Euro funding to help unemployed workers goes unclaimed. Why?

By David Bailey on Aug 28, 09 03:33 PM in Economics

Back in the dying days of the Blair government, the informal EU summit at Hampton Court Ok-ed a €500 million pot of money - called the 'European Globalisation adjustment Fund' (EGF) - to help workers made redundant as a result of "major structural changes in world trade patterns" (i.e. globalisation). At the time, then Commission President Barroso said "We want to show that the EU cares".

The EGF aims to support people, not firms, through interventions in the labour market such as counseling, job search and mobility allowances, retraining such as in new ICT skills, and entrepreneurial support (such as micro-credits).

From 2007 to early 2009, the EGF spent €68 million helping over 15,000 workers find new jobs. Initially it could be used in situations where 1,000 workers were laid off but this was relaxed to 500 workers earlier this summer.

Indeed, a range of countries have applied for and used the funding, and the success rate in getting workers back into work has been described as 'astonishing' (OK that was a comment by the European Commission, but with around 69% of workers back into work, it's difficult to disagree much).

I came across the Fund when looking at the recent Dell closure in Ireland. Some €15 million has been claimed there to help workers made redundant by Dell's decision to close its assembly operation.

Other projects funded by the scheme include €35 million to help textile workers in Italy last year, €10.5 million to help Spanish and Lithuanian car workers affected by Delphi, €2.6 million and €1.3 million respectively for workers at Peugeot and Renault suppliers and so on. You get the idea. The Commission has just announced €17 million to support workers who have lost jobs with the auto firm Volvo in Sweden and with textile firms in Belgium.

Running through this list on the EGF website, I was struck by the fact that there was no British project funded - despite some high profile closures like LDV here in Birmingham.

European Social Fund money has already been used by the UK for retraining purposes, but given the current siuation some more cash to help workers would not go amiss. So it's odd that there have been no British applications thus far.

Officials at the Department of Work and Pensions (DWP) are expecting a possible application from the North East in the near future, but I was still left scratching my head as to why the UK has not put in application. I should add that I'm criticising DWP or even the LDV Taskforce here in Birmingham.

The latter was set up immediately that LDV had entered administration and assistance was made available to workers in a matter of days. The Taskforce is making every effort to help workers back into work and if an LDV rescue comes off, the Taskforce is poised to help the firm re-recruit as many ex-LDV workers as possible.

Rather, I am questioning the way in which H M Treasury views the EGF.It's true that the EGF is an odd beast when it comes to UK case because of Britain's famous rebate position. The EGF appears to use left over money at the end of each financial year which would anyway be coming back to the UK, and the Treasury's view seems to be that if the money comes back via the EGF it simply means less of a rebate otherwise.

But that rather misses the point that it is a way of potentially getting more money to RDAs like AWM (which would be the managing authority here) to help retrain workers. Heaven knows they need it, with unemployment soaring on the back of the economic downturn.

Through the work of the Regional Task Force, AWM has been doing a pretty good job in trying to ameliorate the worst effects on the recession on a very limited budget. Getting some addition funding to help workers seems like a no brainer compared with what Whitehall could otherwise waste the money on (national identity card scheme, perhaps anyone?)

The basic issue here is the narrow way in which the Treasury views the EGF money. They need to loosen up a bit and allow the English RDAs a way of getting some additional funding which could help unemployed workers - preferably sooner rather than later.

Professor David Bailey works at Coventry University Business School.