Saturday, July 13, 2013
EU Structural Funds and nailing Jelly to the Ceiling
First a question: can you think of a policy supported by the Conservatives, Labour, Nick Clegg (though not his MEPs) and UKIP (they say they only voted against the relevant motion in the European Parliament because it didn't go far enough?)
Well, the answer is cutting the EU budget. Both David Cameron and Ed Miliband have said that it would be totally unreasonable at a time when every other public service throughout Europe is under financial pressure if the EU was the one area exempt.
And, as recorded on previous posts, David Cameron and Angela Merkal managed to persuade other EU leaders to agree to this at an EU summit in February, and the European Parliament finally fell into line at the start of July, trimming next year's EU budget by nearly 6%.
The net saving to the UK taxpayer over the next five years is £3.5 billion, according to the Office for Budget Responsibility.
There is, of course, a downside: cutting the EU budget means - wait for it - cutting EU spending. The EU's own administration has escaped, which is an argument for another day, but the Regional Aid fund has been cut to about the same degree as the overall budget.
In other words, because of the 6% cut in the EU budget there will be a 5% cut in Britain's allocation of EU structural funds which are used to aid depressed regions. This is a subject which came up in the comments on one of my previous posts and I thought it deserved a thread of its' own.
Even after the 5% cut the amound of money is still huge - about £9.5 billion over the next fie years.
The UK government decided that the fairest way to allocate this reduction between the four nations of England, Northern Ireland, Scotland and Wales was to apply the same 5% cut to EU regional aid to each of the four nations.
So let us be absolutely clear about what is happening, Scotland is not getting more money from the allocation of EU regional funds by Westminster, they are getting exactly the same 5% cut in EU development funds as Wales, Northern Ireland and the regions of England.
Over the next five years, England will receive £5.3 billion in EU regional aid: Wales, £1.85 billion, Scotland £690 billion, and Northern Ireland £475 million.
It has been alleged in a number of quarters, starting with the Financial Times in March, that there has been a massive diversion of EU aid money from England to Scotland, Wales and Northern Ireland. I an convinced that this is an extremely misleading way to describe what has happened.
It would be more accurate to say that the EU recommended a transfer of regional aid to England would would have meant enormous percentage cuts in regional aid to the other three countries of the UK and that ministers thought that the savage cuts proposed in Northern Ireland, Scotland and Wales would be unfair and damaging, so they went for the 5% across the board instead. England continues to receive 64% of the £9.5 billion of EU structural funds available to the UK, which is exactly the same share as before.
Under the EU guidelines for measuring need, England would have had a small increase instead of a 5% cut. But the cuts imposed on the other three countries of the union by those guidelines would have been savage.
Under the EU guidelines, aid to Wales would have been cut by 22%, aid to Scotland would have been reduced by 32% and aid to Northern Ireland would have been reduced by more than 40%.
EU structural aid to all four countries of the UK goes to help some of the most deprived communities in Britain. To slash the funding designed to help those communities in three of the four countries of the United Kingdom by 22% to 40% at a time of extreme economic difficulty would, in the view of Conservative and Lib/Dem ministers in the Coalition government, have been unfair and damaging.
Unfortunately this is all too often seen as a zero sum game: when you help one community there is less for another. One of the most dire ways in which language is misused in politics these days is to say "CUT" when you mean "Spend less than had been proposed" and a "cut" in this sense can be a significant increase.
Surprise surprise - the action taken to prevent savage cuts in Northern Ireland, Wales and Scotland has been misrepresented as a savage cut in England, which it isn't.
There has been some very silly scaremongering about the supposed impact of this policy on the part of certain opposition politicians and local newspapers, particularly in the North East, who have misunderstood, or chosen to misunderstand, the theoretical "diversion" of money which England never actually had as if it were a real cut in the funding of their own regions. Remember, the actual cut in England is 5%, the same as Scotland, Wales, and Northern Ireland.
Where the reality is that the government has declined to slightly increase aid in England and fund it by a massive cut in aid to Northern Ireland, Scotland, and Wales, some people have misrepresented this "diversion" as a massive cut in aid to regions of England. Some of the figures which are being flung around in consequence are about as close to reality as the Enron or Worldcom accounts.
For example, it has been suggested that the government is proposing to cut EU structural fund allocations to South Yorkshire. As Business Minister Michael Fallon pointed out, this is not accurate if you compare what it is proposed to spend with current or recent spending, unless you go back before the present decade.
“In each of the past three years the allocation has been 20m euros, and for each of the next seven years it will be 23m,” he said. “I cannot call that a cut."
Any attempt to quantify the supposed impact on Cumbria, the North East or the North West of the loss of this hypothetical money which we never actually had is like trying to nail jelly to the ceiling.