European Structural Funds

HC Deb 22 October 1998 vol 317 cc1449-91

[Relevant documents: Seventh report from the Trade and Industry Committee, Session 1997–98, on Reform of European Structural Funds (HC 697), and the Government's response thereto of 11 September.]

6.59 pm

Mr. Roger Berry (Kingswood)

It is a pleasure to open this debate on the Trade and Industry Select Committee's report on the reform of European structural funds. I do so only because my hon. Friend the Member for Ochil (Mr. O'Neill), who chairs the Committee, is unable to be present this evening. He asked me to convey his apologies to the House.

First, I wish to place on record the Committee's thanks to the Clerk and his colleagues, Professor lain Begg of South Bank university, who has provided us with expert assistance and lots of statistics, and all those who gave written or oral evidence. I am mindful of Madam Speaker's earlier request for brevity, and I am aware that many hon. Members wish to speak in this debate, so I shall confine my remarks to a few key issues in both the report and the Government's response.

It is important to see the current renegotiation of the structural funds in context. The funds are the principal instrument of EU regional policy whereby it seeks to reduce regional inequalities, or, as we tend now to say, to promote economic and social cohesion, which seems to me to be essentially the same thing. The current negotiations on the structural funds, the cohesion fund and, indeed, the Community initiatives, are part of the overhaul of EU finances that was initiated by the publication in July last year of Agenda 2000.

The most significant feature of the current discussions about the reform of the structural funds is that they are taking place in much more difficult circumstances than the negotiations on previous reforms. For example, the EU is facing a difficult economic environment, not least characterised by high levels of unemployment. It is embarking on enlargement to the east, with potential EU members being significantly less well off than current members, so more likely to need structural fund assistance.

There is a growing reluctance by net contributing states to continue contributions on the same scale, so there will be only modest increases in resources to promote economic and social cohesion—roughly rising in line with EU GDP. Yet, at the same time, there is a growing awareness of the availability of European funding, so there is increased demand. In the past, structural funds have increased substantially, both in scope and in scale, as the EU has evolved. That will no longer be the case. Therefore, the current re-evaluation of structural fund policy is no easy task, as I am sure the Minister will advise the House.

The Commission's most important proposals are of concern to all of us. The aims are to reduce the number of objectives from seven to three; to reduce Community initiatives from 14 to three; to concentrate funds by greater geographical targeting; in relation to objective 1, to apply the current criterion based on per capita GDP of below 75 per cent. of the European average, but without the existing flexibility; for regions facing major restructuring needs, to set a new objective 2, amalgamating current objectives 2 and 5b and incorporating a number of Community initiatives with particular account being taken of the unemployment rate as the key criterion; and finally, to ensure that the budget for structural and cohesion policies is maintained at the planned 1999 level of 0.46 per cent. of EU GNP.

Allowing for funds committed for enlargement, this will mean an increased spending in real terms of from about 28 billion euros per annum in the current planning period to about 30 billion in the next. There is an increase in real terms roughly in line with GDP, but not a substantial one. It is not like past increases, when we saw the renegotiation of European structural funds. The circumstances are therefore difficult.

Before we consider the Commission's proposals in more detail, we need to address a basic question, which the Committee considered: what is the value of the process whereby member states contribute to a common pool and then get either less or more from that pool, with strings attached by Brussels? That question needs to be asked, and the Committee sought to answer it. Obviously, it is a form of redistribution in the right direction—from rich to poor—and is to be welcomed warmly. It is an important function of the exercise. It is a practical expression of economic and social cohesion at European level. However, the greater the subsidiarity, the more the involvement of European mechanisms must be justified.

The Committee considered that issue in our report, and identified a number of reasons why European funding of this kind has conferred many benefits. As we discovered from travelling around the country listening to people involved in partnerships using European funding, it has led to the growth of many extremely productive partnerships at local level, such as between local authorities and the private and voluntary sectors, the benefits of which should not be underestimated.

Nevertheless, the Committee was impressed by the general indifference of those we met who seek and spend funds as to the source of funding. Whether we were in Merseyside, Stockport or Chorley, the cause of concern was not so much where the money came from as that there should be money available. We made that modest observation in our report.

The Government's response was perfectly fair, reminding us that they believe, rightly, that allocations should be redistributive, and that member states with lower per capita GNP should get more than those with higher per capita GNP. I wholly support that. Redistribution is an important political objective. But with respect, the response slightly side-stepped our point—that those involved in coming up with programmes, projects and schemes that confer enormous economic and social benefits on their communities, and those who have developed partnerships between the local authority and the private and voluntary sectors, often feel that what matters is not the source but the availability of funding. It would have been inaccurate of the Committee not to note that point.

Concentration is a key issue, and is identified at a number of levels. I have already said that the proposal is to concentrate on three rather than seven objectives, and on three rather than 14 Community initiatives. There is to be concentration on areas of priority assistance. There is to be geographical concentration, so that the eligible population in new objective 1 and new objective 2 areas should be reduced from 51 per cent. of the EU population to between 35 and 40 per cent. There is also a proposal for greater financial concentration, which effectively means giving greater priority to objective 1 regions.

The Committee's main concern, which I share, is the proposed increased geographical concentration. There is no obvious reason why increased geographical concentration is a good thing. If relative disadvantage or inequality happens to be widely spread in a spacial sense, there is a good reason to spread the resources to deal with it; so we on the Committee had some difficulty in understanding the emphasis on geographical concentration. Therefore, while we welcome more effective targeting of funds, we share the Government's concern that the current proposals would remove about 10 per cent. of EU citizens—37 million or 38 million people—from structural fund eligibility. We could find no justification for that.

The cohesion fund has taken on a life of its own. It will not be doing what it was intended to do. It was introduced following the Maastricht treaty to help the less prosperous member states with programmes designed to assist them to meet the convergence criteria for entry into economic and monetary union. Now, despite the fact that three of the four countries concerned—Ireland, Portugal and Spain—are to be in the first wave of EMU, having met the convergence criteria, it is proposed that the cohesion fund should continue for those countries for which it was originally set up. That is plainly absurd—probably the strongest expression that I am allowed to use in this Chamber.

The Committee shares the Government's view and that of a number of other member states that continuation of substantial funding from the cohesion fund for those joining the single currency simply cannot be reconciled with the original objectives of the fund. I look forward to the Minister advising the House what the Government, the House or anyone else can do about that extraordinary state of affairs.

As hon. Members will be aware, the Commission proposes that objective 1 will continue to assist regions where per capita GDP for the last three years for which figures are available is less than 75 per cent. of the EU average. Current objective 6 regions—those that are sparsely populated—will also be covered. It is proposed that objective 1 regions will continue to receive roughly two thirds of the funds.

The difference is that it is now suggested that no more than 20 per cent. of the EU population should be covered by objective 1, compared with about 25 per cent. at present, and that the previous flexibility around the 75 per cent. threshold should be eliminated. At the time of writing the report, the Committee understood that that was likely to mean that Merseyside would retain objective 1 status, that South Yorkshire would gain it, and that the highlands and islands and Northern Ireland would lose it, although we anticipated that the highlands and islands would regain it under the sparsity criteria hitherto used for objective 6, and that Northern Ireland would be regarded as a special case.

To eliminate the existing flexibility would in our view cause the United Kingdom particular difficulties. We are the fifth poorest member of the European Union in terms of per capita GDP, but we could lose because we do not have the regional inequalities that exist, for example, in Italy or Germany. This is not special pleading: it is an important matter of principle. The Committee's concern was that the Commission's proposals could penalise poorer countries that had been relatively successful in reducing regional inequalities. For poorer countries to be penalised for achieving greater economic and social cohesion simply does not make sense; nor does the rigid application of the 75 per cent. threshold.

There is no correct statistical methodology for defining the boundaries of EU regions, drawing a line at those with per capita GDP of 75 per cent. of the average, and saying that those below lag behind and those above do not. This is not a statistical exercise; it is a matter of judgment.

I am not talking about the margins of error in a statistical sense, although they exist. The point is that it is simply not possible to replace judgment with an arbitrary statistical device. Therefore, the Committee strongly supports the Government's view that flexibility around the 75 per cent. threshold should continue. In our view, the Government must continue strenuously to question the strange attachment that the European Commission seems to have here, as elsewhere, to rigid and arbitrary criteria. There must be flexibility—a grey zone, as we have referred to it—to give potential but not absolute eligibility to a small number of regions that are on the margin, so that judgment can be exercised rationally.

The Office of National Statistics data were published today. The separation of Cornwall from Devon as a level 2 area is warmly to be welcomed. My hon. Friend the Member for Falmouth and Camborne (Ms Atherton) is sitting here, so I have to refer to Cornwall. I was going to refer to the NUTS—nomenclature of territorial units for statistics—level 2 area, but perhaps sticking to level 2 is more appropriate. My hon. Friend the Minister will bring the House up to date, I know, but it looks as if Cornwall will obtain objective 1 status, as will the new west Wales and the valleys level 2 area. That is to be welcomed.

Mr. Rhodri Morgan (Cardiff, West)

Although my constituency is not in the objective 1 designated area, it is fair to say that there is an enormous welcome throughout Wales for the prospect that a substantial chunk of Wales will for the first time get objective 1 status. However, there is a specific problem, which I think is unique to Wales.

After devolution, working within the Barnett formula, any additional matching funds for the objective 1 bit of Wales could have to be provided by the new Welsh Assembly. It will have to borrow from Peter—the areas outside the objective 1 area—to pay Paul, unless the Treasury agrees to provide additional funds as the matching funds for the new objective 1 area. Did that matter come within the Select Committee's purview?

Mr. Berry

We did not consider that matter. The Minister may wish to comment on it. If I hurry up and finish my comments, other hon. Members will be able to make similar points, perhaps at more length.

Whatever happiness there is about the ONS data published today and what we believe to be their implications for objective 1 status, I hope, and the Committee hopes, that the Government still feel strongly about flexibility around the 75 per cent. threshold. It is an important matter of principle.

For new objective 2, the emphasis on unemployment as a principal measure of need is not unreasonable. Unemployment is perhaps the EU's greatest problem, so we welcome the emphasis on it. However, it makes no sense to rely exclusively on recent local unemployment rates. It is well known that member states do not exhibit identical economic cycles. That has a number of implications. One is that it is absurd to rely on a three-year snapshot of unemployment to determine fund distribution. The Select Committee is therefore of the view that objective 2 funding should be allocated broadly on the basis of per capita GDP, and that member states should have great freedom to identify the areas to be assisted.

Mr. Paddy Tipping (Sherwood)

Coalfield areas have gained substantially from European funding—£200 million a year. Does my hon. Friend agree that it would be strange if the South Yorkshire coalfield got objective 1 status while north Nottinghamshire, which has the same conditions but just misses objective 1 perhaps on unemployment and GDP data, were excluded? Is that not an example of where flexibility ought to be applied?

Mr. Berry

My hon. Friend makes an important point. I shall come to the issue of boundaries.

One issue that local authorities, among others, raised with the Committee was the setting of boundaries for the new objective 2 areas. It is clearly important that areas most in need should receive the funding. The Minister told the Committee that the Government would be looking for an outcome on objective 2 where there would be the flexibility to delve down into areas of real need", even if those areas were concealed in areas of relative prosperity.

In their response to the report, the Government warned that there were many hurdles to overcome, but said that they were committed to the principle of flexibility. Are the Government willing to continue to seek to have objective 2 areas defined below NUTS level 3—at least to ward level 5, if not below? I think that that takes on the point that my hon. Friend has just made.

There has been a broad welcome in principle for the Commission's proposal to reduce the number of community initiatives from the current 14 to three. It has been argued that many activities pursued under community initiatives could as easily be carried out under objective programmes. However, that can be done only in areas enjoying objective status. In Lancashire, the Committee was briefed on community initiative projects of real worth outside objective areas—the Royal Ordnance site at Chorley and a former cotton mill at Stockport spring to mind.

Moreover, the local authority associations were cautious about reducing the number of community initiatives. The Local Government Association sought the continuation of the urban initiative, which provides concentrated assistance to a few selected urban areas. The Convention of Scottish Local Authorities supports the campaign for a fourth initiative, Restruct, which would bring together the current industrial change initiatives.

The Committee's view is that serious consideration should be given to the continuation in some form of the urban initiative and to the introduction of the proposed Restruct initiative. In light of the Government's response to the Committee's recommendations, may I press the Minister to tell the House how far the Government will back the Restruct initiative and seek transitional funding for urban projects just begun, which the Committee feels is important?

The Government's response agrees with almost all the Committee's conclusions and recommendations, which means that only limited disagreement is to be expected this evening. However, I have raised several issues that require further clarification from the Minister. Because of the time available, the list has not been exhaustive, but I am sure that other hon. Members will now add many more items to that list.

Several hon. Members

rose—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. A great many hon. Members are trying to catch my eye and it is already evident that, unless some self-restraint is exercised, many people will be disappointed.

7.21 pm

Mr. Colin Breed (South-East Cornwall)

The broad principles underlying the reforms are to be welcomed. They are, to some extent, overdue. The full implications of enlargement of the European Union, many of which have yet to be recognised, will certainly have concentrated minds, since to do nothing to the current rules relating to structural funding would certainly hugely increase budget contributions. In addition, inequities between certain member states and regions would be created, and tensions within the Union might be aggravated.

The provision of structural funds has clearly been of great importance to all member states, not least the United Kingdom. The funds provide a tangible benefit, and enable people to see how Europe is of assistance to them and how it works constructively for them. That aspect of our membership has not been given the profile it deserves.

The reforms have had to address two sharply conflicting aims: on the one hand, to achieve greater fiscal restraint over a budget and individual contributions that are ever increasing; and, on the other hand, to continue to assist existing poorer regions and cope with future post-enlargement demands from new regions.

Many existing members want their overall contribution to fall in real terms and there have been calls for greater abatements and refunds. However, demands are increasing as awareness of what can be funded increases. Therefore, to reduce the number of initiatives, restrict the range of community initiatives and undertake an exercise in concentration to target assistance in a more focused manner, with the additional benefit of simplifying the system generally, are welcome measures which we should support.

The strict application of the criteria for objective 1, based on per capita gross domestic product of 75 per cent. of the EU average, is understandable from the EU' s point of view. As the hon. Member for Kingswood (Mr. Berry) said, it makes for clear-cut, black-and-white decision making. However, it could lead to conflict over the boundaries used for the purposes of statistical data to support new applications. Common sense must prevail, and some flexibility should be retained.

It appears that the total share of structural funds received by the UK would actually fall, and many regions currently enjoying objectives 2 and 5b status only might in future receive only transitional funds under the new objective 2 status. That might have a major effect on some of the regions currently obtaining support, forcing them to draw up new economic plans.

The proposed timetables are, on the face of it, extremely tight, but they must be adhered to if the reforms are to be well embedded prior to the first wave of any enlargement. There will obviously be a danger, emphasised in the report, of putting off difficult decisions—indeed, it appears that some EU members put off a rather difficult decision today. However, that must not be allowed to happen, as procrastination would clearly invite greater difficulties in future. It might also delay opportunities for new members to join: it must be remembered that the peoples of those aspirant member states might lose some of their enthusiasm for enduring the very strictures imposed on them to enable their countries to meet the accession criteria. The EU must maintain the momentum of reform to ensure that enlargement can and does come about.

The Committee's recommendation to concentrate funding on the poorest 20 per cent. of regions is based on a desire to reduce the gap between richer and poorer nations, but it would also reduce the number of objective 1 regions and so be difficult to implement, especially as some of those regions will have only just received that status—I am not necessarily referring to Cornwall in that context. However, the suggestion that each member state should undertake to reduce the population covered as a means of sharing the burden of geographical concentration has some merit. It would be a fairer system that allowed each state to decide how to implement the policy within its own boundaries.

I should like to make a few remarks as a Member of Parliament from Cornwall. As the Minister knows, the whole of Cornwall was pleased—nay, delighted—when the county became a NUTS 2 region in its own right, with the result that its case for objective 1 status was much enhanced. Cornwall is clearly on a par with places such as Greece and Spain in terms of GDP per head, and I, along with nearly half a million other people, am looking forward hopefully to the confirmation of objective 1 status for Cornwall in the not-too-distant future.

The county of Cornwall has benefited from objective 5b status, the experience of which is pertinent to my final point: that the process of seeking funding is far too complex. In addition, it is too unco-ordinated with other programmes, and too vulnerable to delays in decision making. All that often results in carefully assembled packages falling apart at the wrong moment. The bureaucracy and over-elaborate administrative procedures must be examined and overhauled so that, when dealing with the private sector, which is vital in respect of matched funding, we can keep pace with its timetables.

Such reform will not result in any lessening of the quality of accountability, or of ensuring that proper control is maintained. It is unacceptable to allow impediments to such critical funding packages, especially those relating to objective 1 areas, to persist. Some subsidiarity must be applied to that area of EU operations.

Mr. David Heath (Somerton and Frome)

I am glad that my hon. Friend has touched on subsidiarity. Having read the Committee report and the Government's overall response, does he agree that the weakest part of that response relates to recommendation 13, which deals with subsidiarity? Does it not bode rather ill for the forthcoming informal European Council on subsidiarity if, at that conference, the Government are not going to promote the case for subsidiarity beyond national level?

Mr. Breed

I entirely agree with my hon. Friend. There has been much talk about subsidiarity, but little action to enable it to take place. That is perhaps the most frustrating aspect of the over-bureaucratic administration of funding packages.

The reforms will modernise the structural funds in advance of enlargement, and reduce the total funds available, which should ensure some restraint on funding. However, I suspect that, as with other funds, demand will always exceed the available resources.

I hope that there will be a fervent desire to tackle the bureaucracy and over-elaborate administration. If the red tape were cleared away, that would do much to ensure that economic development was quickly achieved in the regions of the EU, in all the objective statuses, and we know that time is critical to many parts of the UK and other EU countries.

7.30 pm

Mr. Bill O'Brien (Normanton)

It is pleasing to be able to take part in this debate. The contribution of my hon. Friend the Member for Kingswood (Mr. Berry), who fully explained the national and European dimensions, means that my speech will be shorter because I can concentrate on local issues and plead with the Minister to take note of the problems suffered by coalfield areas.

Research shows that European funding is the largest source of finance for economic regeneration in many areas of the United Kingdom. For the five years from 1994 to 1999, the assessed total that we could obtain is about £3.2 billion for objective 2 funding to assist rundown industrial areas. Those include my constituency and the Wakefield area, where mining, textile and engineering jobs have been lost in their thousands. They were well-paid jobs which contributed substantially to the economy of the Wakefield area and the surrounding towns and cities.

European Union funding could contribute to the securing of 340,000 jobs nationally, which would help to create jobs for redundant mineworkers and provide job opportunities for our young people. The UK is the fifth-largest contributor to the EU budget, so we make a substantial contribution for the return that we obtain.

My fear is that the redrawing of the EU map for objective 1 and objective 2 areas which determines the availability of European grants will mean that my constituency loses out. I am concerned that areas such as West Yorkshire, and Wakefield in particular, will not qualify for either objective status if the negotiations currently taking place do not recognise their economic problems. Wakefield, which has lost its traditional industries, including coal, engineering and textiles, would suffer substantially.

I want to impress on the Minister and the European Commissioners the fact that the present criteria for awarding objective 2 status are narrow and sometimes inaccurate. They work against regions such as Yorkshire and the Humber. It would be cruel and dishonest to change the formula without taking into consideration the current economic conditions of regions such as mine.

The gross domestic product per head in former mining, textile and engineering areas is less than the EU average. The nature of jobs has changed: well-paid permanent jobs have been replaced by low-paid part-time jobs; and skilled jobs have been replaced by non-skilled work in retailing and catering. My area is becoming a supermarket jungle—out-of-town shopping is killing off town and city centres.

Training for skilled employment is a mere token in our area. High-tech jobs are difficult to find; high-tech industries are not attracted to the area, mainly because of the dereliction and closure of our traditional industries. Our damaged environment acts as a deterrent and a disincentive to investment. Local authorities that represent those rundown areas are working hard to combat that dereliction, but they have limited resources. That is a significant reason why areas that now qualify for objective 2 status should continue to do so.

The legacy of over-dependency on a few traditional industries is enduring, and local authorities are working hard to encourage industries and businesses to locate in their areas, but the going is hard and we need the support of EU structural funds. We also need the European Commission to take note of the problems in those areas. I ask that, in any redrawing of the structural maps, note be taken of all the economic conditions.

My constituents ask for fairness, not favours. I support the Government negotiators in pressing the European Commission to consider all economic and social aspects in our regions. In my lobbying for objective 2 status for the Wakefield area, I point out that it has a high proportion of derelict land, high levels of economic inactivity, a high level of dependency on income support, high levels of ill health, low life expectancy and declining male employment. On behalf of my constituents, I therefore plead with the House to be unanimous and impress on the European Commissioners the need to maintain objective 2 status in our area.

7.37 pm

Miss Anne McIntosh (Vale of York)

I welcome the report and I am pleased to be able to participate in the debate. I congratulate the Minister on her generous and open-door policy and thank her for her generous replies to correspondence and my requests for meetings with her.

I join other hon. Members who have made special pleadings for their areas. As the Minister knows, there is concern in North Yorkshire that has not yet been allayed, particularly about the fact that two initiatives will be discontinued. The first is the Konver programme, which has had a positive impact on areas in my constituency. I am not convinced that those areas will continue to benefit under the new arrangements for objective 2, which is worrying.

I also make a plea on behalf of the farming community, which receives generous benefits from the 5b proposals. I do not need to remind the House of the present plight of farmers. Never before in my lifetime have I witnessed all sectors of the farming industry in such a crisis. Farmers in lowland areas such as the Vale of York, who would normally admit privately to being reasonably well off, have desperately low incomes this year. I make a special plea that those areas covered by the 5b provision not be forgotten.

I am pleased that the Select Committee's report refers to some programmes specifically. However, I am concerned that, in the tussle for funds between rural and urban areas—such as those represented by hon. Members who have spoken this evening—places such as the Vale of York will lose out because the initiatives and the population number criterion are being reduced. I issue a plea on behalf of the rural community that it should continue to benefit from European funding.

Under the new proposals, the existing arrangements will obviously cease from 2000. Tourism, particularly in North Yorkshire, has suffered this year as a result of the strength of the pound and competition from package holidays to attractive parts of Europe and other world destinations. That crisis in the tourism industry must be recognised. Under the current proposals, most service sectors do not qualify for funding because the emphasis is very much on the decline in the manufacturing industry. I do not know whether the Government—even during the United Kingdom's EU presidency, when a vigorous campaign was fought over the transitional arrangements—have made a special case for funding tourism and other service sectors, including port-related activities. I hope that the hon. Lady will put my mind at rest this evening by assuring the House that tourism will benefit from the revised proposals.

I was struck by one important point in the Committee's conclusions: whether the Government have faced honestly the real impact of the proposals on the whole of the United Kingdom. I refer to new objective 2. Several million people currently qualify for funding under the former objective 5b and Konver provisions, and it is regrettable that there will be a dramatic fall in the number who will benefit under the new arrangements. The United Kingdom receives 9 per cent. of the total EU structural funds, but the amount will fall dramatically from 2000. There is no guarantee that people will continue to benefit to the same extent under the transitional arrangements. Will the hon. Lady confirm that the request for an extension of relevant objectives 1 and 2 to six or seven years will be agreed by the other member states?

The new arrangements will, rightly or wrongly, give more say to the national administration and the local Government offices for the regions on how the funds will be administered. We seek an assurance this evening that there will be a certain continuity in the allocation of moneys, which should not be jeopardised in the future.

I met the Minister in about May this year and I was struck by her reference to the new concept of pockets of rural deprivation. However, the Minister's replies in correspondence of 18 June were rather open-ended. She said, for instance, that the negotiations were still at an early stage. However, I understand that the Prime Minister has said that the new arrangements must be agreed by March next year. That is a very ambitious timetable. Will the Minister elucidate on the concept of pockets of rural deprivation and the other outstanding matters on which we touched earlier?

7.44 pm

Mr. Gerry Steinberg (City of Durham)

I shall be very parochial in my speech tonight—and I make no apologies for that. As chairman of the northern group of Labour Members of Parliament, I speak on behalf of the north-east as well as my constituency. I stress the immense value of structural funds to that region. Those funds have been worth more than £1,000 million to the north-east since 1989 and have created tens of thousands of jobs. At more than £100 million per annum, they are worth more than the proposed budget of the regional development agency. The funds have assisted areas suffering major economic and social hardship and the dislocation of the local work force, and rural areas suffering from a combination of sparse population and a continued dependence on agriculture.

The funds have secured enormous achievements for the north-east. Structural funds have allowed the region to cope with massive structural change and have been a huge boost to the north-east's economic, social and environmental regeneration. They have encouraged considerable private investment. The funds have raised regional competitiveness and have been used effectively and imaginatively. The north-east has been cited by the Commission as one of the best performers in applying and directing resources.

All that is under threat, as the European Commission is recommending the reform of structural funds and a reduction by up to a third in the population level that they cover. Special support to the coalfields and to specific sectors, such as textiles, steel and shipbuilding, will be scrapped. I stress that the north-east needs continued assistance. The task of restructuring the economy is not yet complete and the north-east continues to face severe social and economic problems of a deep-rooted structural nature.

First, per capita gross domestic product in the north-east is the lowest of any region in the country. Secondly, the north-east has the highest unemployment claimant count of any English region. More than one in three unemployed people have been unemployed for more than 12 months. Real unemployment—that is, joblessness—is more than twice as high as the claimant count. Thirdly, average weekly wages in the north-east are the lowest of any English region. The north-east has the lowest disposable household income in the whole of the United Kingdom. Some 37 per cent. of those in work earn less than the Council of Europe's decency threshold—that is the highest rate in the United Kingdom.

Fourthly, business start-up and survival rates are among the lowest in the United Kingdom. Economic activity rates for both men and women are the lowest in England and the second lowest in the United Kingdom. Unfortunately, recent large-scale job losses have exacerbated the problem and highlighted the fragility of the region's economy. I assure the House that that is not a price worth paying.

Although structural funds have cushioned the region from further decline, its relative competitiveness has slipped as other regions have improved their economic performance. A reduction in structural funds would hinder the process of restructuring. It would constitute a major setback in rebuilding confidence and the diversity and strength of the region's economy. Such a reduction would cause a rapid decline in competitiveness and widen the gap between the region and other parts of the United Kingdom and Europe.

The north-east needs the maximum level of financial assistance. Parts of the region—notably the former coalfield and rural areas—have a gross domestic product of less than 75 per cent. of the EU average, which is the selection criterion for objective 1 funding. Northumberland and Durham have not been included as a level 2 region in the agreement reached between the Office for National Statistics and Eurostat. The designation of Northumberland and Durham as a level 2 region would have given us a good chance of obtaining objective 1 status, which would bring up to £150 million in European grants to the area.

The decisions on the revision of level 2 area status are supposedly based purely on statistical arguments rather than political decisions. However, on close examination, that does not appear to be the case. Eurostat has accepted some changes to the level 2 lists. They are in Cornwall, west Wales, London and Scotland.

Before anyone gets up in arms, let me make it clear that it is absolutely not my intention to argue that those areas should not have redesignation—far from it. I agree with the Council of Ministers and the European Commission that decisions should be taken as close to the people as possible. My argument is that there appears to be a double standard in that some areas are accepted while others are rejected.

Let me take Cornwall as an example. If there is supposed to be a statistical adherence to size basis, why should Cornwall, with a population of just 400,000, become a level 2 area?

Ms Candy Atherton (Falmouth and Camborne)

The figure is 480,000. Let us get this absolutely clear. Let us be honest and say that Cornwall is a cultural region in its own right.

Mr. Steinberg

I was coming to that. As I said at the beginning of my speech, I am not arguing against Cornwall's redesignation. I am simply making a comparison, and I am entitled to do that. If one area gets level 2 status and another does not, there must be a reason. I want to find out what that reason is. I do not begrudge Cornwall getting redesignation. I am delighted, so my hon. Friend should not get herself in a twist.

Cornwall has been allowed to split off from Devon because of a recognition of the very different economic conditions of the counties and Cornwall's sparsity of population, geographic peripherality and distinct cultural and historical factors reflecting a Celtic background. That was a quote from Eurostat.

As Cornwall is a county, on the general rationale it should be a level 3 area and, as such, be eligible for objective 2 rather than objective 1. The specific points allowed by Eurostat in accepting the case for level 2 designation include the "different economic conditions" between Devon and Cornwall, which in gross domestic product terms is 15 per cent. The discrepancy in GDP terms between Northumberland and Tyne and Wear is also 15 per cent. Therefore, economic conditions are just as different between Northumberland and Tyne and Wear as they are between Devon and Cornwall.

It is also worth pointing out that Cornwall is part of the south-west region, which has an overall GDP of 95 per cent. of the EU average while the northern region has only 85 per cent. of the EU average. We are a poor part of a poor region, whereas Cornwall is a poor part of a much richer region.

Cornwall's population sparsity is specifically referred to as part of the rationale for accepting level 2 review. However, in Northumberland and Durham, sparsity is worse, at 123 people per sq km compared with 136 people per sq km in Cornwall. Emphasis is placed on Cornwall's geographical peripherality. Penzance, at the extreme western tip of Cornwall is 282 miles from London while Berwick in the north of Northumberland is further away at 357 miles from London.

I now turn to the distinct cultural and historic factors reflecting Celtic background". How can that possibly be a statistical argument? On that basis, Northumberland should have objective 1 status because we were not conquered by the Romans.

In view of that, what exactly is the rationale for accepting Cornwall for review, but not Northumberland and Durham? I ask that question quite seriously. If anything, the statistical case for Cornwall is rather less robust than that for Northumberland and Durham, reinforcing our view that the decision was political, not statistical.

The north-east is one of the most structurally challenged areas and that is why it needs structural funds. The UK Government have finally recognised coalfield areas as a priority. Now is not the time to disallow access to what will be the last major chance of structural funds going to the UK to help those areas. Europe grew out of the coal and steel community. The coalfields have to be understood in the context of permanent, steep long-term decline. The insistence of Eurostat on ignoring the United Kingdom position and rescheduling those areas as level 2 means that they must now compete as objective 2 regions, although their success is by no means certain. In fact, they are objective 1 regions trying to get objective 2 funding. The designation of objective 1 status should be the subject of open debate by the EU and member states, along with the principles of subsidiarity, transparency, fairness and social justice. The matter should not be cut and dried, with Eurostat overruling member states by the utilisation of a subjective formula.

The Commission has proposed that objective 2 eligibility should be based predominantly on employment and unemployment statistics. Industrial decline in the north-east has been long-term and sustained. Some areas have lost so many industrial jobs that they may not continue to qualify as industrial areas.

In selecting eligible objective 2 areas, the United Kingdom Government and the European Commission must use additional indicators of deprivation and exclusion that are meaningful. I suggest to my hon. Friend the Minister that additional selection criteria for objective 2 status should include some of the following factors.

First, per capita GDP should be recognised by the EC as the single most important factor in determining whether a region lags behind the rest of Europe. Parts of the north-east contain some of the lowest GDP in the United Kingdom, and the region as a whole has the lowest GDP of any region. Secondly, the skills level of the work force is fundamental to their ability to compete effectively. The narrow skills base in the north-east is a direct consequence of traditional structural reliance on heavy industry and agriculture. Thirdly, the north-east suffers from endemic deep-rooted unemployment. Official unemployment statistics underplay the problem of joblessness and the related issue of social exclusion. Fourthly, rural areas continue to suffer acute problems in terms of overdependence on a narrow and inflexible economic base, changing economic structures, remoteness and scarcity of population. Finally, aid should be concentrated on areas suffering structural problems. Allowing small areas with cyclical problems to qualify would reduce the impact of structural funds and fail to recognise real need.

At a European level, the UK Government are seeking a fair distribution of structural funds across member states. Distribution within the United Kingdom should also be on a fair basis, recognising real indicators of need. The economy in the north-east is struggling with huge job losses continuing to occur in manufacturing. The region is still undergoing a major restructuring process. The continuation of structural funds is vital to stabilise the future economy and boost job prospects in the north-east of England.

7.56 pm

Mr. David Prior (North Norfolk)

I am pleased to follow the hon. Member for Kingswood (Mr. Berry) with whom I served on the Select Committee for a few months. I am particularly pleased to follow a Labour Member who still believes in the redistribution of wealth, which is something of a surprise these days.

The debate is important because we receive £11 billion a year from the structural fund which represent 45 per cent. of the European budget. We badly need reform, not just because of the enlargement of Europe, but because as everyone agrees—and the Committee certainly agreed—the system has become hugely over-bureaucratic and needs simplification. Let me quote one item from the Committee report: Eligibility for Objective 1 status is based on areas defined in Euro-speak as 'NUTS Level 2'. There has for some years been in existence a system of Nomenclature of Territorial Units for Statistics, designed to provide a single uniform breakdown of sub-national territorial units for statistical and other purposes. Very few normal people can understand a word of that and it illustrates just how complicated and difficult the system has become. I agree with the Committee report when it refers to the results as arbitrary and capricious.

Worst of all is the political horse-trading in the background and we have heard something about it this evening. Even with Agenda 2000 determining the criteria by which parts of Europe should qualify for the new objectives, there is already horse-trading over those criteria.

It is nonsense that the criteria are determined at EU level and I am glad that the Committee recognised that and stated in its conclusions that in future they must include delegation to the lowest practicable level, and to non-statutory bodies in suitable cases. I was also pleased to see conclusion 24 which states: The extent to which Objective 2 arrangements allow for funds to be targeted if necessary below local government ward level will be a measure of the Government's success in negotiations. My own view is that that does not go nearly far enough. It is hard not to agree with Lord Pearson of Rannoch, who asked whether it would be more sensible for us to take control of the whole £11 billion and spend it wisely on our real needs, no doubt saving several billion pounds along the way. The more decisions that can be made locally, the better. If we carry on as we have in the past, we shall merely bring the European Union into disrepute.

Representing a rural constituency, I have a particular concern that objective 5b will be subsumed into the new objective 2, and that the rural areas will be squeezed. They will have to compete directly with industrial and urban areas, and historically they have had far less clout.

The indicators chosen by the European Commission to decide which areas qualify for support clearly discriminate against rural areas. The Commission decided that to qualify, rural areas must have a population density of less than 100 people per square kilometre or a high percentage of agricultural workers. In the United Kingdom that will have a serious effect on our ability to qualify for objective 5b.

Part of my constituency does qualify for objective 5b. It has been successful in attracting new industry and there has been a fruitful partnership between the local authority and private business. Indeed, the Select Committee report includes a letter from my district council which states that it believes that the additional funding available under the programme has seen positive effects delivered in the area—particularly in terms of capital investment projects by the public and private sectors in Fakenham". The loss of objective 5b funding will have a serious impact on Fakenham and the surrounding area.

Mr. Bob Blizzard (Waveney)

The hon. Gentleman will know from that section of the report that parts of his district felt that they did not obtain objective 5b funding because Lowestoft in my constituency was granted objective 5b, although it is a town of 60,000 or 70,000 people. The case for help through structural funds for Lowestoft was overwhelming, but it was not large enough to qualify for objective 2. In answer to my hon. Friend the Member for City of Durham (Mr. Steinberg), may I say that there are small areas with structural, not just cyclical, unemployment?

Because the only way to help Lowestoft was through objective 5b, it had to be redefined as rural. Is that not an argument for reform of the funds, so that areas such as Lowestoft can get what they deserve, without having to be designated as rural at the expense of other rural areas?

Mr. Prior

Indeed, the hon. Gentleman presents an argument for ensuring that decisions are taken locally, so that such considerations can be taken into account.

I shall conclude my speech with a further example. Alongside North Norfolk is a coastal strip where there are several fishing communities. They would have qualified under objective 5b, but for the fact that the travel-to-work area in which a number of fishermen were assessed included Fakenham, Cromer, North Walsham and other towns, so there was not a high enough percentage of fishermen to qualify. Along the coastal strip, however, the percentage is sufficiently high.

I hope that when the Minister negotiates the qualifications for objective 2, she will support the submission to her from the North Norfolk district council that the Nrth Norfolk coastal strip should be designated under the fisheries strand of the objective 2 programme.

I believe strongly that the structural funds should be allocated and spent locally, as near as possible to the ground, and that rural areas such as North Norfolk and other parts of Great Britain should be safeguarded.

8.3 pm

Ms Candy Atherton (Falmouth and Camborne)

I am grateful for the opportunity to speak in tonight's debate. To us in Cornwall, objective 1 is more than an opaque piece of bureaucratic jargon. To many, it is like the holy grail—a recognition that distinct regions such as ours on the periphery of the European Market need assistance to overcome chronic structural disadvantages. Indeed, I would not be going too far if I said that in Cornwall, European structural funds are exceedingly sexy.

It came as a terrific boost in June to learn that the Select Committee on Trade and Industry had recognised the inherent logic behind Cornwall's case for recognition as a distinct region at NUTS level 2. Whereas most people in less hard hit regions might repay the mention of objective 1 with a glazed expression, in my constituency even the eyes of schoolchildren light up.

I should not want my hon. Friends to think that we have been pleading emotionally for special treatment. The merit of Cornwall's case rests partly on its distinct regional identity. Cornwall has a unique cultural and economic history. In its heyday it was the powerhouse of British industry, but today it could easily be described as a backwater. The Select Committee agreed in its report that it would be…absurd to describe Cornwall as a bogus entity. I should welcome a visit to Cornwall by my hon. Friend the Member for City of Durham (Mr. Steinberg), so that I could show him myself the structural problems that we face.

The merit of Cornwall's case also rests heavily on statistics. Recent figures—I believe that more have been published today—show that gross domestic product in the county is only 68 per cent. of the EU average. That is well below the 75 per cent. cut-off for objective 1. I understand that we have come bottom of the table in today's statistics.

For years the truth about Cornwall's problems has been masked by amalgamation with relatively prosperous Devon. We have received objective 5b grants, which are highly constructive. However, they do not offer the fundamental help that the county desperately needs.

The Prime Minister recognised our strong technical case, which also had strong backing in all political parties, in the county and through the wider south-west. The first action of the regional chamber of the south-west was to support unanimously Cornwall's case for objective 1. We were delighted to learn this summer to learn that Eurostat had agreed that Cornwall should be separated from Devon at NUTS level 2.

Cornwall now satisfies all the technical criteria for gaining objective 1 funding. As we approach the next round of objective 1 allocations, we in Cornwall were encouraged that, in discussing the flexibility of the 75 per cent. threshold, the Select Committee suggested that it is hard to imagine a region below the threshold being excluded". I look forward to the county council producing an irrefutable package of proposals, based on widespread consultation throughout the county, which will put the seal on our bid. Next week the movers and shakers of the county meet to thrash out the first phase of our plans to spend. Over the next few weeks a consultation document will be delivered to every door in the county asking for direct input from the grass roots.

I particularly agree with the Committee's analysis of the complexity of the process. It is indeed complex, and that is compounded by the jargon. We encounter terms such as Eurostat, Leader, state aids, objectives 1 to 6, the European agricultural guidance and guarantee fund, and my favourite term—NUTS. It would be fair to say that most people in Cornwall are becoming comfortable with the terminology, if sometimes a little confused. A man came to my surgery recently and asked me, "Well, then, Candy, are we going to get this objectionable 1?" I hope and believe that we will.

In Cornwall we have a true partnership between the public and private sectors, central and local government, and from voluntary organisations to the health authority, all headed by the county council. If we succeed in achieving objective 1, we shall have the opportunity to redefine our county, create a new university, tackle our infrastructure problems and, perhaps, as a predominantly small and medium-sized business centre, become the leading light across the EU in supporting and developing this sector.

The opportunities are there for the taking, and Cornwall stands at a crossroads. I hope that the county that currently stands on a par with the poorer regions of Portugal and Greece will be able to reorient itself into the future, with all its people pulling together.

8.10 pm

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

The reality is, as the members of the Select Committee on Trade and Industry accepted in their report, that the European Union faces budgetary restrictions at a time of expansion. New nations, which we in the Scottish National party are keen to see joining the EU, are the very nations for which structural and cohesion funding are vital to ensure smooth accession and the subsequent smooth operation of the single market.

On the Scottish National party Benches we strongly hold to the principle—as has already been mentioned, it is somewhat out of fashion—that those who have a little more should in the best interests of society, or in this instance the best interests of the EU, contribute to those who have a little or a lot less. Equalising economic development and creating a stable union is in all our interests. We shall all benefit from the new partners who are in a position to participate fully in the single market but the political reality is that there is no endless pot of Euro-gold. If we are to have new members, the cake will have to be divided differently. It is important that the criteria that we adopt in cutting up that cake is not inflexible. We must take a wider view than the current criteria propose.

As for the proposed new objective 1, there must be great doubt over the accuracy of some of the regional gross domestic product figures that are being used as the main criteria for the objective. These figures are partly based on sample surveys. Even the Office for National Statistics itself says that the estimates cannot be regarded as accurate to the last digit shown. Yet on that basis a member of the cabinet of Commissioner Monika Wolf-Mathies, who obviously must be a very important person as he was asked before the Select Committee in another place, said—[HON. MEMBERS: "She."] No. I am talking about the cabinet member representing the commissioner. He said before the Select Committee in another place that 75.1 per cent. shared gross domestic product was enough to exclude a region from objective 1. That means an exclusion based on the first decimal point of an inaccurate statistic.

On that basis, the highlands and islands would technically fall outwith the new criteria based on gross domestic product alone. If we take the original reasoning for objective 1, the highlands and islands would clearly benefit from the sort of structural support that is envisaged for objective 1 areas.

The arguments for the highlands and islands getting objective 1 have been well rehearsed, but they should certainly be repeated with force by the Government during the ensuing negotiations. I would expect the hon. Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) to rehearse the arguments in some detail if he catches your eye, Mr. Deputy Speaker. In terms of peripherality, population density, composition and general geography, there is an overwhelming case for the highlands and islands to be treated in the same way as the northern rim regions of Sweden—these are regions that have a higher gross domestic product than the highlands and islands—and Finland.

The case for the highlands and islands is strong, but less attention has been given in Scotland to the position of new objective 2 or current 5b areas. My constituency currently falls within the 5b area, but much of coastal rural "lowland" Scotland is also covered. Population density, unemployment and depopulation are all useful indicators, but they often fail to show the real picture of need.

The Government must press for objective 2 to take more fully into account all the possible indicators of low economic activity. For example, we must consider the amount of casual, seasonal or part-time employment. We must consider also the incidence of low earnings or low household incomes. We must take account of remoteness and lack of access to services and opportunities. We must consider not only population density but population composition—for example, is there an aging population or is there a substantial incidence of emigration of young people?

We must be concerned also about the arbitrary drawing of boundaries. I must say, given the remarks of the hon. Member for City of Durham (Mr. Steinberg), that I have no claim to include Berwick within any of the Scottish areas. However, gross domestic product and unemployment statistics conceal vast differences within areas. For example, the GDP of the highlands and islands is skewed by the inclusion of Inverness. The area of the islands is greatly skewed by the inclusion of Shetland.

Unemployment is also a variable statistic. Male unemployment based on claimant count within the region in which my constituency is situated—that is Dumfries and Galloway—is 7.4 per cent. Yet male unemployment in the Newton Stewart travel-to-work area within my constituency is 14.6 per cent., which is almost double. We must have a system that is flexible enough to cope with these discrepancies.

I am concerned that my area of Dumfries and Galloway may not qualify under the current proposed criteria. However, the issue is not about looking after our own backyard and that alone; it is about delivering though objective 2 the aims of economic development. It is about ensuring that communities elsewhere in Scotland, the United Kingdom or throughout the European Union do not have the door closed on them because we have rigidly applied some statistics that have been dreamt up in some bureaucrat's office. So objective 2 should be about providing opportunities for the best programmes in areas of genuine need and not simply, as the hon. Member for Kingswood (Mr. Berry) said—

Dr. Norman A. Godman (Greenock and Inverclyde)

Does the hon. Gentleman agree that areas of great need could include, or should include, fishing communities and fisheries dependent areas?

Mr. Morgan

I would certainly agree with that. That is something that we should bear in mind when we are considering the composition of an area. We should take into account the reliance of that area on declining industries such as fishing and, unfortunately, agriculture. I was saying that we should not simply be throwing all the money at a chosen few. Instead, we should be focusing on the best programmes for areas of genuine need.

In the area that I represent the net income from structural funds is dwarfed by contributions from the common agricultural policy. We are faced with not only the reform of structural funding but complete reassessment of the CAP. There is a growing feeling that European assistance under the CAP should move away from subsidy towards a programme of rural investment. That has a crucial bearing on our debate on structural funding.

At a time when rural areas across Europe and the United Kingdom are facing the possibility of reduced structural support, we must ask ourselves whether there are ways of refocusing other moneys to promote economic development in these areas. We need to find ways of more closely integrating the aims of both funding strands—that is the structural funds and the CAP—to ensure that maximum benefit goes to the areas in greatest need.

Finally, I want to focus briefly on the mechanisms for delivering structural funds within Scotland. We have a structure of local programmes and partnerships, which in many instances have been effective in building community structures and in disbursing structural funds. However, with the creation of a new streamlined structure of three objectives and four funds we have a good opportunity to consider the delivery mechanisms. There has been much criticism of existing structures that centre on levels of bureaucracy, endless meetings, seminars, forums, consultants and little true democratic accountability.

That being so, we must ask ourselves whether there is an opportunity to streamline delivery, to make greater use in Scotland of local enterprise companies along with local authorities and community partnerships and to improve scrutiny through a dedicated Committee of the Scottish Parliament. I would expect the new Scottish Parliament closely to examine this area to ensure that our structures are the most efficient at delivering for Scotland.

Transitional arrangements and safety nets will be vital. We must fight to ensure fair criteria for the new objectives. We must ensure that adequate provision is made to cope with any delay in agreeing the new scheme. The successful partnerships now in place must not be allowed to disappear while the bureaucrats and politicians argue about the next scheme.

8.19 pm

Mr. Jon Trickett (Hemsworth)

Paragraph 49 of the report refers to the importance of flexibility in the setting of boundaries for the allocation of funds, and states: It is clearly important that…the areas which are most in need should receive the funding…The extent to which Objective 2 arrangements allow for funds to be targeted … will be a measure of the Government's success in negotiations. I agree.

The European Commission's proposals are in danger of causing great injustice, particularly to the coalfield areas, by being too rigid and failing to deal with significant sub-regional disparities. I shall illustrate my point by reference to my area.

Wakefield district, where my constituency is located, has been a significant beneficiary of European funds for many years under objective 2. Since 1989, it has received about £40 million. We have been able to create 2,500 jobs and train about 11,000 of our residents. Local people cannot understand how the district could not qualify for such funding in future. They say that if we fitted the criteria for assistance more than a decade ago, when, admittedly, things in Wakefield were bad, it is inconceivable that we will not have access to the funds when our situation is immeasurably worse after the Thatcher and Major years. Over the past 15 years, the local traditional industries have been decimated. Wakefield had 20 collieries. Now it has one—20,000 mining jobs went. There have been major closures in other local industries such as engineering, textiles and clothing.

According to the recommended criteria, our economy is counted as part of the West Yorkshire region. Our economic and social data are distorted because we are regarded effectively as being part of Greater Leeds. I come from Leeds. I was born, grew up and spent most of my life there. Eventually, I became leader of that great city, but I now live in the former pit villages in the east of the Wakefield district. That is the place I represent. Leeds and Wakefield share almost no economic or social characteristics except for the fact that, for administrative purposes, we form part of the West Riding of Yorkshire, as I insist on calling it.

To qualify for objective 1 funds, it is necessary for a region to have gross domestic product per capita below 75 per cent. of the European Union average. West Yorkshire's figure is well above 90 per cent., but the figure for Wakefield is much lower. It is estimated at 77 per cent., the lowest by far in the West Riding. That statistic alone demonstrates the falsity of the assumption that the population of a region as diverse as ours should be regarded as socially or economically homogeneous.

The same point applies to the objective 2 criteria, but I shall not pursue it because it is self-evident. However, I shall demonstrate the need for European Union structural funds to be sensitive to sub-regional disparities, especially the needs of former mining areas, by reference to my constituency. There are three factors.

First, Hemsworth in the mid-1980s was massively dependent on an industrial base. We were one of the nation's great wealth generators. Two thirds of jobs were classified as industrial—twice the national average. As a result of what can only be described as an economic cataclysm, two thirds of those jobs disappeared in 14 years. Now only a quarter of the jobs in my constituency can be classified as industrial. Wakefield was the seventh worst hit district in the country in the industrial restructuring of the 1980s and 1990s. The district lost 23,000 jobs, but it covers four constituencies. Half the job losses were in just one constituency—mine. We lost almost 10,000 mining jobs in 14 years. That is industrial restructuring on a colossal scale and we will live for many years with the social consequences.

My second point concerns GDP per capita. We live in a region with slightly more than 90 per cent. of the EU average, but it is estimated that the figure for Hemsworth is substantially less than the 75 per cent., which would allow us access to objective 1 funding. My constituency shares boundaries with Barnsley and Doncaster. Our economic and social structure and the competitiveness of local firms have more in common with the South Yorkshire districts than with Leeds and Bradford. All that separates us from South Yorkshire is a couple of fields and a beck—a stream to those unfamiliar with our Yorkshire language. Wading through the beck on the other side of those fields, it seems that South Yorkshire will benefit from the highest priority objective 1 funds while we lose our access to the lower order objective 2 status.

My third point relates to earned income levels. According to Library estimates, one in four people working in my constituency earns less than £3.50 an hour. That compares with one in 14 in West Yorkshire and one in 20 in the economy as a whole. It is inconceivable to argue on that basis for the trickle-down theory, or to say that we are part of the West Yorkshire economy: we clearly are not.

I recognise that the British Government have a complex and sensitive task in negotiating with Brussels. Many people in my area believe that during the Tory years, a sustained effort was launched to tear the heart out of the villages where I live and which I am proud to represent. Small wonder that a recent university study concluded that many people in Hemsworth feel politically, economically and socially marginalised. The European Union recognised that sentiment as the inevitable corollary of industrial and economic restructuring. The structural funds were established because social cohesion was regarded as a fundamental objective of civilised governance. Its opposite, alienation, was seen as destructive of the social fabric. Social cohesion was one of the fundamental objectives of article 2 of Single European Act.

Over the past 15 years, Westminster has often seemed to be the enemy while the EU, through the structural funds, appeared to be our only ally. There will be great frustration and disappointment should the fund be withdrawn with the task only partially completed, or as I would say, hardly begun. I know that my hon. Friend the Minister will do all that she can to ensure that any changes to the administration of the funds are introduced with the greatest care and delicacy, paying particular attention to the existence of sub-regional disparities and micro-economies such as those in West Yorkshire.

I respectfully remind the Minister of the Deputy Prime Minister's coalfield task force report on this matter. She will recall that the task force was acutely aware of the needs of the coalfields and of the significance of securing continuing assistance from Europe. Its report made three recommendations. I recommend those propositions to the House and to her as she goes to negotiate on our behalf.

8.28 pm

Mr. Tim Collins (Westmorland and Lonsdale)

I commend the Select Committee and its staff for producing an admirably clear and constructive report. It is in many ways a model of its kind, both informative and persuasive. I congratulate the hon. Member for Kingswood (Mr. Berry) on his elegant presentation to open the debate. I know that he was filling in for the Committee's Chairman, but, with his magisterial mastery of the overview, he demonstrated that he deserves to be a Chairman in his own right, if greater glory does not beckon before that.

I agree with what the hon. Gentleman said about cohesion funds. If there is a case—and clearly, as many hon. Members have said, there is—for simplification, reduction and co-ordination of the European Union's expenditure in such areas, surely it must arise first and foremost with the cohesion funds.

Here we have public expenditure that was set up for a specific purpose—to prepare four member states for meeting the convergence criteria for joining the EU. Brussels has declared that three of the four have now met those criteria, yet the money is to continue to be paid in large measure. The hon. Gentleman is right to describe that as absurd. To me it is illustrative of a system one of whose acronyms is NUTS. There is a problem there, and it needs to be addressed.

My second point concerns the wider United Kingdom national interest. Whether we are Euro-sceptics, Europhiles or something in between, whether we supported HMS Durham as it shelled HMS Falmouth earlier in the debate, or whether we supported HMS Falmouth as it elegantly shelled HMS Durham back, and whatever our position on the issues, there is a broad United Kingdom national interest in ensuring that we get as much as possible out of the European funds.

We put far more into the European Union than we get out, and we want to make sure that we get out as much as we can. We must all therefore agree that the Government should take a hard-headed negotiating position.

Mr. Tim Boswell (Daventry)

Does my hon. Friend recall, and will he remind the House, that the genesis of regional development funds lies back in the days of my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath), during the negotiations on European accession? It was precisely in order to correct some of the imbalances in European funding that the concept was introduced.

Mr. Collins

I agree. The funds are an important balancing mechanism. The Government must continue to remind our EU partners that the reason the United Kingdom gets a large share of the funds is that the system was, and should continue to be, an attempt to rebalance some of the ways in which funds are redistributed around the Union.

We continue to put far more into the European Union than we get back, and however the budgetary negotiations turn out, that will continue to be the case. On the evidence of the debate, the Government would be right to believe that there was strong cross-party support for a tough negotiating position. I hope that the Minister has heard that in the debate today; it has been a consistent theme of speeches from both sides of the House.

If the Minister will forgive me for the analogy, I hope that she will—indeed, having read her testimony before the Select Committee, I believe that she intends to—go in to bat for Britain rather as a certain right hon. Lady did a few years ago: thump the table and demand our money. Indeed, I see that the hon. Lady has her handbag beside her on the Bench; no doubt she knows how to use it, and I commend her on her negotiating stance.

Like other hon. Members, I shall talk about an important constituency dimension. Much of my constituency benefits from objective 5b expenditure. It is important to recognise that even constituencies such as mine and that of my hon. Friend the Member for Vale of York (Miss McIntosh), with low unemployment—ours is below 2 per cent., and I know that many hon. Ladies and Gentlemen on both sides of the House might envy that, and want their constituencies to move towards it—are not without their difficulties.

My constituency is very rural. Those in the House who were present last night at a meeting of the Rural Services Partnership heard an interesting presentation by Rita Hale, formerly of the Chartered Institute of Public Finance and Accountancy, about the fact that people in rural areas have far less access than people elsewhere to public transport and public services, and have to travel much further in terms of both time and distance to get any form of public service, whether that be a leisure centre, a library, the health service, a jobcentre or benefits advice.

In my part of the world we are heavily dependent on two forms of employment. One is agriculture, which, according to local farmers, now faces its worst crisis for 40 or 50 years. The other is tourism, which has also had a bad year, partly because of the strength of sterling, and partly because of the bad weather.

That combination means that many of my constituents feel that this is the worst possible time for any serious debate about taking away large sums in European funding from areas such as ours. So I was delighted to hear the Department of Trade and Industry press office confirm to journalists from Cumbria this afternoon that the Government do not intend to accept a simple crude measure of unemployment as the only criterion on which the funds are distributed.

As many hon. Members have said, there are factors within and behind the unemployment figures that need to be taken into account. If rural Cumbria lost all its European funding, many parts of it would feel that they were being left to bleed to death. The Government would be right to fight hard for a broader, more sensible and more all-encompassing system for the distribution of the funds.

I shall finish now, because I know that many others wish to speak, and tell the Minister that I hope that she will feel that there has been consensus in the debate on the need for a strong negotiating position. I hope that she will be able to take into the discussions with our European partners a belief that the House of Commons wishes the Government to fight Britain's corner hard, that the funds are important and that they should continue to be paid in all parts of the United Kingdom.

The funds should be available in Scotland, in Northern Ireland and in Wales, as well as in all sorts of areas in England, rural as well as urban, some with slow economic development and others that, although they may do better from time to time, do not do well all the time. I hope that the Minister feels that she will now be able to go in to bat for Britain and bring home the bacon.

8.35 pm

Mr. Ian Stewart (Eccles)

I, too, welcome the Trade and Industry Select Committee report, which gives a clear and thorough analysis of the implications for the United Kingdom of European Union proposals for changes in structural funds. I also welcome the Government's response to the report.

I am a keen supporter of the benefits of EU membership, and look forward to the enlargement of the Community for the enrichment that it will bring to our political and economic lives. I agree with the Government's premise that a poorer member state or region should receive more than a richer one—in other words, each according to his needs. I also agree with their view that reform of existing regional support must not only be affordable and fair but durable beyond 2006 for enlargement.

The proposed changes in European structural funds mean that while 51 per cent. of the population of the EU now receive assistance, in future only 35 to 40 per cent. of the population will be covered. The Alliance for Regional Aid has shown that funds are already closely targeted. For example, 68 per cent. of the funds go to 25 per cent. of the population.

As the Select Committee has pointed out, the Commission has said that aid should be more focused, although it has not yet made the case for further targeting. The upshot of the Commission's proposals would be that the 92 million people now covered by objective 2 or objective 5b status would be reduced to 74 million. That is a drop—or rather, a plummet—of 20 per cent.

Eccles, my constituency, in the city of Salford within the Greater Manchester area, currently benefits, as do other areas in the north-west region of England, from objective 2 status. The sub-region of Greater Manchester is one of the first and oldest industrial areas in Europe, and has suffered more than most from the widespread decline in traditional manufacturing industries and an aging and crumbling infrastructure.

For example, Salford still has an interest in clearing up the conditions left by mining blight, and one of our local authority members, Councillor Peter Grimshaw, will go to Brussels in December under the auspices of the Alliance for Regional Aid to lobby hard for the maintenance of regional funding that includes mining areas.

Typically, some full-time employment in our area has been replaced by part-time, lower-paid work, which has led to higher male unemployment. Interestingly, female unemployment is less than half the male rate in my constituency. The employment situation clearly would have been worse without European funds.

In the Greater Manchester sub-region, there are many positive points. One of the considerable strengths of Greater Manchester and Salford is its major input into information and communications technologies, research and development. There is further scope for developing this potential for the region's companies through training and advice and the commercial application of research. In the region there are a number of well-developed fibre-optic cable and copper wire networks including the Gemisis 2000 project based at Salford university.

It is ironic that the north-west is faced with the threat of losing EU funding at the very time when the Labour Government are implementing policies that will assist our region, such as the new deal, the minimum wage, the introduction of the regional development agency and chamber, and a single Government office for the north-west. Those measures will improve the efficiency and effectiveness of targeted assistance.

Local authorities in the Greater Manchester area are clear that structural funds have played an essential part in the progress that has been made in the last decade. The funds are vital to ensuring that the progress is consolidated and continued. The Greater Manchester authorities have argued forcefully that, without European support, the gap between the sub-region of Greater Manchester and the other, more prosperous regions in the UK and EU would widen further.

During the 1994 to 1996 programme period, EU structural fund investment in Greater Manchester was about £190 million. More than £80 million has been or will be invested in small and medium-sized enterprises, in which more than 70 per cent. of the work force are employed. Research and development and technological infrastructure projects have received about £25 million. That translates more generally into 52,000 jobs created, 86,000 companies assisted and 13,000 training places.

Between 1994 and 1998, Salford has benefited from £23 million of European structural funds. The local labour initiative was developed by combining European structural funds and European regional development funds, which assisted 275 companies and led to the creation of 221 much needed permanent jobs in the area. Salford is focusing its grant moneys on business support, upskilling the work force and helping the unemployed to access training and employment.

Why should the assistance continue? Greater Manchester and Salford have used their funds well. Funds have been applied as part of a coherent strategy to improve the economic and social position of residents and enhance economic competitiveness. However, the Salford and Greater Manchester economy still has problems which can only be successfully solved through a long-term programme of comprehensive regeneration in which European funding should play a leading and sustained role.

My local authority believes that the review of objective 2 status should not be based solely on the current proposed criteria, and that indices of need should be sharpened and redefined to include, for example, deprivation, local gross domestic product and income levels. Under the index of deprivation, Salford is the 23rd most deprived authority in England, but even that hides the reality. Forty-six of the districts in Salford are among the worst 6 per cent. nationally. It is essential that any revised objective 2 criteria help the UK's traditional industrial and manufacturing areas.

Salford has gained national pathfinder status for its innovative approach to regeneration and is working closely with the Government to share best practice. The loss of objective 2 status would undermine work currently under way. In my constituency, the Barton strategic employment zone—one of the largest undeveloped sites available for economic development in the north-west—has just received EU funding to enable it to be brought forward quickly. The zone is likely to be the engine for growth for the sub-region in the future. Without European funding, it would be difficult to get it started.

The Lowry centre in the neighbouring Salford constituency is an innovative national landmark millennium project which would not be built without EU support. Salford and Greater Manchester's priorities for support in a new objective 2 programme would include integrated business support packages, growth sector-specific support, capital for businesses to grow, access to accommodation for expansion and customised training and development packages.

Like other hon. Members, I welcome the Select Committee's recommendations for transitional support, at paragraph 30, and its suggested seven-year duration. I would like to record my support for objective 1 status for Northern Ireland, parts of Wales, South Yorkshire, Cornwall and Merseyside.

Without continued access to EU structural funds, the ability of the various partners—such as local authorities, training and enterprise councils, the voluntary sector, trade unions and businesses—will be severely hampered from meeting not only our own local and regional regeneration aspirations but those aspirations of the UK Government and the EU. Therefore, I urge the Government, in their negotiations with the European Commission and the Council of Ministers, to press for a package of reforms that will maintain the maximum level of aid to Britain's traditional industrial areas, and to look favourably on us when deciding the allocation of discretionary funds made available to national Governments.

The job of regeneration in the regions and sub-regions is not complete. To reach completion, we need the stability brought about by the maintenance and fair distribution of European structural funds.

8.46 pm

Mr. David Stewart (Inverness, East, Nairn and Lochaber)

I welcome the opportunity to add my brief remarks to this vital debate. I wish to concentrate on two matters. First, I wish to refer to the future of objective 1 funding within Europe generally and the UK specifically, particularly in the light of the Commission's well-known statement about strictly applying the criterion for objective 1—per capita gross domestic product being below 75 per cent. of the EU average. Secondly, I wish to refer to the special case for the highlands and islands in terms of sparsity of population.

The highlands and islands is perhaps unique as the last unspoilt area of Europe—that was perhaps reflected by the visit of the Chairman of the Select Committee to my constituency, a visit which I very much welcomed. I endorse the comments of the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) who perhaps stole my thunder by arguing very competently about sparsity and low wages in the highlands. Perhaps that shows that peace has broken out tonight between Labour and the Scottish National party—not in other debates, but certainly in this one.

As a highlander, I am familiar with the issues of sparsity and low pay. The area is peripheral to the rest of Europe, but forms part of the northern rim of Europe, along with Finland and Sweden. It has high transport costs and unemployment. It is an area larger than Belgium, but has a population less than one third that of Brussels.

The impact of structural funds in the highlands and islands can be traced back to the 1970s, when the area had objective 5b funding status and then, latterly, objective 1. Over the past nine years, more than £240 million has been pumped into the highland economy—from the Mallaig harbour development to the dry dock at the Barmac oil fabrication yard, which will allow the oil fabrication industry in my area to compete in Europe in the manufacture of floating production vessels.

Objective 1 funding is a vital factor in the development of the funicular programme, which will allow a new rail link in the Cairngorms and 12-month-a-year tourism—a great boost to the area. The two main goals for objective 1 within the highlands and islands are, first, the achievement of external cohesion—that is, to pull up the economic performance of the area compared to the EU average—and, secondly, the achievement of internal cohesion, or reducing the disparities throughout the highlands and islands. Objective 1 funding has been a powerful catalyst to stimulate additional investment in the highlands and islands. It has been a great success and hon. Members need not merely take my word for it as independent assessment of all the projects has shown that more than 90 per cent. had either high or medium effectiveness. It has created more than 1,800 jobs in my area, which has been a particular boost to vulnerable and fragile rural areas.

I must touch on some of the threats and opportunities facing the highlands and islands, which will be familiar to many hon. Members with rural areas in their constituencies. The first is food prices, which are 8 per cent. higher in rural than in urban areas—in remote island communities, they can be as much as a quarter higher than in urban areas. Petrol and transport costs are also a great burden and can be up to 20 per cent. higher than in the central belt in Scotland, which reflects the limited competition and a lack of economies of scale.

Unemployment is another big threat. For example, 50 per cent. of those unemployed in the western isles are long-term unemployed. The new earnings survey recently showed that earnings in my area are 14 per cent. below the Scottish average and 23 per cent. below the UK average.

We have, therefore, a combination of a higher cost of living and low incomes. It is a double whammy and it is a recipe for poverty, poor housing and depopulation. However, there are also great opportunities, which I must briefly stress. We have a first-class environment. Two thirds of the sites of special scientific interest are in my area and one third of the highlands and islands is a national scenic area. We have a high-quality environment, which is a key factor in the promotion of the area. Also, we have new technology—that great weapon to defeat the problems of distance. We have the university of the Highlands and Islands, which will offer higher education to all, from the crofter in Barra to the chartered accountant in Inverness. We have the beauty of tele-medicine, so doctors in Inverness can interview patients in Skye. We have tremendous opportunities in the resource base: forestry, fresh water and hydro-electricity. Inverness in my constituency is the world centre for the development of wave power. The area has the opportunities; it merely needs the economic wherewithal to exploit them.

I welcome the recommendation of the Trade and Industry Select Committee that the highlands and islands should be treated on a par with other sparsely populated areas within the northern rim. I also welcome the Government's report on that issue. The highlands and islands are doubly disadvantaged. The area has a low gross domestic product. The figures announced today by the Office for National Statistics show that it is below 78 per cent. of the average GDP in the UK. If that were factored into a European context, I estimate that it would be around 76 per cent. of the European average.

The area also has a sparse population—less than 10 people per square kilometre. Apart from Finland and Sweden, no other area in Europe touches that figure. In addition, we have 90 inhabited islands, and that adds extra social and economic difficulties. That has been reflected in a wider context as article 299 of the treaty of Amsterdam refers to the problems of islands. I understand that the European Parliament will be discussing sparsity in a debate on Monday.

Finally, I warmly welcome this first-class report. It advances a strong case about the range of flexibility, the threshold of objective 1 eligibility and the broader criteria for the new objective 2. The next six months of negotiation in Europe will be tough. The report provides a thorough, thoughtful and welcome addition to the debate.

8.52 pm

Dr. Desmond Turner (Brighton, Kemptown)

Perhaps you may be wondering, Mr. Deputy Speaker, what a nice boy representing a south-coast seat is doing in this debate, which has been so heavily dominated by the north. The answer is simple. If my hon. Friend the Member for City of Durham (Mr. Steinberg) has visited Brighton—perhaps he has been there for the conference—he will have seen the elegant Regency facades and might have assumed that it is a fairly prosperous place. However, if one looks behind the facades, one finds tremendous poverty. The truth is that Brighton and Hove is a poor place.

I will not enter into a competition, saying, "I'm poorer than thee, lad." That would be silly. However, I want to establish that all the indicators put the area on a par with just about every area whose representatives have spoken tonight and which enjoy objective 2 funding. The difference is that we have never had a penny piece of European structural funding although we have the same difficulties. There are several reasons for that, the major ones being the inflexibility of the present set of statistical criteria that govern European structural funds, which the previous Government never seriously questioned, and the fact that no one made a case for Brighton and Hove. We had three Tory Members of Parliament. My opponent at the general election, who lost his seat to me after 27 years, woke up a year before the election to the fact that Brighton had an unemployment problem. I do not remember him uttering a squeak about it for years before.

Brighton has never been a recognised manufacturing centre, but it had manufacturing industry and now has virtually none. We used to build railway engines—I do not expect that many people know that. In the past 20 years, we have lost thousands of engineering jobs. That is a sector of our employment which has been wiped out and it is why we have some of the worst long-term male unemployment in the country. That is why we are one of the 17 pathfinder areas for the new deal in communities. I have not checked the list, but I strongly suspect that the other 16 currently enjoy either objective 1 or 2 European structural funding. We have had nothing, so we have been unable to create new jobs to fill the spaces on our brown-field industrial estates where the jobs have simply gone. We are claiming not to be poorer than thou, but to be in the same league and we want an opportunity to access similar support.

I shall give a few statistics to justify my case. Unemployment in Brighton and Hove is 7 per cent. compared with a national average of 5 per cent. and a regional average of 3 per cent. However, it is up to 30 per cent. in some wards of our city. The unemployment is concentrated in estates, which is why we have the new deal for communities. Our long-term unemployment puts us sixth out of the 354 local authorities in the United Kingdom—I will bet that not many people knew that, but it is important to us. Our poor housing and rough sleepers put us 35th out of the 354; on poverty we are 60th; and, for the numbers dependent on income support, we are 35th. Our crime levels are high and our wages low. The average wage is £30 less than in Liverpool, which is an objective 1 area, and £55 less than the average for the south-east. However, our cost of living is not low but among the highest in the country outside of London. So, we think that, in principle, we have a good case for being included in European Union structural funding. That has been denied us because we have slipped through the statistical net. Under NUTS 2, we were lumped with the whole of Sussex and Surrey. As an objective 3 area, we were still lost.

Despite the criticisms that we have heard tonight of the proposed criteria and regulations for structural funding, I congratulate my hon. Friend the Minister on her work to secure increased flexibility. That has enabled HMS Falmouth to line up for objective 1 status and has allowed Brighton and Hove to be recognised as an objective 3 area in its own right, so that we can bid for objective 2 funding.

I shall not press the case for that now, as one has already been prepared—the Minister will receive a copy of the document very soon, if she has not already—and it stands on its own merits. Provided that in the inal negotiations for the new regulations we do not slip back and lose any flexibility, I am confident that Brighton and Hove has a very good case—which is not to say that I am confident of securing the funding.

With the new flexibility, many urban areas, including Brighton and Hove, will meet the objective 2 criteria, such as whether the rate of long-term unemployment is higher than the Community average and whether there are high levels of poverty, a particularly damaged environment, a high crime rate or a low level of education among the population. Under the proposals, an area has to meet only one of those criteria, and we score on four out of the five. If that is not flexibility, I do not know what is; I suspect that if hon. Members read the small print of the regulations, they will find greater flexibility than they had imagined.

I am grateful to the Minister for her work to date. I hope that she will be able to complete it on the same lines, to ensure that, at the end of the process, we who have never previously had any help can put in our bids.

9.1 pm

Mrs. Janet Dean (Burton)

Hon. Members have concentrated on their own areas, whether urban or rural, and I shall be no exception. Burton upon Trent, the largest town in my constituency, has objective 2 status, and the most northerly ward—Weaver ward—receives help under objective 5.

I wholeheartedly support the Committee's view that the new objective 2 arrangements should apply at or below ward level. It is essential that structural funds can be targeted on real need, which is often hidden in pockets of apparent affluence—unemployment and deprivation may be hidden when the statistics apply to county, district or travel-to-work areas.

Before I deal with the severity of the problem in Burton upon Trent, I shall reflect on Staffordshire as a whole. It has been said that Cornwall is an exception, but there were strong arguments that, with a population of more than 1 million, Staffordshire should have become a NUTS 2 area. The county's average GDP per head over the three years from 1993 to 1995 was 77.3 per cent., a figure that seems to be falling. Staffordshire, therefore, provides a good example of why the strict application of the 75 per cent. rule is wrong.

There is, naturally, disappointment that Staffordshire has not qualified for objective 1 status, but it is important that we look at the needs of individual areas, both urban and rural, in the county. The current state of agriculture makes it essential that every effort is made to secure structural funding for the affected areas of need. The Weaver ward in my constituency is part of the Staffordshire-Derbyshire objective 5b area, demonstrating the case that areas that are below county level or that cross administrative boundaries should continue to be eligible for such funding.

Burton upon Trent is a traditional manufacturing town best known for its brewing industry. In the late 1980s and early 1990s, Burton saw high job losses in its traditional employment base of brewing, engineering, rubber, mining and energy industries. Sadly, Burton has never been included in an assisted area, although neighbouring, more affluent areas, have been included because of their travel-to-work areas. Since Burton has a free-standing travel-to-work area, it has never benefited. I hope that in the review of assisted areas, the Government will look at real need and that Burton upon Trent will be accepted for inclusion.

Although it does not benefit from assisted area status, the difficulties that face the area were recognised and objective 2 status was awarded for the 1994–99 period. That, together with money from the single regeneration budget granted for the inner wards of the town, has helped regeneration to begin. For example, we are proud of the Centre of Productivity and Efficiency that is designed to help business, both locally and regionally, to develop. There is a great need for the good work that has already started to be allowed to continue.

Burton upon Trent continues to have one of the highest rates of unemployment in the west midlands. The current level is 7.4 per cent. However, the unemployment rate in a number of inner wards is still in excess of 10 per cent. Burton has a higher rate of long-term unemployment than the rest of Staffordshire, with 21.4 per cent of all the unemployed having been out of work for over a year.

Industrial employment in the area has fallen by one third from 1984 to 1995, but the percentage of the work force employed in industry remains well in excess of the United Kingdom average. Therefore, there are concerns that there may be a continuing fall in the jobs for industrial workers. Reduction in industrial employment has been only partly matched by an increase in service jobs, many of which, as other hon. Members have said, have been part-time.

There needs to be more diversification of employment opportunities. Burton has the largest single grouping of deprived wards in Staffordshire and within the west midlands shire counties as a whole. Eight of the town's 11 wards have more deprivation than the national average. Over a quarter of households in one ward have an income of less than £5,000 a year. Just under a quarter of all school children in Burton receive free school meals. One of the most frightening indicators of deprivation is the infant mortality rate, which is three times greater than the national average. On most measures, Burton shows high levels of deprivation. A recent survey of private sector housing stock showed that 14 per cent of dwellings in Burton were unfit for habitation.

We often hear of problems in our inner cities and, of course, there is much to be done there, but there are problems in some of our inner towns such as Burton upon Trent, which are hidden by the wider statistics. Structural funds have acted as a catalyst. They have triggered investment and already created over 1,000 jobs in the Burton area. Many people have worked hard. Local government, with its partners in industry, has worked hard to regenerate the area and Burton is beginning to be transformed into an attractive place to relocate business. I must emphasise that because, when one expresses the deprivation of an area, one can sometimes give the impression that it is not a good place to live and work. I believe that Burton and the Burton constituency in East Staffordshire district is a good place, but it needs help.

In order to build on the achievements of recent years, it is essential that Burton retains its objective 2 status. Therefore, I welcome the Select Committee's report and the Government's commitment to arguing that structural funds should be targeted at the pockets of deprivation such as there are in Burton upon Trent.

9.8 pm

Mr. David Lepper (Brighton, Pavilion)

I am grateful for the opportunity to supplement the arguments already advanced by my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) about the particular needs of the Brighton and Hove area. Before I do so, I welcome the comments about simplifying the bureaucracy involved in bidding for European funds, especially in their delivery.

As my hon. Friend said, Brighton does not yet receive structural funds, but we receive funds through community initiatives—Interreg, the safer cities programme, the urban initiative, and the European structural fund. There is great rejoicing in the streets when the announcement of those funds first appears in the local press, although probably not as great as the rejoicing in the streets of Falmouth and Camborne. However, we then face a long wait before we see any signs of the funding for the youth club or community centre, whatever it might be, and disillusionment begins to set in.

As my hon. Friend the Member for Kemptown said, we are not currently eligible for structural funds. The community initiative money has proved beneficial, but it has not helped to solve the structural problems of deprivation and unemployment in our area. I welcome the flexibility that is given to member states in deciding the criteria for the new objective 2, and I can offer my hon. Friend the Minister any number to choose from, all of which I am confident that Brighton and Hove would satisfy.

I shall not repeat points already made by my hon. Friend, but I wish to point out that we come top of the list for homelessness and numbers of rough sleepers. We have 22,500 houses in multiple occupation; Birmingham, which is four times our size, has 5,000.

High levels of unemployment have already been mentioned. In the depths of the most recent recession, in the central ward in my constituency—the Regency ward—male unemployment reached 33 per cent., and it is still in double figures. That ward will be known to any hon. Member who has visited Brighton for a conference, because it contains the conference centre. We have the third highest level of long-term unemployment outside London. Only Liverpool and Birmingham surpass us.

We have not been able to address certain structural weaknesses in our economy through the support that we have received from central Government—although that is becoming better targeted through the new deal for communities—or from European funding. More than a third of the population in the Brighton and Hove area live in wards that are among the most deprived 10 per cent. in England on the indices of local deprivation. More than a quarter of our primary and secondary school children are eligible for free school meals.

Those are some of the indications of the poverty in what many people still regard as a prosperous part of the south-east. Indeed, even in the most prosperous, suburban and leafy ward in my constituency, 25 per cent. of the households are eligible for housing benefit.

I do not wish to dwell only on the reasons why our case for the new objective 2 structural funds should be considered sympathetically, because I wish to draw attention to the potential of the Brighton and Hove area. We have high levels of unemployment, poverty and deprivation, but we also have two universities and a college of technology. Despite the image that is sometimes presented of south-coast towns as places to which people retire, more than 60 per cent. of the population of the Brighton and Hove local authority area are under 45, so we have a relatively young population.

We now need help to help ourselves to realise the potential of our area. Before I entered the House, I chaired—with my hon. Friend the Member for Hove (Mr. Caplin)—the local Brighton and Hove regeneration partnership, which played a key role in bringing together business, the local council and the voluntary sector to address the problems that have been described tonight.

We are beginning to make progress with the aid of city challenge funding, and the town is increasingly becoming wired up. In fact, we claim to be the most wired town in the country. We have developed an innovation centre at the university of Sussex to help new, high-tech businesses. We want to extend that centre, which has a 100 per cent. occupancy rate, but, as firms develop, they need somewhere to move to. Too many business premises in our area are old-fashioned, and do not meet the needs of modern high-tech industry. We need help to provide places in which new young industries can grow, so that they can stay in the area in which they first began to grow.

We need help to develop our transport infrastructure. My hon. Friend the Member for Hastings and Rye (Mr. Foster) will—if he is called to speak—have more to say about the need to develop that infrastructure for our part of the coastal strip. The Brighton and Hove area also contains what is probably the largest brown-field site in the south-east of England—Shoreham harbour. The lack of central or European funding to help us to develop that area has left it undeveloped. Its huge potential for creating jobs remains unlocked.

I hope that, when the Minister receives the document that has been drawn to her attention by my hon. Friend the Member for Kemptown, she will carefully consider the case it makes. I hope that she will help Brighton and Hove, and Hastings further along the coast, to help ourselves to overcome the deprivation from which we suffer.

9.16 pm

Mr. Michael Jabez Foster (Hastings and Rye)

When I introduce myself as the Labour Member for Hastings and Rye, the usual reaction, even from Ministers, is, "How amazing. How did you do that?" In a sense, that is a compliment, but it is also rather worrying. What people are saying is that they think of Hastings as a genteel, well-heeled, south-coast town, living off a Victorian splendour, where families flock for balmy days on the beach. It is that sort of town, when people can get there, which is another problem in itself. It is a unique town, and I am addicted to it. I have always lived there, and I go back every night, which shows how addicted I am.

However, there is another side to Hastings, and that side replicates much of what my hon. Friends the Members for Brighton, Pavilion (Mr. Lepper) and for Brighton, Kemptown (Dr. Turner) have said about Brighton. They said that they would not claim, "We are more hard up than you." I, however, am going to say that Hastings is more hard up than the constituency of almost everyone who has spoken in the debate. I scanned the unemployment figures as my hon. Friends were speaking, and I have not yet found an area in which unemployment is higher than in Hastings. Our 9.6 per cent. unemployment is devastating, and it is the 87th highest level of unemployment for males in the whole country.

That is not the image that people have of Hastings. Yet we also have deprivation and poor housing. I stood outside a hotel in Hastings this morning holding up "Turning the Tide" for the press. That document contains the objectives of Hastings and Brighton, and we need the Government to take notice of it. We need extra assistance.

Perhaps it was the decades of neglect by previous Governments that made Hastings decide last year to have a Labour Member of Parliament. This year, it has for the first time decided to have a Labour council. The people of Hastings also look across the channel, believing that the town's importance in European history might be reflected by the benefits that European Union membership could bring through structural funding. That is why the restructuring of structural funds may prove a lifeline to my constituency.

Although it is only 60 miles from London, the rail journey is close on two hours, and the road journey is often longer. Our hopes for an electrification of the Hastings-to-Ashford line were dashed when Connex failed to gain an extension of its franchise. Only a few weeks ago, we were dealt a body blow when the integrated transport review denied us the A21 improvements and the bypass which is so essential to the regeneration of our town. What other seaside town has the main road along its seafront, choking both visitors and residents alike? We must wait, and I am sure that we shall do so optimistically, for the Government to decide to go ahead with that important bypass.

In the past few weeks, the town's largest employer, Philips, closed up shop. Although it is fair to say that Philips made it clear that neither Government policy nor the strong pound determined that decision, the fact is that several hundred jobs have been lost in an already impoverished economy. Hastings now has about the highest unemployment and lowest wages in the south. Wage levels are little above half the regional average. That is a fair argument for saying that the minimum wage should have no ill effects.

The area is rich in human resources. Voluntary organisations are paramount in assisting with the problems that exist. In partnership with the statutory agencies and the commercial world, they work hard in planning economic advance. The Hastings Trust led by Christine Goldschmidt, the 1066 Enterprise spearheaded by John Cossen, and the new Labour council led by Richard Stevens, are working tirelessly and single-mindedly to bring about regeneration.

We are grateful for the help received through the assisted area status and through successive successful single regeneration budget bids. Full advantage has been taken. Indeed, assisted area status has brought some £3 million to the town since 1993, and that has locked in a further £37 million of industrial investment. The single regeneration budget has produced £14 million, which has generated £90 million from other sectors. About 1,000 jobs have been created as a consequence. Therefore, we make good use of investment. Despite all that, there remains a structural weakness in the economy, just as there is in Brighton along the coast.

The purpose of this speech is not to hold out a begging bowl. Hastings is a proud town. It is to say that poverty exists, not just in northern towns, but in southern climes such as Hastings, Brighton and elsewhere. When three of the wards in my town have household social security claimant rates of 52 per cent., 49 per cent. and 48 per cent., that is real poverty. When we hold the record for the highest number of suicides in young men in the country, that suggests that the area is close to despair. There may be a north-south divide; there is certainly a south-south divide between prosperous Surrey, which is included in our GNP figures, and impoverished Hastings and Brighton. We are the poor relations of a rich family.

Shortly, Hastings, together with Brighton and Hove, will make a joint bid, entitled "Turning the Tide", for objective 2 status. I hope that these comments will help the Minister to understand why the claims of southern towns such as Hastings and Brighton are equally, if not more, valid than those of other parts of the country for this special status. The new urban strand within the objective 2 now gives an opportunity to aid not only areas that have faced traumatic industrial decline, but areas that have slipped into an abyss of poverty through decades of neglect. I am confident that the Government will listen to these pleas. The inhabitants of Hastings and St. Leonards must not be ragged-trousered philanthropists any longer.

9.23 pm

Mr. Bob Blizzard (Waveney)

Last but not least comes Lowestoft—a long-standing pocket of high unemployment and deprivation at Britain's most easterly point.

There is every sense in amalgamating objectives 5b and 2, because, under the current system, at the last round Lowestoft applied for objective 2 and ended up with 5b as the only way of meeting the overwhelming case that was presented. How can a town of 70,000 be a rural area? Strange things happen in the European Union. Of the East Anglian 5b areas, Lowestoft has the best record of submitting projects and accessing funds. However, as so many hon. Members have said this evening, the job of regeneration is far from complete, and it is essential that the designation for structural funds continues for Lowestoft.

I am pleased with the strands that have been identified for objective 2. I am pleased that fishing is still one of them. The decline in fishing was the reason why Lowestoft received 5b funding last time. If Lowestoft, as the second largest fishing port in England, with all the problems that face fishing communities, does not fit the criteria, I do not know where the criteria can apply.

I hope that the strands can be considered in combination, because Lowestoft is also an urban area facing economic and social restructuring. We have lost all our shipbuilding, our food canning factories, a coach works and a shoe factory. The oil and gas industry, which has seen us through in recent years, is now downsizing in a dramatic way. None of those industries has been replaced.

The Select Committee in its report, and the Government, oppose the Commission's proposal for consistency or coterminosity between the structural fund areas and our national assisted area status. It is right to reserve that flexibility. However, in some areas there will be a good case for coterminosity. Lowestoft and its neighbour Great Yarmouth have only five miles of countryside between them, but the previous Government awarded assisted area status to Great Yarmouth, not Lowestoft. Lowestoft but not Yarmouth was awarded European status, possibly as an admission of the mistake in not giving Lowestoft assisted area status.

Any review must take Lowestoft and Great Yarmouth together. They are of a similar size. They are close together. They are a long way from anywhere else, out on the east coast, surrounded by a rural area. They both have high, long-term, structural unemployment, much higher than the unemployment in the hinterland. They are both ports with poor transport links, and they both have involvement in the oil and gas industry. Many of the businesses are interlinked. Many businesses have a presence in each town. People travel to work between the two communities. There has to be a single strategy for both.

We need flexibility, so that objective 2 can cover relatively small areas, as the existing objective 2 cannot. I went to Brussels and lobbied for objective 2 for Lowestoft last time. It met every criterion for objective 2 status, but it was not big enough. We were told that objective 2 had to be awarded to larger areas, and that East Anglia was considered relatively prosperous. Yet within that relatively prosperous area there are unemployment black spots, Lowestoft being the main one.

Last time, the Commission did not favour a black spots approach. It did not believe that regional assistance could be that precise or benefit specified areas. Lowestoft and Great Yarmouth are isolated from the rest of the country and any other areas that might benefit. People ask how else a town such as Lowestoft is to be helped. How are pockets of long-standing unemployment to be dealt with unless we use the structural funds to which we believe we are entitled? The report is right to argue on page 47, as the Government do, that the Commission should not take raw unemployment figures, but should consider other measures of economic difficulty.

The key statement in the report is that regeneration requires continuity. So many of us have argued tonight that we need that continuity. Lowestoft continues to need the European structural funds.

I wonder whether the Minister can take up an important point that has made life difficult in making the best of structural funds. Quite properly, when one submits a project, one has to be specific about the job outcomes. It is difficult to create jobs unless the private sector is involved, yet private sector money cannot be matched by European money. That is a problem for us when it comes to transport. We want to improve our port and our rail links. Railways and ports are almost all private. Associated British Ports is a private company. Railtrack is a private company. It is difficult for those companies to provide their money as match funding for Europe.

Because in this country transport systems, including ports, are largely privatised, we are at a disadvantage compared to other European countries, which can use structural funds for transport infrastructure improvements. We cannot reverse the privatisation, and have no plans to do so, but we need to argue in Europe that, because those privatised companies fulfil a public function—an essential transport function—when bids are put together, the money that those companies can bring to the project should be able to be matched by European funding.

I shall end on that point. I have made my plea for Lowestoft, but I hope that it will help other constituencies if we can tweak those regulations.

9.29 pm

Mr. Tim Boswell (Daventry)

The Select Committee's report is extremely helpful. The subject was clearly introduced by the hon. Member for Kingswood (Mr. Berry) and it has spawned an interesting debate. As my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins) said in his helpful contribution, we are all basically on the same side. We are all informing the Minister and encouraging her to go out and negotiate for Britain's interests, which include getting the largest possible chunk of resources for this country, in some recompense for imbalances elsewhere.

Of course, there were differences of emphasis, for which no apology is needed. It is right that, under our constitution, Members of Parliament have the duty to represent their constituents, to express their pride in their constituency and to explain the needs of their constituency. That was done by hon. Members on both sides of the House, and rightly so. Their speeches revealed not only some of the tensions that are bound to pass into the debate and that will have to be brokered into and through Europe, but some of the underlying concerns that serve to unify us.

I found it instructive to hear the serious speeches made by hon. Members representing constituencies on the south coast of England, those representing urban areas and those representing rural areas. The House knows that I come from a rural background. I am closely involved with Action with Communities in Rural England, and I see that as part of the debate. It would be a foolish member of any party who came to the House and boasted of having no pockets of deprivation in his constituency—to some extent, all our constituencies contain such areas. The question is how we organise their interests and balance them against each other under a principle.

It appears to me that the concern expressed by many hon. Members related as much to issues of relative deprivation and poverty in the middle of affluence as to objective measures. That concern was clearly expressed by hon. Members representing south coast constituencies, and the conditions which they described can be seen in wards in my own constituency. It is uncomfortable to live in such areas, cut off from ready access to higher education, transport links and jobs.

How do we put our concerns together into a policy, bearing in mind the fact that Europe has to change its policy under extremely severe constraints? Let us start with those constraints and with a health warning. It is accepted by hon. Members on both sides of the House, as it was by the Select Committee, that there are important constraints on the EU budget and that they are closely linked to the mounting requirement for the EU to take seriously the issue of enlargement and to finance it as it develops.

It is worth pointing out that any problems of deprivation experienced in our constituencies, wherever they may be, pale into insignificance in comparison with the real poverty and deprivation that characterise most of the countries applying for membership. If we think that some areas in this country should have objective 1 status, those countries should be objective zero. Interestingly enough, when Germany was shattered after world war two, the catch phrase used was "hour zero". That betokens a degree of hope, because, from that shattered state, Germany rebuilt itself and became a successful industrial nation.

There are constraints, which it is necessary coherently to broker and resolve. Nobody has seriously argued that we should not try to target the European funds available better. One point which was not sufficiently stressed is that not all public funding is necessarily distributed at a European level. We are discussing European structural funds, but there is the possibility of public funding from outside Europe. We can debate at another time how that should be balanced and where it should come from. The Select Committee suggested—I agree with it—that we should not use the same template for the state aids map and the European assisted area map because we would deprive ourselves of flexibility, which is what everyone wants the Minister to secure for us.

Continuity is also important. We do not want those who have had support or who have reached different stages in developing schemes—even if they are not included in the current programme—to be cut off at the knees and suddenly to find that they have no support at all.

The final general criterion is common sense. There is no point in pushing a doctrine derived from Brussels beyond the bounds of political acceptability—that is why the concept of the safety net is so much to be welcomed—or practicability. That is why it is important that the criteria are defined reasonably flexibly. I welcome the tone of the debate and—if I may anticipate her—the Minister's readiness to take those messages aboard.

My next remarks are less congenial but need to be made. They particularly concern the rural areas of England. We welcome the fact that political support is clearly developing on all sides for the maintenance of aid for the Scottish highlands, on the analogy of northern Europe, and for Northern Ireland, for important political and objective economic reasons. However, there is a danger that there will be a significant withdrawal of support for the rural areas of England through the winding up of the separate 5b objective.

Before the change of Government, I was the Minister responsible for the agricultural portions of 5b, and I realised its ability to target precise, small-scale and wider rural problems. That was at a time when agriculture was doing relatively well. In or near the constituency of my hon. Friend the Member for Westmorland and Lonsdale, I toured the camping barns scheme. In the constituency of the hon. Member for Falmouth and Camborne (Ms Atherton), I went to see the work of the South-West Horticulture 2000 initiative, which was trying to bring together the wonderful production of her county and Devon. There is tension, not only because of the suggestion that Scotland, Northern Ireland and Wales may benefit, but because English rural areas under severe pressure may lose out. In addition, despite the hon. Lady's welcome for objective 1, which I understand, there is a danger that Cornwall and Devon, which have not traditionally worked together but were integrated in the South-West Horticulture 2000 project, may now be given separate objective statuses.

Ms Atherton

The hon. Gentleman is aware that, if Cornwall achieves objective 1 status, Devon would be well placed to achieve objective 2. We are working with our colleagues in Devon because we want to pull together as a peninsula. What is good for Cornwall will, in the long term, be good for Devon.

Mr. Boswell

I welcome that. I want merely to identify a potential cause of friction through differential treatment. If that can be resolved, so much the better.

We may be able to learn the lessons of flexibility and the virtues of comparatively small-scale, targeted interventions, partnerships and local initiatives. Those are important points which have been stressed by Members on all sides of the House. We hope that we can include them in the new structures and regulations.

Another point which came across strongly—I reiterate it from my own experience—is the need to streamline decision making on the one hand and bureaucracy on the other. We had much difficulty launching 5b in the south-west. It generated a lot of ill will initially because it was very slow to get off the ground and people had to become familiar with the provision. It was complicated and, as challenge funding, was not guaranteed in the traditional manner of agricultural grants; we had to come to terms with that difference. Anything that can make the process simpler, within the bounds of accountability, is very welcome.

We wish the hon. Lady and Her Majesty's Government well in supporting British interests during the negotiations. We are fortunate in having had this constructive report and debate. However, it will be impossible to satisfy everyone—even all hon. Members—and, in fairness, I think that both the House and the Government should accept that constraint on their achievements.

9.40 pm

The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche)

I agree with the hon. Member for Daventry (Mr. Boswell), who speaks for the Opposition on these matters, that this has been a very good debate. Hon. Members on both sides of the House have made contributions of an enormously high standard which have really taken the issue forward. I thank all hon. Members who have participated in the debate for their words of encouragement. Such a united view will strengthen the Government's hand in the negotiations.

The hon. Member for Daventry and practically every hon. Member who has spoken this evening commended the Select Committee on producing an excellent report. I congratulate my hon. Friend the Member for Kingswood (Mr. Berry) on the elegant and thorough way in which he presented the Select Committee's report and case. The House is indebted to the Select Committee for the way in which it has produced the report and the opportunity that it has presented to have this debate this evening.

My hon. Friend the Member for Kingswood outlined the importance of the structural funds and what they mean. My hon. Friend the Member for Falmouth and Camborne (Ms Atherton) also spoke passionately on that subject. For many people in our country, the structural funds and how they are used in their areas are a manifestation of the European Union. I am very pleased that the Committee's report broadly supports the Government's position on several key points. For example, the report refers to the need to contain the cost of the funds, the need for some flexibility for member states in selecting eligible areas under objective 2, and the treatment of sparsely populated regions in the United Kingdom.

Very importantly—this has been a theme of the debate—the report highlights the need for increased simplification, which is a key area of negotiation. We made considerable process in that direction during our presidency of the European Union. The hon. Member for South-East Cornwall (Mr. Breed) and my hon. Friend the Member for Brighton, Pavilion (Mr. Lepper) made that point when they spoke about the need for simplicity. It is important that the reforms should lead to fewer objectives, less bureaucracy, a broader partnership and a much simplified system of payments. Hon. Members also referred to cohesion funding, and I agree with the comments by my hon. Friend the Member for Kingswood.

The Committee researched the report thoroughly. It took evidence from a wide selection of those with an interest in this reform, including several local representative organisations such as the Local Government Association, the Convention of Scottish Local Authorities and some local partnerships. A great strength of the report is that it is so comprehensive.

I gave evidence to the Committee in May in order to set out the Government's view. The Government replied to the Select Committee report by way of a memorandum, and I want to cover a number of those points today. Since the publication of the Agenda 2000 communication in July 1997, we have said that the reform of the structural and cohesion funds must be affordable and fair to all existing and future member states, including the UK and its regions. It must deliver an outcome that is durable, sustainable and capable of applying in the next programming period and beyond that into 2006 without increasing costs unmanageably or introducing inequalities.

Affordability must be set in the context of current levels of spending and of the prospect of an enlarged union, which was a point raised by the hon. Member for Daventry. That inevitably means that, at some point, the present 15 member states must expect to sustain reductions in both coverage and receipts.

Miss McIntosh

Given that Britain receives 9 per cent. of the structural funds and the fact that, although we are a net contributor, we are now the fourth poorest member state and have been described in one report today as bottom of the league, does the Minister accept that there should be a limit to the reduction that we are prepared to accept?

Mrs. Roche

Let me explain to the hon. Lady—I am aware of her experience in these matters—that that is why the Government are taking such a rigorous view in the negotiations. We accept that reductions will have to be made, but our position is that they will have to be on the basis of fairness to the United Kingdom. The Committee takes a very sensible view that it is probably better done sooner than later and that the programming period after 1999 should prepare member states for eventual enlargement. It also makes the important point that it must be fair. Cuts in population coverage must be proportionate across member states, everything else being relatively equal, and no member state should receive more per capita than it does now.

We agree that the Commission's proposals, which would increase funding in real terms are difficult to reconcile with other principles within the proposals such as concentrating or reducing the areas that receive funding. The Select Committee also covered such issues. That is the basis for our insistence on the structural and cohesion funds element of the budget being kept well below 0.46 per cent. of EU gross national product to avoid the possibility, pointed out quite correctly by the Select Committee, of more money for fewer people. We must absolutely avoid that outcome.

Conceivably, there could be a case for objective 1 if we had to accept a position where two thirds of the structural funds' coverage—and possibly the money— went to objective 1 areas or if, following the Select Committee's suggestion, objective 1 was limited to the poorest 20 per cent. of regions. If it meant that the budget was reduced commensurately, that would be welcome, but we could not support a situation that led to increased intensities of support.

The Government support the Select Committee's view that strict application of the 75 per cent. GDP criterion might cause the UK some difficulties, but that is not what the Commission proposes. The draft regulations already specify some exceptions, such as ultra-peripheral regions and objective 6 sparsely populated areas whether or not they meet the 75 per cent. GDP criterion. In our view, that shows that GDP is not the only indicator of genuine need, and we need to look very carefully at the totality of objective 1 and its eligibility criteria. This is our basis for arguing, as we have done consistently, for a sparsity of population criterion to address the needs of areas such as the highland and islands. We welcome the Committee's support for them to be treated on a par with member states in a similar position, such as Finland and Sweden. We heard powerful speeches in this regard from my hon. Friend the Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) and from the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan).

We welcomed the Cardiff Council's commitment to assisting the peace process in Northern Ireland, particularly its recognition that the European Union should continue to play an active part in promoting lasting peace and prosperity in Northern Ireland". Much of the discussion this evening has been on objective 2. The Committee identified correctly the difficulties in interpreting the Commission's proposals for objective 2. Unifying the industrial, rural, urban and fisheries areas within a single objective 2 would advance the aim of simplification. That point has been made. Unfortunately, however, it could also impose complex and apparently artificial distinctions that would automatically exclude from consideration some areas of need. We are working hard to ensure that all strands are dealt with properly. The rural strand was rightly discussed by the hon. Members for Vale of York (Miss McIntosh), for North Norfolk (Mr. Prior) and for Daventry. The fisheries strand was mentioned by the hon. Member for North Norfolk and by my hon. Friend the Member for Waveney (Mr. Blizzard), who both made important points.

In the negotiations, the Government continue to emphasise the importance of flexibility to target areas of need, even if those are concealed within relatively prosperous areas. That was a recurrent theme of this evening's debate, powerfully expressed by my hon. Friend the Member for Burton (Mrs. Dean). The need for flexibility was emphasised by hon. Members on both sides of the House, including my hon. Friends the Members for Eccles, for Brighton, Kemptown (Dr. Turner), for Hastings and Rye (Mr. Foster), for Hemsworth (Mr. Trickett), for Normanton (Mr. O'Brien) and for City of Durham (Mr. Steinberg). It is important that we make it clear that in the UK we need the flexibility to target funds where they are most needed.

I am grateful for the Committee's recognition of the value of the safety net. It limits the loss of coverage for objective 2 and 5b areas to no more than one third and is an important achievement for a number of UK areas. As we gain a better understanding of the process, the benefits of the Government's achievement in establishing the safety net will become apparent.

One of the strengths of the past few months has been the contribution of local partnerships and organisations in shaping the proposals and the negotiations. We have worked together to present a united and coherent case in Brussels. I thank all hon. Members, Members of the European Parliament and members of local authorities throughout the country who have worked so hard with me and my officials. I take this opportunity to thank all my officials too, who have worked tremendously hard in the Department and in our permanent representation in Brussels. I am grateful for all the work that they have done. The importance of delivering for the UK as a whole was pointed out by the hon. Member for Westmorland and Lonsdale (Mr. Collins).

In developing UK policy and the positions for the negotiations, we have held a number of local, regional and national consultations since the publication of the Commission's proposals and have sought to reflect the views gathered along the way in the on-going discussions. I am grateful for all the participation that has taken place. We must make sure that the united front continues.

The Government agree with the Committee that bureaucracy surrounding the funds should not be a bar to access for any organisation, however small. In the negotiations to date—initially this was under the United Kingdom presidency—we have been able to secure agreement to some of the general principles that support the universally agreed aim of simplification of the funds: making them more effective and, most important, better value for money. That was an important first step in a reform proposal as radical as the one that we are discussing. We should not underestimate the scale of the task and of this particular achievement, given the divergent views across member states on the detail of the proposed negotiation.

The focus of the presidency earlier this year was primarily to simplify the administration of the funds. In this, we achieved a high level of consensus among member states. The informal meeting of EU Regional Policy Ministers in Glasgow in June achieved several important levels of agreement on a number of principles: the importance of job creation and employability and of regional competitiveness; the values of effective partnership between the Commission, national Governments and regional and local organisations, and of a clear definition of role for all of them; and the need to bring decision making as close as possible to the people it affects—that was very much a recurring theme of our debate this evening—in other words, more regional and local control over the structural funds delivery.

All of us want to protect the good name of the structural funds. We want the system to operate as democratically as possible. That is why the negotiations and discussions on simplification are so important. All those involved in the funds want to develop a less burdensome and more efficient system for their administration from the year 2000 onwards. It is clear that everybody wants to do that.

It is clear also that complex negotiations are ahead if we are to reach agreement on a fair and transparent system. A great deal more work has to be done, particularly on objective criteria, eligibility issues and finance, if we are to get the system right. There has been discussion this evening about the Community initiatives, which we know have led to some useful partnerships and have provided funds outside the objective areas. However, they have proved complicated to administer and they are not always the best way to address strategic issues. We have supported a reduction in their numbers. The mainstream objectives should be sufficiently flexible to accommodate activities currently included under Community initiatives. At present, there is still very little detail from the Commission about the three initiatives that are proposed, but they clearly must add value to the main objectives in terms of the structural funds.

The Cardiff Council set a deadline of March 1999 for agreement to be reached in the Council on the Agenda 2000 package, which of course goes wider than the structural funds. The deadline is important. As I have said, we recognise that much work will need to be done to achieve it. We will need to make every effort to ensure that it is met.

I am grateful to the Select Committee for its work and to all hon. Members on both sides of the House who have lent their support in such a positive and constructive way. It is clear that, in the months that lie ahead, we need to continue to work together so that a strong UK voice is heard. In that way we can get the right result for the United Kingdom as a whole.

9.58 pm

Mr. Berry

With the leave of the House, I first thank my hon. Friend the Minister for Small Firms, Trade and Industry for her comments and for the evidence that she and her officials gave to the Select Committee during its hearings. That evidence was extremely helpful and useful. I am naturally grateful, on behalf of my colleagues, for the kind remarks that all hon. Members have made about the Select Committee's report. More important have been the comments that individual Members made on specific aspects of this important issue.

In the final sentence of the first paragraph of the report, we said that the report was the Committee's first, but not necessarily its final, word on reform of the European structural funds. Whether hon. Members regard that as a promise or a threat is entirely up to them. It was a brief inquiry following concerns that arose at a meeting in Brussels this February. We may well return to the issue.

I was encouraged by the unanimity of hon. Members. It was of some significance that no one argued that his or her constituency should get less resources. All argued that there should be more, or at least the same, because of important social needs and the need for regeneration and tackling poverty. I will mull over that observation as I go home, because when there is unanimity on such an important point—

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