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Ecc 12Th Report: Revision Of The European Regional Development Fund

Volume 432: debated on Wednesday 30 June 1982

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5. 51 p. m.

My Lords, I beg to move That this House takes note of the Report of the European Communities Committee on Revision of the European Regional Development Fund (12th Report, 1981–82, HL. 126).

I hope in initiating this debate that I will not be regarded as being presumptious, since I am not a member of the committee. Indeed, the committee in their report did not recommend your Lordships to debate this most recent of their reports, perhaps because they were too modest or perhaps because they felt that the last debate was too recent. It is only just over a year ago since the Regional Fund was debated in your Lordships' House, on 13th April last year.

On that occasion my noble friend Lord Banks, who I am pleased to see is going to join in the debate again tonight, said:
"I hope that when the Select Committee produce the next of their excellent reports on this subject, in 1985 or whenever it is, they will be able to report progress".—[Official Report; col. 805.]
The items on which he hoped for progress were:
"support for a very much larger Regional Fund as part of a larger Community budget … support for a co-ordinated regional policy including a much increased proportion of the Regional Fund distributed on a non-quota basis, and support for more direct formal access to the Commission for regional authorities and agencies".—(col. 804.)
Had I been here I would have supported that speech most wholeheartedly. Unfortunately, by sheer coincidence, that was the day before announcements of a new list of peerages was given to a waiting world, of which I was one, so sadly I was not able to take part in that debate.

When it was suggested that I might initiate this debate today I was happy to do so for three reasons. First of all, I have always had a great interest in regional government in the United Kingdom. I was in fact chairman of a committee of Liberal candidates as long ago as 1964 which produced a report on regional government in the North-West of England. I am a powerful believer of a federal United Kingdom within a federal Europe, but I do not propose to pursue that in great detail tonight, but I merely state my position.

I also am pleased to initiate this debate because I believe that it is important that when there is something good to say about the European Community we ought to go on record and say it. After listening to at least part of the last debate, I hope that in some ways we can make some positive contribution to burnishing the image of the European Community in this debate. Secondly, it is a good thing that we in this House should show the good work that is done by your Lordships' House, particularly when it is under attack from all sides, and it seems to me that the Select Committee on the European Community is a good example, perhaps a prime example, of the excellent work which your Lordships can do in Parliament. I think that this report is highly commendable, and I am sure that I shall be joined from all sides of the House in congratulating the noble Lord, Lord Plowden, and his hardworking committee on the work that they have done. They certainly deserve our heart-felt thanks. It is a lucid report on a complex subject.

May I return to what my noble friend Lord Banks said in that last debate. I believe that there has been genuine progress in the Commission's thinking on the basis of what he said and what was included in the 14th Report of the 1980–81 Session which was debated last time. It is true that there is no significant or perceptible increase in the size of the fund. It ramains foolishly low. It is true that behind the report there is the sad fact that regional inequalities are widening in growth, in income, and in employment. One is reminded that that was what lay behind the 14th Report debated last year, and led the committee at that stage to recommend, among other things, the inclusion of industrial projects in broader development programmes; the suggestion that the ERDF support should be confined to those member states who were below the Community average level on a common criteria in order to focus aid where it was most desirable and most needed.

I think it is true to say that the new Commission proposals go at least some way in these directions. We have the recommended introduction of programme contracts. Although there are some doubts about the contract aspect of that phrase, whether it is over-legalised, nevertheless I think that the idea of programmes versus individual projects is something which will find support in your Lordships' House, and certainly found support from the Committee. There is indeed the restriction of quota payments to countries who are below the average of an index based on GDP and employment. It is, of course, one of the facts that this country is one of the bottom four in that league table. It is something which should constantly give us pause.

The other thing is that there is the recommendation that the non-quota payments should be increased to 20 per cent. Certainly from these Benches all those recommendations are welcome. We give a particular welcome to some aspects of the regulations drafted by the Commission which seem, to me at least, to be a genuine attempt to increase transparency, or visibility—I am not sure which is the proper word; I think they probably both mean the same thing even though they are contradictory—to additionality and to local authority involvement.

Of course, there remains enormous problems to which the committee has drawn our attention. The question of the exclusion of Yorks and Humberside, and parts of Devon and Cornwall, to which I suspect that the noble Lord, Lord O' Hagan, may refer at a later stage in the debate. Certainly he has my support there. There is indeed, as the committee says, a need for flexibility. It is worrying that some of the decisions are based apparently on out-of-date statistics. Some of them are as much as four years old. One of the things that we hope to hear from the Minister in his speech is what plans the Government have to try to improve the flexibility in that area.

There is the problem, particularly to this country, of the lack of regional authorities in this country. Again, that would make an interesting debate to be initiated from these Benches. There is the problem of the size of the standard English regions in comparison with those in Germany and France, which all add to some of the distortions and some of the anomalies which are being thrown up in the United Kingdom.

There is, of course, the question of black spots. I should like to ask the Minister how he envisages this problem being handled. May I quote from the committee's report where it says, on page xxi, paragraph 40.10:
"Aid for black spots 'from the non-quota section should rest on the individual needs of those areas, whether or not the United Kingdom Government has granted them assisted area status".
We are anxious to hear from the Government how far they are prepared to go down that road.

Then there is the vexed question of additionality. It is a continuing problem and I detect from the tone of the committee's report that they are becoming somewhat resigned to never getting to the nub of the problem. But it seems to me that Parliament cannot have blind faith in the Government in a matter of that sort; it is not the job of Parliament to take the Government on trust in such matters, and the onus is on the Government at some stage to prove that additionality is part of their policy and is taking place. I say that, not just for basic reasons, as one would do from an Opposition Bench, but because for those of us who are interested in convincing our fellow countrymen that the European Community is working, it is important that it is seen to be working, particularly in areas like the Regional Fund. On the question of additionality, it is not seen to be working at the moment and the onus is on the Government to try to increase the visibility of that additionality. I well understand that it is extremely difficult to prove one way or the other, but if we believe in the fund, it must be seen to be putting its resources where they are needed.

It is difficult to escape the view that the Treasury sponge is gleefully mopping up some of the gravy. That feeling is somewhat reinforced, I would say, by the evidence of the Department of Industry on page 2 of the addenda to the report, where, in the third paragraph, they say:
"The exclusion of certain United Kingdom assisted areas is unwelcome and we shall certainly resist it. However, if the inclusion of such areas seemed likely to result in a significant reduction in the United Kingdom's overall receipts from the Community, we should obviously have to consider that situation very carefully".
That is a somewhat revealing quotation, and it was picked up by the noble Lord, Lord Roberthall, in the questioning on page 8 of that evidence, questions 26 and 27. Again the Department of Industry reply is extremely revealing, for it says:
"At the end of the day, the overall consideration must be the national interest—the overall national interest—and, if the inclusion of these areas the Commission has excluded meant the United Kingdom was going to get less money as a whole, I think the answer is fairly obvious".
That is a fairly obvious answer to the question, but it seems to indicate a central Government view of the matter, one that is prepared to sacrifice black spots and regions, be they Cornwall or Corby, if at the end of the day the going gets too tough; and I worry that perhaps the Government are not applying themselves quite so firmly to the problem as they should.

With that emphasis on the central coffers, I wonder whether we are to be surprised that people remain sceptical about additionality.

I have a slightly critical comment of the committee's response in paragraph 18 on page xii of the report, where they say, talking about that reply from the Department of Industry:
"The Committee well understand this point of view. They believe nonetheless that the rights of the poorer United Kingdom regions to benefit from the ERDF should be determined on the merits of their case."
I wish they had put that point rather more powerfully; they might have been rather more critical of the Department of Industry in their evidence at that stage.

I am also slightly critical of conclusion 40 at page xx, where, talking about the expansion of the non-quota section, the report says:
"The expansion of the non-quota section is the necessary complement to an increasingly geographically concentrated quota section; but it will be difficult to distribute 20 per cent. of the entire ERDF under the non-quota section over the next three years".
Nobody doubts that it will be difficult—I think it will be extremely difficult, and all the evidence they received tended to reinforce that point of view—but I wish the committee had taken a more positive view over the increase in the non-quota section. They might well have said that they really believed that 20 per cent. was the direction in which we should be going, because, frankly, I do not think it is up to us to offer excuses as to why that cannot work, particularly if it is based on pure administrative problems. That is a problem for the Government and the Community to solve, and we should state our case more clearly; and certainly from these Benches we would state quite clearly that we believe that the non-quota section should be increased to 20 per cent.

With those two minor, though important, caveats, I commend the report to your Lordships and I look forward to hearing the Minister's response, and particularly to hearing the contribution of the noble Lord, Lord Plowden. I beg to move.

Moved, That this House takes note of the Report of the European Communities Committee on Revision of the European Regional Development Fund (12th Report, 1981–82, H.L. 126). —( Lord Tordoff.)

6.6 p.m.

My Lords, we are grateful to the noble Lord, Lord Tordoff, for initiating this debate and for the thoughtful speech he made, and to the noble Lord, Lord Plowden, who I am glad to see is in his place, and his colleagues on Sub-Committee A for their report, which is to be read together with their larger report which was debated here on 13th April of last year. It is unnecessary in the light of that debate to traverse the whole ground again. However, during the last 12 months there have been changes and, on the whole, although they are not great changes, they point in the right direction.

It is encouraging to note that some of the proposals of the committee have been accepted by the Commission, as is pointed out in paragraph 11. The restriction of the quota system to four countries, including our own, appears prima facie to be a helpful development and we should be grateful if the Minister would say what additional assistance in practice that will bring us. I would refer specifically to the words at the end of paragraph 10(b):
"The revised United Kingdom share of 29.3 per cent. of the proposed smaller (80 per cent.) quota section is close in absolute terms to the present 23 8 per cent. of the larger (95 per cent.) quota section which it replaces".
In other words, it seems there is to be no more cash for the United Kingdom than before. France, Germany and the others are to receive little or nothing, as the table on page 7 shows, and the money saved is to go to Greece, as is shown in table 2 at the end of paragraph 10. I do not object to money going to Greece—that is something we must accept, now that Greece is in the Community—but it must be made clear that we are not to receive any great benefit as a result of the readjustment.

That really goes to the root of the long-standing British complaint. We are net contributors to the budget and seem likely to remain so until there are radical changes, especially in the common agricultural policy. The Regional Fund is one source from which the United Kingdom could obtain resources to balance the account. Indeed, as the report reminds us, it was set up with that very much in mind when we entered the Community. But the fund and the sums involved are small by comparison with CAP expenditure, and the report reveals that we are unlikely to receive more cash from the ERDF. I think it is important for that point to be made absolutely clear at the very outset of this debate.

The argument about the budget will, of course, continue, and it must not be expected that the ERDF in its present form and size will help to resolve the problem. However, that does not mean that ERDF is of no value; on the contrary, it can be of great assistance to those regions which have serious structural problems. The committee accepted the two indicators used by the Commission to determine the eligibility of regions for ERDF aid; that is, regional GDP per head and the rates of long-term unemployment. Those seem to me to be the proper criteria.

However, in paragraph 17 of the report the Committee strongly criticises the use of only 11 "standard" regions in the United Kingdom, pointing out that that,
"appears grossly to understate the economic difficulties of many areas"—
of this country—
"where there are large pockets of structural underdevelopment within relatively prosperous 'standard' regions".
The committee points to Corby and Cornwall, and there are other places as well. It urges the Commission to show greater flexibility and suggests that the Government should provide more detailed regional statistics to the Commission in future. I hope that they will do so, and I shall be interested to hear the Minister's comments on that important recommendation.

Again, paragraph 33 draws attention to the views of the Association of District Councils on the black spots to which the noble Lord, Lord Tordoff, referred in his speech. The committee takes the view that these unfortunate areas should not be discriminated against by the new non-quota section, and that their case at Community level should rest on the merits, whether or not the Government have granted them assisted area status.

Another case in point is that of mid-Wales, and I am glad to note that the Secretary of State has announced additional help. I think that it was announced in a Written Answer on 28th June. Will the Minister be good enough to confirm that the measures announced by the Secretary of State for Wales will in fact qualify mid-Wales to receive assistance under the ERDF? This is a very important point. In your Lordships' House on Monday the noble Lord, Lord Trefgarne, repeated a Statement made by his right honourable friend, and we were grateful for that. We then had an exchange of questions, but I think the crucial point is whether or not the measures bring mid-Wales within the ambit of assistance from the ERDF.

The committee also maintains that the main responsibility for the black spots rests with the Government and that it is from this quarter that local authorities must receive redress at the end of the day.

Another matter of importance to which the noble Lord, Lord Tordoff, referred in his speech is "additionality" —I am attracted to the principle; I dislike the word—and the report goes into some detail about it. The committee is quite specific in paragraph 4(a), where it reminds us of what it said last year. The committee's Fourteenth Report,
"criticized the reluctance of member governments to allow grants from the ERDF to be added to what they had already allocated for regional aid in their national Budgets. Disrespect for this additionality principle called into question the value of the ERDF and acted as a brake upon its further expansion".
That I think was a very serious criticism, and one which I hope the Government will have taken seriously, though nothing seems to have happened since then.

In paragraphs 31 and 32 of the report the committee makes further recommendations, and, if I may, I shall quote from this part of the report as well. The committee states:
"the present methods of distributing the ERDF quota section finance conceal what little additionality there is, thereby making a strong case for change. The new Regulation could provide the means for achieving greater additionality, especially using the programme contract approach. This appears to be the view of other Member States.…If the programme approach does not succeed in achieving greater additionality, it would at least provide greater visibility to the financial contributions made by the ERDF. That would be a significant gain. The Committee emphasize that the goal of additionality is vital if the ERDF is to have a future and if the credibility of the Community's regional policy is to be maintained".
Those are strong and positive words from the committee, and they call for a clear response from the Government. I was disappointed by the evidence of Ministry officials on this point. They were vague and inconclusive. I do not blame the officials; they were merely reflecting the Government's uncertainty on the matter. The impression is given that the Government do not wish to be precise on the principle of additionality. Therefore, may I ask the Minister a plain question? It is this: are the Government committed to the principle that the regions are entitled to receive the assistance from the ERDF on top of any assistance that they may receive under the United Kingdom's own regional aid programme? A plain answer to that question would clear the air considerably.

Furthermore, the important section on programme contracts also calls for some clarification. I understand that the Government regard these as complicated and as additional burdens on an already overworked Civil Service. Well, I sympathise with that view. The Minister's reaction to this matter will be appreciated. Would it not be possible to use the services not only of government departments—the Department of the Environment, the Welsh Office and the Scottish Office—but also of the Welsh Development Agency, the Scottish Development Agency, and the National Enterprise Board, as well as local authorities, at both county and district level? They would be glad to participate, and I note that this point is recognised by the committee in its report.

I should now like to draw attention to the tables at the end of the report. They make very depressing reading, and they show how vital it is that the resources of the fund should be used effectively and urgently. For example, Table 3, giving the combined indices for the regions, provides a picture of the problem and the need. I hope that I may be permitted to point out that, while many regions are hard hit, Wales has the worst combined figure. Last Friday I attended a meeting of the newly-formed Welsh Committee for Economic and Industrial Affairs, and it is clear that local government in Wales is deeply concerned that the control exercised by the Government has resulted in a failure to maximise the benefits of European funds, especially the ERDF.

One point made was that local authorities receiving grant for infrastructure projects are not permitted to spend more than the pre-award budget. The net effect is to replace loan sanction with grant—a saving to the Treasury without any extra projects being initiated. In my view that is not a good development.

It seems also that the Commission's objective and our own Government's policies to some extent are in conflict. Let me explain. The Government's imposition of stringent controls on local government, limiting local authority expenditure within centrally determined limits, is clearly at variance with the Commission's initiative. The two do not go together. While we understand what the Government are doing, I think it is important that the effect of their actions on the Commission's policy should be made plain to the House and to the country, and I should appreciate the Minister's reaction to this criticism. If it is true, then we may as well know where we stand.

I also assume that the Government's wish to control stands in the way of any possibility of direct dealings between the local authorities and the Commission. That, too, is a matter of much discussion within local government today. It was also made clear to me last Friday that local authorities are ready to co-operate in the development of programme contracts under the direction and guidance of the Government themselves.

In considering the ERDF we should not overlook the importance of the European Social Fund. The relationship between the two funds should be carefully monitored to ensure that both have distinct areas of operation and that resources are not wasted. Local authorities have made valuable use of the ESF indirectly through the Manpower Services Commission's special programmes. In my view that has been very effective work indeed.

We should also consider the importance of integrated development plans, such as the plan for the Western Isles of Scotland. Here agricultural aid, the ERDF, and the ESF can come together, and I should like to know whether the Government believe that this kind of co-ordination is desirable and should be supported.

Finally, my Lords, may I say that we are grateful to the committee for a very instructive and valuable report. May I also urge the Government to make the maximum use of the ERDF with an energy and an urgency which matches the gravity of the problems facing many parts of the country.

6.20 p.m.

My Lords, before the House addressed itself to the problems raised in the report submitted by the noble Lord, Lord Plowden, and his committee there was a brief moment when a Bill was read a first time—a Bill entitled the Derelict Land Bill. There is something particularly appropriate about the conjunction of that Bill and this debate, because the ERDF (the European Regional Development Fund) is an attempt by the European Economic Community to prevent dereliction in the more remote, the more disadvantaged and the more handicapped areas.

These problems cannot be solved by national means alone, and neither can they be solved wholly by the European Economic Community; but the ERDF is an aspect of the Common Market social conscience, and if we are now beginning to clear up some of the remains and the consequences of the first Industrial Revolution, and to re-equip and restore the social and economic balance in remote areas where natural resources are weak and communications are difficult and very expensive, then, as was the noble Lord, Lord Tordoff, we must be glad that the EEC looks at the human consequences of economics, the social aspects of the greater freedom in the distribution of wealth, as well as concentrating on the pure free market and the creation of greater wealth by the exchange of goods and services. So I believe that the case for remaining in the European Community depends in part on extending, making more efficient and consolidating the European Regional Development Fund, and I am grateful to the committee and to the noble Lord, Lord Tordoff, for providing us with a background brief as well as the occasion to discuss this issue.

My Lords, as my noble friend Lord Harmar-Nicholls is absent today I can say with some degree of safety that I agreed with nearly everything that the noble Lord, Lord Tordoff, and the noble Lord, Lord Cledwyn, had to say. It is reassuring that, although we approach the way in which the Community and the Regional Fund itself works from different political angles, in the House there is, I sense already, particularly from the report, a convergence as to what is best for Britain when we are looking at the Development Fund's future. I would not want to traverse the ground which has already been covered by the two noble Lords, so I will merely make one or two marginal comments on some of the things that they have said.

The accessibility of Brussels to local authorities is an important question, but it is not one where the problems are readily appreciated by every local authority in Britain. The number of staff in the Commission (as we should be grateful) is under 10,000, and those concerned with regional development are a very small fraction of that 10,000, a large number of whom are translators. The logistical problems of organising visits continuously from local authorities in 10 member states are very severe; and I hope the Government will consider giving guidance, through the Association of District Councils or the Association of Metropolitan Authorities, or whatever, on the best manner in which aplications can be made, and some understanding as to why it is difficult to get your place in the queue. There are simply too few people in the Commission to give easy access to everybody when they want it the first time. So I would add that note of caution.

Another point that I think noble Lords may feel worth pursuing is this. Grants are given from this fund for a wide variety of projects throughout the United Kingdom, yet many people know nothing about what has been given from Brussels, or what it was meant to do. They are not aware that a quarter of the local fire station or one-third of an advanced factory can be directly attributed to help from the European Economic Community. I wonder whether my noble friend would consider encouraging local authorities, where they are in receipt of moneys under the ERDF, to put up a simple plaque recording that the money has come from Brussels. Some particularly progressive local authorities, such as Devon County Council, do this already, but it is not uniform. I am sure that your Lordships, while regretting the pursuit of uniformity for its own sake, would agree that some form of token indication of gratitude would help the public to know that some of the money that they are so concerned about when they read about the amount that we pay into the Community actually returns in the form of helpful projects.

My Lords, I say no more about additionality except to express the feeling that the Government are a persistent sinner in this regard, and that the prospect of redemption is being ever delayed. If there is anything that my noble friend can tell me to startle me, I shall look forward to it, but I do not expect it. It is particularly useful that we are having this debate today, because the new fund regulations are reaching a conclusion. Rumour has it that there is going to be a Council of Ministers' meeting in July on this proposal; others say it is going to be wrapped up in the Summit. I wonder whether my noble friend is able to give any clue as to when a decision is likely to be taken, or at least when a ministerial meeting is likely to have the new ERDF regulations on the agenda.

There are two other points in the margin. I share the scepticism of the committee that even if the Council of Ministers were able to agree on the non-quota section being extended to 20 per cent., it might be difficult to use all the money. Like the noble Lord, Lord Tordoff, I do not see that as any obstacle against trying, and I see a particular urgency in this country to use some Regional Fund money for those areas that do not happen to fall into the zones used by British Government statisticians for regional purposes. We all know that they are imperfect, and it is a pity that all black spots are excluded. I would welcome reassurance from my noble friend that it is the policy of the Government to allow an increase in the number of projects associated with tourism which can qualify under the Regional Fund for assistance from Brussels. At one point there was some doubt about this. It seems to have been dealt with, but I should like confirmation.

I agreed very much with what the noble Lord, Lord Cledwyn, said when he was reminding us about the difficulties of measuring and the awkwardness of statistics in regard to regional assistance. The standard regions are very awkward for Brussels. They are clumsy, they are big; and, as he indicated, they tend to conceal within them pockets of poverty which are drowned in a sea of wealth. This is certainly true of the South-West. The region itself contains some very striking examples of poverty, with unemployment rates up to 25 per cent. in parts of Cornwall. From a document recently produced by the Devon and Cornwall Joint Committee—a committee of both county councils—it is clear that the average net annual income in Devon and Cornwall, in the assisted areas, is lower than the average net annual income in Northern Ireland. That is not a figure that one would immediately believe, but it is quite true; and when one looks at the statistics of the average weekly earnings, particularly of women, one sees that the position in the extreme South-West is the lowest, bar one, in England.

It is not the steel-hearted and cold-blooded men of Brussels who have looked at Camborne or at North Devon and said, "You people who are unemployed (or, if you are employed, are on low rates of pay) cannot have money from us". It is not Commissioner Giolitti and his team who have studied the statistics of wealth and have said that Humberside and other areas in Britain under threat were too rich; they made no decisions of the statistics of their own; the statistics were those that we supplied and as, the noble Lord, Lord Tordoff, has said, they are now out-of-date and in the case of the South-West and elsewhere the subdivisions of the map do a gross disservice to the nature of poverty in certain areas.

I would suggest to my noble friend that with his recent experience in the Foreign and Commonwealth Office and knowing the difficulty of reassuring people in this country that membership of the Community is really worthwhile, were the British Government to allow areas in the South-West and elsewhere in the country (for purely arbitrary statistical reasons) to be swept off the ERDF map, it would play a significant part in those areas in creating further hostility towards the EEC; and no doubt the MEPs would be blamed but certainly Her Majesty's Government as well and I think it would undermine the position of the Government in trying to influence opinion in the Community.

On opinions in this country about the Community—I do not want to speak for too long—I think that your Lordships would welcome an up-to-date account of the progress of the new Regional Development Fund Regulations. Where do we stand? How firm are the Government going to be? The noble Lord, Lord Tordoff, recounted some parts of the reports. I received a Written Answer recently in which my noble friend Lord Trenchard informed me:
"The proposal for the exclusion of the English regions is … unwelcome, and we are resisting it firmly".
I should like to know what is meant by "firmly". While we still have the veto in the Community, will the Government veto the proposal unless these regions are reinstated? I think that this is something on which we would welcome confirmation. As I understand it, these proposals are severely unpopular in many other member states and therefore a change in what is suggested so far is necessary and likely, from their point of view; and if they are going to get some concession, then we should, too.

In the next debate, we shall be listening to the noble Lord, Lord Harris of High Cross. No doubt his approach to these matters, supervised by the Institute of Economic Affairs, would lead to the abolition altogether of regional aid. I do not think that we can indulge in the economics of the laboratory. I remember a recent occasion at a meeting in a remote part of Devon where the chairman and his wife were the only members of his form at grammar school who remained in the locality. Everyone else had gone. Cumulative denuding of the human and physical wealth of our remoter regions will increase the problem of the member states and of the Community. ERDF is a small, perhaps even token advance towards rectifying these natural defects. By whatever proportion the fund is increased in size, we stand to benefit disproportionately. It is a national to increase the size of the regional fund and it is in the interests of everyone who believes in the Community to welcome its existence and further development. With those words, I thank once again Sub-committee A and the introducer of this debate for giving us the opportunity of looking again at these matters.

6.35 p.m.

My Lords, I am sure that the House is grateful to the noble Lord, Lord Tordoff, for having introduced this Motion and to Lord Plowden's committee who produced the report which is the subject. It seems to me that Lord Tordoff's Motion offers a useful and timely opportunity to debate the relationship between our national regional policy and the Community's regional policy, embryonic though that may be. On the national side, we heard only the day before yesterday of the Government's proposals for completing their reduction of the population covered by assisted-area status from 40 per cent. to 26 per cent. or 27 per cent. It is clear that if resources are scarce they should be targeted where the need is greatest. However, this begs a number of questions.

The first is whether it is right that a nation's regional policy should command only one-quarter of 1 per cent. of GDP. A nation is, after all, the sum of its regions and so we are not talking about some form of fringe activity. There is also the question of the notorious blackspots, already mentioned, some of which are situated in areas which do not attract support as they are not justified by their aggregate characteristics taken as a whole. This leads one into the question of criteria for designation. The rate of long-term unemployment should be a very important indicator, but there are others; and the Committee had some pertinent remarks on the choice of eligible areas in paragraphs 17 to 19 where they point out that using Level 2 regions as a basis, in some cases there are greater disparities within than between regions and we must try to achieve greater flexibility.

It will come as no surprise that we on this Bench attach great importance to these matters. This stems naturally from our commitment to the decentralisation of Government. But there is another very important consideration which is that the success of any advanced and innovative industrial strategy depends crucially on the co-operation and acceptance of sacrifice by those regions in structural decline where the brunt of the unemployment and its attendant miseries is borne. If serious attention is not paid to their needs for help and rehabilitation, there is no hope whatever of securing general consent to the slimmer line of modern competitive industries. The noble Lord, Lord O' Hagan, referred to the Social conscience of the Community. I think he saw the ERDF as embodying that social conscience.

I turn now to the European dimension. Well presented and lucid though the 12th Report of this Session is, the 14th Report of last Session still seems to me to remain the essential background reading. It makes the point very early on that the ERDF is not the executive arm of a Community regional policy based on common Community criteria but simply provides funds from the Community budget which contribute towards the separate regional policies of member states. One wonders if this is really a sufficient role for the fund in a Community whose regional disparities of income still run from 35.1 per cent. to 231.6 per cent. of the average per capita GDP of the EEC—an enormous range.

Indeed, this point is given some prominence by the CBI in the paper they submitted to the sub-committee which is printed along with the 12th Report. They see a big reduction in these discrepancies as an essential precondition of proceeding towards monetary union and other desirable things. It is interesting to note in passing that they do not seem opposed to the aim of a federated Europe, to which the noble Lord, Lord Tordoff, proudly proclaimed his commitment.

The 14th Report of last Session stressed the total control by central Government of ERDF receipts. The local authority applications are processed by the appropriate regional offices of the departments. Payments from the ER DF are made direct to the Department of Industry in the case of industrial projects and to the Department of the Environment for infrastructure projects. The vexed question of additionality here raises its head and it was one of the themes of the 14th Report that there was little or no evidence of additionality in the whole operation. In fact the sub-committee said in paragraph 38 of that report:
"the system is merely a book-keeping exercise on the part of central Government".
While preparing that report, the sub-committee heard views that there was not enough direct contact with Community institutions for applicants, that there were too many intermediate bodies; several local authorities were not content with the way Government departments handled their applications and appealed for more direct access to Brussels. The committee itself appeared to view sympathetically the suggestion that regional agencies, such as the Scottish and Welsh Development Agencies, the Highland and Islands Board, the Development Board for Rural Wales and the Northern Ireland Development Board, should play a greater role in the selection and administration of projects. This was referred to by the noble Lord, Lord Cledwyn of Penrhos, who I think added one or two more organisations. I should like to ask the noble Lord whether the Government can say that they share this view.

In their current report the sub-committee summarise the main recommendations of the 14th Report and remark that there is a substantial measure of agreement between these and the Commission's recommendations for revision. That is gratifying, but it is not going to be much help if the Government will not play ball, too. One of the main new proposals is the shift from project to programme aid, which is I think in accordance with the sub-committee's earlier recommendations. This brings one up against the apparent unsatisfactoriness of the regional development programmes so far presented in Brussels. This may in part be due—in fact, I imagine it almost certainly is—to our lack of a decentralised administrative structure such as they have in Germany or Italy, but it would be a great pity if we were to lose out on this account. So my next question to the Government is: what have they in mind for improving this situation? Will they let regional groupings of local authorities take more of a part in shaping such programmes in line with the suggestions put forward by the North West Industrial Development Association in their submission which is printed along with this report?

Another important proposal is the increase to 20 per cent. of the non-quota section of the fund. This is seen by one witness as,
"a significant step in favour of the additionality principle".
Do the Government agree with that assessment and will they support such a change? If so, I wonder whether they agree with the Commission's idea that proposals for non-quota aid should not require un-animous agreement in the Council of Ministers but should be subject instead to decision in the fund management committee. The sub-committee suggest in Section 22 that this would reduce delays in distributing non-quota resources and relieve the Council of Ministers from the type of decision to which they are not well suited. It will be interesting to hear the Government's view on that.

On the issue of direct contact between local authorities and Brussels, a number of local authorities raised the question of the outdated data base used by the Commission for assessment of eligibility. West Yorkshire made a particular point of this, holding that they have been penalised by the use of 1977 data, whereas on 1981 data they would have qualified for ERDF aid. Does the Government agree with the North West Industrial Development Association—who wrote a very sensible paper—that it would be helpful if regional and local authorities could submit directly to the Commission regular and frequent information on the economic situation in their areas? This, of course, would not require the stream of visits against which the noble Lord, Lord O' Hagan, warned.

Merseyside, in their submission, raised the important question which has already been touched upon of visibility or transparency—whichever your Lordships prefer—of ERDF aid. They say:
"The EEC should be able to obtain full credit for the amount of resource being realised in the region—a current problem because much of the present EEC aid goes into Treasury coffers in support of Government programmes, like MSC and regional develcpment grants, which are recognised locally as solely United Kingdom Government initiatives".
I think they have a very significant point here, and it behoves the Government to decide what their attitude to the Community really is. The Government are, on the face of it, pro-European up to a point. They do not want to withdraw like the Labour Party. That being so, surely the Government will want to be helpful in correcting unfounded anti-Community feeling in the country, and what better way could they choose than to pursue additionality with a little more resolution and give credit where credit is due?

In the end, this is all a question of attitude and approach. In their thoughtful Part III, entitled "A Community regional policy: the long-term prospect", the sub-committee say:
"The Commission has put forward proposals … which deserve support in principle and close attention to detail. A marked shift away from the strait-jacket of an ERDF only providing support for the national regional policies of member states can be detected in many of the new clauses of the proposed regulation. A genuine Community regional policy could be constructed alongside support for national policies by means of programme contracts and the non-quota section".
The Committee add a note of caution on the question of resources and the ultimate dependence of a stronger Community regional policy on resolution of the budget problem. That is fair enough; but we should have a much better case for the shift of resources from the CAP and other things if we could be seen to be using ERDF existing resources properly, which it appears to me we are not.

6.45 p.m.

My Lords, the noble Lord, Lord Tordoff, said he hoped he would not be regarded as presumptuous for opening this debate. Far from being so regarded, I am sure that noble Lords will be grateful to him for having done so. We already have had clarification of some of the problems, particularly local problems, from the noble Lords, Lord Cledwyn of Penrhos, Lord O' Hagan and Lord Kilmarnock. I must confess, as will be obvious from our report, that my committee felt that virtually everything that could usefully be said about regional policy in the short term had been dealt with in our debate last year. Already this debate will have shown that more has been added to it. That is my view.

In opening the debate last year, I said that the purpose of regional policy was to help the poorer areas of the country to come nearer to the general level of prosperity and, in the words of the Community, to correct the principal regional imbalances within the community—a policy of convergence. In that debate, the noble Lord, Lord Tranmire, said that in 1971 the richer regions on an income per head basis were 61/2 times more prosperous than the poorest regions. In 1981 the sub-committee, taking evidence, were told by the CBI that there had been no change. Indeed, therefore, in 10 years there had been no progress in improving the difference between different regions within the Community.

According to the Giolitti Report, which was published by Commission last year, in an enlarged Community of 12 countries, the richest region, which I understand is likely to be Hamburg, would be 15 times more prosperous in terms of income per head than the poorest regions of Portugal.

In considering ERDF spending, we must put it in perspective to total Community spending. ERDF spending is something less than 3 per cent. of total Community spending, while the CAP is about 70 per cent. A major transfer from the CAP to the ERDF in the near future must be regarded as politically extremely remote. A major increase in ERDF funds from new sources is improbable. We must work for a better distribution and a better use of whatever funds are available.

In the Select Committee's 14th Report we made a number of recommendations of which perhaps the most important was to concentrate funds on those countries whose per capita income was below the average of the Community, to be assessed on some agreed economic indicators. We suggested more concentration on development programmes and also on the so-called "integrated programmes" which are being tried out in Naples and Belfast at the present time.

The Commission's proposals suggest, among other things, that the quota section should be confined to Greece, Ireland, Italy, the United Kingdom and the overseas departements of France and that the non-quota section, which is now 5 per cent. of the whole, should be allocated 20 per cent. and devoted to helping any part of the Community adversely affected by serious recent industrial decline or by problems arising from the operation of other Community priorities. The noble Lord, Lord Tordoff, suggested that the Government should press strongly for the allocation of 20 per cent. to be done as quickly as possible. I hope it will not be regarded as unduly cynical if I say that if that were to be done without adequate preparation it might result in less funds in total coming to this country than if it were done in, I will not say a more leisurely way, but in a more considered way.

The Commission proposed that programme contracts—that is, the financing of programmes, in contrast to the financing of individual projects—should be the main vehicle for transferring aid to the regions. There are problems here. It is suggested they should be three-year contracts. How binding would that be, when the budgeting is done on an annual basis? Nevertheless, this is a positive recommendation. They recommended the development of integrated operations, such as Naples and Belfast.

We must recognise that there are real administrative difficulties the Government in preparing programme contracts. Unlike Germany and some other countries in the Community, there is in this country no developed form of regional authority and each government department deals directly with local authorities. It is a vertical organisation rather than a horizontal one. The noble Lord, Lord Cledwyn, suggested that other institutions such as the Highlands and Islands Development Board, and so on, should be brought into assist. That is a positive suggestion that I would urge the Government to consider. Other noble Lords who have spoken about local authority problems mentioned the question of "black spots". This is a real problem but it is something that we ought to deal with: it is not one for the Community. Even given the difficulties of the Government in dealing with programmes of this kind, the committee felt, nonetheless, that the Government should prepare for the change now.

Lastly, I would mention the question of additionality, which other noble Lords have mentioned. The Government claim that ERDF funds would permit more to be done than would otherwise be done. But can this really be true? Perhaps, as a former Treasury official, it would be unfair of me to suggest that if people believe that they will believe anything. But national industrial aid in the regions under the various industry Acts is virtually open-ended; and on infrastructure the Department of the Environment guidelines say:
"It is not the Government's intention that the availability of assistance from the fund should enable local authorities to undertake additional projects".
In practice, what happens is that a local authority which has been allocated a grant for a project from the ERDF will find that its loan sanction approved by the central Government has been reduced accordingly. Real additionality in this area would produce more money for local authorities to devote to improving communications, industrial sites, drainage schemes and sewerage systems and so on—all improvements which noble Lords will know are urgently needed. I do accept that, although no one has produced any figures, nevertheless there must be some additionality and not purely a book transfer.

If aid from the ERDF is to be limited to some countries, as is proposed by the Commission—and I have just referred to that—then those countries which are giving the money and not receiving are, I believe, bound to insist on additionality. They are bound to insist that their money goes to help to solve regional problems which would otherwise not be solved, rather than to help to solve the budgetary problems of the countries which are receiving the aid.

Finally, it would be arrogant to believe that the Commission had followed the advice given in the Select Committee's 14th Report; nevertheless, it is gratifying that so many of the Select Committee's suggestions are included in one way or another in the proposals of this most constructive and positive report of the Commission. I want to bring that out, because we tend very often to be highly critical of the Commission, and here is a case where they have, in my view, attempted to make positive suggestions. I believe that their proposals, if adopted, will lead to a quite definite improvement in the operation of the ERDF and should be welcomed; but we must recognise that they will make only a marginal contribution to Britain's Community budgetary problems and they are no substitute for reform of the CAP.

6.57 p.m.

My Lords, I should like to join in thanking the noble Lord, Lord Plowden, and his committee for this most valuable report that we are discussing this evening. It contains an informative and helpful summary of the proposals of the Commission and some very clear conclusions about them. I should like also to congratulate my noble friend Lord Tordoff for the way in which he introduced this report to us earlier this evening. We have had three reports now from the Select Committee on the regional fund. We debated them in 1977, last year, in 1981, and now we have this third report this evening. As I say, there are in this particular report some very clear conclusions and it is to those conclusions I should like to give general support, as did my noble friend Lord Tordoff.

In all three reports the committee have been concerned with five main problems: the size of the fund; the vexed question of additionality; the method of allocation; the problem of access to the Community and participation in decisions for regional and local authorities; and the need for a comprehensive and significant overall regional policy. None of these problems is yet solved, of course,but it is veryencouraging, as the noble Lords, Lord Cledwyn and Lord Plowden, said, that the developments suggested by the committee in its report last year, which will undoubtedly contribute to a solution, have in large measure been adopted by the Commission.

I should like briefly to consider the Commission's proposals for the revised regulation in the context of the five problems which I have mentioned. First, on the size of the fund, the noble Lord, Lord Plowden, in a debate last year, told us that the European Regional Development Fund accounted for 3 per cent. only of Community spending, and he said it was so small that it could hardly scratch the surface of the problem. In his concluding remarks this evening, he has again warned us that that is the case. In the latest report, the committee say, with regret, that there is little chance of more funds being available, but I am glad that the committee support the demand of the Commission and of the European Parliament for greater resources. The committee point out that since 1975 the situation of the poorer regions in the Community has not improved, but has, in relative terms, deteriorated. An increased regional fund is necessary to help deal with that deterioration.

I repeat my belief that the problem of the British budget contribution will not be permanently solved until the Community budget, which is now only 1 per cent. of the GDP of the Community, is increased through the development of common policies, from which Britain will get more advantage than we do from the common agricultural policy, and in such an increase the Regional Development Fund would clearly play an important part. But if, for the moment, that is not to be, then the Commission's proposals for greater geographical concentration have added importance. But greater concentration will not help, if the funds disbursed do not lead to additional economic activity.

That brings me to the subject which has been much discussed both last year and in our debate this evening—the question of additionality. In our last debate, we discussed how meaningless to the firm's concerned selection of their project for Community aid was, and we saw that, so far as local authorities were concerned, while the saving in interest and principal repayment was welcomed, no additional development resulted from Community aid. Community aid was not much more than a method of reducing the public sector borrowing requirement or relieving the ratepayers. The Government say that they take into account, in fixing the amount of money which they intend to spend on their regional policy, the amount that they anticipate they will get from the Community and that, therefore, they do spend more. But there can be no proof of this, or, at any rate, no assessment of the actual amount more which they are spending, as was underlined by noble friend Lord Tordoff and by the noble Lord, Lord Plowden, although the latter felt that there was some additionality.

The Commission are seeking to implement the principle of additionality by increasing the non-quota section, over which they have more control, by moving from financing of individual projects to financing programmes and by writing into the regulation conditions requiring additionality before programmes are approved. I hope that they will be successful by these means in increasing the degree of additionality, because, as the committee say, without additionality the credibility of the Community's regional policy cannot be maintained. I look forward to hearing the answers which are given to the questions put on this subject, to the noble Lord who is to reply to the debate, by the noble Lord, Lord Cledwyn.

Then there is the method of allocation. I think that there is widespread approval of greater geographical concentration, but there is some argument as to whether the Commission should select countries or regions. In the proposals which they put forward, they choose regions. In our last debate, the noble Lord, Lord Lever of Manchester, suggested that countries should be chosen and that countries should be responsible for all that goes on within their boundaries. That was also the view of some who gave evidence to the committee, when preparing the current report, and it seems to be the view of the Department of Industry. But I do not see the Regional Development Fund as an equalisation fund as between nations. That would be a national assistance fund, rather than a regional development fund.

The importance of the emergence of the regions, as a counter-balance to an inevitable degree of centralisation in Brussels, cannot be over-emphasised. And, of course, it is interesting, as many noble Lords have said, that many people, in giving evidence to the committee, have said how difficult it is to produce regional development programmes in the United Kingdom, because we have no system of regional government—a point mentioned by many noble Lords, but also by my noble friend Lord Tordoff in his opening remarks. I was interested and glad to see that in their report the committee say that the Government must organise themselves, somehow, so that they are in a position to produce the regional development programmes which are required.

Coming back to the choice between countries or regions, it is much more difficult to select countries. If we have criteria for regions, some countries are automatically, for the time being, eliminated, and eliminated with less difficulty than if the choice was being made between countries, since these countries know that, if one of their regions should fall within the criteria, it will qualify. It has been pointed out—and there has been some discussion in the debate—that certain areas in the United Kingdom, such as Yorkshire, Humberside and the South-West, are eliminated by the application of the criteria which have been put forward by the Commission. But the noble Lord, Lord Cledwyn, pointed out that if you have 11 regions in the United Kingdom, as opposed to 33 in West Germany, this is likely to happen. I agree with the committee that there is a case for a sub-division, so far as the application of these criteria is concerned.

So far as the black spots outside the regions to be assisted are concerned, I think that these should be dealt with by the non-quota section of the fund, as the noble Lord, Lord O'Hagan, suggested, and by Governments themselves, as they committee insists. After all, the fund should be an addition to national policies, and while funds are limited national policies have to play a major role. Then there is the question of access for regional bodies. I fully appreciate that, as the noble Lord, Lord O'Hagan, said, there would be great difficulty for the Commission in dealing with 715 local authorities. But I think that they could deal with regional authorities or the various regional development agencies in this country, which were listed by the noble Lord, Lord Kilmarnock. I am glad that in the new proposals of the Commission there will be greater involvment of local authorities, particularly in the preparation of programme contracts, and I hope that this development will be encouraged, in practice, by the British Government.

Finally, there is the question of building up a comprehensive regional policy. In the last debate which we had, the noble Lord, Lord Plowden, said that the regional fund has no policy of its own. But, in my view, if the Commission's proposals are adopted, it will have one. That regional policy will derive from the implementation of the principle of geographical concentration, the application of the criteria for selection and the increase in the non-quota section. The Commission suggest from 5 per cent. to 20 per cent. which I would welcome, as did my noble friend Lord Tordoff. But how far are the funds to be derived from the regional development fund co-ordinated with the funds from other sources in the Community—from the European Investment Bank, the Social Fund, the Farm Fund, the new Community instrument and the Coal and Steel Funds? We know of experiments in integrated operations in Naples and Belfast. I am glad that the Commission propose that these experiments in integrated operations should be extended, and T support, as the committee do, the principle of the 10 per cent. premium.

Finally, in our last debate we welcomed the appointment of one commissioner to deal with both the Regional and the Social Funds, but in this debate I think we must say that there is a need for still closer co-ordination. The impact of all Community policies on each region needs to be continuously monitored, the cohesion of these policies needs to be continually assessed and their common purpose needs to be determined. Such adjustments as the attainment of that purpose may require from time to time need to be made. It is a continuous process of co-ordinating all the different activities in this field of aid and assistance to the regions of the Community which needs to be implemented.

7.11 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security
(Lord Trefgarne)

My Lords, it is particularly appropriate that your Lordships should choose to debate this subject this evening, at the suggestion of the noble Lord, Lord Tordoff. We are passing through an important period in the development of the Community, and decisions which are taken in the near future, in the context of the progress which has been made so far and in the middle of a period of enlargement, will help to shape the future of the Community for very many years to come. I have listened with great interest to what has been said this evening. Perhaps I may now take this opportunity to put the Government's view.

The four documents listed in the Motion before us this evening are closely linked. Although I shall have some specific points to make regarding the latest Commission proposal, they can all be considered as contributing towards the history of the European Regional Development Fund. Not for the first time your Lordships owe a considerable debt to the European Communities Committee and to its sub-committees, in particular Sub-Committee A under the distinguished chairmanship of the noble Lord, Lord Plowden. I recall that my maiden speech in your Lordships' House, nigh on 20 years ago, was made on a Motion moved by the noble Lord.

The original fund was set up in 1975 with the stated aim of reducing imbalances between the various regions of the Community. It began in a very modest way with a budget of some ₣125 million allocated in national quotas to the member states and has grown, rather faster than the Community budget as a whole, to some ₣850 million in 1981. The United Kingdom has always been a net beneficiary of the fund. A major change which took place in the operation of the fund during that period was the provision in 1979 for a small part of the fund to be used in a "non-quota" manner and to be applied to counter the effect of certain Community policies. A further amendment was made to the fund in 1980 to provide a national quota for Greece upon her accession to the Community. The Commission have produced a series of annual reports on the operation of the fund, and it is the sixth of these factual accounts about the fund's operation which is referred to in the Motion.

In January 1981 the Commission produced the first of a planned series of periodic reports on social and economic trends in the Community's regions. These are intended to provide a more wide-ranging view of the fund's operations than the factual annual reports and are bound to be used to provide pointers to ways in which the operation of the fund might be improved in an attempt to achieve its stated aims. The first periodic report revealed that despite considerable economic growth in the Community, regional inequalities in growth, income and employment have widened. The report identified two kinds of regional problem: those resulting from structural under-development and those resulting from sectoral decline or Community policies. The report also noted a general increase in unemployment. In July 1981 the Commission produced their new regional policy guidelines which took these findings into account, and later in 1981 produced their proposals for a new fund regulation based on those guidelines. Perhaps I could now discuss the main points of the proposed regulation in a little detail, because it is the principal matter which has exercised your Lordships this evening.

First, the Commission have commented many times in their regional policy guidelines and in the preface to their new proposed regulation that regional imbalances have been growing, rather than diminishing, since the Community embarked upon a regional policy. That was very much in the mind of my noble friend Lord O'Hagan. It is sad but true. They conclude from it that the time has come to redefine and strengthen the Community's regional policy instruments, and they have so proposed. I want to make it clear that the Government in general endorse that view and welcome the proposals. I could not say that we believe that the Commission got everything right in their initial proposals, but we do believe their objectives to be very much along the right lines. Our doubts are much more to do with details—such as, for example, the potential staffing burden.

First and foremost, we believe strongly that the fund should be more concentrated, and that means concentrated on the less prosperous member states. The proposals, as they stand, would result in the United Kingdom's remaining a net beneficiary from the fund. We, of course, welcome that. Where we have serious reservations in this respect is that the Commission propose to exclude some of our assisted areas—the South West, Yorkshire and Humberside and Corby—from eligibility for the quota section of the fund. Much of the data which the Commission used in constructing their index of eligible regions is inevitably now out of date. Nor is it strictly comparable across the Community.

We have made it clear in Brussels that we are not prepared to accept the proposed exclusions. In our view, once it has been established that member states should qualify for aid from the fund, it is up to those member states to determine which of their regions should be eligible. The United Kingdom regions upon which the Commission's analysis was based are much larger than the Community average. This means that the problems of smaller, but still sizeable and important, areas within them are obscured. We believe it to be fundamental that, at a time when the United Kingdom is concentrating its domestic aid on fewer assisted areas, all those areas should similarly be eligible for aid from the fund. We have also made it clear that the United Kingdom's regional problems, which are essentially those of industrial decline and which are fully represented in the regions I have mentioned, must be given full weight in the distribution of the fund's resources.

My Lords, if my noble friend has no more to say on the nature of the statistics as opposed to the area which they cover, may I ask him whether I am to understand that his argument rests solely on the view that Her Majesty's Government should retain control within the United Kingdom as to which regions are to be given aid? Does my noble friend consider the statistics method for assessing regional deprivation is good and that we need to retain the right to choose?

My Lords, later in my speech I was going to say more about the statistics point. Perhaps I could make further reference to it now, since my noble friend has intervened. Our view is that the proposals for determining these areas of eligibility and the nature of the statistics used are not particularly satisfactory. We have considerable doubts, for example, about calculating regional GDPs. Frankly, national GDPs are difficult enough to calculate accurately. If you try to calculate regional GDPs, it is even more difficult, particularly so if one wants the figures to be as up to date as possible. Certainly we accept some of the criticisms which have been made about figures being used which are rather out of date and that is why we have taken the view that we have. We believe that the national authorities themselves are really better qualified to check on the areas within their countries which ought to be eligible for assistance from this fund.

The Commission have also emphasised, in the proposals, the need to co-ordinate community and national regional aids, as already required by the Council resolution of 6th February 1979. It obviously does not make sense for the efforts of less prosperous member states, and of the fund itself, to be frustrated by excessive support for regions in other member states which already enjoy a higher level of prosperity. How far the Commission itself should assume a role in relation to, for example, the planning of national infrastructure programmes is however a rather different question. On this we shall be urging a more cautious approach, confined to cases of genuine Community interest.

On the question of expanding the non-quota section of the fund from 5 per cent. to 20 per cent., we share the doubts expressed about the wisdom of such a large increase in an instrument which is as yet largely untried. Our experience so far with the non-quota section is that the programmes required by the Commission to support applications for aid are extremely difficult to prepare and the amount of aid received inevitably small when set against the scale of the problems with which the non-quota section attempts to deal. We would favour, therefore, a more modest growth, although we shall of course be alert to the needs of specific declining United Kingdom industries in urging the Commission to put forward new non-quota measures.

The difficulties we have found so far in preparing programmes which meet the Commission's requirements are one of the reasons why we have reservations about the proposed change to financing by programmes rather than by projects. Again, the object is an eminently sensible one but it is a question of devising a simple and practical procedure to make the change worthwhile. The present system works efficiently and we do not wish to give it up until it has been shown that the new system will really simplify administration, not just in Brussels but in member states too. That is why we and some other member states want to preserve a choice of method throughout the life of the new regulation.

We have somewhat similar reservations about the increasing weight being placed on the compilation of regional development programmes, to a common detailed pattern. We fully accept the need for the Commission, and other member states, to see United Kingdom proposals in their context. But our structure of government is not one which allows us to fit easily into the mould of programme prepared by those member states which have a regional system of government. We shall continue therefore to urge for some flexibility in this regard.

The Commission's proposals lay stress on the need to associate local authorities closely in the working of the fund. Bearing in mind the high proportion of resources devoted to infrastructure projects this is clearly right, though we must remember that the legal relationship is between the commission and the member state on which ultimate responsibility continues to lie. My right honourable friend the Secretary of State for the Environment keeps the local authority associations in touch with the progress of the negotiations. I know he appreciates local authorities' co-operation, in the production of the regional development programmes for example, and we recognise the importance individual local authorities attach to the aid they receive from the fund.

It is clearly in everybody's interest—the Government's, local authorities, and the Commission's—that the United Kingdom should continue to use its quota allocation to the full. In the past we have had many more projects, especially in the infrastructure field, put to us than we have been able to submit to Brussels. We have concentrated on submitting projects falling fairly and squarely within the criteria and which generate early payments from the fund. In the future, however, given the change in the coverage of United Kingdom assisted areas, this may not be the case. It is clear that, whatever criteria are finally laid down in the regulation, the Commission and other member states will continue to examine projects critically to ensure that they meet them. We ourselves shall therefore endeavour to ensure both that there is a proper measure of flexibility in the application of those criteria and that we exploit the range of eligible projects to the full.

The Commission's proposals include much more specific references to additionality than does the existing fund regulation. The United Kingdom's position has been made quite clear. We already take receipts from the fund into account when determining the level of expenditure in our regions. Without Community receipts our expenditure would certainly be lower so there is clearly additionality in that sense. There are severe and practical difficulties however in trying to demonstrate additionality at the level of the individual project, difficulties which have been made clear during the negotiations on the new regulations. Projects and programmes alike can take several years to complete and expenditure must be planned ahead. If, for understandable reasons, the fund cannot guarantee its assistance ahead, it is difficult for the member state to commit itself an additionality when its overall receipts from the fund may vary considerably from year to year. We understand that the Commission is giving further thought to this thorny topic. We can appreciate their desire to maximise, and highlight, the real contribution the community is making in the regional field. I hope a practical way can be found of doing so which still makes sense in everyday administration.

Perhaps I should add that all the monies provided by the fund are provided on a grant basis, whereas money which local authorities, for example, might otherwise use for their projects is generally raised on a loan basis. So that where the money is provided by the fund as an alternative to loan finance, the interest charges—which can be very substantial on a large project—do not have to be met. In that sense too there is an element of additionality.

I am conscious that in a short debate such as this it has not been possible to deal in depth with every subject that has been raised. However, perhaps I may now turn to some which have been and see if can deal with them. The noble Lord, Lord Tordoff, inquired in his opening speech about the Government's attitude to the proposed exclusion of some assisted areas. I referred to that in my own remarks just now. I shall say again—actually, it is rather an important point and so does bear repetition—that we have made it clear during the negotiations that the United Kingdom cannot accept the proposed exclusions. Indeed, we understand that the Commission is about to announce some revisions of this part of the proposals, which we hope will go a long way to meeting the points we have made.

The noble Lord, Lord Cledwyn of Penrhos, asked me about the eligibility of mid-Wales. We discussed this matter when I repeated the Statement the other day. Under present regulations and current proposals, only United Kingdom assisted areas would qualify for quota section aid. My right honourable friend the Secretary of State for Wales' new plans for aiding mid-Wales are currently being discussed with the Commission to determine eligibility for non-quota aid and we certainly expect to reach agreement on this.

The noble Lord, Lord Cledwyn of Penrhos, and at least one other noble Lord drew attention to the need for more and better statistics. This was certainly in the mind of my noble friend Lord O'Hagan, as well. We are currently investigating the possibility of providing more detailed statistics to help the case particularly of the smaller areas—the "black spots", as I believe my noble friend described them. This involves a number of Government departments and will not, I fear, be a quick and easy matter. But, as I said earlier, we are certainly not happy with the present basis.

The noble Lord, Lord Cledwyn, also asked me about the possibility of increased receipts from the new quota. The change from the present quota to the proposed one would give to the United Kingdom, we calculate, an extra ₣8 million in 1982 and a further ₣8 million or ₣10 million in 1983.

My noble friend Lord O'Hagan asked me specifically about the position of Devon and Cornwall, which he represents with such distinction in the European Parliament. The suggestion is that new small areas, for example, a Devon and Cornwall unit, should be set up as the present regions like the South-West are rather too large, and, as my noble friend pointed out, tend to disguise the existence of black spots. The difficulty of this approach is that comparable Community-wide statistics for such small areas do not exist. However, as I have said, we are looking at the whole question of statistics in the hope that we can get over this difficulty.

My noble friend may be interested to know that in the last three years, 1979 to 1981, the Devon and Cornwall area received something like ₣16 million from the fund. My noble friend also asked me about tourism, which doubtless is a matter of particular interest to that part of the world. I understand that the new proposals include a specific reference to aid for tourism in Article 16, which I hope will reassure my noble friend.

Again my noble friend and one or two other noble Lords—I think the noble Lord, Lord Kilmarnock, raised this point—asked about direct access to the European Community for local authorities. I touched on that question earlier, but perhaps I could add to what I said in this way. I understand that local authorities frequently send deputations to Brussels. Ultimately, the regulation is a document negotiated between the Council and member states; that is to say, the national authorities of the state concerned and not the regional authorities. But my noble friend was right to point out the modest resources, in some respects, of the Commission in this regard, and clearly a long stream of deputations from every local authority in the Community would be a considerable burden upon the Commission's resources. I think the present arrangements, which I know generate some frustration among local authorities, are perhaps the best we can devise for the present.

In case there are any points that I have failed to deal with, I will study Hansard with care and endeavour to write to noble Lords with some answers.

In conclusion, let me attempt to sum up the present position. We remain firmly in support of the growth and development of the Regional Fund, both as an instrument of Community solidarity and as a method of recognising the United Kingdom's particular problems. I have set out some of our reservations on the Commission's initial proposals, but we are in a constantly evolving situation. What I have been describing is a proposal which has been made by the Commission to the Council and which is currently being discussed by officials in a Council working group. When the group has finished its discussions—and I must say that at present it is not possible to say precisely when that will be—the amended proposals will be submitted to the Foreign Affairs Council. Until then all the provisions of the existing regulation will be maintained. Further enlargement of the Community will in itself require further changes.

In the meantime, other member states have made many of the points which have been made here, and have expressed other reservations also. The negotiations on the new regulations are complex, and clearly there will, as in other Community negotiations, have to be some give and take on all sides if we are to make progress. But I have indicated the objective we shall be pursuing on behalf of the United Kingdom and some of the particular points we regard as fundamental. I hope it will not be too long before we shall be able to report further progress. In the meantime, I am very happy to have had this opportunity to put the Government's views before your Lordships.

7.34 p.m.

My Lords, I am most grateful to the Minister for that speech. When he was dealing with questions that had been put to him, I felt he was perhaps a little more forthcoming than his basic brief allowed him to be, and I am grateful to him for that. There was a slight tendency, one felt, for the departmental straight bat to show through in his brief. I could see that the noble Lord, Lord O'Hagan, was a little depressed at the answer he received.

I think we have had a good debate. Originally this Motion was to be debated in the dinner hour on Monday. I am rather glad that we have had the extra time, because I think the contributions have been varied and extensive. I am most grateful to those who have joined in. I thank the noble Lord, Lord Plowden, for his kind words and his indulgence in regard to my putting down this Motion.

I think one glimmer has come through, which is that, the Government having stated their position quite clearly on the regions in Yorkshire and Humberside and Devon and Cornwall, that gives some hope that the Commission has seen the light and is about to come forward with something that might hold out some promise; and we wait with interest for that. Meanwhile, I thank your Lordships again for your contributions.

On Question, Motion agreed to.