House of Commons

Communities and Local Government Committee


European Regional Development Fund Inquiry (ERDF)

Vol II HC81 13 July 2012


Des McConaghy   Evidence


I respond as an individual and as a retired public servant with experience of policies and official reviews relating to regional policy over five decades. And I worked in Whitehall during the Heath and Callaghan administrations specifically to bring a "total approach" to the tasks of urban and regional recovery.


Rome Treaties & Regional Policy


1. As a layman nearing his 81st birthday I crave the Committee's indulgence for some mainly historical observations. In the early 1960s I was involved in large-scale public works in Scotland and Northern Ireland and therefore concerned about the impact of EEC trade liberalisation on our peripheral regions.


2. So I contacted Pierre Uri (a colleague of Jean Monnet and a draughtsman of the original Rome Treaties) about the need for mandatory regional planning provisions since it seemed clear that trade liberalisation would favour optimum European locations at the expense of Europe's more peripheral regions. At this time I also had in mind France's own indicative planning system and their proposal to include regional prospects within their Fourth Plan (1962-1965).


3. But Pierre Uri responded as follows; "Why should we have burdened the Rome Treaty with a controversial issue, trying to insert a clause making it mandatory to have regional planning? It was enough, as experience shows, that this effort has not been barred. Now there is the problem of implementation and I do not know if the 'aménagement du territoire' in France and the 'économies régionales' in the Community are going to lead to effective action as long as the principles themselves are not clear ". [1] (emphasis added)


4. Ten years later I used a Churchill Fellowship to look at the demise of the "Model Cities" programme in the USA. In spite of the growing problems of race and poverty in the US Cities, by 1972 it was clear that US Federal assistance for this programme was unable to stimulate the effective coordination of municipal action at State or City levels. So President Nixon terminated the programme. With this experience in mind I then visited the first EEC Regional Policy Director in Brussels (M. Jean Cros) in September 1972. And at this time EEC funding was largely directed to individual projects or consultant studies; that is, without any effective read across to local, national (or EEC) budgeting in Member States.


5. Consequently in 1972 I sent the EEC Directorate (M. Cros) proposals which were then published by my Shelter Neighbourhood Action Project in Toxteth Liverpool. [2] For the first time these showed how supplementary funding that covered a comprehensive range of public sector programmes could be locally coordinated and strategically funded across English regions - and within a single strategic and parliamentary validated national programme. Jean Cros, the EEC's first regional director, responded in January 1973 welcoming this as a model. [3]


6. This may have been influential, but in any event the EEC Regional Directorate later moved away from the early ad hoc interventions towards the present style of programme definition.


7. But the same SNAP proposals [2] were also influential in stimulating the first UK Ministerial "Total Approach" as announced in the 1972 Westminster Budget Debate. I was then employed as Urban Policy and Planning advisor in the Ted Heath (Conservative) and later Jim Callaghan (Labour) Administrations, and within the then Department of the Environment (DOE). But my problem was to find Ministers, permanent secretaries or official policy directors willing to deliver an effective degree of interdepartmental funding (or parliamentary validation!) for this explicit "constituency dimension" within the then Treasury spending round (PESC).


Critical Challenge and Basic Failure


8. So the critical challenge at both the European and the National levels has been to establish an effective read across between (a) all such regional bids (and allocations) and; (b) the management of the EEC and UK economies. But this consistently eludes the administrations at both the EU and UK national levels.


9. The same disjuncture is clearly more immediate and critical for all those EU states adopting the Euro after the Maastricht and Lisbon Treaties. This tragedy is now strictly evidential within the more peripheral states that have not enjoyed optimum or even reasonable market opportunities; states moreover where there were often very relatively poor levels of national and regional liaison or standards of public audit and, moreover, where there was little attempt to observe the convergence criteria that should have been a crucial aspect of monetary union.


10. Thus for example Greece has made good progress in the management of its EU regional funding (in 2011 slightly above average absorption rate) - but this makes little real impact. So this country's dire overall circumstances now threaten its whole future within Europe, with similar failures threatening the entire Euro-zone. Therefore this tragedy - for we now begin to perceive tragic consequences for some generations of Europeans in similar States - is mainly due to our abiding failure to locate any regional policies within truly accountable national and EU supply procedures.


The UK's experience


11. But as noted (para 7) we also have not achieved an interdepartmental or clearly defined "constituency dimension" for our expenditure plans - one that embraces all priority and exceptional local expenditures beyond main local government revenue support (RSG) and personal transfers. After my own initial 1972 Whitehall struggles (para. 7 above!) I managed to initiate an official internal review covering all relevant programme areas. [4] But in spite of informal inter-departmental support the official bureaucratic barriers still prevented this being pursued across all relevant Whitehall departments. Downing Street blamed this on my DOE permanent secretary's reluctance to face difficult Whitehall battles. [5] But at base this was, and it still remains, a political failure. It is precisely this absence of an explicit parliamentary validated "constituency dimension" (i.e. inter-departmental "strategic funding") in PESC (and now within the CSR) that continues to undermine all UK regional and local government reforms. [6]


12. Thus, for example, our 1974 "strategic" counties had no effective strategic roles, and didn't last! Our early useful "expenditure-planning systems" for strategic transport planning (TPPs & TSG), or housing (HIPs), or health (RAWP) - and likewise in each main programme area - have each been unable to find any common framework linked to the annual Treasury expenditure round, let alone any effective parliamentary supply procedure! The "Single Regeneration Budget" (1994-2004) made an attempt at the SNAP format (para. 5) but once again without adequate inter-departmental arrangements - and statutory town and country planning still has little relationship to executive spending: merely an obligato piped over our ever-spreading regional and urban budgetary haze. [7]


13. Consequently an endless array of new special area measures proliferate (and often overlap!); a confusion further aggravated by the outsourcing or even off-shoring of public services. Various "single pots", "EZs", UDGs, Community Budgets, Enterprise Zones, Transition (& Recovery) Funds, New Deal for Communities, Social Impact Boards, Housing Market Renewal Areas, "Growing Places Fund", Rural Growth Fund, etc., have all added to UK's own budgetary confusion. A NAO Report on the recent Regional Growth Fund is now due.


ERDF repatriation


14. So within this abiding and general budgetary haze "the repatriation of the ERDF to the Government in London" brings no clear general benefit. Our own systems of local and regional financing are also unfocussed and deficient


The Way Forward


15. But we cannot begin to address these basic failures at either the EU or UK levels without some basic domestic reform. Obviously this must start at home, within our own Parliament's need for a coherent supply procedure. As the Hansard Society has pronounced, "To draw an analogy, the government decides the value of the cheque, to whom it should be paid and when, and Parliament simply signs it. The UK is considered to have among the weakest systems for parliamentary control and influence over government expenditure in the developed world". [8]


16. We must therefore ensure that the Treasury's current "Alignment Project" (or equal) offers an escape from this parliamentary impotence. We should recall also that those who initiated the reform of UK public audit (leading to the creation of the National Audit Office) emphasised the need for public audit to directly inform this parliamentary supply procedure. [9] Apart from the benefits of following best practice elsewhere, this would then mean that NAO criticisms of partial measures (such as those instanced in para. 3 above) would be corrected within the annual supply procedure instead of being endlessly repeated decade after decade.


17. Clearly the DCLG Committee has a special interest and opportunity in exploiting this "constituency dimension" of regional policies within a much more focussed reform. As successive service chiefs have pointed out, "What we lack is a deeply held consensus on the role of local government", (Sir Andrew Turnbull, Solace, April 1996). "I think the core of our difficulty lies in not having solved the financial relationship between central and local government", (Sir Robin (Lord) Butler, Policy Studies, Autumn 1995). The Committee might also anticipate informed support since the present DCLG permanent secretary was a local government CEO and is now also, and significantly, the Head of the civil service!


18. In the meantime the defects in the UK's own disjointed implementation of urban and regional policy - and the EU's implementation of the ERDF - are both strictly evidential. As noted this is exacerbated in the operation of the ERDF in those EU States where public audit and its relationship to public expenditure planning is even more casual than within the UK. But the fact is that disparities continue to grow between the most prosperous parts of Europe and the more deprived regions - just as (over the half a century of my personal involvement) the disparities continue to grow between the North and South of Great Britain: Europe's most centralised state!




Des McConaghy

13 April 2012


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