EU Funding
John Healey (Wentworth and Dearne) (Lab)
I welcome the Secretary of State for Business, Innovation and Skills to the Front Bench, and I hope that his presence will presage a more balanced approach to the decisions on the EU funding period than has been the case to date. I hope that that hope will not be dashed.
Eight months ago, I led an Adjournment debate on two decisions that Ministers had made on EU regional funding. The first, announced on 26 March, was on the allocation of funds between the four UK nation states. The second, announced on 27 June, was on the allocation of funds between the English regions. I argued then that those decisions were unfair and unjustifiable. I was supported then, as now, by colleagues from South Yorkshire and from Merseyside. Two weeks ago, in the High Court, Mr Justice Stewart stated that
“the decisions of 26 March 2013 and 27 June 2013 are quashed”.
The Ministers were wrong. Their decisions are unfair, unjustifiable and unlawful. They take funds from South Yorkshire and from Merseyside to top up support for Scotland, Wales and Northern Ireland, to limit their losses to 5% while cutting our support by more than 50% compared with the figure for the current full EU funding period. They undermine the very purpose of EU structural funds, which of course is to boost the jobs, skills, businesses and economies of the regions lagging behind.
Documents disclosed for the first time to the Court show just how far Ministers are cheating South Yorkshire and Merseyside. They show that the Government have calculated that the European Commission’s intended allocation for South Yorkshire would be €236 million—€58 million more than Ministers plan. They show Merseyside’s intended allocation from the EU to be €318 million—€116 million more than Ministers propose. I suspect the Secretary of State may say that the allocation methodology was not found by the Court to be flawed, even though the judgment found that the allocations were unlawful. They were unlawful because Ministers: failed to comply with the public sector equalities duty; failed to avoid discrimination against those in our ex-industrial areas; and failed to consider the consequences of using criteria that took no account of the respective economic needs in all UK regions—in other words, we are talking about equality of funding.
I say to the Secretary of State that that is a concern to me, to my Labour colleagues, to our councils and to our business organisations in South Yorkshire and Merseyside. It will also be a concern to the European Commission, because the principle of equality is a general principle of EU law and a right conferred by it. By protecting Northern Ireland and allowing Scotland to protect the highlands and islands, the Government have completely distorted the funding purpose and the budget for the nine English transition regions, resulting in some wealthy, more developed regions receiving significantly more funding from the EU in this proposed seven-year period than the transition regions, which have a much lower GDP.
Bob Stewart (Beckenham) (Con)
I am slightly surprised that European funding, when allocated, can actually be interfered with by Ministers if it has already been agreed. I presume that is legal, but is it?
John Healey
The allocations are made to the United Kingdom, whose Government then have a degree of discretion about the distribution of those funds within the UK. What was at stake in the Court challenge and is at stake in this debate is whether those decisions were fair, whether they were justifiable and whether they were lawful. That is the point at stake and it is where things have changed since the debate I introduced about eight months ago.
Jim Shannon (Strangford) (DUP)
The right hon. Gentleman has mentioned Northern Ireland. Does he accept that Northern Ireland’s fuel costs are the highest in the whole UK, its levels of unemployment exceed those in other parts of the UK and its educational standards do not match those of some areas of the UK, and that allocations of EU moneys are based on the criteria of need and Northern Ireland falls into that category? I would be happy to see Yorkshire getting its true worth, but I would hate to see it happening at the expense of those in Northern Ireland.
John Healey
I understand that. Northern Ireland, South Yorkshire and Merseyside all face similar problems, and under this funding period arrangement they have all been designated as transition regions. I must say to the hon. Gentleman that the GDP—the wealth, product and income—in Northern Ireland is in fact higher than it is in South Yorkshire and in Merseyside, yet the decisions the Government have taken mean that Northern Ireland will be protected, with its drop in funding for these seven years compared with the previous seven years being limited to just 5%, whereas we face a funding cut of more than 50%. I think he would agree that that simply is not fair.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
I apologise to my right hon. Friend for the number of interventions, but he is so well informed. A few moments ago, he referred to the protection of the highlands and islands of Scotland. Will he offer advice to me and perhaps to the people of Scotland as to what might happen in the event of Scotland voting for independence?
John Healey
My right hon. Friend poses a bigger question than I would have imagined from the terms of this debate. Clearly, Scotland would have to become a part of the European Union and then to lay its claim for any potential structural funding support in the way that this programme is designed to deliver.
Paul Blomfield (Sheffield Central) (Lab)
I congratulate my right hon. Friend on the work that he has done in co-ordinating the concern of the South Yorkshire region over this issue. Does he agree that the perverse impacts of the way in which the Government have brought together their formula are illustrated by the fact that Cheshire, which happens to include the Chancellor’s constituency, has been allocated 34% more per head than South Yorkshire, even though its GDP is 19% above the EU average while ours is 16% below? What conclusion does he draw from the way in which the Deputy Prime Minister, although supposedly representing our region, has strongly defended the formula, which took money intended for areas such as ours and other poorer regions and gave it to wealthier areas?
John Healey
First, the Deputy Prime Minister was asleep on the job when the decisions were taken in government. Secondly, he is allowing the arguments that we have heard from other Ministers in this Chamber to pull the wool over his eyes. He has not been standing up for South Yorkshire, and I see this as a Forgemasters mark 2 against the card of the Deputy Prime Minister.
A more measured reflection on the figures that my hon. Friend has just given allow me to continue to develop my argument, which is that the Government’s approach to date does not apply the principles of equality and proportionality. Similar regions were treated differently, and allocations were not proportionate to their needs. I say to the Secretary of State that we will not let this matter rest. We will take it all the way. Our councils will take the case to the Appeal Court to ensure that the principles are taken into account by the UK Government, just as the EU does in designing and allocating the structural funds in the first place. We will also take the case to Commissioner Hahn, who has to approve UK Ministers’ plans to ensure that those principles are taken into account.
The High Court judgment two weeks ago requires Ministers to review, but not necessarily to change, the funding decisions. I urge the Secretary of State to take a fresh and deep view of this set of decisions. He should revise those decisions now rather than being forced to do so later.
Let me take the Secretary of State back to what his junior Minister, the right hon. Member for Sevenoaks (Michael Fallon), said in the first debate. He rightly said:
“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.”—[Official Report, 1 July 2013; Vol. 565, c. 725.]
The EU funds are designed to give a boost to the economy of flagging regions. It is an outrage that areas of the UK with more jobs, wealth, businesses and prosperity are also getting more European funding in the period ahead. South Yorkshire is one of those 11 transition regions in the UK, which means that our GDP is between 75% and 90% of the European average. All the more developed regions have a GDP of at least 90% of the European average. Nine of them will receive more, not less, funding than the Sheffield city region. They include Worcestershire and Leicestershire. As my hon. Friend the Member for Sheffield Central (Paul Blomfield) has said, they also include Cheshire and Warrington, which have a GDP not of 84% like South Yorkshire but of 119% of the European average and will get EU funding not of €117 per head like South Yorkshire but of €157 a head.
Steve Rotheram (Liverpool, Walton) (Lab)
I thank my right hon. Friend for highlighting this Government’s lamentable record on the transparency and fairness of previous funding allocations. Does he agree that there is no justification for this latest round of gerrymandering whereby the richer regions will benefit over and above areas such as Merseyside and his constituency and area?
John Healey
I do indeed. The judge at the hearing described the situation as bizarre. He rightly said that the decision to protect Northern Ireland and Scotland was what got the Government into this mess and skewed the budget for the nine English transition regions.
Let me illustrate the point about the flaws and the unfairness just by looking at the highlands and islands of Scotland, which like South Yorkshire is an ex-objective 1 area and, in the current funding period, has phasing status—in other words diminishing and tapering funding during the seven years. It is a transition region in the next period and has a GDP exactly the same as that of South Yorkshire—84% of the European average. But unlike South Yorkshire it is set to get not €117 a head but €478 for every man, woman and child in the region. In other words, it is similar in economic status but will receive more than four times the European funding for the seven years ahead. The Chief Secretary was clearly doing a job for his area. The Deputy Prime Minister was clearly not doing a job for ours when the Government were blatantly making such bad and damaging decisions for South Yorkshire.
Kevin Barron (Rother Valley) (Lab)
I congratulate my right hon. Friend on getting this debate. Does he think it ironic, after the 20 years or more of changing South Yorkshire’s infrastructure as a result of the coal mining programme, that we see a succession of members of this Government coming to the Advanced Manufacturing Park? The last Government used structural funds to build it, and these Ministers now all get their photo shots done there. It is attempting to turn the South Yorkshire economy around, yet the same people appear to be putting the boot into South Yorkshire through the structural funding.
John Healey
My right hon. Friend is right. We know how to use funds well in South Yorkshire. We have plans to use them well in the future. The Secretary of State himself has regularly visited the Advanced Manufacturing Park. He will know what a contribution it is making to overcoming some of the structural weakness in the South Yorkshire economy. We will fight this all the way because the Government are making decisions not just for next year’s funding. These decisions set the funding for a full seven years—for the whole of the next Parliament and the next Government and beyond. That is why they are so important. The Secretary of State has agreed to meet me and my hon. Friend the Member for St Helens North (Mr Watts). I hope that the review that the Court judgment has forced on Ministers will mean that he will lead the Government in thinking again and making good the funding shortfall for South Yorkshire and Merseyside that the allocation decisions so far have caused.
The Secretary of State for Business, Innovation and Skills (Vince Cable)
I congratulate the right hon. Member for Wentworth and Dearne (John Healey) on securing the debate. I welcome it because it gives me the first opportunity to set out in the House how we want to respond to the High Court, because we are dealing essentially with the legal implications of that ruling.
Let me start with the legal particulars before getting on to the wider policy question. On 7 February 2014, the High Court indeed quashed two decisions that I made last year. The first allocated EU funds to England, Scotland, Wales and Northern Ireland, and the second allocated funds to local enterprise partnerships within England. Two arguments were put forward by the claimants—the LEPs representing south Yorkshire and Merseyside—in the judicial review case. The first was that the allocations were irrational and unreasonable, which is the case the right hon. Gentleman has developed again today, and the second was that insufficient regard had been paid to the public sector equality duty.
On the first point—and this is absolutely crucial to the debate—the Court found that the methodology and allocations were rational, proportionate and permissible, and the claimants’ arguments on these points were dismissed. That is relevant, because it was not so much the right hon. Gentleman in his speech but some of his colleagues in their interventions who talked about gerrymandering, or the arbitrary attempt to include the Chancellor’s constituency. It is very clear that the Court found that the decisions were not arbitrary in that way. They may not have produced the satisfactory political outcome from Opposition Members’ point of view, but the Court did not uphold the argument that there was any form of irrationality or disproportionality in the decision.
John Healey
The Secretary of State is factually correct, as I said in my remarks, but does he regard those decisions as fair and consistent with the purposes of the European structural fund?
Vince Cable
Well, we do, because we have been trying to reconcile a whole series of different issues. I was going to make this point to the right hon. Gentleman later: he has been a Local Government Minister in his earlier capacity. I remember petitioning on behalf of my own council. He knows the problems of allocating resources when there is a fixed pot of money; some people will be happy and some people will be unhappy. These are difficult decisions, and we derived a methodology that we believed to be fair. These decisions were not based on arbitrary allocations; they were based on a methodology. That is very important—these were not arbitrary decisions.
The judge ruled—the ruling was very clear—on the sole ground that our public sector equality duty was not met, even though an equality impact assessment was completed and it concluded that it was unlikely that having regard to such a duty would have made any difference to the original decisions by the Department for Business, Innovation and Skills.
Steve Rotheram
Taken in isolation, perhaps the argument stands up in regard to what is perhaps a quirk of the formula. However, the moral argument may not be about the methodology; it is certainly about the poorer areas being penalised by the richer areas, which are the only beneficiaries from the formula.
Vince Cable
It is simply not true that richer areas are the only beneficiaries. There was a redistributive effect in some of the poorer areas of the country. If I remember correctly—I may be incorrect—the north-east of England, or many parts of it, benefited from this reallocation, but I will check that.
Let me go to the central point. Following the ruling, we have to follow the law. That is obviously our duty, and I now have to take a fresh decision on the allocations, having regard to the public sector equality duty. We are now doing further work, which we will take into account in making a new decision. However, I have to be clear about this point: on the basis of the Court ruling, the new decision will be limited to reconsideration of allocations in light of any impact on equality. We are not planning to reconsider the methodology, unless the equalities assessment highlights the need to do so. Obviously, we will need to be legally compliant and we will be legally compliant.
We want to announce the decisions in the next few weeks and it is very important that we move quickly, because we want to end the uncertainty about the allocation, which affects jobs and growth across the UK. I also want to make it clear that of course I regard it as absolutely essential that we pursue policies that are equal and fair. I have set out on many occasions my vision that equality, diversity and inclusion be embedded in what the Department does, so we will be working hard over the next few weeks to ensure that we meet our obligations under the public sector equality duty.
The right hon. Member for Wentworth and Dearne confirmed that Liverpool and Sheffield are seeking permission to try to overturn the High Court ruling on methodology. While they have every right to do so, I am obviously disappointed that they feel the need to take such action, not least because it risks delaying the allocation of funding. However, clearly the matter must be tested in the courts.
Let me say a little about the wider context regarding Liverpool and Sheffield, because the right hon. Gentleman is right that we must be balanced when looking at this in the round. It is fundamental that we take account of regions’ need and relative prosperity. Given his history in government, I am sure that he understands that Sheffield and Liverpool will not be alone—this is the nature of such allocations—in thinking that they would like more money. However, the EU sets the overall budget and we must address the needs of all UK regions.
The Liverpool and Sheffield decisions were reached after a great deal of thought and in recognition of the areas’ history, with which the right hon. Gentleman will be familiar. Between 2000 and 2006, Liverpool and Sheffield were both objective 1 regions, meaning that they were among the parts of the country with the greatest need, which was reflected in their higher funding. In 2007, they were reclassified as phasing-in regions because the indicators showed, although the levels were relatively low, that there had been considerable economic progress. Their recategorisation as phasing-in regions between 2007 and 2013 was designed to avoid the steep and sudden cut in EU funding that would have followed from relatively high levels of economic activity.
As I am sure the right hon. Gentleman knows, the phasing-in regions received a tapered reduction in funding between 2007 and 2010—given that he was in government, I am sure that he followed that process closely—and then received the same amount of annual funding between 2011 and 2013. The crucial point in this argument is that the phasing-in regions were fully aware of their changing status, so they must have anticipated a significant drop in funding between 2014 and 2020. The right hon. Gentleman must have helped to negotiate the current programme when he was in government, and it states categorically:
“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”.
The transition is clearly awkward for the areas affected, but it was fully anticipated and had nothing to do with a change of Government, as it was going to happen in any event.
South Yorkshire and Merseyside are now categorised as transition regions and must be treated in the same way as other such regions. The original BIS decision gave each transition region a 15% funding increase against an overall drop of 8% in European structural funds, with an across-the-board formula applied.
To give a wider context, I want to say a little about the support that we are trying to give through regional growth, some aspects of which have fairly been mentioned. It needs to be emphasised—this was missing from the right hon. Gentleman’s speech—that about half the funding in the period between 2007 and 2013 was retained for allocation by central Government, but we have tried to change to a more locally-based allocation system, with local areas, through their LEPs, determining how 95% of structural funds will be used. While some areas might have had more funding in the past, they did not have their current power to direct resources to their own priorities.
EU funding is only one aspect of official funding. The right hon. Gentleman will know about some of the schemes we have going, which I will run through quickly. The Sheffield city region has been granted enterprise zone status to extend the capability of advanced manufacturing technology, including £14 million to develop the Markham Vale site—I visited it some time ago following a suggestion by the hon. Member for Bolsover (Mr Skinner)—which we expect to generate just under £100 million in private investment and create 2,000-plus new jobs.
Sheffield’s city deal is expected to bring in £72 million in public and private investment over the next three years. The transport fund alone could be worth £500 million. Not every transition region has a deal of that kind. In addition, under the first three rounds of the regional growth fund Sheffield was allocated £57 million, including £25 million in support to the LEP’s business investment programme to unlock £100 million in direct investment, and £9 million has gone to three bids in round 4, although they are still going through due diligence.
Finally, the advanced manufacturing research centre, which I have taken a personal interest in—I met several Sheffield colleagues early in my period in office to try to help facilitate it—has now been allocated £37 million for development and manufacturing research in the civil nuclear sector. The centre is proving brilliantly successful and expanding rapidly. It is the source of the world’s most advanced research factory through the £43 million Factory of the Future project, to which we have granted £10 million.
A similar story can be told about Merseyside. I do not think that there are any Merseyside MPs here, but—[Interruption.] Sorry, I failed to pick up the accent of the hon. Member for Liverpool, Walton (Steve Rotheram), which I thought was from the north-east—I should have learnt from “Match of the Day” and not made that mistake. I profoundly apologise. As he will know, we have granted enterprise zone status to Liverpool and Wirral Waters. The city deals are extensive. The Liverpool and Liverpool city region deals have led to a £75 million economic development fund. The regional growth fund has a programme of £10 million, leveraging £50 million for private investment and safeguarding 1,200 jobs directly and £35 million for the new container port. Other major investments include the £470 million Government contribution to the Mersey Gateway bridge and the redevelopment of Liverpool Royal hospital.
If we take the position in the round, a great deal of thought has been given to how to support two parts of the country that undoubtedly have real economic needs. I restate our position that we must obviously act lawfully in respect of the Court’s judgment, which we will now do.
Question put and agreed to.