The European Union
Whereas the UK had been one of the principal ‘beneficiaries’ of the old style ERDF (though little real benefit was actually attained), the new allocation of funds which gave priority to objective one regions meant the UK’s (with northern regions initially no higher than objective two status) share greatly diminished (table 1). Inevitably this had a decidedly negative effect on declining coal, steel and textile industries in the north (Cheshire, 1991).
By 1994 however, two regions in the UK (Merseyside and the Scottish Highlands) had the dubious honour of achieving objective one status in the eyes of the Commission and thus were entitled to a significantly larger proportion of the available funds (Independent, 1993). Whilst this new ranking does offer some glimmer of hope for the Merseyside and Highlands region in the shape of new available capital for the area, their slide down the rankings is perhaps indicative of the general failure of EU regional policy.
This failure is still predominantly attributable to the woeful lack of capital in the structural funds, a factor that is seen to be inextricably linked with the overfunding of the Common Agricultural Policy. Another reason that explains its apparent ineffectiveness is however related to the subversive activities of (the UK) government and their treatment of the funds.
Whereas the structural funds are supposed to supplement national government grants to problem regions the UK government has in many cases been solely utilising EU aid, justifying the decision via reference to the large UK contribution to the CAP and the budgetary deficit it leaves (Financial Times, 1991, Hitiris, 1991, Times, 1991, Marks, 1992, Financial Times, 1993). The conflict between the EU and UK over this matter has been so intense that “Ministers have been warned over [a loss of] i?? 1 billion EC aid” (Financial Times, 1993, p8a) if they do not start conforming to the rules and matching EU allocations.
However, although the EU in the SEA (and in practice) have tried to introduce policies/funds to “reduce disparities between the various regions and the backwardness of the least-favoured regions” (SEA cited Franklin, 1990, p70) the conflict that exists between the notions of (interventionist) regional policy and the operation of a neoclassical market place represents a dichotomy that is difficult to resolve and that, consequently, has important implications for the UK and in particular its north.
The EU pursuit of a ‘level playing field’ where free and fair competition can proceed apace has placed limits on the tools available to national government to promote regional development. For example, state aids to uncompetitive industries have been deemed incompatible with EU ideals and therefore have been abolished or harmonised throughout the Community (Cheshire, 1991).
This meant, for example, that in 1977, shortly after the UK entered the EC, Regional Employment Premiums probably the most significant developmental instrument of the time but one that favoured manufacturing firms in (northern) special development areas had to be phased out. Similarly, negative location controls, such as the 1945 Building Licences and 1948 Industrial Development Certificates, which effectively allowed the government to prohibit development (usually in the south-east) were also abolished since they disfavoured regions and therefore upset the notion of competition on equal footings.
Consequently, when related to the structural and competitive weaknesses of the manufacturing base in the north of UK such a free market program has the potential to severely reduce industrial capacity and deepen the north-south divide in the UK further (Cheshire, 1991). Such a program also has profound implications for another problem being experienced in the UK at present and one that is intimately tied with the north-south divide: over congestion in the south-east (primarily London).
Hitiris (1991) notes that such an area also constitutes a problem region since the high degree of agglomeration economies which it offers results in a concentration of economic activity deemed to be excessive because, “… it combines the social benefit of increased economic activity with rising social costs associated with overpopulation, congestion, pollution, noise and other urban problems” (Hitiris, 1991, p239).
Unlike the north then, the regional problem is how to divert economic activity to reduce congestion and prevent ‘overheating’ of the urban system. In such a situation, previous UK governments would have been able to implement negative location controls on London and the south-east and favourable location controls in northern areas that would hopefully promote a diffusion of excess economic activity northwards and reduce national disparities. Two reasons now exist that make such a policy impractical.
Firstly, membership of the EU has made that option ‘illegal’. And secondly, even if a legal technicality could be found or the EU reversed their decision regards such a program of controls the increased mobility in the Single European Market would probably result in firms moving to Paris or Hamburg or other Euro-core regions rather than northwards towards the UK periphery. Inevitably, the risk is that a market system already shown and believed to have imperfections is left to prevent urban ‘overheating’ without any intervention from national government.
The Community’s wish to impose a Social Chapter of Workers Rights as part of the 1992 Maastricht Treaty, had it been signed by the UK, would also have increased the peripherality of the north and drawn the south further into the core of Europe. Presently, one of the only saving factors of the north being peripheral and having higher than average unemployment rates is that branch-plants from multinational corporations are being attracted by low labour costs and the access they gain to the EU market (Minshull, 1991).
The Social Chapter, in its attempts to prevent ‘social dumping’ and create a ‘level playing field’, wishes a minimum wage (along with other rights) to be imposed throughout the Community. Should this be implemented it would eradicate probably the only advantage peripheral regions such as the north of Britain have a comparative advantage in and cause a relocation of industry again towards the core that would obviously heighten the degree of regional disparity. Just as social and economic policies have had a positive and negative impact on regional development in the UK so too has the Common Agricultural Policy (CAP).
This policy assumes the largest budgetary importance in terms of EU spending; in 1986 it accounted for 70 per cent of the entire Community budget, with 96 per cent of this going on the price guarantee section of the EAGGF (Nevin, 1990). As previously mentioned, the overwhelming financial dominance of this policy has placed severe constraints on the potential impact of other European (regional) policies. In this sense at least, the CAP can be said to have indirectly contributed to a widening of the north-south divide. However, it has also had its own direct impact on the regional structure and standing of parts of the UK.
Forcing British farmers to switch the source of their agricultural supplies from the traditional low-cost producers of the Commonwealth to the high-cost producers of Europe has inevitably favoured large farm holdings and hence has put the occupants of small farms out of business (Harvey and Thomson, 1985). Quite clearly, this will have affected the degree of intra-regional disparity in rural/agricultural regions (Nevin, 1990). Harvey and Thomson (1985) though trace a scenario where the controversial price guarantee section of the EAGGF is removed from the CAP and discover that significant benefits have been accrued.
Their theory begins with falling product prices, and goes on to see production of livestock therefore becoming increasingly uneconomic and consequently a change in the pattern of land use by farmers towards cheaper cereal production. Overproduction of cereal then results in a dramatic fall in prices and a subsequent reduction in farm incomes. Their conclusion is that without the guarantee section of the EAGGF, the dramatic fall in farm incomes would result in a rapid out-migration from rural areas that would have increased pressures elsewhere (Harvey and Thomson, 1985).
In conclusion, it can be seen that UK membership of the European Union has had profound implications for national levels of regional development. Probably the single most important problem membership has bestowed on the UK is regards an exacerbation of the existing north-south divide predominantly via the increased mobility of goods, capital and labour in a Single European Market, though many other EU policies also favour the core.
Yet whilst this is true, it is also true that the EU has recognised the inability of free market mechanisms to ensure reasonably equitable levels of development and thus has begun to take on board the responsibility of a Community regional policy. Presently however, the monies available for such policies are too trifling to have much of an effect on regions suffering from welfare disparities and structural decline since the majority of Community funds are tied up in the CAP.
Although criticised as a waste of resources, evidence suggests that had the EAGGF not been in place the Community would have seen a massive outmigration from rural areas that would have compounded the position of the declining industrial areas and congested urban centres. It thus appears that either individual national governments are going to have to assume responsibility for their own problem regions and grant aid for the general good of the country or their expenditure to the EU will have to be increased to make existing policy frameworks more effective.
If it is the latter option that is to be pursued then the current branch of academic thought that sees a hollowing out of the nation-state appears to be justified as regional issues increasingly become scrupilised at a European, rather than a national, level.
BIBLIOGRAPHY Armstrong, H (1989) “Community Regional Policy”, In Lodge, J (ed) The European Community and the Challenge of the Future, London, Pinter, pp167-186. Champion, AG and Townsend, AR (1990) Contemporary Britain: A Geographical Perspective, London, Edward Arnold.
Cheshire, P et al (1991) “1957-1992: moving towards a Europe of regions and regional policy”, In Rodwin, L and Sazanami, H (eds) Industrial Change and Regional Economic Transformation: The Experience of Western Europe, London, Harper Collins, pp268-300. Clout, H et al (1994) Western Europe: Geographical Perspectives, third edition. Daniel, W et al (1993) “UK: Shaping Factors”, In Jacquemin, A and Wright, D (eds) The European Challenges post-1992, Aldershot, Edward Elgar pp424-462. Financial Times (1991) “EC holds back i??100m aid for mining regions”, 26/7/91 p7a. Financial Times (1993) “Ministers warned over i?? 1 billion EC aid”, 25/2/93 p8a.
Franklin, M (1990) Britain’s Future in Europe, London, Pinter. Harvey, D and Thomson, K (1985) “Costs, Benefits and the Future of the Common Agricultural Policy”, In Journal of Common Market Studies, vol. 24 no. 1 pp1-20. Hitiris, T (1991) European Community Economics, second edition. Independent (1993) “EC cash for Scots and Merseyside”, 25/2/93 p1d. Leonard, D (1993) European Community, London, Economist Books.
Marks, G (1992) “Structural Policy in the European Community”, In Sbragia, AM (ed) Euro-politics, Washington, Brookings, pp191-224. Marsh, JS (1989) “The Common Agricultural Policy”, In Lodge, J (ed) The European Community and the Challenge of the Future, London, Pinter, pp148-167. Minshull, GN (1990) The New Europe, London, Hodder and Stoughton. Nevin, E (1990) The Economics of Europe, London, Macmillan. Times (1991) “Regions miss out on i?? 1bn EC aid”, 23/12/91 p2h. Times (1993) “EC approves i?? 7m aid”, 22/12/93 p18g. Wise, M and Gibb, R (1993) Single market to social Europe: The EC in the 1990s.