By Vivienne Russell | 13 July 2012
European Union-backed regeneration projects could stall unless ministers take ‘urgent steps’ to provide them with match funding, MPs have warned.
The Commons communities and local government committee today published the report of its inquiry into the European Regional Development Fund, which part-funds regeneration schemes.
This concluded that, following the abolition of the regional development agencies, the main source of match funding for ERDF-sponsored projects had gone, while the downturn had limited alternative options even further. Failure to provide projects with match funding risked stifling growth, the committee said.
The MPs called on the government to ring-fence part of the Regional Growth Fund for ERDF programmes. Committee chair Clive Betts said: ‘There is a pressing need to spend each region’s ERDF allocation before 2015, but unless ministers take urgent steps to deliver on the government’s promise to make it easier for projects to secure match funding through the Regional Growth Fund, there is a significant risk that value for money will suffer and ERDF will not make the impact it could to help rebalance the UK’s economy.’
According to current European Commission proposals, the next ERDF funding round will be in 2014 and run until 2020. It is also being suggested that member states tailor the size of their programme areas, a move that could allow local economic partnerships to take on responsibility for managing EU funds. The committee endorsed this.
But Betts added that in the long term the ERDF allocation system should change, so the UK retains direct control over its EU contributions earmarked for English regeneration schemes. Currently, member states pay money into the ERDF and receive a portion back, but the MPs said this ‘circular money flow’ should end.
Betts said: ‘Members from all political parties on this committee agree this repatriation of funding for regional development would permit the EU to focus on the needs of the poorest member states, and allow England to regain control over the precise application of regional policy.
‘We recognise this shift will not happen for the 2014-20 round but we encourage the government to press for this change to be made in subsequent rounds.’
But a Department for Communities and Local Government spokesman said: 'The committee's findings are not borne out by the facts. More than 98% of the total programme is already spent, contracted or in the pipeline. Projects are required to identify their sources of match funding before they can enter the contracting process and more projects are continuing to come forward for funding. Money can be paid out until the end of 2015.
'The government realises how important match funding is which is why, in December, [business minister] Mark Prisk and [local government minister] Baroness Hanham wrote to all the chairs and vice chairs of the local management committees which oversee ERDF funding locally to ensure they were aware of the availability of match funds from within government programmes.'
The ERDF is the main vehicle through which the EU attempts to reduce economic disparities between regions. It was worth €201bn between 2007 and 2013, with England taking a €3.3bn (£2.2bn) allocation. Most of England’s funds were directed at projects in Cornwall, Merseyside and South Yorkshire.
