4. Levels of competence: who should do what?

Particularly influential on the gestation of Agenda 2000 was the growing disenchantment with elitist rule by Monnet-style experts and technocrats, and concern about the dearth of checks and balances on the power of un-elected and remote European institutions. The debacles of the Danish and French referenda on the ratification of the Treaty of Maastricht were the most spectacular expressions of this, but there were others, of which the disinclination of Norway to pursue membership at the expense of ceding to others control (in some measure) of its sensitive resources is noteworthy in the present negotiations on Eastern enlargement.

There is evidence of this in the opening remarks of Agenda 2000. In reviewing "What has been achieved since the Single Act" (p.11f), amid the self-congratulation two "difficulties" are singled out. The first is economic, in particular unemployment, while the second is described as "of a political and psychological nature". The Maastricht ratification "debate", it is suggested, "revealed that the general public had not kept up with the accelerating pace of institutional change". They "did not feel properly involved" (p.12).

One response to this so-called 'democratic deficit' has been to think anew about allocation of competencies: what should be done at European level, what at local level, and what at levels in between? The 'principle of subsidiarity' was borrowed from the Vatican and thereafter regularly invoked: solutions should be pursued and decisions should be taken at the lowest level possible (other things being equal). But this of course raises a fundamental question: how to determine, for the EU at the end of the century and on the eve of Eastern enlargement, what is best done at which level?

The general 'retreat of the state' observed in the last quarter of the twentieth century, of which the principle of subsidiarity may be seen as but one expression, seems to have had a number of more particular causes - apart, that is, from the acceptance (or not) of philosophical arguments about the legitimacy with which duties and responsibilities have been claimed by or allocated to the state. One was growing doubt about the ability of the state to discharge adequately, or more adequately than other institutions, its existing tasks. Its power to tax has declined with its reputation for efficient delivery of administrative funcions from the centre to the periphery.

These doubts connected with another debate about fundamental issues, this time in political economy. After some decades of what came to be called Keynesian consensus, the question addressed in 1776 by Adam Smith came to be asked with practical concern for how to do things two centuries later. What is the origin and cause of the wealth of nations? In particular, what relations between rulers and people promote its generation and what obstruct it? In the wake of a number of global events in the 1970s - notably the oil crises and the subsequent unprecedented combination of economic stagnation, high inflation and long-term structural unemployment - fashion in political economy turned against the state and towards the market, coming to regard the former as an obstacle to the efficient operation of the latter. This was later reinforced by International agreements on the reduction of levels of national protection of agriculture and other industries, and loss of national control over monetary and fiscal policy partly as a result of applications of new information and communications technology, especially the Internet.

One consequence, intended or not, of this kind of decentralisation to the market, was to encourage thinking about how to design alternative administrative structures that would be more appropriate to a diminished role for the centralised state and an expanded one for dispersed markets. Such thinking in the case of the EU amounts to thinking about the allocation of competencies.

After the institution of the Single European Act with its unified market, then the Treaty of Maastricht with its timetable for monetary union - swiftly followed by the Maastricht ratification debacle - the concern with economic efficiency struck a chord with political interest in devolving responsibility, away from top-down processes and procedures and towards those that worked from the bottom-up. In the EU, this change received perhaps clearest expression in the conception and operation of the LEADER Initiatives after 1991, but may also be discerned in a general receptiveness to ideas about the re-allocation of competencies of all kinds.

The EU being what it is, the broad considerations discussed so far should be set against narrower, sharper ones. Confessions by higher levels of their incompetence and their voluntary renunciation in favour of lower levels of (some) powers may indeed be prompted by concern for the greater good, such as reducing democratic deficits and increasing economic efficiency. It may also be prompted by more pragmatic, prudential reasons, such as a desire to pass the buck and get out of the firing line. Brussels has long recognised that among other services it provides a convenient scapegoat when things go wrong or are neglected altogether.

For their part, national governments have long been wary of devolving too much power to the regions. If they do, regions may find it all too congenial to be able to bypass the national and go straight to European level, not least because they might thereby avoid or at least moderate national policies and constraints.

But as at European level there are more positive reasons why there has been interest in re-allocating competencies within national states. There is a long-term trend of devolution from central state to the regions, and of integration within regions. This is not just a matter of regional politics and the associated horse-trading, nor of the diminishing power of central state to tax that is both a cause and consequence of the general retreat of the state. It also has to do with a re-assessment of regional differences. There is greater appreciation that these may not always be just a store of trouble and an ever-flowing spring of ungrateful complaint. On occasion at least they may be the source of solutions.

When differences are conceived as "disparities", they sound as if they are problems in need of structural remedies via regional policy. When they are thought of as aspects of regional "diversity", there is the possibility that they may constitute distinctive resources, which though characteristically immobile, are therefore uniquely available to local areas to address local problems.

This raises the question of how to gain access to and mobilise such resources. Answering that question becomes the more important when coupled with recognition of the declining ability and inclination of the central state to deliver resources from outside the locality to deal with local problems.

If the state at national level cannot supply the resources a locality needs, either because it has not got them itself or cannot command other regions to transfer them, then the locality must supply them or go without. Some it may have already, others it may need to find. It may well be in the interest of the national level to help the local level develop its capacity to supply its own needs, not least because this would reduce their demands on it.

Because local resources are dispersed, so too is knowledge of what they are, where they are, and how to get at them. Knowledge of what resources are needed but lacking is also dispersed. As well as knowledge of what resources are available locally and what are needed, local resources here include being in a better position to allocate them efficiently under local conditions. Some monitoring of where resources go and evaluating how well they have been used may be easier and perhaps more effective when done locally rather than at various administrative removes. At national level, this may be difficult to do at all, or to do conveniently, quickly, and cheaply.

By the same token however, development projects dispersed over a range of localities can be integrated effectively (whether locally, regionally or nationally) only where the information needed to do so is readily available. Information constitutes usable knowledge only when it can be brought together. This requires channels through which information can flow quickly and smoothly. Doing this efficiently is an important consideration in allocating competencies to different levels.

Practical experience and problems
The Commission is responsible for EU money being well spent. It deals with Member States at national level, holding them accountable for their programmes that draw on EU funds and setting various conditions on their relation to national funding, notably through applying the principle of 'additionality' with varying degrees of subtlety and through financial control mechanisms. The Commission will not talk formally to regions without the invitation and approval of national governments, and even then has no formal competence to negotiate with them. National states can break up existing regional structures and devise new ones to gain (better) access to EU funds, but such changes are for Member States to sort out for themselves; it is not for the Commission to say. Nevertheless, the Commission can influence this process, for example by laying down rules for the type of administrative region which may be eligible for Objective 1 or 2 status, and by state aids rules which apply inside and outside these boundaries.

In any event, the experience of Member States suggests that it is generally unwise for them to ask the Commission for its suggestions, as distinct from asking its opinion of specific proposals of their own devising. The Commission will always prefer fewer programmes, which are easier for it to deal with. Within programmes however, it is always keen to see funds tightly allocated to specific areas, because this makes it easier for it to exercise control. Accordingly, Member States generally find it prudent to opt for fewer measures and objectives rather than more, because this gives them greater flexibility and more scope for adjustment to meet changing circumstances as programmes proceed.

Global grants have to be allocated, programmes put together, and individual projects selected and monitored, at some level or other. For a structure of competencies to work to best advantage, be it 'most efficiently', with 'greatest value for money', or 'most effectively in developing rural areas', the various levels must not only be allocated tasks most appropriate to them but their separate operations have to be integrated as well. As Agenda 2000 is implemented, who does what will be settled one way or another. While things are still being sorted out, the relevant questions to ask may be first, what is the best level for dealing with present problems and second, how to take best advantage of what is on offer. The most appropriate level should get the finance. The answers to these questions may be different for different regions and different problems, so it is well to beware of commitments to standardised formulas and inflexible structures.

At national level most states have traditionally favoured the sectoral approach because it is administratively convenient and conducive to exercising political and financial control. Over the years the sectoral divisions have become entrenched in separate bureaucratic structures; co-operation between sectors tends to go against the grain, thus reinforcing the original sectoral divisions and exacerbating their rigidity. Lobby groups, their noses trained to detect where power lies and eyes peeled to discern its structural manifestation, have mirrored their organisation to that of the government, the more so in states where the government is strongly centrist. At local level, many localities have long been accustomed to have outsiders do things for them, and may be content for that to continue - not least because they do not care for the bother of learning a different way, particularly one that requires them to act for themselves rather than just complain from a sedentary position.

But if any level, be it European or local or those in between, decides that the old ways cannot or should not continue, a number of practical problems arise. As well as defining and agreeing on an alternative, there is the problem of how to implement the change. How to get people to forsake the old sectoral way, from the top down and a single centre out, to a new allocation, which devolved competencies and responsibilities to lower levels and dispersed them over a number of smaller areas? Once this devolved and de-centralised structure is established, how to integrate its operations so they work not just satisfactorily but better than the old way in meeting the needs and aspirations of the various levels?

An example of this is the way partnerships for rural development tend to be organised at regional and local level, whereas farmers' lobby groups are organised at national level. When farmers are asked to join such rural development schemes, they may ask why they should get involved locally when they have a direct route to the top, to the national, or indeed to the European level. But as the lobby leadership comes to recognise that they can no longer deliver ever-increasing subsidies to their local members via national lobbying, they too may look to other levels where they can pursue their sectoral interests more effectively under the new conditions. Farmers themselves are coming to recognise that their interests may be increasingly or better served locally.

The value of establishing local markets and local identities for agricultural produce will increase as favourable access to guaranteed markets for undifferentiated commodities is threatened by international negotiations under the WTO. The recent development of farmers markets in the UK is one manifestation of this⁴.

Such changes in the locus of activities may be seen as an illustration of the principle of subsidiarity at work, albeit applied this time to lobbyists. For lobbyists will tend to operate, effectively in practice if not officially in principle, at the level at which decisions are taken. If there is a change in the level at which power is exercised , so too will there be a change in the locus of their activities.

The same goes for regions and the loyalties of citizens. Increasingly, regions are lobbying Brussels directly, bypassing the national level, especially if regions are making decisions of their own and the plans and policies of diverse regions differ from one another. The German Länder have long maintained their own offices in Brussels and since the 1980s most Local Authorities in the UK have set up a European unit to identify European funding programmes that could benefit their locality and increase their chance of sharing in them. Under the circumstances in the UK, this would also serve to loosen the control of the (national) Treasury over Local Authority spending, a contentious issue when a central policy of the national (Conservative) government was to reduce public spending while many local authorities were controlled by the opposing (Labour) party. For its part, the Treasury might seek to retain control via the condition that European funding be complemented by 'matching funds' from local authority or other budgets, this being particularly effective where the revenue raising powers of local authorities are severely constrained.

If the game is about grabbing funds⁵ then attention will move quickly to wherever the money is. Administrative structures that develop in response to particular funding procedures will tend to be ephemeral, because those procedures are ephemeral. Because rural development programmes are a long-term business, however, they need to be integrated into regional forms that can avoid dependence on what may amount to subsidy. That way they may increase their chance of accommodating changes in funding procedure and so survive changes in funding fashion.

Institutional engineering in response to funding courts the danger of developing duality of structures. Newly-created regional bodies with no track record and little experience will have difficulty in being taken seriously. Partnerships may have large budgets, but because they are un-elected their legitimacy in relation to democratically-elected local government may be questioned. There is a need to integrate transient structures into regional forms that can be locally legitimate and sustainable in the long run.

The 1996 Cohesion report⁶ showed that regional policy had worked satisfactorily at state level but not at regional level within states. There were notable differences between states. In Portugal and Ireland, for example, whose state structure had long been centralised, European funding tended to be allocated by the state to regions surrounding the capital cities of Lisbon and Dublin. These regions grew richer while peripheral regions grew poorer, though the state as a whole grew richer.

All CEECs have a legacy of centralism from the pre-1989 regimes, if not earlier, with regions having relatively little power. Accordingly, they need to develop the capacity of their regions, particularly so if states which lack distinct or powerful regions because of long tradition of centralism find themselves at a disadvantage in negotiating regional policy at European level with the Commission. Acceding States need to organise themselves at regional level before dealing with the Commission: it is not prudent for a state to have to say "we may need to change things when we hear from the regions".

This raises various questions about the relation between kinds of regional institutions and outcomes for development. For example, how to aggregate local areas into appropriate size and number of regions? CEECs seeking to develop regional structures to overcome centralism need to know such things; they benefit from the experience of Member States.

Good decision-making requires, among other things such as ready access to good information, that the decision-makers are competent enough to recognise and be able to implement the best of the available options. At regional level this requires strong regions. This in turn requires that the national level institutes policies to strengthen weaker regions so they can operate effectively in regional-level decision-making processes.

Incentives to build capacity have to be greater in weaker regions; otherwise the classic vicious cycle of regional inequality will operate. Disparities will tend to increase, the ability of weaker regions to deal with them decrease, and with it their power to bargain with stronger regions. The corollary to this is that national government has to be strong enough to say 'no' to rich and vocal regions and 'yes' to poor and weaker regions. A democratic mandate is helpful if not indeed necessary for this: private agencies and commercial institutions would find it difficult. The democratically-elected rural parliaments established in Hungary with power to influence the distribution of development funds looks like an interesting idea worth transferring where possible.

Lobbying organisations, developmental as well as sectoral, tend to be stronger in rich regions; how to strengthen the lobbying power of weaker regions? In Scotland some say the Highland and Island Enterprise, which is a non-departmental public body (NDPB), has too much lobbying power, leading other regions to feel hard done by. By general agreement, the Shetland Islanders are the best lobbyists of all partly because of their ability to supply matching funding from their own oil revenues negotiated in the early stages of oil exploitation in the North Sea in the 1970's.

In Romania the level of development and of activity to deal with the problems of different regions varies greatly. Each wants to develop in its own way by its own methods. This raises the question of how to accommodate regional needs, aspirations and plans to the national interest. At what level should decisions about how to support regional development be made: among regions or at national level?

One approach would be for regions to agree among themselves to set appropriate developmental criteria, for example, linking employment created to regional unemployment rates. Targets could be set for each region, and projects evaluated according to how they meet them. There may be no need to use the same regional division to allocate development resources as is used in political and other administrative affairs; the political division may be a traditional inheritance that cuts across current developmental needs. Further, specific resources, perhaps from a number of neighbouring regions, could be allocated to local enterprise companies to meet needs of fragile areas as part of intra-regional cohesion policy.

Lessons from the LEADER Initiatives
The experience of LEADER I and II has cast light on a number of aspects of the EU, of which the competencies of its institutions is one particular example. The way LEADER worked, or failed to work, in different Member States both revealed what was needed and indicated ways of supplying the need where it was lacking. Where the state was excessively centralised, the difficulties in establishing LEADER demonstrated this, while also playing a part in developing the needed capacity. The nature of LEADER meant this occurred primarily at local level but, by calling attention to the need to strengthen it, at intermediate regional level between the centralised state and local communities.

An additional benefit of LEADER programmes that are successful in building capacity at local and regional levels is that capacity is then available for use in other ways than those to do with LEADER. Notably, it can provide experience of operating in ways that are not sectoral, do not proceed from the centre out nor operate from the top down. Such experience is valuable to Member and Acceding States alike in getting used to re-allocations of competencies.

Ex-post evaluation of LEADER I showed that the way it worked in practice was affected by the different institutional arrangements of competencies in the Member States. Germany, for instance, already had in place the structure for a village-renewal scheme, and used this to implement LEADER. France too had a number of local-level institutions, which it used for LEADER. By contrast, in Ireland the local community level was deemed too small to implement LEADER effectively, so larger units were devised. At national level, it seems, Greece did a good job, Italy a bad job.

More generally, across all Member States, three broad cases may be distinguished:

1. Where all participants were public bodies, they spent the money fast because they used LEADER as just another source of funding. In consequence the existing institutions did not change their practices: they did not innovate, nor did they build capacity at levels where this was lacking.
2. Groups that consisted mostly or entirely of independent local people tended to find themselves acting in isolation, if not competition with national and regional levels. Many spent little because they were unable to get going without institutional support.
3. Groups composed of diverse participants with good institutional support and different levels were able to spend their money in ways that were genuinely innovative and succeeded in building capacity that lasted beyond the funding period.

The ex-post evaluation of LEADER II has yet to be undertaken. It used a generalised global grant mechanism, negotiated between Brussels and national governments, and so was centralised not by specific measures employed but rather by monitoring the outcomes of how the Local Action Groups chose to allocate funds to projects associated with the various measures. There is a widespread view that the mechanisms of central government or government agency control over Local Action Groups increased between LEADER I and LEADER II, but the outcomes of this have yet to be determined.

Conclusion
The European Union, like its predecessors, operates according to a blend of pragmatism and principle, the exact proportions varying with time and circumstance. Since the 1970s, the way European institutions have coped with the consequences of the events of that decade and later have been compared with institutional performance in other parts of the world. There has been concern about whether traditions and habits amount to institutional rigidities and entrenched prejudices. This has continued into the era of Agenda 2000.

In public documents such as Agenda 2000 such concern tends not to be stated explicitly, but can be read between the lines. There is an acknowledgement that the existing institutional framework and allocation of competencies has its limitations in the face of enduring regional diversity and more so the long-term consequences of change of which the events of 1989 and the prospect of Eastern enlargement is one of the most pressing.

The question of competencies - of who does what at each level from the European to the local - remains unsettled as Agenda 2000 is implemented. A reasonable guiding principle is to ask what is the most appropriate level for doing what needs to be done, and allocate resources and responsibilities accordingly. In Agenda 2000, continuing the trend of the last decade or more, the European level has been allocated more of the tasks to do with monitoring outcomes and diminished responsibility for designing, selecting and implementing projects to other levels. But in practice this is not all there is to it. Member States have learnt by experience (and Acceding States can learn from their experience, without having to repeat it themselves) that what is convenient for the Commission may not be congenial for them. The same goes for regions and localities with respect to the national level. Farmers are not the only ones to fear control by others.

While things remain in flux, there is scope for all levels to exercise initiative and a need to avoid the issue going by default. There is a willingness at least to entertain schemes of reform, ideas for new ways of doing things, but more certainty about what is wrong than how to put it right. One direction in which solutions have been sought is the idea of partnerships, the next issue the Seminar discussed.

4. According to a recent article in the FT, there are now 120 Farmers Markets in Britain, whereas in 1997 there were but 2. Weekend FT, October 23, 1999.

5. It is not of course only about this! The conferring of Objective 1 status, for instance, also alters the limits imposed by State Aids rules on the levels of public subsidy which may (or may not) be offered for new investment by private enterprises [see Article 92 of the Treaty].

6. First Report on Economic and Social Cohesion. European Commission, 1996.