EU Structural Cohesion Funds
The Committee consisted of the following Members:
Kate Emms, Anne-Marie Griffiths, Committee Clerks
† attended the Committee
The Chair: Let me explain the procedure, because everybody pretends they know what is going on, but none of us does. In a moment, I will ask a member of the European Scrutiny Committee, Mr Phillips, whether he wants to speak for up to five minutes by way of an introductory statement. I will then call the Minister to make an opening statement, which should be largely factual and explanatory, and which should last no more than 10 minutes. No interventions can be taken during his speech.
After the Minister has sat down, we have up to an hour for questions, and if we are doing really well, I have the discretion to extend it by a further 30 minutes. Once all that is done, we move into the formal debate. The Minister will probably want to move the motion formally, and the Opposition spokesman will want to have her say. We will then be into normal debate procedure. Once we have finished all that, we put the motion to the Committee. The absolute latest we can be in this Room is 7 o’clock.
The structural and cohesion funds are the principal instrument, at EU level, for addressing disparities in levels of economic development and opportunity between member states and regions. Last October, the Commission published a package of measures providing an overall framework for the implementation of the funds during the next financial period, 2014-20.
In presenting its package, the Commission highlighted the challenges facing the EU in light of the deep economic crisis, rising unemployment and the need to switch to a low-carbon economy. It said the EU should focus on fewer, more strategic objectives that were closely aligned with the Europe 2020 strategy and concentrate its resources on developing the conditions for sustainable development and growth. It should also remove any unnecessary costs and burdens, strengthen co-ordination between different EU funding instruments and policies to enhance their overall impact, and introduce clear, measurable
That is what the so-called draft common provisions regulation, which is perhaps the most important element in the Commission’s package, as well as being the focus of today’s debate, seeks to achieve. The regulation proposes a basic set of rules, which would apply to five EU funds: the EU’s existing structural and cohesion funds—the European regional development fund, the European social fund and the cohesion fund—and two additional funds, the European agricultural fund for rural development and the European maritime fisheries fund. Those funds are referred to collectively as the common strategic framework funds.
The draft regulation identifies 11 thematic objectives, all linked to the Europe 2020 Strategy, which each of the CSF funds would support. It also provides for the creation of an overarching common strategic framework to ensure that operational programmes implementing the CSF funds maintain a clear focus on the goal of
set out in the Europe 2020 strategy. The framework would identify key actions to be supported by each fund and seek to ensure that expenditure is co-ordinated with other EU policies and funding instruments to achieve a greater concentration of resources and a higher impact. Each member state would develop its own partnership contract describing in some detail how it intends to utilise its national allocation of CSF funds to achieve the thematic objectives set out in the draft regulation and the key actions in the common strategic framework.
As I mentioned, the draft regulation forms part of a package and so cannot be considered in isolation. A separate set of fund-specific regulations—six in total—contains more detailed provisions on the investment priorities for each CSF fund.
Even that brief description illustrates the complexity of the Commission’s package, with different instruments setting out different layers of regulation. The key issue for today’s debate, therefore, is whether it can work. The Government told the European Scrutiny Committee that they welcomed efforts to align expenditure with the goals set out in the Europe 2020 Strategy, to simplify the operation of the funds and to reduce administrative burdens. However, they also said they would be seeking significant reductions in the €336 billion budget proposed for the structural and cohesion funds for 2014-20. Will the Minister enlighten the Committee on the scale of the reduction that the Government intend to seek and indicate what impact that might have on funding levels for UK regions, particularly for those likely to qualify as less developed or transition regions?
The Government expressed concern that the framework proposed in the draft regulation might result in too much top-down control and reduce the flexibility available to member states and regions to make investment decisions based on their own assessment of need. The Government also highlighted attempts to introduce increased conditionalities, including macro-economic conditionality, which links the provision of EU funding to broader issues of economic governance. How confident is the Minister that macro-economic conditionality will either not apply to the UK, or not lead to a reduction in funding for UK regions? Does he believe that the thematic
The European Scrutiny Committee has recently scrutinised, in addition, a Court of Auditors’ opinion on the draft common provisions regulation and considers that some of the weaknesses the court identifies go to the heart of the proposed new arrangements for the structural and cohesion funds from 2014. The Committee was particularly struck by the court’s assessment that the draft regulation provides “an incoherent legislative framework” for the funds. The Government told the European Scrutiny Committee that the court’s opinion is broadly in line with the Government’s view. Will the Minister give a clearer indication of the principal concerns that they share with the court, and how they intend to tackle the concerns during negotiations?
The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk): I thank my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips), the representative from the European Scrutiny Committee. His statement was useful for all of us, even those of us who have been more intimate with the details than perhaps one might have thought four of five years ago, or indeed, dare I say, four or five months ago.
The Government are determined to ensure that we get strong and sustainable growth in the United Kingdom and in the European Union. Structural funds, which are what we are discussing, have an important part to play. I want to respond to some of the points raised and highlight the UK’s priority areas, for which we are currently negotiating for the funds from 2014-20.
The European Scrutiny Committee mentioned the EU budget in the conclusion of its report. This Government’s top priority is budgetary restraint, so we are not seeking any additional funding in any area of the EU budget, even where we believe that it is a priority area. We want to ensure that that message is clear.
The need for budgetary discipline will mean a reduced structural and community fund budget, which we believe should then be concentrated on the poorer member states. We want richer member states to receive less funding, with a view to receiving no funding from 2020 for economic development.
Within that, we have identified priority areas that would benefit from activity, for example a focus on small and medium-sized businesses, innovation and research and a low-carbon economy. All of those, together with skills, are the sort of things that should be focused on more than they have been in the past.
As the European Scrutiny Committee noted in its report, we welcome the concentration of funds on themes that promote strong, sustainable growth. The focus on Europe 2020 priorities is important in that context. The elements that we particularly like, which should shape what the Commission is about in this field, are moves towards integration of the funds at a strategic level; harmonisation of some of the rules; and geographic flexibility to tailor programmes around
First, regarding integration, the UK welcomes moves to better co-ordinate between different EU funding streams. We think that that will improve the impact of the funding from the structural funds. It will better focus funds on priority areas and give leading projects more flexibility and options for funding. We believe that it should be for member states to decide where the integrated programmes will most add value in their territory. That is an important principle on which we are negotiating with other member states.
The second element that we are pressing for is the harmonisation of rules. It is true to say that the Commission has put forward some positive suggestions in this area, but we think that it can go a lot further. The structural and cohesion fund regulations should be further simplified to minimise the administrative burden, not only on national bodies but on the funding recipients. Even now, there are still far too many different sets of rules that are trying to solve pretty similar problems, for example the problems around small businesses. That is the area in which we believe further progress can and should be made.
We are working with other member states to push for much greater harmonisation, so that funding recipients can concentrate on the delivery of projects that actually help economic growth. In other words, we want to ensure that in the period between 2014 and 2020 there is a greater focus on outcomes rather than processes.
What is perhaps of greatest interest to us is the opportunity to draw up programmes at different geographic levels depending on functional economic areas. Those programmes can better fit the models that we have for economic development across the UK. Inevitably, therefore, they will vary from place to place and I dare say from nation to nation within the UK. The approach that is taken is far more likely to involve local stakeholders, businesses, partners, civic leaders and the community than we have seen in the past. The establishment of 39 local enterprise partnerships in England is a classic example of how we want to ensure that, between 2014 and 2020, the European programme reflects those economic areas, which have been very much supported by businesses in those communities.
To put it simply, if I can do so, we want to see that there is an affordable structural funds budget for the next period—between 2014 and 2020—and we want to ensure that it is coupled with a regime that concentrates on driving growth, that is less bureaucratic and that gives member states the flexibility to focus funding on the specific barriers to development that they face. If we can get this process right, it gives a real opportunity to offer integrated programmes that address the different issues in different areas, whether those areas are rural, urban, or whether we are talking about developing broadband or skills.
There is a genuine opportunity here but of course we are in the middle of negotiations, so it is early days in terms of seeing where we can get a consensus to secure things. However, there is a genuine opportunity to make the funds more relevant to our constituents’ concerns and therefore more effective as we rebalance and seek to grow the economy.
The Chair: We now have until 5.30 for questions to the Minister. May I remind Members that those questions should be brief? Members may group questions if they wish to do so. If a Member has a speech to make, may I suggest holding fire until the next part of the Committee’s deliberations?
May I ask a specific question about the category of transition regions that are defined in the document? I understand that there are nine transition regions defined in the UK, one of which is Durham and the Tees valley. I would very much like to hear from the Minister how he sees those regions accessing funds—whether they go direct to Europe or via central Government—and how he sees the mechanism working.
Mr Prisk: In truth, we have real reservations about the transition regions and their affordability. Of course, what areas will be eligible depends on the publication of the latest EUROSTAT figures, because the question is whether an area is below 75% of the average gross domestic product per head. However, the questions that we will be putting back to the Commission are about the issues of affordability and practicability, and to date we have not had the answers that we are looking for.
I have some questions for the Minister about, first, the broad principles of the Government’s approach to Europe and to UK regional development policy as it applies here, and, secondly, the specifics of the document.
At the end of November 2011, more than £1 billion of European regional development funding remained unallocated, with less than two years to go before all the money has to be allocated. Therefore, I have some concerns about the Government’s handling of EU structural funds and I seek some reassurances on that.
Part 2 of the document talks about multi-level governance, but that type of governance is not working effectively in regions and sub-regions, especially with LEPs—as the Minister mentioned—and transport initiatives, for example. Will he clarify how LEPs fit into multi-level governance, given that some of them overlap the boundaries between English regions?
The Minister’s explanatory memorandum states that the new economic development landscapes in the UK will need to be consistent with the new provisions. Will he expand on that and explain how the Government will balance those landscapes so that English regions are not disadvantaged by a lack of regional autonomy structures and regeneration funding to support their bidding process? Do the Government intend to form a coherent regional view on the new proposals? Which stakeholders have the Government consulted, and how?
How will the Government determine who will be the lead at the regional level? Will it be via the Department for Business, Innovation and Skills and its local offices, or will it be the responsibility of the Department for Communities and Local Government?
Finally, I note that the Commission has proposed “community-led local development”. Will the Minister explain how local action groups are to be given the opportunity to “design and implement”, given that the regional growth fund is managed and delivered from Whitehall? [ Interruption. ]
Mr Prisk: On expenditure, European regional development fund spending is on target. This is what is known as M plus 2, the allocation plus two years. It is all on target at this stage, as is the European social fund. There was a glitch in December in the ESF in England, which led to a short interruption. I understand from the Department concerned that that has been lifted, as of last week, so that money is still in train.
On governance and the roles of the LEPs—in a sense, this deals with the hon. Lady’s fifth question, about regions—we need to be clear that regions are not simply the geographical areas that we used to know, bounded by the old regional development agencies. In Wales, for example, the region will be Wales and it will be the managing authority. In England, of course, the LEPs now take the lead on that sub-national leadership. The national body—for instance, the Department for Communities and Local Government—is the managing authority. Below that, the delivery of programmes delivered by the RDAs will be slowly handed over to the LEP. That answers the question on national and regional governance.
Will the English regions lose out? No. The intention is to ensure particularly that we get a strong alignment between the regional growth fund and the European regional development fund, and that the people who used to handle the regional development fund bids, who used to work in central Government—they were transferred to the regional development agencies, but have now been transferred back to the Department for Communities and Local Government—are still in play. That means that we have the same teams in place.
Chi Onwurah: The Commission has proposed “community-led local development”. How will local action groups be involved in that, given that, for example, the regional growth fund is delivered from Whitehall and the institutions for local delivery may not be clear.
Mr Prisk: In the three devolved Administrations and in England, we will consult to ensure that the relevant community groups in those areas can participate. We want to be reasonably open about that. Trying to help
The hon. Lady asked about consultation. We have involved Scottish, Welsh and Northern Irish colleagues in the negotiation, which we are part of, with the Commission. Once we have details on the breakdown of the statistics—in other words, the likely geographical breakdown for areas within England—we will want to consult more broadly. That will enable us to consider the issues in relation to the geographical representation and also the operation. We felt it appropriate at this stage to wait until we have the statistics to negotiate on, and to work with our Welsh, Scottish and Northern Irish colleagues. The moment we have the numbers and maps relating to the Commission’s proposals, we will want to go out and consult LEPs and all the other relevant stakeholders.
Ian Swales: As a supplementary question, the Minister spoke about transition regions and affordability, but are the Government pushing back on the amounts of money being suggested? Will part of that be a simplification or a reduction in the amounts available? Is he proposing that transition regions not have special status in the future?
Mr Prisk: We have real reservations about the Commission’s proposals on transition, and we are, indeed, pushing back on them. Depending on its response, we shall look at how the proposals will work in practice. At the moment, however, we do not believe that they have been thoroughly worked through, and we want more detail and more attention to affordability.
David Simpson (Upper Bann) (DUP): I think I heard the Minister say in his opening comments that the Government’s position is that member states should decide where the money is spent. Does he believe that can be achieved?
Mr Prisk: Yes, I do. Clearly, there will be instances where there has been an administrative error or, in extreme examples, corruption or something similar. We are aware of that across Europe. However, if we can ensure that we have a set of structural fund programmes that allows decisions to be made by member states—in the case of the UK, I mean the UK Government talking to our friends in Northern Ireland, Scotland and Wales—there should be greater flexibility, and attempts to tackle specific problems in each area will not be hindered by needless barriers.
John McDonnell (Hayes and Harlington) (Lab): The Minister has touched on one of the issues with these proposals. How can we more effectively monitor the effectiveness and probity of spend under the new process?
Mr Prisk: Those are two classic areas where we will need to change the way we scrutinise—I say that wearing my hat as a Member of this fine institution and this assembly—not only what the Government do, but what the local agencies delivering this money do, which is a challenge. If we bring those different pots together and they serve a common purpose, it will be easier to identify the outcomes. At the moment, we have parallel schemes. Often, the ESF sits in parallel with the ERDF
John McDonnell: The bun fight normally begins as soon as we start drawing the regions and working on the distribution. Will we need to argue for some form of transitional or dampening mechanism as we move from the existing regime to future regimes?
Mr Prisk: We are looking at how we do that. The Commission has made its proposals and they are what is on the table. Clearly, the proposals will be more popular in some member states. We shall take a view, but a lot of member states are unhappy about them. The key thing will be to look at how we ensure that the proposals are delivered in practice. That is the area where, as the hon. Gentleman says, there will shortly be a free and frank debate.
Chris Ruane: Will the UK’s current convergence areas— I include west Wales and the valleys, which includes my constituency—qualify from 2014 to 2020? Will sufficient UK funds be given to those regions to draw down the EU convergence funds? Does the Minister have the figures and percentages for what has been spent so far in the UK’s current convergence areas? I believe one of them has spent only 49% of its allocation.
Mr Prisk: Future allocation must depend on how an area’s economy—in this case, its GDP per head compared with the rest of Europe—has fared. When the EU publishes its statistics on where each of the areas is, it will consider those statistics and see whether west Wales and the valleys qualify under the new criteria under the new arrangements. My understanding is that it is unlikely that there will be the convergence programme that we have known within the current programme, which runs out in 2013. How that will work in practice, and where west Wales and the valleys will sit, we do not yet know.
I am trying to say that if enough is demonstrated in the new round, and the need is as great as it was in the old, the money will follow. If the status of west Wales and the valleys has improved compared with that of other areas, clearly there will be a lessening of funding. However, ahead of the statistics being published, it is probably wiser for me not to guess what the outcome will be.
Chris Ruane: On the question of whether there will be sufficient match funding in UK funds for those regions to draw down convergence funding, will it be in place and what percentage is being spent in current convergence areas? As I said, I believe that one is as low as 49%, with two years to go.
Mr Prisk: The statistics for ERDF and ESF suggest that, for west Wales and the valleys, the commitment for ERDF stands at 79%, which is substantial, remembering that those are committed funds. There is still the full period until the end of next year before that is actually
Mr Prisk: There is a wide variety of statistics, and I will write to the Committee on the specifics. I have the breakdown of some areas, but I do not have that specific breakdown. I can the tell the Committee the overall figures of funds committed under ERDF: England 63%, Northern Ireland 65%, Scotland, 83%, and Wales 78% as a whole. In ESF terms—the social fund—it is a lot higher. In England and Gibraltar—do not ask me why—it is 95%, Scotland 99%, Northern Ireland 83% and Wales 90.57%. I will check to see whether there is a case at 49% and I will write to the hon. Gentleman.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op): The Minister and I have a record of getting on quite well, but I have to say that he has inflamed me a little by his constant reference to Scotland, Northern Ireland and Wales. He could have pitched in London, too.
I represent the squeezed middle. In Yorkshire and Humber, we have a population that is larger than Scotland. We find ourselves completely disadvantaged now that we do not have a regional development agency. Whether you loved them or loathed them, the fact is that they offered a conduit when organisations made bids for European funding. Indeed, the figures that I have are much more depressing than the figures the Minister has just given the Committee. We are failing to draw down a very large amount of the available budgets. That is very worrying, especially as we now have LEPs. LEPs are all very well, but in Yorkshire—I do not know about the rest of the country—they have no staff, only a few seconded people. They employ no professional staff, and they are fledgling things anyway. We recently had a briefing in the Victoria and Albert Museum, which is a centre of design in this country, on how much funding for designer projects alone we were missing out on because there was no regional base from which to make the application.
Mr Prisk: I understand the hon. Gentleman’s remarks in that context. I do not forget Yorkshire. I have been to Yorkshire as a Minister on four separate occasions. No doubt I will be there again. There are some wonderful opportunities there. To be fair, although it is perhaps not as much as has been committed in other parts of the country, some £273 million is already committed to Yorkshire and Humber. I appreciate that that includes the Humber, and that some may argue, as good Yorkies, that that is not necessarily in the context of Yorkshire. I understand that, and he makes a good point about Yorkshire. It is certainly very firmly on my agenda.
That the Committee takes note of European Union Document No. 15243/11 and Addenda 1 to 4, relating to a draft regulation laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No.1083/2006; and supports the Government’s aim to reduce the administrative burden on both Member States and the recipients of funds, and to target funds in order to maximise support for the Europe 2020 strategy for sustainable growth objectives.— (Mr Prisk.)
Chi Onwurah: I welcome the Minister’s opening remarks in which he focused on growth in relation to the funding streams from Brussels. I can only hope that we will see such a focus on growth reflected in both European and national policies. Despite the Minister’s reassurances about the current round of ERDF funding, in common with many of my hon. Friends, I retain concerns about the speed at which these funds will be drawn down. The Minister needs to address that problem urgently. I hope he will be in a position to do so and to give a guarantee that the ERDF funds will be fully spent by the end of this round.
There is a fundamental mismatch between a Europe whose approach to funding is based around regions and a coalition that does not recognise regions and instead has imposed fragmented local enterprise partnerships. The European approach considers the region as the most significant functional economic unit. I understood the Minister to say that he intended to work with other member states to develop or to change the European approach in this. I have little confidence in his ability to change Europe’s approach, given the examples of his colleagues in other areas of European policy. Nevertheless I am concerned that giving LEPs the lead at a sub-national level, as he put it in response to one of my questions, will leave English regions particularly disadvantaged because of the limit of the resources that they have available. The skills to draw down European regional development funds, which he described as having moved from Department to Department, need to be secured, and I would welcome further reassurances on that.
John McDonnell: In a former life, I was chief executive of the Association of London Government and responsible for London local government’s administration of the ERDF and ESF. After 13 years, I have just come out of counselling following that experience.
I will just run through the agenda for the future, which I would welcome the Government addressing. The first element is on the allocation. It is trying to achieve the equity of distribution of resources based upon the negotiations that will take place on the statistics of deprivation. We will need sharp elbows to fight our corner on that in Europe. When the distribution comes to the nation state, it is about recognising that buried deep within those regional and national statistics are
Secondly, on administration, if we can reduce the bureaucracy, form filling and endless, repeated negotiations on individual project or grant applications, I give the Government a fair wind on that point. However, I add that stability is needed in central Government for teams working in those areas. Having them thrown out of or into government, and with that yo-yo, hokey-cokey effect some staff have experienced, I am amazed that we have been able to maintain their morale, although I know that dedicated teams of staff have been working in those areas over the years.
Thirdly, on probity, having dealt with the Commission auditors over the years, I know that at times, some of their bizarre interpretations of the role defy logic. We need to look at the probity of some issues, and perhaps suggest to the Commission that it should review its role—not only on how it monitors programmes across the EU, but on how it reports on those programmes—and that it should consider what action it then takes to address probity.
Finally, I welcome the Government’s commitment on match funding, and that is now on the record. I hope that there will be stability of purpose on match funding and that, no matter what economic situation we face in future, we recognise that through match funding, we are gaining considerable resources from Europe, and at the same time, we are not turning funding away. I hope that in the next period, we can be that bit smarter and that much more strategic in our approach to the application of those funds, to serve our country’s interest.
Chris Ruane: My hon. Friend says we may need sharp elbows in Europe to argue our case, but as well as those, we may need the caring hand of friendship to build alliances. However, is that hand of friendship there? I met Derek Vaughan, one of the MEPs for Wales, down the Corridor last week. He said that after the shenanigans before Christmas, there was a chill wind towards British MEPs—not only British Tory MEPs or Eurosceptics, but all British MEPs, including those in the socialist group. Has our ability to win friends and influence people over there at this critical stage been diminished because of party political posturing?
Mr Prisk: We have had a good discussion with some helpful, positive points. That is important, because we are at the beginning of a negotiation and we need to ensure that we secure the best possible deal, and I take all the contributions to the debate on that merit.
As for whether we need hands or elbows in the negotiations, I take the view that although all of us have reservations about affairs in Brussels—I put it carefully—we are a member of the club, and we need to ensure that we get the very best out of that membership. That means actively engaging, and I have had very constructive discussions with a number of other countries—not only with the Scandinavians and the eastern Europeans, very important though they are, nor just with the Germans, sympathetic as they are on many such issues. For example, the new Italian Minister, Fabrizio Barca, very much
The Opposition Front Bencher, the hon. Member for Newcastle upon Tyne Central, talked about the question of regions. This is an area in which I am in danger, as a former chartered surveyor who dealt in that field, of donning my anorak. In Europe, regional development is often talked about in an area that runs roughly from London, through Paris, down to Milan that is said by some to be the hot banana in economic terms. Much of the core regional economic development takes place in that area. In one sense that might be the definition of a region, but, in another sense, a region might be defined as an area such as Wales or a sub-national development.
As we have had a particular set of regional economic agencies, there is a tendency to assume that a region simply means the old boundaries. For my money, the best kind of regional economic agency is one that fits a functioning economic area. One of the difficulties the Government had with the old RDAs—without wishing to test your patience by rehearsing that argument, Mr Hollobone—is that the boundaries often did not fit the real economy, which is one of the critical changes that we want to make.
I welcome the points raised by the hon. Member for Hayes and Harlington. I had not realised that he had had such an experience. He has clearly come out well from the counselling. May I take his phone number? In a few months’ time I might need to find out which psychiatrist I need to visit to be able to deal with those aspects.
For the Government, the core is to focus funding on growth and to strip away needless complexities in the structure and criteria of funds so that we can focus on outcomes. The hon. Lady talked about ensuring that, as a Government, we maximise the spend. Yes, I want to ensure that we spend appropriately, but I want to maximise the outcomes, which is what the Government should focus on.
The hon. Member for Hayes and Harlington set out the issues on bureaucracy and red tape very well. I have been encouraged by recent events that have changed the culture of some states that perhaps had less focus on such things in the past. Now those states, particularly those, say, nearer the Mediterranean than ourselves, are a lot more focused than they were even six months ago. We want to try to harness that focus to get the maximum effect, but we also want to ensure that we keep questions of probity and administrative costs to a minimum.
In a sense, that leads to the broader issue of fighting to ensure there is no real-terms increase in the EU budget. That is very important, because, if we are going to ask UK taxpayers to support a reduction in our own Government spending, it cannot be right for the Commission to press ahead, as it currently still thinks it could, with a substantial increase. That is not right, and we are committed to fighting against it.