Select Committee on Welsh Affairs Minutes of Evidence

Examination of Witnesses (Questions 160-179)



Adam Price

  160. Go for it.
  (Mr Beschel) First, I think it should be technically possible to get support out of technical assistance for the programme, we have to look at the technical assistance part of the programme. Normally the kind of work that you are referring to would be eligible under technical assistance in the programme, so the answer is yes. We discussed the consistency of the programme with the new Wales economic strategy in December and we ran through the essential elements. Perhaps it is too early to have a definite conclusion, but it was felt after looking at the elements that they were basically consistent but that some work, and that goes to the next question, should be done in order to get harmonised indicators. We did not overlook the fact that with a new regional strategy for Wales we did not have the same indicators, the same models, if you like, and that technical adjustments would be necessary and we are working on them. That is the second question. Indicators are the third. Spacial strategy, what we tried to do, really, is concentrate on the poorest Community Economic Development measures. As you might recall, this was not an easy discussion because the readiness to concentrate and to reserve a certain amount of money on what would legitimately be identified as the poorest in a territorial terms was not an easy thing to do. If you followed the discussion at the time you will have found that the Commission was very much on the side of the needy and not on the side of throwing money round to the richer. That is a process to be followed.

  161. Thank you.
  (Mr Beschel) Thank you.

Dr Francis

  162. You were, quite rightly, very complimentary about the positive aspects of the way the Objective 1 programme developed in relation to partnership in Wales, would you put that down to devolution? Also, the efforts placed by the new devolved body on emphasising partnership externally, ie between the Assembly, on the one hand, and Whitehall and Europe on the other?
  (Mr Beschel) To your first question a clear yes. I do think that devolution creates a different kind of visibility for the people. Partnership in a devolved region, where the link to political representation is much closer, does make a difference, I can quite clearly say that. In the end I might say a few words about how it works with the other regions because I do not want to be condescending compared to others. This makes a difference, yes. As the work is divided up in more general issues, dealt with in DTLR and DTI, I think it is a good mixture of things.

Mrs Williams

  163. Could I ask you, in the United Kingdom European funding is administered by the government because it is regarded as part of public spending. The European Regional Development Fund, ERDF, payments are made in arrears to the Assembly when certain trigger points are made, is this case in other EU member states? Could I go further, are there any examples where EU money goes directly to devolved regions or where it is ring-fenced in national public expenditure totals?
  (Mr Beschel) I have done a quick survey in other member states, particularly in member states where they have devolved regions themselves, and I could not find any where the money was not passing through the Treasury first of the member states?

  164. Such as?
  (Mr Beschel) Such as Spain, Portugal, Germany and France.

  165. Right.
  (Mr Beschel) The payments go to the national treasury and it is then they are passed on to the regions.

  166. Therefore there are no examples.
  (Mr Beschel) I have no examples of direct payment to regions within a member state.

  Mrs Williams: Thank you.

Julie Morgan

  167. Can you explain the requirement to demonstrate additionality in Objective 1 programmes? Does it have to be demonstrated for each region or for all of the regions in each member state together?
  (Mr Beschel) There are two different levels to look at. Your question makes me slightly nostalgic because in 1988 I was head of the unit who was supposed to draft the then paragraph for the then regulation of originality. It took us about six months to get three lines together. It was a very difficult business. At the end of the day you will find that what is in the regulation is something which is very, very general, which simply means that, (a) you do it on the level of all Objective 1 areas within that member state. You do not put two and three together and then cover the territory, you do all of the Objective 1 regions in the member state. It essentially means two things, we want to have genuinely additional investment and we would not wish to see national expenditure that was foreseen for that kind of activity reduced. The mechanics are very broad mechanics related to the Objective 1 regions in a member state, where the member state is obliged to have at least, as it says in the regulation, the same spending level for development expenditure as in certain reference periods. I think the average of the previous funding period is there in the reference. In terms of examining additionality by the Commission, as has been required by the Court of Auditors, that is the model. The model is related to all Objective 1 regions in a given member state. On the operational side, when we are handling these things we are very interested to identify projects as projects that would not go ahead if the European Union did not fund them, because that gives us the operational assurance of additionality, if you like. That is a different way of looking at it and has nothing to do with the statutory requirement. The statutory requirement is addressed to the member state and it has to maintain a certain level of expenditure within all of its Objective 1 regions.

  168. How do you monitor that?
  (Mr Beschel) Complex, detailed mechanics have been installed by colleagues, by our director general and the director general for economics and finance and it is very much sorted in detail, how additionality is being looked at. Firstly you look at where the member state has to identify and forecast the expenditure. You look at that again in the mid-term evaluation to see have they kept their promise and you look at it again at the ex post evaluation. If a member state is under spending it is obliged to inform the Commission and there are mechanics for discussion for that. There is a certain format of information to be given by certain forms. There is a very detailed follow up on additionality the technical way. The results of a critical report of the Court of Auditors said that you measure additionality a different way in different member states. The Commission was obliged to find very detailed, formatted ways of controlling additionality as a general principle.

Mrs Williams

  169. Just to get the requirement clear in my own mind, I can understand how you have to demonstrate additionality for the European money that is spent in a particular programme, but do you have to demonstrate additionality for the money that the national government spends on a particular programme as well?
  (Mr Beschel) For the Commission European money would be additional in order to satisfy that we have a mixture or that the member state is not reducing its own expenditure for these kind of investments knowing that the European Commission will make good for that because they will be increasing that. In that respect we look at the national spending on development and this is the reference point for additionality.

Mr Williams

  170. The idea of Objective 1 is that you have greater investment in these years. You are saying that it is only the European amount of money spent on a particular programme which has to be additional, that national government does not have to find money on top of what it would normally spend in that area to make that money additional as well.
  (Mr Beschel) How the member states organise co-financing—we are talking about, perhaps, a different concept of match funding or co-financing—that is a different matter and it is the member state's responsibility to make sure that this co-financing is actually being put in place. The Commission is not in a position to say where the sources of national co-financing should come from, should they come from national level, from regional level or from local level? This is a matter for the member state, for the region to decide, it is not for the Commission to say how the co-financing is to be organised. We will look at the overall situation in a given region and if the inflow of European money is so big that it would be really difficult for a regional budget to come up with co-financing we would be interested to see that a balanced solution is found. It is essentially the member state's responsibility.

Adam Price

  171. If there is a breach of additionality rules who can bring a legal case?
  (Mr Beschel) I am afraid this is what the lawyers would call a rule without sanction. There is no immediate sanction provided for under the regulation but, of course, the discussion about additionality and the member state not making the effort would be something that would be known in the political context. I think a member state would have to present very, very good arguments in order to be politically credible and to say, "I could not keep my promise". This is what actually additionality in the programme is, the member state who signs the programme and who agrees to the programme, because every programme is adopted in agreement with a member state and the member state has promised, because it is in the programme, to make available a certain amount of money. If a member state is not willing to do that one would have to look very carefully at the reasons why this was not done. There is no immediate sanctions to say, we cut off the Commission's contribution by half or something, that does not exist.

Mr Caton

  172. Is it not the case that under a previous British government where the Commission found that additionally was not being applied that they held up future regional development funds until that government agreed to abide by those rules?
  (Mr Beschel) Your information is probably more reliable than mine because I only back go back to the documents I read when I went into the job and I looked at what happened. What you might be referring to is a situation which was finally resolved with what was referred to in our circles as the Millan Agreement which, indeed, led to a different way that European money was accounted for in the member states. I understand it took a while before that was sorted out and that in that intervening period Mr Millan thought it more intelligent not to proceed with the current mechanics.

Chris Ruane

  173. Mr Beschel, previously you had warm words for the partnerships that were developed in Wales, when we have taken evidence from business people, people in the voluntary sector, they thought it was a good principle but it was too rigid and there was no give in the third principle. The First Minister told us the three-thirds principle for membership of the partnership was adopted principally to avoid the prospect of a challenge from the Commission, it was reactive. How have other member states approached the composition of their partnerships? Were you there with a big stick?
  (Mr Beschel) No. Quite simply, no. Partnership is a very sensitive thing, sensitive because essentially it touches on subjects like sovereignty of a member state and subsidiarity, because it is essentially the way a Member States organises its own administration, its own implementation of mechanics. If you read the regulation the word "subsidiarity" appears and more than once, it is said "in compliance with the rules of the member state and its current practice". The Commission's view is the following, if you want to develop a region you have to have all of the possible interest, getting those who are involved in that development at the table when it comes to preparing, to implementing, to monitor and evaluate this action. Why? Because they are the living actors on the field and if you do not work with them you will not get the same good results. This is the basic element. How it is done in a member state is entirely a matter for the member state to say—I want to organise the participation of the voluntary sector in such a way, I want to organise the participation of social partners in such a way. The Commission will not intervene on that.

  174. The Commission has never challenged an EU state on the way it has developed it partnerships?
  (Mr Beschel) No, we have never done that. In that respect I can say, compared to the member states I used to work with I found that the way that partnership is practised in a case like Wales is much more advanced than other countries that I know.

Mr Prisk

  175. Given that interesting revelation to the last question can I ask about the involvement of the business partners, particularly in small and medium sized firms? You say that Wales is doing well and yet the principle complaint of the private sector in Wales is that the way it works at the moment is it is too difficult, too bureaucratic and too structured for them to be able to benefit and there are significant complaints both by individual organisations and also their representative organisations, such as the Federation of Small Businesses. How do other member states do it better? How do they adjust their procedures in order to accommodate the many needs of small firms?
  (Mr Beschel) A simple yes or no will not do, I will have to go into a bit more detail. I think the key word is "benefit", the benefit for the private sector. That benefit can happen on two levels, there is the simple level of getting money for a good project, that is one thing. I think the erroneous impression of the private sector was that if they were in a monitoring committee they could easily get the money. I think this is not a necessarily working correlation, I will come to that a bit later. The second is, does the business sector benefit from the structural funds by participating in the monitoring committee and the monitoring mechanics. I was given to understand that the worries of the private sector were particularly related to the role in the monitoring committee, which they found too bureaucratic, too slow and too inefficient. That has to do with the definition of the role of the monitoring committee, what do you do in the monitoring committee, the monitoring committee is not there to spend the money, the monitoring committee is not there to approve projects for given funds, the monitoring committee is to look at the overall progress being made in the programme and to give advice of what is needed to be done better. In that respect for me there is a benefit if a representative of the private sector can come and say, my people tell me that for any application it takes six months and four days on average to get the money, we need it in three weeks, now you better do something about it. That is then a role where the Commission would say, yes, I think it is not right if the applications for private firms for projects take enormously long, so something needs to be done and we wish for the committee to have a report for the next committee meeting to see what has been done in practice to allow better access for private companies to EU monies. The other benefit is the benefit to be heard when there are difficulties or to make suggestions for better movement, to say we have found a big problem in the private sector is not so much training in classical things but we need more training in other things. We should, if possible, either change the programme or change the programme complement. That is also a benefit. It is not immediately tangible but it is a benefit. I think once you understand these two roles, and from what I was given to understand the efforts of WEFO and the others involved were really to demonstrate to the private sector this is how it works, they have led to a better understanding, that these are the different levels of benefit. I also understand that, for instance, in terms of organising the monitoring committee—because we came to the monitoring committee for only one day—the preparation of the monitoring committee takes weeks, it

  is a very, very cumbersome thing. Progress has been made on that end as well. These are the two levels to distinguish, it is the benefit of being able to discuss and to bring forward criticism proposals as to how the private sector business should benefit from it and then the specific organisation has access to the money.

  176. Could I just push that a little further, is it not the benefit of knowing that in those monitoring discussions, at what ever committee it is, you will get a positive response, so that when the committee meets again that small businessman can come along and see the complaints that they have. In a sense that is where the benefit lies. One of the concerns is that these issues are raised, the money is not coming through quickly enough, there are difficulties in terms of paper work and the changes are not coming forward at the subsequent meeting. That is where the benefit lies, in the reaction to the business' view, not necessarily in the fact that business can express that view.
  (Mr Beschel) I think you are entirely right, it is the reaction that is the important thing, that is quite clear. Our interest is if we hear serious complaints like that we will support that, we will support that in the monitoring committee and we would wish to raise it until we find a satisfactory solution.

  Mr Prisk: Thank you.

Albert Owen

  177. There has been some delay in getting large infrastructure projects under Priority 6 started in Wales because they have been heavily over-subscribed, how have other Member States approached this problem of over-subscribed priorities and is there scope within the priorities to shift money about?
  (Mr Beschel) The mechanics are the following for shifting, you have the priorities and you have flexibility within the measures in a given priority, where even without the agreement of the Commission you can shift priorities from one measure to another, you can shift money from one measure to another, you can do that, but within a given priority. If you want to change, if you want to shift money from one priority to another this would imply a change of the programme. If you want to change the programme there are basically two ways of doing that, either you want to do it now, however under Article 14 that is only possible if there is a substantial change in the socioeconomic situation or in the labour market or as a consequence of the mid-term evaluation, where you look at the overall programme, you see where we stand and the evaluator might come to the conclusion and could say, we have a bit of unfinished infrastructure that needs to come in in order to give the overall strategy of the programme its full impact. Should not some of the reserve money be put there? Then it will be a proposal of the member state and the Commission will decide. It is the second opportunity to see if a shifting of monies can be done. If you are talking about an issue of infrastructure in Objective 1 areas in general, I remember in the negotiations that was a bit of a sore point because the Commission seemed to be very reluctant to exceed to that. I have followed Objective 1 regions from 1989 until now and you will find that even in those regions, where there was a clear lack of basic infrastructure, the infrastructure percentage in the current programmes has come down to in some cases less than half what was in the first programmes. What is felt is that infrastructure is something that has to respond to a given region in a given member state. It was felt that the United Kingdom was not a member state where basic infrastructure should be a development problem but that our development efforts should be complimentary, more focussed to development activities that should produce rather quicker efforts in terms of improving the situation of a member state. It is not that we do not like infrastructure, in fact in some cases infrastructure spending is much easier, much more reliable than something else, you have engineers, you have roads, you have concrete, you just do your roads or your railways, or whatever, except that sustainability might be a problem there sometimes.

  178. The transport infrastructure. In Ireland you have responsibility for the DART, Dublin Area Rapid Transport, the trains themselves, the rolling-stock, is that available under this programme? Can Wales invest in that?
  (Mr Beschel) I do not think so.
  (Mr Owen) The simple answer is I do not think that was foreseen in the programme. Certainly other member states movable assets are being financed like that. In the United Kingdom we have taken quite a firm policy line on that, historically the DTLR, or DETR as it was then, was not particularly in favour of that. The only transport assets we were financing were community transport assets, really nothing else apart from that.

  179. Historically it is not the European level that has changed, you are saying it is the DTLR?
  (Mr Owen) Historically it has not been financed in the United Kingdom in the current Objective 1 programme.


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