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Mr. David Stewart: Is it the position of the hon. Gentleman's party that the UK should pay more than 1 per cent. of gross national income? Does he appreciate that, as a net contributor, we are paying twice?

Adam Price: I support the Commission's proposal to increase the level of funding for regional policy, but I cannot remember the exact figures. The hon. Gentleman is right, because the proposal is contingent on the Commission's proposals as a whole in the financial perspective. I support the case made by Commissioner Barnier to increase the regional budget, and that is clearly contingent on increases in the budget as a whole.

I want to find out about the impact of the different proposals. The Commission said that there would be transitional funding of up to 85 per cent., but the Government said that it would be 50 per cent., based on
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the current arrangements agreed at the Berlin summit in 1999. We know from the comments of the hon. Member for Caerphilly what the current EU funding is for west Wales and the valleys—£1.3 billion over the programme period—so, in a rough calculation, the Commission's proposals would give us, after 2007, a bit less than £1 billion while the Government's proposals would give us £650 million. That is a major difference. We would be losing out to the tune of about £350 million or £400 million.

Mr. David: I hear the argument that the hon. Gentleman is making, but what the European Commission is saying is hypothetical, because there is no budget.

Adam Price: I do not understand the logic of the hon. Gentleman's argument. Whatever the budget figures, the Commission is saying that its guarantee will be equal to 85 per cent. of transitional funding, whereas the Government's guarantee is 50 per cent. There is a simple solution: why do not the Government tell us that they will guarantee a transitional funding cushion of 85 per cent. because they believe that objective 1 regions need that level of funding? As those regions have seen no improvement in their economic position relative to the EU 15 and are losing out due to enlargement, why do not the Government tell us that 85 per cent. is a reasonable level of transitional support? There is no reason for their not making that commitment under their proposals.

How would the Government channel the funds, especially in relation to Wales, Scotland and Northern Ireland? Another dimension that the hon. Member for Caerphilly has been assiduous in raising is how the proposals relate to the Barnett formula. As some hon. Members will be aware, the match funding component in Wales was, in the jargon, Barnett-plus: it was additional to the moneys provided through the Welsh block, generated through the Barnett formula. It was over and above the moneys automatically given to Wales through increases in the comparable budgets in England.

If one factors into the equation the Barnett-plus element, the Government's proposals are even worse for Wales. The response that the Secretary of State for Trade and Industry gave the hon. Member for Caerphilly in Committee was clear: deviation from the Barnett formula would not be continued under the Government's proposals. That could mean an additional loss of about £200 million to Wales.

Mr. David: I thank the hon. Gentleman for giving way again. He was referring to the minutes of the Select Committee, but he should also acknowledge that, in response to my point, the Secretary of State said that it was not really her portfolio.

Adam Price: Perhaps I should be generous to the Secretary of State as she is not in the Chamber. We can forgive her for not being an expert in the arcane workings of the Barnett formula, but the issue is fundamental so I urge her to get souped up fairly quickly. There are several problems about using the Barnett formula in this context, one of which is a matter of principle. If one uses the Barnett formula to decide
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levels of regional development funding, there is no mechanism for varying the level between the nations of the UK based on their economic performance.

The Barnett formula is an automatic mechanism that responds purely and simply to increases in relevant budgets in England. For example, if the Welsh economic position were to deteriorate further, there would be no ready mechanism—certainly, the Barnett formula would not provide one—to reflect that fact in additional funding for Wales, whereas European regional aid responds to clearly understood, published, hard-and-fast criteria. That is a problem, as is the fact that no mechanism would be provided directly for Barnett-plus additional funding, so I urge the Secretary of State for Trade and Industry to consider that issue.

Ms Atherton: Can the hon. Gentleman explain why the people of Cornwall should contribute to the Welsh Barnett formula when the GDP of Wales is higher than Cornwall's?

Adam Price: I entirely sympathise with the hon. Lady: I want to scrap the Barnett formula. It should have been scrapped 20 years ago; it should have lasted for only a year. It does not deliver to my nation, to her nation or to many of England's regions. It should be scrapped and replaced by a needs-based formula, irrespective of the Government's final proposals on regional economic policy.

Finally, I return to the guarantee. The hon. Member for Caerphilly also pressed the Secretary of State for Trade and Industry on how she could bind a future Conservative Government. I am sorry that the hon. Member for Hertford and Stortford (Mr. Prisk) did not feel minded to give way to me, because I would have asked him whether he would agree to sign up to the Government's seven-year guarantee. That is a serious issue. Under European regional aid, when the criteria and eligibility rules are determined, we know that we have security of funding for seven years. We do not have that same sense of security under domestic policy. There is always the possibility that the Government will change to a party that has never supported regional policy.

The hon. Member for Caerphilly said that he trusted the British Government more to know the local economic needs of our communities. He may trust this British Government, but would he trust a Conservative British Government? We know from our bitter experience—do we not?—that in the 1990s, when the Conservative party was dismantling the tools of domestic regional economic policy, there was only one game in town for many of our communities: European regional aid, and we were thankful for it. If it had not been for that aid, the devastation wrought by the Conservative Government under Mrs. Thatcher would have been even worse. What future security would we have if we renationalised domestic regional policy and a right-wing Conservative Government were returned at some point in the future? That is an honest question, and Labour Members need to address it—perhaps the Minister will do so in her closing remarks.

Mr. David: I thank the hon. Gentleman for giving way, as he has referred to me several times. I said that I trust this Government, and I did not trust the last
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Government, but I confirm to some extent the point that he makes about the long-term commitment. I hope that the Government are able to negotiate a long-term commitment to their policies, so that we can match the long-term perspective that the Commission is presenting.

Adam Price: That gives rise to the question, "How can we frame that long-term commitment?" No Government can bind a future Government in terms of economic policy or anything else, because of the sovereignty of this place. I have more faith in a European Union that has demonstrated social solidarity across the EU in the past. I believe that it should be helped to continue to demonstrate that policy of solidarity in the future.

6.50 pm

The Minister for Industry and the Regions (Jacqui Smith): We have had an engaging and wide-ranging debate. As many Members have commented, a major bout of consensus has broken out, which I largely welcome given that it is a consensus around the Government's motion. For the avoidance of doubt, I clarify that we have accepted the Opposition amendment, and that does no more than strengthen the consensus.

Mr. Prisk: There was a hint of uncertainty, so I am very grateful to the Minister for confirming that the Government have accepted the official Opposition's amendment.

Jacqui Smith: I am glad that there is not only consensus but a common understanding.

I thank the Select Committee on European Scrutiny for its important report and for giving us the opportunity to debate the issue today. My neighbour, the hon. Member for Mid-Worcestershire (Mr. Luff), was right to declare it to be a significant and important debate for the future of the EU and for our approach to regional policy. The hon. Members for Twickenham (Dr. Cable) and for East Carmarthen and Dinefwr (Adam Price) and my hon. Friend the Member for Falmouth and Camborne (Ms Atherton) focused at least part of their contributions on the important and significant issue of regional policy. Having focused our criticisms on the EU's approach to regional policy, it is important to put on record the Government's extremely strong and passionate commitment to a strong regional policy. It is at the heart of our efforts to achieve high and stable levels of growth and employment, ensuring that economic prosperity reaches every part of the country and the nations of the UK.

For too long, too many nations and regions of the UK have been allowed to fall behind; for too long, there have been huge differences in prosperity within the regions; and for too long, too many people have been left out, with their talents and ability to contribute to the prosperity of the UK wasted. We have rejected the failed policies of the past and developed a new framework for regional development, so that every nation and region of the UK can perform to its full potential.

The determination to tackle regional disparities is reflected in our public service agreement target—a target shared by the Department of Trade and Industry,
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the Office of the Deputy Prime Minister and the Treasury—to reduce the persistent gap in growth rates between the English regions. To do that, we have significantly increased spending on regional policy across the UK, focusing resources on the drivers of productivity, such as skills, enterprise, infrastructure and the development of new technology, which were identified by my right hon. Friend the Paymaster General in her opening remarks.

We have gone further than that, because regional policy will be effective only if it genuinely responds to local needs. That is why we have devolved power to Scotland and Wales, ensuring that decisions are taken democratically and by elected representatives. That is why we are legislating so that the English regions can choose to elect their own regional assemblies, and why we have established regional development agencies to act as a catalyst for regional regeneration while strengthening the role of local authorities in encouraging regional growth. We can therefore now boast of a dynamic UK regional policy, with—and this is important in the context of concerns that hon. Members have expressed about their regions—three quarters of public spending on regional development coming from domestic sources. Only a quarter comes from structural funds.

EU regional policy remains important to us, which explains our determination to push for effective reform in the forthcoming negotiations. I shall return to several issues surrounding the reform in a minute. The context for the reform of EU regional policy is the overall reform that is needed to the EC budget as a whole. That is why, as my right hon. Friend the Paymaster General spelled out in her opening remarks, we are pushing for a reform of the budget that will deliver a fair deal for UK and EU tax payers, and I think that many hon. Members welcome that objective. One of our key priorities will be to keep within a limit of EC budget spending of 1 per cent. of EU gross national income.

We will also take opportunities to reform further the common agricultural policy within the spending limits agreed. The hon. Member for Twickenham asked for more detail about our approach on sugar. It builds on the significant progress that we have made as an advocate for the reform of the common agricultural policy, and we are determined to press on with that. On the expenditure side of the equation, the UK is pressing for a radical reform of the sugar regime to provide a market-based simplified approach that will be in line with our broader trade and development objectives. On the revenue side, the own resources decision lays down four sources of Community revenue, including sugar levies. Any change to sugar levies as a result of reform that was not offset by savings elsewhere would be offset by adjusting other sources to meet the Union's budgetary requirements.

We want to focus spending on a smaller number of EU initiatives with demonstrable added value, and hon. Members made good contributions to the discussion on that today. I strongly agreed with my hon. Friend the Member for Caerphilly (Mr. David), who used his not inconsiderable experience of Europe to highlight some
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of the areas in which proposals put forward by the Commission would probably not add value. He also highlighted areas in which more value might be added. Although the hon. Member for Mid-Worcestershire adopted a more sceptical approach towards Europe than usual, he also said that too many proposals fail to demonstrate clearly either the effective use of resources or added value through European spending.

Our final objective within the overall budget reform is to strengthen support for the external objectives of the EU and the UK while retaining the flexibility to cope with evolving needs and crises. The hon. Member for Hertford and Stortford (Mr. Prisk) talked about the Lisbon agenda and emphasised the need to continue with economic reform. Economic reform is one of the UK's priorities for Europe and, as other hon. Members pointed out, it does not always necessitate large amounts of spending. We want member states and the Community to make more progress on labour market reform, enterprise and innovation, and external trade openness. The prospects for progress are boosted by a run of presidencies held by countries that are in favour of reform: Ireland, the Netherlands, Luxembourg and ourselves. We will certainly work carefully with those countries during that run of presidencies. The mid-term review of the Lisbon agenda gives us the opportunity to ensure that we focus our efforts on delivering economic reform. As the hon. Member for Twickenham said, such reform is important so that we achieve our objective of economic growth, development and regeneration throughout the whole UK.

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