Exiting the European Union (Structural and Investment Funds)

Lord Harrington of Watford Excerpts

Tuesday 19th February 2019 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

I beg to move,

That the draft European Structural and Investment Funds Common Provisions and Common Provision Rules etc. (Amendment) (EU Exit) Regulations 2019, which were laid before this House on 28 January, be approved.

When debating statutory instruments, we normally say how honoured we are to serve before the Chair, whoever he or she may be. This is the first time I have debated a statutory instrument in the Chamber, so I do not know whether I should say it is an honour to do so before you, Mr Speaker. If you took it as read, you would be entitled to do so. [Interruption.] The Opposition Whips are chuntering from a sedentary position, and they do themselves no credit.

[Chris Elmore (Ogmore) (Lab)]

That is bordering on the scandalous.

[Richard Harrington]

Indeed so.

In a no-deal situation, this instrument will repeal the European regulations concerning the European structural funds, while ensuring that the funds can continue operating domestically. It will also repeal the regulations on the Cohesion Fund, for which we are not eligible.

The structural funds include the European regional development fund and its cross-border European territorial co-operation component, and the European social fund. The structural funds are shared management funds that support regional investment across the UK, and they are funded via the EU budget, with co-funding provided by project participants. Typical projects include the recently launched advanced engineering research centre in Sheffield, which supports economic development and upskilling in the local economy. Typical cross-border projects under the European territorial co-operation component of the structural funds include the intelligent community energy project on smart energy. Three UK universities and local small businesses are working in collaboration with French research centres and small and medium-sized enterprises to find local solutions to support low-carbon energy systems.

In a no-deal scenario, the United Kingdom is expected to lose access to European funding. To ensure that this regional funding continues in a no-deal scenario, the Government announced in 2016 that they would guarantee funding for structural funds projects signed before we leave the EU—that was extended last July to cover new projects signed after exit until the end of 2020. That guarantee covers UK beneficiaries and, exceptionally, all beneficiaries of the Peace programme in Ireland and Northern Ireland, and Interreg V-A in Ireland, Northern Ireland and Scotland. This is due to the Government’s continued commitment to support peace and reconciliation in Ireland.

This statutory instrument facilitates the domestic delivery of structural funds in a no-deal scenario. It repeals the European regulations for these funds, as they would become inoperable retained European law and therefore would not work, because the European regulations create a shared management programme between the EU and a member state. Keeping them would create obligations that the managing authorities of the funds could no longer meet after a no-deal exit.

The instrument also ensures that for European regional development fund and European social fund projects started before exit, current fund delivery rules would be upheld through existing funding agreements, without keeping redundant EU regulations. The powers to continue paying project beneficiaries in the UK already exist under our domestic law, so the instrument does not make provision for projects started after exit. Managing authorities for the funds will none the less continue to sign new projects under existing domestic powers and using existing delivery systems, with appropriate simplifications. So the main aim is to provide stability for beneficiaries, and the project rules will continue to be enforced through the same funding agreements. Hon. Members should also note that this instrument ensures that structural funds delivery remains a devolved matter.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I will refrain from asking my hon. Friend’s opinion on a no-deal. Structural funds are there primarily to try to rebalance our economy, through regional investment right across the UK. Whether we are in the EU or out, and whatever state we are in afterwards, does he agree that it is hugely important that we spend a greater proportion of our investment on infrastructure and other economic development in the regions, rather than in the capital?

[Richard Harrington]

I totally agree with everything my hon. Friend said, other than not asking my views were on no deal. I think he knows those, and I hope most people in the House do.

[John Redwood (Wokingham) (Con)]

Will my hon. Friend just tell us what the dispute resolution procedure is?

[Richard Harrington]

If my right hon. Friend would bear with me, I will address that later in my remarks—I thought he was going to ask me the same question.

This instrument includes a transitional provision that enables the guarantee to be paid out to bodies involved in a European territorial co-operation programme. The power to fund beneficiaries of cross-border programmes currently comes from European law, and therefore needs to be continued in domestic law through this instrument to protect beneficiaries in a no-deal situation. That will enable the United Kingdom to continue to participate in cross-border European territorial co-operation programmes involving Northern Ireland, Ireland, and Scotland. Those programmes, known as Peace and Interreg V-A, support peace and reconciliation on the island of Ireland.

The EU has made special provisions to enable the United Kingdom to continue in both Peace and Interreg V-A in a no-deal situation, if the United Kingdom continues to pay for its share of those programmes. The transitional powers in this instrument enable the United Kingdom to make such payments to the EU to enable our continued participation in the event of a no-deal. That is consistent with our general commitments to Peace and Interreg V-A. In this arrangement, the European regulations do not need to be retained. The United Kingdom will sign an agreement with the EU to ensure that programme beneficiaries continue to follow relevant rules. The transitional provision to pay the guarantee to European territorial co-operation beneficiaries also ensures that beneficiaries of cross-border programmes other than Peace and Interreg V-A can be paid sums from the guarantee. Specifically, this provision gives Her Majesty’s Government and the devolved Administrations the appropriate powers to ensure that UK partners of such cross-border projects can receive the guarantee through domestic arrangements, to safeguard for all possible no-deal scenarios.

Among such scenarios, the House should note that in a no deal, without further changes to the European Commission’s regulations, UK organisations would be unable to continue in the majority of European territorial co-operation programmes, other than Peace and Interreg V-A, as they would not have third country access to the programmes. This instrument is designed to enable UK partners to access funding in such a scenario. The EU has published a no-deal regulation that would allow the UK to continue participating in EU programmes in the event of no deal until December 2019. However, that would depend on the UK agreeing to continue to contribute to the 2019 budget as if we were a member state. This proposal is subsidiary and without prejudice to the EU’s specific proposal on Peace and Interreg V-A. The Government are currently analysing the Commission’s proposal, but hon. Members should rest assured that this instrument will allow the guarantee on European territorial co-operation programmes to be distributed in any scenario.

Without this statutory instrument, delivery Departments would not have the powers to pay out the guarantee to beneficiaries of European territorial co-operation programmes.

Without legislation, the United Kingdom would not be able to pay for its share of the Peace and Interreg V-A programmes involving Northern Ireland. That would mean we could not take part in these two important programmes, and current beneficiaries of those programmes would be at financial risk.

I mentioned briefly the separate legal provision being made by the EU for the UK to continue to participate in the Peace and Interreg V-A programmes. That provision is intended to enable continued access to the programmes in the event of no-deal, but it does not resolve the problem of payment powers. That is why we need both the EU regulation and this statutory instrument to safeguard these programmes and to ensure the continuation of their benefits.

[John Redwood]

Before the Minister moves on from the money, will he explain how the money would be calculated, and whether we would have to make a contribution to the administration costs or just to the actual costs of the programme?

[Richard Harrington]

If I may, Mr Speaker, I will use this opportunity to answer my right hon. Friend’s earlier question about the dispute resolution. Any disputes in relation to how funding is spent are dealt with through the audit and default functions and the provisions set out in the existing funding agreements. As for his second question, I will have to give the matter some thought, as I must confess I do not know the answer. If I do not think of it in the next half an hour or so, I will certainly write to him with the answer on that. My memory is quite good and usually things come back in due course, as I know they do to you, Mr Speaker.

I mentioned that the EU is making separate legal provision for us to continue to participate in the Peace and Interreg V-A programmes. That provision is intended to enable continued access to the programmes in the event of no deal, but it does not resolve the problem of payment powers, which is why we need both the EU regulation and this statutory instrument to safeguard those programmes and to ensure the continuation of their benefits. Not having this instrument in force by exit would also prevent the Government and our devolved Administrations from paying out the guarantee to UK partners of other territorial co-operation programmes, risking their financial viability.

[Chris Elmore]

I do not think anyone on the Opposition Benches objects to what the Minister is saying. In fact, I am sure that he and I agree about the catastrophe that could be a no deal. Will he care to expand on what would happen with the shared prosperity fund beyond any transition period and beyond any deal? Currently we seem not to know. The Minister is an honourable man, and it would be helpful if he could give the devolved Administrations some reassurances about how the prosperity fund will be managed and what funds will be available to regenerate communities in my constituency.

[Richard Harrington]

As the hon. Gentleman—who, for the record, is also an honourable man—would expect me to say, that is not actually within the scope of this particular statutory instrument. I know, Mr Speaker, that in this case you do not have to rule on the scope of it, but the answer to the hon. Gentleman’s question is quite long, so I am happy to discuss it with him outside the Chamber, if that is acceptable to him.

[Chris Elmore]

indicated assent.

[Richard Harrington]

I think I got away with that one, Mr Speaker, but I am not sure. [Interruption.] For now, Mr Speaker.

The House should note that this instrument is designed for a no-deal scenario. If there is a deal, the intention is to include a provision in the withdrawal agreement Bill to defer commencement of the regulations until the end of the implementation period. For that reason alone, I urge all right hon. and hon. Members to vote for the EU withdrawal agreement Bill. That deferment would mean that the regulations would come into force at that point, rather than on the date of exit.

In conclusion, in a no-deal scenario this instrument repeals redundant European law while ensuring that regional investment projects previously supported by the EU, including those supporting peace in Northern Ireland, are protected by the funding guarantee. For those reasons, I commend the regulations to the House.

--- Later in debate ---

[Richard Harrington]

Welcome to the Chair, Mr Deputy Speaker. As I explained to the Speaker, this is the first SI that I have done in the Chamber, and I had not realised that this would be a general debate on the European Union. Most Members’ views on that subject are quite clear—many of us share the same views, while some of us disagree—but for the purpose of this statutory instrument, I will try to answer some of the questions people asked about the specifics, if that is acceptable to you.

My right hon. Friend the Member for Wokingham (John Redwood) asked how the funds for the Peace and Interreg V-A programmes would be calculated—those are the funds our country would have to pay to the EU to get back. I can confirm that the UK would pay its full share of the Peace and Interreg V-A programmes, including—this is what he wanted to know—the administrative costs. If he would like further detail, I would be very pleased to try to answer more detailed questions.

I thank the shadow Minister for supporting the gist of the statutory instrument. She asked me quite a lot of questions, which I shall do my best to answer. A lot of them were to do with her views on regional inequality generally, which is slightly wider than the scope of this statutory instrument. However, I must say that I absolutely agree with her, having been brought up myself in the north of England and in a country where government was very centralised.

When I was doing my A-levels, I went to visit—I think this was in her constituency, but it was probably a long time before she was born—[Laughter.] One has to do one’s best to soften up the Opposition a bit, but that was actually true in her case. However, when I was a school student, I went up to visit the local National Economic Development Council, which was an offshoot of the Government. Well-meaning civil servants tried to give people Government money to, basically, invest in companies in the region. We were also shown the devastation caused by the end of mining and other things. That should be very familiar to the hon. Lady, and it is also familiar to me, coming as I do from Yorkshire.

Successive Governments—Labour and Conservative—have tried their best to deal with that issue. In some cases, they did that by pretending that the Government should not have an industrial development policy, which I have no truck with at all. Following that, there was a more centralised approach by the Labour Government, with the best intentions. Then there were different attempts to devolve, either through legislation, as in the case of the Scottish and Welsh authorities, or through regional policy, which I very much support, to try to have local delivery mechanisms. Local mayors are a very good example of that—irrespective of political party, the structure is a very good way to try to address the imbalance—alongside local enterprise partnerships and the northern powerhouse initiative.

The Opposition argue that that is fine, but a lot more money needs to go into the machine in the first place. That is always arguable: Oppositions always say they want to spend more money and Governments of whatever complexion say that they have to find the money from somewhere. Those are well-rehearsed arguments, but I would like to place on record that I fundamentally agree with the point, which was very well made, that devolution and more money to regions are absolutely vital.

The shared prosperity fund will invest in the foundations of productivity, as set out in our industrial strategy, to support people to benefit from economic prosperity. I fully accept that the Opposition and many other hon. Members—not just Members here today—want to know what it will look like. The written ministerial statement in July stated clearly that the fund is designed to tackle inequalities between communities, especially in those parts of the country whose economies are furthest behind. The hon. Member for Argyll and Bute (Brendan O'Hara) argued that case very well. I will address some of his more specific points in a moment, but that point was very well made. The fund is there to invest in the foundations of productivity, which we put in our industrial strategy document: ideas, people, infrastructure, place and a business environment. It will be an integrated, simplified fund that operates throughout the UK, not with centralised decisions.

What are the Government going to do now? I accept the Opposition’s point, but it is always difficult if you are in government. You have to consult everyone and form an actual policy, otherwise one gets criticised—not you, Mr Deputy Speaker; you would not be criticised at all. Unless the Government consult they get criticised, through legal challenges and so on, for not consulting properly. There will be a proper consultation shortly to recognise that there are a lot of interested parties with different opportunities. It will inform our decisions on the composition of the shared prosperity fund, which will be taken at the spending review later this year.

I would like to set the record straight: the shared prosperity fund will respect the devolved settlements. We have made it very clear that we will continue to work in partnership with the devolved Administrations to ensure that the fund works for all places across the Union.

There have been calls for clarity and we are working on that. The Government are holding engagement events with stakeholders from a variety of sectors across the country, including devolved authorities. We have to discuss the lessons of the past and learn from them, as well as potential investment priorities. I believe that next year, when the spending review consultation takes place, we will be able to move a lot more quickly.

The Government have guaranteed funding for all structural fund projects signed before exit in the event of a no deal. The guarantee can also be used to fund projects started after exit. This will protect beneficiaries under the settlement and regional investment will continue as planned.

My hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) has said on a number of occasions, with his usual dignity and tact, that we disagree on certain matters. However, one thing that I absolutely agree on is the way he works so diligently to push the interests of his constituents and the importance of regional plans. He mentioned Mayor Ben Houchen and others. I really think that this is a model for the future. Whatever one’s views on other subjects—again, I apologise for talking about your views, Mr Deputy Speaker—I think everyone agrees that Middlesbrough South and East Cleveland could not have a better Member of Parliament representing its interests. He reiterated the importance of the shared prosperity fund to his constituency.

The hon. Member for Argyll and Bute, the SNP spokesman, also gave his views on Brexit generally. Rather than rehearsing those arguments, I would like to talk specifically on the point he mentioned about why the Government are taking a different approach in this statutory instrument to the agriculture and fishery funds. The European agricultural fund for rural development and the European maritime and fisheries fund share some regulations in common with structural funds, but this SI makes provisions only for the structural funds. There is a separate SI for the agricultural and fisheries funds, which will retain and amend the EU regulations in so far as they apply to those funds. That is why they are being treated differently, unlike the European regional development and the European social funds. He asked why this is happening before the Report stage of the Agriculture Bill. It is because this SI is designed to address structural funds. The DEFRA SI will deal with the agricultural fund, which this is not related to.

Finally, I commend the speech from my hon. Friend the Member for Boston and Skegness (Matt Warman) and thank him for his support. He made the excellent point—often not made in this House—that the distribution of funds should come with love as well as money. I am sure that he could be in charge of love in his constituency—actually, I am sure he is doing that very well at the moment. I have tried my best to answer the questions that were asked, and I commend this SI to the House.

Question put and agreed to.

Resolved,

That the draft European Structural and Investment Funds Common Provisions and Common Provision Rules etc. (Amendment) (EU Exit) Regulations 2019, which were laid before this House on 28 January, be approved.