Fig. 1.3. Developments in community spending.

Source: European Community Finances, HM Treasury, Cm. 2824, London, HMSO, 1995.

Table 1.1 Contributions to, and receipts from, the European Community budget,* 1993 (£ billion)

* From the Court of Auditors Report, 1993

**  Excludes £4.9 billion which is mainly development aid and administrative expenditure for the other institutions. The receipts are Community payments to both private and public sectors in member states

*** As constituted since 3 October 1990
Source: Social Trends 95, London, HMSO, 1995.

1.4   The Common Agricultural Policy

The details of the CAP are given in Chapter 16 so this section is concerned with the place that it has within the economy of the European Union. The CAP was the first of the common policies and by far the most important because it absorbed so much of the revenues of the original EEC and later the Union. It also had a profound effect on the political development of the Union and on the relationships between the members, especially when new states acceded. The CAP has also influenced the foreign relations of the Union particularly with developing countries and with the USA where it has been a persistent source of grievance. The policy has, in addition, had a significant impact on the redistribution of income between member states and within the various regions of the Union. There have been large transfers of income to the areas of marginal farming and important additions to the prosperity of rural areas. Overall the CAP has added to the price of food for the consumer if EU prices are compared with world market prices and the assumption is made that the food could have been bought abroad. If it had been, of course, there would have been high rural unemployment as a consequence and a higher tax burden to pay for that. It is probably better to pay higher prices for food and directly keep farmers and farm workers in jobs. In the longer term the CAP will be an integral part of the European Union's environmental policy and may change radically as agricultural products are used for fuel and when (if?) world demand for agricultural products exceeds supply.

1.5   The Common Fisheries Policy

The CFP is one of the most controversial policies of the Union and is one that is never likely reconcile the national desires for maximum catches and strong fishing fleets with the desperate need to conserve fish stocks. Every time a new member joins the European Union there has to be a renegotiation of the CFP and the allocation of catches and quotas because, outside the narrowly defined coastal territorial waters, the fish stocks are regarded as a joint resource. The accession of Spain, the second largest fishing country in the EU after Denmark, has caused particular anxiety in the UK because Spanish ships were allocated a quota of some species in the Irish Box which impinged on traditional UK waters. Spanish ships were also registered in the United Kingdom in order to take some of the UK quotas and some UK owners sold their quotas to the Spanish. An attempt by the British Government to legislate against the practice was declared illegal by the European Court of Justice. One of the reasons that Norway's referendums have rejected membership of the European Union is the fear of the impact on their fishing industry.

Although the fishing industry employs only 260 000 fishermen in the EU, that is about 0.2 per cent of the working population, it has a much larger impact indirectly by employing four or five times as many on boat building, processing, distribution and so on. It also has a disproportionate importance in less developed regions where there is little alternative employment. Fishing is a term that can be extended to include fish farming, and the collection of shell fish and molluscs.

As territorial waters, or economic zones, have been extended to 200 nautical miles from coasts, the EU fishing fleet has been excluded, except by Treaty and the allocation of quotas for catches, from the old fishing areas off eastern Canada (now almost fished out), Iceland and Norway. The deep-sea fleets now travel further to the warmer waters of the Atlantic, the Indian Ocean and to Africa where agreements have been negotiated with the countries concerned. At the same time there is increasing competition from the former Soviet Union countries and Japan for the dwindling supplies.

The conservation of fishing stocks has led to very controversial decisions, some of which seem to have counterproductive results. The EU has agreed that members should reduce their fleets of certain types of boats by paying the owners to destroy them. The United Kingdom has been rather slow to pursue this policy. At the same time the EU has also had a policy of financing the building of more modern, technologically advanced boats which can stay at sea longer and catch fish more effectively. The attempt to conserve stocks has led to different boats being allocated quotas for specific types of fish. The consequence is that if a boat reaches the quota and then catches more of that species they have to throw the excess back, dead, into the sea. There is a strong temptation to cheat and keep the fish and smuggle it ashore. Another effort to reduce catches is to increase the mesh size of nets and regularly inspect fishing gear and fine defaulters. The most hated method, however, is to limit the number of days in a month that a boat can fish, a regulation that creates all sorts of anomalies and injustices, given the problems of the weather that beset fishing. The final policy is to suspend altogether fishing of certain fish, for example as happened with herring in the North Sea. Governments seem to respond exceptionally slowly to the dire warnings of the conserva­tionists in respect of fish stocks and seem to listen more to their fishing lobbies. Fishermen tend to adapt to shortages of one type of fish by switching to catching other types and by doing so they aggravate the problems. The long-term solution may lie with fish farming but even that is throwing up political problems as Norway is accused of dumping farmed salmon and trout on the European market. Paradoxically there is sometimes a glut of fish, mainly caused by the activities of non-EU boats such as those from Russia, and some fish prices have collapsed at the quay side but not in the shops. An example was in 1995 when such an occurrence resulted in French fishermen staging destructive demonstrations and the EU responded by introducing minimum prices for some species.

It is hard to see how the intractable problems of the CFP can be resolved except, perhaps, by a savage reduction in fishing fleets, draconian imposition of quotas or restrictions on time at sea or a repatriation of fishing policy to each member state and a return to national fishing controls, which is what many nationalists advocate. If this latter policy were adopted it would be a serious breach of the single market concept.

1.6   Regional Policies

The regional policy of the European Union is closely bound up with other policy areas such as agricultural, social, transport and environmental but the main methods of implementing regional changes are contained in the structural funds. There are four of these and their purpose is to reduce regional disparities and increase economic and social cohesion. The four funds are:

1. The European Regional Development Fund (ERDF);
2. The European Social Fund (ESF);
3. The Guidance Section of the European Agricultural Guarantee and
   Guidance Fund (EAGGF);
4. The Financial Instrument for Fisheries Guidance (FIFG).

The ESF was set up by the Treaty of Rome and began to operate in 1961 has been reformed several times, the latest reform being introduced in 19 when it was modified together with the ERDF and the EAGGF. The FIFG was introduced in 1993 to help struggling fishing communities. These funds have been given six objectives in the post-1994 framework:

1. Helping less developed regions that are lagging behind in the sense that they have a GDP per head of less than 75 per cent of the Union average or where there are special reasons for including them in this objective. The regions eligible for aid under this objective are the whole of Ireland, Portugal and Greece, the south and west of Spain, the Mezzogiorno of Italy, the overseas territories of France, one region of Belgium (Hainaut), the Flevoland region of the Netherlands, all the East German Lander, and in the UK, Merseyside, Northern Ireland and the Highlands and Islands. Three funds supply money, the ERDF, ESF and the EAGGF.
2. The economic conversion of declining industrial areas where the
   unemployment rate and the rate of industrial employment are higher than
   average and the rate of industrial employment is falling. The ERDF and
   the ESF provide money for this objective.
3. Reducing long-term unemployment and facilitating the integration into
   work of young people and those socially excluded from the labour market,
   The ESF applies here.
4. Facilitating the adaptation of workers to industrial changes and to changes
   in production systems through preventative measures against unemploy­
   ment. The ESF applies here.
5. (a) Promoting rural development and helping to adjust production, processing and market structures in fishing, agricultural and forestry as part of the CAP reform process. The EAGGF and FIFG apply here, (b) Assisting development and economic diversification in vulnerable rural areas affected by structural decline. Three criteria apply here and two must be satisfied to receive aid. They are a high share of agricultural employment, a low level of agricultural income and a low population density and/or a significant trend towards depopulation. The EAGGF, ESF and ERDF all apply here.
6. Helping regions with a population density of less than 8 inhabitants per square kilometre and meeting certain criteria on GDP. The Arctic and sub­arctic areas of Sweden and Finland will benefit.

Strictly speaking the regional objectives are 1, 2, 5(b) and 6 while the others cover the whole Union.

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