Select Committee on European Communities Eleventh Report



Letter from the Rt Hon Margaret Beckett MP, President of the Board of Trade, to Lord Tordoff, Chairman of the Committee

  I am grateful for the work carried out by Lord Barnett and his Committee in producing the report. I welcome the report and the contributions it makes both to the debates on the future of the Structural and Cohesion Funds across the European Union and to the question of improving the administration of the Structural Funds within the United Kingdom.

  The debate on the future of the Funds is at an early stage, and this Government will take the recommendations of the Committee into account in developing its policy in this area. The Committee has proposed useful ideas for simplifying and improving the effectiveness of the Funds across the European Union and we will press the Commission to give careful consideration to this area when putting forward proposals for reform. At this early stage of the debate, I will focus my comments largely on those recommendations affecting the Funds within the UK.

  The Committee's recommendation (para 116) that devolution of decisions to the regional level should be carried further to maximise the potential benefits of the Structural Funds identifies a particularly important point. This is in line with our manifesto commitment to the creation of regional chambers in England to co-ordinate transport, planning, economic development, bids for European funding and land use planning. The legislative proposals outlined in the Queen's Speech for regional development agencies will also have a significant impact. These steps will affect the work and the role of the Government Offices, covered in other Committee recommendations.

  The comments on the need for partnership are also welcome (paras 115 and 125). This is in line with our general policy, expressed in our manifesto, on the need for new partnerships between government and business, fully involving local authorities and the voluntary sector, to attack long-term joblessness. The Funds need to complement or supplement national and regional economic development and employment programmes, rather than cut across them (para 113). The regional programmes for expenditure under Objectives 1, 2 and 5b are strategies, drawn up by the English Government Offices, the Scottish, Welsh and Northern Ireland Offices in close consultation with local partnerships. Under Objective 3 of the European Social Fund, regional development plans are to be prepared by July 1997. These will be taken forward by regional committees and will seek to ensure that provision under Objective 3 meets the needs and priorities of that particular region. We are also committed to lifelong learning and will seek to see an Objective 4 programme adopted as soon as possible, taking account of the need for prior consultation with partners (para 118). The Department for Education and Employment are working with the Scottish and Welsh Offices on a plan for implementation of Objective 4, and will be consulting widely on this plan.

  We recognise the important role local authority elected members have to play in the Structural Funds, and welcome their involvement (para 117). This is being implemented. In most places this will be via programme monitoring committees, but Scotland has separate parallel consultation arrangements which are working well.

  Proper targeting of the Funds is important, both in terms of the size of local areas and in the use of appropriate indicators of need, both within the UK and across Europe (paras 114, 135 and 136). The UK produces substantial regional and local statistics which help identify areas with particular needs. Unfortunately, these are not replicated in all EU countries, and are therefore difficult to apply across the EU when determining Structural Fund allocations centrally. In 1996, the Government Statistical Service consulted widely on a review of areas in the UK used for European regional statistics, and intends to recommend to Eurostat changes which it believes would enable the provision of statistics for more appropriate UK regions and local areas.

  We support additionality as a general principle (paras 119 and 120) and note the Committee's detailed comments, as well as points made by members of the sub-committee during the evidence sessions. Any test of additionality needs to be understandable as well as being meaningful in the circumstances.

  The Committee called for the prevention of state aids which harm enterprises in another EU Member State (para 123). We said in our manifesto that we would pursue tough action on unfair state aid. The Industry Council on 24 April 1997 called on the Commission to produce a report on the impact of state aids and Structural Funds on transfers of enterprises and jobs from one Member State to another. In the UK, some Structural Funds assistance goes to SMEs or to private sector projects where cross-border competition is minimal, but we do not have schemes, such as those in some other Member States, which use Structural Funds to supplement national regional aid schemes.

  We will continually review how best to improve Structural Funds administration throughout the UK, and to accelerate projects approvals and payments (paras 116, 130 and 131). This process is largely conditioned by the current Structural Funds regulations, and the sub-committee's impressions from their visit to Republic of Ireland (para 71) may have been based on the very different procedures for the Cohesion Fund, which does not apply to the UK.

  For the Structural Funds, the Commission pays money to the national governments, in tranches, for the entire programme, the first tranche being transferred almost as soon as the programme is adopted. Then, before any payment is made to projects, monitoring committees have to be set up, which then agree criteria for project selection, make a call for applications, appraise the applications for value-for-money and approve projects. Only then can projects submit claims. ERDF payments, following normal Government practice, are made in arrears. Only in the case of the ESF are project payments made in advance, because many of the applicants are voluntary bodies.

  Once a properly made-out claim is submitted, payment is made as soon as possible. This is in line with the Council Regulation which says Member States . . . shall ensure that the beneficiaries receive the advances and payments as soon as possible, and as a general rule within three months of the receipt of the appropriations by the Member State and provided that the beneficiaries applications fulfil the conditions necessary for payment to be made".

  The introduction of targets by English Government Offices aims to reduce delays in the project approval process; and a working party convened by the Scottish Office is looking at ways of speeding up payment of ESF grants at every stage of the administrative process. The Scottish Office report was expected to be available by the end of May. The introduction of a Single Vote for the ERDF in England this year will cut down some of the cross-Whitehall administration. The proposed increased delegation of responsibility and decision making to the Government Offices should also improve the speed of the decision making process. We will consider how best to monitor times between receipt of properly made-out claims and payments; and will seek to minimise delay wherever possible.

  We have also recently introduced the option of adopting an Action Plan approach to implementing programmes in the Objective 1, 2 and 5b areas of England. Action Plans will allow partnerships to bring together individual projects in a way that reflects regional priorities, tackles issues in a co-ordinated way and streamlines bureaucracy.

  The committee recommends that, where feasible and suitable, loans should be employed, whether from the EIB or from other sources of finance (para 122). The financial returns of a project are taken into account when assessing the need for a grant. It is for the applicant to decide and pursue the source of any loan finance which may complement grants from the Structural Funds for the project. The Chancellor of the Exchequer is a Governor of the EIB and will take account of the need to balance security and risk in EIB activities. The Government will also continue to encourage the EIB, the EBRD and other banks and institutions to work co-operatively in Central and Eastern Europe.

  As the report says, Member States and Central and Eastern European countries (CEECs) seeking to join the EU should give a high priority to the competence and probity of the civil administration (para 121). We will continue to promote the adjustment in the CEECs' institutions through support of the EU PHARE programme, through bilateral aid such as the Know-How Fund and through the loan of UK Government advisors.

  The absorptive capacity of countries and regions is an important consideration and will need to be taken into account for any new Member States (para 139). So too will the equity, effectiveness and stability of arrangements for allocation of the Structural and Cohesion Funds after enlargement of the European Union.

  Early proposals from the Commission on reform of the Funds and early agreement of new regulations (para 128) would increase the likelihood of new programmes being properly planned and, unlike the current programmes, starting on time. It would be desirable for detailed regulations to be in place by the end of 1998, so that work could begin on drawing up programmes for implementation at the start of 2000. Agreement of new Structural Funds Regulations is likely to be dependent on the conclusion of a number of other major negotiations however, and will require the involvement of the Council and the European Parliament, as well, of course, as the Commission whose role it is to propose new draft regulations. The timetable is therefore very ambitious. We will do all we can to progress matters in our Presidency of the Council in the first half of 1998, if detailed proposals for Member States' consideration have been made by then.

30 June 1997

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