EU transport policy needs a strategic heart
The ECA landscape review on transport and mobility issues, published in December 2018, builds, in particular, on 13 special reports published by the ECA since 2010. With that in mind, we invited the three ECA directors involved in producing these reports for an interview. Gabriele Cipriani led the Investment for Cohesion, Growth and Inclusion Directorate from 2002 until 2014, and retired from the ECA in December 2018. In 2014, Martin Weber took over, and left in 2017 to head the Directorate of the Presidency. Gerhard Ross, who has been director at the ECA since 2016, succeeded Martin in May 2017. Gerhard has thus been in charge of this directorate when the more recent special reports on passenger rights and high speed rail, as well as the landscape review itself, were finalised. The aim of bringing the three directors together was to obtain a more holistic view of this policy area over the last decade, but also to provide a preview of what audits under the new Multiannual Financial Framework could look like.
Interview with Gabriele Cipriani, Martin Weber and Gerhard Ross, respectively the successive and current directors of the ‘Investment for Cohesion, Growth and Inclusion’ Directorate
By Derek Meijers and Gaston Moonen
Some conclusions of the past … still valid today
A comparison of current ECA reports on transport with those of about a decade ago can offer some interesting insights into developments in the ECA’s approach to auditing transport policy and programmes. Gabriele Cipriani explains: ‘When I became director in this area there was already the question was how the ECA itself could help improving the effectiveness of EU transport policies. Let us take for example special report 6/2005 on trans-European networks for transport. It has two conclusions, which, I am afraid, might still be valid today. Firstly, we concluded that the financial aid, disbursed under the so-called TEN-T programme, was allocated in an overly fragmented way and was not sufficiently focused on cross-border projects. As such, it would not achieve its European added value to the fullest.’ The second conclusion, as Gabriele recalls, refers to coordination of transport infrastructures by different EU funding programmes, which the ECA recommended should be strengthened.
… regulatory measures matter more than money in many respects.’
He emphasises that 10 to 15 years ago there was increasing awareness at the ECA that, besides the usual financial and compliance audit work, there was a need to further develop performance audits to deliver added value. ‘But this was easier said than done. How to develop for example performance indicators in a context where the objectives were so wide and eligibility criteria not always that clear.’ Referring to another special report, 08/2010 on improving transport performance on Trans-European rail axes, he says ‘Here we clearly indicated that funding is not necessarily the most important element as regulatory measures matter more than money in many respects.’
Martin Weber agrees that the issue of eligibility is a concern. ‘For these mega projects like the Brenner Base tunnel, fulfilling a key role in the major EU corridors, the eligibility criteria are decided at a political level. These projects are funded because there is a political will behind it. The question is then how would you assess this? Most often they are stand-alone projects. And, just to give an example, you cannot easily compare one mega tunnel with the other, particularly when looking at the economic rationale behind these projects.’ He considers that one interesting feature of many of these EU-funded mega projects in transport is their cross-border character. ‘These concern tunnels through the Alps or the Pyrenees, the Fehmarn belt bridge, the Euro tunnel. And that adds additional complexity to these projects because several actors from different Member States are involved.’
Gabriele adds that there is also a time dimension since most of these projects take a long time to be completed. ‘And what was a priority in the nineties might not be a priority now — be it for advancing technological or other reasons — which explains some of the reluctance to invest in some corridors.’ He gives the example related to the Lyon — Turin corridor. ‘It was put forward within a national strategy, and then became part of the TEN-T corridors. Yet, now it risks to be called into question by the Italian government, while five years ago it was considered a priority.’
Using EU funding as catalyst for change
For Gabriele it is also clear that the EU budget for transport needs to be put into perspective. According to estimates drawn up by the Commission in 2011, the cost of EU infrastructure development to match the demand for transport has been estimated at over €1,5 trillion for 2010–20130. The completion of the TEN-T network requires about €550 billion until 2020, out of which some €215 billion can be referred to the removal of the main bottlenecks.. Obviously only a fraction of this can be supported through EU funding. This shows how important it is to concentrate the EU budget on where it can serve as catalyst.’ Gerhard underlines this view by adding to this the budgetary perspective that for the 2007 to 2020 period the entire EU funding instruments in support of transport amounted to €193 billion.
With enlargement, everything turned east — west and there was no infrastructure […] Perhaps not many people realise how successful the EU has been in creating this structure.
Martin points to what he considered a major challenge for the EU at the time when the ECA started to produce its performance reports on transport. ‘Before the 2004 enlargements the transport was mainly north –south. Most road and rail infrastructure was built that way. With enlargement, everything turned east — west and there was no infrastructure, or what was in place was not adequate to cope with the rapidly increasing traffic flows. Perhaps not many people realise how successful the EU has been in creating this structure. It is clear that not all cohesion funds have been used in the best possible way. But I believe it has played a crucial role and without EU funding this success would clearly not have been possible.’
As second point Martin mentions is market liberalisation. ‘The EU single market has had a tremendous effect. In the 1990s, you still had a rather controlled and regulated transport sector with mostly domestic companies running the business. Although there are still protected niches — for example in rail — the situation now is very different, with far more businesses operating EU-wide .’ In addition, regarding technological change and innovation, he states that ‘like the other two developments, this trend will continue and it is difficult to predict in what way this will impact traffic flows. It could mean more traffic, less traffic, difficult to tell.’
Facilitating competition between modes of transport
When discussing the diverse developments in the different modes of transport, Martin raises the issue of equal competition between types of transport. ‘For example, in relation to our special reports on airports. That was intrinsically linked with taxation because without subsidising fuel for planes, for example, there would not have been this level of demand. Prices would be higher and fewer people would fly.’
Our findings regarding underutilised sea ports and airports tell you […]that they can fund things which are not needed.
Gerhard Ross ties this to a lesson that can be learnt: ‘Our findings regarding underutilised sea ports and airports tell you there is a problem with cohesion funds, namely that they can fund things which are not needed. In that sense transport expenditure can be an obstacle for the EU to reach the goals it is committed to, since euros spent on such underutilised infrastructure are not available to be spent on something better.’
This issue touches upon one of the key challenges identified in the 2018 ECA landscape review on transport: focusing EU funding on those priorities with the highest EU added value. Gerhard ties that to another challenge: ‘We also identified as a key challenge the enforcement by the EU of closer alignment of national infrastructure decisions with EU policy priorities. But the problem is if the lion’s share of the funding is coming from Member States and not the EU budget, whether the EU level has the power to do so.’
If […] the regions can do what they want, then you arrive at the conclusions the ECA had to draw regarding empty seaports.
Gabriele agrees with Gerhard. ‘All the more since, as a result of the Multiannual Financial Framework agreement, for structural policies there is a funding — also called ‘envelope’ — for every country — which in many of them is further subdivided by regions. If, due to the absence of an overall intervention strategy, the regions can do what they want, then you arrive at the conclusions the ECA had to draw regarding empty seaports. The question here is also: Why does the Commission not take a firm stance, simply by making the commitment of EU funds conditional upon the existence of a certain number of guarantees (among others, an operation plan) to ensure the sound financial management of EU funds.’
EU involvement when strategic decisions are prepared
Gabriele points out that sometimes interests are so divergent that if becomes difficult even to devise a strategy, giving the example of inland waterways. Martin agrees: ‘The problem with inland waterways is that it immensely expensive to maintain the infrastructure, to build the channels, etc. If you do not have a particular economic interest, then of course it brings back the issue of lack of funds. In a fully liberalised single market, it can be counterproductive to decide on transport infrastructure at a regional and national level. It simply does not make sense from an EU perspective.’
With that in mind, Gerhard remarks that it would make more sense to take out EU transport investments from the European Regional Development Fund (ERDF). ‘But wherever you put it, the main share will still have to come from the Member States.’ On that issue, Gabriele argues that EU funding decisions should aim at maximising European added- value. ‘For transport in particular this implies taking account of the cross-border perspective … I think you should go out of the purely national dimension.’ Gerhard brings in the issue of will: ‘To maximise their impact EU resources, which are limited, should focus on the highest priorities and EU added value. But what does that mean, exactly? That is also a question of political will.’ Martin, with a laugh, suggests: ‘Why not take inspiration from the Americans? They have federal highways. Creating a European infrastructure for the main corridors across the Union, fully funded and maintained by the EU, and also label it like that.’
Creating a European infrastructure for the main corridors across the Union, fully funded and maintained by the EU, and also label it like that.’
All three directors agree that from a strategic point of view the Commission is not sufficiently involved in the approval of the biggest strategic projects. Martin: ‘That is a major issue because the misallocation of money happens when the decision to launch the project is taken. For the major transport infrastructure projects, which have an impact which goes beyond the Member State in which the project is located, it is crucial to have this independent view from the outside, looking at the bigger picture.’
More audits on transport issues
Gerhard remarks that transport is the biggest area of expenditure in cohesion. ‘Over 70% of this expenditure is spent on roads and rail. However, we also see an increased importance in 2014–2020 for multimodal transport and intelligent transport systems. Thus, it is not surprising that transport issues dominate the topics of the reports in our audit chamber. And they are appealing too, people can relate to it.’ He adds that his directorate has now six ongoing audits on transport issues.
Martin points out that in ‘his’ period this was slightly different. ‘We did not have the luxury to choose at the time. It was good if you got one audit on transport through. Do not forget that when I started we did three or four special reports per year in the directorate. Now you are doing 10 or 12, preceded by many more proposals.’
… increasingly the question will be about maintaining or upgrading what we have.
In addition, the focus in the transport area itself has changed. Martin: ‘In the past, the EU budget in this area was mostly about building new infrastructure. But increasingly the question will be about maintaining or upgrading what we have. Actually, in the past it was not permitted to spent EU money on maintenance.’ He thinks it needs to be changed now because the big issue is maintenance. ‘Take the bridges in Italy, but also Germany and many other countries: a significant share of them are under close surveillance because the authorities are no longer sure that they will hold.’ Regarding maintenance Gerhard adds another aspect: ‘During the financial crisis, maintenance spending went down in the Member States. And the EU budget co-financed investment only.’
For Gabriele, maintenance relates closely to sustainability. ‘We made similar remarks years ago in our audits on waste water treatment, noting in particular that over dimensioning of the project can only aggravate the maintenance issue.’ Martin adds: ‘Some countries have problems building an airport, let alone maintaining it. And as the EU’s external auditor we have a nice competitive advantage: cross country comparison.’ He then refers to special report 5/2013, where the ECA compared the cost of building comparable structures of motorway in four Member States (Poland, Greece, Germany and Spain). ‘Germany came out as most cost effective, which was counter-intuitive. I am convinced that if we did more of these benchmarking audits, similar results would emerge.’ He adds with a laugh: ‘It is also interesting that in some countries, such as the Czech Republic, prices seemingly went down, following our report.’
But has an ECA audit actually resulted in stopping an EU programme? Gabriele refers to a report published when he was director, special report 03/2013 regarding the Marco Polo report for rail freight. ‘We concluded that there was no real added value in the programme. In the end the Commission accepted this and the programme was discontinued.’
Taking a user’s perspective
Turning to more intangible aspects of transport, like passenger rights, Gerhard finds that looking at the issue from the customer’s angle in such audits is a good opportunity because ‘It raises interest and we were rather successful with it in the media. We looked at the subject from the perspective of users, and used surveys to collect their views. One of the outcomes was a list of ten very hands-on tips on how to avoid problems with enforcing your rights as a passenger. It was quite a novelty in the house to put this in the press release, related to special report 30/2018.’ Martin adds: ‘Carrying out such an open survey where every EU citizen could participate was certainly a new element, and we should use it more often in our audits.’
Gerhard points out that besides the performance audits, his directorate also looks at the financial and compliance side of projects. ‘You have public procurement, issues with eligibility rules, or non-compliance with state aid. It is the normal list of the main sources of error. Nothing specific.’ Martin adds that there is often a public perception that there is a lot of mismanagement in EU-funded projects. ‘But in reality the compliance issues are much fewer, and spending is probably much more regular than in comparable projects that are exclusively funded from national budgets. This is mainly so because national authorities are afraid of the Commission imposing financial corrections so extra care is taken that the files are correct and rules are complied with.’ He thinks that it is not just the money. ‘With errors the EU programmes come are interrupted or even suspended, there are further investigations and potential damage to the reputation of the implementing bodies. Nobody wants such trouble, and it may help that projects co-financed from the EU budget are often comparatively clean.’
Gabriele has a more cautious view of the effectiveness of financial corrections, at least in the time when he was leading the Investment for Cohesion, Growth and Inclusion Directorate. ‘For many years projects with errors in them were simply substituted by other projects. As a result, there was no true financial impact while at the same time the focus on errors deflected the managers from content issues. Moreover, the Commission’s approach, considering that the negative effect on the EU budget was neutralised simply by applying a financial correction whenever something was found, ignored the opportunity cost of this money not having been made available for other compliant projects. The rules applicable to financial corrections recently changed, but it is still too early to say whether this has made them more effective.’
Martin indicates that he visited nearly all the big tunnel projects in the Alps. ‘I have also been to the 57 km Lyon — Turin tunnel currently under construction, for an estimated cost of €8 billion. This new tunnel will replace a much shorter, high-altitude tunnel on which construction started when Savoy was still part of Italy. But when the tunnel was finished in 1872, Savoy had been sold to France. And therefore it became a border tunnel.’
Transport is in the picture
Selecting the audit topic and assessing the programme is one thing, getting media attention for it is another. When discussing how the ECA nowadays draws attention to its reports Gabriele is, like the two others, very positive. ‘I think this is the way to go, as I was all in favour of producing the predecessor of press releases — then called information notes — for our reports.’
Martin, speaking in his current role as Director of the Presidency in charge of communication, adds: ‘From the 15 top special reports in 2018, three relate to transport; the ones on Public-Private Partnerships, high-speed rail and passenger rights.’
Gerhard adds: ‘Our special report 23/2018 on high speed rail was the ECA report with the highest media coverage in 2018. Special Report 9/2018 on Public-Private-Partnerships was also taken up with great interest, and there were a large number of references made to it in specialised journals and the audit team got invited to speak at several conferences across Europe.’ Martin remarks that Special Report 23/2016 on seaports even contributed to developing a new national seaport strategy in Italy.
… Also negative aspects of transport — pollution, noise, air quality — will continue to attract our audit interest.’
When it comes to assessing the use of intelligent systems and digitalisation in transport, there are and will be a number of reports covering this — a report on the European Rail Traffic Management System (ERTMS) is published and a report on air traffic management is published while a second one on its deployment is in the reporting phase. Gerhard: ‘We will also be looking at urban congestion and mobility. Also negative aspects of transport — pollution, noise, air quality — will continue to attract our audit interest.’ An example of the latter is the briefing paper the ECA published in early February 2018 on vehicle emissions.
EU transport achievements most visible … when it breaks down
Taking a wider perspective, Martin concludes: ‘I think in the EU we have progressed a lot in terms of policy and legislation. But it is not always that visible to citizens. I think these massive changes are not perceived as such. People cannot grasp that ultimately many of the things that became better are related to European initiatives.’ Gerhard adds: The looming departure of the UK from the EU will most likely show how important many of the EU achievements are, particularly in the transport area.’
I think in the EU we have progressed a lot in terms of policy and legislation. But it is not always that visible to citizens.
The three directors agree that the advantages gained through EU actions, including those in transport, do not always stand out in the ECA reports. Gerhard: ‘In our audits we also try to identify positive elements, but it is not always easy. If we have a positive finding it is often followed by a “however.”’ Martin adds: ‘We are looking at things that have been done and we are looking for problems with these things. This sometimes leaves the things that go particularly well, or where additional EU involvement would add value, untouched because that is not our specific role in the EU accountability system, or currently not yet perceived to be our role in the house.’
Professional insights not necessarily having an impact on private transportation habits
When asked how all these audits on transport have influenced their own choice of methods of transport, the three directors have to think a bit longer. Martin says ‘In fact, I am a convinced train user but this is being made more and more difficult. One example is that if you want to go to by train from Luxembourg to Milan, 20 years ago you could take a direct train. Now, you have to take a TGV to Mulhouse, get a local train to Basel, a Swiss train to Italy, or even changing again in Switzerland. And you cannot buy a single ticket. Not really a customer-friendly approach. In my view, this is an area where additional regulatory measures are needed. The operators need to be forced to provide these cross-border services all along the distance, otherwise you are lost as a customer.’
I am a convinced train user but this is being made more and more difficult.
Gabriele replies: ‘I cannot say I have been influenced by my official duties. But I have changed my habits — in recent years I have started to come to the office by bus rather than by car. This was, however, due to the fact that the ECA chose to offer the ‘Jobkaarts’ to its employees. I just made good use of them.’
Gerhard, laughing: ‘In terms of my mobility, I would say that my work has rather reduced my mobility in the last year, at least over the weekends: because then I needed to read and comment on draft transport reports at home.’
This article was first published on the January-February 2019 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.