European Union Structural Funds - Essay Example

What are the EU Structural Funds To what extent have they made EU budgetary expenditure redistributive EU Structural Funds European Union (EU) Structural Funds are funds that are allotted by the EU to its Member States to be "used to promote regional development and employment" (Draft National Strategic Reference Framework [DNSRF] 2006, p. 6, 1). The funds are allocated in budgetary cycles of seven years each. The current programme 2007-2013 succeeds the previous perspective 2000-2006. Through the years there has been a growing consensus that the EU as a whole stands to benefit more, if the disparities between the Member States - and even between regions within a member state - lessens. Indeed, this approach towards collective growth broadly forms the guideline for the distribution of the Funds; especially during the current budgetary cycle (DNSRF 2006, p. 7, 9). The Structural Funds are split into the European Regional Development Fund (ERDF) and the European Social Fund (ESF) (DNSRF 2006, p. 7, 10), based on the kind of activities they foster - while they are distributed based on 'Objectives'. Objectives are the eligibility criteria drafted by the EU which determine the volume of investment aid that can be assigned to a region. The areas that are eligible for investment aid are identified by the Member States based on the EU's Regional State Aid Guidelines (DNSRF 2006, p. 6, 7). The 2000-2006 programme had three Objectives, namely, Objective 1, Objective 2 and Objective 3, and also a few Community Initiatives like 'Interreg'. The 2007-2013 perspective has three Objectives again, but has the following changes: the Convergence Objective (which replaces Objective 1), to develop those regions with a GDP per Capita below seventy-five percent of the EU average; the Regional Competitiveness and Employment Objective (which replaces Objectives 2 and 3), to support the more prosperous regions; and the Cooperation Objective (which replaces 'Interreg'), to foster cross-border and trans-national cooperation (DNSRF 2006, p. 7, 11). Once the Objective is determined, the ERDF and the ESF are allocated. Generally, the ERDF is used for activities that affect the region or community as a whole, while ESF is used for the betterment of the individual. ERDF activities include developing infrastructure and environmental sustainability, improving accessibility and connectivity, promoting community regeneration and rural development, promoting and encouraging enterprise, increasing investment in research and development and improving favourable business environment. ESF activities include increasing - and tackling barriers to - employment, improving skills levels of the local workforce, progressing people into sustained employment and progressing people to better-quality and better-paid jobs (DNSRF 2006, pp. 35-36, 44-48). National Strategic Reference Framework Each Member State is required to draw up an Assisted Areas Map based on the EU's Regional State Aid Guidelines which establishes the areas that are eligible for investment aid. These areas are provided aid either by the Member State or through the Structural Funds (DNSRF 2006, p. 6, 7). The EU does not fund all the projects of its Member States. It requires them to draw up a National Strategic Reference Framework (NSRF) which not only acts as a reference instrument for the provision of Structural Funds but also ensures that the "Structural Funds spending is consistent with the Community Strategic Guidelines and the Member State's National Reform Programme (NRP) for delivering the Lisbon Agenda." (DNSRF 2006, p. 9, 18). The NSRF includes an "analysis of the Member State's economic strengths and weaknesses and [specifies] the strategy chosen for the [three Objectives] (DNSRF 2006, p. 9, 19). The NSRF thus becomes a key instrument upon which the EU depends, for the distribution of its funds - specifically the Structural Funds. As it needs to illustrate a Member State's strengths and weaknesses, the NSRF contains data from the previous perspectives, thus leading to a comparative study of the distribution of funds across years and across programmes. It also provides a comparison of the allotment of Structural Funds across the various areas in the Member State. The NSRF is therefore an instrument which illustrates the redistributive character of the EU budgetary expenditure. Draft National Strategic Reference Framework The Draft National Strategic Reference Framework for the United Kingdom was developed by the Ministry of State for Industry and Regions, in close collaboration with related departments and the government representatives of Scotland, Northern Ireland and Wales (DNSRF 2006, p. 5). The document illustrates the difference in the allotment of Structural Funds for the various regions in England, Scotland, Northern Ireland, Wales and Gibraltar (DNSRF 2006, pp. 37-88); this difference is based on the Convergence, Competitiveness and Cooperation Objectives. The document also posits that the ratio of the allotment of the ERDF and ESF may not be uniform across all regions. They may be distributed differently owing to the requirement in the region (DNSRF 2006, p. 13, 37). The Draft National Strategic Reference Framework defines the strategies that would be used to distribute ERDF and ESF for each region within the country. Furthermore, the Annexe B of the document is a written communication from the Minister of State for Industry and Regions (Mr. Alun Michael) in which he draws attention to the inclusion of ten new States in the EU. He informs that this would result in a reduction in Structural Funds for the older fifteen Member States compared to current levels, "reflecting their comparative prosperity and the need to support the economic convergence of the new Member States." (DNSRF 2006, p. 90). Thus, Structural Funds are distributed differently across Member States and even across regions within the States, proving that the distribution is not rigid, but is flexible. The following five paragraphs support this claim by referencing specific data from the Draft National Strategic Reference Framework. Reform Of The Structural [And Cohesion] Funds 2007-2013 As observed earlier, the structure of the Objectives has changed from that of 2000-2006, to mostly accommodate the inclusion of new Member States. Cornwall and the Isles of Scilly and West Wales and the Valleys would get full Convergence funding because their GDP per Capita is below seventy-five percent of the EU average. However, the Highlands and Islands would be entitled to 'phasing-out' Convergence funding. This is because these regions would have been eligible for full Convergence funding, had not the EU average dropped as a result of the inclusion of new Member States. All regions in the UK except those covered by Convergence funding - whether full or phasing-out - would be eligible for Competitiveness funding. Special 'phasing-in' Competitiveness funding would be given to South Yorkshire and Merseyside, to support their growing economies; these regions had qualified for Objective 1 in the 2000-2006 programme. Thus, the funds have been redistributed across regions in accordance with changes brought about by improved regional development and the expansion of the EU (DNSRF 2006, pp. 7-8, 12-13). The Strategic Approach To EU Regional Policy The EU has adopted a three-stage strategic policy to establish clear EU objectives for regional policy and to ensure that the Structural Funds reaches the grass-roots level keeping in line with the Lisbon Agenda. At the very top, the EU would establish the Community Strategic Guidelines which would set the EU's objectives for regional policy; at the next stage, each Member State would prepare the NSRF, which would establish the State's main priorities for the allocation of Structural Funds; and at the final stage the Member States would draw up detailed Operational Programmes which would establish in detail plans for the utilisation of the Structural Funds at the regional level. The European Council has agreed to ensure that a minimum of sixty percent of Convergence Funding and seventy-five percent of Competitiveness Funding would be spent in support of the Lisbon agenda. This strategic approach to the distribution of Structural Funds not only adds clarity and credibility to the programme but also ensures better redistribution of the Funds (DNSRF 2006, pp. 8-9, 15-21). The UK's Draft National Strategic Reference Framework The UK's Draft National Strategic Reference Framework was developed by the Central Government Departments and the devolved administrations for Scotland, Wales and Northern Ireland, thus ensuring a reliable representation of investment issues at the regional level. It would carry an analysis of the economic disparities, weaknesses and strengths and a summary of the strategy for the three Objectives. The Draft contains information on funding provided by the Member States themselves, and would also include information on the relationship between the Structural Funds, other EU Funds and the domestic Funds. The data contained in the Draft National Strategic Reference Framework would enable authorities to ensure proper redistribution of Structural Funds (DNSRF 2006, p. 10, 22-24). The Allocation Of Structural Funds In England And Scotland The countries in the UK have adopted different methods for the distribution of Structural Funds. To illustrate this on a broad canvas, the methods adopted by England and Scotland are explained here. England has proposed an ERDF Convergence Programme for Cornwall and the Isles of Scilly, a regional ERDF Competitiveness for the other regions, and a single ESF Convergence and Competitiveness Programme for the entire country. Scotland on the other hand has proposed separate ERDF and ESF phasing-out Convergence funding for the Highlands and the Islands, an ERDF Competitiveness for the Lowlands and Uplands of Scotland, and ESF Competitiveness Programme for its Lowlands and Uplands. Each country has proposed different methods to suit their individual requirements. Thus, ERDF and ESF allotted to a Member State are distributed variously among its regions. This is highly evident in the case of the UK because the nations therein are instantly recognisable as distinct entities (DNSRF 2006, p. 11, 28 & 30). Strategies For Distribution Of Structural Funds The ERDF and ESF have different objectives and serve different purposes. Hence, they would require separate strategically-driven mechanisms for distribution. According to the methodology agreed by the Member States at the European Council, Competitiveness Funding could be referenced by the following criteria: population, unemployment, employment levels below the seventy percent Lisbon target, numbers of employed people with low educational levels and population density. Another set of criteria proposed is based on measures of innovation, entrepreneurship, accessibility or prosperity (DNSRF 2006, p. 14, 41 & 43). A system of ceilings could be implemented to ensure that no nation or region receives unfairly high or low levels of funding (DNSRF 2006, p. 15, 47). Whatever be the strategy chosen, it would ensure that economic disparities across nations and regions are identified and addressed, and the gap between the growth rates is reduced (DNSRF 2006, p. 13, 39). These strategies at their core are all driven by the ideology that Structural Funds must be effectively redistributed. Conclusion The EU uses 'instruments' like the Lisbon Agenda, the Regional State Aid Guidelines, the Community Strategic Guidelines, the National Strategic Reference Framework and the Operational Programmes therein to ensure that financial aid (inclusive of Structural Funds) reaches the various regions on a 'most-deserving gets first-priority' basis. Indeed, the Structural Funds Programme appears very sound on paper. The Draft National Strategic Reference Framework which has been looked at in some detail here has provided good amount of evidence that the method of distribution of Structural Funds has made the EU budgetary expenditure redistributive. However, a study of the statistics of the funds allotted - and their effects - on the regional level would be necessary to lend credibility to the claim made above. References Draft National Strategic Reference Framework (2006) Draft National Strategic Reference Framework - EU Structural Funds Programmes: 2007-2013. Department of Trade and Industry [Internet], February 28, URN 06/810. Available from: [Accessed 31 March 2007]. Read More