EU funds 'can help drive north of England economy'

IPPR North, business and industry, devolution and localism, economy, finance, jobs, training and skills

Author(s):  Paul Callaghan
Published date:  29 Nov 2012
Source:  Public Service Magazine

Despite the failure to agree a long-term European Union budget in Brussels, debate was launched in earnest last week about the distribution of whatever slice of EU structural funds the United Kingdom ultimately receives, with a series of roadshows fronted by business and enterprise minister Michael Fallon.

Although the exact amount is as yet unknown, it is likely to be in the region of £8bn. Following the 2009 Barca report, the European Commission is committed to involving local and regional authorities in allocating this money and bringing the priorities of the EU closer to citizens. But for the 2014–2020 funding round, a common strategic framework has been developed for each member state to bring forward its own proposals. In other words, it is no longer down to regions but central government to decide how to allocate the money.

The UK's Department for Business, Innovation and Skills is talking about a more "complementary and integrated" approach with "local enterprise partnerships closely involved in the process of distributing funds". It remains to be seen whether that involvement is in the form of an equal partner or – as in Michael Heseltine's proposals – a competitive bidder.

As part of the Northern Economic Futures Commission's evidence-gathering process, we collated views from a wide range of businesses and other organisations on the future of EU structural funds. We are keen to feed these into the government's decisions on what funding arrangements would be best for the country as a whole and, more specifically, for the northern economy.

Most UK regions – including the north – will be categorised as more developed regions, for which funding is not ring-fenced geographically. With public spending on economic development in London currently double what it is in the north, there are clearly concerns that a national business plan might reduce the emphasis currently given to northern regional development in favour of investment in the south or in England generally. As the Institute for Public Policy Research North has shown in its recent Borderlands report, in the past 'spatially neutral' national infrastructure policies have not typically been good for the North. In its final report the NEF commission argues that the following seven principles should be embedded in arrangements for EU funding for 2014–2020.

First, local areas or regions need to be involved at all stages of the funding process, including in the development of the programmes, identifying priorities, deciding which projects and activities are to be funded, and determining how to deliver them. Localism must be real – if not, rather than galvanising communities, it can highlight and further disempowerment.

Second, a place-based approach should be followed, taking into account wider linkages and delivering public interventions that rely on local knowledge. Use of the structural funds is a key element in driving growth and rebalancing the economy. The UK government needs to be kept to its commitment "to promote strong, sustainable and balanced growth that is more evenly shared across the country and between industries".

Third, the EU structural funds must be seen as part of an integrated and holistic economic development strategy. There has to be integration across all EU funds and between EU and domestic funds. While such an approach is sensible full stop, its importance is amplified in the current testing economic conditions. Ideally EU funds should be part of a 'single pot' for economic development.

Fourth, connectivity is a cornerstone of sustainable growth: the north of England in particular needs to be viewed as an interconnected economic area of metro-regions. While it is diverse, the north has a shared history. Its recovery from devastating deindustrialisation has been held back by entrenched and longstanding structural problems which impact the whole of the northern economy. Connectivity is essential to the north fulfilling its economic potential.

Fifth, joint decision-making is critical. The local evidence-base can help to guarantee that funding goes where it will be most efficient and effective. Design, decision-making and delivery greatly benefit from increased local input, but audit and risk management processes are better facilitated at a national level. Joint decision-making must be kept as simple as possible and be outcome-oriented.

Sixth, the range of European Investment Bank-approved financial instruments should be increased, providing localities with the ability to pick and choose the suite of instruments which best suit their circumstances. The use of financial instruments can help to recycle funds and make the pot of available money go further.

And finally, funds should enable capacity-building and support research to deal with new challenges. In an increasingly fast-changing world and inherently unstable economic times, the funds should help local areas to increase their knowledge base so that public interventions can better rely on local knowledge and thus be more successful.

While for many commentators these matters may seem arcane, they could be worth billions to cash-strapped Local Enterprise Partnerships and combined authorities in the north. Embedding these principles in the EU funding arrangements would help drive to regional economic development and to rebalance the economy.