HC Deb 21 June 2000 vol 352 cc66-90WH

11 am

Mr. Martyn Jones (Clwyd, South)

European structural funding is probably the most important issue affecting Wales's economic future for perhaps the next 10 or 15 years. I think that the Welsh Affairs Committee's report reflects the concern of all hon. Members from Wales to realise the opportunity to obtain for Wales possibly £1.2 billion in European funding, which would be a tremendous boost for the Welsh economy and a huge asset for Wales. Although the funding would go to only a part of Wales, Wales as a whole would benefit hugely from it.

The Committee began its inquiry on the matter in 1998–99 when it became apparent that west Wales and the valleys would qualify for objective 1 status in the 2000–06 European structural fund round. The Committee was very concerned to ensure that everything that could be done to prepare for the round would be done. In March 1999 we took evidence from the Wales European taskforce. On 1 July 1999 responsibility for social and economic development in Wales went to the National Assembly for Wales, but there is not a clear dividing line between devolved and non-devolved matters. Additionally, there was widespread concern that, because of UK Government funding restraints, Wales would not be able to benefit fully from the available European funds. The Committee, therefore, decided to continue our inquiry, focusing primarily on UK funding issues.

We took evidence at Westminster from the Secretary of State for Wales. In November 1999 sitting for the first time in the National Assembly building, we took evidence from the chairman of the Assembly's Economic Development Committee. We also took evidence from the Wales European task force and from the Assembly Secretary for Economic Development.

The Committee emphasised throughout our proceedings that we were taking evidence from the National Assembly not to scrutinise how it handled devolved responsibilities, but to obtain information that would enable us more effectively to scrutinise the UK Government. We greatly appreciated the spirit of cooperation shown by Assembly Members in responding to our inquiry.

The report was agreed unanimously on 8 February 2000 and published on 17 February. In it, we attempted to clarify the funding issues, many of which are very complex. There was much confusion about the concepts of public expenditure cover, match funding and application of the Barnett formula. The additionality rules and the UK rebate also confused the issue. We recommended that the Government and the Assembly should jointly publish a simple but authoritative guide on public expenditure and on obtaining UK and European funding.

Public expenditure cover—an authority to spend public money—is required for European funding and for any match funding, which is the local contribution to project costs, that is provided from public sources.

We reported some concern about public expenditure cover for 2000–01, noting that in the first year structural fund payments are expected to be few. As funding for projects is effectively scheduled over five to six years, most funding comes in the third or fourth year, so although very little funding was likely to be needed in the first year, there was some doubt that the funding available would be sufficient. We have urged the Government to allow, for additional public expenditure cover in Wales for 2000–01, if structural funds are greater than expected.

Real problems may arise in 2001–02 and beyond if a significant increase in public expenditure cover is not agreed. It is not possible for Wales to meet the costs of objective 1 from its current budget, which has been formulated and allocated to meet the costs of services already being provided by the Assembly. The concern is that, if we do not receive additional funding, we shall not be able to access the £1.2 billion of European funding.

Mr. Nigel Evans (Ribble Valley)

The hon. Gentleman has said that he is happy that there is sufficient funding for year one, although that is only a small sum. Is he really happy that sufficient funds are available? I understand that various local authorities have proposed various projects but have been told to scale them down to only one project each. Could the hon. Gentleman say something about that?

Mr. Jones

I have no knowledge of that, but should be concerned if it were true. All the information that the Committee has received is that money set aside in the Assembly's budget is sufficient to cover foreseen projects. As I have no other knowledge of the matter, I cannot comment further on it. The Committee has to accept that what we have been told is correct—that £25 million will cover the first year's funding. It seems likely that that sum will be sufficient. The evidence that we received on the spending profile over six to seven years supports the view that very little other than, perhaps, seedcorn funding—which is provided for in the £25 million—will be needed.

The Committee is more concerned about the period 2001–02 and beyond. I am sure that at least all hon. Members from Wales will appreciate that some services will be lost if the block grant has to cover expenditure additional to expenditure on the services—such as health and housing—for which it was formulated and the Assembly is responsible. We know that extra public funding will have to be provided to Wales if we are to obtain a percentage of the £1.2 billion. We also know that some of the funding will come from private expenditure. Although that is all to the good, a substantial percentage will still have to come from public expenditure.

The objective 1 area covers 65 per cent. of Wales's population, and objective 2 covers another 9 per cent. In the comprehensive spending review, the Assembly is arguing for an increase in its departmental expenditure limit to provide additional public expenditure cover for all the anticipated European receipts. We urge the UK Government to make a clear and early commitment to increasing Wales's public expenditure cover to allow a full take-up of European funding.

The Assembly will also have to find money for match funding. The situation is confusing, as there are two factors in the calculation. In addition to public expenditure cover, which is the authority to spend money, there is a cash element to the extra funding. The Committee believes, as I have implied, that it would not be possible for Wales to raise the estimated extra £885 million of public sector match funding from existing resources. We have therefore urged the Government in the next comprehensive spending review settlement to increase the funding made available to Wales, to meet in full the public sector element of match funding.

In the Government's response, which was published in our fourth special report, we were told essentially that we would have to await the outcome of the spending review. Ministers reiterated their assurance that they fully appreciate Wales's needs and the importance of objective 1 funding. Both as members of the Committee and as hon. Members from Wales, we were very glad to receive that assurance, and at least some of us appreciated that we would have to wait to see the outcome of the comprehensive spending review.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

Is the hon. Gentleman aware that, last week, the Minister for Local Government and the Regions gave cast-iron assurances that money would be available to the English regions, whereas such assurances have not been given to Wales?

Mr. Jones

I was not aware of that. If it is true, I am happy that the English regions have received such an assurance, although it would be nice if Wales could receive a similar assurance. The problem may be that it is not as easy for such assurances to be made under the Barnett formula. I look forward to my hon. Friend the Minister responding on that point.

The report's conclusion is clear. It states: The award of Objective 1 status to West Wales and the Valleys is a sign of how far parts of Wales lag behind the rest of Europe in economic development. The next few years offer an unprecedented opportunity to transform this situation … Unless the UK Government provides a substantial increase in the Assembly's expenditure limits in the Comprehensive Spending Review, Wales will not be able to take full benefit of the European funds available. The current CSR negotiations are a test of the Government's commitment to Wales, and indeed of the Devolution settlement. That statement still holds good, but if we accept the restraints we must therefore accept the Government's answer that there are problems with the CSR. We understand that it is those problems that have caused the delay, but we hope that the Minister will continue to press the case very strongly for maximum public expenditure cover and maximum match funding for Wales.

We have a unique opportunity to access European funding, which will not come again. The Committee is aware of what objective 1 funding did for Ireland's economy.

Mr. Evans

I understood that, when the proposals were resubmitted to the European Union, a cast-iron guarantee was sought that match funding would be made available by 31 March. That date seems to have disappeared. Has the hon. Gentleman been given any indication that the Government have guaranteed to the EU that the £1.2 billion will be match-funded throughout the entire period of the EU structural fund grants?

Mr. Jones

I was not aware of that either, but it seems odd that the Commission would want such an assurance. European funding is project-based: if the projects do not exist, anticipating and accounting for the destination of every penny, ecu or euro of that £1.2 billion would require a crystal ball. If such a demand had been made, I would be concerned, but I do not think that the European Union could have imposed it on the Government. Given that any such demand would have required the assurance that it sought, but that no such guarantee has been given by the Government, I am certain that no demand was ever issued.

Wales has a unique opportunity. I believe that the Government are committed to getting as much money as possible into Wales. I hope that today's debate will strengthen Ministers' collective arms in their negotiations with the Exchequer.

I look forward to the Minister's response.

11.13 am
Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

The Select Committee report derives from a wide-ranging piece of research undertaken in a short space of time. I shall not dwell on the report's conclusions, which were highlighted by the hon. Member for Clwyd, South (Mr. Jones), but its main thrust is to urge the Government to give some cast-iron assurances on the additional funding and match funding that are prerequisites for drawing down moneys for successful structural fund projects.

We also said that we supported the initiative of the Assembly Secretary for Economic Development in seeking to exempt Structural Funds from the operation of the Barnett Formula. That is an important point, as about 5 per cent. of the moneys coming to Wales do so under the Barnett formula. That 5 per cent. would be imposed on the total structural block moneys coming to the United Kingdom and, as a result, Wales would, in effect, be sold short.

The hon. Member for Clwyd, South said that about 65 per cent. of the population of Wales reside in the area now given objective 1 status. The funding is therefore more important to Wales, pro rata, than any other part of the UK.

The Committee also urged the Government to respond swiftly to the report. Over the past few years, we have been disappointed in the content of the responses from Governments to reports, and in the fact that there have been delays of nine, 10 or 12 months before such responses have been made available. Those delays have been something of a scandal. On more than one occasion, the Committee has had to write a firm letter to the Wales Office asking for an urgent response. Those request have been totally ignored for another three or four months.

That is not good government. It is an affront to the Select Committee on Welsh Affairs, and to the parliamentary process. However, the Committee urged the Government to respond swiftly to the report by making a clear public commitment that they will provide Wales with public expenditure cover for the anticipated European grants, and with additional funding to meet the full costs of the public sector match funding requirement.

Swift response there was, in this particular case—indeed, it came the same day as the report was published. In a press release, the Secretary of State stated that it is my view that the report is incorrect in its conclusion. Somehow, the Secretary of State had prejudged the report's conclusions, or had received a leaked copy of the report. Clearly, he knew the contents of the report, and the Wales Office press release was issued on the morning of the press conference held by the Select Committee.

The press release continued: In these circumstances I believe it would be entirely wrong to separate one aspect of funding of the Welsh block grant from all the others. We cannot afford to prejudge decisions about funding of Welsh schools and hospitals by considering one aspect of the Welsh budget in isolation.

The Parliamentary Under-Secretary of State for Wales (Mr. David Hanson)

The hon. Gentleman has made the very serious allegation that the report was leaked to my right hon. Friend the Secretary of State. I hope that he will clarify that in his contribution, as it is a serious allegation against my right hon. Friend and members of the Committee.

Mr. Llwyd

In return, will the Minister explain how the press release came to be issued at the time of the Committee's press conference?

Mr. Hanson

My right hon. Friend the Secretary of State expressed a view about the report's conclusions.

Mr. Llwyd

Without seeing the report?

Mr. Hanson

He had certainly seen the report's conclusions at the time of the press conference.

Mr. Llwyd

I dispute that, as the press release was issued at the same time as the press conference was being held. That is a matter of record. However it happened, the Secretary of State gave an urgent response—that much is true.

Mr. Martyn Jones

I think that I can clear this up. Press copies of reports are sent out under embargo, 24 hours before their official publication. The Secretary of State would therefore have had 24 hours notice of the report's conclusions.

Mr. Llwyd

The hon. Gentleman confirms that the Secretary of State would have had prior sight of the report, in which case it is good that he gave his response within 24 hours of receiving it.

However, the content of the Secretary of State's response is far from good, as he made it clear that he believed that the report was "incorrect in its conclusion".

Mr. Hanson

Will the hon. Gentleman withdraw what he said?

Mr. Llwyd

I will not.

Mr. Deputy Speaker (Mr. Frank Cook)

Order. I remind hon. Members that there is a Chair here. It is occupied, and must be recognised.

Mr. Llwyd

I am obliged, Mr. Deputy Speaker.

There was a swift response to the report, saying "Wait for the CSR," and that the Committee's conclusions were incorrect—even though the report was consensual and its conclusions had been agreed by members of all parties involved.

Last week, it emerged that the English regions qualifying for objective 1 status—Cornwall, South Yorkshire and Merseyside—had been assured that they would receive match funding from the Government. The Minister for Local Government and the Regions has struck a deal with other Government Departments. Those Departments' budgets will be treated with more flexibility, so that cash can be freed up to match funds from the EU.

As we have heard, the issue of match funding for Wales is still to be resolved. We must have assurances that we will receive the necessary amount of match funding, over and above the Barnett block, to enable organisations in Wales to draw down money from the European structural funds.

Mr. Chris Ruane (Vale of Clwyd)

Does the hon. Gentleman agree that it is easier for the three English regions with objective 1 status to get money as they represent only 6 per cent. of the English population? They can go to the Government and say, "We represent only 6 per cent. of the population. Can you spare us just a few extra pounds"—or millions of pounds. It is harder to do that in Wales, where 76 per cent. of the population live in objective 1 or objective 2 regions.

Mr. Llwyd

I hear what the hon. Gentleman says and I dismiss it utterly.

We must ensure that the First Secretary and the Secretary of State for Wales do all that they can to put pressure on the Treasury to deliver on this crucial issue. Without adequate funding it will be impossible to draw down funds from Europe, rendering objective 1 status worthless and a Pyrrhic victory.

Why are Welsh Ministers failing when those representing the English regions have been able to do deals with the Department of the Environment, Transport and the Regions, the Department for Education and Employment, the Department of Trade and Industry, the Ministry of Agriculture, Fisheries and Food and so on and are able to give cast-iron assurances?

Mr. Richard Livsey (Brecon and Radnorshire)

I am interested in what the hon. Gentleman is saying, as I understand that the English regions have clearance for expenditure from 1 January 2000, which gives them a significant advantage. Does that not also highlight the fact that the Barnett formula has a stranglehold on the issues of public expenditure cover and match funding?

Mr. Llwyd

I agree entirely. The hon. Gentleman, as a member of the Select Committee, is fully aware of the problems that we face.

Mr. Evans

Does the hon. Gentleman also accept the fact that, because so much of Wales is covered by objective 1 and 2 status, there is a greater need for the Government to take an urgent decision instead of hiding behind the smokescreen of the comprehensive spending review?

Mr. Llwyd

I agree entirely. The hon. Member for Vale of Clwyd (Mr. Ruane) said that objective 1 regions in England represented 6 per cent. of the population, whereas in Wales they represent 65 per cent. according to my figures, and 76 per cent. according to his. Obviously, the decision is urgent and in any event it represents more people pro rata.

It is not just my party that is making this point; so are the hon. Members for Ribble Valley (Mr. Evans) and for Brecon and Radnorshire (Mr. Livsey). We are all ad idem on this and we need to get it clear. We have been asking for a decision for months now. This situation led to the downfall of the First Secretary in Cardiff and we are still no nearer a decision. I wonder when we will know what is happening.

Many projects are on hold and will not wait for much longer unless some assurances are given. People who are prepared to make inward investment are not prepared to wait for ever for assurances to be given. For all I know, some projects will switch to the English regions, once again denuding the Welsh economy of much-needed inward investment.

Mr. Ruane

Match funding is a key issue. It is not just the three Opposition parties that want an assurance on that; the Labour party does, too. There are rules, however, and announcements will be made in July. Does the hon. Gentleman accept that going on exclusively about match funding is scaring investors away from Wales? We are talking Wales down and people are afraid of getting involved because the only issue that they hear about is match funding. We need to talk up projects in Wales.

Mr. Llwyd

With respect, we can talk up projects in Wales till the cows come home. If we are unable to persuade inward investors that the economic conditions are right and the money is there, we can talk up Wales from now till kingdom come without any benefit to anyone.

The Government have failed the people of Wales in this matter. I understand that the final strategy and programming document will be with the Commission on 4 July and that the shadow monitoring committee will meet on 16 and 29 June and 21 July. The fast-track procedure will operate for two weeks in July with the possibility for every local partnership/regional package to submit applications.

There is great concern that only large-scale projects involving bodies such as the Welsh Development Agency will be considered as part of the procedure. Small voluntary and community organisations are concerned that they will be left out. Further, there are serious concerns that only one project per application can be considered, since many local partnerships already have 50 to 100 projects lined up. All other project applications will have to wait until the end of September to be submitted and, in reality, will not start until November or December when the money starts to come through. That means that nearly a year has been lost since west Wales and the valleys have been eligible to receive objective 1 funding.

There are fears that only a small number of projects will be able to get into the fast-track procedure in July and that only a few will be able to claim under that process. Retrospective funding is the term for claiming back money that has been spent after a project has been approved. That, too, is in danger. The leader of Gwynedd county council told me yesterday that he has been informed that there will be no retrospective approvals and payments in respect of some projects already undertaken. I specifically ask the Minister to give us an answer on that when he replies to the debate. It does not have to wait for the comprehensive spending review.

My party and others represented in this Chamber have the best interests of Wales at heart. Objective 1 funding has been designated simply because the GDP of Wales is below that of the rest of the United Kingdom and below the European Union average. That is not a matter of pride. We are all concerned about that, but we are equally concerned that this is our last chance to draw down the funds. Six years from now there will be further integration into the European Union, probably involving eastern European states, and objective 1 funding will no longer be available, so we need to make as much as we possibly can of the current opportunity.

As I have said, it is undeniable that we have lost 12 months already and crucial issues still need to be resolved, such as the relationship between what can be delivered through regional and local packages and actions plans. Will there be a lead body or accountable body responsible for projects under such packages? Who will have financial control over those projects?

Many organisations and partnerships complain that they are being held back by the lack of guidance from the Assembly on such issues. Lack of guidance from the Government of Wales is doing enormous damage to preparations for the launch of such projects in all objective 1 regions. I believe that that was intentional on the part of the Government as they have allocated only £25 million for such projects during the first financial year.

We have been saying for the past six to nine months that we have been let down by the Government of Wales. The achievement of objective 1 status may well turn out to be a Pyrrhic victory if we are unable to maximise the structural funds that we can obtain. The Government have handled the matter in a deplorable way and we will get nothing like the benefit that we could have achieved.

Mr. Martin Caton (Gower)

We have heard on many occasions in the past few months that the Government are letting Wales down. Can the hon. Gentleman give us a figure that he would expect from the comprehensive spending review that would not result in a statement the following day from Plaid Cymru to the effect that the Government had let Wales down again? How much does the hon. Gentleman expect from the comprehensive spending review?

Mr. Llwyd

I am no more privy to the comprehensive spending review than the hon. Gentleman is. It is one of the problems to which the Minister will refer in a moment. I do not know what is in the comprehensive spending review. I say simply that we should have additional funding and match funding sufficient to allow us to use all the allocated structural funds that have been designated for the poorer parts of Wales.

11.29 am
Mr. Chris Ruane (Vale of Clwyd)

I am concerned about the contribution of the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd), which contrasted greatly with his more collegiate, co-operative approach in the Select Committee on Welsh Affairs yesterday. Perhaps someone has had a word with him—he is usually an amiable character, yet he said that the Government's record on objective 1 was deplorable.

Was it deplorable when the former Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain), accepted the hon. Gentleman's county and my county into the Welsh Office bid at the last hour? If he had not, 7,000 people in the hon. Gentleman's constituency would not have benefited. Was it deplorable when the former Secretary of State for Wales, my right hon. Friend the Member for Caerphilly (Mr. Davies), argued in Cabinet—quite often with Cabinet members from other regions with objective 1 interests—that Wales should be accepted, and that it should be the largest region in the United Kingdom to be accepted? Was it deplorable when the Prime Minister went to Berlin, argued through the night for the UK bid to be accepted and then flew back to Hawarden airport to announce that to the Labour party conference?

Labour has delivered on these three key points, yet the Welsh nationalists have used objective 1 as a political football—a political cosh with which to bang Labour over the head time and time again. They have neglected the true interests of the people of Wales; they have sought party political gain at every opportunity—at the local elections last year, at the European elections and at the Assembly elections. They sacked the First Secretary, conniving with the Opposition parties in Wales to achieve that narrow political goal. They were after a political scalp, not objective 1 or match funding. They have used the subject of structural funding time and again for their own narrow political ends.

Match funding is a critical issue, and no one in Wales has tried harder than I have to ensure that objective 1—

Mr. Evans

Does the hon. Gentleman not accept that if the Government had come forward with the match funding, Plaid Cymru, the Conservatives and the Liberal Democrats would not have united in the interests of the people of Wales and removed the First Secretary?

Mr. Ruane

I am not accepting a criticism like that from the hon. Gentleman. When the previous Government came to power in 1979, of the 13 regions in the UK, Wales was mid-table as far as gross domestic product was concerned. When they left office in 1997, Wales came bottom of the league table. It is thanks to the previous Government that Wales achieved objective 1 status—they took us from the middle of the table to the bottom. They sacked the miners, they sacked the steelworkers, they put nothing in their place and they did not get the structural funds for objective 1. So I will have no truck with the hon. Gentleman when it comes to objective 1 funding. The Conservatives did nothing, and they continue to carp and do nothing.

As I was saying, match funding is a key issue. The way to achieve it is not along narrow party political lines, but through a collegiate approach. We should forget our political objectives and work together to put a cohesive, cogent case to the Chancellor of the Exchequer for match funding. That is what the Welsh Affairs Committee report does. It is critical, and it has all-party support. We want match funding.

I should have liked the Chancellor of the Exchequer to announce last year, or even in December, in the middle of the comprehensive spending review, that Wales was a special case and that the Government would stop the comprehensive spending review and guarantee the people of Wales objective 1 funding.

Mr. Llwyd

Can the hon. Gentleman confirm that Treasury Ministers were invited to give evidence to the Select Committee but declined?

Mr. Ruane

I am disappointed that they did. I should have preferred them to give evidence. I should have preferred the Chancellor of the Exchequer to announce in the middle of the comprehensive spending review that money for Wales—for the objective 1 regions in the UK—had been guaranteed. The report says that, and I support that view. However, we live in a political world, and if my right hon. Friend had guaranteed Wales that money for objective 1 funding, every other Department in Whitehall would have demanded the same. So that is what I wanted, but it was not to be. It will happen in July.

You have threatened us with all sorts. You have sacked the First Secretary.

Mr. Deputy Speaker

Order. I have threatened no one.

Mr. Ruane

I am sorry, Mr. Deputy Speaker.

Mr. Llwyd

Is the hon. Gentleman aware of the last Budget speech made by the Chancellor in which he departed from the purdah on the comprehensive spending review in no fewer than three instances, saying that extra expenditure would be forthcoming? If he can do it in those cases, why can he not do it for Wales?

Mr. Ruane

The Budget, as the hon. Gentleman knows, is fine tuning for the economy. The comprehensive spending review sets spending patterns for a three-year period. The objective 1 spending pattern is over a nine-year period. We do not need fine tuning; we need a strategic approach for the next nine years. That is why the funding has not been announced.

Mr. Robert Walter (North Dorset)

Will the hon. Gentleman give way?

Mr. Ruane

This is the last time I shall give way—unless it is to one of my hon. Friends, of course.

Mr. Walter

I thank the hon. Gentleman for giving way. I am a little concerned by what he says. Is he suggesting that when we do get the announcement of the comprehensive spending review, the Prime Minister's commitment not to let Wales down may not be fulfilled, and that the money that is necessary for the first three or four years of objective 1 will not be provided?

Mr. Ruane

I take the Prime Minister at his word; I take the Chancellor of the Exchequer at his word. If the money is not delivered, I will be the first to criticise. On the flip side of the coin, I hope that if—or, rather, when—the money is delivered in the comprehensive spending review in July, the Opposition parties will apologise for sacking the First Secretary and for using objective 1 as a political cosh. I will criticise, and I hope that they will apologise, when we have the result in July.

I have concerns about the objective 1 plans for Wales. I have concerns that information has not percolated through to our communities over the past two or three years. Like the hon. Member for Meirionnydd Nant Conwy, I am concerned that the agencies that have paid employees on £25,000 and £30,000 a year will cut the cake before the community projects can get up and running.

In Cornwall, a 27-page full-colour brochure was sent out to all 450,000 households.

Mr. Livsey

Because of the Liberal Democrat council.

Mr. Ruane

The hon. Gentleman's party political point is well taken. However, such action has not been taken in Wales; it has certainly not been taken in Denbighshire and Conwy, which entered the bid late. We have had 40 meetings in Denbighshire on objective 1—people know about it, but there is more to be done.

I am also concerned about something else that the hon. Member for Meirionnydd Nant Conwy said. The procedure for applying for objective 1 bids is not clear to the communities, especially for community projects. What do the application forms look like? We need a general outline—if they are not ready yet, let us look at the sort of things that should be included. What is the line of command? Where is the local responsibility? Will it be too complicated? I believe that there are 32 strands, including strands for the development of tourism, small and medium-sized enterprises, agriculture, and so on.

I am also concerned at the slow pace this year. I hope that, once the comprehensive spending review is announced, and match funding is in place, there will be rapid action. I have been evangelising and enthusing about this in my communities; I have organised numerous events giving information in my constituency. My constituents are expectant—they want results. I want results, and I hope that we will see them soon.

The Committee's report is an excellent document—it is critical, comprehensive and readable. It has strong conclusions. I hope that the Ministers who read it will take the feedback from the Committee and the people of Wales right to the top so that it will influence the Chancellor of the Exchequer when he makes his announcements on the comprehensive spending review in July.

11.39 am
Mr. Martin Caton (Gower)

I want to focus first on the Select Committee's recommendation, in paragraph 12, that the Government and the Assembly, jointly publish a simple but authoritative guide to public expenditure in Wales, setting out in simple terms how both UK and European funding operate in Wales. When I reconsidered the evidence taken by the inquiry, I was reminded what a difficult and painful process it is to get one's head around the whole subject of European structural funds.

Most of that pain and aggravation is unnecessary, however. Yes, the issue is complex; to get on top of it, one has to become familiar with terms such as departmental expenditure limits, PES—public expenditure survey—cover, match funding, additionality, single programme documents and so on, as well as the organisational structures and grant criteria applied under a particular programme. However, one cannot help but wonder whether some smoke and mirrors have not been chucked in to make life even more complicated.

Last October, Jane Hough, of the House of Commons Library, attended an informal briefing of the Committee to try to lighten our path through the structural fund jungle. She provided us with an extremely useful background paper, although she acknowledged that it was not definitive. She pointed out: There is an absence of any substantive explanation of the process either from the Treasury or the territorial departments. I have, however, discussed this matter with an official at the Treasury. While he was unable to add to the notes below, he confirmed that my understanding of the subject was "as accurate as it could be for someone outside the Treasury". I do not know about you, Mr. Deputy Speaker, but those words sound to me like those of the high priest of an obscure cult, protecting the mysteries of the inner sanctum from the common worshipper. That is not good enough. Structural funds are an instrument of public policy and should be open to public scrutiny and democratic influence at every level. It is not merely a matter of producing helpful brochures and booklets to enable individuals or organisations to submit grant applications—although, of course, that is vitally important. Information about how the funds are designed and how they work should be available to anybody who is prepared to undertake a little study. At present, that is not the case. I hope that soon the Assembly and the Government will work together to produce a guide, as we have requested them to do.

The inquiry was the Committee's first attempt to fulfil a liaison and communication function between the National Assembly in Wales and the Government in Whitehall. There are clear responsibilities for both forms of government. Early on, ways were established for the Executives in Whitehall and Cardiff Bay to communicate and to reach decisions. Joined-up government can work between different tiers and in different geographical locations. Many members of the Select Committee hope that we can help to achieve joined-up scrutiny and joined-up accountability by working with the National Assembly on such issues.

We have not yet completed a mechanism to achieve that, but our inquiry did not make too bad a start. We took evidence from the First Secretary and the Chair of the Economic Development Committee in Cardiff, as well as from the Secretary of State.

The focus this morning has understandably been on match funding and public expenditure cover. However, the report made other significant recommendations—on the possibility of advance payments in certain circumstances; on shifting administration of the social fund from the Department for Education and Employment to the National Assembly for Wales; on operating aids—a matter which needs further exploration; and on urging extra funding from the UK Government if it was shown that there were a higher number of claims than were predicted when the allocation was made. The recommendations were all important; they have in part informed the consideration of structural funds at both tiers of government.

There has been a lot of huffing and puffing on spending cover and match funding this morning. That comes over as rather unconvincing theatre. As my hon. Friend the Member for Vale of Clwyd (Mr. Ruane) said, our report made a bid for a commitment to match funding. I certainly support that, although we did so more in hope than in expectation—aware that, in all likelihood, the Welsh block would have to be considered together and as part of the comprehensive spending review.

Mr. Walter

From talking to Commission officials in Brussels, my perception is that, if the money is not additional to the Welsh block, it will not fulfil the requirements of the objective 1 programme. Is the hon. Gentleman aware of that?

Mr. Caton

I do not know what the hon. Gentleman heard in Brussels, but I certainly agree with the spirit of what was said. We need the money to be additional. If the rules permit us to receive it only in that way, I have no problem with that. The money should be additional to the block grant.

We are within weeks of learning what the comprehensive spending review will reveal about Wales. My view of the matter has become firmer over the months; we shall hear a good-news story for Wales. However, the problem is how will the Opposition parties assess whether it is a good-news story? That is why I put my question to the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd). One cannot help but feel that, whatever is announced in the CSR, the day after, we shall hear that the Labour Government have let Wales down again. If Opposition parties do not have a figure in mind—how much they expect in order to provide match funding—when we are within weeks of that announcement, it is most disturbing.

Mr. Livsey

The answer to the hon. Gentleman's question is simple. We know that we need £885 million for match funding from public expenditure. We shall judge—

Mr. Deputy Speaker

Order. I should be much obliged if hon. Members would address the Chair rather than the wallpaper.

Mr. Livsey

Mr. Chairman, I shall never do that again—

Mr. Deputy Speaker

Order. Perhaps I should remind hon. Members that when the House took the decision to adopt this modified form of debate, it also decided that those who regularly occupy the Chair in Westminster Hall were to be addressed as Deputy Speaker. Those to be addressed as Mr. Chairman—or Miss for that matter—would be those who were reserves. I am not a reserve.

Mr. Livsey

I take your comments on board, Mr. Deputy Speaker.

The judgment that has to be made is about whether the Government come up with the amount of match funding required to meet that provided by the EU—as we know that is £885 million. That is surely how the matter should be judged.

Mr. Caton

It is interesting that the hon. Gentleman has not mentioned the fact that match funding for our existing structural fund money has not taken into account the current DFEE payments through the social fund. I am sure that he will enlarge on how he arrived at that figure when he makes his speech.

Mr. Evans

Will the hon. Gentleman tell the Chamber what figure he expects in the announcement, so that we can judge whether the Government were successful or inadequate in their provision?

Mr. Caton

My assessment will be based on the type of formula that I had begun to outline in response to the hon. Member for Brecon and Radnorshire (Mr. Livsey). After taking into account the existing match funding for our present structural funds, and after taking out the money currently controlled by the DFEE—which should eventually be controlled by Wales—the amount should match the remainder. It is as simple as that. I hope the amount will be better than that, and that we shall hear a good announcement about the block grant.

To conclude, Mr. Deputy Speaker—I apologise for my failure to address you correctly earlier—I am sure that there will be a good-news story. When we receive that announcement, we need to get on with the job of exploiting objective 1 in west Wales and the valleys to the benefit of constituencies such as mine, which desperately need it.

11.49 am
Mrs. Betty Williams (Conwy)

I had hoped that we would have had a constructive debate about European structural funds. However, I am sorry to say that, having listened to the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) in particular, it sounds as though the nationalists' campaign continues as it has for the past eight to 10 months. I would like us to work together constructively to put a strong, sound case forward, so that, in a few weeks time, my right hon. Friend the Chancellor of the Exchequer will make a favourable announcement for all the people of Wales and not just one section of society.

My hon. Friend the Member for Vale of Clwyd (Mr. Ruane) referred to the comprehensive spending review. However, we do not receive answers from the nationalists' representatives when we try to pin them down on how much funding they seek. They have mounted a long campaign, but I do not accept that we should expect any Chancellor, Minister or Prime Minister to sign an open-ended cheque to any organisation without knowing exactly what sum we are talking about.

The comprehensive spending review will tell us the Government's plans for the next three years. That must be separated from any Budget announcement, because that is the whole point behind having a comprehensive spending review.

Mr. Llwyd

Did the hon. Lady hear me earlier refer to the fact that the Government departed from that general rule in no fewer than three instances in the latest Budget statement? Furthermore, did she not listen when I said that the Minister for Local Government and the Regions has already given cast-iron assurances via the Treasury to the three English regions now getting objective 1 status?

Mrs. Williams

I am not a Minister, but I am sure that my hon. Friend the Under-Secretary of State for Wales will address that point when he winds up. However, my hon. Friend the Member for Vale of Clwyd attempted to give the hon. Gentleman an answer on that point.

At the height of the nationalist campaign to talk Wales down, prospective applicants raised certain questions. However, Labour Members and the Government were able to persuade those applicants to put packages together. I, as the Member for Conwy, was asked by members of the Federation of Small Businesses, voluntary organisations and local authorities whether it was worth their while to put packages together if they would be disregarded at the end of the day. They had accepted the nationalists' view that the money would not be available. I am confident that, in a few weeks time, we will hear a favourable announcement from my right hon. Friends the Chancellor of the Exchequer and the Prime Minister and that they will not let Wales down. It is wrong for any politician to consider this issue only in a political sense when the rest of us sincerely feel that the whole nation should be considered when we make our case to Government for match funding and for additional resources for Wales.

My hon. Friend the Member for Gower (Mr. Caton) referred to paragraph 12. The absence of a simple guide has left the door wide open for opposition parties to make use of the fact that people are unclear as to what additionality and match funding actually means. The opposition parties have grasped that opportunity and made the most of it in their 10-month campaign.

We must now persuade Government that the need for the funding exists. I refer to a meeting that we had at the Welsh Office some time ago at which the hon. Member for Meirionnydd Nant Conwy was present. We tried to persuade Government that Conwy and Denbighshire should be included on the map for objective 1 status. We succeeded in doing that, and the Prime Minister then succeeded in his attempt when he spoke on behalf of the United Kingdom later that year.

We need to work together on this at the last minute before the announcement is made. We need to persuade the Prime Minister, the Cabinet and the Chancellor that Wales deserves additional resources so that we can consider closely all the packages and projects that have been prepared in the past few months. I am confident that my right hon. Friends the Prime Minister and the Chancellor will not let Wales down and that we shall have a favourable announcement shortly.

11.54 am
Mr. Richard Livsey (Brecon and Radnorshire)

The Welsh Affairs Committee has produced an important report. It is important because it is an all-party report and it was well received, not least by Members of the National Assembly, as an effective contribution to the debate and to ensuring that Wales receives a fair deal.

The report primarily deals with objective 1 funding and, in particular, with the raising of public expenditure for match funding. It highlights the importance of advance payments and it asks for a clear and early commitment for full public sector funding. We identified the amount of match funding that is required, and I referred to that figure earlier. We also asked for the exemption of structural funds from the operation of the Barnett formula and for funds for European social fund payments to be transferred from the Department for Education and Employment to the National Assembly. That is an important issue. We also want to ensure that private sector match funding is adequate.

We also asked what new structures for overseeing and monitoring plans after the wind-up of the Welsh Office task force will apply. I am sure that hon. Members will remember that we were critical of the way in which the task force was wound up, because that caused a significant delay to objective 2 plans which cover 9 per cent. of the population of Wales.

We also asked for a renegotiation of the objective 2 map, but that has not occurred. The answer that we received in the Government's response about additional public expenditure survey cover was to wait for the comprehensive spending review. That is a case of jam tomorrow and I believe that it is strongly connected with the next general election campaign. It demonstrates the iron grip by an iron Chancellor on such information. However, as has already been pointed out, he was prepared to make three exceptions only the other day.

I wish to deal in particular with the problems confronting objective 2, because much has already been said about objective 1. First, I congratulate the East Wales Partnership, which produced a single programming document that has already received approval from the European Commission. Although it still has to go over several internal hurdles, it has been approved in principle as a result of much hard work by civil servants in the National Assembly and by councils within the partnership, driven, not least, by my county council in Powys.

What worries us in particular is that there appear to be inadequate numbers of staff in the National Assembly to deal with the programming document. I understand that every expectation was given that the document would be in place and ready to go by November or December of this year. However, we found out only yesterday that the process has been delayed to March or April of 2001. The right hon. Member for Wokingham (Mr. Redwood) slashed the number of staff in the then Welsh Office and that has contributed to the delay. None the less, why cannot consultants or competent members of county councils be drafted in to speed up the process? The delay has slowed everything down. When I was in America with the Welsh Affairs Committee last week, I saw a fast-food restaurant called Mr. D. De-lay!, but the only problem was that it had been shut down and looked decrepit. That is what could happen to objective 2. The problem is serious.

The English regions have already had approval for objective 2 and that will be effective from 1 January. As of yesterday, we understand that objective 2 will not be effective in Wales until a starting date of 26 May and we must remember that the money is disbursed by the "M plus 2" rule. In other words, the money must be spent within two years. The position is therefore very unsatisfactory.

To achieve objective 2 status, we need £80 million of match funding against a contribution of £50 million from the European Union. The programme is extremely important. In my own area of Powys, the gross domestic product in 1995 was 76 per cent., of the average, which is only 1 per cent. over the 75 per cent. qualifying threshold for objective 1. It is now well below that threshold, even though we are receiving objective 2 funding, which concentrates on 60 per cent. of business development, entrepreneurship initiatives, help for small and medium enterprises and growing indigenous businesses, all of which are vital to our local economy.

I draw the Chamber's attention to a report produced last week by the Alliance for Regional Aid which addresses the problem of additionality that we discussed this morning. The report highlights the fact that additionality does not apply so much in England because of the Barnett formula. It says that the Treasury does not allow public expenditure to rise in Wales, but should do so. That is a huge issue. Indeed, the report proposes a matching finance fund. It states that there are two problems, the first of which concerns the additionality of EU grants. This is about the public expenditure cover for the grants themselves. At the present time additionality is primarily a problem in Wales— in the context of a comparison with what is happening in England— where the fixed public expenditure total has not been adjusted to reflect the extra money coming as a result of Objective 1 status. The net effect is therefore that extra EU grants in Wales threaten to displace an equivalent amount of other Welsh public expenditure—on schools, hospitals, social services etc. That point cannot be made often enough. The report goes on to recommend a way of ensuring additionality and states: One way of averting the immediate problem of non-additionality in Wales would be for the Treasury to allow Welsh public expenditure to rise by the value of the additional grants coming from the EU. That way, the extra grants would no longer displace other Welsh public expenditure. The disadvantage of this one-off solution is that it is likely to provoke a reaction from other areas. A better way forward is to provide Wales with the extra spending it needs but within a framework that treats all EU grants equally and provides fairness for all parts of the UK. There are two simple ways in which this could be done. The first way is to take all EU regional grants right out of departmental spending totals. The second way is to give automatic extra spending consents, equal to the value of the grants to bodies in receipt of EU funding. That is common sense and should be done. We expect it to be included in the comprehensive spending review; indeed, we should have had this information far sooner.

12.3 pm

Mr. Nigel Evans (Ribble Valley)

First, I welcome the fact that we are having this debate. I have read the report and I congratulate the Welsh Affairs Committee on its comprehensive work.

The subject of objective 1 status is vital to the vast majority of Wales. As the map shows, whole swathes of Wales will now be covered by objective 1 status. We recognise that there are pockets of deprivation, even in those parts of Wales that are not covered by objective 1 status. It is therefore important that we do what we can to get this money through to the most deprived and disadvantaged areas of Wales as quickly as possible.

We have already given money in connection with these European funds. We are net contributors to the European Union and, as we are getting back our own money, the matter is doubly urgent. I agree with much, if not all, of what the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) said.

Mr. Evans

It is just as well that the hon. Gentleman is not running for his party leadership, as that might have been a critical blow to his campaign.

Mr. Llwyd

It would have been fatal.

Mr. Evans

What the hon. Gentleman said was important. Criticism of the Government is useful when their actions are wrong. There is nothing improper about such criticism. Indeed, in the first five years of my being a Member of Parliament, I was critical, both publicly and privately, of my Government when they did things that were wrong.

Mr. Ruane

Name the issues.

Mr. Deputy Speaker (Mr. Nicholas Winterton)


Mr. Evans

There is nothing wrong in being critical when things are going wrong. Indeed, it is a strength to be critical of one's own Government. Similarly, we are not talking Wales down when we discuss deprived and disadvantaged areas, but are recognising problems that need to be recognised.

We have already heard a little about the fast-tracking of some bids that have come through in the first year. I was led to believe that any local authority that came forward with such projects would be match funded within the first year. We heard that £25 million would be made available, but were then told that the authorities could look at only one project in each area. Caerphilly has 90 projects; Blaenau Gwent has 40; Swansea has 20; Carmarthenshire has 10, and Gwynedd has seven. However, those areas will now have to reduce their projects to one each. If objective 1 is to be important for such areas, surely all the projects that have come forward should be examined. One should not just say that £25 million will be sufficient in the first year, as clearly it is not. I accept that the First Secretary is busy, as he is also a Member of Parliament and, I understand, has four jobs. The problem may be that he cannot give the necessary time and attention to objective 1 funding. Perhaps that should be re-examined.

I sat on the Standing Committee that considered the Bill that became the National Lottery etc. Act 1993. The Committee was told that lottery funding would all be additional funding, and we have heard the term "additionality" being used. However, it seems that some of that money will go into funds that the Government would normally provide. Again, we learn that we must wait for the comprehensive spending review. Is that a smokescreen? Going back to the subject of the lottery, it seems that the dome can ask for as much money as it likes. Cheques are written there and then as it needs the money straight away. Yet, whenever Wales asks for money, it has to wait for the comprehensive spending review. It seems that if Wales is now playing second fiddle to a failing theme park in Greenwich.

Mr. Ruane

Is the hon. Gentleman seriously suggesting that match funding should come from the lottery?

Mr. Evans

As I understand it, the Government have said that they are seriously considering using lottery funding, which will be part of the match funding to win funds from Europe. If the hon. Gentleman is critical of that and wants to intervene again, it would be breath of fresh air to hear him criticise his Government on anything. The lottery and lottery funding will be vital in gaining funds from the European Union.

Time and again, the Government use the comprehensive spending review as a barrier to prevent those funds getting through. Yet the dome can use lottery funds and goes back, cap in hand, time and again, and there does not seem to be any problem with that. The funding of £1.2 billion will be critical to parts of Wales and may be the last of its kind. As has already been said, several eastern European countries want to join the European Union and some of them are very poor indeed. I do not doubt that they will seek large cohesion funds from the EU to assist them with their problems.

Mr. Ruane

As a representative of the Conservative party, does the hon. Gentleman take credit for taking Wales from mid-table to the bottom of the league? We got objective 1 funding because we were at the bottom of the league for the whole of Europe.

Mr. Evans

That is a typical tactic by the hon. Gentleman, who is not prepared to address the problems of whether the Government will guarantee match funding, which we are here today to discuss. He just looks back at the past, and he must recognise that the Conservative Government did a great deal for Wales over 18 years, but, in 1997, despite the fact that more than 300,000 people in Wales voted for us, we paid a price. We are listening, and it is about time that the hon. Gentleman started listening to what people in his heartlands in Wales are saying. He should look at the results in the European, local government and Assembly elections, because the people in Wales are shouting, and he is refusing to listen.

Mr. Ruane

I am listening.

Mr. Deputy Speaker

Order. I enjoy and encourage interventions, but they should be interventions to which the hon. Member has given way. I deplore sedentary interventions that interrupt the flow of the debate.

Mr. Evans

As ever, Mr. Deputy Speaker, I am grateful for your protection.

The £1.2 billion will be vital to Wales, but what has been achieved so far? We are six months into the programme, and not a single project has got off the ground. All that we have had is the scalp of the First Secretary for Wales, and I will not let Plaid Cymru take all the credit for that because the support of all the opposition parties in the Assembly was necessary.

Mr. Llwyd

May I assist the hon. Gentleman by pointing out that half of the Labour Members of the Assembly wanted to get rid of the First Secretary as well?

Mr. Evans

I am looking forward to reading autobiographies as they emerge. Perhaps we will then get the full story of exactly what happened on that day; it could not have been only the Prime Minister who did not know what was going on.

I am concerned that projects could be lost. We do not know whether any have been lost to date. We know that a firm in Ceredigion in west Wales said that it was looking for objective 1 funding so that it could expand. We have to accept that inward investment into Wales might now go somewhere else. It has been suggested that the investment might go to England, but, with the European Union single market, it could go to Germany, France, Spain or Portugal. I cannot imagine Germany, France or Ireland—which has done very well out of the EU—hiding behind their comprehensive spending review and failing to get EU money.

The single programming document was sent to Brussels and criticised roundly by the European Union, and by businesses and by local authorities, because of the lack of guidelines that the hon. Member for Gower (Mr. Caton) has mentioned. In January, it emerged that the European Commission had been critical of the way in which Wales had handled its bid for objective 1 funding. It stated that the bid was flawed in several ways, including a lack of vision and innovation, a weak sense of ownership of the programme by some of the partners, and the barrier caused by match funding.

The Commission said that the weaknesses of the submission were more comprehensive than the strengths. It concluded that the Commission needs to be satisfied that future financial resources will be available to provide public funding for the whole programme and cannot be satisfied that this will simply be reviewed in the forthcoming CSR. The Commission has made the same criticism as we have.

Mr. Livsey

By contrast, will the hon. Gentleman congratulate the East Wales partnership, which was not criticised? Its single programming document was accepted, but it is subject to even greater delay. We wonder whether some of the match funding due to go to objective 2 areas may, as a result, find its way into objective 1 areas, and that may be a reason for the delay.

Mr. Evans

Of course I accept that, but we are all keen to make sure that the funding comes through as soon as possible for all the regions of Wales, so it must be tackled as a matter of urgency. The Prime Minister said that he would not let Wales down. He said, "Trust me, I'm Tony," but we are still waiting. We have to ask why Wales is being let down. The Government state that this summer they will publish a clear, simple guide to the funding policy, and we look forward to that.

As many hon. Members know, I have a business in Swansea which I am expanding at the moment. When I borrowed funds for that, I was told, "And here is £500 from the European investment bank." I did not ask for that and it was not critical to my investment, but of course I am grateful for it. There are many areas in which such funds are available, and in many cases they may be critical to investment by a business. It would be extremely useful if the Government produced guidelines in simple language so that people knew exactly what funds were available and what projects they might be able to develop to get EU funding.

Mr. Caton

Do I take it from what the hon. Gentleman is saying that a Labour Government are good news for the economy of Townhill?

Mr. Evans

No, but I can tell the hon. Gentleman that the Evans family are good news for the economy of Townhill.

Perhaps the Minister will tell the Chamber when those guidelines will be published.

We know that the Chancellor of the Exchequer has a war chest, and we are all wondering what he is going to do with it and when he is going to spend it, but some areas of Wales are deprived now and they are asking for that money. The Chancellor is getting £22 billion for mobile phone licences, and people in Wales are wondering why they have to wait for the comprehensive spending review.

The Select Committee report is critical of the involvement of small businesses. The Federation of Small Businesses made several comments to the Committee. Will the Government re-examine that involvement, because it is the small businesses in Wales that will create new jobs, as they did in the 1980s?

The report says that the Committee will continue to monitor the situation of objective 1 funding, and I welcome that and wish it well. I hope that lessons will be learned for the future. Although it will be several years before we find out how much of the £1.2 billion will be taken up, will the Minister tell the Chamber exactly what percentage he believes will be taken up?

Paragraph 20 of the report says that the "trust us" approach is not enough, and I agree. The Government are all spin and no delivery, and style and no substance. They have gimmicks galore, but the people of Wales will not be fooled and will not forgive them if they do not stop the spin and deliver where Wales needs it most, in its deprived and disadvantaged areas.

12.17 pm
The Parliamentary Under-Secretary of State for Wales (Mr. David Hanson)

Anyone who had arrived from the planet Zog and listened to this debate would think that objective 1 was a bad news story for Wales. I state categorically that it is a good news story for Wales, whatever criticisms have been made this morning about a range of issues, in the report and by hon. Members. Wales will benefit from objective 1 and, with the Government, will maximise that benefit. I shall try to respond to all the points that have been made, but I hope that hon. Members accept that the Government are acting in good faith on objective 1.

This is the first time that a Welsh Affairs Committee report has been debated in Westminster Hall, and I welcome the contributions that have been made and the partnership approach that the Committee has taken in discussions with the National Assembly. I welcome also the work of the staff in producing the report, which is comprehensive. We have had an enjoyable and interesting debate, which has strayed into party political issues.

Mr. Llwyd

How strange.

Mr. Hanson

Well, the report was consensual, and the debate has strayed into party political points to which I shall respond accordingly.

It is important to say at the outset that Europe matters to Britain and to Wales. Over 50 per cent. of our trade in goods and services is with the European Community; one seventh of all UK income and production and millions of jobs depend on sales to EU countries, and Wales is home to many mainland European businesses. The EU's 380 million consumers make it one of the largest and richest markets in the world.

The Government are pro-Europe, but it is not all about the market or working with our colleagues in Europe—there is also a common social objective. It is through the European social partnership and structural funds that we can make progress on achieving our common aim of reforming and modernising Wales. The voluntary and private sectors have an important role to play in Wales to make sure that we can look outwards to the UK, European and global economies.

The hon. Member for Ribble Valley (Mr. Evans) is slightly out of tune with the shadow Chief Secretary, the right hon. Member for Wells (Mr. Heathcoat-Amory), who does not believe that structural funds are of value. However, the Government believe that European structural funds provide a real and tangible benefit to the people of Wales and to our membership of the EU. They are of particular significance to Wales.

As my hon. Friend the Member for Vale of Clwyd (Mr. Ruane) said, my right hon. Friends the Prime Minister and the Chancellor negotiated through the night at Berlin to reach agreement on the eligibility rules across the EU for objective 1, so that Wales can benefit from objective 1 status. That is why west Wales and the valleys have been designated as an objective 1 area and allocated 1.85 billion euro in the seven years 2000–06. The Government are committed to the receipt of structural funds and taking the issue forward.

As hon. Members have said, objective 1 covers areas that have less than 75 per cent. of average EU per capita gross domestic product and is intended to stimulate proper economic growth, enabling Wales to catch up. Given the political nature of the discussion, I have to say that the hon. Member for Ribble Valley has a bit of a brass neck to say that objective 1 is an important issue when the Government have been able to secure objective 1 partly because we have had to return to the EU and raise the Conservative Government's failures; they increased deprivation and the disparity between wealth and prosperity in Wales.

It is vital that such a huge injection of money is spent wisely and that the priorities correspond to the real needs of all the different sectors of the Welsh population. The EU resources must go where the real need lies, not just to established projects, partners and bidders for money. The widest possible partnership is needed, involving all sectors with an interest, from the National Assembly to the United Kingdom Government and the organisations on the ground. The rejuvenation of the economy of west Wales and the valleys is a vast and worthy task, and we must show that we are up to the job.

My hon. Friends the Members for Gower (Mr. Caton) and for Conwy (Mrs. Williams) and the hon. Member for Ribble Valley asked whether the Government would produce, with the Assembly, a report and authoritative guide on the European process. We shall produce an updated version of the statement for funding policy that was first published in March 1999. It will be published in the summer, shortly after the comprehensive spending review reports. I hope that it will help to clarify precisely the roles and responsibilities of the National Assembly and the Government.

The Welsh Affairs Committee report on European structural funds clearly shows the seriousness that it attaches to the matter, which I welcome. Objective 1 is immensely important to Wales and, as hon. Members have said, represents a once-in-a-lifetime opportunity. As the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) has said, the enlargement of the EU before the next structural funds round means that this will almost certainly be the last chance for Wales to receive the economic boost that objective 1 funding will bring. That is why the Government are committed to grasping this opportunity firmly and ensuring that it makes a real and lasting difference to Wales.

The report was thorough, comprehensive and raised several serious and important matters. My right hon. Friend the Secretary of State and I particularly welcome the recommendation on the importance of making the objective 1 programme a success in Wales. As my hon. Friend the Member for Vale of Clwyd clearly said, it is imperative that we move the debate on from funding and consider how to use the money. Hon. Members understand where we are coming from; we have explained the position many times. We have a commitment from Brussels, and the Government are committed to examining the issue in the comprehensive spending review. My right hon. Friend the Prime Minister has clearly and publicly said in Wales and in Parliament that he will not let down Wales. It is important hon. Members take that commitment in the good faith that my right hon. Friend gave it and in which I repeat it today. We await the outcome of the comprehensive spending review shortly so that we can consider how to use the money and resources to transform the Welsh economy.

Mr. Walter

Before the Minister moves on, several questions have been asked about funding, but I am not sure that we have heard any answers. Why is it necessary to negotiate something to which the Government have allegedly agreed? Will those funds be in addition to the Welsh block grant?

Mr. Hanson

As the hon. Gentleman will know, the Welsh block grant, objective 1 funding, additionality and other issues will be considered in the comprehensive spending review. It is important to take the Government in good faith and to await that announcement in due course. Hon. Members have understood that to be the position for many months and have continued to ask those questions—it is their legitimate right to do so.

Mr. Llwyd

If it is clear that, following the CSR, the Chancellor will commit £60 million in additional funding to Wales, together with £190 million direct from Brussels without taking any money away, that good faith will have been well invested.

Mr. Hanson

I take the hon. Gentleman's point. The CSR is due shortly. The Government's decision to include objective 1 funding in the current spending review does not put programmes at risk in any way. The hon. Member for Ribble Valley said that programmes and projects are threatened, and other hon. Members have made similar points, but projects cannot be brought forward in Wales until the Commission has approved the plans. The plans will not be approved until next week at the earliest, so no project has been approved or can be supported.

The hon. Member for Meirionnydd Nant Conwy, among others, mentioned retrospective payments. It is difficult—in fact, nigh impossible—to approve payments that have been made already on potential projects, because the Commission has not approved the plans. Some hon. Members have spoken about projects not being brought forward or allowed, but that is tosh because, to date, the document has not been approved and, therefore, the Government are as yet unable to consider it.

Mr. Livsey

Will the Minister give way?

Mr. Hanson

Time is pressing.

Mr. Livsey

What about objective 2?

Mr. Hanson

I must deal with the points that have been made.

As hon. Members will know, the spending review is a thorough, on-going examination of all Government spending plans. In those circumstances, it is wrong to try to separate one aspect of Welsh funding from the others. European structural funding is not new to the United Kingdom; it is well known. The comprehensive spending review constitutes the normal procedure for reviewing the spending needs of Wales and all Departments, including those for structural funds. My right hon. Friend the Chief Secretary to the Treasury has recognised that objective 1 is new to Wales and that that has to be considered in the current spending round.

When the objective 1 plan has been approved in Brussels, which is imminent, we will have a strategic framework in place. At that point, the Assembly will be able to draw down the payment on account and then submit claims to the Commission to reimburse payments that have made on account. That money will go straight to the Assembly, without delay. Britain would be in breach of the Commission's regulations if that did not happen. From then on, the success of objective 1 will be driven by the excellence of the projects and packages proposed for funding. The vision and local ownership of proposals produced by the Welsh partnership, tailored to meet Welsh needs, will be fundamental elements.

I give a clear commitment that the outcome of the spending review will be announced before the end of next month. It will include overall spending limits for Departments and the Assembly, as well as the other devolved administrations. I cannot pre-empt that announcement—as hon. Members would expect, negotiations are still continuing—but spending limits will be set from April 2001.

It is time to look ahead. We must consider what we must achieve for Wales—promoting community regeneration, employment and developing a competitive environment for business, a learning society and the sustainable use of natural resources. That involves a step change for Wales, and we shall use objective 1 funding to help to make that step change. We need to get on with that job.

The Welsh Affairs Committee report is welcome. Considerable allegations have been made and concerns have been expressed today, but I hope that the Government's intentions will be taken in good faith. The Labour Government have negotiated and achieved objective 1, and we shall deliver it for Wales when the time comes.

Mr. Deputy Speaker

I congratulate the Minister on responding in the time available. We now come to the next debate.