EU Funding

Steve Rotheram Excerpts

Tuesday 25th February 2014 Commons Chamber

[John Healey]

First, the Deputy Prime Minister was asleep on the job when the decisions were taken in government. Secondly, he is allowing the arguments that we have heard from other Ministers in this Chamber to pull the wool over his eyes. He has not been standing up for South Yorkshire, and I see this as a Forgemasters mark 2 against the card of the Deputy Prime Minister.

A more measured reflection on the figures that my hon. Friend has just given allow me to continue to develop my argument, which is that the Government’s approach to date does not apply the principles of equality and proportionality. Similar regions were treated differently, and allocations were not proportionate to their needs. I say to the Secretary of State that we will not let this matter rest. We will take it all the way. Our councils will take the case to the Appeal Court to ensure that the principles are taken into account by the UK Government, just as the EU does in designing and allocating the structural funds in the first place. We will also take the case to Commissioner Hahn, who has to approve UK Ministers’ plans to ensure that those principles are taken into account.

The High Court judgment two weeks ago requires Ministers to review, but not necessarily to change, the funding decisions. I urge the Secretary of State to take a fresh and deep view of this set of decisions. He should revise those decisions now rather than being forced to do so later.

Let me take the Secretary of State back to what his junior Minister, the right hon. Member for Sevenoaks (Michael Fallon), said in the first debate. He rightly said:

“The aim of the funds is to provide EU member states and regions with assistance to overcome structural deficiencies and to enable them to strengthen competitiveness and increase employment.”—[Official Report, 1 July 2013; Vol. 565, c. 725.]

The EU funds are designed to give a boost to the economy of flagging regions. It is an outrage that areas of the UK with more jobs, wealth, businesses and prosperity are also getting more European funding in the period ahead. South Yorkshire is one of those 11 transition regions in the UK, which means that our GDP is between 75% and 90% of the European average. All the more developed regions have a GDP of at least 90% of the European average. Nine of them will receive more, not less, funding than the Sheffield city region. They include Worcestershire and Leicestershire. As my hon. Friend the Member for Sheffield Central (Paul Blomfield) has said, they also include Cheshire and Warrington, which have a GDP not of 84% like South Yorkshire but of 119% of the European average and will get EU funding not of €117 per head like South Yorkshire but of €157 a head.

[Steve Rotheram (Liverpool, Walton) (Lab)]

I thank my right hon. Friend for highlighting this Government’s lamentable record on the transparency and fairness of previous funding allocations. Does he agree that there is no justification for this latest round of gerrymandering whereby the richer regions will benefit over and above areas such as Merseyside and his constituency and area?

--- Later in debate ---

[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.