Wales: European Structural Funds

Lord Wigley Excerpts

Wednesday 5th February 2020 Lords Chamber

Asked by

[Lord Wigley]

To ask Her Majesty’s Government what their proposals are for replacing the European Structural Funds currently administered by the Welsh Government.

[Lord Wigley (PC)]

My Lords, in speaking to the Question I have on the Order Paper, I am grateful to be afforded this short debate at a most opportune time, coming as it does in the first week after Britain’s departure from the European Union. I thank other noble Lords who have put their names down to speak; I look forward to hearing from them. I am particularly delighted to see the noble Lord, Lord Thomas of Gresford, back on his Bench and ready to participate. I will not repeat the arguments we have had over the past four years concerning our membership of the European Union, other than to relate their significance for today’s debate. While I will focus on Wales, parallel issues clearly arise in other parts of these islands.

I welcome the fact that the noble Baroness, Lady Bloomfield, as a Wales Office Minister, is answering this debate. She is personally aware of the economic difficulties facing Wales, particularly in the west of the country—an area which has benefited since 2000 from European structural funds at their highest possible levels. In my home area, projects such as the performing arts centre Galeri in Caernarfon and the Management Centre and Pontio project at Bangor University would not have been possible without European finance. My home county of Gwynedd has benefited from £169 million of EU structural funding since the original Objective 1 funding became available 20 years ago. The big question today is what should take over such important structural funding now that we are outside the EU. I invite the Minister to consider three aspects of the matter: funding principles, the level of funding and associated administrative issues.

The area designated West Wales and the Valleys has been in receipt of the highest level of EU structural funding because the average GDP per head of these 15 counties has been consistently under 75% of the EU average. It is one of the poorest areas in Europe, and it is a damning indictment of successive Governments at Westminster that the disparity between the richer and poorer areas here in Britain is starker than anywhere in Europe. Net disposable income per head of population in west London is four times the level in Anglesey or the Gwent valleys. That speaks volumes about the failure of Governments over four decades to address this issue. The eastern part of Wales also faces economic and social challenges, albeit not as stark as those of West Wales and the Valleys.

The purpose of the European Regional Development Fund is to redress the main regional imbalances within the union. A key element of the ERDF is additionality: such funding coming from the European Union must not displace existing public funding available to the qualifying region but be additional to it. This was a bitter point of dispute between the National Assembly and the UK Government in 1999-2000, the Assembly’s first year of existence. The then Labour Government in London initially refused to pass over the European structural funds for which Wales qualified; only after the intervention of Michel Barnier—Europe’s then regional commissioner—did Gordon Brown make a statement in July 2000 that the Treasury was passing £442 million over to Wales. Subsequently, successive Governments have been obliged to abide by the additionality principle.

The provision of this funding explains why Wales has been a net beneficiary of EU funding over two decades and why this element featured largely in the referendum debate on Britain’s membership of the EU. Understandably, during 2016 much attention was given to this feature of Welsh public finances; so much so that commitments were repeatedly made by those supporting Brexit that Wales would not lose a penny by virtue of the UK departing from the EU. I have little doubt that this pledge largely explained the vote in Wales—albeit a narrow one—to leave the EU. Voters were assured that we would not lose such vital funding and that the UK Treasury would bridge the gap. We have been required to abide by the outcome of the referendum vote, so it is not unreasonable that we also abide by the commitments that delivered that vote.

My party, Plaid Cymru, has long called for rebalancing the economy through the allocation of resources on the basis of need, rather than population—the system used in the Barnett formula much criticised by committees of this House. It is our belief that a regional development fund for Wales—as Wales’s needs-based share of the UK prosperity fund—should be administered on a separate basis from the Welsh Government’s core funding. It should be a multiannual funding programme to facilitate both long-term planning and funding security, and not be sullied by short-term electoral cycle considerations.

The current Welsh European Funding Office should have its guidelines reviewed so that they deliver the new funds as effectively as possible and have the maximum strategic impact; that has not always been apparent in the use of EU strategic funds by successive Welsh Governments over the period during which we have been their beneficiary. The programme funding in Wales should maintain the objectives of the European structural funds, including streams relating to employability and regional economic development, while maintaining a synergy with Welsh government policy.

May I therefore ask the Minister five questions about the funding principles? First, will the Government make it a statutory requirement that the fundamental aim of the shared prosperity fund is to redress the main regional imbalances within the UK? Secondly, will they commit to allocating funds on the basis of need, related to people’s living standards? Thirdly, will they ensure that the principle of additionality applies to the shared prosperity fund? Fourthly, what role will devolved Governments have in methodology and funding determination? Fifthly, will the fund prioritise employability and regional economic development?

I will now say a word about funding levels. The UK was allocated just over €10 billion in European structural and investment funds for the funding cycle 2014-2020. Wales was allocated about a quarter of this sum, just over £2 billion—equivalent to £140 per person. The withdrawal agreement provides for maintaining the current structural funding arrangements only until the end of the transition period—that is, until the end of this year. My party contends—I strongly support this—that Wales should not receive a penny less under these new arrangements than we would have received under the EU arrangements for 2014-2020, uprated for inflation. This would provide some £2.5 billion for the period 2021-2027. Will the Government give cast-iron guarantees that current funding levels will be maintained, and will she give a pledge that no region will be worse off than it is under the current programme?

On the administration of such funding, the current administration of the European structural and investment funds is undertaken jointly between the EU and the nominated managing authority of the member state. Jointly, they put together an operational programme laying out their strategy and priorities, which has to be agreed with the European Commission before funding is made available to the managing authority. For Wales, that authority is WEFO, which is responsible for the social fund and the regional development fund in both West Wales and the Valleys, and in east Wales. My party contends that, on similar principles, Wales’s portion of the shared prosperity fund should be managed in Wales, not at a UK level for Wales. That would be in line with the Government’s pledge not to centralise devolved competences. We do not want to see another power grab by Whitehall and Westminster. Furthermore, the funds made available as Wales’s element of the UK shared prosperity fund should be re-allocated to Wales, rather than using a competitive bidding process run from London.

I have two final questions for the Minister. Will the Government make a commitment that responsibility for the administration of the shared prosperity fund in Wales will be fully devolved to the Welsh Government? What forum will be used for the co-ordination, where necessary, of schemes in Wales, Scotland, Northern Ireland and England, where some overlap may potentially occur? Will that be through Joint Ministerial Committees, as the Government propose for other functions?

Getting this right—and doing so now, well ahead of the end of the transition period—is necessary not only to fulfil the pledge given that Wales will not lose out on such funding as a result of Brexit, but to enable the co-ordination of public sector investment in Wales in a manner which delivers the maximum possible impact on the Welsh economy and on the living standards of our people.

A broad consensus on these matters exists in Wales, across party-political demarcations. I am sure that the Minister will concur with those objectives, so I now await to hear from her exactly how they will be achieved.