Wednesday, June 21, 2006

EU funding - warped and unaccountable

A visit to Wales reminded me how bad the EU budget can be. Everyone knows the EU spends a fortune on agriculture, but there are also large expenditures on 'structural funds'. These are monies that the EU pays for social or infrastructure investment in poor areas... sounds good? But it isn't... The trouble is UK taxpayers pay all this money into the budget in the first place, only to find it returned to the UK with EU strings attached, and without much democratic accountability for this 'tax and spend'. In round terms, we pay in about £8.4 billion and get back about £4.1 billion (2004-5). So anything coming from the EU to UK is basically UK taxpayers' money rebadged (often with a little blue flag so that the EU can claim credit)

Why mention Wales? Well it seems we get some money for flood protection schemes from the Structural Funds in Wales, much of which has 'Objective 1' status - ie. it is poor. But to get this, we have to demonstrate these schemes have "additionality" ie. they wouldn't be funded by the domestic flood defence programme. But we have a domestic investment appraisal system for flood defences that is designed to select the schemes that give the best value for money. So the consequences of funding through the EU, is that we have to find schemes that give worse value for money in order to qualify. So money is taken out of the UK, sent to Europe and returned to be spend on poorer quality investment, with the hapless taxpayer fleeced again by unaccountable Brussels!

The only wrinkle in this purple-faced polemic, is that the domestic system probably doesn't take enough account of deprivation and social impacts compared to reducing economic damage from floods, whereas that is the focus of EU funds. But that is an argument for changing the domestic investment apparaisal appraoch...


Anonymous said...

Clive some of us are working on changing the appraisal system. Hope to have it ready to phase in by the start of the next CSR.

The big problem with present system is that we only really value what we can measure in £s.

Funding something that can't be measured in £s is not necessarily poor value - it is different value.

What we and Government need to decide is what do we mean by good value. Some projects can then be funded from national funds while others from EU. We just taregt the different priorites from different pots

I regret we have not been very smart at working the system in the past.


Clive Bates said...

I completely agree - the value of "non-market goods or services" like human life or amenity value of eco-systems, etc etc is often undervalued. Also, there is good literature and policy guidance on "equity weighting" (ie. reflecting the fact that small improvements in the lot of poorer people produce disproportionately high utility) - see posting on the Millennium Development Goal. The irony is that these concepts are well covered in the Treasury "Green Book" which is supposed to be the bible of policy design, but largely ignored or underplayed in major policy areas like investment appraisal for flood defences.

Anonymous said...

Enjoyed a lot!