||Westminster means the Parliament
rather than the Cabinet Office.
The Convener: A
range of options will be open to us. We will be able to pass our opinions to the European
Scrutiny Committee but we will also be able to use the offices of the Secretary of State
We should not duck the issue, but we should come back to
it at a later date. If we want a discussion on where items go from this committee and on
what our relationship is with Westminster, we can put that on a later agenda.
Bruce Crawford: That would be fine.
Ms MacDonald: We would like that to be on the next
Dr Sylvia Jackson (Stirling) (Lab): I want to make
two brief points. When we refer the Scottish explanatory memorandum to the Scottish
Executive, we need to put forward clearly the points that Bruce and Irene made about the
environment and equal opportunities and stress that those are important matters.
I do not know whether we will discuss the date of our
meetings at some other time, but our briefing paper says that we will meet in the
afternoon. Are we agreed on that?
The Convener: As opposed to in the morning?
Dr Jackson: I think
that morning meetings were originally suggested.
The Convener: We might
have to refer that to the Parliamentary Bureau because other
committees have to meet as well. There is a suggestion that,
because of the volume of work and the way in which the process
works, we should try to meet on a Tuesday. However, that might
clash with other business, so we need to be flexible. For example,
some of us on this committee are also on the Health and Community
Care Committee and are unable to attend some of that committee's
business because we are here. It is a bit of a nightmare. We
will return to the timing of meetings at another time.
The Convener: I would have thought that the next
item of business, a presentation by Jim Millard of the Development Department of the
Scottish Executive, would have been worthy of a long and detailed discussion, but I am
looking at the time and I am beginning to wonder when we will finish. Jim will outline
some of the issues and try to brief us on where they stand.
Before we start, I stress that this is not the only debate
that we will have on those matters but the first of many detailed discussions that we will
||in the next few weeks. As more
information comes out and the decision-making process develops, we will have to make our
views known, but today's presentation is about some of the broader matters.
Ms MacDonald: I have an
urgent matter to raise that I believe is relevant to the subject of Jim's presentation.
Will we have an opportunity to talk after the presentation, if not at great length?
The Convener: There will be questions and a
Mr Jim Millard (Development Department, Scottish
Executive): But please do not ask any hard questions.
I am grateful for the opportunity to offer an informal
briefingthe first of many, I am sure.
On my way in to work this morning, a traffic report warned
of standing water on the M8. I believe that the report simply meant puddles. European
issues, structural funds in particular, sometimes get caught up in unhelpful, misleading
or less than clear language, but I will try to avoid that trap.
One of the interesting facets of the process in which we
are involved is that European affairs are a reserved matter. However, the Scottish
Executive is the implementing authority for structural funds in Scotland. That
responsibility will be of key interest to the committee. This morning, I will speak about
the structural funds arrangements, the reform of the structural funds, which we are in the
middle of, and the way forward for Scotland under the structural funds, in so far as it is
clear at this stage.
European structural funds are split into individual funds.
The European regional development fund is fairly well knownsigns around Scotland
show that stretches of motorway, buildings or some kinds of business activity have been
supported by the regional development fund. Similarly, the European social fund is readily
identified with support for training and learning. The other two funds are less obviously
part of the structural funds. The easiest way to put the European agriculture guidance and
guarantee fund in context is to say that the guidance section is not the guarantee side
and the guarantee side is about price support, intervention and so on. The financial
instrument for fisheries guidance, the fourth fund, is fairly self-explanatory.
Structural funds, in a generic sense, are about support
for projects to encourage economic and social cohesion across the European Union.
Structural funds are delivered by two means. The first is
geographically, through objectives 1, 2 and 5b. In Scotland, objective 1 covers the
Highlands and Islands, which are identified as areas lagging behind the rest of Europe;
||2 covers much of the central
belt, which is experiencing industrial decline; and objective 5b covers much of rural
Objectives 3 and 4the horizontal
objectivesdeliver support for training across Scotland and are not geographically
Those programmes will run until the end of 1999, when
project approvals under them will finish. Project sponsors have up to two years after that
to complete their work and claim grants.
Structural funds reform has been on the agenda for a
couple of years, first the threat and then the substance. Commission proposals were
debated at length in working groups by officials from member states and were signed up to
at the Berlin summit at the end of March.
Reform had to recognise that the European Union will get
larger, although we are not sure by how much it will do so or how soon. Preparations had
to be made for a larger European Union that would embrace countries that are not as
economically and socially advanced as us. Leg-room had to be provided through budgetary
discipline, and the costs of structural funds, which account for one third of European
Union expenditure, had to be constrained.
Reform was also needed to simplify things. Some people say
that structural funds are complicated, but they are wrong: structural funds are much more
difficult than that. Simplification ought to stretch from the European Commission, through
member states and implementing authorities, to the people who deliver projects. I am not
quite sure that that is the case, but there is an opportunity for the Scottish Executive
to make life as straightforward as possible for project sponsors. I may live to rue these
words, but there is an onus on us to absorb the technicalities and to deal in-house with
complexities between Scotland and Brussels.
The other key principle is concentration, to which there
are two aspects, the first of which is that the seven objectives under structural
fundsI mentioned the five that apply to Scotlandhave been condensed into
three. Objective 1 remains much as we currently recognise it; it deals with areas that are
suffering from economic difficulties or are lagging behind economically and where gross
domestic product is 75 per cent or less of the European average. However, that status
applies at regional level rather than, in our case, at local authority level.
Objective 2 picks up the need to address both economic
development in areas suffering from industrial decline and urban issues. Although a
objectiveobjective 5bhad been established for rural development, objective 2
now contains a rural strand. It also contains a fisheries strand, which is a recognition
that fisheries areas are suffering economically, either because fish are less easily
caught or because of effort limitations or quotas. In either case, the economics of
fishing have become that bit more fragile.
3 deals with learning and training objectives that had been delivered under objectives 3
and 4. Interestingly, it is expected that although the majority of training support will
come through objective 3, it will still be delivered through objective 1 and accounted for
in objective 1 programmes. It is currently possible to support training through objectives
2 and 5b and, indeed, there is almost an expectation that that should happen. Next time
roundafter January 2000training support will mostly come through objective 3,
although the various programme partnerships will still have the option to use some of
their objective 2 resources to support ESF activities.
The secondperhaps more obviousaspect of
concentration was to reduce the percentage of the EU population covered by structural
funds. The intention was to reduce the current figure of about 51 per cent to 40 per
centwhen rounded down, that figure is still about 40 per cent but, in practice,
perhaps 41 or 42 per cent of the EU's population will still be covered by structural
For Scotland, that means that
the Highlands and Islands will no longer have objective 1 status
because its GDP exceedsalthough only just the 75
per cent threshold. However, to replace objective 1 status,
the Prime Minister has secured a special programme worth 300
million for the Highlands and Islands from 2000 to 2006. We
can pursue eligibility for objective 2 status under its four
strands: industrial, rural, urban and fisheries. Although we
face reductions in population coverage, the Berlin summit confirmed
that there will be a safety net for the UK so that the new round
of structural funds will cover no less than two thirds of the
population that is currently covered by objective 2 and 5b.
That means that, at a UK level, we will experience a reduction
of no more than a third.
The safety net is a recognition that the criteria proposed
in the regulationsand favoured by the majority of member statesacted unfairly
and disproportionately on UK areas. As very few UK areas meet the qualifying criteria, the
net ensures a reasonable degree of continuity and coverage for the coming period.
For areas not designated for any objective status, there
are arrangements for transitional support over six years, which is one year less than the
length of the next programming round. For the first time, we have very welcome
||just from the EC but from member
statesthat it is not a sensible idea to turn the structural funds tap off abruptly.
Transitional support offers an opportunity for affected areas to develop exit strategies
to wean them off structural funds support.
2 status is still up for grabs. Early next month, UK ministers will consider how the
objective 2 map for the UK might look, which means that, despite what some newspaper
reports have said, no decisions have yet been made. UK proposals to the European
Commission for objective 2 coverage have to be submitted by the end of September. It is
hoped that the Commission will confirm UK objective 2 areas around the end of October or
at the end of November.
Objective 3 and the rural development regulation are
unaffected by that process and will apply across the piece. Therefore, even areas not
designated for objective 2 status will still have access to the regional fund through
transitional status, to the social fund through objective 3 andif those areas are
ruralto measures pursued under the rural development regulation.
The Convener: Jim, I will have to cut you short.
The next part of your presentation deals with the preparation for the next phase and the
plan teams. We can return to those issues at some point. We have limited time, so perhaps
we should concentrate on the issue of structural funds and the immediate decisions that
need to be made.
That was a very good background presentation on where we
have come from and our current position. As a committee working on behalf of the
Parliament, we need to influence the process from this time on. I am aware that some
critical decisions are to be made soon. I was alarmed at the departmental paper that was
circulated, which suggested that there would be a significant detrimental impact on
I am glad that the Secretary of State for Scotland has
been fighting vigorously to present Scotland's case. I think that we urgently need Jack
McConnell to come before this committee to talk about the case that will be presented for
Scotland, because issues such as the safety net raise questions about whether the net is
protecting Scotland as we would expect. I do not think that the committee accepts that
Scotland suffers disproportionately in the population coverage provided by the net when
compared with the rest of the UK.
We will have a discussion on Jim's presentation, but is
the committee agreed that we should ensure that we get the minister into our next meeting?
Furthermore, I also want to suggest writing on behalf of the committee to the Secretary of
||for Scotland to express both our
concern and what we expect to happen in the next round of the process. Perhaps we could
include some of our more relevant comments and questions in that letter. If we agree on
that, we can return to the discussion.
Bruce Crawford: I think you are right. I certainly
need to understand what is meant by
"pressure in Scotland because of the general and
relative wealth compared with areas in England"
which is on page 6 of the briefing paper on European
structural funds. How are such judgments made? What sort of monitoring figures are used to
compare wealth in Scotland and different areas of England? If the minister is coming, will
he come armed with answers to those questions?
Ms MacDonald: I ask the indulgence of the chair. I
do not mean to make facetious use of this committee. Although I appreciate much of what
Jim Millard said, I hope that we will be able to act on his points. If I may draw on what
he said in his presentation, there is a desire for simplification following the Berlin
summit. We, too, are trying to simplify the whole mechanism.
It is unfortunate that we cannot invite the minister now,
because the closure of the Continental Tyres plant in Newbridge, which has been announced
today, will have as much of a dramatic effect on east central Scotland as the problems of
Kvaerner have had on west central Scotland. I am interested in whether it is possible to
use some of the mechanisms that are open to the Parliamentpresumably, as this is
holiday time, through this committeeto administer the moneys that may be available.
In Jim's presentation, we heard that there is still an
opportunity to use some objective 2 funds for training. I am raising the matter now
because, at the Continental Tyres plant in Portugal, the company was recently able to
ensure that staff were not laid offsaving the attendant costs in welfare
benefitsby working with the Portuguese Government to retrain factory workers in situ
until the market picked up again. I am reliably informed from all sorts of sources that it
is a perfectly valid and viable operationI accept that, as those sources worked in
the factory, management may have another point of view. The problem is the market, which
is the same argument that was used about Kvaerner.
I said that I would be looking for your indulgence, Mr
Henry, but is it possible to find out from the Deputy Minister for Enterprise and Lifelong
Learning whether we can access available funds? If the money is available, I want
||to use it in a relevant way to
show people that we are doing some good and that there is some point to this committee, to
the Scottish Parliament and to the European Parliament.
The Convener: It would be wrong to give the impression that
this committee can look at every potential closure and suggest that we can bring to it a
European dimension and interest. However, as the issue has been raised, we could ask the
minister whether any European funds are available to keep the factory open.
This issue is complex and it would be wrong of us to
suggest that simply accessing European funds will alleviate the problem. If European funds
are available, this committee should ask Mr McConnell to give the matter due
consideration. I am sure that that will happenand that it has already
happenedbut it is not the direct business of this committee.
Ms Oldfather: I am sympathetic to the point that
Margo raised. My constituency of Cunninghame Southwhere 500 Volvo jobs are at
riskhas exactly the same problem. If money is available and if we are going down
that route I would want to make a case for that fact to be taken into consideration. In my
areawhich has the fourth highest unemployment in Scotlandthose 500 jobs are
tantamount to what is happening at Kvaerner.
The Convener: I think that it is valid that such
areas of concern are raised, but we will not do justice to this committee if we ask what
the minister is doing in terms of European funds every time something like that happens.
There are other committees that have greater relevance to that pursuit. We must consider
whether European funding is generally being properly and effectively used in areas of
deprivation and industrial development. If we set a precedent of looking at every
industrial closure, every voluntary group that gets European funding will ask us to become
involved. We have enough on our agenda without assuming that responsibility.
David Mundell: I accept what you say, Mr Henry, but
I would like you to set out in your correspondence that the particular process of dealing
with objective 2 applications has not been satisfactory. Areas that have submitted
applicationsI cite Dumfries and Galloway as an examplehave not been clear
about the time scales. They have put much effort into lobbying for their cases only to
find that the time scales have changed constantly. As Margo said, that has led to negative
speculation and double spin that says the situation is worse than it was originally and
that we will get less than was expected but more than the
||spin said we were going to get.
The process of dealing with the current round of objective
2 funding has been thoroughly unsatisfactory. We should make that point because many
organisations throughout the country have lobbied hard and have produced detailed and
complicated documents. They obviously cannot take account of changing circumstances but
they have to know what the rules of the game areand I do not think that that has
been the case.
The Convener: We can certainly comment now, and
later when we have analysed how this process has worked. We can talk about inadequacies
and the things that need to be improved, but for the moment I would prefer to concentrate
on making the arguments that allow the Government to give Scotland what we regard as fair
in that process.
I do not want a tome discussing what has not happened in
the past few months to go to the minister, which would allow him to overlook the fact that
we are discussing critical issues such as population coverage and the safety net and what
areas will be critically affected.
It is probably too late to influence the process now, but
we should discuss the issues and, perhaps, invite some partner organisations in Scotland
to give evidence on some of the difficulties that they have faced. If we do not get this
right, we will always suffer from it in the future. We should therefore deal separately
with the issue of taking evidence from organisations such as those that have been
mentioned that are unhappy about the process, and concentrate on the issues that are to be
decided in the next five or six weeks.
Ms MacDonald: I apologise and I appreciate that
this is not the correct committee at which to discuss these issues, but it is the only
forum we have as the Executive is on holiday.
David Mundell: I am quite happy to agree with you,
Mr Henry, but I am not clear whether the decision is still open. Are you confident that
the decision on objective 2 is still absolutely open?
The Convener: Yes. No decision has yet been made on
issues such as the safety net. We must get in and ensure that Jack McConnell appreciates
the issues and that the Secretary of State for Scotland is aware of this committee's view
of what the issues are.
I am asking that today we agree to invite Mr McConnell to
this committee, and that we write a holding letter that gives our overall views to the
Secretary of State for Scotland. We will have the opportunity to go into that in more
detail at the next meeting.
Dr Winnie Ewing: I have two questions, the
||of which concerns structural
operations in the fisheries sector and the fact that only draft regulations exist. Might
we have any indication as to when we will get sight of those? We would certainly want to
see the draft regulations before they harden.
second question relates to transitional funding for objective 1 for the Highlands and
Islands. In what respect is the approximately £210 million different from what the
Commission offered? It was clear that there was always to be transitional funding if we
lost objective 1 funding. Mr Millard said that that was achieved at Berlin. I wonder what
the achievement was. What is the difference between what had already been offered and what
was obtained at Berlin?
Mr Millard: I will answer the easy question first.
We understand that fisheries regulation will be approved later this year. The intention
had been that fisheries regulation and regulation of other structural funds would be
agreed at around the same time but for some reason or another there has been delay. It
should happen later this year and, in fact, it almost has to happen later this year if the
regulations are to be effective from January 2000.
The special deal for the Highlands
and Islands is that the 300
million gives levels of funding equivalent to those of the existing
objective 1 programme. Had the Highlands and Islands gone straight
on to objective 1 transition funding, the transition arrangements
would have been worth less. It is, in short, enhanced transition
Dr Ewing: The mystery that I am trying to solve is
whether we know by how much it was enhanced?
Mr Millard: No.
Dennis Canavan: Could Mr Millard explain to us the
differenceif there is anybetween development area status and objective 2
status? Last month the British Government forwarded our development area map for the whole
UK to the European Commission. The EC can presumably either agree or not agree to that
map. What opportunities are there for amending that map at this stage? Will the map that
eventually emerges be a map of the UK that will simply be for what used to be called
development area status, but will also be used for objective 2? Are the maps exactly the
same or are we talking about the possibility of two different maps?
Mr Millard: We are definitely talking about two
mapsthe development area map and the assisted areas map. The assisted areas map
represents areas where the member state's Government can provide support for business
development and business expansion. Assisted area status allows higher levels of grants
||support to go to individual
companies, to the extent to which an enterprise company or the Scottish Executive through
its enterprise and lifelong learning department can support businesses.
The objective 2 structural funds map establishes the areas to which
European funds can be brought to bear to enhance, augment and support the efforts that are
made by local authorities and local enterprise companies.
There may be an overlap and a coincidence of coverage, but
the maps are quite discrete and separate and are for quite different purposes.
Dennis Canavan: Does not the development area map
influence the objective 2 map? Is it possible for an area to have development area status,
but not have objective 2 status, or, indeed, the other way about?
Mr Millard: All things are possible.
Cathy Jamieson: I am particularly concerned with
the situation in Ayrshire, particularly South Ayrshire, part of which is in my
constituency. Areas in South Ayrshire have recently lost part of their assisted area help
and I am worried about the speculation that South Ayrshire will no longer qualify for
objective 2 status.
I have already written to Jack McConnell and a number of
pieces of correspondence have gone back and forward. This is relevant not only to South
Ayrshire, but to the whole of Ayrshire and its structure plan, and to how we take things
forward. I welcome Mr Henry's suggestion that we get Jack McConnell along to this
committee, but I also hope that we will do all we can in considering all the areas that
are in a situation similar to that in South Ayrshire. There is a real danger that people
assumeas Dennis pointed outthat the two maps are interchangeable or that the
objective 2 map should follow logically on from what happens in regard to assisted areas.
It would seem to me that under the new categorisation for
objective 2which takes in issues such as industrial decline, rural areas and so
onan area such as South Ayrshire would qualify for more rather than for less.
Ms MacDonald: She would say that, wouldn't she.
Cathy Jamieson: Absolutelyand I will continue
to say it.
The Convener: I am aware of some of the problems in
South Ayrshire that you have identified, but I do not want this committee to become simply
a lobbying voice for the areas that we represent.
Cathy Jamieson: I appreciate that.
||The Convener: My area in
Renfrewshire is similarly affected. We must, as a committee, keep a wider perspective
while continuing to lobby for our areas as individuals.
Cathy Jamieson: I just wanted to ensure that we consider all
the areas that are affected.
Allan Wilson: You have made the point, Hugh, that I
was going to make about some of the special pleading that may be taking place. There are
important issues here and we all welcome the suggestion that we meet Jack McConnell at the
earliest opportunity. That way we can clarify some of what has happened behind the scenes
in relation to the drawing up of maps and the relationship between them. We could also
answer Dennis's question about the correlation between assisted area status and objective
This question might better be directed at the Scottish
Executive, given what has been said about the Executive's role in the implementation of
structural funds, but I am interested in the method of delivery of those funds and the
relationship with the Barnett formula and the block grant. I am also interested in the
correlationif there is anybetween increase in population coverage and the sums
of money available, given the existence of the safety net. Those are, I am sure, areas
that we will want to develop further with the Scottish Executive, but does Mr Millard have
any information on those issues?
Mr Millard: No, not at this stage. Much depends on
how the map turns out and the relative shares of funding that Scotland, England and Wales
Ben Wallace: I missed, or did not quite understand,
your answer to Dennis Canavan's question. You are saying that we are expecting a decision
from Europe on objective 2 by about October. How far has the UK presented its case, and
are we now in a position to influence it? If the case has been presented, can we see it?
The sooner we see it, the better will be our position to address any problems or impacts
it may have.
Mr Millard: The UK case on objective 2 will go to
the Commission around the end of September. At the moment the most that exists is a range
of scenarios using different methodologies and different selection criteria that produce a
range of options. Ministers will need to consider those options early next month.
Ben Wallace: So are we in a position to influence
The Convener: Absolutely. There are critical
thingsparticularly the safety netthat we need to be involved in just now.
Ben Wallace: I have a second point. The briefing paper,
"European Structural Funds, their reform and their application in Scotland,"
refers on page 4 to the loss of Community initiatives such as RECHAR II, which helps the
coal industry, and PESCA for fishing, and their replacement by single programming. Will Mr
Millard expand on what single programming is? Initiatives such as RECHAR II and PESCA have
been very good targeted initiatives. Will single programming be more under Executive
control? Will the Executive draw up the programme? How much influence will we have on that
Mr Millard: There are currently 12 or 13 Community
initiatives. Next time round there will be three Community initiatives, one encouraging
interregional co-operation, one similar to the LEADER rural development initiative and one
on training. The expectation is that the activities that have been successfully pursued
under the other initiatives will be mainstreamed within objectives 1, 2 or 3. The
programme partnerships that are responsible for the mainstream programmes will take
responsibility for those areas. Indeed, most areas that enjoy support from Community
initiatives at present are already eligible for further objective 1, 2 or 5b support.
Ms MacDonald: I apologise if I have not picked this
up correctly but, to make it absolutely clear, will Mr Millard confirm that the map has
not yet been decided?
Mr Millard: There is no map.
Ms MacDonald: The map has not yet been decided. The
function of this committee, as the convener suggested, is to feed in to the secretary of
state, but I have three or four sheets of paper somewhere in which the secretary of state
is patting himself on the back and saying, "You did well, John; you got us a terrific
deal." At what point can we influence the secretary of state by suggesting that
although he got a great deal, there might be a better one if we just changed the map a wee
The Convener: When the minister attends, we can go
into some of the detail on the map, population and so on. However, at the moment, there
should be a holding letter from the committee to the secretary of state to make some of
our concerns clear.
Ms MacDonald: Exactly. We might have ideas to add
to those of the secretary of state. Brilliant.
The Convener: We will hear from Irene and then I
will draw this item to a conclusion.
Ms Oldfather: I have just a few points. It is
important to acknowledge the progress that has been made. The UK has won a round at the