|
|
|
|
|
European Regional Policy
9 February 2009
A debate in the House of Lords on 9 February 2009 on a report from the EU select committee
Lord Trimble: : My Lords, the noble Baroness, Lady Cohen, said that the most significant recommendation in our committee’s report is that regional policy should concentrate on the poorer areas. The implication of that is that the convergence objective alone should be pursued, with the so-called competitiveness objective no longer existing, because, while an objective of competitiveness might seem attractive, it is simply a means of spending some money under regional policy in all the areas of the Union where the GDP is above 75 per cent. I would suggest that “competitiveness” is put there as an attractive label; the real purpose is to have some money going to the areas that are not poor. This is irrational; it would be much better to focus purely on the poorer areas.
I have a little anecdote which I shared with the committee and which I propose to share with the House, relating to my time as First Minister in Northern Ireland. When I was talking about regional policy with a senior official from our finance department, he observed that regional policy was sometimes more trouble than it was worth. That might seem to be a strange comment, but it is not. The money that, notionally, is spent by various agencies and regions in the United Kingdom under regional policy does not go directly to them from the European Union. European Union money goes to the United Kingdom. My interlocutor told me that the Northern Ireland Department of Finance then found that it was under pressure from the Treasury to arrange its capital expenditure in such a way that would draw down the largest amount of regional policy money. This meant that its capital expenditure programmes did not prioritise, and were not based solely on, what the department thought were the key priorities for Northern Ireland. Those priorities were distorted to increase the amount of money that was drawn down. He found that a disadvantage. To this disadvantage is added the fact that money has to be provided to match the money that comes from the regional fund. There is always an element of matching, which varies from around 50 per cent to 85 per cent, depending on the circumstances. Matching money has to come in, which can also be a problem in running regional policy.
This is reinforced by a story in today’s Financial Times. It reports that the Treasury has decided not to draw down some £671 million of EU money under regional funding. This applies only to regional funding that would have been for England. The Treasury has decided to take up the option for the devolved regions, so sums of money will go to them, ranging from £60 million for Wales to £25 million for Northern Ireland. However, the £671 million for England is not being drawn down. This may seem as though it is a loss for the Treasury and for England, but the unspent money will instead be recouped by the Treasury, which can deduct it from future contributions to the European Union budget.
It seems that the Treasury has repatriated to itself this aspect of regional funding and regional fund policy. Instead of being spent on projects that come within the definition of the regional fund and are approved by Brussels, that £671 million will now be available to the Treasury to spend as it chooses. It may mean that it is not spent on the sort of developments that the regional fund is promoting, but is spent elsewhere. No doubt people will pursue that matter. It reinforces my earlier point that regional fund money is not always as desirable as one might think.
If the policy change that we have suggested is followed, the cut-off figure of 75 per cent of GDP will become crucial in the operation of the regional fund. Incidentally, we accept the figure of 75 per cent of GDP. It could be argued that some other criteria could be used, but a criterion, whatever it is, has to be adopted and that one has been used throughout on this. If it becomes the sole criterion, there will be greater pressure—or, at least, greater focus—on the consequences of coming above or below that 75 per cent figure. We think that there should be greater concern about, or focus on, transitional arrangements.
There are two elements for the regional policy as it operates in the current phase, from 2007 to 2013. One is phasing out and the other is phasing in. Phasing in relates to those regions to which the noble Baroness, Lady Cohen, referred, which are now above 75 per cent of GDP and are no longer entitled to European fund money under the convergence criteria. There is an expenditure on those areas of 3.4 per cent of the total budget. These areas have over 75 per cent of the GDP figure for the 15 member states that were in the Union at the beginning of the period.
If the threshold had remained at 75 per cent of the EU 15 GDP, a further group of regions, the so-called phasing out ones, would have qualified by being below that figure, but, because of the enlargement of the European Union to 25 countries, and those countries being generally poor, the 75 per cent figure has gone down. Therefore, these countries find themselves over the new 75 per cent figure, but they would have been below the old 75 per cent figure. Consequently, they are getting transitional support under the heading of phasing out, and 4.1 per cent of the budget is spent on them.
The point that occurs to us is that there would need to be some arrangement for transitional relief or support, if one prefers that term, for the next financial period, which is 2014 to 2020. I observe, parenthetically, that in the previous period, that between 2000 and 2006, my recollection is that there was transitional relief. My recollection is that Northern Ireland had been below 75 per cent before that period but had gone over 75 per cent and so was no longer entitled to what was then called Objective 1 status, and did receive quite generous transitional relief during the period 2000 to 2006. Currently there is no provision with regard to the financial perspective from 2014 to 2020.
The Government’s response to our report did not really clarify their position with regard to this matter. Consequently, the noble Lord, Lord Grenfell, the chairman of the Select Committee wrote to the Government. They replied in November 2008 by letter from Mr Pat McFadden. As regards the changes that one would like to see in regional policy, he said:
“We also acknowledged that the consequences of significant changes to funding patterns would need to be considered. This would include what the shape of appropriate transitional arrangements would be. However, those arrangements would have to be considered within the context of the available EU Budget resources and priorities that had been agreed”.
One welcomes the fact the Government see that there is a need for transitional arrangements. That would have to be negotiated within the new budgetary arrangements.
Regional policy involves particular areas within member states. The classification of those areas comes from something that rejoices in the name of NUTS—the NUTS regional classification. It stands for the nomenclature of territorial units for statistics. Within this classification, there are various levels, NUTS1, NUTS2 and NUTS3. Regional policy is classified as NUTS2. By way of illustration, the United Kingdom has 12 NUTS1 regions, 37 NUTS2 regions and 133 NUTS3 regions.
There are some problems with regard to the operation of these regions. One is that there can be pockets of deprivation within an otherwise wealthy region. For example, Hastings and Thanet were cited as examples of urban deprivation in an otherwise wealthy NUTS2 region. The NUTS2 region is the south-east of England. Both are also relatively poorer than their NUTS3 regions, which are East Sussex County Council and Kent County Council respectively. Consequently, moving from a NUTS2 to a NUTS3 region would not help in that situation.
Another problem drawn to our attention is that the classification can be misleading where people have their homes in one area but work outside that area. This effect becomes quite significant in the environs of wealthy cities. People live in the countryside but work in the city, so the wealth that they produce is attributed to the city and not to the surrounding territory in which they live. Apparently that is particularly marked for the area south of Hamburg, which is in a “phasing-out area”, if I have caught that right. It would be very good if better methods could be developed for measuring the prosperity of a region, so that regions could be defined in such a way that we could have greater targeting of regional development expenditure.
Clearly, regional policy is a major policy in the European Union. Expenditure on it has been growing and is likely to continue to grow as a proportion of the overall budget, particularly in so far as reform takes place elsewhere—I refer, of course, to reform of the CAP. The work of this policy will become more important in the future
To read the debate in full click here
9 February 2009
» Return to House of Lords section
|
|