier has fixed the the CAP and represents its main level at 0.45 per cent, but some states have expenditure. asked for it to be lower. The budgetary discussion will take place at the end of next Within the agriculture directorate-general, year. many people are talking of a switch between the first and second pillars of the CAP—in The Convener: I am interested that some other words, a switch from price support to states have asked for a level that is lower direct aid to farms. A general feeling exists than 0.46 per cent. Which member states are that the future of the rural sector depends not interested in lowering the budget? just on agriculture but on other activities. Philippe Cichowlaz: (simultaneous Members perhaps remember objective 5b interpretation) The main state that is from a few years ago in the context of interested in lowering the budget is Germany, regional policy. That objective will disappear although it has not quite made that position from regional policy and many people believe official. Germany has some budgetary that a new objective 5b should increasingly problems, but it is not the only country to become part of the common agricultural experience them. Some countries, such as policy. The regional policy of competitiveness Germany, are fed up with paying the greater will be focused on strong, mainly urban part of the European budget. Germany is elements and the CAP will support the therefore interested in reducing regional aid development of territories. and the budget in general so that it can solve All those developments are being its own problems. discussed and little skirmishes are taking Sweden is also against increasing the place between the regional policy directorate- percentage. I do not know what the other general and the agriculture directorate- countries’ positions are. For the most part, general about which directorate-general the others have not really taken an official should be in charge of the policy. Each position. However, today the trend is towards directorate-general is claiming that the policy making savings rather than towards having is within its remit. the political will to pursue European All that will depend on the discussions that integration as much as in the past. Perhaps will take place between the United States that is contradictory, given the challenge of and Europe on the evolution and the future of enlargement and the momentum of history, price support within the WTO. The United but budgetary requirements are coming to States has recently taken a new position of the fore. support for its agriculture sector. No one The Convener: You have spoken about knows whether it will maintain that position or the member states having more control whether it is for the next few months only. within the context of subsidiarity. Some of the The trend at European level is towards a evidence that we have taken in the past has reduction in the importance of price support dealt with the argument about and an increase in support to farms. That is renationalisation and giving priorities back to essential in relation to the budget. the member state. How will that argument By 1999, following the Edinburgh develop across Europe? agreements of 1992, we had reached a level In your presentation, you spoke about the of Community aid of 0.46 per cent of three tiers working together. There seems to Community gross domestic product. At the be an underlying argument that member Berlin summit, a reduction in Community aid states should take back some of the regional for the EU 15 from 0.46 per cent of GDP in policy powers. They should get a block of 1999 to 0.31 per cent in 2006 was agreed.
94 European Committee, 3rd Report 2002 - ANNEX B money and prioritise that for their regions. taken into consideration when structural fund How is that debate developing across reforms are being reviewed? Europe? There are differing views on that in Philippe Cichowlaz: (simultaneous the United Kingdom. interpretation) There are two on-going Philippe Cichowlaz: (simultaneous studies. One study, on the islands, was interpretation) The CPMR is totally against launched by the European Commission a few renationalisation of policies. Whatever months ago. We are following the progress of criticisms can be laid at the door of regional that study and we are awaiting results. I do policy, it has brought a lot to local and not yet know the content of the study or the regional Parliaments. Whatever differences findings. there have been, there have also been great However, as far as the islands are strides forward in methods of programming concerned, things are quite simple. We know and in the evaluation of public policies. All what an island is and we know what type of those elements have been quickly and neatly problem an island confronts. The mountains forgotten, but 10 years ago they did not exist. are more difficult. A call to tender has been In the field of efficiency, Europe has helped made and the first bids have been submitted. the local territories and regions make a lot of The final date has been postponed because progress beyond the budgetary discussion. of problems with methodology. It is difficult to Those are some of the important elements establish criteria for the mountainous areas. that have happened thanks to that policy. Technically, there are mountains in the The people and arguments that advocate alpine valleys that are extremely rich and renationalisation of regional policies do not have a high density of population. Should we do so for political reasons. They base their go below the level of NUTS 3 to NUTS 4 or arguments on economic and budgetary NUTS 5, which are more comparable with reasons. It seems to me that there is a strong the level set by the EC? Should we compare contradiction between the pursuing of the altitude with the population density to regional policies and renationalisation. At the form a criterion? moment, the gap between territories and regions is infra-national. Europe therefore Great strides forward have been made with has a role to play in co-ordinating the some of the permanent problems, but it member states. would be difficult to distribute money on the basis of that. Should there be a specific When we try to protect the better co- instrument for such low-density regions as ordination between the three tiers, it is to the islands or mountains? Alternatively, prevent a situation in which one tier pulls the should we say that regions that contain a action towards one end when another is certain percentage of either islands or pulling it towards another and then nothing mountains and that have a certain level of happens. It is important to balance and to GDP and a low-density population could follow a common path in order to ensure have a bonus of 10, 20 or 30 per cent greater efficiency. That seems to us to be at according to their GDP? That is what we the centre of the debate. have to think about. Within the Commission and particularly The concept of bonuses would be more within DG regio—apart from a few people— favourable than that of a specific instrument, the majority of people are against because we could take, say, 1 per cent of the renationalisation at the moment. They are in structural fund to give to insular or favour of pursuing objective 2. However, mountainous regions. However, that would there is always a dichotomy between political not be very useful in the end. Whatever the prospects and budgetary constraints. type of instrument, it would be important to Renationalisation means more policies. know what amount of money will be available The Convener: In your presentation, you to allow us to have efficient policies in those spoke about handicaps. You will be aware regions. I think that the ambitious scenario is that, particularly in the north of Scotland, we better than the toolbox scenario, which I fear face a number of handicaps. We have could be a device with very low budgetary mountainous regions and a sparse endowment. population and those factors cause The Convener: As there are no other difficulties with matters such as questions from members, I thank you for that transportation. Those problems are different interesting and informative presentation. We from GDP but probably affect it. How are drafting a report on these issues and the confident are you that such issues will be
95 European Committee, 3rd Report 2002 - ANNEX B evidence that you have given us today will be huge amount of work for the clerks if we do helpful. I hope that we continue to have not. We have the facility in the budget to do dialogue with the CPMR in the months so, particularly for such a large inquiry. ahead. I am sure that that pan-European Appointment of an adviser might expedite the view and analysis of how the negotiations are gathering of evidence and would certainly lift going is helpful to us. some of the burden from the clerks. I suggest that we take a two-minute break If members think that it would be useful to to allow us to deal with the IT and for M appoint an adviser we could invite interested Cichowlaz to leave. people to submit CVs. We could consider the matter at our next meeting and select Philippe Cichowlaz: Thank you. someone who could consider the evidence The Convener: I also thank the interpreter. over the recess. The call for evidence is open She has been interpreting for an hour. until September. Meeting suspended. Sarah Boyack: That seems to be quite sensible and would give us some space. On resuming— Given the weight of the day-to-day work that The Convener: Since our last meeting we the committee is dealing with, extra have received two written submissions, one assistance would be helpful in addressing the from Clackmannanshire Council and another employment strategy. I note that we will from Campbell Christie and Andrew Scott. begin to get more Council information during Campbell Christie is a member of the the summer, which will really kick in by the Economic and Social Committee of the autumn. It is difficult to predict how much European Union and I know that he is more energy that will require, but I suspect rapporteur for an opinion on economic and that it will take more committee time than is social cohesion. He made the written currently devoted to monitoring and scrutiny. submission to the committee as part of the It is a good idea to suggest potential advisers drawing together of information for his in time for the next meeting. opinion. We had intended that today would Stephen Imrie: We would be happy to be the last meeting at which we took suggest some names and speak to our evidence, but I am open to suggestions. colleagues in the Scottish Parliament Does the committee wish to invite Campbell information centre, which holds a database of Christie to the next meeting or are members people who have expressed interest in being satisfied to take his written evidence into committee advisers. I should advise the account? committee that there is another necessary Ben Wallace (North-East Scotland) step, which is to ask the Parliamentary (Con): Given the fact that the submission is Bureau for approval to appoint an adviser. I fairly detailed and that our next meeting is am not aware of an occasion on which such our last meeting before the summer recess, a request has been declined. I would be we should perhaps draw the evidence taking happy to do that on behalf of the committee. to a close. That would enable us to consider The Convener: Okay. the draft report at our next meeting and to bring the inquiry to a close before the Ben Wallace: On rounding up the inquiry summer. The written evidence is reasoned into the cohesion policy, there are two and properly set out and there is no need to significant points that have not come out extend the timetable to take oral evidence. previously. First, following discussion around the yet-to-be ratified Treaty of Nice, the next The Convener: Okay. If there are no other round of the European budget must be views on that, we will incorporate the written finalised before enlargement happens. evidence into our report and ask the clerks to Therefore, the people who sit round the table produce a draft summary of all the evidence deciding the new budget will not necessarily for the next meeting. I appreciate that the gain from it. That was a concession to Spain next meeting will be our last before the in the Nice treaty negotiations. In drawing recess, so it would be helpful if we could pull together the final report, I hope that we can together the draft report. reflect on what came out of Nice. Given that There is another matter on which we have Spain is the country that is most likely to lose not agreed. The employment inquiry is a very out, it is interesting that it has gained that big piece of work and we must decide concession, which means that the new whether we want an adviser; it will mean a countries will not be part of the debate.
96 European Committee, 3rd Report 2002 - ANNEX B
The Convener: That sounds reasonable. We will ask the clerks to bring together information on that as background to the report. What is the second point? Ben Wallace: It is on fishing, but I will not raise it as time is running out. Perhaps I could write to you.
97
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