Clive Betts
Main Page: Clive Betts (Labour - Sheffield South East)(11 years, 8 months ago)
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Mr Clive Betts (Sheffield South East) (Lab)
It is a pleasure to serve under your chairmanship for the first time, Ms Dorries. The all-party report on the European regional development fund was literally that, because all Committee members agreed with it. That is the way it should be. We took evidence, and on the basis of that evidence, we came to our conclusions. The attendance at this debate probably reflects the fact that all members of the Select Committee on Communities and Local Government are happy for me to speak on their behalf about the report and raise the few issues on which we took a slightly different view from those eventually indicated by the Government in their response. The Committee was unanimous in valuing the ERDF, which has clearly done excellent things in many parts of the country, particularly the poorer parts, which, for the obvious reason that that is what the ERDF is designed for, have benefited from the scheme.
One of the first things that we examined is the fact that although everyone thinks that the ERDF is good and has done good things in the areas where it has been spent, no one can actually prove it. There was certainly little hard evidence about the ERDF’s actual impact. What is better because of it? What jobs and facilities exist now that would not have been there if not for the ERDF? The Government gave us a helpful response indicating that they are now doing more work to monitor and evaluate this round of the ERDF. That should be done some time this year, and it will then feed into any proposals for spending during the next ERDF spending round. That is welcome. Does the Minister have any further information on that evaluation study? What is it likely to cover, when is it likely to report and when is it likely to be made public? I think he has promised that a copy will be sent to the Committee for our consideration. It would be helpful to have that further information.
The Committee considered the changes that had occurred. Clearly, we do not want to get into a debate— I am sure, Ms Dorries, that you will pull me up if I do—on the wider issue of the benefits or otherwise of the abolition of the regional development agencies, but it clearly changed the control of ERDF funding, the responsibility for which was given to the Department for Communities and Local Government.
John Healey (Wentworth and Dearne) (Lab)
While my hon. Friend is still on the question of all-party consensus and before he strays away from it to the abolition of the RDAs, does he acknowledge that the Heseltine review, which has a good deal of support across the parties, recognises the importance of EU funds such as the ERDF as a boost to economic growth and structural change?
Mr Betts
Absolutely, and I will say a little more about it later. It is probably consistent with the European Commission’s recommendations on trying to improve how European funds are spent by pulling the various funding streams together at a European level, thus enabling simplification within the UK, and allowing that funding to be controlled and brought together with other funds at local level, including through local enterprise partnerships. That would be entirely compatible with and would boost the direction of travel for which Lord Heseltine has been arguing. That is an important and valid point.
John Healey
My hon. Friend will forgive me if he plans to move on to this, but it is critical to know how the now-secured ERDF funding will be spent and the degree of local discretion, decision-making and flexibility, particularly at the LEP level or, in our case, the Sheffield city region level. I hope that he will encourage the Minister and his colleagues in the Department for Business, Innovation and Skills to give us maximum localist discretion.
Mr Betts
That is absolutely right. I was going to touch on that a bit later, but I am certainly happy to do so now. It is important that the European Union has recognised that, and it is important that Departments are prepared to do so. The challenge for Ministers is getting an overview and ensuring that the totality of available funding in the ERDF budget is spent, while giving local flexibility to ensure that it is spent on the right projects and in the right ways to benefit local communities. It is always a challenge for those of us with a localist bent who want more decisions to be made at a local level to ensure that that is done so as to keep national commitments and spending budgets intact.
I come to the DCLG’s responsibility. The evidence that we had—it was clear, and I do not think that there was any dissenting evidence—showed that by and large, the switch from RDAs to DCLG, as an administrative exercise, had been well managed. However, there were one or two examples of potential delays. We asked the Government to examine those, and the response was, “We can’t find any evidence of delays.” The Committee was a bit concerned—that concern has grown—that Ministers were a little complacent in saying, “We’ve got 98% of the money committed.” By “committed”, they meant projects in the pipeline as well. It was not all contractually committed; “committed” also meant projects that were moving forward but had not been finally signed off. Historically, with the ERDF and similar budgets, to hit the target of 100% spending, it has probably been necessary to have more than 100% commitment when moving forward.
Since our report, it has come to our attention that the west midlands ERDF local management committee identified some problems with spending for which there had apparently been a commitment. The committee’s minutes for September 2012 indicate on the performance of venture capital and gap funding projects that most investment grant projects had
“made few investments at this stage and are slipping between 50% and 92% from their original profiles. There can be no confidence at this stage that forecast ERDF will be spent this year, and this will have a significant impact on priority 3 in particular”.
That problem was identified in the west midlands. Does the Minister know whether it exists in other areas? If it does, he probably should not be surprised, as a survey by the Local Government Association also found similar problems. It said that two thirds of councils responding were not confident that match funding was available for the rest of the ERDF money available. More than half had projects that had fallen through or were considered to be at risk of doing so. Clearly, there are issues.
In Sheffield, we have been trying to get Government funding for flood defences, following the serious floods of 2007. We welcome the commitment from the Department for Environment, Food and Rural Affairs to find that money. When we were arguing early last year, we were told that ERDF funding would be necessary but that none was available; no one could find a penny. Miraculously, £1.75 million was available later in the year. I do not know where the money was found—it probably floated down the River Don and into the hands of civil servants.
Mr Betts
The money was clearly available; ultimately, DEFRA found the money in its budget. We did not think that ERDF funding was available, but it is widely known that civil servants ring up local authorities across the country on the QT and whisper, “Have you got any projects available? We may have a bit of ERDF slippage elsewhere that we could do with spending.” We had assurances from Ministers 12 months ago that all was well, all was committed and there were no problems. Of course if it is 98%, not everything is contractually committed. Even contracts have slippage. A year later, slippage will occur. That could have been anticipated. I am surprised that Ministers were as reassured as they appeared to be by the information at that stage.
I assume the minutes from the west midlands are replicated elsewhere. The Minister has probably not had a chance to look at those minutes or to ask for minutes from similar bodies across the country, but he may find that similar concerns have been expressed.
John Healey
My hon. Friend makes an important point about areas not spending and taking full advantage of ERDF funding. Of course, the availability of match funding is critical, but does he accept—he may have addressed this in his report—that there is an understandable caution among local authorities and local bodies given their experience in recent years of the European Commission changing its auditing benchmarks? Some projects have found that clawback is required, which has caused problems for the Department, local funders and local projects.
Mr Betts
I am well aware of such problems in Sheffield. That was not particularly drawn to our attention in evidence, but, in a slightly wider sense, we considered the problem of match funding itself.
We stepped into the slightly controversial territory of the abolition of the regional development agencies, which were clearly a major source of match funding. The funding was flexible and available at the local level, but it has now gone. Our attention was drawn to the problem caused by the absence of match funding. The ministerial response was, “There are local authorities, universities and businesses.” It may have escaped Ministers’ attention that local authorities are not overwhelmed with spare cash to find match funding. Universities are in a slightly difficult financial position, and the private sector is also cautious.
One of our concerns is not merely that there may not be enough match funding to deliver the total spend of the ERDF but that the constraints mean that the range of projects that might go ahead may be determined by the particulars of the match funding. We will not necessarily get best value, therefore, because the schemes that might give best value are not the schemes for which match funding is easily available, which is a problem that Ministers have not addressed terribly well.
I appreciate that the Minister was appointed after our report was published and that he is new to the issues. We suggested that the regional growth fund should have a ring-fenced element identified for match funding because it would give the sort of flexibility that has been lost with the abolition of the RDAs by providing a pot of money so that the best value projects might more easily obtain the needed match funding. There would then be the local flexibility mentioned by my right hon. Friend the Member for Wentworth and Dearne (John Healey), which the Government ought to consider. They removed such flexibility from the table and said, “It is not something we want to do, and it is not our policy.” They should have another look. The last two things Ministers would want are an underspend or money being spent on things that do not represent value. There is agreement on that, but the Committee was driving at how best to reach that position.
The Committee welcomed, as the Government did, the European Commission’s changes to common provisions regulation, which simplified the way in which different funding streams, such as the ERDF and the social fund, may be brought together to reduce the complexity for applicants. That should also give better value by allowing the local flexibility that my right hon. Friend mentioned. We welcome the push to harmonise the regional policy funds and the idea that responsibility could be devolved to bodies such as local enterprise partnerships.
The Committee is generally in line with the Government in seeing no problem with conditionality on individual projects, and it is right that those projects are properly assessed and audited, despite the problems caused by changing the goals of auditing, which my right hon. Friend mentioned. If projects do not do what they say on the tin, the money may be clawed back. Conditionality on individual schemes, and holding a bit of money back until they are proven to be spending appropriately, is right.
We agree with the Government—or the Government agree with us, because it is that way around—that conditionality on a country basis is wrong. The UK is not a member of the euro, and we are not part of the growth and stability pact. There is general agreement that, for ERDF purposes, applying conditions to the UK that are attached to that pact would not be right.
As a Committee, we believe that there is merit in transitional arrangements for regions where GDP is between 75% and 90% of the EU average. Having a cliff edge where regions below 75% get something and regions above 75% get nothing is not right. The Government, however, disagree and feel that all ERDF funding should go to the poorest areas. I declare an interest because south Yorkshire is one of the areas that has benefited from transitional arrangements, or their equivalent, in the past.
Have the Government analysed the potential effect on European funding in the UK of ruling out transitional areas altogether? That is not going to happen, because the EU is proceeding with the transitional areas, but the Government seem to be shooting themselves in the foot by denying UK regions the possibility of European funding through a transitional area designation.
John Healey
Does my hon. Friend find it remarkable that, right up to the very last moment of the recent budget negotiations, the Government were opposed to any transitional region status as part of the budget settlement? In fact, it is because of the determination of other countries to see such arrangements in place that 11 regions across the country, including the one we share in the Sheffield city region, stand to benefit. May I tempt him to go a little further by urging the Government to consider switching their attitude by embracing the fact that we have such funding for the next seven-year period? Let us ensure that we make the most of that funding.
Mr Betts
I hope that will be the case. Clearly, we are where we are, and we ought to spend the money properly. Government support would be most welcome. Did they think through their opposition to the transitional regions? Did they consider the net impact of such resistance on the UK and our economy? Their position seemed strange.
When we discuss Europe in Parliament, battle lines are increasingly drawn on a party basis, but that is not always so. The report was all-party, and it was agreed by all members of the Select Committee. We looked at the issue of ERDF funding and Britain’s contribution, which is a net contribution to the total ERDF budget. We were supportive of the United Kingdom as a relatively rich country contributing to ERDF spending in the poor regions of the EU. That was accepted and not a problem—that is part of what the EU is all about, to rebalance our total European economy and to give assistance to the poorest regions. We did look, however, at the fact that the United Kingdom gets money back from the European Union; because we are a net contributor, in effect we are paying money over to Brussels and Brussels is paying it back to us. There is a way in which that position can be improved.
We talked about repatriation and thought that the Government would be all in favour of that. The Prime Minister recently made a speech about taking certain powers back to the United Kingdom from the European Union, and our suggestion would fit in with that. Strangely, it was something that the previous Government was trying to achieve as well. No one is arguing that that would be easy to achieve, and we would probably not get a majority for it in the next spending round anyway, but we thought there was a better alternative to passing money backwards and forwards and to having a set of European rules and a set of UK rules. The British Government could make a commitment: “This sum of money we would be transferring to Brussels and having transferred back to us, so we commit over the spending period of the European Union, over the next seven years, to spend that amount of money in the UK. We commit to spend it on those regions that are identified as either below the 75% level or with the transitional region status, but we will do so in line with our own developed policies in this country.” It could be scrutinised by the EU but, essentially, we would not have to pass money backwards and forwards, or to have another level of direction from the European Union, and we would save on administration and double layers of bureaucracy. That seemed to be a remarkably sensible recommendation, and we do not understand why the Government do not get it.
We thought that the Government had a general objective to bring powers back. We can disagree about what that might involve in the round, about referendums and their timing and about all such issues, but the Committee felt that that practical measure was a sensible proposal, which would mean less bureaucracy, less transfer of funds and more decisions made locally, but with the UK Government committed to ring-fencing the money, so that it is identified and committed for seven years and committed for spending in particular areas.
John Healey
In stressing the fact that what my hon. Friend urges on this Government, the previous Government committed themselves to doing, I do not want him to gloss over an important difference. The previous Government made exactly the commitment, in arguing for that repatriation of structural funding, that he is urging this Government to do as part of the overall argument. We made the commitment that we would ensure that the amount of money due to the UK through the European structural funds would be secured and guaranteed to those areas as part of our argument to Europe about repatriating such powers and decisions.
Mr Betts
Absolutely. It was repatriation within an overall European commitment to be consistent in the amount of money we spent and the areas in which we spent it, as well as in the general purpose of that spending.
The Government response was that the Treasury cannot commit for seven years. Of course it can. The Treasury is committed to the European budget and our contribution to it over seven years. The Treasury therefore makes such a commitment anyway. Why it could not ring-fence money in the way that we recommended seemed an inadequate non-response to what we thought was a practical, sensible proposal.
I have been through the Committee’s major recommendations. There are clearly areas of agreement with the Government: the value of ERDF funding; the simplifications proposed by the Commission; and doing things more locally. There are major issues on which the Government response was not as good as we might have hoped: whether we can guarantee that the money will be spent; the availability of match funding and the distortion of spending through non-availability; the transition areas; and repatriation. Perhaps the Minister can offer some further explanation in due course on those matters.
Mr Foster
In simple terms, I am very happy to give that assurance.
I am delighted to have this debate because there is a good-news story to tell about how we are making use of European funds, particularly ERDF money. All hon. Members present know that, with the European social fund, ERDF is one of the two European structural funds aimed at reducing disparities between and within member states. I want to say a little about the past as that has been touched on, a little about the present and, as questions have been asked about it, a little about the future.
All hon. Members present know that ERDF funding is an important part of our growth agenda, and during the current 2007 to 2013 funding period—hon. Members are aware that we are dealing with calendar years—it represents some £2.7 billion in England.
As the report focuses on England, it is only to England that I am referring; responsibility for the use of those funds in the devolved Administrations is not subject to our deliberations today. The funding represents £2.7 billion in England, which is matched with equivalent funding from other sources, and that is delivering jobs and businesses right across England.
Since the 1994 programme began, England has received some £8 billion from the ERDF over the three programme periods that have occurred, up to the end of this year. That has supported growth in a variety of different ways, creating jobs and supporting businesses. Just to give a flavour, the 2000 to 2006 programme supported more than 6,800 projects, created nearly 180,000 new jobs and helped more than 200,000 small and medium-sized enterprises. That is a serious contribution to growth by any standards.
A whole range of different projects have been supported. Some are large and high-profile, such as the very well known Eden Project in Cornwall and the Manchester Metrolink. Others have been much smaller and focused on the needs of communities, such as a project in Leicestershire that coaches women to help them become entrepreneurs. The ERDF has supported innovation, such as through a project in Cambridgeshire, which uses hemp to create lightweight components for industry. I could give many other examples that illustrate the different ways in which the ERDF contributes to growth.
The Government’s first priority when they came into office was to sort out some of the financial liabilities that had been left by the previous Administration. Poor management had led to a situation in which auditors from the European Union were basically imposing financial corrections on England—on our Government—totalling some £236 million for the 2000 to 2006 programme. That quarter of a billion pounds would have to have been met by the taxpayer. However, because of the excellent work done within my Department, we have now got that figure down from £236 million to just £14 million, and we are working to try and resolve that small amount as well.
So far, the 2007 to 2013 programme has delivered more than 42,000 new jobs and more than 11,800 new businesses. It is absolutely on track to achieve the target of creating more than 135,000 new jobs by the end of the period. The period of the funding stops in 2013, but the programme rolls on to 2015, by which time the money has to have been spent. The programme has already contracted with projects to deliver more than 31,000 new businesses, which is twice the number set at the beginning, in 2006.
As the hon. Member for Sheffield South East (Mr Betts) —the Chairman of the Select Committee—rightly pointed out, we brought the management of the fund into the Department following the abolition of the regional development agencies. We introduced standardised management systems to ensure that the same procedures were followed right across England, so that we can track our liabilities much more accurately than in the past. That has resulted in some efficiencies in the resources that the Department uses to administer the programme, and ensures that the risks of ineligible expenditure are reduced. I hope that that answers the question asked by the hon. Member for Derby North (Chris Williamson). We are leaner, but fitter, and we are more efficient in delivering good value.
As the Chairman of the Committee will well remember, when the European Commission gave evidence to the Select Committee last year, it was asked how we had managed the transfer from the RDAs to the Department. As the hon. Gentleman acknowledged, the European Commission said that it had been “well managed” and considered that we had done a good job in handling the transition. I was delighted that the hon. Gentleman confirmed that, but as he said, it is not all perfect. There are concerns in some parts of the country. He gave the west midlands as an example, so I can help him by giving the most up-to-date figures—I know that he always likes to be kept up to date.
The situation in the west midlands is that we have now contracted £254 million of the allocated funding of £328 million, leaving £74 million to be contracted. So far, we have created 7,404 jobs, and we are contracted to deliver 17,704, despite the target having been only 11,550. From that information, I hope that the Committee Chairman gets the clear indication that we are confident that the west midlands is now very much on track—not only to deliver, but to deliver more than was originally targeted.
Mr Betts
I think that that was a reassurance from the Minister, but I got the point that £74 million was still not contractually committed, and presumably there are similar figures for other regions. Does the Minister have a total figure for money that is not contracted, and if it is all right in every region, why are civil servants ringing round, saying, “Can you deal with underspends from other regions?”
Mr Foster
Let me answer the hon. Gentleman’s question and another one. He also asked, “Would it not make sense to slightly overplan, in case there is some slippage?” In terms of the £74 million, I can tell him that negotiations are under way for some £83 million of contracts, so we are well on the way to using up the money and getting the match funding, which he is concerned about. However, because he has recommended it to us, and it is on his advice, we are going slightly over the top to allow for the slippage that he thinks might occur.
I hope that the hon. Gentleman will commend us for what we are doing. If he asks me whether I have got the information for all the other regions, the answer is yes. He can take his pick, and I will happily give him the answer for each and every one of them to demonstrate that, in every part of the country, we are now on target to deliver what we are committed to—and in many cases, to deliver more than we were originally expecting to achieve.
Mr Foster
I am more than happy to take account of the hon. Gentleman’s request. I will not make an absolute commitment immediately, because it may be more helpful, on advice, to defer doing so until we are further along in some of the pipeline negotiations that are well under way. In broad principle, however, I have no objection to making the information available, but I hope that he will allow me to consider the most efficient time to do so—for his benefit, as well as that of his Committee and all Members.
Mr Foster
The hon. Gentleman is getting a little uptight about something that is very simple. I hope that he would agree that I am taking a responsible position: I am saying that I am more than happy to make the information available, and I am merely adding that I will seek advice on the most propitious time to do so. New data that will give us a clearer picture may be expected tomorrow. That is all I am saying. I will make the information available as soon as possible.
Mr Betts
I thank the Minister for what in almost all respects was a very positive response to the Select Committee’s report. First, I thank him for his commitment to send to the Committee the results of the evaluation of ERDF spending, which he has already contracted to do. That will be most welcome when we get it. It is a difficult task, as we appreciated in our report, but it should be worth while, to enable spending in future rounds to be even better targeted, so we welcome that completely.
Secondly, on transitional regions, the Committee thinks that the Government were simply wrong in their initial objections, but I am pleased to hear the Minister say that transitional regions will be there for the next spending round and that the Government will fully commit to ensuring that the money is properly spent in those regions, with the full engagement, asked for by my right hon. Friend the Member for Wentworth and Dearne (John Healey), of the LEPs and local authorities in those regions. That is most welcome.
The Minister offered reassurance about the Government’s commitment to ensure that all the ERDF money was fully spent. Again, that is welcome, although the Minister did act as a bit of a tease. He was saying, “I’ve got all this information here. You can have any bit that you want. Just ask for it.” I then asked for it all and was told that it might come in due course when the time was right and subject to the advice of those who advise him. Well, yes, okay, we will have to leave it at that for this afternoon, but we look forward to receiving the information in the Committee and in the Library at an early date, so that we can be reassured on those matters.
I still think that some projects with the best chance of delivering value might not go ahead because of the non-availability of match funding. The Government must address that problem; we have not got to the bottom of it this afternoon.
I have two final points. We welcomed in our report the pooling of the spending pots. The Government are clearly seized of the importance of that. Using the LEPs as building blocks is very welcome. That relates to my right hon. Friend’s point about the Heseltine report. I would warmly welcome such funding or funding through the Heseltine measures being further devolved to local areas, for the LEPs and local authorities to build on, together with European and city deal money, and we might eventually move to the idea of community budgets as well. I think that the Select Committee will look at those issues.
Mr Foster
I apologise that I did not pick up the point about the Heseltine report. I am sure that the hon. Gentleman will understand that, with a Budget to come in the very near future, I can only give him an assurance that that issue will be addressed at that time, when an announcement will be made. I clearly cannot say anything more about that at this stage.
Mr Betts
Again, that sounds like a helpful response, but we will wait and see. We will start to see a different landscape of European funding decisions being made flexibly, together with other pots of money, to make a real impact locally. That is a move forward that can be welcomed.
Finally, on repatriation, I am not sure where the penalties came in. It certainly was not an issue that the Government raised with us. However, it is an issue for the future. It seemed to the whole Committee to be a sensible suggestion. I hear from the Minister that, in principle, it has not been ruled out. It will be looked at in future in terms of relationships between the UK and the European Union. That is to be welcomed as well.
I thank the Minister for his response. We will await further information from him and await the reports of the review, and we might return to the issue in the Select Committee in due course.