Examination of Witnesses (Questions 134
- 139)
TUESDAY 25 JULY 2000
RT HON
HILARY ARMSTRONG
MP, MR PAUL
HOUSTON AND
MR DERMOT
PADDON
Chairman
134. Minister, can I welcome you to the Committee
and ask you to identify yourself.
(Hilary Armstrong) Good morning, Chairman.
I am Hilary Armstrong, Minister for Local Government and Regions.
I have with me Dermot Paddon of Regeneration Division 3 from the
Department; and also Paul Houston, who is the Head of Regeneration
Division 3 in the Department. They have policy responsibility
in this area.
135. Thank you very much. Do you want to say
anything by way of introduction, or are you happy for us to go
straight to questions?
(Hilary Armstrong) Maybe I ought to say that I am
pleased to have the opportunity to discuss this with you. The
loss of the PIP programme I do believe was very serious for regeneration,
and we are taking a number of steps to mitigate the situation.
I am sure you welcome the fact that significant extra resources
are being made available for regeneration programmes following
the Spending Review announcement by the Chancellor; and these
include extra money to help compensate for the change from PIP;
and we are seeking to find ways forward with the Commission.
Miss McIntosh
136. Minister, the ruling obviously has had
quite disappointing consequences for the Government: how would
you describe your reaction to the Commission ruling?
(Hilary Armstrong) I have already said that we were
extremely disappointed. We want very strongly to support the Commission's
endeavours to ensure that State aid is not abused. The Government
has consistently sought to ensure that we support the overall
aims of making sure that State aid is used in a way which does
not disadvantage Britain as a Member State. On the other hand,
we do feel that this is a disappointing decision, and that it
reflects the fact that, in many senses, the rules were written
before there were any effective public/private partnerships; and
it is for that reason that in some senses the Commission have
ruled against us. We do want to continue to press that in the
long term. I was pleased that after discussions with Commissioner
Monti he did agree to what I think are very generous transitional
arrangements; and that has meant that all projects that were in
the pipeline have been able to be continued despite the ruling.
137. It appears, Minister, the back point is
that clearly the way other European countries provide regeneration
funding is very different from the tradition in this country.
The Treaty does allow for the Government (and I agree) within
a very limited timeframe to have taken this decision and appealed
it before the European Court of Justice. Did the Government consider
this option?
(Hilary Armstrong) As I say, we wanted very much to
make sure that we were supporting the overall aims of the Commissioner
to tackle abuse of State aid across the European Union. On that
basis we came to the view that we would look for alternative ways
of delivering the programme, which was very firmly within the
State aid rules. Our legal advice was that that was most effective
way to proceed. I would also say, had we decided to go for an
appeal, that would have taken a very long time and would have
left developers, Regional Development Agencies and others who
were seeking to get on with the job, in limbo and with great uncertainty.
Mr Blunt
138. Why? It would not have left them with uncertainty,
surely?
(Hilary Armstrong) It would have left them with uncertainty
as to how they would proceed and what could develop.[1]
139. Surely not if the Government was underwriting
the scheme? If the Government continues to make it available as
far as the developers are concerned then there would have been
certainty for them; because the Government would have been saying,
"We are appealing this decision, and we're going to make
sure that, as far as people who would therefore undertake schemes
whilst the Government is appealing the decision are concerned,
they would be protected and would have certainty"?
(Hilary Armstrong) That is a matter of judgment. My
judgement is that as soon as the Commission raised this there
was great uncertainty around the country, and an urging of the
Government to try and sort this out. That is what we are proceeding
to do. The reality is that we want to make sure that we get very
clear rules on State aid, and that those rules are applied throughout
the Community. That is very much in the interests of Britain.
It is very much in the interests of Britain that we are seen to
be complying with the Commission on that basis, and that affects
not just PIP but that affects a whole range of programmes. All
I can say is that we did take the decision that it was the right
thing to agree the problems that there were. I do not know whether
you have read the Treaty and what it actually says about State
aid and looked at the PIP programme, but it did become clear that
we need to change the overall rules before being absolutely confident.
1 Note by Witness: When the European Commission
made their decision in December 1999, this came into force immediately.
Challenging the ruling would not have delayed that. Thus even
if a legal challenge had been made, it would still have been necessary
to close the Partnership Investment Programme to new applications. Back
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