§ The Secretary of State for Trade and Industry (Ms Patricia Hewitt)On 17th September,Official Report, columns 53–54WS, I confirmed that the Government's proposed EU Framework for Devolved Regional Policy would form the basis of our negotiating position in Europe. The Government believe that the EU Framework offers the best model to reform EU regional policy in line with the principles of a flexible UK regional policy, ensuring that it is both effective and fair for all Member States.
We also believe that our proposal provides a sustainable response to the challenge of EU Enlargement and that it will actively support the Lisbon agenda of higher productivity and employment. The Government are committed to promoting regional policy over the longer term and this proposal reflects the Government's strong and enduring commitment to decentralisation and devolution and to ensuring that economic disparities between our nations and regions are identified and addressed.
In the consultation exercise the Government conducted earlier this year, most of those who commented on the overall aim for reform of EU regional and cohesion policy supported our key objectives. But many of the respondents felt they did not have enough information to make a proper judgment and requested further details on how the proposed approach would operate in practice. This statement aims to provide that further information, while recognising that we cannot provide a definitive blueprint at this stage. Details will inevitably change as negotiations progress. The statement refers to a more detailed paper that I have deposited in the Library of the House today.
94WSOPERATION OF THE EU FRAMEWORK
We envisage that the EU Framework would be established by agreement in the European Council of a set of high level, outcome-focused objectives which support the achievement of the Lisbon and Gothenburg agendas. Member States would then develop with their nations and regions, consistent with their respective constitutional arrangements or devolution arrangements, Devolved Strategies for Regional Policy which would be subject to a peer review process facilitated by the Commission. More details are given in section 1 of the accompanying paper.
THE FINANCIAL GUARANTEE
The Government's guarantee that the nations and regions of the UK will not lose out if the EU Framework approach is agreed is based upon the amount of Structural Fund receipts that could be expected if, in 2007, the current allocation system were applied but in the context of an enlarged EU. This is explored further in section 2 of the accompanying paper.
POSSIBLE DELIVERY MECHANISMS
The Government stressed in the consultation document that we want regional policy to respect devolution in Scotland, Wales and Northern Ireland, and in future possibly in some English regions, and to be locally led with decisions taken as close as possible to local people, thereby supporting civil renewal. We also wanted to retain the strengths of the Structural Funds, such as multi annual funding and partnership working, but achieve significantly simplified delivery mechanisms. The ways in which such delivery in support of Framework objectives might work must take into account current devolved and decentralised arrangements and the views of stakeholders.
In addition to seeking reassurance about their future role in decision-making on regional policy, many respondents also wanted to be reassured that the agendas supported by the Structural Funds would continue to be supported through domestic funding under the proposed approach. This applied particularly in the areas of skills and employment, social inclusion and regeneration and for rural and urban areas. Although it is not possible now to say exactly what the domestic institutional arrangements will be in 2007, nor exactly how increased domestic funding would be distributed or on what it would be focused, the direction of our thinking on these areas is set out in section 3 of the accompanying paper. This focuses on arrangements in England given that, as outlined in the consultation document, Devolved Administrations would continue to devise and implement their own regional policies.
LINKS BETWEEN EU REGIONAL POLICY REFORM AND OTHER EU POLICIES
The UK Government is a firm advocate of the need to transfer more funding from Common Agricultural Policy (CAP) production support and income subsidy to the CAP rural development budget. The aims of CAP rural development to effectively assist in conversion of the EU agriculture industry to a more sustainable structure and to tackle the social, economic and environmental consequences in rural areas of change in the sector, and our objectives for EU and domestic regional policy, need to be mutually supportive. Among other things, this means that the range of instruments available at EU, national or regional level needs to make 95WS a proper and well co-ordinated contribution to the Government's productivity agenda in rural areas as well as elsewhere. This is discussed further in section 4 of the accompanying paper.
Since the Lisbon Council in March 2000, successive European Councils have called on Member States to
further their efforts to promote competition and reduce the general level of state aids.The Stockholm Council in March 2001 established the target that Member States should demonstrate a downward trend in state aid in relation to GDP by 2003. More recently, the Barcelona Council in March 2002 restated that aid should he directed to
horizontal objectives of common interest, including economic and social cohesion, and to target it to identified market failures. Less and better-targeted state aid is a key part of effective competition.The UK Government firmly supports these conclusions.
In the context of regional policy, the Commission announced on 2 April 2003 that it would conduct a thorough review of its rules on regional state aid for the period after 1 January 2007. In line with the European Council conclusions on state aid, the UK will be seeking a modernised state aid system which is more efficient and which allows Member States to tackle the market failures which cause regional underperformance, while bearing down on distortive aids.
Under an EU Framework, the objective of Structural Funds would be to aid development in the poorest Member States, while the state aid rules would allow all Member States to provide support to address regional and sub-regional/area underperformance, consistent with the need to ensure state aid discipline.
EU BUDGET
We believe that our proposal benefits all Member States by focusing scarce EU Budget resources where they will have the greatest effect. It also supports regional policy across the EU, by providing a shared policy framework for all Member States—whether recipients of funding or not—linked to the Lisbon goals and objectives. Our proposals, by providing a solution that is sustainable in the long-term (both for the Financial Perspective starting in 2007, and beyond), will bring lasting benefits shared by all Member States.
The UK also believes that, like other elements of the budget, spending on regional policy should achieve a fair budgetary deal for the UK taxpayer. As a net contributor to the Structural and Cohesion Fund (SCF) budget, additional receipts from a larger SCF budget would only come at a net cost to the UK taxpayer, reducing the amount of potential funding available for UK regional policy. Further details on the budgetary aspects of reform are contained in section 5 of the accompanying paper.
CONCLUSION
The Government have already reformed domestic regional policy in England to enable all regions to reach their full potential, based on their indigenous strengths, and devolved substantial power to Scotland, Wales and Northern Ireland. If the Government is to meet its ambitious domestic goals, and if EU cohesion policy is to be both sustainable, effective and fair for all Member States, radical reform is needed. In particular, we believe that EU regional policy should be substantially devolved 96WS and decentralised. The Commission has committed to examining in detail the options that have been put forward so far in its 3rd Cohesion report due next month and we await this analysis with interest. We, in turn, are committed to continuing to consult with domestic stakeholders and our EU partners as the debate develops with the aim of producing the best outcome for the new Member States, for Europe and for the nations and regions of the United Kingdom.