John Healey
Main Page: John Healey (Labour - Wentworth and Dearne)(11 years, 2 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.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
It is a great pleasure, Ms Dorries, to serve under your chairmanship, and it is a great pleasure again to be in the Chamber debating with the excellent Chair of the Select Committee on Communities and Local Government. I thank him and the cross-party members of his Committee for their excellent work and this excellent and helpful report. I also thank him for his thoughtful contribution today in which he was broadly supportive of much of the Government’s work in this area. He was very supportive of ERDF funding and the work that it achieves, but he rightly asked some questions. I will pick up some of them in more detail in a moment.
I agree with the Chairman and his Committee that the research to which he referred is important, so that we are absolutely clear about what arrives as a result of ERDF funding in the creation of businesses, jobs and so on. It is really important. We have commissioned Regenerist Ltd to do that work for us. It is under way and will be completed by the summer. I give a commitment here and now that we will share its report with the Committee.
I do not want to become too bogged down in debates about the European Union and my right hon. Friend the Prime Minister’s negotiations, which have delivered an extremely good deal for this country. You would call me out of order, Ms Dorries, if I did so, but the purpose of objecting to transition regions was that we believe —I suspect that the Committee Chairman shares this view—that European structural funds should be used predominantly to help the least well off, whether in this country or Europe.
We believe that making additions to the pot could have increased the cost to this country and not delivered. Having said that, because of the work that my right hon. Friend the Prime Minister did so successfully in his negotiations with the EU about the funding deal, it has been possible for the transitional regions to go ahead. I will say later how we will get the best use of the next funding stream to ensure that those transitional regions, with other parts of the country, benefit to the greatest effect, taking in part the Committee’s advice.
John Healey
I am grateful to the Minister, but I think he may be trying to deflect me in cueing me for this intervention. He referred to the successful negotiations on the EU budget from the UK’s point of view, but does he recognise and will he confirm that up to the point of agreement the Government remained opposed to a transition regions category?
Mr Foster
I will confirm that. At the last minute, when we got the deal that we thought was in this country’s best interests, we were able to cease opposition to transitional regions. We now have them, and we will make effective use in those regions of the money that becomes available. We will do that in ways that were recommended in part by the Committee, and I will return to that if I can.
John Healey
I welcome that confirmation and reassurance about now wanting to get best use from those funds. That will be welcomed by the local authorities in the 11 areas that may gain. They are led by all political parties and have worked effectively together to support the case for those transition regions in future. Perhaps the Minister will assure them that they will be a central part of the discussions about how best to use ERDF money for the next seven years.
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.
John Healey
I am grateful and I do not wish to pester the Minister with interventions, but he did just say that he would give the information at the time most convenient to the Select Committee and the House. That time is now. As my hon. Friend the Member for Sheffield South East (Mr Betts) rightly said, we would like the picture now and the Minister does have it. If more projects and commitments are in the pipeline, that is good—let us have an update on those at an appropriate time as well.