Strengthening EU Cohesion Policy: The vital role of delivery systems and budget allocation
April 2024
Cohesion Policy represents a cornerstone of the EU’s efforts to promote economic, social, and territorial cohesion across its member states. Yet, for this policy to truly fulfil its mission, it must be backed by a strong delivery system and sufficient budget.
The report of the group of high-level specialists on the future of Cohesion Policy (S'ouvre dans une nouvelle fenêtre), argues that Cohesion Policy and its delivery system must evolve to align with the changing socio-economic governance landscape of the EU. Furthermore, the budget for Cohesion Policy in the EU post-2027 should increase, reflecting the substantial needs and challenges within the EU. Reducing investment in cohesion would be a mistake and a significant step backwards.
The backbone of Cohesion Policy: A Robust Delivery System
A well-functioning delivery system is the backbone of Cohesion Policy. The delivery system of Cohesion Policy is intricate, designed to ensure responsible and targeted use of funds. This system emphasises thematic concentration, strategic objectives, accountability, shared management, partnerships, and multi-level governance. It is a system designed with a certain level of flexibility to adapt to regional contexts, changing circumstances, and crises, which is crucial for its success. Indeed, it is this structure that allows Cohesion Policy to maintain its focus on long-term goals for cohesion and development across regions.
However, this delivery system, despite its strengths, is not without challenges. It has been critiqued for its complexity, which affects the efficiency and returns on investment. While the policy's complexity including e.g. the implementation of conditionalities, is designed to enhance its effectiveness, it has also been points of contention. Simplification efforts, therefore, must continue to focus on reducing this complexity and enhancing the institutional capacity of the various players involved in policy delivery.
There have been various efforts to both improve and simplify the delivery system of Cohesion Policy to enhance the effectiveness and efficiency of how Cohesion Policy is implemented, while maintaining its integrity and effectiveness.
The regulatory framework for the 2021-2027 period e.g. aims to simplify the delivery and management of Cohesion Policy and some of the features include financing through the extended possibility to use Simplified Cost Options (SCOs) and Financing Not Linked to Costs (FNLC), enabling conditions, reduced audit requirements and control systems, simplified eligibility rules for beneficiaries, simpler reporting from beneficiaries, result-oriented approach, reprogramming and simpler procedures for applications. These measures are steps towards reducing the administrative burden and making the policy more accessible and responsive to the needs of regions across the EU.
In addition, many flexibilities have been introduced to respond to the crises from COVID-19 and the Ukrainian refugee and energy crises caused by Russia’s war on Ukraine. As a response to crises, the EU introduced new policies and crisis instruments such as CRII/CRII+, REACT-EU, CARE/CARE+, FAST-CARE, REPowerEU and SAFE.
Yet, the balance between simplification and maintaining rigorous standards for funding allocation remains a delicate one. Despite its proven adaptability and success, the delivery system of Cohesion Policy faces criticism for its complexity.
A few discussion points for further improvement of the delivery system are highlighted in the report of the group of high-level specialists on the future of Cohesion Policy. They include the following:
Stick to the principles. Key principles of Cohesion Policy such as the partnership principle, multi-level governance, shared management and subsidiarity should continue to be important in a changing future. They are preconditions for enhancing government quality, effectiveness, transparency and accountability, i.e. for wise spending, strengthening democracy, trust in public institutions, economic growth and the returns of Cohesion Policy investments.
Empower sub-national players. The future of Cohesion Policy also depends on empowering sub-national players, which is an important level for public investment. Capacity building at the sub-national level is crucial for public investment and civil society representation. This includes not just individual training but also organisational and territorial capacity development, which enhances participation, transparency, and accountability. Such comprehensive capacity building helps to improve Cohesion Policy implementation and also aids in the execution of various policies across Europe. This point has also been addressed in an earlier blog post on governance (S'ouvre dans une nouvelle fenêtre).
Simply the delivery system. A further simplification of the delivery system is essential. Firstly, this may include a reduction in the number of funds. For many people the differences between the multitude of funds are incomprehensible. Clear criteria, better vertical coordination, and greater homogenisation are needed to improve the public perception, efficiency of partnership principles and co-financing. Secondly, the policy's effectiveness has also been compromised by excessive bureaucracy resulting from multiplying conditionalities, often unrelated to its ultimate goal. Despite scepticism towards the idea of conditionalities, some are potentially beneficial. One may need to differentiate between (a) endogenous or efficiency conditionalities, and (b) exogenous or compliance conditionalities to see which conditionalities should be strengthened as integral part of Cohesion Policy and which belong to a broader general EU policy framework. Thirdly, shifting the focus towards performance-based approaches can help to simply the delivery system. While simplification should not compromise the quality of programming, it is vital to ensure that it does not impose additional burden to various levels of implementation.
The crucial role of budget in shaping policy outcomes
Besides improvements of the delivery system, budgetary considerations are pivotal in determining the scope and impact of Cohesion Policy. Cohesion Policy plays an important role for strengthening social, economic and territorial cohesion across EU regions, and addressing the consequences of external shocks, such as COVID-19 and the war in Ukraine. Adequate funding is essential not only for maintaining the policy's current level of operations but also for ensuring its capacity to respond to future challenges and enlargement.
Certainly, Cohesion Policy is the largest and most successful territorial development policy in the world and involves the biggest budget globally to reduce disparities in development across regions. Still, in relation to the task or objectives of economic, social and territorial cohesion, the budget remains rather limited.
Furthermore, in every round of budget negotiations there are voices arguing for a reduction of the budget lines for Cohesion Policy. The policy's share of the EU budget has seen fluctuations, influencing its ability to address disparities and respond to crises effectively.
Since the early 1990s, Cohesion Policy accounts for about 1/3 of the EU’s budget, i.e. the Multiannual Financial Framework. Since 2007 this share has decreased continuously. In particular with the introduction of NextGenerationEU the share declined substantially. The share for the economic, social and territorial cohesion in the EU budget for the 2021-2027 period is 30.5% excluding NextGenerationEU, and 20.8% including NextGenerationEU. This underlines the need for a concerted effort to ensure that Cohesion Policy is adequately funded in the future.
As the EU looks towards future challenges, including potential enlargements and the ongoing transitions to a green and digital economy, the need for a strong Cohesion Policy is more evident than ever. This requires also ensuring that it is adequately funded.
Cohesion Policy can solve many problems the EU faces and contribute to a more efficient and innovative EU that offers a better quality of life for its citizens. Key arguments for a strong budget for Cohesion Policy post 2027 include the following:
Cohesion Policy helps mastering EU challenges. The EU is at risk due to external challenges and internal ones which push people and places apart. To address the risks, Cohesion Policy matters. The EU is becoming less relevant globally not least due to its diminishing economic dynamism. Potential across the whole EU must be used to boost economic dynamism. Making less developed regions more dynamic can create positive feedback loops which also benefit prosperous urban areas. The EU faces integration challenges as ongoing polarisation drives discontent and risks pitching Europeans against each other. Cohesion Policy can emphasise democracy, integration and solidarity as important characteristics of the EU. Cohesion Policy can help regions and people in Europe to navigate development challenges and uncertainties. This also contributes to stronger economic, social and territorial cohesion.
Cohesion Policy offers development perspectives. Cohesion Policy helps to support places and people facing low development prospects, lack of economic dynamism, and lack of opportunities. It also supports territorial cooperation, rural development, rural-urban links, demographic transition and enlargement. For demographic change and the brain drain, it is important to offer prospects for young people and not constrain their ability to move around the EU.
Cohesion Policy offers a long-term perspective. In many EU policies, there is a risk that short-term gains are prioritised over strategic long-term investments. Cohesion Policy is well-established to further long-term EU objectives of structural change including a green, social, connected, innovative and smart Europe. Still, continuous learning from the crises should flow into long-term strategies. A combination of short-term reaction and long-term reflection is the essence of adaptive and transformative resilience.
Cohesion Policy can facilitate enlargement. Institution building will be essential for forthcoming enlargements, supporting accession countries to develop institutional capacity and fully benefit from the potential of EU integration. Cohesion Policy is well-placed to support institutional capacity building, with improved governance and organisations.
A Call for Strategic Investment and Simplification
As the EU faces new challenges and opportunities, including potential future enlargements, a strategic, well-funded, and efficiently delivered Cohesion Policy is more crucial than ever. Can we picture a Cohesion Policy that not only addresses immediate needs but also lays the groundwork for long-term, sustainable development across the EU, ensuring that no region is left behind?
Consequently, the path forward for the EU's Cohesion Policy should be clear: strengthen its delivery system and ensure sufficient budget allocation. By focusing on improving the delivery system, ensuring sufficient budget allocation, reducing complexity, and strengthening the capacities of all players involved, the EU can enhance the policy's impact.
In an era marked by rapid change and increasing challenges, investing in the foundations of Cohesion Policy is not just wise – it is imperative for the future of the EU.
The full report of the group of high-level specialists on the future of Cohesion Policy, and a range of background materials are available at the group’s website (S'ouvre dans une nouvelle fenêtre).
by Kai Böhme
