Rt. Hon. Barbara Roche - Former Parliamentary Under Secretary of State for Small Firms (May 1997 - Dec 1998)

The Seventh Report From Trade And Industry Committee Session 1997-98, On The Reform Of The European Structural Funds

I agree with the hon. Member for Daventry (Mr. Boswell), who speaks for the Opposition on these matters, that this has been a very good debate. Hon. Members on both sides of the House have made contributions of an enormously high standard which have really taken the issue forward. I thank all hon. Members who have participated in the debate for their words of encouragement. Such a united view will strengthen the Government's hand in the negotiations.

The hon. Member for Daventry and practically every hon. Member who has spoken this evening commended the Select Committee on producing an excellent report. I congratulate my hon. Friend the Member for Kingswood (Mr. Berry) on the elegant and thorough way in which he presented the Select Committee's report and case. The House is indebted to the Select Committee for the way in which it has produced the report and the opportunity that it has presented to have this debate this evening.

My hon. Friend the Member for Kingswood outlined the importance of the structural funds and what they mean. My hon. Friend the Member for Falmouth and Camborne (Ms Atherton) also spoke passionately on that subject. For many people in our country, the structural funds and how they are used in their areas are a manifestation of the European Union. I am very pleased that the Committee's report broadly supports the Government's position on several key points.

For example, the report refers to the need to contain the cost of the funds, the need for some flexibility for member states in selecting eligible areas under objective 2, and the treatment of sparsely populated regions in the United Kingdom.

Very importantly--this has been a theme of the debate--the report highlights the need for increased simplification, which is a key area of negotiation. We made considerable process in that direction during our presidency of the European Union. The hon. Member for South-East Cornwall (Mr. Breed) and my hon. Friend the Member for Brighton, Pavilion (Mr.Lepper) made that point when they spoke about the need for simplicity.

It is important that the reforms should lead to fewer objectives, less bureaucracy, a broader partnership and a much simplified system of payments. Hon. Members also referred to cohesion funding, and I agree with the comments by my hon. Friend the Member for Kingswood.

The Committee researched the report thoroughly. It took evidence from a wide selection of those with an interest in this reform, including several local representative organisations such as the Local Government Association, the Convention of Scottish Local Authorities and some local partnerships. A great strength of the report is that it is so comprehensive.

I gave evidence to the Committee in May in order to set out the Government's view. The Government replied to the Select Committee report by way of a memorandum, and I want to cover a number of those points today. Since the publication of the Agenda 2000 communication in July 1997, we have said that the reform of the structural and cohesion funds must be affordable and fair to all existing and future member states, including the UK and its regions. It must deliver an outcome that is durable, sustainable and capable of applying in the next programming period and beyond that into 2006 without increasing costs unmanageably or introducing inequalities.

Affordability must be set in the context of current levels of spending and of the prospect of an enlarged union, which was a point raised by the hon. Member for Daventry. That inevitably means that, at some point, the present 15 member states must expect to sustain reductions in both coverage and receipts.

[Ms McIntosh Intervention]

Let me explain to the hon. Lady--I am aware of her experience in these matters--that is why the Government are taking such a rigorous view in the negotiations. We accept that reductions will have to be made, but our position is that they will have to be on the basis of fairness to the United Kingdom. The Committee takes a very sensible view that it is probably better done sooner than later and that the programming period after 1999 should prepare member states for eventual enlargement. It also makes the important point that it must be fair. Cuts in population coverage must be proportionate across member states, everything else being relatively equal, and no member state should receive more per capita than it does now.

We agree that the Commission's proposals, which would increase funding in real terms are difficult to reconcile with other principles within the proposals such as concentrating or reducing the areas that receive funding. The Select Committee also covered such issues. That is the basis for our insistence on the structural and cohesion funds element of the budget being kept well below 0.46 per cent. of EU Gross National Product to avoid the possibility, pointed out quite correctly by the Select Committee, of more money for fewer people. We must absolutely avoid that outcome.

Conceivably, there could be a case for Objective 1 if we had to accept a position where two thirds of the structural funds' coverage--and possibly the money--went to Objective 1 areas or if, following the Select Committee's suggestion, Objective 1 was limited to the poorest 20 per cent. of regions. If it meant that the budget was reduced commensurately, that would be welcome, but we could not support a situation that led to increased intensities of support.

The Government support the Select Committee's view that strict application of the 75 per cent. GDP criterion might cause the UK some difficulties, but that is not what the Commission proposes. The draft regulations already specify some exceptions, such as ultra-peripheral regions and Objective 6 sparsely populated areas whether or not they meet the 75 per cent. GDP criterion. In our view, that shows that GDP is not the only indicator of genuine need, and we need to look very carefully at the totality of Objective 1 and its eligibility criteria. This is our basis for arguing, as we have done consistently, for a sparsity of population criterion to address the needs of areas such as the Highland and Islands. We welcome the Committee's support for them to be treated on a par with member states in a similar position, such as Finland and Sweden. We heard powerful speeches in this regard from my hon. Friend the Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) and from the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan).

We welcomed the Cardiff Council's commitment to assisting the peace process in Northern Ireland, particularly its recognition that the European Union "should continue to play an active part in promoting lasting peace and prosperity in Northern Ireland".

Much of the discussion this evening has been on Objective 2. The Committee identified correctly the difficulties in interpreting the Commission's proposals for Objective 2. Unifying the industrial, rural, urban and fisheries areas within a single objective 2 would advance the aim of simplification. That point has been made. Unfortunately, however, it could also impose complex and apparently artificial distinctions that would automatically exclude from consideration some areas of need. We are working hard to ensure that all strands are dealt with properly. The rural strand was rightly discussed by the hon. Members for Vale of York (Miss McIntosh), for North Norfolk (Mr. Prior) and for Daventry. The fisheries strand was mentioned by the hon. Member for North Norfolk and by my hon. Friend the Member for Waveney (Mr. Blizzard), who both made important points.

In the negotiations, the Government continue to emphasise the importance of flexibility to target areas of need, even if those are concealed within relatively prosperous areas. That was a recurrent theme of this evening's debate, powerfully expressed by my hon. Friend the Member for Burton (Mrs.Dean). The need for flexibility was emphasised by hon. Members on both sides of the House, including my hon. Friends the Members for Eccles, for Brighton, Kemptown (Dr. Turner), for Hastings and Rye (Mr. Foster), for Hemsworth (Mr. Trickett), for Normanton (Mr. O'Brien) and for City of Durham (Mr. Steinberg). It is important that we make it clear that in the UK we need the flexibility to target funds where they are most needed.

I am grateful for the Committee's recognition of the value of the safety net. It limits the loss of coverage for objective 2 and 5b areas to no more than one third and is an important achievement for a number of UK areas. As we gain a better understanding of the process, the benefits of the Government's achievement in establishing the safety net will become apparent.

One of the strengths of the past few months has been the contribution of local partnerships and organisations in shaping the proposals and the negotiations. We have worked together to present a united and coherent case in Brussels. I thank all hon. Members, Members of the European Parliament and members of local authorities throughout the country who have worked so hard with me and my officials. I take this opportunity to thank all my officials too, who have worked tremendously hard in the Department and in our permanent representation in Brussels. I am grateful for all the work that they have done. The importance of delivering for the UK as a whole was pointed out by the hon. Member for Westmorland and Lonsdale (Mr. Collins).

In developing UK policy and the positions for the negotiations, we have held a number of local, regional and national consultations since the publication of the Commission's proposals and have sought to reflect the views gathered along the way in the on-going discussions. I am grateful for all the participation that has taken place. We must make sure that the united front continues.

The Government agree with the Committee that bureaucracy surrounding the funds should not be a bar to access for any organisation, however small. In the negotiations to date--initially this was under the United Kingdom presidency--we have been able to secure agreement to some of the general principles that support the universally agreed aim of simplification of the funds: making them more effective and, most important, better value for money. That was an important first step in a reform proposal as radical as the one that we are discussing. We should not underestimate the scale of the task and of this particular achievement, given the divergent views across member states on the detail of the proposed negotiation.

The focus of the Presidency earlier this year was primarily to simplify the administration of the funds. In this, we achieved a high level of consensus among member states. The informal meeting of EU Regional Policy Ministers in Glasgow in June achieved several important levels of agreement on a number of principles: the importance of job creation and employability and of regional competitiveness; the values of effective partnership between the Commission, national Governments and regional and local organisations, and of a clear definition of role for all of them; and the need to bring decision making as close as possible to the people it affects--that was very much a recurring theme of our debate this evening--in other words, more regional and local control over the Structural Funds delivery.

All of us want to protect the good name of the Structural Funds. We want the system to operate as democratically as possible. That is why the negotiations and discussions on simplification are so important. All those involved in the funds want to develop a less burdensome and more efficient system for their administration from the year 2000 onwards. It is clear that everybody wants to do that.

It is clear also that complex negotiations are ahead if we are to reach agreement on a fair and transparent system. A great deal more work has to be done, particularly on objective criteria, eligibility issues and finance, if we are to get the system right. There has been discussion this evening about the Community initiatives, which we know have led to some useful partnerships and have provided funds outside the objective areas. However, they have proved complicated to administer and they are not always the best way to address strategic issues. We have supported a reduction in their numbers. The mainstream Objectives should be sufficiently flexible to accommodate activities currently included under Community Initiatives. At present, there is still very little detail from the Commission about the three Initiatives that are proposed, but they clearly must add value to the main objectives in terms of the structural funds.

The Cardiff Council set a deadline of March 1999 for agreement to be reached in the Council on the Agenda 2000 package, which of course goes wider than the structural funds. The deadline is important. As I have said, we recognise that much work will need to be done to achieve it. We will need to make every effort to ensure that it is met. I am grateful to the Select Committee for its work and to all hon. Members on both sides of the House who have lent their support in such a positive and constructive way. It is clear that, in the months that lie ahead, we need to continue to work together so that a strong UK voice is heard. In that way we can get the right result for the United Kingdom as a whole.

Other speeches by Rt. Hon. Barbara Roche - Former Parliamentary Under Secretary of State for Small Firms (May 1997 - Dec 1998)

(the following are available from the archive)
• The OECD Electronic Commerce Ministerial Meeting (09/10/98)
• EU Telecomms Liberalisation Event, (19/01/98)
• Enhanced Business Links - A Vision for the 21st Century (08/10/97)