Shared Prosperity Fund: Wales

Ian C. Lucas Excerpts

Wednesday 14th November 2018 Westminster Hall

[Ian C. Lucas (Wrexham) (Lab)]

I beg to move,

That this House has considered Wales and the Shared Prosperity Fund.

It is a pleasure to see you in the Chair, Mr Hollobone. I welcome the new Minister from the Wales Office; I think this is his first official appearance at the Dispatch Box. He will find us a welcoming but challenging bunch in Wales. I am sure that we will have a good debate, and that his noble Parliamentary Private Secretary, the hon. Member for Montgomeryshire (Glyn Davies), will look after him just as well as he has looked after the Minister’s many predecessors.

One of the extraordinary aspects of the Government’s approach to Brexit is their failure to address some of the fundamental reasons for the leave vote before the act of leaving. Obviously there is a lot happening as we speak on that issue, but on major areas of policy—such as immigration policy—we still do not know what the Government propose for the post-Brexit world. A hugely important area that they are not speaking about is regional funding, which we will address today. I hope that this will be the beginning of a debate about changes to regional funding that takes into account the views of Members right across the United Kingdom and right across Wales—this is a very important subject in Wales.

It is true that Wales has been one of the major beneficiaries of EU structural funding. Between 2014 and 2020, west Wales and the valleys will have benefited from investment of more than £2 billion from the European Union.

[Nick Thomas-Symonds (Torfaen) (Lab)]

I congratulate my hon. Friend on securing this important debate. My constituency in the valleys has benefited enormously from structural funding. Does he agree that one of the problems with UK priorities, and with the shared prosperity fund, is that areas that have benefited have no guarantee of benefiting to the same extent in the future?

[Ian C. Lucas]

Absolutely. Certain areas of Wales have benefited much more than others. East Wales received £406 million in investment between 2014 and 2020—a lot less than west Wales and the valleys. Investment is determined by rules set at EU level that govern the distribution of state aid and are intended to compensate for regional disparities.

Since the 1980s, one of the fundamental drivers of the UK national economy has been the inexorable rise of south-east England. The huge investment that it has received at the expense of the rest of the country has had a long-term negative effect on many of the areas that we represent. EU structural funds have gone some way towards compensating for its dominance, but have failed to check it altogether or to bring about a fairer long-term distribution of wealth and investment across the UK. If we are leaving the EU, we need that move to achieve a benefit for our constituents in the future. It is imperative that a system is put in place to benefit the regions of the UK that have been left behind by economic development.

It is unfortunate that notwithstanding the importance of the issue, the Government have given very little indication of how the UK regional prosperity fund will operate. I do not believe that they have even given a commitment that the amount of money distributed to Wales will not fall. I have asked the Secretary of State for that assurance and for more detail on what the fund’s rules will be, but I have had very little information from the Government. It is high time for it, because we are at a hugely important moment and lots of businesses and organisations in all our constituencies are interested in exactly what will happen. Will the Government please answer some of our questions?

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

Does my hon. Friend share my concern that many regeneration projects in Merthyr Tydfil and Rhymney and across Wales simply would not have happened without EU structural funds? That makes it all the more important that we get some certainty about the prosperity fund. Wales needs to play a part in how the fund is managed.

[Ian C. Lucas]

Certainty is something that all our constituents and all the businesses in our constituencies crave, but it has been sadly lacking in the period since 2016, so I would like the Minister to provide some in his début today. First, can he assure us that Wales will not receive less in funding under the new UK regional prosperity fund than it does under EU structural funds? Secondly, and importantly, will the rules of the UK prosperity fund be set at UK level, with the same rules applying across the devolved nations and regions? Will there be any difference between rules in Scotland, in the regions of England, in Wales and in Northern Ireland, or will the rules apply in the same way as the current EU rules?

[Wayne David (Caerphilly) (Lab)]

I think we all welcome the fact that a prosperity fund is to be created. Following on from my hon. Friend’s argument, does he accept that the sensible and most effective thing would be for the Welsh section of the fund to be administered by the Welsh Government? That would ensure that the fund enhances the work that the Welsh Government have already conducted.

[Ian C. Lucas]

My hon. Friend must have read my speech on the quiet, because my next question is who will administer the fund—will it be administered by the UK Government or by the devolved bodies?

[Luke Graham (Ochil and South Perthshire) (Con)]

The hon. Gentleman is making a very interesting speech, but does he not see the advantage of having the UK shared prosperity fund administered centrally, to ensure that it has the depth and breadth to fund the projects that are needed around the United Kingdom? For example, tidal power schemes may need more than the amount that would be allocated on a devolved nation basis. Secondly, does he not appreciate that as we leave the European Union, it is a good time for Members of this House to strengthen our own Union by advocating that projects be funded directly here in Westminster?

[Ian C. Lucas]

It is interesting, isn’t it? The EU rules apply EU-wide, so there is a certain logic in a UK prosperity fund having UK rules that apply across a single market within the United Kingdom. I would not want a race to the bottom as a result of rules being applied differently in different countries of the United Kingdom, so I understand the argument for applying a single set of rules so that we do not have state aid in one area being weighed against another—just as the same general EU rules have applied across the UK despite devolution.

This debate is an important one, but we have not had it yet. That was a big mistake, because we could have spent the past 18 months or two years discussing these hugely important issues. I would like that to start today, and I will be very interested to hear the contributions of colleagues.

[Guto Bebb (Aberconwy) (Con)]

The hon. Gentleman is right to say that this is important. The issue is of concern to local authorities and further education colleges in north Wales, but does he agree that, as a result of the efforts to get the north Wales growth deal on board, it is at least being discussed by the relevant stakeholders there? It is therefore a very opportune moment to ensure that comments made in north Wales are listened to, both in Westminster and in Cardiff Bay.

[Ian C. Lucas]

The hon. Gentleman has read my speech, too—I was planning to go on to the north Wales growth deal. I am passionate about regional policy and devolving powers to the nations and regions, but the Government should be giving a lead. It is their responsibility to compensate for market failures with engineering investment to improve a part of our economy that the market on its own would leave behind.

There is agreement across the political spectrum that the present system has not worked as it should for the benefit of all the nations and regions of the UK. We need to reflect on the result of the referendum and ask why investment from the structural funds, for example, has not achieved as much as we would all have liked.

[Stephen Kinnock (Aberavon) (Lab)]

My hon. Friend is making an excellent speech. Surely the best way to ensure the best possible outcomes for our programmes and projects is to decentralise and devolve, empowering local authorities, local stakeholders and the practitioners who will ultimately deliver the projects to design measures and outputs. The people on the ground know best what works and what does not.

[Ian C. Lucas]

That is my next paragraph, which I shall read. As someone who believes in devolved decision making, I believe that decisions relating to investment in Wrexham and north Wales should be made by people who are close to our local economy and community. Historically, the EU’s structural funds system did not work well for my constituency of Wrexham.

Let me give one example. Wrexham Glyndwr University was established in 2008—the first time in our history that we had a university. That was a strategic moment for Wrexham and hugely important. As I said when I was a Minister within the Department for Business, Innovation and Skills, universities are at the centre of developing economies in the modern world. The establishment of Wrexham Glyndwr University was a really important period, but between 2008 and 2014 it received no structural funds at all. The Wales European Funding Office tells us that, in the same period, Swansea University received £89 million, the University of Glamorgan £41 million, Cardiff University £29 million and Bangor University £47 million. There was a lack of investment from the source that was supposed to be supporting the development of the economy in the area that I represent. That was a missed opportunity and will have had a negative impact on the university that we are developing as part of the local economy.

That lack of investment is mirrored in funding for north-east Wales generally. Neath Port Talbot Council received over £89 million between 2007 and 2014, while Flintshire received £3 million. Incredibly, Wrexham received only £446,000. After Brexit, we will need a new system of funding and a fair allocation across Wales. As the hon. Member for Aberconwy (Guto Bebb) said, we have shown the way in north Wales: from the bottom up, local government, MPs, Assembly Members and universities have worked together to produce a growth bid for north Wales to remedy the failings that we believe exist within our local economy. We put forward that growth bid on behalf of the community that we represent; it is very much devised and put together by the local players.

I still get frustrated at having to go with a begging bowl either to the Treasury across the road or to Cardiff Bay to beg for investment. I want those decisions about investment and the power to raise money to be devolved to places such as north Wales, because I have lot of confidence in the north-east Wales economy. Despite the fact that we have not benefited from a lot of the funding that other parts of Wales have had, the economy in north-east Wales has developed during the period that I have been privileged to represent Wrexham. We need to address the defects in our local economy in transport and digital infrastructure. In the future, we will have an insight into our local economy to see where the defects are and to begin to address them.

[Anna McMorrin (Cardiff North) (Lab)]

My hon. Friend is making an excellent speech. Do he and the Minister agree that we need to guard against reverse devolution? If we do leave the EU, we need to be guaranteed of those funds in Wales and across the UK. They must also be distributed by the Welsh Government, because they understand how our local communities work, and they can then further devolve such decisions to places such as Wrexham and local authorities across Wales.

[Ian C. Lucas]

Absolutely. I have already asked for an assurance that Wales should receive no less money. As I have just said, I do not want this decision made in Cardiff Bay or in the Treasury; I would like to see it made on a devolved basis. There needs to be more devolution. When I speak to my constituents in north Wales—my hon Friend knows the area well—I find that their perception is that we need to have more local decision making. The end of the restrictive and fixed rules that have previously existed could be an opportunity, as the Federation of Small Businesses in Wales has highlighted. It said:

“The removal of European boundaries also opens up geographical possibilities…Post-2020 there will be opportunities to refit the business support environment to modern economic boundaries, including…the emerging economic regions.”

I agree entirely with that. We need a structure that accords with the economic action plan of the Welsh Government, which is a very far-sighted document by the excellent Economy Minister, Ken Skates, who is contributing massively to creating a growth-driven, inclusive economy in north Wales. We need to develop that and work within the confines of that economic action plan, working with the Welsh Government rather than sticking to the outmoded geographical model that we had previously, which was restricted by inappropriate local government boundaries. Certain local government areas attracted funding, while others did not. For example, the journey to north-west Wales from north-west England requires going through north-east Wales, which could not attract funding for projects in that area, so the transport system in north-east Wales has not really developed in the way needed to develop the local economy.

I certainly want an assurance from the Government that under any new system they will commit to no less investment for Wales. I also want the new First Minister, when we know who that will be, to commit to a new funding formula that means fairer funding right across Wales. I have spoken many times before about devolution in Wales, the fact that north Wales sometimes feels left behind, and the need to create new structures by working with local government, local businesses and institutions such as universities across Wales to develop an inclusive economy. We must carry forward that devolved system of addressing economic failings in particular areas of Wales.

This is an important debate. We need to grasp and grapple with it in the weeks, months and years ahead. I will be listening intently to the Minister’s response, to try and get some flesh on the bones of what the prosperity fund will look like, and I will also be listening carefully to my Opposition colleagues to hear what they say on the matter. This is an overdue debate, but it is of enormous importance to our constituents.

[Several hon. Members rose—]

--- Later in debate ---

[Albert Owen (Ynys Môn) (Lab)]

It is always a pleasure to serve under your chairmanship, Mr Hollobone. I welcome the Minister to his place and congratulate my hon. Friend the Member for Wrexham (Ian C. Lucas) on securing the debate. I am disappointed that the hon. Member for Monmouth (David T. C. Davies)—the Chair of the Welsh Affairs Committee—chose to talk about other things when the topic of the debate is so important for the future of Wales.

My constituency has been a major beneficiary of both European structural funds and the European regional development fund. In the 1980s, my constituency had twice the national average of unemployment—mass unemployment and mass depopulation, which is why it qualified with low GDP for European structural funds. Objective 1 has been a success in my area and it has helped repair communities through its social cohesion funds. It has also helped port communities with infrastructure—the main gateway between Wales and the rest of Europe—and helped the agricultural, food and farming sector.

As my hon. Friend the Member for Cardiff Central (Jo Stevens) said, the further education and higher education sectors have also been major beneficiaries. There have been real, tangible outcomes in my constituency, such as energy centres, food technology centres and job creation, and Wales and the valleys are benefiting from this.

However, we still need to reflect on how we are going forward, because my area is still a low area of gross value added—GVA—and that needs to change. That is why we need a further commitment from the Government for post-2020: that the circumstances will not change and that there will be real growth. Unemployment in my area is now below the national average, when in the 1980s it was double the national average. That is job creation helped by European structural funds—real people benefiting from real jobs in my area. That is why I am a big supporter.

Even today, we have great investment coming in. In 2015, we had a brand-new, state-of-the-art, innovative science park, which was part funded by the Welsh Government and attracted private investment, but it would not have been possible without the grant from the ERDF. In 2017, we got a business park at Llangefni, which now works closely with colleges and universities to ensure that we get top-quality jobs coming to my area. Again, that did not happen in the ’80s, before the structural funds were put in place in the ’90s. A tourist package worth £1.7 million will help the port of Holyhead, which was damaged by storm—again, some of that money comes from the European social fund. It is a good thing. Energy companies are investing in my area, such as Minesto from Sweden, and a not-for-profit organisation has been set up—an indigenous company in Wales—because of ERDF funding.

[Ian C. Lucas]

Does my hon. Friend agree that the determination of companies and institutions throughout north Wales to work together is a massive attraction to outside businesses to come to our area? We have shown that we work very effectively together and can plan the north Wales growth bid.

[Albert Owen]

Absolutely. That is the next point that I want to move on to. I am a strong supporter of devolution—I have fought for it in referendums, and I have seen its enhancement—but devolution is no good just going from Whitehall down the M4 to Cardiff Bay. It needs to go throughout the areas of Wales, including to north-west Wales and north Wales generally. Real devolution is about empowering people in their local communities. My hon. Friend is right: we have a structure in the north Wales growth bid. We have a board set up, with business and local authority representatives, and they have the ability to be a mechanism for distribution of the new growth fund in the future. I hope that the Minister will take that on board. I know that he is visiting my constituency in north Wales shortly, and he will hear about that.

I want to quote the remarks referred to by the hon. Member for Ceredigion (Ben Lake), in which the Secretary of State for Housing, Communities and Local Government stated:

“The UK Shared Prosperity Fund will tackle inequalities within communities by raising productivity, especially in parts of the UK whose economies are furthest behind…It will have simplified administrative arrangements aimed at targeting funding effectively; and…It will operate across the UK. The UK Government says it will respect the devolution settlements in Scotland, Wales and Northern Ireland, and will engage the devolved administrations”.

I want those words to be put into action. I want the new Minister to take that on board and to work with us, as Welsh Members, to ensure that areas such as mine continue to grow and will benefit from the shared prosperity fund. I do not want to see this Government pull the rug from under the feet of the poor communities, education communities and farming communities that have benefited since 2000. Europe based its European structural funds on need, and that is what we need: to establish the needs of areas throughout the UK, including periphery areas such as the one that I represent, to show that we will go forward, that we do share prosperity and that we share it at a pace equal to that in the south-east of England. At the end of the day, we want a more equal society, economically and socially.

--- Later in debate ---

[Ian C. Lucas]

A number of Members asked for a commitment that Wales would not receive less under the UK shared prosperity fund than it currently receives. I note that this commitment, which has been asked for ever since the general election, still has not been given. There is great concern about that.

[Nigel Adams]

rose—

[Ian C. Lucas]

I will give way to the Minister if he wants to give me that commitment.

[Nigel Adams]

The hon. Gentleman will appreciate that the exact amount must be considered as part of the comprehensive spending review in due course.

[Ian C. Lucas]

It is pretty fundamental that we do not want Wales to lose out. I think I speak for everyone who participated in the debate when I ask the Minister to convey to the Government, on behalf of Wales, that the sum must not be less than it is currently. As we heard, there are different views about how the fund—