HC Deb 15 June 1998 vol 314 cc108-14

Motion made, and Question proposed, That this House do now adjourn.—[Ms Bridget Prentice.]

9.58 pm
Mr. Gareth Thomas (Clwyd, West)

Hon. Members may feel that it is particularly timely that a Welsh Member should be given the opportunity to raise the important subject of European Union structural funds, when the Council of Ministers is meeting in our capital city of Cardiff, which will soon be home to the National Assembly for Wales, our first ever all-Wales elected body.

My hon. Friend the Under-Secretary of State for Trade and Industry will know that there is considerable interest in Agenda 2000 and the review of structural funds, particularly in Wales, and it is not difficult to understand why.

The Welsh economy has undergone enormous structural changes in recent years, with the contraction of the traditional heavy industries of coal and steel. The difficult process of transformation of the Welsh economy has undoubtedly been assisted by European funding in respect of financing infrastructure and other projects.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pope.]

Mr. Thomas

The interest that has been generated in Wales in reforming structural funds is understandable, given the context of economic change which has been very much a feature of life in Wales recently.

There is a positive feeling in Wales towards Europe. It is worth emphasising that there is a great expectation that the help and assistance that deprived areas of Wales have received in recent years will continue well into the next millennium.

I appreciate the fact that the review of structural funds is a sensitive subject, and I acknowledge that the Government, and my hon. Friend the Minister, who represents the lead UK Government Department, are involved in what are no doubt delicate negotiations with our European partners. Given the requirements relating to the size of the EU budget and the financial implications of enlargement, the process of reform is likely to be difficult.

During tonight's short debate, I wish, first, to seek clarification from my hon. Friend on the nature of the review process and the timetable within which Government Departments are working. Secondly, I should like to take the opportunity to put the Welsh case, particularly for objective 1 status—the most valuable funding available from Europe—and to seek assurances that Wales will be dealt with fairly. The Welsh expression "chwarae teg" means fair play, and that is all we are seeking. I have no intention of denigrating the case that has been put on behalf of other regions and nations of the United Kingdom, particularly Cornwall and South Yorkshire.

I acknowledge that the Welsh case has been, and will continue to be, put forcefully by the Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain), and my right hon. Friend the Secretary of State for Wales.

Outside Wales, there is perhaps a perception that we have done well economically in recent years. There have been many well-publicised inward investment projects, but, as those who know the Welsh economy well will vouchsafe, those projects and the bulk of inward investment have been confined to the more prosperous south-eastern and north-eastern regions, leaving behind the western parts of Wales and the old industrial valleys.

The Welsh Development Agency has a high profile and it has done a good job. It is a success story, although inward investment, both foreign and UK-based, has declined in recent years. The impression may have been given that Wales does not need help, but that is not the case. In south-east Wales, particularly in Cardiff, there is increasing economic prosperity and optimism, but that is not true of the areas represented by me and some of my hon. Friends. In west Wales and the valleys, there is severe economic deprivation.

Mrs. Betty Williams (Conwy)

Does my hon. Friend agree that figures recently published by the Welsh Development Agency's international division show that, between 1993 and 1997, not a single job was created by foreign inward investment in the Conwy unitary authority area, which is part of my constituency and, furthermore, UK inward investment created only 18 jobs in that area?

On foreign inward investment, I am sure that my hon. Friends will agree that that part of north-west Wales is the worst in Wales and in Europe. I do not think —

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. This is a long intervention, even for an Adjournment debate. That is sufficient.

Mr. Thomas

My hon. Friend is entirely right. The record on inward investment, particularly in that part of Wales, has been poor and the cause of considerable concern. It gives the lie to the idea that Wales has universally done well out of inward investment. There is a growing east-west divide in Wales. Regions in the east have done better and prospered from inward investment, but that has not percolated through to the more peripheral areas of the west and the valleys—their peripherality is very much a feature of their economy.

The levels of gross domestic product in those unitary authorities are particularly low. I shall not burden hon. Members with too many statistics, but my hon. Friend the Minister will appreciate that, in such a policy area, statistics are unavoidable, particularly bearing in mind the fact that we are dealing with the criteria for objective 1, which requires sub-regions to establish that they have a GDP of less than 75 per cent. of the European average.

According to statistics produced not only by the House of Commons Library, but by the independent source of Cardiff university business school, the sub-region of west Wales and the valleys has a GDP per capita of 68 per cent. of the EU average, which is well within the 75 per cent. threshold, compared with 90 per cent. in eastern Wales. My constituency incorporates much of the unitary authority of Conwy, which has a GDP per capita of 59 per cent. of the EU average. Those are remarkably low figures and show that there is economic difficulty and deprivation in western areas of Wales which, in my respectful submission, should be reflected in a vigorous approach by all Government Departments in pressing for the best available funding from Europe.

There are statistics relating to economic activity. As those who have studied the figures are aware, levels of unemployment in the UK are not necessarily as high as in other European member states. That may reflect how the figures have been compiled in the past, but the figures for economic inactivity show that real unemployment in Wales, especially in my area, is even higher. Economic inactivity rises to about 30 per cent. in some areas, showing that there is great hidden unemployment.

West Wales and the valleys show up poorly on all indices of economic deprivation and poverty. The Welsh Office recently produced a Green Paper entitled "Better Health, Better Wales", revealing that the general and infant mortality rates in Wales are poor: Within Wales a significant proportion of the population remain deeply disadvantaged in terms of expectation of life and health-related quality of life, and there are wide variations between those with the poorest health and those with the best. Life expectancy in some parts of the south Wales valleys is about five years less than in other parts of Wales and considerably worse than in other parts of the UK.

It would be apt to refer, in the context of western Wales and the valleys, to the crisis facing rural communities which compounds the problems encountered by these peripheral areas where farming is a crucial part of the rural economy. Farm incomes have declined dramatically in recent years—a factor which I hope my hon. Friend the Minister will take into account.

I had the opportunity to put the case for my constituency and for western Wales and the valleys to the President of the European Commission when he came to Wales about three weeks ago, before the summit. Mr. Santer was quite surprised to discover how much we had depended on European funding during the transition from our dependence on declining industries. He was quoted in The Western Mail as saying that, if the right conditions and criteria were met, there was no reason why Wales could not benefit from objective 1 funding. He added that, if the western half of Wales met the criteria for objective 1 status, he could see no reason why the country should not benefit from such funding. I trust, therefore, that the DTI and other relevant Departments will pursue the Welsh case as vigorously as possible.

Mr. Chris Ruane (Vale of Clwyd)

My hon. Friend has asked for fair play in respect of Wales. Is he aware that, when the structural funds were reviewed last time, under a Conservative Government, a senior British civil servant in Brussels said that north Wales got the rawest deal in Europe?

Mr. Thomas

There is a considerable legacy of disquiet about how that review was conducted. Many commentators in Wales feel that some parts of the country, particularly in the north, were badly dealt with. I am confident that the Government will pursue the interests of all regions of Wales as vigorously as possible.

Ms Jackie Lawrence (Preseli Pembrokeshire)

My hon. Friend said that farm incomes in Wales had dropped by 43 per cent. Does he agree that Wales faces a dichotomy, in that, although it is incumbent on us to paint a picture of a successful, thriving, enthusiastic region, that presentation can often mask the problems that we have in parts of west Wales—especially my constituency, where not only have people been affected by the 43 per cent. drop in farm incomes, but our gross domestic product decreased by about 12.5 per cent. under the previous Administration?

Mr. Thomas

I am aware that the position in my hon. Friend's constituency is especially severe. It has a problem of peripherality, which is shared by the other areas that I mentioned—a feature which is unique to Wales—and, as the Welsh Affairs Select Committee said in its recent report, in Wales there has been an imbalance in economic activity and inward investment. Eastern areas of Wales—one wishes them well, and I notice that my hon. Friend the Member for Newport, West (Mr. Flynn) is in the Chamber—have done very well indeed, although perhaps not as well as they could. When we have the National Assembly for Wales, greater prosperity and optimism are to be expected in Wales.

At present, however, there is an imbalance. The wealth that appears to have come to Wales does not go beyond two narrow areas—the A55 corridor, bordering England, in north-east Wales, and the M4 corridor, in south-east Wales. Any objective assessment of the economic data will reveal that the western areas of Wales and the valleys are very badly off indeed, and have GDP levels far below the threshold of 75 per cent. In those circumstances, I am sure that my hon. Friend the Minister will be more than prepared to pursue the case as vigorously as possible.

10.16 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mrs. Barbara Roche)

I congratulate my hon. Friend the Member for Clwyd, West (Mr. Thomas) on initiating this important debate. I say to him—and to all my hon. Friends who intervened—that we note the important points that have been made.

The debate gives me the opportunity to bring hon. Members on both sides of the House up to date on the specific aspects of the proposed reform of the structural and cohesion funds. This is a good moment to discuss these issues, as we take forward discussion of the draft regulations under the United Kingdom presidency of the European Union. The proposals are also being considered by the Select Committee on Trade and Industry.

Ministers and officials in the Department of Trade and Industry, the lead Department on the funds' reform, liaise closely with colleagues in interested Departments, including the Welsh Office, to co-ordinate UK policy. Administration of structural funds programmes within Wales, and the distribution of funds to them, is the responsibility of the Welsh Office. The DTI has responsibility for the co-ordination of issues that affect the UK as a whole.

It might be helpful to set the present discussions on the structural funds' reform in the wider context of the challenges confronting the European Union. It is no exaggeration to say that this is a critical point in the Union's development, not least because successful enlargement will be vital in ensuring that the Union is ready for the 21st century. The Council of Ministers, meeting in Cardiff today and tomorrow, will discuss, among other matters, Agenda 2000. I congratulate my hon. Friend warmly on his timing.

Reform of the structural funds is one of the most important elements in the process. It is certainly one of the most visible benefits of the European Union to local people. For many people, the EU is manifested through structural funds. That is why it is so important that we get the reform right.

At the informal meeting of EU regional policy Ministers in Glasgow last week, which was chaired by my right hon. Friend the President of the Board of Trade, there was universal agreement on a number of principles: the importance of job creation and employability, and of regional competitiveness; the value of effective partnership between the Commission, national Governments, and regional and local organisations, and of a clear definition of role for each; and that subsidiarity—that is, decision making as close to the people as possible—should have practical effect. In other words, there should be more regional and local control over the funds' delivery. I know that the agreement on those principles will be welcomed by all hon. Members.

Those points mirror the views that emerged consistently from the local and regional consultations that took place earlier in the year across the UK. The UK-wide consultation exercise was invaluable in gathering views that we could feed into the negotiations. This is an appropriate moment for me to thank all the interested parties who took part. We are grateful for all their contributions.

During our presidency, we have taken the negotiations forward as effectively as possible, given the divergent views across member states on the detail of the proposed regulations. It has been expedient, therefore, to focus discussion on the general regulations that deal with simplifying the administration of the funds. Excessive bureaucracy is one of the aspects that people dislike about the administration of the funds, and we are determined to simplify it as much as possible.

In the consultation exercise, that was an issue close to the hearts of those, particularly on the monitoring committees throughout the country, whose task is to ensure proper administration of the programmes. That is why it is so important for the Government to liaise with those whose job is the practical administration of the funds.

I spoke at the national simplification conference in early May to discuss issues for regional partnerships. Over the past few months, I have corresponded with many hon. Members, and have met a number of Members and their local delegations to discuss structural fund reform. I shall continue to do so to ensure that local views are represented in the on-going discussions.

A key concern for the Government in pressing forward the negotiations under our presidency has been to leave a solid framework for their continuation next month into the Austrian presidency. On issues affecting finance and eligibility criteria, all member states have distinctive views. Most, including the UK, have difficulties with the current proposals. The discussions are likely to take place towards the end of the year and will continue into early 1999.

In the negotiations to date, the UK presidency has been able to secure agreement on some of the general principles that support the universally agreed aim of simplification of the funds, making them more effective and better value for money. That is an important first step in such a radical reform proposal, and we should not underestimate the scale of the task and of the achievement.

Throughout the negotiations, the Government have kept and will continue to keep in mind one overarching principle, which will become more important as we head into the discussions in the autumn—the principle of fairness. That point has been made repeatedly this evening, and the Government have taken the message. Fairness has dominated the lobbying positions of the Government and local organisations in Brussels with the Commission and with other member states, since the publication of the Agenda 2000 communication.

Fairness means that the costs of reform should be shared fairly between all existing member states. The Government do not believe that the proposals as they stand will achieve this. We believe that if we are to make the funds affordable, all member states must accept cuts. Clearly, that means that no member state should receive more per capita than it does now.

Therefore, we are not prepared to bear disproportionate cuts in United Kingdom coverage. On the strength of our lobbying before publication of the proposals, we secured the last-minute concession of the safety net in the draft regulations that limits to one third loss of coverage for objective 2 and 5b areas. As I am sure my hon. Friend is aware, that could prove to be an invaluable achievement for Wales.

We should remember also that that is merely the starting point in a long and complex set of negotiations. There is a great deal more work to be done to achieve fair criteria and transparent systems across all the objectives. For example, we should like to see greater flexibility on the objective 1 GDP cut-off and the inclusion of a GDP criterion under the new objective 2. We are still some way from the discussions on eligibility criteria and financial issues, and we should certainly not try to prejudge their outcome.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

In adding my support, and my congratulations to the hon. Member for Clwyd, West (Mr. Thomas) on securing this debate, I respectfully suggest that there is no question of the west and the valleys of Wales qualifying under all the criteria. I draw to the Minister's attention the fact that this is a cross-party issue and that we fully support the comments of the hon. Gentleman and his colleagues this evening.

Mrs. Roche

I am extremely grateful to the hon. Gentleman for that intervention. I am encouraged by the many representations from, and my many discussions with, hon. Members on both sides of the House about this issue. That is a very encouraging part of the process as we pursue this issue that is so important to the United Kingdom.

We are at the beginning of this vital process, and I cannot overstate the importance of pursuing together, in common cause, the best deal for the United Kingdom as a whole. My hon. Friend has done the House a great service in raising this vital policy area tonight. I will ensure that we keep the House fully informed about all the discussions that are taking place.

Question put and agreed to.

Adjourned accordingly at twenty-seven minutes past Ten o'clock.