EU Funding

John Healey Excerpts

Tuesday 25th February 2014 Commons Chamber

[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?

--- Later in debate ---

[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.