UK kickstarts debate on regional funding, March 2003

On 6 March 2003 the UK Chancellor, Gordon Brown, joined the debate on the future of the European Union's Structural Funds. Announcing the publication of the consultative document 'A modern regional policy for the United Kingdom', Mr Brown said:

'With our plans to increase UK funding for regional policy, devolve decision-making power to the regions and return key regional policy responsibilities from the European Union back to Britain, the future control of regional economic policy is moving from Brussels to London and then from Westminster to the nations and regions themselves. Creating a new framework which, by enshrining the principle of subsidiarity, provides the flexibility for Member States to pursue the right regional policies to meet their differing needs.'

Whilst focusing on the needs of the United Kingdom, the proposals are made in the context of the Union's forthcoming expansion to 25 Member States and are clearly aimed at opening up the debate on the future of the Structural Funds and of EU regional policy - including the Cohesion Fund. As the UK paper states: 'European regional policy has to change as Eastern European regions, with GDP per head at just 30 to 50 per cent of Europe's, take over from some of our poorest regions with 70 to 90 per cent of GDP as top candidates for structural funds after 2006.'

The proposals are intended to:

• 'respond to European enlargement and the need for growth in all EU nations and regions;

• offer new freedoms and flexibility to localities and regions, empowering them to build local economic strength;

• promise that if the Government's proposals are accepted we will provide additional UK government funds for regional policy in the next spending review in place of EU receipts;

• modernise state aid rules to reflect real economic and market effect.'

The UK wants to see greater freedom for Member States to fund and deliver their own regional policies, although working to common principles. EU regional funding would, in the UK model, be 'refocused on those poorest Member States that will benefit most from direct EU involvement. For other Member States, regional policy would be resourced nationally and delivered according to national priorities, with greater freedom than under the current regime.'

Comments on 'A modern regional policy for the United Kingdom' are invited by 4 July 2003. The UK's initiative follows hard on the heels of a number of contributions to the debate made by the European Commission. At the end of January, the Commission published its Second Progress Report on Economic and Social Cohesion, with Commissioner Michel Barnier, responsible for regional policy, saying:

'There is no doubt that in 2003 the question of the future of regional policy will be at the top of Europe's domestic agenda. This report shows that much is at stake. With enlargement, income disparities will double. A quarter of the population in an enlarged Europe will live in low-income regions of which no fewer than six out of every ten will be in the new Member States. Bridging the gaps between rich and poor is a major challenge for the future.'

A month later, the Budget Commissioner, Michaele Schreyer, spoke of the need to decide on the structure and size of the Union's budget post-enlargement. The current Structural Funds regime ends in 2006; the Commission is now working to develop a new financial framework with the aim of putting forward proposals in December 2003. Commissioner Schreyer said that the forthcoming debate will be goal- rather than budget-based, and identified a number of areas which the Union might want to consider for financial support, including external relations, quality of life, sustainable growth and solidarity.

A few days after Mrs Schreyer's speech the Commission announced that it had approved a draft framework ('the internal roadmap for preparing the Union's financial framework after 2006') and 'intends to shape the preparatory work around the key themes Peace, Freedom and Solidarity.'

The Financial Times reported that Mr Brown's proposal 'follows similar indications from the German and Dutch governments, which like the UK are net contributors to the EU's budget'. The FT also pointed out that 'Since any policy change requires unanimity among member states', opposition from the main beneficiaries of regional funding - Spain, Portugal and Greece - 'will make Mr Brown's proposals impossible to effect.'

Links:

UK Government: HM Treasury
	06.03.03:	A modern regional policy for the United Kingdom
European Sources Online: Financial Times:
	06.03.03:	Brown seeking reform of EU aid for poor member states
European Commission:
	27.02.03:	Michaele Schreyer: Making the enlarged Union a success - The challenges for the EU's new financial framework [SPEECH/03/110]
	05.03.03:	The Commission prepares Union finances beyond 2006 [IP/03/326]
European Sources Online: In Focus
	The state of Europe's regions, January 2003
European Sources Online: Topic Guides
	The Structural Policy of the European Union

Eric Davies
Researcher
Compiled: Friday, 7 March 2003

On 6 March 2003 the UK Chancellor, Gordon Brown, joined the debate on the future of the European Union's Structural Funds with the publication of the consultative document 'A modern regional policy for the United Kingdom'.