Wales: Regional Development Funding

Stephen Kinnock Excerpts

Tuesday 7th May 2019 Westminster Hall

[Stephen Kinnock (Aberavon) (Lab)]

I beg to move,

That this House has considered the future of regional development funding in Wales.

It is a pleasure to serve under your chairmanship, Sir Graham. I take this opportunity to welcome the Minister to his place. I have lost count of how many have preceded him. I have not counted how many days he needs to get through to exceed his predecessor, but I am sure that one of my colleagues will work that out as we speak. We wish him well and we wish him good luck—he is going to need it.

Regional development funding has been absolutely critical in boosting less prosperous areas across the United Kingdom, including in Wales. It is crucial in an era in which the divides in terms of wealth and prosperity in British society are so evident for all to see. We are witnessing a growing trend whereby our cities attract investment, create wealth and offer high-quality jobs, whereas our smaller towns are left behind or, worse still, buffeted by the winds of globalisation without any real support from the UK Government.

That has been the story of the last 40 years. UK Governments have stood by and watched the forces of globalisation and new technology destroy our industrial base and decimate our high streets, and they have been intensely relaxed about the impact of those changes on the pride, identity and prosperity of constituencies such as mine and others across Wales and the United Kingdom. First, Margaret Thatcher sold out the miners across south Wales, the English midlands and northern England, offering no state support to those who needed it to retrain in other fields. Then, although new Labour injected much-needed investment into our public services, it did not manage to deliver fundamental structural reform through a bold, radical industrial strategy. Then came Osborne-omics, which inflicted utterly self-defeating austerity on the areas that could handle it least.

As a result of this triple whammy, manufacturing has collapsed, from 30% of UK GDP to just 10%, since the 1970s. In comparison, Germany’s manufacturing base has remained stable, at 23% or above. The vast differences between the UK and German experiences of the last 40 years demonstrate conclusively that globalisation is not an unstoppable force of nature; it is a man-made phenomenon. The repeated failure to harness globalisation and make it work for our communities was caused not by force majeure but by repeated failures of political leadership.

The collapse of our manufacturing base has of course led inexorably to our skills and productivity crises. No recent Prime Minister has come up with any kind of half-decent strategy to support the so-called forgotten 50% who do not go to university or get good jobs and training. For those graduates living in the big cities, the last 40 years have delivered wealth, opportunity, diversity and the excitement of technological change, but non-graduates who live in our towns and villages have simply been ignored and left behind. Younger, diverse cities full of graduates continue to thrive; older, smaller towns with close-knit communities of non-graduates continue to suffer. Wales is a case in point. Despite the efforts of the Welsh Government—I will come to the vital support the Welsh Government have delivered for constituencies such as mine—many parts of our great country have experienced hardship due to inept government at the UK level.

The gap in GDP between Wales and London makes the UK the most unbalanced EU member state in terms of regional economic disparities—a truly shocking statistic that shows the size of the challenge we face if we are to reduce inequality and spread opportunity. In Aberavon, we have had absolutely no regional development support from Westminster. The Swansea bay tidal lagoon would have put south Wales at the forefront of a 21st-century industry, marrying our desperate need to produce more green energy with the creation of genuinely high-quality jobs across the region.

Wales was the cradle of the first industrial revolution, and we could have been the cradle of a new, green revolution, but the Tory Government ran scared, spending £1 billion to buy the votes of each Democratic Unionist party Member but not a single penny for a long-term strategic infrastructure project that could have boosted wealth and opportunity for my constituents and so many across south Wales. I cannot help wondering whether that £1 billion would pass a value for money audit, given the voting behaviour of the DUP over recent months, but I digress.

The tidal lagoon decision followed hot on the heels of another broken promise: to electrify our railway lines. That promise made it only as far as Cardiff, with the line down to Port Talbot and Swansea still firmly embedded in the 20th century. With everything the Transport Secretary has achieved in his quite remarkable tenure, it feels that too little attention has been paid to this kick in the teeth for Welsh commuters and travellers and for the Welsh economy. Maybe handing a £50 million ferry contract to a company with no ferries was in fact a cunning plan to distract us from the fact that the Government he represents were holding Wales in contempt.

Thankfully, where the UK Government have failed, other tiers of governance have stepped in to give the Welsh economy a much-needed boost. The Welsh Government and local councils have combined to deliver so many crucial projects, but many have relied on the funding that we receive from the European Union—the EU structural fund.

[Carolyn Harris (Swansea East) (Lab)]

Although the Swansea bay campus is in my hon. Friend’s constituency, the £60 million EU investment in it has benefited my constituency incredibly. Does he agree that, given that we have missed out on the tidal lagoon and electrification, we now deserve assurances from the Government that structural funding will come to our region and to our communities?

[Stephen Kinnock]

I agree with every word. As I will come on to, the key point is that we must not receive a penny less; there must not be any sleight of hand in the shift from EU structural funding to the shared prosperity fund.

EU structural funds are distributed to regions throughout the European Union based on their relative GDP. Areas where GDP per capita falls below 75% of EU GDP are placed in the first tier, and therefore receive the maximum funding. The poorer the region, the higher its priority and the more funding it receives. West Wales and the valleys is ranked as a region of the highest priority, and therefore received £2 billion for the 2014-20 cohort. No other area of the UK received more than £750 million, showing the scale of the challenge for the economy in that area of Wales. We are talking about a serious amount of funding here.

Like much of Wales, my Aberavon constituency has benefited hugely from European money, and from the strong vision and partnership working formed between the Welsh Government and our local Neath Port Talbot Council. Take, for instance, the new integrated transport hub—a Neath Port Talbot Council project in partnership with the Welsh Government, using EU money—or the sunken gardens and toddlers’ play area on Aberavon beach, which is a Neath Port Talbot Council project using EU funding granted by the Welsh Government.

There are more, from the bay campus, as my hon. Friend mentioned, to the Croeserw community enterprise centre, to the Cognation mountain bike trails in the Afan valley, to the Port Talbot magistrates court regeneration project. Those projects would not have been possible without European funding and strong political leadership of a type we see consistently from the Welsh Government and our local councils, but too rarely from Westminster. That is why Brexit raises a number of concerns regarding the future of regional development funding.

[Chris Bryant (Rhondda) (Lab)]

My hon. Friend is absolutely right that the Government have previously guaranteed that every penny from Europe that Wales lost would be matched by Westminster funding. That still has not happened. Has he noticed that, in the meantime, the Government have guaranteed that the British overseas territories will now receive from Westminster every single penny that they received from the European Union? Is it not a bit of an irony that the British Government are prepared to guarantee money to our overseas territories but not to our territories at home?

[Stephen Kinnock]

Indeed. That is a quite shocking example of the failure to prioritise what is happening right on our doorstep. It is absolutely vital that we see the funding in Wales that we need if we are to deliver. We all know how much support is required to deal with the huge changes in our economy over recent decades. We currently have a system that, while not perfect, works relatively well: EU funding is targeted at less prosperous areas and delivered by devolved Administrations who know the needs of their areas better than anyone else.

Now, we can debate Brexit until the cows come home—I am sure that we would love to—but I am sure that we can all agree that it is crucial that Wales does not lose a single penny of the funding that we would have received had the British public voted to remain instead of to leave the EU on 23 June 2016. The UK Government have agreed to replace those European funds, yet nearly everything about the shared prosperity fund is still to be worked out. We still do not know how much funding will be available. We need £1.7 billion per year UK-wide to keep up with what the EU is set to contribute from 2020 to 2026.

[Wayne David (Caerphilly) (Lab)]

There is an active debate ongoing about how the shared prosperity fund ought to be allocated. Some strongly argue that there should be a huge competitive element. Does my hon. Friend agree that it is far better to have a needs-based formula, so that resources are allocated where they are desired, not according to which area can put forward the best bids?

[Stephen Kinnock]

I agree entirely. There are two key points. First, the big advantage of the current system is that it is depoliticised. The European Union works on the basis of data and facts and of a scientific analysis of what is required. There is a huge risk that the shared prosperity fund will be turned into pork barrel politics, where the fund gets used as a slush fund for, dare I say it, a Conservative Government in Westminster. Secondly, competitive bidding does not work. The shared prosperity fund needs to be embedded in an industrial strategy and a regional development strategy that works from a strategic point of view rather than being based on bidding.

The second key question is how this money will be divided across the country. The third question is what activities will be eligible for support. The fourth question is who will take the decisions on how the money is spent. We are still none the wiser on all those key questions.

It really is not just about the money. There is a real fear that this will be not just a financial grab, but a power grab: the Westminster Government will use this opportunity to reduce funding for areas that need it most and claw back powers that sit naturally with the devolved Administrations.

[Jessica Morden (Newport East) (Lab)]

This week is the 20th anniversary of the first elections to the Welsh Assembly. It is therefore important that, when we have this debate, we respect the role of the Welsh Government and devolution.

[Stephen Kinnock]

One of the key recommendations we in the all-party parliamentary group for post-Brexit funding for nations, regions and local areas have made in our report on the future of the shared prosperity fund—apologies for the plug, Sir Graham—is that the devolution settlement must be respected. Of course, the Westminster Government, the Assembly in Cardiff Bay and local authorities need to work as a team on this, but, fundamentally, the people on the ground know best how to spend this money and deliver maximum impact. Therefore, it is essential that the devolution settlement is respected in spirit and letter.

As I was saying, there is a fundamental worry that the shared prosperity fund will become a politicised slush fund, with a Conservative Government using it to buy votes in marginal seats. Those deep-seated concerns led to the creation of the all-party group, which I am proud to chair. The wide-ranging review we carried out heard from 80 organisations across the UK, including the Welsh Government, a wide range of local authorities in Wales and the Welsh TUC. Those representations were unanimous: the UK shared prosperity fund must comprise not a single penny less in real terms than the EU and UK funding streams it replaces. Westminster must not use Brexit as an opportunity to short-change the poorest parts of the UK and of our great country of Wales. Equally, the UK Government must not deny devolved Administrations the appropriate control over funds. Local decisions must not be made by an official or Minister sitting at the other end of the M4.

While it is deeply disappointing that the Minister with overall responsibility for the shared prosperity fund, the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Rossendale and Darwen (Jake Berry), has refused to meet with our APPG, I am pleased to report that its officers met with the Secretary of State for Wales last month to make these points to him, and then last week with the Chief Secretary to the Treasury. Both meetings were conducted in a positive and constructive spirit, but it is shocking that there is still no sign of the public consultation on the SPF being launched any time soon. In fact, in one meeting there was a suggestion that the consultation may even be delayed until the comprehensive spending review in the autumn. Given that the CSR will include information on the funding of the SPF, I am not sure how relevant bodies, such as the Welsh Government and our local authorities, will be able to contribute in a meaningful way to a debate over funding when the horse will have already bolted. However, I can assure the Minister that our APPG will be watching carefully to ensure that there is no sleight of hand from the Government on this point.

Our APPG report contains 19 specific and deliverable recommendations. I hope the Minister has had an opportunity to read it, and we look forward to his response. However, in the limited time available, we would be particularly grateful if he responds to the following requests. Will he guarantee that Wales does not receive a penny less and that the devolution settlement will be fully respected, and will he provide clarity on when the SPF consultation will be published?

Let us be clear, the Welsh are a proud, resilient people. They are not looking for special treatment or anybody’s charity. However, we are looking for a level playing field—an opportunity to compete without having one hand tied behind our backs. This is the essence of the Welsh spirit: an unrelenting commitment to community, fairness and the wellbeing of our future generations. With that spirit, every single Welsh MP on the Labour Benches will keep fighting to ensure that Wales gets the regional investment that it needs to thrive in this city-centric era of globalisation and fast-paced technological change.

[Several hon. Members rose—]

--- Later in debate ---

[Stephen Kinnock]

The Minister’s speech showed that the Government are truly paralysed by Brexit. We could have a debate about that, but the fact is that that paralysis is having real-world consequences. What is the future of that key infrastructure project? What is the future of that vital skills project in our community? What is the future of that vital railway upgrade? We simply do not know. We do not have answers to those questions, and the clock is ticking. We are talking about 2020 as if it is a decade away. It is not; it is just around the corner. These are multi-annual programmes that have a time lag in them, and the clarity should have been forthcoming months ago.

I and many other Members asked for a guarantee that Wales will not receive a penny less, a guarantee that the devolution settlement will be fully respected, and clarity on when the shared prosperity fund consultation will launch. It is a matter of great regret that answers to those three questions were not forthcoming. We will therefore continue to press the Government for some clarity on those vital points.