The structural funds were set up to give financial support to under-developed and economically weak EU regions. The structural funds include the European Regional Development Fund (ERDF), European Social Fund (ESF), Cohesion Fund and the Instrument for Pre-Accession Assistance. Between them, they now make up a major part of the EU budget.
They aim to encourage the convergence of EU economies so poorer economies develop closer to wealthier ones. Alongside their economic aims, the funds are also important in pursuing the EU’s aim of solidarity between the regions of the EU. While many welcome their economic goals, the way in which they share out money has frequently been a source of argument, especially following the entry of poorer eastern European countries to the EU.
The idea of structural aid for deprived regions was first developed in the early 1970s. The European Social Fund (ESF) had been established in 1958, followed by the ERDF in 1975. With the entry of poorer countries – Greece, Spain and Portugal – in the 1980s, regional funding became a key means of bringing these countries’ wealth up to the European average. In 1994, this idea was taken further with the creation of the Cohesion Fund, which was designed to encourage economic convergence between member states in the lead up to the introduction of the euro.
In 1999, a model for distributing aid was developed with the aim of preparing for the entry of eastern European countries into the EU in 2004. Upon joining the EU, these countries had only limited access to structural funds, but during the negotiation of the EU’s 2007-13 budget, they fought hard to get a better deal.
The model for distributing aid between 2007 and 2013 was based on 3 objectives: convergence; regional competition and employment; and territorial cooperation. The 2014-2020 budget saw a new fund category introduced, the European Agricultural Fund for Rural Development (EAFRD), and the priorities refined.
How do the Structural Funds work?
To qualify for structural funds, regions must have one of three objectives set by the EU. These are: to help under-developed regions (with a GDP less than 75% of the EU average); adapting to major economic changes such as declining rural areas; and helping those with special educational or employment needs. The EU also provides support for rural areas. This means that areas of the UK that are poorer than average, including Cornwall, West Wales and the Valleys, and the Scottish Highlands, benefit from EU funding even though overall the UK is a prosperous country within the EU. For the 2014-2020 period the UK will receive 10.8 bn euros, of a 351.8 bn euro total.
The Instrument for Pre-Accession Assistance provides specific aid for countries due to join the EU. The EU Commission sets its own priorities for how the money from the funds is distributed, with a particular emphasis placed on programmes that can help more than one region and forge direct links between local authorities and the Commission.