EU Regional Policy (EUC Report) — Motion to Take Note

Part of the debate – in the House of Lords at 6:35 pm on 9 February 2009.

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Photo of Lord Watson of Richmond Lord Watson of Richmond Spokesperson for Innovation, Universities and Skills 6:35, 9 February 2009

My Lords, we will do neither.

I associate myself with the compliment of the noble Lord, Lord Steinberg, to the noble Baroness, Lady Cohen, on her chairmanship of Sub-Committee A. She has brought firmness and clarity to the chairing of that sub-committee and Tuesday mornings are a rare pleasure as a consequence.

When the Economic and Financial Affairs, and International Trade Sub-Committee, to give it its full title, took evidence for this report in the early months of 2008, of course the economy of the European Union—its finances and trade—was very different from now. I agree with the noble Baroness, who pointed out at the start of her speech how the context for regional policy has dramatically altered during the period of this report and the Government's response. As we all know, the truth today is that the European Union is in the grip of recession and, indeed, some people would say, I am afraid, that it is teetering on the brink of depression. Industrial production in the biggest economy of the European Union, Germany, has fallen quite significantly in the last quarter; central and eastern European countries are all under growing pressure, and they are, of course, the principal recipients of much of the regional aid; the euro currency has fallen from its all time high against the dollar; and, of course, as you might expect, in Paris and in London , President Sarkozy and the Prime Minister are both claiming that their solutions are better than the other's, while a somewhat sceptical public on both sides of the Channel brace themselves for something worse. It is a rather unedifying picture. The future looks bleaker than 12 months ago when our sub-committee put together this report.

I have two questions. First, how relevant a future does the European Union regional policy have in the context of this recession, which we must expect will last at least for the remainder of this year and possibly for all of next year as well? Secondly, how do our recommendations and the Government's response hold up in the light of these developments?

Some very important statistics have been given in the debate and I want to return to a few of them. In absolute terms, structural funds—which is the name that links the Social Fund, the European Regional Development Fund and the European Cohesion Fund, the so called triumvirate—equal 36 per cent of the European budget. That is an interesting figure because it has risen while the percentage on the common agricultural policy has fallen. The Government clearly see a balance—to which I shall come later—between the future of the agricultural policy and the future of the regional policy and, in response to our sub-committee's recommendation, they have made that concept explicit. That is quite important.

Article 1.58 is the original article behind European Union regional funding and it is worth reminding ourselves of the objective specified in that article. It is:

"to reduce disparities between the levels of development of the various regions".

The Lisbon treaty speaks of a slightly more elaborate objective of,

"promoting economic, social and territorial cohesion and solidarity among member states".

I want to share with the House a recollection of the meaning of the word "solidarity" in European Union parlance; it is rather specific. Some years ago, at the behest of the late Lord Jenkins, I participated in a committee chaired by Jacques Delors to identify a motto for Europe and possibly even a motto for the currency. One proposal much favoured by Jacques Delors was quite snappy: "Europe, the future: science, development, progress and solidarity"—the kind of thing that trips off the tongue easily and would look very good on the coinage. It was thrown out mainly as a result of an intervention by a German MEP who said, "Solidarity? We Germans know what solidarity means; it means what you want and what we pay for". "Solidarity" fell, I am afraid, and we ended up with "Unity and diversity", which has at least the benefit of ambiguity, I suppose.

The truth is that, faced with recession, too much diversity in the European Union is not going to be very helpful. On the test of solidarity, against the stated aims of EU regional policy that I have quoted, there is indeed some evidence of progress but not very much. In recent years, I remind the House, EU enlargement has involved Latvia, Poland, Lithuania, Slovakia, Estonia, Hungary, the Czech Republic, Malta, Slovenia and Cyprus. That enlargement took place in 2004, Bulgaria and Romania in 2007. The point has already been made in this debate that the poorest regions of all are indeed in the east of Romania. They make for a rather shocking figure: below one-third of the average GDP per head in the European Union.

The point is this: during the period 2004-07, the dates of enlargement, the policy that has as its main objective the reduction of disparity has risen by only two percentage points within the EU budget. By 2013, the end of the phasing of the present policies, the figure will be 38.1 per cent, compared with 43 per cent on the common agricultural policy, which, incidentally, will have come down from 47 per cent. But, as has already been pointed out, the total EU budget is, and will be in 2013, less than one per cent—so we are talking about one-third of 1 per cent. The figure is not insignificant. In certain areas—we have heard of some of them tonight—it can be relatively dramatic and indeed visually evident. The truth, though, is that in overall budgetary terms these are relatively small figures and we cannot expect too much from them.

The European Union, the Council of Ministers and indeed Her Majesty's Government have placed their trust for the achievement of the diminution of disparity between rich and poor in the future of Lisbon. In their Government's response to the committee's report they say they believe that the economic and social disparities across the European Union can best be tackled by focusing on the drivers of growth set out in the Lisbon integrated guidelines. Let us remind ourselves what they are. As relaunched in 2005, the guidelines are to increase European Union public and private investment in research and development to 3 per cent of GDP, and to secure 70 per cent employment rates by 2010. Given this recessionary context, the likelihood of either of those objectives being achieved in Lisbon is marginal and to rest our hope on that is, frankly, a cop-out—that is really what it boils down to. We have to be realistic about this.

I come back to my first question: how relevant a future has European Union regional policy got, given this recession? As that policy is constituted at present, and given its dependence for its achievement on Lisbon, the answer is: not very much. That does not mean it is not important, but it is not very much.

What about our proposals and the Government's response? Again, the answers are rather uncertain. I have already referred to the uncertainty about Lisbon, but there are some positive things. I thought the clarity of the Government's response on the move from grants and loans is absolutely right; it is clearly on the record and it is where we should all be going. Most controversially, the Government picked up our proposal, or suggestion, that the distribution of EU funds within net contributing states, which includes the United Kingdom, should give way in favour of focusing on the European Union's poorest regions—in other words, solidarity. That is clearly right and fair and, dare I say, even somewhat noble.

I remember in our committee the noble Lord, Lord Kerr, pointing out that one would have to be very careful about how this is expressed if one does not wish to invite a headline in the Mail on Sundayaccusing Her Majesty's Government of allowing this country to be robbed. Earlier, the Minister was asked why we are forgoing the £700 million for England—I think that was the question. I look forward to the answer as I look forward, very warmly indeed, to his maiden speech. The noble Lord, Lord Davies of Abersoch, has demonstrated alacrity in his career in the House of Lords, which must be the envy of everyone.

If we and the other net contributors are to forgo, in effect, the moneys which might otherwise be distributed as a result of these policies, the way in which that is expressed and explained will have to be very clear; otherwise it will invite a knee-jerk response: why are we not getting more out of it? One will have to deal with that. The answer is not simple; the answer is in the future tense about a concession made in the present tense; namely, we hope that the funding of the CAP will be further reduced and we hope that the balance of spending within the European Union will be refocused. I totally agree with that, but how it is expressed will be important.

As we took evidence in the first half of last year, members of the committee had the strong feeling that this was an extremely important area and that the objective which the European Union had set itself, which is not overtly a redistributionist objective but, nevertheless, is one which has a commitment to fairness as regards the attack on disparities of wealth, growth and economic development, was very important. However, the actual scale of the budgets concerned was such that the real balance of impact was always going to be, first, with national policies for regional development and, secondly, that the enlargement of the European Union—the most dramatic development of the European Union of recent decades—is not really reflected in the commitments of regional policy. So the time will come, particularly if the recession severely damages or distorts growth prospects in the new member states, when that will have to be revisited.


neil Regan
Posted on 10 Feb 2009 4:20 pm (Report this annotation)

I would like to point out that only the Greek part of Cyprus is in the EU. The Turkish part has never been asked or voted on joining.