The European Regional Development Fund (ERDF) is the EU's main tool to reduce economic disparities between the regions. Worth 201 billion between 2007-13, most of the funding goes to the poorer regions in eastern and southern Europe. England's allocation during this period was 3.3 billion (approximately £2.8 billion), with the largest share of the funds going to Cornwall and the Isles of Scilly, Merseyside and South Yorkshire, all of which face significant and long-standing challenges to economic growth.
To many of those who gave us evidence ERDF is a highly valued source of funding which has supported projects across England that would otherwise not have been able to proceed. It has contributed to major schemes such as the Eden Project in Cornwall, the Sage concert hall and the Baltic art gallery in Gateshead and the Kings Dock redevelopment in Liverpool. It has also supported many smaller projects across the country to boost enterprise and support small businesses.
Responsibility for managing ERDF in England passed from Regional Development Agencies (RDAs) to the Department for Communities and Local Government (DCLG) in July 2011. The transfer has generally been managed well, but the new arrangements have meant that some new projects have taken longer to be approved, and bids for innovative projects are being rejected because of a more risk-averse approach at DCLG. ERDF can only be used to part-fund projects, and bidders therefore also need to attract funding from other sources. The abolition of the RDAs removed the main source of match funding for ERDF projects, and the economic downturn has reduced the options for match funding even further. The Government does not seem to appreciate the problems that projects are facing in securing the match funding needed for them to go ahead. It has not delivered on its promise to make it easier for projects to use its Regional Growth Fund (RGF) as match funding; we urge the Government to set aside RGF money specifically for this purpose. All these factors, together with the pressing need to spend each region's ERDF allocation before 2015, increases the risk that value for money will suffer and ERDF will not make the impact it might have done.
Discussions are underway to agree the size and shape of the next ERDF round (2014-20). The European Commission has proposed a number of sensible changes which we support, including aligning the regulations for a number of EU funds and simplifying the application and compliance systems. We welcome the Commission's proposal to give Member States the power to tailor the size of their Operational Programme areas, which could allow Local Economic Partnerships in England to take responsibility for managing EU funds. We agree with the Commission's intention to ensure that funds are allocated to Member States that can use them properly, but we share the Government's concerns over how this is implemented. The Commission's desire to make the UK's funding conditional on meeting certain macroeconomic conditions, despite previous commitments to the contrary, is not acceptable, and we support the Government's intention to resist this.
ERDF, together with the European Social Fund and the Cohesion Fund, targets money towards the poorest European regions. We agree that encouraging economic growth in these regions benefits England and the rest of the EU, and that these funds can make a valuable contribution. The current system, however, in which even the wealthiest Member States receive ERDF funding, should be replaced by one that provides additional funds for the poorest Member States and allows the wealthiest to retain the part of the funds they currently send to the EU and which is recycled back to them. This would allow the EU to focus on the needs of the poorest Member States, and allow England to regain control over the precise application of regional policy. We recognise that this repatriation of regional policy will not happen for the 2014-20 round but we encourage the Government to continue to press this argument for subsequent rounds. It also has to be underpinned with a guarantee from the Treasury that the same level of funds would be committed to be spent on English regional policy, would be concentrated on the poorest regions and would be fixed for the full seven year term of the EU spending round.
We welcome the Commission's proposal to introduce an intermediate level of funding for middle-ranking regions from 2014. We recognise that this change could benefit up to nine English regions. We urge the Government to support this measure, which will reduce the cliff-edge effect on funding levels that currently exists as a result of a single threshold that separates Member States into just two categories.