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News Analysis
Inside the EU's structural funds


The four EU Structural and Cohesion Funds give the EU powers over investment, jobs, agriculture and fisheries. They account for over one third of its budget: 1) the European Regional Development Funds (ERDF), which is supposed to reduce imbalances between regions and social groups; 2) the European Social Fund (ESF), which supports the EU's employment policy; 3) the European Agricultural Guidance and Guarantee Fund, for agriculture and rural areas; and 4) the Financial Instrument for Fisheries Guidance (FIFG), for the fishing industry.

EU building
Photo: Workers

Where do the funds come from? If they come from our own pockets – as they must certainly do - why do we have to get them back via the Brussels bureaucrats? Why not cut out the middleman and spend the money ourselves?

Have the Structural Funds worked? The European Commission's First Cohesion Report, in 1996, revealed that regional differences in unemployment, income disparity and poverty have increased over the past decade in several member states, especially the UK, Italy and France.

The waste machine
Much of what finally arrives from Brussels is wasted on administration. Simply running the funds costs Britain £670 million a year. Then the money is spent ineffectively. The British government's own National Strategic Reference Framework, published in October 2006, surveyed how the funds have been spent and indicted Labour's record on investment. It also showed how the government has failed to improve education.

Only 10 per cent of the Structural Funds are spent in the poorest fifth of areas. The bureaucratic way in which the EU runs the funds leads to fraud as well as huge administrative costs.

Problems with the funds are one of the main reasons why the European Court of Auditors has not cleared the EU budget for thirteen years in a row. According to the court's latest report, only 31 per cent of the projects audited "were found to be free from error".

The Court found that at least 4 billion euros of the money that the EU Commission handed out "should not have been". Italy's tax and fraud investigator, Guardia di Finanza, noted in its latest annual report that 433 million euros of EU money was subject to outright fraud in Italy alone in 2006.