Wednesday, August 11, 2004

Objectionable headlines

One of the more objectionable type of headlines one sees – usually in local or regional newspapers – is exemplified by one today in the Scotsman, proclaiming: "Scots projects win £28m in EU funds".

The story relates to an announcement by Lewis Macdonald, the deputy enterprise minister, of awards of "£28 million of European funding to boost skills across Scotland". The headline is immediately objectionable on one central ground: it is not "European funding" but simply the EU returning some of our own money, with considerable strings.

To get that money in the first place, we will have had to pay into the kitty in the first place, and more than we get out. Assuming – and the rate varies year-on-year – we paid in total £9 bn into community finds, we would expect to get back after the rebate something about two-thirds of that. On that basis, simply for Mr Macdonald to be able to announce his £28 million “awards”, we the taxpayers will have paid and "above the line" figure of £42 million into the kitty.

However, that is the "above the line" figure. These are moneys paid out of the European Social Fund (ESF) and, because of the rebate agreement settled by Margaret Thatcher at Fontainebleau in 1984, whenever we draw down fund from the ESF, this affects our rebate calculation through what is called the "claw-back" mechanism – currently 71 percent.

Basically, therefore, for every pound that we draw down, the EU "claws back" 71p from the rebate. Thus, by "giving" the Scots £28 million, the EU is then able to claw back £19.88 million, so in fact the net receipt is only just over £8 million.

It gets worse. This is "Objective 3" funding so, for any scheme to qualify for an "award", match-funding must be found – currently at a minimum of 55 percent. In order to get the £28 million, therefore, an additional £34.22 million must be found.

As most of this comes directly or indirectly from public funds, what we find therefore is that to get what actually amounts to £8.12 million from the EU, the taxpayer must spend £42 million in the first place and then add another £34.22 million in order to qualify for the money. In other words, in round figures, we the taxpayers pay £76 million and we get to see £8 million of our own money given back to us by the EU. Then the Scotsman reports that we are being "given" £28 million of EU funding.

See why the headline is objectionable? And we haven’t even discussed what the money is to be spent on.

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