European Regional Development Fund: ECC Report

HL Deb 23 October 1984 vol 456 cc149-74

3.58 p.m.

Lord O'Brien of Lothbury rose to move, That this House takes note of the report of the European Communities Committee on the European Regional Development Fund (23rd Report, 1983–84, H.L.274).

The noble Lord said: My Lords, this is the fund which nowadays is commonly known as the ERDF—a piece of shorthand which I shall use frequently in my forthcoming remarks. This is the fourth report by the committee on this subject since 1977. The ERDF was set up in 1975 to correct the structural and regional imbalances within the Community which might impede the realisation of economic and monetary union. Its purpose was to aid the improvement of economic performance in the poorer regions of the Community, with particular emphasis on job creation in order to bring about a higher degree of convergence among member states.

The economic circumstances of the Community have changed radically since 1975, and economic and monetary union has receded into the distant future, even for those who sincerely desire it. It is still accepted, however, that excessive regional disparities are harmful to the Community and that without the ERDF they would be greater than they are.

The Regional Fund therefore has widespread if not universal support. The committee are aware that there are those who question the whole concept of regional aid, feeling that it does more harm than good and that the vast sums spent on it could be put to better use in other ways. Such arguments are not without force, but neither in this nor in their earlier reports on the subject have the committee felt it their duty to enter into a general discussion of the validity of regional aid.

Regional aid programmes exist, and doubtless will continue to exist, on a massive scale in all Community countries. The committee were concerned with how far the ERDF supports or enlarges such programmes and how far it promotes Community rather than national objectives. In the 10 years of its existence, the ERDF has grown to be the second largest regular charge on the Community budget after—admittedly a long way after—the Common Agricultural Policy.

At present, the ERDF awards grants each year to a total value of over £1 billion to projects from all over the Community. Even so, it remains a relatively small charge on the budget, absorbing in recent years between 5 and 8 per cent. of the available resources. And, of course, ERDF disbursements are very small compared with member states' own regional spending, which ranges from at least 10 times to 50 times the European contribution. Ninety-five per cent. of this contribution has hitherto been allotted under a system giving fixed quotas to individual countries weighted in favour of the poorest countries, which are Ireland, Italy and the United Kingdom. Our quota at present is 23.8 per cent. of the 95 per cent. The remaining 5 per cent. of the ERDF is distributed on a non-quota basis, reflecting Community rather than national priorities.

In the mid-1980s the ERDF is making grants each year some seven times the cash value of those made in the first three years of its existence. After making allowance for inflation, this still represents a substantial real increase in Community spending on regional aid, and this larger expenditure has been concentrated increasingly on the poorest and poorer regions of the Community.

Despite this, disparities in prosperity between the different regions of the Community appear to have widened since the early 1970s. Poorer regions have, not unnaturally, failed to grow as quickly as the richer, and some formerly prosperous regions have fallen on hard times. Happily, these divergences are no longer increasing, but to go further and reverse the trend will not be easy. If present plans, as enunciated at Fontainebleau, for more effective controls over Community budget expenditure are successful—and there is no certainty yet that they will be—more funds for regional aid should become available. But any such increase is not likely to be anything like big enough to have a massive impact on regional imbalances, even supposing that national governments were prepared to allow Community regional aid to supplement their own regional aid programmes.

This brings me to the vexed question of additionality, which your committee have discussed and probed over many years. Clearly, Community contributions to regional aid would be much more worthwhile if they truly supplemented a national regional aid programme rather than being used just to finance a part of that programme. In some marginal instances this does appear to happen but, in the main, governments simply pocket the Community contributions as a set-off" against their own regional expenditure. Nevertheless, in the United Kingdom, for example, an elaborate process goes on year after year under which numerous proposals for ERDF aid are prepared by local and regional authorities and, if accepted by the Department of Trade and Industry, are submitted to Brussels for consideration. In this laborious way we manage eventually to lay our hands on our quota entitlement, to the minimal advantage, as your committee saw it, of the regional authorities who make successful applications.

Between 1975, when the ERDF was created, up to the end of 1982 almost £1 billion of ERDF aid—and the fact that that figure is similar to the one I quoted earlier is quite coincidental—has been paid or promised to the United Kingdom in respect of some 4,232 regional projects. Most of these were to create new infrastructure in eligible regions. While there never seems to be a shortage of such projects, it is a little depressing to note that not only in the United Kingdom but in all member countries since 1980 there has been increasing difficulty in generating investment projects suitable for ERDF aid from manufacturing industry or from the craft or service sectors. This is partly responsible for the inordinate delay in all Community countries in taking up quota entitlements.

The evidence supplied to your committee did not suggest that the general administration of the ERDF was entirely satisfactory. There seemed to be some lack of co-ordination between the various directorates-general in the Commission concerned with these matters while, at the Council of Ministers, regional policy is apparently decided by foreign ministers rather than those directly responsible for regional questions. This led the committee to conclude that there should be a Council of Ministers with specific responsibility for regional policy closely co-ordinating their work with the relevant national authorities.

Likewise, evidence concerning United Kingdom procedures did not show a reassuring picture. The December White Paper on regional industrial development raised doubts about the whole future of United Kingdom regional policy—if, indeed, there is a coherent policy covering the whole country. Some regional authorities are very effective in this area. In other places they hardly exist. The Whitehall departments clearly keep a firm grip on all questions of regional aid but they could do with more forceful advice, not only from some but from all relevant areas. The regional development agencies should cover all areas and be more effectively used. This would perhaps be most likely to happen if one leading minister with one department behind him were to be responsible for regional policy.

The Council of Ministers have been discussing a reform of the ERDF for some two and a half years and, after sitting on proposals from the Commission for most of that time, in an unexpected burst of activity and decisiveness last May-June approved revised proposals by the Commission which broadened the scope of the ERDF and seek to increase Community influence in the field of regional aid. Almost all the evidence received by the committee was favourable to the new proposals. I shall try briefly to summarise them.

The division of the fund into quota and non-quota sections will go. Each country will in future have a flexible quota range. To achieve the maximum allocation within its range, each country will have to offer programmes for ERDF aid in competition with the other member states. Acceptance will depend on whether proposals meet Community rather than simply national policy objectives.

The regulations of the ERDF will also give formal eligibility to integrated operations—that is, those which bring together a number of the Commission's agencies acting in concert: for example, the Social Fund, the Regional Fund and the European Investment Bank. Similar status will be given to the assistance of internally-generated development schemes in poorer regions. Most importantly, there will be a phased replacement of individual proposals for project finance by finance for broader, co-ordinated programmes which it is hoped will have more impact on regional development.

Your committee welcome all these changes but they are at this stage no more than an expression of good intentions. It remains to be seen whether the use of the ERDF can be effectively directed towards Community ends; in particular, whether real and substantial additionality can be achieved. Certainly it cannot be without acceptance by member states. Administrative arrangements both in the Commission and by member states need to be overhauled to eliminate the long delays which now occur in ERDF disbursements. Finally, more attention must be given to the need to create employment—especially long-term employment.

To conclude, I repeat that there seems to be little prospect that the European Regional Development Fund will be so substantially increased in the foreseeable future as to enable it to make a decisive contribution to the solution of the problems of regional imbalance. I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on the European Regional Development Fund (23 rd Report, 1983–84, H.L. 274).—(Lord O'Brien of Lothbury.)

4.11 p.m.

Baroness Carnegy of Lour

My Lords, I am sure that we are all grateful to the noble Lord for his clear and concise introduction to what seems to me to be an admirably clear report. In so far as the report goes, and within the limits which the sub-committee set itself, I agree with the contents, and I agree, with certain reservations which the report makes clear, that the new ERDF regulation is an acceptable updating and improvement of previous arrangements.

As the noble Lord has said, the committee did not see it as its duty—rightly so, in my view—to embark upon discussion of the validity of the whole concept of regional aid as part of the Community's activities. But, as the noble Lord also said, it does acknowledge that there are those who have their doubts. I venture to suggest that Parliament and the Government should also have doubts; that your Lordships should not regard endorsement of this regulation in the short term as a satisfactory end to the story in the longer term.

The justification for the operation of the regional fund must surely be judged in the context of the objectives of the Community as a whole. As the report says, the objective of economic and monetary union is no longer immediately in front of us. The objective now is seen as mainly political; a growing understanding and sense of unity in Europe—a working and acting together to mutual advantage. But what does the regional fund look like to the ordinary person?

If I may take the Scottish experience, which is familiar to me, as an example—and it is not a bad example because, as the report points out, Scotland's arrangements make it one of the parts of the United Kingdom best placed to take advantage of the fund—the first action a person sees being taken by the regional fund in his locality is a notice in the press announcing that the local authority has applied for a certain sum from the fund. The second thing he sees is that the application has or has not been granted. And that is that. The project proceeds with little more mention at all of the EEC—but plenty of mention, of course, of the project. It looks good at the time, although most people perceive this aid as simply part of what has been paid into the fund coming back again—and they are not entirely wrong in thinking that. If they knew the actual cost of the bureaucracy involved in that circulation of funds, they might be even less enthusiastic. There is the cost to local government of putting together the application, the cost to the taxpayer of the co-ordination in the industry department within the Scottish Office, the cost of more co-ordination in the United Kingdom's Department of Industry and in the Community, the cost of the decision by the Community, and then of the disbursement of the funds. No figure can ever be stated, but it must be very large.

Nor would people be encouraged if they knew what their elected members suspect; that the amount which comes to them by this roundabout route for a road, reservoir, sewerage scheme or coastal protection scheme may simply be docked off the United Kingdom's regional aid which they might otherwise get for something else. So quite apart from doubts about the effectiveness of regional aid as a concept, is it the right way nowadays for the EEC to be operating? Is it the best way of demonstrating to people the importance of belonging to the Community? I would suggest that it is not.

This is not the occasion to go into what the alternative might be, but there may be lessons to be learnt from the success of one of the modes of operation of the Social Fund, where pilot schemes are set up in individual member states. Their success or lack of it is closely monitored and reported upon, and that experience is shared and built up within the Community. That system seems to work well.

Perhaps innovative pilot schemes could be set up in each member state under the regional fund to try out ideas for creating long-term jobs and self-employment opportunities, with plenty of publicity and interchange of results, and with the countries then building on one another's talents and experience. Perhaps pilot schemes of that kind would help people identify with the Community more than they do at present as a result of the regional fund. That is just one possibility as to how, at much less cost and with much less bureaucratic effort than that involved in the present schemes, the benefits of Community co-operation and shared talent and experience could help and be seen to help the areas which need that help most.

In any case, it is, alas, clear from this summer's European elections that the present operation of the Community is as yet worryingly unconvincing to the electorate of Europe as a whole. Despite a campaign and election organisation costing £25.6 million, and with 42 million of the electorate under civic or legal obligation to vote, only 57 per cent. of them voted—5 per cent. less than last time. The lowest turnout of all was in this country.

I submit that, if it is true that the regional fund should be a major shop window for the European Community, then the present concept of direct regional aid is probably not the best one and that better ideas in the long term should be sought. Until then, I warmly accept this excellent report.

4.19 p.m.

Lord Banks

My Lords, the whole House will be grateful to the noble Lord, Lord O'Brien of Lothbury, and to his committee for the production of this most valuable report. We are also grateful to the noble Lord for the way in which he introduced the report to the House this afternoon.

When we last discussed this subject in June 1982 we were considering the 1981 proposals of the Commission for a revised regulation. After two years of negotiation those proposals were revised by the Commission in November 1983, and a new regulation, partly based upon that revision, was agreed by the Council of Ministers in June 1984. In that debate in 1982 I said that in all three of the reports that the committee had up to that time made—in 1977, 1981 and 1982—it had been concerned with five main problems: the size of the fund; the vexed question, as the noble Lord called it, of additionality; the method of allocation; the problem of access to the Community; and the participation in decisions by regional and local authorities and the need for a comprehensive and significant overall regional policy.

It is clear from this latest report, which we are now considering, that these five issues remain dominant. First of all, there is the size of the fund. It is true, as the noble Lord, Lord O'Brien, said, that in real terms the fund has increased in size and that it is now the second largest regular charge on the Community budget, after agriculture. But as he pointed out, agricultural expenditure is many times greater—in fact, about 10 times greater—than expenditure under the fund. The fund disburses £1 billion to projects all over the Community. That sounds a large amount of money until one reflects that the United Kingdom Government alone spends over £15 billion a year on defence and over £30 billion a year on social security. The £1 billion is then seen in perspective, and it represents about 0.08 per cent. of the Community's gross domestic product. Other Community policies, of course, particularly the agricultural policy, have a different regional impact upon the fund.

The purpose of the fund is stated again in the report and was stated by the noble Lord this afternoon. It is to correct the structural and regional imbalances which might affect realisation of economic and monetary union. While, as the report says, disparaties would have been worse without the fund, we have to acknowledge its very limited nature and face the fact that such a comparatively small fund could not possibly correct the structural and regional imbalances within the Community—disparities which have grown considerably since the 1970s, even if there is now evidence that they have ceased to grow further. Clearly we must maintain the pressure for a considerably increased allocation of funds for the regional fund.

Additionality is the next point. It is now widely agreed that, while governments may say that they take into account what they expect to get from the European Regional Development Fund in making their plans for development, there can be no proof that they do so. It is not easy to say whether any extra activity takes place as a result of the fund or whether the fund merely relieves the burden on taxpayers and ratepayers of what would happen in any event. This greatly restricts the incentive to local authorities to take an interest in applying for help from the fund and provides no incentive for private business firms. The committee says that a greater element of additionality is needed if confidence in the usefulness of the fund is to be maintained. I am sure it is right to say that. It also says that additionality will only occur when individual member states decide that that is what they want. It implies that in Britian the reverse is the case because, it states, It seems that the United Kingdom is expecting the European Regional Development Fund to pay in future for a higher share (in money terms) of a much reduced national regional aid scheme". I should like to ask the noble Lord the Minister who is to reply to the debate this question: is that the policy of the Government? Does that quotation from the committee's report fairly represent the present policy of the Government?

Then there is the method of allocation. It was encouraging to read on 8th October, in newspaper reports of the Commission's annual report on the regional fund, that 10 EC countries, including the United Kingdom, received more than 95 per cent. of the grants last year. Allocations are being increasingly concentrated in the poorest regions of the Community and that is very good news. I should like to ask whether the Government are confident that the sort of distribution which the figures reveal for 1983 will be maintained under the new regulation? Is that the Government's view and expectation?

However, nine-tenths of the money distributed in 1983 went to infrastructure projects. The committee's report points out that there is a serious imbalance between infrastructure and industrial projects, which these recent figures confirm. Administrative problems, delays and the lack of additionality are no doubt among the reasons for this. Can the noble Lord say, when replying, what the Government feel about this and how they think the problem should be tackled?

Fourthly, there is the question of access to the Community. In all the debates which we have had so far I have expressed concern, as have other noble Lords, about the participation of local authorities and regional agencies in the preparation of projects and programmes. The report has much to say about that. It says that in the United Kingdom local authorities are kept firmly in a subordinate role. The report speaks about insufficient liaison between central Government and local government. It also states: More effective regional machinery. especially in England, would enable the more disadvantaged regions to respond more rapidly to the European Regional Development Fund's call for programmes. Again, it states: There are major gaps in the machinery of regional administration in the United Kingdom which must be rectified if the programme approach is to have a wide and successful application. Finally. the report states: Greater use should be made of the regional development agencies in the administration of the European Regional Development Fund in the United Kingdom. It is clear that there is a serious problem here and that we have not satisfactorily worked out in this country the method of involving the regions in the preparation of projects and programmes. I should welcome a comment from the Minister on that. It will be interesting to learn the Government's view of how the situation can be improved.

Of course, all the other large member states have elected regional authorities as well as regional administrative machinery. The United Kingdom has no elected regional authorities and its regional machinery has been reduced. The importance of the regions to the development of the Community cannot be over-emphasised. We on these Benches believe that elected regional government in this country could ensure, among many other benefits, that the best possible use is made of the regional fund.

Finally, I come to the need for a comprehensive and significant overall regional policy for the Community. The European Regional Development Fund is one arm of Community regional policy but is there yet an overall policy embracing all the arms of EC policy, including the CAP? I am not clear that there is, and I should like to ask the Minister to say whether he has discerned such a policy, and what the Government are doing to promote such a policy.

I would say in conclusion that within such a policy a vital role could be played by a larger European Regional Development Fund, providing genuinely additional resources in close association with regional authorities, working within nationally agreed guidelines. I believe that we must do all that we can to move things in that direction.

4.30 p.m.

Lord Bancroft

My Lords, much of what I wanted to say has already been said by the noble Lord, Lord O'Brien, with lapidary precision. He guided the subcommittee with the same deftness during our deliberations. During his remarks he defined the policy which the ERDF is there to serve: to aid the improvement of economic performance in the poorer regions of the Community, with particular emphasis on job creation". At the end of its fourth examination of regional policy, the committee concluded, rightly or wrongly—I think rightly—that this definition remains valid, both despite and because of the changes which have taken place during the past eight years. But the committee also felt that both the fund and the policy which it serves need regular examination, not least because both have their critics.

There are those who are opposed in principle to Community regional aid in its present form. We have heard from the noble Baroness, Lady Carnegy, a reasoned statement of that case, put forward with spirit and vigour. That view I respect and understand. There are also those, who have not as yet had a voice in this House, who oppose national regional aid. That view I neither understand nor agree with. In that context a totally untrammelled market place and market forces seem to me neither surrogates nor substitutes for common sense.

The energising forces of the market—and they are energising—need to be adjusted at the margins: encouraged here a bit, restrained there a bit. Regional policy, after all, is only one small component of the total adjustment process, which includes fiscal policy, public expenditure policy, employment policy and physical planning policy—a whole range of policies of different sorts.

In truth, as the noble Lord, Lord O'Brien, said, regional aid represents only a small charge on the Community budget—between 5 per cent. and 8 per cent., as compared with about 65 per cent. for the common agricultural policy. It is therefore a modest piece of Community policy, with perhaps rather too much of it to be modest about. National regional aid, as has been said, is of course much bigger, but it is still marginal in terms of gross domestic product and total public expenditure.

So far as Community policy is concerned—and so long as there is an ERDF—I think most of us would agree that we owe it to our deprived regions to secure for them a share of the development fund. We have contributed to it; they have contributed to it. There is no charity involved. It should be, but, alas, too often is not, an investment vehicle. I repeat that our objective ought to be to use it sensibly and, where at all possible, profitably for our poorer areas. I think that the record of successive British Governments in achieving that objective has on the whole not been a bad one, though there is room for improvement—but, after all, there always is.

How can we best continue to pursue that objective? I ask the question on the assumption that we are not suddenly going to turn our backs on the concept of regional policy and a European regional development fund—we are not going to turn our backs on it either out of settled conviction or in pursuit of an ideological whim.

The committee's report makes a number of suggestions on that point, and I intend to pursue just two of them. To a certain extent I shall be a bit repetitive but I hope not too much. By way of preface, I observe, as previous speakers have done, that any national government can if it wishes (and most of them, alas, do) frustrate much of the policy and its instrument by a simple device—that is, to dock national aid to its regions by the amount that it receives from a fund. We then have no additionality. The fund's support for that country thus becomes a very cumbrous way of shovelling negative amounts of money (if I may use that curious term) across the frontiers of Europe.

My two points are these. First, following the noble Lord, Lord Banks, I ask whether the balance between infrastructure and industrial development is right. I suppose that one answer is that they both form part of a continuum and that it is rather profitless to talk about rightness in that context. But, as the noble Lord observed, it is interesting that in the last three years almost 90 per cent. of the fund Community-wide has gone on infrastructure projects. So far as the United Kingdom is concerned—and this time taking an eight-year period—about 30 per cent. of the projects financed from the fund's quota section were industrial and 70 per cent. infrastructure. This 30/70 split compares with a West German split of 60/40 over the same period, but I think that it is generally agreed that the German trend is, in gardening terms, a sport. The Community-wide bias, Germany excepted, in favour of infrastructure is partly—perhaps mainly—a reflection of the fact that private industry does not want to invest in the poorer regions.

As the noble Baroness implied, unless governments, and the Commission, are prepared to face that issue, the basic policy underpinning the fund will remain faintly unreal. There are two extreme scenarios: on the one hand, cutting losses in these regions and moving people out of them into jobs; on the other, moving productive jobs to people in the deprived regions. In practice, as we know, a mix of both is bound to be involved. But what seems to be a doubtful course is to pour investment into the infrastructure and then simply hold one's thumbs and hope that that in itself will attract enough industrial investment. It does not always happen, as the under-used trunk road network in North-West and North-East England demonstrates. In short, incentives for private productive industry in the deprived regions remain an essential element.

This leads me to my second and last point. It is the case that structure, organisation, administration, management, call it what you will, is the servant of policy. It is not a policy end in itself. It should be made, however, to serve the ends of policy efficiently. I think that all of us would agree with that. As already noted by earlier speakers, there is room for the organisation both of the Commission and of the Council of Ministers to be tilted a bit more in the direction of purposeful decision-making and action-taking. The fact that regional development policy, with its industrial and employment detail and importance, and its funding, should be dealt with by the Council of Foreign Ministers has really a touch of Ruritania about it. But it is, in fact, deadly serious. There ought, surely, as the noble Lord, Lord O'Brien, pointed out, to be a forum for the more relevant Ministers to meet, discuss, decide and act.

In the case of England, the report comments not unkindly that regional planning appears to be undertaken at present in a vacuum". This is at a time when, and I quote the report again: Community pressures are now pointing Member States in the direction of regional planning". The report notes that it was the Commission that indicated that there were major gaps in member states' own regional incentive schemes regarding the development and application of innovation in small firms. No one, least of all myself, wants to see more layers of expensive officialdom. But so long as we have an ERDF, I think that there is a case for making what exists, or used to exist, work a bit better. I note without comment the abolition of the regional economic planning councils, themselves an unpaid system of decentralised consultation. I note, too, the resulting attenuation in the roles of the regional economic planning boards.

I think that I am probably the last Member of this House to believe that deep-seated problems can be solved by some artful juggling of the machinery of government. I doubt, for example, whether any form of physical activity was materially assisted by the creation of the office of Minister for Sport and Children's Play. None the less, I do commend to your Lordships the report's suggestion that a single Minister and department should be designated to take the lead—not to take the sole responsibility, but to take the lead—in handling regional policy.

I conclude by saying that much has happened to the machinery of government—perhaps, indeed, too much—since the 1970 White Paper on the reorganisation of central government. This stated that the Department of the Environment would have the leading responsibility for regional policy but that the Department of Trade and Industry would retain responsibility for certain economic aspects including industrial development in the regions. That was a bit of a fudge. And, despite all that has been done, said and written, some of it very recently, on the subject, it does remain a bit of a fudge still on the ground. It has not helped in the formation of a coherent regional policy. I fancy that the unemployed men and women in Skinningrove and Millom do not really spend their evenings discussing nice points about the machinery of government. But they do care about the effects that it has on the prosperity of their region.

4.44 p.m.

Lord Tranmire

My Lords, the noble Lord, Lord O'Brien, has, with great clarity, exposed the problems covered by this report. Those of us who served on the sub-committee I know would wish me to pay tribute to the unfailing courtesy and the penetrating wisdom that he used when he occupied the chair. Having been over this course four times, I have come to know some of the fences, particularly the rather awesome water jump, "Additionality". It has perhaps left me, rather like my noble friend Lady Carnegy, with some misgivings about the European Regional Development Fund. Coming straight to the water jump, the principle of "additionality" was meant as a safeguard against reimbursement of national budgetary expenditure. It is quite incapable of proof and may be inclined in fact to encourage evasive tactics in certain of the member states.

The noble Lord, Lord Bancroft, talked about the division between infrastructure and industrial problems. It is not surprising that there has been a great decline in the number of applications for industrial grant in all countries of the Community when you realise that a successful applicant never handles the grant. It is quite immaterial to him whether the application succeeds or is rejected, except that if it succeeds he probably gets rather more involved in bureaucracy than he does otherwise. Even in the case of the infrastructure investment application, the only advantage really that the successful applicant gets is that he will have his loan charges somewhat reduced. I do not know what the solution is. I do not attempt to offer a solution. But it is I think an inherent defect of the ERDF.

What is clear, as I think all speakers have agreed, is that today the need for help towards regional development is more pressing than ever. Although the ERDF budget, as the noble Lord, Lord O'Brien, has pointed out, has increased sevenfold since its inception, regional disparities are more wide today than they were in 1975. Rising unemployment throughout the Community and prospect of the results of enlargement have aggravated and changed the nature of the problem. Notwithstanding these facts, Mr. Mathijsen,

the director general responsible for the Regional Development Fund, told the Committee in evidence: Maybe regional policy as such does not exist. It is rather regional politics that exist". He described the regional fund as just an instrument towards a policy.

I am afraid that I keep on having to repeat what the noble Lord, Lord O'Brien, has said because he has covered the report so well. Although there are at Brussels a Council for Social Policy, a Council for Agriculture, a Council for Industry, a Council for Finance and a Council for Economics, there is no Council for Regional Policy. The regional fund is to a certain extent circumscribed by each Government's decision in declaring an area to be an assisted area even though, as a consequence of that, areas denied assisted area status may be in greater need of regional help than areas in other member states that are receiving grants.

A further weakness I believe is where industrial problems are closely linked with the agricultural problems in less favoured areas. While the former are assisted by the European Regional Development Fund, with all the limitations that noble Lords have outlined, the latter are more generously provided for by the Agricultural Guidance Fund. On enlargement, this will become even more evident. Already it has led the Commission to create an integrated development programme for the Mediterranean countries. The Court of Auditors, in their last report, criticised the vagueness of the screening by the Commission for some of the project's finance.

How far can Britain's regional policies be solved by an integrated development programme? We really have only the example of the Belfast integrated programme to guide us. This has been extremely slow in producing results, leading to the suspicion that the Community's administrative machine is not geared for such programmes and that the Regional Development Fund has not sufficient staff to oversee them. That was admitted by the director-general in charge of regional policy.

Although we should beware of creating more bureaucratic log-jams at Brussels, the solution may possibly be—I suggest—to hive off the European Agricultural Guidance Fund from the Council of Agriculture and attach it to a new Council for Regional Policy, so that the problems of industry and the less favoured areas may be together under one council at Brussels. This development, I believe, might encourage the richer countries of the Community to take more interest in, and to be more generous to, the European Regional Development Fund.

In conclusion, I wish to stress that while the new regulation represents a substantial advance upon its predecessors, the Regional Development Fund could be doing far more to rectify disparities throughout the Community. Its future success will depend on the progress it makes with integrated development operations and how far these can raise the standard of living in areas of industrial decline, in travel-to-work areas and in agricultural, less-favoured areas. It would appear that the Commission has at present inadequate staff to tackle these problems and has not the overall policy required for this purpose. I believe that it is in the interests of the Community that further thought should be given to devoting more of its initiative and resources to reducing the disparities throughout the enlarged Community.

4.53 p.m.

Lord Ezra

My Lords, I should like to intervene very briefly in this debate, so ably introduced by the noble Lord, Lord O'Brien. I wish to make only one point. That point is to remind ourselves that the Community's regional development policy can form only one part of a wider-ranging initiative which is now required to address itself to the basic economic, industrial and social problems facing the Community as a whole.

As my noble friend Lord Banks made clear, the Regional Development Fund is in itself now totally inadequate to achieve the objective for which it was initially proposed. Less than I per cent. of the Community's overall GDP is clearly not going to be sufficient to deal with the massive regional disparities which exist within the Community. This limited fund has itself been further weakened by the lack of the application of additionality, as many noble Lords have made clear.

But, of course, since the fund was introduced in its present form in 1975, and subsequently revised, a lot has happened in the world, as the report itself makes clear. It would seem to me that, now that the major budgetary problems have been overcome, the next biggest question to which the Community should be addressing itself is the whole problem of how we try to deal with the basic economic difficulties within the Community. It might well be that as a result of such a review a much larger Regional Development Fund, under new principles and new guidelines, would be required. Therefore, although that fund and its allocation have recently been reviewed, I should like to suggest that the time might well be near when we should be looking at this whole question on a much wider basis.

4.56 p.m.

Lord Taylor of Gryfe

My Lords, tribute has already been paid by other speakers to the reasoned way in which this report has been introduced by the noble Lord, Lord O'Brien of Lothbury. I should like to add my tribute to his conduct as chairman of this committee. This is the second report with which I have been privileged to be associated under his chairmanship. While we spend long hours listening to witnesses and reading evidence in the room upstairs, one must occasionally ask oneself whether it is worthwhile. I hope the speeches that have been made this afternoon will continue the process begun by an earlier report—a complicated report on membership of the European Monetary Fund—which seemed to revive a general interest in that matter. I hope that the noble Lord, Lord O'Brien, and his colleagues will feel encouraged to use their talents, their probing, their objectivity in the interests of this House and the production of reports similar to the one that is before us this afternoon.

As has been pointed out by the noble Lord, Lord Bruce of Donington, this is regional policy day in the House of Lords. We have already passed the Cooperative Development Agency and Industrial Development Bill, which provides for the restructuring of regional assistance. A White Paper already exists and the map of the restructuring of regional assistance is promised and I welcome very much the assurance of the noble Lord, Lord Lucas of Chilworth, that that will be the subject of debate, because some of us have a great deal to say about it even if I cannot match the eloquence of the noble Lord, Lord Bruce of Donington.

The question of regional aid, with which this report is associated, is of great importance. Anyone who, like the noble Baroness, Lady Carnegy of Lour, and me, lives in Scotland, will appreciate how significant is the application of regional aid in the reconstruction of the devastated areas of the Scottish economy. One thinks of firms like Motoralo, East Kilbride, National Semiconductor at Greenock, IBM, Hoffman Laroche in Dairy. Eighty per cent. of UK production of intergrated circuits now takes place in Scotland. This does not happen by accident, and questionnaires sent to the firms concerned, which have expanded their investment in Scotland, confirm that regional assistance is a very important factor in making these decisions.

Yet many of us, not only in Scotland but in other parts of the country represented in this House, are increasingly apprehensive about the Government's intentions as regards regional aid. I refer to the report of the committee on the Industrial Development Act which has just been published, of which my late colleague and good friend Bill Mackworth Young was chairman. The report points out that from the quality of the cases which it considered: the board remains of the view that selective financial assistance has a vital role to play in developing the industrial strength of the United Kingdom, particularly so in the new high technology areas". Yet the report contains some interesting facts. For example, automatic grants to special development areas and to development areas dropped by more than a third to £438 million in the year to 31st March 1984 compared with £689 million in the previous year.

So the cut in regional assistance is already being imposed. What is particularly significant for people who live in Scotland and who have benefited from regional aid is that the highest fall affected Scotland and payments fell by half to £142 million compared with £287 million in the previous year. As the Financial Times said when referring to this report: These figures will make especially grim reading". We are in a situation where regional aid can make an important contribution to restructuring industry and creating economic growth. These cuts have already been imposed and a few more are no doubt promised in the redrawing of the map which will shortly come before us.

In Europe, just as in the United Kingdom, there can be no sense of community if there is a wide divergence in standards of living. If we have an increasing disparity in the standards of living and the state of economic well-being in the constituent parts of Europe we shall never develop a strong sense of community. I as a pro-European and the Alliance Benches—who are committed to Europe even if occasionally it is unpopular—believe strongly in the strengthening of the European Community, and we wish to support any efforts which will prevent the regional disparities from widening. In our own life, in our own country and in our own cities we know that the division between rich and poor is the most destructive element in the establishment of happy communites.

As has been said by other speakers, there is a total inadequacy in the £1 billion which is spent under the fund on projects throughout the Community. As has been said in the report at paragraph 84: Member States' own regional spending account for at least ten times and sometimes up to 50 times this amount". Nevertheless, although the ERDF contribution is limited in the total picture of regional aid, at the same time it is an important gesture, it is an important symbol of European interest in this important area. I always hoped that the lobby of the unemployed in Europe might be almost as powerful as the lobby of the French farmers.

It is very disappointing when we look at United Kingdom regional policy to find that in paragraph 93 dealing with the subject of additionality, which has been much aired this afternoon, the report says: evidence from the Department of Trade and Industry, is not encouraging, since it seems that the United Kingdom is expecting the ERDF to pay in future for a higher share (in money terms) of a much reduced national regional aid scheme". So the Government are practising something of a sleight of hand hoping to attract more money from the European fund and at the same time cutting drastically the aid from the Exchequer.

I was particularly interested in the evidence that was received from the local authorities during the Committee's consideration of this matter. The Strathclyde Region and other regional authorities made it abundantly clear that so long as the fund is centrally administered the whole thing looks like a handout from Whitehall, and the sense of European involvement in assisting regional development is not fully realised. That is not helpful to those of us who are anxious to develop the European idea, and the importance of Europe in providing regional aid is frequently not recognised.

May I also draw your Lordships' attention to paragraph 98. While we recognise that the present £1 billion spread over Europe is inadequate, we are shortly to be faced with the possible entry of Spain and Portugal who will also be claimants on the fund, and we shall never be able to discharge our Community responsibilities unless there is a substantial increase to take care of the new members.

I hope that the noble Lord, Lord O'Brien of Lothbury, will not feel that his labours have been in vain in producing this excellent report. I can only hope that the Government in replying to this debate will give assurances that this is a matter of high priority. I hope that they will give certain assurances with regard to the promised new policy in support of regional aid. I hope they can assure us that it will not be a case of depending to a much greater extent on European aid in order to get the Exchequer off the hook.

5.7 p.m.

Lord Bruce of Donington

My Lords, the Select Committee's Report on the European Development Fund, No. 274, is one of the most interesting reports that it has been my privilege to read since I have had the honour to be a Member of your Lordships' House. It has been most cogently put together. It is not only that the conclusions of the committee have commanded such support this afternoon; it is not only that the recommendations are important; but some of the evidence which has been given by officials of the departments concerned has been most illuminating and more informative than some ministerial utterances to which we have been privileged to listen from time to time. It is a report that should command the widest attention; and for my part I should like also to offer my congratulations to the noble Lord, Lord O'Brien of Lothbury, for the very calm and dispassionate way (I was almost going to say the unenthusiastic way) in which he introduced it.

Indeed, I think it is fair to say that the contributions that have come from all sides of the House this afternoon have cast a little doubt on the efficacy of the European Regional Development Fund. I believe that there is a little unease as regards its administration; and to say the least, there has certainly been a degree of unease about the way in which Her Majesty's Government have delt with the question of additionality. In fact, in expressing my own appreciation to the Select Committee and its members I am bound to say, somewhat uniquely for me, that I have found very little in any speech delivered by any Member of your Lordships' House this afternoon with which I can violently disagree.

I well recall when the European Regional Development Fund came into existence. If I may venture to remind your Lordships, it was the result of the Dublin re-negotiations which took place in 1974, which were a prelude to a referendum that was held in this country in 1975 as to whether or not we should remain in the European Community. I well recall the arguments that were adduced in those days concerning the strong desirability of this country for retaining its membership; and one of the reasons given for that was the vista that was held out to Europe, and particularly to the United Kingdom, of what the establishment of the European Regional Development Fund would do. A new directorate was created. We were assured that it would develop into an instrument that would powerfully assist in the vast discrepancies of resources of fortune that existed throughout Europe and, indeed, in this country.

What has happened in the event? The point was made very well by the noble Lord, Lord Tranmire, I thought—and it is undoubtedly true, and is in the report—that despite this the richer areas of Europe have become richer and the poorer areas have become poorer. There is now no doubt about that at all. It is within the context of that undoubted fact that we have to consider this report and the suggestions that it makes.

The Members of your Lordships' House who were members of the Select Committee were at one that the funds at the disposal of the European Regional Development Fund should be substantially increased in exactly the same way as that renowned firm of accountants who investigated the operation of the regional policy in the North-East recommended that the state contribution in this country ought to be doubled from £600 million to £1,200 million. The noble Lord the Minister will recall the report because I referred to it in an earlier contribution that I was privileged to make in another debate.

What are the possibilities? As a former member of the European Parliament, as one who was interested in budgetary matters and who for a little time was the president of the European Parliament's regional committee, I shall recount to your Lordships exactly what happens. In the preliminary draft budget as submitted to the European Parliament the Commission includes certain suggestions as to the total amount of payments into the Regional Development Fund during the year. It does this in two ways. It lays down the figures which it thinks the payments should be limited to, and, on top of that and absorbing them, what commitments should be allowed to be entered into in regard to the regional fund. The preliminary draft budget is then considered by the Parliament, by its regional affairs committee and by the Parliament's budgetary committee, which invariably add a very significant sum to that suggested by the Commission. Amendments are put down and are ultimately passed, and the preliminary draft budget as amended by Parliament goes to the Council of Ministers.

There is one thing of which we can be dead certain—and this has applied right from the beginning, and still applies. Any significant increase in the Regional Development Fund or, for that matter, the Social Fund is invariably turned down by the Council of Ministers, on which our own Government are fully represented, because, of course, as many noble Lords have pointed out this afternoon, agricultural expenditure (which is sacrosanct, which is completely out of control and which, in point of fact, is demand-led) invariably squashes everything else out of the budget. The draft budget is returned from the Council of Ministers to Parliament with possibly a token increase over the original suggestion for regional aid, but certainly it does not concede power.

I have been present at numerous conciliation proceedings between the Council of Ministers and the European Parliament in which our own representatives, including those of a previous Administration—I want to be quite fair to the noble Lord the Minister—have invariably resisted any significant increases in this fund. I venture to suggest that the prospects of increasing it this time are fairly remote.

One other matter has to be borne in mind. It is alleged that the application of the Regional Development Fund, even at its reduced level and even at a level which is inadequate, is some heaven-sent benefit conferred by the European Community on the places which ultimately benefit from grants from the fund. The noble Lord, Lord Taylor of Gryfe, touched upon this indirectly when he referred to the question of additionality. But there is an additional factor, because in the course of evidence that was given by Mr. Walmsley at page 15 of the report he said: we already contribute 22 per cent of the 24 per cent we take out [of the European Development Fund]". It is all very well to say that we have had this contribution to this or that part of Scotland or Wales and notices are required to be displayed saying, "This development is with the aid of the European Community", and so on. In point of fact we contribute 22 per cent. of the fund and take out 24 per cent., and the benefit to the United Kingdom is exactly 2 per cent., which is a fact that is not generally recognised. Indeed, miniscule though it may be—and the profit is £25 million in all—it is the one profitable item to be offset against these thousands or millions of pounds that go directly from the United Kingdom taxpayers' pockets into the agricultural fund for the subsidisation not only of our own farmers but of others. Those are the facts.

Therefore, after a lapse of nine years from its establishment one cannot wonder why a sign of disillusionment, however politely expressed, begins to creep in as to the effectiveness of this part of the EEC. Added to that there is the question of additionality. The committee expressed itself temperately on this matter, but on going through the evidence upon which it based its judgment—and I have been all through every bit of the evidence incorporated in the report—there can be no doubt whatsoever that the United Kingdom, before it determines what it is itself going to spend in connection with the distressed, the special development and the development areas of this country, should take into account what it expects to get out of the Regional Development Fund. There is abundant evidence of it. And yet when they speak in the Council of Ministers and elsewhere they pay tribute to the whole question of additionality.

On financial grounds one of course cannot complain, because it saves money. It saves a contribution, or part thereof, into the European Community itself. But for any Government really concerned with bringing aid to the distressed areas of this country—and there are now hundreds with unemployment going above the average of 12 per cent.—to avoid additionality by what amounts to, in Community terms, a subterfuge is not something for which it should take great credit.

I found myself in considerable agreement with the noble Baroness, Lady Carnegy of Lour, in what she said. What she said is true: applications go in for regional aid; they are vetted by the government department; they then go up to the Commission itself—DG 16, I think it is—and they are considered there. Then, once every three months there is a management committee composed of representatives of all the nations. Usually they are ambassadors, or people who are appointed by the ambassadors, who solemnly get round the table and determine the carve-up. After that projects are approved, and they come back. I agree with the noble Baroness that all this, going right the way through channels up and down again, must be costly. It may satisfy those who desire, or who have any lingering desire, to preserve the reputation of the Community as an institution, as a mere fig leaf to show the world that it is useful, but in financial terms it is not very productive.

One of the most remarkable things is the extent to which local authorities themselves are involved. With the permission of your Lordships I shall give a quotation from the report which indicates the ambivalence of the Government in this matter. At page 8 of the evidence your Lordships will find that my noble friend Lady Llewelyn-Davies of Hastoe asked Mr. Walmsley, of the Department of Trade and Industry, the following question: When you apply for grant do you have to have local authority support for your project to begin with or can you apply without that? That seems to be a question which should be capable of an immediate and direct answer. But the reply given by Mr. Walmsley, I think your Lordships will find, was slightly reminiscent of the style adopted in, "Yes, Minister". Mr. Walmsley did not reply whether the local authority came into the picture or not. These are the words he used: In the case of infrastructure projects, the only projects which are eligible are those which are financed by the public sector in one form or another". This was the way in which the direct question of my noble friend was answered. Whereas, of course, we all know perfectly well, and it is made clear in the evidence—and this was touched upon by the noble Lord, Lord Banks, and the noble Lord, Lord Taylor of Gryfe, and indeed by other noble Lords—that the local authorities are virtually excluded from any creative participation in the ERDF or, for that matter, in the development of regional policy.

There are emphatic statements in the report to that effect. This is not surprising when one considers the remarks made by Professor Goddard, who gave evidence before the committee on the state of regional planning. The committee itself arrived at the conclusion that regional planning in England appears to be undertaken at present in a vacuum. At page 36 of the evidence, in reply to a question by the noble Lord, Lord Croham, Professor Goddard, of the University of Newcastle-upon-Tyne, said this: The problem is that at the present time we do not have a machinery for regional economic development planning in the United Kingdom and it might be quite difficult to prepare those sorts of programmes because we have put the machinery on one side for the time being". I am merely quoting from the report, but if anything that the report has said is inaccurate then I shall be glad if the noble Lord would correct me. If the report is incorrect in saying that there is no machinery for regional economic planning, then, if there is, perhaps the noble Lord will tell us what it is. If there is not, it of course explains the strange reluctance to which I referred in a previous debate to set out any future plans for what regional development is going to be in this country.

I regrettably have to agree with the sentiment expressed, I thought somewhat wistfully, by the noble Lord, Lord Taylor of Gryfe, when he inferred that the Regional Development Fund is rather more of a symbol than anything else of the existence of the Community at this time in any fields outside the CAP. Surely, has not the time come when we ought to admit that the emperor has no clothes, and when to these peripheral activities (including the European Regional Development Fund), however much we ought to support them—and I agree this on the basis of getting as much as we can for our own country, ourselves being a net contributor to the Community—we ought to give such support with our eyes wide open, and not place any great hopes upon their future development?

I invite those noble Lords who have not done so to read through this document—which, I repeat, is a good and informative document. I sincerely hope they will. I am quite sure that when they have done so they will come to the conclusion that the Select Committee have done a very good job indeed, and that the contributions made in your Lordships' House this afternoon have been well worth while and are a tribute to it.

5.29 p.m.

Lord Lucas of Chilworth

My Lords, may I begin by congratulating the noble Lord, Lord O'Brien, and indeed the Select Committee as a whole on the wealth of information they have managed to pack into what is, as the noble Lord, Lord Bruce of Donington has said, a most interesting and informative report. At this time perhaps I may also thank all noble Lords who have taken part in the debate this afternoon, which has made it most interesting.

As we are about to enter a new phase of the fund's activities this is a good moment to take stock. I deal first with the general but important question of enlargement of the Community, which has been touched upon by one or two noble Lords.

Although recommending a proportional increase in ERDF resources on the entry of Spain and Portugal, the Committee quite properly related this to future development of the overall budgetary resources of the Community. This is also the Government's position. The Government welcome the forthcoming accession of Spain and Portugal to the Community, which we believe is in the interest of all member states.

The fund's declared aim under the old 1975 regulation was to "correct the principal imbalances within the Community." The new regulation rather more sensibly moderates this to contributing to the correction of these imbalances. For as the Committee have pointed out in paragraph 84—and I believe that the noble Lord, Lord Banks, made this point—member states' own regional spending is very much larger than spending by the ERDF. This will continue to be so. It is sensible that the principal role of the ERDF should continue to be to contribute to and support member states' own regional policies.

As regards the future under the new regulation, which was adopted on 19th June 1984, from the Commission's first proposals in 1981 through to the amended proposals of last year, the United Kingdom has pressed for early agreement of a new regulation in pursuit of its belief that the ERDF should continue to develop, with the conviction that every opportunity should be taken to improve the efficiency and effectiveness of the fund's operations. I am glad to note that the weight of the evidence recieved by the committee has led them in their own report—and this is also true of the weight of comment by nearly every noble Lord who has contributed this afternoon—to welcome the new regulation. This is also the Governments' view, and our aim is to make the new regulation work and to work well.

It was perhaps disappointing for both the Government and the Commission that it did not prove possible to reach complete agreement between member states on the Commission's original 1981 proposals. It is perhaps not surprising that new proposals for allocating resources should have given rise to difficulties, particularly when they would have meant that most member states would have received little or nothing. The Committee has, in fact, noted that there may be important political advantages in allowing every member state to have a share of the fund and there is something to be said for that view. I note the distinction that my noble friend Lady Carnegy made in this respect.

The noble Lord, Lord Bruce of Donington, made some comment with regard to the United Kingdom's input and net receipts. It is difficult totally to foresee how the new system will operate in practice. What is clear is that the United Kingdom can now aspire to 28.56 per cent. of the fund by comparison with our previous 23.8 per cent. The House may be sure that the Government will be pressing very hard indeed for such a share. Whether we can achieve this will depend on a variety of circumstances, many of which are outside our control, and not least the bids submitted by other member states and the extent to which we may or may not benefit from any Community programmes proposed by the Commission.

The other big changes have been in the operation of the fund. All member states want improved efficiency in the operation of the fund. We therefore attach considerable importance to the provisions in the new regulation for the financing of programmes rather than a multiplicity of individual projects. We are now considering, with the Commission, how to make best use of these new arrangements.

In the case of Community programmes, the Commission must first make a framework proposal to the Council, which the Council may then adopt by qualified majority—so here there will be no question of a one-state veto. The detail of the Community programmes would be settled in the same way as that of national programmes—by the member states concerned and the Commission, in consultation with the fund management committee. However, there is one important and reasonable qualification: a Community programme could not be approved without the agreement of a member state in whose territory it would apply. I think that is only right. That is set down in Article 7, Section 2.

My noble friend Lord Tranmire, among others, spoke upon the subject of Community procedures. I note particularly the Select Committee's proposal that regional policy should be dealt with by a specific Council of Ministers rather than by the Foreign Affairs Council. That is in paragraph 98 of the report. There may have been an argument for this when the ERDF regulation was under review, though not necessarily, I would suggest, a convincing argument. Now, however, that the new regulation has been settled, the Government do not believe there would be sufficient ministerial work to warrant setting up a separate council. The Government will not therefore be pursuing this proposal for the time being. However we recognise the case for ad hoc meetings of Ministers particularly responsible for regional policy.

The noble Lord, Lord Bancroft, asked about who might take the overall lead. I noted that the committee recommends that for England there should be a leading Minister and department to handle regional policy. How one reads that recommendation is, I think, open to question, because I believe that the recommendation itself has arisen from a misunderstanding. My right honourable friend the Secretary of State for Trade and Industry has overall responsibility for regional policy for all the United Kingdom, but this should not obscure the fact that he is also the Minister who takes the overall lead for regional policy questions in England.

Of course, my right honourable friend does not work in isolation. The Secretary of State's White Paper on Regional Industrial Development, dealing with the review of regional industrial policy, referred to the need to take account of the regional dimensions in a wide range of central and local government policies, and to the close working relationship between the Department of Trade and Industry and other departments. Decisions are always taken in close consultation with all interested departments of state. The valuable and essential contributions made particularly by the Scottish, the Welsh and the Northern Ireland departments and by, among others, the Departments of the Environment, Energy and Transport are all taken into account.

The committee's report refers to "gaps in the machinery of regional administration" and to the Government's reappraisal of regional planning in 1979. I would remind the House that the regional planning at that time was primarily concerned with the use of land. At no time were the tripartite regional planning strategies or the appointed regional economic planning councils capable of directing the scale and location of capital investment undertaken by the public authorities charged with providing infrastructure services, still less the commercial and industrial developments undertaken by the private sector.

The committee also raised the important question of the link between United Kingdom regional policy and eligibility for ERDF assistance. This was in paragraph 97. The report suggests that the Government's regional industrial development White Paper raised doubts about the future direction of United Kingdom regional policy in this country and in particular whether there will be a sufficient number of projects and sufficiently wide coverage by assisted area or other status to provide an adequate number of industrial and service projects. The White Paper clearly spelt out the Government's firm commitment to an effective domestic regional policy. We discussed this earlier this afternoon and indeed last week and I think therefore that it would not be helpful if I returned to the arguments that I deployed earlier.

Perhaps I may turn to some of the more general points which were made during the course of our interesting debate and to one about which without exception—unless perhaps it was the noble Lord, Lord Ezra, in his brief intervention—all noble Lords spoke. That is the question of additionality. This, I believe, is an issue which, again, is often the subject of misunderstanding. The principle that it expressses is that grants should not lead to reduction in national expenditure. The report suggests in paragraph 79 that the supposed lack of additionality may discourage local authorities from making application to the ERDF.

The simple fact is that this additionality can only be provided for at the level of overall public expenditure planning; and that is exactly what we do. The Government plan their expenditure on the basis that a certain level of ERDF receipts will be forthcoming; with the result that the total level of expenditure—and this is important—is higher than it would be without those receipts. The total number of projects which can be implemented is obviously greater. Quite contrary to what the Committee has implied, this practice has by no means discouraged local authorities from applying for support for their projects. Quite the reverse! They fall over themselves to secure assisted-area status and the coveted ERDF eligibility; because by this means they are able to undertake more, and perhaps even more expensive, projects.

The Committee's report also suggested in paragraph 80 that greater visibility in relation to ERDF receipts in the national accounts of member states would be an advance. So far as the United Kingdom is concerned, the public expenditure White Paper already shows the expected amount of ERDF receipts alongside the planned levels of domestic expenditure under the same headings; and separate ERDF figures are also given in the supply estimates and the appropriation accounts. My noble friend Lady Carnegy of Lour spoke about the administrative costs of the operation of ERDF. Regrettably, the administrative costs in any system of regional aid are fairly high. We recognise this and this is why the Government hope to make good use of the new provisions that there are for the national programmes.

The noble Lord, Lord O'Brien, in his speech and I think also the noble Lord, Lord Banks, in his, spoke about the need for the creation of permanent employment. The committee recommended that more attention should be given to the creation of this, particularly with the help of ERDF. So far as we are concerned, I remind noble Lords that the Government made clear in the White Paper on regional industrial development that their own view is that it is essential to ensure that regional policies are effective in creating genuine jobs. Again, we discussed that earlier this afternoon. Both the noble Lord, Lord O'Brien, and Lord Banks, spoke about the development agencies. I noted what they had to say about development agencies to cover the whole country.

But, with respect, regional policy is about a part of the country rather than about the whole. It is true that there are no agencies in England that are comparable with the Scottish and the Welsh Development Agencies; but, through the activities that are carried on through the regional offices and the discussions that take place with local authorities, we feel that although the package may be a different shape, the contents are essentially the same. Much was said by a number of noble Lords, notably, I think, by the noble Lord, Lord Bancroft, about the industry infrastructure balance. This was a point that the committee noted. This imbalance to which he referred is quite simply because the Community's economic situation, coupled with the large growth of the fund and its restrictive rules, has made it impossible for most member states to maintain the 70/30 infrastructure industry balance which was provided for in the old regulations. Last year it would have been quite impossible for the Commission to have used all the available resources of the fund if the Council had not waived that provision. The new regulation sensibly provides that member states and the Commission should merely try to allocate at least 30 per cent. of the fund to industry projects. I appreciate that the noble Lord, Lord Bancroft, made a comparison between the United Kingdom and Germany. The fact is that there have not been enough industrial applications coming forward that, even had they been accepted, would have brought our 70/30 balance more into line with what I believe the noble Lord sees as the more ideal situation which obtains in Germany.

The noble Lord, Lord Ezra, said that ERDF resources should be expanded proportionately on the entry of Spain and Portugal. I suppose that that is a fair comment and I suppose that when any grant or fund is set up there are those who say for a variety of reasons that there should be more spent or that it should be expanded. I think that we have to accept that, in considering the ERDF budget more broadly, it is noteworthy that the fund has grown since its inception in 1975, when expenditure was £125 million, to £1,220 million or so this year. The fund, I believe, is unlikely to grow at the same rate in coming years but the United Kingdom firmly supports the conclusion of the Brussels European Council that the financial resources allocated to aid from the fund should continue to increase in real terms, again within the limits of financing possibilities. I take much account of what was contained in the remarks of the noble Lord, Lord Bruce of Donington, on that subject.

A number of other interesting points arose. They were perhaps more expressions of view than questions addressed to me. I think that I have answered those that were specifically put in that spirit. Perhaps I may conclude therefore by saying that I thank the noble Lord, Lord O'Brien, and the Members of the select committee for their report. This afternoon has been most interesting and it has provided an opportunity to air really important matters. I hope that I have been able to make it clear that the Government are committed to maintaining an effective domestic regional policy. We are committed to a continuing effort to support and develop the work of the European Regional Development Fund, and we are committed to explore the new possibilities which will arise from the implementation of the new regulation.

5.50 p.m.

Lord O'Brien of Lothbury

My Lords, my first pleasant duty is to thank Her Majesty's Government for enabling this debate to take place this afternoon, and if I may say so at such a civilised hour. I should also like to thank all noble Lords who were good enough to take part in the debate both for their contributions and for the tributes that they have been good enough to pay to the Committee—and, indeed, to me. little though that was deserved. The noble Lord, Lord Bruce, said in the course of his remarks that he had agreed with all the speakers up to that point, and I began to wonder where we had gone wrong. But I came to the conclusion that there was one exception even to the best of rules, and so I decided to press on. He said he thought that my introduction of the report was a little unenthusiastic. We all know that the noble Lord, Lord Bruce, is a passionate politician, and I suppose he is a stranger to the cool objectivity which is what I tried to use in my approach to this subject, and indeed so did the Committee as a whole.

Certainly I can say that we are not in any way unenthusiastic about the European Community idea. We are certainly not unethusiastic about the great desirability of minimising the disparity between regions in the Community—a formidable task at all times. We are not unenthusiastic about the ERDF as such, but we are very worried about the bureaucratic jungle in which it seems to operate in all countries, not least in this, and, as the noble Baroness, Lady Carnegy of Lour, said, the cost involved. Although I could be said to have been a bureaucrat all my life, I have an intense hatred of the creation of mountains of paper by bureaucrats when a straight forward approach to problems could solve them without all that trouble and expense.

We have also been greatly troubled by the lack of additionality, as indeed all speakers this afternoon have been; and despite what the noble Lord, Lord Lucas of Chilworth, has said. I think we shall remain troubled about that until we see evidence that it has changed. He says that the Government are not willing to set up a Minister in charge of regional affairs. I wonder really how strong the case is for not doing that. If we can have a Minister of Sport, surely regional affairs and the problems associated therewith are infinitely more important even than sport.

I was attracted by the proposal made by the noble Lord, Lord Tranmire, that the Agriculture Guidance Fund should be tied up with the Regional Development Fund in our consideration of the future financing of the Community and the place which the Common Agricultural Policy plays in it. We have been worried, as indeed everybody has, by the immense expenditure on the common agricultural policy, and the thought of how this might be minimised by giving help to those who are poor in agriculture, like the hill farmers, without giving blessings to the whole farming community—and excessive blessings in many cases. An idea of this sort might help in that direction. I also welcome the plea of the noble Lord, Lord Ezra, for a wider view on this question. It certainly should not be concentrated simply on the operation of the European Development Fund or indeed on the regional policies of individual countries. It is a Community problem of immense importance.

The part played by local authorities in this country was also discussed by the Minister and we heard a lot about it in the Committee, of course. The regional authorities do play a part: they do have contracts with Brussels and they value those contacts. It seems to me they could be used in a much more productive manner. I hope we shall see under the new regime which is now being established a greater Community element in the programmes. The Minister has said that if the Community has ideas of a regional policy, each country affected by that policy must agree with it. That is something which I believe is indispensable, but I hope our country in particular, and indeed all European Countries, will approach this desire for a Community element in regional aid positvely and creatively. Again, I thank everybody for taking part in the debate, and the Minister for replying to it.

On Question, Motion agreed to.