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10.4 am

Mr. Edward Davey (Kingston and Surbiton): I congratulate the hon. Member for Putney (Mr. Colman) on putting the case for London so well, and on pointing out that we have large unemployment problems in the capital and that we will have to ensure that London's case on the reshaping of structural funds is made.

I should like to make a few comments on reform of objective 3 funding--especially as it relates to the European social fund--which is particularly germane to London. As the hon. Member said, regional--even sub-regional--definitions can miss out areas of concentrated poverty, which are, by their very nature, quite wide. As he also said, London is likely to miss out not only on objective 1 funding but on much of objective 2 funding. In the worst case scenario, none of London's areas will be given objective 2 status. Therefore--particularly because of the regional definitions--it is important for areas such as London that overall objective 3 funding is well resourced.

As the hon. Member said, London has concentrated areas of poverty that are not revealed in the nomenclature of units of territorial statistics definitions. Those areas have to be able to share in support from Europe. If that

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support will not come from objective 2, we will have to ensure that objective 3 is well resourced so that it can back us up.

Administration of objective 3 funds is another issue which must be addressed. Although the hon. Member touched on the issue, I should like to make a couple of major points. Hon. Members will have read the Trade and Industry Select Committee's recent report on the reform of European structural funds, which makes two telling points on reforming administration of the European social fund. The first deals with the complexity of current administrative arrangements.

At the back of the report, there is a submission from the Leader II network in England, which describes current administrative arrangements for the social fund as "Kafka-esque" and says that the number and complexity of forms render it incredibly difficult for many organisations to apply. As a consequence of the complexity, simply to apply for funds, political lobbyists have to become involved in the process, and special posts have to be created. That is not an efficient way of running such a system.

Administrative complexity creates barriers for, and limits the number of, organisations that would otherwise apply. It is almost as if the funds were being rationed by complexity. We want a much more open, simple and transparent process in which many more people and organisations can apply.

A second aspect of the administrative arrangements that requires reform--which also was highlighted by the Select Committee--is to push down administration of large pots of money from Brussels to the national and regional tiers. Such reform would help to improve the fund's administrative efficiency, would inherently simplify administration and would provide a much more targeted focus in allocating funds.

The Liberal Democrats welcome the Government's proposals for regional government in London. The development of regional government and regional development agencies may well produce tiers of government to administer the pots of money that come from Europe through objective 2 or objective 3 status and ensure that they are more efficiently administered; the byzantine processes of the current system seem to miss many areas of need.

If we do not have better and simpler administrative arrangements that follow the principle of subsidiarity, we will miss out on money being channelled to some of the most severely deprived districts in the country. As the hon. Member for Putney said, some areas of London are severely deprived. The top four areas in the index of deprivation include London boroughs.

My constituency is normally considered to be one of the more prosperous boroughs, but some wards suffer severe deprivation. Norbiton, for example, has a higher Z score than almost any other ward in outer London and is on a par with the poorest areas of central London. The need to ensure that money goes where it is most required is urgent, and one of the best ways to achieve that is to reform the administrative processes.

10.10 am

Mr. Andrew Love (Edmonton): I join the hon. Member for Kingston and Surbiton (Mr. Davey) in congratulating my hon. Friend the Member for Putney

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(Mr. Colman) on securing today's important debate at such an appropriate time and commending him for focusing on London and correcting the mistaken impression of many right hon. and hon. Members and the wider public that London escaped the recessions of the 1980s and 1990s.

Londoners have not magically overcome or avoided the deprivation that affects other cities and regions. Indeed, there is enormous disparity between those who are very wealthy and those who are very poor. Greater London includes some of the poorest areas in the country, and is affected by poverty, deprivation and social exclusion.

This is an apposite time to be discussing structural funds for London. There are 13 objective 2 areas in the United Kingdom, covering 31 per cent. of the population and spending 30 per cent. of the objective 2 structural funds from Europe. However, as was said earlier, London receives only 4 per cent. of the UK allocation. That cannot be a fair distribution. Indeed, London has only one objective 2 area--east London and the Lea valley--which is programmed to spend about £132 million by the millennium.

Many have pressed the case for London over an extended period; several organisations were mentioned earlier. They include Greater London Enterprise and the Local Government Association, but I should like to pay particular tribute to the London Members of the European Parliament who campaigned for a long time, despite the scepticism of their colleagues and the opposition of many bureaucrats in Europe, but finally won through to secure a bridgehead for London and recognition of the multiple deprivation that is suffered here.

East London and the Lea valley objective 2 area combines great need and significant opportunity. The need exists across the entire area, but it is concentrated in the central and eastern parts--in Tower Hamlets and Newham. There are also significant development opportunities in the upper Lea valley where there are more than 200 hectares of underdeveloped and derelict sites waiting to be developed to provide opportunities.

The London TEC Council, recently produced a report entitled "Skills and Sustainable Development", which identified six distinct local economy profiles within London. They range from the global city core, which I do not need to describe, to the regeneration economy. The report states:

That is a description of east London and the Lea valley. All the indicators show that the area suffers significant deprivation, poverty and social exclusion. Tower Hamlets, Hackney and Newham would appear at the top of any list from any statistician. Indeed, parts of Haringey, Waltham Forest and, in my constituency, Enfield also appear high on the list of deprived areas.

Of course, the problems in the Lea valley have been exacerbated in recent years. There were 26,000 jobs losses between 1984 and 1991, and the area has failed to benefit from the wider new industries that have been attracted to the regional economy in Greater London. Perhaps most significantly, local people have been unable to maximise the opportunities that are available because they lack the skills to tap into the job market. The objective 2 bid was originally made in order to tackle some of those deep-seated problems.

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East London and the Lea valley has a population of just over 500,000. The area has a significant level of need, which is illustrated by one statistic that has been used by European statisticians. Unemployment there is two and a half times the national average. There are many deprived communities, especially black and ethnic minorities, who represent 36 per cent. of the total population, and, according to all the indicators, suffer significantly greater deprivation and unemployment than the norm. A recent survey carried out of the Bangladeshi community showed that only 44 per cent. were engaged in the real economy.

There have been a number of successful projects that will benefit local communities and have a significant impact on the development of the objective 2 area. I shall mention three of them briefly. First, a science park is being developed in northern Enfield on 45 hectares of derelict land. There are three partners: Middlesex university, Thames Water and the London borough of Enfield. The lead agency on the site is building 60 incubator units to foster new and high-technology businesses. It is a very exciting business called the Lea Valley Business Innovation Centre and it does tremendous work. It was set up using regional development funding and is one of 12 such developments across the United Kingdom and one of 150 in the European Community. It promotes innovation by providing support and advice, and early-stage finance, should that be needed for the development of the business. Since it was set up three years ago, it has supported more than 1,000 business ideas. In its first year, it helped to establish 22 new businesses, creating 44 jobs. It is a very exciting development.

I should also like to mention the Tottenham Hale transport interchange, which provides a one-stop service to either Stansted airport or central London. There are excellent connections on the London underground, and the road network is connected directly to the M25 and central London. The interchange will open up an entirely new and, until now, fallow area of the Lea valley objective 2 area for development.

I turn briefly to the impact that Agenda 2000 and the Government's negotiations will have on objective 2 funding for London. First, I accept that enlargement of the European Union will necessarily mean a refocusing of funds on new member countries of eastern Europe, although the Government's acceptance that that will lead to reductions in the overall structural fund does not sit easily with their commitment to regeneration. Indeed, in a recent consultation document in which the Government outlined the features that should underpin their future regeneration policy, they concluded that

Achieving such aims require continued funding of objective 2 areas and the Government to address poverty and deprivation in many parts of London.

Secondly, concern has been expressed at the use of unemployment as the principal criterion for the designation of new objective 2 areas. That would be to the advantage of east London and the Lea valley--and,

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indeed, as has been said, of Greater London. I accept--and I think that London would accept--that, given that different countries are at different stages of their economic cycles, the use of such a criterion does not make sense and may not be the most appropriate basis on which to divide spoils among member states. Unemployment is only one of many indicators and will not, by itself, give an accurate picture of local need. Below the national criteria, some form of assessment of deprivation or social exclusion based on national and regional criteria would be favourable and a sensible way forward. After all, local people know best what is happening in their area.

Thirdly, there must be flexibility of implementation to allow member states both to decide on the new criteria for objective 2 designation and to draw the boundaries of new areas, taking account of the situation on the ground. For example, many deprived areas may be concealed in a larger and much more prosperous region. Such a problem is far more prevalent in Greater London than in other parts of the country. We need to take on board local experience and local knowledge in evaluating the criteria on which we want to operate.

Fourthly, I should like to address the issue of the safety net, which has been mentioned. According to recent estimates, before the concept of a safety net came forward, only a third of the current eligible population under objective 2 status were likely to be covered under the new criteria. A safety net that allows us to drop only a third of the coverage marks significant progress. The Government--and Commissioner Kinnock, if he was involved--should be congratulated on that.

However, there is still a difficulty. I understand that part of the EU's policy on objective 2 funding states that it will be limited to 18 per cent. of the population of any country. Such a limit could adversely impact on objective 2 funding in London. I ask the Minister to consider that carefully.

Fifthly, we must protect existing investment. East London and the Lea valley achieved objective 2 status only in 1995. Projects and programmes will have been running only for a maximum of four years by 1999. Continuity of funding is therefore necessary to deliver the regeneration that was called for when the objective 2 area was set up. That is important if we are to replace jobs lost through industrial decline, and train the local work force so that they can take jobs that are becoming available not only in the Lea valley but across London. The investment that has already been made in east London and the Lea valley area should not be put at risk by the phasing out of objective 2 status after 1999. Such status has contributed to a reversal of economic decline in the area.

To take up a point made by the hon. Member for Kingston and Surbiton, there is growing awareness among local groups and voluntary organisations--even the private sector--of the benefits that an area can accrue from structural funding. It is important that we maintain that interest and focus. If that is lost through the phasing out of objective 2 status, it will be difficult not only to maintain such interest but to set up the partnerships that will be critical to the future success of the area.

The new arrangements for Agenda 2000 should attempt to achieve several other things. They should reduce the complexity of the system. The EU has already gone some way towards that; it has reduced the number of objectives to three and the number of initiatives from 13 to three,

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greatly simplifying the structure. The Trade and Industry Committee suggested that funding arrangements for four or five different funds should be simplified and brought together in one straightforward fund.

We also need to consider how we can simplify the process for people at the other end of it. If we do so, we shall achieve significant benefits. We need to reduce bureaucracy. To how many agencies do people who have received European structural funds have to report? How many do they have to keep in touch with? How many forms do they have to fill out? The situation is ridiculous; we need to simplify it and ease the process for organisations and partnerships that are trying to achieve the objectives that we have set them.

We must simplify form-filling. One needs a degree in the subject simply to understand the complex forms. Indeed, the complexity of EU forms is legendary. Everyone who has attempted to contact the bureaucracy in Brussels has to complete an exceptionally complex form. That has become a major impediment to new groups coming forward, and it has meant the failure of groups that could have delivered on the objective 2 criteria if that hurdle had not been placed in their way.

We need arrangements to increase transparency. No one understands how Europe operates; I am still trying to find out.The reality is that we end up with consultants, political insiders and people who know how the bureaucracy operates earning a living doing that rather than contributing to the objectives. There should be opportunities to simplify matters for those filling in forms and trying to create local partnerships.

We need flexibility, a greater say for local agencies and the involvement of non-statutory organisations to help ensure that we target the funds more efficiently. That will be essential if we are to maintain public support for an effective programme of regeneration into the 21st century.

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