17/02/12 - Chris Kelly MP launches campaign to end "outrageous EU money-go round" and get West Midlands money invested in places like Dudley

The West Midlands contributes more than three times what it receives from EU regional funds, according to a new report, and Chris Kelly (MP for Dudley South) is backing a new emerging campaign to get Black Country money invested in the Black Country and end the “outrageous EU money-go round”.

According to the report by Open Europe, 'OFF TARGET: The case for bringing regional policy back home', between 2007 and 2013, Britain will pay in around £30billion to the EU’s so-called structural and cohesion funds, but get back just under £9billion. Of the UK’s overall contribution to the funds, 70% goes to other member states, 25% is redistributed within the same UK region in which the funds were raised, and only 5% is redistributed between richer and poorer regions within the UK. The West Midlands is contributing £1.077bn, but will only receive £303m back – a net contribution of £774m.

Chris Kelly MP commented: “For the UK as a whole, these are vast sums of money which we can ill afford. Only two small regions actually get back more than they pay in. The West Midlands currently contributes £1.077billion to EU regional funds and receives only £303million back - a net contribution of £774million. We only get £1 for every £3.55 we pay in. And we shouldn’t need the permission of the European Union to spend our own money. It is an outrageous money-go-round which gives jobs to EU bureaucrats, but fails working people in Dudley and the Black Country.”

“Metropolitan boroughs like Dudley are losing out because this money is controlled by EU rules, not by people elected by Dudley voters. This must change!” Mr Kelly added. “But before the last election, this policy was Labour’s policy, so there should be cross party consensus to campaign for this in the EU.”

Before the 2010 General Election the then Chancellor of the Exchequer and, later, Prime Minister, Gordon Brown said: “When the economic and social, as well as democratic, arguments on structural funds now and for the future so clearly favour subsidiarity in action, there is no better place to start than by bringing regional policy back to Britain.”

Open Europe has suggested that EU Structural Funds should only be given to countries where Gross National Income is less than 90% of the EU average. If the UK and other richer member states were to pay for their own regional policies and the use of the remaining structural funds was limited to poorer EU member states – as was the policy of the previous Labour Government – this could save the UK up to £4.2 billion over seven years, assuming that the next EU budget takes a similar shape as the current one.

Mr Kelly added: “If this money was invested into UK regions, the West Midlands would benefit from an additional £137 million.”  The money is saved by stopping the flow of money to the EU that then just comes back to the UK, and by halting the EU subsidies to relatively well-off countries like Spain, Italy and Greece. New members of the EU in Eastern Europe who are much poorer would continue to get the help they need.

Notes to editors:

• The structural and cohesion funds are intended to promote economic growth and convergence between different regions, but every region in every EU member state receives some funding, even the richest ones.
• They account for roughly one third of the EU’s overall budget – just under €350bn over the current 2007 – 2013 budgetary framework period. We estimate that over the course of these seven years, the UK is contributing roughly £29.5bn and getting back around £8.7bn.
• While they can have a positive impact in individual cases, if combined with good public administration and pro-growth policies (e.g. Ireland in the 1990s), there is no conclusive evidence that the structural funds have had an overall positive economic effect on Europe’s economy.
• There is a circular distribution system with Brussels at is heart – i.e. everyone pays in and everyone gets paid. This means, for example, that the UK pays for projects in Sweden and vice-versa.
• We estimate that of the UK’s overall contribution, 70% goes to other member states, only 5% is redistributed across regions, with the remaining 25% being redistributed within the same region in which the funds were raised. This begs the question what the added economic value of the structural funds is for Britain.
• The policy of previous Labour government was for regional policy and spending to be devolved back to the UK (it became an EU competence in the 1980s). The way this was to be achieved was by introducing an eligibility threshold of 90% or below average EU income – thereby poor countries would continue to benefit but richer ones would no longer recycle money between each other. However the Coalition appears to have dropped this ambition.
• We estimate that had this threshold been in place over the current budgetary framework, the UK on the whole could have saved £4.2bn over seven years, and could save a similar amount over the next seven year framework (2014-2020).

 West Midlands

• According to the European Union the West Midlands has the lowest level of disposable income in the UK (83% of the national average)
• However, it is a net contributor to the structural funds; we estimate it pays in £1.077bn into the structural funds but receives only £303m back – a net contribution of £774m over seven years.
• This means that the West Midlands pays £3.55 for every £1 it receives back in the form of EU regional subsidies. By contrast an area such as North Yorkshire (with disposable income of 107% of the national average) pays £3.51 for every £1 it receives back. This shows how poorly targeted the funds are in the UK.
• Because of the EU’s focus on large areas, pockets of depravation (in the UK this overwhelmingly covers urban areas) are overlooked; this affects the West Midlands more than areas that may be poorer on the whole (e.g. Cornwall) but have a lower rate of income divergence.
• Under our proposals, from the UK’s overall saving of £4.2bn, the West Midlands would receive an additional £137m over seven years for development/growth promotion. If the UK government decided to take disposable income into account when re-distributing the UK’s savings, the West Midlands could potentially benefit even more.