Committee Reports::Report No. 10 - Youth Employment::03 May, 1978::Appendix



1. The European Social Fund

The European Social Fund was set up under Article 123 of the Treaty of Rome “in order to improve employment opportunities for workers in the Common Market and to contribute thereby to raising the standard of living”. It was given “the task of rendering the employment of workers easier and of increasing their geographical and occupational mobility within the Community”. Shortly before Ireland’s accession to the EEC a review of the Fund had taken place, which resulted in the establishment of a reformed Fund under Council Decision 71/66 (EEC) of 1 February, 1971. The new Social Fund, as it was called, was intended to be a much more dynamic instrument than the old Fund, an instrument which would play a much more significant role in influencing Community employment policy and which would have a much broader scope. The new Fund was brought into operation with effect from 1 May, 1972, seven months before Ireland acceeded to the Community.

2. Budgetary Division of the Fund

The new Social Fund operates under a fixed budget, or to be more precise, under three budgets which are determined in advance as part of the general Community budgetary arrangements each year. The three budgets under the new Fund cover the three broad types of projects which were introduced under the 1971 Council Decision. Two of the budget headings relate to what are known as Article 4 and Article 5 projects so called after the Articles of the 1971 Decision which brought them into being. The balance between appropriations reserved for action under Article 4 and Article 5 is predetermined by the rule contained in Article 9 (2) of Decision 71/66/EEC as amended by Decision 77/801/EEC. This rule provides that appropriations for interventions in respect of operations under Article 5(1) which are carried out in regions referred to in Article 5(1)(a) shall not in any one year be less than 50 per cent of the total appropriations available. The third budget heading which accounts for a very much smaller part of the total resources devoted to the Social Fund, is intended to assist preparatory studies and pilot schemes. This broad division of the Fund’s budget into three categories still obtains. The types of operations covered under each category are explained in the following paragraphs.

3. Article 4—Provisions

Fund assistance under Article 4 is available when the employment situation is affected or likely to be affected following the adoption of specific measures by the Council in the framework of Community policies, or by action decided upon by joint agreement to encourage the achievement of the Community objectives, or where the employment situation calls for specific joint action to improve the balance between the supply and demand for labour in the Community. The categories which are eligible for Article 4 assistance have to be specially designated by the Council. Put more simply, though perhaps less precisely, Article 4 caters for particular employment problems which result from some policy or policies adopted by the Community, or problems which apply on a wide-spread scale throughout the Community.

4. Categories Designated Under Article 4

At present, under Article 4, there are five categories which the Council has designated as eligible for assistance from the Fund. The categories and the main operations which are assisted by the Fund under each Decision are briefly as follows:

(i)Persons in the textile and clothing industries—retraining for jobs in other industries or for different jobs in textile/clothing

(ii)Persons leaving agriculture—retraining for jobs outside agriculture

(iii)Migrant workers—training and integration measures of migrants moving from one Community country to another; integration measures only for migrants from outside the Community

(iv)Young persons (under 25 years)—schemes, mainly vocational training, to help young people on the labour market to find employment; assistance is limited, in practice, to first job-seekers

(v)Women—training schemes for women over 25 who have lost their jobs or who are seeking work for the first time or after a long absence from work who have no qualifications or insufficient qualifications, interpreted to mean unskilled or semi-skilled women. There are some other limiting conditions.

The terms of the Council Decisions relating to the different categories of Article 4 intervention vary, but the basic objective in all cases is to provide for Fund assistance towards measures designed to facilitate the employment of persons in the problem categories concerned.

5. Article 5—Provisions

The terms of Article 5 have been amended as a result of a general review of the rules of the Fund carried out in 1977—but its broad objectives remain unchanged. It deals with measures to resolve employment problems which are not the direct result of any specific Community policies or which are not to be found throughout the Community. One of the objectives of Article 5 is to help to deal with employment problems which impede the harmonious development of the Community and under this heading comes the main area covered viz. measures to help in resolving employment problems in “regions which, because they are less developed or there is a decline in their main activities, suffer a serious and prolonged imbalance in employment”. Priority is given in practice to training of unemployed workers. Article 5 also covers certain measures designed to provide new or improved skills for workers whose employments are affected by technological progress or changes in production or marketing conditions. Finally an important aspect covered by Article 5 concerns measures to facilitate the entry or re-entry of the handicapped into open employment.

6. Preparatory Studies and Pilot Schemes

So far as the assistance for preparatory studies and pilot schemes is concerned, these are studies and schemes relating to employment of a novel or experimental character which are likely to be of interest to the Community as a whole. Assistance is not provided for pure research. Any studies undertaken with Fund assistance must clearly be intended to lead to practical projects. Pilot schemes carried out with help from the Fund cannot involve more than 30 jobs. Unlike programmes eligible under Articles 4 and 5 which must be subvented wholly or partly by the Member State in which they take place preparatory studies and pilot schemes do not have to be in receipt of financial assistance from the appropriate national Exchequers in order to qualify for Social Fund assistance. The contribution of the Social Fund towards such studies and pilot schemes may not exceed 50% of the total cost. The basis on which Fund assistance for other types of programmes i.e. under Articles 4 and 5, which may be regarded as the normal programmes which benefit from the Fund, were specified in the basic Decision of 1971 establishing the reformed Fund.

7. Basis of Social Fund Financing

The 1971 Council Decision laid down different formulae to govern the rate of Fund assistance applicable to (a) operations carried out by public authorities in Member States and (b) operations undertaken by private concerns. The Decision provided that a public authority would be eligible to receive 50% of eligible expenditure on approved operations, whereas a private body would qualify for an amount equal to the amount of subvention from the public funds of the Member State in question towards the costs of an approved programme. These provisions continue to apply to programmes carried out in the Community generally, but for operations carried out in five less-developed Community regions which are recognised to have especially difficult employment problems, including the whole of Ireland, the rates of intervention by the Fund have been increased by 10% with effect as from 1 January, 1978. This means that in approved operations undertaken by Irish public authorities the Social Fund will now contribute 55% of the cost instead of 50% and that the Fund’s contribution towards the costs of approved operations by private bodies will be increased pro rata related to the amount of contribution from Irish public funds. The increased intervention rate for operations in Ireland and the other specified less-developed Community regions was introduced following the general review of the Fund which was carried out in 1977.

8. Amendments Following 1977 Review

The general review of the Fund which was undertaken in 1977 was carried out in accordance with the terms of the basic Decision of 1971 which contained provision for such a review. The review covered the basic Decision and various implementing regulations as well as other matters pertaining to the operation of the Fund which had no legislative implications. The main outcome of the review was that the broad structure of the Fund i.e. the division into Articles 4 and 5, was maintained though some changes were made in the text of Article 5 including the concentration under that Article of all assistance for programmes of vocational rehabilitation of the handicapped which was previously spread over the two Articles. The increases in the Fund intervention rate for operations carried out in certain less-developed Community regions was a significant result of the review so far as Ireland was concerned.

9. As part of the general review exercise, the Article 4 interventions relating to persons employed in the textiles and clothing industry, migrant workers and young persons, which were all due to expire at dates in mid-1977, were first extended to 31 December, 1977 and then for a further three years up to the end of 1980. The Article 4 decision relating to retraining of persons leaving agriculture required no extension, as it contained no termination date; it was and remains open-ended. In conjunction with the review also, the new Article 4 intervention to help measures designed to promote the employment of women was introduced. Finally, the review resulted in a number of changes in the administrative requirements relating to the Fund, designed to improve procedures and particularly to speed up payments.