Open Europe Blog

Last Friday, the Parliamentary Select Committee for Communities and Local Government‘s inquiry into the European Regional Development Fund, to which Open Europe submitted both written and oral evidence, published its final reportAmong others, the report recommended that:

“We support the principle of repatriating regional policy funding, provided funding could be protected and ring-fenced over the long-term to ensure that the poorest English regions continued to receive the same level of support they would have received under the current system.” 

 In our recent report on the subject, Open Europe recommended that:

“Limiting EU regional spending to poorer countries [GDP below 90% of the EU average] would be a win-win situation for both Britain and Europe. It would channel more cash to the newest member states and allow the UK to spend exactly the same amount on its regions as it does now, with the option of adding the several billion that it would save from streamlining the structural funds. It would also eliminate a range of additional costs and allow the Government to radically improve the targeting of funds towards poorer areas and to viable projects.” 

We are therefore delighted that MPs accepted the central tenet of our recommendations, especially as Open Europe was the only organisation profoundly critical of the status quo to submit evidence. However, we consider that there is a realistic prospect of the government being able to secure this reform in 2014 – and that the government should be prepared to veto the next MFF, currently up for negotiation, in order to make this demand more credible – whereas the Committee sees this as an objective for 2020 and beyond.

Just to briefly recap the arguments why the reform would be a win-win for the UK and Europe:

  • While it can generate added value in individual cases, involving all member states in EU regional spending, irrespective of their relative wealth, is economically irrational. In richer member states, the structural funds mostly serve to redistribute income within the same regions. As the Commission itself has admitted, this exercise creates “considerable administrative and opportunity costs”;
  • Over the 2007-2013 EU budgetary period, the UK is contributing roughly £29.5bn to the funds, and getting back around £8.7bn. Of the 37 regions in Britain under the EU’s classification system, 35 are net contributors to the structural funds, with only West Wales and Cornwall net beneficiaries. Some relatively poor areas lose out substantially; for example, the West Midlands, which has the lowest disposable income per capita in the UK, pays £3.55 to the structural funds for every £1 it gets back;
  • Limiting the structural funds to poorer countries would result in 23 out of 27 EU countries paying less into the EU budget than at present. – all new EU member states would be better off. The UK would save around £4bn net over seven years in addition to the £8.7bn it currently gets back through the structural funds. This option could therefore attract strong political support in many capitals, especially given the current need for governments to make savings;
  • Domestically, it could enjoy cross-party support given that it was originally a policy championed by the previous Labour government, and areas represented by Labour MPs stand to be the biggest winners under this reform. 

All in all, the campaign to reform EU regional policy is gathering momentum…

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