Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): I beg to move,

Thank you, Mr. Pope. It is a pleasure to be in Committee for the first time under your chairmanship. I wish to put a few points that Liberal Democrat Members want clarified to the Minister about the order and the process. It is worth stating at the outset that the order is important to the areas that it affects. As I am sure that the right hon. Lady will spell out, the order is not about European Union funding or guarantees of financial support, but areas that will or will not be entitled to receive additional support for business investment. For example, areas in Scotland that are included on the map for the whole United Kingdom will be entitled to assistance under the regional selective assistance scheme, and areas that are not on the map will not be so entitled. We are talking about measures that describe a vital tool for boosting the local economy and supporting developments in areas and, thus, tackling social exclusion and geographical disadvantage.

It is worth saying that the Government have had a difficult job applying the new European Union guidelines for assisted areas, particularly because of the reduction in the proportion of the UK population that was allowed to be covered, which fell from 30.9 per cent. under the previous regime to 23.9 per cent. under the proposed regime set out in the order. I do not argue that the Minister has had an easy task, but I wish to discuss certain points with her.

The order covers areas that will be defined by two parts of European Union law, the first of which is article 87(3)(a) of the treaty of Rome, with which I know the Committee will be familiar. That provision is relatively straightforward. It covers areas that, by virtue of GDP and other issues, are similar to those that receive objective 1 European funding. Eligibility under the assisted area rules is guaranteed and, in addition, several other areas such as the highlands and islands of Scotland, in which my constituency is located, are covered. It is correct that funding should continue for such areas. The current order sets out improvements in the coverage of the highlands and islands that are subject to article 87(3)(a).

Unlike other areas that are entitled to a level of assistance under the order, the eligibility of the highlands and islands will be reviewed in 2010. There will be a discussion by the European Commission about whether the highlands and islands should be covered by article 87(3)(a) or by article 87(3)(c) to which I shall refer in a moment. Why is a review being sought in 2010? I seek reassurances from the Minister about the purpose and nature of the review and the Government’s proposed involvement in it. It is important that the right hon. Lady can offer guarantees to the highlands and islands that the review will be based on the most up-to-date statistics.

There have sometimes been problems in the past about not only assisted areas, but other forms of European support, such as objective 1 funding, when it has been felt that out-of-date figures were used, as a result of which the case was not presented as powerfully as it could have been. I hope that the Minister will reassure the Committee that, when this review takes place, every effort will be made to ensure that the most up-to-date figures are used and that the Government will argue powerfully in that review, in their discussions with the European Commission and with their European partners, that the unique disadvantages of the highlands and islands should be recognised.

I hope to see the continuation of the level of support for this area, which runs up to 2010 under the order, not least in recognition of the dispersion and the logistical problems that that implies for businesses, the fact that incomes are substantially lower than in the rest of the UK and the importance of this status, under article 87(3)(a), to the continuing building of the region’s economy. That is critical, because the highlands and islands have experienced significant improvements in recent years, not least in finally turning around population decline. It is important that every tool in the locker, including this one, is used and is allowed to be used for as long as conceivably possible.

On the Government’s discretion in relation to areas that are entitled to be assisted areas under article 87(3)(c), the Government’s consultation document makes it clear that, given the other constraints involved, that amounts to deciding which 16.4 per cent. of the UK population is eligible. There are constraints relating to Northern Ireland, towards which I am sure that the Committee will be sympathetic. However, bigger questions arise as to decisions about which areas should be entitled to be assisted areas under that article. On the face of it, the Government decided which areas should figure under the scheme, and those areas are all listed in the order, which is sensible. Employment rates, the level of adult skills, numbers of incapacity benefit claimants and the share of employment taken up by manufacturing industry are all relevant factors. However, I have some questions about how this arrangement has been implemented in practice, as embodied in the order.

In the south of Scotland, about which the Minister is aware, according to the South of Scotland Alliance the GDP of that region was 75.4 per cent. of the EU15 in the three years up to 2003, which was poor in comparison with many other regions in the UK. In terms of the four criteria that I have mentioned, the south of Scotland has, for example, a substantially higher than average share of employment in manufacturing, due to the historic prevalence of the textile industry, and a large number of adults with a level of skills and qualifications below level 2, which, again, is substantially different from the rest of the UK. One would have thought that, given that it meets the criteria, that area would have been potentially eligible for the relevant level of assisted area status.

The South of Scotland Alliance and other bodies in the region propose an area composed of wards, as required by the Government’s approach, covering 214,000 people who, in its analysis, meet the Government’s criteria. It is not clear why this area, which I have picked as an example to try to understand more about the process, was left out.

In her correspondence with my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (Mr. Moore), the Minister made it clear that additional criteria to the four main ones had to be used to ensure that a larger proportion of the population than the 16.4 per cent. that the Government were looking to work towards would have been entitled. In her letter of 9 October 2006, she said:

In other words, in addition to the four criteria, which some areas may even have met, an additional level of discretion was used to whittle down to the population numbers required by the European Union rules. The Minister is shaking her head, and I look forward to her response. However, that seems clear from the correspondence that I have seen.

One well understands the need for ministerial discretion on such matters, but the question is about those criteria and how that judgment was exercised. What about the idea of flexibility for large companies? And should areas in which large companies can use flexibility be targeted? Does that mean, for example, that smaller rural areas would get weeded away from potentially benefiting from assisted area status even though, on the GDP criterion and the four subsequent criteria set out by the Government, such areas could clearly benefit from assisted area status? Again, one need only look at the example of the south of Scotland, which previously was within the assisted areas regime, to see that it benefited substantially in those years. Some £3.7 million was allocated in grants, helping to create and sustain 800 jobs.

I have said that I approve of the decision made in respect of the highlands and islands, so the Minister might ask why I am concerned. On the grounds of fairness, I want to understand the full nature of the process that decides how certain areas should be included or excluded. Why has a region such as the south of Scotland been excluded, for example? Furthermore, I am looking to the future and the fate of the highlands and islands in the context of assisted area status, which is rightly guaranteed until 2010. However, if after then—I hope that this will not be the case and I shall work hard to ensure that it is not—the highlands and islands were to move into the category of areas covered by article 87(3)(c), which would happen if the approach that was taken with regard to the south of Scotland were applied to them, I would be concerned about their fate.

I have specific local concerns, and there is a need for a much wider understanding of the process that has led to areas being included or excluded when, on the face of it, they seem to meet all the relevant criteria. I look forward to the Minister’s response.

The Minister for Industry and the Regions (Margaret Hodge): At this stage, I simply suggest that we have a debate and that I respond at the end to the issues raised, if that is all right with the Committee.

Mr. Mark Prisk (Hertford and Stortford) (Con): Like the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), I welcome you to the Chair, Mr. Pope. This is the first time that you have chaired proceedings in which I have had the opportunity to participate. I am glad that it is today and not tomorrow—you have told me that you have a family celebration tomorrow, and I hope that it goes well.

I begin by noting the remarks made by the hon. Member for Inverness, Nairn, Badenoch and Strathspey—I say his constituency’s name with due care and attention. For my part, I intend to focus my remarks on how the areas are to be assisted, as opposed to how the boundaries were drawn, although I understand the hon. Gentleman’s reasoning.

Helping poorer areas to compete as viable economic locations is important for not only the national economy but local communities. As the first industrial nation, Great Britain has faced significant changes in its economic fortunes. As the shift from industry to service sectors has accelerated, so the locations of wealth creation have moved. It is that spatialand economic challenge that underpins the order before us.

It would not be feasible—I suspect that the Committee would not appreciate this, too—for me to attempt to address the issue from the perspective of every successful area, let alone address those not included and defined in the order. Our challenge is trying to understand how the order applies in the real world. If I may, I shall consider the effects of the order by taking Cornwall as an exemplar, not least because it is the only tier 1 area in England under the order. I confess that I do so with a vested interest; I was born and brought up in Cornwall and much of my heart remains there, so I know the county well. We have to be clear that the issue is about not only the order, but where we have come from and how we have got to this point. Last week, I had the pleasure of travelling back to my home county to meet many small, medium and large businesses there. The good news is that there are many excellent businesses in the duchy. However, we need many more.

Industrial change has historically hit Cornwall hard. Tin mining was, after all, a vital and prosperous business, and farmers and fishermen were also able to earn a good living and create much-needed jobs in that county. However, over the last generation all three industries have fallen on seriously hard times, and Cornwall has found itself falling behind the rest of Great Britain. With the lowest average wages in England and high, persistent unemployment, Cornwall has come to rely almost exclusively on its tourist appeal. For many years, Cornwall struggled, not helped by its distance from London and poor communications. For some time, tourism has remained the vital ingredient, and it is a significant sector in the county. Cornwall is steadily changing, however, in character and profitability, and, fortunately in terms of balancing the local economy, other sectors are starting to develop rapidly.

The case for Government aid, which we are considering today, is strong in a county such as Cornwall. For the past 10 or 15 years, we have seen steady economic growth, but we have also seen considerable outside investment, and the combination is making an impact. The order identifies criteria on which aid can be based for the next six-year period. I believe that strategic projects, such as the Tate at St. Ives, the Eden project near St. Austell and the National Maritime museum near Falmouth, have helped to lever in significant private investment. By creating opportunities, they have proved to be an effective way of achieving the most bang for the public’s buck. In many ways, such investments and opportunities are far more effective in changing a local economy in a sustained way than the more conventional approach of spending state aid in lots of small sums, which might be socially worthy but which will not necessarily make the lasting change that is the purpose of such programmes.

What analysis have the Government undertaken of the leverage achieved by such strategic projects over the past six years? Does the Minister agree that investing in such opportunities can often be more effective than spending money on more conventional programmes? Further to that, considering the period covered by the order, which will last until 2013, what targets, if any, have the Government set for levering in private investment? Based on what has happened under the previous order, how much do the Government hope to achieve in the balance between public and private investment under the present order?

Turning to how these areas will be run over the next six years, I want to raise two points of serious concern. First, many partnership boards are dominated by public bodies. I have talked to a lot of small businesses in Cornwall, and they are not the only ones to raise that concern—I was in Newcastle last week, too. They have told me that all too often they find that the voice of the private sector is overwhelmed in discussions about how the money should be allocated. All too often, the money is channelled into perfectly worthy, but social, schemes, to the detriment of small firms and of achieving real and lasting economic change. Will the Minister tell me what scrutiny her Department maintains to ensure that business and economic opportunities are not crowded out in that process?

Secondly, small businesses complain that turf wars often break out between public bodies, either between Departments or between Whitehall, the regions and local authorities. The danger is that the way in which resources are allocated in assisted areas is sometimes skewed in a direction that was not originally intended. What assurances can the Minister give me that she will stop such disputes from undermining the future of assisted areas, such as Cornwall?

On a wider but similar point, does the Minister think that only EU-wide goals should determine local economic development? Many local authorities and small businesses say that all too often they find that they have to re-label schemes to suit regional, national and EU administrators’ ambitions rather than addressing issues that are local to them. What opportunity will there be under the order for local issues to be directly addressed? And will the Department scrutinise that in an effective manner?

Finally, in England we have the selective finance for investment in England programme, which, as the Minister will know, is different from the regional selective assistance programmes in Scotland and Wales. Given that the SFIE specifically cites productivity skills and employment as key objectives, what assessment have the Government made of each programme’s performance in achieving lasting economic improvements? To put it simply, which is best?

At the heart of this order is the desire to enable—

Mr. Tom Watson (West Bromwich, East) (Lab): I have been listening to the hon. Gentleman’s argument with some interest. I have heard it said that the British Conservative party would like to abolish the Department of Trade and Industry. Is he saying that he would like to protect this assisted scheme, if the DTI were to be abolished?

Mr. Prisk: That is a nice attempt to drag us off into the minutiae of how government might be run, but I am happy to answer his question on the record. The hon. Gentleman knows that I believe passionately that there must be a voice for business both in Cabinet and Whitehall. As to what its label or structure might be, I suspect that the hon. Gentleman is nearer than me to the decision maker on what may change in the coming months.

Mr. Watson: Does that mean that the hon. Gentleman would not protect the scheme?

The Chairman: Order. I hesitate to interrupt, but this is straying quite a way from the order before us. Perhaps I can draw the hon. Member for Hertford and Stortford back to that.

Mr. Prisk: After that enjoyable excursion, I will return to the order. At the heart of the order is the ability to enable our poorest communities to compete with the rest of the country. That is the essence of the issue, and therefore in answer to the hon. Member for West Bromwich, East, I am concerned to ensure that every single pound spent is put to best use.

I have not sought to address which areas should or should not be included in this order, as the hon. Member for Inverness, Nairn, Badenoch and Strathspey attempted to do earlier in terms of the debate that we had last year. Rather, I am concerned that the areas achieve lasting economic and social change, which is best achieved not by creating a new reliance on state aid, but by investing in those economic opportunities and infrastructure projects that will enable areas such as Cornwall to become more entrepreneurial and able to compete on their own terms.

Therefore, the real issue is how the powers and resources stemming from this order are used in practice. Given that, I hope that the Minister will respond fully to my question. I also ask her specifically to commit her Department today both to the detailed scrutiny of how the money is spent, the details of which we will be interested to hear, and to report back each year to this House on the progress achieved.

Lorely Burt (Solihull) (LD): I want to ask the Minister some general questions that apply to the whole of the United Kingdom. First, why are we discussing this matter on 13 March 2007, when the order should have been implemented on 1 January and has in fact been in force, as I understand it, from 13 February?

Secondly, why has the UK population eligible for this assistance dropped from 30.9 per cent to 23.9 per cent? I understand the reasoning that our economy has been successful and that we now have more countries to assist. However, are the 7 per cent. of the population that we have lost from assistance now all more prosperous and, if they are not, what is happening to those who have been left out? Have they all been awarded tier 3 status? And what is happening in Scotland and Wales? I understand that the tier 3 status refers only to England.

The DTI website says that the 23.9 per cent. of the population who are covered is up from 9.19 per cent., not down from 30.9 per cent. Will the Minister explain that particular piece of Government spin, where the 9.1 per cent. came from and whether the allocation is down or up? When this is reviewed in 2013, the amount that goes to the United Kingdom and the percentage of the population covered will presumably go down again. It is a self-fulfilling prophecy: those who do not do so well qualify for more assistance, and those who do well qualify for less assistance, so poor performance is effectively being rewarded.

I want to ask about the wards in my area of Solihull with tier 2 status—if the Minister is unable to answer these questions at the moment, she can respond in writing. The borough has four of the 10 per cent. of most deprived wards in the country. As far as I am aware, however, none of the wards listed in the order fall within that particular category, with the possible exception of Bickenhill. None of those wards are in my constituency—they are in the Meriden constituency. I am interested to know why those four deprived wards have not been included in this review.

The purpose of the assistance is very clear and welcome. It supports investment and job creation and creates a level playing field not only across Britain, but presumably across Europe as well. By the way, for many years Liberal Democrat policy has been to abolish the Department of Trade and Industry. [Interruption.] From a sedentary position, one of the Labour Members has said that we are jumping on the bandwagon; I assure him that it has been our bandwagon for quite some years now. It is said that emulation is the sincerest form of flattery, and I am interested to see that the other parties are now adopting the stance that we have held for some considerable time.

In conclusion, will the Minister gaze into her crystal ball and comment on what she sees as the future for that type of assisted status from 2013?

Mr. Tobias Ellwood (Bournemouth, East) (Con): Thank you, Mr. Pope, I am delighted to be working under your tutelage today. I have a brief question prompted by a recent Westminster Hall debate on regional development agencies, during which it was made clear that certain limitations are imposed on how money can be spent in assisted areas. Various examples were given in that debate. For instance, in the Czech Republic such key investment can be spent on infrastructure and transport needs. Will the Minister say whether those restrictions are still imposed in the UK? In the south-west, for example, it has been suggested that a number of wards receiving assisted aid might have a bigger impact on their areas by joining up in order to improve roads or rail links and their regeneration prospects. If there are caveats, I am keen to know who is responsible for setting them—is it the UK, the EU, or the Government offices for the regions?

Margaret Hodge: That was a useful short debate on the issues, although we did stray into much wider issues about regional policy and assistance. I will deal with the questions why we have the assisted area status and why we pursue that policy. The mechanism enables us to provide support for large firms, so that they can create, maintain or expand a business in a particular area. It is specifically there to ensure that we can tackle the disparities in economic performance. We have flexibility with the instrument to provide state aid, but not from Europe. It helps us to fulfil the eligibility criterion for providing state aid, which is why the policy is there.

Mr. Prisk: The Minister has rightly noted the Government’s position on large industry, but does she not also recognise the vital importance of small and medium-sized firms? Last year, there were a number of representations during the consultation process calling on the Government better to reflect that in the criteria. Will she accept that simply concentrating on one sector is a mistake?

Margaret Hodge: The role of small and medium-sized enterprises is, of course, absolutely crucial in a regional or local economy. However, this particular instrument, which provides only 20 per cent. of the state aid that we distribute right across our regions, is specifically there for that purpose. In deciding how we use the instrument, we could have defined it purely around the small and medium-sized enterprises. We chose not to do that, because we thought that within the limitations of our flexibility and rules of eligibility, it would be better for Britain to concentrate this particular instrument on supporting large industrial concerns.

Small and medium-sized enterprises are eligible for state aid under other rules and instruments of European funding, which is why only 20 per cent. of state aid is provided through assisted areas status. There is a whole range of UK-run programmes, such as the £1.4 billion we put through regional development agencies, and European programmes in which eligibility is not determined by assisted areas status. Programmes include small and medium-sized enterprises, research and development and environmentally friendly projects, and there is a whole range of issues around that.

Mr. Fraser Kemp (Houghton and Washington, East) (Lab): Returning to the question about the difference between small and medium-sized firms and larger organisations, a major company in my constituency, which is a big concern, benefited from research and development money from the Government. That money had a huge impact on many companies in the supply chain to the motor industry, and something like as many jobs again have been created in small and medium-sized firms. Therefore, although the grant might not be direct, it is certainly a substantial benefit that helps both employment and smaller firms that supply the motor industry.

Margaret Hodge: That is one of the reasons why we use the instrument to focus on large industrial concerns. The instrument not only maintains or expands jobs in many of our traditional industries, such as the automotive, aerospace and pharmaceutical industries, but it enables us to provide support jobs and all that goes with them right the way through the supply chain.

The hon. Member for Solihull has raised some questions about the figures, such as why the percentage of population covered has gone down from 30.9 per cent. to 23.9 per cent. That is simply because Europe has enlarged and, therefore, the budget has been focused and targeted on those areas of greatest need, which the UK Government support. We have run an extremely successful economy. Every area of Britain is better off today than it was 10 years ago. Every area has higher employment rates and has enjoyed 58 quarters of consistent economic growth. All that is because of our superb management of the macro-economy. [ Interruption. ] I had to get that in.

The reason why the hon. Member for Solihull saw the figure of 9 per cent. was because the initial proposals from the European Commission suggested that only9 per cent. of our population would be eligible. We think that we got a rather good result compared with France. Under the old map, France had 36.7 per cent. of its population covered, but now it has only 18.4 per cent., and Ireland was 100 per cent. covered, which has gone down to 50 per cent. We therefore think that we did rather well in the negotiations.

Our flexibility has been limited, because of a number of things. To meet the need to establish zones of 100,000 population under the criteria and to ensure that we took advantage of this limited instrument to exploit the opportunities existing in the industrial base, some wards were left out, which, I think, explains what happened with Solihull. That was one of our limitations. The other limitation was the filter, where areas that in the past had been eligible for state funding, because they had assisted area status, lost it after improving considerably and therefore not meeting the EU filter for eligibility. Ellesmere Port is a classic example, where we can currently help but where we will be limited in doing so under assisted area status in the future.

I agree with much of what the hon. Member for Hertford and Stortford has said, although he strayed—I think knowingly—from the context of the debate, which is about this very limited European instrument. With any public sector investment in an area that we are attempting to regenerate and where we are dealing with disparities in economic performance, the key impact that we are seeking is a catalyst through that public investment, which will bring its own regeneration. In my many visits around the country, it is often inspiring to see the imagination and commitment that has led to some really innovative projects. The hon. Gentleman has mentioned projects in Cornwall, which are important down there.

I have recently been going around seaside towns, many of which are declining. What is interesting if you go down to Margate, Mr. Pope, is that they are attempting to establish a Turner gallery to provide a catalyst for regeneration. In Folkestone, an offshore wind farm, which has just succeeded in getting planning permission, will provide a lot of jobs and environmental industries. Go up to Great Yarmouth, and they are trying to improve the harbour as the catalyst. And I have been up in West Kilbride, which is another coastal town that has suffered from the decline in tourism, where they are successfully looking at craft industries in regenerating what was a small seaside town. The hon. Gentleman is absolutely right that we want such catalysts.

The hon. Gentleman has asked about the scrutiny of expenditure. Of course there is scrutiny, both through the Select Committee and when we put our annual report before Parliament under the Industrial Development Act 1983. No doubt he will scrutinise that report very carefully when we publish it in June.

Mr. Prisk: The point about scrutiny concerned leverage—I share the Minister’s view about using strategic projects. Does the Department specifically measure the leverage that is achieved in such projects under the scheme?

Margaret Hodge: Yes; substantial leverage is required under the selective finance for investment scheme for England and the regional selective assistance schemes for Scotland and Wales. To give the hon. Gentleman a figure from 2005-06, which is the last year available, the £80 million offered was associated with £753 million of private sector expenditure, which was not bad leverage.

The hon. Gentleman also raised the point about public investment crowding out private investment. Clearly, all public expenditure here is subject to Green Book rules, so that is the basis on which we try to ensure no such crowding out. To give him further assurance, the SFI and RSA are being evaluated by the DTI, the Scottish Executive and the Welsh Assembly for the purpose of ensuring that we learn lessons from past expenditure for future programmes.

Mr. Prisk: Will that evaluation be published?

Margaret Hodge: Yes, it will be published.

Turning to the issues raised by the hon. Member for Inverness, Nairn, Badenoch and Strathspey, I have lost one of my bits of paper on which I noted them, so I apologise if I do not cover them all. As he knows, the highlands and islands qualify under different rules. Despite his endeavours, it is difficult area in which to keep that eligibility. I am sure that it is his wish that economic prosperity will grow sufficiently for the area not to require the specific selective assistance that comes with the old objective 1 and new tier 1 status. If, at the point of the review, GDP per capita is more than 75 per cent. of the European average, it will not be eligible. However, I assure him that it will still be covered by the regional aid guidelines after 2010. It will lose the special status, but it will automatically be subject to article 87(3) coverage, which should give him some comfort.

Danny Alexander: I am grateful for the Minister’s assurance that the highlands and islands will continue with assistance under article 87(3)(c) of the treaty of Rome. Her response was helpful, but I also want a sense of the level of engagement that she sees the UK Government playing in those negotiations in the run-up to 2010 about the status of the highlands and islands. The right hon. Lady is right that the current status is a sign that economic progress has not been as fast as we would have hoped. None the less, I seek further reassurance that the Westminster Government will take a close interest in the discussions and make sure that the position is presented as much to the advantage to the highlands and islands as is possible consistent with the facts.

Margaret Hodge: There are no negotiations about the eligibility. There will be no room for negotiation, because either the highlands and islands will continue to meet the criteria or they will not. If they fail, they will be eligible under the other guidance. It is not an issue of negotiation. In the general thrust of the argument, we work extremely closely with the Scottish Executive. In fact, the whole process of arriving at the final map has been very inclusive, with a lot of consultation with all stakeholders. Indeed, I have had many meetings with individual MPs and have tried when possible within the limitations of my discretion to meet specific issues that they raised at constituency level—I did that successfully in a dozen or so cases. We have tried really hard to be as inclusive as we can.

The hon. Gentleman referred to our having other criteria, particularly when we looked at Berwickshire, Roxburgh and Selkirk. We did not have other criteria; we had criteria based on need and opportunity. What he was reading from my letter to the hon. Member for Berwickshire, Roxburgh and Selkirk was our view of the opportunity in that area. Between 2000 and 2006, there were 32 RSA offers in Berwickshire, Roxburgh and Selkirk, of which 25 went to small and medium-sized enterprises and only seven went to larger companies. Nearly two thirds of the money went to SMEs, while just more than one third went to larger companies. The appropriate instrument for intervention is tier 3 intervention, which covers most areas in Scotland and England.

As a whole, Scotland lost less than England. The coverage in Scotland went down from 48 per cent. to37 per cent., so the proportional loss of population was less than it was elsewhere. As the hon. Gentleman knows, the decisions were difficult, and we had to balance need and opportunity against what we were thought were pretty sensible criteria. I think that he accepts that.

Danny Alexander: Will the Minister clarify her point about the application of the criteria? She has rightly pointed out that there were four criteria and two rules, either one standard deviation worse than the Great Britain average on one of these indicators or half a standard deviation worse than the Great Britain average on at least two of these indicators. Is she saying that, having applied those rules to the remainder of the UK that was potentially eligible, the outcome was that precisely 23.9 per cent. of the population were eligible, or that there was further discretion within those rules once they had been applied? If so, for the benefit of the Committee, will she describe how that further discretion was exercised in practice? In particular, what role did the concept of large businesses play in that further discretion, given that she seems to be saying that, having applied the rules as set out, more than 23.9 per cent. of the population was still eligible so she had to narrow it down? How did she go about narrowing down and what role did large businesses play in that concept?

Margaret Hodge: The answer is that there had to be a further narrowing down, which was based on those four criteria. We did not look at any other criteria. In some instances the need, as defined by the three-need criteria, was greater than elsewhere. In the other instances, the opportunity, as defined by the opportunity criterion, was greater than elsewhere. Crudely, 16.4 per cent. came through the threshold, and then we simply used the criteria more precisely. It was not just particular areas that came through the threshold—the areas selected had either greater need or greater opportunity, and we moved forward on that basis.

Danny Alexander: It is not clear from the Government’s documentation which of the four criteria that the Minister has referred to is the opportunity criterion. Will she explain which one of the four it is?

Margaret Hodge: I do not have the number in front of me. There are three criteria on needs which are skills, long-term unemployment and productivity. Areas with a reliance on manufacturing may be the most vulnerable to future closure, creating a further need for flexibility, and I define that as an opportunity criterion.

The hon. Member for Hertford and Stortford talked about central control over this programme. We are attempting to decentralise much more through the RDAs, local strategic partnerships and other partnerships, because it is arguable that many of the ways in which one can tackle regional disparities are bottom-up rather than top-down. We clearly want to ensure that people spend the money in a productive way to add value to the local economy, but the decisions must be decentralised. That is the thrust of Government policy.

Mr. Prisk: I endorse that principle. It is important that the balance in the partnership between the public and private sector is not skewed in order to allow industrial and economic decisions to be subject to significant representation, if not a majority, from the private sector. The worry that has been expressed to me is that once every different government agency is sitting at the table, the balance between the public and the private sectors is skewed. I share the wish to drive that down, but does the Minister agree that getting balance between public and private is just as important as delegating decision making to a local area?

Margaret Hodge: Indeed it is. I think that the hon. Gentleman has referred to the structural funds and to administration and expenditure in connection with those funds. He will be aware that the Government have decided to allocate the structural funds through the RDAs, which, of course, are private sector-led bodies with representation from local authorities and from other bodies, such as learning and skills councils. The partners join through the RDAs, but the endeavour is very much led by the private sector. Indeed, I have received many representations from local authorities up and down the country which want a greater input into decision making on structural fund allocations than will be the case. I hope that partnerships will work at the local level. Partnership working is the best way forward, and it is what we want.

The hon. Member for Solihull asked about the future. My view is that in the relevant period we did much better than anticipated in maintaining flexibility for the UK to make considerable use of what is a very valuable instrument for responding to regional opportunities. I am sceptical whether much of the UK will remain eligible when we reach 2013—that is crystal ball gazing. However, instruments of regional intervention will ensure that we can tackle disparities between regions and have proper social inclusion. If the Government continue to manage the macro-economy up to 2013 and beyond as successfully as we have done in the past, and if we couple that with instruments of regional intervention, there might be no need for equivalent measures in future.

Question put and agreed to.

Resolved,

Committee rose at twenty-one minutes past Eleven o’clock.