I welcome Jack McConnell, the Minister for Finance, and his officials. We propose to invite the minister to make a short presentation, following which I will invite each member of the committee in turn to ask him a question, hear his reply and, if necessary, follow up with a supplementary. If we still have time once everybody has asked a question, we will return to other questions that may not have been addressed.
Thank you very much, Mr Henry. It is good to be here. It would be helpful if I made one or two introductory remarks about the relationship between me, the Executive and the committee, before commenting on the structural funds and objective 2.
Thank you very much for that short but comprehensive introduction. Some of the issues that you touched on have been discussed at this meeting and at previous meetings. For example, although we have not discussed objective 2 status, we have discussed the Highlands and Islands, and there was a strong current of opinion that assistance should be targeted on need.
As you mentioned, there have been informal briefings and press speculation—some of it ill informed, I believe. Perhaps you can address the primary question that concerns the committee, the Parliament and the people of Scotland. Will Scotland lose out in its financial settlement as a result of what is proposed, and how will communities that have come to depend on social funding be able to access that money?
There are a number of elements. The overall Scottish budget will not be affected by those decisions. We will spend the same amount this year that we spent in the previous year on European structural fund projects as part of the overall Scottish assigned budget, and that will not be affected by those decisions. The budget will rise or fall in line with the funding policies that have been agreed and the decisions that are taken here and elsewhere. The amount that we are able to allocate to European projects will fall as the population coverage falls and European funding allocated to the UK falls. We should be clear that in the first three years of the new programme the amount that is spent on projects in Scotland is—if anything—perhaps likely to increase slightly as previous commitments work their way through the system.
We discussed that latter point briefly when we had a briefing at our previous meeting. Can you give us the reassurance that there is sufficient flexibility in the disbursement process within the block grant to ensure that communities—whether those are on NUTS 4 or on NUTS 5—will be able to access public money for those purposes, whether or mot it is classed as objective 2 money?
I have to be careful, because I cannot tie the hands of the Parliament, which has to make the decisions on the budget, or of the next Parliament, because our session lasts for four years and this programme lasts for seven. What I can say is that for the first two—and I would expect three—years of this programme, the amount spent on European structural fund projects in Scotland will be roughly the same as, and perhaps in year two slightly higher than, it is at the moment. For the years following that, it will be up to the Executive and the Parliament to decide what the moneys that will be freed up by the reduction in population coverage will be spent on. One of the options would be to ensure that some kind of funding package was available to areas that had benefited—perhaps, for example, working in partnership to attract industry and develop new projects from the previous objectives 1 and 5b.
I might come back to that at the end of this process.
One of the problems that has plagued European structural funding, and particularly European social funding, has been late payment. The voluntary sector is dependent on that problem being resolved. Given that the time scale is tight in agreeing those regulations, can the minister give an assurance that contingency plans are in place, should there be any slippage in the programme?
I hope to make an announcement—which has not yet been agreed—within the next two to three weeks, about the period between the end of the current programme and the start of the new one, which is likely to be some way into next year. I estimate that that gap could be between four and six months. We want to ensure that organisations that currently benefit from grant aid will be aware, at an early date, of their likely situation in the new year. I cannot commit myself to an announcement today, but I can commit myself to a firm announcement on that in the next three weeks.
Can we be reassured that organisations whose staff and programmes are dependent on European social funding—even though it is a new programme period—will be viewed sympathetically? Knowing that this funding will come, even if it will be late, is the cornerstone of much of their work.
I do not think that I can make a firm announcement today about what will happen next year, but I can commit myself to making an announcement within the next three weeks. I can also say that when that announcement is made, it will be communicated as quickly as possible to everyone who is affected by it, so that they can know clearly how they will stand at the end of the year.
The last meeting of this committee coincided with the announcement of the loss of jobs at Newbridge. We discovered that, in that situation, folk could fall between the two stools of the old and the new programme. I was therefore interested to hear your remarks about your own time scale for your announcement of starting dates for the new programme and the tailing-off in funding for people who might have been able to use that funding under the old programme. That was certainly the case in respect of retraining at Newbridge.
That is not quite the same question that Irene Oldfather raised, as it involves a different set of circumstances, and I want to be absolutely clear in my reply. There are two issues. First, activity is already under way involving officials to ensure that where packages are possible, they can be put in place. If that is possible within the existing funding programmes, it will be considered.
The continental situation provides a good example of the switch from one programme to the other. When I spoke to the member for Edinburgh West, Margaret Smith, she said that on the new map Newbridge might just manage to squeeze into the Kirkliston ward. However, it might not manage to squeeze into that ward; it might still be in West Lothian. That is what I mean by falling between two stools. If you do not mind my telling you, that is a good example to show why you must target closely. I am concerned that the timetabling might mean that we miss the boat.
On the day after the announcement about the Newbridge plant was made, I announced some new moneys for European social fund projects in Stirling. Some of the people who were present were on their way to Newbridge to take part in a meeting about that kind of initiative. It is important to recognise that ESF money—objective 3 money—covers the whole of Scotland, so regardless of the population coverage of the map for objective 2, the training money that exists for such a situation covers all those areas. It is important to ensure that priority is given in the plan to areas that suffer an immediate economic impact.
I would like to ask about the objective 2 map and, in particular, about the geographical unit for eligibility. There were reports last month about a Cabinet sub-committee meeting having to be cancelled or postponed because of some disagreement among various Cabinet ministers. The report said that the Secretary of State for Trade and Industry, Stephen Byers, demanded that eligibility for objective 2 status be based on the boundaries of entire councils rather than on those of smaller council wards. The same report said that Mr Byers's proposal would release more money for Scotland, yet when the Secretary of State for Scotland, John Reid, appeared before the Scottish Affairs Committee at about the same time, he indicated his preference for the electoral wards as the best units of measurement for objective 2 status. Does the Scottish Executive agree with the Stephen Byers proposal or with the John Reid proposal? Why?
The confusion between what were reportedly the views of ministers at the Department of Trade and Industry and the clear view that was expressed by the Secretary of State for Scotland at the Scottish Affairs Committee in the House of Commons is a good example of why it is not always helpful for me or anybody else to speculate about what might be happening between different departments. That is particularly true when the departments are in Whitehall.
You mentioned the assisted areas map. We were told by one of your senior officials, when he came to give evidence to us just a few weeks ago, that there are two completely different maps. There is the assisted areas map and the objective 2 map. Surely there must be some kind of relationship between the objective 2 map and the assisted areas map. The assisted areas map is based on electoral wards. For example, would it be possible, either in theory or in practice, for an electoral ward that is excluded from assisted area status to be included on the objective 2 map—or the other way about?
In theory, yes. However, while there is flexibility, and the two maps are essentially separate, the Commission would like the closest possible correlation between the two. That is taken into account by the UK Government when it submits the second map.
Could you answer this specific question: is it possible for a ward that is excluded from the assisted areas map to be included on the objective 2 map, and vice versa?
Yes, but it is important that we recognise, on the fisheries side, for example, that there is a difference between the two maps. They cannot be identical, but we and the European Commission want them to be as close as possible.
At the end of the round of questions we return to the first question, which was about funding. I want to explore further your comment that, even if areas are excluded from the objective 2 map, there should be the financial flexibility to assist some of those areas. That is an important point for us, and is a shift in thinking that must be teased out further.
Given what you have just said about the inappropriateness of speculating on what Dr Reid and others said, and given that Dr Reid is a member of the sub-committee that will decide the issue, do you agree that it would be wholly appropriate for Dr Reid to agree to meet this committee, so that we could avail him of our views and he could let us know what his current thinking is?
That is entirely a matter for Dr Reid and for the committee.
You have no view on that?
No, it is entirely a matter for Dr Reid and for the committee. The relationships between the Executive and Dr Reid's and Mr Wilson's offices are strong in terms of communication and joint action on the matter. At the same time, it is entirely a matter for this committee as to whether it wants to invite Dr Reid and entirely a matter for him and for you as to whether and when he appears.
At the beginning of your evidence you alluded to the fact that Scotland can interpret EU regulations and directives differently from England. That was confirmed for me by the European Commission last week. That being the case, do you recognise that in future there might be an element of conflict? For example, if the Scottish Executive party was different from the party that was running Westminster, our interpretation of EU legislation might be different. If our interpretation was regarded as void by the EU, it would take action against Westminster, not us. For example, if the Scottish Executive refused to implement an EU directive on fisheries because it would damage our industry, the EU would fine or sanction Westminster, and it would be up to Westminster to take action against us. Who would police our implementation of EU regulations from the Westminster end? That could be a point for friction in the future.
Before the minister answers—and it is entirely up to him whether he does—I would like to point out that we agreed to discuss objective 2. The area that you are touching on is much wider than objective 2 and is not what we are here to debate. I will leave it to the minister, but I would like the discussion to focus on objective 2.
I have great faith in the people of Scotland not to elect representatives to this Parliament who would do that sort of thing.
I raised the question because you alluded to it earlier.
I am happy to answer the question, and that is my answer. I do not believe that the people of Scotland would ever elect a majority of members to this Parliament who would take that sort of action.
I am sure that we are all relieved that you intend to focus on the areas of most need through the ward approach.
The safety net was an agreement that was reached following negotiations between the UK and Berlin. The rationale for the safety net was that, although it was correct for the European Union to target the funds to areas that needed the money most, other areas that benefited from high population coverage would lose out. Britain was able to ensure that we would have high funding for the next seven-year period, although our population coverage might fall dramatically. That does not apply across every region or nation of the UK because there are relative levels of need and prosperity.
I welcome the fact that you mentioned targeting resources to the areas of greatest need. There has been a lot of concern that areas that currently receive funding might lose out under what people assume to be the current proposals. I am not making a special plea for my area—the convener would not let me do that and I am aware that other areas experience similar problems—but places such as South Ayrshire, which have a mix of rural and urban areas and use funding for skills training for tourism and business development, could lose out.
As committee members will be aware, it would be wrong of me to speculate about individual areas. It remains to be seen what decisions are made by the UK Government, but the Executive and the Scotland Office are clear that the best way to distribute the population coverage and therefore the funding is on a grouped ward basis, which would allow the most targeted approach at a local level. It would also allow more communities in different parts of Scotland to be included rather than only whole local authority areas.
That is helpful in terms of a commitment to looking at the indicators as well as developments. I welcome the opportunity to hear more about the actual map.
I will mention here our ideas to integrate the strands of funding. There are a lot of initiatives in Scotland, not least the social inclusion partnerships, as well as a number of initiatives from the Executive and the UK Government targeting poverty and social exclusion. As we look at the new plans and the priorities for projects for the next seven years we need to ensure that we maximise their impact. We also need to make sure that we are linking what we are doing in the Scottish Executive to try to tackle the communities in Scotland that are currently suffering most in terms of economic deprivation and social exclusion with what is being done at a local government level, in the voluntary sector and in the UK Government. I am very keen that we do that and in the course of the next few months there is likely to be an opportunity for the committee to be involved in discussions on how we might approach that.
I will open the discussion up.
On that last point, there was a lot of concentration on maps, and rightly so. Correct me if I am wrong, but the point that Mr McConnell just made is probably the most important. Whether individual communities or areas of defined need find themselves included or excluded from either the assisted areas or from the objective 2 map, what is important is how we facilitate access for those communities to the moneys that are available to them. Will the Scottish Executive implement plans to facilitate that process for those areas of need that we can all identify?
I would like to stress one or two points, as I understand that the committee is due to finish about now.
I am going to cut you off in full flow.
Am I all right?
Yes, you are okay.
This programme offers a lot of opportunities over the next seven years. The population coverage decreases in Scotland were always going to happen, as we were benefiting from these funds more than any other part of Europe in the late 1980s, as a result of the efforts of Strathclyde Regional Council and Highland Regional Council. We can benefit again over the next seven years. We can do that best by streamlining the administration, targeting resources, monitoring the projects in order to ensure that those that are more successful in terms of outcomes receive continued funding, and ensuring that the areas that perhaps miss out on being included in the map not only receive transitional funding but are supported by the work of the Scottish Executive. That will ensure the continuation of the good work that they have done over the years to improve their relative economic position.
Just before I bring Dennis in, I want to follow through on that point. There is a strand that brings together earlier points made by Dennis Canavan, Allan Wilson and Cathy Jamieson. Mr McConnell answered Cathy Jamieson's point about better integration and targeting resources on areas of greatest need—a point raised by other members. Dennis Canavan asked whether there could be areas that are eligible under assisted area status but that are not eligible under objective 2 status, to which Mr McConnell replied, "Yes".
I do not like using the phrase "best of both worlds" in relation to devolution, although others have used it in the past. I think that Scotland will get two benefits from the final decisions that are about to be made on European structural funds.
To clarify, irrespective of any decisions already made by the Commission or the UK Government, the same amount of money will still be spent in Scotland. In the element that is not European-funded, the Parliament, in discussion with the Scottish Executive, will be able to establish and determine our own priorities. In other words, there will be no financial loss to Scotland but, for at least part of that expenditure, there will be greater influence for the Parliament in determining how the money is spent.
Yes, the assigned budget is there, it is published and it will remain as published. The level of expenditure in Scotland will be roughly the same for the next three years because of the commitments that are already in the budget. What the overall picture is in the Scottish budget, where the priorities are, and any resources that are released, will be up to the Executive, and the annual discussions between the Executive and the UK Government.
In order for the Scottish Parliament to come to an informed decision about whether the Executive has made the correct recommendation to the UK Government, we need maximum information about what is going on in the Executive. There must be a considerable amount of documentation about all this—for example, internal communications, and communications between the Executive and the UK Government. We cannot seriously expect Whitehall departments to reveal their documentation. They get very concerned when there are leaks or alleged leaks, or when any parliamentary committee—whether of this Parliament or Westminster—tries to find out what is going on in the corridors of power.
The answer that I am about to give Mr Canavan will not surprise him, but I would like to justify it. It is not possible to release those documents. Although that may largely be as a result of convention and the need for us to build a relationship of trust between the new Executive, Whitehall departments and UK ministers, we have to recognise that the UK Government, once its proposals for the map are agreed, has to take its proposals to the European Commission. It is important that it goes on behalf of the whole UK, including Scotland, to get the best deal for us all. That case may be damaged by internal positions, statements of pros and cons, or different options that have been debated in advance. I understand the need for that position and I am not able to release the documents.
But you have not given us even one document, Mr McConnell. Even at Westminster, when ministers come before the select committees, they bring some documentation for public consumption and for the committee.
I understood that committee members already had documentation on the subject and that, the week before last, members received a specific briefing from Mr Millard on this topic. It is not reasonable to say that information was restricted before my presentation and this question and answer session.
I am just a seeker after knowledge.
As ever.
I want to ask, on behalf of my colleague Winnie Ewing, how much money we are talking about. No one has mentioned any figures, Jack, and you may be able to explain to me the disparity between two figures. Sometimes we read that the total amount of the funds available under the proposed settlement is £300 million, while the next figure that is mentioned is £200 million. I wish that Winnie were here, because she seemed to think that someone, somewhere, had lost the small change.
The reduction in approvals would start immediately because the population reduction starts immediately, but that takes two or three years to feed into the system. Approvals that have already been given will be paid for out of the Scottish budget over the next year, the year after that and the year after that. The amount of money that we spend on European structural fund initiatives in Scotland will remain roughly the same for the next three years. After that, it will be for the Parliament to decide how money is distributed over and above the level that will be covered by the funding.
But it will be reduced?
The amount of money that goes directly to local projects will be reduced as a result of the population reduction. However, the amount of money available to the Parliament to spend as it sees fit—on this and on the use of additional resources—will not automatically be reduced.
I am still seeking knowledge. It is up to us to determine what we spend on individual projects—
It is up to us to determine how we spend the Scottish budget. Within that budget, there is a sum based on the historical position for European structural funds—that provision remains. The provision is not an identified amount within the overall Scottish budget. For example, if the amount of money that we can allocate on European structural funds in Scotland for the next seven years were to be reduced, in theory, by £10 million a year, that would not mean that £70 million came out of the Scottish budget that we got from the Treasury. The £70 million would still be in the Scottish budget; we would just have more freedom on how we spent it. That is what I mean about our having the best of both worlds.
Up to now, the debate has focused on the financial loss to Scotland in terms of structural funds, but it would perhaps be helpful for us to have a briefing on the concept that you have introduced, Mr McConnell. What I take from this discussion is that, if Scotland loses European structural funds on one line, the equivalent loss will still be available for spend from the total Scottish block. I think that we need to examine that equation. From what you said, I have understood that, irrespective of any cut in the allocation of European funding, there will be no loss to Scotland in expenditure.
I am happy to make supplementary information available if that is helpful. As I understand it, the role of the committees in relation to the annual budget will depend on whatever liaison arrangements exist between the conveners and the Parliamentary Bureau. I am happy to discuss the future use of funding with the European Committee but I want to be sensitive to the role of the Finance Committee and to the determination of who is discussing what.
We in no way want to step on to the remit of other committees. However, if we in the European Committee see replacement expenditure for the reduction in European funding starting to come in under another heading, I think, from the discussions today and at previous meetings, that we could request that the Parliament address certain aspects of the gaps between the assisted area status and current objective 2 status maps and integration. That is not our responsibility but we could flag up indicators for other committees. You have given us something new to think about today, Mr McConnell, and that has been very helpful.
Those options definitely exist, but are clearly going to be subject to discussion and decision within the Executive and, ultimately, to the Parliament's decision-making processes for the annual budget rounds over the next seven years.
I want to clarify something that you said, Mr McConnell, in answer to a point that Dennis raised about NUTS funding. Were you saying that NUTS 5 funding would give Scotland more money, whereas NUTS 4 would give less but spread it round more, and that, in your view, NUTS 4 is the favourable route?
Neither guarantees more coverage. Ultimately, coverage will be based on a comparison with similar areas elsewhere in the UK. The point that I was hoping to make was that the more the geographical scale is broken down, the better the targeting of resources. I would rather have £1.5 million across Scotland, clearly targeted on the areas that need it most, than £2.5 million spread across Scotland with much of the coverage wasted. Neither of the two options exists, so I can give them as an example.
Thank you very much, minister. Given some of the issues that you raised and that came up in discussion, we would welcome your attendance at a future meeting.
Meeting closed at 16:35.
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