Thursday, 15 October 1998
Seanad Éireann Debate
Mr. Costello: I welcome the Minister of State to the House to discuss an extremely important matter that concerns the entire country, that is, EU funding between 2000 and 2006. Ireland was considered a single entity for Objective One status until now. However, the Government and the Minister for Finance propose to divide the country into two regions consisting of 13 counties. They then intend to apply for Objective One status for the west, midlands and Border counties and Objective One transition status for the rest.
While I have no difficulties with rural areas getting the maximum amount available, it means the main urban areas fall into the latter category. Therefore, blighted communities in these urban areas cannot benefit from Objective One funding even though they fall within the required criteria. There are  huge swathes of disadvantaged communities in my constituency stretching from Sheriff Street to Séan McDermott Street to Ballybough to O'Devaney's Gardens. Further north, there are equally deprived communities in Blanchardstown, Finglas, Ballymun, Darndale and Coolock. The south side of Dublin has its problems, for example, in the inner city in Ballyfermot and Cherry Orchard and the western suburbs of Clondalkin and Neilstown. A more prominent example is Tallaght which is a city in its own right with a population of more than 100,000 people. This can be compared with County Leitrim which has a population of approximately 28,000. The population of a number of counties on the western seaboard equates to that of one of Dublin's suburbs.
These communities comprise most of the city. They have huge problems with multiple deprivation, high levels of illiteracy, school drop outs and unemployment and insufficient and inadequate housing. Fifty two per cent of unemployment in Dublin is long term. This demonstrates how entrenched and “ghettoised” these problems are in some communities. Governments have failed to addressed poverty, social exclusion and unemployment in urban communities. EU Structural and Cohesion Funds have been largely responsible for the initiatives which have been introduced in these urban blackspots.
The human resources operational programme targeted early school leavers and deficiencies in literacy and numeracy and funded long-term unemployed and equal opportunities programmes run by FÁS. Two recent reports by the OECD and the international human resources programme indicated that our national literacy rate was approximately 25 per cent, which is abnormally high in comparison with other developed countries. The local urban and rural development programme is area based and designed to tackle social exclusion and development. It funds partnerships, community groups, county enterprise boards and the very important integrated development of disadvantaged areas programmes. These are financed through Structural Funds.
When Ireland loses Objective One status which body will fund these critical initiatives that are making inroads into poverty and social exclusion in urban areas? What will happen to the partnerships, the Combat Poverty Agency, FÁS in urban areas, Youthreach and VTOS and the literacy and numeracy levels which have mushroomed in deprived areas? EU Commissioner Wulf-Mathies said there is only a certain envelope of funding for Ireland in the upcoming financial period and the Minister for Finance did not disagree with this. Will there be additional funding as a result of the proposed regionalisation approach? Even if there is additional funding, none of it will go to the urban areas I have mentioned.
Why was a special case not made for blighted urban as well as rural regions? England was able  to cobble together regional status for Cornwall and parts of Merseyside. Wales was able to do the same for scattered mining communities while Scotland did it for its islands and highlands. Why could Ireland not do it for urban regions that fall within the required 75 per cent of GDP? I have not heard a reason we cannot do it. As a result of our failure to approach the problem in a coherent and holistic fashion we are in danger of dividing the country and setting the disadvantaged rural dweller against his urban equivalent.
If the Minister of State and the Minister are determined to proceed along the path that has been proposed, a framework must be devised by their Department to ensure the Exchequer makes up the difference between the funding available through Objective One status so that urban communities which have a per capita income well below the 75 per cent EU average will get the same benefit as their equally disadvantaged country cousins. I hope the Minister will give a commitment that a case will be made for large urban communities that fall within the necessary criteria or alternatively that there will be a transfer of funds from the Exchequer to meet the needs of these communities in the same way as the rural areas which have been targeted will benefit from Objective One status.
Minister of State at the Department of Finance (Mr. Cullen): I welcome the opportunity to discuss this matter; Senator Costello will find there is quite an amount of detail in my response as I wish to put as much information as I can on the record in order to remove confusion on this issue. Senator Costello raised some key points and almost answered the question of what will happen.
The issue of regionalisation for Structural Funds purposes is at present before Government on foot of a memorandum for Government and an accompanying paper prepared by my Department. The paper has also been the subject of consideration by the Ministers and Secretaries General Group on EU policy. The Seanad will understand that I cannot anticipate the outcome of the Government's consideration of the issue. My response today does, however, afford me the opportunity to comprehensively brief the Seanad on the facts.
Ireland as a whole is currently treated for Structural Fund purposes as one single NUTS II region under Objective One. NUTS II regions are regions established by EUROSTAT, the Commission's statistics agency, for various statistical purposes but they are also used for the purpose of determining eligibility for Objective One assistance. Objective One channels Community support to the most disadvantaged regions of the Union which are lagging behind economically. The criterion for Objective One eligibility is for a region to have a per capita income in GDP terms below 75 per cent of the Community average. Ireland's GDP per capita now well exceeds this  figure. Accordingly, the region of Ireland no longer qualifies for Objective One status.
If the eligibility requirements for Objective One assistance were strictly applied, Ireland as a single region would simply not qualify for Objective One status under the next round. However, the European Commission in their Agenda 2000 proposals recognised that it would be undesirable for a region to be suddenly cut off from Objective One assistance. The Commission therefore proposed that regions like Ireland would be given transition status whereby Objective One assistance, albeit at a gradually diminishing level, would still be available. In practical terms, this would mean that Ireland would experience a gradual reduction in EU funding over the period of the next financial perspective, i.e., the years 2000 to 2006. Initially, a region in transition from Objective One would enjoy full Objective One benefits. From then on a gradual reduction in support levels would occur until, by the year 2006, lower levels of Objective Two type funding are reached.
The Government is conscious that certain subregions of the country at the NUTS III regional level, the next level of statistical mapping below the NUTS II configuration, have not performed as well as the rest of the country in terms of GDP growth. In particular, the subregions 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 of Structural Funds, and this gives rise to the possibility of seeking to adopt a regionalisation approach to the next round of Structural Funding.
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 put in place, 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 region in transition for Objective One funding.
The Government is, therefore, currently considering the option of 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 would qualify for Objective One status. Such a region would also potentially qualify for Structural Funds transition arrangements after the year 2006. It should also qualify for a better State aids regime for attracting new industry for the years 2000-2006 than it would if it were in transition.
I stress that if a part of the country were to qualify for Objective One 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 under the transition regime currently proposed for Ireland as a single region. That is vitally important and must be understood. This in no way diminishes the Objective One in transition status but is something extra we may be able to get. The question for the State is whether we seek more or forego it. That is the nub of the issue.
The Government will insist that the non-Objective One part of the country would qualify fully for the transition regime, and we have no reason to believe differently. Consequently, if one region in Ireland qualifies for full Objective One assistance, the other region benefiting from the transition regime will be no worse off. Any extra benefits for a region qualifying for full Objective One status cannot and would not be at the expense of the region in transition under Objective One.
Overall, there will be a substantially lower per capita transfer of Structural Funds in the next round to Ireland as compared with the current round. This must also be understood. People are basing assessments for 2000 and 2006 on what is currently happening under the CSF programme. Whatever happens, that will be substantially different and less in transfer terms. In addition, any region in Ireland which receives Objective One status will not achieve the same per capita transfer of Structural Funds as Ireland as a whole received in the current round. This reflects the improved economic performance of the country at national and regional levels as compared with the European average in recent years. More specifically, being below 75 per cent of GDP for a region is not the sole factor as regards shareout. Other criteria are equally important.
In the final analysis the levels of assistance going to a region are determined by reference to its population, relative prosperity and unemployment levels. Regarding the latter, for instance, Ireland's unemployment rate and the unemployment rate of any prospective Objective One region in Ireland are significantly below the levels of unemployment in some of the more populous Objective One regions elsewhere in Europe.
Regarding Senator Costello's matter specifically, I stress that the scope in terms of area for reclassification is limited. That is a fact. The regional classification operates on an EU basis and any new regions must be generally in line, as regards population and size, with the norm across the EU. They must also be geographically contiguous. This means that the option of designating micro regions, such as poverty blackspots within regions and cities, to avail of Objective One funding for those particular areas is not available.
As part of the process of preparing the groundwork for the Government's consideration of the issue, my Department has intensively examined and analysed the various implications of any regionalisation approach. I emphasise this point.  Official contacts have been made with not only Directorate General XVI, which under Commissioner Wulf-Mathies has responsibility for the Union's regional policy, but also with EUROSTAT and Directorate General II, which under Commissioner de Silguy has responsibility for EUROSTAT. These contacts have been useful in enabling an informed analysis to be put to the Government.
In the event of a regionalisation approach being adopted, the regional administrative framework may require adjustment. Such adjustment as is necessary will be the subject of discussion with the Commission and will take account of the views of the regional interests.
A major consideration in this general regard is that the efficient and effective administration and management of Structural Funds spending, for which Ireland enjoys a just reputation, must not be jeopardised, particularly in the coming period of declining overall assistance from Europe.
I underline that the key point in regard to the next round of Structural Funds is that Ireland will suffer a significant drop in its receipts. Regionalisation should help to mitigate this to a degree, but this will not be at the expense of the region in transition. Against a background of facing a drop in Structural and Cohesion Fund receipts as compared with the current round, Ireland must, reflecting its increased prosperity, be able to meet more of our investment needs from our own resources. Senator Costello raised key points on this subject and is correct in saying that the burden will shift to the State's own resources and EU transfers will be a component  of a total national package but it will be a smaller component for the future. Emphasis will clearly shift in terms of funding.
The Government has put significant additional resources into key programmes designed to eliminate social exclusion and improve social services in areas such as health and education. The Government's expansion of the capital investment programme will continue to develop Ireland's economic potential while, at the same time, improving facilities in social services. I take Senator Costello's point that all of us, whatever House we serve or whatever party we belong to, are dedicated to social exclusion. We do not want to see a worsening and widening of the social exclusion barrier as a result of our economic success. That would represent failure in terms of the success we have achieved.
Our budgetary situation means Ireland is now in a strong position to continue these programmes throughout the country in future. As long was we continue with the prudent policies which have played a major part in securing economic growth of recent years, we should have the resources to make good the reduction in EU aid for the country.
In conclusion, the negotiations at European level will be tough and complex and are likely to continue for several months. The European Council in Cardiff last June did not involve substantive conclusions on Structural Funds. While the European Council in Vienna next December can be expected to advance the negotiations, it is unlikely that any final agreement will be reached before the target date of next March.
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