EC Regional Development Policy: ECC Report

HL Deb 14 May 1992 vol 537 cc455-502

3.35 p.m.

Lord Aldington rose to move, That this House takes note of the report of the European Communities Committee on the EEC Regional Development Policy (4th Report, Session 1991–92, HL Paper 20).

The noble Lord said: My Lords, this is a full and lengthy report and I shall do my best not to keep your Lordships for too long. The report is based on evidence taken between 4th June and 22nd October last year. Our conclusions were reached before the Maastricht summit though there is no disharmony between what we say and what was then decided. The inquiry and our report arose from the Commission's fourth periodic report on regional development.

Before coming to the substance of the report I have some preface points. First, I should like to congratulate, as she was congratulated yesterday, my noble friend Lady Denton on her new appointment. We look forward to hearing her speech at the end of the debate. It is her second speech in two successive days—a good baptism if I may say so. Secondly, I wish to pay tribute once again to my colleagues on Sub-Committee A, whose knowledge and wisdom never surprises me but whose tolerance of, and helpfulness to, their chairman surprises him more every day. Thirdly, I should like to remind your Lordships that the House is much blessed with the qualities, skills and devotion of its Clerks. The report is another example of how much is owed to them.

The new technology in the Committee Office has added further to its effectiveness. I should add a special tribute to the new word processing equipment and the well trained operators whose product—most easy to read—goes straight to the Stationery Office and thence on to the printed pages, thus saving much time and money in the publishing process. Your Lordships will also notice that the report has broken new ground by including coloured maps and tables.

Our specialist adviser, Professor Mayes, is to be specially thanked for bringing into play not only his professional skills in economics but also a specific understanding of the European regional development scene. As usual, I am sure that the House will join the Committee in thanking all who gave evidence, particularly Commissioner Millan who came specially from Brussels for the purpose and the former Secretary of State, Mr. Peter Lilley.

I wish to say a word about the timing of the debate. I have indicated that our conclusions were reached before the turn of the year. In other circumstances it would have been right and expected that the House should debate our report, which was published on 21st January, in the latter part of March. We all know why that became impossible. However, we were fortunate to receive a reply from the Government within the agreed two months of publication. I am grateful to them for that and also for the substance of the reply. As your Lordships will know, it is rare for me to be the chairman of a committee responsible for a report to the House which commands the almost complete agreement of Her Majesty's Government.

The report seeks to tackle longish term issues and questions of principle which will still be relevant when enlargement of the Community produces different problems—for different they will be—facing the Commissioner in Brussels. I look forward to hearing your Lordships' comments. Part 3 of the report sets out the opinion of the Committee. Without in any way detracting from the importance of the rest of that opinion I shall confine myself to some points relating to the aims of Community policy, the roles of the Commission and related to that role the role of the member state governments and the regional authorities. I shall refer also to the procedures, administrative problems and the scope for increasing the effectiveness of Community help to the poorer regions including that provided through other Community policies.

The strengthening of the Community's economic and social cohesion is firmly entrenched in the treaty as one of the Community's principal tasks, with member states committed to conduct their economic policies in such a way as to attain that general object and the specific aim of reducing disparities between the various regions and the backwardness of less favoured regions. Regional disparities in incomes per head in the Community were, in 1990, at least twice those in the United States of America. In 1990 unemployment rates in the Community varied between an average of 2½ per cent. in the best 10 regions and 22 per cent. in the worst 10 regions, which were in Spain and southern Italy.

While in the earlier part of the 1980s the disparities had increased slightly, in the latter part there was some improvement. But in Greece the disparities widened. That does not mean that there was no improvement in absolute terms in the position of the poorest region; I am talking of relativity. Therefore it seemed to many that the doubling of the structural funds in 1989 was necessary and welcome. But of course that had not had time to be reflected in the figures before us. With the doubling of the funds there were changes in the Commission's policies, some of which were advocated in the Select Committee report to your Lordships of 1988.

Our report lays emphasis on the roles of member state governments as having the principal responsibility under the treaty for implementing the cohesion policies. It is their national income and economic policies which determine the ability of their regions to improve their creation of wealth in a fully competitive way. Trade within the single market regime, which will begin to be fully effective next year, is of course the Community's main wealth creator, but free trade with its disciplines makes the problems facing backward regions more difficult in the first place before its fruits mature. The shrinking and eventual abandonment of most subsidies and state aid add to the initial difficulties for most of them. That problem affects Eastern Europe as well as the Community regions.

The role of the Commission is quite simply to support the achievement in member states of the agreed Community objectives. It gives that support through the structural funds and through special Community programmes of which RECHAR, STRIDE and others are examples. Quite rightly, there has to be full involvement of, and full co-operation with, authorities and administrations in the regions. Nevertheless it is the national governments which have the responsibility for economic policies within their countries and for deciding the priorities and political preferences. The totals of public expenditure are, as we surely well know, a vital element in the success of national economic policy. I stress that because of tendencies, not to be found in the Commission itself but in some regions, to expect the writ of Brussels to override national wills. There is nothing peculiar to Britain about that point. Neither is it wrong for the British or other governments to want to ensure that similarly sound economic policies are followed by other countries which receive Community funds. It was made clear to us by Commissioner Millan that he accepts the principal role of national governments.

Administrative responsibilities as between the regions and national governments differ significantly —I might say very significantly—among member states, and so does administrative competence, particularly in some of the regions. The Commission has to recognise that and I believe it does. The size of funds available to the Commission depends in part on the economic growth of the Community and in part on the other demands on the Community's resources, particularly the common agricultural policy which, in 1990, took 59 per cent. of the budget. Even by 1993, after the completion of the process of doubling the structural funds, only 25 per cent. of the Community budget will be used in the structural funds. That means that even then, 75 per cent. of the budget will be used for other purposes, not much of which helps cohesion, and some of which, particularly in the CAP, pulls in exactly the opposite direction. It is that factor which produces the extraordinary result illustrated in Table 3 of our report on page 32, where some member states with a higher than Community average of GDP per head received in 1989 more from the Community than they contributed. On the other hand, Spain, with a GDP per head well below the Community average, was apparently a net contributor.

I shall not describe to your Lordships the differing objectives established by the Community for the implementation of its policies. The United Kingdom is mainly concerned with Objective 2, which is for revitalising regions affected by serious industrial decline, and with Objective 5a, which is designed to develop rural areas. Objective 1, which is the most important and which takes the majority of the funds, is for regions where development is lagging. It is applied to Northern Ireland alone in the United Kingdom.

The report sets out the particular problems affecting the regions in the United Kingdom. Some of my colleagues may refer to them; I shall not. I believe that our peripheral regions, particularly the Highlands and Islands, should have more support from the Community and that it should alter its rules for that purpose. I believe the Commission will find that it has to when it is confronted with the northern states of EFTA joining the Community.

The regions told us of the difficulties facing them because of the burdensome procedures attending Commission grants. We have suggested some simpler procedures as advocated by the Secretary of State. I hope that the Commission will respond. Mr. Milian is well aware that his procedures need review. It is, however, wise to remember that the Commission will always have to ensure that the moneys it grants to member states are used for the purposes of the grant and for nothing else. The joint settling of programmes through the Community support frameworks and the monitoring of their progress should achieve that quite simply provided that there are sound financial control systems in place in each member state. I emphasis that proviso. That is an important principle for the United Kingdom which is both a recipient and a contributor.

There is one Commission rule, as many of your Lordships will know, which has caused trouble. In the past it has caused trouble not only in the United Kingdom. That is the additionality rule. Additionality in the regional development context means, that anything that the Commission does by way of financial assistance should be additional to what would be officially provided in the eligible areas concerned without that assistance".

That seems a sensible rule, particularly for a country like the United Kingdom which is a net contributor to Community funds. However, it would not be sensible if that rule were to be applied to individual programmes so that the recipient of the grant had to show that that programme would not have been carried out without the grant. Such a procedure would mean that Community-supported programmes were the least important in each member state's programmes. It should surely be satisfactory to show that the total regional development effort each year in each recipient country was larger by the amount of the expected grant than it would have been without it and that the grant from the Commission went to the programmes and areas for which approval had been given. That is what we suggested should be made transparent by Her Majesty's Government to the Commission. We were very pleased that, after that transparency had been achieved, the dispute between our Government and the Commission over RECHAR was settled.

I want to touch on the important question: how can the Community's assistance be more effective in reducing disparities and advancing cohesion? It is very difficult to measure the effectiveness of development programmes. The success of some can be seen quite soon. Parts of Britain have clearly gained from British regional development policy. But in the main regional development matures over a longish term. However, the Committee was able to see examples of successes in central Italy and Spain. We also learnt of what still remains to be done—a gigantic task in some places.

We advocated that the Commission should be flexible in the measures which it supports and should encourage the interchange between regions of good ideas. We were told of the value of innovation and training help and we advocated the use of know-how support for administrations as well as for businesses. The encouragement of joint action by the private and public sectors, which has proved so successful in parts of British regional policy, should be fostered. All this is clearly in the minds of the Commission and the British Government.

There was no doubt in our minds—there should be no doubt in anyone's mind—about the importance to development in the past and in the future of sound national economic policies and sound administration. Without them, Community resources will not have their full effect and may be wasted. Without them, private investment will not be attracted to those regions so that sound economic growth can proceed.

The demand for another substantial increase in the structural funds is understandable. There is so much to be done, but there is also a limit to the amount of money that can be effectively absorbed in the lagging regions and in regions of weak administration. We felt it right also to issue a reminder that the future wellbeing of the Community and its ability to secure cohesion depends on sustained growth in the more developed areas, and that that growth must not be jeopardised by forcing too large a transfer of resources from those areas to the weaker areas.

The discussions over what is known as the Delors II proposals will settle how large an increase there is to be in the Community's total resources, from which the structural funds will gain at least a part. But even without any change in the contribution limit—and it is that proposed change which has attracted so much controversy —there is no doubt that there will be an increase, partly from normal economic growth and partly from the new accessions, which are likely to be from net contributor countries. Further savings from a reformed CAP could lead to an even larger increase. We did not think it wise to recommend the extension of the scope of structural fund support to education generally or to anything else. That would weaken the effect, diffuse the available funds, and we think—or at least, I think—offend the principle of subsidiarity.

It was suggested to us that part or all of the Community's support could be given better by direct fiscal transfer rather than through the support of specified programmes. We did not so recommend. The present arrangements ensure that Community money can be spent only on programmes approved by the Community. Similar assurances need establishing for the new cohesion fund, which I welcome. It would not help the cohesion or the economic betterment of the Community's peoples if Community resources were to be used for purposes not approved by the Community.

It will be several years before the statistics give us evidence of the success or failure of present policies in terms of improving income per head and employment opportunities. It is right that the Community should not try to fix any level of disparity as a target for reductions from 75 per cent. to 80 per cent. of Community averages, and so on. What is wanted is a steady improvement in the wealth of backward regions, and in their competitiveness and output. In addition, as far as possible, the rate of growth should be faster in the backward areas than in the richer areas without slowing the rate of growth in those richer areas. To achieve that is a task of enormous size. The Community must do more to ensure that all its policies pull in the direction of cohesion—or, at worst, do not pull against it. That is another urgent reason for reviewing and reforming the CAP.

But the full purpose of cohesion includes a political purpose as well as an economic purpose. It depends also on the more psychological feeling in the lagging regions that the Community has both a purpose and a benefit for them. The grants from the structural funds encourage that feeling and the Commission is wise to tell the public of its involvement. It was a wise decision of Her Majesty's Government in 1972 to emphasise the value to the Community and its members of regional development policy. Like other member states, the United Kingdom will gain over the years by the greater prosperity and cohesion of all the regions in the Community, just as she has long sought to gain by improving conditions in all the regions of the United Kingdom.

The means used to achieve a reduction in the stark disparities between regions will evolve over the years. The Commission must be and, I think, will be flexible. It must not be bound by the particular funds or particular means that are now in use, promising as they are. I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on the EEC Regional Development Policy (4th Report, Session 1991–92, HL Paper 20).—(Lord Aldington.)

3.55 p.m.

Lord Mason of Barnsley

My Lords, I should like to congratulate the noble Lord, Lord Aldington, and his Committee on this worthwhile and illuminating report that deals with the EC's regional development policy. Perhaps I may assure the noble Lord that it is not out of date. Indeed, it is very relevant to today. It conveys a picture of bureaucratic bungling and constant squabbling over the use of regional development funds. It reveals the different attitudes taken by the Department of Trade and Industry and the European Commission on definitions of EC terminology, and the unending frustrations of those local authorities and enterprises that have prepared projects, submitted them for European regional development funds or for European social funds, and which have waited interminably for the cash.

The report has certainly brought to the attention of major government departments, the Common Market Commission and local authorities the difficulties and frustrations of carrying out the five objectives of the use of structural funds. As a result of the ridiculous squabbles between the DTI and Commissioner Millan over the allocation of RECHAR monies destined for the coalfield communities, £121 million has still not been paid. The report also illustrates the degrees of obstinacy of both parties concerning not only the determination of RECHAR, but also the question of additionality—that is, moneys allocated to us by the Commission in addition to national regional funding.

All this has resulted in Common Market cash being bogged down in Brussels; projects earmarked for development in our most needy areas being held up —some are already out of date; in reassessments having to be made and in needless and endless extra work by planning and project departments. What a shambles—and at what extra cost! That squabbling must cease. Too many of our people, including thousands of the unemployed in our old traditional steel and coal areas, are suffering as a result. Their elected representatives, officers and members of bodies representing industry and commerce in those regions must be in deep despair.

Commissioner Millan said that there had been a difference of opinion between the Commission and the United Kingdom Government over the co-financing of local authority schemes for support for small and medium-sized enterprises. There is no doubt about that. On the RECHAR programme, he said: We do not have problems with other governments in the way we have had problems with the United Kingdom Government". Even on the question of additionality, the noble Lord, Lord Aldington, will remember that the Committee stated: although the reform of the Structural Funds seems to have eased the difficulties over the principle of additionality in most Member States, in the United Kingdom these difficulties still persist. The Committee's report continued: Whilst the difference between the Commission and the United Kingdom Government on this issue remains unresolved important programmes are delayed, applicants and enterprises involved are hindered and valuable time of officials at all levels of government and in the Commission is wasted. Well, that is condemnation indeed and it requires an answer from the Minister at the conclusion of this debate.

Let me now draw the attention of the House to paragraph 82 of the Committee's report. It reveals that: The Association of British Chambers of Commerce (ABCC) said that from the business point of view … additionality referred to an investment programme aimed at supporting regional developments for which funds were not available through local or national public expenditure … They had received a number of examples from around the country where efforts being made to tackle acute economic, environmental and social problems were being held up by lack of funds, due to the continuing impasse on the additionality question. A notable example was the case of the bid from the South Yorkshire Chambers of Commerce"— —which covers Barnsley, Doncaster, Rotherham and Sheffield— for RECHAR funding". It was a Business Plan for Business Development Services 1991. Those areas had the support of the European Commission and with the release of the RECHAR funding could provide an immediate and positive injection into the regeneration of the business community in South Yorkshire. Without it, the process would be slow and far less effective.

Of course, as noble Lords may be aware, nothing has happened. The plan for 1991, if it is finally financed, may be a plan for 1993 or 1994. After 18 months of wrangling between the DTI and Commissioner Millan, the then Secretary of State for Trade and Industry announced in another place on 17th February this year, conveniently a fortnight or so before the announcement of the general election, that he had come to an agreement with the commissioner and the RECHAR moneys of £121 million would now be released. He concluded his Statement by saying: The implementation of the RECHAR programmes can now proceed immediately".—[Official Report, Commons, 17/2/92; col. 22.] Where is it? The coalfield communities have been waiting 21 months for their allocation of Community cash and already three months have elapsed since the programme was going to be implemented "immediately". One can readily recognise the frustrations that build up due to this vacillation and procrastination by the DTI. Therefore I ask in this regard for the Minister to state whether all the projects in the programme will be going ahead as planned when we get the money; or will they all have to be reassessed?

The interviews conducted by the committee reveal that the noble Lord, Lord Carr of Hadley, whom I am pleased to see in his place, questioned Mr. Corley of the DTI. The noble Lord said: What I still do not understand is this. Some years ago I was involved in trying to get more money out of Brussels for things like business initiatives, technical education, enterprise initiatives and so forth, and every time I got something, one thought, promised, my bitter experience was that we never actually got it because we never fulfilled our own requirements back here. I am thinking of the town of Barnsley … for which we got some promise from Brussels conditional upon British sources also being put in. Because the British sources were not put in we never got the money, and we had not when I finished with it. Had we put in our share of the additionality we would have got more money from Brussels. I simply do not understand". Mr. Corley replied: I am pleased to say … on the question of Barnsley that they have actually got the money". In sheer exasperation the noble Lord, Lord Carr, retorted: Good—it took years! He was referring to the start of the Barnsley Business and Innovation Centre, of which I am the chairman—unpaid of course. Due to high unemployment in our region and long-term unemployment, and seriously suffering from the virtual death of the traditional steel and coal industries, we qualify both for European Regional Development Fund support and European Social Fund support. As a consequence British Coal Enterprise, which is doing a remarkably good job in the run down coal areas, Barnsley Metropolitan Borough Council, and local banks and businesses banded together and decided to build a business and innovation centre—a specially built complex, housing incubator units, in which companies could develop and market high technology based products and innovative projects, and, having developed their high tech products, then move out into the region and establish production units—new technologies in a depressed area. Indeed a new technology culture is being born. There are nine such BICs in the United Kingdom, all of which should be encouraged. But we need more help from the DTI, and it is true of many small businesses too. The regional office is helpful, but the frustration always is at national level and especially in obtaining EC funds which we have been allocated. The report refers to these frustrations. Our experience shows that long delays in decision-making by bureaucrats in London and Brussels create enormous frustration.

Like other businesses, we are constantly presented with new systems from the Commission. ERDF15 becomes Community support framework. Then we have the integrated development plan (IDOP) followed by the eastern England plan. Then there is RESIDER followed by RECHAR—a non-stop series of schemes which are baffling to all those enterprises which for one reason or another are entitled to some of the financial benefits. The Commission does not fare well in this regard because it gives the impression of a bureaucratic shambles. One scheme has hardly started before another scheme is brought forward.

At home we spend time and effort trying to get our allocated EC funds—for example, trying to obtain our ERDF15 revenue support for the Barnsley Business and Innovation Centre. After months of frustration with the DTI I wrote to the noble Lord, Lord Young, then Secretary of State at the DTI, on 9th June 1988. I led a deputation to see him on 27th September 1988. Peter Corley of the DTI visited us on 18th October. A claim form was provided and cash was paid at the end of March 1989—but for one year's operations only when our agreement with the Commission was for three years. I had to start the operation all over again. I sent a letter to the new Secretary of State, Nicholas Ridley, on 22nd November 1989. I led a deputation again to the Secretary of State on 29th January 1990. He offered me two years' cash. An application form was received on 8th May 1990 and cash was paid in October 1990. All that time and effort and all those delays add up to a substantial and increasing loss to enterprises like the Barnsley Business and Innovation Centre. The lack of early revenue funding slowed the rate of client-seeking and selection. Subsequent delays in building funding resulted in there being no accommodation available for more than a year. Overall this must have cost us an unrecoverable £100,000 of rental income. How many times must this saga be repeated in our regions?

From personal experience and consultations with local authorities may I say that, although the DTI suggests that EC structural funds make only a minuscule contribution to regional spending, the sums from ERDF, ESF and IDOP help considerably with industrial estate extensions, road improvements, factory units and support for enterprises like the Barnsley BIC. The structural funds are under review yet again and the new regimes are likely to take effect from January 1994. I only hope that the DTI will bear in mind that Objective 2 of the structural funds—to revitalise regions affected by serious industrial decline —is of the utmost importance to the badly hit coal and steel communities of our country.

On the positive side, the local authorities in South Yorkshire and the business innovation centre have a good working relationship with the regional office in Leeds, especially where it advises the local authorities on developing and implementing programmes and likewise giving support to the Barnsley BIC's revenue schemes. It would appear that decisions for the local authorities generally are being speeded up. On the other hand, it is self-evident that the RECHAR and additionality arguments speak for themselves—they have been most depressing. Unfortunately, the Government give the impression that they are reluctant to embrace the spirit of the structural funds, and there is limited co-operation and discussion between the DTI nationally and local authorities. Consequently, they are excluded from having any influence on programmes.

Matters can be improved with better administration by the Commission, including simplifying the bureaucracy for planning and implementing programmes. Also, let the Government speedily allow EC funds to go to the regions where they are intended. I believe that a positive attitude is necessary by the DTI to effect a closer working partnership between the Commission and the Government and that they should not be jealous or envious of the EC's regional programmes.

Under this Government, the sad fact is that local authorities have only EC regional policy to fall back on when it comes to public sector regional regeneration. I believe that the Government sell their poorer regions short by their current policies. They ought to be changed. Perhaps the new president of the DTI will act accordingly.

4.11 p.m.

Lord Hooson

My Lords, like the noble Lord, Lord Mason of Barnsley, I should also like to congratulate the noble Lord, Lord Aldington, and his committee on their work and on their report. I largely agree with the opinion expressed in Part 3 of the report, but with two important reservations and one lesser. Clearly it was a very high-powered committee. I found the report to be a valuable and instructive contribution to the greater debate. Many of the questions asked by members of the committee, especially the reflections of wisdom and experience in them, were very illuminating, as were some, but not all, of the answers that they elicited. In particular, members of the committee did not have much success in trying to find out whether there is any degree of additionality provided for in the United Kingdom's utilisation of these European Commission funds, or, if there is any—which I doubt —it is a matter of degree.

As a fairly practised questioner in our courts for four decades, I was quite amazed at the skilful and delicate footwork—if I may use such a term—of the Treasury witnesses in dancing around the probing questions on the issue of additionality. That brings me to my major reservation on the opinion of the committee. I feel that members of the committee were excessively kind in dealing with the matter of additionality; that is, whether the Government actually fulfil their obligation to use those additional funds from the European Community to make an additional impact over and above what would normally be done in those parts of the country which alone are eligible for that form of assistance. Reference has already been made to the definition in the report at paragraph 74 of the word "additionality": Additionality means that anything that the Commission does by way of financial assistance should be additional to what would be officially provided in the eligible areas concerned without that assistance". There is clearly a very important dispute as to whether the UK is fulfilling its obligation on additionality. It was actually spelt out by Commissioner Bruce Milian in his evidence in response to an invitation from the noble Lord, Lord Aldington. I refer especially to the questions and answers (489 to 495) at pages 90 to 92 of the report.

The committee's last word in its opinion at paragraph 135 on additionality ends with a pious hope which I think that I should quote: It seems to the Committee that the Government should redouble their efforts to satisfy the Commission by the transparency of their procedures that the additionality principle is being followed in the United Kingdom, that anticipated grants from the Commission were included in expenditure plans to add to what would have been spent in regional development without the grant, and grants approved by the Commission within the CSFs reach the agreed areas. The Committee hope that their Report will help towards a very early resolution of this dispute and they stress that there is a real urgency for this". Clearly, the experience of the noble Lord, Lord Mason, illustrates the urgency of the point.

I do not believe that the United Kingdom is fulfilling its obligation. That is a belief that I know is shared by many others. I should like to set out some of my reasons for that belief. First, if one accepts that there is a general understanding that additionality applies, why go out of one's way, as the Government did here, to emphasise that there is no legal obligation? The comment of members of the committee on that in paragraph 135 was that they agreed that there was no legal obligation but noted, the acceptance by the Government that there is a general understanding that additionality applies to receipts from the Structural Funds"— adding the qualifying words— which did not appear to them to be the case at the start of their enquiry". It seems to me that the Government are saying, "Our first defence is that we have no legal obligation". When that defence fails, they will then say, "The transparency of procedures is a sufficient defence".

Returning again to the report, members of the committee also said in their opinion: In looking for a way out of the seeming impasse of this dispute, the Committee have been helped by the distinction made by the Treasury in their evidence (Q558) between the additionality issue and transparency procedures". I am bound to say that I fail to follow the meaning of that sentence. I fail to see how it benefited the committee. Perhaps someone will be able to illuminate the point for me before the end of the debate.

It is instructive to remember that Commissioner Milian, who was Secretary of State for Scotland for many years, has considerable experience and knowledge of local government financial procedures in the country. It was suggested that that might be a difficulty. He plainly expressed his view at the end of his answer to question 496. He said that it was the transparency of our procedures that enabled him to say that he was not satisfied and in fact did not believe that additionality was being employed in this country.

We then come to the evidence as regards how the money is actually spent. Because I come from Wales, I refer in particular to the answers given by Miss Davies of the Welsh Office when she dealt with the priorities and so on. She gave examples which I know members of the committee probed. They were surprised. There was, for example, the question of the money spent on the railway signalling systems and the money spent on Manweb, the company that produces electricity in North Wales. There was also the probing by the committee of the sponsors to the effect that they were waiting for people to make suggestions. Altogether it did not appear to me that the evidence available—from Scotland, Northern Ireland or Wales, although I thought that the answers from Wales were the least satisfactory—showed that additionality was being applied here.

I turn now to my second serious reservation; namely, the effectiveness of the help that we are receiving. To a degree that hinges upon the question of additionality, but it is also a matter of priorities as regards how the money is spent. The committee set out its findings in paragraphs 117 to 119 at pages 34 to 35 of the report. In particular, paragraph 117 states: A complete judgment on effectiveness would need to include an estimate of what would have happened without any Community with arrangements to support cohesion-aimed programmes". Oddly enough, by far the most effective support for rural areas in the EC, comes from the common agricultural policy. It has many critics and there is great scope for reforms in its methods of support. But I do not think that it has been fully appreciated, either on these Benches or any other Benches, what would happen if the common agricultural policy were scrapped. If the GATT negotiations were 100 per cent. successful and we had total free trade, one would have enormous agricultural, economic and social problems in many of the regions of the United Kingdom and total devastation in Europe. We should have millions of people looking for jobs in industry. I do not think that anybody has fully faced up to the implications of that.

In the area in which I live, in Mid-Wales, we have considerable help from the Common Market funds —I think there was £79 million in the latest plan. That is chicken-feed compared with the support that is given by the common agricultural policy. So when one talks of scrapping it one should face up to this point. One suddenly has great scope for reforming it but I simply point out the devastation that would occur.

We should not underestimate the value of the agricultural economy in supporting the infrastructure of social and economic life in areas such as my own, as well as in Spain and Denmark and Holland, which are net beneficiaries because of the common agricultural policy. Without it, their standards of living and earnings would be nothing like they are today. So we face a dilemma there.

The United Kingdom preference for infrastructure use of these funds seems to me to be wrong. It accentuates one's suspicion that the funds are used in fact in substitution for central funds and not additional to them.

Perhaps I may quote from paragraph 118 of the report: The Committee wish to point to the enterprise initiatives taken in the United Kingdom by the business community and other non-governmental bodies in partnership with local authorities and central government, which have enabled a relatively small injection of public money to produce a major stimulus to the small business sector as an important source of new jobs and local wealth creation. They were impressed with evidence that showed the value of regional support through innovation services in the central part of Italy, to help small businesses". That statement is made in contrast with the emphasis by the Government in their various departments on the importance of using this money for infrastructure benefits.

Perhaps I may go back to my experience in Mid-Wales. When I first became a Member of Parliament for Montgomeryshire in 1962 our area was a net exporter of population. There was an acute drift of population away and the area was still suffering from this acute de-population which resulted in an age structure which was a great cause for concern. I shall not describe the self-help elements, but they came to my mind when I noted some of the questions asked by the noble Lords, Lord Carr and Lord Boardman, in particular. There was a progression from a voluntary Mid-Wales development association to the new town development corporation and eventually to the Development Board for Rural Wales.

The committee refers to the relatively modest help that sometimes can be given to private enterprise. This results in very beneficial development. I asked the former development officer of the Rural Development Board for Wales, Mr. Peter Garbett Edwards, who was by far its most effective officer ever, whether he could give me some examples; he gave me four. First, there was Presco in Newtown which makes portable buildings for export. It is very much a national company now. The company started with 20 employees and had regional help—this was before Common Market funds were available. It now employs at least 240. For our part of the world that is a considerable business. Next there was Control Techniques, which is now an international high-tech company in Newtown. The company started with an employment force of six and now employs over 100 in Mid-Wales and many others in many parts of the world. As I have said, it has become an international company. Then there was Laura Ashley, which started off 30 years ago with virtually a man and his wife coming to the area and receiving some support from regional grants.

Baroness Seear

My Lords, a wife and her man.

Lord Hooson

My noble friend Lady Seear corrects me and says "A wife and her man". I am not sure that I would entirely agree with that. Nevertheless, they started off 30 years ago and now it is an international company. I happen to be a director so I must declare an interest. The company employs between 600 and 1,000 in Mid-Wales as well as those it employs elsewhere. Then there was Durward at Llandrindod Wells—a national firm now for office filing equipment. It started with 15 employees and now employs over 300. All that was achieved in the early 1960s and early 1970s.

What has happened since that time is that, according to the evidence of the Development Board for Rural Wales, and I refer to paragraph 38 on page 19, it still has the lowest level of pay in the United Kingdom. So the disparity between our area and other parts of the United Kingdom is still as great as it was when those companies started.

I think that there is need for many more innovative ideas of the kind suggested by some of the probing questions asked by the committee. The Development Board for Rural Wales needs new ideas. It needs to develop some of its home industries, to encourage innovation, to bring about those technological changes to which the noble Lord, Lord Mason, referred and to have less concern with publicity-seeking prestigious schemes. We should go for the people who produce the growth and not so much the subsidiary factories of much larger factories elsewhere, which are the first to close in any recession.

I would challenge the effectiveness of the use of the money. A great deal of the blame for this lies in the Government's insistence that most of this money is used for infrastructure work such as for Manweb, for the railway signalling scheme and so on instead of encouraging local industries and people who come in to develop industries.

I should like to conclude with a reference to paragraphs 136 to 138—The Need for Partnership. I very much agree with the general sentiments expressed in particular in paragraph 136, where the committee points out the clear advantage that West Germany has, with its highly developed regional government, in ensuring that the funds that are available go to the regions for which they are intended and are additional to any other expenditure there. I would make this plea for England. At the least a well-focused regional administration is needed. For example, there is a reference by the committee to the Abruzzo region in Italy where this exists. I agree with the appreciation that the Scottish, Northern Ireland and Welsh Offices express in paragraph 138 and share the concern that England may have difficulty in reaping benefits because it does not have a regional administrative system.

Perhaps a member of the committee could enlighten me as to what the last sentence of paragraph 138 of its opinion means. It states: The Commission are associated with regional and local authorities in the CSFs and the Committee do not see the need for any discrimination by the Commission against United Kingdom regions, nor have they any evidence that there is any wish to discriminate, which would, indeed, be very wrong". That is one of the most obscure sentences I have ever read. What does it mean? Against what evil is it aimed? What is the hidden meaning there? I do not know.

I shall conclude by expressing my appreciation to the committee for its work and diligence. I found reading the report and evidence rewarding. I should have thought that it has given food for thought to a much wider audience. In relation to our country, I challenge the manner of dealing with those funds. The funds are supposed to remove disparities between poorer and richer regions. The eligible regions—the poorer regions—have just cause for complaint, as has the European Commission, against the way we use those funds in this country.

4.31 p.m.

Lord Thurlow

My Lords, before turning to some of the points that have been raised, perhaps I may express my appreciation for having been able to participate in the inquiry and pay the warmest possible tribute to our chairman, who works with incredible diligence and skill. I endorse his tribute to our Clerks.

It was natural for noble Lords who preceded me to emphasise the issue of additionality. If I had been in the position of the noble Lord, Lord Mason of Barnsley, surveying through the years the dreary arguments over RECHAR and the failure of the money to come through, I am sure that my feelings would have been equally strong. As I came to the inquiry with a completely unfurnished mind, I found the labyrinthine maze of the procedures for the administration of the regional policies which have grown up over many years to be bewildering.

To return to additionality, I hope and believe—I think partly as a result of the committee's recommendations—that we have now emerged into a new era in which we can forget the dreary wrangles of the past. I believe that we are in sight of a smooth passage over additionality in the future. The noble Lord, Lord Hooson, referred to the term of art "transparency". I shall not try to explain the complicated metaphysics that lie behind some of the terms. Transparency is a key matter. I believe that we shall now have transparency; that the moneys that have been held up are about to be paid; and that we shall not have a repetition of that kind of unedifying inability of competing bureaucracies to agree.

One of the difficulties from the United Kingdom angle in coming to grips with what the regional policies and structure funds amount to is the paradox that some of the countries—ours in particular—are both donors and recipients. In the past that has given some of our loyal officials ammunition to take the line, "Well, when all is said and done, we are not talking about money from Brussels; it is British money that goes to Brussels which is recycled back again under approved procedures". To simple-minded former officials like myself there is a certain Alice in Wonderland look about that.

In reply to a question I put, one of the extremely able officials who came to enlighten us said that if we were starting from scratch we would not have wished to have set up administrative arrangements of the kind that have grown up over the years. But we are not in that position. We have never been in that position. As the noble Lord, Lord Cockfield, constantly reminds us, we were late to join the club; we accepted the acquis; and we accepted the rules and practices that the Commission had developed over the years. We do not regard them all as ideal, but we go along with them and do our best to improve and refine them.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord for giving way. Is he aware that the rules about the regional development fund and the whole question of regional development policy were established after we entered the Community? They were not established before.

Lord Thurlow

My Lords, I stand corrected by the noble Lord, who has great experience as a result of his previous membership of the European Parliament and otherwise. Nevertheless, the Commission's practices and general administrative patterns were to some extent set in stone before we arrived upon the scene. We are determined to continue to do our best to help our fellow member states to continue to improve the arrangements.

The noble Lord, Lord Aldington, referred to a number of our recommendations which are directed to those objects. I should like to mention one or two more because we sought to submit a report that was constructive, and not negative, in tone. One of our important recommendations—I am sure this will please the noble Lords, Lord Hooson and Lord Mason —is that the Commission's role in the structural funds should be limited as far as possible in the future to Community-wide co-ordination; to monitoring; to evaluating; and to financial control.

Under the principles of subsidiarity which we hope will now be observed increasingly, it is unnecessary for the Commission to involve itself in the detail of matters which local authorities, regional authorities and Whitehall have gone over and over and in many ways to duplicate that work. We look forward to a simplification there.

Again, we believe that there is scope for streamlining the administration when relatively small sums of money are involved. Relatively small sums in a local area may often relate to something that is important and significant. Nevertheless, in the view of our report there is scope for streamlining in the lower tiers of magnitude.

We considered that the processes of approving programmes could be changed. There are possibilities for making these processes much less burdensome to all those who have been involved in the past. We have recommended that through Community funds planning assistance, under a know-how scheme, should in future be given to strengthen the administrative capacity of some of the weaker regions. In our own overseas aid practices over the years, we have always attached the utmost importance to technical assistance, know-how and the transmission of skills. This is an area where our committee considered that the administration of regional policies could be improved and refined.

There is another possibility for improving matters, which noble Lords who have already spoken will welcome. We recommended that there should be more consultation in the processes of working out planning and approval. There should be more consultation with non-governmental bodies like the CBI, the TUC and many others which have a real interest in regional proposals and have contributions to make.

The noble Lord, Lord Hooson, thought that the weight of Brussels support under the regional development policies should be attached to infrastructure. Our committee warmly endorses that and it has always been the view of Her Majesty's Government. The noble Lord, Lord Hooson, thought that perhaps there was a conflict between that and the obvious need to do everything we can to promote and facilitate innovative schemes, such as those he mentioned. They interested me very much and they have been important and helpful in central Italy, as well as in many parts of this country. A comparatively new form of governmental assistance is the facilitation or the providing of facilities for small businesses to work together more easily and draw on more centralised technologies. However, this is not so much in conflict with the main emphasis on infrastructure rather than support projects as a matter for reasonable flexibility.

No one wants the arrangements of the Commission to be inflexible and rigid, but, that being said, our Committee strongly endorsed the view that Her Majesty's Government have always held that the most rewarding field for Community support schemes is in the area of infrastructure. We have all learnt how easy it is for official funds to be sucked into specious and, on the face of it, attractive projects for helping lame ducks or giving a boost to promising industrial enterprises. But experience in this country and elsewhere suggests that this is not the best way of deploying limited government funds.

While we endorsed the general aims of the regional development policies and also the choice of areas, in our view they had no implication for accepting any particular targets for the scale of reduction of disparities between the richer and the poorer nor for the amounts of funds that have to be put, in total, into commissioned programmes. We have to be pragmatic. No amount of money within conceivable sight could ever do more than make a marginal difference to disparities in any of the recipient countries.

That does not, of course, apply in relation to regions which benefit enormously from comparatively small sums. Generally speaking, the regional development policy of the European Community is not the main means by which the disparities will be reduced. The main means is by following sound economic and financial policies in each of the countries and by the freeing up of markets. Within the Community itself, we hope and believe that over the years the single market will do far more than anything else to enable the weaker countries, the lagging countries, to rise.

I wish to mention in passing the important point which the noble Lord, Lord Aldington, made in his introduction. It was that the effect of the common agricultural policy at present distorts the whole process of cohesion. He quoted the absurdity of the case of the Netherlands and Denmark as net recipients. This is an indirect effect of the past and somehow it must be corrected. I have no doubt that Her Majesty's Government will battle hard to have it put right.

Two days ago, upstairs in a committee room, M. Attali expounded his vision for the ultimate enlargement of the Community to stretch, not in General de Gaulle's vision from the Atlantic to the Urals, but from Wales to Vladivostok. This opens up a wide perspective, and it will be many years and there will have to be many developments before anyone can see whether that vision will be realised. We hope and believe that the Community will be enlarged to incorporate three EFTA members and then perhaps the rest of EFTA. Then, in 10 or more years' time, the Baltic States will wish to join. The Eastern Europeans will be knocking at the door, and no doubt the successor countries of what was Yugoslavia will also be knocking at the door. Therefore the problem of the structural funds and the regional development policies is of growing importance. It is all the more important that the principles and the practice of administration should be got right.

We are building a foundation for an edifice which is likely to include more and more weak economies. Therefore we have to get the matter right. We must avoid the temptation of putting money into schemes that may not last. In general I hope that your Lordships will endorse the committee's view and approve the report.

4.51 p.m.

Lord Carr of Hadley

My Lords, as a member of the sub-committee which conducted this inquiry I wish to reinforce the tributes already paid to the work of our chairman, the noble Lord, Lord Aldington, and to the work of our Clerk. The whole House needs to be grateful to those of our colleagues who are prepared to take on the extremely arduous task of chairing inquiries of this kind. I am delighted to be a member of such a committee of inquiry and I feel highly privileged to be part of that committee. However, I am not sure that to be chairman of such a committee is anything other than a sentence of hard labour. However, our chairman has produced good results.

There can be no doubt that a growing feeling of cohesion among the member states of the Community and among their populations is extremely important. There has to be developed an increasing feeling of belonging and a feeling that member countries and their populations will become enriched by being members of the Community. I agree strongly therefore with the first sentence of the second paragraph of the committee's conclusions, that is paragraph 108. I agree that the task of the Community is to strengthen cohesion. I endorse particularly warmly the final sentence of that paragraph which states: Cohesion for the future depends in our view on the understanding by all the peoples of the EC that steps are being taken within the Community and will continue to be taken to reduce the disparities between regions and to improve the prosperity of the less developed, whilst time is given for macro-economic policies to work". That is an objective that we must never forget and never neglect if the Community is to flourish and to have a long and vital life and if it is not to deteriorate as the years go by.

While a regional development policy is certainly not the only means by which cohesion can be encouraged it is the most obvious and visible symbol of the Community's commitment to the objective which I have just described. Here in Britain we have a long experience of regional development policy over more than half a century. We know how difficult it is to make such a policy successful. I suggest that for many decades we have had many more disappointments than successes. We have found that vast capital expenditure projects tend to produce relatively few genuinely new jobs.

We have found that subsidising satellite factories at great cost in places where the companies or industries concerned would prefer not to have gone has limited and shortlived results. Such satellite factories tend to be the first to close when a recession is threatened. However, —this I believe is most important and good news—in this current deep and long recession there has been clear evidence that the old depressed areas of Britain have stood up better than many others which have hitherto been thought to be resistant to such problems. Perhaps that shows that over the 50 or 60 years we have worked at this problem we have learnt from experience. I think that we have done so and that by trial and error we have found out a lot about what works and what does not work.

We have also learnt that even the best regional development policies are slow working and that to go for quick results is usually self defeating. I wish to dwell for a few moments on the matter of applying these lessons throughout the Community. In my career I have had considerable personal involvement in regional policy problems. I have had two spells as a Minister at the Department of Employment. I was chairman of the CBI's special programmes unit for some three or four years and I was chairman of Business in the Community for three years. As the noble Lord, Lord Mason, reminded me, I was the UK representative on the board of an organisation called the European Business Network whose main object in life—although not its sole object—was to help to establish in difficult regions in all the countries throughout the Community organisations known as business initiative centres or BICs. We certainly had our share of frustrations in trying to make that policy successful in this country. That was notably the case in Barnsley although it was not the only place where we suffered frustrations in implementing the policy. However, something happens in the end and it is a case of better late than never.

On the basis of that personal experience I wish to pick out and slightly elaborate upon a few points from the report which I believe to be particularly important. First I wish to quote from paragraph 116 on page 34 of the report. The paragraph concludes: If the objective of furthering cohesion within the European Community is to be achieved, however, it is essential that the large sums of money made available to the poorest regions by the European Community should be well spent". I am sure we can all say "hear, hear" to that. I wish to consider some of the conditions that must be laid down for ensuring that the money is well spent. While I do not wish to belittle the need for detailed auditing control, I believe the essence of good spending is to get the strategy and the policy right. If the strategy and the policy are wrong, however much one counts up every penny of the money that is spent one will not achieve results that reflect value for money. Therefore we need to look at the basic objective of this matter. That basic objective is well defined in the penultimate sentence of paragraph 119 of the committee's report on page 35 which states: In the end the effectiveness of regional development will be proven by the extent to which regions now unattractive to private investment are made attractive to those whose activities lead to real economic growth". That, I believe, is the key objective. We shall only spend funds well if the primary—not the sole—purpose of the spending is to try to bring about that objective. That is not to say that public initiative and public services are not important, but that is the prime basis on which one can make a region, or a small locality within a region, self-generating and self-supporting providing not only a good economic standard of life for the people of the region but also a satisfying quality of life. That, I believe, is the test which we must apply. That objective must govern all our policies. It is fundamental.

Within that context I should like to draw attention to what, from my experience, I have come to believe to be the two essential conditions for success. The first is strong—and I emphasise "strong"—decentralisation of detailed policy making and the management of programmes. All our experience here in Britain has shown that success on the ground depends on building from the bottom up and not from the top down. It is not sufficient or helpful to go to a community, large or small, with money and outside experts to do good or to impose good on local people or communities. They do not like it; they do not appreciate it; and they do not understand what it is that one is trying to do.

What one has to do is to go in in a humbler spirit to help local people to help themselves, to find out what local people want and what they do not want, what they regard as important to their lives and what they regard as less important. One has to give local leaders the help they need to give leadership in their communities. That is the prime secret of making development, whether in inner cities or larger development areas, successful. If we forget that we shall waste a lot of money. Money will not be well spent.

The habit of decentralisation is vital, although it is a habit which does not come easily to the European Commission in Brussels or, equally, to the mandarins and Ministers who inhabit Whitehall. Perhaps I may include myself in the last category, having been a Minister and no doubt having been much more resistant then to decentralisation, although perhaps I did not realise it at the time, than I am now. We have to bite the bullet and stop believing that detailed control is the way to achieve good economy. There has to be a measure of it, but it must be strongly criticised: it is the central method, policy and strategy which is the source of good, effective spending of money.

If we are to do that in our communities we have to assist the setting up of local partnerships with central government or agencies of central government. As stated in the report, it is very important that there should be strong local administration. It does not have to be, though some might wish it could be, local or regional government as strong as that in Germany, but strong, local administration is important. I am unrepentant in believing that if we had development agencies in our regions in England as we have in Scotland and in Wales we should spend our money more effectively and also use more effectively such extra help as we manage to draw from the Community in Brussels.

Therefore, there has to be partnership between central government, local government in each area, local business leaders, local professional people and locally active charitable organisations. They must all be brought in. It is not just a matter for public bodies, local government and central government. All those people have to be brought into local partnership.

In support of that point I should like to say how much I approve of the views expressed in paragraph 118 on page 35 of the committee's report, which have already been referred to. The report states: The Committee wish to point to the enterprise initiatives taken in the United Kingdom by the business community and other non-governmental bodies in partnership with local authorities and central government, which have enabled a relatively small injection of public money to produce a major stimulus to the small business sector as an important source of new jobs and local wealth creation". I believe that to be profoundly true.

That movement has been going through a rough time during the recession of the past two years, but there is no doubt that that type of partnership enterprise produced a great new burst of growth in small and medium business activity in this country. It both increased the birth rate and reduced the infant mortality rate of new small businesses. That will become apparent and, when the recession fades, a new source of strength for this country. It needs to be copied throughout Europe. When we give help, whether it is to eastern Germany or the eastern states, that lesson which we have learnt ourselves should be kept very much in mind.

Decentralisation is my main theme and I wish to stress one more aspect. Just as it must apply within member states it must also apply between the European Commission and member states. I was glad to hear my noble friend Lord Aldington stress in his opening remarks that the prime responsibility for regional development rests with the governments of the member states and that the role of the Commission is to support and enable but not to take over responsibility for the programmes. That underlines the importance stressed in the report of simplifying and reducing drastically the bureaucracy involved in present regional development procedures, both in developing and supervising policy. If that applies to bureaucracy in Brussels it applies just as much to bureaucracy here in Britain, both at central and local level.

Something else needs to be said. I come to the unpopular subject of additionality. If the Commission is to be a supporter and enabler rather than the manager of regional development programmes which it helps to finance then member governments must accept reasonable responsibility for additionality. What do I mean by that? Above all, I mean transparency, which I was pleased to hear my noble friend Lord Aldington stress. I believe that most of the problem in this country, which I hope has now been largely cleared up—and perhaps this report has helped to clear it up—has related not to what was actually done so much as the total lack of transparency about what was being done.

Additionality has to be regarded in a somewhat wider sense. My noble friend Lord Aldington also pointed out that European structural funds do not cover fields such as education and training. He pointed out that the report states that they should not, and I fully agree with him. Yet there will never be good regional development unless greater attention is paid to education and training. That has to be accepted as the responsibility of the government in each member country.

I believe that it is perfectly reasonable for the Commission to say, "If you are expecting us to give aid in that region we, the Commission, must be satisfied that you, the member government, are playing your part to the best of your ability in providing those elements of infrastructure such as education and training without which the development programmes we are going to support with EC money have no chance of flourishing." If we could achieve that type of general relationship in place of the present nit-picking relationship over additionality between member governments and the Commission we should make a great deal more progress.

My second central condition, about which I shall speak very briefly, is the need for concentration on infrastructure development. Here I must take issue with some of what I understood the noble Lord, Lord Hooson, to say. It may be that I did not understand him fully. I believe that it must have clear priority over support for specific industrial projects, which should take very much second place. I am concerned that some of the committee's evidence seemed to suggest that the Commission in Brussels had a growing interest in supporting industrial projects and that that was beginning to overtake its previous prime interest in infrastructure. If that is so, I hope that the Government will sit heavily on it to reverse that interest. It must put infrastructure first. We must never forget that the prime objective is to help regions to become capable of self-governing growth. They will never do that unless their infrastructure is adequate. But infrastructure must be interpreted widely. It must include not only essential and vital aspects such as road and rail communications, telecommunications and so forth, but also a proper provision of education, training, housing and social services. Those are factors which make an area one in which people wish to invest in many ways.

As the noble Lord, Lord Aldington, pointed out, those factors are not covered by sectoral funds and must therefore be covered by governments of member states—if the government is a member state. I believe that the Commission is entitled to inquire in general —not in bureaucratic detail—whether governments of member states are accepting their responsibilities adequately in those respects before they commit EC funds to help in those regions.

The other essential component of infrastructure is a small, vigorous, medium-sized business activity. That requires the partnerships to which I have already referred: local enterprise agencies, business initiative centres, business and science parks and so on. We must concentrate on those two essential requirements. The objective must ultimately be to make each region self-generating, a place where people wish to come. Essential conditions are decentralisation—building from the bottom up and not from the top down—and the concentration of all the help possible on building up a complete infrastructure. That is supported by what is happening in parts of other countries. Spain has been referred to.

Paragraph 44 on page 20 of the report states: Professor Stuart Holland of the European University Institute in Florence outlined successful Italian examples of financial networking and pooled involvement in professional training, research and technological experimentation which had brought about a striking increase in the economic growth of the regions concerned … He believed that these kinds of services for small and medium sized firms needed to be regional and local. He recommended that the Commission should give guidelines to make it possible for the policies to be considered consistently throughout the Community". My final word therefore is this. Let us realise what has been working well. Let us continue to concentrate on that. Let us use our influence to ensure that similar approaches are adopted throughout the Community; and then we shall indeed play our full part in the Community in this field.

5.14 p.m.

Lord Desai

My Lords, first, I join other noble Lords in congratulating the noble Lord, Lord Aldington, on an excellent report and the opportunity that it gives us to discuss regional development in the EC.

Unlike some noble Lords, I am not against the EC. Nor do I consider that its bureaucracy is large. However, the sums of money involved are not negligible. We are talking about approximately £40 billion to £45 billion given to regional funds according to the figures in the report. UK aid to the third world is about 0.3 per cent. of our GDP, which would total about £2 billion. Those are large sums of money. While I am aware that there is much poverty in Portugal, Spain, Greece and parts of the United Kingdom, we are referring to relative underdevelopment rather than absolute underdevelopment. Therefore we must be very careful that the money is spent properly and carefully and not frittered away. It is not that I do not believe that the money should be spent. But we must be careful that we spend it properly.

I do not speak as a member of the committee or as someone with a regional interest. Islington does not qualify as a region under the European definition and therefore it cannot hope to receive more money. Nor does the parish of St. Clement Danes. Therefore, I argue more as an outsider and as an economist.

If the noble Lord, Lord Harris of High Cross, had been present, he would have said what rubbish this regional development fund is. All one needs to do is to establish a free market, free mobility in labour and capital and, hey presto, things will happen. It is a belief that somehow free mobility of labour and capital and a free market would accomplish what we wish to accomplish: a reduction of inequality. Historically that is not the way things happen. It is not that movements in labour and capital reduce inequalities in equal proportion. Very often inequalities persist and we have a growing divergence whereby the prosperous regions become more prosperous and the poor regions poorer.

Left to itself, a free market—to which I have only mild objections—does not accomplish that objective by itself. We have to have an enabling policy. I believe that some regional policy which counters the tendency of the market towards equilibrium is clearly necessary. However, we have to ask ourselves about the criteria on which regions are designated as needing aid and the criteria by which we judge that the policy has been effective. My point is not related specifically to the Select Committee report but more to the policy followed by the Commission: that the criteria of relative per capita income and relative unemployment are rather crude. It is not that they are wrong; they are crude. They result in a somewhat absurd idea that an entire nation qualifies under Objective 1 as a backward region. That surely cannot be true. Even in a poor region—in Portugal, Greece or wherever—there are prosperous pockets and prosperous people and poor people. If we indiscriminately designate a large region as poor we may be at risk of giving money where it does not necessarily have the best effect.

The Commission ought to consider whether it has sharp enough criteria in Objectives 1 and 2 for designating regions as needing funds. Objective 2 is more sharply defined. Are the criteria good enough for designating regions as needing aid under these funds?

I cite two reasons. First, in the current debate on development there is a greater awareness of the fact that per capita income is not a good indicator of development or under-development. It is not a good indicator either of the quality of life or of what we wish development to achieve. The United Nations development programme—I referred to the human development report in the debate in this Chamber yesterday—has moved away from mere reliance on per capita income to include a broader category of social objectives such as longevity and literacy. However, that is for a much broader range of countries.

Perhaps the time has come to have a more mixed bag of indicators going beyond per capita income and including other qualities. For example, as regards Scotland the report discusses the insularity from which the region suffers. It discusses the fact that it is peripheral and sparsely populated. They are important criteria and per capita income may not capture the fact that a region needs a loan not because it has low per capita income or high unemployment but because it happens to be isolated, peripheral or insular.

I urge the Commission through our debate on the report to think about a broader set of criteria for designating regions. I believe that per capita income is a crude criterion and needs to be combined with others. If that were done there would be a better and sharper formulation of policies.

That leads me to the connected problems of the criteria of effectiveness. It is clear that regional backwardness is a long-standing problem and cannot be quickly corrected. We know from Italy that the problem can last for a century or more. The evidence from my friend Professor Stuart Holland, referred to by the noble Lord, Lord Carr, relates to the prosperity of a relatively prosperous region of northern Italy. It is there in Modena that these lovely things have happened, and I welcome that. However, by and large, it is a backward region of a relatively more developed part of Italy, the north, which is being developed rather than the backward south. It is clear therefore that not only can backwardness persist for a long time but that prosperous regions benefit from aid rather than backward regions.

Given that fact, we must ask ourselves what we can do. Literature on development policies shows that for a long time we believed that speeding up per capita income growth was the answer to everything. After about 40 years of making mistakes we know a little better. For example, we know that per capita income growth is difficult to speed up. We know that speeding it up without regard to environmental and other consequences may not be right. We also know that rather than looking at immediate criteria such as industrial development we might look at deeper criteria such as education, training, research and development and so on.

I recognise that a structural fund cannot deal with that. However, the effectiveness of the policy of giving structural funds to the regions may not be only in whether it speeds up per capita income growth but in other criteria. For example, it may be that in a sparsely populated region such as the Highlands and Islands the correct policy is not to develop it so that it will be flooded with tourists and environmentally destroyed but to keep as it is, perhaps making the citizen feel less isolated. Certainly it should not be rushed into development by some technocratic idea. We must find better notions and concepts of what development consists of other than merely per capita income. Equalising per capita income, which is a crude measure, may not necessarily be a good criteria at which to aim.

Two or three other questions arise. The first is the simplification of procedures. There is a conflict. On the one hand we should like less bureaucracy and fewer tiers of decision-making but on the other hand we should like lots of participation, making sure that money is not wasted. There lies the conflict. If one wishes to ensure that money is not wasted one needs a great deal of monitoring and examination to ensure that the scheme is good, that the money is spent as it should be and that it does good. All that means a great deal of work.

There are three tiers: local regions, state governments and the EC. The question is: is one of those tiers redundant? Some noble Lords have suggested that it would be right to pass the money from the Commission to the national government and let them deal with the problem. I can see the logic of that argument, but there is another argument which will not be popular. It is to cut out the national government tier and to let the money go directly from the Commission to the regions. That would be difficult because of the co-financing problem. If there is co-financing, someone—it happens to be the national government—must fork out the remaining part of the grant, which in some cases is 25 per cent.

One way of doing that would be to say that, if a region wins a competition for the allocation of structural funds for a scheme, the national government concerned should see that as a prima facie case it is a good scheme to give co-financing to, whatever the other rules are. If it were the case that once a region had won the competition it would reasonably automatically be granted the co-financing part of the deal, one layer of bureaucracy would be cut out. It would also simplify the horrible problem of additionality.

I know that the two problems are separate, but a point about additionality is the suspicion that somehow schemes may be put forward which could win Commission support but which would not otherwise pass the approval of the UK Government. Therefore the UK Government may be argued into spending money where they do not necessarily want to spend it.

That arises from a philosophy which pertained for a large part of the past 13 years—I hope that it will no longer exist—of regarding anything which the Commission did with great suspicion and anything which local government did with even greater suspicion. We should regard additionality as having a multiplier effect. The fact that people have obtained the money from somewhere else should be thought to be a good reason for not withdrawing the money but adding to it. I hope that a change of regime at the Department of Trade and Industry means that the new Secretary of State will look again at the problem and that additionality will be less of a struggle.

I believe that the report indicates that at the Commission level rather than at the national level there is a need to think in a fairly serious and sophisticated way about the kind of criteria which are used to allocate funds to the regions, to evaluate what the funds do and to know whether we have been successful. The objective of equalising per capita income in all regions is foolish beyond measure. What we can do is not so much to arrest growing inequality but to say that people who live in different regions, although their measured incomes may be unequal, should find sufficient reason to stay voluntarily in that region because their quality of life has compensations. Some kind of broader concept of quality of life rather than per capita income might he the way to achieve the goals of regional development and cohesion.

5.29 p.m.

Lord Boardman

My Lords, I join with other noble Lords in congratulating my noble friend Lord Aldington on his chairmanship of the committee. As always, he displayed the lucidity and kindness to members of the committee and witnesses which we are accustomed to receiving from him.

I join also with a number of other noble Lords in agreeing that the concept, the policy for support in the way it is designed, is right in its need to strengthen cohesion. I accept that means the transfer of some resources from the richer countries to the poorer ones. I accept too that almost inevitably transfers of cash to spend to one person from someone else leads to certain abuses and the money is not spent as it would be if it were their own money. That is perhaps particularly true when that someone else happens to be what in most people's eyes is a rather remote but also rather rich body such as the Community. I am sorry to say that there has been some evidence of such abuses within the Community.

A number of points arise from the report, but one to which I think all noble Lords who have spoken have referred is the question of additionality. That is something which has created massive confusion. The noble Lord, Lord Mason of Barnsley, referred to that in connection with RECHAR, and other references have been made to it. It creates a fairly impossible situation. You must endeavour to show that there would not have been the expenditure if it had been your own money and yet when it is someone else's money, that expenditure is essential. I put it rather more crudely than did my noble friend Lord Aldington; but I think it is complete nonsense. It was put not inappropriately by one of the witnesses from the Department of Transport. In part of his reply (at page 143) he said: The projects which are put forward for ERDF funding are very worthwhile. I think that means automatically they are going to be pretty near the top of any list of priorities. So, I think it is hard to argue that a project would have been unlikely to have gone ahead had it not qualified for ERDF funding". I then put a question to him as regards whether or not that conflicts with the additionality point, and he conceded immediately that it did. He went on to say that if we applied additionality as it is sometimes construed, there would be almost limitless expenditure.

Of course, it is very strangely interpreted. We have the example given by the noble Lord, Lord Mason, of RECHAR. On the other hand, I recall a case in Italy where a subsidiary company in a development area was asked to explain how it obtained Community funds. It said that it put in all its capital budgets for some time ahead to its head office in Rome. The head office sorted out the ones it thought would get through the Community and in that way the subsidiary company received its funds from the Community. That conflicts very much with my understanding of the Community's interpretation of additionality.

I move from that to another point of anxiety; that is, the potential conflict between member states and regions. There is some pressure coming from various quarters that the regions should be able to carry out negotiations directly with the Commission, by-passing the member states. Both my noble friends Lord Aldington and Lord Carr quite rightly said that that should not happen. Member states are responsible for the economic and social policies of their regions and for the economic growth of those regions. We must take great care to avoid duplicating or eroding the responsibilities of member states for their regions, which are perhaps the less fortunate parts of a particular state.

The most worrying part of the procedure—and it comes out in the report—is the evidence of bureaucracy which we had from many witnesses, including witnesses from Scotland, Wales and Northern Ireland. They gave as an example the increase in the number of committees. One witness said that what had been dealt with by one committee is now dealt with by six. What had been dealt with locally now involved constant travel between Brussels and wherever it may be in order that he could try to get some understanding and agreement on how the money was to be spent.

As regards the selection of projects, the gist of the evidence was that the projects were worthwhile but not necessarily the projects which the various officials or witnesses would have chosen had it been their money and their decision as to how that money should be spent. I do not blame people for making applications for funds if they believe that they can obtain them. But there were some farcical examples. For example, Community funds were provided, after all the procedures had been undertaken in committees and so on, for erecting public lavatories in the car parks in Cardiff. I wonder how far bureaucracy can be stretched in order for that to be achieved. I am sure that a notice was attached saying, "This facility is erected for the convenience of the public by the generosity of the European Community". However, I believe that is fairly ridiculous.

If one ignores the obligations which I accept—and I am sure noble Lords accept—that we have a duty to help the poorer nations, from the point of view of the UK alone, we should be better off spending our own money as we think best for the regions in this country which need it most. We do not need six committees to assess those. We do not have to spend twice the amount of money that we spend now. As table 3, (on page 32) shows, to which my noble friend Lord Aldington referred, nearly a quarter of the total contributions to the Community—some 10 billion ecu —is unattributable to any member-state. Presumably, it is largely used for "running the shop". However, we get back only half of everything that we contribute. Therefore, when we spend £100 from Community funds, we have already contributed £200 into the Community to get back the £100. That rather smacks of entering into some of the dangers created by the CAP. I hope that we can avoid going down that road because I read that in 1993 the Community will spend 25 per cent. of its budget on the structural fund, which is a substantial slice of money.

Again, as my noble friend Lord Aldington pointed out, if one follows the route of the CAP, we shall have the state of affairs in which rich countries like Denmark and the Netherlands receive more from the Community than they contribute. That cannot be right. If we accept the concept, as I do, that we have a duty as one of the richer nations to help some of the poorer nations, we should not pour more money into the richer nations.

I resent—and perhaps that is not too strong a word to use —the way in which the Community insists on putting up notices where they have funded particular projects. Where a bridge has been built with Community funds, one finds a notice saying, "This bridge was erected with European Community funds". I do not believe that is right or really very honest. It should go on to say, "This and another similar bridge in Europe has been built at the cost of the British taxpayer". That would be an honest statement of fact. It seems that the picture has been distorted. Somehow it gives a picture of the EC as a charity so that when people in this country see one of those bridges they say, "How charitable and kind the EC is to us". However, that is just not so. As I say, for every £2 we pay to the Community, we receive back £1 for support to the regions of this country.

As other noble Lords have said—and I shall try to condense my arguments on this—we must try to simplify the procedures. The aim which we accepted —and I certainly accept—was to secure greater cohesion among the member states of Europe.

We must ensure that the Community adequately accounts for its expenditure—a point to which the noble Lord, Lord Desai, made reference. Monitoring is important, yet somehow we must achieve an effective form of monitoring without having a massive bureaucracy chasing round and counting every penny spent. It is not an easy balance to obtain. However, if we are to give respectability to the projects which are put forward and the people paying for them, we must somehow see that they are reasonably monitored and the money not wasted.

I question some of the moves in what has been referred to as the Jacques Delors Mark II, which are moves towards expansion of funds, of the role and of the scope operated by the Community, bringing in such matters as hospitals and schools. By expanding development or structural funds in that way, we are completely eroding the responsibility of member states for the provision of those things which are essentially their burden and their responsibility. I hope that we will do that. We must aim for contributing to and achieving greater cohesion among the members of the European Community. But we must do so by avoiding and resisting any bureaucracy which follows from that.

5.41 p.m.

Lord Bruce of Donington

My Lords, I too thank the noble Lord, Lord Aldington, and his committee for the report that they produced, particularly as I have been what may be called a participating spectator, possibly not always a welcome one, to the activities undertaken. At any rate, I certainly agree that the staff of the committee—the secretariat, its legal adviser and all those associated with the production of the report—are to be congratulated.

I was somewhat surprised to the point almost of glowing pleasure to find that I agreed with a good deal of what the noble Lord, Lord Boardman, had to say. One of the difficulties in public life, and if I may say so I have been an active participant for over half a century, is to determine for oneself the difference between illusion and actuality. It seemed to me today that the noble Lord was, albeit somewhat slowly and reluctantly, coming down in favour of the actualities. I refer to the illusions, for example, about the status of the European Commission, the aura that surrounds its every utterance, nay even the saintliness of some of its members which has been the characteristic of public comment for so long. Indeed, if one ever ventures to penetrate the veil of the halo—the Holy Grail that is the European Commission—then one is regarded as somewhat of an eccentric at the most generous and at worst a rotten anti-European. The veils are beginning to drop. The noble Lord today did the House and himself a service by at last being able to appreciate the real power and significance of the Brussels bureaucracy.

The regional development policy put forward by the Commission soon after Britain's accession in 1972, partly as a result of the pressure that successive British governments exercised and particularly in the renegotiation that took place in Dublin in 1974, added a powerful impetus to the whole establishment of the redistributed apparatus that lay behind the general concept of European regional development policy. As my noble friend Lord Desai pointed out, with good effect I thought, it is the essence of the operation of free market forces over any specific area of the earth that the rich get richer and the poor get poorer. That applies not only internally within our nation where, despite a considerable number of economic miracles, we still see a growing division between rich and poor, but it applies also in Europe and particularly in the European Community. Incidentally, it applies in the world as a whole because the richer nations of the world are getting richer and the poorer nations are still getting poorer.

It was therefore quite natural that there should be some move within the European Economic Community to correct a process that it really did not like to admit to itself. For example, although the operation of free market forces was and still is regarded as the last word in enlightened economics, both this country and every other country in the EC were careful to exempt the agricultural community from the benefits of the free market system. They were conscious of the fact that the free market system produced the inequalities to which I referred. As noble Lords will gather from the report, large sums of money have been diverted to those kinds of purposes through the regional development fund and other types of structural fund. But it is necessary to bear in mind that, despite that process, which has been going on since 1974—nearly 20 years—the disparities are still growing between the richer areas of the Community and the poorer areas.

The Commission knows that well. It has been advised but has a queer way of stifling discussion on those matters. First, there was a report produced by MacDougall which the Commission never released for debate in the European Parliament. That pointed out those problems. Secondly, there was the Maldague Report produced by my friend Stuart Holland—a friend also of my noble friend Lord Desai—which showed how the operation of the multinationals in Europe produced regional disparities. The Commission declined to have that discussed by the European Parliament. Indeed, most of the reports commissioned by it, unless they agree with the views of the Commission, are rarely discussed in the European Parliament. I speak with some experience. For some two years I was president of the European Parliament's Regional and Transport Committee. Believe me, I know how the system works.

We should surely at last bear in mind and let it sink in—however sentimental we may feel about it—that the European Commission is not composed of extraordinary people who have some kind of supernatural powers. They are just ordinary people, some with experience in political life and some with none. Their political experience and expertise does not always qualify them for the positions which they occupy. Yet unless one agrees with everything that the Commission puts forward one is reckoned to be anti-European and one is below the salt. One does not belong to the really organised intelligentsia in politics. One is some kind of eccentric.

We all know perfectly well what happens as regards the European development and other structural funds. The noble Lord, Lord Boardman, put it very well indeed. I have a quotation marked but since he has spoken with authority I would not even dream of producing one in support of him. He knows quite well that the money that is put into regional projects, for example, in various parts of the United Kingdom, accompanied always by a notice: "this project has been financed by the European Community", is a lot of nonsense. First, the money goes from the British taxpayer to the Community and then, wearing a Community label and in order to enhance the reputation of the Commission, purports to be provided by the Community. Of course that is a lot of nonsense.

There was a time when the only fund in the Community budget out of which Britain derived a profit—she actually got out more than she put in which was most remarkable because that does not apply to anything else—was the regional funds. Since the enlargement of the structural funds, which again was reported on by the committee headed by the noble Lord, Lord Aldington, and which was referred to in such glowing terms by the report itself, Britain now gets less and loses. She puts into the structural funds —the noble Lord has quite correctly cited the figure of £300 million—more than she gets out.

Therefore, let us have no more nonsense about this wonderful organisation, the Commission, composed of appointed civil servants, not democratically elected by anybody, and their staff. They are not the source of any benefits received by the United Kingdom; they are merely a bureaucratic channel, which there must be, through which these things are conveyed. One cannot have a Community organising itself to follow certain common principles without having a bureaucracy to administer it. That is quite proper. However, in addition to performing those functions, which are quite legitimate and proper and which I support, all bureaucracies eventually begin to seek ever-increasing powers for themselves. That is exactly what Her Majesty's present Government are beginning to realise.

Even now there is audacity, against current fashionable opinion, in assertions that the member states really do have a role to play. It is now no longer not respectable to say that a British Government are quite capable of governing their own people. To have said such a thing five years ago and to have excluded the European Commission, would have been regarded as heresy. Possibly people have been listening to me for quite a time now and they may know differently.

As the noble Lord knows perfectly well a number of projects are quite admirable and very necessary, particularly in areas where the traditional industries have declined or where industries, by the operation of unrestricted, free market forces, have suddenly produced distressed conditions in certain localities. It is very right and proper for aid to be directed to those places and for projects to be developed. It is also right for governments themselves, in conjunction with local authorities, private interests and charities, to persist in that process in the hope not only of regeneration but of at least averting further distress. All that is quite right.

However, in selecting a project, one should not have to go through the tortuous machinery of deciding what one wants locally, involving the local inhabitants and businesses, local authorities and charitable organisations, and then to have to send the damned thing to Brussels to a bureaucracy for further approval. It does not make sense. The committee has not said so in so many words but it has hovered on the edge of being slightly supportive of the assertion that I have so far made.

Local authorities work up their projects in conjunction with chambers of commerce, trade unions, charitable associations and other organisations. They apply, after approval from the Ministry, to Brussels. Then there are the weighty deliberations by people who probably have not had any experience of local government at all. I have in mind Mr. Bangemann who is a very good friend of mine. He has no experience of local authorities. When I saw him last his principal anxiety was to inquire why it took him six months to get a Jaguar car. They do not understand the problems involved in the same way as we do. Why should the matter be referred to Brussels and then brought back here in a process which has been so well described by my noble friend Lord Mason? Such a procedure passes all imagination.

We now have to ensure that these processes do not take place. While it may be necessary on a global European basis for the Commission, subject to the Council of Ministers, to lay down guidelines, this massive, but trivial intervention producing delays at local stages is nothing more than a sop to bureaucracy and should be stopped.

There are other aspects to the matter as well. One has to bear in mind that, according to the Government, this year the United Kingdom is a net contributor to Community funds, after all receipts and abatements, to the tune of £2.5 billion. That is British taxpayers' money. It is incumbent on us and on our Government, now at the heart of Europe, to pay some attention to where the money is going. Nothing is more obscene than the provision of public money not only from the United Kingdom, but from Germany and the other member states as well, by way of regional and other aid, to Italy. I quote Italy deliberately because, as the Commission well knows, the Italian Government has not yet established the position where it can actually verify to the Commission or the Court of Auditors, that the money provided out of Community funds has in fact been spent for the purposes for which it was given. We all know that the Italian Government cannot handle the Mafia or, indeed, the other corrupt institutions in Italy which are busily sucking at the teats of the money that is provided by the rest of the Community.

Those are the reasons that we have to take a rather closer look at the regional development policies. Our prime objective must always be—not only in the United Kingdom but, because we are active members of the Community, throughout Europe also—to see that the worst effects of the operation of free market forces are halted or at any rate alleviated. However, we must also see that some of the new network methods, which were referred to by my noble friend Lord Desai on the advice of Professor Stuart Holland, are given far more critical examination than hitherto. If we can do those things and, above all, if we can exert our own democracy at local and national level and successfully fight the growth of this octopus-like bureaucracy, which is ever seeking more power to itself, then we shall not only have done our nation good, but a favour to Europe itself.

6.1 p.m.

Lord Thomson of Monifieth

My Lords, I apologise to the House for the fact that, although I made arrangements a few days ago to speak in this debate, owing to an accident my name was omitted from the typewritten list of noble Lords wishing to participate.

I join all noble Lords who have spoken in thanking the noble Lord, Lord Aldington, and the members of Sub-committee A for their excellent report on European regional development policy. It is in the great tradition of the reports of the Select Committee of this House on the European Communities in creating, through constructive criticism, an informed climate of opinion about EC developments, especially as they affect the United Kingdom.

The report is of particular interest to me because it shows how much the Community's regional development strategy has expanded since the days when Britain joined the community 20 years ago when I found myself the EC commissioner charged with setting up the first regional development fund. I apologise to the noble Lord, Lord Bruce of Donington, for reminding him of that murky chapter in my past. I generally enjoy the noble Lord's polemics about the European Community and totally agree with him on one aspect—that is, that all the members of the European Commission and its senior officials are ordinary, fallible mortals and sinners like the rest of us and are not the superior people he seems to think we are.

Although I recognise the sincerity of the convictions of the noble Lord, Lord Bruce of Donington, about British membership of the Community, I remain a little puzzled that he and I, who belong to the left of centre tradition of British politics, and that he, who believes in the redistribution of resources to help the disadvantaged within the nation state, should apparently feel so strongly opposed to that in principle when applied at the European Community level, given that we are members of that Community.

The enlargement of the Community and the accession of Portugal, Greece and Spain, with their severe problems of underdevelopment, added a totally new dimension to the problems of regional development. That was reflected in the major reform of the structural funds in 1988, in the doubling of the resources available to them and, perhaps most important of all, in the commitment to co-ordinate the work of the three funds in a single coherent strategy, although I am sure that there is still a long way to go in that respect.

Despite that widening of the Community's regional responsibilities, the regional fund in particular remains important for many regional and industrial interests in this country, as has been made plain by a number of noble Lords today. As the report records, the United Kingdom is the biggest beneficiary from Objective 2 assistance, with almost 40 per cent. of the Community's grant under that objective. I do not deny for a moment the point that was made by the noble Lord, Lord Boardman, and by the noble Lord, Lord Bruce of Donington, that, setting that grant against our contribution, one could make a different calculation. Commissioner Bruce Milian was right in his evidence to the committee that if Her Majesty's Government wish to deal with that, they should do so in the overall context of our budgetary contributions in terms of the Fontainebleau agreement, and not by undermining or seeking to destroy the Community's regional policy.

The fact that that aspect of the regional development fund is so important to regional authorities and industrial interests in many parts of the United Kingdom makes it more depressing that the argument with Whitehall about additionality is still dragging on, and has been so thoroughly aired in this debate. The then Secretary of State for Trade and Industry is reported at paragraph 82 of the report as thinking that the United Kingdom's dispute with the Commission over additionality was "metaphysical" rather than administrative. If I may say so, that is a typical mandarin's approach to the matter. Bodies such as the Association of British Chambers of Commerce, the Association of District Councils or the Welsh Regional Development Board take a more down to earth view of the matter. They know additional resources when they see them and, alas, even more so when they do not see them.

The Government appear to take refuge in the view that this question only began in 1988 with the Article 9 regulation relating to the doubling of the structural funds. In its evidence, the Treasury denied that there had been any objection to additionality before 1988. That is simply not true, except perhaps in the most narrow legalistic sense. As the first regional development commissioner, I can testify personally that the obligation to additionality was made clear by the Commission to all member governments from the very day that the regional development fund was set up in 1974. It was the subject of lively but, I must concede, inconclusive arguments between the Commission, Whitehall and our regions from the moment that the regional development fund began.

Of course, there are practical administrative difficulties about defining how far Community contributions are genuinely additional to national assistance, which varies from year to year as national budgets vary, but I must confess that I find it demeaning that the Committee should find: The evidence … received suggests that the United Kingdom is the only Member State which has problems in satisfying the Commission that it is fulfilling the additionality requirement. I hope that the Government will genuinely seize on the tactful escape route that your Committee, in its wisdom, has offered the Government in paragraph 135 of its report.

Lord Bruce of Donington

My Lords, is the noble Lord aware that the Commission itself was responsible for bringing forward the proposal for the amendment of the regional development regulations in 1988 and for the drafting of Article 9? Is he also aware that the British Government—and I am sorry to have to support their attitude on this—were quite right in their interpretation of Article 9, which placed on them no obligation for additionality at all because, under the new structural funds, they were not receiving any more than they had been previously?

Lord Thomson of Monifieth

My Lords, I am, of course, aware of what the noble Lord has said about the origins of Article 9 and the Commission. There is a dispute with the Commission about the legality of this. As I have said, in its report the committee tactfully decided to concede the legality, but to argue that the Government should move on from that point. My noble friend Lord Hooson felt that your Lordships' committee had been a little too kind to the Government on that point. The report notes the Government's acceptance that there is a general understanding that additionality applies to receipts from the structural funds, which did not appear to the committee to be the case at the start of its inquiry. I await with interest what the Minister has to tell us in defining the Government's attitude. I hope that the committee is right in its views. If the report has achieved nothing else than this apparent change of attitude by the Government it will have been a worthwhile report. It is to be hoped that the Government will now follow the committee's advice and re-double their efforts to satisfy the Commission by the transparency of their procedures that the additionality principle is being followed in the United Kingdom just as other member states of the Community are trying to follow it.

This takes me on to the inevitable discussion about too much Brussels bureaucracy. The alliteration is irresistible to journalists and politicians alike. The familiar example in this case is the approval by Brussels of lavatories in Welsh car parks and that kind of thing. From a close reading of the evidence of the then Secretary of State I rather suspect that perhaps the bureaucracy that led to the detail of lavatories in Welsh car parks causing so much heavy weather may have lain as much in Whitehall as in Brussels. The inherent trouble about the European Commission is not that it is a bloated bureaucracy—some rather modest figures were given to us at Question Time this afternoon—but that it is a Byzantine bureaucracy. That is the difficulty about the bureaucracy at Brussels.

There is also a real problem of how much financial supervision is necessary. One has to bear in mind that the most vociferous of critics of the bureaucracy of Brussels—I look towards the noble Lord, Lord Boardman, in his remarks —are sometimes the same people who complain about financial laxness and fraud. As is so often the case in these matters, one must try to get the balance right. Commissioner Millan was reassuring when he said that neither the Court of Auditors nor anyone else had serious evidence of fraudulent use of regional development fund resources. The wisest conclusion on the issue of bureaucracy was probably that of the DTI, which said that everyone thought that this bureaucracy should be reduced, and it was being reduced.

By "this bureaucracy" I assume it means the bureaucracy in Whitehall as well as the bureaucracy in Brussels. It is a constant and endless battle. That is all one can say about it. One had immense sympathy with the characteristically powerful and devastating speech of the noble Lord, Lord Mason, who described how in Barnsley he was ground between the upper and nether millstones of the bureaucracy in Brussels and the bureaucracy in the DTI.

Turning to wider Community issues, I think that the committee strikes a wise balance between the importance of Community regional policy and its limitations. On direct fiscal transfers, tempting though it is to someone like me who looks back to the MacDougall report, the committee is absolutely right to come down against this concept, certainly at this time. Regional policy, however successful, will not eliminate regional disparities, but it can mitigate them and make them more tolerable. The need to do this becomes more urgent and more necessary because of the single market and the prospect of economic and monetary union.

What is vital, as the report emphasises, is to ensure that other Community policies do not work against the effect of the structural funds and lead to transfers of funds in the opposite direction to the richer regions and states. The common agricultural policy, the heart of so many of the problems of financing the Community, is a case in point. It has been a massive anti-regional policy during most of its life. As paragraph 139 of the report remarks, it has benefited the richer states more than the poorer.

The task of the structural funds is to benefit the poorer regions and states, not the richer, and through that to strengthen Community cohesion. Unlike the noble Lords, Lord Boardman and Lord Bruce, I get great satisfaction now as I travel around the Community—these days as a tourist and a superannuated Eurocrat—in seeing the blue notice-boards and plaques from John O'Groats to Sicily which announce useful developments which have been assisted by the regional development fund. For millions of people in the less prosperous regions, who might otherwise feel deeply alienated from the concept of a rich and powerful single market Community, the structural funds are the acceptable and humane face of the Community. That is their real importance.

6.15 p.m.

Lord Williams of Elvel

My Lords, I join other noble Lords in congratulating the noble Lord, Lord Aldington, and his committee on an excellent and, if I may say so, extremely long report. It has been rather difficult to read and has taken up a good deal of your Lordships' time. But it has been an extremely worthwhile operation, as the noble Lord, Lord Aldington, said in his lucid introduction. It brings to the forefront of our debate several important points. I shall try not to detain your Lordships too long because we have had a long debate already and I want to give the noble Baroness proper time to reply for the Government.

First, I wish to make two rather general points before making some specific ones. My first general point is about the aim of regional policy. It is a slightly philosophical point. What is the whole object of regional policy? Here we have first of all to ask ourselves what would be the effect if we had no regional policy. Secondly, we have to ask ourselves what are our obligations. Our obligations, as the introduction to the report makes clear, are under Article 130a of the treaty which was introduced by the Single European Act. Perhaps I may remind your Lordships of that article. It states: In particular the Community shall aim at reducing disparities between the various regions and the backwardness of the least-favoured regions". Whatever one may think of the philosophy behind that, our treaty obligations seem to be absolutely clear. There is also—my noble friend Lord Bruce of Donington was right about this—historically a process whereby if everything is left to market forces, as sure as eggs is eggs the rich will get richer and the poor will get poorer. This has happened nationally and is happening internationally. The object of regional policy has to be to apply some corrective measures to that. That is the philosophy. We have an obligation under the treaty and we have a genuine philosophical requirement.

We then have to ask ourselves what is the end result of regional policy. The noble Lord, Lord Carr of Hadley, quite rightly, pointed out that in the recent recession, out of which we hope we are coming, it was in fact those parts of our country which had benefited from 40 or 50 years of regional policy that did better than the South-East which had not. I join the noble Lord, Lord Carr of Hadley, in believing that organisations such as Scottish Enterprise and the Welsh Development Agency—I am sorry that the noble Lord, Lord Hooson, was rather hard on the Development Board for Rural Wales because I happen to think that it still does a rather good job —have contributed to mitigating the hardship that market forces, left to themselves, would have imposed on those communities. Regional policy has clear aims and it is clearly important.

I thought I detected in the report—I come again to something said by the noble Lord, Lord Carr—a slight difference of opinion between paragraph 119, which the noble Lord, Lord Carr, said was the ultimate objective of Community regional policy, and paragraph 131. Paragraph 119 says: the effectiveness of regional development will be proven by the extent to which regions now unattractive to private investment are be made attractive to those whose activities lead to real economic growth". Paragraph 131 says: The Committee agree with the Commission that policies designed to strengthen economic and social cohesion in the Community can only be lasting if 'environmental considerations are taken into account and seen as an essential part of economic and social development'". All of us know—because the European Commissioner for the Environment said so only yesterday—that environmental considerations can be expensive and can be at the expense of economic growth and the conditions that attract it. We also know that unrestricted private economic growth can be environmentally damaging. Therefore, there seems to me to be a slight discrepancy between those two passages in the report. When the noble Lord, Lord Aldington, responds, I hope that he will be able to clarify my mind on that point.

Thirdly, I agree with remarks made by my noble friend Lord Bruce of Donington about the necessity for efficiency in the management of whatever regional policy funds—that is, Community or national—that there may be. It is inexcusable to have the situation so graphically described by my noble friend Lord Mason of Barnsley. That really must be an area upon which the Government, the Commission and, indeed, all of us must concentrate. As in all areas of Government, I think that efficiency must be the watchword. I very much hope the noble Baroness will confirm that that will be a major objective of government policy when we take up the presidency of the Community.

I turn now to deal with the specific points. I believe that the word "additionality" has been sufficiently mentioned. I have nothing to add to what was said, except to say that when a Secretary of State comes before a committee and says, We do try to operate it in a way which is conforming with the underlying moral principles of additionality and we think we have gone a long way to achieving that", I get rather suspicious that he is really trying to say, "We are not doing it at all but, roughly, we think that we are moving in the right direction". I believe that the Government must now come forward and say what they are doing. Whether the transparency of procedures—or whatever it may be that the committee recommends—is the right way forward, they must come clean and say what they are doing.

The whole question of economic and monetary union and regional policy to which the committee drew attention is one which fascinates me. I believe that the Maastricht convergence criteria, which are basically financial criteria rather than a criterion of convergence in the real economy, are a mistake. We ought to have had criteria for convergence which relate to the real economy, unemployment and various other matters rather than just the rate of inflation and all the things that are in the Maastricht agreement.

My noble friend Lord Desai put forward some very interesting questions about how we should measure the results of regional policy and how we should then measure convergence so that we can get a proper economic monetary union, if that is what we want. It is not simply a question of drifting into a common currency on the basis of the inflation rate. I believe that my noble friend raised the whole question of how regional policy could be evaluated in such a way as to bring us towards an economic and monetary union without serious disadvantage and dislocation. If we cannot reach a solution to my noble friend's question, I very much fear—and this would disappoint me enormously—that economic and monetary union, if and when it comes, will bring dislocation, unemployment, inefficiency and inefficient distribution of resources. That is something that we must guard against. I do not think that the Maastricht convergence criteria guard against it.

I turn next to the common agricultural policy. Yes, certainly, it has been counter regional policy. It has been a sort of social welfare programme in its own right. It generates opportunities for absolutely massive fraud—indeed, many of the benefits go to the traders rather than to the farmers—and it distorts agricultural production and consumption patterns. In almost every way it has now turned into something of a mess. I trust that the reform which we hope will be undertaken will start to eliminate those problems. But, living not far from the noble Lord, Lord Hooson, I have a certain sympathy with what he said about farmers in marginal areas. If we try to do without any support system for farmers in marginal areas, such as Mid-Wales, the whole agricultural economy, and hence the whole rural economy, will break down. Therefore, let us be enthusiastic about reform of the common agricultural policy, but let us not think that market forces and agriculture can and should prevail in their entirety: there must be some kind of support system. We found that out during the Second World War and afterwards.

My next point is partnership. I very much agree with what the report said in paragraphs 136 to 138. I also agree with what noble Lords have said on the subject. When the noble Lord, Lord Carr of Hadley, talked about decentralisation, I thought that I was hearing an echo of the speech about decentralisation of the Department of Trade and Industry that I made yesterday from this Dispatch Box. I absolutely agree. I shall not say it again. I believe that the Department of Trade and Industry must decentralise itself. Once that happens and decisions are made in the regions themselves—that is, not treating the regions as branch economies—we shall begin to have a healthy regional policy. But, as the report says, and as other noble Lords said, there must be partnership with those people who know about the region or locality itself; for example, local government, trade unions in the area and chambers of commerce. That must happen if there is to be an effective policy.

I believe that what I have said is really all that I wanted to say on the specific points. However, I must return to the issue raised by my noble friend Lord Bruce of Donington which is of fundamental importance. Regional policies must be efficiently organised if they are to mean anything. Regional policies are necessary because of the natural action of market forces in diverting resources to the rich from the poor. Regional policies from the Community—that is, provided that they are sufficiently organised —are necessary if there is to be real convergence of the economies of the present Community, let alone of the enlarged Community which may appear within the next few years. In my view, they will also be vital during the restructuring period which will take place as the single market is completed. Without a strong regional policy, the costs of decline in some regions will significantly delay the benefits of harmonisation. I shall cite but one example: the possible potential problem of large-scale migration, with all the social and economic costs that that entails, which could easily occur if there are large and widening regional disparities within the Community.

In the future the Community that was bound together in the past by the common agricultural policy should be bound together by effective policies for balanced growth and reduction in unemployment. Those are the two priorities. The United Kingdom has a great opportunity. The election is over and we are about to take up the presidency of the Community. We have a tremendous opportunity to set such a programme on the road. That is the right way forward. If the Government take that road they will have our full and enthusiastic support.

6.29 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield)

My Lords, the debate augurs well for my tenure of office in the Department of Trade and Industry—a tenure which I hope will please the noble Lord, Lord Williams, by its length. The quality of the speeches in the debate has matched the quality of the report produced by the committee. The report was of course extremely well researched, with well balanced opinions, and is, as my noble friend Lord Aldington said, in many ways in agreement with government thinking. The chairman and the members of the committee are to be highly congratulated.

I am conscious that I have become closely involved in European regional policy at a momentous time, with the current negotiations on the Delors II package, to be followed immediately by review of the structural funds regulations. I am also conscious that in this area, although exceedingly well briefed, I have an enormous amount to learn. A Select Committee report of your Lordships is no bad place to start; and I thank my noble friend for his words of welcome to a fascinating job.

As well as responding to the points raised in the debate, I shall also talk about the Government's objectives in negotiating the future of the structural funds, an issue which my right honourable friend the Minister for Industry is discussing with his EC counterparts in Lisbon tomorrow. I am sure we wish him well. If I speak at a little length I hope noble Lords will forgive me. It is important and I am among experts.

First, let me say a word or two on cohesion and the role of the structural funds. The Community confirmed its commitment to the principle of cohesion at Maastricht, and the United Kingdom accepts the need to review Community structural policies aimed at improving economic and social cohesion. But the treaty makes it clear, as many noble Lords have confirmed, that the pursuit of sound economic policies by member states is the principal means by which greater cohesion within the Community can be achieved. The role of the structural funds is to provide an important but nevertheless secondary means of support.

The present doubling of structural funds in real terms represents an investment by the Community in the economies of recipient member states comparable with the aid provided under the Marshall Plan for post-war reconstruction. As the noble Lord, Lord Desai, said, the figures we are talking about are not negligible. So we are entitled, as is every other member state, to ask whether they are being put to good use. We in the UK are the second largest net contributor to the Community budget, of which the structural funds now take over a quarter. Even more, we are entitled to demand a proper evaluation of spending so far, in view of the huge increase, almost a further doubling, proposed as part of the Delors II package. The noble Lord, Lord Thomson, drew attention to the fact that sometimes at the moment the best that can be said is that no evidence of fraud can be seen.

We have been extremely disappointed with the Commission's long delayed mid-term review, or "assessment and outlook" as it now calls it. The Commission simply has not demonstrated adequately the impact of spending from the structural funds to date. We agree with the committee that existing policy instruments should be evaluated before the Community agrees to any further increase in structural funds.

That is not to say that the expenditure of the funds in the United Kingdom has not been of value. The committee itself acknowledged the success of the Sheffield Meadowhall Roads project. I agree with noble Lords about the important role that infrastructure plays in such regional growth. I am sorry to disagree with the noble Lord, Lord Hooson, on this subject.

Probably the most significant ERDF project in the United Kingdom will be the construction of a gas pipeline from Scotland to Northern Ireland costing an estimated £170 million, with an ERDF grant of 35 per cent. In view of Northern Ireland's lack of indigenous energy sources and its distance from the larger energy networks of Great Britain and mainland Europe, this project will clearly have a substantial economic impact on the area.

On a more modest scale is a project to improve Caerphilly town centre which received 50 per cent. ERDF support. I believe that it covered streetscape improvements in a project designed to improve the poor image of the town centre and to improve the attractiveness of the area as a location for investment and to generate tourism. But I regret that I cannot assure my noble friend Lord Boardman that it did not also include toilets.

The Barnsley Business Innovation Centre, with which the noble Lord, Lord Mason, to its great benefit, is so closely associated, is an example of a different type of project. As the noble Lord can tell your Lordships better than I, the centre seeks out entrepreneurs or small technologically based companies who need business advice. The centre also provides incubator units for new enterprises. I understand that the occupancy rates have been high. Some 50 new jobs have been created. In addition to the grants from the European Social Fund, ERDF support of over £1 million has been provided. It is that type of activity for the help of small businesses which as small firms Minister I hope I will be able to encourage elsewhere. I hope also that I shall be able to count on the help of the noble Lord in support of that. I also thank the noble Lord for the compliment he paid to the regional office of the department.

The ERDF has played a strong role in securing the upgrading of ferries for the islands of Scotland, providing some £6 million of grants over the past two years and making a considerable contribution to easing the geographical problems. I note the noble Lord's pleas for greater support for periphery areas in the United Kingdom.

As the noble Lord, Lord Mason, said, on 17th February—and he drew attention to the closeness of the date to the election, but I would be supportive of my right honourable friend in hoping that he was trying to resolve the matter as quickly as possible—new arrangements within the UK public expenditure system for ensuring that the additionality of ERDF is fully transparent were announced. With effect from the financial year 1993–94 full public expenditure cover will automatically be made available for all forecast receipts and be transparently identified in departmental expenditure programmes, as has been requested. I hope that the frustrations of the noble Lord, Lord Mason, will be less in future years and that other noble Lords who have raised this matter will be more satisfied.

It may be the moment to comment on the many remarks we have heard on the issue of additionality. Until I read your Lordships' report I had not quite realised the metaphysical nature of some of these issues. I have a feeling that with additionality it is a question of "Now you see it, now you don't". The Department of Transport was quoted as to the difficulty of identifying how one defined a project. I shall quote Mr. Lilley, who said to the committee: So you are simultaneously required to argue to the Community that you need to do these things and you need the money, but you do not need to do them so very much that you would have done them left to your own devices". It is a difficult role and I think that the Department of Transport staff were perhaps clearer on that issue.

I also thank the noble Lord for coming to the defence of the Government in drawing attention to the fact that, although the committee's report states that we were very much out of line, Commissioner Millan said in his own statement that he was still involved in discussions with virtually all member states on additionality. He said that it was a difficulty they faced in every single member state.

But I hear a request for a clear view from the Government's position now. We have not changed our view of the legal obligation on us as to additionality. But the changes being introduced will ensure that it can be shown that local authorities in respect of the ERDF grants will acquire the spending power to use them.

I return now to the question of the RECHAR grants with which the noble Lord, Lord Mason, is concerned. I hope that noble Lords will understand that when these changes were agreed it was too late for them to be fully implemented into the financial year which began last month. However, for the intervening period there will be a special transitional arrangement for ERDF grants under the RECHAR programmes to ensure that commensurate public expenditure cover is available to the relevant spending authorities for that element of their expenditure financed by the ERDF. We are looking forward to announcing arrangements very soon and I understand your Lordships' impatience. But I hope we shall never be expected not to fight to protect our large investment in the Community. I find no relevance in the statement that we were the only country to contest or to question in these areas. I am sure that the noble Lord, Lord Bruce of Donington, would agree that being alone in such a situation is not necessarily being wrong.

The total current value of the RECHAR programmes as approved is approximately £124 million. However, the Government have asked the Commission for increased funding under RECHAR to take account of job losses which have occurred in the industry since the original programmes were submitted in July 1990. If successful, that additional claim could amount to some £19.5 million. We look forward to hearing from the Commission on that matter.

The noble Lord, Lord Mason, asked whether projects would have to be reassessed. That is not a government matter. The projects have to go to the programme committee which has not yet met. It is, however, possible that projects will have to be updated. Those asking may well have to look again at what they want compared to what they requested in mid-1990. I confirm that "very soon" means very soon. He also claimed that local authorities were excluded from having any input. They are represented on programme committees where projects are decided and have every opportunity to comment on programme priorities.

I shall now deal with the issue of administration, an 'issue raised by many noble Lords. Much has been said and written, not least in the committee's own report, about administrative problems related to the implementation of the reformed funds. That is right in my view, bearing in mind that a key objective of the reform was to reduce bureaucracy, while the experience in the United Kingdom and in other member states has been the reverse. The committee supported the proposals of the previous Secretary of State for Trade and Industry for administrative simplification. I can report genuine progress and hope that tomorrow in Lisbon the Commission's commitment to real simplification will be strengthened. In particular, we are looking for a firm commitment to reduce the number of stages involved in deciding structural funds assistance from three stages to two (or even one, if miracles were possible).

Another essential measure will be for the Commission's role to be more clearly defined as Community wide co-ordination, exercising broad aspects of financial control but without direct involvement in programme detail or project selection, as the noble Lord, Lord Thurlow, requested. To the extent that the Commission has a role in member states its involvement should be differentiated according to the importance of the Community's contribution. Obviously there is more interest in ensuring effective monitoring of huge Objective 1 programmes than small Objective 2 programmes, but of course we would not, indeed, could not, countenance any relaxation in financial control.

Community initiatives have been roundly criticised, not least by your Lordships, for adding layers of bureaucracy to an already overloaded system because the Commission has launched too many initiatives, mostly consisting of measures which could and should be financed by general structural funds programmes. The Commission agrees there have been too many initiatives, 12 so far at a cost of 3.8 billion ecu, but that has not stopped it proceeding with a 13th, RETEX, at a cost of 500 million ecu which the Commission does not have. The Community initiatives budget should not be quadrupled, as proposed by the Commission; instead the budget should be cut.

In the next review of the funds there should be very few initiatives, and such initiatives should be confined to programmes of trans-national interest which can only be effected by community investment. Detailed proposals for initiatives should be submitted by the Commission to a management committee, not an advisory committee, for approval. A small reserve could be held back to be used, if necessary, for initiatives to deal with unforeseen problems. But that should not include particular sectors of industry, such as those to be addressed by RETEX. I am sure we are all used to working with contingency funds. No one's crystal ball is perfect.

It is not the job of the funds to address problems of a sectoral nature; it is to help, as has been said time and time again this afternoon, weak regions, whatever the cause of their problems. Member states should address their own sectoral problems, with the Community's help as appropriate, from general structural funds programmes and subject to the Community's competition policy. Similarly, we agree with my noble friend Lord Aldington that it is not for the Community to subsidise the costs of sectors of industry to train and educate their own employees. As my noble friend Lord Carr says, they should be tasked to concentrate upon education and training, but the cost should not be subsidised.

Of course administrative simplification goes hand in hand with subsidiarity, that crucially important principle which we must protect and strengthen. The German Government have made a proposal in the area of the structural funds which we and several other member states support. It is that in future, subject to minimal criteria and ceilings to be determined by the Council, member states should themselves determine which areas should be eligible for support under Objectives 2 and 5b. If I have heard your Lordships correctly, I believe that you support that proposal. Not only would that be in line with subsidiarity; it will enable greater coherence with the maps of areas eligible for state aids and will allow member states themselves to respond flexibly to new sectoral problems as they arise.

I shall comment briefly upon some of the issues raised. My noble friend Lord Aldington and the report comment upon the enormous disparity within the European Community. We should of course be constantly aware of the changes in those disparities which will be brought about by the joining of the EFTA countries and the Eastern European impact. There has been a great deal of comment about the distortion caused by the CAP. I heard the Welsh plea and the support for it given by the noble Lord, Lord Williams. We must be aware of the needs of rural areas. Concentration on urban areas has been fashionable, although rural areas have equal needs. When looking to resolve some of the problems of rural areas we should perhaps look outside agriculture. The message has been well heard.

I heard my noble friend Lord Aldington say that the growth of the economically developed countries is a key factor. The noble Lord, Lord Mason, perhaps credits the DTI with more influence in Europe than I fear we have. It was interesting to hear the noble Lord, Lord Hooson, say that we had great influence on the Treasury. I assure your Lordships that we shall attempt to look after the matters that have been discussed.

The noble Lord, Lord Thurlow, brought common sense and a positive approach into the discussion about what can be achieved despite bureaucracy. That is something with which we have to live, but his is an attitude that I shall follow. I confirm that it is not considered that advice should come exclusively from government bodies, neither central nor local, but that others such as the CBI, enterprise agencies and so forth have much to contribute to the discussions on how to help small firms. I assure your Lordships that I shall use every source I can to ensure that the partnerships mentioned by my noble friend Lord Carr thrive.

Again, as my noble friend Lord Carr of Hadley said, the older depressed areas have weathered the problems better in recent years. There is some message to be found in how deep roots go. It reinforces my noble friend's argument that things which are bottom up have a strength. People rarely pull up what they have planted. It is important that projects are carried out under a national policy.

Before one can start the individual regions growing, it is important that the national strategy in which we plan activities is right. My noble friend Lord Carr must be pleased to register the formation of a new urban agency under the chairmanship of Sir Peter Walker. It will give a focus which we have seen in Wales and Scotland. Earlier this week I spent a day in Wales and I suspect that I should be a better advocate today of the work of the Welsh Office and the Welsh Development Agency than perhaps the noble Lord, Lord Hooson. Those bodies have made many achievements in attracting economic growth to the area.

The noble Lord, Lord Desai, put forward interesting comments and concepts. I suspect that he and I come from the two extremes of the great educational establishment, the London School of Economics. He concentrates on what should be done and I tend to veer towards what can be done. But I was delighted to hear, in his recognition that competition for resources had a role to play, perhaps an endorsement of our city challenge scheme. I hope so. As he rightly says, keeping people in their own region must be desirable.

My noble friend Lord Boardman drew keen attention to the operation of additionality by other nations and the fact that we must not erode the responsibility of national states. He also mentioned that it is an expensive shop to run, a concept with which the noble Lord, Lord Bruce, found no difficulty in agreeing. I was pleased, as other noble Lords must have been, to witness that moment of agreement between the noble Lord, Lord Bruce, and my noble friend Lord Boardman.

The noble Lord, Lord Bruce, drew attention soundly to the fact that government money is the citizens' money which we are trusted to spend. The Community does not possess money; it is money from some countries' taxpayers. All of us in government, be it national or European, would do well to remember that.

The noble Lord, Lord Williams, identified the tightrope that must be walked between industry and environmental needs. I draw attention to my maiden speech in which I said that it was no good having green banks and blue skies if everyone sitting there is unemployed. The tightrope is difficult but it must be walked.

I conclude by summarising our key objectives for the forthcoming review. First, as net contributors to the EC budget, we wish to ensure that the total size of the funds, including the new cohesion fund, is no larger than necessary. The increase sought by the Commission is not justified.

Secondly, we wish to ensure that Northern Ireland remains eligible under Objective 1, and England, Scotland and Wales receive their fair shares under other objectives. Thirdly, we shall wish to ensure that spending is put to good effect with arrangements for evaluation which are in accordance with the principle of sound financial management. We wish to ensure that member states pursue sound macro-economic policies, with respect for the principle of subsidiarity.

Fourthly, we will insist on simplifying administrative procedures, particularly outside Objective 1 regions, but without detriment to, and wherever possible with benefit to, financial control and value for money.

In past years, as a less privileged member of the Community, I have always been aware of the excellent reports from your Lordships' Select Committees and of how they provided a learned view based on extensive and thorough research that few could equal. Today, I am pleased to have had the responsibility and privilege of responding on behalf of the Government to a report in exactly that mould. The noble Lord, Lord Aldington, and the members of his committee are to be thanked for their hard work and congratulated on the results of their industry.

I was criticised when I suggested in the debate on the report by my noble friend Lord Caldecote that it should be turned into a popular bestseller. I was then told where the copyright lay. However, I continue to believe that the more people read your Lordships' reports, the more intelligent the public debate will become.

6.55 p.m.

Lord Aldington

My Lords, this brings us to the end of what has been to me an interesting debate which has taught me some new points and emphasised others. First, I wish to thank my noble friend Lady Denton for her comments and for the trouble she took in her speech to deal with the points in the report and to enlighten us with interesting information about the Government's policy on these matters. She also dealt with new projects which they have in mind. As I expected, she dealt with the additionality points which had troubled some of my colleagues and Members of the House who may not have seen the departmental statement in February in such detail as it was explained by the noble Baroness.

I also wish to thank all noble Lords who have been good enough to enter into the debate, particularly my noble friends Lord Carr and Lord Boardman, who helped me so much on the committee. I also thank the noble Lord, Lord Thurlow, who was rightly congratulated by the Minister for his commonsense approach. Those three noble Lords show the strength of committees like ours in your Lordships' House and the wide experience and different attitudes which they bring.

I enjoyed hearing my noble friend Lord Carr whose predilections and preferences I have generally shared throughout my political work with him. I also enjoy being pulled up sharply from time to time by my noble friend Lord Boardman. He does it extremely well, but always with the same aim as both the committee and I have. The same is true of the noble Lord, Lord Thurlow. I was grateful to the noble Lord, Lord Mason, for giving us his experience in Barnsley. It confirmed what we found and what we said because we supported his frustration.

The noble Lord, Lord Hooson, began by telling us what a good cross-examiner he had learned to be and what bad cross-examiners members of the subcommittee had proved to be. I admit that I have not carried out as much cross-examination as the noble Lord but I have done what few of your Lordships have done. I have been in the witness box for five days and have been subjected to cross-examination. I know precisely the kind of points the noble Lord was making about what paragraphs 135 and 138 mean. When counsel was cross-examining me and he had a really bad point on which he wished to trip me up, he said, "I don't understand what the words mean." The noble Lord, Lord Hooson, quoted from paragraphs 135 and 138 but it is absolutely clear what the words mean. The truth is that the noble Lord, Lord Hooson, does not really agree with them.

The noble Lord, Lord Williams of Elvel, said that paragraphs 119 and 131 were not quite consistent. They were indeed wholly consistent and complementary. In her reference to the environment, my noble friend Lady Denton enlightened the noble Lord. He knew perfectly well what was meant.

I welcomed the attendance of the noble Lord, Lord Bruce, at the committee. He has much knowledge and sharpness of expression. However, in my humble opinion, he suffers from "Commissionophobia" in a serious way. Although out of our nine meetings the noble Lord attended seven and greatly helped us, I regret that he did not come to the meeting to challenge the commissioner himself with his strong views. I wish he would do that rather than constantly dig at the Commission without putting the points straight to the commissioner responsible. Having launched my little barb at the noble Lord, Lord Bruce, who has been an adversary as well as a partner in political discussions for many years, I conclude by thanking once again all noble Lords who have taken part in the debate. I hope that the House will take note of this useful report.

On Question, Motion agreed to.