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Volume 490: debated on Monday 30 March 2009

I am today announcing the revaluation of the 2007-13 programme of projects eligible for assistance through the European regional development fund. This is a prudent step to reflect the impact of changes in the exchange rate on the sterling value of the funds. With immediate effect, I can confirm there will be an increase of £144 million in the value of these programmes. This is money that is available to increase regional competitiveness, create and safeguard jobs, and stimulate economic growth. This will help regions minimise the impact of the recession.

I am also able to confirm, that because of the challenging economic circumstances, the European Commission has increased the advance payment due to the regional development agencies. This now totals £195 million (7.5 per cent. of the total programme). The extra £65 million of this will be paid to regional development agencies in late spring.

The actions I have described here will provide further help to these programmes to target worklessness, support small and medium enterprises and fund innovative, high-tech business investment and I have asked RDAs to revisit their programmes to ensure these reflect the Government’s priorities of creating and safeguarding jobs.

Late last year the European Commission offered member states the possibility of extending the 2000-06 programmes for a further six months until June 2009. The offer did not mean that there was any new money being offered by the EC. It was simply an offer of more time for those projects that had slipped against the previously planned schedule or those that had capacity to continue spending to produce additional outputs. There was little additional flexibility and it would have been unlikely that any new projects could be commissioned that met the requirements of the programmes and delivered in the time frame available. The European Commission recently offered us the opportunity to review this decision. We have done so carefully but there remains little advantage in England accepting this. Instead, we now want to ensure all efforts possible are made to help future projects and programmes maximise the substantially increased resources that are available in the new programme round (for the 2007-13 programme) which is just getting under way. Through these programmes a total of €3.2 billion (approximately £2.8 billion at today’s exchange rate) will be invested. Part of the requirement for the EC funding is that match funding must be secured for the ERDF grant. Match may come from a variety of sources, typically from RDAs, local authorities, other public bodies and private sector investors. This is tough in the current economic circumstances and we are aware of the challenges programme partners face in making the necessary investments quickly enough to have an impact.

I am therefore today writing to all the chairs of regional development agencies (who administer the 2007-13 programme round in England) to undertake a rapid joint stocktake of the match funding position to identify gaps and potential sources and to share best practice.

In addition, my officials are working collaboratively with the RDAs to help establish high spending programmes such as Joint European Resources for Micro to Medium Enterprises (JEREMIE) and Joint European Support for Sustainable Investment in City Areas (JESSICA) which are new financing schemes to support small and medium enterprises and help secure regeneration benefits in less well performing areas. We are working to overcome the barriers to these models and to technical issues relating to venture capital funds. These have the potential to create a sustainable investment legacy which over time will decrease reliance on European grants.

I am also taking the opportunity in this statement to report decisions by the European Commission which has now confirmed financial corrections for the 1997-99 programme period. These relate to the north-east and north-west regions. These programmes together are valued at £358 million and have been of substantial benefit to the regions. They have assisted more than 1,700 regeneration projects helping to boost employment, skills and business in disadvantaged areas. The financial correction for the north-east region is € 8,435,883.80 and for the north-west is €18,035,904.26. As the commission recognises we have worked hard to answer their concerns and there is no question of fraud or misuse of funds. These corrections are substantially reduced from the commission’s original findings as a result of the challenge we have offered in documentation and in strong representations at oral hearings.

We have made provision in our departmental accounts for these corrections. There will therefore be no impact on other priority areas of work, and I can also confirm that no local project will lose out or be asked to contribute given the length of time which has elapsed since projects started.