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Eu Structural Funds (Cornwall)

Volume 405: debated on Tuesday 20 May 2003

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4.16 pm

I very much welcome the opportunity to debate an issue of very great importance to Cornwall: namely the future of objective 1 status in the county after 2006. I will provide a little of the history of the subject. Winning objective 1 status was historic for Cornwall, and was the result of a great campaign that involved all the MPs in the county. The county council played a pivotal role, and opinion formers and many others in the community became actively involved.

The critical moment that enabled us to achieve objective 1 status came when the Prime Minister intervened and instructed civil servants to work with the European Commission to see what could be done to decouple Cornwall from Devon. After that intervention, Cornwall and Devon were effectively divorced for statistical purposes, and we stood alone. Before that, Devon's relative prosperity had been pulling us above the 75 per cent. threshold set for gross domestic product. There is no doubt that the Government secured an excellent settlement for the UK regions at the European Council summit in Berlin in 1999. Cornwall certainly benefited from that, and I would like to thank the Prime Minister for his efforts at that summit. After that, the Chancellor agreed to match funding for the programme, and, despite the doom-mongers, that has happened.

Objective 1 status is worth £600 million over the life of the programme, and it opens doors to many other sources of money. To date, 300 or more projects have received objective 1 funding in Cornwall. Offers so far total about half the funding, and the spend is pretty good in most areas. It is perhaps only in the farming sector where we need to do more. Some £150 million has been spent. With match funding, that comes to £345 million, which has gone to projects on the ground. That is one contributor to the incredible feel-good factor in the county.

Some £38 million of objective 1 funding went to the combined universities project, which is the flagship project of this phase of objective 1. It will create 700 new jobs and 8,000 student places by 2010. The topping-out ceremony takes place in Penryn in my constituency this week. Those in the Chamber who have followed the progress of that project would no doubt accept that, if it had been suggested just two or three years ago that the topping-out ceremony would be happening so soon, few would have believed it.

I believe that the university is critical to our developing economy. I hope that it will end the flight of so many young people who, for generations, have fled the county, crossed the Tamar bridge and gone to university in other parts of the country. They often do not return to their home county until they retire, if at all. We need those young people to stay in Cornwall and to develop new companies and create new jobs. I hope that the university will play a critical role in that.

Good news stories abound in the county. Rick Stein, Padstow, Eden—which is an international statement and a fantastic success as one of the top tourist attractions in the country—the maritime museum at Falmouth, which has just recently opened, and the Tate gallery at St. Ives all raise the profile of our traditional tourist industry, and make it a year-round concern. In Newquay, a new surfing beach opens later this year. You may care to partake in that, Mr. Taylor. I even extend an invitation to my hon. Friend the Minister.

Unemployment has continued to fall across the county. There has been a staggering 59 per cent. drop in Falmouth and Camborne since 1997. Alongside that, we have seen the introduction of the national minimum wage, which has lifted wage levels for many of those in the greatest poverty. Objective 1 has helped to bring broadband internet access to 10 towns across the county, and another 17 exchanges are being enabled. Even Prince Charles started to sing the praises of the Cornish economy recently, and I welcome that. A CBI analysis of regional trends noted that output rose highest in the south-west at the end of 2002, although that includes Swindon and Bristol. This is a good point to pause and to say that there is still a great contrast between the GDPs of Swindon and Cornwall. Swindon's is approximately twice that of the county.

There are those good news stories, but we have suffered the decline of manufacturing. Just two or so weeks ago, Compair Holman in my constituency, a company that was the cornerstone of the town for more than 200 years, announced that it was closing later this year and effectively exporting production to Germany. Yesterday, despite announcing profits of more than £100 million, British Airways announced that it was closing the critical business service between Newquay, Plymouth and Gatwick.

I congratulate my hon. Friend on obtaining this important debate and on making a powerful case since she was elected in 1997 on behalf of Falmouth and Camborne and the wider interests of Cornwall. British Airways is causing understandable anxiety among the business communities in Cornwall and Plymouth. Does she agree that it is vital that we start the strongest possible campaign to re-establish an operator for those services as quickly as possible?

I agree entirely with my hon. Friend. The cross-party meeting held with the Under-Secretary of State for Transport, my hon. Friend the Member for Plymouth, Devonport (Mr. Jamieson), was critical. We must work with all parties to ensure that these critical business services continue.

I turn to another aspect of objective 1. The bureaucracy has done serious damage to many rain forests around the world. The form filling reaches almost Kafkaesque proportions and it is totally unreasonable. We in the county are still lagging behind our colleagues throughout the UK and, according to the Commission, we could be below the 75 per cent. threshold at the end of the programme—the only part of the United Kingdom that falls into that category.

With that in mind, last autumn I went to Brussels, where a debate is taking place on how the EU and European Commission will handle structural funds given that the 10 countries seeking to join the 15 suffer such disproportionately low GDP in comparison with the rest of the EU. This March, the Government published their proposals on "An EU Framework for Devolved Regional Policy" within the consultation "A Modern Regional Policy for the United Kingdom". That is quite a mouthful, but it is very important to the county of Cornwall. The consultation lasts until July, and most of my comments will relate to it. It has initiated an important debate regarding the future of European structural funds. My question to the Minister is: what impact will they have on Cornwall?

The Government understandably want to focus on the poorest countries and to have the greatest effect. Money going from the UK to France post-2006 will cease. But what will happen to Cornwall? Relative to the rest of the UK, we are still lagging behind. I recognise that, in the document, the Government have pledged that regions will not lose out, but what does that mean? Are we talking about the European region of Cornwall or the Government office for the region that extends from Bournemouth to Gloucester, the Isles of Scilly to Swindon and that has double the GDP of Cornwall?

What safeguards will there be for a sub-region such as Cornwall? Are we going to be married to Devon again, or even Swindon? The current pledge is to the region. I suspect that that means the UK Government region. I can find nothing in the document about protecting existing objective 1 regions. How will they not lose out despite what it says in the document? What is in comparison to what? Will this be what the EU would have agreed—the full Monty of objective 1, phase two, or will it be a much smaller amount of transitional funding when we might have qualified for the blockbuster?

The Government say that they want to devolve power to the regions, but we need to know what that means. Will it mean that Cornwall will control the money or will the Treasury tell the regions what it has decided? Will regions be directed to spend money in the poorest areas? What if the regional development agency directs funds to Swindon to solve the skills shortage at the expense of Cornwall?

I am grateful to my hon. Friend, who has been a champion of Cornwall and of objective 1 funds for many years. However, does she agree that it is important that the Government negotiate on two strategies? The first strategy is to negotiate the best deal for British regions if there is a European-based structural fund after 2006, and the second is at least to get some detail on what it will mean for regions such as Cornwall if nationalising the structural funds is advocated.

Absolutely. I could not agree more. That is basis of my questions for the Minister today. We need to know to know where we stand.

There are concerns that Cornwall may lose its special treatment as part of the south-west region. There must be a focus on the poorest regions in the RDA areas. There is one aspect in which taking control of the system might be beneficial. As I said earlier, the bureaucracy of objective 1 has to be seen to be believed. To have to satisfy only one set of masters as opposed to at least two would be widely welcomed.

I want to reassure the Minister that we do not want to remain dependent on support, but we need at least some transitional funding. The blood transfusion cannot be stopped before the patient has recovered. It is unrealistic to think that the poorest region can be turned round by one tranche of objective 1 funding. Our poverty was not created overnight, nor will it be solved overnight. People cannot wake up to find that projects have had funding streams cut away. Phase two of the university, which I have described to the Chamber, is critical in that context. If we are going to make the jump, all the rural areas of the county must be involved. That is the main thrust of phase two. We would need objective 1 funding or similar in order to make that critical move for the university.

In my constituency, an urban regeneration company has only just been established, which is one of only two in the wider south-west. Coincidentally, the other one is in Swindon. If we are to make a real impact on the largest industrialised part of Cornwall—the Camborne. Pool and Redruth area—we shall need long-term help.

I have to be honest and say that I think that the Government may face many problems in the plan for nationalisation of structural funds. The Commission would be loth to lose control of regional policy because, apart from the common agricultural policy, regional policy is the largest expenditure in its budget. Any changes will have to be agreed by all the states. That, I suspect, could be a tall order. At the forthcoming summits, there will be debates long into the night. In the negotiations that take place over the next few months and years, it is critical that the Government have a clear vision for Cornwall. Will the Minister say how our European colleagues greeted the British proposals? Have the Government already met resistance and if so is a revision of the plans on the agenda?

In conclusion, objective 1 has been the success story that it is in Cornwall today. The Government have been critical to achieving that and I am grateful, as are many other people in the county, for the work that they have done. However, I hope that the Minister can reassure my constituents that our fragile economy, which has been making strides, will not stall and that there will be long-term, sustained investment in the best county in the UK.

4.29 pm

I congratulate my hon. Friend the Member for Falmouth and Camborne (Ms Atherton) on securing this debate and on her strong representation of Cornish interests. As far as I am concerned, she is one of the reasons for the feel-good factor in Cornwall. As for the invitation to visit, I have been to Cornwall on many occasions, not least last year on a family holiday to the Roseland peninsula. I have seen at first hand what a beautiful county Cornwall is. Although the debate is specifically about Cornwall, I cannot dissociate it from our approach to the whole issue of European Union structural funds and cohesion policy post-2006. As my hon. Friend is aware, we are currently consulting on the proposals. The consultation document may not have the snappiest of titles, but it represents an effort to start thinking about an important issue.

The proposal, on which we are consulting internally before talking to colleagues in Europe—although there are informed discussions going on—offers the best way forward for Cornwall as well as for the UK and the rest of Europe. In 1999, when the structural and cohesion funds were last debated—in Berlin—we were successful in securing an objective 1 programme in recognition of Cornwall's development needs. At that time, we were taking the very early and tentative steps towards decentralisation in the UK, as well as to devolution in Scotland, Wales and Northern Ireland. We did not have a regional policy worth speaking of and had only just set up the regional development agencies. The London RDA did not come into being for another year.

Tackling regional and sub-regional disparities, dealing with social exclusion and urban deprivation and addressing the needs of rural communities are as much a priority for this Government as they are for Brussels. Those concerns have been mainstreamed domestically and are absolutely central to our objective of spreading prosperity and opportunity through all UK regions. There has been a policy change.

The next round of structural and cohesion funds will apply to a European Union of 25 member states. The historic enlargement of the EU is key to its future success. It will bring tangible benefits to both new and existing member states, locking in peace and stability, enhancing security and opening new markets. However, it also presents new challenges, of which this is one.

Disparities between member states will be starker than ever before. All the new entrants have a per capita GDP below the current EU average; they are all poorer than the poorest member state. The lowest four have a GDP of less than 40 per cent. of the average. The whole ball game has changed. Objective 1 funding is allocated to regions that have less than 75 per cent. average GDP. The change in the average has a statistical effect.

As I have said in answers to the hon. Member for St. Helens, North (Mr. Watts), we accept that the fact that there has been a statistical change does not remove the problems of people living in Cornwall, South Yorkshire, Merseyside or any other area that is or has been an objective 1 area. However, it does change the way in which Governments address such issues. In future, community resources need to be focused on the Union's poorest member states, particularly on our new partners. The case for the reform of the structural and cohesion funds is overwhelming. After the current round of funding ends in 2006, we will have a unique opportunity to adapt EU structural and cohesion policy to reflect the changed and disparate needs of an enlarged EU, while reinforcing our commitment to common European goals.

In my constituency, I am more than aware of the importance of EU funding in regeneration. It has been an essential part of the recovery in Hull after the collapse of the fishing industry. I agree that EU structural funds have provided a catalyst for new and innovative working practices and for new partnerships that did not exist previously. That is particularly relevant in Cornwall, where people have told me that the catalyst was objective 1 and that they have now found partnerships and co-operation that did not previously exist. As we know that EU resources act as a catalyst, helping to focus the domestic agenda on regional issues, we want to ensure that, in future, the resources of the EU will be available to those who need them the most.

We launched our discussion document, which was a joint document between the Treasury, the Office of the Deputy Prime Minister and the DTI, at the beginning of March. It is an important contribution to the debate on the future of the funds and it explains, albeit rather long-windedly, our proposals for reform.

We believe that future cohesion policy should be explicitly linked to the agenda set by European leaders at the Lisbon Council in 2000—the 10-year strategy to reform Europe's product, capital and labour markets. We propose that this link be established via an EU framework of objectives for cohesion policy supported by the regional development efforts of all member states. My hon. Friend said that the Commission would be loth to lose control of regional policy. We are not trying to do Commissioner Barnier out of a job and we are not seeking to change the basic fact that the European Union sets this policy. We set policy in many other areas such as industrial policy and competitiveness. It is not always linked to the funds. We are making an important differentiation.

When I have spoken to Commissioner Barnier, he has talked about three levels of funding and a change so that the current objective 1 regions would effectively get a special different type of objective 1 post-enlargement. Will my hon. Friend comment on that?

Commissioner Barnier plays an important part in this debate. We had an informal meeting in Greece on Friday and Saturday, at which not just the 15 member states but the 10 accession countries had a healthy discussion. I am unable to say yea or nay to proposals from Commissioner Barnier or anyone else. We simply say that we must start the debate now. We must look ahead. The crucial point in terms of what Commissioner Barnier says about objective 1 relates to a point that I will come to in a second.

We argue that net contributors to EU funds, such as the UK, should not need to recycle their money through Brussels. It is a simple argument. Much of the bureaucracy that my hon. Friend described could be cut away, given that we have a regional structure. We have decentralisation and we may have gone a bit further towards devolution in England, let alone Scotland, Wales and Northern Ireland by 2006. It would end the unnecessary and inefficient recycling of funds between richer member states such as the UK via Brussels, and it would concentrate EU activity where it can add the most value. Devolving the delivery of regional policy in support of common objectives to member states would also entail less red tape and bureaucracy. In the UK, our commitment to devolution and decentralisation would mean greater flexibility for regional policy.

The Minister said that regional policy was a long-term pursuit. What sort of programme do the Government plan to develop? Will it be a seven-year or a 10-year programme? Once those funds are allocated, will they be there for seven or 10 years?

That is a perfectly valid question. We tend to think that the seven-year programme is right. There is a debate about whether it should be longer or shorter.

I hope that the Minister understands that at present the regional development agency in the south-west has a say in how objective 1 funding is spent—a rather bureaucratic one from our point of view—but it cannot spend the money elsewhere. The Government appear to propose that money that would be allocated specifically to the objective 1 region would go to a regional office that would have the discretion to spend it elsewhere. Is that correct?

That is an important point. If the hon. Gentleman will forgive me, I shall come to it when I reach what might laughingly be called my peroration.

Devolving the delivery of regional policy in support of common objectives would cut red tape and simplify the procedure. Of course, we recognise that Cornwall is in a unique position. If we continued with the same system, and on the basis of current GDP data, Cornwall, unlike any other existing objective 1 area in the UK, might retain objective 1 status in an EU of 25 member states. Merseyside, South Yorkshire, West Wales and the Valleys would lose eligibility. However, given that Cornwall would be one of the richest objective 1 regions, in one of the more prosperous member states, its allocation would be much lower than currently. It is a simple fact that, throughout the UK, our receipts from structural funds will fall post-2006.

Some people suggest that the overall budget should be larger, which is a perfectly healthy part of the debate. Incidentally, I do not think that there are many takers for that, even from our informal soundings. However, as a major contributor to the EU budget, we say that increasing the EU cake to ensure that we can all still get a slice will only divert more domestic resources away from the people who need it in Cornwall and the rest of the UK. That is not the solution. It makes more sense for the UK to fund its own regional development in support of EU cohesion policy. That would give us the flexibility that we need to react effectively to problems as they arise.

We recognise that such a reform would mean forgoing some structural funds that would have found their way to the UK post-2006, even with enlargement. Therefore, the Government guarantee that, if the EU framework that we propose were agreed, domestic regional funding would be increased, so that the UK nations and regions did not lose out through that reform.

I come now to the question asked by the hon. Member for Truro and St. Austell (Matthew Taylor).

I am grateful to hear that reassurance from the Minister, but can he be specific and say who will make decisions relating to that money? Will they be made by the regional development agencies or at a lower level, and will the money be ring-fenced to the county, not the wider region?

It is the same question, and a crucial one. We are at the stage of saying that we need to change the basis of EU structural funds; we are not yet discussing the nuts and bolts of how we do that. However, I have said clearly in this debate that we are looking to put resources where they are most needed. In the EU, that will be in member states. Within member states and the richer member states, that will be the regions and areas that need resources the most. We think that areas of high unemployment and low GDP are in that category.

There are various mechanisms. We are not saying that we will go into this brave new world with the existing way in which we allocate RDA money. There is a proper debate to be had on that, and we are willing to listen to the arguments of hon. Members in Cornwall and elsewhere about how we might do that. Currently, 75 per cent. of all regeneration funding is from domestic funds; only 25 per cent. comes from the EU. We are already considering how we can deal with that in a much better way. If that is an argument about RDAs—the Swindon-Cornwall argument, to put it in crude terms—let me say that we are wedded to the principle of looking at areas of high unemployment and low GDP. We will consider the mechanisms necessary to do that.

In addition to what I said a moment ago, we would commit to ensuring that UK nations and regions had sufficient resources to continue to be able to promote regional prosperity, targeted on areas of high unemployment and low GDP. We cannot put a figure on that commitment now, because we are talking about decisions being made in 2006 on the basis of data that we do not yet have. However, it is hard to imagine a situation in which Cornwall loses most of its EU receipts without being considered a high priority by a UK Government.

The UK's proposals are aimed at creating a regional policy that is flexible enough to continue to meet Cornwall's needs. As I have said, the Government are consulting on the proposals. We very much welcome debates such as this, although we will not call the proposal our proposal for the rest of the EU until we have finished our domestic consultation, including, of course, with the devolved Administrations. This is a healthy debate, and I hope that I have reassured hon. Members that we are talking about a perfectly sensible proposal for change. There will be a once-and-for-all opportunity to achieve that in 2006.

Question put and agreed to.

Adjourned accordingly at sixteen minutes to Five o'clock.