European and External Relations Committee, 24 Jun 2003

Meeting date: Tuesday, June 24, 2003

Official Report 206KB pdf

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European Structural Funds

The next item on the agenda is discussion of responses to the UK Government's consultation, "A Modern Regional Policy for the United Kingdom". The previous committee touched on the future of regional funding and the impact on Scotland, post-enlargement.

The UK Government issued in March this year a consultation on the future of regional funding, which was poor timing from the Parliament's point of view because members were fighting elections and the Parliament was in dissolution. We are therefore now up against a deadline to respond to the consultation. The consultation is important from Scotland's point of view, but it closes on 4 July. Today is our last opportunity to discuss whether we want to respond to the UK Government's consultation and, if we do, what the nature of our response should be.

I will remind members of the issues that were brought to the previous committee's attention by the various organisations that it consulted earlier in the year. The key issues that those organisations brought to the committee's attention are: first, the UK Government's proposal to renationalise regional funding; secondly, the UK Government's proposal to guarantee or match transitional funding from Europe if regional policy is renationalised—the UK Government would in the coming years continue to match funding from Europe; and thirdly, the need for simplification of the funding programmes and for flexibility, which were widely supported.

The final issue that arose from the consultation and the UK Government document was the loss of ability to badge EU-funded projects in Scotland that would result if regional policy were renationalised, as is proposed by the UK Government in its consultation document.

To help our discussion, the briefing paper that has been issued to members on the topic lists three options. Before we discuss those options, I invite members of the committee to comment. Given that regional funding to Scotland from the EU is worth hundreds of millions of pounds, this is clearly an issue that will exercise the Parliament's mind in the coming year or so. Many local authorities around Scotland have sent their comments to the committee; those authorities also benefit from regional funding from Europe. Do members have any initial comments?

I had a look through the responses that were received by the committee, but I did not notice any from the voluntary sector. Have we received any responses from the voluntary sector? Given the role that voluntary organisations play in structural funds, it is important that we seek their views. Do we have any idea what the thinking is in the voluntary sector?

We have had no input from the voluntary sector. I remind members that the consultation was initiated by the previous European and External Relations Committee just before dissolution, so it was not this committee's consultation.

If nobody else wants to speak, I would like to make a few more comments. Several points strike me. What the Government is doing is probably correct; it is examining the changes' effects on structural funds in the UK. It recognises that the extension of Europe by the introduction to the EU of countries from eastern Europe will mean that structural funding will never be the same again, and it is trying to address that. From my point of view, what is strange is that, here am I—a Tory—talking about renationalisation. That worries me. However, "renationalisation" is being used in a different sense from how it has been used in the past.

It seems that everyone who has received cash in the past has some concerns about renationalisation. Those concerns seem to be based on the fact that the Chancellor of the Exchequer is not prepared to ring fence cash for structural development. His idea is without question a good one, because it would leave the UK and Scotland to get on with developing their infrastructures, in line with structural fund requirements and in the ways that would be best suited to their needs. I would have thought everyone on the committee would approve of devolution's working in favour of people here in Scotland. I find it strange that the previous committee was a bit sceptical about the value of that measure. I for one appreciate it very much, and I think that the chancellor is on the right lines.

I should point out to the committee that most of the consultation responses that we have received are also sceptical about some of the proposed measures—in particular the responses from local authorities, which are among the papers for today's meeting.

I made the point that I think that that is because of ring fencing—or the lack of it.

There is a statistical analysis in annex D of the briefing paper. Our share of the UK structural fund allocation was 28 per cent in 1975, but by 1999 that had been reduced to 15.2 per cent. I wonder whether one of our efficient researchers could perhaps find out whether there is an update to that, because that seems to be a fairly substantial reduction. As a member from the Highlands, I know how concerned Highlands and Islands Enterprise is about the implications of the UK structural fund changes.

I also note from the declaration that was made by the Committee of the Regions at the Leipzig conference on 5 and 6 May that it is expected that the declaration will be signed by cities and regions in the member states. I wonder whether we are agreeing with what was said by Albert Bore—that seems a strange name, but perhaps it is pronounced Boré.

He is a Scot.

Albert Bore said:

"a new Objective 2 programme would focus on sustainable growth and economic and social opportunities, not on the protection of declining industries."

I have a lot of sympathy with that attitude; I do not think that we should throw good money after bad by supporting declining industries. However, we have to think of the implications for some of our basic industries, which are under threat, of the common agricultural policy and the common fisheries policy.

Our private briefing paper suggests that there should be a change of attitude on the question of whether objective 1 funding should continue to be based on the 75 per cent limit. However, as soon as the Highlands and Islands lost objective 1 status, we lost about 3,000 jobs, which would have taken us under the limit. Has the committee given any thought to that?

I am conscious of the late stage at which I come to the committee, but those questions need to be addressed seriously.

I am reliably informed that Scotland gets 10.8 per cent of the UK's structural funds. I briefly point out that we will discuss the work programme later in the meeting and that the issue that Margaret Ewing has raised is on the agenda for discussion at that point. The committee can address some of the more detailed points in the future, if it wishes.

I will pick up on something that Phil Gallie said. I do not think that the previous European Committee took a negative view of cash not being ring fenced for structural development, because we did not have time to discuss the matter. We produced a report on structural funds, but that was well in advance of the Government's paper. I have underlined the same phrase as Phil Gallie; I, too, wanted to raise the issue because we did not previously have a full discussion. We said that we would consult on the matter, which is what has happened.

I am caught between a rock and a hard place on the matter. I see myself as being European, but I also come from the perspective of wanting to maximise funds to Scotland. How can we ensure that Scotland will benefit after 2006? How can we ensure that, after 2006, voluntary projects will not go under through not qualifying for funding because of competition from east European regions?

It is important that we do not throw the baby out with the bath water. We have a proposal before us that suggests that certain guarantees might be secured, but I want to do a little more work on the subject. As Richard Lochhead said, the matter will be included in our work programme, which is good, because the committee will want to monitor the situation over time. It is early days yet and the debate still has a long time to run. I do not want to reject outright anything at this time. A debate on some of the issues will be had next week in the Committee of the Regions and among the UK delegation. President Bore will be there and will put forward his perspective.

It is important for the UK that the paper is on the table. I do not want to reject outright anything in it, because that might be detrimental to the voluntary sector and to other groups in my area.

Of course, we cannot respond in full today, but we must decide how to respond to the UK Government's consultation, which closes in about 10 days' time.

We are running out of time in which to make a substantial response to that consultation. The briefing paper suggests that we could send in a relatively short holding response by letter. However, it might be difficult to get consensus among members about what should be in such a letter.

Paragraph 11 of the briefing paper refers to the possibility of reaffirming the alternative proposals for funding regional development after 2006, which were expressed by the previous European Committee. There might be merit in that, but I do not know whether new members of the committee would agree to it without seeing what was recommended. A detailed response would be difficult. On paragraph 10, whatever the merits or otherwise of renationalisation of regional development, I do not think that the main criterion for the decision should be whether it puts across a good, bad or indifferent image of the European Union, nor should it be what will happen in next year's election to the European Parliament. The main criterion should be whether renationalisation will be an effective regional policy for socioeconomic development in the various parts of the United Kingdom and further afield.

As far as paragraph 11 is concerned, Dennis Canavan is right. It is difficult for me, as a new member, to reaffirm something that I have not read. We know that time is against us, so is it possible for a submission to be bounced around via e-mail and signed off with members' agreement between now and the close of play on Thursday?

That is certainly an option. It is worth remembering that the previous minister, Peter Peacock, wrote to the committee urging it to make a submission by the deadline. That was difficult, given that that was just before dissolution. We have a short time scale. I take it that the committee agrees that we should respond before the deadline?

Members indicated agreement.

We will do that. We do not necessarily have to finalise the wording today. As Alasdair Morrison suggested, we could appoint two or three individuals to agree the wording of a letter, which would form the submission, if we can now broadly agree its aims. Although we do not have to reaffirm the views in the previous committee's report, we could ask the UK Government to note the report and its recommendations.

I am a wee bit worried about paragraph 11. As the clerks will recall, we wrote the report before the consultation paper came out. It is not helpful to reaffirm the views in the report, because that view was formed before we knew what position the Government would take. As Alasdair Morrison said, there will be time over the next couple of days to put together a letter that could be agreed. Most committee members will be around during the next few days and I hope that we could agree something by Thursday by using e-mail and by having quick meetings here and there.

Given that some organisations have responded to the committee, are members happy to reiterate in our submission some of the issues that were highlighted to us?

That would be fair, if people have responded to the consultation. My disappointment was that I found it difficult to agree with quite a lot of the comments. I go along totally with Dennis Canavan; whether to do so might have a negative effect on the EU's image should not be one of the major reasons for not renationalising structural funding. That should be the last thing that we think about.

My interpretation of much of the consultation is that fear of the proposal could be removed if we were to include in our comments a message to the chancellor that we do not see it as an opt-out measure for him on providing structural funds. We envisage a structural fund for the UK being established, but left to be split up in a fair and proper manner. It is interesting to note from the paper that the countries that seem to go along with what the chancellor is proposing are those that are net contributors to the European budget. I can see arguments in Europe developing around who gets what; we have to be in there arguing our corner and ensuring that there is cash for our requirements somewhere along the line.

Thank you.

One of the other key issues that came to the committee's attention in almost all the consultation responses that we received was the fact that the spending programmes of Europe and the UK are out of sync. The UK works to three-year spending reviews, whereas the structural funds run for seven years. Therefore, there could be a change if the policy was renationalised. That is an issue that we will have to address.

I have a constituency interest in structural funds, because I come from a part of the world that has received precious little in structural funds over the years. We are perceived as being far too well off and, no doubt, well represented, although there has been some useful stuff for ex-coalfield and rural areas. Nevertheless, we must accept that there will have to be changes because of the expansion of the European Union and because of the differences between levels of prosperity in eastern Europe and those here. We all understand that.

I would not expect Phil Gallie to be fair to Gordon Brown—that is not his job. However, in proposing the financial guarantee mechanism, the chancellor is trying to find a way in which to ensure that we maintain the quality, if not the quantity—and perhaps even the quantity—of structural funding for appropriate projects in appropriate areas in the United Kingdom and, in particular, in Scotland. It would, therefore, be silly to be too critical of that proposal. If there is a mechanism that can ensure continuation of the present level, or an appropriate level, of expenditure, I do not think that local authorities, voluntary bodies or anybody else will be unduly fussed about what label is attached to it, provided that the funding exists. The committee should be careful not to throw out the possibility of achieving a useful compromise solution that might be a lot better than the alternatives.

We are all agreed that we are not able to offer a detailed response to the consultation because of the time scale. We have all agreed that we will have to address the issue again—we will have the opportunity to do so in a few minutes, when we discuss our future work programme. I suggest that we draft a letter as a holding response, because the debate will continue over the next year or so. Two or three members of the committee could agree the wording of that letter before close of play on Thursday.

I agree with that suggestion. There are things on which all committee members agree which we could put in the letter. We could stress the importance of the partnership approach, which has worked well in European terms. We could ask whether the partnership approach would still be in place under the Government's new proposals and we could ask for things such as clear and transparent criteria and better linkages between the proposed menu and how things would operate on the ground.

The Convention of Scottish Local Authorities has given a holding response that says that it will consider the matter over the next few months, that it will consult local government generally about how the proposal will work on the ground and that it will produce proposals. Several groups will make proposals, so perhaps we could give a few pointers about the kinds of things that it would be helpful to have clarification on, in order to enable us to take the discussion forward in the next few months.

Is the committee happy for our letter to be, in the first instance, merely a general letter that highlights some of the issues that have been brought to our attention?

Which members will put the letter together?

I suggest that that should be done by members from different parties.

When are we going to sign the Leipzig agreement—about which I spoke earlier—on behalf of the Scottish Parliament, if we agree with it? It will have to be signed in mid-July at the Committee of the Regions. Are we going to postpone that, too?

Do other members have comments on that?

The matter will be discussed by the UK delegation next week in the Committee of the Regions. I do not think that we would get all members present to agree to everything in that agreement today.

Can I take it upon myself to get clarification of what is happening elsewhere in that context?

Mrs Ewing indicated agreement.

Do I take it that we will write formally to thank the organisations that took the trouble to respond to the committee, and to explain to them how we plan to proceed with the matter, bearing in mind the time constraints?

We want to record our thanks to those organisations for responding. I expect that that has been done, but if not, I will ensure that it is.

We need volunteers from the parties to vet the letter that we will send before close of play on Thursday. I suggest one member from each party.

Irene—it is all yours.

Yes; I volunteer.

We have Irene Oldfather and Phil Gallie. Finally, we should have Margaret Ewing or Dennis Canavan.

I am happy for Margaret Ewing to take that role, although I would be grateful if I could see the draft before it is finally approved.

I think that that is the same thing as volunteering to vet it. It is difficult to differentiate between vetting the letter and seeing the final draft.

We do not have a Liberal Democrat—not that I am one to defend them.

Margaret Ewing can represent them.

Don't be ridiculous.

Dennis Canavan, Phil Gallie, Irene Oldfather and I will check the letter and send it off. Is that agreed?

Members indicated agreement.