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7.44 pm

Mr. Gerry Steinberg (City of Durham): I shall be very parochial in my speech tonight--and I make no apologies for that. As chairman of the northern group of Labour Members of Parliament, I speak on behalf of the north-east as well as my constituency. I stress the

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immense value of structural funds to that region. Those funds have been worth more than £1,000 million to the north-east since 1989 and have created tens of thousands of jobs. At more than £100 million per annum, they are worth more than the proposed budget of the regional development agency. The funds have assisted areas suffering major economic and social hardship and the dislocation of the local work force, and rural areas suffering from a combination of sparse population and a continued dependence on agriculture.

The funds have secured enormous achievements for the north-east. Structural funds have allowed the region to cope with massive structural change and have been a huge boost to the north-east's economic, social and environmental regeneration. They have encouraged considerable private investment. The funds have raised regional competitiveness and have been used effectively and imaginatively. The north-east has been cited by the Commission as one of the best performers in applying and directing resources.

All that is under threat, as the European Commission is recommending the reform of structural funds and a reduction by up to a third in the population level that they cover. Special support to the coalfields and to specific sectors, such as textiles, steel and shipbuilding, will be scrapped. I stress that the north-east needs continued assistance. The task of restructuring the economy is not yet complete and the north-east continues to face severe social and economic problems of a deep-rooted structural nature.

First, per capita gross domestic product in the north-east is the lowest of any region in the country. Secondly, the north-east has the highest unemployment claimant count of any English region. More than one in three unemployed people have been unemployed for more than 12 months. Real unemployment--that is, joblessness--is more than twice as high as the claimant count. Thirdly, average weekly wages in the north-east are the lowest of any English region. The north-east has the lowest disposable household income in the whole of the United Kingdom. Some 37 per cent. of those in work earn less than the Council of Europe's decency threshold--that is the highest rate in the United Kingdom.

Fourthly, business start-up and survival rates are among the lowest in the United Kingdom. Economic activity rates for both men and women are the lowest in England and the second lowest in the United Kingdom. Unfortunately, recent large-scale job losses have exacerbated the problem and highlighted the fragility of the region's economy. I assure the House that that is not a price worth paying.

Although structural funds have cushioned the region from further decline, its relative competitiveness has slipped as other regions have improved their economic performance. A reduction in structural funds would hinder the process of restructuring. It would constitute a major setback in rebuilding confidence and the diversity and strength of the region's economy. Such a reduction would cause a rapid decline in competitiveness and widen the gap between the region and other parts of the United Kingdom and Europe.

The north-east needs the maximum level of financial assistance.Parts of the region--notably the former coalfield and rural areas--have a gross domestic product

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of less than 75 per cent. of the EU average, which isthe selection criterion for objective 1 funding. Northumberland and Durham have not been included as a level 2 region in the agreement reached between the Office for National Statistics and Eurostat. The designation of Northumberland and Durham as a level 2 region would have given us a good chance of obtaining objective 1 status, which would bring up to £150 million in European grants to the area.

The decisions on the revision of level 2 area status are supposedly based purely on statistical arguments rather than political decisions. However, on close examination, that does not appear to be the case. Eurostat has accepted some changes to the level 2 lists. They are in Cornwall, west Wales, London and Scotland.

Before anyone gets up in arms, let me make it clear that it is absolutely not my intention to argue that those areas should not have redesignation--far from it. I agree with the Council of Ministers and the European Commission that decisions should be taken as close to the people as possible. My argument is that there appears to be a double standard in that some areas are accepted while others are rejected.

Let me take Cornwall as an example. If there is supposed to be a statistical adherence to size basis, why should Cornwall, with a population of just 400,000, become a level 2 area?

Ms Candy Atherton (Falmouth and Camborne): The figure is 480,000. Let us get this absolutely clear. Let us be honest and say that Cornwall is a cultural region in its own right.

Mr. Steinberg: I was coming to that. As I said at the beginning of my speech, I am not arguing against Cornwall's redesignation. I am simply making a comparison, and I am entitled to do that. If one area gets level 2 status and another does not, there must be a reason. I want to find out what that reason is. I do not begrudge Cornwall getting redesignation. I am delighted, so my hon. Friend should not get herself in a twist.

Cornwall has been allowed to split off from Devon because of a

That was a quote from Eurostat.

As Cornwall is a county, on the general rationale it should be a level 3 area and, as such, be eligible for objective 2 rather than objective 1. The specific points allowed by Eurostat in accepting the case for level 2 designation include the "different economic conditions" between Devon and Cornwall, which in gross domestic product terms is 15 per cent. The discrepancy in GDP terms between Northumberland and Tyne and Wear is also 15 per cent. Therefore, economic conditions are just as different between Northumberland and Tyne and Wear as they are between Devon and Cornwall.

It is also worth pointing out that Cornwall is part of the south-west region, which has an overall GDP of 95 per cent. of the EU average while the northern region has only

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85 per cent. of the EU average. We are a poor part of a poor region, whereas Cornwall is a poor part of a much richer region.

Cornwall's population sparsity is specifically referred to as part of the rationale for accepting level 2 review. However, in Northumberland and Durham, sparsity is worse, at 123 people per sq km compared with 136 people per sq km in Cornwall. Emphasis is placed on Cornwall's geographical peripherality. Penzance, at the extreme western tip of Cornwall is 282 miles from London while Berwick in the north of Northumberland is further away at 357 miles from London.

I now turn to the

How can that possibly be a statistical argument? On that basis, Northumberland should have objective 1 status because we were not conquered by the Romans.

In view of that, what exactly is the rationale for accepting Cornwall for review, but not Northumberland and Durham? I ask that question quite seriously. If anything, the statistical case for Cornwall is rather less robust than that for Northumberland and Durham, reinforcing our view that the decision was political, not statistical.

The north-east is one of the most structurally challenged areas and that is why it needs structural funds. The UK Government have finally recognised coalfield areas as a priority. Now is not the time to disallow access to what will be the last major chance of structural funds going to the UK to help those areas. Europe grew out of the coal and steel community. The coalfields have to be understood in the context of permanent, steep long-term decline. The insistence of Eurostat on ignoring the United Kingdom position and rescheduling those areas as level 2 means that they must now compete as objective 2 regions, although their success is by no means certain. In fact, they are objective 1 regions trying to get objective 2 funding. The designation of objective 1 status should be the subject of open debate by the EU and member states, along with the principles of subsidiarity, transparency, fairness and social justice. The matter should not be cut and dried, with Eurostat overruling member states by the utilisation of a subjective formula.

The Commission has proposed that objective 2 eligibility should be based predominantly on employment and unemployment statistics. Industrial decline in the north-east has been long-term and sustained. Some areas have lost so many industrial jobs that they may not continue to qualify as industrial areas.

In selecting eligible objective 2 areas, the United Kingdom Government and the European Commission must use additional indicators of deprivation and exclusion that are meaningful. I suggest to my hon. Friend the Minister that additional selection criteria for objective 2 status should include some of the following factors.

First, per capita GDP should be recognised by the EC as the single most important factor in determining whether a region lags behind the rest of Europe. Parts of the north-east contain some of the lowest GDP in the United Kingdom, and the region as a whole has the lowest GDP of any region. Secondly, the skills level of the work force is fundamental to their ability to compete effectively. The narrow skills base in the north-east is a direct consequence of traditional structural reliance on heavy industry and

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agriculture. Thirdly, the north-east suffers from endemic deep-rooted unemployment. Official unemployment statistics underplay the problem of joblessness and the related issue of social exclusion. Fourthly, rural areas continue to suffer acute problems in terms of overdependence on a narrow and inflexible economic base, changing economic structures, remoteness and scarcity of population. Finally, aid should be concentrated on areas suffering structural problems. Allowing small areas with cyclical problems to qualify would reduce the impact of structural funds and fail to recognise real need.

At a European level, the UK Government are seeking a fair distribution of structural funds across member states. Distribution within the United Kingdom should also be on a fair basis, recognising real indicators of need. The economy in the north-east is struggling with huge job losses continuing to occur in manufacturing. The region is still undergoing a major restructuring process. The continuation of structural funds is vital to stabilise the future economy and boost job prospects in the north-east of England.

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