European Regional Development Fund

HC Deb 08 May 1984 vol 59 cc821-58

10 pm

The Minister of State, Department of Trade and Industry (Mr. Norman Lamont)

I beg to move, That this House takes note of European Community Documents Nos. 10705/83 for a Council regulation amending regulation(EEC) No. 724/75 establishing a European Regional Development Fund, together with 8833/81, New Regional Policy Guidelines and priorities; 12104/82, Special Report 5/82 of the Court of Auditors; 11232/82 and 9938/83, second series of specific Community regional development measures; 9361/83, eighth report from the Commission to the Council on the activity of the European Regional Development Fund in 1982; and 9449/83, proposal for a Council decision enabling grant aid from the European Regional Development Fund for infrastructure investment projects to exceed the 70 per cent. limit for the period 1981–83; and supports the Government's intention to press strongly for the early adoption of a new and improved regulation for the better administration of the European Regional Development Fund. I welcome the opportunity to review the recent activities of the European Regional Development Fund. I well understand that the House may feel that a debate on these matters is somewhat overdue. A good many instruments and draft instruments to do with the ERDF have emerged within the last year or two and perhaps it would be for the convenience of the House if I were to place them first in the context of the history and purpose of the ERDF.

I should point out to the House that the Community's anxiety to reduce the differences between the various regions and improve the position of the less favoured regions is given a very high priority in the preamble to the Treaty of Rome; indeed, it even appears ahead of the preservation and strengthening of peace and liberty. Whatever that may say about the priorities of those who drafted the treaty, the concept of the ERDF has been strongly supported by successive Governments and is no less strongly supported by the present Government.

When the fund was established in 1975, its expenditure amounted to some£125 million; by 1983, it was committing £1,160 million, of which £250 million was allocated to the United Kingdom. That is no mean growth rate, and we have supported it. Although we should like to see the fund continue to grow in real terms, the constraints on overall Community spending suggest that this rate of growth is unlikely to be maintained.

The fund was given the objective of correcting the principal regional imbalances within the Community. Perhaps this was slightly overambitious given the size of the fund. The latest proposals sensibly lower the sights a little by providing that the fund should simply "contribute" to the correction of those imbalances.

Community regional policy is essentially made up of the national regional policies of its members; and, collectively, they represent a far greater financial contribution towards regional policy than does the ERDF, the principal role of which has been, and will continue to be, contributing to and supporting member states own regional policies.

This does not mean to say that there is no role for the fund in providing for special Community policies, and this fact was recognised in 1979 when, for the first time, 5 per cent. of the fund was set aside for special Community programmes. This provision has become known as the "non-quota section". The reason for its being called the non-quota section is, of course, the fact that the other 95 per cent. of the fund has normally been divided between the 10 members of the Community in terms of predetermined percentage shares, or quotas under Council regulation No. 724/75 which established the ERDF. The United Kingdom's quota was set at 23.8 per cent. having been modified in 1980, along with everyone else's to accommodate Greece. Further accommodations will have to be made in due course for Spain and Portugal, whose proposed accession we welcome and want to see at the earliest opportunity.

Coming now to the operation of the fund, a member state's call on the ERDF must be supported by a regional development programme, drawn upon lines laid down by the regional policy committee. The latter is a body composed of senior officials of member states, who are appointed in an independent capacity, and who elect a chairman from among themselves. It provides advice to the Commission on a variety of matters to do with the operation of the fund.

In relation to the quota section of the fund, all United Kingdom receipts go towards the support of projects and activities in assisted areas, in certain inner urban areas that receive assistance under the Inner Urban Areas Act and in the rural areas of mid Wales covered by the Development Board for Rural Wales. It is, of course, an essential feature of the fund that only projects receiving some form of national public assistance are eligible for its support. This further underlines the fact that the fund's principal role is the support of domestic regional policies.

The support is given for both infrastructure and industrial projects. Regulation 724/75 provides that at least 30 per cent. of the fund should be allocated to industrial projects, unless the Council should decide otherwise. The downturn in industrial investment throughout the Community has meant that in practice the Community has not been able to meet that objective. For this reason, the Council decided unanimously to waive the requirement in 1983; hence document 9449/83, which allows the 70 per cent. ceiling on infrastructure support to be exceeded for the three years ending 31 December 1983.

It is appropriate to note at this point that the Commission has proposed to drop that binding requirement in its proposals for the future, although it will remain the case that all member states will be requested to continue to do their utmost, as desired both by the Commission and the European Parliament, to devote as much as possible of the fund's resources to industrial support.

Regulation 724/75 also provides that fund aid given towards industrial projects may be retained by member states as a partial repayment of their own aid. That is an important factor in maintaining the level of regional industrial support that member states can give. There can be little doubt that, without this support, the level of regional aid throughout the Community would be lower than it is today.

Aid towards infrastructure projects, on the other hand, is passed on to the local and other public authorities that undertake the work. That currently accounts for about 80 per cent. of the fund. In the United Kingdom last year, to quote just a few examples, the fund contributed to the construction of coal handling plant at south Shields and a dual carriageway road link for Grimsby—

Mr.Nicholas Budgen (Wolverhampton, South-West)

Before my hon. Friend gets involved in the minutiae, which the House must find of gripping importance, will he explain in general terms whether the Government approve of the fact that the regional fund should extend its activities and enjoy the support of more money?

Mr.Lamont

We welcome the fact that the fund should grow in real terms. I shall explain the Government's attitude to the regulations

I was saying that the fund has contributed to several projects, including the national exhibition centre in Glasgow and the entertainment and leisure complex at Swansea. I recognise the importance that public authorities attach to these receipts. The United Kingdom is also benefiting substantially from the first series of ERDF "non-quota" measures that were approved in 1981.They include fiv-year programmews from 1981 to 1985 to help to promote alternative employment in shipbuilding and steel areas and to improve the economy in the border areas of Northen Ireland. We expect that these measures will bring about £35 million of ERDF assistance to yhe United Kingdom

I come to documents 1132/82 and 9938/83. Arising from those documents the Council of Ministers adopted regulations in January setting up a second series of non-quota measures, from which the United Kingdom should benefit to the extent of £89 million. These regulations came before the Council at short notice and unexpectedly, following 12 months of consideration in the Council's working group. I regret that these circumstances led to the measures being adopted before they had been discussed in the House. As we had been pressing for the measures for two years, the Government felt bound to give their agreement. I explained the circumstances to the House in a statement on 1 February, and to the Chairman of the Select Committee.

The measures will provide further aid of £19 million and £10 million respectively for eligible steel and shipbuilding closure areas, plus, for the first time, about £60 million for textile closure areas. The aid will be available over a five year period, though it will be some time before it begins to flow, because member states must first prepare special programmmes for Commission and management committee approval, showing how they intend to implement the measures for which the aid is available. Subject to the agreement of the Commission and the management committee, the aid will be available for projects for the improvement of run-down areas and the conversion of disused buildings into premises for small and medium-sized enterprises, as well as for providing consultancy and common services for such undertakings. Help on innovation will also be eligible, as will the establishment or extension of economic promotion agencies. Eligible steel closure areas in Scotland, Wales and England will benefit. The shipbuilding area assistance will go to Strathclyde, Cleveland, Tyne and Wear, Merseyside and Belfast. The textile provisions will help areas around Manchester, west Yorkshire, Lancashire, Northern Ireland and Tayside in Scotland. We welcome these non-quota measures which will help to combat the worst effects of decline in all these areas, and we are getting on with the work of preparing the required programmes.

Finally, document 9361/82, the eighth report from the Commission, covering the activities of the fund, offers a detailed picture of the fund's operations and of how the fund's resources were used and monitored. The Community has been reassessing the operations of the fund in the light of changing circumstances. In July 1981, in pursuance of a Council resolution, the Commission published proposals for new regional policy guidelines, document 8833/81. The Commission proposed that there should be greater concentration of quota section aid in areas of the community suffering from structural underdevelopment, and that the non-quota section should account for a larger proportion of the fund's expenditure. This was followed by the Commission's proposals for amending the ERDF regulation itself.

These 1981 proposals envisaged, among other things, concentration of quota section resources on Greece, Ireland, Italy and the United Kingdom; financing of national programmes rather than individual projects; an increase in the non-quota section's share of the fund from 5 to 20 per cent; and the further development of what are called integrated operations—that is, those that combine different sources of Community finance. We welcomed these proposals as a constructive approach to the further development of the ERDF, whilst having reservations about certain administrative aspects.

It is probably fair to say that agreement had been achieved on some 90 per cent. of the text of a new regulation. Unfortunately, discussion foundered on the principal issue of concentrating the quota section exclusively on the four less properous member states as judged by the Commission at that time; and it is clear that the majority were unable to agree to this. The House should note that from the beginning of 1982, that part of article 2 of the present regulation which lays down quotas has expired—so that 95 per cent. of the fund is now distributed solely at the Commission's discretion. Whilst we are confident that the Commission will administer the fund fairly and equitably, it is a situation which all member states would prefer to see ended.

The 1981 proposals were still on the table when the Council met in June last year. The Council asked the Commission to report on ways of increasing the effectiveness of the Community's funds, including the ERDF. In its report at the end of July, the Commission suggested a new approach to the operations of the ERDF and in November 1983, the Commission withdrew its original proposals, and sent to the Council an entirely new proposal for amending the ERDF regulation, which is document 10705/83. Although the 1983 proposals down draw to some extent on the work done on the 1981 proposals, there is much that is new.

Going through them in order, the new arrangements would abolish both the distinction between the quota and non-quota sections, and the arrangements by which the quota section is allocated according to predetermined, fixed quotas. Instead, each member state would have a quota range based on the quotas set in 1981. The United Kingdom's 1981 quota was 23.8 per cent. and the proposals would give a quota range from 20–23 per cent. to 28.56 per cent. of the fund. For more prosperous member states, the base point would be their 1981 quota, less 10 per cent., thus providing a potential concentration, of aid in favour of less prosperous member states. As an example, the proposed range for Germany is 3.55 per cent. to 4.81 per cent. compared with its 1981 quota section share of 4.65 per cent. The United Kingdom would have the possibility of increasing its share of the fund to 28.56 per cent., but the final allocation of a member state's quota within its range would depend, among other things, on a member state's ability to submit acceptable qualifying programmes and projects of interest, and on the extent to which it could benefit from any special Community programmes proposed by the Commission and approved by the Council. The United Kingdom is, however, currently a net beneficiary from the ERDF and it is the Government's firm intention that this should continue to be the case under the new arrangements.

Mr.Budgen

Why?

Mr.Lamont

Obviously, if we are in the fund, it is far better to be a net beneficiary than otherwise.

Sir Anthony Meyer (Clwyd, North-West)

The Minister hopes that the United Kingdom will continue to be a net beneficiary, but earlier in his speech he said that regions, which were not classified by the United Kingdom as assisted areas, would not qualify for aid from the ERDF. Does that mean that if there were either a revision or a reduction in the assisted areas under the Government's proposals, it would militate against receiving a larger share of the ERDF globally?

Mr.Lamont

The purpose of the ERDF is to support regional policies. If an area is not assisted, it will not benefit from the ERDF. The changes that we are making to the regional development grant will make eligible the automatic element in our regional policy, which is not at present eligible for support from the ERDF. There will be a greater possibility of taking up money from the ERDF as a result of those changes. If the area is not assisted, it cannot qualify for assistance, unless it is one of those rural areas in Wales which qualifies under the Inner Urban Areas Act, which benefits certain city areas.

Mr.Budgen

Are the Government in favour of the principle of economic convergence because they believe that it will provide an excuse for always being a net beneficiary? If, by chance, the United Kingdom became one of the richest countries in the EC, would the Government then be against economic convergence because the United Kingdom would no longer be a net beneficiary?

Mr.Lamont

That is a theoretical question, because the United Kingdom is a long way from being the richest member of the Community. We are in favour of being a net beneficiary from the fund because it is in the interests of the United Kingdom and helps us to strengthen our regional policies.

Mr.John Prescott (Kingston upon Hull, East)

What happens when Spain and Portugal join the Community?

Mr.Lamont

That is a fair point. Obviously the regulation will have to be amended when they join. The impact of the ERDF on the United Kingdom after their accession requires a considerable amount of consideration and thought.

The Commission proposes that a growing proportion of fund aid should be authorised in support of programmes of expenditure rather than individual projects, rising to 40 per cent. at the end of four years. The Commission also proposes increases in the rates of grant—examplefor example, up to 40 per cent. for the usual infrastructure projects instead of the present 30 per cent. maximum. For individual project applications, the present maximum contribution of 50 per cent. of the national aid would remain. The additional provision that aid from the fund should not exceed 20 per cent. of total investment cost would, however, be deleted.

The Commission also wants grant rates higher than this for projects incorporated in programmes or forming part of integrated operations which combine different sources of Community finance, and up to 15 per cent. of a member state's receipts from the ERDF could be used for measures to help promote—I apologise for this jargon—what is labelled as "internally-generated development" —measures available on a local basis to help local development, especially small and medium-sized enterprises.

That is the main outline of the proposals. I sense that the hon. Member for Bolsover (Mr. Skinner) is not very enchanted by all this detail which I thought it proper to give the House, but I assure him that it is extremely important that the House is aware of the detail of the instruments. The Select Committee believed it important that the House should have an opportunity to comment on the voluminous and detailed documents.

Mr.Dennis Skinner (Bolsover)

The Minister will be pleased to know that I have been listening to him as he read almost every word from his script. If he had had to speak on his feet, based upon only a few notes, he would have been finished 10 minutes ago. He is just reading it out and making a boring speech, and because I made a comment about the Common Market catastrophe, and the fact that it is bankrupt and is calling on British taxpayers and others in the Community to find another £1,600 million, he has to make remarks about not following the detail. The fact is that the Common Market is crumbling into little pieces and the sooner it goes, the better it will be for the British people. This is the time for Britain to get out.

Mr.Lamont

I do not know what has got under the hon. Gentleman's skin, but I am glad that he has got the poison out of his system. It is important that the details of the new proposals and regulations should be laid before the House. I assure the hon. Member for Bolsover that I am looking forward to replying to the debate and to the contribution that I hope he will make.

The Government have welcomed these new Commission proposals as a constructive effort towards reaching agreement on the future of the fund, although we regret the inability to reach agreement on the 1981 proposals. Detailed discussion is proceeding within the Community, and the French Presidency's aim is that the new proposals should be discussed at the Foreign Affairs Council on 14 May. That does not mean that they will be agreed then.

In these discussions we have accepted the idea of quota ranges in principle, as a basis for negotiation. We are also ready to consider the introduction of programmes for an experimental period; the introduction of Community programmes; integrated operations and activities to support development from within the regions. Financing by programmes, instead of by individual projects, seems to us to be a useful idea, especially if it reduces the very considerable administrative burden in member states and the Commission, and so helps the fund to operate more efficiently; but it would involve a new approach and new procedures which we would prefer, in common with other member states, to be developed gradually and experimentally.

However, we share other member states' concern about the unpredictability involved in the Commission's proposals and also the extension of Community competence. Some modifications can be made to help with this problem, and the possibilities are being explored in the negotiations. For example, we should like to know more about what would be taken into account in the allocation of quotas within the ranges. It could also help if the quota minimum were higher, thus giving a larger guaranteed share than that proposed by the Commission and reducing the width of the ranges. There is also uncertainty about the extent of the Community programmes, and it will be our objective to limit these to the lowest realistic proportion of the fund, precisely because we are concerned about the extension of Community competence.

Mr.Paddy Ashdown (Yeovil)

Before the hon. Gentleman leaves the largest guaranteed share and predictability, is the reason why he wants more predictability and a larger guaranteed share that the Government will then cut national programmes commensurately?

Mr.Lamont

The reason is the obvious one that if one has the range, it is no longer guaranteed that we would be a net beneficiary out of the fund because the bottom point of the range is below the point at which our quota is fixed. If we raise the minimum, that will also have the effect of lowering the maximum. One cannot do the one without the other. If one narrows it, there will be a greater certainty and a greater possibility of getting a net benefit out of the fund. I hope that the hon. Gentleman will not have the impression that we are unconfident that we shall be able to put forward proposals that will be approved by the Commission. We should like that uncertainty to be lessened.

Mr.Ashdown

I am grateful for that clarification, but is it not the case that the Government have cut back national funding precisely commensurate with the amount of input from the European development fund, and the Government are the most guilty in Europe of additionality? That is what has happened in the past. What guarantees are there that this will not continue to happen in the future?

Mr.Lamont

The House knows that regional assistance has been cut back in real terms. Additionality has been maintained at the macro level. More money has been spent on regional policy than would otherwise have been spent. The hon. Gentleman questions what I mean by "macro level"—it is simply the concept of additionality as applied to the totality of Government spending rather than to the level of the individual project. That is the right way to approach it.

Before the hon. Gentleman intervened, I said that it would be our intention to keep the Community programme as part of the new regulations to the lowest realistic proportion that we could get. At the same time, we shall wish to ensure that the approval procedures preclude any Community programme being imposed on a member state against its will. Again, although the Community programmes might not be very different from the present non-quota section arrangements, we want to know more about the criteria by which a proportion of the fund's resources might be allocated for this kind of assistance. That is the criteria that will be used within the range.

Mr.Budgen

What percentage increase in the funds used by the regional fund are anticipated in the next year?

Mr.Lamont

The fund is expected to grow by some 5 per cent. in real terms.

Our view on the integrated operations is that they should in the first place be able to stand on their own merits. Integrated operations, are those that are being financed from several resources. The draft regulations put forward the idea that they should have an extra grant because they are integrated operations. A grant bonus such as that proposed in article 34 of document 10705/83 would involve some further benefit for those projects. If those operations are of benefit they should not require an additional grant.

Lastly, one change we are particularly glad to note is that all United Kingdom areas receiving domestic regional assistance would in principle be eligible for ERDF aid. That was not as some of my hon. Friends will recall, the case with the 1981 proposals, which would have excluded assisted areas in the south-west, Yorkshire, Humberside and the east midlands from the benefits of the quota section. We resisted that and I am sure that those hon. Members with constituencies in those areas welcome the Commission's amendment.

The only document in the motion that I have not referred to so far is 12104/82, the special report by the Court of Auditors dated November 1982, on job creation and maintenance in the granting of Community and national regional aid. This considered the difficulties of estimating jobs created under the different approaches used by member states and concluded that not all jobs foreseen necessarily came into existence in the longer term. In its reply, the Commission noted that differences of treatment between member states were to be expected and that economic conditions made it very difficult to make reliable estimates of job creation possibilities. The Government are, as the House knows, committed to making our national regional policy more job related.

Finally, although it is not strictly within the terms of the motion, I should perhaps draw the attention of the House to the fact that during 1983 the Commission accepted that inner city areas eligible for support under the Inner Urban Areas Act 1978 are eligible in principle for ERDF aid. While the Commission has said that it intends to use its discretion to limit the areas which will benefit in that way, assistance of about £5 million for infrastructure projects in the west midlands, Blackburn and Rochdale has already been approved. I am sure that my hon. Friends will agree that that is a welcome development. Obviously, we shall be pressing hard to have that assistance extended to other areas.

I apologise to the House if I have wearied it with overmuch detail on the documents. I agree that some of them are not exactly the most digestible pieces of literature. But it is important that their detail, which is highly complex, should be available to Parliament. I hope that I have outlined the Government's general approach towards the new regulations, particularly the range of aid that will be available to us and how we intend to take up a negotiating position which we hope will lessen the uncertainty inherent in the proposals.

In general, the proposals that are being put forward should be welcomed. They are in the interests of Britain and are compatible with national policy. With the examples of the ways in which the fund has developed and provided assistance for our regions, I commend both documents and the motion on the Order Paper in the name of my right hon. Friends to the House.

10.32 pm

Mr.Geoffrey Robinson (Coventry, North-West)

All Members on this side of the House felt that the Minister of State did neither himself nor the Government justice this evening. He scampered through the draft with a great deal of unease, the sort of unease we saw in Committee, to which we shall be returning probably next week. I well understand his unease because it is on precisely those technical and difficult details that he frequently tied himself and tried to tie the Committee in knots.

It is not my purpose to do that this evening. We owe it to the House and the Select Committee on European Legislation, the Chairman of which is present this evening, to try to get to the heart of what the Commission is trying to do and the extent to which it is being helped, quite disgracefully, by the Government in restricting the amount and purposes for which the ERDF money can be used. Those restrictions and pressures are coming not so much from the directorate for regional policy, but increasingly from the directorate for competition policy.

What the Minister failed to tell the House was that the rot set in in 1980 when the then Secretary of State for Trade and Industry, now the Secretary of State for Education and Science, suddenly thought that, if he could in some way adapt our RDG system to meet the criteria of the directorate for competition policy, some El Dorado of Community regional funds would be available to us. Since that fateful decision was made, effectively to get rid of RDG, the Government have been on the defensive. They have reeled from one humiliation to another, from having capitulated to the directorate for competition policy in 1980, published in the report of 1981, to losing out completely on a set of potentially hopeful regional development policies in 1981, and to the set of documents before the House tonight which make sorry reading for those committed to, and interested in, an expanding and constructive regional policy for the country.

Some hon. Members, notably the hon. Member for Wolverhampton, South-West (Mr. Budgen), do not believe in regional policy, and have the honesty of their convictions in saying so. It is the sheer hypocrisy of the Government that is astonishing. After the fine flow of words of commitment to the reduction of disparities among the regions, and to the original highly constructive and moral tone, as the Minister himself said, of the treaty of Rome in respect of the regions, we now have a Government obsessed with one idea and one idea only —to cut the level of Government expenditure on the regions. If they can in some way camouflage this by saying, "Look how clever we are at getting money out of the ERDF," they hope, by that sleight of hand, that the fact will go unnoticed, that, while saying that they are committed to a regional policy, they are doing the opposite.

I assure the Minister of State and the House that, when we debate the Bill in Committee, on Report, and on Third Reading, we shall expose the Government's policies for precisely what they are. I do not wish to get dragged into that debate now. It would be wrong, in the interests of the purpose for which the Select Committee has chosen these seven important documents and instruments, to do that.

Before I come to those documents, it would be sensible and appropriate for the House to examine what we are considering in terms of the ERDF in the context of the whole budget of the Community. We are discussing tonight over 200 pages, contained in seven documents with detailed technical, legal and administrative implications. We must not lose a sense of perspective as to what they and the ERDF represent. In the last three years, agricultural spending has increased its percentage of the total Community budget from 65.7 to 67.7 per cent . , or a staggering £10 billion in 1984. From The Financial Times of Friday 4 May, one understands that, for 1985, there will be a further overspend in the total Community budget of £1.2 billion on top of the massive spend that we know is already occasioned by the Prime Minister's failure to secure long-lasting adjustments to the way in which agricultural spending is administered, and by the fact that the agricultural spend budget will be exceeded yet again by a further £1 billion.

Against that, the ERDF is a humble 5.6 per cent. of the EEC budget in the current year—only £817 million of money being made available for the entire Community. Despite the quixotic forays of the Prime Minister, always accompanied by her indefatigable Sancho Panza, the simple fact is that the British net contribution to the budget has increased in each of the last three years. In 1982 it was £605 million, in 1983 it was £658 million and I understand from the Library that it is likely to be £719 million this year. When one compares those figures with the total regional policy fund, one realises that the United Kingdom's net contribution to the EEC budget is almost equivalent to the entire ERDF for the last three years.

I understand that our allocation is about 23 per cent. Will the Minister confirm that the United Kingdom's receipts from the ERDF in the last three years were under 20 per cent? Can the Minister be certain that we shall achieve the take-up even of the lowest of the low figures which already represent a reduction on the original quota for the United Kingdom?

The seven documents represent an enormous amount of legislation for the House to consider this evening. It is inappropriate to try to hide our lack of grasp of the issues by dealing with abstruse detail. That is not the purpose of the documents being brought to our attention. They were drawn to our attention for the opposite reason—so that we can understand what is happening to regional policy in Europe and the extent to which we are, or are not, complying with it. We must consider the priorities, the guidelines, the administration, and the ceilings associated with ERDF assistance. We must also be aware of where we are going with our own policy.

How does the Minister expect that he can take up over 20 per cent. of the allocation when we have already operated at under that figure? The Minister proposes to eliminate at a stroke no less than £200 million of regional development grant. That decision was announced in advance of any consultation. The consultation was meant to last until 31 May, but the Government have already eliminated that £200 million from regional policy.

It could be argued, but not in terms of document 10705/83, that replacement investment is inappropriate, unacceptable or inevitable within EEC legislation. It is clear that modernisation is not construed that way: that is spelled out with appalling regularity in each of the seven documents. They state that the Commission will contribute to the modernisation of an industry in a region, even if it leads to a loss of jobs, provided that it involves restructuring and re-investment to make the industry viable in the long term.

Will the Minister reconsider the unnecessary cut which he has imposed upon the aid budget for the regions by eliminating modernisation? Is the Minister confident that he will be able to meet the take-up envisaged?

Document No. 10705/83 suggests several new ceilings for the level of aid that can be given by the ERDF towards any one Government's regional programme. To what extent has C31/9, the original document which set the limit, been modified by the proposal in document 10705/83, the first document put to us for our consideration?

I note that the ERDF can come up with 65 per cent. of a total national programme, but it can be only 50 per cent. of a total national regional programme. Why is there that difference? Even if it is only 50 per cent., why is the Minister so anxious to impose the second of his very heavy cuts in regional policy on the cost-per-job ceiling? Why cannot he accept the original levels of Government grant and allow the Commission to impose its ceilings, which are tight—50 per cent. for industrial grants and between 20 and 40 per cent., although it can be up to 50 per cent., for infrastructure programmes?

The Opposition feel that the first document raises worrying questions. We will move away from national programmes with Community objectives towards Community programmes. It is intended that within four years the Community programmes will draw on more than one source of finance and may, therefore, come to imitate th programmes of draconian reductions that have occurred for steel, textiles and shipbuilding. Is that the sort of integrated programme that the Commission has in mind? Will the Minister go further and say that we will not go along with so large an increase in the Community-administered programmes at the behest of the Commission without an annual review being put to the House to show that it is not working against the interests of British industries?

The Opposition regard with the utmost reserve the 40 per cent. total that will come under direct Commission discretion. We cannot easily agree to it tonight, but we shall not stand in the way of anything that will enable us to take up our full share of ERDF funds—given the extent to which the Government are committed to reducing their contribution to regional policy.

Will the Government's job-capping limit on the ceiling of the cost per job, about which the Court of Auditors report on the ERDF was caustic, be applied to the Community programme? If so, will that not mean that we may qualify for programmes that bring some money with them, but because of the ceiling we have imposed on our programme we would have to tell the Community, "No, we cannot take that much money from you."? We need a clear answer to those questions.

Document 8833/81 deals with the new regional policy guidelines and priorities which, I understand, have been amended to some extent by document 10705. The four criteria in the first paragraph are acceptable to the Opposition, although they may not be acceptable to all Conservative Members. We believe in regional policy; we believe even in what the Treaty of Rome originally said about regional policy. The Government do not. The figures for what has been made available and what has been cut back show that. The Minister should not be so churlish about what his Government are doing. He should have some insight and recognise that they are trying to reach out to him without admitting it.

In the new policies on guidelines and priorities, page 3 states clearly that the new criteria do not preclude restructuring that involves labour-shedding where productivity can thereby be improved. Modernisation, without any increase in employment, is entirely in line with the criteria and consistent with the Community's thinking and, therefore, eligible. The Minister could not have it clearer than that.

The document also says that some of the recession that is taking place is accentuating factors that generate imbalances— referring to regional imbalances— further impeding the flow of capital to the less favoured regions." It is concerned about the flow of capital. It is not concerned about linking it arbitrarily, to unilaterally, the creation of jobs. It is saying that these are important considerations that have a role to play in regional policy. I ask the Minister, therefore, to consider those points in the context of the elimination of modernisation and the £120 million that that will cost, in relation to what his cost-per-job ceiling will do to our ability to take up national and Community programmes. The audit commission report—the special report of the Court of Auditors, as it is technically termed, document No. 2104—makes interesting reading and is at its most sceptical about the policy of this—indeed any—Government who try to relate their regional policy to the creation of directly related jobs. The Minister has there a totally dispassionate view of the policy on which he is about to embark; far from being vindicated, it is viewed in a highly dubious light. The report says: The creation of a new undertaking represents a simpler situation in this context. To ensure its operation, the new undertaking requires staff . . the total number of staff plus a given number of jobs created. These are the criteria that the Minister is adopting. But the report goes on: In a number of cases, the desire to create or maintain jobs must give way before the necessities of preserving the undertaking, since technological and economic developments may, in fact, mean that to establish or regain its competitive position, a firm or a sector activity may have to shed jobs. We on these Benches are not embracing a policy of shedding jobs. We are telling the Minister in the simplest possible terms that the policy on which he has embarked will harm the competitive position of vast sectors of industry in the regions.

On the non-quota measures, we must view with grim humour the terms in which they are presented. What is contained in them as mitigating the impact of the recession on some of our hardest-hit industries has proved to be nothing for them but a savage reduction in capacity and employment.

Considering the three industries to which the document refers, in iron and steel, the number of employees has been reduced from 325,000 to 178,000. This has all happened under the measures agreed by the EEC and the ERDF. Textile employees have been reduced in number from 439,000 to 286,000, and in shipbuilding and marine engineering, from 166,000 to 131,000. The reductions in the output of those sectors show precisely what is meant by Community aid to some of the hardest-hit regionally based industries in the United Kingdom.

What have we received in response to that? The funds announced—by surprise; another piece of policy in the making, no doubt—are higher than those I have documented. We have had about £6 million a year for steel, about £3 million a year for shipbuilding and between £10 million to £12 million a year for textiles. That, by way of compensation for the massive loss in jobs and capacity, is the worst possible deal the Government could have made. It would have been better for us to hang on to the jobs and not to have the money. Other European countries hung on to jobs much more successfully than we did. We should have done the same in these key industries.

The seventh document on the Order Paper—I shall take it out of order—proposes that a decision be taken to allow infrastructural aid to amount to 70 per cent. of total aid. We are committed to taking up a higher percentage than hitherto, despite the cuts that the Minister is imposing, which will have an inevitable effect on our ability to take up a higher percentage. The contribution of the service sector, welcome though that is, will not make up for the massive £200 million reduction in RDG to which he is already committed.

We have never approached the 30 per cent. level which industrial aid is meant to take up, and the new policy guidelines are designed to encourage us to take up 40 per cent. We shall agree willingly, of course, that the 70 per cent. proposal be waived. I do not think that it has ever been met since it was established. We hope that we can find some means by which the non-industrial infrastructural aid can make up the gap between what has been agreed for the ERDF and what can be spent by it.

Bridging that gap will not solve the Minister's problem. Let him be clear that the problem will not go away. He is compounding his own problem. Every time he submits new proposals to the Commission that are meant to enable us to take up a higher percentage of what is available, the emphasis will always be put on infrastructure. We are not cutting back on our ability to spend on the industrial side through a reduction in RDG and through the imposition of a ceiling on the cost per job, but at local government level, through the abolition of the metropolitan counties, the ability to submit to the EEC credible, integrated, large-scale regional policies on infrastructure will be severely reduced.

We have seen in the administration of the aid policy that the United Kingdom has been successful—it has been more successful than many other member states—in advancing well-argued cases that have led readily to the obtaining of Commission and ERDF funds.

The sixth document relates to the eighth report of the Commission to the Council of the ERDF. The Minister was keen on detail in his speech, so I shall put a point of detail to him. I am sure that he has read paragraph 14 of the report with great interest. I should like to know why no member state has made use of the possibility that is afforded by article 4(2)(b) of the ERDF regulations. The paragraph provides: Fund assistance for infrastructural projects may consist wholly or in part of a rebate of three percentage points on loans made by the EIB. This is because member states prefer to obtain ERDF assistance under their quotas within a relatively short period— that is reasonable enough— in the form of an amount based on the progress of the projects rather than in the form of an interest subsidy comprising payments spread over a relatively longer period, i.e. the term of the EIB loan. The paragraph is fairly clear until that point, and I think that I carry the Minister with me.

Does the hon. Gentleman agree that making use of that possibility would increase the impact of the assistance provided by the two financial instruments by allowing a number of investors easier access to credit and, secondly, by allowing more resources to be channelled to regional development through the fund? This is a technical matter, but the Minister, with his merchant banking experience, will readily take it on board. There is a cash flow implication to be offset against an eventual total flow of funds. The cash flow advantage would be considerably outweighed if the DCF calculation were made.

More importantly, and more central to the issues that we are discussing, are two other parts of the ERDF review of the eighth report of the Commission on the working of the ERDF for 1982. The first paragraph of the 1982 review makes it clear that the purpose of the ERDF is to buttress national regional development measures, not to replace them, or to make up for the cuts the Government wish to impose. In paragraph 2—hardly into the report—with a shrewd eye on the United Kingdom, the Commission states: It is no coincidence that the countries with the greatest regional disparities are the very ones that are least able to solve them, since they are also faced with the most serious economic problems. That is a succinct description of the United Kingdom's position.

Where are we after five years of Conservative Government? I refer to page 78, paragraph 10, and a survey of the progress and achievements of each country in the year under review. After five years of coherent clear strategy for the economy, the regions, inflation and high interest rates, New programmes for 1981–85 were notified to the Commission in 1981". That was the year when the Government thought that they were on the way to a new deal, to something worth having. What happened? The report states: the Regional Policy Committee deferred consideration pending the submission of further information. The United Kingdom. Government has undertaken to submit new revised. programmes. Of course, the Government had to do so. The sad truth is that after five years of regional policy, the Government are back to square one. All our regions have their highest ever rates of unemployment.

Unemployment in the prosperous royal county of Berkshire stands at 106 per cent. of the average in the Community as a whole. Surrey barely rates par, at 101 per cent. That occurs in a Community that includes Greece and the Mezzogiorno in their entirety. That is the Government's achievement—a record lack of investment and the lowest rate of growth, output and investment. The Government's answer to historic, deep-seated regional problems has been to cut further, and now to hand over the whole problem to the EEC and hope for the best.

The Government are going way beyond any measures in the ERDF documents or anything that the regional policy directorate wants. The Government's words on the Order Paper— this House … supports the Government's intention to press strongly for the early adoption of a new and improved regulation for the better administration of the European Regional Development Fund— deserve severe reservations. The Opposition do not support the Government's regional policies, as we shall make clear shortly. In the meantime, we hope that the country gets everything on offer from the ERDF, and we shall do all we can to ensure that that is the case. We cannot yet accept that the EEC has a coherent, constructive or convincing regional policy. For that, we must wait for the return of a Labour Government to back the regions with funds, agencies and policies that will reverse the regional and national decline of the past five years.

11.3 pm

Mrs.Elaine Kellett-Bowman] (Lancaster)

I shall put the hon. Member for Coventry, North-West (Mr. Robinson) right on his observations on paragraph 2 of the eighth report from the Commission to the Council. The Commission was referring not to the United Kingdom but to Greece and Italy. If the hon. Gentleman knew anything about regional policy he would be well aware of that fact.

I regret that this debate on the ERDF, which is crucially important to the less prosperous parts of our country—

Mr.Burden

What?

Mrs.Kellett-Bowman

Yes, crucial. My hon. Friend comes from a different part of the world, but this debate is crucial to the part of the world from which I come. I regret that the debate is taking place so late at night and covers so many documents, any one of which—

Mr.Budgen

Will my hon. Friend give way on the word "crucial"?

Mr.Kellett-Bowman

No, I shall not. My hon. Friend may make his points later. He can bicker about words here and there. I am interested in getting at the bones of this policy, and in getting the best deal for this country and our region. I shall not argue semantics with my hon. Friend, who constantly interrupts these debates.

The amending regulation is soundly based on the experience of the working of the first two regulations and seeks to concentrate aid, as my hon. Friend the Minister of State said, on areas needing it most. For the first time, as the Minister said, quotas have been been abandoned in favour of a more flexible "range" or "bracket" of aid for the different countries.

The Minister said that he would have liked a higher level of guarantee. I believe that the European Parliament voted wisely to concentrate the aid still further by allocating a higher proportion of the fund to the four least well-off countries and raised the floor and ceiling levels for the United Kingdom substantially to 21.66 per cent. for the lower limit and 30.45 per cent. for the upper limit. I hope that those increases will be accepted.

Article 2 of the fund regulation referred to the Periodic Report. Until these reports were produced we had no objective method for comparing one region with another. We had no statistics that covered the whole Community. We were working in the dark. It is now possible to make those comparisons. Although it was dated earlier, the second periodic report was published only two weeks ago, and it is a far better tool than the first report, especially for the United Kingdom, because for many purposes it uses level 3 statistics—roughly county level—instead of the much bigger level 2 planning regions which failed utterly to pinpoint problem areas, and made matters extremely difficult. Less prosperous areas, particularly in the south-west, were linked almost as far as London. It completely disguised the problems faced by those areas.

The league table contained in the second periodic report gives an index based on productivity per head and unemployment. On that so-called synthetic index, Lancashire is 31st in order of need with an index at 80.7 — roughly one quarter of the way down the list. It is most important that when the Government decide — I have made these representations to the Minister, as has my city council and the borough of Wyre — on their new map for regional assistance, they should not so narrow the area eligible for aid that there will be insufficient projects — the Minister dealt with this point — to absorb our share of the Regional Fund and, what is also very important, to take full advantage of the assistance offered by the European Investment Bank, which has done immense good in Cumbria, Lancashire and throughout the north-west. Many projects which have been assisted by the European Investment Bank would no longer be eligible if they were not assisted areas.

Factors such as the age structure of the population and distance from markets are crucial matters to be considered. The revised regulation stresses the importance of all policies working together to promote the prosperity of the regions and the need to ensure that all funds are properly co-ordinated and that no policy undermines another.

In the past it has seemed that some of the agricultural policies were working in direct variance to the regional policies. We are trying to eliminate that and we must continue so to do.

Experience has shown that the upper limit of 70 per cent. on infrastructure projects — it is done over three years and not annually—is too inflexible and could lead to underspending of the fund, not just for this country but of the overall resources of the fund, while useful infrastructure projects queue up and wait for funds, which would be highly undesirable. It would be damaging to the more distant regions, such as the north-west, because the further one goes from markets, the more important road improvements become to lessen transport costs.

Roads such as the Brierfield link road and many others in the north-west have been built with aid fom the ERDF, but many more are needed and the lifting of the 70 per cent. barrier will be helpful. I am glad that the draft due fund regulation does not include a specific limit on infrastructure projects.

I should be less than human if I did not welcome warmly and wholeheartedly the second series of non-quota proposals for aid to the textile industry. I and my husband, in another place, have been pressing for these for many years. These proposals deal generously with Lancashire. They give the lion's share of the £58 million grant—I do not know where on earth the hon. Member for Coventry, North-West got his figures, as he had them only half right—will go to Lancaster, Accrington, Burnley, Nelson and Rossendale, as well as Rochdale and other parts of the greater Manchester area. Those areas have been hard hit by the recession in the textile and shoe industries. The Conservatives have never made any bones about that. The rot started when the Labour party was in Government, and we have been doing our best to clear up the mess that they left. The aid will be very welcome. All in all, I believe that the series of documents represents a positive degree of help for our region and I wish the Minister well in his negotiations with his Community colleagues.

11.10 pm

Mr.Paddy Ashdown] (Yeovil)'

I looked forward to the debate with a degree of enthusiasm not usually associated with European Community documents not because I expected to hear too much that was new from the Government—many of the details are in the voluminous documents before us—but because, with the impending European elections, I thought that the hon. Member for Coventry, North-West (Mr. Robinson) would reveal some of the great vision and expansive ideas about the new Messina and the developments which they envisage for Europe.

I have no doubt, Mr. Deputy Speaker, that you would have been indulgent enough to have allowed Labour Members to put some of that broad picture to the House, provided that they had been clever enough to relate it to the context of the development of a European regional development fund, and how that might be reformed. Indeed, the hon. Member for Coventry, North-West touched upon that aspect at the end of his speech. He said that we must wait for a Labour Government and a Labour concept of Europe and of how these matters could be developed. Yet we have heard no details so far.

I should have thought that, in a three-hour debate at this time of night on such important matters, we should have seen a glimpse of the vision that has been resuscitated recently in the Labour party as to how Europe might develop. We heard nothing of that.

It is deeply revealing to me as well as to those outside the House that the talk of a new vision for Europe is revealed merely as an attempt to paper over the massive cracks within the Labour party about the true nature of that vision. I can agree with some of the points made by the hon. Member for Coventry, North-West, but his speech was revealed as essentially non-productive, non-positive and wrecking in its nature. There is no true vision to put to the British electorate. The Labour party is committed, whatever its leader might say, to a narrow vision of Europe.

I came into the Chamber in the hope of hearing something about a broader vision in the speech of the hon. Member for Coventry, North-West, but I have heard nothing of that. It is, therefore, incumbent upon me to say that the alliance believes that the European regional development fund is at the heart of the best that Europe can produce. The policies of the Liberal party and of the SDP are clear on the matter.

They have been set out for some time. The objectives of the regional development fund are to help the regions with older industries to adjust to industrial change, and to help the poorer and less developed regions to catch up with the more developed areas. The fund is designed to extend to the social infrastructure capital projects such as housing, hospitals and schools.

We wish to see a significant increase in the regional fund. I am glad that the Minister of State said that the Government wish to see an increase too—of about 5 per cent.—in the regional fund as part of the overall system of budgetary reforms that we should like to see in operation.

We should like regional aid to be additional to assistance from national sources. Regional and local authorities should have the right to apply directly to the regional fund and to be consulted directly by the Community to establish regional needs. We agree that the proposals go some way towards achieving that. We still want to see more permanent publicity on site for projects supported by the regional fund.

It naturally follows from what I have said that we largely agree with the proposals. We have some reservations, which I shall come to, but I should like first to dip into the history of the matter, as the Minister and the hon. Member for Coventry, North-West did. It is a pity that the 1981 Giolitti proposals, mentioned by the hon. Member for Coventry, North-West, were not fully supported, and did not go through then. We are somewhat bewildered about why those proposals were torn up, or did not come forward. We see some elements of them in document 10705/83 and some of the other proposals. They are, of course, welcome, but they are not as good as the 1981 Giolitti proposals, and we are sorry that they had to be removed.

We are also somewhat bewildered, because document 1070583, in particular, has been produced, not by DG16 or the regional affairs directorate in Brussels, but by the Secretary General. Perhaps the Minister can help us, because we hear rumours from Brussels that DG16 is not entirely happy about some of the proposals. However, we generally support them, and they have received support from academics, local government organs, MEPs and from across the broad European spectrum. We too go along with them.

I shall outline why we welcome some of the proposals in particular. I think that the Minister will disagree with me when I say that we find them of benefit precisely because they give the Commission greater discretion. I make no secret of the fact that we would have greatly preferred greater discretion not for the Commission, but for the European Parliament We believe that Europe will never develop appropriately until power is in the hands of the democratically elected representatives, and that Europe will always be blighted if that power is limited. However, it is far better that that discretion should lie in the hands of the Commission than in those of the national Governments. In that way, we shall see less and less of the pork barrel politics of which Europe has recently seen more and more. I refer to the sort of politics that is concerned not with Europe's greater needs, but with the trading off of advantage and disadvantage between nation states, which will always pursue their most selfish interests.

The Minister revealed that most clearly when he said that it was appropriate that we should get out more than we put in. When he was asked what would happen when the EEC was enlarged, he said that things might change. But the reality, as he knows, is that Britain's share of the ERDF is bound to drop and should drop, because our needs will be fewer compared with the relative needs of others in the enlarged Community. The Minister knows that perfectly well, and I am surprised that he is not prepared to admit it. It is indicative of the Government's selfish and narrow attitude. They will only support something in Europe that they know that they will get more out of than they put in. If there was ever a recipe to ensure that the grander concept of Europe would not succeed, that must be it. Greater discretion on the part of the Commission may mean that the ERDF will now tend to achieve the things for which we hoped in the long term.

We also believe that until now the quota system—which we are happy to see abolished—has been too inflexible. It became too predictable, and national Governments could then reduce their own national fundings accordingly. Whatever the Minister says, he knows as well as I do that the question of additionality is central to the success of the ERDF. He said that the macro view was adopted. Taking account of that macro view, can he tell us what the net increase in funding from the ERDF is? What is the net increase, after the Government have reduced national spending in line with those areas that have received funding from the ERDF? The Commission has shown some expertise in its administration of the non-quota, 5 per cent. sector. That leads us to believe that it has someting to offer under the new system.—

We welcome the award for the co-ordinated programmes, the fact that they will become more important than the projects, and that they may become more geographically concentrated. There is something to be said for the new possibilities in the proposals for a direct liaison between the Commission and local government or regional organisations. We are happy that the infrastructure to industry split—the 60–40 split—will be more flexible in the immediate future than it was in the past and, indeed, that it will be abolished in the long term. We support those proposals.

The Commission assumes the existence of a regional structure—a point touched on by the hon. Member for Coventry, North-West —which will relate to national regional programmes. It is sad that the United Kingdom does not have a regional structure. The Liberal party and the SDP have long believed that we should have a stronger regional structure which more effectively matches the European systems.

Although we have none, the proposals depend on such a regional structure. Article 2 of document 10705/81 states: The regional authorities concerned shall be involved as much as possible in their preparation … including expenditure in each region under their infrastructure budgets. The document refers throughout to regional structure. Article 15 states: The Commission shall supply national and regional administrations which so wish with technical assistance to help them in the preparation and implementation of the programmes. There are no such effective regional structures in Britain. Such structures as there are—the metropolitan councils—are being abolished. For that reason, West Yorkshire county council recently gave evidence in the House of Lords to the effect that after the abolition of metropolitan councils no structures will remain, which could ensure the effectiveness of the proposals. The district councils are too small. I hope that the Minister will address his reply to this key area. What regional structures will there be? How will the proposals be affected after the abolition of the metropolitan councils?

The West Yorkshire authority set up an effective system under the 5 per cent. scheme in Colne Valley and Calderdale for the textile industry, and expressed serious doubts about whether the regional structure would be sufficient for the proposals in document 10705/81. Its opinion should be greatly respected.

But the main question which I wish to address is the question of additionality. It is because of this that the whole edifice of the ERDF is in danger of crumbling. The British Government are undoubtedly the worst in Europe regarding additionality. We have always sought to reduce national funding commensurate with our funding from Europe. The fact that that practice has become more widespread in Europe is only because others have followed our lead. We have a disgraceful reputation. The hon. Member for Coventry, North-West may nod, but the Labour Government before 1979 were just as bad. They did not move towards a more reasonable structure. The United Kingdom policy is clearly against the spirit of the European regional development fund.

As the hon. Member for Coventry, North-West said, a procession of local authorities have gone to Europe to make use of the funding available to them. How much longer will they continue to go if that money is then clawed back by the Government?

More importantly, the more that the United Kingdom does not play the game on this issue, the more that we ignore the spirit of the proposals — the more that Britannia waives the rules on this matter—the more others will join us in undermining the system. The more they do so, the less is the likelihood that when the Community is enlarged more money will be put into the ERDF. That must be of considerable concern to the United Kingdom, because, as I am sure the Minister and other hon. Members know, the United Kingdom does very well out of the fund. With 23.8 per cent., it is the second largest recipient. Unless the ERDF works properly, begins to get more resources, and enlarges with the enlargement of the Community, it is inevitable that the British contribution will fall off the bottom of the table when the Community is enlarged. By any criterion, we will no longer occupy our present position.

The attitude of the United Kingdom, and the nations which have followed our suit, to additionality is the biggest threat to the long-term development of the ERDF system. We have always believed that additionality is a key factor, so I researched into the view of the Conservative party on that matter. The handbook for the 1979 European elections stated: It is clearly necessary to ensure that . funds are used in addition to those sums already being spent on regional aid by national governments. I could not agree more with that. That is precisely the attitude that we wish to see adopted.

However, the 1979 Conservative manifesto says something entirely different: Where the Community's institutions clearly can discharge a . task more effectively than national governments, there is a strong case for responsibility to be borne at Community level. In most cases it should be a genuine exchange in which an increase in Community spending is accompanied by a saving in likely costs at national level. I must ask the Minister: where does the Conservative party stand on this? Here we have a handbook and a manifesto, published within months of each other, taking diametrically opposite views. The Minister should come clean on this.

The Conservative party criticised the 1979 Labour Government and said: It is not wasteful to add European Regional Development Fund assistance to projects which are going ahead anyway. They were clearly in favour of adding them, yet five years later Community funds still flow directly into national coffers, giving the Government the chance to flaunt Community prohibitions by cutting spending on regional development.

It is important, when the British public are about to vote in crucial elections, that the Government should come clean about those statements and should tell the people what attitude they take.

The motion commends document 8833/81 to the House. Page 6 of that document—this is a hope with which we agree—states: In this way, Community assistance will at last be seen to be additional to national aid. Does the Minister support that statement? Whatever his plans for the ERDF, and whatever brave words he utters, unless the Government are genuinely prepared to consider this funding as additional to that which the Government provide—unless they consider it as a mechanism for counterbalancing the deprivation in some areas, not as a way of clawing back more money into the Government's coffers—the ERDF will not completely fulfil its potential. What is more, Europe will never completely fulfil its potential. That is the reality, and if the Minister does nothing else I hope that he will point the way towards a future brighter than the mean-spirited and narrow-minded vision that we have had so far.

11.30 pm

Mr.Nick Budgen (Wolverhampton, South-West)

The hon. Member for Yeovil (Mr. Ashdown), as one expects, has attempted to inspire the House with his vision of the unity of a federal Europe. We know that the Liberal party is as good as its word in this respect and wishes that, in the future, the own resources of the EEC may be increased to 2 per cent. take from VAT. While I understand but, sadly, disagree with the hon. Gentleman's view, I find it difficult wholly to understand the Government's position. When I compare the Government's attitude towards regional policy funded from national resources with their attitude towards regional policy in Europe, it seems that there is some inconsistency between the two.

The great advantage of the Government's position on regional policy on the national scene is that they say, robustly and openly, that regional policy is pursued principally for social purposes. They do not pretend that there are great economic advantages, for instance, in building a factory near Linwood and taking work away from the west midlands. They say that this has to be done on occasions for social reasons, or, in small brackets perhaps, for political reasons. There is little economic justification for such industrial intervention. The Government are now promising, although they may not be as good as their word, that the money spent on industrial intervention over the next few years will be considerably reduced.

In the recent White Paper on expenditure, the Government say in volume II, page 27, that in 1982–83, £928 million was spent on intervention, and they hope that by the year 1986–87 that will be reduced to £600 million. That is jolly good. That shows that the Government are anxious to diminish expenditure for these social reasons.

However, when the Government come to introduce these measures, they say that, broadly speaking, the measures are to be welcomed. I suspect that we do not wish to get involved in the minutiae of each and every one of these measures, but the first document that the House is invited to consider, and the communication from the Commission, is based on two main propositions. The first is the belief in economic convergence, and the second is the idea that the European development fund should have a vastly increased role in the future.

I hope that, if the Government are broadly to welcome these proposals, they will explain, for instance, why the expenditure of national funds on industrial intervention is something that they wish on the whole to diminish as far as is possible within the constraints of the promises that have been made in the past while they welcome a document that envisages a larger role for industrial intervention in the EEC. Most of all, I should like my hon. Friend to be good enough to explain to the House why a Conservative Administration are in favour of the idea of economic convergence. Of course, I understand why a Liberal or a Socialist devoted either to the brotherhood of man or to equality, wherever it can be seen, would be in favour of economic convergence. I can understand how a Liberal or a Socialist might say, "Let us bring the beauty of Greece to the west midlands" or "Let us bring the vulgar griminess of the somewhere in the black country down to the Peloponnese". Those are, no doubt, great ideals. They may not be easy to carry out but no doubt with the application of other people's money and our own hypocrisy we may be able to progress towards them in a modern and purposeful way. But I do not understand how a Tory Government can be in favour of that.

Sir Brandon Rhys Williams (Kensington)

Is not my hon. Friend making his habitual mistake of thinking that the Conservative party is in fact the nineteenth century Liberal party? Are we not, in fact, the Conservative and Unionist party, and do we not revel in working together for other people?

Mr.Budgen

My hon. Friend and I have had this argument many times. That is why it may well be that I tend more towards the Gladstonian element in our party and he more to the—[Interruption.] Gladstone started as a Tory. It may be that I am more, as my hon. Friend would wish to accuse me of being, a Gladstone Liberal, and he more of a high Tory. That is way I am prepared to support: on a national level regional policies provided that they are expressed to be for social purposes—that is to say, for proper Tory reasons. I am not prepared to support regional policies on the basis that they make economic sense.

The Government's support for the measures is dangerous because it is based upon what was no doubt seen originally as a clever if hypocritical support for the idea of economic convergence because it was believed that that would always provide us with a useful way in which we could hold our cap out to receive funds from the rest of the EC. It was anticipated that for the foreseeable future we would be one of the poor men of Europe. But the Government should be careful. All this clever Socialism and clever Liberalism may catch them out in the end. With the enlargement of the EC we shall cease to be one of the poor men of Europe. We shall be one of the middle ranking men of Europe. As such it is possible that we may be able to take funds out of our left hand pocket and put them into our right hand pocket. But it seems unlikely that we shall be net beneficiaries.

I hope that in future the Government will put our attitude towards the European intervention in industrial matters in a more limited light. I hope that they will not put it in terms of economic convergence or the creation of a Socialist federal Europe. I hope that the Government will be able to say that there is in Europe a pork barrel. It is not politically possible to abolish the pork barrel. We know, because we are mature politicians, that pork barrels are much loved by all politicians. We say that so long as the pork barrel exists we would like to have our share of it. We shall from time to time put forward various inconsistent arguments as to its distribution. But we just want a cut out of it. I suggest that it would be a great deal better to put it on that narrow and realistic level than to try to elevate the matter into an issue of high principle.

11.39 pm

Mr.Nigel Spearing (Newham, South)

The hon. Member for Wolverhampton, South-West (Mr. Budgen) has characteristically introduced a tone of philosophical merit into his speech which I fear I will not be able to follow. As Chairman of the Select Committee on European Legislation, I think that I had better remain within the remits of that Committee. However, his comments on the reasons and the purposes of public expenditure unite both sides of the House. We are all concerned with public expenditure, in diminishing it, in making sure that it gives proper value for money, and in directing it in different directions. Whether that expenditure can be described as pork barrel or not, it is part of the modern state.

No hon. Member has yet pointed out — and the Minister will correct me in his winding—up speech, if I am wrong—that public expenditure in respect of the EEC regional fund is a non-obligatory expenditure under the Treaty of Rome. If I am right, as I believe that I am, it could be that this particular pork barrel gets rather less in volume, unless the own resources problem is resolved. I make no prognostications in that matter. The assumption so far made by hon. Members on both sides of the House that the fund will be maintained, or even expanded, may not prove possible.

The scrutiny of public expenditure by Parliament is perhaps the basis of the power of the House. As has been pointed out, we have not just six proposals before us, but six reports thereon by the Select Committee, six voluminous documents from the Commission, and six explanatory memoranda from the Government, so there are no fewer than 18 documents before the House.

Were we debating British public expenditure, I suppose that we would have before us a page of the Estimates, which I think might set out the dilemmas and the problems before the House in a rather more succinct and efficient way. It has been the task of the Scrutiny Committee, whose job is to look at the legal and political importance of EEC legislation, to try to summarise these proposals as they come to us from Brussels. Indeed, they have come to us over a considerable period of time. The first of the documents was reported to the House as long ago as 2 February 1983. Some of the six are not major but are amendments to what has come previously. One of the problems of the House and the Committee is that a statutory instrument or an amendment in Committee can be equivalent to a Bill. There is no major distinction in the documents that come before us.

As the Minister said in opening, it was very late in the day and somewhat unexpectedly, that the main proposals, which I take to be the ones in Document No. 10705/83, came forward for agreement at the Council of Ministers. Although the document had been recommended for debate some time before the 11th report of the Scrutiny Committee, in session 1983-84, had recommended Document No. 10705/83, the Minister, as he has hinted, had to agree that document before the debate took place. Indeed, it is not taking place until tonight. That was unfortunate, because on 30 October 1980, in the course of a long debate setting up the new procedure for Standing Orders, the House passed a resolution that I should like to read: in the opinion of the House, no Minister of the Crown should give agreement in the Council of Ministers to any proposal for European legislation which has been recommended by the Select Committee on European Legislation, etc., for consideration by the House before the House has given it that consideration unless—

1. (a) that Committee has indicated that agreement need not be withheld, or
2. (b) the Minister concerned decides that for special reasons agreement should not be withheld;

and in the latter case the Minister should at the first opportunity thereafter, explain the reasons for his decision to the House. —[Official Report, 30 October 1980; Vol. 991, c. 838.] I quote that in full because I do not think that it has appeared in Hansard since that date. It is an important resolution.

The Minister was in a difficult position. The development of the new proposals for the European regional development fund were not known when it would have been relatively easy for the Leader of the House to arrange a debate. What was the use of debate until the proposals were known? I believe that the proposals suddenly appeared at high speed and the Minister left with an invidious choice. He agreed in the Council of Ministers before debate had taken place. Properly, conforming to the resolution, he told the House why he had done so.- That is history, but it illustrates the problem for the House, not just in the voluminous nature of the proposals, but in the question of timing. I have no doubt that discussions will take place about how that can be improved.

I should like to be clear. In Document No. 10705/83, the Select Committee said: The principal feature of this instrument, developed on the basis of the earlier proposals, is the gradual replacement of individual projects qualifying for fund aid by 'programme contracts', (i.e. agreements between the Commission and Member States). Such programmes would be either national programmes of Community interests or Community programmes linked to the development of other community policies. The Commission envisages a progressive trend in favour of Community programmmes which would eventually absorb the greater part of the Fund allocations. Leaving aside the question of whether those funds are available I should like confirmation that a double change is involved—not only a change from quota and national programme, but a change to a Community programme decided by the Commission. I see that the Minister nods his head. That is a major change and it is unfortunate that the House was not able to debate it before it became part of our legal system.

The Community has passed discretion on to the Commission.

Mr.Norman Lamont

I am sure that the hon. Gentleman does not want to mislead the House, but he is referring to the wrong document. The document approved in the unfortunate incident is that which relates to the non-quota measures. He is talking about an important matter, but that matter was not approved in the circumstances to which he referred.

Mr.Spearing

I am grateful to the Minister. I was hoping that he would correct me if I went wrong because it is important to get this absolutely right. I am relieved by the Minister's correction. Nevertheless, there was a change from the quota and to that extent I was half correct. That is serious enough, because it means that he had to approve a different system on his own.

There is a change to programmes to which the Minister referred. It is a pity that there is a change because the twelfth report of the Court of Auditors states: After considering the different systems of national regional aid schemes and the difficulties inherent in the use of job-creation criteria in determining the level of regional assistance, the Report suggests, on the basis of selective on-the-spot audits, that perhaps only half the jobs planned are achieved within the stipulated time limits. The change to programmes may mean that that matter will be more difficult to deal with than if the ERDF was confined to dealing with specific projects that were not altogether satisfactory, as the auditors' report points out.

The Select Committee has attempted to present a coherent picture to the House in six different reports over a period of 15 months. It has not been the wish of the Committee for the reports to be so disparate and not all that easy to follow. Its difficulties, and, indeed, those of the House and the Minister, have arisen from the political position. It is clear that the ERDF has changed direction. All we need to know is whether, and on what terms, its volume of aid will be maintained.

11.51 pm

Sir Brandon Rhys Williams (Kensington)

This debate will give a wrong idea of the general feeling of the House if somewhat warmer appreciation is not expressed of the speech of my hon. Friend the Minister and the general movement of Government policy on the regional fund. The setting up of the regional fund was the result of a British initiative. It is right that the Government should now continue to support the evolution of the fund.

At the time when the fund came into being, the Government were more cheerfully interventionist than they are now. There is always time for second thoughts and further examination of policy for the avoidance of waste and to ensure that funds are used to achieve the required results; but the fund was intended to deal with long-term programmes, and that is something that the EEC needs now as much as it did 10 years ago. The feeling at that time was that if we did not proceed towards economic integration, we should certainly not solve our problems of regional disparities, but that even if we did make progress towards a more integrated economic Community, there would still be a need to assist the black spots and areas in special difficulty that could not progress as fast as the rest.

It was thought then, and it is right to continue with that policy, that it was good to adopt practical initiatives to accelerate investment in the areas suffering particularly from the years of intermittent neglect of investment, which is all part of the history of western Europe in the 20th century. We need especially to assist the public sector with the ambitious, modern schemes of infrastructure investment that are not entirely within the scope of local or national Governments to carry through. While we continue with distorting factors such as the unnatural structure of exchange rates within the Community, there must be a deliberate attempt to correct those distortions when they create hardship and areas of uneven opportunity.

I wish to take this opportunity to challenge my hon Friend the Member for Wolverhampton, South-West (Mr. Budgen) because, as usual, there was so much ambiguity in his apparently thoughtful attitude. He speaks from these Benches, but in fact he speaks from the past. In a voice of great clarity but rather mysterious quality, what he told us from the past came from the mouth of Gladstone rather than Disraeli.

Are we to look back on economic history and decide that Disraeli was really a pupil of Gladstone and that occasionally he made hostile speeches through some sort of personality quirk and not because Gladstone was wrong? Or is there perhaps a Disraelian tradition in the Conservative party which should just occasionally be expressed? We might give a wrong impression to people outside the House if we constantly reiterated Gladstonian thoughts and forgot the old Conservative tradition. After all, we spent the entire 19th century combating what we thought were the obvious untruths of the Gladstonian economic position. From time to time, someone should express a Disraelian thought in the context of the European Community.

We are moving shortly to elections throughout western Europe, the second direct elections to the European Parliament, and all the parties in the different European states are preparing their manifestos and schooling their candidates to come forward with ideas to attract the voters.- However, when all is said and done, there is really only one issue in the coming European elections: do we want more progress towards integration in the Community, or do we prefer to fall back on states' rights? That is the issue behind our debate on the regional fund; do we want a regional fund to promote the integration of the Community or do we want to diminish the activities of such a fund so that we can fall back into economic nationalism?

Mr.Budgen

As the hon. Baronet understands the position, are the Democrats in the European Parliament in favour of states' rights or of progress as he defines it?

Sir Brandon Rhys Williams

I prefer to speak for myself. I am a Conservative and Unionist. The Unionist theme will be important in the coming elections because, since we signed the treaty and are still committed to it, we must work with the other member states to make the best of it. We should not work secretly to undermine the treaty by constantly finding fault with the basic conceptions of economic unity as a source of strength.

If one believes in laissez-faire economics, as my hon. Friend the Member for Wolverhampton, South-West clearly does, how can one tolerate national barriers to trade or national subsidies to investment? It must be wrong to promote economic nationalism and then pass it off as a development of the gospel of free trade. Free trade might have worked if it had ever been tried, but it never was; and although there have been attempts at free trade, because it has never been implemented fully, the world in which we live is full of economic distortions of every kind. Do we allow those economic distortions to persist, particularly when they affect large pockets of our own people. or do we work to get rid of them by conscious effort? That is at the heart of much modern economic argument.

It is right, as the House has given itself a three—hour debate, for me to comment on some of the theories which we must examine if we are to give a welcome to the Government's initiative over the regional fund. Free trade and the management of policy in the private and public sectors should expand over the widest area possible to obtain the potential benefit of the division of labour and the operation of market forces without distortion. I should have hoped that my hon. Friend the Member for Wolverhampton, South-West and people who feel the way he does about the benefits of free trade would welcome the creation of a large free-trade time-zone in western Europe and should not constantly be carping and falling back into economic nationalistic attitudes.

But they are doing so, not only in this country but in other countries of the Community, and they are having alarming success. If we consider the progress of the Economic Community in the last few years by comparison with Japan and the United States, we cannot be particularly proud of ourselves. The reversion to economic nationalism in the last few years in the Common Market has not produced satisfactory results. The Commission has given us a good deal of figures over recent weeks in the economic analysis of the present state of the Community. World imports in 1984 could increase by 5 per cent., as against only 1.7 per cent. in 1983; but the European Community's share of the increase in trade is expected to continue to diminish. The United States is pushing ahead, as is Japan and the yen area; but our revival is going ahead less fast than theirs and the EC's share of world trade is diminishing as a result. I do not think that that is because the EC states are too closely united. The reason must be that we are still Balkanised by our national policies and nationalistic traditions.

Unemployment in 1984 is likely to rise less fast in the Community than it has done over the past few years. That is to be welcomed, but in the United States a fall in unemployment is taking place. It should fall in 1984 to about 7 per cent. in the United States and in Japan it should fall to about 2.5 per cent. It may well be said that those countries measure unemployment in a way that is quite different from ours—there may be much truth in that—but if there is a fall in unemployment taking place in the United States and Japan while unemployment in the Community is still rising, there must be something fundamentally wrong with the way in which the Community is operating its affairs. We should ask ourselves what it is. Once again, I do not think that any rational person could say that our poor economic performance is because the Community is too united, too closely harmonised or has gone too far with integration.

Mr.Austin Mitchell (Great Grimsby)

The hon. Gentleman might concede that in 1970, before the United Kingdom had entered the Community, we had a handy surplus in our industrial manufactured trade with the EC and that last year the deficit, which has increased every year, was over £8,000 million. Surely that has some connection with our comparative industrial decline and has had an effect on our industrial performance. We took down a greater tariff barrier against the other member states than they removed for us and it was easier for them to penetrate a small market than it was for us to penetrate a large one.

Sir Brandon Rhys Williams

That problem would not have been overcome by our remaining a smaller and more isolated market. The problem that we have suffered since joining the Community has been the persistent overvaluation of the pound. That is not the invention of this Government or the previous Government. The pound has been over-valued for 60 years, ever since we went back on to the gold standard after the first world war at too high a rate of exchange. It has been the policy of the Bank of England and of those who have guided policy in Britain to ensure, for years, that the pound should be kept at as high a level as possible for prestige reasons, with the result that our export trade has declined so that we are ashamed of our exports of manufactures. We have encouraged imports from throughout the world and we have increased our standing in the world of invisibles—no doubt the City of London has benefited—but it has been a setback for Britain that we have constantly enjoyed cheap imports while making our export trade so difficult. This is a matter of over-valuation and it has nothing to do with our membership of the Common Market. If we had corrected the over-valuation 10 years ago when we joined, as the French did to a great extent, we would have had the same benefit from joining the Common Market as the founder member states.

I do not want to speak at too great length, but I want to give a warm and encouraging welcome to the Government in proceeding with the development of the regional fund. Investment intentions in the Community are up but gross capital formation should expand in 1984, according to the Commission, by only a little over 2 per cent. That is a disappointing figure if we are giving ourselves the vision of the European Community recovering rapidly from the world recession. There is a recovery taking place, but it is not moving nearly fast enough. If we want investment confidence to revive, I do not think that we shall do anything to strengthen it by—for example — national economic policies that enable member states to retain their own tax structures for business and to make changes in tax structures without any warning or consultation. It does not help that our national economic policies result in persistent distortions in the exchange rates, so that there is no pretence of purchasing power parity in the Community, and that we follow on with sudden, unpredictable changes under the aegis of the European monetary system, which can leave traders greatly exposed to loss through no fault of their own.

I reiterate my commitment to a unionist policy for the EEC. The handicap of all Community expenditure is that the timespan of discretion for the Commission in planning Community expenditure is far too short. I have often said that the European Community is still living in the Stone Age with its economic planning because the Commission is virtually bound to consider expenditure yearly, and cannot make an expenditure plan in the confidence that it will be executed over a long period. The regional fund should be able to deal with projects that cannot be carried through in the scope of an annual budget.

We have of course the European Investment Bank and the beginnings of the Ortoli facility for dealing with the Community's capital needs. Everyone agrees that the European Investment Bank is a tremendous success and I very much admire it as an institution; but only about 2 per cent. of its total advances are for a period of more than 15 years. Capitalism does not thrive on the basis of investment that must mature and be paid for in five, seven or 10 years. To receive the full benefits of our investment, we must look for timespans of 25, 30 and 50 years. I hope that the regional fund can involve itself in rectifying the deficiencies of the areas falling behind, and those projects and industries that have been neglected. I hope that the difficulties and problems that have accumulated over long periods can be rectified and that sufficient time will be given to carrying through those policies so that they bear fruit. Regional policies should not be abandoned when they have only just begun.

Additionality has limited the extent to which the British Government have benefited from the return of funds from the Community. My hon. Friend the Minister of State said that in regard to Community competence we shall go for the lowest realistic proportion we can get. In that it seemed to me that he was lapsing into blatant economic nationalism. His assumption is that local expenditure decisions are better than decisions at the Community or federal level. I do not believe that I am misinterpreting my hon. Friend's intentions.

Do we apply the same policy to local government? Is it better to take a national view on local expenditure, to remove anomalies and inconsistencies that may appear in the application of expenditure policy in various places? In dealing with federal expenditure in the Community and its conflicts with national economic policies, we are simply reproducing at a different level the policy conflicts in which we are engaged between the national Government and the organs of expenditure at local level that are not in accordance with the national Government's policy. Is national Government the perfect level at which to take the big decisions on economic policy? I doubt if that is right. We should be planning many actions at the federal level. I do not think that we are erring on the side of giving too much money to the Community, in view of the relative failure of the western European economy to pull itself out of recession. We shall not solve our national economic shortcomings by acting alone. We know how to solve our economic problems, because, after the 30s and the crisis of the war, we joined with the other western European economies and democratic countries in other parts of the world, notably the United States, to set up a world economic order. It was a highly fruitful success and it lasted for many years. Tragically in the early 1970s, it broke down. Now other parts of the world are putting their act together again, but in western Europe we are clinging to economic nationalism. The result is shown in rising unemployment, a loss of investment confidence, and a failure to put money into research and to develop our resources in the way that we should.

I want to encourage the Government to persist with their unionist policies, and I welcome the Minister's approach tonight.

12.

10 am

Mr.Austin Mitchell (Great Grimsby)

I shall not follow the hon. Member for Kensington (Sir B. Rhys Williams) all the way, largely because I could not follow his arguments, which seemed to have more to do with theology than with economics, very far. I do not know whether he is standing for the European Parliament this time, but I hope that Conservative candidates stand on his new definition of unionism. If they do, they will surely be massacred by the British people, who want no more of this European union but who know that the only effective

framework in which democratic control of the economy can operate, and through which people can control their own destinies, is that of the nation state.

Although the hon. Member for Kensington was critical of economic nationalism, that was the only solution that emerged from the 1930s and the problems of the depression. Devaluation, protection and cheap money produced the massive drop in unemployment in this country from 1931 to 1936.

Sir Brandon Rhys Williams

The hon. Gentleman is recommending National Socialism. That did not do Germany any good.

Mr.Mitchell

I am recommending national expansionism, national Keynesianism. Keynesianism in one country, if the hon. Gentleman likes—which worked in the 1930s and which would work again for a country that has the massive oil resources that we have.

If the hon. Gentleman advocates free trade, why does he not pursue the argument to its logical conclusion and advocate industrial free trade between this country and Japan? If free trade is the virtue that he describes, there would be no harm in hitching ourselves to such a rapidly growing market and major industrial power. On the logic of his arguments, we should benefit from it.

By joining the Common Market, we have coupled ourselves in industrial free trade with the Japan of western Europe—West Germany — and taken on the added burden of supporting French agriculture. The joint burden is too much for us.

Although the hon. Gentleman was correct to say that one of our major problems has been the over-valuation of sterling—I agree with him completely on that—the fact that escapes him is that entering the Common Market has made it imperative that we devalue more than we would have had to outside the Common Market, to improve our competitive position within the market.

As my right hon. Friend the Member for Leeds, East (Mr. Healey) said in 1972, a concomitant part of entry to the Common Market is a substantial devaluation, because that is the only way in which we shall be able to preserve our industrial base. That devaluation is more massive inside than would be necessary outside, where we can rebuild behind our own, comparatively minimal, tariff barriers. I do not want to pursue that argument, because it is something of a detour from the main business.

I speak with some diffidence, because the documents before us are in Eurogluck, so far as I can see—difficult for us to follow and almost incomprehensible for our electors. The ERDF is difficult for the public to understand. That is the way that the Market wants it, because, to a large extent, this is a European confidence trick. We are being given back our money, because we contribute to the ERDF to the tune of about 90 per cent., yet we receive only about one fifth of the expenditure. In all these projects we are getting back our own money, with strings attached, filtered through the Commission for the greater glory of the Market rather than for the benefit and improvement of this country. To that extent, it is undoubtedly welcome to the Commission that the provisions are difficult to follow. If the confidence trick were easy to follow, it would be clearly revealed for all to see.

The regional fund is not a benefit to us, although it is heavily advertised as such in local media. As soon as a grant is received from the fund for a project in any area, the Common Market appears in the headlines, but it is not said that the grant is for much less than we had contributed. We get back a small proportion of our money, with strings, reservations and control by the Commission attached. However, I do not want to pursue that argument too far.

I was reminded of the way in which the fund works by a visit that I made with a delegation from the Great Grimsby borough council to see an official of the regional fund in Brussels. We were told that we were the sixth local authority delegation that he had seen by 2 o'clock that afternoon. Clearly, Brussels is becoming the new Mecca, the centre of pilgrimage to which delegations from local authorities from all over the country are lured by the possibility of obtaining grants for their projects.

To my mind, that heightens the confidence trick. The Commission's officials say, "Here we are. Come to us and talk about your projects. We can help. Talk to us about it." When delegations return to Great Britain, however, the Government say, effectively, "No. You must go through us. There is no point in going directly to the Commission. Projects must be authorised here, as well as participant funds. We are the prime source of supply." That conflict between the Government and the Commission is doubly confusing for local authorities.

I want to make three simple, clear and straightforward points in the main part of my speech. The Select Committee on European Legislation report for the session 1982–83 lists the non-quota elements in the regional fund. The money goes to mitigate the adverse effects of the restructuring of the steel industry in certain zones of the United Kingdom, and to mitigate the adverse effects of the restructuring of the shipping industry, textiles and clothing industries in certain zones of the United Kingdom. I am concerned that nothing in the fund—if I am wrong, I hope that the Minister will tell us the extent of the provision when he replies to the debate—goes to help the fishing industry through the crisis that it has faced, as a direct consequence of the restructuring that was imposed by membership of the Common Market.

The fishing industry has been crippled by the burden of Community membership in the sense that, expelled from Icelandic and other waters by the world trend towards setting 200-mile limits, we were unable to rebuild our industry in a way that most other countries did—the Labour party would certainly have done it—behind our own territorial limits, in order to catch fish from our own vessels. Ours are still among the richest fishing grounds in the world. We were unable to restructure our industry because of the Common Market's insistence on an agreement reached a few days before we started negotiations for entry, saying that fish was a common resource and that European vessels should have access to it. As a result of that and of the common fisheries agreement that was reached by the Government 18 months ago to a fanfare of trumpets, our fishing industry has declined rapidly.

The industry has shrunk to a shadow of its former self. It is probably catching about one third of the catches achieved before we entered the Common Market. The number of vessels, certainly of distant water vessels and freezers, has been drastically reduced from more than 100 to perhaps less than a dozen still fishing. About five of those are on Humberside. We have seen a cataclysmic fall in employment in the fishing industry.

That devastating effect has been localised in ports such as Grimsby, Hull and Fleetwood, but especially in English ports. We have not had the benefit of aid from the EEC's regional fund to help us to face the problems and the agony of restructuring. That is a crime against the fishing industry and a dereliction of duty by the Commission and our Government. They should have been urging the claims of that industry and the areas affected by it. For some peculiar reason, areas north of Flamborough Head are classified as north Britain, whereas Grimsby and Hull are not. The latter are both fishing ports; Grimsby was Britain's premier fishing port and is still the premier fishing port for England. As Hull and Grimsby are not classified as being in north Britain, they do not qualify for special aid from the fishing fund. In addition, they have not qualified for any aid from the regional development fund. Indeed, we have not even qualified for any aid from the social fund.

Fishermen have been thrown out of work and made redundant, but they have not received any of the massive compensation or redundancy payments paid to those in other industries. They have been thrown out of work without any compensation, because it is assumed that they are casual labour, so they do not qualify, under the two years continuous employment requirement, for redundancy payments. The Government would not help, and would not even deduct the money from the redundancy fund. The Commission has effectively washed its hands of the fishermen, because our applications to the social fund on their behalf have received no offer of help. The applications to the regional fund for help for the areas in which those fishermen live have beeen treated similarly. Thus, my first point is that there has been a failure to help an industry that has been restructured following the bankruptcy that was a direct result of membership of the EEC.

My second point is that, although I do not want to stay in the Community for any longer than a week, or possibly a fortnight at the most, it could be said that the Community will have no relevance for our people until its true priorities are shown in its financial allocations. An institution that allocates 67 per cent. of the Community budget to 8 million farmers, when there are 13 million or 14 million unemployed within it, must have its priorities wrong. Regional aid amounts to only about 5 per cent. of the Community's expenditure, the percentage that benefits the unemployed is minute. Until the unemployed are treated better than the farmers, who are already well off, there can be no justice in the Community. It is another Euro-farce if we talk about the regional fund without recognising that those should be the EEC's real priorities, if it is to be relevant to this country. We have a greater burden of unemployment and regional decline to bear than any other member state. That is not our fault, but it is a recognisable economic fact. However, we shall suffer now in comparison with the new members, because they will also have claims for regional poverty, which might be regarded as stronger than ours.

My third point is that although it is important to have a regional fund, which should be bigger than the agricultural fund—which itself began as a means of helping regions, and was just perverted into a means of helping farmers and agriculture—and although it could be regenerated with massive injections of money that make it relevant to the problems of this country, it cannot be accepted by Opposition Members, or any other hon. Members as a quid pro quo for any increase in the Community's own resources. We all know that the settlement is coming; it is just that it cannot be announced until after the European elections, because it amounts to a Government sell-out. We know that own resources will be increased. What frightens me is that they might even be increased without being accepted by the House in the form of primary legislation. Here is a major constitution innovation and a strengthening of the EEC—

Mr.Budgen

The hon. Gentleman can take comfort from what has been described as the Whitelaw undertaking. On 20 November 1977 Lord Whitelaw gave the clearest undertaking that if the powers of European institutions were increased—along the lines suggested by the hon. Gentleman—it should be done only by parliamentary legislation.

Mr.Mitchell

That is an important point. An increase in own resources would be a constitutional change, because it would involve a substantial transfer of authority from this Parliament to the European Parliament. It is unacceptable for the European Parliament to have more control over that than we have, and such an increase should be undertaken only by parliamentary legislation.

I fear that an increase in own resources will be permitted after much huffing and puffing. It will be kept quiet until after the election, because it would be discreditable to announce it before. An increase in the regional fund cannot be a satisfactory quid pro quo for concessions on own resources. I would make no concession, as that is the only way to impose discipline on agricultural spending. That is our only negotiating card. I hope that the Government will hang on tightly to it, and not give way. If the Government think that an increase in the regional fund would be a satisfactory solution, I must disillusion them.

My most pressing question to the Minister is: what have the fishing areas, especially Grimsby, had from the regional fund, and what can they hope for?

12.23 am,

Mr.Norman Lamont

The hon. Member for Newham, South (Mr. Spearing), who has unfortunately left the Chamber, asked about the circumstances in which documents Nos. 11232/82 and 9938/83 were approved without a debate in the House. I made a statement in the House and wrote to him as Chairman of the Select Committee, and he graciously accepted my explanation. The Government regret that those circumstances arose. I feel strongly as an hon. Member, that the House should wherever possible be given the opportunity to debate instruments in advance. We try to adhere to the principle which the hon. Gentleman read out.

The hon. Gentleman also referred to the document specifying that Community programmes might take over the major part of the resources of the ERDF, and asked what the Government's attitude to that was. I made it clear in my introductory remarks that the Government are worried about the extension of Community competence in this matter and would like the Community's programme on the ERDF to be kept below the level proposed by the Commission. However, my hon. Friend the Member for Kensington (Sir B. Rhys Williams), in his interesting speech, took a different view.

The hon. Member for Newham, South also asked whether the expenditure was non-obligatory. It is non-obligatory under the treaty, but that has not stopped the expenditure from continuing to grow.

It gives me great pleasure, as I come from Grimsby, to reply to the questions of the hon. Member for Great Grimsby (Mr. Mitchell), although I fear that I cannot do so in a dramatic way that will make the headlines of the Grimsby evening newspaper. The hon. Gentleman was not here when I said that the ERDF had assisted some programmes in the Grimsby area. He asked about fishing, which has not benefited from the non-quota section of the fund. It has been restricted in the United Kingdom to steel, shipbuilding and textiles. However, I understand that the Commission is considering introducing ERDF non-quota support for the restructuring of areas that depend upon fishing, so there might be a pronouncement on that.

Several hon. Members, my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) among them, asked about the take-up of quota and some were anxious that Britain might not take up its full quota in future. Of course, in the past we have succeeded in taking up our quota; indeed, in some years we have put in applications for rather more than our quota. Because of that, applications have been carried forward into the following years. As a result of the changes made to regional development grants, they will qualify for ERDF support, whereas they do not at present. That will help to alleviate the problem. The fact: that the Community is proposing grant increases will also help with any problems.

The hon. Member for Coventry, North-West (Mr. Robinson) implied that because we were now making changes so that regional development grants could come into the qualification for support from the ERDF, that must mean that ERDF support for other areas would be cut. But that does not necessarily follow, because, as I made clear, the ERDF will grow. Of course, we would expect, as the economy picks up, that more industrial applications will be made and that perhaps the balance will alter between local authority and industrial spending. It must be in Britain's interest to put in the largest possible application.

Mr.Geoffrey Robinson

The Minister has not answered the substantive question that I put to him:; how can a 50 per cent. reduction of £200 million in regional development grant be made good by a 5 per cent. increase—the figure that he gave—in the ERDF? That cannot be possible, and the difficulty of meeting our take-up will be greatly increased.

Mr.Lamont

At present regional development grants do not qualify for support from the ERDF, so there can be no question of making up the difference. Furthermore, although regional development grant will be cut, we have made it clear that part of the cut will be replaced by selective assistance.

Mr.Budgen

Does my hon. Friend agree that the Government's overall aim is to reduce expenditure on these projects?

Mr.Lamont

Yes.

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) asked about growth in the ERDF, and I confirm what I said in response to his intervention: that we expect it to grow by at least 5 per cent. in real terms, although the Commission would prefer it to grow faster than that.

The hon. Member for Yeovil (Mr. Ashdown), who, alas, is no longer in the Chamber, enlivened our proceedings by giving us some vision, which reminded us that the European elections are upon us. The hon. Member for Great Grimsby took a less visionary approach, and described the ERDF as simply giving our money to the EC and then giving it back to ourselves in the form of regional funds. That was a healthy antidote to some of the rhetoric and vision from the hon. Member for Yeovil.

We take the more mundane view that the ERDF is underpinning and supporting our national regional policy. I could not agree with the easy way in which the hon. Member for Yeovil said that he would be happy for the ERDF to grow, even if we were not to continue to be a net beneficiary of it. That is something that we should have to consider. The hon. Gentleman was clearly revealed in his federalist clothes. He has now returned to the Chamber. I am sorry that I had to answer some of his points while he was out, but I shall be coming to his points about additionality.

The hon. Member for Coventry, North-West used the debate not to talk about EEC documents before the House, but to make a Pavlovian attack on the Government's regional policy, whether that had any relevance to the documents or not. Just as Pavlovian was his ability to get the facts wrong. He started by saying that we had managed to take up less than 20 per cent. of the available ERDF quota. That is incompatible with our having been a net beneficiary of the fund. In 1980 we took up 32.1 per cent. of the quota, in 1981 32.2 per cent., and in 1982 28.5 per cent.

The hon. Gentleman also raised, yet again, the question of the ERDF and the net grant equivalent, something that he raised in Standing Committee again and again. Despite many attempts to enlighten him, he fails to understand that the regional development grants are subject to rules governing competition and state aids. Whatever ERDF documents say about limit, competition and the state aid rules surrounding article 92 of the treaty are the things that bite on our regional aids. This point has also been explained to the hon. Gentleman several times.

The hon. Gentleman referred to the proposed job limit. This limit is being introduced by the Government to focus RDG on job creation. It is not an EEC requirement, and I have made that clear again and again to the hon. Gentleman. He referred also to modernisation projects. Those that do not create jobs may be eligible for ERDF where they safeguard or maintain jobs. These projects will still be eligible for selective regional assistance. They will not, except for small firms, be eligible for RDG. This is again ground over which we have been many times in Committee.

The hon. Member for Yeovil raised various points about additionality. The Community's intention is that ERDF aid should not be used as an excuse for reducing domestic aids. The Government take into account the expected Community contribution in determining their level of expenditure on various programmes, and expenditure ceilings are higher as a consequence than they would otherwise be. The hon. Gentleman questioned what- I said about the level at which additionality applies. In our view, that is the proper level at which additionality should be taken into account, for this reason. The Commission wants us to put forward applications for projects that are almost certain to go ahead. This means that they have to be projects that will probably go ahead even if the ERDF grant is refused. Planning for projects has to be done well before it is known what ERDF aid will be available, so ERDF receipts passed on to local and public authorities have already been taken into account in the overall level of expenditure.

For industry projects United Kingdom domestic assistance is pitched to provide only the assistance necessary to achieve viability. It would obviously be wasteful to provide more and that is why ERDF receipts in respect of industry projects are used to provide partial reimbursement of aid already paid by the United Kingdom.

Mr.Ashdown

The hon. Gentleman said that it would be wasteful to provide more. May I draw his attention again to the Conservative party's 1979 manifesto which said that it is not wasteful to add European regional development fund assistance to projects that are going ahead anyway? How does he square his statement with that?

Mr.Lamont

I have just done so. I have explained that the projects may be ones that will go ahead and that the fund means that more money is spent on regional policy than would otherwise have been the case.

My hon. Friends the Members for Wolverhampton, South-West and for Kensington led us on to the high ground of principle. I am not sure that I want to take up their argument about Disraelian politics against Gladstonian economics, nor indeed about the pros and cons of economic convergence. That is referred to frequently in the documents, but it is rather like parallel lines. Unless we have monetary union, it is difficult to see convergence in any real sense. We are a long way from monetary union and many people have strong opinions against it. I prefer not to go further into the argument between my two hon. Friends.

My hon. Friend the Member for Wolverhampton, South-West sought to make a wrong antithesis between the justification for regional policy that my right hon. Friend the Secretary of State for Trade and Industry gave when he described it as having a social objective although it is economic in character and in means of adminstration. That description applies equally to European regional policy. With great respect to my hon. Friend, there is no difference between the two. The objective is the same.

I am grateful to my hon. Friends the Members for Lancaster and for Kensington for drawing attention and responding so positively to the documents. As my hon. Friend the Member for Lancaster said, the hon. Member for Coventry, North-West somewhat underestimated the figures. I am not sure where his figures came from relating to the non-quota section. In the latest round of measures we shall benefit to the tune of about £89 million. My hon. Friend is right to refer to the considerable aid that is going to the textile areas in Yorkshire—Bradford, Dewsbury, Halifax, Huddersfield, Keighley and Todmorden; in Lancashire — Accrington, Blackburn, Burnley, Lancaster, Nelson and Rossendale; and in Greater Manchester—Ashton-under-Lyne, Bolton, Bury, Leigh, Oldham, Rochdale and Wigan. Those are considerable sums covering a significant part of the country where there have been problems and contraction in the textile industry.

The hon. Member for Coventry, North-West contrasted the report in one of the documents on job creation and the uncertainty that can sometimes arise in regional policy in trying to estimate the job effect of particular regional instruments with the policy being followed by the Government in their new proposals. Article 20 of the Commission's new proposals provides that industry projects, to be eligible for ERDF assistance, shall relate to … activities which are intended to create or preserve permanent jobs". I do not dissent from the view that obviously the calculation of jobs in regional policy is difficult. Difficult though it be, I am sure that the Government are right to make regional policy more job related. Far too much of our regional assistance has gone on capital intensive projects and has not done good for the regions. Whatever anybody else may think about it, we are firm in our view that our domestic regional policy ought to be geared to the creation of jobs and that is its main purpose.

The hon. Member for Yeovil—I regret that I have not referred to all his points—dragged in the metropolitan counties. Again, that was perhaps a slight electioneering touch. We do not envisage any great difficulty from the abolition of the metropolitan counties as regards the ERDF. We expect that the districts and others will take over from the metropolitan counties some of the projects that will be put forward for ERDF support, and it will be for the Government, as they have done before, to formulate the programmes, and to draw together the different strands and programmes to make a programme that can be put to the ERDF on behalf of this country.

The new proposals do not guarantee this country an increased share, as I have made abundantly clear. However, there is a good chance that we can continue to be a net beneficiary. We will use our best endeavours to narrow the range that is being put forward.

Mr.Geoffrey Robinson

Will the Minister confirm that the figures I gave, which I obtained this afternoon from the Library, show that, of the total ERDF about which we are talking, because that part which was non-budget related will disappear under the new arrangements, the take-up has been 17.6 per cent., 18 per cent., and 19 per cent. of the total? Does he agree that unnecessarily, as he has admitted tonight, cutting out modernisation of over £100 million a year will make it much more difficult for the Government to get the upper band of the percentage availability for this country?

Mr.Lamont

No, because the hon. Gentleman's figures are incorrect. As I pointed out earlier, this country has taken up its quota in the past and achieved the 23.8 per cent. share of the fund. The hon. Gentleman shakes his head, but I assure him that that is so. We have succeeded in taking up our quota. We believe that the changes that we are making in regional policy will strengthen our ability to take up our quota. We want a system of regional development grants that can qualify for support from the ERDF, and that change should be seen in a positive light.

I commend the documents to the House, and I commend to the House the line that we propose to take at the Council of Ministers when the proposals are put forward. I have endeavoured to explain our general position and what our negotiating stance will be. I believe that this is in the interests of the country, and should be commended to the House.

Question put and agreed to.

Resolved,

That this House takes note of European Community Documents Nos. 10705/83 for a Council regulation amending regulation (EEC) No. 724/75 establishing a European Regional Development Fund, together with 8833/81, New Regional Policy Guidelines and priorities; 12104/82, Special Report 5/82 of the Court of Auditors; 11232/82 and 9938/83, second series of specific Community regional development measures; 9361/83, eighth report from the Commission to the Council on the activity of the European Regional Development Fund in 1982; and 9449/83, proposal for a Council decision enabling grant aid from the European Regional Development Fund for infrastructure investment projects to exceed the 70 per cent. limit for the period 1981-83; and supports the Government's intention to press strongly for the early adoption of a new and improved regulation for the better administration of the European Regional Development Fund.