§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)My right honourable friend the Minister of State for Industry and the Regions (Jacqui Smith) has made the following Written Ministerial Statement.
The European Commission has published proposals for amending the guidelines that govern regional state aid (which define assisted areas and aid intensities allowed within them) for the period 1 January 2007 to 31 December 2013 and is seeking member states' views on its proposals. My department will shortly be issuing a consultation document seeking the views of all interested parties on the Commission's proposals.
The Government remain committed to improving prosperity in all regions of the UK and to reducing the gaps in growth rates between the regions and have introduced a range of measures to address regional disadvantage, such as measures to promote training to ensure that people in the region have the skill; to fulfil the region's long-term economic strategy and to deal with the consequences of industrial change and measures to promote urban and rural regeneration.
The Government believe that funding at EU level—the structural funds—should go to the poorest member states, where it will add most value. As these economies grow, so will prospects for UK exporters. The expansion of the EU will create a market of 450 million customers 21WS opening up opportunities for commercial activity for businesses in every region. However, the Government consider that richer member states should have more scope to use their own funds to tackle the causes of underperformance.
The Commission explains that its objectives in reviewing the regional aid guidelines are to tackle market failures, promote entrepreneurship and ensure less and better targeted state aid. The Commission's aim is to allow a better concentration of regional aid to investment in the least favoured member states and regions, while increasing the flexibility for other member states and regions to pursue local development policies that address specific regional problems or opportunities. The Commission proposals would reduce the areas in which regional aid can be provided in nearly all of the longer-standing member states, including the UK. The levels of aid that could be given would also be reduced. Its proposals would at the same time increase levels of aid for capital investment allowed to small and medium sized firms outside the assisted areas. Plans to provide a completely new instrument permitting quicker approval of certain types of aid considered to be less distorting would also introduce greater flexibility to provide lower levels of aid outside the assisted areas. Further reviews of other state aid guidelines, such as those permitting aid for research and development, are planned.
The Government support an effective state aid regime, since state aid can distort competition between firms, which can, in turn, limit business performance, prosperity, and quality for consumers. An effective state aid regime helps to create a level playing field for business across the EU. At the same time, the state aid regime needs to be flexible and governments must be able to tackle the causes of underperformance where they arise.
As already noted, investment aid is only one way in which the Government work with business in the regions; most business support schemes do not depend on the regional aid guidelines.
The horizontal rules on aid for SMEs, research and development, environmental aid, training and employment aid, risk and venture capital will continue to allow aid to be granted anywhere post-2006. The Commission has indicated that it is open to further proposals from member states in terms of greater flexibility under these "horizontal guidelines" and the consultation document seeks views on this issue.
Regional aid nevertheless remains an important tool. The Government therefore want to ensure that under the new regional aid guidelines, regional aid can still be granted in the areas where it is most needed to help to address regional disparities and local deprivation. The present proposals from the Commission do not deliver this effectively as they do not adequately allow for disparities within regions, given that poor areas exist side by side with rich areas. The consultation document therefore seeks views on potential alternative methods for determining the assisted areas; aid intensity levels allowed within them; and how best to provide for a suitable level of flexibility to give aid outside the assisted areas where it is needed.
22WSThe Commission has asked for member states' comments by 1 July. However, the Government expect to continue discussions with the Commission on this issue into the Autumn. The Government's consultation document therefore requests responses by Monday 6 September 2004 but notes that if it is possible for respondents to provide early responses (or initial comments) by Monday 28 June 2004 these will help inform the Government's formal response to the Commission proposals in July.
Copies of the full consultation document will be placed in the Libraries of the House and will also be available on the DTI website at www.dti.gov.uk/ewt/stateaid.pdf and at www.dti. gov.uk/consultations/ stateaid.pdf