Have Government officials broken EU rules?

eu.jpgIC Wales | QUESTIONS have been raised over whether European rules are being broken in the running of a new £92m business grant scheme. The concerns follow a meeting at the Holland House Hotel in Cardiff on Thursday, when senior Assembly Government officials briefed members of the Welsh business community about the new system.

Someone who attended the meeting, who did not wish to be identified, told the Western Mail: “Some of us who were invited to the Holland House meeting were shocked at the implications of what was said. It seems the Assembly Government is intending to use money from the European Regional Development Fund as revenue support for the running of the Single Investment Fund (SIF), announced by (Deputy First Minister and Minister for Economy and Transport) Ieuan Wyn Jones in April.

“This will include paying the salaries of the new ‘relationship managers’ who will be responsible for liaising with companies seeking business support.

“My understanding of EU regulations is that this breaks the ‘additionality’ rule, under which money from European programmes is meant to be used to supplement core government spending on economic development.

“ Instead, it seems the European money is being used as a substitute for core government spending. It appears to me and others that this is a clear breach of EU rules.”

The member of the business community said the amount of money allocated to the SIF by the Assembly Government was significantly less than had been available in the past.

“The £92m budget represents a cut of about 33% compared to previous years, if you add up the various pots of money the SIF has replaced. We were told at the meeting that, in future, bids for aid would be competitive and companies from different sectors and regions would have to compete against other projects for aid. This at a time when the Welsh economy is 63% public sector.

“Fears were expressed in the meeting about the policy and timing of this move. There were also concerns that the Valleys and West/North Wales would again suffer from such a policy.

“The figures pose the question, where has the European Commission’s Objective One money gone in the past eight years? It has had no impact on the real economy. Why? Because the funds were raided by the Assembly Government to spend on other budgets, especially pay and jobs in the public sector.

“In Ireland, Objective One money was used to greatly improve the country’s transport infrastructure. In Brittany, which has received lower levels of European aid, money has been used to develop new tourism and leisure facilities in fishing ports.

“ We have little tangible to show in Wales after eight years of top-level European aid.”

An Assembly Government spokesman said: “These claims are simply inaccurate. It is clear that the person making them has misunderstood the information given at the meeting, and it is a pity that they did not raise their concerns with us at the time, rather than through the press.

“No European funding has been used to pay staff from the Department (for Economy and Transport) for their roles as relationship managers in the new ‘Flexible Support for Business’ structure. This new system of flexible, streamlined support, and the creation of the Single Investment Fund, is exactly what the business community has been calling for over a number of years.

“The Single Investment Fund was only introduced in April, and is being rolled out in stages. Therefore it is wrong to compare the value of the fund now with previous support programmes, as the fund does not currently reflect the full extent of our widespread support for businesses across Wales.

“At the end of the previous programme, EU-supported projects will have created up to 46,000 net additional jobs and supported the launch of some 2,400 new small and medium businesses. The impact of this is clearly demonstrated by employment levels in West Wales and the Valleys, which have risen by 11% since 1999, compared with a 9% increase across Wales and 7% across the UK.

“The new round of European funding programmes provides us with the opportunity to build on this progress and deliver further real improvements across the Welsh economy.”

Last night the member of the business community who raised the concerns insisted: “I do not believe I misinterpreted what was said.”