Wales: Regional Development Funding

Wayne David Excerpts

Tuesday 7th May 2019 Westminster Hall

[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.

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[Hywel Williams (Arfon) (PC)]

I congratulate the hon. Member for Aberavon (Stephen Kinnock) on securing the debate, and I welcome the Under-Secretary of State for Wales, the hon. Member for Torbay (Kevin Foster), to his place—I hope that he will add some much-required substance to the Wales Office team.

Three years ago, Vote Leave campaigners promised that Wales would lose not a penny if we voted to leave the EU. If we leave the EU, Plaid Cymru is determined to ensure that they fulfil their promise. I will briefly outline the principles of Plaid Cymru’s model for regional development funding. It would be a substantial new step in reducing regional inequalities across the UK; I think that Wales could take a lead in this regard.

Although the EU has the makings of a proper regional development policy, in the UK, by default, the regional policy is to favour London and the south-east of England. Wales currently receives £245 million more a year from the EU than it pays in. That we qualify for so much money reflects our poverty, which is on a par with areas in former USSR satellite states. It also reflects the extreme centralisation, the policy vacuum and the chronic underfunding by the UK Government. The worst inequality in any EU member state is indeed that between London and Wales, and leaving the EU will make the situation worse, unless the Government act.

Two years ago, Westminster committed to creating a UK shared prosperity fund that was

“specifically designed to reduce inequalities between communities across our four nations.”

We are on the cusp of exiting the EU, so where is it? Wales will not forgive a Westminster Government that cannot, or perhaps will not, plan for the funding on which so many of our communities are forced to depend. However, decisions on future funding must be timely. We cannot have a Government-caused funding gap disrupting the proper transition in the delivery of projects on the ground.

Replacing European structural funds with a well-funded UK SPF could be genuinely transformational for Wales and for the rest of the UK, but we need timely planning and proper funding to enable Welsh solutions for Welsh problems. Funding must be managed in Wales and be pre-allocated. A cut-throat bidding process would pit Wales against other regions and nations in a race to the bottom. Also, funding must be multi-annual. I think that all hon. Members here today will know of project managers who have so often been disempowered by self-defeating short-term funding cycles.

Finally, Welsh programmes should continue to meet the goals of European structural funds, with streams for employability and economic development, with any funding being co-ordinated with Welsh Government policy and spending, as well as meeting sustainability legislation, such as the very welcome Well-being of Future Generations (Wales) Act 2015.

[Wayne David]

Does the hon. Gentleman agree that, as far as Wales is concerned, it is important that any allocations are made outside of the Barnett formula?

[Hywel Williams]

Indeed, that is a crucial point, and one that I have taken up with Government Ministers. In my case—in north Wales and in much of rural Wales— that point is particularly crucial for farming. If we pit marginal farming on the uplands of Wales against the grain barons of East Anglia, we all know what will happen. The hon. Gentleman makes a crucial point.

Funding for Wales should meet the goals of the European structural funds. I also mentioned the Well-being of Future Generations (Wales) Act 2015, which is crucial in this regard. Decades of under-investment by the Welsh and UK Governments have led to chronic and disgraceful child poverty, as outlined in the Assembly this afternoon by my colleague Rhun ap Iorwerth, and to families having to choose between heating and eating. Leaving the EU will harm our communities further, unless the Government act properly.

The UK shared prosperity fund must deliver for Wales. Otherwise, ever more of our citizens will conclude—rightly, I believe—that we would be better out and in: out of the UK and back in the EU.

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[Kevin Foster]

I thank the hon. Gentleman for his intervention. Our clear emphasis will be on ensuring that it works for local communities and delivers prosperity and growth across the nation. The consultation will set out our plans, and I am sure that he and other Members will be powerful advocates in ensuring that the fund works for their communities in the way they envisage.

I am conscious that many Members have raised the future of EU funding. In 2016, the Government guaranteed funding for UK organisations in receipt of EU funds where projects are agreed before the day the UK leaves the European Union. In July, the Government announced an extension to that guarantee, which will underwrite the UK’s allocation for structural and investment fund projects under this EU budget period to 2020 in the event of the UK leaving without a withdrawal agreement. That ensures that UK organisations, such as charities, businesses and universities, will continue to receive funding over a project’s lifetime if they successfully bid into EU-funded programmes before December 2020.

Our overall message is therefore business as usual. We want all places to continue to sign contracts while we still belong to these funds.

[Wayne David]

Will the Minister give way?

[Kevin Foster]

Not for the moment.

The December 2017 withdrawal agreement means that Wales will receive its full 2014 to 2020 allocation, because we recognise the importance of short-term certainty on funding. As we transition to longer term arrangements, we will of course ensure that all parts of the UK are treated fairly and that their circumstances are taken into account. We have promised, as I have already touched on, to engage the devolved Administrations as we develop the UK shared prosperity fund.

[Wayne David]

Will the Minister give way?

[Kevin Foster]

Given the time, I need to make progress.

I fully recognise the importance of EU funds to Wales. The guarantees set out by the UK Government show the importance that we place on those funds, as does the position that we have since reached with the EU on participating in the 2014 to 2020 EU programmes until closure. Under the terms of the withdrawal agreement, UK entities ripe to participate in EU programmes such as Horizon 2020 and Erasmus+ during the current multi-annual financial framework period will be unaffected by the UK’s withdrawal from the EU for the lifetime of the projects financed by the current multi-annual financial framework. UK-based organisations and people will be able to bid for funding and participate in and lead consortia in 2019 and 2020.

In terms of our future participation, the joint political declaration published in November sets out a basis for co-operation in European Union programmes, subject to the conditions set out in the corresponding Union instruments, such as in science and innovation, culture and education, development and defence capabilities, civil protection and space. Of course, the UK would make financial contributions were we to participate in any EU programmes.

On the specific point made about Barnettisation and potential agricultural funding, direct payments will continue to be made on the same basis in 2019 and 2020. The Government have already confirmed that overall funding for UK farm support will be protected in cash terms until the end of the Parliament in 2022, providing more certainty than any other EU member state. Crucially, the Government are clear that they will not simply apply the Barnett formula to changes in DEFRA funding beyond this Parliament. That means that farmers in Wales, Scotland and Northern Ireland will not just be allocated funding according to the population size of each nation, which in each case is significantly smaller than that of England.

In the beginning, EU funding was seen as something of a panacea for all Wales’s ills and as an opportunity that needed to be grasped with both hands. However, we should question whether, given the way that money was spent, it has reached those communities. We can all think of examples of projects that did not succeed, such as Techniums, the Ebbw Vale funicular railway and the All Wales Ethnic Minority Association.

I hear the passion with which many Members representing their communities have articulated what they see as the benefits of EU funding. However, we need to contrast that with the fact that some of the areas involved returned some of the highest leave votes. That was not based on whether a consultation was going to take place, but on what people perceived in their areas. It is a challenge for us as politicians to ensure that people see the benefit of what is done in their area.

As I set out at the beginning of my speech, the UK’s exit from the EU provides us with a considerable opportunity to reconsider how we invest our money in a way that helps to reduce inequality across our four nations. The current system is bureaucratic, inefficient and difficult to access. With the UK shared prosperity fund, we would have the opportunity to design a fund that works in the interests of Wales and the UK as a whole. I am clear that we will do that while respecting the devolution settlements and continuing to engage with the devolved Administrations, as we have successfully and productively done and continue to do on growth deals, and as I have done personally since my appointment, in the shared interests of those we serve.

Ultimately, the Government want to see an economically strong Wales, within a prosperous and strengthening United Kingdom. Working alongside the Welsh Government, through a future shared prosperity fund and other initiatives such as the growth deal, we can ensure that that becomes a reality.