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Mr. Luff: I am very grateful, Mr. Deputy Speaker.

5.25 pm

Mr. Wayne David (Caerphilly) (Lab): This is an important debate because it is all too easy these days to allow the draft EU constitutional treaty to dominate debate on Europe, whereas the financial perspective for 2007 to 2013 is crucial as well. I understand that the perspective represents the EU's multi-annual budget for those years. We are also considering EU cohesion policy this afternoon. That, too, will have a profound impact on the EU in the next few years.

The European Commission has proposed a budget for the next financial perspective of 1.26 per cent. of Community gross national income. That represents an increase in the EU budget of some 25 per cent.—a significant increase by any stretch of the imagination. The European Commission argues that that increase is needed to finance the common agricultural policy, to
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support a wide range of policy initiatives, some of which are new, and to fund the structural and cohesion funds—in other words, the instruments of regional policy. Of course, the Commission argues very strongly that that significant increase in the EU budget is necessary because of the recent expansion in the EU from 15 to 25 states.

Today, I want to question whether such an increase is justified, especially when, as has been said, the EU is concerned about the budget deficits of several member states in the eurozone. There is something of a contradiction therefore: the EU is saying, on the one hand, that certain member states should tighten their belts, but on the other that they should contribute more to the EU's budget. In particular, I want to question whether that large increase in expenditure is justified in two respects. I want to question the expenditure that is projected under the heading "Citizenship, freedom, security and justice", and I then want to say a little about regional policy.

I should like to spend some time questioning whether it is sensible to increase the CAP budget, but we have to accept the current practicalities and the commitments that have been made on the CAP. The Government of the United Kingdom are to be commended for ensuring that at least a modest reform of the CAP has taken place.

I find it very strange that the European Commission proposes in its draft financial perspective expenditure a raft of new proposals, on some of which there has been no agreement. I cite, for example, the European border guard corps, which has been suggested without any political agreement. The British Government have not agreed to that suggestion, yet the European Commission nevertheless proposes funding for that new entity. The European Commission also proposes that resources should be allocated to reinforce the political concept of European citizenship. That proposal is very dubious to say the least, given the belief of many hon. Members, myself included, that the EU should be based on the principle of subsidiarity. The regions, small nations and the nation states are the EU's essential building blocks, and that should be part of the mosaic of European citizenship.

I would question many other proposals, too, but I should like to focus in particular on the resource projection for what is called external representation. It is quite breathtaking, to be perfectly honest, that the European Commission suggests that funding should be provided for single external representation at the World Bank, the International Monetary Fund and the United Nations economic agencies. We should place a very large question mark against that.

I also question the need for the proposed increase on regional policy. The European Commission proposes in its draft financial perspective a regional policy that is financed to the tune of €336.3 billion. It proposes that roughly half the structural funds and the cohesion fund should be focused on the new accession states, the countries of central Europe, and that the remaining half should be focused on the 15 states that were members before 1 May this year. It wants to spend the money under three headings. The first is convergence, the second is regional competitiveness and employment and the third is the promotion of territorial co-operation.
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The first part of the Commission's proposal makes a great deal of sense. We should focus our attention on the accession countries of central Europe. They are very poor by our standards and they are struggling to come to terms with the single market. They certainly want to develop their economies up to the standards of ours. From an economic sense, and also from a moral and social sense, we should give the greatest possible support to the development of those new democracies.

I have problems, however, with other aspects of the Commission's proposals on regional policy. In purely monetary terms, it makes no sense at all for the United Kingdom to have to contribute €1.6 to get €1 back. That situation applies not just to the United Kingdom, but to other member states, and it is quite unsatisfactory and illogical.

Mr. David Stewart: Does my hon. Friend agree that the argument is about direction rather than speed and about finding the best organisation to add value? Is it the EU or the nation state?

Mr. David: The argument is partly about that, and I shall specifically address that point a little later. However, it is also about hard cash. It does not make sense for the United Kingdom Government to give large sums of money to other quite prosperous regions, but receive only a small amount of money to spend on our regions. It is far more sensible for the 15 member states to control finance themselves.

Mr. Hopkins: I remind my hon. Friend that every single region of the United Kingdom is still a net contributor to the European Union.

Mr. David: To be honest, I am not sure that that is absolutely the case, but I suspect that my hon. Friend's facts are probably right; he would not have made that point otherwise.

As Members will know from my accent at least, I come from a part of the United Kingdom, south Wales, where we have had large amounts of structural fund assistance—under the current financial perspective, the figure is £1.3 billion. That is because the south Wales valleys and west Wales are classified as objective 1 areas. It is true to say that the programme is very successful: large sums have been spent successfully. To be rather parochial for a moment, I refer to my constituency of Caerphilly and the Tredomen business park and the Ystrad Mynach college, which provides fantastic training opportunities, especially for young people. Widespread intermediate labour market measures have been introduced to help the long-term unemployed and many others.

It is important to recognise, however, that although much has been done, there is still much more to do. As we have heard this afternoon, a debate is going on among many of the regions that support the structural funds about whether they would be better off with an extension of the current arrangements with the European Commission or with the Government's proposals. There is a genuine worry that money from Europe might dry up, but it is difficult for us to debate specific sums at the moment because the budget has not been agreed. The European Commission is talking hypothetically, so we will know exactly where we are only when the European Union budget is agreed.
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There is much to commend about the Government's firm commitment that the regions of the United Kingdom will not lose out—that genuine statement was reiterated this afternoon. However, if we leave finance aside, we must take account of other considerations, as my hon. Friend the Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) suggested. A few months ago, the British Government published a Green Paper entitled "A Modern Regional Policy for the United Kingdom". The document suggests a new way forward for the United Kingdom's regional policy and I commend much of what it contains, not only because of financial considerations, but because of administrative considerations.

I followed closely the way in which the European single programme document was drawn up because it has governed the expenditure of objective 1 moneys in south and west Wales. Much of the document should be commended, but it would have been much better if more local control had been exercised over it. One of the problems encountered when drawing up such documents is that they must comply with European Union agreements—in other words, they must fit in with what the European Commission says. I shall outline a case in point. The south Wales valleys face the specific problem of a lack of transport because of the area's topography. We desperately need more roads so that we may open up our valleys. That suggestion could not be written into the single programme document because the European Commission was against it. In other words, despite the fact that local people wanted the scheme, European money could not be spent on it because people in Brussels deemed that it was against the blueprint that they had established. That situation is unsatisfactory.

I hope that future policies will be determined according to the principle of subsidiarity. Local plans would thus be drawn up by local people who understand their areas, so in the case that I outlined, the National Assembly for Wales would do that. I want any funds that come via Brussels to match the strategy outlined in the Assembly's national economic development strategy, "A Winning Wales". At the moment, the European programme runs in parallel with that, but sometimes the complementarity is not perfect. The Government's proposal to streamline the system represents a far more logical and sensible approach on regional development.

The Green Paper deals with regional policy and structural funds, but it also places important emphasis on the future of European state aids, which is equally important. The key word must be "flexibility". We must have flexibility so that the regions of the United Kingdom may tackle market failure. The current situation is unsatisfactory. For example, when the Government wanted to introduce regional venture capital funds to benefit regions, they had to wait 12 months for the European Commission's permission. Why should that happen? Why on earth are such measures not determined nationally and regionally, which would be far more sensible and straightforward? Let us consider what happened with the Government's implementation of stamp duty reductions. Again, they had to wait for the European Commission to approve
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the proposal. There is no logical reason why that should have happened, and I argue that it should not happen in the future.

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