ALLOCATION BETWEEN THE MEMBER STATES
33. The accession of the new Member States in
2004 and 2007 has had a major impact on the distribution of the
funds. Because of the enlargement and the overall EU budget
constraint, the original EU15 will receive 36% less support in
this Financial Perspective compared with the last.[31]
The United Kingdom's Structural Funds allocation fell by nearly
a half. Nevertheless, the richer Member States (i.e. the original
EU15 less Greece and Portugal) are set to receive a substantial
share of the Structural and Cohesion Funds over the period 2007-2013.
They received 36% of the budget commitments with the remaining
64% allocated to the poorer Member States. With the ending of
transitional relief for some of the richer Member Sates and their
regions, the share of the poorer Member States will rise to 67%
in 2013 (p 58).
34. The Commission gives each Member State indicative
annual sums for each of the seven years of the financial framework.
The fact that the funding is guaranteed for seven years is seen
as one of the advantages of multi-annual programming.
35. The amount allocated to each Member State
depends on the population of regions or Member States falling
within the various objective categories and the various allocation
formulae which differ between the objectives.[32]
However, the size of the funds for which the new Member States
would be eligible under the allocation formulae is so large that
there are doubts as to whether they have the capacity to use them
efficiently. Consequently, an absorption cap based on a sliding
scale, related to the Member States' GNI per head, has been introduced;
while this applies in theory to all Member States, in practice
the constraint is only triggered for some of the new Member States.
For example, the cap for countries whose average GNI per head
in 2002/3 was less than 40% of the EU average limits the total
contribution of the Funds to about 3.8% of GNI. This can result
in a reduction of around a half of the funds available for a number
of the new Member States,[33]
although the amounts allocated can still amount to around 20%
of total public and private investment in these countries.
36. As the Funds are territorially concentrated,
they can also form a not insignificant proportion of a region's
investment, even within the richer Member States. This is notwithstanding
the fact that the funds received by several of the richer Member
States amount to less than 0.1 % of GDP each.
Alternatives to grants
37. Both the Government and Graham Meadows, former
Director General, Regional Policy, European Commission suggested
that especially for the richer regions, more use could be made
of loans as opposed to grants, and in particular of recyclable
loans (Q 245, pp 57, 79). We heard from Mr Meadows (Q 245)
that as late as 1989, Marshall Aid funds were still being recycled
in Germany. The advantage of recyclable loans, as opposed to grants
from the Funds, is that the money is returned to the region at
the end of the programming period when they are repaid. They can
thus be used repeatedly time and again over a long period. The
Government suggested this could be facilitated through more extensive
use of the EIB[34] (p 57).
We would welcome increased use of loans and invite the Government,
in their response, to outline what steps they are taking to encourage
their use.
14 Technical assistance provides funding for those
activities that enhance the quality and efficiency of the implementation
of ERDF projects. Back
15
Council Regulation (EC) No. 1083/2006 of 11 July 2006 laying down
general provisions on the European Regional Development Fund,
the European Social Fund and the Cohesion Fund and repealing Regulation
(EC) No. 1260/1999, Article 3(a). Back
16
Ibid, Article 3, 2(a). Back
17
Ibid, Article 3, (6). Back
18
Ibid, Article 3, 2(c). Back
19
In the 2000-2006 period, Objective 1 regions were those that had
a GDP per head less than 75% of the EU average. Back
20
Sources: European Commission: Cohesion Policy, 2007-13 Commentaries
and Official Texts Luxemburg, Office for the Official Publications
of the European Communities. Commission Communication The Growth
and Jobs Strategy and the Reform of European Cohesion Policy.
Fourth Progress Report on Cohesion (Table 3). Back
21
The accession of the 10 new Member States to the European
Union had the statistical effect of lowering the EU GDP per head
by about 12.5%. This support will not be renewed after 2013. Back
22
This also includes Cyprus which, due an overestimate of
its GDP per head, did not have Objective 1 status. Back
23
For the methodology employed see the European Commission, Directorate-General
Regional Policy, "Commission Methodological Paper Giving
Guidelines on the Calculation of Public or Equivalent Structural
Spending for the Purposes of Additionality", Working Document
No.3, December 2006. Back
24
As set out in the Integrated Guidelines for Growth and Jobs
(2005-2008)-Council Decision 2005/600/EC of 12 July 2005. Back
25
Article 9(3) and Annex IV of Council Regulation (EC) No. 1083/2006
of 11 July 2006 laying down general provisions on the European
Regional Development Fund, the European Social Fund and the Cohesion
Fund and repealing Regulation (EC) No. 1260/1999 include a list
of the priorities underlying each of the above categories. Back
26
2004 prices are often used by the Commission as the reference
point for the 2007-13 Financial Perspective. The Commission and
the Government equated this amount to €347 billion at current
prices (p 58). Back
27
Sources: European Commission, The Community Budget: Facts in
Figures, 2000; European Navigator at www.ena.lu and Commission
documents. Notes: a Total appropriations for payments.
1998, 1993, 2000 and 2007 are the first years of the Financial
Frameworks, Sources: European Navigator at www.ena.lu, European
Commission, EU Budget 2006-Financial Report. Back
28
€ in 2004 purchasing power parities except GDP per head which
is 2005. Sources: OECD (2007), Economic Surveys: European
Union, Table 7.4, p.144. European Commission (2006) The
Growth and Jobs Strategy and Reform of EU Cohesion Policy.
The difference between the Total and the Convergence Objective
is made up of spending under the Competitiveness and Territorial
Cooperation Objectives. Back
29
All regions other than Cornwall, West Wales & the Valleys,
and the Highlands & Islands. Back
30
National Strategic Reference Framework for EU Structural Funds
Programmes, 2007-2013, HC Deb 23 October 2006 cols 72WS-74WS. Back
31
Bachtler, J., Wishlade, F. and Méndez, C. (2007) New
Budget, New Regulations, New Strategies: The 2006 Reform of EU
Cohesion Policy (Figures 9 and 10, p.37), European Policy
Research Paper no.63, European Policies Research Centre, University
of Strathclyde. Back
32
Annex II of Council Regulation (EC) No.1083/2006 of 11 July 2006. Back
33
See Table 14, p.27 of Bachtler, J., Wishlade, F., and Méndez,
C. op. cit. Back
34
The European Investment Bank was established in 1958 and raises
considerable sums of money on the capital markets for lending
to the Member States. Priority is given to projects for developing
less-developed regions. In 2006, €27.5 billion, or two-thirds
of total EIB lending, went to regional development in the EU27.
The Commission is already in partnership with the EIB in JASPERS
(Joint Assistance to Support Projects in European Regions), JEREMIE
(Joint European Resources for Micro-to-Medium Enterprises) and
JESSICA (Joint European Support for Sustainable Investment in
City Areas). JEREMIE is an initiative with the European Investment
Fund, of which the major shareholders are the EIB and the Commission.
(See also Communities and Local Government, Financing Investment
in Sustainable Cities and Communities in Europe-the Role of the
European Investment Bank, 2007.) Back
