HC Deb 18 April 2000 vol 348 cc171-8WH

12 noon

Mr. A. J. Beith (Berwick-upon-Tweed)

The Berwick and Berwickshire areas received a bitter blow just over a week ago. As is often the way these days, we read the news in a newspaper on Monday morning, in advance of an announcement made in the House on Monday afternoon giving further details, that we were to be excluded from the assisted areas map. As speculation had suggested, the Berwick town wards of Edward, Elizabeth, Shieldfield, Seton, Spittal and Tower were excluded, with the rural wards of Belford and Beadnell, and the Islandshire ward, which includes rural and urban areas. A total population of about 17,000 was removed from the list of areas eligible for tier 2 status. In adjoining Berwickshire, the ward areas of Burnmouth, Foulden and Hutton, Eccles and Leitholm, and Edrom, Swinton and Whitsome were also dropped from the tier 2 map. Those areas, on two sides of the national boundary, are clearly connected—many people travel to work across the boundary.

We were pleased to be included in the draft map when it was published last year and assumed that we had been included because of the problems caused by the loss of more than 250 jobs with the closure of the Pringles textile factory. A total of more than 800 jobs have been lost from the town's textile industry since 1996. The over-reliance on the textile industry was acknowledged by the establishment of the Berwick task force, with the encouragement and participation of the Department of Trade and Industry. Berwick was also included in the last months of the European Retex programme, but that gave time only for studies and programmes to be prepared rather than for regeneration work.

The proposals of the Northumberland Strategic Partnership for assisted area status for Northumberland noted that 20 per cent. of the workforce in Berwick on Tweed borough were employed in manufacturing in 1996… unemployment in Berwick shows a strong seasonal pattern… Berwick is a strategic site, being capable of attracting substantial inward investment. Regional selective assistance is the main instrument of the Government's regional industrial policy. It is designed to create and safeguard jobs, to attract and retain mobile investment and to improve the competitiveness of disadvantaged areas. However, regional selective assistance is the key factor that is lost by removal from tier 2 status. The wards that are being removed include those that contain sites where just such selective assistance could be used—sites such as large factories, where substantial opportunities for promoting employment can be pursued.

Dr. Desmond Turner (Brighton, Kemptown)

I offer the right hon. Gentleman my sympathy for the plight in which his constituency finds itself. I have an analogous problem in my constituency, where one ward that forms half of a new deal for communities pathfinder because it is in the top 5 per cent. of the local deprivation index and includes industrial sites capable of modernisation—where tier 2 status can be used to promote significant employment—has been replaced by a town centre ward that is so heavily developed with houses that not even a garden shed could be added to it. One could not possibly spend the money there. I am frustrated and puzzled. Does the right hon. Gentleman have an idea of what is going on?

Mr. Beith

I hope that the Minister recognises that that problem was brought about by the changes in the map. In several places, the very wards in which industrial development could take place have been taken out, while those in which it could not conceivably take place have been put in. That is the situation in Northumberland and other parts of the country.

Let us consider the index of deprivation, which includes factors such as unemployment and economic activity. There are 119 wards in Northumberland and three of the excluded wards—Edward, Tower and Spittal—are in the worst fifth. However, wards much lower down the index of deprivation have been added to the list.

One of the list's eligibility criteria is that areas should be "compact and contiguous". Berwick and the adjoining Berwickshire wards are, indeed, compact and contiguous and they contain the employment sites and the people who would benefit from the opportunities created by regional assistance. About 87 per cent. of people in the Berwick area who travel to work do so within the Berwick borough. That is a fairly unusual figure and it is far higher than elsewhere. Cross-border travel is primarily from the immediately neighbouring area of Berwickshire, which is represented by my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood). The area is, of course, isolated—that is part of its problem, not a reason for denying it the help that it needs.

The unemployment rate in Berwick town is 7.1 per cent., which is up from 5.7 per cent. in 1998. In some wards, it is dreadfully high—9.4 per cent. in Seton ward and 7.3 per cent in Elizabeth and Spittal wards. Those figures are well above even the north-east average of 6.8 per cent., let alone the UK average of 4.6 per cent. Two hundred and fifty jobs were lost at Pringles in 1998–99 and 50 jobs were lost at Libris Computing and other firms. Northumberland as a whole is unable to keep up with the job losses and more than 2,000 jobs have been lost, while only 800 have been gained.

Manufacturing accounted for 20 per cent. of the employment sector in Berwick in 1996. About 93 per cent. of women employed in manufacturing work full time. Equally, 16 per cent. of all the unemployed in Berwick were plant and machine operators—the largest group among the unemployed. However, the rate for the creation of new firms is well below national figures—6.09 per cent. as opposed to 8 per cent. for Northumberland and 11.6 per cent. for England.

We could also consider the decline of VAT-registered businesses in Berwick. The number dropped by 6.5 per cent. in 1994–97. The figures for vacant premises show that 23 per cent. of Berwick's industrial premises were vacant in 1998. The economic activity rate is in the lowest quarter for all English regions.

Let us, however, consider the future. The prospect of tier 2 status in July 1999, when the map was first published, led at least three local companies to draw up plans, which would have meant approximately 100 new jobs. Those proposals will not now be eligible for the reduced rate of assistance through tier 3 enterprise grants and are in jeopardy because of the revisions to the map. They were at the heart of the work of the regeneration task force. When a comparison is made with the incentives available in other areas, exclusion from tier 2 will weaken the case for relocating firms to Berwick. We have a single regeneration budget programme, but it cannot deliver enhanced competitiveness by itself. There will be a significant negative impact on the programme, which does not have the resources to deal with it.

I have concentrated on the problem in the Berwick town wards, where the major industrial expansion can take place. However, there are also problems in some rural areas. Sea houses, which has its own small industrial estate, has been excluded from the beginning. The Minister wrote to me on 11 August, before last week's announcement, to say that the Sea houses case could be re-examined if the map had to be reconsidered. Nevertheless, Sea houses has been left off the map and the community does not have access to the help that it needs.

In 1999, a harbour regeneration study called for extra funds to be targeted at the infrastructure of the harbour, which lies at the heart of the village's economic viability. In March, the harbour was refused a single regeneration budget grant. Now assisted area status is denied. A pile of reports and studies keeps showing the need for help, but not the means for its delivery.

Mr. David Crausby (Bolton, North-East)

I understand the right hon. Gentleman's natural disappointment, but does he accept that my right hon. Friend the Minister had to do a difficult job as best he could? A reduction was required. The right hon. Gentleman may know that my constituency did rather well out of the redrawing. There will inevitably be some winners and losers. Is that not one of the points of a review?

Mr. Beith

I am sure that the hon. Gentleman's constituents will be pleased by that news, but I would like him to come to Sea houses to explain to a community that is desperately in need of such help why it should be denied to it. I appreciate the Minister's difficult task, but suggest that he could have handled the matter differently.

Mr. William Cash (Stone)


Mr. Beith

I must limit the interventions that I allow, or I shall not be able to give the case that my constituency needs presented.

The Belford area became nationally famous a week or so ago with the closure of a Barclays bank. That community is engaged in active regeneration projects and has been dropped from the map this time round. I would like the Minister to suggest whether the third tier of assistance—more limited assistance for small and medium-sized firms—will be made readily available to those more rural communities. If it is not, I do not see how they can achieve the needed regeneration. That tier of assistance may be available on only a limited scale. The funds may not go round all the areas now dropped from the map and would not support the relevant industrial projects in Berwick.

I shall suggest some ways in which the Minister can consider the matter in the remaining consultation period. I am puzzled that the Government have not appealed against the refusal of the map that they first proposed. That may be because of the time—probably about six months—that it would take to appeal. The process itself will also take some time. The original proposals were subject to extensive consultation, involving more than 350 responses and 40 meetings throughout the country. When the Government proposed the original map, surely they were satisfied that it met the European Commission's guidelines and the local circumstances, so far as possible, on the basis of the consultation. Now the map is completely different. Some areas have been removed and others have been added that have not been subject to such consultation. Would it not have been better to have appealed against the European Commission's objections to the original map, as the Government had the power to do?

The Government's first proposals did not include the limit to populations of 100,000. Areas with populations of less than that figure could be included, with the penalty that they would be counted as having populations of 100,000 for the purposes of the overall figure. It is worrying that the Commission seems to be moving the goalposts. If its doing so excludes the Berwick area, the Government must deal with that.

If the Commission insists that the areas must have a population of 100,000, the logical consequence is to put all the border areas hit by the decline of the textile industry together and treat them as a single area. As the Minister knows, that decline has spread across the borders. What consultation has there been with Scottish Departments and those with responsibilities in Scotland about the implications? Berwick is part of a border economy more than a north-east economy, so it would have been logical to have joined it to the chain of wards that has been affected by the devastating decline in the textile industry. My hon. Friend the Member for Roxburgh and Berwickshire will refer more to the matter in a moment.

There are two more weeks of consultation and the Minister will receive representations. In my view, a disastrous mistake has been made in an area in which the Department of Trade and Industry recognised that a task force and regeneration programme had to be implemented because there was a serious problem. If Ministers are serious about the regeneration of the Berwick economy, they cannot deny it the regional assistance that I described. I therefore plead with the Minister to restore the Berwick area to the map when the consultation period ends in two weeks' time.

Mr. Deputy Speaker(Mr. Nicholas Winterton)

The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) has sought the permission of the right hon. Member for Berwick-upon-Tweed, the Minister and Ito take part in the debate. I call the hon. Member for Roxburgh and Berwickshire.

12.15 pm
Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I am pleased to be able to make a brief contribution to the debate. I am pleased, too, to support the eloquent and telling case made by my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith). He is absolutely right to say that throughout my parliamentary career he has been telling me that there is no national boundary between the economies of north Northumberland and the coastal communities and those further west, north of the border in Scotland. There is much social intercourse between the areas and many people travel to work across the national boundary—facts of which the administrative proposals take no cognisance whatever.

My right hon. Friend is also right to say that there is anger and confusion about the changes to the July 1999 map. The amendments are severely deleterious and prejudicial to the community served by Berwickshire and the town of Berwick-upon-Tweed. The area was recognised recently by the Scottish Office as a regional economy in dire need of special assistance. Indeed, a ministerial working party was set up to make cogent proposals to tackle some of the issues. If the amidst to the map are implemented, they will severely damage any prospect of development in places where there are real opportunities for doing so. My right hon. Friend is right to underscore that point.

The towns in Berwickshire in my constituency that will be particularly prejudiced are Eye mouth, especially the Gunsgreen industrial estate, and Chirnside, where there are substantial manufacturing employment opportunities. Further west, the electronics industries in wards 7, 11, 12 and 16 would benefit from significant and sustained future development. As my right hon. Friend said, in all those areas projects are in the pipeline—they were encouraged, worked out and are ready to go. The amendments to the map will put the kibosh on them and render the projects nugatory.

Competition is an important issue. As my right hon. Friend said, if Berwickshire is not eligible, firms there will suffer severely from competition from companies in other parts of the United Kingdom that are eligible for area aid.

I hope that the Minister will accept my right hon. Friend's offer of serious consultation with his colleagues north of the border to bring some coherence and sense to the proposals. I endorse my right hon. Friend's plea that the deletion from the map of the town of Berwick-upon-Tweed and its surrounding areas and areas in Berwickshire should be urgently and seriously reconsidered. Account must be taken of the long-term future and prosperity of the entire area.

12.19 pm
The Minister of State for Trade(Mr. Richard Caborn)

I have listened carefully to what has been said and will take it into consideration in the consultation period, which ends on 2 May. If right hon. and hon. Members want to submit further evidence, we shall consider it.

I commend the right hon. Member for Berwick-upon-Tweed (Mr. Beith) for the force with which he put his case. I know that he feels strongly about the matter. I am sure that he appreciates that in July last year, when the Government submitted the original proposals for the assisted areas and the structural funds objective 2, we recognised the needs of that area. Indeed, I know that the right hon. Gentleman and the people of Berwick are disappointed that we have not been able to deliver what we put forward in the July proposals. We listened carefully to the views of the local and regional partners and that included the regional development agency. We also worked closely with the Scottish Executive and the National Assembly for Wales.

We found it hard to maintain the July proposals in our negotiations with the Commission. Indeed, the amendments that we announced last week were solely to meet the Commission's concern about those proposals and not because we do not recognise the case that has been put forward today. As the right hon. Gentleman appreciates, the British Government do not have a free hand. Under the EC treaty the Commission has sole competence in this area. We cannot pay any regional state aid without an assisted area map approved by the Commission. We have, therefore, been faced with some hard choices.

Mr. Cash

Will the Minister give way?

Mr. Caborn

No, I had better reply to the outstanding questions first.

Mr. Cash

Could the Minister just confirm that it is not simply a question of wanting another place to be given assisted area status? There are circumstances in which people, such as those in my Grindley lane investment area, would want themselves to be taken out, having examined the structure plan.

Mr. Caborn

I am coming to that matter. I am just explaining how the maps are drawn up.

We were first faced with hard choices because of the criteria that were applied much more stringently by the Commission. We could either make the changes to meet the Commission's concern about the July map or, as the right hon. Member for Berwick-upon-Tweed said, we could take that challenge. We are trying to get clearance for these maps before the summer. That would then backdate to 1 January when a number of indicative offers were made to people who have made applications that we cannot pay.

Some of the Government's indicative offers have gone through the due procedure for regional selective assistance; others have not. If we delayed and went through the procedures of article 88(2) of the treaty the process would go on for at least another six months and the outcome would be doubtful. We therefore decided to submit the revised map to the Commission. We made those amendments to ensure that 16.5 million people who will be covered by the new assisted areas are not disadvantaged.

We have made two principal changes, we have had to reduce the population covered by our proposals by a third of a million people and we have had to show that the areas proposed are more compact and self contained. Both of those changes have had an impact on our proposals for Berwick and Berwickshire, but we could not simply extend coverage up the coast to Berwick-upon-Tweed and across the Scottish border into Berwickshire, as we did in the July proposals. The areas proposed in July were not sufficiently compact to secure the Commission's approval. Under the new constraints that the Commission has imposed, we would have had to include much of Northumberland to ensure coverage of Berwick, and most of the Scottish borders to include Berwickshire. That approach would have been expensive in terms of population and would have had to be taken for other parts of the UK.

Overall, the coverage of the north-east has increased by 10 per cent. on the July proposals and a further increase to allow the coverage of Berwick-upon-Tweed could not have been accommodated within the overall reduction in population coverage imposed by the Commission. The alternative would have been to exclude another area of the north-east to allow the inclusion of Berwick-upon-Tweed. Similarly, within Scotland, the inclusion of Berwickshire as part of the wider Scottish borders area could have been achieved only at the expense of other areas.

The Government are conscious of the needs and concerns of the people of Berwick and Berwickshire and I stress that the assisted areas are but one part of a package of measures that the Government have put in place to meet regional needs and tackle the problems of Britain's most needy areas.

We inherited an uncoordinated and disjointed set of regional bodies with no overall strategy to bring together regional activities and we have tackled that problem. With devolution in Scotland and Wales and the establishment of the regional development agencies in England, we have put in place a framework to ensure that all parts of Britain share in our future prosperity.

The regional economic strategies that the RDAs produced last October are a significant milestone and provide the basis for promoting development and competitiveness in the regions. The Government are working with the RDAs to ensure that those strategies are delivered. Indeed, we are committed to delivering an integrated package of support for the regions to tackle poverty and unemployment and to support regional developments. As the right hon. Gentleman will know, the Budget introduced a £100 million regional venture capital fund to help to finance small and medium-sized companies, a £60 million package to help small firms to get online, a new £50 million regional innovation fund to provide support for business clusters and incubators and an enterprise grant to offer assistance to small and medium-sized enterprises.

The right hon. Gentleman will be aware that £3.4 million from the Northumberland strategic partnership's award of £15.6 million under single regeneration budget round 5 has been allocated to Berwick district for its action for communities programme. The measures that have been identified for support include increasing the competitiveness of local companies, providing work space and developing Berwick docks.

The right hon. Gentleman will also know that, two weeks ago, the European Commission approved the UK's objective 2 fund map, which included Berwick and Berwickshire. That will ensure that many of the most needy areas in the UK benefit from the £3 billion of European regional funding for the next seven years. The north-east, including Berwick, will benefit from more than £400 million of objective 2 funding in the next seven years. In Scotland as a whole, the total value of objective 2 is about £500 million.

I assure the right hon. Gentleman that recognition of the amended assisted areas proposals, together with the new objective 2 maps, will mean that all but 1,000 people in his constituency are covered by tier 2 and tier 3. That cover has been achieved at a time when our assisted areas are being cut by a fifth and our objective 2 areas are being cut by a third. The right hon. Gentleman will agree that his constituency has got a pretty good deal.

Mr. Beith

I hope that the Minister will recognise that the largest industrial project that might be mounted in the wards of Berwick that contain the industrial estates is the one that I fear will fall between the spaces in the policies that he has described.

Mr. Caborn

We will consider those matters. The right hon. Gentleman must understand that we are acting under constraints that have been imposed by the European Commission, not Whitehall. Given that context, we have got an extremely good deal. I am sure that the right hon. Gentleman and many of his colleagues in Cornwall, the north-west and south Yorkshire understand that if my right hon. Friend the Prime Minister had not got the two thirds safety net in relation to objective 2 in Berlin 12 months ago, we would not have got such a good deal. Our coverage in terms of structural funds would have been considerably less—about 50 per cent. of what my right hon. Friend achieved. That coverage, the assisted areas map and what we are doing in the round for regional development agencies represent a mature approach to sustainable economic regeneration. The RDAs are considering the issue in a strategic way and that is the right way.

We could do what the previous Administration did, which was to chuck a few bob at the problem—a few crumbs off the master's table—and let areas scramble for them. However, those days have gone; our approach is about partnership and a sensible approach. We cannot deliver anything but, on this occasion the northeast has probably got an extremely good deal. I know that it will use the resources effectively for longer-term sustainable regeneration.

The consultation is open to 2 May and we will seriously consider all proposals. We want to do the best that we can for UK Limited, within the constraints that the European Commission imposes on us.

Mr. Deputy Speaker

Order. We move on to the last debate in Westminster Hall this morning. It is initiated by the hon. Member for Brent, North (Mr. Gardiner) and the title on the Order Paper is "Regulatory supervision of the transfer of domestic utilities supplies".