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2.30 pm

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): I wonder why the hon. Member for Islwyn (Mr. Touhig) left the Green party free of his venom.

It is often said that, when political parties unite, they do so for a serious cause. There is no doubt that all the political parties in Wales--notwithstanding the long spat between my right hon. Friend the Member for Caernarfon (Mr. Wigley) and the Secretary of State--have worked together to try to obtain objective 1 status for west Wales and the valleys. I have rarely seen such a concerted effort, and I have worked closely with members of the ruling party in north Wales to secure that all-important designation, which would be a tremendous social and cultural boost for Wales.

The underlying principle that should guide us in considering objective 1 status is the impact that it could have on economic and social cohesion. We must consider additionality: significant improvements have been made in demonstrating additionality at national, regional and local level. However, there is a need to ensure that mechanisms are in place that fully demonstrate the transparency and improved measurements of the concept.

Complementarity--the relationship between structural and domestic funds--has never been adequately addressed. A grey area remains over, for example, the differences between the European regional development fund, the European social fund and the European agricultural guarantee and guidance fund. Matters still require to be ironed out in that complicated area, and we should all consider them more often than we do, standing, as we are, on the threshold--possibly--of obtaining objective 1 status.

The Secretary of State referred to partnership--a buzz word in politics, but an important feature of structural fund policy in Wales--which will be a prerequisite of policies related to objective 1 status. I have the privilege of representing a constituency that falls into two unitary authority areas--Gwynedd and Conwy. Both would benefit substantially if objective 1 status came to Wales. Mindful of the time constraints, I shall today talk only about Conwy county borough council, which covers what was previously Aberconwy borough council and part of Colwyn Bay borough council.

The area has suffered greatly over the past 12 or 13 years. Aberconwy qualified fully for objective 2 designation 10 or 12 years ago, but lost out. I visited Brussels, and a number of members of the Commission

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confirmed that there was no shadow of a doubt that the area qualified on all basic criteria. Alas, however, it did not happen. Over the past 10 or 12 years, the area has undoubtedly suffered. I do not doubt that the luck of Merseyside--good luck to that area--in obtaining objective 1 status was an active disincentive to inward investment into Conwy.

Conwy has the lowest gross domestic product in Wales, the lowest-wage economy in Britain and a low rate of inward investment. It is incredible but true that only 18 new jobs were created between 1994 and 1997. Yet the area gains no assistance from designated status.

The economy in Conwy depends on jobs in the tourism, public and agricultural sectors. Changes in tourism and agriculture are putting significant pressure on the viability of businesses in both sectors. The economy of Conwy desperately needs to diversify to strengthen its base if it is to be socially and economically sustainable. Recognition of the county's problems, and its inclusion in the west Wales and valleys sub-region which has the prospect of obtaining objective 1 status, is a tribute to all who have striven in partnership to have Conwy and Denbighshire included in that designation.

Led by the county borough council, partners are developing a county-based development strategy based on the themes of competitive business, countering social exclusion and balanced development. That strategy will be integrated into the broader west Wales objective 1 strategy, providing a clear framework from 2000 to 2006. I hope that that will help the area to overcome its structural problems.

The strategy will seek to create a balance of indigenous and inward investment, a matter that has, of late, much concerned the Select Committee on Welsh Affairs. A report has been prepared, and the Committee, of which I am a member, took evidence from many areas on inward investment and indigenous expansion in parts of the UK and beyond.

A full range of support services will be developed for existing and potential small and medium enterprises. Perhaps simplistically, I believe that we do not pay enough attention to SMEs, which, if my figures are correct, account for 90 per cent. of employment in Wales. The stark fact is that, if every SME created one more job, there would be hardly any unemployment in Wales. We must concentrate on that sector, and--although I hope that I am wrong, and that LG will come on line--there are lessons to be learned from putting too many eggs in one basket. It takes creative thinking to expand SMEs and to create an atmosphere of expansion. However, we would do well to target that area as the benefits would be considerable.

The hon. Member for Brecon and Radnorshire (Mr. Livsey) said that the difficulties of the agricultural sector, and the knock-on effects that they have on the whole community, have extremely serious ramifications for his rural community. The same is true of Conwy. It is essential that the quality and value of agricultural produce from Conwy--and from all of rural Wales--should be maximised locally. Objective 1 status can assist us in that area.

The Welsh Office has recently confirmed that the new development authority will have a far more extended agricultural brief, and that is welcome. I hope that we may see such things as a substantial chilling plant for meat in

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mid-Wales, which could serve Wales and beyond. We lack that at present, and it is an area on which we could concentrate. We should add value locally to meat--the new prepared foods such as lasagna and other meals that are very popular nowadays. By producing such food locally, we would add value to the product. We have a good product, and we should add value as locally as we can to the point of production.

There has been an historic lack of both investment and investment opportunity in Conwy. Several barriers need to be brought down. I am very pleased that Conwy has been included in the European objective 1 designated areas; it is critical that people now concentrate fully on the way ahead and on drawing up plans in good time. If the county of Conwy is to succeed, it is important that projects are proposed as soon as possible, partners found and all potential European and other funding effectively sought.

I could repeat that message on behalf of Gwynedd, but I am mindful of the time constraints and aware that several other hon. Members want to speak. Last year, as part of a delegation from the Select Committee on Welsh Affairs, I visited Inverness and the highlands and islands of Scotland. The problems of those areas were not dissimilar to Gwynedd's problems--the feeling of remoteness and declining economic activity in a rural setting. The visit was most instructive, because it brought home starkly to me the potential benefits of objective 1 status, if properly used--opportunities for small businesses to expand, and for a hard-pressed agricultural sector to expand and diversify to meet the challenges that will inevitably flow from Agenda 2000.

I also learned of the utmost importance of matched funding. I was told that, because of the effective drying up of matched funding, little use had been made of objective 1 structural funds in the preceding 18 months. In other words, because of the absence of matched funding, the European funds could not be drawn down; the process was at a standstill. Members of Parliament from the north of Ireland have told me of their similar experience of stop-go--when matched money is not available, everything is put on hold. Because any scheme under objective 1 lasts for only a given period of time--six years--if we fail to do our level best to get as much as possible out of objective 1 status, money is wasted. We have all seen the prosperity that has been created in Ireland, largely because of objective 1 funding. Many of us trumpet Ireland's economic success: now, at long last, there is net immigration of Irish people to Ireland, as highly qualified youngsters come back to the good jobs on offer in an economy that appears to be booming.

I do not care greatly that, by raising this important subject, I risk incurring the venom of Ministers--not that venom rests comfortably in the Under-Secretary of State for Wales, the hon. Member for Neath (Mr. Hain), who is sitting on the Treasury Bench. There are, and will be, serious difficulties if matched funding is scarce: we need a greater commitment from the public sector and, more important, from central Government, especially for the long term. Consideration for matched funding should be agreed at programme level, not by project; and there should be further exploration of the global grants system and far greater co-ordination of domestic funds, with better clarification of the rules governing private sector involvement.

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I mentioned the general concordat--to use a word of the moment--between the political parties during the campaign to secure objective 1 status. When the Government submitted the plans to Brussels, opposition parties were asked not to rock the boat, lest that should in some way damage the chances of obtaining objective 1 status. I found it offensive when the Secretary of State said that my party, of all parties, was creating difficulties. Far from it--we did everything that we could to assist and we shall continue to do so. In that vein, I shall ask the Minister one or two questions; I trust that, in that vein and in this context, he will find my questions helpful. I shall find it helpful if the answers are forthcoming.

I have campaigned for objective 1 designation for a long time, as have other right hon. and hon. Members. On each and every occasion when the Secretary of State for Wales, the Prime Minister and the Chancellor of the Exchequer have been asked to give an assurance on the subject of matched funding, they have fallen silent, despite their having, rightly, trumpeted the fact that the Government have done everything that they can to secure objective 1 status. There is now grave concern because, without adherence to the principle of additionality and, of course, securing matched funding from additional Treasury money, the whole campaign could come to nothing, like a handful of sand seeping through one's fingers. I am not encouraged by the Government's predisposition to hide behind the Fontainebleau accord--for example, to deny the farmers of Wales proper agri-monetary compensation. The whole question of matched funding has a similar flavour and I am greatly concerned, as is my right hon. Friend the Member for Caernarfon.

In his opening speech, the Secretary of State referred to a recent press release. Professor Kevin Morgan and other members of the Institute of Welsh Affairs have expressed their concern sensibly, not in a headline-grabbing manner. They say that at stake is as much as £1.8 billion between 1999 and 2006, and they quote a letter that they received from the Economic Secretary to the Treasury. The hon. Lady was asked how much matched funding would be available, to which she replied:

She added:

    "For Scotland, Wales and Northern Ireland, cover for Structural Fund spending must be found within their respective blocks, determined on the basis of the Barnett formula."

That is an extremely worrying response.

The Secretary of State was probably right to say that we do not yet know what decision will be made; however, if we do not yet know but such a negative response has already been forthcoming, questions must be asked. It behoves all of us across the political spectrum to ask the appropriate questions and not to leave them until some future date. Why cannot the questions be asked now? More important, why can they not be answered now?

Professor Morgan says:

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    Whitehall . . . Brussels has since been convinced that the GDP of the new west Wales and the Valleys region is below 75 per cent. of the EU average. So there is a strong case for the Treasury in London to approve Public Expenditure Survey cover for new funds. Assurances need to be sought by our political representatives that this will be the case. Failure to secure PES cover from the Treasury will mean that up to £1 billion will come from the existing £7 billion Welsh Office block grant. The economic and political implications of this could be disastrous. The Objective 1 victory would be a cuckoo's egg."

I call on the Minister to give a full, frank and straight answer to that vital question. Failure to do so will mean that, once again, the Government can be summarised best as a Government who are always ready to raise hopes and expectations, but who are unable to deliver.

I strongly urge Welsh Office Ministers to contact the Treasury and obtain a full, clear and unequivocal answer to the question. All the hard work that has been done throughout Wales and across all the political parties might yet come to nothing unless that assurance is available. I would go so far as to say that, if the additional moneys are not available, the Welsh Office will have let down the people of Wales, because the Treasury will have denied the Welsh Office. The current devolution proposals, good as they are, will not affect that betrayal.

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