CAIN: Democratic Dialogue: Politics: Continentally Challenged (Report No. 5)

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Continentally Challenged

Cash questions

The Single European Act of 1986, the project which established the single market, recognised as an offsetting principle the role of regional policy in "strengthening ... economic and social cohesion" (article 130A).

This led in 1988 to the reform, and doubling, of the 'structural funds' (the regional fund, the social fund and the guidance section of the Common Agricultural Policy), in which 'objective one' was the "development of structurally backward regions", like Northern Ireland and the republic (though Northern Ireland's inclusion, despite marginally breaching the threshold of 75 per cent of EU average gross domestic product per capita, was on the basis of its 'special situation').

This growing orientation towards disadvantaged regions was strongly associated with the then president of the European Commission, Jacques Delors. Indeed, a further doubling of the structural funds in 1993, bringing the planned total for 1999 to more than 27 billion ECU, was widely known as 'Delors II'. Brussels' growing regional largesse necessarily entailed a switch in regional funding from projects (led by member states) to more substantial and coherent programmes (led by the commission), which in turn implied a growing partnership with the disadvantaged regions.[1]

But no one should get carried away by the Brussels sauce train, for three very important reasons. Firstly, crucial though it is as a vehicle for policy innovation, it pales beside the Westminster subvention to Northern Ireland. The 1994-9 structural-funds aid plus specific Community Initiatives will deliver some £180 million annually on average.[2] Assistance to the region under the Common Agricultural Policy is running well in excess of £100 million per year.[3] And expenditure in Northern Ireland under the 'peace package', though back-loaded over the initial period, 1995-7, would average at some £70 million per year. This would imply annual EU assistance to Northern Ireland of some £350 million - about a tenth of the £3-4 billion subvention. In the wider context, structural-funds expenditure is infinitesimal when set against overall EU GDP, of which it represents just 0.4 per cent.[4]

Relatedly, as Harvey Armstrong points out, the goal of 'economic and social cohesion' is "tantalisingly vague", making evaluation very difficult. Thus there has been no attempt by the commission, for obvious reasons, to identify just how large regional expenditure would have to be to have a significant effect on inter-regional disparities, but current levels-despite the quadrupling under Mr Delors - are almost certainly too low.[5] And they are not likely to increase in the context of overall budget stringency, and particularly the continuing fiscal strains arising from unification in Germany: "The resistance to sizeable budgetary increases in a number of member states should not be underestimated. Germany's politicians have increasingly drawn attention to the fact that Germany's budgetary contributions are more than those of the UK and France combined."[6]

The Budget Council, meeting in November 1996, confirmed its goal of a 'zero growth' EU budget for 1997. Indeed, it envisaged a one billion ECU (c£800 million) reduction of spending on the structural funds and the Common Agricultural Policy.[7]

Thirdly, enlargement beckons, raising not only the prospect of the beurre being spread more thinly but also of both parts of Ireland rising well above a lowering threshold for major support from the structural funds, as the ex-Communist bloc bangs on the door of the union. The 10 central and eastern European aspirants have an average GDP per capita only 30 per cent ofthe EU mean.[8]

True, the enlargement horizon is receding. The change of government in Malta has disturbed its application and the simmering inter-communal crisis in Cyprus has placed a big question mark over the latter's. And as regards the central and eastern European countries, as David Arter succinctly puts it, the current phase of western European integration is in contrast to the post-Communist dynamic of disintegration - most tragically in ex-Yugoslavia and Chechnya - with which it has coincided in the east.[9] The European Commission now admits that there will be no additions from the east before 2002.[10]

But the problem will remain, albeit postponed. As Armstrong contends, "The size of the EC regional policy budget remains inadequate for the tasks which currently confront it. Further EC integration, notably the admission of new member states, would require a major new increase in the regional policy budget if regional disparities were to be prevented from widening."[11] As Hooghe and Keating grimly conclude, with richer states increasingly reluctant to step up their payments, "It is possible that the limits of policy have been reached."[12]

Hence the almost panicky debate in the republic as to whether it could defy its own centralist political organisation and have Dublin treated separately as a region, so the rest of the country could still be a significant funds beneficiary, or the suggestions that post-1999 funding should be functionally directed (at long-term unemployment, for example) rather than regionally targeted.[13]

A European Commission official anticipated that the 75 per cent criterion for objective-one status would persist after the current tranche of funds runs out in 1999 and that there would be less scope for a political compromise to favour Northern Ireland in this regard. Moreover, there was a desired "democratic effect" of regions graduating out of objective one, and the union faced pressures from the World Trade Organisation to diminish regional aids in the name of global 'market freedom'. And that was all apart from the competing demands enlargement would, eventually, generate.

One thing is clear: there is no chance whatever of the republic coming within a kilometre of the 75 per cent threshold in the new millennium. The assessment is made on the basis of the most recent available three-year series, and the figures take some time to emerge. Nevertheless, while GDP per capita in the republic is still only 78 per cent of the EU average in the latest available series, 1991-93, so dramatic has been growth in the last few years that Eurostat estimates that the republic overtook average EU per capita GDP in 1996 - and, by the by, that of the UK.[14] Thus the regional affairs commissioner, Monika Wulf-Mathies, told the House of Lords in January 1997: "Ireland needs to wean itself off regional aid from the European Union."[15]

Gross national product gives a somewhat more sober measure, excluding as the latter does repatriated profits (which the republic's high multinational penetration and low corporate taxation render substantial). A commission official in Brussels estimated the differential as around 10 per cent. So the republic is even on the cusp of losing its status as one of the four member states entitled to support from the Cohesion Fund - the threshold being a per capita GNP less than 90 per cent of the average. But the fact that it is one of the 15 member states around the European table means it will have the power to ensure transitional arrangements, rather than a cut-off of all financial life-support (outside of the Common Agricultural Policy) from the year 2000.

While the republic has taken off in the past few years, Northern Ireland's position remains laggardly. Thus, in 1993, its per capita GDP was 79 per cent of the EU average.[16] In 1988, when the original judgments were being made about objective-one status, the figure was 76 per cent, on the margin of qualification - the balance tipped by the political factor. Partly because of the 1989-93 tranche of funds, Northern Ireland has now moved away from the borderline. The 'special' political situation, sadly, still pertains. But it is hardly an attractive case to have to advocate: 'okay, we re not really so poor, but we remain a political basket-case-please give generously'. Indeed, the failure of the 'peace process'may make it a case that is less receptively heard externally than in the past.

In a BBC interview last year, the European Commission vice-president, Leon Brittan, warned that Northern Ireland should make the most of the current round of funds since support was only guaranteed to 1999: "There won't be a sudden cut-off of the money but there will be a need to focus on the poorest regions of Europe and by then Northern Ireland is not likely to be so poor by comparison." Since a drop in funding would reflect Northern Ireland's economic improvement, this should be a "source of pride", he suggested.[17]

So a key concern for Northern Ireland has to be to make maximum use of EU assistance as a small lever for a much bigger reconsideration of mainstream programmes-both in terms of their context and their delivery. And here the peace package' has been of great significance, especially its 'partnership' theme. Thus in April 1995, making his first visit to the UK since becoming president of the European Commission, Jacques Santer told a conference on the 'peace package' in Belfast, convened by Northern Ireland's three MEPs, that it represented a "bottom-up approach involving local and grassroots organisations".

As Hooghe and Keating rightly point out, while partnership has been a leitmotif ever since the 1988 reform of the structural funds, "Member states, however, reserved for themselves the right to decide who would be part of the partnership."[18] The UK took this to imply a zero option, leading to frustration amongst the social partners in Northern Ireland, growing commensurately with the structural-fund assistance to the region, at their absence of involvement.[19]

But the commission official referred to earlier argued that member states were likely to be allowed less discretion over partnership arrangements in the post-1999 structural-funds regime. Similarly, tighter guarantees of additionality - that EU funds are genuinely additional to those from the Treasury, rather than being used to offset them-were on the cards. And he said it was "disgraceful" that the commission didn't even know the "financial circuits" through which structural-fund moneys went.

All these concerns are interlinked. Genuine additionality is only assured and transparency evident if funding is directed to discrete, innovative projects! programmes, rather than looking suspiciously like it is being attached to preexisting departmental activities.[20] Innovation is thus at a premium, in turn requiring transparency in debate about how money should be spent, and maximising the 'value added' which relatively marginal sums can generate. The focus thus needs to shift from how much to what for - the latter question has so far received disturbingly little attention.

Given that the structural funds represent a social-democratic mechanism of redistribution towards disadvantaged regions-to offset the tendency of capital to concentrate around the London-Milan axis - it might be thought that an egalitarian effect within the regions to which they are applied would be central. (Of course, the Common Agricultural Policy is openly regressive, being paid for by all European taxpayers but giving most assistance to the largest farmers.)

Not so, however, as a joint analysis by the Northern Ireland Council for Voluntary Action and the Community Workers' Co-operative (a parallel body in the republic) has shown.[21] Only 23 per cent of structural-funds support in the north (marginally more in the south) goes to people living in poverty, people with disabilities and minority ethnic groups. Indicators of equality outcomes are sparsely used, monitoring of fund allocations tends to focus on financial control[22] and non-governmental organisations comprise only 6 per cent of the representatives on monitoring committees. The report recommends much more rigorous equality-proofing of programmes, greater representation of women and NGOS on monitoring committees and a pooling of best practice north and south on indicators and monitoring.

Here again the innovative character of the 'peace package' should be underscored. Terry Stewart, originally from Belfast but then a senior official in DGV, told the 1995 Belfast conference that it was a unique programme, especially in its emphasis on social inclusion. It highlighted the need for involvement of, and ownership by, local people in disadvantaged areas.

The experience of the EU 'Poverty 3' project in Northern Ireland, Brownlow Community Trust, which had adopted an integrated and multi-dimensional approach, had been "extremely useful", Mr Stewart said. Social inclusion was itself about involving people in a bottom-up way. And here much of the experience at local level was outside of the formal political arena, particularly among women who had held communities together. That emphasis on women's role - and the associated need for childcare - was endorsed by Ms Wulf-Mathies from the commission, later in the conference.

But politics more narrowly is not irrelevant here, particularly to the additionality issue. Supposing there was a highly autonomous regional administration in Northern Ireland, to which responsibility for the negotiation of European assistance - given its recognised 'special situation' - was transferred. While the additionality issue vis-à-vis the British exchequer could reproduce itself internally, there is at least the possibility, particularly if such an administration operated in a transparent and accountable manner, that this long-running sore could finally be healed.[23] And, as earlier indicated, it would also open up fresh possibilities of north-south co-ordination.[24]

There is, moreover, a wider and sobering political point. The innovative Marxist thinker Antonio Gramsci argued that politics needed to be understood as an "autonomous science". Yet, ironically, there has been a vulgar-Marxist tendency in Northern Ireland to assume that economic initiatives - such as the 'peace package' - can in and of themselves conjure political change, in the direction of reconciliation.[25] On the eve of the Belfast conference, Mr Santer said international funding could not buy peace. In a now-poignant comment, he went on: "That can only be achieved when people are prepared to live together in mutual respect and harmony."[26] Just so.

But then people have an uncanny tendency to be factored out of the European debate.


1Brigid Laffan, Integration and Co-operation in Europe, Routledge, 1992, pp 108-9
2 derived from Northern Ireland Information Service press release, November 21st 1996
3Northern Ireland: A Region of the European Union, Representation of the European Commission in the United Kingdom, London, 1996
4Lisbet Hooghe and Michael Keating, The politics of European Union regional policy', Journal of European Public Policy, vol 1, no 3, 1994
5Harvey Armstrong, 'The role and evolution of European Community regional policy', in Barry Jones and Michael Keating eds, The European Union and the Regions, Clarendon, Oxford, 1995, pp 51-55
6Laffan, conclusion to Laffan ed, Constitution-building in the European Union, Institute of European Affairs, Dublin, 1996, p212
7European Commission Representation in Ireland, The Week in Europe, 42/96, November 29th 1996
8 Laffan, Constitution-building ..., p211
9 David Arter, The Politics of European Integration in the Twentieth Century, Dartmouth, Aldershot, 1993, pp ix-x
10 Lionel Barber, 'Brussels seeks to point way', Financial Times, November 22nd 1996
11 Armstrong, op cit, p62
12 Hooghe and Keating, op cit, p385
13 See Price of progress, EU to phase out aid for Ireland', Irish Independent, November 4th 1996.
14European Commission, EC Economic Data Pocket Book, no 11, 1996. I am grateful to the commission office in Dublin for this reference.
15Frank Mulrennan, Ireland told it must wean itself off EU regional aid', Irish Independent, January 29th 1997
16 that is, of the current 15 members, not the then 12. See Eurostat, Statistics in Focus: Regions, no 1, 1996, Luxembourg.
17 Newsline 6.30, BBC NI, June 19th 1996
18 Hooghe and Keating, op cit, p380
19This was a recurring theme in research carried out by the author for the Irish Congress of Trade Unions in the run-up to 'Delors II'. See ICTU, The Participation of Trade Unions and other Social Partners in the Community Support Framework for Northern Ireland, Belfast, 1993.
20ibid, p48
21 NICVA/CWC, Equality and the Structural Funds, Belfast/Galway, 1996
22 One exasperated member of a monitoring committee, interviewed for the ICTU study, exclaimed: "To be honest it's gobbledegook as far as I'm concerned." (ICTU, op cit, P50)
23 op cit, p48
24 See chapter five.
25 Paul Nolan and Robin Wilson, 'No reconciliation-no receipts', Fortnight 353, September 1996
26 Euro cash aid cannot buy peace, says Santer', Irish News, April 10th 1995

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