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The committee’s recommendation in paragraph 64, that the 2008-09 budget review should result in reduced spending on agricultural price support, is welcome, and I hope that it is fully shared by the Minister. The committee’s recommendation that richer member states should remain responsible for the majority, if not all, of their own regional funding is also one that the Government should pay heed to. Indeed, the Prime Minister himself called a few years ago for the repatriation of regional funding. It is regrettable that he did not pursue it more vigorously. We agree with the conclusion that regional policy will never be the primary vehicle for encouraging economic competitiveness. Many of the poorer EU countries’ inefficiencies, especially of those which have recently joined, are the consequence of national problems. Although these EU funds can of

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course be very useful, they must complement national policies if any real improvement is to be seen.

There needs to be better control of funds at national level. It would be very helpful if the Minister could tell your Lordships, first, what level of auditing and ex post assessment has taken place and does take place; and, secondly, whether any UK local authorities have been censured by the EU Court of Auditors over the handling of EU money, and if so, which ones. I will understand if he cannot answer me today, but if he could able to write to me afterwards it would be appreciated.

Many of the other recommendations in the report are sensible, too. Using loans instead of grants—to which the noble Lord, Lord Watson, referred—as a vehicle for encouraging development would not only ensure that the projects concerned were viable without permanent public funding but would also, over time, allow limited funds to go much further.

Similarly, we would echo the sub-committee’s support for co-financing. If a national Government retain a financial interest in the success of a project which they are considering funding with EU money, there is less likely to be any lowering of standards at the end of the year as a result of having to spend the money to avoid returning it.

The committee has made a considerable number of recommendations, of which I have mentioned only a few. I look forward to hearing the Minister’s response. I again thank the noble Baroness, Lady Cohen, and her sub-committee for this report, and your Lordships for an interesting debate.

6.57 pm

Lord Davies of Abersoch (The Minister of State, Department of Business, Enterprise and Regulatory Reform and the Foreign and Commonwealth Office): My Lords, this has been an excellent debate. I thank my noble friend Lady Cohen and her committee for their detailed and very informative report. The Government welcome and support the committee’s call for reform of EU regional policy.

Regional policy is of importance to everyone in this country, not least for a newly ennobled Welsh Peer. With your Lordships’ permission, I should like to put the EU debate on the future of EU regional policy post 2013 into its wider context to set out the Government’s thinking on where we want regional policy in Europe to be, and to inform the House of how the current cohesion policy is reacting to the global financial crisis that we are facing.

However, I should like first to say a few words about myself and my role. I begin by extending my thanks to noble Lords for the warm welcome that I have received from all sides of the House over the past few weeks. I genuinely appreciate the convention and sincerity in the welcoming remarks made this evening—with the exception of the comments on Tottenham Hotspur. I thank particularly my noble friend Lady Cohen for her kind words and welcome. I also thank the noble Lord, Lord Teverson, for his comments about the glossary of terms, which genuinely drove me nuts this weekend, most of which I indeed spent with JESSICA and JASPERS.

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As I took my oath, or y llw in Welsh, I reflected on the fact that I did not really speak a foreign language—namely, English—until I was six or seven, so I apologise in advance for my future performances in English in the House. When under pressure, as I struggle to master the latest trade statistics, may I reserve the right to mutter the odd word in Welsh? Indeed, paragraph 4.47 of the Companion to the Standing Orders specifically mentions that languages other than English should not be used in debate, except where necessary. I might also utter one or two words in Cantonese, as I lived in Hong Kong and Singapore for many years. I am also a Minister and, as civil servants now refer to me in that way, I just cannot get the image of the chapel, Sunday school and my mother’s Sunday hat out of my mind. That is what a “Minister” meant to me.

Only one or two years ago, being a bank chairman would have seemed an ideal background for somebody joining this House. How times have changed. Bankers now keep a very low profile. The past 12 or 18 months have been extraordinary for the industry that I have worked in for over 30 years. The industry has lost credibility, trust and respect, but we must be balanced in our reaction and our criticism. Not all banks were caught. However, it is critical that lessons are learnt and that banking regains credibility and stability, since it is an industry that is critical to the future of a thriving global economy. It is a complex and international industry, which has allowed me and my wonderful family to live in different places. It has made me realise, simplistically, that the citizens of the world, irrespective of colour, religion and background, get on well together. In my one Kate Winslet Oscar/BAFTA moment, I should also like to thank my wife of 29 years for her support.

Living in Asia changed my view of the world and made me realise the huge potential of China and India. It also made me realise the huge potential that those two large markets and countries offer the UK. Until recently I was the chairman of Standard Chartered, a bank which is proud to be British and yet operates in 70 countries with over 70,000 staff. I was on the board of that bank for 12 years. I notice that several noble Lords were, as has already been mentioned, either board members or worked with me in the bank. I should like to put on record my hope that I did not upset them during my time there. This afternoon, as I had a cup of tea, I spoke to my noble friend Lord Faulkner, and I discovered that his father was the Chartered Bank company secretary in the 1960s. So I am phasing in to the House of Lords and phasing out of another life. That is what “phasing in” and “phasing out” mean to me.

My entry to government clearly has come at an interesting time, to say the least. When the opportunity came to do public service, I felt compelled to do it. The privilege of being a Member of this House, with its huge variety of talent, is indeed just that: a privilege. Recent accusations have undoubtedly affected the standing and image of the House. I will do my very best to uphold the high standards of integrity and tradition in this House, which are evident for all to see. Although I have had to give up my outside interests, with the exception of the Royal Academy and being chair of

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the council of Bangor University, my passion for sport and the arts will remain undiminished. I hope that I will feel the same about politics in due course. My role as Minister for Trade and Investment is an exciting and challenging one. Britain’s industrial position needs talking up, not talking down. I do not agree that we have no manufacturing, no industrial capability and no innovation in the UK. My role is to prove the cynics wrong and assist British business.

I turn now to the EU debate. I am obviously a newcomer to this whole question. However, having studied the committee’s report and the evidence, I was struck by how the report has rightly looked at distribution management and the impact of the funds. It is very pleasing that the committee found that the funds are effective and, in general, fit for purpose. It has to be right that, through Article 158 of the treaty, the EU aims to reduce the disparities between levels of prosperity in some of the countries. We have to make sure that we help the least favoured regions. After all, elements of regional policy are designed to counter any negative repercussions of a single market. Clearly, supporting the use of economic and knowledge transfer from rich to poor regions, and interventions to counter both unemployment and underutilisation of resources, is the right way forward. The aim of structural and cohesion funds has to be not just the reduction of income inequality but also sustaining growth rates in the poorer member states.

On reading the report, I was struck by the evidence of Professor Bachtler from the University of Strathclyde that it is difficult to determine effectiveness. We must always strive for efficiency. Finding the balance between strong financial management and avoiding bureaucracy is one of the most difficult and challenging aspects of EU funding.

It is clear that regions need flexibility and strong social institutions to take advantage of these opportunities. It is also clear that the debate will be a long one. We are considering a policy that will not be in place until 2014. All interested parties need to participate actively. As the noble Lord, Lord Trimble, pointed out, transitional arrangements will be key.

The noble Lord, Lord Teverson, spoke about gaps between funding periods. I listened with interest to this issue. The situation is not as stark as presented. The “n+2” rule—another piece of structural fund language that I am getting used to—means that spending is continuing on the 2000 to 2006 programmes. The rule helps ensure that the change from one programme period to another is relatively smooth.

As this is a long-running debate, we do not expect to have an outline of Commission proposals for the future before 2010. It also needs to be seen, as pointed out by my noble friend Lady Cohen, in the wider context of the EU budget and its ongoing review. Some have asked for the debate to be considered free of financial constraints.

However, the European Union’s financial instruments for addressing its cohesion policy are the structural and cohesion funds. Any expansion of the cohesion policy is likely to lead to additional demands on the European Union budget. As was pointed out, the debate is also linked to the Lisbon treaty and its

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introduction of the European Union aim of territorial cohesion. Some see this introduction as a rationale for expanding the scope of cohesion policy.

Recent Commission consultation has been launched on territorial cohesion to try to get a better idea of what that means. The Government will be responding in the next few weeks on that aspect. I will respond to the noble Lord, Lord De Mauley, on the auditing point. I do not have the answer.

The Government have set out their position on the future of regional policy several times over the past year in responses to community consultations as well as at meetings and conferences at both official and ministerial level. I would like to take this opportunity to set out briefly the main points of our position. The primary aim of cohesion policy should be addressing disparities in economic development and, in particular, should be focused on supporting the Lisbon jobs and growth agenda in conjunction with the Gothenburg sustainable development agenda. The UK also wants to see a significant increase in the proportion of the funds allocated to poorer member states as this is seen to bring the highest level of what we consider to be EU added value. I spent my career banning the words “added value” because I never knew quite what they meant in the corporate world, and here I am in my maiden speech talking about EU added value.

Where member states have the institutional structures and financial strength to develop and pursue their own regional policies, they should be enabled to do so within a common EU strategic framework. I was struck by the points made by my noble friend Lady Cohen on the need to help poorer countries that do not have that infrastructure. Consequently, structural funds in the richer member states should be phased out. Given that aim, the priority should be that standard competitiveness and employment funding should no longer be available to richer member states.

The noble Lord, Lord Teverson, raised a number of issues, including that of continuity. I agree that continuity is crucial. However, as I get into the role, I also believe that the role of RDAs has developed in the UK. This morning, I joined the meeting of the executive board of UKTI, and it is clear that the RDAs play a pivotal role. I am very keen to get involved in understanding them and making sure that they play the right role.

I turn to the impact of the current global financial crisis on EU regional policy. The focus of EU debate has moved to how current policy can be adapted to these extraordinary times. As the noble Lord, Lord Watson, mentioned, it is a critical issue. It is important that we do not lose sight of the fact that we are trying to create employment across Europe, particularly in the poorer states. The Government welcome changes to the funds that increase liquidity, and changes that simplify and improve the effective management of the funds. At a time of economic crisis across many countries, it is important that money moves quickly and efficiently. There is now increased activity on simplification of the current funds. The Commission has formed a simplification working group. I always believe that simplification working groups can, on occasion, make life more complicated, so we will have to make sure

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that, through our active participation, we have high-impact, low-cost and efficiently delivered money. That is the Government’s aim and we need to make sure that that happens.

Noble Lords have had the opportunity to see the Government’s response to the report. It has been mentioned a few times and I will not use the time to reiterate it. I will mention that the Czech presidency aims to hold an international conference in March on the future of cohesion policy, and an informal ministerial meeting in April. We need to make sure that a number of points raised today are fed in to these meetings, and also through other channels.

At the informal ministerial meeting we are expecting a political debate on the main principles of the future of cohesion policy post-2013. We also expect a presentation from the European Commission on the preliminary findings of the Green Paper on territorial cohesion, and an orientation paper that we believe to be a summary of the debate to date.

There have been a number of questions and, as this is my maiden speech, I am going to take them at the end, rather than insert them into the speech—I hope to become more expert at that in due course. The noble Lord, Lord Trimble, and other noble Lords, mentioned a very important point about NUTS and allocation methodology. The Government will consider these issues; they are important and we need to carry

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on the debate about whether we have the right methodology and allocation. The only other question I will answer concerns the overall relevance of cohesion policy in the general debate. I believe that EU regional policy and EU aid is more rather than less important at a time of economic crisis.

Noble Lords have raised a number of issues. We will take those points away, feed them into the debate and carry on the discussion.

7.14 pm

Baroness Cohen of Pimlico: My Lords, this has indeed been an excellent and timely debate, and I thank everyone who has contributed. In particular, I thank the Minister for his summing up, and I welcome the Government’s commitment to the poorer regions of the EU. He made a really excellent speech although I suspect that he might not have chosen to take on in his maiden speech the intricacies of EU financing. However, the speech went very well, I congratulate him and we look forward to many more good speeches. I welcome him again to the House and say how very glad we are to have a man of great distinction, not only in banking and finance, but in the arts, in the ranks of our Ministers.

Motion agreed.

House adjourned at 7.15 pm.

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