Rethinking Cohesion policy

1. Ideas, orientations and proposals: Rethinking the future of Cohesion policyProfessor John Bachtler and Professor Douglas YuillPresentation to theMinistry of Regional Development, Warsaw, 14 December 2009

2. Rethinking Cohesion policy • Context for reform – the debate on the EU budget • results of the budget consultation • Commission thinking on the budget • Rethinking Cohesion policy • performance of the policy • DG Budget proposals • the Barca Report • Samecki orientations paper • Conclusions and questions

3. Context for reform:the debate on the budget • Conclusion of the budget consultation (November 2008) • refocusing of spending on contemporary challenges • ‘fair and transparent’ mechanism of contributions • more flexibility for the budget to respond to evolving challenges • DG Budget studies • survey of EU expenditure • meta-analysis of EU spending • Ideas from academics/think tanks

4. Budget debate – 3 questions 1. What are the budgetary priorities (with high European added value)? • Environment – especially responses to climate change - increase direct spending; align other policies with environmental needs; need for strong spillovers • Energy – increase direct spending; concentrate research efforts on energy; promote low-energy lifestyle • Competitiveness, research, knowledge – increase expenditure (up to 25%); focus actions within other policies on improving competitiveness • External policies – more spending on defence and foreign policies • Agriculture – amounts and efficiency of spending do not address the new reality - maintain CAP as EU policy reinforcing Pillar 2; introduce co-financing; re-orient CAP towards new goals Cohesion policy – does not have universal high added value - limit Structural Funds to Convergence and Territorial Cooperation objectives

5. Budget debate – 3 questions 2. What should be the approach to budgeting? • No consensus in the consultation • some support for an EU tax, others ambivalent or opposed • key principle is ‘fairness’ in contributions (relationship between national GDP and budget payments, net balances) • opposition to special/general correction mechanisms...but may be needed to achieve fairness • Academic/policy debate has more radical suggestions • two-stage budgeting procedure to decouple discussions about overall funding from questions of distribution • restructuring of the budget into three types of expenditure, each with different source of funding: redistribution (Cohesion policy and the CAP); allocation (all other EU public goods) and stabilisation (EU capital expenditure) • alignment of Financial Perspective periods with those of the COM and EP

6. Budget debate – 3 questions 3. What are the prospects for change? • Barroso has called for radical change – seeking agreement on three key principles as ‘ground rules for the debate’: • the added value of spending • a commitment to solidarity rather than the ‘poison’ of net balances • ensure budgetary flexibility • But views among many policy commentators is that radical change is unlikely: • there is a bias towards the ‘status quo’ in EU budgetary negotiations • budget agreements require unanimity • fiscal constraints in major EU economies limit the scope for more spending

7. Budget debate – answers? Leaked budget paper gives some ideas on the thinking of DG Budget: focus on three key axes: sustainable growth and jobs – research, skills, convergence, innovation climate and energy – energy efficiency, mitigation and adaptation global Europe – poverty, migration management, neighbourhood cooperation stable budget of 1% of GNI reform of EU financing replacement of VAT by new own resource phasing out of all correction mechanisms (over time) delivery simplified procedures – delegation of financial control to Member States more use of performance incentives, conditionalities differentiation of management/control requirements based on capacity 7 John Bachtler, European Policies Research Centre, University of Strathclyde

8. Rethinking Cohesion policy:analysis and evaluation • Regions 2020: analysis of the likely regional impact of four key challenges: • adapting to globalisation • demographic change • climate change • energy use and supply • Sixth progress report on economic and social cohesion: updates on EU socio-economic trends and responses to the territorial cohesion consultation • Ex post evaluations of 2000-06 period and studies of policy performance in 2007-13

9. Rethinking Cohesion policy: evaluation of performance Evaluation is not yet complete, but other research provides some insights Progress in meeting challenges some convergence between Member States, and between the least developed and developed regions. Lisbon targets are not being achieved - entrepreneurship, RDTI, human resources significant group of regions between 75% and 100% of EU GDP per head which are experiencing difficulties major challenges ahead for different regions from globalisation, demographic change, climate change and energy supply 9 John Bachtler, European Policies Research Centre, University of Strathclyde

10. Rethinking Cohesion policy: evaluation of performance • Role of Cohesion policy • Cohesion policy is making a sizeable contribution to economic development in some areas – and has the potential to contribute to Lisbon and Gothenburg objectives • however, performance is patchy – results are not universally evident • intervention is undermined by strategic choices and inadequate institutional capacity • slow absorption in current period • inconclusive evidence on the effectiveness of the funds – mixed picture from Objective 1 and 2 region evaluations

11. Rethinking Cohesion policy:reform proposals • Proposals by DG Budget in the leaked budget paper • Proposals in the Barca Report • Proposals in the Samecki orientations paper • Points of agreement and difference • Key questions

12. Cohesion policy reform: DG Budget proposals Structure/spatial focus of the policy concentration on national convergence, and regional disparities within countries questioning of value of Objective 2 – possible redirection of Competitiveness funding to areas like research, innovation and TENS strengthened focus on cross-border cooperation extended use of adjustment instruments in response to external shocks – economic crises, natural disasters, terrorism, public health emergencies Thematic focus - limited number of priorities human capital development infrastructure connections between lagging areas and growth centres climate & biodiversity investments (climate proofing) research and innovation 12 John Bachtler, European Policies Research Centre, University of Strathclyde

13. Cohesion policy reform: DG Budget proposals Performance strengthened conditionality based on agreed and measurable objectives improved evaluation mechanisms more use of performance indicators and incentives/sanctions Delivery separation of European Social Fund from ERDF? Single Strategic Framework for all Community funds under shared management (Cohesion, rural development, maritime) more support for institutional capacity – know-how, networks 13 John Bachtler, European Policies Research Centre, University of Strathclyde

14. Cohesion policy reform: Reaction to DG Budget proposals Critical comment from REGI (EP), CPMR and AER, and other regional networks Main objections de facto renationalisation of Cohesion policy downgrading of multi-level governance – no recognition of regional and local issues/interests or involvement removal/downgrading of Objective 2 – “potential exclusion of 200 regions” separation of ESF from Cohesion policy shift of resources from lagging-behind regions to other policy areas 14 John Bachtler, European Policies Research Centre, University of Strathclyde

15. Cohesion policy reform: the Barca Report • Independent study led by Dr Fabrizio Barca, Director-General, Ministry of Economy & Finance, Italy • “An Agenda for a Reformed Cohesion Policy: A place-based approach to meeting EU challenges and expectations” • Report prepared at the request of Commissioner Danuta Hübner • Report based on • review of evidence • hearings with leading academics • workshops with senior government officials

16. Cohesion policy reform: the Barca Report Structure/spatial focus of the policy a place-based policy providing a long-term strategy for tackling persistent underutilisation of potential and reducing persistent social exclusion in specific places through external intervention and multi-level governance Cohesion policy is justified in intervening throughout the EU with a significant share of the EU budget a ‘territorialised social agenda’ should be considered Thematic focus – 55-65% of funding on 3-4 core priorities (EU-wide relevance, place-basedness, verifiable) innovation climate change managing migration deprivation among children skills demographic ageing 16 John Bachtler, European Policies Research Centre, University of Strathclyde

17. Cohesion policy reform: the Barca Report • Performance • a new contractual relationship, implementation and reporting aimed at results • promoting additional, innovative and flexible spending • promoting experimentalism and mobilising local actors • promoting the learning process: a move towards prospective impact evaluation • refocusing and strengthening the role of the Commission as a centre of competence • reinforcing the high-level political system of checks and balances • Delivery • a new strategic framework for cohesion policy • a strengthened governance for the core priorities • addressing financial management and control

18. Cohesion policy reform: reaction to Barca proposals • Member State views • useful document, interesting ideas, complex arguments • support in principle for: spatial and thematic concentration of resources, flexibility on n+2, simplification of the additionality requirement, experimentalism, more strategic reporting, high-level political debate • but...concern about operationalisation of proposals e.g. narrow core priorities, strategic framework, outcome-focused contracts, feasibility of impact evaluation, creation of new Cohesion Policy Council • No clear DG Regio position on the Report – ambivalence about the findings? • Discussion continuing in bilateral meetings with Member States

19. Cohesion policy reform: the Samecki (Hübner) paper • Mission: • a strong development policy which enables all EU citizens wherever they live, to reap the benefits and to mitigate the risks of market unification • removing barriers to growth and facilitating structural adjustment • reinforcing linkages between leading and lagging areas • providing a governance framework for integrated, tailored responses • mobilising territorial potential to maximise impact of other EU priorities • Goals • to enhance competitiveness and employment at regional level • to facilitate growth in the lagging areas of the Union • to foster integration across borders

20. Cohesion policy reform: the Samecki (Hübner) paper • Fund-specific objectives: • supporting development and structural adjustment of regions (ERDF) • improving employment opportunities, adaptation to change, fighting social exclusion (ESF) • improving connectivity and environmental sustainability (CF) • More effectiveness requires: • concentration on core priorities (economic modernisation, environment sustainability, employment and social cohesion) • stronger focus on performance and results • high-level political debate on policy effectiveness • responding to unexpected economic and social change • More efficiency/simplicity requires: • coherence in delivery (strategy definition, alignment of instruments) • simpler management & control systems (differentiation of requirements, different financial control, harmonised eligibility rules, adjustment of decommitment, review of co-financing, greater private sector role)

21. Cohesion policy reform: the Samecki (Hübner) paper Initial assessment: • coherent conceptual approach – based on Barca • recognition of need for change - evidence-based set of proposals • many valid improvements to the implementation system But.... • no explicit reference to the problems of the policy • weak justification for intervention in all regions • Why should EU have a role? Why better than national intervention? • Why Cohesion policy rather than other EU policies? • shared management system is not called into question • maybe expecting too much from the emphasis on performance • insufficient attention to capacity limitations – at MS and COM levels

22. Cohesion policy reform:synthesis of proposals • Areas of similarity • focus the policy on a limited number of EU objectives: research and innovation, low-carbon economy, human capital • better, more visible performance is required: conditionalities on spending, indicators, evaluation • more strategic coherence between relevant policy areas: joint programming • rationalising financial control requirements • simplifying administration • Areas of difference • spatial coverage / role of the policy: EU-wide or focused on the poor? a strong or secondary policy area? • relationship between different structural policies: e.g. between ERDF & ESF? • role of multi-level governance – a centralised or regionalised policy?

23. Conclusions • After 2 years of consultation and reflection, the reform debate is resuming • Milestones are: • discussion of Samecki paper in the HLG (December 2009) • EU budget paper (Spring/Summer 2010?) • Fifth Cohesion Report (late 2010) • proposals for post-2013 financial framework (2011) • Key questions • should Cohesion policy funding be allocated nationally? • should there be another Objective 2? What reforms are needed? • how can thematic concentration be implemented? • what would ‘better performance’ mean in practice? • are the proposals for simplification sufficient?

24. Thank you for your attention! john.bachtler@strath.ac.uk 24 John Bachtler, European Policies Research Centre, University of Strathclyde