84. THE REFORM OF THE STRUCTURAL FUNDS
AND THE COHESION FUND (30TH REPORT, SESSION 1997-98)
Memorandum from the Department of Trade
130. The Commission's package, with its
three themes of greater concentration, simplification and cost
savings, is well considered, and we support the general thrust
of the Commission's proposals. We agree with the proposed concentration
of the Structural Funds by reducing their coverage from roughly
half of the EU15 population to around 35-40 per cent (paragraph
Although the funds should be targeted to areas
of greatest need to concentrate population coverage down to 35
or 40 per cent this could result in some areas which remain eligible
within the new Objectives receiving more per capita than
they do at the moment. Such per capita increases for certain
regions would be unfair while others are facing, in certain cases,
quite large cuts. Concentration should stand for the targeting
of Funds to the areas of greatest need not only in a fair and
equitablebut also in a durable way; ie we should not increase
per capita receipts because that could not be sustained
in an enlarged EU without putting unacceptable pressure on the
131. Cuts in the Structural Funds received
by existing Member States are inevitable unless enlargement is
accompanied by an increase in the EU Budget Share, which we would
not welcome. The important point is to ensure that the cuts are
fair. The 75 per cent of GDP criterion for Objective 1 eligibility
should be strictly enforced.
The Government welcomes the Committee's support
for containing the cost of the Funds and agrees with the Committee
that it is important to ensure that cuts are fair. Member States
should face real but equitably spread cuts now in preparation
for the future. For Objective 1 however, the application of a
strict 75 per cent of GDP criterion would leave question marks
over some areas of genuine need. Of course the Commission's proposal
for Objective 1 is not simply the strict application of the 75
per cent criterion since it also includes a number of exceptions,
for example some specified remote regions and current Objective
6 areas would be eligible whether they met the 75 per cent criterion
or not. This demonstrates that GDP criterion is not the only indicator
132. The Committee supports calls for a
wider range of socio-economic indicators to be used by Member
States to designate regions for Objective 2 (paragraph 104).
The Government welcomes the support of the Committee
on the UK's position on Objective 2 criteria.
133. It is right for the Structural funds
to recognise the particular problems created by the combination
of geographical remoteness and sparsity of population, and that
the former Objective 6 regions should be absorbed into Objective
134. It is essential for the Highlands
and Islands of Scotland to continue to receive Objective 1 support,
as the somewhat similar regions in Sweden and Finland will under
the Commission's present proposal (paragraph 107).
The Government agrees that remoteness and sparsity
of population should be recognised and is proposing a sparse population
criterion for Objective 1 to address these areas in the Highlands
135. We call on the Government to publicise
the aims of the proposed new Objective 3 (development of human
resources), and to encourage the maximum uptake of funding under
this new Objective.
The draft Regulations state that ESF activity
should be based on five policy fields:
Active labour market policies to combat
Promoting social inclusion.
Lifelong education and training systems
to promote employability.
Anticipating and facilitating economic and
Equal opportunities for men and women.
The UK interprets this to mean that Objective
3 should be able to support the Government's wider policy of lifelong
learning by continuing to respond to the needs of those most at
a disadvantage in the labour market throughout the country. However,
the draft Regulations propose that new Objective 3 would provide
national policy framework for human resource development but would
itself provide funding for human resource development projects
only in areas outside Objectives 1 and 2. The UK is not convinced
that the Commission's proposals would enable the ESF to continue
to support all those at a disadvantage in the labour market throughout
the country and is therefore proposing that new Objective 3 continue
to be horizontal, operating everywhere outside Objective 1 areas.
The Government is committed to publicising all
aspects of the Structural Funds post-2000, including Objective
3 and the ESF as a whole. Whatever the outcomes of the negotiations,
the Government will ensure that the aims and objectives of new
Objective 3 are widely promoted and will seek to achieve maximum
uptake of available funds in ways which benefit those people and
regions most in need.
136. The Committee urges the Commission
and the Member States to make every effort to ensure that the
bureaucratic procedures associated with EU structural operations
are kept to the minimum consistent with effective controls.
The Committee's recommendation is supported
wholeheartedly by the Government. The new Regulations must provide
a simpler system for implementation of the Funds, commensurate
with proper management and financial controls, and the Government
is working towards these goals during the current negotiations.
137. We support the calls for a Community
InitiativeRESTRUCTthat can be used to deal with
new problems of industrial decline.
The Government is aware of the calls for an
industrial Community Initiative called RESTRUCT. A number of local
authorities have raised this with the Department.
The Government's view is that the test for deciding
whether or not to support particular Initiatives should be whether
they clearly add value to the main Objectives. Experience to date
shows that Community Initiatives can be administratively burdensome
and sometimes work against a cohesive and strategic approach.
Where the main Objectives are sufficiently flexible to address
the main issues we believe it is preferable, both administratively
and strategically, to use these.
However, it will not be possible to gauge whether
the Initiatives proposed by the Commission or other proposals
such as RESTRUCT can add value until we have a clear picture of
the way that the main Objectives will be applied in the UK. We
are therefore taking the line in negotiations with the Commission
and other Member States that the Community Initiatives should
not be agreed until after the main Objectives.
138. The Commission should have included
clear and manageable statistical and operational measurements
of additionality as part of its current proposals. We call on
the Commission to clarify the application of the additionality
rule and to make the requirements more transparent.
The Government supports the concept of additionality
and has given a general welcome to the Commission's proposal on
verification, which does provide greater clarity and simplification
than the previous regulation.
139. The Structural funds and state aids
policies have different aims and we consequently see no justification
for the proposal that the maps for these policies should coincide
The Government welcomes the Committee's support
for the UK's opposition to harmonising the Structural Funds map
and State Aids map.
140. We do not support the idea of renationalising
the Structural Funds.
The Government agrees with the Committee. However,
in order to achieve maximum value for money, the Funds should
be used in co-ordination with domestic regional expenditure as
part of a strategy to target the individual needs of regions in
141. Cutting the Peace and Reconciliation
programme at this critical stage of the Peace process could be
little short of disastrous. Whenever the Structural Funds package
is finally agreed, the Peace and Reconciliation Programme should
be part of it (paragraph 110).
The European Council at Cardiff expressed its
commitment to assisting the peace process. Ministers have had
discussions with the Commission and Commissioners about the situation.
There is clearly an understanding of the special situation there.
The UK Government will continue to press for continued EU support
for Northern Ireland which reflects its special circumstances
and helps in adapting the region's economy to peace, both economically
142. Those Member States which have joined
the single currency should no longer be eligible for Cohesion
Fund receipts, although we recommend that these should be phased
out in the period up to 2006, as should the Fund itself (paragraph
The Government agrees with the Committee that
Member States which have joined the single currency should not
receive Cohesion Funds. We believe the rationale behind the creation
of the Cohesion Fund was to help the economic convergence of the
four poorest Members of the EU in preparation for their participation
143. Improved management arrangements must
be put in place to bring the financial control of the Cohesion
Fund into line with that under the Structural Funds (paragraph
The Government agrees with the Committee's recommendation
to bring the Cohesion Fund financial controls into line with those
of the Structural Funds.
144. The Commission and the Council should
already be considering how the Funds need to be adapted to be
effective in the Central and Eastern European Countries.
The intention is that the regulations currently
under consideration for 2000-06 would apply to any new member
states joining the EU in this period. Much of the regulations
concern financial and administrative procedures which, subject
to individual points that the Government has on current drafts,
should be equally applicable in acceding countries. It would not
be right, for example, for the principles and practice of financial
property to be watered down for acceding countries. The Government
is pressing for the pre-accession regulations to reflect as far
as possible what will be contained in the Structural Funds regulations.
145. The 2002 accession target is optimistic;
the Commission should be asked to explain its current thinking
on what will happen to the Structural Funds if, as widely expected,
enlargement occurs later than 2002 (paragraph 118).
One of the main purposes of Agenda 2000 is to
prepare for enlargement. It is right for the Community to set
itself an ambitious but realistic target and use that as a working
Agenda 2000 will set the framework for the Structural
Funds for the period 2000-06. It is likely that the Financial
Perspective will draw a clear distinction between funds earmarked
for the EU15 and those for accession. The arrangements for the
EU15 should then not be affected by the time of accession.
146. We support the Commission's proposal
to de-commit funds which have not been used within three years.
The Government has also given its support to
the Commission's proposal on decommitment since, as a quid pro
quo to the simplified commitments and payments system, it believes
this is necessary to ensure rigorous financial control and management.
147. Despite its virtuous intention, the
Commission's performance reserve proposal would be unworkable,
and should be dropped.
Whilst the Government seeks to promote and reward
efficient programming, it has reserved its position on this issue
until the position is clearer on how the Commission's proposal
might be implemented in practice. The detail available so far
leads the Government to believe that the proposal may not secure
the desired effect since it could lead Member States to lower
standards in order to qualify for the reserve.
148. Rather than using the blunt instrument
of the 10 per cent performance reserve, increased effort should
be made to encourage best practice by Member States. In particular,
we recommend an improved evaluation process, including the publication
of evaluation reports. Improved financial management may become
especially important as part of the preparation for the enlargement
of the Union.
The Government welcomes this contribution to
the debate on promoting and rewarding good performance and sees
much to commend in it. It will promote alternatives such as these
in the continuing debate on the reserve.
149. Policies designed to strengthen economic
and social cohesion in the Community can only be lasting if environmental
considerations are taken into account and seen as an essential
part of economic and social development. It would be wrong for
Community funds to be spent on programmes that conflict with the
agreed policies of the Community (paragraph 125).
In drawing up programmes and assessing applications
for funding the Government supports the principle that spending
should not be in conflict with the agreed aims of the Community.
The UK has been in the forefront within the EU in taking account
of environmental considerations within the Structural Funds. The
Government believes that only by considering projects in the context
of sustainable development can we be sure that they take proper
and balanced account of economic, social and environmental factors.
150. We recommend that environmental authorities
should be mentioned as key members of the "partnership"
in Article 8 of the Structural Funds Regulation on "Complementarity
and Partnership". Environmental authorities should be re-introduced
into the system as core partners in the Structural Funds at all
stages and they should be included in the management authorities
for Community Support Frameworks, Operational Programmes and Single
Programming Documents (paragraph 126).
The Committee raises questions on the position
of environmental authorities with regard to their standing as
members of the "Partnership" and their involvement as
core partners at all stages of the Structural Funds. The Government
agrees with the Committee that environmental authorities should
be included in partnerships; it is UK policy to include them and
this will continue. However, as a matter of subsidiarity it should
be a matter for a Member State to decide which bodies are involved
as members to the partnership or are introduced as core partners
in the Structural Funds.
151. We also support the idea of a specific
linking of environmental protection and improvement activities
with employment creation programmes (paragraph 127).
The Government supports appropriate linking
of programmes to improve employability with action to protect
the environment, such as those provided by the Environmental Task
Force in the Employment New Deal for people aged 18-24. The European
Social Fund should, during the 2000-06 programming period, support
such national actions.
152. We call on all concerned to intensify
their efforts to reach agreement on the reform of the Structural
funds and Cohesion Fund so the narrow window of opportunity to
reach agreement by spring of 1999 is not missed.
The Cardiff European Council concluded they
should intensify their work so that political agreement can be
reached on the package as a whole no later than March 1999. With
substantial progress at Vienna, the UK Government agrees with
this objective and welcomes the Committee's support.
9 October 1998