I want to say a little about the political balance between convergence and cohesion. I want to talk about what I regard as the paramount political importance of seeing the Structural Funds as a complement to the Lisbon agenda. I want to say something about the political shift that is slowly bringing regional political actors into the structural funding process. I will also say a little about the politics of the budget negotiations themselves. I want to finish by saying just a little about what I think the South West can do to best exploit the new arrangements.

The South West region saw significant benefits from the 1999 European spending round. Cornwall was given Objective 1 funding that has been channelled into projects designed to improve the county's infrastructure and encourage its isolated local economy. Deprived parts of Bristol and Plymouth have been assisted with Objective 2 regeneration funding, as were parts of rural Devon and West Somerset.

With European enlargement the structural fund regime will undergo an important shift of focus and much poorer regions in the enlargement states will have a stronger claim on the funding. It is still too early to be sure who or where in Britain will qualify for assistance in the next programming period, but it looks likely that Cornwall may qualify again. This is both good and bad news. Good, because it is important that Cornwall's needs are recognised. Bad, because although there has been real progress in Cornwall, those needs still exist. Structural funding is a means not an end: the end must be no longer needing it.

The Structural Funds

The ultimate goal of the structural fund programme is cohesion: making sure that Europe's regions share as equitably as possible in the benefits of European Union and are a tighter community because of it. Solidarity is a key principle of European Union, and the structural funds reflect the conviction that serious disparities in regional prosperity can undermine European solidarity. (It is an interesting historical fact, by the way, that the solidarity among the regions and nations of the United Kingdom was strongest in the nineteenth century when they shared much more evenly in the economic benefits of the industrial revolution. The rise of regionalism in Britain reflects almost exactly the failure of central government in the twentieth century to reverse the decline in this shared prosperity). The Right in this country tends to paint the structural funds as a British handout to continental Europeans, for the rather simplistic reason that Britain does not get back every penny it puts into regional funding in regional funding, but this of course misrepresents the rationale of the funds. Britain benefits to the tune of about 11 billion pounds a year from membership of the single market that the structural funds build - and the richer that single market becomes, the higher that number will be. By helping our neighbours get richer, we are enriching ourselves.

Convergence and Cohesion

The assumption of the structural funds has always been that convergence - by which we mean bringing poorer regions up to speed with extra injections of localised investment - was the key to cohesion - by which we mean a Europe that shares the fruit of the single market as evenly as is practicable. But convergence is a bit of a statistical exercise. It measures European regions against each other as lumps of GNI, and this actually tells us very little about cohesion. If the political priority is a Union built on the economic engine of a common market - and I think it should be - then we need to be at least as interested in the measures of regional interconnectedness, and in the ease with which they can trade with each other as their rising GNI. In the last three years the growth of inter-state trade in the EU has slowed to a crawl. In GNI terms the EU15 have pretty much converged, but there are still significant barriers to trade and fair competition between them.

So if it is cohesion you are after, then focusing investment in a localised way is only half the answer. Cohesion means delivering the advantages of closer Union. A growing cottage industry sector in the South West of England is of limited benefit if barriers remain to selling the goods and services it produces in the European internal market. Bristol's financial services sector needs access to customers from the rest of Europe. There are still too many regulatory and practical hurdles for the South West in doing business with the rest of Europe - not least Britain's self-exclusion from the eurozone. The rationale of the structural funding is to ensure that Europe's regions can compete on a level playing field, and we have to be sure that we are investing in regions that can root their new prosperity in effective trade with the rest of Europe.

Filed under Lisbon

That is what I meant when I said that we have to see structural funding as a one of a raft of measures usually filed under the 'Lisbon Agenda'. Lisbon is about making the EU more competitive. This means further opening Europe's internal market and improving its transnational performance - not just roads and railways but telecoms liberalisation measures that will ensure cheap, universal access to the internet. The first meeting between a business in Bristol and a business in Budapest will almost certainly be a homepage. A website in Cornwall is a shop window to the rest of Europe.

If the Lisbon agenda is about raising the general level of Europe's economic performance then the structural funds are an important way of advancing that reform agenda. One of the key themes of Lisbon is the social and economic restructuring needed to equip Europe for the twenty first century. The shift away from industry and agriculture and fisheries in Britain and across Europe means that is often in the poorest regions - regions like Cornwall - that the work of adjusting to the post-industrial economy is most urgent. The structural funds have to be an instrument in this painful but necessary process.

Structural funding can be used to create jobs; it can be used for retraining and education. It is used to improve the basic infrastructure, often after years of neglect. The Lisbon Agenda is about creating a Europe that does not need structural funds, and the funds themselves should be administered in the same spirit. The less we need them the better we are doing. I think that the new cohesion report has reflected this role of the funds much more clearly and it should be the political context for all further planning.

The Rise of the Regions

Now a word on regional leadership in this process. The European Parliament’s recent report on the Commission White Paper on European Governance saw the regional and municipal governments of Europe as the crucial intermediaries between European citizens and the EU. This level of government is most often responsible for the implentation of the funds. I cannot speak for all of my South West MEP colleagues in this, but I fully endorse Commissioner Barnier's call for greater regional input in the management of the structural funds. The new report calls explicitly for a new partnership between regions and the EU. We need to rebuild the process as a trilateral one, in which the regions are treated as equal partners with the Member States and the European Union.

This is not just for reasons of legitimacy and accountability - particularly in self-governing regions like Scotland and Wales - but practicality. We should reject calls to renationalise cohesion policy, and I am pleased the South West did. A renationalised regional policy is too likely to tempt states into state aid, often for already rich regions, and this will only widen regional disparities. A community perspective means priorities can be defined strategically rather than politically and it enables more reliable long-term planning. The regions themselves are the obvious partners with the EU in this process, although I don't see Member States accepting that argument anytime soon.

The Negotiating Process

And it is of course the Member States in Council who have the last word on the structure and scope of the funds. How the budget negotiations are likely to turn out is anybody's guess. The Union's multi-annual budget only makes sense when you realise the amount of sweat and tears that is poured into writing it. There is a good reason why we do this only once every five to seven years. It is intensely political, and only made more so by the increasing activism of regional government in Brussels and at home. Given the costs of realigning the structural funds towards the enlargement countries the UK’s suggestion that the European Union budget should be capped at 1% is unrealistic. The idea that the Union should 'tighten its belt' in the same way as many Member States makes a good soundbite but it rather ignores two facts. First, that the Union is already spending considerably less than Member States have already budgeted for it - in many respects thanks to the belt tightening imposed by the European Parliament's Budgets Committee. Second, on May 1st Europe will go up a number of trouser sizes as it takes in ten new members. Europe is run on something of a shoestring already, and I have some sympathy with Commission President Romano Prodi when he looks at the list of things that Member States want to achieve in the EU and the tools that they are willing to give him to do it and comments that he is not a 'miracle worker'.

The UK government has made it clear that it would like to see the administration of the policy renationalised and I am opposed to this for the reasons I outlined above. I do not think the South West would get a better deal from London than Brussels. The genuine needs of the South West as recognised from Brussels would have to be weighed against a repoliticised regional assistance program, and I can guess who would lose out.

The South West

What does all of this mean for the South West? Let me emphasise three things. First, we have to be ready to take advantage of the new funds. This means we need to be well advanced - certainly much more advanced than London - in thinking about where potential funds need to go and how we can maximise their benefits.

Second, we have to keep our own minds on the end goal. We need to see Cornwall's place in the South West and the South West's place in Europe in terms of a new level of economic competitiveness. The new prosperity we create has to be locked into a sustainable competitiveness. We need to see the structural funds as the key to delivering the cohesion that will guarantee the regions prosperity for the future, not just add a few GNI points for 2013.

Third, we have to pressure central government in this country to continue to shift the balance in favour of greater regional input, and we have to resist the renationalisation of the funds. Not just because the South West will do better with Brussels but because regional policy in Europe needs to be freed from the politicisation of national capitals. Europe already suffers from a chronic deficit of effective long-term planning. Repoliticising one of the few effective sources of long-term investment in Europe's prosperity would be a mistake.

We also need to ensure that the South West continues to be well represented in the European Union. Here I would recognise the great work done by Eleni Marianou and the South West UK team in Brussels. The people who root for the South West in Brussels are a Greek, a Welshman, a Scot, two Germans plus one German and one English stagiaire. They all work to advance the interests of the South West. Here, they are backed up by capable people in each county – Shirley Woolner in Gloucestershire, Paola Schweitzer in Bristol, Anna Lisa Taylor in Somerset, Sue Smith in Devon, Brian Shipman in Cornwall, Mike Parker in Wiltshire and others. Hitherto they’ve benefited from the assistance of Chris Elton at the Regional Assembly. But the Brussels team can only work well if we have the right structure in the South West, and I cannot help thinking that there is too little political co-ordination across our region. The region needs a strong voice through the Regional Assembly. You cannot imagine the damage done to our reputation when senior Commission officials learn that Cornwall might seek to co-locate with Wales, for example. Is Cornwall seriously considering swapping millions of pounds of Objective 1 money for a few pence to support Celtic culture?

We need to be proactive: we cannot afford to wait around for London to generate policy or make decisions for us. We have to shape policy in London and Brussels. In particular we have to remind London of its responsibilities and try to ensure that it does not stand in the way of a budget settlement sufficient to met the needs of the European Union between now and 2013.

I do not doubt that the next programming period will deliver benefits for the South West if we are ready and able to make the most of them. Structural funding is not an abstract question - it is about delivering real change on the ground, among the people we are all accountable to. This time round we need a leg up. The goal is making sure that seven years from now we do not.