Skip to main content

European Regional Aid

Volume 301: debated on Wednesday 19 November 1997

The text on this page has been created from Hansard archive content, it may contain typographical errors.

12.28 pm

I am pleased to have the opportunity to speak about a matter that is of paramount concern not only to my constituency in South Yorkshire, but to every other area in the United Kingdom that has suffered job losses as a result of the demise of our traditional industries—industries such as coal mining, as in Barnsley's case, and steel, textiles and heavy engineering. All those industries are trying desperately to get back on their feet and reaching for new economic directions. Without new industry and new jobs they will inevitably continue on a downward spiral.

I am happy to say, however, that huge strides are being made. In Barnsley and Doncaster, a brighter future is beginning to emerge: although there is still a long way to go, a solid foundation has been laid for future growth. I would like to say that that foundation stemmed from the interest and help of the last Government over the past decade or so but, sadly, assistance from that quarter has been derisory, so I cannot say it. No Conservative Members are present to answer that point.

What I can and must say is that, without doubt, the impetus for the first steps in Barnsley's recovery has come primarily from the European Union. Given my position as a Barnsley Member, it is difficult for me to criticise Brussels. When we lost 14 pits and 20,000 mining jobs almost at a stroke, Barnsley lost its livelihood and came close to economic death. Over recent years, European help—not the last Government's help—has sustained us and put Barnsley back on the road to recovery. Barnsley is not atypical: I know for a fact that the same can be said for all coalfield areas and I suspect that the story will be similar in the many other areas that have suffered from the structural decline of their basic industries.

The figures speak for themselves. The current EU regional aid programme runs from 1994 to 1999; in that period, the United Kingdom will have received some £4.7 billion in assistance—nearly £1 billion for each and every year. We are talking big money. Over the years, the EU has been used to nurture new enterprises, to provide new industrial infrastructure, to fund training and to develop community projects.

That brings me to the crux of my reason for requesting the debate. There is a real crisis on the horizon: there is a real danger that our principal lifeline could soon disappear. The current spending round for EU aid ends in 1999. Discussions on the framework of the next round, which will run from 2000 to 2006, are already well advanced. The European Commission has already revealed its proposals in a consultation document that was published in July. Fortunately, those proposals have yet to be agreed by member Governments.

I say that with relief because it is no exaggeration to state that, if allowed to proceed, the proposals will deal a body blow to our hopes of recovery. Let me spell it out loud and clear. If the Commission is allowed to do as it intends, there is a real possibility that not one part of the United Kingdom will qualify for continuing regional aid. It is that bad—that serious. I shall explain why.

First, the Commission is determined to reduce the geographical coverage of the regional funds from about 50 per cent. of the EU population to between 35 and 40 per cent. Secondly, it is proposed that there should be no change in the key eligibility criteria—gross domestic product, industrial job losses and unemployment—that are used to decide the distribution of aid. Those two factors—greater concentration of funds and unchanged eligibility criteria—are extremely bad news for Britain.

The GDP indicator for eligibility is used to decide the top tier of aid, which is known as objective 1. If an area is to qualify, its GDP must be less than 75 per cent. of the Community average. In Britain's industrial areas, although GDP is falling in relation to that of the rest of Europe, most rates are between 75 per cent. and 90 per cent. of the Community average and none are lower than 75 per cent.

In other words, those areas are in a poor state of health but are not quite badly off enough to qualify for the top tier of aid. Ironically, despite their lower GDP, they may well fail to qualify for the second tier of aid as well—objective 2 aid. The eligibility criteria are industrial job losses and unemployment. We can no longer demonstrate substantial recent job losses, most jobs having been shed in the 1980s; and our official unemployment rates are falsely low and, for the most part, will not meet the EU criteria.

On paper—this is the information that European Commission officials will use—Britain's older industrial areas seem to be in fine fettle, with few job losses and falling unemployment, but anyone who is familiar with the situation in, for example, the north-east, south Wales, Merseyside and my patch—South Yorkshire—will know that that is simply not the case. Despite progress, the problems of those areas remain numerous and acute.

Such concerns are heightened in areas such as Merseyside, which have been experiencing the worst of the recession over the past few years. Among other things, we would like a commitment from the Government to fight for every area that currently enjoys objective 1 and objective 2 status. That is very important to us. We would also like the labour survey figures, rather than the unemployment figures, to be used; and we would like the Government to fight for a flexible approach to GDP. If my hon. Friend the Minister will give me an assurance to that effect today, much of the concern that has been expressed to me—which I know is felt throughout the country—will be alleviated.

I agree with everything my hon. Friend has said, and I hope that my hon. Friend the Minister will reply specifically to his points.

The fact that only a few of the hundreds and thousands of jobs that were lost in the 1970s and 1980s have been replaced is hidden by the distortion of the unemployment statistics. I shall give three brief examples from my area. First, 24.4 per cent. —nearly one in four—of school children in Barnsley come from households with no experience of work Secondly, the average income in Barnsley is 55 per cent. of the national average. Thirdly, 19,000 new jobs will be needed to return employment in Barnsley to the national average. I defy anyone, here or in Brussels, to say that those figures illustrate the existence of a vibrant and healthy economy.

My hon. Friend is making a powerful point, which can be equally well illustrated by the situation in south Wales. Economic inactivity rates—which reflect hidden mass unemployment—are also extremely important, and male economic inactivity rates in my area are of grave concern to us. I hope that my hon. Friend the Minister will press that point hard in negotiations about the criteria.

I thank my hon. Friend for his comments. Again, I look forward to hearing the Minister's response.

I would like to say that Barnsley is unique. It would certainly be in the town's interest for me to do so, thereby indulging in a spot of special pleading. I cannot say that, however. It must be said that Barnsley's circumstances are replicated, to a greater or lesser extent, in other traditional industrial areas throughout the nation. In making our case to Brussels for continuing aid after 1999, we could all be scuppered on the same misleading grounds, unable to demonstrate the existence of large-scale job losses in recent years and unable to show the true level of joblessness. I am enraged by the position and—as has been demonstrated by the interventions that we have heard—others share my sentiments. Brussels must not be allowed to walk away from a job that in our areas is only half done.

What should we do? I am closely associated with the alliance for regional aid, which was set up specifically in response to fears about European regional aid. The alliance represents virtually every local authority in the older industrial areas of the United Kingdom that currently qualify for objective 1 and objective 2 regional aid. In total, 130 local authorities make up that alliance, so it has a powerful voice. It has been working on this issue for some months and has come up with proposals that I and many other hon. Members fully endorse.

It is essential for the Commission to adopt eligibility criteria that reflect the true situation in Britain's industrial areas. The true picture is not shown by information on recent job losses and official unemployment figures. The thrust of the Government's negotiations must be to modify those criteria.

I urge Ministers seriously to consider three proposals. First, the Commission currently uses the International Labour Organisation's measure of unemployment, which profoundly disadvantages the United Kingdom by excluding people who have given up looking for work and those who are supported by benefits, such as incapacity benefit and income support, that do not require them actively to seek jobs. A broader definition of unemployment that embraces all those out of work who want a job would be a truer reflection of joblessness. Those figures are available Europewide, so such a definition could be adopted.

Secondly, GDP figures are used as objective 1 criteria. Their adoption as objective 2 criteria would assist the United Kingdom's case enormously. Most UK industrial areas have a lower GDP than similar areas in France and Germany, so such a step would benefit us greatly.

Thirdly, the Commission must be persuaded to take a long view, possibly as far back as 1980 when the United Kingdom's industrial restructuring began. If it adopts a base date in the 1990s, most UK industrial areas will not qualify. It is of paramount importance that the Government urgently and successfully negotiate adjustments to the criteria in those three critical areas.

Furthermore, informed, reliable guidance shows that the Commission is minded to designate up to 50 per cent. of objective 2 areas across the European Union on the basis of proposals from member state Governments using national data. That would greatly assist our case. The Government must grasp this opportunity, because it would open the door for objective 2 aid to be directed at areas where it is needed by allowing European Union-wide criteria to be supported by criteria set at national level and based on national data.

Indicators that measure social exclusion and competitiveness could be brought into play. That would substantially strengthen the United Kingdom's bid for continued funding. I ask the Government to consider including in the calculations three measures of social exclusion: income support, incapacity benefit and level of earnings. I am confident that close examination of those three indicators would reveal those areas of the United Kingdom that most urgently need help, and that should be recommended to the Commission for objective 2 assistance.

I remind Ministers that time is running out. The Commission will publish firm proposals on the future of regional aid next spring and it will then be difficult to bring about a change of course. There is no doubt that European regional aid has provided a lifeline to former traditional industrial areas such as Barnsley and Doncaster. The new Labour Government must maintain that lifeline.

12.44 pm

I congratulate my hon. Friend the Member for Barnsley, East and Mexborough (Mr. Ennis) on securing the debate. As a former leader of Barnsley metropolitan borough council and as founder and chair of the Barnsley economic regeneration forum, which is a private-public partnership, he brings great local and national experience to our discussions. He has shown his expertise by setting out the case not just for the Barnsley area, but for the whole of the United Kingdom.

I am glad to see a good attendance by Labour Members at this first economic debate on regional aid—in contrast to the vacant Conservative Benches. Not one Conservative Member is present and there is no Conservative spokesman. Where is the shadow President of the Board of Trade, the right hon. Member for Wokingham (Mr. Redwood), or any of his deputies? No wonder they were recently described by a Conservative supporter as nonentities. They are not present because they do not know about the problems and do not care.

As my hon. Friend acknowledged, European structural funds make an important contribution to economic development in many regions of the United Kingdom. On 16 July, the European Commission published its suggestions for the reform of the funds in its communication "Agenda 2000". We expect detailed legislative proposals in the spring of next year, so this short debate is topical.

Current structural fund programmes run until the end of 1999: 30 programmes operate across the United Kingdom. My hon. Friend's constituency is covered by the Yorkshire and Humberside objective 2 programme. Our short-term aim is to maximise the effectiveness of those programmes. So far this year, elected members from local authorities have played a strong role in programme monitoring, new financial systems have been introduced in England to accelerate payments, and we have brought social partners, such as representatives from employers' and employees' organisations, into local partnerships to support those programmes.

I am pleased to tell my hon. Friend that we have also nominated to the Commission 10 UK pilot projects for territorial employment pacts, including one in Barnsley. In England, we have put new arrangements in place for administering structural funds. We want to give local partnerships more responsibility through an action plan approach. Action plans will provide a real opportunity to improve the administration of structural funds. They will allow partnerships to bring together individual projects so as to reflect regional priorities, to tackle issues in a co-ordinated way and to streamline bureaucracy.

Circumstances vary across the country and between regions, so we are not seeking to impose a uniform system. It will be for each programme monitoring committee to decide to what extent it wishes to adopt the new action plan approach. We will aim to do more in the next two years to improve effectiveness further.

I realise that the interests of all my hon. Friends go beyond 1999. The European Union will face significant changes over the next decade, particularly if it is to be enlarged to include new member states from central and eastern Europe. The common agricultural policy should be reformed and its structural policies should be adapted to the changed circumstances.

On the key question of reform of the structural and cohesion funds, the Government believe that the new arrangements should be fair to all member states, especially to the United Kingdom and its regions, and should be affordable, durable, simpler and more efficient.

The United Kingdom is the second largest net contributor to the European Union's finances. We are net contributors to the cost of these development funds. That is why we are paying close attention to the total cost of the funds and to our receipts.

The accession of poorer countries will have significant implications for EU finances. As the overall EU budget must be contained within its current share of GDP, enlargement will mean that the structural funds will have to stretch further. All existing member states will have to accept significantly lower receipts in the next century. The United Kingdom's net contribution, like those of many other countries, will rise on enlargement. We accept this as the necessary price for bringing these countries into the EU, but we cannot accept that the UK's net contribution should move even further out of line.

The fundamentals of reform for the structural and cohesion funds should be as follows. First, the overall cost of the structural and cohesion funds should be contained below 0.46 per cent. of European Union GDP both before and after enlargement. Secondly, existing member states should expect cuts in their receipts if costs are to be contained. Thirdly, while we recognise that there will be a drop in receipts, the new regime should and must be fair to the UK in comparison with other member states. Fourthly, the reform of the funds should be durable and fair to acceding member states. Fifthly, the effectiveness of the funds should be improved, and substantial administrative simplification is needed.

Fairness was at the heart of the remarks by my hon. Friend the Member for Barnsley, East and Mexborough, so I will go into some detail about what we understand by fairness. According to data held by the Commission, the United Kingdom is the fourth or fifth poorest state in the European Union; the Commission's proposals will not make us the fourth or fifth largest per capita recipient. Therefore, we are not convinced that the Commission's ideas for distributing the funds are fair. I am pleased to tell the House that we are actively pursuing with the Commission and with other member states the issue of how a fairer system can be established.

I feel passionately about the key issue of unemployment. The Commission intends to use Eurostat figures as part of determining allocations and eligibility based on unemployment. Those statistics are based on the International Labour Organisation definition and are collected in the labour force survey. People are asked whether they are working or looking for work and whether they are available for work. Even on this internationally harmonised basis it is not clear whether the statistics provide a useful measure of need between countries. On that basis, UK unemployment is still three or four percentage points below the European average.

Portugal's unemployment rate is a third that of Spain despite being the poorer country. Comparisons between different countries and unemployment statistics may say more about business cycles and national labour markets than about regional need.

Would it help if our unemployment statistics had not been produced by the fiddled method that the previous Government introduced? They altered the collection of unemployment figures 30 times. Presumably it would be helpful to have the correct figures. The Government have a problem because, if they correct the figures in one fell swoop, it will look as if we have massively increased unemployment. At least for a period, two sets of figures could be produced, one under the current method and the other under the method that should be used with the corrected figures that we think should be taken into account.

I agree with my hon. Friend that the issue is not about figures: it is about millions of unemployed people. We need Europewide figures that will accurately reflect that. We agree that the present figures do not accurately reflect the criteria that are needed to assess regional aid and regional aid policy. We are considering other possibilities that more accurately reflect the realities of unemployment. I assure my hon. Friends that we are discussing those with the Commission and with other member states. One suggestion is that receipts and eligibility should be related to national GDP, with each member state or region deciding which sub-regional areas would be eligible within a centrally determined total.

Would my hon. Friend be prepared to meet an alliance delegation which might be able to help him come up with a better formula than the one that is currently used?

As my hon. Friend knows, I do not have direct responsibility for this matter, but I shall certainly communicate his request to my right hon. Friend the President of the Board of Trade.

I am grateful to the Minister for giving way, if only to prove that although the Conservative Benches are empty there are at least some opposition Members in the House. Will he assure the House that he will argue for fairness in a European context and in the national context so that all regions have an equal ability to access funds? In previous years, the DTI has been a barrier rather than a help to some regions' attempts to access funds. There should be subsidiarity in this matter as in others.

That point was well made by my hon. Friend the Member for Barnsley, East and Mexborough. The Conservative Benches are still empty, as they have been throughout the debate.

The Commission has proposed reducing the number of objectives from seven to three so that each area of the European Union is covered by one of them. In terms of eligibility for the three objectives, the Commission has proposed that objective 1—the most generous—should be based on regional per capita GDP.

For the new objective 2, the Commission is slightly less clear about eligibility criteria. That objective will cover industrial, urban, rural and fishing areas, and it is a matter of deciding which areas would benefit most from such support. Relatively few local area statistics are available at the European level; many more are available nationally. In our informal discussions with the Commission, we are suggesting that determining eligibility at national or regional level would improve the effective targeting of the funds.

The Commission also proposes that the population coverage of the two geographically targeted objectives should represent only 35 to 40 per cent. of the EU population. This compares with 51 per cent. currently covered by geographical targeting. The consequence will be that many European areas currently benefiting from objective 2 or objective 5b will lose such eligibility. Some of them will be in the United Kingdom.

My hon. Friend has spoken many times about informal discussions. Do the Government intend to table a proper paper on these issues? If they do, will he make it available to the House?

I think that I have referred only once to informal discussions. There have been other discussions. My hon. Friend has fought tirelessly to bring employment to his constituency and to south Wales. I know that he will support our aim of ensuring that the UK as a whole is treated fairly.

We hope to obtain a reasonable transition period for areas that eventually lose eligibility. In negotiations on the future of the funds, the Government aim to protect everybody in the United Kingdom and will seek to ensure that the needs of individual regions are taken into account.

For the first six months of next year, the UK will hold the presidency of the European Union Council of Ministers. We expect the Commission to present detailed legislative proposals on the funds during the spring. We will then push forward the detailed negotiations, although we would expect them not to be completed until the Austrian presidency. They will also need to be approved by the European Parliament. At some stage, possibly in early 1999, we will know how eligibility under the three objectives will be determined and individual areas' eligibility can be confirmed and financial allocations made. After that, regional plans can be drawn up, negotiated and adopted. The European Commission must aim to complete that in time for the new programmes to start in the year 2000 and the funds must be able to continue their work. However, that is a matter for negotiation.

I repeat: we will seek to ensure that the needs of individual regions are taken into account. We have already started lobbying. We need the UK to speak with one voice, whether it is the national Government, local authorities or campaigning groups of the type that have been mentioned. We need to draw on one another's knowledge, skills and argument.

The House has listened to the points of my hon. Friend the Member for Barnsley, East and Mexborough with interest. I am sorry that no Conservative Member has listened. It would help us to argue our case in Europe for each UK region if we spoke as a whole House and if Conservative Members took an interest in the matter. I welcome the opportunity that my hon. Friend has given us to consider some of the crucial economic issues involved.