Dáil Éireann debate -
Wednesday, 18 Nov 1998

Vol. 496 No. 7

Adjournment Debate. - EU Funding.

Mr. Noonan

Last Thursday the Minister for Finance made a lengthy statement in which he clearly signalled that he favoured a regionalisation approach so that additional Structural Funds could be obtained in the next tranche of funds covering the period 2000-6 which is being negotiated. He strongly indicated that Objective One status would be sought for three sub-regions, the west, the midlands and the Border counties, an area comprising 13 counties. The Government took its decision yesterday and added two further counties, Clare and Kerry, to these sub-regions.

So far the Government has provided no estimate of the amount of money it expects to receive in the next tranche of Structural Funds. About £1 billion accrues annually to the Exchequer in Structural and Cohesion Funds.

The expectation of the rainbow coalition Government was that, while there would be a scaling down of this sum, it would still be possible to negotiate about £700 million for each of the seven years from 2000 to 2006 giving a total of slightly under £5 billion which by any standards is an enormous amount of money. Will the Minister of State confirm that the estimate of the previous Government is still in line with Government expectations?

The debate on Structural Funds which has followed the Government's decision has concentrated on the additional amount which could be delivered through a regionalisation approach. A figure of £120 million over five years has been mentioned. While this is a significant amount, it is relatively small in contrast with the expectations of £5 billion, the figure in circulation when we left office. The Minister of State should clarify the situation.

I congratulate everybody in the 13 counties whose areas are included. The Celtic tiger's influence has been spread unevenly. While GDP in the country as a whole increased by 21 per cent in the period 1991-5, in the three sub-regions in question it increased only by between 13 and 15 per cent.

The change in the distribution of the population which has occurred in the past 30 years also supports a regional approach. The proportion of the national population in the regional authority areas of Dublin and the mid-east has risen from 34 to 39 per cent while it has fallen in the west, midlands and Border counties from 30 to 27 per cent. Last week the Minister informed us that only 23 per cent of grant-aided jobs created in the years 1995, 1996 and 1997 were created in the west, the midlands and Border counties. This is due principally to poor infrastructure.

Many Deputies are concerned that their constituencies have not been included in the Government's application. They could hold the line if the application was confined to the 13 counties originally chosen but the inclusion of Kerry and Clare has undermined the position of many Deputies in their constituencies. It is not the Structural Funds issue that is of primary concern but the fact that a higher level of grant aid may be paid to industries setting up in the favoured regions. Many fear that the counties not included will experience a kind of industrial blight along their boundaries.

Will the Minister consider including DEDs outside the 15 counties but contiguous with them in the Government's application to Brussels? The DED is the smallest unit used for statistical mapping by EUROSTAT. We are familiar with its use as the smallest unit in relation to the disadvantaged areas scheme. If the Government accepts this proposal, it will ensure areas as disadvantaged as the areas included in the application but contiguous to them are considered by EUROSTAT.

There is no doubt that the Minister, when he made his statement last Thursday, did not expect Clare and Kerry to be added to the sub-regions. He said:

Consideration could be given to including some adjoining counties in the new NUTS II region with Objective One status. This would, however, involve consequential changes at the next level, NUTS III, which might not be acceptable to EUROSTAT and might also endanger qualification for Objective One status by breaching the 75 per cent GDP threshold.

It is clear that neither the Minister nor the Department favoured the addition of the two counties mentioned in the application. It is also clear that political pressure was exerted during the weekend which influenced the political decision made by the Cabinet at its meeting on Tuesday.

The criteria for inclusion in Objective One is that the per capita income of a region be less than 75 per cent of GDP. The Government has made its case on the basis of the 1995 figures. I understand that at noon tomorrow EUROSTAT will publish the 1996 figures. As the CSO prepared these figures for EUROSTAT, I presume the Government had access to them in advance of the decision. Will the Commission make its decision on the basis of the 1996 figures or taking into account the average over 1994, 1995 and 1996? Will the per capita figures announced tomorrow strengthen or weaken the Government's position in respect of the 15 counties for which Objective One status has been sought?

Minister of State at the Department of Finance (Mr. Cullen)

As the House knows, the Government decided yesterday to pursue an application to EUROSTAT, the statistical service of the European Commission, for a change from Ireland's current status as a single region to one comprising two regions. This application will be sent to EUROSTAT soon via the Director General of the CSO. The application involves a reclassification of Ireland's statistical regions in the European Nomenclature of Territorial Statistical Units. One region would comprise the current regional authority areas of the west, which now includes Counties Clare and Kerry, the Border and midlands. The other region would comprise the rest of the country. The inclusion of Clare and Kerry in the regional authority area of the west will ensure that the new Objective One region will encompass the western seaboard from Donegal to Kerry, an area on the periphery of the European Union.

It is worthwhile to outline once again the circumstances which form the background to the Government's decision. As everyone now knows, because of our increased prosperity, the country as a single region no longer qualifies for Objective One status for Structural Fund purposes. Under EU rules, regions which have a per capita GDP below this 75 per cent threshold are classified as Objective One and qualify for the highest level of EU support. Ireland's per capita GDP is now well above the 75 per cent threshold and there is no prospect of securing Objective One status for the whole country.

In this context, the Government, when making its decision, had regard to three factors. First, no difference existed in the past between the various sub-regions in their eligibility for Structural Funds. Negotiating support and managing the funds on a national basis gave maximum flexibility without compromising our capacity to target regional inequalities. Expenditure per head in the west, Border and midlands exceeded the national average. However, the regions of the west, including the two counties mentioned, the Border and midlands, because of their low GDP levels in comparison with the EU average, would continue to qualify for Objective One status in the next round of Structural Funding from 2000-6. This reflects the fact that they have not developed the industrial and service industries which have strengthened the economic base of the rest of the country. This points to the need to adopt a new approach to regional development, including the management of Structural Fund transfers.

A second key factor is that this region would also qualify for a higher level of assistance by way of industrial grants from national agencies, such as IDA industrial promotion grants, in line with EU State aid rules. This is in line with the Government's commitment in An Action Pro-gramme for the Millennium to bring about improved targeting of the problems of regions of the country which, despite Ireland's recent economic progress, are lagging behind. The develop-ment of an economic base for the future in the west would therefore be facilitated.

A third factor underlying the Government's decision is that regionalisation will also keep open the possibility of continued EU assistance on a transition basis for this region in the period following the next round of funding after 2006. I listened carefully to what Deputy Noonan said when he quoted certain figures and I do not believe he considered the prospect of what the funding would be beyond 2006, which is an important element of the total package. We are not just focusing on the period 2000-6 but are also including what happens in transition after that.

Mr. Noonan

That is the next tranche.

Mr. Cullen

Yes, but the position must be established now. Many comments have been made to the effect that a regionalisation approach means the Government is turning its back on the poor and socially excluded. Nothing could be further from the truth. I emphasise that the regionalisation approach will not deflect it from its commitment to tackle social exclusion, urban or rural.

Regarding those programmes in the area of social exclusion eligible for EU co-financing under the current round, the Government will, within the overall parameters of EU and other funding available in the two proposed new regions, ensure that the objectives of these programmes remain a priority in both regions. Assistance for initial education and training and reskilling opportunities for the unemployed and those with inadequate qualifications will continue to be available in both regions. There will continue to be support for early school leavers, local enterprise development and the integrated development of disadvantaged areas within the new regions, especially in urban blackspots.

The Government will also press at European level for the retention of the URBAN community initiative. The Commission's proposals do not provide for its retention, but the Government believes that, as it funds important schemes in urban blackspots in Dublin and Cork, it should be retained. I am happy to report that Ireland's stance on this issue has attracted support not only from other member states but also from a range of MEPs. In other urban areas, such as Waterford and Limerick people in disadvantaged areas suffer from social exclusion. Their problems must also be addressed in the context of the formulation of the next national plan.

Social exclusion is not just confined to urban areas. The Government is also conscious of the position of traditionally deprived areas bordering on counties in the proposed new Objective One region. In its discussions with the Commission on Structural Funds, the Government will seek to have account taken of these areas. In addition, the Government will, in drawing up the national development plan, pay attention to the needs of these areas.

The scope for regional reclassification is limited. We do not have the option of designating micro-regions, such as urban blackspots, so that they can avail of Objective One funding. Such funding goes to NUTS II regions which must consist of geographically contiguous areas which come within the EU norms as regards area and population. The Structural and Cohesion Funds have played an important role in developing Ireland's infrastructure, encouraging industrial development, fostering human resources capabilities and countering social exclusion. More investment in these and other areas is needed throughout Ireland.

The regionalisation application, if successful, does not change the fact that we are facing a reduction in Structural and Cohesion Fund receipts compared with the current round. The Government recognises that, reflecting our increased prosperity, we must be able to meet more of our investment needs from our own resources. However, it remains the Government's intention to continue to press in the Agenda 2000 negotiations for the maximum share for Ireland and the proposed two new regions.

The Government's programme contains a wide range of policy initiatives designed to secure Ireland's economic and social development. It has already put significant additional resources into key programmes designed to improve services in areas such as health and education. The Government's expansion of the capital investment pro-gramme up to 23 per cent in 1999 will continue to develop Ireland's economic potential while at the same time improving facilities in social services. The budgetary situation means Ireland is now in a strong position to continue these programmes throughout the country in future. As long as we continue with the prudent policies which have played a major part in securing the economic growth of recent years, we should have the ability to manage the appropriately phased reduction in EU aid for the country as a whole.

The Government has decided that a revised regional structure is needed in the context of the regionalisation proposal. This will be the subject of discussion in Brussels as part of the regionalisation application and will take account of the views of regional interests. Accordingly, the Government will be initiating early contact with the existing regional authorities. After these discussions and consultations, it will make a decision on the final shape of a revised regional structure. The Government stresses that a major consideration is that the efficient and effective administration and control of Structural Funds spending, for which Ireland enjoys a just reputation, must not be jeopardised, especially in the period of declining overall assistance from Europe. An application will shortly be lodged with EUROSTAT and the Government hopes it will be settled satisfactorily and quickly to enable preparations for the next national plan to go ahead.