Below sets out the text for the Scottish Government response to the EU Commission's Green Paper on Territorial Cohesion, sent on 27 February 2009
EUROPEAN COMMISSION GREEN PAPER ON TERRITORIAL COHESION:
TURNING TERRITORIAL DIVERSITY INTO STRENGTH
RESPONSE BY THE SCOTTISH GOVERNMENT
The Scottish Government is pleased to respond to the European Commission's Green Paper on Territorial Cohesion: Turning territorial diversity into strength.  In doing so, we take the opportunity to build on the submissions we made in 2008 to the Commission's consultation on the Future of Cohesion Policy and to the Budget Review. Along with our contributions on the future of the Common Agricultural Policy and fisheries, this submission demonstrates the Scottish Government's readiness to engage with the Commission and other European partners on significant policy issues.
The consultation is timely from the perspective of both the Commission and the Scottish Government. For the former, it represents an important component in its assessment of the post-2013 policy environment and the responses that will be required to the difficult challenges generated by globalisation, demographic change, climate change and energy security. The Commission Staff Working Document Regions 2020: An assessment of future challenges for EU regions  provides a useful analysis of these challenges and the different spatial impacts they might have across Europe.
At the same time, the Scottish Government is able to draw on its experience since 2007 in adopting an outcomes-based approach to policy in important areas such as national spatial planning, regional policy (Structural Funds and State Aids), enterprise policy, urban regeneration and rural development, marine policy, ICT and connectivity, energy and the environment, transport and multi-level governance.
The Scottish Government's response to the Green Paper should be seen in the context of the National Conversation, launched in Autumn 2007, which is exploring the options for the future governance of Scotland and the relationships that Scotland might have with its main partners. In addition, 10 years of experience of devolved government have confirmed the importance of fiscal autonomy in the context of Territorial Cohesion. When governments - whether at the Member State or sub-Member State level - are able to benefit from the fiscal returns on the investments that territorial development delivers, there is an incentive to take risks and spend resources in ways that are likely to generate those returns in the long term.
This response of the Scottish Government complements the parallel response of the UK Government, on which we have been consulted and which we broadly support.
In presenting this response, we focus on several key principles that we believe should inform the purpose of cohesion policy, including Territorial Cohesion. Accordingly, we have not responded sequentially to the questions raised at the end of the Green Paper (reproduced for completeness in the Annex below), but have framed our submission around the wider issues or themes which they raise (whilst also noting which of the Green Paper's questions are relevant to each issue).
These issues are:
* The importance of cohesion and equity as an objective of EU policy;
* The need for EU Territorial Cohesion policy to demonstrate added value (covering part of Question 2 and Question 6 in the Green Paper);
* The Scottish Government's positive experience of Cross-Border and Transnational Co-operation programmes;
* The promotion of local governance and decision-making (covering Questions 3 and 5);
* Territorial Cohesion as the basis for developing a more flexible and joined-up approach to all EU policy support (covering part of Question 4).
The next section of this response covers two background items: the definition of Territorial Cohesion ( Question 1 and part of Question 2) and the Scottish Government's policy framework since May 2007.
Our starting point is provided by the definitions of the concept of Territorial Cohesion, as given by the Green Paper:
Territorial cohesion is about ensuring the harmonious development of all these places and about making sure that their citizens are able to make the most of inherent features of these territories. As such, it is a means of transforming diversity into an asset that contributes to sustainable development of the entire EU.
and in the introductory paper provided by the French Presidency for the debate on Territorial Cohesion during the Informal Ministers Meeting in Marseilles in November 2008:
The concept of territorial cohesion…. invites [us] to take action and to co-operate across the territory and across the administrative and political boundaries to provide citizens with fair opportunities in terms of living conditions and quality of life, and provide enterprises with fair perspectives for development, relying on specific territorial potentials, wherever they are settled.
The subsequent interim report by the French Presidency, which summarised the conclusions of the Ministerial Meeting and of successive meetings of the Council Structural Actions Working Group,  reported that:
[T]here is a certain consensus on the general meaning of territorial cohesion: aiming towards sustainable and balanced development of the whole of Union territory, taking into account the constraints and opportunities specific to each region, so as to ensure fair living conditions throughout the European Union.
However, whilst it is clear that the general concept of Territorial Cohesion might be succinctly described, it is much more difficult to arrive at a formal definition of its specific coverage and scope. Indeed, it is instructive that, even within the short introductory section to the Green Paper, there are over a dozen disparate policy areas - ranging from promoting sustainable development through to improving conditions along the EU's Eastern external border and improving access to education and health in remote regions - that are judged to fall within the remit of Territorial Cohesion.
The Scottish Government's view is that further extensive effort should not be devoted to deriving a precise definition of Territorial Cohesion. Rather, the focus should be on the spatial aspects of the relevant policy actions and governance arrangements. Accordingly, we think there is merit in adopting the Green Paper's suggestion that policy responses should lie in action on:
* Concentration - i.e. overcoming differences in density
* Connecting territories - overcoming distance
* Co-operation - overcoming division
* Assisting regions with specific geographical features (e.g. mountain, island, sparsely populated)
The last of these areas for action is usefully echoed in the French Presidency's introductory paper, which refers to Article 174 of the Lisbon Treaty:
Among the regions concerned, particular attention shall be paid to rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or handicaps such as the northernmost regions with very low population density and island, cross-border and mountain regions.
2.2 The Scottish Government's policy framework
Our response to the Green Paper is fully consistent with the domestic policy objectives that have been established by the Scottish Government. The central Purpose of the Government is:
To focus the Government and public services on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.
The Government Economic Strategy  sets out how the Scottish Government will support business and individuals to deliver the Purpose and identifies five Strategic Priorities that are internationally recognised to be critical to economic growth. One of these Strategic Priorities is that of equity, and the Government Economic Strategy describes the approaches that are being pursued in relation to social equity, regional balance and environmental sustainability. The Scottish Economic Recovery Programme, launched in December 2008, complements the Government Economic Strategy by outlining our response to the global economic slowdown. The programme has six elements, designed to maintain investment and development in the economy whilst targeting support at households and businesses.
In support of the Government Economic Strategy, the Scottish Government has developed its strategic thinking in a number of key policy areas as given, inter alia, in the Scotland Rural Development Programme, the National Planning Framework, the National Transport Strategy and the Strategic Transport Projects Review (STPR). Each of these has a direct relevance to spatial aspects of Scotland's long-term development. For example, the National Planning Framework sets out a spatial strategy to 2030, identifying priorities for the improvement of transport, energy and environmental infrastructure. It is informed by the EU's Territorial Agenda, its priorities for promoting economic competitiveness and protecting the environment, and its targets for energy supply and the reduction of greenhouse gas emissions. The National Planning Framework is concerned with Scotland in its wider context and provides the starting point for collaboration in wider spatial planning initiatives. The National Transport Strategy provides a structure within which questions of investment, priorities and policies can be addressed. Within this context, the STPR sets out the investment programme for transport in Scotland over the next 20 years - the most ambitious Scottish transport plan ever published - and identifies 29 major transport investment priorities.
3. Key principles
3.1 The importance of cohesion and equity as an objective of EU policy
In our 2008 response to the Commission's consultation on the Future of Cohesion Policy, the Scottish Government stated that we were "pleased at the importance placed on territorial cohesion in the Reform Treaty and the recognition that peripheral parts of the EU can face significant challenges, not least with the shift to the east in the EU's centre of gravity. This recognition should continue to inform the development of EU policy".
Our policy position remains unchanged. Economic growth should take place within a framework of reducing regional and local disparities. The Government Economic Strategy recognises that, "at present, differences in income, participation and growth across Scotland act as a drag on economic performance and potential" and it sets future targets for narrowing the gap in labour market participation between Scotland's best and worst performing regions. As part of this commitment to regional equity in Scotland, special attention is being given to ensuring that the most remote areas of Scotland can contribute to, and benefit from, economic growth.
Three important points should be noted here.
* The cohesion/equity objective not only captures the relative prosperity of regions or localities, but also social equity (for low income households and/or disadvantaged groups and communities that are disconnected from the mainstream economy) and inter-generational equity (for example, the need to protect and enhance Scotland's environment and natural heritage for future generations). The concept of Territorial Cohesion is entirely consistent with this holistic approach to meeting the equity objective.
* Following on from this, we refer to the Green Paper's observation that the 2006 Community Strategic Guidelines on Cohesion encouraged Member States and regions to take the territorial dimension into account in the design of the 2007-13 Structural Funds programmes. Reference is made in the Guidelines to the specific problems and opportunities of urban and rural areas, cross-border and broader transnational areas, and regions characterised by insularity, remoteness, sparse population or mountains. A similar promotion of Territorial Cohesion is given in the 2006 Community Strategic Guidelines on Rural Development. In addition, it is already the case that other EU policies also explicitly recognise the relevance of territory in the decision-making process, for example those relating to lifeline ferry and air services, wind farms and natural habitats.
* We support the point made in the Green Paper with regard to assisting regions with specific geographical features. In the Scottish context, for example, the Highlands & Islands region experiences the types of sustained development challenges - including population retention, very small farms, a dispersed business base, peripherality, small island economies and infrastructure deficiencies - that are also faced in other EU countries, particularly in northern Europe. We emphasise, however, that in addressing such challenges, the policy focus should be determined by the comparative strengths of the localities - i.e. through the support of positive and sustainable opportunities (for example in renewable energy technologies) that will lead to the realisation of potential at the local level - and not by a need for passive compensation for chronic deficiencies. Moreover it is important that all strands of EU policy (including competition and environmental policy) work to support these Territorial Cohesion objectives in a balanced and proportionate way.
3.2 The need for EU Territorial Cohesion policy to demonstrate value added
The Scottish Government believes that the key test for EU Territorial Cohesion policy should be its ability to bring added value to the efforts of nations, regions and/or localities in reducing spatial disparities of economic and social opportunity. We support the general principle set out by the UK Government that any attempt to expand EU competence using Territorial Cohesion as the rationale would need to be considered on a case by case basis with a clear demonstration of the EU added value that it would bring.
The relevant economic concept here is that of market failure and "public goods" - i.e. where the production and consumption of outputs has to be decided by society as a whole, rather than individuals or groups - the provision of which must necessarily fall to government, rather than the market.  For the EU to have a locus in Territorial Cohesion policy, therefore, there must be demonstrable additionality, as reflected in the improvement in social welfare brought about by policy design or implementation or by any genuinely additional funding that can be brought to domestic funding arrangements. It is clearly important that Territorial Cohesion policy determined at the EU level does not duplicate efforts at other levels of government. At the same time, there may be a particular role for cohesion policy where the procurement of environmental public goods in the interests of the EU as a whole requires spatially focused intervention limiting otherwise available economic and social opportunities.
The Green Paper's identification of climate change and energy security as key challenges to be addressed in the post-2013 policy environment confirms the importance of public policy in addressing market failure. For example, the exploitation of marine renewable energy sources - a potentially significant sector in the development of climate change mitigation programmes in the USA and Europe - is likely to require that market failure be addressed through public support at the point where innovative trailblazers confront the big leap up into the large scale deployment of the winning technology. In this context, it is relevant to note the Scottish Government's ambitious programme to harness the power from Scotland's seas in order to generate renewable energy. This is being undertaken not only through the generation of inward investment opportunities and support for infrastructure and supply chain development, but through discussion with the European Commission and its Joint Research Council on promoting the importance of renewable technologies in the EU's energy mix. The potential benefits would be felt not only in the stimulation of local and national economic activity but, at the much broader level, in the positive contribution to the EU's climate change agenda.
The Scottish Government's positive experience of Cross-Border and Transnational Co-operation programmes suggests that there is value in the spatial assessment and conduct of public policy that extends beyond the geographic coverage of administrative boundaries. There are opportunities for gains in social welfare when an integrated approach between different authorities and stakeholders produces the joint response to common policy challenges. Moreover, the "public goods" criteria can be seen to apply at all levels of collaborative engagement i.e. on a relatively small-scale (or local) level through to (in the cases of climate change or migration flows) a level that incorporates several Member States.
In our 2008 response to the Commission's consultation on the Future of Cohesion Policy, the Scottish Government argued that value added would be better demonstrated where there is greater spatial targeting of cohesion policy. We remain of the view that the policy should be concentrated on those sub-national parts of the EU that experience the most difficult economic development challenges, wherever the areas are located. As noted above, the Green Paper's suggestion that assistance should be given to regions with specific geographical features is helpful, provided that the focus is on the positive strengths and opportunities in such localities, subject to the constraints of scope and scale resulting from geography and/or demographics.
The above discussion implies that consideration should be given to developing a more refined approach to identifying and targeting spatial areas in need of support. It also raises the interesting question of improving the quantitative and qualitative indicators of Territorial Cohesion. We note that the French Presidency's interim paper reported that there had been a consensus at the Ministerial Meeting in Marseilles in favour of drawing up indicators to better assess the disparities between territories at a level which may be other than regional. We support the view that additional statistics should be compiled to help inform territorial observation and analysis, including through the ESPON programme. In taking this work forward, it will be important to draw on experience and good practice within individual Member States. Relevant examples include Scotland's indices of Multiple Deprivation and Rurality. Also of interest is the suite of indicators of economic activity, wealth, population change and demographic burden developed by Latvia's Regional Development Agency.
3.3 The Scottish Government's positive experience of Cross-Border and Transnational Co-operation programmes
The Scottish Government's experience of these programmes is extensive and we are able to draw on that experience in providing views on any future programme of Territorial Cohesion. The programmes have evolved over time. In summary, between 2000-06, the Transnational Co-operation programmes were strongly influenced by spatial planning, with Interreg III as one of four Community Initiatives. The concept of "territorial cooperation" has been introduced for 2007-13. Spatial planning per se has been removed, but the spatial approach has been retained through the geographical definition of the Cross-Border and Transnational programmes. There has also been a move towards "concrete" projects: i.e. tangible outcomes beyond networking and pure research. There is a significant Scottish commitment to participating in Cross-Border and Transnational Co-operation programmes during the 2007-13 period and we would wish to see these develop further beyond 2013.
A number of important lessons might be drawn from our experience of these programmes:
* Geographies do not always make sense in socio-economic terms. The boundaries of the existing programmes are mainly administrative (based on the NUTS hierarchy), but the economic and social impacts of a policy might follow a different spatial pattern.
* Recognition should be given to the different status attributed to these programmes for regions based in mainland Europe with land borders and those in more peripheral island and rural areas. For many regions and Member States, it is important that Cross-Border Co-operation is not promoted/pursued at the expense of Transnational objectives.
* In the application of Cross-Border and Transnational programmes, there tend to be differences in the approaches and procedures conventionally adopted by administrative partners. At a practical level, therefore, it takes time to build effective partnerships between those involved in different administrative regimes and, as a result, to build projects.
* There is an unavoidable requirement for a critical mass of partners as potential applicants, population as potential beneficiaries and a viable business and research/academic base.
* A number of common policy themes are evident in all 4 of Scotland's current Transnational programmes: i.e. innovation, environmental sustainability (climate change, renewables), accessibility, sustainable communities.
* The sectoral approach is challenging unless particular sectors are "clustered" in an area/region. Some such clustering might occur naturally - as seen in the Scotland Rural Development Programme and the LEADER and Fisheries programmes - but the creation of sectoral groupings crossing administrative boundaries can produce artificial clusters that are difficult to maintain.
3.4 The promotion of local governance and decision-making
The diversity of specific geographic features in different regions implies the need to avoid "one-size-fits-all" policy solutions and administrative arrangements. It is clear, for example, that assistance to fragile communities within some remote rural areas is likely to require a different range of policy tools and decision-making processes, compared with those needed in urban areas with concentrations of social deprivation and poverty. We have also noted above that the principles of Territorial Cohesion have been recognised in different sets of Community Strategic Guidelines and, moreover, that there are a number of lessons that can be drawn from the experience of Member States and regions in implementing the Cross-Border and Transnational Co-operation programmes. These two factors, combined, suggest that the more formal adoption and application of Territorial Cohesion as a policy objective should not be allowed to lead to a centrally-imposed prescription of the challenges and solutions. Rather, the principle of subsidiarity of policy response within a common framework of shared objectives should remain.
This conclusion applies to the governance arrangements, where the existing models of administrative infrastructure can be built upon. For many applications of Territorial Cohesion, the promotion of local partnerships - and multi-level governance and decision-making - would be the appropriate way forward. In the case of Scotland, supporting evidence for this approach is provided by our experience not only in drawing on the collective experience of Programme Monitoring Committees to provide the strategic steer to successive Structural Funds programmes, but also, within the domestic context, through the success of the Concordat signed by the Scottish Government and COSLA (the representative body of Scottish Local Authorities) in November 2007. The Concordat has removed an inflexible ring-fencing approach to Local Authority funding and is focusing the collective attention of the Scottish public sector on the outcomes - rather than the outputs - of policy decisions. The mutual accountability for the delivery of agreed outcomes and the acknowledgement of the ownership of the respective Scottish Government and Local Authority contributions have been recognised in a series of Single Outcome Agreements (SOAs). We agree with the statement given in the COSLA response to the Green Paper that the best practices adopted in the SOAs could be used with respect to other EU policies.
Also within Scotland, at the local authority level, the partnership approach to agreeing collective expenditure and outcome targets in regeneration policy is reflected in the Community Planning Partnerships, which are local networks (Local Authority, voluntary sector, local Health Boards and other relevant bodies) charged with meeting specific urban regeneration, community sustainability and social inclusion outcomes.
As noted above, our experience of the Cross-Border and Transnational programmes indicates that there are inevitable differences in the procedures adopted by administrative partners and that it can take time before the benefits of effective partnership are fully realised. Such issues are likely to arise in the context of Territorial Cohesion, particularly when the collaborative arrangements straddle national borders. The rewards for success could be substantial, however, given a distribution of spatial benefits that cuts across the traditional administrative boundaries.
Against this background, it will also be important to avoid the external imposition of excessive administrative and/or audit burdens that add to the perceived bureaucratic cost of participation in Territorial Cohesion activities by either administrative partners or potential project sponsors. In our 2008 submission on the Future of Cohesion Policy, the Scottish Government stated that, since 2005, there has been a disproportionate emphasis by the Commission on financial and procedural rather than strategic issues, and we made several recommendations to strengthen the financial control system. We recognise that, in 2008, the Commission made progress in alleviating some of the audit burden associated with the 2007-13 Structural Funds programmes. However, in (correctly) ensuring that the appropriate use is made of any public funds released for Territorial Cohesion, it will be important to ensure that there is clear guidance on their use and that the audit requirements are proportionate.
3.5 Territorial Cohesion as the basis for developing a more flexible and joined-up approach to all EU policy support
The European Commission's strategic planning for the post-2013 policy regime, of which the consultation on Territorial Cohesion is a part, provides a clear opportunity to give greater consideration to a joined-up approach to its different funding streams. This would allow a focus on equity outcomes as a whole, rather than attention being given to the specific (and often unintegrated) goals of the individual funding streams.
In our 2008 submission on the Future of Cohesion Policy, we noted that this is particularly true of Structural Funds and rural development funding, where the dividing line between the objectives of both types of funding can be artificial. This is evident from the regulations governing each funding stream, which unhelpfully require the a priori demarcation of funding that should instead be contributing to a common purpose. Similar examples are provided by the tensions between EU sectoral policies which play out in a Scottish context (e.g. energy and environment; competition and regional development). Territorial Cohesion provides an opportunity for the formal assessment of their spatial impacts, as it also does with issues such as the extension of the Trans-European transport and energy networks and, in the context of climate change strategy, the continuing importance of aviation in maintaining the connectivity of the more peripheral parts of the EU.
Policy development in Scotland is fully consistent with the clearer alignment of EU policy objectives. An example is the research proposal to be submitted under the Intelligent Energy Europe programme in 2009 by the Scottish European Green Energy Centre, with the support of the Scottish Government, to examine best practice in harmonising renewable energy projects with EU environmental obligations. Drawing on successful case studies from Scotland and other parts of the EU, the project will consider the EU's overlapping and competing environmental and energy policy objectives with a view to examining how both sets of objectives could be reconciled. The research should not only lead to real gains to local communities in remote and peripheral regions of the EU, where renewable energy resources are often found, but also to the better harmonisation of EU policy objectives and the benefits of coherent policy development.
In addition to providing greater clarity of policy objectives and outcomes, the joined-up approach would help to address some of the points made above regarding the disproportionate audit burden which has accompanied Cohesion Policy in recent years. The over-auditing of projects by EU auditors and the development of competing recommendations by different audit officials have placed a severe strain on domestic administrative resources without producing a clear and proportionate gain.
The above arguments indicates that the opportunities generated by the Green Paper on Territorial Cohesion to explore the scope for combining Funds should be firmly grasped. However, even if combining Funds is not possible, serious attention should still be given to the possibilities of requiring joined-up delivery of those Funds. In Scotland, for example, we have acted to bring the major deliverers of regional development funds, local authorities, and agricultural staff together into the sub-regional strategic priority setting for the Scotland Rural Development Plan; and we are working out how to engage the same partnership of delivery agencies into decisions on individual grant applications. This model should ensure the most effective deployment of public funds for territorial development.
February 2009ANNEX. QUESTIONS RAISED IN THE EUROPEAN COMMISSION'S GREEN PAPER
Territorial cohesion brings new issues to the fore and puts a new emphasis on existing ones.
- What is the most appropriate definition of territorial cohesion?
- What additional elements would it bring to the current approach to economic and social cohesion as practiced by the European Union?
2. The scale and scope of territorial action
Territorial cohesion highlights the need for an integrated approach to addressing problems on an appropriate geographical scale which may require local, regional and even national authorities to cooperate.
- Is there a role for the EU in promoting territorial cohesion? How could such a role be defined against the background of the principle of subsidiarity?
- How far should the territorial scale of policy intervention vary according to the nature of the problems addressed?
- Do areas with specific geographical features require special policy measures? If so, which measures?
3. Better cooperation
Increased cooperation across regional and national borders raises questions of governance.
- What role should the Commission play in encouraging and supporting territorial cooperation?
- Is there a need for new forms of territorial cooperation?
- Is there a need to develop new legislative and management tools to facilitate cooperation, including along the external borders?
4. Better coordination
Improving territorial cohesion implies better coordination between sectoral and territorial policies and improved coherence between territorial interventions.
- How can coordination between territorial and sectoral policies be improved?
- Which sectoral policies should give more consideration to their territorial impact when being designed? What tools could be developed in this regard?
- How can the coherence of territorial policies be strengthened?
- How can Community and national policies be better combined to contribute to territorial cohesion?
5. New territorial partnerships
The pursuit of territorial cohesion may also imply wider participation in the design and implementation of policies.
- Does the pursuit of territorial cohesion require the participation of new actors in policy-making, such as representatives of the social economy, local stakeholders, voluntary organisations and NGOs?
- How can the desired level of participation be achieved?
6. Improving understanding of territorial cohesion
What quantitative/qualitative indicators should be developed at EU level to monitor characteristics and trends in territorial cohesion?
 SEC(2008) 2550, 6 October 2008.
 SEC (2008) 2868, 14 November 2008.
 Council of the European Union, 17580/08, 23 October 2008.
 Scottish Government, November 2007.
 The textbook characteristics of public goods are that they are "non-rivalrous" (i.e. one individual's use of them does not deprive someone else), "non-excludable" (so that if one individual uses them, others cannot be stopped from also doing so) and "non-rejectable" (individuals cannot opt out of their use). The non-excludability and non-rejectability criteria mean that no market can exist and, therefore, that provision must be made by government.