Dáil Éireann díospóireacht -
Thursday, 1 Oct 1998

Vol. 494 No. 3

Adjournment Debate. - Objective One Status.

Mr. B. Smith

I am glad of the opportunity to raise this very important issue about which public representatives in the six southern Border counties are concerned. Recently voluntary organisations and other interested parties have expressed their support for our efforts. The retention of Objective One status for the period 2000-06 for the Border region is essential if regional imbalance and disparities in economic performance are to be eliminated. The case for Objective One status is economically and politically justifiable. The infrastructural deficit suffered by the Border region must be addressed. This will only be achieved through the drawing down of the maximum level of Structural Funds.

Structural Funds exercise the minds of public representatives and bodies in the region. At recent meetings in Belfast, Derry and Omagh of the sub-committee of the British-Irish Inter-Parliamentary Body we learned that this issue is one of key concern for public representatives in the six northern Border counties. Last June the Minister for Tourism, Sport and Recreation, Deputy McDaid, launched the Border regional report, "The Border Region after 1999: The Case for Special Status". It outlines in a comprehensive manner the numerous valid and cogent arguments for the retention of Objective One status and has been submitted to the Department of Finance. I trust the Minister and Government have had the opportunity of studying it. It outlines the poor performance of the region in socio-economic terms and articulates the region's unique status in the Irish and EU context. Subsequently, a more detailed report was submitted to the Department by the Border Regional Authority, who I commend for its active role in this campaign.

It must be accepted that the prolonged northern troubles had a devastating effect on the economy of Border counties and the seemingly intractable situation inhibited the normal pace of economic growth and development in the region. The Border created an economic divide, with towns being cut off from their natural hinterland and rural areas being cut off from their natural towns. The area suffered from security problems and from a general lack of development in social and economic terms.

In 1997, 14.7 per cent of the labour force in the Border region was unemployed. This was the highest unemployment rate recorded in any region and well above the national average of 11.8 per cent. Fortunately, employment here increased in the period 1993-97 and unemployment fell. However, the Border region's performance again lagged behind that of other regions which meant that fewer new jobs were created and the reduction in unemployment was lower than anywhere else in the country.

Urbanisation is a feature of economic growth and the Border region is hindered in its potential development due to its largely rural nature. As a region it was unable to achieve the full benefit of the Objective One status the country has enjoyed to date because of the political difficulties in the North. The region looks forward to the implementation of the British-Irish Agreement. The ongoing peace process must be underpinned by large scale investment in infrastructure, inward investment and the creation of employment. Now is the time to redress the economic difficulties the region has suffered over a period of almost 30 years.

The region faces new opportunities for the future arising from the peace process but it also faces a new challenge in being on the exchange rate frontline when Ireland enters EMU without Britain. The region has benefited from Structural Funds expenditure, funds which were successfully negotiated in 1989 and 1992 by Fianna Fáil Governments. However, it did not achieve the success rate of the rest of the country.

The report by the Border Authority clearly outlines why the region should retain full Objective One status. The region is clearly below the 75 per cent of GDP threshold which determines eligibility for Objective One status. It continues to be remote and peripheral in EU terms and it has special status regarding the historic political and economic opportunities arising from the peace process.

I call on the Government to favourably examine the merits of the case advocated by the Border Authority. With the Leas-Cheann Comhairle and my Fianna Fáil colleagues in the Cavan-Monaghan constituency and other Border counties, I lend my support to the arguments outlined in the authority's report. I wish to see the region achieve its potential in economic and social terms. That can only be achieved by large scale and early investment in our roads, water and sewerage services, industrial buildings and telecommunications. The region will only enjoy an increase in employment and a halt to rural depopulation when such investment occurs.

West of the Bann suffers from lack of development similar to the southern Border area. The implementation of the British-Irish Agreement should add considerably to economic convergence on this island. The retention of Objective One status for the southern Border region and north of the Border is needed so the necessary economic development can take place to under-pin the peace process. We need investment on a large scale. This is an opportune time to show that our Government and the European Commission are committed to economic and social progress in the Border area.

I thank the Minister for Finance for listening to the case I put forward. I look forward to his response.

Minister for Finance (Mr. McCreevy)

I will explain the current position on regionalisation. As was announced on Tuesday, the Cabinet is considering a paper prepared by my Department for the Ministers and Secretaries General group. The paper deals with this issue not only for the Border area but also in the wider context of the entire country. The Cabinet will continue to consider the matter in two weeks time when I return from Washington following my attendance at a meeting of the International Monetary Fund next week.

The House will understand that I cannot anticipate the outcome of the Cabinet's consideration but I can explain some of the background. Ireland is currently treated for Structural Funds purposes as a single region under Objective One. Objective One channels Community support to the most disadvantaged regions of the Union which are lagging behind economically. The criterion for this eligibility is a per capita income in GDP terms of below 75 per cent of the Community average. Ireland's GDP per capita now exceeds this figure so, as a region and member state, it no longer qualifies for Objective One status. This is the first truth we must recognise.

If it were the case that strict eligibility had to be applied, Ireland as a single region under the relevant regional statistical map of Europe — which comprises more than 200 regions across Europe — would simply not qualify for Objective One status and would have to settle for much lower levels of transfers from the outset. The European Commission in its Agenda 2000 proposals recognised that it would be undesirable for a region which had been receiving assistance to be suddenly cut off from that asistance. This would create a shock to the economy which could threaten progress already made. Therefore — the Government had been lobbying for this — some arrangement was essential to avoid such an economic shock.

In Agenda 2000, the Commission proposed that regions such as Ireland who were "graduating" from Objective One status would be given transition status. This means in practical terms a gradual reduction in EU funding over the period of the next Financial Perspective, that is, the years 2000 to 2006. Initially the region in transition from Objective One will enjoy the full benefits of that Objective. From then on a gradual reduction in support levels would occur until by the year 2006 the lower Objective Two levels of funding will be reached. This is the Commission's proposal.

The Government is conscious that the prosperity which has been achieved has not applied uniformly throughout the country and is committed to addressing this problem. Undoubtedly certain sub-regions have not done as well as the rest of the country in terms of GDP growth. The sub-regions of the Border, the west and the midlands currently have a per capita GDP of less than 75 per cent of the EU average and are likely to be below 75 per cent for the reference period to be used for the next round.

In this context a possible approach is to address and to adopt a regionalisation approach to the next round of Structural Funds. Under the most straightforward regionalisation approach, the existing single region of Ireland would be reconstituted as two new regions, of which one could consist of those parts of the country whose per capita GDP is below 75 per cent of the EU average. If such an approach were taken, the region with a per capita income below 75 per cent of the EU average would qualify for full Objective One status, while the rest of the country would still be a transition region covered by Objective One but on a diminishing scale.

The Government is currently considering an approach to EUROSTAT, the Commission's statistical office, with a view to having Ireland reclassified from its present single region status. This move, if it is decided upon and accepted by EUROSTAT, could mean that a region comprising the west, Border and midlands regional authority areas could qualify for Objective One.

We must be clear and precise about what this would mean. The first criterion for eligibility for Objective One is a per capita income in GDP terms of below 75 per cent of the Community average. Ireland's overall GDP per capita now exceeds this figure. Whatever the outcome of the current negotiations we must anticipate a substantially lower transfer overall to Ireland. Regionalisation could help this situation for part of the country.

However, being below 75 per cent for a region is not the whole story. Other criteria are equally important, for example, population. In the final analysis it is not just the region which determines levels of assistance but its population, relative prosperity, unemployment levels and so forth. The bottom line is that whatever way the decision goes, no part of Ireland will enjoy transfers at levels it previously enjoyed when the whole country qualified for Objective One status as in the current round.

My Department has already started preparations for the next national plan and has invited submissions on this from all regional authorities. Whether we go the single region or regionalisation route, the key must be that we are positioned to make good and effective use of the funds we receive from Europe, especially against the background of a drop in the overall level of transfers.

I will allay some misapprehensions that have been mooted recently. If a part of the country were to qualify for Objective One status as a result of the proposed reclassification, this would not mean that the rest of the country would be treated any less favourably in EU transfer terms than it would have been anyway under the transition regime currently proposed for the country as a whole. The Government would insist that the non-Objective One part of the country would qualify fully for the transition regime and we have no reason to believe otherwise. In consequence there is no loss involved for the rest of the country from a proposal which results in one part being Objective One status.

The problems of the west, Border and midlands have been well ventilated and are recognised. These regions have not achieved the same development as others. This is why the Government programme "An Action Programme for the Millennium" undertook to seek a better deal for these regions in the next round. In other areas, particularly urban blackspots, there are pressing problems to be addressed and a special focus on these need not suffer or be diluted through the adoption of regionalisation.

The Government decision in this matter will be taken in full appreciation of the interests of all those involved, both in the regions such as the Border which still have some catching up to do and in those parts of the country where problems of infrastructure, unemployment and social blackspots remain. There is no question of robbing Peter to pay Paul. The interests of all regions will be looked after.