Draft European Structural and Investment Funds Common Provisions and COMMON PROVISION RULES ETC. (AMENDMENT) (EU EXIT) (REVOCATION) REGULATIONS 2020

Rupa Huq Excerpts

Wednesday 16th September 2020 General Committees

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

It is a real pleasure to serve under your chairship, Dr Huq, especially on this very important subject, which I know is close to your heart and that of all of us here. I thank the Minister for his opening remarks, which were enlightening in some respects, though not in all, as I will come on to.

Between 2014 and 2030, the UK benefited from £17.2 billion of European structural and investment funds, as well as the additional national and private co-financing that that funding leveraged. That investment continues to strengthen projects led by not-for-profit organisations, local authorities, registered charities, higher and further education institutions, voluntary and community organisations, and statutory and non-statutory public-funded bodies, but it also—the Minister briefly made reference to this point—makes its way to businesses across the regions and nations of the United Kingdom that support these sectors in making the best of the investment.

Over time, the funding streams have become an integral part of the US business landscape. Whether through research and innovation, supporting our shift towards a low-carbon economy or promoting social inclusion to combat poverty and create jobs, the European Union structural and investment funds have mitigated some of the chronic regional, socio-economic and business investment disparities we see in the UK. As an MP from the north-east of England, I know very well how vital the funds have been in plugging the gaps left in my region after a decade of austerity.

The funds are underpinned by fair and progressive distribution formulas that ensure investment gets to where it is needed most and where it will have the most impact. I am sure that the Minister will agree that is the very definition of levelling up. Indeed, the Institute for Public Policy Research’s report on the proposed shared prosperity fund, published in February 2019, states:

“After Brexit, the UK will need to continue to give targeted support and investment into regions with lower levels of growth and higher levels of poverty, or it risks worsening the geographical divide.”

Labour supports the SI, in so far as it ensures that UK-funded programmes and activities entered into as part of the MFF 2014-2020 can continue to operate smoothly through to completion beyond the end of the transition period. We recognise that the SI is largely technical in nature and that it revokes a previous SI that, as the Minister has said, is no longer relevant and must be removed from the statute book. However, I want to raise a number of concerns that I hope the Minister will be able to speak to in his response.

We have just months left until the end of the transition period, but the Government are seemingly—obviously, I would say—struggling to negotiate effectively with the European Union, and they continue to undermine their own political declaration and withdrawal agreement at every turn. It was interesting to hear the Minister say that the SI was no longer needed because the withdrawal agreement had been signed and agreed, yet we debate in this House whether the withdrawal agreement will continue to apply in certain important aspects.

As things stand, the UK will have no access to structural investment funds once the 2014-2020 funding cycle comes to an end. The Minister said that “it is proposed” that the replacement be the strategic prosperity fund, using the passive voice as if it were not part of his Department’s obligations—or promises rather than obligations. The Minister will also know that Labour has been concerned for some time that the UK shared prosperity fund has no details on how the Government will distribute and match the success of EU programmes. No details have been forthcoming whatsoever.

Labour has been pushing the Government for any kind of plan since the new fund was first suggested in the Conservative party’s 2017 manifesto—more than three years ago. We were told that we would be seeing a full consultation document and final decisions on the fund’s design as part of the 2019 spending review, so businesses and key stakeholders across the country duly geared up to work with the Government on the replacement fund. Instead, the Government cancelled the spending review and have since rowed back on their commitment to a full and transparent consultation process. The Minister made no mention of that.

A rescheduled spending review to conclude in July 2020 has been further delayed due to covid-19. We understand that, and the Government can be forgiven for having to adapt their legislative programme at short notice. However, the plans for the fund were already off schedule well before the pandemic hit. Without figures or even a simple timetable, businesses operating in all sectors across the UK are left in the dark, unable to plan for key funding applications beyond 2020, and all that just months before the transition period comes to an abrupt end. That adds even more layers of uncertainty on top of those already being felt by businesses small and large across our country as a result of the Government’s mismanagement of the coronavirus pandemic and European Union negotiations.

The British Chambers of Commerce wrote to the Government in July 2019, more than a year ago, stating:

“From city regeneration schemes to business support, investment finance to research collaboration, businesses do not want to see ‘cliff edges’ in funding, but nor do they want a copy-and-paste approach to replacing the current system of EU development finance. Government must publish long-overdue proposals for a UK Shared Prosperity Fund for consultation—with a commitment to maximum local autonomy, a strong voice for business and a focus on economic growth.”

That was requested more than a year ago.

First, can the Minister clarify today when we can expect to see a credible plan for the UK’s shared prosperity fund? Secondly, can he confirm whether a full public consultation will take place to ensure all views and stakeholders get an equal opportunity to feed into this important and nation-shaping fund? Can he also clarify what work his Department has done to audit the impact of the European Union structural investment fund on businesses across the regions of the UK? Labour believes it is important for the Department and Ministers to have a clear picture of the impact before plans for a replacement fund can be decided upon. Can he agree that that vital work will be placed in the public domain before any consultation takes place?

The all-party parliamentary group for post-Brexit funding for nations, regions and local areas believes that the European regional development fund, the European social fund and the local growth fund, a non-EU fund, may be considered for amalgamation. The Minister mentioned a series of smaller funds including the European maritime and fisheries fund, and there is also the LEADER programme for rural development and the youth employment initiative. They could be considered for folding into the UK shared prosperity fund too. Taking into account the inflation uprating of those funding pots, as well as the additional designated “less developed regions” and “transition regions” the UK would have been allocated in the next MFF, the APPG suggests that any new shared prosperity fund should total just over £4 billion. Taking that figure as a starting point, will the Minister say whether the Government’s fund will be higher or lower than that figure?

On devolution, the Welsh Government have legitimate concerns about the shared prosperity fund being directed centrally from Whitehall, which they would see as an attack on devolution. Welsh businesses need the Government here in Westminster to ensure that the extraordinary benefits experienced by Welsh businesses under the European structural and investment funds are not lost in the transition to a new fund. Many local authorities across England, Scotland and Northern Ireland share that concern. I want to see the replacement fund enabling local leaders, businesses and people to have more say on how money is spent in communities. Indeed, in March this year the Institute for Government said

“Although the UK government has committed that the UK Shared Prosperity Fund will operate in a way that respects the devolution settlements, the devolved administrations are also suspicious that it might be used to allow the UK government to spend money directly in devolved areas, bypassing the devolved governments. This could signal a centralisation of regional development policy which would, according to Welsh First Minister Mark Drakeford, represent “a direct attack on devolution”.”

Can the Minister reassure us that that is not his intention?

In a letter to the Chancellor in February, the chair of the North East England Chamber of Commerce, James Ramsbotham, called out the Government’s “extremely poor” approach to engagement and consultation on the UK shared prosperity fund, which must recognise the north-east’s specific challenges regarding deprivation and lower economic performance. You will understand, Dr Huq, that as a north-east MP I cite a north-east example, but I know that other regions have concerns about the lack of consultation. Many businesses I speak to are also concerned that the Government may move to a shorter funding cycle. A seven-year funding cycle is embedded in European Union structural and investment funds, which enables businesses to plan strategically to make smarter investments in their workforce and operations over a longer period of time. I ask the Minister to acknowledge the value of longer-term cycles. Will the Minister be advocating for that approach on behalf of UK businesses in any new fund?

I have concerns that the Government will propagate politically motivated funding strategies via the shared prosperity fund that could negatively impact areas that most need investment. We have seen cynical funding formulas deployed in the future high street fund and in the town of culture funds, targeting Conservative party seats that have received disproportionate levels of funding. Will the Minister allay the concerns of businesses and non-Conservative target seats by declaring today that the Government have no intention of leaving out areas that are in urgent need of investment?

[Chair]

Does any other Member wish to catch my eye, any Back Bencher? SNP not here? That’s them for you, isn’t it.