EU reforms may include EU regional policy

The idea of an EU referendum is politically divisive, but all sides support EU funding reform. EU regional policy and funds look set to change, but what might these changes look like?

This month the UK Prime Minister has set out how an EU referendum might happen around 2018; and the Labour Party front bench has made media comments on their agreement in the UK seeking reforms of EU regional policy including the EU structural and cohesion funds (SCF).

This could be the policy pendulum swinging back to the 1970s.

Prior to being outlawed in 1988 in the UK there was quite a move, especially within local government, to promote ‘contract compliance’ by which progressive and anti-discrimination practices could be written into taxpayer-funded contracts.

And prior to 1992 it was possible for countries in the EU to operate regional and industrial ‘preference schemes’ to channel aid to areas and industries in or at risk of decline. The politics of the 1980s reduced and then ended these ‘state aid’ schemes, characterised as ‘lame ducks’. More recently, the former EU Commissioner and UK politician Peter Mandelson noted wryly: ‘these schemes were less about governments choosing failing businesses, and more about failing businesses choosing government support’.

Over time the EU single market law took a deeper hold and any forms of local protection became outlawed, to be replaced by grants and loans through the new SCFs run by the EU. These new funds were also improved: projects were bundled together into five-year programmes with devolved administation, avoiding (it was hoped) the Brussels bottleneck.

Maybe some or all of these changes from the 1980s will now form part of the EU reform negotiations. It is an open secret that the UK Treasury does not like the SCFs, seeing it as an inefficient way to be paid back around 60% of the UK’s financial contribution to the EU, and with strings attached. However, local politicians like the SCFs for the same reason, that it provides a significant pot of money which the Treasury cannot confiscate.

So much of the public debate has been about the quality of the activities funded by the EU through these SCFs such as the European Social Fund (ESF) and the European Regional Development Fund (ERDF). The Open Europe organisation, not the EU’s greatest fan, published its view in a booklet in 2007: ‘Why the EU should not run regional policy’ which included anecdotes such as:

‘In the South East an ESF grant was given to a “cafe van”, whose owner is meant to tour the country for the purpose of teaching builders about sustainable development. (Building, 27 Oct 2006)’ which by the Executive Summary had become a burger van for builders. To be fair, the booklet also makes some more measured points on the limitations of the chosen method of economic statistics in targeting funds on the most deprived areas.

Where next?

The very topic of regional policy was an anathema to the Coalition Government in 2010, though the increasing North-South gap and the lack of growth are becoming more politically visible as time passes. The report on enabling regional growth by Lord Heseltine has become a rallying point for many politicians north of London, of the left and centre if not the more neoliberal right.

So perhaps the next stage is a reform at the EU level of competition policy within the single market, to allow again for subsidies in areas of greatest need. EU competition policy assumes a level playing field which it preserves by law; it is useless when the field is built on a steep hill and the poorer regions are forced to play uphill. A new regional remedy may be part of the reforms. Lord Hesletine has spoken in favour of the French system of compulsory membership for businesses in their local chamber of commerce. He may also like the French ‘Colbertist’ culture of strategic state subsidies too.

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