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Mr. Kirkwood: I have only one more point to make, and I was trying to get it in before 7 o'clock, but I failed.

I want to draw attention to fisheries, because the new objective 2 schemes provide us with a new opportunity to help distressed fishing areas. According to the figures that we have worked out locally, between 10 and 15 per cent. of the Berwickshire travel-to-work area depends on fish landing and processing, and the ancillary sectors.

I know that the Minister is an expert on some of the relevant issues, and realises how important fishing is to coastal communities. Landings of fish at Eyemouth have slumped in the past 10 years from 8,000 tonnes to 5,000 tonnes, according to figures produced in the past few months. That is a worrying trend, and I think that objective 2 funds could address the problem constructively if we use them properly.

The Scottish Office working party report did valuable work in identifying what needs to be done, and came to the conclusion that, in terms of trying to deliver that programme for the future, it was important that continued access to European structural funding should be continued in some way and at some level into the new programme.

Objective 2 status for the whole of the Scottish borders is a crucial target for us, and I hope that we can count on the Government's support in trying to achieve that end.

7.1 pm

Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale): I thank my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) for inviting me to contribute to this short debate, and I also thank the Minister for agreeing to my participation.

Most of the key points have already been made by my hon. Friend, and I shall reinforce some of them. In particular, I must emphasise the grim couple of years that we have had in the borders, with thousands of job losses and the widespread collapse of farm incomes, which affects nearly every significant sector of the local economy.

We have had many responses from the local enterprise company, the council and the Government--a contribution that my hon. Friend and I have been more than willing to acknowledge in the past, and I am happy to acknowledge it again. The partnership between the different political parties and the different agencies has worked, and we are keen for it to continue.

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It is evident to all of us that we need to continue with the diversification of the borders economy and ensure long-term support both for new industries and for the many successful continuing businesses in key sectors such as textiles. In that context, the continuing availability of structural funds for the borders, and winning back assisted area status, will be critical.

My hon. Friend mentioned the borders working party report, which was published as recently as March. It is a solid document with real proposals and good pointers for the future. I want to draw the Minister's attention to two or three of those. On page 7 it is acknowledged that

over the past few years. The report continues:

    "The Government is . . . committed to reallocating unused European structural funds for use in the Borders."

Like my hon. Friend, I hope that the Minister will--if not this evening, soon--be able to respond to our concerns and perhaps honour the pledge made to the borders in that respect.

The most important section in the working party report states:

that is, the objectives of the new economic strategy.

The report puts things clearly and eloquently, and I endorse what it says.

A number of the factors that will be difficult for us have already been mentioned and I do not want to repeat too much of what my hon. Friend has said. One such factor is the migration of young people. We have a growing population, but that is accounted for largely by the commuter belt around Edinburgh and by the increasing numbers of retired people, who are welcome in the borders but are masking the underlying trend of young people leaving the area.

We hope that the Government can continue to support our case and will recognise that, with our rurality--ours is the second most sparsely populated area in the United Kingdom after the highlands and islands--and our industrial dependency, which, paradoxically, is the second highest in Scotland, and with 2,500 jobs lost already in the past couple of years, matters are serious and need to be addressed.

My hon. Friend the Member for Roxburgh and Berwickshire and I will go to Brussels on Monday to speak to the European Commission about these very issues. We hope that we take with us Government support and can be assured of on-going efforts on their part to secure new objective 2 status. We have seen already that the Government have recognised the problems of the borders and we hope that, in on-going representations to Europe, they will support us in seeking some of the solutions.

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7.6 pm

The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald): I congratulate the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on securing the debate. I also congratulate both him and the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) on their contributions to consideration of the important matter of European structural funds and the borders. It is not the first time that we have debated the subject. I pay tribute to the way in which both hon. Gentlemen articulated the interests of their constituents in what is obviously a difficult time for the borders area.

As has been said, structural funds have played their part in contributing to economic development in the borders and in Scotland. The benefits are already clear across the whole of the borders area, and we can expect further benefits to flow over the next few years as projects mature and as their longer-term aims are realised.

Both hon. Gentlemen raised two principal concerns--the current borders objective 5b programme and whether additional funding can be found for that, and the prospects for the area in the next round under objective 2.

Structural fund assistance was introduced to the borders as a result of the previous reform, way back in 1993. At the time, the programme partnership, which includes all the local agencies, was unanimously of the view that the level of EC resources provided for the borders programme was inadequate to meet the needs of the area. Although strong arguments for additional resources were then advanced, nothing was done. All eligible areas had been allocated funding based on an agreed set of criteria already used for disbursement of objective 5b funds.

In recognition of the serious impact of recent job losses in the area, the new Government made a commitment last year to try to find unspent EC resources to allocate specifically to the borders, and we intend to deliver on that commitment. On the basis of the Government's commitment, the borders objective 5b partnership drew up a mini-programme, as the hon. Member for Roxburgh and Berwickshire mentioned, based on immediate and longer-term need, with the expectation that additional EC resources would be made available at some stage before the end of 1999. The necessary processes take time, and they are still continuing as I speak.

Officials in the Scottish Office Development Department approached various project sponsors towards the end of 1998 and again in February of this year, to establish precisely what the projected spend profiles would be in their various projects. The exercise involved a review of the forecast financial uptake of projects approved to date, together with an accurate assessment of what was likely to come forward for structural fund support during the remainder of 1999.

That exercise concluded that £2.2 million could be reallocated for use by the borders to advance the projects approved by the programme monitoring committee as contained within the mini-programme, and I am pleased to be able to confirm the Government's intention to reallocate that funding.

The process of transferring funds will take a little time as it has to be cleared by the European Commission, although we do not have any reason to suspect objections or difficulties with what we propose. In the meantime, the borders project sponsors will be allowed to proceed with

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those projects approved subject to the availability of funds, but at this stage it must be at their own risk, given that final approval is in the hands of the Commission.

I have no doubt that the additional EC funds to be made available to the borders, together with an equivalent amount of co-finance from the various public sector authorities, which together amount to a package of more than £4 million, will be of significant assistance to the area. As the hon. Member for Roxburgh and Berwickshire said, the Government promised to find the money last year in recognition of the special problems of the borders. We are sticking by that promise and are well on the way to delivering.

Let me deal with the future of structural funds after the current programme period finishes in December. Briefly to set the context, member states largely signed up to the Commission's broad aims of concentration, simplification and preparing the way for a much-enlarged European Union. However, although we accept that concentration inevitably means reduced coverage for existing member states, we were determined that that should be achieved in a fair and even-handed way among all member states.

For the UK, as has been pointed out, that presented a particular challenge. At the time of the last allocation of structural funds, in the early 1990s, UK unemployment was extremely high and the UK was in the grip of a serious recession. As a consequence of that high unemployment and other factors, the UK received extensive coverage under objective 2.

The picture in the late 1990s and as we head into the next century is very different. The new Government have achieved the lowest levels of unemployment in 22 years. Low unemployment would inevitably mean dramatically reduced coverage of objective 2, unless the UK could negotiate an alternative. That is why the Prime Minister proposed and pushed so hard for a safety net. Securing that safety net in respect of objective 2 was a priority every bit as great for the Government as getting a good deal on the highlands and islands, although it may have received less press attention.

The Prime Minister won his argument on the safety net at the Berlin summit at the end of March. The safety net delivers for the UK as a whole much larger coverage of objective 2 than would otherwise have been available. It doubles the population coverage that we would otherwise have got, from 6.5 million to 13.5 million people.

Having secured the safety net, we must allocate that coverage fairly within the UK, and in a way that is acceptable to the Commission. The first step in that process has been to engage in wide public consultation, as has been mentioned, on objective 2 coverage. That consultation finished on 25 May, and we have been considering carefully the range of submissions received.

The next step is for the Government to propose a list of areas to the Commission. It is intended that that should be done in July, but it is likely to take three or four months before final agreement is reached between the Government and the Commission on the list of designated areas.

As soon as there is a definitive list of eligible areas, decisions can be taken by Ministers in the new Scottish Executive on the mechanics of operating the new programmes. Clearly, the final level of eligibility will be significant in determining programme areas and committee structures.

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In the interim, however, time will be used constructively. Plan teams in Scotland have been established and have met regularly since the beginning of March to do the preparatory work needed for drafting new programmes. Although the eligible areas obviously remain unknown, it is still possible to undertake much of the economic analyses and priority setting in advance, particularly as all areas currently eligible will receive transition funding at the very least.

Again, it is thanks to the Prime Minister that we shall have six years' transition for all areas losing eligibility, instead of the four years proposed by the Commission for current objective 2 and 5b areas. That will allow all areas the opportunity to develop strategies over a reasonable time scale, even if they fail to qualify for full funding in the new round.

Given the future realities of enlargement, it is important to remember that these may well be the last available structural funds for most of Scotland, whether in transition or fully eligible, and that future eligibility will be concentrated on the areas in greatest need. All partners must accept that, in view of the future concentration, there will inevitably be areas that lose eligibility. With reduced funding available to a smaller population, the emphasis must be on targeting the most deprived areas.

I understand how the borders area is placed, and how the eligibility criteria in the regulations affect its relatively high dependence on the industrial sector, the discernible decline in industrial employment, the sparse population,

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the out-migration that was mentioned, the high proportion of agricultural employment and the fisheries dependency around Eyemouth or the Berwickshire coast. As has been said, those factors are well brought out in the case submitted by Scottish Borders council.

I appreciate the fact that partners in the borders, along with many others, are concerned about the likelihood of future funding under objective 2. Obviously, I cannot give any assurances at this stage in the process, but I can promise that careful attention is being given both to the cases submitted by areas and to the data available to the Government. The Government will look carefully and hard at the relative and respective merits of the cases put forward and will use open and transparent criteria for the final selection.

Finally, I emphasise the importance of the role of the partners in the borders, and any other area in Scotland which is pursuing objective 2 funding. They know the local priorities and local problems best, and it is for them to develop and implement exit strategies accordingly. It is for the partners to ensure that they make the best possible use of whatever funding they secure, be it objective 2, objective 3, transitional or rural diversification funding.

I hope that what I have said has been helpful to the hon. Members for Roxburgh and Berwickshire and for Tweeddale, Ettrick and Lauderdale and their constituents, and that this evening's announcement will be positively received in the borders.

Question put and agreed to.

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