The
Committee consisted of the following
Members:
Alexander,
Danny
(Inverness, Nairn, Badenoch and Strathspey)
(LD)
Burt,
Lorely
(Solihull)
(LD)
Campbell,
Mr. Ronnie
(Blyth Valley)
(Lab)
Dobbin,
Jim
(Heywood and Middleton)
(Lab/Co-op)
Ellwood,
Mr. Tobias
(Bournemouth, East)
(Con)
Foster,
Mr. Michael
(Worcester)
(Lab)
Gilroy,
Linda
(Plymouth, Sutton)
(Lab/Co-op)
Hodge,
Margaret
(Minister for Industry and the
Regions)
Kemp,
Mr. Fraser
(Houghton and Washington, East)
(Lab)
McCabe,
Steve
(Birmingham, Hall Green)
(Lab)
Palmer,
Dr. Nick
(Broxtowe)
(Lab)
Prisk,
Mr. Mark
(Hertford and Stortford)
(Con)
Pritchard,
Mark
(The Wrekin)
(Con)
Rifkind,
Sir Malcolm
(Kensington and Chelsea)
(Con)
Scott,
Mr. Lee
(Ilford, North)
(Con)
Watson,
Mr. Tom
(West Bromwich, East)
(Lab)
Winnick,
Mr. David
(Walsall, North)
(Lab)
Jenny
McCullough, Committee
Clerk
attended the Committee
Sixth
Delegated Legislation
Committee
Tuesday 13
March
2007
[Mr.
Greg Pope
in the
Chair]
Assisted Areas Order 2007
10.30
am
Danny
Alexander (Inverness, Nairn, Badenoch and Strathspey)
(LD): I beg to
move,
That the
Committee has considered the Assisted Areas Order 2007 (S.I.
2007, No.
107).
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 Governments 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 regions 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
Governments discretion in relation to areas that are entitled
to be assisted areas under article 87(3)(c), the Governments
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 Governments approach,
covering 214,000 people who, in its analysis, meet the
Governments 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:
It is
essential that we use our discretion to focus on areas that are best
able to use the flexibility provided, particularly for large
companies.
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 thenI hope that this
will not be the case and I shall work hard to ensure that it is
notthe 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 Ministers
response.
10.42
am
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.
10.43
am
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 tomorrowyou
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 StrathspeyI say his constituencys
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.
Gentlemans
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 feasibleI suspect that the Committee would not
appreciate this, toofor 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 publics 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 concernI
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
programmes 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. Gentlemans 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.
10.53
am
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 statusif
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 constituencythey 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?
10.57
am
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
themis it the UK, the EU, or the Government offices for the
regions?
10.59
am
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
Governments 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 strayedI think knowinglyfrom 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
leverageI share the Ministers 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 Ministers
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 levelI 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 thresholdthe
areas selected had either greater need or greater opportunity, and we
moved forward on that basis.
Danny
Alexander:
It is not clear from the Governments
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 2013that 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,
That
the Committee has considered the Assisted Areas Order 2007
(S.I. 2007, No.
107).
Committee
rose at twenty-one minutes past Eleven
oclock.