Opinion of the Economic and Social Committee on the '7th Annual Report on the Structural Funds 1995` (97/C 206/08)

On 29 November 1996 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the 'Seventh Annual Report on the Structural Funds 1995`.

The Section for Regional Development and Town and Country Planning, which was responsible for preparing the Committee's work, adopted its opinion on 11 April 1997. The rapporteur was Mr Simpson.

At its 345th plenary session (meeting of 23 April 1997) the Economic and Social Committee adopted the following opinion by 123 votes for, two votes against and five abstentions.

1. Introduction

1.1. Council Regulation (EEC) 2081/93 sets out the tasks of the Structural Funds, the classification of the Objectives of the Funds and defines the activities which are eligible for support under each of the Funds. Article 16 of the Regulation requires the Commission to submit, before 1 November of each year, a report to the European Parliament, the Council and the ESC on the implementation of the Regulation in the preceding year. The report is required, in particular, to detail the progress made towards achieving the objectives of the Structural Funds and in concentrating assistance in the manner specified in the Regulation.

1.2. COM(96)502 final is the 7th Annual Report on the Structural Funds and details their operations during 1995.

1.3. In addition, Article 16 also provides for the Commission to submit a three yearly report to the Parliament, the Council and the ESC detailing the progress being made towards economic and social cohesion and the contribution made by the Funds and the Community's other financial instruments, together with proposals for the development of the Community's operations and policies regarding economic and social cohesion. The first such report was presented by the Commission on 6 November 1996 () and is the subject of a separate opinion.

1.4. This opinion, therefore, concentrates on assessing the value added by the 7th Annual Report on the Structural Funds and does not stray into a consideration of the wider issues addressed in the wider report on economic and social cohesion. However, at certain points the Committee has acknowledged the further information provided in the Report on Economic And Social Cohesion and, indeed, of the Court of Auditors Annual Report of 1995 which commented extensively on the implementation of the Structural Funds.

2. The context of the report

2.1. The major reform of the Structural Funds in 1988 introduced four key principles to guide the operation of the Funds, namely:

- concentration - of resources on defined priority objectives and in specified geographical areas;

- partnership - involving close collaboration between the Commission and the relevant authorities at national, regional or local level. This partnership was extended in 1994 to competent authorities or bodies - including, within the framework of each Member State's national rules and current practices, the economic and social partner designated by the Member State;

- programming - in terms of the period covered, the scope for assistance and the selection of specific actions appropriate for each eligible area, through the medium of a Community Support Framework (CSF) or a Single Programming Document (SPD), and

- additionality - to ensure that the finance from the Structural Funds is not used to replace national structural aid, Member States were required to 'maintain, in the whole of the territory concerned, its public structural or comparable expenditure at least at the same level as in the previous programming period` and to supply the information required to verify that the principle of additionality is being reflected.

2.2. These principles were maintained and reinforced in the revision of the Structural Funds regulations undertaken in 1993, which extended the concept of partnership to the Economic and Social Partners (subject to the practices of particular Member States), placed a particular emphasis on the environmental impacts of the Structural Funds and provided a new map of the regions eligible under each of the Structural Funds objectives. In addition, the Act of Accession for the new Member States added a 6th Objective to the Structural Funds - helping the development and structural adjustment of regions with extremely low population densities.

2.3. Member States were invited to submit, by June 1994, proposed development plans for each region, or eligible purpose, covering the period 1994-1999. In addition, proposals for actions under each of the Community initiatives were also to be submitted in the same time-scale.

2.4. As a result over 700 proposals were submitted to the Commission during 1994 and the Commission's work in relation to the Structural Funds during 1995 was dominated by the process of considering and approving the plans submitted. The result is that the report on that period is dominated by issues of process and compliance. As the various CSFs and SPDs evolve it would be expected that the report will become progressively more concerned with assessment of the impact of the Structural Funds in particular regions and across the Union and with issues relating to their future development.

2.5. The Structural Funds remain the primary budgetary instrument through which the European Union assists the economic and social development of the less prosperous regions of the Union. Within the overall EU budget in 1995 of ECU 71,0 billion, the Structural Funds were allocated ECU 22,3 billion and the Cohesion Fund ECU 2,2 billion (see appended table 1).

3. Response to the report

3.1. General

3.1.1. The report is welcome. It provides a detailed and thorough assessment of the implementation of the Structural Funds in 1995.

3.1.2. The report runs to over 330 pages and has over 170 tables, including those provided in the annexes to the report. As a result the report is complex. A welcome attempt has been made to provide an overview in the introductory section of the report.

3.1.3. Given the complexity of the report, it is clearly not possible for the ESC to consider all of its aspects. In this opinion the Committee concentrates on the degree of achievement of the principles underlying the reform of the Structural Funds and a small number of other issues of strategic importance.

3.1.4. The report acknowledges the influence of previous ESC opinions in relation to the Structural Funds, in particular those in relation to spatial development, inter-regional cooperation and the future of cohesion with reference to future enlargement.

3.1.5. In overall terms the Committee endorses the report and commends the Commission on its comprehensiveness. The comments and suggestions made in later parts of this opinion need to be interpreted in the context of the overall welcome the Committee has for the report.

3.2. Concentration

3.2.1. The principle of concentration requires the focusing of assistance on a limited number of objectives and eligible areas, a focusing on the most severe problems and on several themes which are important across the EU.

3.2.2. In practice, the main decisions on concentration were made in 1994 with the determination of the eligible areas for Structural Fund assistance and of the indicative financial allocations to each area. However, the Commission has respected the principle by concentrating its priority efforts on the proposals for Objective 1 areas.

3.2.3. It is worth noting that the Court of Auditors in its Annual Report of 1995 was not convinced that the principle of concentration had been adequately respected. The Court reached the view that as a result of more than half of the Community population being eligible for some form of support under the Structural Funds 'Community aid measures are to a certain extent sprinkled over a large number of eligible areas` (). The first report on economic and social cohesion also concludes that the principle of concentration was not well respected in setting the parameters for the 1994-1999 period.

3.2.4. The Committee has reservations about the use of a GDP per head measure as the sole determinant of the economic and social condition of regions - particularly given the problem of inter-regional transfers. It believes that the Commission should consider additional measures, to replace or supplement the use of per capita GDP. However, in the context of the current report, it would have been helpful for the Commission to have demonstrated the per capita allocation of the Structural Funds to each region, which qualified under Objectives 1, 2 and 5, in relation to the level of GDP per head in the region as a first approximation to a measurement of the degree of concentration of the financial allocations on the most disadvantaged areas of the Community.

3.2.5. Data provided in the Court of Auditors Annual Report of 1995 enables an analysis to be carried out of this relationship in relation to Objective 1 regions. The results are shown in the chart in the Annex, which suggests that, while in general regions with lower per capita GDP levels have received more funding per capita than other regions, the relationship is relatively weak and there are very many considerable exceptions to the relationship ().

3.2.6. A further aspect of concentration is the use of the various funds (the ERDF, the ESF, the EAGGF and the FIFG) to tackle the development problems faced by regions in an integrated and programmed manner. In this context it is disappointing to note that only 31 of the Objective 1 operations adopted in 1995 (19 % of the total) involved three of the Structural Funds and only 12 (7 %) involved all four of the funds.

3.3. Programming

3.3.1. Much of the report is about the process of programming Structural Funds interventions in each region.

3.3.2. In all, over 700 Structural Funds programmes were adopted in 1994. The overriding conclusion, endorsed by the Commission, from the 1995 report is that procedures risk becoming excessively complex and bureaucratic.

3.3.3. The first report on economic and social cohesion debates the implications for future Structural Funds policies of the experience of the congestion of systems by numerous programmes in the 1994/95 period. The Committee notes the implications of that experience for future rounds of the Structural Funds and endorses the actions taken by the Commission to address the problems by reducing the complexity of programming procedures and/or making good and timely preparation for the process by training and the allocation of adequate resources both in the regions and in the Community institutions themselves.

3.4. Additionality

3.4.1. Additionality is to be verified by information provided by Member States at the level of each objective and programme. In the case of a Member State covered by more than one objective this can be complex, especially as the areas covered by some Structural Funds interventions do not coincide with regional financial structures in some Member States. The requirement is that the Member State's own structural interventions in the eligible regions are not reduced to less than their level in the previous programming period (subject to a number of caveats relating to exceptional expenditures, privatization, cyclical effects etc.).

3.4.2. The report states that the additionality verification process in relation to the period 1989-1993 (the previous round of the Structural Funds) has been completed for Objective 1 and 2 regions and that

- additionality was verified for five Member States;

- was impossible to verify in three Member States because of incomplete data, and

- impossible to verify in four Member States because of a total absence of data.

3.4.3. In relation to Objectives 3 and 4 additionality in relation to the 1989-1993 period was verified for four Member States, uncertain for two Member States and impossible to verify for five others. Only in relation to Objective 5(b) was additionality in relation to the period 1989-1993 verified in all Member States.

3.4.4. Assessment of additionality in relation to the current operations of the Structural Funds was undertaken only for Objective 1 in 1995 and the results were 'limited` because only one Member State observed the principle and the verification procedures.

3.4.5. Clearly the system for the verification of additionality is not working well, in part because of the complexity of the issues and in part because of a lack of cooperation by certain Member States. This is a matter for considerable concern. The complex administrative and programming procedures laid down for the Structural Funds can only be justified if the Funds have a genuinely additional impact in the regions and on the issues identified. If such a genuinely additional impact cannot be verified, the programming and administrative requirements may act as a drag on the development of the least prosperous regions of the Community, rather than a response to their needs. The Committee endorses the actions which the Commission is required to take to verify additionality and to stress that workable arrangements for such verification will be an important component of future arrangements for the Structural Funds.

3.5. Partnership

3.5.1. Partnership is the fourth principle underlying the reform of the Structural Funds. The concept of partnership was extended in 1993 from regional and local bodies to the economic and social partners, but this extension was subject to the rules and practices of each Member State.

3.5.2. The report notes that partnership arrangements with regional authorities are now better developed but arrangements are less satisfactory at local level. It also notes a trend towards greater involvement of the economic and social partners, but acknowledges that the situation varies greatly between Member States 'from no involvement in some Member States, through indirect representation or mere information procedures in others, to real involvement in decision making in others`. The report also refers to the complexity and unwieldy nature of many of the monitoring arrangements at regional level and of the need to develop more appropriate procedures to avoid the danger of 'increasingly unwieldy procedures in increasingly complex partnership structures`.

3.5.3. The Committee endorses the Commission's efforts to extend the practice of partnership in the context of the Structural Funds, but notes that the Commission has no power to insist on appropriate partnership structures where these would not fit with Member State procedures. This will be an important issue for the next round of the Structural Funds and to enhance the contribution of the economic and social partners to the enhancement of closer cohesion. The Committee would ask the Commission to report more fully on the actual condition of local partnerships in subsequent Annual Reports on the Structural Funds, enabling the Committee to make a more fully informed judgement on the true extent and nature of the role played by all of the economic and social partners in each Member State.

3.5.4. Both the existence of a partnership and its quality are important. The Economic and Social Committee is concerned that regional or local bodies involved in a partnership structure may not have genuine independence of central government (in part because of financial relationships) and may, therefore, not accurately represent the full range of opinions in their areas. The real test is the extent to which all of the economic and social partners at national and local levels have a voice which is heard and which is genuinely influential both in determining strategic priorities for the Structural Funds and in the day to day decisions about their application.

3.5.5. The Committee would encourage the Commission to continue its efforts to extend the process of economic and social partnership in all Member States. This could include actions to improve the technical capability of the economic and social partners so that they can respond more fully to request for inputs and opinions and to the other demands of their role. The Committee, however, recognizes that the Commission has no power to insist on the representation arrangements for economic and social partners and it therefore concludes that there exists a heavy onus on the Member States to develop and implement appropriate and effective structures for the involvement of the economic and social partners in the delivery of the Structural Funds.

3.6. Monitoring and Evaluation

3.6.1. The main activities in relation to monitoring and evaluation in 1995 related to:

- establishment of the monitoring committees;

- the publication of a 'Common guide for monitoring and interim evaluation`, and

- the commencement of the process of carrying out mid-term reviews of the CSFs, SPDs and Community initiatives.

3.6.2. In relation to the establishment of monitoring committees, the comments made in the preceding section in relation to the principle of partnership emphasize the important of open and transparent monitoring with the genuine involvement of the economic and social partners. The Committee has noted that the role of the Monitoring Committees goes beyond the financial monitoring of the Structural Funds and that the economic and social partners, therefore, have an especially important role in providing and assessing qualitative data on the progress of Structural Fund interventions. Effective exercise of this role requires that the economic and social partners are provided with sufficient technical capacity to fulfil the tasks allocated to them and that they are provided with sufficient information to enable them to develop informed judgements.

3.6.3. The publication of the 'common guide` is welcomed. The guide provides a framework within which the progress of Structural Funds can be monitored. Unfortunately, the guide was published after the preparation of the CSFs and SPDs and its recommendations, therefore, have to be added on to existing monitoring arrangements. It would have been preferable to publish the 'common guide` before the process of developing CSFs and SPDs began so that its recommendations could have been embedded in Member States' proposals and in the agreed plans.

3.6.4. The process of mid term review is important. There is the danger that it will again clog the administrative system as over 700 OPs, SPDs and Community initiatives are reviewed and, where appropriate, renegotiated to refocus them in the light of experience or of a changed environment. The report notes that the mid-term review process is due for completion in 1996, but got off to a slow start. The ESC will wish to consider the outcome of the process of mid-term review in some detail in considering the 1996 Annual Report on the Structural Funds and requests that in that Annual Report the Commission should highlight the extent of the involvement of the economic and social partners in the process of the Mid Term Reviews in each Member State.

3.7. The environment

3.7.1. In recognition of the importance accorded to the environment in the Structural Funds regulations, the report places a special emphasis on the environment and numerous examples of environmental aspects of the implementation of the Structural Funds are provided throughout the report. The report states that there has been a clear improvement in the way in which the environment has been taken into account in planning Structural Funds interventions for the period 1994-1999.

3.7.2. The greater emphasis on the environment in the Structural Funds and in the Annual Report is very much to be welcomed. The various examples provided in the Report show that the environment is receiving considerable priority in Structural Funds activities across the Community. However, the report provides little information about the aggregate environmental impact of the Structural Funds in individual regions, by objective or across the Community. In future reports it will be important to develop a framework for reporting the environmental impact of the Structural Funds against a number of criteria including any available performance indicators.

3.7.3. This process should be assisted by the existence in CSFs and SPDs of quantified environmental objectives, although it should be noted that in most cases those objectives will not be achieved until the end of the programming period because of the long lead times involved in infrastructural projects. The Commission may wish to give consideration to a series of pilot studies to identify the various environmental impacts of the Structural Funds in different EU regions.

3.8. The Structural Funds, employment and other Community policies

3.8.1. The report provides a valuable analysis of the inter-relationships between the Structural Funds and other Community policies. In 1995 (and 1996) considerable debate focused on the relationship between the Structural Funds and the generation of additional jobs. The report emphasises that the Structural Funds are already significantly focused on employment generation, on training and re-training and on tackling social exclusion and exclusion from the labour market. A number of proposals were developed in 1995 and 1996 to sharpen even further the focus of the Structural Funds on these issues. The ESC will wish to consider the outcomes of the consultation on these issues which will be important considerations in the mid-term review of Structural Fund activities and which should form an important focus of the next Annual Report on the Structural Funds.

3.8.2. The report also comments on the degree of conformity with a range of other Community policies and priorities and this extra dimension to the report is welcomed.

4. Conclusion

4.1. The Committee congratulates the Commission on the preparation of a good report. It provides a comprehensive overview of the implementation of the Structural Funds in 1995 and enables a preliminary assessment to be made of the extent to which the principles underlying the reform of the Structural Funds are being respected.

4.2. The report needs to be considered in the context of the first report on economic and social cohesion, which is the subject of a separate Opinion. That report provides a first consideration of the role of the Structural Funds after 1999, an issue which will be of considerable interest to the Committee.

4.3. As we move through the 1994-1999 programming period it is to be expected that the focus of the Annual Reports on the Structural Funds will progressively move from one of process and compliance towards an emphasis on the assessment of actual impacts and development options.

4.4. Reconsideration and reform of the procedures for developing and approving the plans to use the Structural Funds is necessary. The strong impression from this report is that during 1995 the administrative systems were effectively blocked by the task of approving several hundred Operational Programmes, Single Programming Documents and Community Initiatives. These procedures were cumbersome, costly and gave rise to substantial delays. Their reform before a new set of Structural Fund Programmes is submitted in 1999 is already urgent. When the new Structural Funds policies are formulated, considerable resources and adequate time will need to be allocated for preparation and training for the process of Programme development in the regions and consideration and approval by the Community institutions.

4.5. The ESC will wish to consider, in the context of the next Annual Report, the outcome of the current debate on the relationship between the Structural Funds and employment generation. This issue will also be an important consideration in the Mid Term Review of the Structural Fund activities.

4.6. The Committee recognizes that the preparation of the annual report on the Structural Funds is a considerable task and commends the Commission on the 1995 Report. In preparing the 1996 report, the Committee would wish the Commission to bear in mind the following points for particular emphasis:

- the role of the economic and social partners in the implementation of the Structural Funds in each Member State: the ESC would wish to see fuller and more critically appraised information to allow it to make an informed judgement on the actual status, role and effect of the economic and social partners;

- in this context, particular emphasis should be placed on the technical capacity of the partners to play their allotted roles and on the steps which may be taken to enhance that capacity where such enhancement is considered necessary;

- in addition, the Committee wishes to consider the role of the economic and social partners in the conduct of the Mid Term Reviews in each Member State;

- in the Report, consideration should be given to alternative measures of the economic and social condition of regions (and the less prosperous Member States) to supplement the present reliance on GDP per capita;

- the Committee would welcome information in the 1996 report on pilot studies to identify the specific effects of the Structural Funds when applied to environmental projects in different regions, and

- the Committee supports the Commission in its efforts to secure greater progress in assessing 'additionality` in relation to the interventions by the Structural Funds and calls on the Member States to co-operate fully with the Commission in this important means of verifying the effectiveness of the Funds in achieving their objectives.

4.7. The Committee welcomes the way the Commission has drawn attention in its report to the new Member States and to their use of the Structural Funds after enlargement. This is particularly important for new Member States when they are assessing their position in relation to future use of the Funds.

4.8. The Committee hopes that the Commission will take account of the various comments made in this opinion both in the implementation of the Structural Funds and in the preparation of the 1996 and subsequent annual reports. Furthermore the Committee expresses the hope that the Commission will present the report on the Structural Funds in 1996 as soon as possible and, in any case, earlier than was done with the 1995 report.

Brussels, 23 April 1997.

The President of the Economic and Social Committee

Tom JENKINS

() COM(96) 542 final.

() The data in the table are taken from table 5.3 in the report of the Court of Auditors (referred to above). The GDP figures are those for 1993 and have been standardised in terms of purchasing power on the basis of: EU (15) = 100. The data on aid/inhabitant are calculated in ECU/inhabitant on the basis of population figures for 1990, the average of Objective 1 regions being equal to 100.

() 2.1 of the 7th Annual Report.

APPENDIX I

Chart showing the relationship between GDP/head and Structural Funds Aid/head in the Objective 1 regions

Aid/head Compared to GDP/head - Objective 1 Regions

>START OF GRAPHIC>

Aid/head EU 15 = 100

GDP/head EU - Objective 1 = 100

--- Aid/head (ECU)

- - - Linear [Aid/head (ECU)]

>END OF GRAPHIC>

APPENDIX II

>TABLE>