EU reclaims ESF funding from the Netherlands

In July 2001, the European Commission announced that it was reclaiming EUR 239 million of European Social Fund (ESF) money from the Netherlands. The funding, it is claimed, was spent by the Dutch Employment Service with insufficient care and for purposes other than those intended (additional activities to train unemployed people in order to increase their chances of finding employment in the regular labour market). The Dutch social partners, who are involved in administering the Employment Service, support the actions of the Service and the Ministry of Social Affairs, while a committee of inquiry has exonerated the Ministry and Service and questioned the European Commission's method of investigation. A parliamentary majority has expressed agreement with the committee's conclusions.

In July 2001, the European Commission announced that it expects the Netherlands to repay EUR 239 million to the European Social Fund (ESF), giving the Dutch government two months to respond. Of a total of NLG 440 million received in ESF funding , NLG 380 million is said to have been spent incorrectly, while a subsidy of NLG 80 million for technical support is being postponed because the Commission considers overhead costs too high.

The well-defined objective for ESF funding is that it should be spent to on additional retraining and further training activities for unemployed people to increase their chances of finding employment in the regular labour market. As suggested on several occasions in the past, the European Commission now believes that within the scope of administering the Dutch public Employment Service (Arbeidsvoorziening), it is not possible to check adequately if training courses are given to the correct participants. In the background, there is the matter of ESF monies allegedly having been spent to compensate for cost-cutting at the Employment Service since 1994. Since 1991, the Employment Service – for which the social partners have borne administrative responsibility since 1990 – has been assigned with the task of spending ESF funding.

Social partners back minister

Ad Melkert, now the likely successor to the current Prime Minister, Wim Kok, was the minister responsible for social affairs between 1994 and 1998. The question has been raised of whether he 'turned a blind eye' to incorrect use of ESF funding in order to enable the Dutch Employment Service to operate smoothly. The social partners, who as the administrators of the Employment Service are particularly closely involved in this issue, responded with some reserve, believing that there were not grounds for accusing Mr Melkert of wrongful deeds. However, the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) has argued that ESF money should never be considered as the Employment Service's own income. In 1994, FNV proposed compensating for cost-cutting measures at the Employment Service by raising employees' unemployment insurance contributions. However, along with the minister, employers did not believe this to be a viable solution.

Committee of investigation reports

With the European Commission's earlier polite requests for more information and accountability on ESF expenditure having now become an official reclamation procedure and demands to provide declarations on overheads, the current minister of social affairs, Willem Vermeend, instituted a committee of investigation in July. A former Auditor General, Henk Koning, joined the committee of experts to look into the matter swiftly.

The most important conclusions of the 'Koning committee' are that, although the ESF regulations may not have been properly followed at all levels in the Netherlands, there is no question of large-scale fraud or misuse. The irregularities identified mainly concern understandable and unintentional misunderstandings regarding the ESF regulations. By EU standards, the ESF funding was well spent in the Netherlands and achieved above-average results from a European perspective. Deregulation at the Employment Service, which effectively distanced the Ministry of Social Affairs and the social partners from administrative supervision, contributed towards a situation in which those ultimately responsible had little insight into the quality of the results of the ESF-funded actions. Changing relations between the central Employment Service and decentralised (local) employment services, with the latter bearing responsibility for actual administration, also led to a situation in which insufficient supervision could be maintained over a verifiable administrative process.

The Koning committee believes that the amount of NLG 448 million currently being reclaimed by the European Commission is too high; in its view, NLG 71 million would be justifiable. It blames the present predicament on the disparity of the management cultures in place in the Netherlands and those at EU level, where theory and practice are dominated more by legalities than in the Netherlands, where open consultation in advance is more prevalent.

A majority of the Lower House of the Dutch parliament supported the findings of the Koning committee and saw no need for further investigation. One government coalition party, the the social liberal Democraten 66 (D66), is concerned that the Ministry has failed to maintain control over the sensible expenditure and administration of subsidies. The opposition Christian Democrats (Christen Democratisch Appèl, CDA) CDA are more critical: the report's conclusions are deemed too positive and CDA is shocked that so much information has gone astray because of a flawed administrative procedure. Two smaller left-wing opposition parties – the Green Left (Groen Links) and the Socialist Party (Socialistische Partij, SP)– do not rule out the possibility of a parliamentary investigation.

The permanent parliamentary committee for social affairs (part of the Lower Chamber) was due to question the social partners and the Employment Service at the start of October 2001 about expenditures related to ESF subsidies. The report issued by the Koning committee will be used by government to challenge the claim put forward by the European Commission. The minister of social affairs is currently stating that he will not repay the money, because the Commission officially accepted the Dutch accounts for the period 1949-6.

Commentary

Ironically, the European Commission's claim for reclamation of ESF funding is based on an auditors' report that the Dutch minister of social affairs commissioned following allegations of possible irregularities. He submitted the report to Anna Diamantopoulou, the EU Commissioner for Employment and Social Affairs, and the Commission extrapolated the findings (based on a random survey) to underpin its claim for repayment. A clearer picture of differences in management cultures hardly seems possible.

In the Netherlands, this issue has left something of a bitter aftertaste. The minister responsible for social affairs during the 1994-8 period, Ad Melkert, who now finds himself accused, was precisely the minister responsible for setting up the so-called 'Melkert jobs' scheme, which created large-scale, although subsidised, employment. Although the Koning committee has done its job, the partially critical Lower Chamber of parliament will review the report.

The social partners also find the current situation unpleasant. This is because it has now emerged that, at a time in the 1990s when they adopted a more modest role in the administration of the Employment Service, irregularities emerged in relation to one of the points that they more or less supported: creating jobs, particularly for those people excluded from the labour market due to reasons such as inadequate previous training. (Marianne Grünell, HSI)