European Regional Development Fund

Lord Foster of Bath Excerpts

Thursday 28th February 2013 Westminster Hall

[Chris Williamson (Derby North) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Dorries, for the first time. I congratulate my hon. Friend the Member for Sheffield South East (Mr Betts) on securing the debate and on the excellent report that his Committee produced. I hope that the Government will look at the report and implement its recommendations.

The European regional development fund is clearly an increasingly important funding stream in a time of austerity, when funds from other sources are under pressure. That brings about its own issues, and local government funding cuts are making life increasingly problematic in enabling local authorities to find the match funding necessary to draw down the important ERDF funding stream. I regret to note that the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth (Brandon Lewis), when he was on the “Today” programme this morning, was urging even more reductions in the years ahead, even though we have already had unprecedented funding cuts to local government. That will obviously make life even more problematic for those councils that seek to secure the funding stream through the ERDF.

I have spoken to a number of colleagues in local government, and there is some anxiety and cynicism about the possibility of an underspend. I am reassured to some extent by what I have heard in my hon. Friend’s contribution and by what I understand Ministers are saying about ensuring that the fund will be spent in total, without an underspend. That has not, however, stopped the anxiety or the cynicism expressed to me by colleagues, who are concerned that under the terms of the UK rebate any unspent European funding or a proportion of it—two thirds of it—is clawed back by the Treasury. The fear is that that might be an under-the-radar funding cut being sought by Government over and above the cuts that they have already made to local authorities around the country.

Last year, there was concern about an underspend of up to £1 billion, but I believe that that is now not likely to be the case. Nevertheless, as my hon. Friend referred to, there is significant concern about projects falling behind or being in danger of collapsing altogether, and a significant sum remains uncommitted at the moment. Two thirds of local authorities are already anxious about their ability to match-fund, so any further reductions in funding will be even more problematic. With 50% of councils falling behind with projects, there is obviously a major problem to be addressed.

For the record, although the debate is not about the abolition of the RDAs, they clearly played an important role in dealing with ERDF funding in the past. My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) tabled a written parliamentary question last year, which was responded to by the Minister for Housing, the hon. Member for Hertford and Stortford (Mr Prisk). My question is about value for money under the new regime, because in his response, he said:

“The net cost per job for the Regional Growth Fund (RGF) was £32,000 in round 1 and £34,000 in round 2. As set out in the NAO Regional Growth Fund report published on 11 May, the detailed appraisal process is in line with HM Treasury’s Green Book and reflects good practice. As set out in the NAO Regional Growth Fund report, the average cost per net additional job generated by Regional Development Agencies occurring as a result of spend between 2002 and 2007 is £28,000, with wide variation between schemes.”—[Official Report, 24 May 2012; Vol. 545, c. 896W.]

Job creation, therefore, is clearly costing up to £6,000 more per job under the new regime than pertained under the old RDA regime. That is a source of concern, particularly when finance is tight. I wonder what the Minister will say in response to that and whether there are any ways in which the Government could assist in obtaining better value for money, or at least the value for money that the previous regime achieved under the old regional development agencies.

There has been a transition of ERDF administration to the Department for Communities and Local Government, but another concern that has been expressed to me is that the teams responsible for administration are quite small, and that might lead to difficulties.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)]

Value for money.

[Chris Williamson]

But will it be value for money if it leads to delays, and results in value-for-money comparisons of jobs created costing several thousand pounds more than under the old regime? The Minister may argue that it is a tighter ship, but if in the long run it does not provide the same value as previously, it should be looked at.

Will the Minister outline how any delays that have been reported will be tackled and what support and assistance he will give to local authorities to deal with them and iron them out. How will he address the shortfall in match funding that local authorities have articulated? The point has been made that two thirds of local authorities are concerned about the availability of match funding. On the “Today” programme this morning, the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth, called for even more reductions in funding for local government, and that will create real tension. How will the Government assist in addressing the shortfall in match funding that we are all aware of?

Will the Minister allow the regional growth fund to be used as a match-funding source, and what steps is he taking to enable novel projects to proceed? I understand that there is anxiety because novel projects may be sacrificed to facilitate the spending of available money by supporting less complicated projects that are easier to deliver. What assurances can he give on that? Finally, what is he doing to maximise the impact of ERDF funding in areas such as Cornwall and the Isles of Scilly where there are particular problems? Perhaps he will outline what steps he can take to ensure that this important fund delivers the maximum impact.

[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]

rose—

[Mr Foster]

I give way to the right hon. Gentleman, whose many interventions have been welcomed by us all.

[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.

--- Later in debate ---

[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 Betts]

I would not burden the Minister with having to read out the whole list, but it would help if he put the figures in writing and in the Library, so that we could see the total picture across the country.

[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 Betts]

Will the Minister give way?

[Mr Foster]

Of course. Please continue—it is much more interesting than giving the speech.

[Mr Betts]

I agree.

I am not sure why the Minister wants to delay. He offered, here and now, to read out the figures for any region, so the figures are available. It would help to have them now; if the Minister wants to update them in due course, he can do that as well.

[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]

Will the Minister give way? [Interruption.]

[Mr Foster]

I will give way to the right hon. Gentleman, but I see that hon. Members are beginning to arrive in the Chamber to discuss nuisance phone calls. I will not treat this as a nuisance intervention, but I do not want to delay hon. Members much longer.

[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.

--- Later in debate ---

[Mr Foster]

I hear what the right hon. Gentleman says, but I have given my answer. I will consider the matter and make the information available as quickly as I can, following advice.

I have already said that I think that we are doing remarkably well. It is great that the European Commission thinks that we have handled the transition very well, and I am delighted that the Chairman of the Select Committee broadly agrees with that. I am also sure that he will join me in praising how we have arranged to be able to use ERDF funds to help us with one very important issue that will assist with growth—the roll-out of high-speed broadband. We have been working closely with my hon. Friend the Under-Secretary of State for Culture, Media and Sport to ensure that that is delivered. In fact, there will be a contribution of some £165 million from the fund to help with that aim. Already, 80% of the allocation has been contracted.

I also want to touch on the future, because that is very important. All hon. Members who follow this issue with interest will know that there are several themes in the 2014 to 2020 programme. We will ensure that we make the most effective use of the funds, and one way we will be able to do that is by following the advice of the Select Committee about bringing the various pots together to provide much greater flexibility in the way they are used. The Departments responsible are working very efficiently together in planning for that.

It will, however, be important also to take on board the concern expressed by the right hon. Member for Wentworth and Dearne (John Healey) about ensuring that, wherever possible, there is local determination of how the funds can be used. That is why we will be using the local enterprise partnerships as the basis for much of the work. We have agreed that they will be the building blocks of the 2014 to 2020 programme. They will be working with a wide range of other interested parties, but they will be in charge of that seven-year set of allocations. However, as I said, there will continue to be local input from a wide range of sources to ensure that local priorities are being met.

We are learning from the mistakes of the past to ensure that we do not saddle taxpayers with large new bills and that the programmes are efficiently and effectively managed in the way we have demonstrated we are now managing them. However, it seemed to me that the real excitement envisaged in the Select Committee’s report was about being able to pool the funds to ensure maximum effect.

We can envisage a scenario in which, for example, a derelict building can be brought back into use and businesses encouraged to make use of it; I am thinking of start-up businesses. People in the area can be provided with the skills necessary to get the jobs in those start-up businesses. By bringing the funds together, we can use the European funds collectively to deliver on that vision. That is what the issue is about.

I want to end by addressing one other point raised by the Chairman of the Select Committee—repatriation. He spent quite a lot of time on that. Let me just say to him that we looked at it. We discovered that it would not work and that it would involve financial penalties. But that does not mean that that is the end of the matter, because we know that the hon. Gentleman feels very strongly about it. It is clear that his right hon. Friend the Member for Wentworth and Dearne feels very strongly about it, and no doubt the hon. Member for Derby North, who speaks for the Opposition, feels strongly about it. That is why the Prime Minister has established a Committee that is considering the whole issue of the European Union and competences. This is one of the areas that will be considered.

There might be an opportunity for change in the light of any further information that the Select Committee, its Chairman or any other hon. Member provides that group working on this issue, but at the moment we have concluded that it is not in the best interests of the people of this country to go ahead, because it would end up costing us money and delivering far less than we are currently able to deliver.

The ERDF has been of enormous benefit. Given the bringing together of the funds, the slimmer, tighter and more efficient management organisation, the local decision making that will come through the LEPs to deliver what local people really need and the opportunity provided through the transition regions to spread the money fairly across the country to meet needs in all parts of the country, the future will be a very exciting time. We have done well so far, and there are very exciting times ahead.

[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.