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Future Of The EU Structural Funds
by Anthony Vigor
Municipal Journal - Thursday 27th March 2003
The recent Government document – A Modern Regional Policy for the UK - unveiled a
radical new policy on EU regional aid. Prompted by a realisation that the eastward
expansion of the EU after 2006 would dramatically cut the structural funds currently
available to poorer regions, the Government wants to ‘re-nationalise’ structural funds in
wealthier member states. This would enable resources to be concentrated on the poorest
nations and regions within an expanded EU – mainly in Eastern Europe.
Such a move is laudable and consistent with the aims of a pro-European centre-left
government. However, it will mean an end to the structural fund programmes in which
certain local authorities are so heavily involved, and raises questions over the role of local
government in future regional policy.
Specifically, the document suggests that EU structural funds after 2006 should be
concentrated within those member states with levels of GDP per head less than 90
percent of the EU average – the UK regions would fall outside this category (although
this will concern Cornwall, which could retain Objective 1 status). The document argues
for a more flexible approach at the regional level, emphasising subsidiarity within an EUwide co-ordination framework. The argument runs that this would enable individual
countries to better correct market failures and address pressing social issues.
This would obviously mean that many, if not most, of the UK’s existing EU-funded
programmes would cease. Local government has long welcomed the ‘added value’ that
these programmes bring to economic development, and the partnership approach has
generally been seen to be a success – although the bureaucracy will not be missed. If, as
promised, the Government maintains current levels of funding then its role in regional
development will necessarily be enhanced and Europe’s necessarily diminished. Local
Government must ensure that it is not sidelined too.
This intervention in the structural fund debate also represents a broader statement on
regional policy. Within the document the Government renews its commitment to a
stronger UK regional policy that promotes growth and prosperity in every region
through a more regionally-sensitive approach. While this commitment should again be
welcomed, there are important issues that must be resolved.
It was surprising that HMT, the DTI and the ODPM have failed to mention the EU’s
ten-year strategy of building a competitive and inclusive European economy. This
strategy was agreed upon at the Lisbon summit in 2000, and a pledge was made to ensure
that all parts of the EU meet a target of at least 70 percent of the adult workforce in
employment by 2010. This target-setting and proposed benchmarking of progress
marked a welcome departure from the traditional EU policy-making process and the
Government’s failure to appreciate its importance is a missed opportunity.
A strong and detailed commitment to this Lisbon framework would provide the
opportunity to introduce significant floor targets across Europe. This would represent a
key step towards providing employment and promoting prosperity for all. It could also
ensure that future administrations could not abuse a nationalised system and renege upon
a commitment to significant spending regional aid.
Furthermore, if this target is to be achieved in the UK, then Government must make
serious policy interventions in areas of high unemployment and low GDP. Much existing
Government strategy speaks of increasing employment, but in truth focuses almost
entirely upon enhancing productivity. Government must recognise that both have
important roles to play in promoting regional prosperity, and establish suitable
If we are to have full employment in lagging areas, the Government must make
significant funding available. This funding must also represent a long-term commitment.
The Government argue that through their seven-year funding commitments EU
structural funds provided stability. The 2004 Spending Review provides an opportunity
to establish a similar long-term regional spending commitment. Such stability could
provide a significant policy tool to address the UK’s enduring regional disparities.
The ‘re-nationalisation’ of regional aid policy in wealthier nations, whilst concentrating
EU resources in the poorest regions of the EU, represents a sensible response to the
structural fund debate. But it also raises important questions over the future of regional
policy – not least what will replace the partnership approach of Structural Funds, and
what will the role of local government in regional policy be in future?
‘Re-nationalisation’ will also carry with it a commitment to significant financial
interventions within the UK. If the Government is to reduce regional disparities then it
must make more significant support available for lagging regions in particular.
Entrenched disparities require substantial responses. A Modern Regional Policy for the UK
whilst useful only takes us some of the way there.
Anthony Vigor
Researcher – UK Regions, ippr