3rd Cohesion Forum Conference

Last week, I delivered a keynote speech at the third cohesion forum in Brussels. That historic event brought together, for the first time since enlargement, the 25 member states of the European Union to discuss the future of EU cohesion policy. Well over 1,000 people attended, including Andrew Davies, the Minister for Economic Development and Transport, the other three Welsh party leaders, Christine Gwyther, the Chair of the Economic Development and Transport Committee and Ronnie Hughes, who leads for the Welsh Local Government Association on this subject. Opening the event, the commission President, Romano Prodi, said that the structural funds proposals, and the overall EU budget proposals, were realistic, with clear political objectives driving the proposals. I formed part of a round table discussion chaired by the new Regional Affairs Commissioner, Jacques Barrot, who has replaced Michel Barnier. Barrot’s agenda is unchanged from the Barnier proposals, as set out in the third cohesion report, published in February.
The theme of my contribution was ‘something has got to give’. That reflects the contradictions in the positions of some member states. The 1 per cent maximum EU budget is a convenient round figure to latch onto for many finance ministers, commentators, and maybe even members of the public. If the overall EU budget for the next financial perspective will not exceed 1 per cent of EU gross national income, you cannot, at the same time, have high spending on common agricultural policy and structural funds, regardless of whether you have the proposed 50:50 split, or any other split, in structural fund spending between the old and new member states. The UK Government position is that there should be less overall spend on structural funds, with the focus almost exclusively on the new and much poorer member states. Will that position change? Will the position on the 1 per cent budget change, or will something else change, such as the CAP spending commitment? There will now be 12 to 18 months of extremely complex discussions, probably culminating in a deal being struck sometime towards the end of the British Presidency in the second half of 2005.
I told the forum that the recent UK decision to have a referendum on the draft EU constitution would give added brownie points to those areas of EU expenditure, such as structural funds, which have a popular resonance. The Treasury argument that, for every additional £1 of EU structural funds spending in the eligible areas of the UK, the UK’s net contribution would have to rise by £1.60, was not one that could easily be used in a referendum campaign. I emphasised strongly that to prove their worth in the transformation of underperforming regions, the structural funds programmes had to demonstrate genuine European added value. What did European structural funds oblige you to do that you would not otherwise have done? I explained the importance of the current Objective 1 programme to Wales, in covering 1.9 million people out of a population of 2.9 million in an unusually complex area, comprising a mixture of livestock farming, upland rural areas and former coal and steel heavy industrial areas.
I finished in praise of Wales’s generally healthy experiences of the structural funds programmes, which we wanted to share with the new member states. I quoted examples, including the setting up of Finance Wales as a people-friendly finance agency for small and medium-sized enterprises, the setting up of a technium programme to bring together higher education and business, and the Wales Tourist Board’s assistance programme for small tourism operators—all of which are in the category of soft infrastructure, concentrating on people and finance and incubator buildings, rather than on concrete. However, I reiterated at the end that something would have to give, if that kind of progress was to be maintained during 2007 to 2013. I later urged the commission to ensure that statistical effect regions, of which Objective 1 Wales will presumably be one, be given adequate eligibility under the revision of the regional aid guidelines for the attraction of inward investment. The commission should already be thinking hard about giving those regions the same high-level status as full Objective 1 areas will have with regard to the maximum regional aid that can be provided. The regional aid guidelines are entirely within the competence of the commission, and so their negotiation is a different affair to the current structural funds negotiations.
My address to the forum was followed by one from the German state secretary for finance, Karl Diller, who did not think that the German federal budget could cope with the sort of increases that were suggested by the commission. This was a hard-line speech on the 1 per cent maximum issue, which left the 1,000-strong audience stunned into silence. His definition of EU solidarity was that the wealthier parts of the EU, including those that had benefited from structural funds in the past, should now support the lion’s share of the funds going to the much worse-off regions of the new member states.
Speaking from the floor, the UK regional policy minister, Jacqui Smith—Minister of State at the Department of Trade and Industry—reiterated that the cost of the current commission proposals was too high. She noted, however, that the UK shared some common ground with the commission, particularly on simplification and greater proportionality in how programmes are managed. The commission assured delegates that the points raised during the two days of the cohesion forum would be given close consideration in finalising the draft regulations that will govern the next generation of structural funds programmes.
Commissioner Barrot underlined that he intended that these draft regulations would be brought forward before the summer, that is, before the new commission comes in. That gives him and his fellow regional affairs commissioner, Peter Balazs from Hungary, a tight deadline, especially given the need to include contributions from the other relevant commissioners, Stavros Dimas, the new employment commissioner from Greece, and Mario Monti, the shortly-to-retire competition commissioner. It is widely expected that the negotiations will be lengthy, with no final decision on either the overall budget, or the structural funds package, until well into 2005. However, there will be plenty of detailed discussion about the details of how structural funds will be designed and managed post 2006. The Assembly Government will lead that debate for Wales. When the new commission and Parliament are in place later this year, we will push the key participants to complete the budget negotiations and the structural funds negotiations by the end of 2005, thereby giving 12 months for programme planning, before the new programme begins on 1 January 2007.