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European Committee 3rd Report, 2002 Report on the Inquiry into the Future of Cohesion Policy and Structural Funds post 2006 SP Paper 618 £13.30 Session 1 (2002) Parliamentary copyright. Scottish Parliamentary Corporate Body 2002. Applications for reproduction should be made in writing to the Copyright Unit, Her Majesty’s Stationery Office, St Clements House, 2-16 Colegate, Norwich NR3 1BQ Fax 01603 723000, which is administering the copyright on behalf of the Scottish Parliamentary Corporate Body. Produced and published in Scotland on behalf of the Scottish Parliamentary Corporate Body by The Stationery Office Ltd. Her Majesty’s Stationery Office is independent of and separate from the company now trading as The Stationery Office Ltd, which is responsible for printing and publishing Scottish Parliamentary Corporate Body publications. European Committee 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