European Regional Development Grant (Northern Region) (Hansard, 13 November 1987)

§ Ms. Joyce Quin (Gateshead, East)

I wish to raise a matter which has concerned me for some time—the decline in European regional development fund grant to the northern region of England in the past four years. I have been aware of the problem for some years as a Member of the European Parliament and more recently as a Member of this House. It is of considerable concern to my constituency and to the northern region as a whole.

Like many other areas of the United Kingdom, the northern region of England is eligible for ERDF grants for infrastructure and for various schemes related to job creation. One might argue that the northern region is especially eligible as, with the exception of Northern Ireland, it has the highest unemployment in the United Kingdom and has long-standing problems due to industrial decline.

In the early years, from 1976 to 1980, the north benefited considerably from European funds, but in recent years the position has changed greatly. In 1983, 1984 and 1985 the region's share of European development funds coming to the United Kingdom was 12.5 per cent., 10.5 per cent. and 7.3 per cent. respectively. For Wales the figures were 18 per cent., 15 per cent. and 16 per cent. For Scotland, they were 31.7 per cent., 25 per cent. and 20.1 per cent. Calculated per head of population, that means that in those three years the amount of grant per head was £18 in the north, £29 in Scotland, £34 in Northern Ireland and £42 in Wales. Indeed, the figure per head of unemployed population are even more dramatic.

In July 1986, I drew the matter to the attention of the Minister of State, Foreign and Commonwealth Office, the right hon. Member for Wallasey (Mrs. Chalker) in her capacity as a Minister during the British presidency of the EEC Council of Ministers. That approach was subsequently referred to the hon. Member for City of Chester (Mr. Morrison) who then had responsibility at the Department of Trade and Industry. In a letter dated 21 October 1986, the Minister agreed that there was a problem about the decline of funds to the northern region, but he said that one of the difficulties was that most of the large infrastructure needs of the northern region have now been met. My reaction to that was one of amazement, as I could think of many infrastructure projects in the northern region which certainly would have been grateful beneficiaries of EEC funds, not to mention the possible dramatic improvements on the A1 from Newcastle to Berwick, the A69 from Newcastle to Carlisle, the completion of the Tyne and Wear metro system, and many other developments in telecommunications infrastructure. The Minister's statement contradicted the Government's own words in their regional development programme 1986–90 which it submitted to the European Commission about the problems of the northern region. Referring to infrastructure, the Government said: However, it is equally apparent that much more needs to be done. In section 7A of the same regional development programme, the Government wrote: 743 While nationally there were signs of a gradual recovery in the economy, this was not the case in the north-east". The Government thereby reinforced our need for ongoing help from the European regional development fund.

In 1986, the position improved somewhat. In particular, there was a helpful visit to the northern region by the then European Commissioner for regional policy, the late Alois Pfeiffer. We managed to obtain a higher proportion of EEC funds in that year. This year has seen a further dramatic decline. The figures that the European Commission recently released show that the northern region has obtained 0.7 per cent. of the grants that were allocated to the United Kingdom under the ERDF. Scotland obtained 16 per cent., Wales obtained 17.3 per cent., and the west midlands obtained 18.8 per cent. If we calculate the figures according to the amount of money received per head of population, we shall see that in the north there was a grand total of 28p per head of population, whereas the figure was £16.69 in Northern Ireland and £7.20 in Wales.

I do not condemn the activities of other regions which have been fortunate enough to get a greater amount of EEC funds, hut, on the face of it, the allocation looks anything but fair. I imagine that the Minister may say that the position is due to improve—I hope that that is the case—but I trust that he will accept that considerable injections of such funds will be necessary if the shortfall of the last few years is to be made up. The problem is compounded by the decline in regional development grant to the northern region which, during the period 1984–86, declined by 78 per cent. That is a more dramatic fall than in any other United Kingdom region.

It is true that obtaining money from European funds is related to the number of applications that a region puts forward. It could be that not enough applications of a sufficient size or of a sufficiently suitable nature have been put forward by the northern region. If that is the case, the Government need to look at the situation to make sure that a fairer number of applications are put forward by the region in the future.

One thing that concerns us in the north is that we feel that, lacking a strong regional structure, we may be losing out as we do not have the institutional framework necessary for co-ordinating and putting forward applications across our regional area. In that respect, we notice that the Scottish and Welsh Offices, quite understandably, are active in direct contacts with Brussels and in putting forward the case for their particular parts of the United Kingdom. Incidentally, the north-east was not helped by the abolition of the Tyne and Wear metropolitan district council which covered an area the size of which is deemed suitable for the purpose of applying for EEC funds, and it was an area with which the European Commission was used to have some contact.

We hope that in the future the northern region will be able to co-ordinate more successfully its efforts to establish its own regional structure. We hope also—perhaps the Minister can assure me on this point—that we shall be more successful in the future than we have been in the past in getting money from the section of the European fund that deals with integrated operations and national programmes of community interest.

I should like several assurances from the Minister about this matter. I should like him to assure us, for example, that he will act to ensure that more applications from the 744 northern region are forwarded by the Government to Brussels. It is not only the Commission that decides on applications. A large measure of the chances of an application's success is whether it has been successfully backed by the national Government and forwarded to Brussels with strong recommendations.

I should like the Minister to assure me that he will act to try to ensure a high quality of applications from the northern region to enhance our chances of success. I should also like his assurance that the northern region will continue to be a priority area and will be a key priority area when the Government negotiate on EEC grants with the European Commission.

I should like the Minister to commit himself to achieving a reasonable share-out of the funds in future, and to make sure that if he is not prepared to try to get a specific quota of the fund allocated to each region, he will act to ensure that enough applications have gone forward to achieve a reasonable take-up of the funds in future.

Finally, I should like the Minister to accept that, if he does not act on these issues, there will be two consequences. First, there will continue to be the widespread belief in the northern region that we are losing out badly on this. When the European Commission publishes—as it does regularly—the amount of money that it has awarded to various regions under the ERDF, if the Minister has not acted he must be prepared for yet more and more unfavourable press and other media responses in the northern region to those announcements. Secondly, if he does not act, there will be the increasing danger that money from Brussels will seem to be the result of strong political and organisational lobbying powers rather than need. The funds will not be seen as addressing the real regional problems that they were designed to alleviate, but simply as a response to various pressures.

I hope that the Minister will give me the assurances that I seek, that he will act to end what many of us regard as a highly unsatisfactory situation and will ensure that it does not recur.

§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Francis Maude)

I am grateful for this opportunity to talk about the issues which the hon. Member for Gateshead, East (Ms. Quin) has raised in a calm and responsible way. I am grateful for the tone of her speech; it speaks well of her concerns for her local area.

I visited Newcastle recently and in particular spoke to those operating in the financial services sector, which is my special area of responsibility. I was heartened by the buoyancy that I discerned among those to whom I spoke about the extent to which new businesses in that sector are developing and the extent of demand for their services. The financial services sector is not merely self-standing; it provides services to manufacturing industry and all sorts of industries. To some extent the requirements for manufacturing industry and other new and developing industries mirror the development and buoyancy of the financial services sector. I detected a burgeoning sense of self-confidence in the region, which was reflected by those to whom I spoke.

I hope that the north-east will not gauge its standing with the Government and generally on how much public money, whether European money, national Government 745 money or local government money, it manages to obtain. It has a developing strength of its own. I hope that its growing self-confidence will reflect that.

I am glad to have the chance to talk a little about the extent to which funds from the European Community are available. But I should introduce a note of caution about my readiness to talk about the shape of things in future. I am sure the hon. Lady will understand my reticence as she has experience of the way in which European institutions work.

This is a particularly important time in the reform of the Community's structural funds, of which the ERDF is one. I shall explain later that the reform of the funds is subject to increasingly intense negotiations in Brussels. It must be seen as part of the question of the financing of the Community which, as the hon. Lady knows, we see as crucial. Therefore, I cannot be as precise as I should like to be in answering the hon. Lady's questions.

In the north-east there is an enormous diversity of activity with many of the non-traditional activities on the increase. I have adverted to some of those. New industries and service industries are doing as well as many traditional industries, and the hon. Lady will welcome that as much as I do. That diversity has been reflected fully in the support that the region has received from the ERDF and other Community funds. That support is extensive and I do not apologise for going into it in a little detail.

All the assisted areas in the northern region are eligible for ERDF support. Up to the end of last year commitments to the region totalled more than £353 million, which is more than to any other English region. Most support was provided for infrastructure projects, but a significant amount of aid was given for industrial projects. Some of the more notable projects assisted include the development of the Sunderland airport industrial site, which attracted £3.4 million from the ERDF, and the construction of sewers, pumping stations, mains and so on, on Tyneside which attracted £17.5 million.

The northern region also benefits from two out of the three national programmes of Community interest which have been approved for England. These cover the Shildon and Tees corridor areas and, taken together, represent some £36 million worth of ERDF funding. I hope that the hon. Lady agrees that there can be little doubt that that assistance has brought significant benefits to the region. I am sure, too, that the region will continue to benefit.

Commitments to the northern region in 1986 were the second highest ever. The year 1982, which contained the highest, was an exceptional year, with a large award made for industrial projects in Cumbria. Much of the region's major infrastructure is now in place. I take the hon. Lady's point that it is always nice to have more. One can always think of additional infrastructure projects, but essentially the major infrastructure projects are in place, which is not the case in every region. I hope that the hon. Lady accepts that the north-east has had its fair share of support in the past. Projects submitted now tend to be those where eligibility for support from the Commission is less certain than in the past, for example, projects on tourism, which is growing fast in the north-east, as elsewhere.

On the face of it, the region's share of the ERDF awards so far this year appears to be poor. I agree with the hon. Lady that a figure of 0.7 per cent. of the total awards 746 for the United Kingdom is a small amount. However, it is premature to be concerned because further awards are to be made. Only just over half of the funds available for commitment this year have been allocated, and it is likely to be early next year before the full picture for 1987 commitments become clear. I have little doubt that the northern region will receive substantial further awards. The hon. Lady will be aware that last year the northern region received 11 per cent. of the total United Kingdom awards. I would expect that, subject to Commission approval, this year's total awards will he very close to, even if it does not actually reach, that figure. I hope that she agrees that that would represent a substantial commitment to the area.

As the hon. Lady knows, the Community's ERDF regulations set out a guaranteed lower limit of awards for the United Kingdom — 14.5 per cent., provided that sufficient qualifying applications are submitted. Further awards are possible, up to a maximum of 19 per cent. of the fund, at the discretion of the Commission. In 1985, before Spain and Portugal joined the Community, the figures were a little higher. The limit applies for a period of three years and the current period ends this year. Similar provisions apply to other member states. Since the sum total of the current lower limits is 88.6 per cent. and of the higher limits 117 per cent., it follows that the eventual outcome is likely to be somewhat closer to the lower rather than to the higher figure.

The United Kingdom, as with other countries, attaches great importance to ensuring that we receive a high share. We always attempt to ensure that the value of our applications submitted to the Commission is greater than the United Kingdom's maximum share of the fund, and that has been achieved on a regular basis. I have to stress that the decision about which projects are supported rests with the Commission. There is competition with other projects submitted within the region and with those from all other United Kingdom regions. In addition, above the United Kingdom's lower limit percentage share of the fund there is competition with applications from other member states. The Commission makes its decisions on merit.

The hon. Lady has suggested in the past, and she did so again today, that there should be a quota for each region within the United Kingdom's percentage range. There are no such quotas at present, but the point will be very much borne in mind. At the end of the day, however, the final decision about which schemes are approved rests with the Commission, irrespective of any domestic quota that the United Kingdom might decide to establish.

In addition to disbursing its funds through support for infrastructure and industrial projects, the ERDF provides a source of finance for the business improvement services scheme, which is proving very popular. More than £8 million worth of support has been provided for the north-east region since the scheme was introduced in 1984. Some two thirds of that will have been met from ERDF sources, with the United Kingdom Government providing the balance.

Quite separately from the ERDF, the north-east has benefited from two other Community instruments. First, the European Coal and Steel Community has provided cheap loan finance for job-creating investment projects throughout the north-east. So far this year, 15 loans worth almost £4 million have been approved for projects in the region. Loans up to £500,000 also benefit from my 747 Department's exchange risk guarantee scheme, which enables firms to borrow in low-interest rate foreign currencies. That is an innovative development.

Secondly, the European investment bank operates throughout the assisted areas in the region and provides loan finance for major infrastructure projects. Last year the bank approved loans for road improvements in Cleveland and Durham and made loans to the Northumbria water authority—a total of £12 million.

To complete the picture of funding from the European Community, I should mention the European social fund and the European agricultural guidance and guarantee fund. Support from those has been substantial. Nearly all of the region has priority status under the European social fund. It is due to receive £12 million this year for training programmes, doubling the figures for the two previous years. It has put in a larger bid for 1988. That funding, amounting, on average, to about £1,000 per trainee, is in addition to the Government's own programmes under the Manpower Services Commission and to industrial training board schemes. I trust that the House will accept that that is due recognition of the training needs of the region.

As to agricultural support, the region is classified among the less favoured in the United Kingdom and is therefore eligible for the higher rates of capital and headage payments.

This has been an imposing recital of the support that the region receives from the Community. I could add, too, the help provided under United Kingdom national schemes for the regions and for particular projects or needs. The Department's national schemes of support are available in the north-east as in other regions. In keeping with the objective of regional industrial policy of reducing, on a stable long-term basis, employment disparities between regions, the north-east benefits extensively from my Department's regional schemes of support. Indeed, assisted area coverage in the region represents some 97 per cent. of the working population—a higher percentage than in any other region.

As a further reflection of the Department's support, English Estates North was formed just a year ago to bring about a greater regional emphasis in the activities of the English Industrial Estates Corporation, which forecasts expenditure of approximately £14 million in the north-east in the current financial year. English Estates North has been quick to forge links with other organisations such as the Northern Development Company and in its first year has established a partnership with ICI. In a joint project between the two a 167-acre site has been identified as the location for a technology park which should attract up to 5,000 jobs in the longer term.

The Northern Development Company itself receives substantial financial assistance from my Department. In recognition of the efforts of local interests in setting up the NDC as a vehicle for the regeneration of the economy of 748 the north, the Department will he providing nearly £1.2 million this year towards the cost of the company's inward investment promotion and core programme activities.

All this emphasises the Government's recognition of the circumstances of the region and the extent and the flexibility of the assistance that has been given, both through the Community and directly.

I have in this context to comment on the review of the structural funds and particularly the ERDF. The treaty of Rome as it now stands requires that the ERDF be devoted to structurally less-developed regions and declining industrial regions. The United Kingdom's predominant interest lies in the declining industrial regions. This interest is very strong in the northern region. At the same time, there is widespread support in the rest of the Community for the proposal to concentrate more of the fund on the structurally less-developed regions, and there is an overriding need, as everyone will agree, for discipline in the Community budget. I cannot say at this stage what the outcome of these negotiations will be in terms of funds for the northern region. There are too many unknowns. What I can say is that the importance we attach to help for DIRs has the needs of the northern region very much in mind.

Perhaps I should add something about the form in which I expect some at least of the future ERDF support for the region will be given. The Commission has proposed special programmes for declining steel and shipbuilding areas. In line with business improvement services measures, they will support the creation of alternative economic activities undertaken by small and medium-sized companies, thus generating jobs and, I trust, reinforcing the new dynamism in the region.

The programmes, Resider for steel and Renaval for shipbuilding, are being discussed in Brussels in the hope of decisions within months. Here too I cannot say what the outcome will be, but I assure the House that the United Kingdom is seeking help for areas such as those in the north that have long borne the burdens of job losses in these industries.

On a slightly longer timescale, I look forward to the submission to Brussels of programmes of integrated action prepared for Durham and Cleveland, Tyneside and south-east Northumberland. Such programmes are a new concept, largely replacing the provision of support to individual projects. If approved by the European Commission, these would be a principal means of bringing ERDF and social fund finance to the region in future. Other parts of the region may be preparing programmes in due course.

I hope that the hon. Lady will accept that we are well aware of the worries that she has expressed. I hope that she can draw some comfort from my replies, even though some were, of necessity, imprecise. We have listened to her carefully and I hope that she will not be disappointed in due course.