How the European Regional Development Fund benefits the UK

Sunday 16th December 2012

Johannes Hahn

Johannes Hahn, European Union Commissioner for Regional Policy

The debate around the setting of the European Union’s next seven year budget has prompted deep questioning about the value of the EU and its spending – nowhere more so than in the UK, and nowhere more so than in my area of regional policy where funds for regions and their local communities currently make up more than a third of the EU’s budget.

But in recent weeks, voices in some national capitals have grown louder insisting that “Brussels” is claiming too much for its coffers, and that in future, spending for regional development should be restricted to Europe’s poorest areas. I have been struck by the very different message coming from the regions – in those very same “net payer” countries. There has been a steady stream of them calling recently: from Cornwall to Yorkshire and Humberside, from the Scottish Highlands and Islands and the Welsh Valleys to the German Lander and the Dutch provinces. All of them are saying that local communities rely on the EU funds and that if they were to be cut, national treasuries would never replace them.

The current crisis has quite rightly concentrated minds on the need to ensure that every euro, every pound of taxpayers’ money is spent even more wisely. In the context of regional policy, that means creating jobs and stimulating much needed growth. It means focusing funding where it will have the most impact, building on local strengths and at the same time promoting our wider aims of boosting competiveness by investing, for example, in innovation, business, sustainable transport and renewable energy. That is the dramatic transformation of our policy that I am overseeing – from being just a support mechanism for the poorest regions to being a modern instrument for investment.

In the UK, EU regional funds combined with national funding can claim huge successes in regenerating communities and cities and in fostering regional growth. Support for research and development, help for small and medium sized businesses – the life blood of our local economies – has been the principal focus of the funds. From 2007-2011, we estimate they have so far delivered 43,500 new jobs while safeguarding thousands of others. The UK’s own figures for England record that between 2000-2006, European Regional Development funds created 177,391 new jobs and supported 207,662 small and medium enterprises.

But I would stress the value of those co-managed funds under the umbrella of the EU. One of the effects of the crisis is that regions and communities have been blighted by a lack of confidence, deserted by investors and deprived of hope.
I believe our funds have helped to mitigate the full impact of this.

That is partly due to the way EU spending is organised. Unlike the annual national budgets, fought over by domestic ministries and vulnerable to change at election times, our budget spans seven years. That makes it inherently reliable and a valuable draw for private investment with more scope for strategic planning. As part of our modernisation of the policy, financial instrument schemes are taking a more prominent role, with huge benefits for local regeneration and growth. Indeed, our project Finance for Business North East Funds has proved something of a beacon for the rest of Europe. Since 2010, £125 million worth of loans and equity investments have been made available to local business in the North East of England – £44.25 million from the European Regional Development Fund , another £18.25 million in match funding, and £62.5 million from the European Investment Bank. That in turn has so far attracted another £59 million in private investments. For local people that has meant 532 new jobs so far, with another 1, 180 safeguarded.

But as we plan the new programmes for 2014-20, our approach is also very firmly anchored in the concept of local partnership.

For the first time we have launched a dialogue with member states, regions and communities to pin down where the investments will be most effective, even before the figures are agreed. On the ground, EU cohesion policy is mobilising local knowledge and resources. It is contributing across the UK to community participation and transparency, and represents a vital part of Britain’s strategy for local growth.

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