Assisted Areas Map

HC Deb 18 April 2000 vol 348 cc953-60

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

11.24 pm

Mr. Malcolm Moss (North-East Cambridgeshire)

The Minister's announcement on 10 April of the Government's intention to submit an amended set of proposals for new assisted areas brought disappointment and dismay to many of my constituents and delivered a body blow to the Fenland area. It is almost a year since I stood in more or less the same place in the Chamber to plead the case for the continuation of assisted area status for Wisbech. At that time, the Government were making their first attempt to redraw the regional selective assistance map of the United Kingdom. We were delighted that a new area, embracing Fenland district council and King's Lynn and West Norfolk borough council, was designated by the Government and included in their submission to the European Commission in July 1999.

Imagine our devastation, then, when we heard of the Government's latest U-turn. Our area is to be removed from the assisted area map because of concerns expressed by the Commission, and we have only three weeks for consultation. I believe that the Government have made an error of judgment, and I shall try to put the case for reinstatement of the Fenland partnership area in the assisted area map.

No one disputes that there must be rules and strict criteria to identify areas that warrant regional selective assistance. However, a model that fits the city-region concept of mainland Europe does not necessarily embrace the particular needs of rural areas in the UK. To my mind, the key is flexibility, without which needy areas such as Fenland and others in the eastern region will lose out.

The new criteria set by the Commission require a reduced population coverage of the national map. The eastern region has provided 43 per cent. of the reduction. That can hardly be fair when eight regions are involved. The east of England is being asked to shoulder the lion's share of the proposed reduction, but has also received the lowest funding for its regional development agency and its inward investment effort.

Several companies with the potential to employ significant numbers in a rural area suffering from a steady reduction in agricultural employment have been encouraged to consider investment in the fens. They have been attracted by the opportunity of offsetting logistical disadvantages with financial assistance. I believe that Fenland and King's Lynn and West Norfolk deserve reinstatement.

Let us consider the track record of assisted area status in the Wisbech travel-to-work area, which has been the cornerstone of economic regeneration in the area since 1993. The area has an impressive track record in attracting grant, assisting companies and creating and safeguarding jobs. Some 75 offers of grant were made, totalling £5.6 million. That levered in some £35 million in private investment. A total of 1,043 jobs were safeguarded, and 1,296 created. There is both an opportunity and a need to continue to make effective use of regional selective assistance grants and to secure best value from them in the King's Lynn and Fenland areas.

In the recently published draft regional planning guidance, paragraph 4.2.5 states that a key element of the strategy is addressing the remaining disparities in opportunities and quality of life across the region through a focus on the priority areas for regeneration. Policy 10 of the guidance states: Development plans should include policies consistent with sustainable development to promote regeneration, economic enhancement and environment protection and enhancement of the Priority Areas for Regeneration, including Wisbech and the remote rural areas, the Rural Development Areas and those rural areas designated under the European Union's Objective 2 and Transitional Objective 5b programmes. Among other things, policies in those priority areas should, first, ensure an adequate supply of land, employment and premises; secondly, promote the areas for inward investment; and, thirdly, provide business support services.

The priority areas for the regeneration strategy are also reflected in the regional economic development strategy published by the East of England development agency. One of the aims of that strategy is the development of a thriving rural economy. Strategic priorities identified in the REDS include the attraction of new and high-growth businesses to the area; the revival of market towns; and the support of diversification in the agricultural sector. The strategy also refers specifically to the rural development area and to the Wisbech priority area for economic regeneration.

If the Government are serious about developing a thriving rural economy and targeting resources on priority areas for regeneration, they must understand the important role that assisted area designation has played, and can play in future, in delivering their stated economic objectives in the fens. To withdraw assisted area status does not represent joined-up thinking on the implementation of their policies for those areas that have already been identified as priorities for regeneration.

Although current economic headline indicators might not appear to be as poor as those for other areas, the Fenland and the King's Lynn and West Norfolk areas are characterised by an exposure to structural decline among traditional local industries; by over-dependence on declining economic sectors—Fenland is placed at 443 out of 459 in the Henley centre's industrial structure index; by a forecast jobs gap of 9,800 by 2006; by low educational attainment and skills; by lack of an investment image and a credible offer in the investment market; by a cost-value gap for industrial and commercial development that inhibits investment; and, finally, by peripherality and poor strategic transport infrastructure.

The substantive case relates to the underpinning principles of the Industrial Development Act 1982, which clearly states that the Secretary of State shall have regard to all the circumstances, actual and expected, including the state of employment and unemployment, population changes, migration and the objectives of regional policies. The economy of the area has shown some improvement in recent years, in line with the national picture. However, the local economy and employment are based on industries that are in rapid decline, where only continuing capital investment will prevent rundown and closure. Recent closures and job losses in the fens include H.L. Foods Ltd., which is making 300 people redundant. Kings Lynn Steel is closing, creating 40 redundancies; SCL Breamist Ltd. is closing, making 70 people redundant; and Courtaulds is closing with 75 redundancies.

Without the designation, private sector investments will be diverted elsewhere in the United Kingdom and to Europe. Nor have the fens benefited from a jobs and business spin-out from Cambridge with its high-tech and knowledge-based economy—despite its geographical proximity. That benefit may reach the southern parts of the fens in the longer term, but it is unlikely to affect the whole area until there are significant improvements in the skills of the work force and in the transport infrastructure. It is simply unrealistic to expect benefits from Cambridge.

The area's poor future prospects are demonstrated by the fact that it has little representation in the seven sectors identified by the East of England development agency as key to the region's future growth and prosperity. The fens has a far lower proportion of employment in those sectors than the region or England as a whole. It also has a work force with considerably lower educational attainment and skill levels than elsewhere in the region. Such attainment and skills are essential to attract and support these high-growth sectors.

The withdrawal of assisted area status puts at risk the attraction of the areas to future investors. Specifically at risk is a significant investment by a European company in the fens.

I have in front of me a letter from the managing director of Graveley Packing, owned by Budelpack, a Dutch company. The managing director, James Robinson, writes to me in the following vein: I was dismayed to hear the news that the Government has decided to remove Fenland from the above grant assistance. As you may know we applied for, and received, a grant of £0.5m towards buildings and equipment under the selective regional assistance scheme. This of course was subject to the EC confirming the UK regional proposals. The grant was based upon the creation of 283 permanent and 75 temporary jobs in addition to safeguarding the current 125 jobs. Because industrial property values in March in the constituency of North-East Cambridgeshire are extremely low we have to take a substantial loss on our investment. Our new building will cost £3.8 million. Its open market value when complete will be only £2.8m. We have had huge difficulty in obtaining adequate external finance for the building because of this Elm cost-value gap. I have today received a suitable offer but unfortunately it is dependent on grant assistance being made available to us. It appears therefore that this decision, if confirmed, has pulled the rug out from under our scheme and its associated job creation. The possible consolation prize of tier 3 assistance of some 7.5 per cent. grant aid to a maximum of £75,000 in Cambridgeshire is not an option. That company is unlikely to be eligible, as it is too large and multinational—and, of course, the Dutch parent company takes a dim view of what has taken place.

While the first programme of assisted area benefits had largely helped the indigenous business base, there were emerging benefits of attracting new firms to the area from abroad. Those benefits will now be lost, as the fens will no longer be able to offer financial support for companies seeking to relocate to the area.

The way forward for the fens is to redraw the whole map and provide the fens with the assistance that it needs. I know that we have only a few weeks for consultation and I recognise the need for the Government to press on with the regional map so that the key areas may receive the necessary financial assistance. Therefore, in asking the Minister to consider redrawing the map, I realise that it is something of a tall order.

However, last week, the Government, in launching their national strategy for neighbourhood renewal, acknowledged that job creation was the key to addressing social exclusion. Regional selective assistance and the invaluable help that it provides in both creating and retaining jobs is crucial to addressing the wider deprivation and social exclusion problems facing the fens. It will support investment to retain and enhance the competitiveness and performance of existing industry—notably the food cluster that we have in that part of the fens. It will be a vital tool in creating opportunities for rewarding work, raising aspirations and making learning pay. Finally, it will promote private sector investment in infrastructure and property, essential prerequisites for attracting and creating more businesses.

All the agencies in the fens area are committed to working together in a co-ordinated way to address the area's problems. The area had already suffered one body blow, with its failure last autumn to be designated as an objective 2 area. Without RSA designation, it is likely to miss out on other forms of national support, such as the single regeneration budget and EEDA's partnership investment programme, which is largely tied to such priority areas. The funding available to EEDA, as the most poorly resourced RDA in England, is already limited. Targeting to objective 2 and RSA areas will mean that little funding is available for other areas that are not so designated.

Assisted area designation up to 1999 brought significant benefits to Wisbech. It helped the area benefit from the general improvement in the national economy. However, agencies in the fens believe that this is only a temporary position, and that with the removal of two core pillars of support—objective 2 and the RSA—the economy will falter and slip into decline. Assisted area designation will help prevent that, and, as we all know, prevention is better and less costly than cure.

The Minister will now know that the fens should not be bypassed again, and he should give the partners—notably the East of England development agency—the resources to do their job. I ask the Minister to assist and encourage all central Government, regional and local agencies and the private sector to work together to address the problems of the fens area. We hope that, in this very short consultation period, they will listen to all the representations made to them by the interested parties, and reinstate the fens on the assisted area map.

11.42 pm

Dr. George Turner (North-West Norfolk)

I congratulate the hon. Member for North East Cambridgeshire (Mr. Moss) on securing this short debate, and thank him for allowing me to contribute briefly to it.

As the hon. Gentleman pointed out, the area that earlier had assisted area status included the fenlands part of my constituency to the west of King's Lynn, which forms almost a separate travel-to-work area from the Wisbech area. The hon. Gentleman made the case very clearly with regard to the disappointment that will be felt by my constituents who live in that fenlands part of my constituency, who will feel the same deprivation as his constituency will feel over the withdrawal of support for that travel-to-work area.

I must admit that there was some icing on the cake for us last summer, when we heard that the Government were taking to Europe proposals to extend the former area to include much of the rest of my constituency—in particular, some of the major areas of deprivation in the King's Lynn area itself. It is a part of the country that has lost many jobs as a result of the decline of fishing from the port and the loss of the food processing and canning works which were there historically, and one that suffers from a great portion of work being too low-paid and in non-growth areas of the economy. We were looking forward to the extra support that assisted area status would have brought to us.

Those constituents saw what they had thought would be some icing and some jam taken away from them. I suppose that they will reflect that, under the same Government in the past three years, unemployment has dropped considerably within the area. The economic development officer will have a harder case to make in pressing the need for assisted area status than he would have had three or four years ago, thanks to the Government's success in running the economy.

I should like to add two points to those made by the hon. Gentleman. First, could my right hon. Friend the Minister assure us that the case that is being drawn up will be considered carefully? The representations and the work being done now will be considered in a short consultation period, so will he assure my constituents that that does not mean, as some cynically think, that the representations will not be listened to? Secondly, will he assure us that the decision, which was pushed on us in large part from Europe, does not mean that the Government will withdraw other measures of support and that they will consider carefully the needs of the area? As the hon. Gentleman said, we have one of the worst funded—by almost a factor of two—regional development agencies in the country. There is concern that not enough measures are in place to support the economy if assisted area status is not given to us.

11.45 pm

The Minister for Trade (Mr. Richard Caborn)

I commend the hon. Member for North East Cambridgeshire (Mr. Moss) on the case that he has put forward on behalf of his constituents for assisted area status. I understand his disappointment and that of my hon. Friend the Member for North-West Norfolk (Dr. Turner). May I point out at the outset that—yes—the consultation period is short, but we will consider all representations very seriously?

The east of England region, even under the amended proposals, will have an increase in coverage on the assisted areas map, which was introduced in 1993. That increase has been made at a time when the overall population coverage has been reduced by a fifth. Overall, the amended proposals will represent a pretty good deal for the east of England region.

There is, I know, disappointment in King's Lynn and the fenland areas. However, there is a recognition and understanding of why the changes have been made. Indeed, I was particularly interested to read last Tuesday's article on the assisted areas announcement in the Eastern Daily Press. In that article, the chairman of the development committee of King's Lynn and West Norfolk council is quoted as saying that, in comparison with other areas—including Yarmouth, Lowestoft and Luton—that area has not done too badly. Similarly officials at Fenland council are quoted as saying: The first time we applied for assisted area status in 1994, unemployment was three times above the national average and now it is only half of one per cent. above it. There are areas of much greater need than ours. The local newspaper and the people who were quoted were responsible to make that point.

The Eastern Daily Press article clearly shows that, although there is disappointment, there is also an understanding of why we have made the choices that we have. Our objective for the new assisted areas is to target assistance on areas of need where such assistance will be effective in meeting that need. That remains the case.

However, we are trying to meet our objective within the population ceiling that the European Commission has set us. If we include King's Lynn and Fenland in our proposals, another area—either in the region or across the country—will have to come out to facilitate that. That is the hard choice that we have had to make.

We recognised the needs of King's Lynn and Fenland in our original proposals and I can assure the hon. Member for North East Cambridgeshire that we fought hard to secure the July proposals that we submitted to the European Commission. However, ultimately the Commission holds the whip hand on assisted areas. Therefore, we were faced with the choice of amending our proposals or facing, as the hon. Gentleman underlined, a lengthy and uncertain investigation process, at the end of which we might still have been in exactly the same position as we are now.

The hon. Gentleman may find it helpful if I set out the background to the changes that we made last week. The Commission made it clear to us that it was concerned that our July proposals would have given the United Kingdom an unfair advantage over other member states. However, in view of the misconception that appears to be held by some people, I want to stress that the Commission did not decide that our July proposals were illegal. Also, I note that it has never accused us of gerrymandering them.

The competition directorate of the Commission was concerned that our approach to the July proposals might have allowed the UK to include employment sites within the assisted areas without including the population in surrounding areas who might benefit from aid given to the businesses on those sites. Within our population ceiling, that would have allowed the UK greater scope for securing mobile investment in competition with our European partners.

In view of those doubts, Commissioner Monti informed us that unless the proposals were amended, he would be required to open an investigative procedure under article 88(2). Under that procedure, the Commission would set out its concerns about the UK's proposals and invite comments from interested parties, not just in the UK but in every member state. It would then, in the light of those comments, decide whether to accept the proposals.

Even if our proposals were accepted at the end of that procedure, approval of the new assisted areas would be delayed by up to six months. The hon. Gentleman recognised that there would have been a risk that our original proposals would not be accepted at the end of the article 88(2) procedure, given the Commission's concern that our proposals gave us an unfair advantage and given the scope for interested parties in other member states to put their case. The only alternative open to us, other than the article 88(2) procedure, was to amend our proposals to meet the Commission's concerns, and that is what we duly did.

We are not alone in amending our proposals in response to the concerns raised by the Commission. The European Commission opened article 88(2) proceedings against the proposals submitted by Germany, France, the Netherlands, Belgium, Portugal and Italy. Germany, Belgium, France and the Netherlands have amended, or are amending, their proposals in response to the Commission's request. The procedure continues for the other member states.

With many other member states making changes and securing the Commission's agreement to their new regional aid maps, it would have been wrong to continue to press our case with no guarantee of success. The new assisted areas map will benefit some 16.5 million people in the UK. During the seven years that the map is in place, companies will be able to apply for grant aid from total expenditure currently in excess of £250 million a year. Further delay and uncertainty would have been damaging to those people and businesses.

We have had to make a number of hard decisions and as a consequence some areas have had to be removed from the map. Although that is obviously disappointing for the areas concerned, I am confident that our new proposals present the best possible deal that we could broker with the Commission.

I should, however, make it clear that the new assisted areas are only part of the Government's strategy for tackling regional and local needs. We are putting in place a comprehensive framework for ensuring that all parts of Britain can meet the challenges of the future. We inherited an unco-ordinated, disjointed set of regional bodies. Regional activity on inward investment, supply chains, rural development, physical regeneration and social and economic regeneration were all in separate organisations. There was no overall strategy to bring together regional activity. We have addressed those problems.

I am pleased that the hon. Gentleman pleaded for more resources for the East of England development agency, and I hope that he will continue to do so. I hope that, if the Conservatives ever get back into power—God forbid—he will argue that the development agencies ought to remain in place, because the official position of Conservative Front-Bench Members is that they will be closed down. It is therefore pleasing that the hon. Gentleman acknowledges the worth of the development agency in the lives of his constituents.

The hon. Gentleman will also understand that we have devolved power to Scotland and Wales and set up the regional development agencies in England to address the fragmentation to which I referred. Last October, each RDA produced, with local partners, a strategy for improving the economic performance—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at six minutes to Twelve midnight.