Simplification of the EU’s cohesion policy is the unanimous plea of all stakeholders, from ministers and regional officials to the European Parliament and the Committee of the Regions. There is too much paperwork, too much red tape, too much complexity in controls. Even the Court of Auditors confirms the problem: there is a staggeringly high rate of errors in Structural Funds payments, resulting in most cases from the complexity of procedures.

Cohesion policy – almost one third of the EU budget – contains the largest number of payment errors. For 2006, the Court of Auditors found that €4 billion had been disbursed in error. Its report on execution of the 2008 budget shows that at least 11% of the total amount paid that year should not have been. More than half the European Regional Development Fund (ERDF) transactions checked presented errors (51%), 59% in the case of the Cohesion Fund. In most cases, say the auditors, these were not due to intentional fraud.

According to the European Anti-Fraud Office (OLAF), suspicion of fraud concerned less than 2% of all payments under the cohesion policy during the period 2000-2008, but instead these were due to the complexity of procedures. The fact remains that this has a disastrous effect on public opinion, to say nothing of the more basic problem: the number of potential beneficiaries who simply give up, unable to cope with the complexities involved.

As a result, calls for simplification remain a constant in discussions on the future of cohesion policy. But simplification has been much in the spotlight in recent years: due to the adoption of rules for 2007-2013, including the reduction in the number of financial instruments and introduction of a proportionality principle to ease administrative burdens, and more recently to a major package adopted in spring 2010 to simplify investment in times of crisis.

NO REVOLUTION

So the question is whether there is any room for manoeuvre left. “There is no more margin for major simplification of cohesion policy. But there are still things that can simplify matters for member states and regions,” explains Nicola De Michelis, deputy head of cabinet to Regional Policy Commissioner Johannes Hahn. The ideas being considered primarily concern the control system, including a mechanism for longer-term accreditation of the national oversight authorities that have demonstrated their effectiveness. This would enable the European Commission to play a smaller role in the system and give the states more responsibility.

On the administrative side, the partial closing of accounts – instead of closing upon completion of projects, which obliges managing authorities to keep records for many years – would also be used more extensively. There is talk of further simplifying eligibility rules for the different funds, moving towards unified criteria for each intervention area, such as transport infrastructure and innovation.

This is admittedly not a revolution, “but considering that the Lisbon Treaty still states that the Commission is responsible for the budget, there are limits to what we can do,” explains De Michelis. While member states seek simplification, “they do not want to end up having to reinvent the management system and set up new structures every seven years”. The watchword will therefore be stability, but with targeted changes where there is still room for manoeuvre.

RESULTS, PLEASE

In the final analysis, the system would give more responsibility to national and regional authorities, with the Commission pulling out of the control phase. It would have a corollary, however: higher expectations from the Commission on what the states plan to do with the funds. “I am convinced that we can win a discussion with the member states on the need for more diligence in resource use strategies if, on our side, we present a genuine simplification of the implementing system,” commented a DG Regio senior official. Tied to the issue of simplification and easing of rules is that of the Commission’s expectations in terms of results and performances. The principle of this debate seems agreed: performance and results will be at the heart of the Commission’s proposals.

This question of results and performances, introduced by MEP Danuta Hübner during her time as regional policy commissioner and taken up by her successors – Pawel Samecki on an interim basis and now Commissioner Hahn – is mentioned by all stakeholders, not just the Commission, but also the European Parliament and the Committee of the Regions (its opinion on the future of cohesion policy, adopted in April 2010, states that the value of regional policy will be measured “on its results”). There is no doubt that discussions will be difficult. “Extremely difficult,” confirms Hübner, who remembers the “long discussions” on this subject that punctuated her term as commissioner.

The Commission now openly speaks of “contracts” with the states and regions ( see interview on page 7) on concrete targets. This would obviously – if the targets are attained – be a way of silencing the detractors of cohesion policy and its added value. It implies prior agreement on what is to be measured and thus the definition of performance indicators, a very tricky task.

“Most results come over the long term. You don’t see them right away, which is why it’s so difficult,” observes Hübner. She is persuaded that “we have to convince the member states, when they draw up their programmes, to make it a rule to provide concrete indicators on what they wish to attain”. Michèle Sabban, president of the Assembly of European Regions (AER), agrees on the difficulty of the exercise: “One cannot but accept this objective [a results-based policy], even if the difficulty inherent in evaluating a qualitative, structural and long-term policy should not be underestimated”.

Will the regions be willing to play the game? Eleni Marianou, secretary-general of the Conference of Peripheral Maritime Regions (CPMR), highlights the context of economic crisis and considers the results requirement “highly desirable”. She is “prepared to work with our regions to determine conditions for results”. Frédéric Vallier, secretary-general of the Council of European Municipalities and Regions (CEMR), approves a results-based approach, but “as long as these are not dictated from the top but are rather defined in partnership with the territory in question”. This is the message of the regions. “Fundamentally,” notes Mairanou, “it is the quality of partnership between the regions, national and European authorities underpinning cohesion policy that will determine its effectiveness”. Sabban echoes that view: “The lack of effectiveness seen at times in cohesion policy also stems from its excessively centralised implementation. Involving the regions from the policy-shaping stage would be a step towards this culture of results.”

REVIEWING PERFORMANCE RESERVE

The commitment to improve the performance of Structural Fund interventions is expected to lead to proposals to put in place a new performance reserve. The idea of setting aside a (fairly small) part of funds for the programmes showing the best performances has in fact existed since the 2000-2006 programming period. During the latest negotiations on the Structural Fund regulations, the states saw to it that the reserve was made national – ie the money is theirs whatever happens: regions in the same state ‘compete’ to win the jackpot – and optional. This is a long way from what the Commission initially proposed, namely a Community reserve (where the money placed in reserve is not automatically granted to each state).

For post-2013, the Commission is expected to come back with the idea of a community rather than a national performance reserve. “The logic is to put regions across the Union in competition with one another. Limousin will not just compete with Picardy but with regions from other member states,” confirms De Michelis. The executive is likely to learn from the weaknesses of its previous proposal, used by member states to get round its initial intentions. In contrast with what the Commission proposed in 2004, programme performance would no longer be judged in the light of macroeconomic criteria, such as evolution of employment and GDP per capita – it was easy and in the interest of the states to say they had no control over these indicators – but on the basis of indicators more directly tied to investment. To be clear: additional resources would be awarded if the region progressed towards previously determined objectives not tied to the economic cycle, such as a certain percentage of the population having access to high-speed internet or clear progress in the number of households with access to quality water.

“There is no more margin for major simplification of cohesion policy” 

What will become of N+2?

Discussion of effective financial management brings to mind ‘N+2’, the rule whereby funds reserved for a programme must be spent within two years following the year of allocation. If left unspent, the funds go back into the EU’s coffers. Everyone agrees that this is a rule for sound management that has proven its worth. So it will be part of the Commission’s future proposals, but not necessarily in the same form. “The question of whether it will remain +2 is still open but it is clear that this rule needs to be made a bit more flexible,” explains De Michelis.

According to the deputy head of Hahn’s cabinet, different options are being reviewed: 1. switch to ‘N+3’. The crisis measures adopted in spring 2010 already introduced ‘N+3’ for financing allocated in 2007. It is conceivable that the states will be tempted to keep this extra margin compared with the initial rules; 2. keep ‘N+2’ with the exception of the first year, because it is the first year that is critical for the start-up of programmes. Afterwards, the machine is in running order. According to our information, this is DG Regio’s preferred option; 3. apply ‘N+2’ at national level rather than for each operational programme. This would give states the possibility of transferring resources between programmes every year, depending on the speed with which they are deployed on the ground.