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EU Regional Policy (EUC Report)

My Lords, I first came into contact with European regional policy in 1994. One of the big challenges is understanding anything about it, what with the nomenclature, the acronyms and the things that you expect to mean one thing that actually mean something completely different. In 1994, when the 1994-99 programme started, there were Objective 1, Objective 2 and Objective 3, which was in two parts, one national and one regional. There was Objective 4, which I do not think anybody understood and which did not apply to the United Kingdom. There was Objective 5A, which was national, and Objective 5B, which was regional. That was divided into the European Social Fund, the regional development fund ERDF, and EAGGF, which was the regional part of the agricultural programme, but not all the agricultural programme. Once we had got used to that, there were the community initiatives, of which there were about 20 at the time, and for which they invented great names. Pesca covered fishing, but had nothing to do with FIFG, which was the common fisheries policy part of regional development. There were also Leader 1, Leader 2, Urban—which was urban—and 18 others. I am pleased to say that, through two more seven-year periods, we have managed to rationalise these down to just the cohesion programme for whole member states, the structural funding that is known as convergence instead of Objective 1, and competition, which was similar to Objective 2. However, it is now difficult to understand where the agricultural part fits. In the statistics, we read that regional funding is something like 36 per cent of the EU budget and agriculture is 47 per cent, but this does not explain where the agricultural part of regional policy lies. I would be interested to have this clarified by the Minister, who I am sure is completely up to speed on these matters. I congratulate the Committee because, as well as understanding these issues, it called as a witness Mr Graham Meadows. He was a great friend of the United Kingdom in the Commission when he headed up the DG Regio, a particular friend to Cornwall in the south-west and also to various initiatives in Ireland, to which he was very committed. ““Should all of this exist?”” is the question in my mind. I strongly favour these funds, but should they be a part of the European programme, or should they be pushed down as part of subsidiarity? That is an important question that the report looked at. The logic is good: there was the Single European Act and the single market, which was expected, through market forces, to make regional differences even more pronounced. The two fit well together; they showed that cohesion funds were important for all member states and for European monetary union. What sprung out at me from the report were the variations in the GDP levels of different regions. Seeing the figure for Nord-Est in Romania of 24 per cent of EU GDP was staggering. However much you might be committed to total subsidiarity and repatriation as a member state, there is no way that the European Union should not be involved in trying to help that degree of disparity between different regions. The other particularly important area for me is that regional policy should work. It can be very important; it does not always work, but it gives regions a chance to get it to work. We have seen that regarding cohesion policy in the Republic of Ireland; one of the league tables in the report shows has a GDP per head second only to Luxembourg, yet it was originally one of the poorest member states, certainly under EU12. Regarding Cornwall, where I live, the witness, Graham Meadows, states in the report that there was a point at which the region was able to use an important part of funding, although not a huge part of the county’s GDP, as a hook to start development, new thinking and getting together. A good thing about regional policy in the European Union is that it produces a reasonably independent view of which regions need assistance and which do not. In the past in the UK there has been a far more political agenda—the noble Lord, Lord Woolmer, will probably disagree—whereby the north has been looked after and some of the poor bits of the south have been forgotten. Not until Cornwall became an Objective 1 region was it recognised within the United Kingdom as requiring help. Is the NUTS system completely objective? It is to a degree; there are a lot of question marks regarding the GDP measure, but it is stated in the legislation that regions are in if they are under 75 per cent, but if they are over 75 per cent they are out. That is very objective. Of course, that does not recognise—perhaps it is not mentioned in the report—all the lobbying that goes into changing the boundaries and how a lot of regions in the UK lobbied really hard, not for Objectives 1 or 2 or convergence funding, but to change the NUTS2 boundaries, whereby NUTS3 regions could be reclassified as NUTS2. The system also provides seven years of certainty; very few national programmes are able to do that in this country or elsewhere. That is a big plus for regional planning, although obviously in non eurozone states, such as the UK, you do not know what the exchange rate will do; therefore your funding increases and decreases. One thing that is particularly impressive in the UK, although it is true of other members states, is that the system forces partnerships, not just between national and regional government, but between private sector organisations and many third-sector organisations, which come together to decide how the programmes will work. That factor was not there previously. The partnerships work around real money and real programmes, and they can be very effective. That is true of co-funding as well. The system also gives a much broader perspective to European regions which often, perhaps, do not think more broadly. Hence, there is an ability to innovate; certain schemes which have worked in some member states are able to work in others. There is a sharing of experience. One of those schemes, which is mentioned in the report, is the provision of revolving funds, rather than grants, in terms of financial assistance to the private sector. That idea was innovated in Merseyside and has been used as a model right across Europe; it has been imitated particularly by the European Investment Fund. That is important, and I wish to come back to that issue in my questions to the Minister. Concentration is also good, as is the fact that 82 per cent of these funds go into particular convergence areas. That gives many of those regions a basis for hope that their problems are understood, that a much broader Europe recognises that they have issues and needs to be solved and that there are real resources there to help. It will not be the full solution, but at least if the regions want to make the most of it, there is a set period of seven years in which that will happen. What are the bad things? I cannot see that the competitive area, at 16 per cent, covering more or less the rest of the European Union, can work. There is still some question about whether additionality happens. That is one of the words that I had to learn when I first got involved in this area—the idea that national governments should not start taking away money when European money comes in. Then there is the area of underspend. Although I understand that the EU put on these very clever capacity caps, I presume that that is a political argument for making sure that new member states did not get a much larger area, so the EU budget overall could take the capacity. In the evidence, a Commission witness said that a senior bureaucrat from one region said that he hoped that his campaign for Objective 1 did not succeed because they did not have the capacity for it. He might have thought that but he was wrong. That region took on the challenge and was successful, so even some people who are involved do not always realise that. Time-consuming bureaucracy, also mentioned in the report, is a real problem. Lots of bureaucracy does not mean that the control is any better. In this area it often means that the control is worse. The biggest problem within the UK programmes is not the bureaucracy of filling in forms but the inability of bureaucrats to make decisions. They would rather not make a decision; they justify that by asking more questions, when really the answer is, or should be, no, but they do not want to say so. The real challenge is to ensure transparent decision-making, honesty, and that decisions are made in reasonable time. The biggest condemnation, from a practical point of view, is of the funding gaps between these programmes. Because they last for seven years, we know when they are going to end. We know that the 2007-13 programme will end on 31 December 2013. For those regions that are carrying on—we have figures reasonably far ahead for the ones that do not—we expect some continuity and reasonable planning. However, there are large gaps. Much of the convergence programme money and projects are starting to be approved only now, when the money—or certainly the project approval—ended at the end of 2006. Therefore, will there be greater planning by the Commission and the Government for these gaps so that good programmes do not die between one ending and the next one being approved, with the loss of all skilled staff and the things that result in a lack of continuity? I notice that the Government did not respond to the important question of revolving funds. Are they in favour of continuing revolving funds within the structural funding? They have set up a number of organisations in Objective 1 regions. Yet, interestingly, the money being made available through the EIB or EIF into helping SMEs is not being channelled by the Government through their own organisations. They are putting it through the banks. Will they reconsider that? Will they, as they did the last time, try to renationalise the funds the next time these programmes are considered? Decision-making bodies have moved from government offices to regional development agencies. In the previous programme, finally, the government offices were pretty good at implementing the programmes, although they were not previously. Then we change bureaucracies and, again, there is a slow-up. I should be interested in the Minister’s view as to whether the RDAs are starting to perform rather better than they did at the beginning of the programme to get these funds moving and into the places that can use them. My final question is one raised by the noble Lord, Lord Trimble. Will the Government resist the temptation of repatriating the tranches of money and putting them back into the Treasury? This is an excellent report. It raises a lot of questions but I hope that this round of regional policy, will move from strength to strength.