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Andrew George: I am grateful for the clarity with which the Minister is responding to specific questions. That is extremely helpful. However, a Labour Member made the point that the political cycle in the UK can be no longer than five years. How can the Minister guarantee funding for the same length of time as the EU, which can fund a seven to nine-year programme, when the political cycle in this country is only five years?

Jacqui Smith: First, the EU cannot guarantee—and has not yet guaranteed—funding for the period that the hon. Gentleman mentions. I shall say more about that shortly. Secondly, of course we are all subject to changes of Government. Given that the hon. Member for Montgomeryshire (Lembit Öpik) suggested that the only two alternatives are a Labour Government or a Liberal Democrat Government, we have nothing to worry about if we can believe Liberal Democrat pledges. However, it would be difficult, given the strength of the commitment that we have made in the guarantee and its multi-year nature, for any Government—although I do not expect a different Government—to go back on it.

Hon. Members asked about the way in which we deliver the guarantee. As I said, we have not worked through the details of the administrative arrangements, but we have made it clear that we want to build on the positive aspects of current structural funds programmes, including devolved delivery, the sort of partnership working to which the hon. Member for St. Ives referred and multi-annual funding. I shall have to depend on the efforts of my hon. Friends the Members for Knowsley, North and Sefton, East (Mr. Howarth) and for Liverpool, Walton to deal with the difficulties of Liberal Democrat Liverpool council, but I have every faith that they will do that.

Mr. George Howarth: My right hon. Friend, like several other Ministers, is welcome to join us in that little enterprise.

Jacqui Smith: If my hon. Friend examines my constituency majority, he will realise that I have other fish to fry. However, if I have any spare time I shall be up there to help. I hope that I have given some reassurances about the guarantee.

Mr. Watts: Will my right hon. Friend clarify exactly what the guarantee reflects? Many Labour Members
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believe that the poorer areas should be no worse off than they would have been had enlargement not taken place. We accept that resources need to go to the new areas, but we do not believe that the poorest regions should pay for enlargement. Will she give us some assurance about that?

Jacqui Smith: I think that I have spelled out what the guarantee would mean. It would maintain the same criteria, but in a post-enlargement environment. Of course, that relates to only a quarter of resources that come into regions from structural funds. My hon. Friend and other hon. Members who represent similar areas will continue to argue for increased investment in our regions. I simply point to the Government's record, which has been of continuous increased investment in the sorts of constituencies that hon. Members who are present represent.

It is also important that the process engages stakeholders. We are holding an ongoing dialogue on that. As my hon. Friend the Member for Falmouth and Camborne said, and following the strong representations that she and other Cornwall Members of Parliament—I have to say that she, in particular, is on my back—have made, my hon. Friend the Economic Secretary has worked with key Cornish stakeholders, including Cornwall county council, Cornwall Enterprise and the South West of England Regional Development Agency, to discuss future arrangements and how to ensure the most effective funding deal for Cornwall. We have especially considered different funding streams and how we can use them as flexibly as possible to ensure that, as my hon. Friend rightly says, the funding gets to the areas of Cornwall where it is needed, that it is maximised most effectively and that the best use is made of it.

Let me turn now to the Commission's proposals for reform of the funds. I can understand why hon. Members want to compare the Government's proposals with what they believe to be on offer from the Commission. The Commission's proposals were set out in its third cohesion report of February 2004 and in a package of draft structural and cohesion funds regulations for the next financial perspective, which was published in July 2004.

The Government welcomed aspects of the Commission's approach, including its proposals to strengthen the strategic focus of EU regional policy on the Lisbon and Gothenburg agendas. However, we have serious concerns regarding aspects of the Commission's approach. First, that approach is—in our view, and in the view of the majority of contributors to the budget—dependent on an unaffordable expansion in the EC budget. The Commission is advocating a major 33 per cent. real-terms increase in the structural funds budget for the next EC financial perspective. We oppose that considerable increase, but the hon. Member for St. Ives gave the impression—I do not know whether he meant to—that what we were proposing in our financial perspective negotiations was somehow a cut in the available funds. That is not the case. A 1 per cent. of EU gross national income budget in Europe is still an increase on the current financial perspective— an increase, in fact, of 6.5 per cent. in real terms. So, yes, we are arguing that we need resources to go into that project. We are also arguing, however, that they should be spent in a way that adds the most value.
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Secondly, the Commission's proposals fail to focus the EU's limited resources on key priorities such as the economic development of the poorest member states. This is where the proposals fail the test of whether they are focusing in the right area because, at European level, that should be where those resources are focused. Thirdly, the Commission's proposals do not go far enough to simplify the bureaucratic arrangements for implementing programmes or to give member states, their nations and their regions greater flexibility to deliver programmes that genuinely reflect local needs.

The hon. Members for St. Ives and for Montgomeryshire, and my hon. Friend the Member for Knowsley, North and Sefton, East rightly mentioned the range of Government programmes and initiatives, but argued that in some cases they were too fragmented and bureaucratic. I have some sympathy with that argument, and the Government are currently working on ways of ensuring that those many different funding streams can be more coherently brought together in the regions.

However, when we talk about bureaucracy and difficulty, it is usually the EU structural funds programmes that are the villains of the piece. In 2003, the Government commissioned an independent study by Ecotec Consulting on the added value of structural funds programmes in the UK, which reported that the administrative processes for delivering structural funds programmes were widely described as a burden and as more resource-intensive than domestic programmes. Of course, one of the things that causes fragmentation in objective 1 regions is the distinction between whether the money is coming through a structural funds route—with all the administration that that involves—or through a domestic route. The domestic route might also involve administration and bureaucracy, but what we have set up by sending the money through both the European and domestic routes is an additional fragmentation, and our proposals would help to overcome that in relation to the delivery of programmes and funding.

Andrew George: Does the Minister accept that a large number of EU member states that enjoy objective 1 status bring together both nation state and EU funding programmes in the form of a one-stop shop, involving one place of entry and one application form? They bring the administration together so that the people involved who have to interface with the process are not faced with complexity and bureaucracy. It has therefore been possible for a large number of European states to overcome the kind of bureaucratic difficulties that she has described.

Jacqui Smith: I do not disagree with the hon. Gentleman on that. A lot of work in the UK has gone into making sure that that administration is as smooth as possible. My hon. Friend the Member for Vale of Clwyd (Chris Ruane) rightly praised the work of those involved in the management of structural funds programmes in making sure that that is as effective as possible.

What do our proposals mean for current objective 1 regions in the UK? I am aware that the Commission's expansionist budgetary proposals hold superficial attractions for some UK stakeholders. As I have tried to
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explain, however, the Commission's proposals would, in our view, offer a poor deal for the whole UK and no security for our objective 1 regions. In contrast, the Government's approach offers a genuine guarantee of continued funding for our poorest areas, and a fair deal for the taxpayer.

First, it is important to understand that the Commission's proposals in no way constitute a credible offer of funding for the UK's regions. As I suggested earlier, net contributors to the EC budget, such as France, Germany, Austria, Sweden and the Netherlands, are firmly opposed to the Commission's budgetary proposals and share the UK's determination to maintain that total EC budget of 1 per cent. of EU GNI. Liberal Democrats have a touching faith in the Commission, which, perhaps understandably, they do not have in a Labour Government. They have faith, however, in Commission proposals that promise money from a pot that does not yet even exist, and which will not be agreed by member states. The debate needs a bit of reality.

Secondly, it is essential to remember that money does not come from Europe as if by magic. As one of my hon. Friends pointed out, the UK is a net contributor to the EC budget. All receipts from the EU will come at a cost to the UK taxpayer. It is not free money—currently, we contribute about €1.6 for each €1 that we receive. Therefore, in order to continue to receive substantial structural funds receipts following enlargement, it is inevitable that the UK will have to make much greater contributions to the EC budget, leaving less money available for domestic spending on regional policy.

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