EU Funding

Vince Cable Excerpts

Tuesday 25th February 2014 Commons Chamber

[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.

[Steve Rotheram]

Taken in isolation, perhaps the argument stands up in regard to what is perhaps a quirk of the formula. However, the moral argument may not be about the methodology; it is certainly about the poorer areas being penalised by the richer areas, which are the only beneficiaries from the formula.

[Vince Cable]

It is simply not true that richer areas are the only beneficiaries. There was a redistributive effect in some of the poorer areas of the country. If I remember correctly—I may be incorrect—the north-east of England, or many parts of it, benefited from this reallocation, but I will check that.

Let me go to the central point. Following the ruling, we have to follow the law. That is obviously our duty, and I now have to take a fresh decision on the allocations, having regard to the public sector equality duty. We are now doing further work, which we will take into account in making a new decision. However, I have to be clear about this point: on the basis of the Court ruling, the new decision will be limited to reconsideration of allocations in light of any impact on equality. We are not planning to reconsider the methodology, unless the equalities assessment highlights the need to do so. Obviously, we will need to be legally compliant and we will be legally compliant.

We want to announce the decisions in the next few weeks and it is very important that we move quickly, because we want to end the uncertainty about the allocation, which affects jobs and growth across the UK. I also want to make it clear that of course I regard it as absolutely essential that we pursue policies that are equal and fair. I have set out on many occasions my vision that equality, diversity and inclusion be embedded in what the Department does, so we will be working hard over the next few weeks to ensure that we meet our obligations under the public sector equality duty.

The right hon. Member for Wentworth and Dearne confirmed that Liverpool and Sheffield are seeking permission to try to overturn the High Court ruling on methodology. While they have every right to do so, I am obviously disappointed that they feel the need to take such action, not least because it risks delaying the allocation of funding. However, clearly the matter must be tested in the courts.

Let me say a little about the wider context regarding Liverpool and Sheffield, because the right hon. Gentleman is right that we must be balanced when looking at this in the round. It is fundamental that we take account of regions’ need and relative prosperity. Given his history in government, I am sure that he understands that Sheffield and Liverpool will not be alone—this is the nature of such allocations—in thinking that they would like more money. However, the EU sets the overall budget and we must address the needs of all UK regions.

The Liverpool and Sheffield decisions were reached after a great deal of thought and in recognition of the areas’ history, with which the right hon. Gentleman will be familiar. Between 2000 and 2006, Liverpool and Sheffield were both objective 1 regions, meaning that they were among the parts of the country with the greatest need, which was reflected in their higher funding. In 2007, they were reclassified as phasing-in regions because the indicators showed, although the levels were relatively low, that there had been considerable economic progress. Their recategorisation as phasing-in regions between 2007 and 2013 was designed to avoid the steep and sudden cut in EU funding that would have followed from relatively high levels of economic activity.

As I am sure the right hon. Gentleman knows, the phasing-in regions received a tapered reduction in funding between 2007 and 2010—given that he was in government, I am sure that he followed that process closely—and then received the same amount of annual funding between 2011 and 2013. The crucial point in this argument is that the phasing-in regions were fully aware of their changing status, so they must have anticipated a significant drop in funding between 2014 and 2020. The right hon. Gentleman must have helped to negotiate the current programme when he was in government, and it states categorically:

“Because of its phasing-in status South Yorkshire’s financial allocation annual profile is heavily weighted towards the first four years and tapers off towards the end of the programming period”.

The transition is clearly awkward for the areas affected, but it was fully anticipated and had nothing to do with a change of Government, as it was going to happen in any event.

South Yorkshire and Merseyside are now categorised as transition regions and must be treated in the same way as other such regions. The original BIS decision gave each transition region a 15% funding increase against an overall drop of 8% in European structural funds, with an across-the-board formula applied.

To give a wider context, I want to say a little about the support that we are trying to give through regional growth, some aspects of which have fairly been mentioned. It needs to be emphasised—this was missing from the right hon. Gentleman’s speech—that about half the funding in the period between 2007 and 2013 was retained for allocation by central Government, but we have tried to change to a more locally-based allocation system, with local areas, through their LEPs, determining how 95% of structural funds will be used. While some areas might have had more funding in the past, they did not have their current power to direct resources to their own priorities.

EU funding is only one aspect of official funding. The right hon. Gentleman will know about some of the schemes we have going, which I will run through quickly. The Sheffield city region has been granted enterprise zone status to extend the capability of advanced manufacturing technology, including £14 million to develop the Markham Vale site—I visited it some time ago following a suggestion by the hon. Member for Bolsover (Mr Skinner)—which we expect to generate just under £100 million in private investment and create 2,000-plus new jobs.

Sheffield’s city deal is expected to bring in £72 million in public and private investment over the next three years. The transport fund alone could be worth £500 million. Not every transition region has a deal of that kind. In addition, under the first three rounds of the regional growth fund Sheffield was allocated £57 million, including £25 million in support to the LEP’s business investment programme to unlock £100 million in direct investment, and £9 million has gone to three bids in round 4, although they are still going through due diligence.

Finally, the advanced manufacturing research centre, which I have taken a personal interest in—I met several Sheffield colleagues early in my period in office to try to help facilitate it—has now been allocated £37 million for development and manufacturing research in the civil nuclear sector. The centre is proving brilliantly successful and expanding rapidly. It is the source of the world’s most advanced research factory through the £43 million Factory of the Future project, to which we have granted £10 million.

A similar story can be told about Merseyside. I do not think that there are any Merseyside MPs here, but—[Interruption.] Sorry, I failed to pick up the accent of the hon. Member for Liverpool, Walton (Steve Rotheram), which I thought was from the north-east—I should have learnt from “Match of the Day” and not made that mistake. I profoundly apologise. As he will know, we have granted enterprise zone status to Liverpool and Wirral Waters. The city deals are extensive. The Liverpool and Liverpool city region deals have led to a £75 million economic development fund. The regional growth fund has a programme of £10 million, leveraging £50 million for private investment and safeguarding 1,200 jobs directly and £35 million for the new container port. Other major investments include the £470 million Government contribution to the Mersey Gateway bridge and the redevelopment of Liverpool Royal hospital.

If we take the position in the round, a great deal of thought has been given to how to support two parts of the country that undoubtedly have real economic needs. I restate our position that we must obviously act lawfully in respect of the Court’s judgment, which we will now do.

Question put and agreed to.