HL Deb 13 April 1981 vol 419 cc797-837

5.27 p.m.

Lord Plowden rose to move, That this House takes note of the Report of the European Communities Committee on regional policy (14th Report, H.L. 93).

The noble Lord said: My Lords, I beg to move that this House takes note of the Report of the European Communities Committee on regional policy. It is 32 years almost exactly to the day that the noble Lord, Lord Roberthall, the late Sir Alan Hitchman and I started a week's discussion in Paris with M. Jean Monnet and his two principal colleagues. The subject of our discussion was the possible unification of the British and French economies. As noble Lords know, nothing came of this French initiative: it was premature. But one of M. Monnet's objectives was to bring about a higher standard of living together than could be reached separately, and inherent in the policy was the endeavour to bring up the standard of living in the regions to that of the whole—the subject which we are debating today.

The purpose of regional policy is to help the poorer areas of a country to come nearer to the general level of prosperity, and in the words of the EEC: to correct the principal regional imbalances within the Community"; that is, to do for the individual member countries of the Community what this country, for instance, is trying to do for its regions. This is the policy of convergence and it has always been recognised that a common economic policy, which is the ultimate objective of the Community, cannot be expected to work well if there are great per capita differences in wealth between the member states. Unfortunately, as Community policy papers constantly reiterate, there is little progress towards convergence. Freedom of movement should help this process, but experience shows that even with a common language there can still be wide disparities; and language differences of course accentuate them.

A positive instrument is needed, and for the Community this is the Regional Fund. It receives an allocation from the Community budget and it is distributed in grants to member countries, to be used to support their own regional policies. The gap between the poorer and the richer members of the Community is not decreasing, and it will increase with the advent of the three new members—Greece, Spain and Portugal. The Regional Fund amounts to about 3 per cent. of Community spending, and it is so small that it can hardly scratch the surface of the problem.

Of course, as noble Lords know, by far and away the largest part of Community spending goes on the common agricultural policy—over 70 per cent. of the total spending. This is not an occasion for discussing the CAP, but its reform is one of the biggest problems facing the Council of Ministers. It cannot be stressed too strongly that, so long as it takes the lion's share of Community money, the hopes for convergence through regional policy are quite illusory. Twenty times more money is spent on price support for farmers than on regional assistance, and the way that this agricultural support is spent, on balance, helps the already most prosperous areas more than those most needing help. So when we talk about what the Regional Fund might, or might not, do, we must always bear in mind that it is so small and, on present policies, is likely to remain so.

The Regional Fund has no policy of its own. It distributes 95 per cent. of its money to member countries to support their national policies in the form of quotas. These quotas are assessed according to population size and relative wealth. The system is criticised as inflexible but, at least, it transfers resources from the richer member countries to the poorer, unlike the common agricultural policy. Until this year, the United Kingdom, which pays about 20 per cent. of the total budget, received 27 per cent. of the Regional Fund, but Greece has now joined the Community and this has reduced our share for the coming year to about 24 per cent. With the further accession of Spain and Portugal in the coming years, this process is likely to continue.

The more poor members join the Community, the less funds there will be for existing member states, such as the United Kingdom, who are the poor members of the Community at present. For this reason, the Select Committee suggested that, in the long term, only member states below the Community average—to be defined by agreed economic indicators—should receive any money from the Regional Fund.

The resources of the fund are limited. The fund is supposed to transfer resources to the poorer regions and, therefore, rich member states should not receive a quota at all, but at present, of course, every country receives something. The evidence that the Select Committee took showed a great deal of enthusiasm for the principle of the Regional Fund. Local authorities, regional development agencies, the CBI, the TUC, academics, Members of the European Parliament—all were in favour. But almost all criticised the way in which the fund works at present.

Additionality—that is, whether the regional fund causes additional things to happen—is at the root of the problem. The Government claim that the receipts from the Regional Fund enable more to be spent on regional development in this country than otherwise would be spent. But the claim is difficult to substantiate. In the case of aid for industrial investment in the regions, national aid under the Industry Acts is virtually open-ended. Indeed, in practice, no ceiling is placed on the aid in any one year. If all corners with eligible schemes would receive national aid anyway, and the Government then reclaim from Brussels some of the aid which they have actually granted, then, clearly, nothing additional has happened: the firm would have got the grant anyway.

On the infrastructure projects—that is, roads, port facilities and so on—additionality is also difficult to substantiate. In fact, the Department of the Environment's guidelines, which are quoted in our report, explicitly say: it is not the Government's intention that the availability of assistance from the Fund should enable (local) authorities to undertake additional projects". Understandably, there is a widespread belief that, whatever the Government may say, additionality is not respected. This reflects another of the main criticisms that was made in evidence. There is little incentive for the supposed beneficiaries of regional aid—firms, local authorities, regional agencies and so on—to seek fund money.

This is clearest in the case of industrial projects. In this case, Government departments draw up a list of applications for Regional Fund assistance out of industrial projects which are going ahead anyway, and which are receiving national aid. They ask the firms' permission to use their investments as applications for fund aid; the firms may be requested to do some paper work. When the applications have been approved in Brussels, money is paid from the Community to Government departments which then keep the money. The firm is informed that the application in respect of its project has been successful. Not unnaturally, the firm sometimes asks "Well, where is the money?" to which the answer is "You've already had it." This may be a harmless exercise, but it contradicts statements by the Commission that EEC aid is actually helping British firms.

In the case of infrastructure projects, the position is better. Despite the complaints that we had, the keenness of local authorities to get Regional Fund aid suggests that they must feel that the effort is worthwhile. Although no new projects may be generated by Regional Fund aid from Brussels, aid does mean that an authority partly finances a project with a grant instead of a loan, so it has no interest to pay and no principal to pay back. But it does not mean that they do anything more than they would otherwise have done.

It was tempting—and we did consider it—to suggest that the whole complicated procedure of individual project applications to Brussels should be scrapped. A great deal of time and effort could be saved if the bureaucratic requirements for projects were dropped, and straight budgetary transfers were made between the exchequers of member states, according to the ERDF quotas. The net result would be the same. It would be simpler and the partial illusion of Community regional assistance would be avoided. But the Select Committee decided against this idea. The Regional Fund is a symbol of the Community's concern for the regions. It may not do much good, but it does do some good and, if it is seen to be efficiently administered, it is good for the Community's image. This was stressed to us strongly when the committee visited Brussels. Moreover—and much more important—we must work to obtain a larger share of the Community's budget for the Regional Fund.

So should a partially effective Regional Fund be kept just for show? The evidence suggested to the committee that the fund should be kept but that it should be improved in such a way that local disenchantment with it was reduced. That was what guided the proposals that we made.

As I have already said, the worst example is the fund's assistance for industrial projects. The committee suggest that this should be abandonded, either by the Community as a whole or optionally by individual member states but at any rate by the United Kingdom. Instead, they suggest a system of development programmes which would increase local involvement and pass on more money to local authorities.

The United Kingdom has an understandable interest in getting its full quota from the Regional Fund and getting it as quickly as possible. We have been very successful at this. Whatever the faults of the present system, Government departments, and in particular the Department of Industry, are to be congratulated on the way they have handled this. From the point of view of the Government, the present system therefore has some advantages and any suggestions for change must ensure that we draw our quota in full, and speedily.

As so often is the case, national interest is not identical with local interest. A system that meets the national requirements is not necessarily liked by the regions, the very people who are supposed to benefit from the fund. The proposals which the committee put forward are intended to try to meet both these needs. We suggest that local bodies—local authorities, groups of authorities, regional agencies, or all of them together—should draw up development programmes for their regions, for which they would seek EEC assistance. These would not rule out individual applications for large infrastructure projects but they would replace the present system of individual industrial projects. Industrial projects could of course be included in the programmes, together with other schemes.

This suggestion for programmes is not new. Programmes are already being drawn up for the non-quota section of the Regional Fund—that is, 5 per cent. of the Regional Fund. On a much larger scale, programmes are also being used to allocate some of the budget refunds which the United Kingdom negotiated in the 1980 settlement of our budgetary problem.

So far, I understand, we have received about £645 million from the Community as contributions to public sector investment programmes. These are principally in the regions. I believe that programmes have been drawn up for Northern Ireland, Scotland, Wales, the North of England, North-West and South-West England, Yorkshire and Humberside. The programmes cover such things as roads, railway investment, water and sewerage, land reclamation, advance factories, housing and telecommunications. So it cannot be claimed that the committee's suggestion is impractical. It is already being put into practice in another context.

The programmes would continue to be submitted to Brussels by Government departments. We see no way round this. Direct access to Brussels, although desirable and asked for by many local authorities, is just not practical. The Commission could not cope without a very much larger staff. It would add to the paperwork and it would not produce any more money. Payments from the Regional Fund for successful programmes should then be passed on in full to the local bodies concerned. The advantage of this system is that it would simplify administration, because there would be fewer but larger applications, and move the burden from central Government to local authorities who would, as they want, be more directly involved. By grouping projects of all sorts into programmes, the impact of fund aid on a particular locality would be greater than it is now, with individual projects scattered over a much wider area.

There is no reason why this system should not meet national as well as local requirements. It would of course be in the interest of local authorities, as it is in the interest of central Government now, to send in applications which lead to quick payment of funds from Brussels. This is a point which central Government could and should check when they send programme applications to Brussels. There is no reason to suppose, therefore, that well constructed programmes would draw funds out of Brussels any more slowly than individual projects do at present.

As for taking up our full quota, again there is no reason to suppose that local authorities would not be able to put forward schemes that would cost altogether £150 million, because that is all that we are talking about this year. And if the Government object to this shift in the balance between central and local government, on the ground that all ERDF payments being passed on in full to local authorities would no longer help the national exchequer, then that would be an admission that additionality does not come about.

Those are the reasons why we suggest changing to programmes. There would still be bureaucracy. There would still be applications and payments flowing to and from Brussels. It would not be as simple as straight budgetary transfers between Member States. But at least within the political constraints with which we have to live, which in the committee's view make a root-and-branch reform impossible, the proposal for programmes would avoid the worst absurdities of the present system while meeting more requirements, both national and local, than are met at present.

However the common agricultural policy is reformed, it is probable that this country will always be a net contributor. It is for this reason that, at least for the time being, we should work for a Regional Fund that disposes of greater resources than it does at present and that works in a more practical way than does the present system. But it would be an illusion to suppose that a Regional Fund can be a substitute for reform of the common agricultural policy. I beg to move.

Moved, That this House takes note of the Report of the European Communities Committee on regional policy (14th Report, H.L. 93)—(Lord Plowden.)

5.49 p.m.

Lord Banks

My Lords, I am sure that the whole House will be grateful to the noble Lord, Lord Plowden, for the interesting, helpful and constructive way in which he has introduced the debate this afternoon. I should like to express appreciation of the work done both by the noble Lord and by the members of his committee in producing the very comprehensive and yet succinct report to which we have our attention drawn this afternoon.

The committee last reported on this subject in 1977, four years ago, and we debated it on 31st March 1977. I remain as strong a believer in the aims of a Community regional policy as I was then. The final communiqué of the Paris Summit in 1972 which is quoted in the current report spoke of correcting the structural and regional imbalances which might affect the realisation of economic and monetary union. The guidelines for Community regional policy which were adopted by the Council of Ministers in 1979 state this: Regional policy is an integral part of the economic policies of the Community and member states. It forms part of the various elements which contribute to the attainment of a high degree of convergence of the economic policies of the member states". As the noble Lord suggested, the convergence of economic policies seems as far off as ever, and economic monetary union, although brought slightly nearer by the welcome establishment of the European Monetary System, nevertheless still seems fairly remote. But as I said, my belief in the aims of the Community regional policy is as strong as ever. My confidence in the possibility of the member states ever taking the necessary steps to achieve those aims is somewhat less buoyant. The report indicates that the problems of the poorer regions of the European Community are more acute now than they have been at any time since the United Kingdom joined the EEC. Regional disparities within the Community are greater now than in 1975, when the European Regional Development Fund was launched. Reading the report one sees that the difficulties are the same as they were four years ago.

First, the report makes clear, despite the introduction of the regional impact assessment system, that there is still no properly co-ordinated Community regional policy. As the noble Lord, Lord Plowden, pointed out, the common agricultural policy takes 70 per cent. or more of the expenditure of the Community and it has a regional emphasis quite different from that of the Regional Fund, and to a considerable extent, the report says, it works in the opposite direction. The Regional Fund is really a fund for assisting national regional policies and is not itself based on any very clear Community policy.

Secondly, as the noble Lord, Lord Plowden has said, the Regional Fund is too small. It has grown since four years ago, but in 1980 it was only 2.57 per cent. of the total Community expenditure as against 70 per cent. on agriculture. So, compared with the amount spent on other EEC policies and compared with the amount spent on national regional policies, the Regional Fund is too small to achieve the aims of the Community regional policy or to make much impact. I am convinced that the noble Lord, Lord Plowden, is right when he says that the Regional Fund must be considerably larger, and that is particularly so when enlargement of the EEC is taken into account. If the problems of balance between the various expenditure programmes are to be solved—problems between the various EEC policies can be put right—the budget itself, of which the Regional Fund constitutes such a small part, must be larger. I think it is important to emphasise this at a time when the finances of the Community are due for overhaul as the Community's own resources on the present basis run out.

In 1977 the MacDougall Committee pointed out that the EEC lacked the mechanisms for redistributing income between members—mechanisms which already existed for redistributing it within the regions of existing nation states. About 40 per cent. of the gross disparities between regions within individual nation states is eliminated simply by collecting taxes on a progressive basis throughout the nation and spending them on national services. This has an automatic bias towards the poorer regions, and by transferring some expenditure from a national to a Community level a similar redistributive effect would be achieved between the member states.

The MacDougall Committee suggested that by raising the expenditure of the EEC from 0.7 per cent. of the Community's gross domestic product to 2.5 per cent. of the Community's gross domestic product, this aim could be achieved, and I am sure that a larger budget for the Community is the only way to deal with the dominance of the common agricultural policy. Certainly we want to seek to reform the common agricultural policy; certainly we want to reduce the surpluses and to reform the system by which they are created, but this year's farm price settlement suggests that there is not likely to be any drastic reduction in the total amount spent on agriculture. The increased budget, largely a transfer of expenditure and functions from national to Community level, would have a redistributive effect but it should contain a considerably increased Regional Fund which would not be a transfer but an addition designed to accentuate the redistributive effect in clearly defined directions.

That brings me to the thorny question of additionality, to which the noble Lord, Lord Plowden, referred. This we discussed four years ago. We deplored the lack of additionality then, and the report and what the noble Lord has said to us this afternoon indicate that the position has not changed. As he pointed out, so far as industrial projects are concerned it makes no difference to the firm carrying them out whether they are said to be helped or not. The Government keep the money to offset their own contribution. Noble Lords may recall a song in the Gilbert and Sullivan opera The Mikado which begins in this way: See how the Fates their gifts allot For A is happy, B is not. Yet B is worthy, I daresay, Of more prosperity than A". Yet no such problems arise under the workings of the Regional Fund. It does not matter that A is selected for help and B is not: their happiness is equal.

The Government say that they judge the total level of regional expenditure which they plan to make, taking into account what they expect to get from the Regional Fund, so that in effect the Regional Fund does enable the total amount spent to be increased; but, as the noble Lord, Lord Plowden, has said, this cannot be proved and there is certainly no incentive for firms to apply for help from the fund. So far as infrastructure payments are concerned, to local authorities and similar bodies there is an advantage—again described by the noble Lord, Lord Plowden—but no additional expenditure necessarily made.

When we debated this matter in 1977 the noble Lord, Lord Elton, for the Conservative Opposition declared of this process, as far as it affected both industrial projects and infrastructure projects, "This is not additionality". Those were his words, and he added: I believe additionality to be important, because it should result in more investment, positively directed to where it is most needed". I should like to ask the noble Lord, Lord Trefgarne, if the party opposite still adhere to that point of view, and if they do, how they hope to see it made effective.

I welcome the introduction of the non-quota allocation, which was merely hinted at at the time when we had that last debate. The quota system and nationally determined criteria for assisted areas mean that some areas receiving aid—in Germany, for example—are better off than areas in Britain which do not qualify for aid. The non-quota allocation, over and above the quota allocation to national Governments is, at 5 per cent., very small but it is a beginning. I should like to see it expanded as the basis for a real Community regional policy. I should like to see more concentration on areas of real need, coupled with a recognition that there can be pockets of need within relatively prosperous areas and that means of assisting them also are necessary.

In our last debate I asked whether it would not be desirable that there should be direct access to the Community for such bodies as the Highlands and Islands Development Board and other regional agencies, so that they could have direct access while working within the national regional programme drawn up by the national Government. The committee, on balance—and the noble Lord, Lord Plowden, referred to this—reject this idea on the grounds of administrative complication. But I wonder whether they are right. If regional development programme applications, covering many projects which were explained by the noble Lord, Lord Plowden, tended to replace individual project applications—this is what the committee recommend—I wonder whether the administrative burden on the Commission would be quite as great as feared.

My Lords, to sum up, I would urge support for a very much larger Regional Fund as part of a larger Community budget, support for genuine additionality, support for a co-ordinated regional policy including a much increased proportion of the Regional Fund distributed on a non-quota basis, and support for more direct formal access to the Commission for regional authorities and agencies, or at least a further consideration of the possibility of that. I hope that when the Select Committee produce the next of their excellent reports on this subject, in 1985 or whenever it is, they will be able to report progress in these directions.

Lord Saint Oswald

My Lords, the whole House, though not the whole country, is aware of the factors which make a debate of this nature timely and significant, and we therefore owe gratitude to the noble Lord, Lord Plowden, and the committee which produced this report. The European Commission are charged with producing a new design for the financing of the Community, a restructuring of the budget, to produce it soon after 1st June, the month in which the United Kingdom takes over the presidency of the Council of Ministers. I hope that restructuring here means as much as it promises by implication, and I hope that the date of the report will not slip much further than 1st June. It is the first recognition that a deep, injurious problem exists and that a solution must be found.

Sad to relate, speeches on the subject of Europe during this epoch tend to be either defensive or antagonistic; few are openly optimistic. That is unnatural, given the balance of facts and a balanced outlook. The debate in another place last Wednesday was opened by the statement that Britain's relationships with her European partners had deteriorated since Christmas last. It would be difficult to contradict that statement. It would require some fairly strenuous wishful thinking to deny it. But one thing I can and do affirm; to whatever extent the trend may exist, it is unnecessary, it is deplorable and it is reversible. Some of us have been saying for many years, before the signing of the Treaty of Rome in 1957, that Britain's best hope of serving humanity and herself to the full was through membership of the European Economic Community. Perhaps those of us who have fought in wars and have a sense of the history of a war-torn Europe have been saying it with greater vehemence and conviction than others. Great men have said it with a wisdom eclipsing any effect that I can hope to have. Yet today in this very climate of doubt and publicised disappointment I make a point of saying so again.

This debate today does not deal with the basic concept of European harmony, but it does deal with one of the keys to Britain's viability within the present Community, and it describes the urge to mutual support replacing the old urge to mutual destruction. There is a tendency within our land, ugly and unreal, to blame every ill we suffer upon our membership of this Community. It is hard to judge whether the ugliness or the unreality is the more harmful aspect of this false diagnosis. There are even those who obtain satisfaction from noting signs of disharmony with our partners. They celebrate such signs of disharmony. I will mention one of them by name in a minute or two. I consider it a sick satisfaction.

Such signs should cause dismay to all, and, my Lords, because I feel so strongly upon this matter I am ready to make a challenging assertion. I believe that a cardinal explanation of our present partial failure is that we are not always regarded, even not often regarded, as "good Europeans", and sometimes, not always, we draw this charge upon ourselves. We loudly lament the injustice of paying a high contribution widely at variance with our gross national product. There is injustice, at least inequity; but in my view we often set about describing it and curing it in the wrong way.

Our complaint has been made and heard, and regional aid is one of the means which is being applied to satisfy it, in addition to the revised financial mechanism. The present new level of regional aid has to be seen as related to our gross contribution, or people will not appreciate the intention behind its provision. All noble Lords attending this debate will be aware that the gross contribution is the result of the method of collecting the resources propres, a method agreed and incorporated into the treaty which we signed. This method, established by Article 131 of the Treaty of Accession, has in fact had a punitive effect on our economy, but in a very real sense its effect and scale are determined by our own commercial habits, our own commercial behaviour, traditional to our ways and still operated by our own choice.

The major portion of each partner nation's contribution to the Community comes from the collection at its borders of duties and levies on goods from the world outside the Community. Customs officers of each nation are acting as agents for the Community. It happens that citizens and firms in this country choose to buy a great volume of goods outside the Community, as is their undoubted right; the duties and levies on those goods are passed to Brussels as agreed. I am among those responsible, in driving a Japanese car and operating a Japanese video-recorder. My little bit of tax goes on to Brussels, and it would not have been collected if I had bought a British or French car or a Belgian recorder. There is nothing sinful or un-European in such behaviour. The Community was not set up as an inward-looking rich man's club, as some more ignorant or mischievous propagandists were wont to claim. One of the declared principles was to liberalise and expand world trade, and so it remains. Some of the imports which pay levies are worthier perhaps than cars and recorders. New Zealand butter and lamb, and the crops from the sugar-producing countries which were British dependencies, are brought in to keep faith with those countries, to honour a promise. They all pay levies to Brussels and so inflate our gross contribution, to make it inordinately large.

Regional aid is one of the means of lightening our net contribution, and I hope that noble Lords will explain in the country the neighbourly goodwill which is demonstrated by our partners in seeking to do this. It would be appropriate but unwise to introduce into this debate a technical passage on the quota and non-quota allocations of regional aid directed to Britain, and even to identify what my own territory of Yorkshire and Humberside has received or will receive. The noble Lord, Lord Plowden, with his immense specialised knowledge, has touched on this. No doubt there will be other opportunities for me to do so. My emphasis must be on what happens when regional aid resumes its normal pattern, or takes a new pattern, and what can be done to make us less reliant on favoured treatment.

Of course I should like to see the regional fund enlarged. It should be larger. The noble Lord, Lord Thomson of Monifieth, whom I shall always regard as my noble friend wherever we may sit in this House, opted in 1973 for the commissionership of regional affairs because he thought that it would provide the scope he deserved. It did not. That fund and the Social Fund have been starved of means from their inception—and again the noble Lord, Lord Plowden, made this point. There is a culprit in this and that culprit is also distorting Britain's net contribution. For that reason I beg the House to indulge me for a moment or two if I speak on matters not evidently or directly related to the title of this debate, but matters inextricably related to Britain's present need for refunds—refunds largely in the form of regional aid.

Those refunds, designed for Britain, directed to Britain, are specific to our present difficulties and the special levels have a limited life. The ultimate correction of our imbalance has to be sought in other ways, and let us not deceive ourselves. Our problem is created not so much by the gross contribution as by the net contribution, as everyone present evidently knows. We do not recover as usefully or as substantially as we should from the money pooled. The culprit is—and this has already been mentioned today—the common agricultural policy. That is what consumes three-quarters of the Community's, resources propres, the financial lifeblood of its existence.

From the very beginning we, the pro-Europeans, have made it plain that it was our intention to change and improve and refine that policy. In a parliamentary context Peter Kirk, in Strasbourg on 16th January 1973, said so in a famous introductory speech for the British delegation, of which I was a member. Geoffrey Rippon who succeeded him as leader of the Conservative group after Peter Kirk's tragic death, reiterated it consistently. Both did so with great force, and it is my contention that their expression of our dissent was as correct and convincing, as that of some others, including some Ministers, has not always been correct and convincing. They did not say, "It is wrong because it does not suit Britain". They said, "It is wrong because it is a waste, a misapplication of European resources. It is wasteful of what we all share". That was and remains a positive and persuasive approach, but in a way it has been frustrated by clumsier attacks from other quarters.

While I am on this theme I must also be critical of the vocabulary employed by some of our spokesmen. In the matter of our gross contribution, the method and purpose of collection is known to them, and it is therefore wrong, inexact and misleading to speak of it as "our money". When levies and duties are collected in Rotterdam, Marseilles or Bremen they are not claimed to be "Dutch money" or "French money" or "German money". This unhappy and repetitive slip—more than a semantic slip—on our part gives the impression of Britain trying to change the rules to suit Britain, and that provokes suspicion and it hampers understanding. It is prejudicial to our own best negotiating interests. It enables, for instance, my friend Mr. Enoch Powell to gloat at me, as he did the other day, when he quoted a speech he had made on the Continent after Parliamentary approval had been obtained for Britain's entry by a majority of 112 in another place and a majority of seven to one in your Lordships' House. What he said in that speech, made as it happens in Vaduz in Liechtenstein, but addressed to all continental dwellers, was, "Don't count on Britain. Don't suppose that those parliamentary votes mean anything. We shall rat on them—you will all see that we shall rat on them". Those are not the exact words that he used or which are printed in the speech, but they are not so much a reinterpretation as a condensation.

Enoch Powell has remained a personal friend despite the deep cleft between us over Europe and other matters. Three weeks ago in the shadow of recent events he quoted and he gloated amiably, but with open glee, at causing me intended discomfort. He is certain that he is right. I am certain that he is wrong, but so long as some people entrusted with our voice—the voice of our country—either in Government or in Opposition parties, appear to corroborate his warning, we are in trouble. We are creating trouble for ourselves which we do not deserve. We are disturbing our friends and satisfying our opponents. We are to be trusted: I wish we could always make that clear by communication.

I have done, but I should like to leave a final thought with your Lordships. This is a time when other equally old and splendid nations—one in particular—at the other end of Europe—are showing that they cannot be forced into unity by an imposed discipline. We can show that the nations of Western Europe are capable of combining by our own individual wisdom and will. That must, it appears to me, effectively hearten them. We are all part of the great creative Continent of Europe. Those of us who are free have the opportunity to prove that freedom not only enables us to combine, but persuades us to do so, to draw together by our own will and wisdom. If those peoples see this as the shining prize to be won in the end, it may lift their spirits. I hope that the example of our success may do so.

6.15 p.m.

Lord Lever of Manchester

My Lords, it gives me especial pleasure to follow the noble Lord, who is very welcome back to the House with this contribution. The fact that I happen to be in almost complete and categorical agreement with every sentiment that he has expressed I do not think is alone due to the value which I place upon his contribution, which I find to be very relevant to the subject which we are discussing. Of course, we are all very grateful indeed to the noble Lord, Lord Plowden, for his usual lucidity and the persuasive understatement with which he brought in his report and recommendations. I think that few of us will be disinclined to disagree with him. But I, who may be pardoned if I do not stay within those limits of valuable responsibility for a few moments, shall comment rather generally on some points.

First, it seems to me that there are two problems here which are being confused and perhaps deliberately confused. One is the question of regional aid from the Community's point of view and the other is the inter-country regional aid. The central problem from the Community point of view is not specific concern with the disparities within the country, though they may have very healthy and creative views about that. Their central concern and responsibility must be to affect the disparities between the country members of the Community so that we can achieve a greater convergence in economic policies than has so far been possible. I think that it is important to stress this because that is the Community's central purpose and that should be the Community's central role.

I do not have to repeat my own passionate belief in the central importance of the European Community to European co-operation and to world co-operation. But it is very important that we should not, when suffused with this general sense of collective Community co-operation, lead ourselves down paths of centralisation where centralisation is inappropriate. The role of the Community is absolutely relevant in deciding the apportionment of the Regional Fund as between different countries. In my opinion, the role of the Community must necessarily be a small one, or a negligible one, in deciding how, within each country, regional development is given preference.

Therefore, it follows that I do not altogether support the notion that it is self-evident that the absence of this ugly word "additionality"—which probably appears in no reputable dictionary—is to be deplored. In fact, the absence of the word would certainly not be deplored by me! The reason for that is that if in fact the Community were deciding to alter the structure of the aid given to the regions of, for example, our own country, it would be unnecessarily and irrelevantly interfering in decisions which ought to be made from a more decentralised and knowledgeable basis.

It is not hard to say that our regional policies are inadequate and ought to be stepped up. That is a matter for the people and the Government of this country. But I believe that the role of the Community is not especially significant—at best it is marginally significant—in encouraging convergence. We must be very careful about accepting the self-evident desirability of additional benefit from the regional aid of the Community, because we shall follow it up with what I believe will be very unrewarding, mechanical achievements. It means that we enlarge detailed supervision by people in Brussels of individual projects about which they do not have adequate experience, and cannot have adequate experience; they certainly do not have an experience comparable with that of the local departments, which have a universal enthusiasm, but which, even with their considerable local advantages, do not perform this task to the undiluted satisfaction of all those concerned.

Therefore, to allocate this task to Brussels—which will deal not only with this country's detailed regional problems but will presume to pronounce upon individual projects on this principle throughout the enlarged Community—would be a great error, would result in a useless extension of bureaucracy and would be precisely the wrong use of the Community in encouraging centralisation, whereas we all ought to be encouraging decentralisation and local knowledge. If we are not very careful and go into other schemes of enlarging the quota—or removing the quota—for Britain and depending wholly on ex-quota contributions made with this detailed supervision and judgment of individual projects in Britain, we shall end up with the Community fund being a vast beehive of bureaucratic activity—a beehive with no honey to be seen.

Lord Plowden

My Lords, I am not quite sure whether I have understood the noble Lord, but is he implying that the committee recommended that there should be direct access to Brussels and to Brussels' bureaucracy?—because that was exactly what the committee did not recommend, as it would create an enormous bureaucracy which could not possibly work.

Lord Lever of Manchester

My Lords, I am sorry if I did not make it absolutely clear; I thought that I had made it clear that I agreed with everything that the noble Lord said and with the conclusions that lie reached that the logic of those who are passionate for additionality must lead to the concept of the enlargement of the non-quota contribution. I do not want to press this in detail, and I could hardly describe the conclusions which the noble Lord reached as a passionate enthusiasm for demonstrative additionality in the impact internally.

Of course, we all want a bigger Regional Fund, which is a different matter, but it is in order to deal with disparities between countries. I did not understand the committee's great passion for increased surveillance of detailed projects from Brussels. If the noble Lord is saying that the conclusions imply that our own Government ought to be pressed to make those funds assuredly additional to the funds which would otherwise be engaged, he is merely asking—and I would support him—for increased regional aid to be given within our own country.

However, it seems to me that that is not precisely the same as demanding that the Regional Fund, as between countries, is not intended to correct the inadequacy of the national disposable resources in dealing with regional problems. The logic must be that if you are to insist that these projects should be additional, it is almost inevitable—though I accept the noble Lord's assurance that he would not support it—that this would mean greater detailed surveillance from Europe.

At the present time the overwhelming effect of the operation of the Regional Fund is to make a modest correction towards the disparities which exist between countries. It does so under the guise of adding to—but fails to add to, to any significant extent, except the trifling extent of infrastructure interests—the internal policy of regional aid. The reason for this ought to be considered, It is that its central purpose—which I insist must be to correct divergence between countries—is being evaded by all the members of the Community, including this country. That is why the tendency is to move away from convergence, and not towards convergence, of the broad outlines of our economic policy.

Here we have a regional policy which makes a small contribution to inter-country convergence in order to counter the very massive contributions to inter-country divergence which the failure of the leading countries of Europe to co-operate adequately has brought about in recent years. Let me take one issue, such as parity. Failure of Britain to understand the need to co-operate adequately on international monetary matters is one thousand times more important in promoting divergence between the performance of countries than can be any marginal, regionally dressed-up, contribution made by the Community. We are a Community that is still insufficiently co-operative. If it is not a misuse of language, our country is one of the leaders in failing to bring about the enhanced co-operation which is absolutely vital if we are to have the significant achievement for Community purposes that those in favour of the Community have in mind.

I welcomed the speech of the noble Lord, Lord Saint Oswald, because those who believe this are largely silent. The massively chauvinist unilateralists—alas! well-represented in both parties, but more heavily, influentially and contemptibly represented in my own party—tend to take the floor to play upon the naive, popular publicity available to them; whereas some of us recognise—as does the noble Lord, Lord Saint Oswald, and as do I—that this massive increase in co-operation is what is required rather than a foolish, unilateralist regression.

I raised the point about parity. Why are we not in the European Monetary Fund? Why are we not co-operating in that sense? I cannot go into this subject without trespassing too far on your Lordships' indulgence, but I must make the bold assertion that it is because the present Government and the previous Government—encouraged in their errors by the Treasury of our country in particular, and not sufficiently discouraged by the more enlightened areas of foreign policy—have stayed out for what they believe to be national advantage. We welcome the principle, but we refuse to participate in the practice.

I shall only say briefly that it was a very unrewarding exercise in unilateralism because staying out of this central Community purpose for our own short-term gain was motivated by a desire to see our currency parity rather lower than higher. The reward we got for our chauvinistic unilateralism is to be left in our present position with a ruinously high parity and without the means of co-operatively, in alliance with our European partners, dealing with a problem of that kind. Until the spirit of co-operation is greater among all the leaders of the Community, and until this country above all starts to make a positive contribution of a co-operative character, we shall be frolicking on the margin of the problem of convergence that is national and inter-country convergence.

Therefore, while welcoming the report and its constructive character, I have to emphasise that until we, as a member of the Community, show a heightened willingness to recognise that we are missing a great opportunity of an entry point into the outlying world economic financial strategies which can alone avoid the cataclysmic dangers which are threatening the world, and unless we in this country take a very different standpoint from that evidenced by our Governments so far, we shall get no progress made, and not only get no progress made in general but in the detail of matters like reform of the Community itself. You cannot expect the French to accept the kind of agonised reappraisal in terms of the co-operation required of them to accept serious modifications in the common agricultural programme unless you show that that is part of a general determination by us all to make the kind of sacrifices involved in constructive co-operation.

6.33 p.m.

Lord Cobbold

My Lords, the noble Lord, Lord Plowden, has set out clearly the main conclusions of this report. I thought it might be of interest to your Lordships on this occasion to recall briefly the previous report on this subject that was made by this committee at the end of 1976, to which the noble Lord, Lord Banks, referred. It might be of interest to consider to what extent regional policy has developed in the intervening four years. It may also be useful to draw attention to some of the criticisms and suggestions which were put forward in the earlier report and see to what extent they have been met.

First, may I recall, though it is perhaps not absolutely connected with the subject we are discussing, that the earlier report arose from concurrent sittings of subcommittees of both Houses of Parliament. It was one of the few occasions when this concurrent procedure has been adopted. I am aware of the complications involved in that procedure, but I should like to repeat, as I had the privilege of chairing those joint sessions, what I said on the subject in introducing the debate on 31st March 1977: If I may express a personal view, though I believe that it is generally shared by my colleagues, the experiment of the two sub-committees sitting concurrently has been very rewarding. It saves the time of witnesses and parliamentary staff; it avoids a great deal of duplication; and we have found the somewhat different approach very helpful. The terms of reference and the practice of the two sub-committees differ and the reports made by the two Select Committees need not be identical, the practice of this House being to go in more depth into detail and recommendations. The fact that the two reports are, on this occasion, not identical, though they are in no way contradictory, does not, in my view, invalidate the usefulness of the 'concurrent' exercise".—[col. 1054.] The final conclusion, in paragraph 52 of the earlier report of 1976, read as follows: The committee conclude that it was wise on both economic and political grounds to establish the Regional Fund, and that the fund has great potential for encouraging Community cohesion. The difficulties facing the future development of a coherent and viable regional policy in Europe are long term ones. Initially effort should, therefore, be concentrated in the Council of Ministers on a limited number of the more important problems, which would include additionality, the improvement of communication between all those concerned, the future size of the fund, and improvement of co-ordination of all aspects of Community policies which affect regional development". The present report deals with each of these points. As the noble Lord, Lord Plowden, has pointed out, although there has been some increase in the size of the fund since 1976, it remains quite inadequate to have any great impact by itself, a situation which is liable to be made much more difficult by the inclusion of new member states with heavy regional problems. This report lays great emphasis on the need for coordination with other funds and other policies of the Commission, referring in particular to the regional effects of the common agricultural policy.

The earlier committee had the advantage of evidence from Lord Thomson shortly after his retirement as commissioner, when he described this co-ordination with other Community funds as "the most obvious need". Further co-operation with the European Investment Bank is advocated in both reports. The problem of additionality remains much where it was four years ago, and no evidence to the committee shows convincingly that the size of each member state's regional aid programme is bigger as a result of setting up the Regional Fund. I shall not go into the argument between the noble Lords on the subject of additionality. It is a complicated subject. I found myself in agreement with the noble Lord, Lord Plowden, and not with the noble Lord, Lord Lever.

Lord Lever of Manchester

My Lords, I thought so myself too, and I shall explore the supposed difference, but elsewhere.

Lord Cobbold

My Lords, the present report goes more deeply into the improvement of communication between all concerned and makes a number of recommendations. Both the earlier report and, more specifically, the present report stress the value of development programmes. I agree with the noble Lord, Lord Plowden, that this is an extremely important point. The report also welcomes the introduction of the non-quota section.

In general it seems fair to say that in the last four years a little progress has been made on a number of the points emphasised in the earlier report, except on additionality. But the fund remains far too small to have any real impact on the growing regional disparities in the EEC; and the problems which will result from enlargement of the Community remain to be dealt with. Though there has been some improvement in co-ordination within the Community and between the various funds, there is still a very long way to go. Some evidence to the committee suggested that the Regional Fund in its present form caused little to happen that would not have happened anyway, and that there could be some doubt whether the administrative time and effort involved could be justified.

Nevertheless, the bulk of evidence given to the committee indicated a widespread desire to see some Community involvement in regional matters, and also to see local authorities in the member states playing at any rate a more active role. The committee feel that much could be done to improve the existing practical framework and to encourage more substantial longer-term developments. It will need concentrated effort by the Community authorities. The committee hope that their recommendations may prove helpful.

6.40 p.m.

Lord Tranmire

My Lords, the noble Lord, Lord Plowden, has the happy gift of being able to extract clarity out of the confusion of some witnesses by a very courteous and penetrating examination, and he has shown that quality today. Indeed, I found his speech so clear that I thought I could throw away most of the notes for my speech, because he had dealt with the subject clearly, however not sufficiently clearly for the noble Lord, Lord Lever. However, I felt something was wrong in that one thing I thought he was not doing was creating any beehives of activity without honey and we were trying to reduce the number of honeyless beehives.

I will briefly look at the position historically and what it is now. I recall on 26th October 1971 in another place—this was before accession—arguing the question of regional policy, and the Minister said: I am one who believes that entry into the Community would provide the regions of Britain with a unique opportunity of breaking through into better times". He said that at the time when a book was written by Kevin Allen and M. C. McLennan on the whole question of regional policy, and I quote from their conclusion: The disparities between the richer and poorer regions within the EEC"— the EEC as it then was— are quite startling. Income per head in the richer regions is six and a half times as great as that in the poorest: the higher regional unemployment percentages are 70 times greater than the lowest". They went on to give a warning: A most disturbing point is that there is no public evidence that the regional implications of entry have been investigated in any depth by the authorities". When we took evidence before the recent report was written we got the views of the CBI, who said (paragraph 98 of our report): Income per head in the richer regions is six and a half times as great as in the poorest regions". In other words, no progress had been made in those 10 years. The fund report for 1979, published in August of last year, confirmed that the gap between the richer and poorer regions widened in the '70s, and in our 14th Report we make the same point: Regional disparities within the Community are greater now than in 1975". I differ from the noble Lord, Lord Lever of Manchester, on the question of disparities. My picture—what I want to get right in relation to the Regional Fund—is one which removes disparities within countries, not merely between countries, and that to my way of thinking is the whole purpose. But as we see, the disparities are growing wider each year, and they will continue to grow wider unless something is done.

As I see it, there are three main reasons for that. The first—this point was made by the noble Lord, Lord Plowden, among others—is the insignificant contribution the Regional Fund makes to the problem of regional disparities For 1979, the year about which we took evidence, we received in infrastructure and industrial grants £107 million from the Community. Our total expenditure in that year on infrastructure and industrial grants was £1,326 million, so the proportion was only about 8 per cent.

Secondly, the point has been made by many that in 1979 the Regional Development Fund represented some 3 per cent. of Community expenditure, while the common agricultural policy represented 75 per cent. The CAP is in fact pulling in the opposite direction to the regional development fund, and therefore we have a tug-of-war, and that is the main reason for the regional disparities.

But thirdly—and this is probably the most potent argument of all—the Commission had made a study of the regional impact of the common agricultural policy and have concluded: Many of the farmers in the richer states are not working full-time in farming. In Hessen, Bavaria, Rhineland, Baden-Wurttemberg, Saarland, Alsace Lorraine, Rhone Alpes, Languedoc-Roussillon and Provence, 50 to 70 per cent. are part-time farmers". In Italy, the proportion goes up to between 70 and 90 per cent. That means that the guarantee and guidance funds are being used to bolster up the incomes of small part-time farmers in regions which are in general richer than most, are non-agricultural and prosperous. In many cases, part-time farmers receiving those sums have other sources of income. Further, when the Community imposes co-responsibility levies, those small part-time farmers are excused payment of the levies, which then have to be paid by the other members.

Probably the best way to illustrate the anti-regional effect of the funds is to look at table 7 in the 1979 report on the guarantee and guidance funds. There one finds that the chief beneficiaries of those two funds are the three richest countries in the Community—Germany, France and the Netherlands—and the United Kingdom, except for Luxembourg, comes at the bottom of the list. I should have said that British farming was as efficient as any in the Community, yet next to Luxembourg we come bottom in the list.

If, next, one examines the figures in the development fund report for 1979 and adds those to the guarantee and guidance funds, one finds that—adding the regional aid we get to the guarantee and guidance funds—France and Germany receive three times as much in European units of account as the United Kingdom (I am quoting the figures for 1979, taking the tables from the two reports for that year) that the Netherlands and Italy each receive twice as much, and that only Ireland and Luxembourg receive less. That means that, in accordance with the way in which the Community is being run at the moment, the poorer countries are receiving far less than the richer ones.

That is worrying; but still more worrying is what will happen when we get enlargement. Then we shall have disparities of not 6½ to 1, as we had in 1971 and as, according to the CBI, we have today, but disparities, bearing in mind the new entrants, of 12 to 1 or more. If the same system of the guarantee and guidance funds, as well as the Regional Fund, continues without amendment, quite clearly there will be no regional improvement, and probably in the end it will be necessary to bankrupt the fund, unless it is increased beyond the 1 per cent. VAT.

Therefore, there is an urgent need to get it right. Incidentally, in the guidance fund there can be found a very good illustration of what is going wrong. This is contained in the study that I mentioned earlier relating to the regional impact of the common agricultural policy. It is pointed out how in the guidance fund very little money is spent. However it varies, it says, from 20 per cent. for some projects in Ireland and Italy, to 70 per cent. for projects in Germany and the Netherlands. Quite clearly the guidance fund is being far more anti-regional even than the other fund.

How are we to get this right? I think that we must look to see why it is necessary to have an arrangement under which aid to rural communities is paid under one system out of the CAP, whereas the Regional Fund is paid under another system based on a quota and with the rules of additionality—whatever may be required. I should have thought that the time has come to draw together. In fact in our report a few years ago we recommended that the rural and urban systems of regional aid be put on the same basis. I should have thought that in the case of a rich country, such as the Saar or the Rhineland, if aid is being given to that country it should be given by the nation state rather than by using the guarantee and guidance funds.

Again, I would suggest that the money should be disbursed by the Community under the same system of national quotas. Having sat on many of the subcommittee's examinations, it strikes me that we are failing to make a success of the Community. Now after accession, whatever have been our former attitudes, we should be trying to make a success of it. We are finding that the Commission is trying to harmonise everything from the noise made by lawnmowers, to banking, insurance, and company law. But it is failing to harmonise what is essential—that is, the rules of regional aid, in order to correct regional disparities both urban and rural. I fear that until we do that regional disparities will increase.

6.54 p.m.

Lord Croham

My Lords, I agree with what the noble Lord, Lord Tranmire, has said about the great clarity with which the noble Lord, Lord Plowden, introduced the valuable report of the Select Committee. Indeed, my reaction has been very similar to that of the noble Lord, Lord Tranmire—I have considerably reduced what I wish to say this evening. The noble Lord, Lord Cobbold, made a quite important point when he referred to the concept of the European Fund as something which would improve the European spirit. I am sure that originally the Regional Fund and the Social Fund were both seen as part of a bringing together of Europe, of which the CAP was another manifestation. But we in this country have tended to concentrate most of the time on the use of the Regional Fund as a means of offsetting the known costs of the common agricultural policy. This is important because a fund seen as a means of improving the European spirit must have in it a degree of additionality, so that the regions can be seen to be benefiting from the European Fund. In terms of an offset to the balance of payments and resource costs of the CAP additionality must be at a minimum—and I shall come to that point in a moment. The fund was also seen as a way of reducing what now seems rather ironical in retrospect—the attraction of industry and jobs to the prosperous golden triangle of South-East England, which in those days certainly was seen to embrace the Midlands.

The quantitative expectations of those who saw the fund as a very important contribution to the offset of the CAP when making arithmetical assessment of the pros and cons of Common Market membership were bound to be disappointed. The fund has always been too small, and even though we have had quite a substantial share, the quota system has had unsatisfactory results. There was a time when it would certainly have been in our interest to criticise the quota arrangements of the fund on the grounds that—and I quote from the report: all the ERDF aid to Germany is going to areas which are wealthier than any part of the United Kingdom". The accession of Greece, and the impending accession of Spain and Portugal, too, may make the retention of the quota system as the key to the distribution of ERDF monies appear in a more favourable light to us. I am not as convinced as were the committee that a formula based on the average will be entirely beneficial to this country. I agree with their view that larger funds must be put up now that we have enlargement, but larger funds have to be put up by somebody. It could be that ending the quota system will make some of the countries that would have contributed more unwilling to contribute. Moreover, one must stress the point—it comes back a little to additionality—that if we have to put up a lot more money ourselves, we shall need to get a lot back before we have really gained very much.

The committee, I think rightly, attached importance in their report to the two features which I think probably account for much of the disappointment about the Regional Fund. I have already mentioned the matter of additionality. The second problem has been the insistence of all member Governments that all assisted projects must be submitted through national Governments. That has to be done to reduce bureaucracy, but the fact that the programmes have to be part of central governmental programmes has certainly increased the degree of central control and I think has reduced the interest and attraction of regions in a European Fund as such.

As I have already said, the desire to use the Regional Fund to offset the balance of payments and resource costs of the common agricultural policy certainly makes all the finance Ministries and treasurers insist that as far as possible the funds are used to pay for expenditure which otherwise central Government would pay for and should not represent additional expenditure. Of course that is contrary to the spirit of the fund, and therefore one has to go along as far as possible without much resource commitment to making it appear that our policies are in line with the rules. But given that there has been little additionality—so long as we insist on the offset for CAP there will be little additionality—there is obviously a substantial reduction in the attraction to regions of the ERDF monies because they do not receive any very obvious benefit from them.

One suspects also that the insistence of Governments in having all the applications controlled by them is not merely in the interests of reducing bureaucracy at the centre, but is also an indication of a reluctance to give up any element of national sovereignty. I think that the economic logic of these factors is impeccable, but I doubt whether the interest in the country in the European Fund as such has benefited very much by the fact that it is so much controlled by Government and appears to be mainly an outdoor relief for Government rather than extra relief for the regions.

I referred to the initial arithmetic of our entry. I had no great expectations that membership of the EEC would quickly produce a large economic benefit for this country. I had no great expectations that the regions would be transformed by a European Regional Development Fund. But I am sure that we could have secured a better result from our membership had we devoted more effort during the period we have been a member to getting a larger fund and administering it in a way which provided more obvious incentive for the assisted regions to relate to it—and I use that word that I do not like very much, "relate" to it, because I think that one needs to get more of a feeling in this country that Europe is not something that is entirely hard economics; there are social and political elements in it, and by concentrating too much on balance of payments offset we neglect those.

I believe that the proposals which the Select Committee have made in their report as to the size of the fund and the modification of its procedures are very important. I think that I would like to stress particularly the desirability that local bodies should be involved more directly in the fund and be placed in a position where they bear more direct responsibility for the success of an application for aid. That does not contradict the point made by the noble Lord, Lord Lever of Manchester, about bureaucracy. Greater involvement and bearing more responsibility can, I think, be achieved quite compatibly with the present basic framework of arrangements.

Our continued and effective membership of the Community is now essential; it is quite idle to think otherwise. But our poorer regions will not see it that way unless both our national and community regional policies are far more effective in securing a better regional balance than they have been in the recent past.

7.2 p.m.

Lord Sandford

My Lords, I greatly welcome the timely, concise and astringent report that we are speaking to today, and particularly the lucid delivery of it this evening by the noble Lord, Lord Plowden. He started, quite properly, with a reference to the noble aspirations which lie behind the Regional Fund and his conversations in Paris with M. Monnet and others some 30 years ago. The report records the worthy political gesture of 1972, later endorsed in 1979, by which the ERDF is looked to as one instrument among several designed to obtain greater convergence between the economies of the member states of the EEC.

Those noble aspirations and political gestures, and that very worthy symbol, are all, I think, still widely endorsed, though perhaps not widely enough. But the report makes it quite clear (though the noble Lord is too polite to put it in such crude words) that what we in fact have is a complicated and time-consuming sham. If your Lordships think that is too strong language, you have only to compare paragraph 9 with paragraph 1 of the report's introduction to see that, alas! it is true. You have only to look at the size of the fund in relation to its task—at the comparison between this fund and the CAP, which is such that a by-product of the common agricultural policy is more than sufficient to reverse the whole effect of the regional fund in quite a number of rural areas in quite a number of countries. You have only to see that the EEC funding in relation to the United Kingdom funding is such that the effect of it is barely perceptible—and I will give your Lordships a few illustrations before I have finished of how true that is.

In addition to that—and this is a point on which the Association of District Councils feels fairly strongly—there is no mechanism by which the regional fund as it is operated in this country can reach black-spots which are far worse off, by all indicators, than a number of other areas in other countries which are being supported by the fund. Nor are there any means whereby, at present, any small projects (which we are all now so keen on, following the advice of the noble Lord, Lord Lever) can be supported by the fund.

Personally I find that, having occasion to debate the common agricultural policy last Thursday and the regional fund today, one's loyalty and enthusiasm for the European ideal is being rather sorely tested. I am afraid I disagree with the noble Lord, Lord Plowden, when he says that the fund symbolises something worth while; it does no great harm and it is probably still doing some good. My impression—and it is only an impression; it is not based upon hard evidence—is that as one local authority after another comes face to face with the hard facts of the situation, the disillusionment and the frustration they feel is positively harmful to their general attitude towards the European ideal. The sooner this system in the form into which it has degenerated is changed, the better all round.

Speaking now as president of the Association of District Councils, who have a very direct interest in the better working of this, I am grateful to the noble Lord for having recognised and recorded in his report the very considerable enthusiasm that nevertheless still persists for first of all wanting to see this system improved and then wanting to participate more actively and constructively in operating the improved system.

Fortunately, all local government—not just the district councils but the metropolitan authorities and the county councils—are in a good position to respond to the idea of development programmes, because in response to my right honourable friend the Secretary of State for the Department of the Environment, in an initiative which he took last May to do with better relations between local authorities and local business interests, all the associations have conducted a survey of the initiatives which were being taken by our members in respect of their support of local businesses and of their development. The survey we sent out led to a better response than we have had to any survey we have ever done. We now have a great compendium of detailed notes on all the investments they were making in land, the servicing that they were undertaking on their land, the construction of factories—advance factories—the promotion of industry, the giving of advice, the holding of exhibitions, et cetera—all the constituent elements which, I take it, will go into the preparation of a development programme.

This raw material was supplied to the Secretary of State and mulled over by what has become known as the Burns Committee. Sir Wilfred Burns reported to the Secretary of State at the end of July, and so far we have heard nothing further. My question to my noble friend—I think the first question he has had to deal with—is to ask him why there has been no progress so far, when we can expect progress and what form progress will take when we see it. It is highly relevant to this debate today, because what is involved in focusing all the separate and disparate initiatives of the various local authorities—the metropolitan authorities, the county authorities and the county council authorities—is the same thing as is involved in making those initiatives up into a development programme which can be aided by the fund.

There are a number of other points of which the ADC has criticisms and troubles in connection with the ERDF, but my noble friend Lord Irving of Dartford, who is a vice-president of the association, will I think be dealing with a number of those in his speech, and so I do not have to deal with them now. So I conclude by welcoming the progress that has been made—it is not very great, but there has been some—in the Commission towards the idea of development programmes. I enormously welcome the extent to which our own committee has identified this as the way forward.

By way of conclusion, I should like to illustrate such progress as there has been and such progress as there needs to be by reference to a couple of our member authorities. Consett is one of our districts. It is an area in which virtually the sole employer has collapsed, has closed. It is a steel closure town. It is in a special development area and therefore the most qualified of any area to receive help from this fund. It will be eligible, when it is operating, for the particular form of integrated assistance from the Commission that is recorded in paragraph 33 of the report. But in the latest set of grants allocated under the Regional Fund—and dated 16th February—Consett, with all its problems, with well over 20 per cent. of unemployment, benefits to this extent: Consett, Watling Street Industrial Estate, construction of an additional access road; Phase II, Consett, Tanfield Lea Industrial Estate, construction of access road, foul and surface water sewers and water and electricity supply. That is all. For the highest priority area, which I think we have, with the highest unemployment, that is not a particularly significant contribution. I think your Lordships can see from that how much more valuable will be development programmes to embrace everything that Consett is doing—and I have three pages of material on what Consett is doing—all of which should be strongly supported.

Turning by way of illustration to something that seems to be more satisfactory, to Corby, also one of the top-priority assisted areas in this country, we have progressed this far. Eight separate projects, all to do with infrastructure, (pumping stations, sewers, roads, industrial estates) have been lumped together and are being aided under what is called a global application. That is still only dealing with infrastructure. It could be dealing with the umpteen other things Corby is up to to alleviate their situation; but it is not yet (although it is eligible) for the integrated support from non-quota section set out in paragraph 33.

I believe that we are making more progress on the rural front. Your Lordships will remember that when the Select Committee did a study on the enlargement of the Community they were appalled at the prospects for the rural areas under the impact of the unreformed CAP and I was asked to do a study of EEC policies for rural areas. During this time the EEC made their own proposals for three pilot programmes in integrated development of rural areas. Among the three they chose, one was the Western Isles, which comes under the good offices of the Highland and Islands Development Board. This programme, I trust, has now been agreed and is beginning to operate. Our own report on rural policy was accepted and has been taken on board by the Commission to the extent that they have now commissioned further research into the general idea of an integrated approach to rural areas; and I am glad to say that the Rural Planning Research Trust and two members of my association, the Radnor district of Mid Wales and the Eden District of Cumbria have been entrusted with one of the seven or eight research projects allocated across the community. We are making progress. I think it is pitifully slow and I am delighted that our committee has now made such a practical series of proposals. I hope they will be taken up and advocated powerfully by our own Government at the next appropriate meeting in Brussels.

7.16 p.m.

Lord Seebohm

My Lords, we have had some serious criticisms of the modus operandi of this scheme, both in the report itself and today in speeches by noble Lords. I think that these criticisms are justified but I myself do not wish the whole thing to be dismissed as of no consequence as a result of that. If properly administered, this fund could be and should be of great use. There are a lot of differences between this and other forms of aid agencies. For instance, the European Investment Bank makes loans, the European Coal and Steel Community makes loans. But what we are talking about today are grants that need no repayment. Therefore, for certain depressed areas where development is absolutely essential, this money could probably produce a good scheme whereas, if loan finance were needed, the repayments and interest would make the burden intolerable.

I think that the real importance of this report is the concentration that has been placed on changes which must take place; and I shall confine my remarks to that. Most people who have had any experience of distributing development aid or even funds from a large charitable foundation know that if they are spread too thinly they are quite useless almost anywhere. They must be concentrated to do any good; and particularly with the smaller amounts. This is where additionality comes in, because it shows that it is not being used as it was originally intended and that it is being spread around with no effect. We have had a lot of evidence from local authorities who are getting frustrated and who would like to have direct contact with Brussels. I do not think that that is possible. In this country alone there are 330-odd district councils with planning powers, and another 100 unitary or second-tier authorities; and there is no question of over 400 bodies having direct contact with Brussels.

On the other hand, if the proposal is that we should move from project finance to programme finance, the situation seems to be different. First, the amount of work that would have to take place in Brussels would be minimal compared with what it is now. That means that it would be possible for more people to be in direct contact with Brussels than is the case now. I suggest, therefore, that we look to see whether we cannot move at least one tier from the chain of operations. There are only seven development regions in this country and it seems to me possible, therefore, that seven regions could deal direct with Brussels. This means that the obvious tier to eliminate is Whitehall. I see no reason why Whitehall should come into the picture at all so far as the development fund is concerned. It would enable the regions to have the money paid to them direct and the local authorities would see the money coming into their hands in a form which would be welcome as a grant which was not going to cost them anything.

This seems the obvious solution and the one which in business one would use. One would get rid of a tier—and the nearer the top it is removed the better.

We have had a certain amount of complaint that the minimum of the project is too low. It is 50,000 EMU (£27,500 or thereabouts). I do not agree with that because the administrative costs of just putting it on the books would swallow up most of the money before one started. If we move to the programme system, this becomes irrelevant, These things can be slotted in as and when the local authority likes and in the form it likes. In order to get the development fund efficient and effective, the first thing is to move, as the noble Lord, Lord Plowden, has stressed quite strongly, from the project approach to the programme approach, and that we should then also be able to deal direct from Brussels with the development regions themselves.

7.20 p.m.

Lord Irving of Dartford

My Lords, I want first of all to congratulate the noble Lord, Lord Plowden, and the committee on their report, and on the enormous amount of work that has gone into it. I can do that with a good conscience because I am now a member of the committee, but my first meeting was on the day that they approved the report so I am not congratulating myself. I give my wholehearted support and congratulations to the committee on their report. It is a valuable addition to the considerable number of reports—now more than 300—which the committee have produced since our entry into the Community and which have become so influential in helping the development of European legislation and policy. It will also be a very valuable contribution in the review that the Commission have to make of the European Regional Fund which is due to be deposited some time this year.

The report makes it clear that the overriding problem is the smallness of the monies available to the fund. The United Kingdom received £136 million in 1980. However, this year, because of the accession of Greece, our share of the total will fall from 27.03 per cent. to 23.8 per cent., and the share of the three poorest nations—the United Kingdom, Italy and Ireland—will come down from 72.9 per cent. to 65.2 per cent. The committee says in one of the most significant paragraphs of the report: The problems of the poorer regions of the European Community are more acute now than at any time since the United Kingdom joined the EEC. The Community's Regional Fund has grown since the establishment in 1975, but it is still comparatively small, and the problems have not disappeared. In fact, regional disparities within the Community are greater now than in 1975". It is not surprising that in the evidence that the committee received it detected a disenchantment with the fund, and in general the view was that it was too small to make any significant contribution to the objectives that it was set up to achieve. These, as the noble Lord, Lord Banks, indicated, were set out at the Paris Summit of 1972 as correcting, the structural and regional imbalances between member states. As the report points out, the guidelines for Community regional policy adopted by the Council of Ministers in 1979, stated: Regional policy is an integral part of the economic policies of the Community and member states. It forms part of the various elements which contribute to the attainment of a high degree of convergence of the economic policies of the member states". This is an important role which it cannot carry out as long as the amounts available are so small. We welcome these amounts; but in terms of the total need they really are only scraping at the surface of the problem.

I listened to my noble friend Lord Lever with the care and respect I give to everything that he says; but I find it difficult to go along with him. I entirely agree that more co-operation is necessary and I want to see that speed up and be successful. But to assume that we must back-pedal on everything else until that co-operation is achieved seems to ignore the size of this problem. The budget of the fund represented only 2.57 per cent. of the total Community expenditure in 1981. I believe that the amounts have to be trebled to be even significant.

Lord Lever of Manchester

My Lords, my noble friend must not accuse me of urging back-pedalling on anything else. I was merely seeking to point out that as long as there is a tug-of-war in Community policies, with some tugging in the direction against convergence and the Community fund in favour, and as long as you have a number of giants on one end of the rope and a shivering pygmy on the other, you will not get the major advance that you want to convergence by merely giving a tonic now and again or a pick-me-up to the pygmy.

Lord Irving of Dartford

My Lords, I certainly accept the difficulties of the problems that we are facing, but I hope that now we have the support of my noble friend in seeking to extend by whatever degree the amount of monies available to the Regional Fund. It is important that this should be done because the CAP—which many noble Lords have said absorbs three-quarters of the total Community budget—has, as suggested in the report, the opposite effect to that of the Regional Fund in that it transfers income to areas which already have high agricultural incomes, such as North Germany and the Paris basin.

I would, however, guard against the view that we can, simply be reforming the CAP—and reform is necessary—switch resources from the CAP to the Regional Fund, because I believe that difficult as the CAP problem is, it still constitutes only 1½ per cent. of the total gross national product of member states, which is about the same as Japan, about the same as America, and a lot less than Russia, which is not surprising. What I am really pleading for is that we need new funds but we also need a new commitment.

One of the other problems that the report indicates is that there are no Community-wide criteria in determining allocations, which creates the totally anomalous situation where the aid from the Regional Fund to Germany is going to areas which are wealthier than any part of the United Kingdom. In my view aid should go to those parts of the Community that really need it.

As the noble Lord, Lord Sandford, indicated, I am vice-president of the Association of District Councils. I want to put the point that they have very cogently made to me. This is on the question of additionality. This is very important. The principle is that any money received from the Regional Fund must be in addition to money available from National or local reserves. If there is not a respect for this principle it calls into question the whole of the Regional Fund, in my view. The noble Lord, Lord Plowden, indicated that of course it is very difficult indeed to determine whether the money is additional or not.

The Government now take the view that because of the need to restrict public expenditure, the availability of assistance from the fund should not enable authorities to undertake any additional projects. Money from the fund is to be passed to the authorities responsible for the projects for use in reducing the amounts that would otherwise have to be borrowed to finance the projects, but are not additional to the capital allocations that they would otherwise receive. Indeed, under the new capital expenditure control system operative as from 1st April 1981, any capital grants from the Regional Fund must be deducted from the annual expenditure allocation to each local authority.

We have a clear indication of policy, as I understand it; but whereas previous Governments have never admitted that they were not operating additionality, here we have almost institutionalised the fact that it will not be allowed to happen from 1st April onwards. I should be very grateful if the noble Lord the Minister would comment on that. The ADC maintains that the money which is available should be additional to national and local reserves; anything else destroys the value and idea of the fund and is out of harmony with its spirit.

I should also like to talk about assisted areas. The ADC agrees in principle with the conclusion of the Select Committee report (paragraphs 43, 55, 75 and 76) that the Regional Fund should be concentrated on smaller areas in the most needy regions which meet certain minimum criteria of need, such as measures of income per head and unemployment levels. It also firmly supports the view that concentration of the fund's resources should not prevent national Governments from designating limited "black spots" outside the assisted areas as eligible for Regional Fund assistance.

The ADC believes strongly that the greater the concentration in national priority areas, as defined by the individual national Governments, the more important it is to ensure that the pockets of need outside those areas are not rigidly excluded from eligibility for Community aid. The definition of "priority area" is at best arbitrary, and the use of regional and county area unemployment figures often masks the reality of individual pockets of unemployment. The latest available unemployment figures as at 12th February this year show clearly that there are high unemployment rates in many black spots outside assisted areas. For example, although the average rate of unemployment in the non-assisted South-East is 7 per cent., there are many pockets of much higher unemployment. Clacton has 14.4 per cent., Margate, 15.9 per cent., Milton Keynes, 12 per cent., Sheerness, 15.2 per cent., Chatham, 11.2 per cent., and Ramsgate, 12.1 per cent. Also, if you take East Anglia, the average unemployment rate is 8.4 per cent., but it masks Cromer with 14.9 per cent., Great Yarmouth with 12.3 per cent., Hunstanton with 19 per cent., Leiston with 14.2 per cent., and Wisbech with 13.5 per cent.

The same applies to tourism—and I ought to declare an interest, as a director of a travel company. In many areas tourism makes a significant contribution to the local economy and to employment. While the existing financial aid to assisted areas for tourism projects is welcome, the need for tourism is not confined to the assisted areas. There are many parts of the country—for instance, East Anglia and the South-East—which do not qualify for aid, and yet the increasing volume of tourism from Community countries arriving at coastal ports and visiting tourist centres and attractions makes heavy demands on transport and facilities such as parking, toilets, information centres, accommodation, caravan and camping sites. In small towns the facilities cannot be funded from local resources, which are inevitably very limited. Therefore there is a very strong case for the special needs of tourism being recognised in the allocation of Community resources, regardless of whether or not a town or district is within an assisted area.

I should like to talk briefly about development programmes. I welcome the committee's proposal that individual applications for industrial projects should be abandoned in favour of a system of broader development programmes. I believe this could save a great deal of administrative work. I am particularly anxious as a member of a local authority to say nothing of being a vice-president of the ADC that the maximum consultation should take place with the local authorities in the development of these programmes, both in the United Kingdom regional development programme and in local programmes. In the larger towns and cities, district councils have developed corporate policy statements and development plans as a basis for consultations with other public bodies as well as with commerce and industry. This framework could be readily adapted, in my view, to drawing up development programmes for regional aid.

As to the criteria for eligibility, I certainly welcome the broadening from 1979 of the criteria for assistance to infrastructure projects. However, the Regional Fund requires a minimum investment of 50,000 European units of account, or something like £20,000, on projects. That means that the smallest projects, which are often quite significant in a local context, are excluded, so that a number of schemes which could contribute to the creation of jobs cannot be considered. The threshold for the small project, I believe, is set too high to help in establishing small industries; and local development programmes should have a lower minimum, which would enable such schemes to be assisted.

Finally, there is one way in which I perhaps differ from the committee, and that is regarding the question of subsidised interest rates. I have always been attracted to the use of a larger proportion of Regional Fund moneys in this way. The proportion—anyone in local government knows this very well—of total costs attributable to interest in any project is exorbitant. I believe it could be avoided while at the same time enabling the fund to help many more authorities.

The committee points out that the obligations stemmed in part from the fact that the grants are paid in mixed currencies and the cost and risk of dealing with the foreign exchange problems eliminates almost all the advantages of paying a lower interest rate. However, I think that the subsidy, in present-day terms, is too small anyway to be significant. Nevertheless, I should like to see a great deal more work put in on this aspect of the problem than I believe has been given in the past. I believe that here I am in very good company because Jean Monnet was one of the most important advocates of the use of subsidised interest rates in projects of this and other kinds. I wish to congratulate the noble Lord and the committee on a splendid job of work, and I hope that most of its recommendations will at one stage or other be accepted.

7.37 p.m.

Lord Greenhill of Harrow

My Lords, it is late. I shall be very brief and I hope that what I say you will not consider to be frivolous. The message which comes to me from this characteristically lucid report is two-fold. It is, first, that the fund is not achieving its objectives and, secondly, there is very little chance of significantly improving the position. This, I fear, is the message which today all too frequently comes when the workings of the Community are examined by subcommittees of this House. Shortcomings are identified, but for political reasons it is virtually impossible to rectify them, and this situation will surely become even more difficult after the enlargement of the Community. Dissatisfaction with the present situation is not peculiar to this country, to the British, but is felt by many members of the Community who share it with us. Even the Germans have come recently to express some of their misgivings.

What can be done about this? First, we could decide to leave the Community. It is not the course I would favour, but there is a case to be argued and a case to answer. Secondly, we can stumble along in the face of growing hostility in public opinion, hoping against hope that it will come right in the end, and on the way, as the report has done, we can suggest sensible reforms which we hope will be taken up and successfully incorporated.

If we pursue that second course we have to face the fact that progress is going to be extremely slow; maybe there is no other way. But there is one other way which can be briefly mentioned, I think. One is tempted to think impatiently that the best course would be to try for a wholesale revision of the Treaty of Rome—not just a renegotiation of the British terms of entry but a fundamental look at the whole treaty. No treaty is Holy Writ for all time; many years have passed since the negotiations and the shape of Europe has very much altered, and very much altered economically.

I am sure that many of your Lordships will say that this is utterly impossible and that it would probably be very unwise to attempt it. I am reminded that some years ago the noble Lord, Lord Stewart of Fulham, who was then Foreign Secretary, suggested to Mr. Gromyko that the United Nations Charter should be revised. Mr. Gromyko replied, rather wearily I thought, that if the noble Lord had known how difficult it had been to negotiate the charter he would not make such a suggestion. I daresay that those who took part in the negotiations on the Treaty of Rome would feel exactly the same way. But in spite of all this, I do not think that the idea of a fundamental revision of the Treaty should be entirely dismissed, and the time may well come shortly after some of the future enlargements have taken place.

7.40 p.m.

Lord Bruce of Donington

My Lords, the House has already expressed its appreciation of the quality of the Report on Regional Policy that has been produced by the Select Committee. I, too, should like to commend the noble Lord, Lord Plowden, for the lucidity of his speech which, in support of the report itself, gave one of the best factual analyses of the working of the European Regional Development Fund that the House has had before it for some time.

I was a little sorry that I could not agree altogether with the conclusions that he derived from the Committee's factual analysis. Your Lordships will recall that the question became reduced by the noble Lord to whether it was worth retaining the European Regional Development Fund as a symbol of European unity within the EEC. It will be my respectful submission to your Lordships that it is far better to face the facts as they are, to assess the prospects as to how the factual situation is to develop, rather than to retain a mere symbol which, on all reasonable expectation and projection of the facts, is likely to remain only a symbol and may tend to people looking at symbols of distant vistas, of dreams rather than of facts.

Many of your Lordships have drawn the attention of the House to the fact, which is outlined in the report itself in paragraph 9, that the regional policy was designed to correct, the structural and regional imbalances which might affect the realisation of Economic and Monetary Union. It may well be, as my noble friend Lord Lever has hinted, that that was probably a wrong objective for the Regional Fund, anyway; that convergence of the European economies could be achieved by a combination of other means. Be that as it may—and I do not want to be drawn into arguments outside the Regional Fund—the purpose of the Regional Fund was certainly to correct regional imbalances.

As the noble Lord, Lord Banks, has pointed out from the Liberal Benches, shortly after accession a study group was formed under the chairmanship of Sir Donald MacDougall of the FBI, in order to consider the whole question of how convergence could be established to a point where economic and monetary union became a feasibility. This was the whole purpose of the conduct of the study which, characteristically enough, was never laid by the Commission before the European Parliament where it could properly be debated; it was only referred to.

The study revealed that it would need about 10,000 million units of account, or roughly £5,500 million at the current rate of exchange between the ECU and the pound, in order that 10 per cent. of the existing per capita differentials between member states could be removed. Indeed, four times that amount would be required to remove the 40 per cent. differentials, which, at that time, was conceived to be the only feasible basis upon which economic and monetary union could be achieved.

Nothing at all like that has happened and, as noble Lord after noble Lord has pointed out, far from there having been the achievement of a greater convergence between the various economies, despite the operation of the Regional Fund, the position has become very much worse, partially due, as noble Lords have pointed out, to the operation of the CAP. That is the position.

What has gone wrong, on the assumption that the whole concept of the Regional Fund at the beginning was the correct one? Of course, the first reason, as many noble Lords have pointed out, is that the funds allocated to the Regional Fund have been so derisory that the effects on individual economies have been absolutely marginal. The total payment appropriations out of the Regional Fund amounted to £331 million in 1979, £352 million in 1980 and, in 1981, they are estimated to be £340 million.

On a percentage basis, £91 million went to the United Kingdom in 1979, £68 million in 1980 and £80 million in 1981. Those figures are based on percentages which are set out clearly in the report. On the basis that Britain makes a contribution to the fund of about 20 per cent., that gives a net disbursement into the United Kingdom of £25 million-odd in 1979. £17.71 million in 1980 and £12.92 million in 1981. I am talking in net terms; the money we pay in and the money we get back.

Be that as it may, what we now have to consider, not merely on the basis of the small net amount that we get back—incidentally, in sheer money terms, it is about the only profitable aspect of the entire Community budget that we get apart from a slight benefit from the Social Fund in certain years—is the measurement of the total Regional Fund figure of around £350 million to which I have referred. That is less than the amount payable out of the United Kingdom Exchequer to the local authorities in Northern Ireland. The Regional Fund is also less than Titles 1 and 2 of the budget that deal with the Commission's expenditure on its own administration. Titles 1 and 2 together are in excess of the total amount paid into the Regional Fund. Of course the effects are marginal.

What are the prospects for an increase? The noble Lord, Lord Sandford, and my noble friend have referred to the ambitious plans which have been drawn up by local authorities. What prospect is there of these plans materialising except as part of the refund in kind or in cash that is coming as part of the refund of Britain's net contribution to the European budget? As has already been said, the regional policy amounted to only 3.63 per cent. of the entire Community budget in 1979, 2.62 per cent. in 1980 and 2.64 per cent. in 1981. The agricultural fund, the common agricultural policy, was 20 times greater than the Regional Fund in 1979 and 28 times greater than the Regional Fund in 1980. On the basis of estimates, it will be 25 times greater than the Regional Fund in 1981.

What are the prospects of the Regional Fund increasing to a point where it can make even the remotest statistical impact or even the remotest material impact, net, on any part of the regions of the Community? Noble Lords know perfectly well that under the Treaty of Rome, the "own resources" is limited to some 1 per cent. of the VAT base. What other prospects of any more money being available are there?

As the noble Lord, Lord Trefgarne, will confirm, we are already pressing, after the recent price review of the common agricultural policy, against the 1 per cent. VAT limit. The noble Lord may perhaps correct me after consulting his right honourable friend the Minister of Agriculture, but it may well be that the price increases which were granted in the recent price review, on the basis of a very good harvest in Europe (which there might well be) will send the Community over the top of the 1 per cent. VAT limit. In the event of that happening, what is going to give? The answer is that payments to the Regional Fund, the Social Fund and to the other funds are going to give. As your Lordships know, agricultural expenditure is what is called compulsory expenditure, which means that it originates in the regulations themselves. As past agricultural Ministers have admitted and as agricultural Commissioners have also admitted, expenditure of that kind under the agricultural regulations is largely out of control.

What are the prospects for the Regional Fund? Surely the fund can only increase, even marginally, if either the common agricultural policy is changed to a point where it takes less of the Community budget or the VAT base itself is changed. But the right honourable lady the Prime Minister pronounced her verdict on this on 3rd December 1979 at col. 40 of Hansard: I have made it perfectly clear said the right honourable Lady, and everybody knows how she makes things perfectly clear, that I believe that the limit on the budget of 1 per cent. contributions on value added tax should not be exceeded". We know that the lady is not for turning, so I would rate very low the prospect of going beyond the 1 per cent. limit.

Let us take the other alternative. What is the prospect for a fundamental change in the common agricultural policy, upon which I will not expatiate at length except to point out the wastage not only of the levies, to which the noble Lord, Lord Saint Oswald, referred, but also of the vast sums paid for the storage of "mountains" which are quite surplus to anybody's requirements and which are continually being enlarged. What are the prospects for changing the CAP? Initially, early in 1979, Mr. Peter Walker gave a very good prospect. On 14th June 1979 he said: The reform of the CAP is an aim which I shall be pursuing in forthcoming negotiations ….—[Official Report, Commons; 14/6/79; col. 606] Those were the fine days of confidence. A little later, the noble Lord will recall that his right honourable friend the Prime Minister referred to the madness of the common agricultural policy. But now it is all receding because, as noble Lords who were present at the debate last week will recall, the noble Earl, Lord Ferrers, said that his right honourable friend had made it plain that he has an interest in persuading the Council to adopt a long-term approach. He then said that a comprehensive five-year plan for the whole food and agricultural sector might be pretty ambitious and he doubted whether it would be achievable. This was the noble Earl, Lord Ferrers, speaking last week on behalf of the Minister of Agriculture. In those circumstances, do we really have to consider the whole of the European Regional Development Fund as anything other than a symbol?

A further point which arises is exactly what happens and how the fund is administered. Let us consider the trouble, the time and the expense that is now incurred in ensuring this recycling of money from one member state up to the Commission and back again to its own country. Industrial projects for consideration by the European Regional Development Fund are sponsored by the Department of Industry. This is made quite clear in the report produced by Lord Plowden's committee. So far as the infrastructure is concerned, local authorities make their applications to the Department of the Environment. Therefore all the applications for regional aid in one form or another go through one of two Ministeries. And three times a year, as the noble Lord has correctly pointed out in his report, a commission is formed which groups the applications and takes them up to Brussels for consideration.

Who comprise the people who consider the whole question at the Commission end? There are two committees. There is a regional policy committee and there is a fund management committee. Each of these committees contains representatives of the Government of each member state. Therefore what happens is that when the applications go, for example, from the United Kingdom up to the Commission for consideration they are sent to these committees upon which already sit representatives of their own Government. This happens in both committees, so it is all channelled upwards. These applications are considered by Governments who support them, and they are considered again by Governments sitting on these two forms of management committee.

Moreover, there is no question ultimately of judging them on their merits. The report makes quite clear that the project particulars that are sent up are not of a frightfully satisfactory quality. But it is not as though even after that the projects are dealt with on their merits. They are dealt with according to quotas. Every member state has its certain quota. Bearing in mind the triviality of the sums involved, I should not have thought that it was worth while going to all this trouble of gathering the projects together, having them considered by Ministers or by ministerial departments, having them sent to the Commission with another costly and time-consuming translation review, having them considered again before any decision can be made and then seeking the final decision of the various committees which consist of representatives of member states who are required to distribute, in terms of the totality of the money involved, exactly in accordance with a pre-arranged format. That does not seem to be a very good way of conducting the business.

It may well be that there are other ways of achieving a greater convergence within the EEC countries. I devoutly hope that there are, but I do not think that this country ought to be deceived by symbols. I do not think they should have prospects held out to them in respect of the marvellous things that the Regional Fund is capable of doing when, first, it does very little other than append its label to projects that in the main come back to the country which supplied the money. It should not do that and it should not hold out prospects for the future which are not based on logical expectations and all reasonable suppositions based upon the facts.

I am well aware that in so saying it may be said that I am taking the traditional anti-European posture. I am not. I do not regard the EEC as being synonymous with Europe. Europe operates within a wider context and within more countries than the EEC does and indeed, in President Jenkins' own assessment shortly before he left, he said he had come to the reluctant conclusion that the EEC itself was mainly the common agricultural policy with the other activities as a periphery.

I do not think that we should assess our affairs on that basis. I think that so far as we can we should be factual. I do not think that we should retain symbols and, unless the EEC is prepared greatly to reduce its common agricultural policy doubt, we ourselves should be quite bold and say that we do not want anything to do with symbols and it would be far better and far saner and make for a far better understanding of public affairs if such artificial concepts were abandoned.

8.4 p.m.

Lord Trefgarne

My Lords, I have heard it said that the reports of your Lordships' European Communities Select Committee are read with the closest attention, particularly in the Commission itself. I hope and believe that that will be so in the case of the report that we are considering tonight because it is of the same high standard that we have come to expect from our European Community's scrutiny committee and its sub-committees. Indeed, following the timely Motion of the noble Lord, Lord Plowden, this evening the Hansard of tonight's debate should, I believe, be appended to the report when the Community officials study it, as I hope and believe they will.

As your Lordships will recall, the Regional Fund was established when we joined the Community, in order to provide a means by which the Community could help us by contributing towards the convergence of the less prosperous regions of the Community, which include in particular Northern Ireland and the assisted areas of Great Britain.

Although the fund has been increased in size each year since it was formed, its total resources—as the committee point out at the beginning of their report—are limited. They are a very small part of Community expenditure—the allocations for commitment in the 1981 budget were only about £832 million at the current exchange rate. These commitments represent about 7.3 per cent. of the total Community budget, while the appropriations for payments against commitments were even smaller—about £335 million. Similarly ERDF expenditure is far less than national spending on regional policy. Thus in 1980, for example, the United Kingdom received new commitments of about £153 million, and payments of about £136 million for both industry and infrastructure projects, while central Government aid for industry in 1979–80 was over £500 million and expenditure on infrastructure in the assisted areas was of the order of two or three billion pounds.

While the fund's resources are thus limited, they are not negligible. Since the inception of the fund to the present day, we have received commitments of some £647 million, and payments, against these commitments, of £377 million. We have been able to take up our full quota each year with a wide range of projects. For example, last year, the Commission made commitments of £2 million towards the Ely link road at Cardiff; £3.2 million towards the Monkland motorway at Glasgow; a further £4 million making £27 million in all towards the Kielder Reservoir; and some £3 million towards port and harbour improvement schemes in Northern Ireland. The fund contributions to these and other infrastructure projects bring a real and attractive benefit to local and public authorities in the form of reduced interest charges over several years.

Turning to the future, in addition to the part which the fund may play in the community budget restructuring exercise, the regulation governing the operation of the fund is due to be re-examined by the Council before the end of 1981 following a proposal from the Commission. Thus, the arrangements and conditions governing the operation of the fund will be thoroughly scrutinised by ourselves and other member states during the next few months.

One question which is often raised is that of the size of the fund; and while, as I have already said, it has increased in size each year, there have been proposals from the Commission, the European Parliament, and others, for even further increases. While I have some sympathy with these suggestions, it is necessary to take into account the overall budgetary effect, and the consequences of the further enlargement of the Community. We cannot come to a decision on this matter until the Commission have presented their proposals and we have studied them.

I would now like to consider some of the more detailed suggestions put forward in the report. First of all, there is the very interesting idea that local authorities or regional development agencies, should prepare development programmes which would include industrial and infrastructure projects. The programmes might also include service and consultancy projects and groups of small industrial projects which are below the existing minima. The concept of submitting a comprehensive programme which will be aided by the Community is at first sight very attractive, not least to the Commission itself. Indeed, the procedures adopted for the non-quota section of the fund are based on programmes. However, there are considerable practical difficulties to be borne in mind. Some of these stem from accounting and auditing requirements.

When we apply for fund aid for an individual project, the application gives a great deal of information about the justification for the project, and the cost and time scale involved. In preparing a programme for a range of activities, it is likely to be necessary to provide a similar amount of detailed information about the justification for the activities which will be aided, and the way in which the activities to be aided fit into the overall regional policy for the area concerned.

The Commission will require such information in order to enable them to commit Community funds, and even if they were prepared to look sympathetically at programmes which gave less precise data it is likely the programmes would have to be considered by the fund's management committee or some other committee of member states where such detailed information is likely to be a prerequisite of approval.

There is the further point that a wide range of consultation would be needed if programmes were adopted as the basis for fund aid. I am sure that the local authorities and agencies could prepare programmes to cover their own activities, but in order to be comprehensive, and to forestall possible criticism in Brussels, any such programme would need to refer to investments by other public authorities—water boards, gas and electricity authorities, British Telecom et cetera—and to comment on the use made of other Community funds. I believe that the Government departments concerned are better placed to provide this overall view, and to hold the balance for allocatng ERDF monies between local and other public authorities. This is not to say that local authorities do not have a large part to play in the administration of the fund. They do; and their co-operation is essential and much appreciated. I hope that it will continue.

I would also emphasise that I am certainly not ruling out the use of programmes as a basis for fund aid, but I am uttering a word of caution; they are not a panacea to the problems which can arise when fund aid is based on individual projects. The committee also suggested that the geographical area covered by the fund should be reduced in order to increase its impact, but that the fund should also cover some individual black spots outside the normal aided areas. I would accept the first of those suggestions, which is well in line with the Government's policy of reducing the size of the assisted areas in order to concentrate our own regional aid in areas where it is most needed.

However, the suggestion that it should cover some black spots outside the assisted areas does present difficulties. Such black spots would by definition not be eligible for the normal kinds of regional aid under the Industry Acts. The fund regulation imposes a clear link between eligibility for national regional aid and eligibility for ERDF aid, and the Government would not support the idea of breaking this link; it is difficult to see the justification for providing Community regional aid to areas which the Government of the member state concerned considered did not justify national regional aid. Indeed, I would expect considerable opposition from other member states to breaking this link for this very reason. Such an extension of the fund would be extremely difficult to make, unless the black spots in question were in receipt of some other regionally differentiated system of aid to industry. Nevertheless, I would not wish to give the impression that the Governments mind is closed in this matter.

On a point of detail, I would support the suggestion that the arrangements for making interest rebates on EIB loans should be amended to make them more attractive. As the committee point out, these rebates have been unpopular, simply because a 3 per cent. rebate spread over many years is less attractive than an immediate block grant.

The committee also proposed that consideration should be given to broadening the scope of ERDF aid to cover operating subsidies. The Government would not support such a step. Our policy on assistance to industry is firmly based on providing assistance only to new investment and to companies with good prospects of long-term viability. Using funds to provide operating subsidies could encourage inefficiency and a misuse of resources. Such assistance would also be contrary to the Community's normal competition policy.

I think I should now mention one of the most frequently voiced criticism of the fund, namely, that the fund payments should be additional to national regional aids and should be passed on to the sponsors of the projects concerned. This is a matter which has I think been raised by almost every noble Lord who has spoken this evening. Perhaps I can touch on this in some detail as I think the implications are frequently misunderstood. Let me consider first fund aid to industry projects.

Under the present fund regulation, aid can only be given to new industry projects which are already receiving national regional aids. This implies that a decision has already been made to grant national regional aids, and that the project will already be proceeding, so that any decision to grant fund aid—whether or not it is passed on to the company—cannot provide an incentive to the company to carry out the project. Our quota is not sufficient to enable us to obtain fund aid for every eligible project, and if fund contributions were passed on to some companies, it would simply be a windfall, which would be unfair to those other firms who would have received national regional aid but not fund aid. Moreover, there is the very real difficulty that passing on fund aid would, in some cases, breach the Community ceilings on the total amount of regional aid that may be given to any particular project.

While the present regulation imposes the condition that the only industry projects which are eligible for fund assistance are those receiving national regional aids, this requirement could in principle be removed if all other member states agreed to do so. Such agreement is unlikely, as member states—and I think the Commission—would not wish to spend Community money in aiding a project which was not being given national regional aid. Similarly, we ourselves would support the principle that Governments are in the best position to determine the thrust of regional assistance, and we would not welcome ERDF assistance—or indeed other Community money—going to projects which we did not think should be supported.

Before leaving this question of the fund contributions towards industrial projects, I should like to take the opportunity to thank all the companies who have voluntarily co-operated with the Government by allowing their projects to be used for applications to the fund even though, as I have explained, the benefits of fund aid do not go directly to them. The applications do involve some requests to the companies for additional information—which we keep to a minimum—as well as occasional visits by the Commission or the European Court of Auditors. This extra burden falls on local managers to whom we are particularly indebted.

The position with infrastructure projects is different, in that the fund contributions are passed on to local or other public authorities concerned, although without any corresponding increase in their ceilings on capital expenditure. Given that all such authorities plan their investment programmes several years ahead, removal of this limitation would not enable entirely new projects to be introduced. The most that Fund aid would be likely to achieve in these circumstances would be an earlier date for implementing projects which were already in mind, and this could be of some help to a region. However, given the need to contain the total of public expenditure, I think that the present arrangement, which gives authorities a very signficant saving in loan charges, is a good compromise.

There is no doubt that the concept of additionality is a difficult one; it involves an assessment of what would have happened if the fund aid had not been available. Nevertheless, it is true to say that the Government does take account of receipts from the ERDF in determining its public expenditure plans; if these receipts were not forthcoming some cuts would be required if the totality of public expenditure was to be contained. In this sense, ERDF receipts are fully additional.

May I deal with a point made by the noble Lord, Lord Irving of Dartford, about additionality in the context of the new capital expenditure control system for local authorities. There is no change of principle imported with the new system of capital expenditure control. The new rule recognises that ERDF grants are a source of finance for capital expenditure. Control of capital expenditure nationally requires that the grants should not be used to increase expenditure which has been set at levels that already take into account expected ERDF receipts.

The report also referred to complaints about difficulties in dealing with some particular kinds of projects—advance factories, tourism developments and service and industry projects. It is true that some other member states are taking a narrower interpretation of the fund regulation than we do, and they have therefore objected in the fund management committee to some of our applications for advance factories and tourist projects. We are continuing to argue that such projects make a valuable contribution to regional development and fully deserve fund support.

We are, however, concerned at the suggestion that some applicants find it difficult to discover what has happened to their application. While a project which is non-eligible because it does not meet the criteria of the regulation, can be ruled out quickly—and the applicant authority informed—decisions as to which eligible infrastructure projects will be submitted to the Commission cannot be taken until all the possible candidates for submission at the same time have been received. This must cause some delay for early applications. We do our best to keep the authorities concerned informed. Nevertheless, departments have taken note of the criticism and I hope that this particular problem will not recur.

My noble friend Lord Sandford raised the matter of the alleged delay in taking action on the Burns Report, which refers to local authority powers of assistance to industry and commerce and which I think was mentioned in paragraphs 7 and 8 of the Association of District Councils' Memorandum. The Government recognise the important contribution which district councils can make in providing the right environment for economic regeneration, and we are urgently considering the issues raised in the Burns Report. I am sorry if that is rather cryptic, but my noble friend will appreciate the difficulty that I find myself in when I am asked to anticipate the outcome of ministerial consideration on matters such as this. I might also say, in fact, that with regard to the delay to which my noble friend referred some local authority interests invited to comment on the report have been rather slow in coming forward with their views.

My noble friend also referred to a number of specific cases including in particular the case of Consett. I can say that any further applications for infrastructure grant received from the Consett authorities will be considered for the next batch of submissions to Brussels, which is due in June or July.

Lord Sandford

My Lords, before my noble friend leaves that point, may I say that his remarks are not at all cryptic: they are just contradictory. It is a fairly simple committee making a fairly simple report and to have taken nine months to fail to arrive at any conclusion at all is just too much of a delay.

Lord Trefgarne

My Lords, I am sorry that my noble friend feels like that. I shall certainly convey my noble friend's views to my other noble friends and right honourable friends who are responsible for reaching these decisions, and I am sure that his anxiety will spur them on to even greater efforts.

The noble Lord, Lord Plowden, in opening this debate referred to the suggestion that areas eligible for fund aid might be determined on the basis of common Community criteria of need. Such fixed criteria might well exclude some of the areas in more prosperous member states, such as Germany or France, where fund aid is now available in areas which are below their national average but which are better off than most parts of the less prosperous members. However, such fixed criteria would necessarily have to be agreed on a Community basis and they might well be set at a level which would exclude parts of our own assisted areas which we ourselves would wish to receive fund aid. While I have some sympathy with this concept, I am not sure that it would necessarily be in our long-term interests, and I think that some other member states might likewise see difficulties in transferring the decision as to which parts of the country should receive ERDF aid from capitals to Brussels.

The noble Lord, Lord Plowden, also referred to the use of programmes, as did at least one other noble Lord, as the basis for payments under the supplementary measures regulation. This was a special short-term measure and it is not necessarily a sound precedent for programmes in other areas. A political will existed to approve these programmes which would not necessarily exist for ERDF programmes.

The noble Lord, Lord Banks, asked if we still supported the principle that most aid should go to areas in greatest need. Indeed we do—most fund aid is paid in respect of projects in development and special development areas. Indeed, some 58 per cent. goes to SDAs and to Northern Ireland.

The noble Lord, Lord Greenhill of Harrow, raised a very fundamental issue. I hope that he will forgive me if I do not attempt to answer him tonight, but perhaps I may consider what he has said and if there is anything new to report on that matter I shall write to the noble Lord.

I had better come to the end of my remarks. It is expected that the Commission will be sending their formal proposals for amendments to the regulation to the Council within the next two or three months, and we shall then carefully consider them. While I have had to sound a note of caution on some of the conclusions of the Select Committee, I can assure your Lordships that we shall keep this very helpful report fully in mind when we are looking at the Commission's proposals, together, of course, with the views that your Lordships have expressed tonight.

8.28 p.m.

Lord Plowden

My Lords, we have had a long and most interesting debate on this subject and the number of noble Lords who have taken part is an indication of the interest in regional policy generally. Most speakers have expressed dissatisfaction with the working of the ERDF. However, all appear to wish to improve its working and various suggestions have been made to that end and not to abolish it, with the exception of the noble Lord, Lord Bruce of Donington, who in his usual inimitable and forceful way appeared to be discussing a report other than the one that we are discussing this evening, because he appeared to suggest that we were setting out to deceive the country by advocating symbols and that moreover there was no possibility whatever of the Regional Fund offsetting the amounts that have to be paid to the common agricultural policy. I think that in almost the last words of my speech I said, "Do not let us be deceived into believing that any reform or increase that is possible in the Regional Fund can in any way be a substitute for reformation of the common agricultural policy".

The noble Lord, Lord Seebohm, suggested, contrary I think to almost every other speaker, that a region should have direct access to the Community in Brussels. As a former bureacrat I would deplore that. I cannot imagine what kind of organisation would be necessary to consider applications from the Highlands and Islands and from the Mezzogiorno, from Portugal and various parts of Spain and the Greek Islands. Tempting as it might be, I do not believe that it would be practicable.

I am grateful to the noble Lord, Lord Trefgarne, for his replies. On additionality, his views were as I expected. On the question of programmes, I was disappointed that he received it with really faint consideration. I am reminded of a remark that the late Lord Bridges once made to me when I was in the Treasury that I should not say things like that as it savours of the official grimace. I felt that the comment was very luke-warm. I believe that there is more to be said for programmes than perhaps the noble Lord is willing to accept. However, this has been a most useful debate and I welcome Lord Trefgarne's statement that the Government will take into account our report in negotiating in Brussels.

On Question, Motion agreed to.