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House of Commons Hansard
European Regional Development Fund
20 March 2015
Volume 594
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I wish to inform the House today of the launch of the €3.6 billion (approximately £2.9 billion) England European Regional Development Fund Operational Programme for 2014-20.

From 20 March 2015, applicants will be able to apply for funding to invest in projects that support innovation and boost businesses across local economies in England. This is on the basis of progress my Department has made in agreeing the major points of principle with the European Commission about the European Regional Development Fund Operational Programme.

By launching the programme and project calls on 20 March, local teams will be able to begin assessing applications. This will mean that we will be able to sign funding agreements as soon as the Operational Programme has been formally adopted by the European Commission, which we anticipate happening in June.

Decentralising funding to local economic areas

The 2014-2020 European Regional Development Fund Operational Programme is the most locally-led that we have ever had in England. We have abolished unelected regional quangos that were previously in charge of the schemes and given an important role to local enterprise partnerships and other local partners to shape and influence how the money is spent.

We also believe local partners should have a direct role in decision-making outside of a formally delegated arrangement, to further increase local engagement. The European Commission ruled this ou,t however, as not being compliant with European Union regulations. We have nevertheless ensured a strong local role for partners, whose advice will be pivotal in determining the priorities of project calls and the funding decisions that are taken—ensuring that projects are focused on the interests of local communities. We are committed to reviewing partnership arrangements in 12 months’ time and will effect changes as necessary.

Accordingly, the Operational Programme is built on the priorities of England’s 39 local enterprise partnership areas, and all funding decisions will be taken within this framework; local needs are therefore embedded into the programme and the funding decisions that will follow.

As a result, the Operational Programme is made up of the following funding priorities:

strengthening research, technological development and innovation,

improving access to, and use and quality of information and communications technology,

increasing the competitiveness of small and medium sized enterprises,

supporting the shift towards a low carbon economy in all sectors,

supporting climate change adaptation, risk prevention and management,

preserving and protecting the environment and promoting resource efficiency,

encouraging sustainable transport and removing bottlenecks in key network infrastructures in Cornwall and the Isles of Scilly,

technical assistance.

To ensure that local areas can fully exploit the range of European programmes that are available for the 2014-20 period, the European Regional Development Fund, the European Social Fund and part of the European Agricultural Fund for rural development are being combined in England into a single local growth package. This will be called the “European Structural and Investment Funds Growth Programme”. Local areas will benefit from combined allocations that support this approach.

Navigating the European Union bureaucracy

The programme has to operate within the rigid rules set by the European Commission. There are significant financial risks involved in running what are highly complex and bureaucratic European programmes. These can carry large financial penalties for which the Government—and therefore UK taxpayers—always remains financially liable.

That is why the Government have completely overhauled the way in which European Regional Development Fund programmes have been managed in England. Previously, the schemes were poorly overseen by the Government Offices for the Regions (2000-06 programme) and the Regional Development Agencies (2007-13 programme). The coalition Government inherited in 2010 a situation facing hundreds of millions of pounds of liabilities for breaches of the complex rules.

We have tackled this and sorted out £236 million of financial liabilities which we took on in 2010, and are on track to completely close the 2000-06 programmes with a dramatically reduced financial liability. In addition, all programmes in 2007-13 are maintained through an enhanced, disciplined and effective management process to minimise potential liabilities.

Ensuring value for taxpayers money

Every euro cent received from European funding schemes is UK taxpayers’ money. The European Regional Development Fund is a circular programme. UK taxpayers’ money is given to the European Union budget. Under the fund, a local project receives a contract, spends money and then claims from DCLG. DCLG then claims funds back from the European Commission. The whole process goes through a complex auditing process involving DCLG auditors and then European Union auditors. There is a debate to be had about the involvement of the United Kingdom’s future involvement with these types of structural funds. There is a strong argument that it would be better if structural funds were repatriated—and the United Kingdom had its money back, cutting out the middle man of the European Commission.

Turning to the 2014-20 programme, we think it is important that the role of UK taxpayers in funding these programmes is clear to all. That is why projects which are funded with Government money will be branded with the UK Government logo.

Spending public funds wisely is central to our Government’s approach in getting maximum value for money for the taxpayer. Reflecting the changes we have made to DCLG grant agreements, as I outlined in my statement of 23 February 2015, Official Report, HCWS292, we are also inserting new provisions into the funding agreements to stop taxpayer-funded lobbying with these European funds.

The Institute of Economic Affairs which has undertaken detailed research into the widespread and unhealthy practice of taxpayer-funded lobbying and so-called “sock puppets”. Their analysis has also identified the spending of millions of taxpayers’ money on the ‘European project’—Euro funds going to groups to promote ever closer European integration, bigger EU budgets and more EU regulation. This is not a good use of public funds.

Our funding guidance now states: “The following costs are not eligible expenditure: Payments that support activity intended to influence or attempt to influence the UK Parliament, Government, political parties, European Union Institutions, or inappropriately attempting to influence the awarding or renewal of contracts and grants, or attempting to influence legislative or regulatory action in the United Kingdom or the European Union.” Nothing in this prevents third party institutions from campaigning with their own private funds for whatever causes they want, but they should not do it with taxpayers’ money.

The myth of “free money” from Europe

My Department also oversees a number of “European Territorial Co-operation” (or, INTERREG) programmes. In the past, these programmes have suffered due to poor management and investing money in unsuitable projects which have not been consistently focussed on economic growth. My Department will ensure that 2014-20 programmes invest money much more efficiently.

Under the last Administration, funds were wasted on vanity projects for artificial pan-national Euro regions, such as the “Transmanche”. Pointless expenditure included a series of Cross-Channel Cycle Lanes, films on European fairy tales, a Cross-Channel Circus, a human treadmill, transnational dance troupes and an Atlas which renamed the English Channel as “Le Pond”.

Some parts of the public and voluntary sector have viewed European funding as “free money”, and not applied the same financial discipline that would apply to the direct spending of UK Government funding. Yet, there is no “free” money from the European Union: there is only UK taxpayers’ money. Indeed, the UK is even more of a net loser given the massive amount spent on bureaucracy, complex auditing and projects that would never have been funded by the UK Government directly. We have therefore sought to ensure that the 2014-20 schemes focus on jobs and growth, as well as tackling genuine maritime-related issues such as coastal flooding.

I will shortly be writing to partners to outline our robust approach in defending the interests of UK taxpayers with regard to INTERREG programmes.