ECONOMY

UK risks EU row with proposal to reform regional aid procedures

LONDON – Britain called yesterday for an overhaul of European Union regional aid policy as London seeks to minimize the cost of a larger EU and ensure that Britain’s poorer regions do not lose out on funding. Picking his latest fight with Brussels, Britain’s Chancellor of the Exchequer (finance minister) Gordon Brown said he wants to reverse «decades of centralization» and seize back the controls over spending to nations and regions from Brussels. In a blueprint for regional aid in an enlarged EU, Britain proposed channeling more funds to the 10 poorer mostly Eastern European countries due to join the bloc in May 2004 and away from current major recipients like Spain or Greece. But Britain, one of the EU’s main paymasters, wants to keep the enlargement bill to a minimum and ensure it continues to receive EU Structural Funds – designed to enhance regions’ competitiveness – which is why it wants the controls back. «One proposal – simply to increase structural funds all around – would mean that Britain would pay in far more but would not get more out,» Brown told union and business leaders. The blueprint, targeting one of the EU’s flagship policies, puts Britain on a collision course with those Europeans who want a more centralized European economic and foreign policy. It could spark a row as the EU draws up its spending plans for its next seven-year budget for 2007-2013. Footing the bill Britain fears it will have to foot a hefty bill for regional aid when the 15-nation EU bloc enlarges. Ten countries, eight of them from Central and Eastern Europe, are due to join the bloc next year, while Bulgaria and Romania hope to enter in 2007. «Without reform there is going to be huge extra spending on regional aid. We are all for regional assistance but think it should be focused on Eastern Europe,» said a Treasury source. If current regional policy were maintained in an enlarged EU, Britain could lose much of its current Structural Fund support due to the effect of enlargement and the strong performance of the UK economy. Brown called on the EU to «devolve decision-making power to the regions and return key regional policy responsibilities from the European Union back to Britain.» He wants regions to decide their own spending priorities via regional development agencies. The proposal could find favor among the EU’s main donors like Germany, Britain and France who may also be opposed to digging deep when the EU enlarges. But it is likely to meet resistance from the main recipients of EU regional aid such as Spain, Portugal, Ireland and Greece. Brown’s call for the devolution of spending powers from Brussels could irk Europeans who favor a more centralized European state as the EU draws up a new constitution. «Reversing decades of centralization will not be an easy argument to win. The first draft of the European convention text calls for the Union to coordinate a federalist economic and foreign policy,» Brown said in an article in The Times. Britain opposes the word «federalist» in the draft constitution. Brown has been a fervent critic of the EU’s Stability and Growth Pact, which underpins the European single currency, and Britain has led the challenge against the EU’s Common Agricultural Policy, upsetting major benefactors like France. Brown prepared the proposals with Deputy Prime Minister John Prescott and Trade and Industry Secretary Patricia Hewitt.