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Westminster Hall

Tuesday 11 January 2000

[Sir Alan Haselhurst in the Chair]

Objective 1 Funding

Motion made, and question proposed, That the sitting be now adjourned.--[Mr. Dowd.]

10 am

Mr. Andrew George (St. Ives): I welcome this opportunity to debate a subject of great importance to the four regions.

Mr. Alan Duncan (Rutland and Melton): On a point of order, Mr. Deputy Speaker. Given that the hon. Member for St. Ives (Mr. George) expects the Minister to reply and that no Minister is present, is it appropriate to continue?

Mr. Deputy Speaker : There is no question of order about who is present. It is entirely a matter of courtesy to the proceedings that a Minister be present. [Interruption.] The Minister is now here.

Mr. George : Thank you, Mr. Deputy Speaker. I am delighted that the Minister is now present for a debate of extreme importance for the four regions that have won objective 1 status. So much depends on our work in this Chamber, and on our work with colleagues in the European Commission and our partners in these four poorest regions of the United Kingdom. We must make the most of this opportunity, because it is the best in our lifetime that these regions will have to pull themselves up.

I congratulate all those involved in securing objective 1 status for the four regions, including the Government, Members of Parliament, Members of the European Parliament, councils and campaigners. Above all, I congratulate the people of the regions who have continued their work, often in the knowledge that little or no heed was paid to their poverty. The people of Cornwall are used to being envied for their environment, their community and their sense of place and identity, but they are also accustomed to their poverty being ignored. We welcome the fact that at last it is recognised that the region of Cornwall and the Isles of Scilly is deserving of additional financial aid to bring it into line with the level of gross domestic product enjoyed by the rest of the country and Europe.

I realise that putting together single programming documents is a challenging exercise, and I congratulate the four regions and the Government Departments that have undertaken the gargantuan task of preparing them and getting them off to Europe on schedule. The Minister has acknowledged that the Government inherited a legacy of confusion and complexity: I and other hon. Members want to deal with that issue in the debate. The fault lies partly with European systems, but is also related to the separation of Departments and the failure of a joined-up government approach to this important matter. Putting together the pieces of the

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objective 1 jigsaw has involved a great deal of work: it is a much less simple task than many other economic development projects have been.

I want the debate to be conducted in a constructive environment. Many hon. Members who represent constituencies in the four regions want to speak on this subject of all-party concern. Properly raising concerns about match funding and its complexities is not scaremongering. Questioning the sources of all available public match funding does not imply that objective 1 will fold: it would be inappropriate to portray that as a doomsday scenario. Equally, however, it would be irresponsible to be complacent. There is some concern that much planning is based more on hope than on certainty.

I have conveyed a message to the Minister so that he is fully aware of questions that I wish to raise in a constructive spirit. I seek clarification of matched funding arrangements, the extent of central and regional co-ordination--in the terminology of joined-up government, the joined-upness of the system--and the extent to which local partners in objective 1 regions may decide their future for themselves, which involves the decision-making procedure.

I have some experience of that process, as I was involved, on behalf of the voluntary sector, in the last objective 5b programme in the south-west, which largely involved Cornwall, but included parts of Devon and Somerset. That experience was pretty unedifying, as the programme started a year late. Total funding for the programme came from Europe, along with all measures, and amounted to Euro177.6 million. However, the total paid up until the end of 1999 was Euro71.2 million--a mere 40 per cent. of the EU finance available for that region. We must improve our performance considerably if the objective 1 region of Cornwall is to spend Euro314 million over a seven-year period and work within the financial programme regulations, which are, appropriately, much stricter.

More money has yet to be claimed, and existing commitments have yet to be fulfilled. However, the prospect for spending the full amount of objective 5b funds is poor. Of most concern is the difficulty of securing public match funding, which partly accounts for the slowness of the programme and the problem of initiating projects. Government bodies and quangos came up with only Euro15 million, which is 19 per cent. of the match funding, or 10 per cent. of all funding for the 5b process. Most worrying, by far the largest public match-fund contributor was the national lottery--a source that did not exist when the programme was first put together. Lottery sources represent 54 per cent. of total match funding for the Cornwall objective 5b programme.

Of equal concern is the fact that the original intention behind the objective 1 and 5b programmes was strategy-driven. A strategy is devised which those programmes are designed to deliver. My experience was that that turned out to be a six-month bidding round involving spending on a first-come, first-served basis. The Government should increase the extent to which they allow objective 1 regions to take decisions to implement their own strategies, and those decisions should not be overruled. Such regions should have proper support from Government in identifying match funds to develop their strategies.

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It is impossible for normal well-adjusted humans--of whom there are some outside this place--not to be shocked by the almost unbelievable, impenetrable complexity, red tape and gobbledegook surrounding such schemes. I shall argue that that may choke and suffocate initiatives and deny the very people for whom funds are intended. European funding programmes are probably for those who are pushy, articulate and can afford consultants; such people will find their way through these programmes. However, the socially excluded, who do not have such resources and abilities, will find it difficult to enter the system, let alone get through the application process and bring a worthy initiative to fruition. That is a matter of great concern, and the Government can do a great deal about it.

In my opening remarks, I have concentrated mainly on Cornwall and the Scilly Isles because I know that part of the country best. Other hon. Members will want to speak about areas in their constituencies. However, to secure objective 1 status, Cornwall had to go through an important process of disaggregating itself from the unreal and synthetic objective 5b region to which it was previously attached. Geographically, historically, culturally, constitutionally, communally and economically, Cornwall is an entity in its own right. It does not want to cut itself off from the rest of the world, but rather to include itself in the celebration of the diversity of cultures, peoples and religions throughout the British Isles and Europe.

The key issue is whether what was self-evident to Cornwall and the Scilly Isles is accepted by others, especially given that successive Governments have previously failed to recognise Cornwall's obvious distinctiveness. I congratulate the Government on accepting Cornwall's case to be a European region in its own right, although it is a pity that they did not go further and allow Cornwall to have a regional development agency. However, we shall not go over that argument now.

Once objective 1 is achieved, all the relevant regions will face the challenge of financial and programme discipline--particularly the new challenge of straight-line funding over the seven-year period, which means having to commit an agreed one seventh of the financial year's funds and spend it within two years of making the commitment. Under the objective 5b programme in the past, there was much carry-over of finance from one year to the next. It is helpful to have more discipline, but it brings additional pressure on those who have to deliver the programmes. The Minister recognises that, and I am sure that the partners on the ground are aware of it too.

I have congratulated everyone on the successful campaign for Cornwall's acceptance as a distinct region. There is now the much more challenging job of making the most of the opportunity--collating plans, framing strategies and producing and lodging the single programme document.

Match funding remains a major concern. Having considered all five priorities in the Cornish programme, it is clear that problems remain in drawing on spending under the EAGGF--there are many acronyms and other unique terms relating to European funding.

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European agricultural guidance and guarantee fund moneys will not be drawn down entirely, as funds available from the Ministry of Agriculture, Fisheries and Food and other finances will be required to fulfil the farm diversification and competitiveness strategy.

As to the European social fund, I think that Department for Education and Employment funding and other sources of finance may be sufficient. I am yet to be entirely convinced, but they may be enough to fulfil that part of the programme. Some people are optimistic that there will be enough collective public match funding to support community regeneration and infrastructure measures, largely through the Department of the Environment, Transport and the Regions and from other sources. That seems more a hope than a certainty for the next seven years.

The priority to develop small and medium-sized enterprises is important to an area such as Cornwall, which has almost 20,000 businesses, of which almost 15,000 employ five or fewer people. Those are micro-businesses and they must grow if the economy of Cornwall is to grow. Small businesses will provide the basis for growth, so it is vital to support the enterprise culture--in Cornwall, but doubtless also in west Wales, the valleys and other regions.

We need to ensure that matching MAFF and DTI funding is available. The DTI's enterprise fund would be an important source, but the total amount available next year is Euro250,000. That sum is available not only to Cornwall, but to the Government's so-called South West regional development agency area. Cornwall represents less than 10 per cent. of the population of that area, so our notional fair share of that money would be a little under Euro25,000, which would not go very far to kick-start the economy of Cornwall.

Many funds are operated on a regional basis, and the programme operates on the wholly optimistic notion that Cornwall has to secure more than its fair share of national and regional funding. Whatever level of match funding Cornwall achieves under 5b, we must at least double it under objective 1. The communities of south-west England will understandably take the view that Cornwall already has the benefit of objective 1 funds, and will ask why it should have a disproportionate slice of the available regional funding cake. The Minister may wish to offer advice on how to reassure our friends and colleagues in the south-west region that we are not taking more than our fair share to fulfil our objective 1 programme.

Indeed, in a letter to me dated 5 January the Prime Minister wrote:

Let us assume for a moment that there are sufficient public match funds, although I still have a rather jaundiced view of the system's ability to operate and

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deliver the finance to get the projects off the ground. There is not just the European finance--the four funds: the EAGGF, the European regional development fund, the European social fund and the financial instrument for fisheries guidance--but many little pots of funding within each of the four Government Departments, which must all be tapped to make that funding available. Any objective observer of the process would quickly conclude that one needs to be articulate and pushy and have a paid consultant to have any chance of getting through this system, but that is really not the way forward. Frankly, one needs a PhD in gobbledegook to get through the system. Rather than simply sitting back and adding to the complexity by including departmental complexities, the Government should take a handle on the matter and start to see the problems of European funding from an applicant's point of view.

Mr. John Healey (Wentworth): I applaud the approach that the hon. Gentleman is taking to this issue, which is extremely important to all our four objective 1 areas. I apologise because I must leave to attend a Standing Committee, so I shall not be able to hear his full contribution. Does he agree that the problem of the complexity of the system and the access for local partnerships to central Government sources of match funding requires a cultural change and a change of understanding in Whitehall? The objective 1 programme should be seen not as just another European source of funding for local projects, but as something that will bring economic restructuring to our areas. Whitehall must also see that objective 1 in our four areas can help the pursuit of Government objectives and policies as well as local objectives and policies.

Mr. George : That was a helpful intervention. There is a shared interest in making sure that objective 1 succeeds. The Government have an interest in making sure that the wealth generated in this country is enjoyed by all equally as far as possible, and that the four regions that have been identified as outstandingly poor are given an opportunity to bring themselves up at least to the average enjoyed by the rest of the country. It is in the shared interests of all hon. Members to ensure that that happens. Hon. Members from objective 1 regions know that we share the Government's interest in making the objective 1 programme succeed.

I shall conclude my speech, because it is important that other hon. Members who want to speak have ample time to do so. We must recognise that the point of the exercise is to give an essential lift to the economies of the four poorest regions, not to justify a more complex and impenetrable bureaucracy. We need to overcome the barriers that applicants experience. We need greater certainty about the funds. We need a more applicant and project-centred process. We need a joined-up government approach to the problem. We need greater evidence that the four Departments are coming together strategically. Indeed, the right hon. Member for Swansea, West (Mr. Williams) has proposed in the all-party objective 1 group that a Cabinet Committee should co-ordinate the approach to the issue.

Brittany has a single application form for European funding and regional funding. That makes it considerably easier for applicants for objective 1 status to respond to the complexities of the process. In France,

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the departements face those complexities and the prefet, with his committee of advisers, decides that if people succeed in one fund, they succeed in the lot. That is how things should happen. Applicants should not have to complete 12, 13, 14 or 15 application forms for different financial years and different criteria.

In the next seven years, there will be a golden opportunity for objective 1 areas. It is vital that we get it right this time, because there will not be a next time. Objective 1 regions deserve the Government's full support. Applicants deserve an applicant-friendly system. I urge the Minister to respond to the genuine fears--we are not scaremongering--that we in the objective 1 regions might fail to make full use of the opportunity provided by objective 1 funds in the next seven years.

10.23 am

Mrs. Louise Ellman (Liverpool, Riverside): I congratulate the hon. Member for St. Ives (Mr. George) on securing this important Adjournment debate. It is important because it comes at a critical time when the draft single programming document for objective 1 areas is being considered in Brussels. We have a small amount of invaluable time in which to resolve some of the practical issues that have emerged. They must be resolved if we are to take full advantage of the objective 1 funds for which so many people have worked so hard.

In Merseyside, this issue is especially important because we are coming to the end of the highly successful first objective 1 programme. That programme has successfully safeguarded jobs, secured additional employment and brought new investment to Merseyside. It has introduced innovations to support small businesses--especially the Merseyside special investment fund, which is an innovative fund investing European funds in small businesses--and major projects of cultural and employment significance, such as the conservation centre in Liverpool, which won the award of European museum of the year, the CIMS projects at Liverpool university, which invests in technology transfer, and many local programmes in areas of particular deprivation, such as Dingle, Granby and Vauxhall, which work with local people, support local resources and develop training and employment opportunities.

In considering the practical issues that we face in securing maximum advantage from the second objective 1 round, we in Merseyside want to build on our successes and make maximum use of that funding. What we have already achieved in Merseyside can be replicated in the new objective 1 areas, some of which have similar needs.

One factor is different this time. Significant changes in UK regional policy have taken place, including a much sharper focus on regional economic policy, the creation of regional development agencies with a clear remit and the development of regional economic strategies, which have now been presented for all regions. The regional economic strategy for the north-west covers matters such as the environment, business skills, transportation and general infrastructure, and I suspect that regional economic strategies for the other regions cover similar matters. A change is also taking place in the nature of

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the business support offered by the UK Government. Training and enterprise councils and business links are moving to the small firms fund and the skills councils.

Changes in regional policy have taken place. We have regional development agencies and regional economic strategies, and we are sharpening up our means of delivering business support. In addition, Government offices for the regions have a new role, which is still being developed. They should become much more of a voice for the regions than for the Government operating in the regions.

Such factors are extremely important in considering financial and managerial arrangements for the new objective 1 programme. We must ensure that we maximise all available economic development resources in order to bring maximum support to objective 1 areas. To be effective, the use of European objective 1 funds must be aligned as closely as possible with the use of UK funds--whether from the public, the private or the voluntary sector--that are identified for programmes in the regional economic strategies or for local programmes. The two must work together. To make maximum use of those programmes, we need sufficient match funding and co-ordination at all levels.

In Merseyside, the main focus of the new objective 1 single programming document is business support: supporting the creation and survival of SMEs and developing the community's knowledge base and growth points in the economy, such as pharmaceuticals, leisure, work through the docks, which will have major repercussions for the Merseyside economy, new areas such as environmental technologies and spin-offs from our universities and institutions of higher education. We must consider transport, skills and infrastructure as well as investment. In Liverpool, objective 1 funding must be aligned with regeneration, especially through working with Liverpool Vision, the first urban regeneration company to be created following the Rodgers report on the regeneration of urban areas.

Although those are major issues for Merseyside and Liverpool, they also apply to the other objective 1 areas. If we try to keep European objective 1 funds in a separate box, they will not be as effective as they could be. They will be fully effective only if we develop managerial and financial arrangements and structures that will enable objective 1 funds to be used effectively with other funds that are or can be made available.

I shall refer now to specific issues on management and financial arrangements, some of which the hon. Member for St. Ives mentioned. The partners in the Merseyside objective 1 programme have come together to provide finance for a separate officer responsible to the programming committee for not only delivering the programme, but considering how it can be better assessed and made more effective. Will my hon. Friend the Minister explain the Government's views on that issue? I know that discussions have been held at Government level and beyond. It is an important issue because it relates to the establishment of the programme committee--co-ordinated with other funding bodies--as a body in its own right to assess these activities more effectively than before.

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It is important to establish effective links, within the programme monitoring committee and elsewhere, between the North West regional development agency, the Government office for the north west--or their equivalents in the other objective 1 areas--and the European Commission. Such links must be developed in an organised way if they are to be effective. Such work is already happening, but I should like an assurance that it will be facilitated at Government level so that the constructive links that are developing within the area are supported nationally. Such co-ordination must be replicated at Government level. It is extremely important that the DFEE, DTI, and DETR--the major Departments involved, although there are others--work together to assist the delivery and co-ordination of the objective 1 programmes. One of the difficulties we encountered in the previous programme was the lack of co-ordination; some of the long delays frequently encountered in putting together and delivering the objective 1 and objective 2 programmes arose because different Departments interpreted Commission guidelines differently, to the detriment of the programme. I ask the Government to address that central issue.

The issue of match funding has been raised. I ask the Minister for an assurance that there will be maximum flexibility in identifying match funding so that we get maximum benefit from the objective 1 programme. Would selective assistance from the DTI, for example, count as match funding? Will there be support for the venture capital funds that some of the regional development agencies are setting up, and which the North West regional development agency is considering, and will they be used to support match funding? Will the Government be as flexible as possible with regard to their programmes and related programmes to enable match funding to be made available, so that we get maximum advantage from objective 1 funds?

Budgets are important. There was a particular problem in the north-west, because the North West regional development agency inherited many of the previous programmes. Because of the limited budget it inherited, most of its funds for 2000-01 and beyond are already committed. Will my hon. Friend assure me that he will reconsider the budgets of the regional development agencies, specifically in relation to objective 1 funding, to ensure flexibility? Will he also assure me that, where necessary, there will be additional funding or additional access to funding, to ensure that objective 1 money is spent as effectively as possible?

The hon. Member for St. Ives referred to a new issue that has emerged with the objective 1 programme--decommitment, to use the jargon. If the allocations for the programme in a given year are not committed by offer letter by the end of the calendar year and have not been spent within two years, the money may automatically be removed from the objective 1 area to which it has been designated.

If that is a firm rule, timing is essential. There were many delays at the beginning of the previous objective 1 programme for Merseyside. First, the Commission did not accept the single programming document put forward by Merseyside, and there were problems with policies and funding. Those difficulties were eventually resolved, the programme is now fully committed and the

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funds will be fully spent. However, the new decommitment rule means that if such delays occur again the money will be lost. Our debate is timely because it is important that the problems of match funding, management arrangements and Government co-ordination are resolved now.

My hon. Friend the Minister has a long history of understanding European funding problems. I know that he is deeply committed to regional policy and to European funding for the regions. I ask him to consider sympathetically the points that have been raised in this morning's debate. Their resolution will have maximum impact on the United Kingdom's poorest regions. European funding was hard fought for, particularly by the present Government. By resolving these issues, he will bring maximum value to the regions and make the Government's regional policies fully effective.

10.36 am

Mr. Dafydd Wigley (Caernarfon): I congratulate the hon. Member for St. Ives (Mr. George) on securing this timely debate. It is important that those of us who represent the four regions that have secured objective 1 funding should have common cause. The details may be different from one area to another, but the principles that we are debating today--what we want to secure for our areas--are identical. It is right and proper that we should all pull in the same direction; that will ensure that the programmes are delivered in such a way as to achieve maximum benefit.

Large parts of Wales are designated as objective 1 areas. That is a reflection of our failure over the years to attain economic regeneration. The extent of the problem is shown by the fact that, out of a total population of 2.9 million, 1.9 million people in Wales get less than 75 per cent. of the average per capita income of the European Union. The problem affects not only the old coalfield areas--one can well understand that the running down of the coal industry has caused income per head to fall here--but the rural west and north-west, and a large part of north Wales, which has suffered rural deprivation and the running down of some of the historic centres on the coast that used to generate economic wealth.

Taking all that together, the immense challenge is to get the gross domestic product per head up to something approaching the European or UK average. The objective 1 programme gives us a God-sent opportunity, but it is available only between now and 2006, perhaps with an overspill for a year or two more as the programme runs down. We shall not have this opportunity again, because countries from eastern Europe will have joined the European Union and will start making demands on its regional resources. We must make the most of this opportunity.

I pay tribute to the work undertaken by former Ministers in the Welsh Office in securing the programme for Wales. For many years, people campaigned to get the nomenclature of units of territorial statistics II--NUTS--map changed to reflect the reality of the country's social deprivation. In their time at the Welsh Office, the right hon. Member for Caerphilly (Mr. Davies), as Secretary of State for Wales, and the hon. Member for Neath (Mr. Hain), as his deputy, faced a tremendous battle to secure that funding: that it has

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been done is great. The objective in winning the battle is to make the programme work, and we face several problems in Wales. Questions about structures for managing the programmes and the generation of interest in new projects, which is vital, are largely matters for the National Assembly for Wales, and I must pursue them with my other hat on.

The fundamental question that faces the National Assembly and those involved in the project is about funding, as has been mentioned by the hon. Members for St. Ives and for Liverpool, Riverside (Mrs. Ellman). We in north Wales have watched with great interest Liverpool's progress and the benefits that it has secured from the programme, and we wish Merseyside well with the next part of the project. Both those hon. Members referred to funding, matched funding and the availability of finance. The situation is slightly different in Wales, because the Barnett formula defines our available funding. A rolling programme agreed by the Welsh Office and the Treasury is updated from year to year.

The expenditure available to us was defined in the Welsh Office spending programme more than a year ago, before Wales was accorded objective 1 status. In that rolling programme, the total managed expenditure for Wales in 2000-01 was Euro7,908 million. No provision in that figure was made for objective 1, as it was some months before that had been cleared by the European Union. Under the National Assembly and the office of the Secretary of State, who remains in Westminster, the budget for next year will be Euro7,909 million, which is within Euro1 million of the original budget. There is no additional money whatever in the budget for Wales for 2000-01 to reflect the additional expenditure necessary with regard to objective 1.

The figures are similar under the current expenditure plans for 2001-02. The original budget for Wales published more than a year ago was Euro8,334 million for that year, and the updated figure published a few weeks ago by Edwina Hart, the Assembly's Finance Secretary, was Euro8,335 million. Again, that is within Euro1 million. For the year after next, no additional money has been included in the budget for Wales to take account of objective 1.

Hon. Members have touched on additionality--the projects to be provided by objective 1 money will be additional to what would have otherwise taken place. That argument is not new. It was used by members of the Labour party involved in the fight in the early '90s when Bruce Millan was a Commissioner in Brussels and the focus was on the RECHAR programme. A famous victory was secured then.

A document provided by the Coalfield Communities Campaign, which has been heavily involved in areas of England and Wales, states:

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    as to provide matched funding for European expenditure, less money will be available for the programmes than was originally foreseen.

We are not talking about small amounts of money. In Wales, we are talking about match funding of about Euro170 million to Euro180 million a year. Graham Meadows, a senior officer in charge of such programmes in the European Union, told us that that match funding must come from the public sector. That was confirmed in a regional meeting of the National Assembly in Rhyl in September--I see that the hon. Member for Vale of Clwyd (Mr. Ruane) is present. Civil servants from the Welsh Office confirmed that the information they had been given by Brussels was that the match funding for the new programme had to come from the public sector, not the private sector. That is on record, having been stated in Brussels by Graham Meadows to MEPs, and by civil servants in meetings in Wales.

If the match funding has to be found from the public sector and there is no additional provision whatever in our budget in Wales, where will the money come from? Something must be done to find it. It is not simply a problem for 2000-01. I accept that there will be a delay in expenditure, and that projects started in that year may not fully need their cash flow expenditure until the following year. Therefore, the figure needed in 2000-01 may be below Euro170 million, but we need additional money.

On 23 November, I received a parliamentary answer from the Department of the Environment, Transport and the Regions, which stated:

As we work within a global figure defined by the Barnett formula in Wales, we must be assured that a mechanism has been authorised for public expenditure survey cover for the additional money from the European Union for objective 1 purposes. We need additional match funding to ensure that genuinely additional projects will be pursued in Wales, and we need additional PES cover for the half the money for those projects that comes from Brussels.

So far, we have been told that the Government will not let Wales down, and I hope that we can bank on that commitment. I am glad to hear hon. Members, especially those on the Government Benches, reinforcing that hope. If we can trust that commitment, we shall be very happy indeed, but we want to know how it will met.

My local authority has passed me a copy of a letter that the hon. Member for South-East Cornwall (Mr. Breed), who is in the Chamber, received from the Prime Minister. In the context of objective 1 spending in relation to Cornwall--I guess that his comments are equally applicable to other areas--the Prime Minister said:

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    "There has been considerable speculation that the UK Government will make additional public resources available to these areas in order to provide a further source of match funding for projects under the programme. However, such match funding will continue to be the responsibility of the grant applicant and will be largely derived from the existing domestic programmes available to the area . . . I cannot guarantee that more public funding will be available. If more public funding is not available, there will be cuts in expenditure in Wales on health and education to provide the money necessary for match funding for the European programme. Frankly, that is not acceptable. The areas in Wales that are entitled to the money are areas of social deprivation. The objective of the programme is to overcome that deprivation with self-regenerative economic growth. It is unacceptable that social programmes should have to be cut to maximise the benefit that we receive from the European Union.

When the Minister winds up the debate, I hope that he will give a categorical assurance--not simply for Wales but for Merseyside, South Yorkshire and Cornwall as well--that there will be additional match funding so that projects can be genuinely additional. There must also be PES cover, so that the funds from Brussels will be over and above the expenditure programme that has been approved so far.

10.49 am

Ms Candy Atherton (Falmouth and Camborne): I congratulate the hon. Member for St. Ives (Mr. George) on securing the debate. I am glad that he has not followed the doomsday scenario adopted by some of his hon. Friends, who seem more interested in cheap headlines today than in Cornwall's prosperity tomorrow.

Mr. Duncan : Oh, that is a good line.

Ms Atherton : It is a true line.

The people of Cornwall and those of other objective 1 regions have been given a vital opportunity, and everyone must do whatever they can to maximise the benefits. I am confident that those who have worked so hard to win this opportunity will ensure that that happens. The Labour Government who won the additional funding will ensure that the poorest regions benefit most. That is why I welcome the opportunity of suggesting how that can be done.

A little history is required because some hon. Members do not remember how Cornwall won objective 1 status in the first place. Two years ago, the county had as much chance of winning objective 1 status as Manchester United has of winning the world FIFA cup--it was not even in the sphere of possibility. Several events assisted our campaign, notably the sad end of tin mining in Cornwall, which highlighted all too dramatically the plight that the region faced.

My hon. Friend the Minister assisted in what became a long campaign within Government to point out the needs of the county. Even colleagues from the north of England failed to understand the endemic nature of Cornwall's poverty. I am pleased to say, however, that many Ministers listened, and when the Prime Minister met me and my hon. Friend the Member for Plymouth, Devenport (Mr. Jamieson), Cornwall suddenly became a runner. The Prime Minister instructed civil servants to

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make the case for Cornwall to be separated from Devon for statistical purposes. To my intense joy, within a few weeks the case was won in Europe. The poorest region in the UK now stood at the front of the list of achieving objective 1.

Mr. Duncan : Will the hon. Lady confirm that the bid on behalf of Cornwall had been set in motion by the Conservative Government before the general election?

Ms Atherton : I am astonished: all of us knew at that time that Cornwall was not even in the running. However, I am delighted to hear that we have the support of the Conservatives, and I can confirm that the key statistical separation from Devon was achieved not by the previous Conservative Government, but by the present Labour Government.

When I heard the news about the statistical separation, I danced around my living room for ages while an electrician looked on aghast as I celebrated what I immediately recognised as a great opportunity. That night the gloom merchants were out: they said that Cornwall would be left out; that the Labour Government would not confer assisted area status; and that, at the final hour, Cornwall would be denied funding. But, hey presto, we did it. We now hear the same soothsayers predicting that the Government will not match fund objective 1. Balderdash! Much work remains to be done on many fronts--in central and local government--and we now have an opportunity to discuss it. It is important for the Government to establish mechanisms to maximise the benefits of the objective 1 programme. The form that such mechanisms should take should be considered urgently in the weeks ahead.

I am grateful to my hon. Friend the Minister for Trade for a letter sent to me last night, which outlines ways in which partnerships can access match funding. I am also pleased that my hon. Friend the Minister for Local Government and the Regions has agreed to meet the all-party objective 1 group. The Minister for Trade may also agree to participate to help to achieve joined-up government. We will be able to discuss funding mechanisms and establish the best way forward. As others have argued, there is an excellent case for joined-up government in the administration of the objective 1 programme. That is vital. Departments must work together to establish the compatibility of various sources of funding and to ensure that the programme is administered effectively. Those Departments must work with Government offices for the regions and the RDAs. "Joined-up must refer to the regions as well as to the centre.

On the specific question of match funding, regional partnerships must identify and access sources of funding; there are, rightly, no blank cheques. We should examine ways of accessing these sources effectively. Equally, we should decide which funding sources are compatible with European guidance--we need assistance to ensure flexibility from Departments. We must not allow projects to be frustrated by bureaucratic barriers or regulations, or become bogged down waiting for decisions.

Only last week, a local businessman asked me for advice about whether retrospective funding was available for an exciting project that his company was

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developing. I want clear guidelines from the Government on how such information will be given and when. I and other members of the all-party objective 1 group have put these points to Ministers in the past few weeks. We are now waiting for answers. We need to hit the ground running and to ensure that arrangements are established as soon as possible. I know that my hon. Friend the Minister shares my sentiments.

I am pleased to say that I know of several exciting and innovative projects being developed in Cornwall that will make a genuine difference to people's lives. Despite all that I have said, there is an exciting feeling that objective 1 can work for the county and do what it was designed to do--make a real difference to one of the hardest-hit areas of the country. We can make Cornwall a can-do rather than a can't-do county.

Unfortunately, I occasionally have to respond to ill-conceived stories that objective 1 is under threat and that this will be a wasted opportunity. Before Christmas, a story was sent by certain Conservative Members to local papers claiming that the Government refused to match-fund this programme. I am at a loss to understand what they were talking about. Opposition Members had taken a letter from the Prime Minister, which was referred to a little while ago, and spun their own somewhat eccentric interpretation. They decided that the Prime Minister has said that there would be no objective 1 funding for Cornwall, and they hit the "Six O'clock News saying as much. The hon. Member for Truro and St. Austell (Mr. Taylor), whom I am delighted to see here, appeared prominently in those television programmes. However, so great was his concern that he failed to mention the letter and his anxieties in the two hours that he spent with me in the run-up to the programmes. He then hit the television stations when it was impossible to check the veracity of the story. Not content with talking down the eclipse, on objective 1 the hon. Gentleman seems to want to be known as the Member of Parliament for Truro, St. Austell and Doom. Jeremiah mark 2!

What was the hon. Gentleman thinking of when he stated that people in Government Departments would be instructed to put down the telephone on anyone who spoke with a Cornish accent, and that the funding of local councils would be withdrawn? In truth, he and other hon. Members had decided to misinterpret a statement from the Prime Minister that said nothing new.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): Will the hon. Lady give way?

Ms Atherton : No. I am making a specific point about Cornwall, and I wish to keep to it.

Mr. George : Will the hon. Lady give way to one of her local Members?

Ms Atherton : I shall give way to the hon. Gentleman if he insists.

Mr. George : I am grateful to the hon. Lady. History is being rewritten during the valuable minutes in which we should be pressing the Minister about where match funding should be identified. Instead, we are getting into

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a ridiculous spat over an extreme, untrue story. Does the hon. Lady agree that we should be urging the Minister to identify ways in which the programme could move forward?

Ms Atherton : We have spent much of the past hour raising those issues. Just before Christmas, there was some rewriting of history, which should be put on record because many people in Cornwall were greatly disturbed by what was said. The hon. Gentleman knows that much confidence was lost, and many people working on good projects became disheartened. Those people came to us as their Members of Parliament to ask what was happening.

Mr. Matthew Taylor (Truro and St. Austell): Does the hon. Lady believe, as her statements at the time suggested, that the Government should be trusted to deliver the match funding required, given the Prime Minister's statement that he will not guarantee that funding? That is what the letter said, but the hon. Lady asks us to take it on trust that the funding will be provided. However, our debate suggests that hon. Members do not believe that to be the case. We want to win guarantees from the Minister that the Prime Minister would not give.

Ms Atherton : I am grateful for the hon. Gentleman's question. We do not take the matter on trust. However, many of the Labour Government's initiatives--such as health action zones, education action zones, and an imminent development of which the hon. Gentleman is aware--reveal a track record of commitment to Cornwall. The hon. Gentleman and others were not 100 per cent. convinced that the Government would come up with the objective 1 programme and fight their case at the Berlin summit. However, the Government did exactly that. People should consider how Ministers have operated and worked for Cornwall, and give praise where it is due.

That does not mean that I do not want answers from Ministers. I have met Ministers and shall continue to work and fight with them in order to make the case for the county of Cornwall. I repeat: a Labour Government fought for Cornwall to get objective 1 status, and a Labour Government will give a commitment to making match funding work.

11.1 am

Mr. Chris Ruane (Vale of Clwyd): I congratulate the hon. Member for St. Ives (Mr. George) on securing this debate on objective 1 funding. I should like to stress the importance of such funding to the area that I represent, and to discuss match funding.

The exact opposite of the problem mentioned by my hon. Friend the Member for Falmouth and Camborne (Ms Atherton) confronted my county when it tried to be included in the bid from west Wales and the valleys. We had to attach ourselves to that bid, whereas my hon. Friend had to divest herself of the burdensome Devonshire aspect.

I should like to mention the main players who secured the inclusion of my constituency and county in the west Wales and valleys bid. I pay tribute to the Cardiff

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Business School for providing the up-to-date statistics that set the ball rolling. Old statistics based on the eight counties in Wales did not allow Denbighshire and Conwy to participate in the bid. However, new statistics supplied by the Cardiff business school on a 22-county basis gave a true reflection of poverty across Wales.

I also pay tribute to Huw Vaughan Thomas, chief executive of Denbighshire county council, who supplied local Members of Parliament with those statistics, which were used by the then Minister at the Welsh Office, my hon. Friend the Member for Neath (Mr. Hain), to assess the position. Throughout Wales people were saying, "Do not change the map at the eleventh hour. Do not jeopardise things for Wales. However, the Minister took into account arguments for and against our inclusion, and used his decision-making power to ensure that Denbighshire and Conwy were allowed to be part of the bid.

I am grateful to the House of Commons Library for providing the additional information that I believe swung the Minister into making the correct decision to include Denbighshire and Conwy's population of 250,000 in the bid.

Opposition parties have not given sufficient credit to the Prime Minister for the role he played in Berlin in securing objective 1 funding for four UK regions. He flew to Hawarden in north Wales and announced the news at the Labour party conference in Llandudno. Insufficient tribute has been paid to the Prime Minister for that: he would not fly to Berlin and secure funding for the UK, only to scupper that funding on his return, as Opposition Members are suggesting.

It is right for hon. Members to raise the important issue of match funding, which, however, must be kept in perspective. A fine balance is required for match funding and creating the energy and enthusiasm that is necessary to make a success of objective 1. There is a danger of talking down Wales, turning off the business community and stifling the energy and enthusiasm that are the necessary catalysts for successful objective 1 projects in Wales and, indeed, in the rest of the United Kingdom. We should encourage our local business people, as well as United Kingdom and international investors, to invest in Wales.

The case for match funding can be made and it is right that it should be discussed openly in Parliament, but it should be kept in perspective. I am making representations. In the past six months, I have met the Prime Minister, the Chancellor of the Exchequer and the Minister for the Cabinet Office face to face to put the case for Wales and the United Kingdom to get proper match funding. That is how things should be done. We must go forward united. I know that there are many opportunities for Opposition parties to make cheap political points. You are in a privileged position, but I ask you to consider that privilege carefully.

Mr. Deputy Speaker (Mr. Frank Cook): Order. The hon. Gentleman must remember the conventions of the House. The Chair does not have to consider anything other than whether protocol and the Standing Orders are observed.

Mr. Ruane: I accept that, Mr. Deputy Speaker.

The hon. Member for Wentworth (Mr. Healey) referred to the need to match national strategy with the local strategies that have been developed in the single

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programming documents. I concur with that. The Government's main aim is to combat social exclusion and eradicate the poverty that occurred in the 66 constituencies in the objective 1 regions of the United Kingdom during 18 years of Tory rule. We are developing national strategies on social exclusion, education, the economy and the environment. They should be seamless and fit in with the local strategies that have been developed. We must work together without scoring party political points, and present a united front to Ministers during the critical spending review. If we present our case cogently with facts, figures and passion, we shall be successful in achieving match funding.

11.7 am

Mr. Alan Duncan (Rutland and Melton): I hope that hon. Members will forgive me for speaking through a slight veil of snuffles today, but in the circumstances I think that I have been let off lightly. May I take this opportunity to welcome the right hon. Member for Caernarfon (Mr. Wigley)? All hon. Members will be pleased to see him on his feet, fighting fit.

This is the first occasion on which I have spoken in this Room, and I shall endeavour to adhere to the forms of the House in what I think is a failing experiment of an experimental Chamber. None the less, the hon. Member for St. Ives (Mr. George) has raised an important issue, but it is proving its importance only inasmuch as he has shown, as have all those who have contributed to the debate, how unsatisfactory is the state of affairs. We are examining a shambolic system. It is a bureaucratic nightmare, and it is not working. The hon. Member for St. Ives showed that very well; his main thesis was that people must be articulate, pushy and be able to afford a consultant just to reach first base--I might put in a bid. The system is surrounded by bureaucratic muddle. A D.Phil in gobbledegook is needed just to submit an application. That is not how such a system should work. The Minister will have to explain in detail how he will unravel the mess and introduce coherence and cogency to a process for which we in the House should have to answer.

The Minister for Trade (Mr. Richard Caborn) : As usual.

Mr. Duncan : We await the Minister's clarification with some trepidation.

We have the absurdity of the hon. Member for St. Ives saying that Cornwall is struggling to spend Euro314 million. We also have the nonsensical lack of clarity on match funding. The hon. Member for Liverpool, Riverside (Mrs. Ellman) has made a plea for what she calls flexibility in match funding, which looks like a plea to get the maximum out of Europe with the minimum out of her Government. That is what her definition of flexbility seems to be.

We have witnessed the spat between the hon. Member for Falmouth and Camborne (Ms Atherton) and Liberal Democrat Members about whether she bragged that her Government would provide match funding. The basis on which the money is spent seems to be in a complete mess. We believe that the system is utterly flawed, but I do not blame anyone for taking the money if it is available. If there is a pot of gold waiting to be

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used, anyone representing the interests of their constituents will try to find a way of diverting it their way. It is a bit like Dudley Moore at the end of the film "Arthur saying, "I'm not stupid. I took the money. If the system is offering funds, any responsible Member of Parliament will try to obtain them.

If we step back from the system and look at what is happening, we can see how it is taking on an absurd identity. We are in the realms of the absurd. We are net contributors to the European Union. We pay billions into the EU. It gives money back and claims the credit and then, having returned to us money that was ours in the first place, demands that the Government put in more money. We have this extraordinary merry-go-round of taxpayers' money going into contributions, coming back to us and then being spent only partly by us. It is mostly spent by the EU in a way that we cannot properly decipher and for which the House no longer appears able to be properly responsible.

Mrs. Linda Gilroy (Plymouth, Sutton): I am confused by what the hon. Member is saying and would be grateful for some clarification. A moment ago he was trying to lay claim to having put in the original bid under the previous Government. Now he appears to be saying that it is so much of a shambles that it should never have happened in the beginning. Would he have fought as hard as the present Government have fought to get objective 1 status, particularly for Cornwall?

Mr. Duncan : We made the bid because the system was there. If the system is there, one uses it to get the best one can for Britain. The whole system now deserves better examination. Labour has had 18 years to think about it, but it does not appear to have thought about it at all. The merry-go-round of money going from us to the EU and back again is looking increasingly absurd. The right hon. Member for Caernarfon, with his Euro170 million match funding in Wales, now says that he wants more public spending. In addition to the money being taxed and going there and coming back, we have further pressure to compound the burden on the taxpayer in order to double the money, or at least significantly add to it, and to spend it in these areas.

My point is simply that we are elected to the House of Commons to look after the interests of Britain. If it were genuinely additional money I could see the point, but given that it is ours in the first place, the House of Commons should decide within the boundaries of the United Kingdom how its money, raised from its taxpayers, is spent on its citizens.

Mr. Ruane : Can the hon. Gentleman tell me whether that was the system under the previous Government?

Mr. Duncan : Well, that was the benefit of my original thought. We should not just accept the status quo. We should consider whether the system is working, and the debate has proved today is that it is not working. We should decide whether this merry-go-round system makes sense any more, and I seriously question whether it does.

Mr. Matthew Taylor : Will the hon. Gentleman give way?

Mr. Duncan : No. I want to conclude as I want to leave the Minister some time and I am eating into it already.

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He is going to need it. I shall ask him some specific questions. What criteria were used to draw up the map? What were the political criteria? What criteria will be used in deciding how to spend the money? What will be the role of the RDAs, in their interaction with business and the regional offices of the DTI, in deciding and administering that expenditure? Perhaps the Minister can give us a detailed explanation of how the match funding system will work.

11.15 am

The Minister for Trade (Mr. Richard Caborn ): I apologise for my late arrival--I arrived as Big Ben was striking the 10th note of 10 o'clock. I walked from the Ministry--we do not use the transport provided any more--but there were many visitors in London this morning and the traffic lights were against me. I am also suffering from the cold that is doing the rounds.

The contribution of the hon. Member for Rutland and Melton (Mr. Duncan) was unfortunate and showed how far the Opposition are from public opinion. The House makes those decisions. The hon. Gentleman ought to reflect seriously on what the British public said in May 1997 in response to such extremism, because the Tory party is becoming even more extreme. The hon. Gentleman demonstrated a marked ignorance on the subject under consideration--which explains his comments about the sitting. Hon. Members present have an in-depth knowledge of the subject--which, judging from the hon. Gentleman's contribution, the Opposition clearly do not.

I congratulate the hon. Member for St. Ives (Mr. George) on his choice of subject and on the interest that he has taken in European structural funds. He said that he was an expert on the matter before entering the House. European structural funds are a real and tangible benefit of our membership of the European Union. Indeed, for many people they are the most tangible benefit, contributing to a better environment, more jobs and better training. I am therefore delighted that the hon. Gentleman has given us the opportunity to debate aspects of their impact on the UK.

The hon. Member for St. Ives made several points specific to Cornwall and its objective 1 programme. Before addressing them, I remind hon Members of some of the essential features of European structural funds as they affect the UK. There are four such funds, the first of which is the European regional development fund, which reduces the gap between the levels of development and living standards of the various regions and the extent to which the least-favoured regions lag behind. The second is the European social fund, which helps to develop employment by promoting employability, the business spirit and equal opportunities and by investing in human resources. The third is the European guidance and guarantee section of the agricultural fund, which helps to preserve the link between agriculture and land, improving and supporting the competitiveness of agriculture, retaining population in the countryside and preserving and maintaining the environment. We believe that that is vital, especially in the context of the debate about the urban renaissance and encroachment on greenbelt and greenfield sites. The fourth is the financial instrument for fisheries guidance, which helps

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to achieve a sustainable balance between fisheries resources and their exploitation, to modernise the fishing industry and to revitalise areas dependent on fishing.

A separate cohesion fund exists to help the four member states--Greece, Ireland, Portugal and Spain--whose per capita GNP is below 90 per cent. of the European average. The operation of structural funds has been somewhat complex--as has been demonstrated this morning. I am glad to say that in the last renegotiation the Government achieved some simplification, although complexities remain. The number of objectives has been reduced in practice from seven to three. On UK allocations for the funds, which will be in place for the next seven years, we can expect to receive about Euro11 billion, which is, as I said earlier, a tangible benefit of EU membership.

As has already been mentioned, the fact that my right hon. Friends the Prime Minister and the Chancellor of the Exchequer secured such a good deal for the UK at the negotiation of the new round of structural funds at the European Council in Berlin in March 1999 shows the success of the Government's policy. It presents a marked contrast with what the official Opposition have said this morning, and shows that constructive engagement works in dealing with the EU. The result was a package that is affordable and fair to the UK as a whole and to all the regions. Despite the reduction of population coverage by one third for objective 2 areas, the overall package produced an increase in the total population covered by geographical objectives from 24 million to 26.8 million. The UK's total allocation in euros has increased by 18 per cent.

The regional programmes are developed and managed primarily by the regions themselves. To respond to my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman), I hope that the structures that are put in place will be flexible enough to deliver what people want in the regions. Successive revisions of structural funds have increased the role of local partnerships in designing and implementing programmes. Everyone--with the possible exception of the official Opposition--with a serious interest in European structural funds welcomes that development. It is the partnerships that know their regions best. They are committed to them and are best placed to identify projects that will make a genuine impact in their regions. The local partnership typically comprises representation from local authorities, local and regional development bodies, education bodies, chambers of commerce, voluntary organisations and others. In England, regional Government offices have a vital role to play in the management of programmes.

RDAs have already been mentioned. I emphasise the importance of devolution and the introduction of RDAs in England. Devolved Administrations are responsible for programmes in Wales, Scotland and Northern Ireland. In England, the Department of the Environment, Transport and the Regions is the lead Department for objective 1 and 2 programmes, while the Department of Trade and Industry has an overall co-ordinating role and represents the entire UK in negotiations with the European Commission on structural funds in general.

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In England, RDAs have been closely involved in designing the new objective 1 programmes and in ensuring that programmes are consistent with their regional economic strategies. RDAs in the south-west contributed substantially to the objective 1 plan for Cornwall, and I hope that such informed development can continue, not only in Cornwall but in other areas.

The Government's role during the programming period is, nationally, to monitor programmes, their expenditure and the effect of exchange rate movements--the Commission makes all commitments in euros--to provide advice and guidance to regional partners on technical matters, to help to resolve problems between Departments and the Commission, to act as the channel through which payments from Brussels are made and to verify that money is spent properly, in accordance with fund rules.

The Commission's proposals for improved and more transparent financial control management in structural funds are extremely welcome. The UK has consistently and rigorously pursued better financial management and accountability of all European expenditure: we are all European taxpayers, and it is vital that our taxes are well spent and properly accounted for and that genuine value for money is achieved.

I turn now to the funding of programmes, the matter in which hon. Members have most interest. As has already been mentioned, several hon. Members have asked about match funding in the debate and in correspondence with the Government on the matter from the Prime Minister down. I am pleased to have the opportunity to try to explain as clearly as possible how the system of match funding will work, because some misunderstanding has arisen.

Structural funds account for only a proportion of the cost of a project. The remainder must be found from national sources. Match funding may be obtained from central Government or local government, from other organisations such as development bodies, or from the voluntary sector, and may include a variable element from the private sector. [Interruption.] I am glad that it was your pager that sounded, Mr. Deputy Speaker, and not anyone else's.

It is important to note that regulations allow grants of up to 75 per cent. for objective 1 areas. However, the English objective 1 programmes have chosen to apply for support from the funds equivalent only to match funding from the public sector. The addition of private sector match funding has resulted in average grant rates of below 50 per cent. That increases the overall size of programmes, because, although the overall allocation from the funds is fixed, the programmes have to find proportionally more match funding. I stress that that was the decision of the regional partnerships.

Mr. Andrew George rose--

Mr. Caborn : I shall give way in a moment.

I am saying not that 75 per cent. would have been achieved, but that regulations allow for more than 50 per cent. The objective 1 areas decided to go for 50:50 on

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match funding. We should consider what would happen to the rest of the people in the region if the 50 per cent. that is public money were taken out of the match funding. Of Euro100 expenditure, Euro45 comes from the EU, Euro45 is match funding and Euro10 is from the private sector. If the private sector wants to provide Euro15, should one reduce the Euro45 of match funding from the public sector to Euro40, liberating that Euro5 to be spent somewhere else in the region, or should it be additional to that funding, which would allow us to continue to expand the programme in that objective 1 area?

When setting up the regional development agencies on behalf of the Government, I tried to get the RDAs to look holistically at their regions, and to consider using finance, wherever it came from, to deliver a strategy. I believe that the way in which match funding is being developed militates against that.

Mr. George: I am somewhat at a loss, not knowing whether the Minister is atempting to shift the responsibility for that decision on to the partnerships in each of the four regions. The Government signed off those programmes when they went to the Commission in November. I presume that the Treasury and Government Departments agreed to the funding profiles within those programmes.

Mr. Caborn: That is absolutely true, but I and my colleagues in the Department of the Environment, Transport and the Regions, drew it to the attention of those who were making applications that there could be problems with match funding. However, because it was a regional decision, we said that we would live with it. It must be accepted that the programme, which accounts for about 10 per cent. of what it spent, is additional to what has already been put in to those regions.

I appreciate the problems, but the money is additional to the programmes now going on. In terms of match funding, it will therefore be easy. Block grants cannot be made, because they would not follow the particular schemes for which match funding was required and which would be additional to that spending. However, I and my colleagues in the Department of the Environment, Transport and the Regions and in the Treasury are prepared to consider whether to produce a new list. It is in our interests to ensure match funding to achieve a bigger take, but the decision is taken by the regions. That is what devolution of power is about. Regional decisions are now determining the level of match funding that will have to be raised. We believe that the money is there. We are prepared to reconsider regional selective assistance, which we were asked to do, and other assistance, and come back to the hon. Gentleman.

Unfortunately, time has caught up with us. There is much more to put on the record, but there has been a bit of in-fighting among hon. Members so I have been unable to give a full explanation. If hon. Members write to me, I shall respond to them. If they wish to promote another debate, I shall be more than willing to come to this Dispatch Box or the other at any time and debate the subject with the official Opposition.

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