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It being Seven o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Watson.]

Jacqui Smith: We are currently considering proposals for funding a further phase.

We are supporting the work of the Urban Regeneration Company in the constituency of my hon. Friend the Member for Falmouth and Camborne, which is a multi-million-pound investment programme for Camborne, Redruth and Pool. Ambitious plans exist to regenerate the centre of St. Austell. We have recently announced the dualling of the A30, which will constitute a major improvement to Cornwall's road infrastructure.

At the same time, the Government are operating and contributing to a large number of domestic programmes in the peninsula. We are providing £46 million to offer development opportunities for young people in Devon and Cornwall under the Connexions scheme. Cornwall received some £8 million under rounds 4 to 6 of the single regeneration budget. We are providing annual funding of some £750,000 per year for each of seven Sure
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Start projects in Cornwall. Those are just a few examples of the Government funding that goes into Cornwall and the Isles of Scilly.

As a Trade and Industry Minister, I am particularly proud of the regional grants from my Department, such as £2.9 million for the renovation of the Pendennis shipyard in Falmouth and £2.5 million for the development of the Tripos pharmaceutical research centre in Bude. Those two projects alone have created or safeguarded more than 400 jobs in the Cornish economy.

We can now boast a dynamic regional policy for Cornwall and for the whole of the UK. My hon. Friend the Member for St. Helens, North (Mr. Watts) is an important proponent of regional policy in all its forms. He made the point that it is essential to understand that three quarters of public spending on regional development in the UK already comes from domestic sources. We must recognise that, under any scenario, that proportion is set to increase further in the near future. The enlargement of the EU and the entry of 10 poorer countries means that EU regional funding will inevitably—and rightly—shift to the new member states. Richer countries, such as the UK, will increasingly depend on national resources to fund their regional development.

Andrew George: I am grateful to the Government for the investment that the Minister has listed. Will she acknowledge that Cornwall's GDP, which is about 65 per cent. of the EU average, is less than that of a significant number of regions within the accession countries that will get objective 1 status?

Jacqui Smith: I certainly recognise the particular issues in relation to Cornwall, but I disagree with the assumption that the future measurement and definition of future objective 1 regions is cut and dried, and I shall go on to explain why. However, I am not attempting to argue that Cornwall does not have particular needs that must be addressed. Through our regional policy, this Government are better equipped than the Government were 10 or 20 years ago to address those points. The new situation requires a fundamental reappraisal of EU regional policy. We are determined to push for the effective reform of the structural and cohesion funds to deliver a good result for the UK and its nations and regions as well as for other EU member states.

Mr. Watts: Although many of us, including myself, believe that the structural funds have been helpful, they have in-built problems—for example, the rigid criteria used to determine how much can be spent per head. Merseyside would, on occasion, have expected to receive more for transport schemes than is given to major schemes such as Liverpool airport. I know that the Robin Hood airport in Yorkshire is looking for resources. I would hope that our scheme or the European scheme allowed far more flexibility locally for deciding priorities. Will that be an aim?

Jacqui Smith: My hon. Friend makes an important point. I shall come on later to the fundamental reappraisal that I mentioned.

We set down our objectives for the reform of structural funds at the beginning of the process. The UK has five main objectives. We want to develop an EU
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regional policy that fully supports, and adds value to, the ambitious devolution, decentralisation and regional development agenda that we are already pursuing and are committed to domestically. We want to ensure that the structural funds throughout the EU actively support the EU's agenda set at Lisbon, Gothenberg and elsewhere for higher productivity, employment and sustainable development. We want to concentrate the EU's limited financial and administrative resources on the poorest member states, which are most in need of assistance. We want to develop simpler and more flexible implementation and monitoring arrangements for structural funds programmes which are proportionate to the amount of funding available and in which the bureaucracy does not outweigh the potential benefits. Finally, we are determined to secure a fair budgetary deal for the UK taxpayer and a total EC budget of no more than 1 per cent. of EU gross national income.

Andrew George: I need to ask this question of the Minister one more time. She acknowledges that Cornwall's GDP is about 65 per cent. of the average in EU member states and therefore lower than that of many regions in accession states that will benefit from objective 1 status. Does not she agree that those funds should be directed at the poorest regions in the 25 member states, rather than accession states being favoured?

Jacqui Smith: I believe that wherever in the EU regional policy funds come from, they should be directed where the need is greatest, but we do not necessarily need the recycling of resources that means that the richest member states send money to Brussels in order for it to be allocated back to them. The most efficient way is for those countries that have the necessary administrative and financial resources to use domestic resources for their regional policy, supporting regions such as Cornwall. I have no compunction in saying that the county needs support. At EU level, however, we should be focusing on what adds value and ensuring that we focus resources on the poorest member states.

Andrew George: Will the Minister give way?

Jacqui Smith: May I make a little progress first?

That is why we have made detailed proposals for reform as a means of securing those objectives. We propose that in future the richer member states should fund regional programmes from domestic sources and that the EU's limited resources should be focused on the poorest member states where, as I said, that intervention is likely to have the greatest impact and the greatest added value. Interestingly, that would foster genuine EU solidarity and help to ensure that the enlargement of the EU to 25 member states is a success.

At the same time, however—I hope this responds to the hon. Gentleman's concerns—we remain fully aware of the challenges faced by regions in the UK, and particularly those with current objective 1 status, and we are determined to support their continued economic development. It is for that reason that we have made an unprecedented guarantee, if our reform proposals are accepted, to increase domestic funding for regional
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policy in the UK. If our proposals are accepted, we will increase domestic funding for regional policy by the amount that our regions would have received under a no-reform scenario in an enlarged EU, and focus those additional resources on areas of high unemployment and low GDP, as typically seen in regions with current objective 1 status and in the constituencies of hon. Members who have contributed to the debate.

Andrew George rose—

Jacqui Smith: The hon. Gentleman asked me for more detail about the guarantee, and I am about to come to that. Does he still want to intervene?

Andrew George: I do. The Minister has repeatedly used the term "region". Will she clarify whether these funds would go to the Government regional development agency zones or to the EU regions where programmes exist because of the special problems in those areas?

Jacqui Smith: As I said, we have not decided on the detail of the delivery arrangements for the additional money. My hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle) made an important point about our ability to be much clearer about where we are able to focus resources. If it will reassure the hon. Member for St. Ives and my hon. Friend the Member for Falmouth and Camborne, I repeat that I am not trying to argue that Cornwall is not a needy area of the UK—it is, and I would expect any future arrangements to be able to focus resources on it because of its particular needs.

I want to return to the guarantee. The hon. Member for Truro and St. Austell (Matthew Taylor), who paid a short visit to the debate to pour scorn on the Government's guarantee, is not here to hear what I hope will be my reassuring comments about it. The Government set out the detailed methodology for applying the guarantee in their written statement to Parliament of 11 December 2003. I have already spelled out in broad terms what that would be. It is not possible at this stage to calculate the exact value of the guarantee, just as it is not possible to calculate the exact value of future structural funds receipts under the different reform scenarios that are being proposed by the Commission, because structural funds are allocated by reference to statistics on regional economic performance across the EU in the most recent three years for which data are available prior to the programming period. We are probably unlikely to have those data until the end of 2005 or the beginning of 2006. Frankly, anybody working on the basis of those figures at the moment is using data that, at the very best, will be outdated.

Hon. Members expressed concern about the duration of the guarantee. I stress that the Government have made it clear that the guarantee would apply for the full period of the next cycle of the structural funds programme. We fully recognise the benefits of long-term budgeting and planning. It should not be forgotten that we introduced three-year spending review plans, which have become the accepted basis of public spending, or
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that in some areas we have made spending assumptions over an even longer period than that. This guarantee is one of those examples of an area where the Government have made a long-term spending commitment for more than three years. That reflects our very strong commitment to regional development.

I was asked whether this is new or additional money. The guarantee would be subject to the same additionality requirements as current structural funds allocations to ensure that the new money does not replace pre-existing structural expenditure. So that means that the guarantee would be entirely additional to the Government's current domestic expenditure on regional development, including the domestic resources that are used to co-finance structural funds programmes in our regions.

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