John Healey (Wentworth and Dearne) (Lab)
These end of day Adjournment debates are normally confined to the Member, the Minister and, of course, you, Mr Speaker. The Minister will note the strong presence of my Labour colleagues tonight, especially from South Yorkshire, but also from Merseyside, which I welcome. All the points of concern and criticism about Barnsley and Rotherham, and our position in relation to the new European Union funding, apply equally across South Yorkshire, the Sheffield city region and the Liverpool city region. In our area, and for the rest of South Yorkshire and for Merseyside, we face cutbacks in European funding that are much more severe even than our worst fears—massively deeper than in any other area in the UK.
The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)
indicated dissent.
John Healey
It is no good the Minister shaking his head, because we face a cliff-edge cut in the funding for the new European funding period as compared with the previous ones. The European funds are designed to give a boost to the economy of flagging regions. I have to say that it is an outrage that areas of the UK with more wealth, more jobs, more business and more prosperity are also getting more European funding in the period ahead.
Let me tell the Minister that it aggravates our anger to learn that the major factor in this unfair distribution and the cuts that our areas will uniquely take is the Government’s plan to direct top-up funds from South Yorkshire and Merseyside in order to support Scotland, Wales and Northern Ireland—to limit their losses to 5% when we face cuts of more than 50% in our funding for the next period. There is no logic and no equity in that and we have seen no effort to be even-handed.
Paul Blomfield (Sheffield Central) (Lab)
I am sure that my right hon. Friend will share my incredulity at seeing the Minister sitting there shaking his head. Will he note, as I do, that the chairman of the Sheffield City Region local enterprise partnership—the Government look to local enterprise partnerships to provide business leadership—would disagree vehemently with the Minister, because he has pointed out that our arguments have been ignored and that our EU funding allocation has been cut by about a half?
John Healey
My hon. Friend is right to voice the view from the chairman of a local enterprise partnership, which has been echoed by the Liverpool City Region’s LEP. Both are concerned that the potential for boosting our economies will be lost in Barnsley and Rotherham, as in our other two city regions.
Steve Rotheram (Liverpool, Walton) (Lab)
In his usual eloquent manner, my right hon. Friend makes a good point about the unfairness. Can he see any rationale to justify how the Government have gone about allocating this European funding?
John Healey
No. My hon. Friend is right; I was saying that these decisions defy equity and logic, and there appears to be no attempt to be even-handed in the allocation of this funding.
Michael Fallon
The right hon. Gentleman says that we are defying logic. Is he seriously suggesting, given the wealth of his region at 84.6% of gross domestic product, that South Yorkshire should be entitled to more funding than Shropshire and Staffordshire, Merseyside, Lincolnshire, Tees Valley and Durham, all of which are poorer than the South Yorkshire region? Where is the logic in that?
John Healey
The Minister will have a chance to respond in full, but he is perfectly aware—I have had meetings with him and written to him on this point—that the comparison I make is regarding the special protection put in place for Scotland, Wales and Northern Ireland. Scotland has a GDP higher than that of South Yorkshire, Northern Ireland has a GDP higher than that of South Yorkshire and Wales has a GDP roughly on the same level. That is not fair, and it does not make good policy sense.
Jim Shannon (Strangford) (DUP)
I thank the right hon. Gentleman for bringing this very important issue before the House for consideration. Obviously, as an MP for Northern Ireland, I am concerned that Northern Ireland receives its full share. Unemployment is higher, youth unemployment is higher and job opportunities are even scarcer than in other parts of the United Kingdom. Does the right hon. Gentleman want to see the same opportunity given to Rotherham and Barnsley as has been given to Northern Ireland?
John Healey
Indeed. The hon. Gentleman sums up my full argument in a nutshell, and I am grateful to him for that.
Mr Watts
Is not the key point that the Government have taken money from some poor parts of the country and given it to other poor parts of the country? If we look at Cheshire and Warrington, for example, although its GDP is at 119%, it will get £157 compared with Sheffield’s figure, which is less, and Merseyside’s, which is less. How can it be right for a more affluent area to get more funding per person than some of the most deprived parts of Britain?
John Healey
Over the last year, my hon. Friend and I have campaigned for special transition region status for the purposes of the new European funding programme, and have tried to persuade the Minister of the case. My hon. Friend has anticipated some of the points that I shall be making later, which lie at the heart of the problem. I want to deal with the facts, the fix and the future. I want the Minister to confirm the facts, explain the fix, and pledge to make good the funding of our areas for the future.
Let me begin with the facts. As the Minister knows, I welcome the commitment to the European regional development fund and the European social fund as part of a European budget settlement that represents the first-ever real-terms cut overall. I welcome the inclusion of transition region status for ERDF purposes, although the Government held out against it until the final agreement. I welcome, in particular, the Minister’s commitment in his statement on 27 June to a local rather than a central programme, with decision-making powers in local areas. I also welcome the decision to enable European funds to take their place as part of the strategic plans of the local enterprise partnerships.
We know how to use European funding in South Yorkshire, we know how to use it well, and we have firm plans for its use in the future. The advanced manufacturing park on the edge of Rotherham would not be there without support from European funding, and the nuclear advanced manufacturing research centre and the knowledge transfer centre in Rotherham would not be there without £15 million from the ERDF. We have plans for the future. We can put the money to good use, and that will include support for the city deal and for 4,000 extra apprenticeships throughout South Yorkshire.
However, whereas our current seven-year programme of funding from the European Union is worth is worth more than €400 million in South Yorkshire alone, the new seven-year funding programme will provide €203 million, not just for South Yorkshire but for the five north Nottingham and north Derbyshire districts as part of the Sheffield city region. As was pointed out by my hon. Friend the Member for St Helens North (Mr Watts), that is about €117 per head in an area with a population of nearly 1.8 million and a GDP that is 84% of the European average. It represents a cut of more than 50% in South Yorkshire’s funding for the current seven-year period.
Ours is one of the 11 transition regions in the United Kingdom. That means that our GDP is between 75% and 90% of the European average. Which economies have been earmarked for extra funding to boost jobs, skills and businesses? All the more developed regions have a GDP of at least 90%, and nine of them will receive more, not less, funding than the Sheffield city region. They include Worcestershire, Leicestershire and, as my hon. Friend said, Cheshire and Warrington. Cheshire and Warrington has not a GDP of 84% like South Yorkshire but a GDP of 119%, and will receive EU funding of not €117 a head like South Yorkshire, but €157 a head.
Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)
Will my right hon. Friend give way?
Mr Blunkett
I am very grateful to my right hon. Friend, and I congratulate him on the work that he has done on this issue.
The purpose of objective 1 was to recognise levels of deprivation, and the purpose of the transitional arrangements was to recognise what had been invested and how the work needed to be done. Was it not an insult to the people of our communities for the Minister to use Shropshire as a comparator? I went to school in Shropshire, on the border of Wales, and I know the area very well. The notion that a comparison between Shropshire and South Yorkshire, North-East Derbyshire and Nottinghamshire can be anything but a gerrymander is palpably absurd. We should ask why this is being done, and what the objective is. A cynic would obviously ask about Cheshire—as my hon. Friend has just done—given the nature of the constituencies there and the nature of the Chancellor.
John Healey
My right hon. Friend makes a full point. He is right. This decision is unfair and unjustifiable and undermines the very purpose of the European funds.
To develop my right hon. Friend’s point, let me turn from the facts to the fix. Three months ago, out of the blue, the Minister announced on 26 March:
“EU Structural Funds are important for supporting economic activity. The EU formula would have seen several areas in most need of funds lose out, so we have taken the decision to correct that.”
He also said that
“the UK government has decided to re-allocate EU Structural Funds to minimise the impact of sudden and significant cutbacks in Northern Ireland, Scotland and Wales.
This decision means that each Administration is only subject to an equal percentage cut of around 5 per cent in funding compared to 2007-13 levels.”
It seems that no one in government was there to speak up for England when these deals were done for the devolved regions. There is one pot of European funding for the period, so England must pay to protect the other UK nations. Ministers are ripping funds away from South Yorkshire and from Merseyside to top up Scotland and Northern Ireland, where GDP is higher, and Wales, where GDP is at a similar level.
Let me illustrate the point about the deep flaws and unfairnesses of this decision with the highlands and islands of Scotland. The highlands and islands is an ex-objective 1 area, like South Yorkshire. It is a current phasing status area, like South Yorkshire. It has a GDP of 84%, like South Yorkshire. It will have transition region status, like South Yorkshire, but unlike South Yorkshire its funding will not be €117 per head. It will not even be €147 per head, as in Merseyside. It will be €741 per head. Its economic status is similar but it will have over six times more funding for every man, woman and child in the highlands and islands. The Chief Secretary has clearly been doing his job for his area. What has the Deputy Prime Minister been doing for our area? This is Forgemasters mark II. There has been no evidence of concern, and certainly no evidence of influence from the Deputy Prime Minister when this critical decision for Sheffield city region was taken. He is standing up while the Government blatantly make bad and damaging decisions for our area in South Yorkshire.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
Will my right hon. Friend give way?
John Healey
If my hon. Friend will forgive me, I have been generous in giving way and I am running out of time.
I turn to the Minister’s position on this matter. He kindly wrote to me a couple of weeks ago to try to justify the anticipated announcement of the deep cuts in South Yorkshire. He said in the letter on 19 June:
“In the case of Merseyside and South Yorkshire, current EU Structural Funds are gradually reducing from 2007 to 2011, due to their relative rise in prosperity…Their funding has been a taper…For 2014-20 it is therefore not envisaged that either of these regions will enjoy special status…especially as these two regions are no longer amongst the poorest of the English Transition regions.”
I want to say three things to the Minister. First, the relative rise in prosperity in South Yorkshire anticipated at the start of the period has not happened as we were hit harder than many other areas by the global financial crisis and the austerity-driven downturn after 2010. Secondly, the profile of the spend each year during the seven-year period has been broadly equal and not sharply declining towards the end of the period. Thirdly, unfortunately, it remains the case that only three regions in the UK are poorer than Merseyside and only four regions, including Merseyside, are poorer than South Yorkshire. I hate making the case in those terms because I want to talk about the new businesses, the jobs programmes, the skills base, the investment plans and the economic potential of our area, but that is the argument that the Government are using, so that is the argument that I must counter.
Finally, let me turn to the written ministerial statement confirming these allocations for England issued on 27 June. At the end of the statement, it says:
“All allocations are subject to final agreement on the EU regulations and the EU 2014-2020 Budget in the European Parliament. The European Commission will also need to agree the UK Government’s specific proposals.”—[Official Report, 27 June 2013; Vol. 565, c. 9WS.]
I have to say to the Minister that seeing UK regions with a level of prosperity so much higher than ours getting so much more than ours seems to me to ride roughshod over the purpose of the EU budget agreement. That is why I and my hon. Friend the Member for St Helens North have written to Commissioner Hahn asking him to take a hard look at the UK’s decisions and whether they breach the intention of the EU’s allocation policy and formula, and our MEPs, Linda McAvan and Arlene McCarthy, have done the same. There must be a strong case for a judicial review, which I know is also being seriously considered. Although I say to the Minister that we have no wish to hold up the allocation of these funds, as all our areas can put these funds to very good use, we have to fight for funding that treats all our areas equally and that directs the most support to those areas with the greatest need and the greatest potential.
The Minister told me in his letter and in our meeting:
“Unfortunately, very little flexibility remains here.”
Well, he has been painted into a corner by his colleagues in Government making special provision for the devolved regions and making that an early announcement. Tonight we want him to make good this wrong and to balance this deeply flawed decision by reviewing the allocations to South Yorkshire and Merseyside and making a commitment to use other funding routes to rectify the shortfall. We are asking not for special treatment, but just for the same treatment as Scotland, Northern Ireland and Wales, and certainly not to be singled out for such special and swingeing cutbacks.
This is not an argument about a one-off annual grant. The Minister’s decisions now will stand for the whole of the next Parliament and Government, and beyond. That is why what he has to say to the House and the action he takes following this debate are so important.
The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)
I congratulate the right hon. Member for Wentworth and Dearne (John Healey) on securing this debate, and thank him for the opportunity to address some of the concerns he has raised. I know they are shared more widely than South Yorkshire; obviously they extend to Merseyside, some of whose Members are present tonight.
Before I come to last week’s announcement of the provisional allocations of the structural funds to England, I want to remind the House why we faced a number of extremely complex and difficult decisions when making these allocations. First, let us go back to the overarching goal of the funds. The aim of the funds is to provide EU member states and regions with assistance to overcome structural deficiencies and to enable them to strengthen competitiveness and increase employment. For the next seven-year period, the focus of the funds will be on enhancing economic growth, with a focus on innovation and research, small and medium-sized enterprises, the low-carbon economy, skills, employment and social inclusion.
During the current programming period, there were two notable decisions that impacted on us. First, the last Government decided to prioritise the north when making allocations for the current seven-year period, which expires this year. I have had many representations from those representing the interests of the south, and some of the poorer areas of the south, arguing passionately that the Government should not repeat what happened in 2007 and should shift funding back to the south. While I concede that the south is richer overall, we must not forget that within many areas in the south there are significant pockets of deprivation.
Secondly, the area that includes Rotherham and Barnsley was categorised as a “phasing-in region” for the current funding period, 2007 to 2013. For hon. Members less familiar with the technicalities, let me explain that “phasing-in” is a designation given to a region that is emerging from the poorest regional category—“convergence” or “objective 1”—and into the mainstream “competitiveness” category. Competitiveness regions characterise most of the wealthiest countries of the EU. As such, it is the current EU budget period—2007 to 2013—that is the transitional period for South Yorkshire, and the EU funds have been on a declining taper for the entire seven-year period, in order for partners in that area to adjust to a lower level of EU receipts. The highlands and islands, of course, were not on a phasing-out regime; they were on a phasing-in regime. The precise objective of the phasing-in status is to avoid a cliff edge for these regions. Therefore, comparing the allocation that South Yorkshire received for the whole of 2007 to 2013 with the allocation announced for 2014 to 2020 and concluding that there is a 66% reduction ignores the reality of what phasing in actually means.
The current programme clearly states:
“Because of its phasing-in status South Yorkshire’s financial allocation annual profile is heavily weighted towards the first four years and tapers off towards the end of the programming period”.
That is mirrored in the ESF operational programme. Over the current programme, structural funds to South Yorkshire started at €153 million in 2007 and have ended up at €20 million in the current year. Let me be clear that in each of the past three years that has been the figure. For each of the next seven years the figure will be €23 million—an increase. So let us just be clear: there will be an increase in funding for South Yorkshire, not a decrease.
John Healey
As I said, it is patently incorrect to say that the planned profile reflects the reality of how the money has been spent over the period. May I ask the Minister either to confirm or correct any of the facts I gave the House in my speech in a letter to me afterwards? As he clearly may not get to this, given the sort of technical detail he is keen to read out to the House, will he also confirm what, if anything, he proposes to do to try to rebalance this very significant shortfall of funding for South Yorkshire and for Merseyside?
Michael Fallon
I am certainly very happy to write to the right hon. Gentleman about any technical detail that I may have missed, but I do not want him to mislead the House. In the last three years of the current Parliament, South Yorkshire has had €20 million a year. In each of the next seven years, South Yorkshire will receive—
John Healey
On a point of order, Mr Speaker. I think that the Minister was suggesting that I had misled the House, when in fact what I had told him was that the patterns of actual spend in the European regional development fund funding for the final years of this current programme are broadly similar right across the range and have not sharply dropped as the original plan envisaged.
Mr Speaker
I was listening and I thought the Minister was saying that he did not want the House to be misled. I am sure that he would not accuse any Member of misleading the House, because he would be in breach of our procedures if he did. The Minister was not suggesting that, was he?
Michael Fallon
I certainly was not, Mr Speaker. I just wanted to make it absolutely clear that in each of the past three years the allocation has been €20 million and for each of the next seven years it will be €23 million. I cannot call that a cut, and if other colleagues can, I am extremely puzzled.
Steve Rotheram
I thank the Minister for giving way, but I thought the preamble to his speech seemed like it had been written by Antony Jay and Jonathan Lynn; it was certainly like something out of “Yes Minister”. He spoke earlier about fairness and criticised my hon. Friend the Member for St Helens North (Mr Watts) for the comparison he made. If Cheshire is getting more than Merseyside, can the Minister explain the rationale for that?
Michael Fallon
Let me be clear: overall, Cheshire is not getting more than Merseyside. The issue for Merseyside is very simple, as it is for South Yorkshire. I cannot justify to the House why either South Yorkshire or Merseyside should get more than the Tees Valley, Durham or Lincolnshire, which are poorer regions.
Mr Clive Betts (Sheffield South East) (Lab)
Does the Minister accept this basic fact: over the seven-year period of the spending review, comparing the last spending review round with the round to come, South Yorkshire will get less than half the previous amount, whereas Scotland and Wales will get 95% of the previous amount? Are not those facts true?
Michael Fallon
What is true is that South Yorkshire is transitioning. It was a poorer region and is now becoming a wealthier region. Let me repeat: in each of the next seven years, South Yorkshire will get more than in the past three years. Really, we need to be very clear about this.
Michael Fallon
I think I have been very generous in giving way.
What is a transition region? It is a category of region introduced to support those that have a GDP level between 75% and 90% of the average. It means that those regions are no longer eligible for the highest levels of support—that for the so-called less developed regions—and nor are they considered more developed regions. “Transition region” means that they will get benefits providing greater flexibility in how to spend the funding. I want to highlight that during the current funding regime, for which the right hon. Member for Wentworth and Dearne was responsible as one of the Ministers involved, 50% of the funding was retained by central Government to determine how it was spent. I am sure that that was expedient to the effective delivery of Government programmes and so on, but I am very pleased that in the seven years beginning next year, local areas will define and have at their disposal 95% of all the funding available. Of course it is true that some areas would have had higher levels of funding in the past, but they will certainly be able to direct more of the money they want in the same way.
Michael Fallon
I am sorry, but I only have a minute left.
I have focused my remarks on the structural funds, but that is not the only way in which we are helping South Yorkshire. We have granted enterprise zone status across the Sheffield city region, we have a city deal leading to £72 million in public and private investment and we have a transport fund that could be worth £500 million to the Sheffield city region. No other transition region has a deal like that. More than £80 million has been awarded through the regional growth fund, including a local enterprise partnership-led £25 million unlocking business investment programme.
The footprint of all that growth will be approximately 2,000 sustainable private sector jobs. In Rotherham, we are supporting the advanced manufacturing research—