Has Objective 1 funding made a real difference?

Sep 26 2007 by Bill Gleeson, Liverpool Daily Post

IT WAS 13 years ago that Merseyside first won Objective 1 status. Last week, the powers-that-be allocated the last of that cash to projects that will help with the economic and social regeneration of Merseyside.

The funds spent during the Objective 1 programme tot up to about £4.5bn. As well as cash from Brussels, this sum includes matched funding from the Government and the private sector.

There will still be Objective 1 projects going on around Merseyside for some while yet. The cash may all have been “allocated” to various projects, but the schemes have up until the end of next year to spend it.

Nevertheless, now seems an appropriate moment to reflect on whether the programme has made a worthwhile difference to the local economy.

Without doubt, Merseyside has changed dramatically over the lifetime of Objective 1, but was Brussels money the cause of that change or did it merely coincide with what have been pretty good times generally?

As Prime Minister Gordon Brown never tires of telling us, Britain has enjoyed its longest unbroken period of economic growth since the Industrial Revolution. It is possible that most of the good stuff that has happened locally would have occurred anyway.

Take the property sector. Rents and capital values have risen sharply, so much so that city centre property developments no longer get any form of state subsidy, as they used to. Recent projects such as English Cities Fund’s scheme at St Paul’s Square have not needed Objective 1 cash because they can pay their way without it. In contrast, earlier property developments, such as the initial phases of the regeneration of Princes Dock or Queens Square, needed subsidy, otherwise they wouldn’t have happened. Yet the fact that those early projects got off the ground and tenants were found gave confidence to other investors to have a go for themselves.

While property development schemes in the city centre have been successful, it is less clear that the Objective 1 programme’s other big economic development theme has met with the same joy. For decades, policymakers have tried, and largely failed, to stimulate an entrepreneurial spirit locally. Despite hundreds of millions of pounds of funding, local business formation and density rates remain obstinately low. Maybe the sad truth is that no amount of government initiatives can engineer people into something they are not. When it comes to starting your own business, other influences, such as family background, are much more decisive.

One of the big targets at the start of the Objective 1 programme was to raise Merseyside’s GDP per capita above the threshold for qualifying for the cash. This level, set at 75% of average GDP per capita for the European Union, has been exceeded. The local GDP figure has risen gradually from about 72% in 1994 to today’s level of about 77% of the GDP per capita of the old 15 member states EU. Clearly this is progress.

There is an intermediate stage of funding, known as Objective 2, that will last until 2010, but the big challenge that lies ahead isn’t so much how wisely we spend this cash, but how the region copes when all of the money has gone and we are left to stand on our own two feet. Unlike Brussels, the British Government doesn’t have a regional policy.

We will have to wait and see whether Merseyside can sustain strong economic performance without public funding and whether those places that remain big economic and social development challenges, notably north Liverpool, can be jolted into life by purely private sector investment.