Implications for Welsh Structual Funds Arising From The European union Budget Agreement

Following intense discussions at the end of last week, agreement was reached on a new European Union Financial Perspective for the seven-year period commencing in 2007.  As part of this wide-ranging agreement, the West Wales and Valleys region will remain eligible for Objective One funding (re-branded "Convergence" for the new Programme) for the period 2007/2013.  The rest of Wales will potentially be eligible for the "Competitiveness" funding stream and there will be continued opportunities for transnational initiatives of the Interreg type.

The retention of Objective One funding in Wales for a further seven years, with every likelihood of a further transitional Programme for the 2014-2019 period, will provide a significant boost to economic development in Wales.  Early next year there is a real prospect of statistical evidence from Eurostat confirming a rise in levels of Welsh prosperity.  A combination of rising prosperity and continued investment in skills and infrastructure provides the best possible basis for further improvement in the Welsh economy.

The agreement includes a provision to review EU spending as a whole in 2008/09.  It plainly makes sense for any organisation to re-examine periodically its spending priorities and I welcome this plan.  I am also particularly pleased to see the proportion of money ear-marked for research set to rise through the next spending period.  This will enable researchers, companies, universities and government research institutions in Wales to extend their research capacity and so help build up more wealth in the knowledge-based sector of the economy.

The UK Government has agreed to modify the terms of the UK EU abatement in order to contribute, with others, the necessary level of structural investment for the ten countries which joined the EU last year.  The essential components of the "historic" rebate remain in place and the UK rebate in total will rise, not fall, during the next budget period.

Getting the Budget agreed provides a significant boost to the preparatory work already well underway for the new round of Programmes.  In conjunction with our partners in the private, public and voluntary sectors we now have a full 12 months to continue to take forward our preparations before the Programmes are due to start at the beginning of 2007.  The previous preparatory period in 1999 was too short.  The late agreement of the EU Budget then meant we only had a short time to finalise Programmes, leading to delays to getting Programmes agreed prior to the official start date of 1 January 2000.

For the new round of Programmes I am pleased to say that we have moved on from the unique Barnett Plus deal secured with the Chancellor of the Exchequer to provide additional funding to Wales.  We can now look forward to stability of funding for the 2007-13 Programmes with the Chancellor’s announcement in his recent
Pre-Budget Report that he will treat EU funding as a direct receipt to the Assembly budget.  This will link our spending power directly to the resources received from the EU and there will no longer be a need to negotiate with the UK Government a Barnett Plus arrangement.

Whilst the Commission’s proposals for the Regional Aid Guidelines which will apply from 2007 –2013 are quite separate from the EU Budget, the agreement of the Budget means that businesses located in West Wales & the Valleys (WWV) will continue to be able to benefit from the highest level of investment support available in the UK.  WWV is only one of two areas in the UK to retain Article 87 3 (a) status, with Cornwall and the Isles of Scilly being the other.  There will also be a lower level of grant aid available in parts of East Wales which will be determined in the Spring.

The Prime Minister, acting in his Presidency role said that “a very severe crisis had been avoided”.  Any budget negotiation is concluded through compromise and this deal ends months of uncertainty and potentially further months of grief.  I believe the agreement brokered by the UK Presidency is in the interests of Wales, the UK and of Europe as a whole.