Toggle high contrast

Wales TUC response to the Government's consultation paper 'A Modern Regional Policy for the UK'

Issue date

Wales TUC response to the Government’s consultation paper

‘A Modern Regional Policy for the UK’

The Wales TUC welcomes the opportunity to comment on the Government’s consultation paper " A Modern Regional Policy for the UK ". The Wales TUC represents 56 trade unions who in turn represent half a million members across Wales.

Introduction

This document sets out the Wales TUC’s response to the consultation 'A Modern Regional Policy for the United Kingdom' jointly issued by HMT, DTI, and the Office of the Deputy prime Minister in March 2003. The consultation document has been prompted by the likely impact on the EU Structural Funds from 2006 onwards following enlargement of the EU from 15 (EU15) to 25 (EU25) member States in 2004.

The consultation document sets out the Government’s vision for the future of UK regional policy; the Government’s proposals for EU regional policy reform; and the related reform of the EU’s approach to state aids.

The consultation document poses a single specific question - 'What are your views on our proposed approach: that in principle, the EU Framework for Devolved Regional Policy should form the basis for a UK position on Structural Funds post 2006? The Government would also welcome comments on its overall objectives for the future of the Structural Funds and on the current thinking emerging from the Commission.'

Our response is divided into three broad sections dealing with the Government’s vision for regional policy in the UK; the Government’s proposals for EU structural Reform; and the reform of European State aids.

The Government’s vision

We strongly welcome the Government’s vision of a modern regional policy locally led and substantially devolved. The Wales TUC strongly supported the establishment of the National Assembly for Wales, the Scottish Parliament and the English Regional Development Agencies. There has already been a significant decentralisation of industrial policy.

European Regional Policy

The enlargement of the EU from 2004 onwards will increase membership to 25 when 10 States join the EU (Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia). The population of the EU will increase by about a fifth to 450 million, the biggest single market in the industrialised world. Wales would share in the wider economic benefits of enlargement and the potential boost to EU wide trade and investment. The Treasury quotes one 1997 study that estimates the UK GDP would be nearly £2 billion higher as a result.

However, GDP per head is significantly lower in the new member States. This will have a number of immediate economic impacts:

  • average GDP per head across the enlarged EU will fall by about 13 per cent compared with current levels - this is a purely statistical effect;
  • economic disparities within the EU will widen significantly. The Commission estimates that the gap between the 10 per cent of the EU population living in the most prosperous regions and the least prosperous regions will double compared with the current EU15 gap.
  • there will be a significant shift in the geographical distribution of the population living in regions with GDP per head less than 75 per cent of the EU average;
  • EU wide unemployment will be higher - unemployment averages over 15 per cent in the new states compared with 8 per cent across the EU15.

European Structural Funds

The current allocations to the Funds run out in 2006. Over the next eighteen months the existing EU15 members have to agree new arrangements and funding levels to apply for the period 2007 to 2013. The EU has four 'Structural Funds' including the European Regional Development Fund and the European Social Fund that are expected to spend just under 200 billion euros (£140 billion) between 2000 and 2006. The Funds are allocated around four key priorities or Objectives:

  • Objective 1: regions whose economic development is lagging (currently defined as GDP per head below 75 per cent of the EU average);
  • Objective 2: economic and social conversion in areas experiencing major structural change (for example, from run down of traditional industries);
  • Objective 3: modernising training and promoting employment (excluding objective one regions).
  • In addition, the EU has the Cohesion Fund targeted on the EU15 States that at the time of the Fund’s establishment badly lagged the EU average in terms of economic prosperity (Spain, Portugal, Greece, Ireland). The EU also has four relatively small special EU wide programmes called Community Initiatives funded out of the Structural Funds.
  • European policy discussions can confuse because of the terminology used. Regions refers to EU standardised sub-regional units (roughly the equivalent of large counties or groups of counties within the UK) rather than standard regions. Cohesion policy refers to the various EU programmes to address economic disparities across the EU, including both the EU15 Structural Funds and the Cohesion Fund at present available only to Spain, Greece, Portugal and Ireland.

Impact of enlargement on eligibility for EU regional aid

Many more regions in the new member states will become eligible for Objective 1 status because they have GDP below 75 per cent of the EU25 average. But some regions in the current EU15 States will lose Objective 1 eligibility because of the fall in average GDP per head across the EU. Overall, the net effect will be to increase eligibility from 18 per cent to 26 per cent of the EU25 population. However, there will be a marked shift eastwards in the coverage of the population. The statistical effect from enlargement reduces the eligibility for Objective 1 status in the current EU15 Sates by about a third.

The Copenhagen Council

The Copenhagen Council approved an overall envelope for the Cohesion and Structural Funds for the new EU members of 22 billion euros (about £16 billion) for the period 2004-2006. About one third will be allocated through the Cohesion Fund. Two thirds will come through the Structural Funds - mainly Objective 1 funding - about14 billion euros or roughly £10 billion. Copenhagen reduced the financial commitment provisionally made at the Berlin Council in 1999, partly because of growing resistance among EU15 States to increase the size of the cohesion funds and partly because of concerns at the capacity of the new states to absorb large sums quickly.

The Commission has made it clear that accession States can only draw on the funds if they satisfy EU regulations on administrative structures and monitoring and control procedures. As the Commission points out, 'the candidate countries will have to meet the challenge of integrating very quickly into a system which was not designed for them but which offers them a substantial prospect of speeding up their development.' The Commission will report on progress made on putting the required systems in place in July 2003.

The impact on Structural Fund allocations to the UK

The UK has been allocated just over 15 billion euros from the Structural Funds, or just over £11 billion between 2000-2006, of which about £9 billion comes from Objective 2 and Objective 3. Even without enlargement, some regions in the UK were due to lose support from 2006 because their relative economic performance had improved. The loss of this 'transitional funding' would reduce UK allocations by about 2 billion euros in the next funding round from 2006 onwards.

The additional impact on the UK of enlargement means that only Cornwall would retain Objective 1 status, although Wales and some regions might hold on to some 'transitional' funding from 2006 onwards. The Treasury also say that much of the UK would lose Objective 2 status. However, this is partly because relative UK unemployment performance has improved against the European average. The gap between UK unemployment and employment rates and EU25 unemployment rates would widen through the statistical impact of enlargement.

The loss of regional support would mean the UK would have to pay more as a net contributor to the EU Budget under current arrangements. Net payments to the EC budget were estimated at £3.2 billion in 2003-2004, rising to £3.9 billion by 2005-2006 in the 2002 Spending Review. Even if our gross contributions to the EU Budget remained the same and we retain our special 'claw-back' arrangements, we would still get less back to offset support for the Community Agricultural Policy (CAP) and other EU programmes.

In addition there is some pressure within Europe to increase the size of the Cohesion\Structural Funds from 2006 onwards to at least the Berlin Council target of 0.45 per cent of Community GDP. The EU Commission, the European Parliament, the Committee of the Regions, and some EU States have indicated support. The UK has officially reserved its position, but the Treasury is clearly resisting any suggestion that the UK should pay more.

Next steps

The next key issue and the main focus for the Government’s proposals concerns how the Structural and Cohesion Funds would look in the enlarged EU for the period 2007-2013. The Commission is expected to bring forward proposals by November 2003.

The Treasury’s view of European regional policy

The Government sees both strengths and weaknesses in EU regional policy. Some of the strengths are:

  • Structural Fund rules encourage local and regional partners and innovation
  • Economic development can be planned over longer periods with a wider range of partner organisations than most other funding sources allow:
  • 1.
  • Cross-border cooperation through Interreg has been especially helpful in Northern Ireland;
  • 2.
  • European Investment Bank support promotes private investment and encourages innovation in capital projects;

But the Treasury also sees some important weaknesses:

  • Some English regions have found it difficult to use Structural Funds to address their priorities in their Regional Economic Strategies;
  • 3.
  • Excessive bureaucracy and lengthy decision-making, especially for small schemes;
  • 4.
  • Rigid application of state aid rule have delayed the regeneration of deprived communities and derelict sites;
  • 5.
  • Structural Funds may not add value in comparison with domestic initiatives;
  • European regional policy may have been more successful in addressing the gap between individual economies than regional imbalances within them.

The Treasury argues that the reform of the Funds must retain and build on the strengths and get rid of the weaknesses. The UK Government’s overall objective for the reform of the Structural Funds is to deliver an 'effective, sustainable and affordable regional policy for the UK and the EU which gives the best possible value for money and outcomes for the UK taxpayer'. The Government identifies three key objectives for the reform agenda :

  • Active support for the Lisbon strategy of higher productivity and employment through higher investment in physical and human capital, more open markets and sustainable development;
  • 6.
  • Concentrate EU Budget support on the poorest member states, subject to their capacity to absorb funds;
  • 7.
  • A fair deal for the UK in Budgetary terms and that the overall Structural Funds Budget is constrained and focused on where it provides maximum value for money.

To achieve these objectives the Government is proposing a 'EU Framework for Devolved Regional Policy'. This has a number of elements:

  • An EU framework setting out broad economic and employment policy objectives based on the Lisbon priorities;
  • 8.
  • Those EU states with the institutions and financial strength to develop and deliver their own devolved and decentralised regional policies to deliver the Lisbon strategy should be allowed to do so;
  • 9.
  • Regional assistance in States whose GDP exceeded 90 per cent of the average (ie all except Portugal, Spain and Greece) would in future fund their own regional policy programmes, with the exception of some Community Initiatives.
  • The consultation paper provides few details about how these new arrangements might be implemented. However, it says that some of the positive features of the Structural Funds such as the seven year funding period, the partnership approach, and the ability to 'badge' projects to reflect their special status should be retained.
  • The overall approach as outlined by the Government has several attractions. We particularly welcome the Government’s commitment to secure a stronger EU framework based on the Lisbon Council objectives on growth and employment. Had the EU actually met the objective for a sustainable economic growth rate of GDP growth of around 3 per cent, many of the concerns about the funding of the EU’s cohesion policies would be far less acute. Stronger economic growth across the EU would do much to help integrate the new members and speed up the rate at which they close the gap with the EU in terms of GDP per head. Moreover, the Lisbon agenda implies a widening of the traditional focus on regional policy, for example, focusing on the key 'drivers' behind productivity growth. This would help develop a genuinely new approach, not just more of the same, in an enlarged Europe.
  • The commitment to devolution and decentralisation is also highly welcome, as is the concept of greater flexibility within the overall EU framework. However, most European economies have had significant degree of decentralisation and devolution and more powerful regional and local institutions for many decades. By comparison, the UK remains far more centralised than most other EU15 States, albeit with the very welcome progress towards greater devolution in recent years. So while this a powerful argument for the UK, it may be seen as more a description of the status quo in other EU States.
  • The most controversial proposal is to end 'recycling' of funds between the richer member states. In effect, rather than London (or Paris or Berlin) giving Brussels money so that local projects can apply for EU Structural Funds, the Government wants EU Governments to be able to fund projects directly through devolved and decentralised regional institutions. The Government believes that the UK’s proposed Framework approach would mean the UK’s contribution to the Structural Funds would be 'significantly lower' than either continuing with the status quo or other options under consideration in Europe. The Government argues that these savings could be used 'towards enhancing domestic regional policies'.
  • The Wales TUC is currently opposed to the UK position. We favour future regional funding in Wales to be derived from the EU not least because we remained unconvinced, certainly on the basis of these proposals, that the Treasury will allow full and transparent transfer of monies to our most in need communities. We would expect that if our current Structural Fund areas lose funding because GDP levels would statistically improve in the context of EU25, then appropriate transitional or other financial arrangements would need to be in place to provide on-going support post 2006.
  • To outline our primary concerns;
  • The Government’s commitment to fully compensate any reductions of EU State aid with additional Government spending is welcomed. However, this is not spelt out or made transparent. Past experience suggests it can be hard to work out what is genuinely additional to EU funding.
  • Without the EU Structural Funds, it is likely the previous Conservative governments would have withdrawn from regional policy entirely. The Structural Funds provide a guarantee that some commitment to regional development will survive future changes in national government;
  • 10.
  • A strong EU framework is also essential if the Government is to avoid the charge that it is simply trying to 'renationalise' EU regional policy. We would not support such a policy. Unfortunately, as we show below this is clearly what the Commission, the European Parliament and other European institutions think the Treasury is trying to do, primarily as a backdoor means of reducing the UK’s net EU Budget contributions.
  • We note the Government’s commitments to continue the long term funding commitments. However, the consultative paper has not spelt out what this would mean in practice. For example, structural funds are allocated for seven year periods allowing long term projects to be funded with confidence, while most public spending in the UK is allocated on a 2 to 3 year cycle.
  • As we made clear before, the lack of any serious consideration of how social partnership involvement could be strengthened as part of the Government’s proposals is a major weakness. The Structural Funds do provide and encourage social partner involvement, albeit imperfectly. It is not clear the new arrangements would secure even the current degree of engagement, let alone build on it;
  • A major difficulty in assessing the Treasury proposals is that we have no hard counter-proposals to judge them against. The EU Commission’s ideas will not be published until November 2003. The Treasury say, 'their current thinking is not radical enough'. This may or not be right, but until we see the Commission proposals, it would be premature to dismiss them. The Commission’s Second Cohesion Report, published in January 2003, says that: 'Member States will wish to see simplification and a much greater decentralisation of responsibilities' and that there is general agreement that it was inappropriate to apply detailed one size fits all rules and that the principle of proportionality should apply. This appears to be on similar territory to the Treasury.

The Government clearly has much work to do to convince others in Europe that its proposals have been tabled in good faith. In the Cohesion report the Commission noted: 'To a large extent this has been the case, although proposals such as those regarding the renationalisation of the policy tend to be motivated by budgetary considerations'. So it would appear that the Commission thinks the UK approach is primarily driven by worries over the UK’s net contributions to the EU Budget rather than the effectiveness of EU policy.

This is also a European TUC (ETUC) concern, as set out in a policy statement of November 2002: 'At national level, Member states should also integrate the aims of economic and social cohesion into their national and regional policies. The implementation of these policies should be carried out in close coordination with European aims and policies, in order to avoid a certain tendency towards the re-nationalisation of economic and social cohesion policies'. The ETUC also emphasises the need for strong cohesion policies, but with greater emphasise on innovation, co-ordination and the active promotion of the European social model and partnership, including the role of the social partners.

Future size of the cohesion fund

The Commission has not yet tabled a proposal for how big the future cohesion funds might be, but it is thought likely it will endorse the figure of 0.45 per cent of EU GDP (the figure implied by the Berlin Council). This has support within Europe from the ETUC, the European Parliament, the Economic and Social Committee and the Committee of the Regions.

  • The consultation document is rightly concerned with the financial implications for the UK and the regions, but there is a complete absence of hard figures or estimates of what the impact of the various options might be between, for example, keeping the status quo, adopting the 0.45 per cent target, or adopting the UK Government proposals.
  • Nor do we have any figures that might put these changes in the context of other reforms currently under discussion within the EU, notably proposals to reform the Common Agricultural Policy (CAP). A break-through in the reform of the CAP could have markedly a bigger impact on the UK’s net contributions to the EU than any likely change in the cohesion funds.
  • It is hard to see what has changed since the Berlin Council that invalidates the 0.45 per cent target. There is clearly a major short-term constraint because of the rise in budget deficits across the EU. But this reflects both the global downturn and failures in macro-economic policy. The funding constraint would largely disappear if the EU met the Lisbon objective on sustainable economic growth of 3 per cent per annum. However, the 0.45 per cent target must be conditional on the European Commission’s assessment of how fast the new member states could absorb the new sums made available. There would be little point in increasing the cohesion funds if there is no realistic chance of the cash being spent wisely.

State aids

  • The Government is also pressing for a review of the EU’s approach to state aids. This is not addressed in great depth in the consultation document. The Treasury supports the general principle that state aids should not result in unfair competition and the thrust of reform to develop 'horizontal' aids that apply to all firms across the economy. But they argue that the current rules are hampering the development of new good state aids as part of an effective regional policy. The Treasury wants to see a more streamlined approach which concentrates on 'the most economically significant state aids' and also that the rules should 'accommodate clearly identified market failures'.
  • The Treasury has been concerned that the Commission has been holding up new initiatives that the Government see as supporting the broader economic and industrial priorities agreed at Lisbon. In recent years this would include the climate change levy, the regional venture capital funds, and the new community tax credit.
  • We have considerable sympathy for the Treasury’s position. Improving venture capital access at the regional or local level is hardly likely to constitute a serious threat to EU competition policy. Moreover, it is contradictory to call on member states to do more to support venture capital, R&D and sustainable development as part of the strategic approach agreed at Lisbon and then make life difficult when new measures to promote these objectives are introduced.
  • However, the consultation document has little to say about how specifically it would like to see the Commission procedures and state aid rules change. Under Article 87, member States must inform the Commission about 'any plans to grant new aid shall to be notified to the Commission in sufficient time by the Member State concerned'. The vast majority of notifications are approved by the Commission without a formal investigation, and the overall rejection rate across the EU was about 7 per cent between 1999 and 2001. The relatively low rate of rejection is likely to reflect national governments making sure applications fall within the scope of Article 87 to start with.

However, where the Commission has doubts that the aid is compatible with the Article and orders an investigation, over 50 per cent of these applications are turned down, including many of the cases where member states failed to notify the Commission. In recent years most of the negative decisions have involved Germany, Italy and Spain. The UK has relatively few proposals investigated and hardly any are turned down. However, the process can be time-consuming and undoubtedly held back the introduction of some UK measures.

The consultation paper makes no reference and offers no critique of the Commission’s simplification of the procedures by introducing new regulations to take effect from February 2001. These introduce a block exemption for aid to SMEs and for training, so that member states can introduce aid without seeking Commission approval beforehand. It also makes no reference to the Commission’s intention to draw up a new framework for state aids for environmental protection and venture capital and a new block exemption for employment measures. The Commission also says ' work continues on identifying tax measures in the form of State aid'

Clearly, we would not want to see British based companies disadvantaged because foreign competitors were getting tax breaks that were simply re-introducing subsidies by the back-door. But for good reason, the development of a modern industrial policy in Britain has used the tax system with, for example, the new R&D tax credit. It would be counter-productive if in the desire to crack down on uncompetitive practices, the Commission made life harder for the UK government to increase the scope and generosity of the R&D tax credit. If the 'block exemption' principle can be applied to training and employment programmes we can see no reason why the same should apply to R&D support as part of the commitment to the Lisbon strategy to boost R&D spending across Europe.

  • The consultation document makes no reference to the level of state aids. As we have persistently pointed out, the levels of state aids in the UK are far smaller than in other EU economies, even taking into account measurement and definitional problems. An optimistic interpretation of the Treasury position is that they have no objection to spending more on 'good' state aids that address market failures, while supporting the Commission’s wider objective of reducing 'bad' state aids in other EU States that inhibit competition. A TUC analysis of state aids across Europe is summarised in Annex 1.

The UK’s relative position shown in the Commission figures only describes the position to 2000. It will not reflect much of the increased funding for the DTI’s regional industrial programmes under the Second Review, let alone further increases under the Third Review. The new R&D tax credit will also help develop a more balanced industrial policy, although it is not clear whether this or the new Employer Training Pilots would be included as a State aid under the EU Commission’s Scoreboard. Both would however be classified as non-sectoral aid rather though aid for manufacturing even when, in the case of the R&D credit, we would expect most assistance to go to manufacturing. This will present an increasing problem in monitoring whether aid in the UK is closing with that in the rest of Europe. It would be helpful if as part of the review and to help inform industrial policy in the UK the Government and the European Commission continue to improve measures of comparable state aids available across the EU.

ANNEX 1: STATE AIDS ACROSS EUROPE

The EU commission has recently published the 'State Aid Scoreboard' for the EU covering the period up to 2000. The State aid covers national programmes that fall within the scope of EU legislation (in this case Article 87(1) of the EU Treaty) and have been examined by the Commission. It does not include general measures - such as New Deal - or aid from the EU Structural Funds.

The Barcelona Summit saw EU governments agree to cut the share of GDP spent on state aids and to redirect industrial aid towards 'horizontal' objectives such as support for R&D, SMEs, environment, and training and employment. As in previous periods, the UK has the lowest level of state aids in the EU whether measured in terms of share of GDP, euros per person employed, or as a share of government expenditure over the period 1998-2000. Moreover, on all these indicators state aids declined in the UK comparing 1996-1998 with 1998-2000. Indeed, the cut in UK state aids measured in euros per person employed was bigger than the average fall in EU State aids over this period, so that the UK declined from 53 per cent of the EU average in 1996-1998 to 49 per cent of the EU average in 1998-2000.

Between 1996-1998 and 1998-2000 state aids have been cut in most EU States, with the exception of Luxembourg, Ireland, Denmark and the Netherlands. The increase in Ireland is because some corporation tax breaks have been reclassified as state aids by the Commission between the two periods. The increase in Denmark and the Netherlands reflects increased support for the railways. The biggest cuts in absolute terms where Germany and Italy, reflecting cuts in historically very big regional industrial aid programmes. There were also significant cuts in some smaller state budgets, notably Greece and Portugal.

State aids in Europe 1996-2000

Annual average 1998-2000

Euros per person

Index EU=100

Change since 1996-98

Luxembourg

1406

-

+24.1%

Finland

863

162

- 11.3%

Belgium

835

156

- 3.9%

Denmark

750

140

+17.5%

Ireland

739

138

+44.9%

France

711

133

- 13.9%

Germany

684

128

- 14.7%

Italy

529

99

- 29.5%

Austria

524

98

- 11.0%

Netherlands

446

83

+12.9%

Sweden

440

82

- 8.3%

Spain

400

75

- 14.2%

Greece

296

55

- 25.4%

Portugal

287

54

- 23.1%

UK

261

49

- 22.5%

EU average

534

100

- 15.5%

Source: EU Commission Industrial Aid Scoreboard, Spring 2002

Across the EU about 40 per cent of spending on state aids goes to support the railways, followed by manufacturing at just under 30 per cent, and about 17 per cent on the agricultural sector. There were some significant differences between EU States, with 65 and 70 per cent of the national state aid budget going to railways in Belgium and Luxembourg respectively, and 74 per cent of state aid in Finland going to agriculture. Germany and Spain are now the only EU States to devote significant amounts of state aid to their coal industries. The UK appears to devote a smaller share of its total State aid budgets to manufacturing. However, a significantly higher share of UK aid comes through non-sector specific spending on training and employment. Some of this will help manufacturing, although no figures are available to show by how much.

State Aids by Major Economic Sector and Industry 1996-2000

Share of total

EU average

UK

Sector

1996-1998

1998-2000

1996-1998

1998-2000

Transport

34%

37%

34%

37%

Manufacturing

33%

30%

17%

18%

Agriculture

15%

16%

20%

16%

Coal

7%

8%

10%

7%

Services

7%

5%

3%

3%

Non sector specific

3%

4%

16%

18%

All state aids

100%

100%

100%

100%

Notes: 'not classified' by industry includes aid such as cross -sectoral aid to employment and training. Transport is almost entirely railways.

Source: EU Commission, Spring 2002

Priorities for State aid across Europe

A key objective agreed at Barcelona was to concentrate industrial aid on 'horizontal objectives' such as R&D, environment, and support for SMEs and on allowable regional aid under Article 87. Between 1996-1998 and 1998-2000 the share of horizontal aids increased from 26 per cent of EU spending to 39 per cent, and sectoral aid declined from 21 per cent to 14 per cent of the total.

The UK is more focused on horizontal aids than the EU average, with 54 per cent of the total state aid budget going on such aid in 1998-2000. However, the UK spend over this period was massively focused on training support, with relatively little going on support of other objectives such as R&D and the environment. Overall, 40 per cent of UK industrial state aids go in support of training compared with a EU average of 9 per cent.

Priority objectives for Industrial State Aids 1996-2000

EU average

UK

1996-1998

1998-2000

1996-1998

1998-2000

Regional

37%

29%

24%

25%

Coal

16%

18%

21%

13%

Sectoral

21%

14%

7%

8%

Horizontal aids

26%

39%

48%

54%

Of which,

- R&D support

8%

10%

4%

4%

- Environment/energy

2%

9%

-

2%

- SMEs

7%

9%

8%

7%

- Training/employment

7%

9%

34%

40%

- Other

1%

2%

-

-

All industrial State aid*

100%

100%

100%

100%

Note:* excludes agriculture and transport

Source: EU Commission 2002

Manufacturing state aid

The latest EU figures show that in the period 1998-2000 the UK gave less aid to manufacturing than any other EU State, with the exception of Portugal. The Government has been reluctant to accept the EU Commission estimates, arguing that some support for training was not included. There is some truth in this, as successive TUC policy statements have acknowledged. As noted above, the new analysis presented by the Commission shows that the UK has a significantly higher spend on cross-sectoral aid programmes - mainly training related- than in most EU economies. However, we believe that even making fairly generous assumptions hardly changes the UK’s relative position in the European league as shown in the table below.

Overall, EU state aid to manufacturing fell by 21 per cent in terms of euros per person employed between 1996-1998 and 1998-2000, with big cuts in Germany, Italy and Spain. However, several EU states increased state aid for the sector, including France, Denmark, Netherlands, Portugal and Sweden. State aid also increased in Ireland but only because of the reclassification of corporation tax breaks as state aid. The UK also cut identifiable state aid to manufacturing, though by slightly less than the EU average.

Identifiable State aids for manufacturing 1996-2000

1999 constant prices

Annual average 1998-2000

euros

Index EU=100

Change on 1996-1998

Ireland

1866

219

+58%

Denmark

1784

209

+16%

Luxembourg

1266

148

-18%

France

1215

142

+ 3%

Germany

1199

140

-18%

Belgium

1034

121

-11%

Finland

931

109

- 1%

Italy

801

94

-50%

Greece

720

84

-30%

Austria

656

77

- 8%

Netherlands

608

71

+13%

Sweden

575

67

+11%

Spain

487

57

- 32%

UK *

305

36*

-13%

Portugal

215

25

+ 4%

EU average

854

100

-21%

Note: * excludes non-sector specific aid. Denmark, Portugal and Spain also have significant non-sectoral State aids.

Source: EU Commission, TUC.

Enable Two-Factor Authentication

To access the admin area, you will need to setup two-factor authentication (TFA).

Setup now