Examination of Witnesses (Questions 397-399)
LORD FALCONER OF THOROTON, MR PAUL HOUSTON AND MR STEPHEN STRINGER
TUESDAY 30 APRIL 2002
397. Can I welcome you to the second session this morning and can I ask you to introduce your team for the record.
(Lord Falconer) I am Charles Falconer, Minister for Housing, Planning and Regeneration. On my right is Paul Houston, Head of State Aid Division and on my left is Stephen Stringer, State Aid Policy Adviser, all in the Department of Transport, Local Government and the Regions.
398. You have given us a further memorandum. Do you want to say anything this morning by way of introduction or shall we go straight to the questions?
(Lord Falconer) Could I very briefly say a few remarks and then go straight to the questions. Thank you very much indeed for inviting me to give evidence this morning. State Aid rules are there to prevent countries from distorting fair competition and trade and supporting ailing industries in a way that distorts trade within the European Union. Such action damages competition within the community. We wish to see State Aid rules enforced but not expanded way beyond their purpose. They should not inhibit regeneration which has no effect on European Union trade. We must watch to ensure that our regeneration schemes do not breach the State Aid rules but I think the fundamental problem is that the consequence of the PIP decision impacts on a wide range of regeneration projects. I cannot believe that the Commission wanted to stop the vast majority of worthwhile projects. Indeed, their agreement to the gap funding scheme so far indicates that that was not their intention.
399. But that is what they did.
(Lord Falconer) That is what they did, indeed, that is right and we have to see a way through to try to get us back as close as we can to what the State Aid rules are intended to achieve. We have to find a way of rebalancing the application of State Aid rules to regeneration. We have accepted the PIP decision. Whether or not we were right to do so in the way that we did is open to debate but we are where we are and our priority must be now to move forward. We all know that there are some extremely worthwhile regeneration projects out there which are making a real difference to people's lives. It is simply unacceptable that the State Aid rules can prevent such projects from going ahead and we must find a way of removing that barrier. We must be realistic but we must also acknowledge the urgency of the issue. The current strategy is two-track: notifying and seeking the Commission's approval of new schemes and seeking to persuade the Commission of the need for a new regeneration framework. We have taken a number of steps to fill the gap left by the closure of PIP. In addition to the approved schemes, we have notified the Commission of a gap funding scheme for housing and you have heard evidence about the fact that Scotland went there first and we are going there now after Scotland, and you will no doubt want to ask me questions about that aspect of it. With the assistance of the RDAs and English Partnerships, we are developing two further schemes which will be notified to the Commission shortly and again I think you know about them: one allows for Aid up to 100 per cent to cover the cost of remediating derelict and economically damaged land; the other scheme will enable gap funding support for the bringing back into use and conservation of historic buildings and land and that scheme will complement one currently being run by English Heritage. The second part of our strategy is to work towards a new regeneration framework. We have been successful in obtaining the support of some other Member States. We are working hard to persuade the Commission. They are wary about any proposals for new frameworks. It was discussed at a ministerial meeting in October attended by Sally Keeble. Again, you have heard about the meeting and I think you had a representative present as an observer at the meeting which took place in London recently to discuss State Aid regeneration. It was well attended. Several other Member States attended together with representatives from the Director General Competitions bit and the Director General Regional Policy bit of the Commission. It was a constructive meeting. There was an open and frank exchange of views particularly on the need for a holistic approach to regeneration, the nature of market failure and the need to fully engage the private sector in regeneration. I want to build on this. We cannot let our long term aims get sidetracked. It is very important that we take realistic but determined and consistent measures to drive this agenda forward. It is urgent for us to find a solution. Finally, as from next week, a new unit with more staff in the DTLR which will have specific responsibility for taking this issue forward will be set up. Thank you for the opportunity to make this statement.