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Dawn Primarolo: My hon. Friend is a fierce and convincing advocate for Cornwall and use of objective 1 funds. I have had the opportunity of discussing the matter with her previously. I emphasise to her and all hon. Members that the Government's policy on the economic development of all the regions and countries of the United Kingdom is clear. Our objective is to ensure employment growth, skills development, competitiveness and productivity in them all. We are discussing the most effective and efficient way, with added value and respecting subsidiarity, to continue to achieve those objectives.

Mr. George Howarth: Will the Paymaster General give way?

Dawn Primarolo: If my hon. Friend will wait a moment—I have given way to him previously—I shall come back to him. First, I give way to the hon. Member for East Carmarthen and Dinefwr.

Adam Price: The Commission said that, under its proposals, regions such as west Wales and the valleys would have continued to qualify for objective 1 under the previous system with 15 member states but will not because of enlargement, and would therefore receive transitional relief of between 60 per cent. and 85 per cent. of the funding that is currently available. Will the Government guarantee that the same amount of
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transitional relief—between 60 per cent. and 85 per cent.—will be available to those regions under their proposals?

Dawn Primarolo: First, if the Commission is making promises, it is doing so on the basis of a budget that it does not yet have. Secondly, I refer the hon. Gentleman to the statement of the Secretary of State for Trade and Industry in which she clearly set out the methodology that the Government would follow to ensure the development of all the regions and nations of the United Kingdom in pursuing our objective of raising all to the levels of growth and employment from which some currently benefit.

As all member states will do, the Government are entering a negotiation process with the Commission about future funding. It is crucial that we judge that on added value, subsidiarity, the efficiency and effectiveness of the spending, and the opportunities for us to streamline and simplify the process and cut out the wasteful recycling of funds that often happens. I am sure that all hon. Members would wish to achieve the continued support for that development that will result from the Government's economic policy.

Mr. George Howarth: From the tone of my right hon. Friend's response to my hon. Friend the Member for Crosby (Mrs. Curtis-Thomas) and me, I think that she may have misunderstood the point that we were trying to make. We are not into special pleading for Merseyside and the north-west, although, since the occasion presents itself, we might well engage in some. My concern is that, as matters develop and as the Government develop their own approach to those matters, we should deliver my right hon. Friend's objectives—many of which I share—to the areas where they are most needed, rather than spraying them about indiscriminately. There is probably not much difference between us on this, which is why I think that a meeting would be helpful.

Dawn Primarolo: My hon. Friend is a passionate advocate for the area that he represents, as I would expect all hon. Members to be. I hope that I did not misunderstand his pleadings, or give an incorrect indication to the House. What I said was that, following a UK-wide consultation on the future of the funds last year, the Government have proposed an EU framework for the devolved regional policy. Under that approach, all member states would agree to pursue common objectives in supporting regional development, but the delivery would be substantially devolved and decentralised. That would give the member states and their regions and nations the opportunity to pursue their own strategies.

To ensure that funding is focused where it will add most value, the Government have proposed that those member states eligible for the cohesion fund—Greece, Portugal and the new member states—would continue to receive EC funding, while richer members would take primary responsibility for financing regional policy themselves, thus ending the current system of wasteful recycling of funds between net contributors. That is the issue from a financial perspective.

Hon. Members on both sides are rightly pressing me to ensure that the Government remain strongly committed to regional development and, to that extent,
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we have guaranteed that, if our proposals on reform of the structural funds are agreed, domestic spending on regional policy will be increased, so that the United Kingdom's nations and regions will receive a level of resources that will ensure that they do not lose out following the UK proposals. That has been the subject of discussion and consultation, involving a large number of meetings. The UK pays 1.6 euros for every 1 euro that it receives under the current financial perspective. Paying for UK regions means paying for other regions of equal wealth elsewhere, which could cost a great deal. That is why the Government are suggesting this way forward, so that we can direct our resources to our regions.

Sir Archy Kirkwood (Roxburgh and Berwickshire) (LD): I come from a region where the use of European funds could hardly be better. Improvements can always be made, but we have been very successful in deploying such money as we have had.

I am listening carefully to what the Minister is saying, and the problem with the Government's position at the moment is that, while they may have support from five other member states for the reduction of the budget—she mentioned that in the first part of her speech and I understand it—there does not seem to be any agreement between the six that are trying to get the budget constrained about what should follow. Her suggestion that there should be subsidiarity may well be sustainable, but how much support is there among those six colleagues for that? Obviously, if she gets regionally repatriated policy, she must make serious amendments to the state aid rules for that to be of any use whatever.

Dawn Primarolo: If I can start with the state aid rules, as the hon. Gentleman knows, those are also a matter for discussion under the proposals being put forward by the Commission with regard to state aid and regional policy. I am sure that he finds this in his local communities as well, but there are issues with regard to the bureaucracy and complexity of the application for funds. I will put it simply: the Government have committed to increased funding on the basis of 1.6 euros for every 1 euro that we receive, whereas the current proposals in relation to distribution among all member states are for a 50:50 arrangement, so the richer states would also receive it. I am sure that he will agree that we should put forward the proposal passionately and enthusiastically.

The hon. Gentleman questions me with regard to a consensus on cohesion. As he knows, that is sometimes a difficult issue. At this point in the negotiations and discussions with other member states, the Government are strongly of the view that we can put forward our proposals and that they will receive support. I must say, however, that this is the beginning of a long negotiation. If we consider other long negotiations in which the United Kingdom has entered discussions with 14 against and only the UK in favour—the discussions on the savings tax directive spring to mind—he should take comfort from the Government's persistence and ability, in representing the House, to persuade other member states of the correctness of the proposal. On the financial perspectives, the process is about negotiation and putting forward a strong case. I am setting out for the
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House the principles that we will follow and the objectives that will guide us in negotiations, and we will pursue that process with considerable vigour.

Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale) (LD): I echo the comments of my hon. Friend the Member for Roxburgh and Berwickshire (Sir Archy Kirkwood). In our part of Scotland, which has a series of economic problems, whether in the agriculture sector or textiles, structural funds from Europe, coupled with regional selective assistance over the past few years, have been absolutely crucial to the restructuring of that economy. There is now a state of flux and uncertainty about the future in relation to both those issues. Can the Paymaster General explain to the House exactly what the guarantee from the Government will mean for our region?

Dawn Primarolo: I have covered that clearly in terms of the Government's commitment to the English regions and the nations that make up the United Kingdom. As I have suggested in response to previous interventions, the hon. Gentleman should consider the statement from the Secretary of State for Trade and Industry on the methodology that will be used. I would also say that this Government, since 1997, at times in the teeth of opposition from some Members, have created an active regional policy through the regional development agencies and investment in skills and employment. Over that period, we have clearly articulated our commitment to growth and prosperity in all the English regions and the nations that make up the United Kingdom. I see no reason for the hon. Gentleman to doubt that commitment, and I am a little surprised that he does not understand the importance, at the beginning of negotiation, of setting out clearly—as I have here today—the principles, the objectives and the process according to which we will negotiate the delivery of priorities.

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