Committee Reports > List of Committees > Joint > 1980 > Committee on the Secondary Legislation of the European Communities > Report No. 76 - Community Aid for Infrastructural Development in Ireland

REPORT

Introduction

1. Arising out of discussions with the Commission in Brussels in October, 1979, the Joint Committee decided to examine the operation of the European Regional Fund with particular reference to the availability of aid for infrastructural development in Ireland. This exercise involved the examination of Council Regulation (EEC) No. 724/75 as amended by Council Regulation (EEC) No. 214/79. The Joint Committee has also considered the memorandum sent by the Commission to the Council on 20th November. 1979 (10808/79) on the role of the Community in the development of transport infrastructure as well as the formal proposals by the Commission for new Council Regulations relating to (a) specific Community regional development projects under Article 13 of the European Regional Fund Regulation as amended (9808/79 of 16th October. 1979), and (b) aid to projects in the field of transport infrastructure (R/1665/76 of 8th July. 1976).

2. To get an overall picture of the part played by the Community in investment in infrastructure it is necessary to have regard not merely to the grant aid provided or proposed but also to the other Community instruments which can be used to further the development of infrastructure. For this reason the Joint Committee extended its examination of the question to include consideration of the loans provided by the European Investment Bank (EIB), the New Community Instrument (NCI) or “Ortoli Facility” [Council Decision (EEC) No. 870/78 of 16th October, 1978] and the system of interest-rate subsidies available to Ireland as a result of its participation in the European Monetary System (EMS).

3. A detailed examination of the relevant Community instruments and proposals was carried out for the Joint Committee jointly by two of its Sub-Committees, the Sub-Committee on Economic, Commercial and Financial Affairs, under the Chairmanship of Senator Noel Mulcahy, and the Sub-Committee on Social, Environmental and Miscellaneous Matters under the Chairmanship of Senator Mary Robinson. The Joint Committee is indebted to the Sub-Committees and their Chairmen for their work.

Amendment of Regional Fund

4. On 6th February. 1979, the Council adopted a Regulation No. 214/79 amending Regulation (EEC) No. 724/75 establishing a European Regional Development Fund.

The principal amendments introduced are as follows:

—the size of the Fund will be determined annually as part of the budgetary procedure of the Community

—redistribution of the national quotas to allow for an extra 2% for France in favour of the French Overseas Territories (Ireland’s share, as a result of favourable negotiation, has been maintained at virtually the same level as under the previous Regulation)

—introduction of a non-quota section

—a more flexible definition of eligible infrastructures

—an increased intervention rate, in certain cases, for infrastructural projects (maximum rate of aid increased from 30% to 40%)

—certain administrative improvements, including a system of accelerated payments which will significantly improve the flow of Fund receipts.

New Infrastructure Provisions

5. Under the old Fund Regulation only infrastructures “directly linked with the development of industrial handicraft or service activities” could be aided by the Fund (apart from certain infrastructures covered under Article 3(2) of the Council Directive (75/268/EEC) on mountain and hill farming and farming in less favoured areas). This definition of eligibility was unduly restrictive particularly as far as this country is concerned where the provision of adequate infrastructure is a necessary prerequisite to the attraction of industry to less developed areas.

6. Under the amending Regulation the definition of eligible infrastructure has been widened to include infrastructures “which contribute to the development of the region or area in which they are located”. It will therefore be no longer necessary to establish a direct industrial link in the case of infrastructures for which Fund aid is being requested but merely to demonstrate that it contributes to the development of the area concerned.

7. While the rate of Fund aid for infrastructure will normally be subject to a maximum of 30% of the cost, provision has been made under the amending Fund Regulation so that this rate may be increased to 40% for projects “which are of particular importance to the development of the region in which they are situated”.

8. In adopting the amending Regulation, the Council stated in its minutes that, acting on a proposal from the Commission transmitted after consulting the Regional Policy Committee, it will define the infrastructure measures to which the Fund may grant assistance. The definition will be worked out on the basis of the regional development programme submitted by the Member States and regional requirements for particular infrastructure measures will be determined from these programmes. Thus lists of eligible infrastructures are to be drawn up by the Council and it is hoped that this work will be completed before the next Review of the Fund Regulation which is due by 1st January. 1981. This entry in the Council minutes restricts somewhat the widening of the definition of eligible infrastructure since certain Member States are opposed to widening the scope of the Fund in anticipation of the drawing up of the lists.

9. A further restriction introduced under the amending Fund Regulation is that the total share of the overall assistance granted by the Fund for financing infrastructure cannot exceed 70% of the Fund’s assistance.

Quota and Non-Quota Sections

10. Under the original Regulation the resources of the Fund were distributed in accordance with specified national quotas. Ireland’s share was 6% but an additional sum of six million U.A. was granted to Ireland which was to be deducted from the share of other Member States with the exception of Italy. Investments to benefit from the Fund had to fall within the framework of regional development programmes drawn up by the Member States. Aid was allocated by the Commission from the Fund on the basis of projects submitted by the Member States, separately, in the case of investment in excess of 10 million U.A. and globally at the beginning of each quarter year.

11. Under the amending Regulation 95% of the Fund resources are allocated in accordance with the foregoing procedure. Ireland’s total share of the quota section now being 6.46%.

12. Under the new Non-Quota Section of the Fund created by the amending Regulation the allocation of aid is determined by the Council acting unanimously on a proposal from the Commission and after consulting the European Parliament. The Non-Quota Section is intended to finance specific Community regional development measures:

—either linked with Community policies and with measures adopted by the Community in order to take better account of the regional dimension or to reduce their regional consequences

—or, in exceptional cases, intended to meet the structural consequences of particularly serious occurances in certain regions or areas with a view to replacing jobs lost and creating the necessary infrastructures for this purpose. (It is understood that this latter use of the NQS refers to natural disasters and hopefully will not in practice arise).

13. In adopting the amending Regulation, the Council, acting on an Irish initiative, stated in its minutes that it is prepared to examine, under Article 13 (which provides for the Non-Quota Section) on a proposal from the Commission any requests for aid relating to border problems in the most deserving regions of the Community submitted jointly by two or more Member States concerned.

14. Measures to be assisted under the Non-Quota Section must differ in whole or in part from the types of measures funded under the Quota Section. For the current three year period of the Fund, the resources available for the Non-Quota Section will be limited to 5% of the total resources of the Fund.

15. On 18th October, 1979, the Commission submitted to the Council proposals for Regulations instituting five Non-Quota Section measures. The proposals relate to a five year programme period 1980-85 and the Sectors concerned, the beneficiary Member States in whose territories the regions are located and the amounts (in millions of European units of account) proposed are as follows:—

The Council has not yet taken a decision on these proposals.

Cross-Border Measures

16. The Commission’s proposal is for the implementation of a special five year programme, to be presented by Ireland and the United Kingdom, having as its objective the development of economic activities in the fields of tourism, communications and artisan enterprises. The programme would be carried out in Counties Donegal, Leitrim, Cavan, Monaghan and Louth in the Republic and in the council districts of Londonderry, Strabane, Omagh, Fermanagh, Dungannon, Armagh, Newry and Mourne in Northern Ireland. The programme would be financed jointly by the two Member States concerned and the Community, aid being provided from the Regional Fund for the following operations to the extent indicated:—

(a)Construction and conversion of tourist accommodation—50 per cent of public expenditure.

(b)Establishment or development of bodies with the task of promoting tourism, publicity and good management of tourist accommodation—70 per cent of operating costs of the bodies.

(c)Provision of amenities and tourist-related infrastructure, cultural and recreational facilities including angling and riding and works aimed at improving water sports—50 per cent of public expenditure.

(d)Improvement of communications giving access to tourist areas including construction or modernisation of minor roads and telephone exchanges—50 per cent of public expenditure.

(e)Development of transport activities—50 per cent of public expenditure on subventions towards the net costs of providing transport services, and

(f)Establishment and development of artisan enterprises—50 per cent of public expenditure on aids to investments and 70 per cent of public expenditure on aids for the provision of information and advice.

Transport Infrastructure

17. In November, 1979, the Commission presented a discussion document (10808/79) to the Council on the role of the Community in the development of transport infrastructure. Hitherto the Common Transport Policy has been concerned with freeing transport operations from restrictive regulations, suppressing unfair discrimination and allowing free competition. Progress in these areas has been slow. In the discussion document the Commission argues that “the Common Transport Policy will not achieve the objectives defined for it in the Treaty and play its part in the economy as a whole unless it relates more and more to transport infrastructure”.

18. Hitherto transport infrastructure has been considered as essentially a matter for national Governments. The Commission, however, points to the fact that the volume of intra-Community traffic has been growing twice as fast as the volume of purely national traffic. It, moreover, asserts that (a) existing networks are generally conceived and executed in accordance with national objectives, (b) the link between the development of national networks and transport policies of the Member States is not always evident, (c) priorities have varied from one Member State to another and (d) national programmes differ widely. In the Commission’s view a cost-benefit assessment of infrastructure programmes can vary depending on whether only the benefits to the Member State undertaking the development are taken into account or whether benefits to other member states are also included.

19. The Commission believes that the Community’s interest in transport infrastructure is reinforced by its impact on the economic, industrial, regional, environmental and energy policies of the Community. In relation to regional policy it points to the Community objective of counteracting the centralising forces of the Common Market by distributing economic activity more evenly over the territory of the Community. In the Commission’s opinion it is essential for the success of this policy that “the less favoured regions must have an internal network of communications appropriate to their present and future needs” and also that they “must be opened up and linked to the main centres of the Community by rapid modern routes to reduce, as far as possible, the handicap of distance”.

20. In July. 1976, the Commission made proposals (R/1665/76) for a Council Decision instituting a consultation procedure and setting up a Committee in the field of transport infrastructure and a Council Regulation for aid to projects of Community interest in the field of transport infrastructure. The proposed Decision was adopted by the Council in February, 1978. The Commission is now urging the early adoption of the proposed Regulation. The latter would provide Community aid on a selected basis in the form of “loan guarantees, loans, subsidies, interest rate reductions” for a limited number of important projects particularly (i) projects to remove bottlenecks in Community traffic, (ii) cross-border projects. (iii) projects justified on grounds of Community benefit and (iv) projects which facilitate the standardisation of equipment and the synchronisation of work on the Community communications network.

21. In its recent memorandum the Commission, while suggesting that removal of bottlenecks should have priority, provisionally identifies some links which merit particular attention, these being (a) international rail links between major centres e.g. Amsterdam-Brussels-Luxembourg-Strasbourg, (b) links with peripheral regions e.g. in Ireland links with the North (Dublin-Belfast-Derry) and with the West (Dublin-Cork/Galway), (c) links affected by entry of new Member States, (d) links overcoming natural obstacles e.g. the Channel crossing and (e) “missing links” between existing networks e.g. inland waterway between North Sea and Mediterranean via a Rhine-Rhone canal

Community Loans

22. The European Investment Bank provides loans for regional development as well as loans for modernisation and conversion of undertakings and for projects of common European interest. Loans are disbursed in several currencies or in a single non-Community currency, mainly the US dollar, Swiss franc and yen. As the Bank operates on a non-profit basis its interest rates, which are not subject to revision during the period of loan, are close to those on the financial markets where it obtains the bulk of its funds. At present the Bank’s loans do not exceed 50 per cent of fixed assets. The terms of the loan depend on the nature of the project and repayments, covering both principal and interest, are made in the currency or currencies originally received.

23. The New Financial Investment or Ortoli Facility established by Council Decision 78/870 is designed to provide loans for energy projects and also for investments in infrastructure projects which contribute to convergence and integration, taking into account the regional and employment effects. The total facility amounts to 1,000 million EUA and on 14th May, 1979 the Council adopted a decision authorising the borrowing of the first tranche of 500 million EUA for the instrument on the capital market. Of the latter sum 250 million EUA are to be devoted to infrastructure. The Commission decides on the eligibility of projects in accordance with guidelines laid down by the Council and the European Investment Bank decides on the terms and conditions of the loan.

24. Under the measures designed to strengthen the economies of the countries participating in the EMS Ireland can draw on loans of up to IR£225 million each year (through the European Investment Bank) over a period of five years. A 3% interest rate subsidy applies to these loans which amounts to a subsidy of approximately IR£45 million a year. This subsidy is paid as a lump sum in the first year of the loan period. Accordingly if Ireland avails itself of the full amount of the loans on offer it will benefit from resource transfer of approximately IR£225 million over five years.

Loans and Grants to Ireland

25. The borrowings by Ireland under the Community loan instruments in 1979 were as follows:—

Loans under (i) were concentrated on infrastructure. Of the loans under (ii) IR£17.5 million was in respect of global loans to ICC and ACC for on-lending. Loans under (iii) were for infrastructure and energy projects.

26. By comparison some IR£41.7 million in grant aid was committed in 1979 to Irish projects (of which IR£21.9 million was in respect of infrastructure) under the European Regional Development Fund. Actual receipts amounted to IR£25.55 million. The contribution of the fund can be further illustrated by a reference to the grants made available for road improvement in Ireland.

27. The following figures show the amounts of investment, by the Department of the Environment, in road improvements on National Primary and National Secondary roads, since the Fund was established and the overall amounts of expenditure put forward for aid:—

IR£000.000

28. The total amount of aid from the Regional Fund due on foot of roads projects for the period 1975-1979 amounts to IR£ 11.24m. or roughly 30 per cent of the total expenditure put forward. Since the establishment of the Regional Fund in 1975 Ireland has taken up its full quota of aid in each year. Therefore an increased amount of roads projects put forward would not have increased the amount of aid received from the Fund.

Review of the Regional Fund

29. The widening of the definition of infrastructure to include “infrastructures which contribute to the development of the region or area” is welcome. However until the Council defines the actual infrastructure measures to which the Fund may grant assistance it is not certain what the practical effect will be. It seems to the Joint Committee that the amended definition is wide enough to comprehend social infrastructures such as hospitals, schools, technical colleges, etc. and it hopes that the Council will be persuaded to endorse such projects as eligible for Fund aid.

30. The present Regional Fund, amounting to about IR£1,725 million over the three year period 1978-80, represents a significant increase on the original Fund which amounted to about IR£531 million over the three year period, 1975-77. Nevertheless it remains completely inadequate for the task of reducing regional imbalances in the Community. In 1979, for example, Ireland’s actual receipts of IR£25 million amounted to only about 2.5 per cent of the expenditure on the Public Capital Programme. Moreover under the present Regulation the Fund’s resources, such as they are, are not being concentrated on the most needy regions of the Community. Regions comprising half of the territory of the Community and containing almost 40 per cent of its population continue to be eligible for Fund assistance.

31. The Joint Committee cannot believe that the method of administering the Fund and particularly the quota section is as efficient as it might be. The Commission is involved in deciding on and supervising a large number of individual projects in the Member States. The Joint Committee understands that at present 7,000 to 8,000 projects are being aided by the Fund. In Ireland the Department of Finance co-ordinates the submission and processing of this country’s applications for Fund assistance. It relies on submissions from the Departments and Agencies directly responsible for the projects. The latter, in preparing submissions, must have due regard to (1) the Fund Regulations, (2) discussions which have taken place at the Fund Management Committee and the Regional Policy Committee (both of which monitor the operations of the Fund) and (3) whether a project is a priority one which can be financed from the Public Capital Programme in the year in question. When preparing its submission to Brussels the Department of Finance consults the Departments of Agriculture. Environment. Fisheries and Forestry, Industry, Commerce and Tourism. Energy. Posts and Telegraphs. Transport and Roinn na Gaeltachta, together with the I.D.A., Gaeltarra Éireann and S.F.A.D.Co. Another result of the present system is that local authorities are now subject to four audits, namely, an internal audit, a Department of the Environment audit, a Commission audit and an audit by the Board of Auditors. All of this adds up to a great deal of bureaucratic activity which the Joint Committee doubts can be justified by the results. Irish projects are drawn from those activities already qualifying for and in receipt of State assistance. Projects which qualify for grant aid are not of the type that would ultimately have to be abandoned for lack of funds. The Joint Committee believes that the most the Regional Fund achieves is that some projects can be given a priority which they might not otherwise command.

32. The Regional Fund is due for a review which must be completed by the Council, acting on a proposal from the Commission, before 1st January. 1981. The Joint Committee hopes that this review will result in a radical reform of the Fund. Of prime importance is the provision of adequate resources. Without such the Community can never be seen to be contributing effectively to the solution of regional problems. It is also essential to concentrate the resources of the Fund far more on the more needy areas of the Community. In the Joint Committee’s view unless the Fund is reformed along those lines it will not play a significant role in relation to the infrastructural needs in this country.

33. The Joint Committee would also hope that the review will result in a far simpler system of administering the Fund. Possibly whatever aid is available should be for some specific and precise programme, which would be within the framework of the overall regional development programme, rather than for a number of individual projects.

Contribution of Community Loans

34. As can be seen from the figures already cited EIB and NCI loans make a much larger contribution to financing investment in infrastructure development than does the Regional Fund. However these loans are granted under the prevailing conditions of the capital markets. Moreover recourse to loan facilities must depend on ability to service an increasing public debt which in turn depends on increasing economic growth. As far as Ireland is concerned, therefore, further Community measures designed specifically to meet the requirements of infrastructure policy are necessary and for that reason the Joint Committee welcomes the Commission’s discussion paper on transport infrastructure.

Transport Infrastructure

35. The Joint Committee believes that the Commission is correct when it claims that the objectives of the Common Transport Policy will not be achieved unless the Community involves itself much more with transport infrastructure. In this area the Commission is not exclusively or even primarily concerned with infrastructure in less favoured regions. Indeed one of the arguments it uses for the adoption of its 1976 proposal for Community aid for projects in transport infrastructure is the regional orientation of some of the existing Community instruments. However it does acknowledge that the proposed Regulation, if adopted, could help to counteract the centralising forces of the Common Market by aiding the development of transport infrastructure in the less well equipped peripheral regions of the Community. Moreover the proposed Regulation seeks to provide aid not merely by way of loan guarantees, loans and interest rate reductions but by way of subsidies as well. In 1976 the Commission was unable to put a figure on the financial implications for the Community if its proposals were adopted. However in view of some of the projects mentioned by the Commission it is clear that the financial provision would have to be substantial if the Community were to play a significant role. The Joint Committee believes that it may be in Ireland’s interest to support the adoption by the Council of the proposed Regulation and to seek to have some grant aid assistance provided thereunder for the Government’s Road Development Plan for the 1980’s. The Committee also believes that consideration should be given to seeking Community aid for the development of rail links between centres of population in areas such as the West of Ireland and the integration of railways into the overall development of transport infrastructure.

36. The Irish Road Development Plan was laid by the Government before each House of the Oireachtas. The Plan provides that priority in investment will be given to the more important major urban and inter-urban roads, access routes to the principal seaports and airports, and to relief roads and internal circulation roads in Dublin, Cork, Limerick, Waterford, Galway and other important commercial centres. The Plan provides for action on two fronts: The first is a substantial programme of what are termed “normal” improvement works designed to bring all sections of the National Primary Routes and significant sections of the National Secondary Routes up to a minimum standard for “two-lane roads”, that is, a two-lane carriageway of 7.3 metres wide with a paved shoulder of between 2 and 3 metres on each side. The programme of "normal" improvements will include road realignments, road widening and the eradication of accident black-spots. The second is a special programme of major improvement projects including dual-carriageways, bridges, relief roads and by-passes in the major urban centres and on the principal inter-urban routes. The Plan contains a comprehensive list of the proposed major improvement works.

37. It has been estimated that the aggregate cost of maintaining the existing road system to an acceptable standard during the period of the plan will be over IR£475 million, of which IR£73.5 million will be required for the upkeep of the National Primary and Secondary Roads. The total level of investment envisaged for the improvement of the road network is almost IR£600 million, of which three-quarters will be applied to the development of National Routes and major urban roads. These estimates are based on constant 1978 prices.

38. The major works programme includes substantial improvement of those national routes which are called E-routes in the context of Europe’s network of major highways. E-routes are roads which have been provisionally designated by the Inland Transport Committee of the UNO Economic Commission for Europe (E.C.E.) as suitable for development for international traffic requirements. The plan therefore is designed to improve roads which form part of a greater European road network and to make for the better connection of our centres of industrial production with major ports and airport termini. In the Joint Committee’s view the successful implementation of the plan would be very much in the interest of the Community as a whole.

39. The Joint Committee believes that the road development envisaged by the plan is no more than what is essential for Ireland’s economic development. In no sense can the plan be described as extravagant, and even if fully implemented will not include a motorway. In the Joint Committee’s opinion a strong case can be made for special assistance from the Community towards speeding up the implementation of the plan. Apart from aiding the economic development of this country and thereby reducing the gap between Ireland and the more developed regions of Europe such assistance would have the direct effect of stimulating intra-Community trade. The Regulation proposed by the Commission in 1976 might, if adopted, prove a vehicle for such assistance.

Cross-Border Programme

40 The proposed Regulation to provide aid from the non-quota section of the Regional Fund for the border areas is somewhat limited in scope being confined to tourism and artisan activities. Moreover the aid proposed is modest. Certain tourist roads in the border Counties may benefit but the details of the programme are not yet known. However the Joint Committee wishes to welcome the proposal and to acknowledge that it represents an expansion of Community concern for the problems of the Irish Border region.

Conclusions of the Joint Committee

41. One of the fundamental objectives of the EEC is to promote economic convergence by removing regional imbalances. When Ireland joined the Community the other Member States recognised that it was in their common interest that the Irish Government should attain the objectives of its “policy of industrialisation and economic development designed to align the standards of living in Ireland with those of the other European nations and to eliminate underemployment while progressively evening out regional differences in levels of development”. If these objectives are to be attained the Joint Committee believes that substantial and sustained investment in infrastructure such as roads, railways, communications, sanitary services, ports and harbours is of paramount importance. While the primary responsibility for ensuring such investment rests on the Irish Government the Committee believes, in view of commitments recorded in Protocol 30 to the Treaty of Accession, that Ireland is entitled to look for significant aid from the EEC particularly in those areas of development which are clearly in line with the expressed policy of the Community. While the Committee considers that the administration of the Regional Fund can be improved it does not believe that this Fund can play a significant role unless the grant aid provided by the Fund is considerably increased. In the area of transport structure where substantial improvement is needed in Ireland the Committee supports the Commission’s view that the aims of the common transport policy call for direct Community involvement and it urges that the proposed Regulation submitted by the Commission be energetically supported. Finally the Committee wishes to acknowledge the significant assistance received by Ireland by way of Community loans particularly since the EMS interest free subsidy became available.

Debates in the House

42. In view of the importance of infrastructural development in Ireland the Joint Committee requests that a debate on this report take place in each House in accordance with the Orders of Dáil Éireann and Seanad Éireann of 17th October, 1979 and 6th February, 1980, respectively.

Acknowledgements

43. The Joint Committee is extremely grateful to the Economic and Social Research Institute, An Foras Forbartha and the Departments of Finance and the Environment for their help in considering this matter. It also owes a particular debt of gratitude to M. Jean Jaeger of the Directorate-General on Regional Policy. Commission of the European Communities. At the invitation of the Joint Committee M. Jaeger met the Joint Committee’s Sub-Committees in Dublin and the Committee wishes to express its thanks for the informative briefing he provided on the occasion.

(Signed) ALEXIS FITZGERALD,

Chairman of the Joint Committee.

11th June, 1980.

^* Projects put forward for aid in 1978 could have started in 1977 and continued on into 1979.