Examination of Witnesses (Questions 140-159)
MR MANFRED BESCHEL AND MR PHILIP OWEN
MONDAY 28 JANUARY 2002
140. Thank you. I take your point that for the Commission clearly real spend is crucial because it has the impact on triggering payment. I also take your point about the real outcomes of the programme, it cannot just be measured by how much money is spent, those are important points, but it is a way of assessing progress. It seems to me that very early on that actual commitment in the very early stages is, perhaps, the only way you can be assessing how progress is going?
(Mr Beschel) Commitment is the necessary pre-stage to spending, because commitment is a sort of legally binding contract or other obligation to do a certain project in execution of the programme. In that respect, for instance, when we do monitoring in the monitoring committee or in our contacts we are, of course, keen to know how much money is in the pipeline and has been committed. That will determine the spending pattern and also, in order to avoid surprises, when the spending does not go well. You are well advised not to wait until you see that, you can very often discover it via the commitment pattern, that the following spending pattern might or might not be able to follow the execution of the programme as planned. In that respect commitment still constitutes as an element of checking the execution. For me that is already almost a quality check, because you see the commitment pattern and you see most of this priority is now covered by commitment, even with a bit of overspending in the ideal case. Then we say, "Okay, you have a good ground for good spending", but if you have a very low commitment rate we ask questions, we would say, "What is the matter? Do we have to do something in addition or do you have to do something in addition to get the spending up to the level that has been programmed?" In that respect commitment is a necessary pre-stage in appreciating the follow up of the spending pattern.
141. Can I finish this off with a couple of quick related questions, recognising that role for commitment is there a common definition of commitment across the European Union? In our country the DTI told us a couple of weeks ago, when we took evidence from them, that it is basically when an approval letter for a project is sent out, in our case WEFO, have you any other measures of progress, other than commitment and actual spend?
(Mr Beschel) The matter of commitment, as we said, in the new system is for the member state. It is for the member state to define the commitment as it goes. Our definition used to be a legally binding obligation, that was the criteria by which, for instance, we evaluated it. For the closure of programmes the commitments were done in time, because the commitments for the previous programme round had to be entered in a binding way before the end of 1999. Our criteria was that commitment means a legally binding obligation for the execution of a programme. Now, as I said, it is the member state's responsibility to do that.
142. Where does Wales lie in expenditure so far, are we on target?
(Mr Beschel) Let me put it this way, we have no reason to believe that the programme is not going its normal course. As I have said, we have had the annual review meeting and when we went through the spending pattern we were looking at the commitment pattern and what we found there was, on the basis of the indicators that we have at this point in time we think the Welsh Objective 1 programme will go its due course.
143. Does Mr Owen have any specific information about where we are on the league table? Does a league table exist?
(Mr Owen) We do not have a league table, but I can refer you to the written answer to a Parliamentary question on 14 November, where a league table was set out in Hansard. We do not have a league table, this is something which has been invented by the Objective 1 regions in the United Kingdom. We want to see the money well spent, we want to see the payment claims coming in and we want to see the indicators being achieved, the jobs created, the businesses assisted and people trained. That is what we want to see. We are not at that stage yet, that will start arriving during the year. We do not have a league table. These programmes are not comparable, necessarily, they have different strategies, different implementation methods, everything is different, it is like comparing apples and pears in reality.
144. In a written answer the Secretary of State for Wales advised me that as of 9 January £280 million in European grants had been approved. Can you confirm that figure?
(Mr Owen) Actually if you bear with me, I called a figure off the website earlier today.
145. I ask in part because of the distinction between what you may see as being approved and what the DTI may see as approved?
(Mr Owen) According to the website as at 22 January there were 447 projects approved under Objective 1, totalling £279 million worth of grant. Those are WEFO figures, they compiled them.
Mr Prisk: We are working from the same statistics.
146. Have there been any problems with previous programmes in terms of under spend or decommitment with structural funds for programmes in Wales?
(Mr Beschel) Not since I have been in office, and that applies for Philip Owen as well. Because we will have to close down as of 1 July this year we will see when the final reports for the previous periods are supposed to come in and we will then be in a position to say if there is an under spend or not. On the commitment side, on 31 December 1999 all of the monies of the programme were committed. It is now a question of does the actual spending as a follow up to the commitment reach the same level or not. We will not know that before we have a final report, and we will get them as of 1 July this year.
147. I do not think I got an answer to the question as to whether you have any other measures of progress, other than commitment and spend?
(Mr Beschel) In the monitoring committees what we are trying to do is to establish where we stand in the execution of a programme. There we use other indicators, like output indicators, numbers of people trained, new jobs created, new SMEs created and we look, for instance, at, does the amount per job created coincide with what we have planned. What we are doing is taking a number of quality indicators that are in the programme and the programme complement and looking to see if the programme is going according to these indicators as they stand. This will culminate at the mid-term evaluation and later on at the ex post evaluation. The monitoring committee is not a committee that only looks at figures it also looks at what other indicators of progress there are or, inversely, what obstacles to progress appear.
148. Following on that point, we have heard witnesses from Objective 1 regions in England and Wales who have emphasised the importance of balancing strategic approach or, put differently, balancing hitting spending targets with a strategic approach, what is your view of that?
(Mr Beschel) Personally I must say I think this is a sort of contradiction which does not exist. What we have done with the programme is to create a strategic basis for developing a region. What spending is supposed to do is the financial implementation of the strategy and, therefore, for me spending money fast is not a contradiction to strategic spending. There are different categories, you have a strategy and then you spend the money in order to implement it and you try to do it as efficiently as you can. There is no contradiction between strategic approach and the efficiency of spending, one is a concept and the other is the way, how you go about implementing that strategy. Normally I would say quick spending should be a good implementation of strategy, however that does not mean that we do not look at strategic elements from time to time with a view to see if corrective action is necessary. It is not that we are spending blindly, but I think the spending element is more an element of management quality than an element of strategic design. The strategic design has been laid down with a programme and with a programme complement. You have all of the elements, you have the objective, you have the target, you have it there. The spending indicates you go about implementing.
149. You can understand that there is this debate taking place in Walesthere is no need for you to make an observation on itbut in order to explain it, one of the crude measures, perhaps the only crude measure, of progress is, is this hitting spending targets and those who are actually running these Objective 1 regions trying to put it into a wider, more sophisticated context of saying that we have to have a strategic approach. They are saying that in order to explain it to the public that you cannot measure it in this crude way.
(Mr Beschel) I have seen the transcripts and I found them interesting. It seems to me that what it means is that when you implement, in other words when you pay, you have to bear in mind the strategic background that you are supposed to serve. I think that is the element. What you have to do in implementation is to set up implementation criteria, for instance, allocation criteria, selection criteria that allows you to reflect the kind of strategy that you want to achieve. You can measure strategic quality by output indicators and others, yes, but for me it would not be right to put it as a sort of contradiction or counterbalance to quick spending. You can spend money quickly and well and you can spend it slow and badly. The quickness of the spending is not necessarily an element for the strategic quality of a programme, it is more an element related to implementation and management.
150. It is put too crudely from my position, we should not be talking about solely of consumption, we should be talking in terms of investment and sustainability.
(Mr Beschel) Correct.
151. I am surprised in your earlier answer in listing the quality measures one of the measures you did not mention or use was the word "sustainability".
(Mr Beschel) In that case I apologise for overlooking it. Of course sustainability is one of the key issues, it is one of the key measures. Not only in Wales, but in general terms and linked to another important question that you have asked, "What happens after this programme period?" The only answer we have at this point in time is with sustainability create structures that are able to live beyond that period, create mechanics that help you to develop and carry on afterwards, and sustainability is the key for that. There are a number of things, we can look them up in our inventory, environmental, and so on. The quality of the programme is a multifaceted thing. If you look at research, for instance, you have other quality indicators, if you look at infrastructure you have other quality indicators, so you have a long list of possible things. What I have tried to give are some examples of quality outside purely financial indicators.
152. That is why Rechar was such a failure because we measured it in such crude, quantitative terms of so-called jobs and so-called training numbers, in fact we never really talked seriously about sustainability.
(Mr Beschel) My experience in the job that I have known now for about 12 years is the most difficult thing is to find a few meaningful indicators that give you an idea about the quality of a programme, to find a few good targets. When I am having discussions with my colleagues about evaluation it is normally not about the number of indicators, because they have about 500 for everything that I wish to measure, but I do not wish to have 500 indicators, I want to have five that are meaningful and allow me to see if that programme was a success or not. If there is anything over the years since the introduction of a programme oriented regional policy, regional funding exists since 1989, I think most of the progress that we have really tried to make was in the area of evaluating and targeting the actions, because that is very, very difficult.
153. Surely the ultimate aim of the structural funds, particularly in Objective 1, is to see an increase in the GDP of those regions in relation to the average GDP across the whole of the European Union? How far do we have to go into a programme in terms of years before we can get some feel or some indication as to the improvement of the GDP?
(Mr Beschel) With your second sentence you have almost answered it. GDPs and Objective 1 are an interesting indicator. Normally Objective 1 money is substantial on the overall expenditure pattern in an Objective 1 region, so it is natural to say that it should have an impact on the regional GDP. We think in the case of Wales we will follow that and we will see to what extent we can identify a difference because the calculationand I have done this exercise twicethe difficulty is always to say, what would have happened without this and then you make a calculation. We will do the same in the case of Wales. I really hope that we will be able to demonstrate that an effect of that can be identified at least in an ex post evaluation if you are looking at a period of spending for all in all eight years. I do not think it is identifiable very quickly. You cannot after one year say, the GDP has increased by . . ., you will not be able to do that. This is something you will have to look at on a longer term basis.
154. If you look at it after eight years there is no way you can influence the programme to get the results?
(Mr Beschel) In my country politicians told the people, in five years East Germany will be a booming area, that was over 10 years ago and people are now saying it will take at least another 10 or 20. Regional developments, particularly for Objective 1 regions, are really a long term perspective, having to do with human resources, having to do infrastructure, having to do with the mentality of people. This is Objective 1.
155. Can I ask you if there is any monitoring of spending within a region? I can give you an example of figures that were given to me by my local county council, 15 counties of Wales revealed that my county of Denbighshire had an average of £59 per person spend, which was at the top of the league, and Bridgend was at the bottom with £7 a head. Do you monitor that and do you have any input into that?
(Mr Beschel) What you are talking about is how the statistical elements within a region are building up. From our end we have no possibility to control and monitor that. These are the kind of figures that come up on the ground and will have to be worked with by the authorities concerned. We have no possibility to control or monitor that.
156. Does it concern you there is such a disparity?
(Mr Beschel) When in a monitoring committee we see that compared to what we have planned in a programme or programmes, where we have detailed information, that some are much more advanced and others are not, and we will ask questions. That might lead to a situation where those local councils that have not spent well might learn from the others that have spent faster. That is a possibility. This is how it works. This is very much a process that has to develop in the region itself, it is not something that we can influence, unless it appears on a level where the spending for the programme in its entirety is concerned.
157. What do you see as the most positive aspects of the way in which the Objective 1 programme is being managed in Wales?
(Mr Beschel) There are, perhaps, two or three that strike me straightaway. There is a very powerful and well functioning partnership situation, it is something that I found impressive at the beginning. Also, you seem to take gender balance more seriously in the implementation than other regions that I am dealing with. There is, perhaps, an element of how successively an effort has been made to involve the private sector and make them understand better how it works. It was a real conscientious effort to make them understand how our programmes work. I was impressed how systematically this was attacked, the element of publicity, making structural funds known in the regions to the political interest, which is also linked to what is happening. As I said in my introduction, we find that when there is a political interest in following up our actions they have a better transparency, in which case we are very interested that good performances come out into the open, we would wish that the people know and learn that, so the element of publicity and transparency and political guidance, if you can call it that, are also elements that I found very positive. Overall, and I come back a bit to the strategic element, I also find that the overall strategic structure of the programme is a good one, because the new Objective 1 for Wales was a bigger challenge, a far bigger challenge than before. The amount was about three times the amount of structured fund money that was available before, so in that respect to transform that into a strategy is not easy and I think it was a job well done.
158. Coming back to the private sector of awareness that you mentioned as a positive aspect, has that, in your opinion, resulted in involvement and, indeed, in bids going through, successful bids? It is all very well being aware.
(Mr Beschel) It has resulted most of all in one thing, that the private sector, perhaps, better understood its role in the whole business. This is a very specific United Kingdom problem, in other countries where I have worked the private sector would not dream of getting money out directly, they would go to aid schemes, and that is it. In the case of Wales the private sector wanted to be involved and due to the efforts that have been made in order to implicate them in the design of the whole thing, in the strategic element of the whole thing, in the role that the private sector can play, they have improved the performance enormously. The question of the private sector, I will say, and I have said this before, is not, how much money I can draw from the structural fund, it is how much can I contribute to the development of the region. If they contribute to the development of the region, they have good projects, they should get the money for it and they should get it quickly.
Albert Owen: Thank you.
Adam Price: Can I return to the issue of strategic quality? There is one specific question, and Roger Williams alluded to the GDP per capita headline figure, one of the problems we have, as you quite rightly said, is we do not have the figures for GDP until many years down the line, it takes about three or four years for the Office for National Statistics, UNISTAT, to agree on where Wales is, let alone a subregion of Wales. In Scotland they have quarterly figures for GDP more or less at the same time as the rest of the United Kingdom, so they have real-time figures for GDP. Would it be possible to use technical assistance money from the Objective 1 programmes so that we can have real-time figures on the progress on those headline indicators? The second question, a more qualitative one, I was surprised to hear you say that you felt that we had developed a strategy and you welcome it because the criticism and the scepticism of the Objective 1 programme in Wales operated at two levels, one very much on the ground in terms of the operational level but there is also, I think, a concern of the lack of strategic thinking in terms of the National Economic Development Strategy, which is a kind of sister document to the SPD. There was widespread leaking, of course, of the Commission's own response, which pointed out some of the failings in terms of earlier drafts of the SPD but also a feeling that there is no internal consistency in the SPD and in the National Economic Development Strategy in this sense, that there is no clear linkage between the objectives in terms of the level of projects. We are back to the pepper pot approach. I cannot see the evidential basis whereby the projects that are currently being approved will flow through into the kind of changes in terms of the headline indicators, because there is no economic model. There is one available, but it was not used, the input/output of the Welsh economy in actually informing the strategic thinking. I am surprised to hear you feel that that was done well. On the point that Mr Ruane made, the lack of a spacial strategy, a subregional spacial strategy was one of the criticisms the Commission itself made and it is now coming through in terms of the very different pattern of spending that we see in the Objective 1 region, is this not a worry for the Commission, that actually the more affluent areas of the Objective 1 programme, where, possibly, there are more opportunities, are having a very good crack at the whip whereas the areas of need are actually failing to produce the level of spending we would like to see? Was the Commission not right to criticise the SPD in terms of the special strategy?
Chairman: Before you answer that can I just say, can Members keep the questions as short as possible.
Adam Price: I think they were all very, very good questions.
159. I am not sure how many there were. Can you also keep the answers as short as possible as well.
(Mr Beschel) I can say no, yes, yes and no.