APPLICATION OF, AND ORDERS UNDER, PART V (Hansard, 13 June 1989)

§ Mr. O'Brien
I beg to move amendment No. 288, in page 64, line 20, at end insert— `(3A) Nothing in this Part shall apply to a company in receipt of funds from the European Regional Development Fund on behalf of the relevant local authority'. This is a very important amendment for many local authorities. Part V deals with companies in which local authorities have an interest. Many local authorities have been working hard to attract European regional 854 development fund assistance. The Government should place on record the practical implications of this part of the Bill in terms of European grant aid to Britain.
There is concern that ERDF moneys could be lost if the Government do not accept the need for joint ventures. ERDF requirements stipulate that in order to gain assistance the body should be a public authority, or should act as though it were a public authority. It excludes applications from individuals and private sector organisations. A minority interest is unlikely to be sufficient to satisfy European conditions of assistance because public money is not regarded as secure.
My authority, Wakefield, is involved in this exercise. If ERDF money is not made available to it, it could have traumatic consequences. The implications of the legislation affecting companies will force local authorities to relinquish control of or influence over a company when existing or future capital requirements take the authority beyond its stated control total. That will lead to a dilution of the public interest to 20 per cent. or less and therefore to a substantial reduction in local authority activity if provision is not made for ERDF money to be paid to companies over which local authorities exercise influence.
An example is the National Exhibition Centre in Birmingham. An example from the NEC agreement illustrates the point that I am making. Article 5 of that agreement states in paragraph (a) that until 1 July 2019 the Commission's approval shall be obtained before any application is made to the Treasury for consent to any new issue of shares in the NEC Ltd., or to any disposal of existing shares in NEC Ltd., to any person or body other than the Secretary of State or a local authority for the purpose of the Local Government Act 1972; Paragraph (b) is extremely important. It states: Birmingham City Council shall not, without the prior approval of the Commission, transfer any part of its share holding to the Birmingham Chamber of Commerce; Paragraph (c) states: NEC Ltd., shall not, without prior approval of the Commission, dispose or offer to dispose of all or any of its interests in the Birmingham Convention Centre. It is clear that if the Bill does not make provision to protect the payment of European regional development fund moneys to local authorities, local authorities could lose a great deal of support. I ask the Minister to consider the amendment extremely carefully.

§ Mr. Pike
If the Government do not accept the amendment, will the project being undertaken by Lancashire Enterprises in conjunction with Lancashire county council and the borough councils to revitalise the Leeds-Liverpool canal corridor be put in jeopardy? The project is bringing in considerable European funding and is vital to Lancashire.

§ Mr. O'Brien
My hon. Friend gives a further example of the importance of the amendment. I quoted the National Exhibition Centre in Birmingham. My hon. Friend has said what could happen in Lancashire and other colleagues could give further examples as to what could happen in their regions. The evidence before the House tonight makes it clear that the Government ought to give the amendment careful consideration. I urge the Government to accept the amendment in the best interests of local authorities throughout the regions as it will affect the economic wellbeing of local authorities.

§ Mrs. Virginia Bottomley
In general terms, ERDF grants for infrastructure investments are intended to 855 support public-sector investments. In May 1987 the European Commission confirmed that local authority controlled companies were eligible for ERDF grants. In addition, the Commission confirmed that other companies would also be eligible if they had sufficiently close links with the public sector. The proposals in part V are precisely to provide a statutory framework for local authorities' interests in companies.
At present, when local authorities become involved in companies, all too often they are absolutely free of the statutory regulations governing financing propriety and accountability. When it comes to ERDF moneys in particular, it is difficult to argue that the relationship with the local authority should be anything other than extremely close.
The eligibility for ERDF grants of companies in which local authorities have interests stems from their links with the local authorities concerned.
The amendment seeks to ignore that and proposes that any company in receipt of an ERDF grant should be exempt from the provisions contained in part V of the Bill. That is quite unacceptable as a company could enjoy the benefit of grants payable to public sector bodies by virtue of its connections with local authorities but would not be subject to public sector disciplines. For example, a local authority could set up a company which it wholly owns to carry out an infrastructure project. The company could then claim ERDF grants for the project. Under the terms of amendment No. 288 that company would then be free to borrow unlimited amounts, possibly guaranteed by the local authority concerned and generally conduct its business in any manner it or, more appropriately, the local authority wished. I am afraid that the amendment would create a simple and obvious method for avoiding the controls that should properly be applied to local authority business. I hope that I have won the argument.
The hon. Member for Normanton (Mr. O'Brien) referred to two particular areas of concern. The position of the National Exhibition Centre is being considered carefully at the moment. The Lancashire Enterprise project, which I have had the pleasure of visiting, is not in any jeopardy. The amendment would seriously undermine what we are trying to achieve, and I strongly urge the House to reject it.

§ Mr. O'Brien
The Minister is trying to face both ways. She is saying—[Interruption.] I can understand that hon. Members do not believe that, but it is true. She is saying that local authorities that receive EC money and form companies should conform to Government disciplines. That can be achieved without the legislation we are considering. She referred also to the two examples that I gave and has admitted that they must be looked at in detail, because there are certain provisions that are relevant. Those examples are mirrored in local authorities throughout Britain.
The Minister should examine carefully the points she has made. What she has said does not ring true when one considers what is happening in local authorities. The Government should reconsider their proposal.