Scottish Parliament
European Committee
Official Report

Meeting 3, 1999

previous page contents page 31 August 1999

Col 88 Ms MacDonald: The European answer is subsidiarity.

The Convener: We will break for five or 10 minutes, depending on when the minister arrives.

Maureen Macmillan: Before we break, can I give my apologies for having to leave.


Meeting suspended.


On resuming—

Structural Funds (Objective 2 Eligibility)

The Convener: I welcome Jack McConnell, the Minister for Finance, and his officials. We propose to invite the minister to make a short presentation, following which I will invite each member of the committee in turn to ask him a question, hear his reply and, if necessary, follow up with a supplementary. If we still have time once everybody has asked a question, we will return to other questions that may not have been addressed.

The Minister for Finance (Mr Jack McConnell): Thank you very much, Mr Henry. It is good to be here. It would be helpful if I made one or two introductory remarks about the relationship between me, the Executive and the committee, before commenting on the structural funds and objective 2.

It is important that the Executive works closely with the committees, and particularly important, given my role in relation to the European structural funds and, to some extent, in other European matters, that I have a strong and constructive working relationship with this committee. It is probable that more practical, decision-making work will regularly be done here than in most committees. It could be helpful to the Parliament and to the Executive to have that relationship, given the experience, the level of interest and the expertise—across all parties—of the members who have been selected or have volunteered to take part.

There is much work to be done, and Colin Imrie and Jim Millard, who are here today for this presentation, and I will be happy to come back on other occasions to discuss some of those issues in greater depth.

The committee will be aware that its members and the Executive have a number of practical responsibilities, including implementation of the 

Col 89 structural funds and EC legislation and the representative role for Scotland.

We also have a wider role, which is to inform Scotland about European affairs and the work of the Parliament in relation to them, to represent Scotland externally and to promote European issues and ideals in Scotland. I hope that we can do that together in a united fashion, as well as having political debates and discussions when they are appropriate. Within that context, I will make a few remarks about the structural funds, but I am happy to answer questions from the committee.

Scotland has done particularly well from European structural funds over the years. In the 1980s, a Scottish commissioner in Brussels was responsible for structural funds. That and the good work done by Strathclyde Regional Council and then by Highland Regional Council led to Scotland receiving good deals from the structural funds at the time and since. The devolution settlement recognises that: it gives us a clear responsibility for implementing the programmes of funding inside Scotland, a role in feeding into the UK's representations on the frameworks and the funding that is agreed at a European level, and a guarantee of the allocation of the budget that exists in the overall Scottish block.

The European Union agreed in Berlin in March this year to some fairly dramatic changes in funding, which the committee will be largely aware of already. The efforts in the community to focus funding on areas of real need should be welcomed by everybody who has an interest in social cohesion and economic prosperity across Europe. The impact for Scotland and the rest of the UK of enlargement, of economic changes and of an overall reduction in population coverage across Europe are clear. In March, the UK got a good deal and so did Scotland. The decision to maintain funding for the Highlands and Islands when it fell so far short of automatic objective 1 criteria, the decision to have a 67 per cent safety net for the objective 2 coverage and the agreement on transitional moneys for the areas that would lose out across the UK should all be welcomed by us.

That leaves us with decisions to make about the new objective 2 framework, which covers most of the old objectives 2 and 5b and many of the Community initiatives that were taken up in many areas in Scotland during the past decade. The UK must agree a map of population coverage to be presented to the Commission. It must be fair and reasonable and, as far as it is possible to assess, target the potential for funding on the areas of most need.

The committee will be aware of the four strands that make up objective 2. They need to cover the old fisheries areas, areas that are suffering rural 

Col 90 depopulation, areas that are suffering industrial decline and inner-city areas that have multiple difficulties. They are important strands that we recognise as top priorities in Scotland, but they are areas where Scotland's relative position in the rest of the UK as well as in the rest of Europe has improved in recent years. For that reason, we face a challenge in securing the maximum amount of population coverage—and therefore funding—for Scotland in the new objective 2.

Scotland's position in relation to many of the poorer areas of Europe is much stronger than it used to be. A point I would like to make very forcibly is that even the figure of approximately 40 per cent of Scottish population coverage, which was being speculated about at the end of July, is significantly above what Scotland would get if population coverage were based on gross domestic product and compared with the European average, and significantly above what would be the case in England and despite the fact that the economic performance of Scotland and England is now much closer than it used to be.

We have to be very clear that Scotland has had, over the years, a very good deal from European funding. Even with the reduction in population coverage, with the greater focus on targeting areas of real need it should be possible for Scotland to continue to get a very good deal. Our job is to ensure that money is spent in the best way possible.

The Executive is very keen that the map that is submitted by the UK is as focused as possible on areas of need, so we support the move towards the grouping of local authority wards to design the map. We want to ensure that that happens as much as possible so that areas in Scotland that deserve European funding are well covered within the overall regulations.

The budget for European funding in Scotland is guaranteed as far as we can see into the future, which at the moment is just over the next two or three years. Any reduction in population coverage in Scotland will not affect that budget for the next two and a half years at the very least, until the spending round for the final year of this Executive in Parliament.

We are in a strong position; I want to touch briefly on what might be the way ahead. This may not be the immediate focus of the committee's attention, but I assume that the committee will want to debate a number of issues in the weeks and months ahead.

We have to prepare programme plans, and I am aware that the committee has already discussed the Highlands and Islands draft plan that is out for consultation. A plan for objective 3 status will be published in the near future, and once the map is 

Col 91 agreed, there will have to be plans for objective 2 in different parts of Scotland.

The programme plans should come back here for discussion. I would like this committee to discuss the programme monitoring committees and the programme management executives, which have responsibility for agreeing the detailed work on those plans and monitoring their implementation. The committee must be clear that I am absolutely committed to a local approach to the implementation of the structural funds within the overall Scottish priorities and framework.

We should take a partnership approach, which has been successful during recent years. The new committees and the Executive must work efficiently and effectively to ensure that the moneys are best targeted and focused on those who are successfully delivering local projects as well as on the communities that most need funding.

I will continue to welcome the committee's views on those matters and on the immediate matters that face us in September 1999. I am also keen to hear the views of committee members on strategic priorities, urban and rural, on the matter of wards versus local authority areas, and on the variety of choices that face the British Government in making its representations to the Commission on the map for the whole of the UK, including Scotland.

The Convener: Thank you very much for that short but comprehensive introduction. Some of the issues that you touched on have been discussed at this meeting and at previous meetings. For example, although we have not discussed objective 2 status, we have discussed the Highlands and Islands, and there was a strong current of opinion that assistance should be targeted on need.

You mentioned the future of programme monitoring committees, and you also talked about the way in which things worked previously. David Mundell spoke about learning from some of the difficulties of earlier programmes. Although we might not have the opportunity to go into that subject in much detail today, that is a topic about which the committee will want to come back to you. There is a strong view that we must learn from earlier inadequacies and problems to try to improve matters for the future.

I was interested to hear you talking not only about Scotland having done well, but about Scotland's development. The document that Scotland Europa produced at the beginning of the debate on the change to structural funds, entitled, I believe, "Transition to Prosperity", stated the strong view that partners in Scotland Europa recognise the value and worth of European 

Col 92 funding.

We recognise the improvements that have been made and we in Scotland took the mature and responsible view that we could not continue to argue for more of the same. To do that would be to recognise that we had failed. The precipitous withdrawal of funding from areas that were managing the transition process could hinder the very process that was under consideration. Therefore, although we recognise that at some point we could not continue to justify some of the funding that was awarded because of our deprivation and poverty, nevertheless we would lose the benefit of some of that investment if assistance were withdrawn from certain areas too quickly. We are concerned that the areas of Scotland that are most in need continue to receive assistance as they struggle to come through a very difficult period.

That is enough from me. Starting with Allan Wilson, let us go round the table and ask the minister questions.


Allan Wilson: As you mentioned, there have been informal briefings and press speculation—some of it ill informed, I believe. Perhaps you can address the primary question that concerns the committee, the Parliament and the people of Scotland. Will Scotland lose out in its financial settlement as a result of what is proposed, and how will communities that have come to depend on social funding be able to access that money?

Mr McConnell: There are a number of elements. The overall Scottish budget will not be affected by those decisions. We will spend the same amount this year that we spent in the previous year on European structural fund projects as part of the overall Scottish assigned budget, and that will not be affected by those decisions. The budget will rise or fall in line with the funding policies that have been agreed and the decisions that are taken here and elsewhere. The amount that we are able to allocate to European projects will fall as the population coverage falls and European funding allocated to the UK falls. We should be clear that in the first three years of the new programme the amount that is spent on projects in Scotland is—if anything—perhaps likely to increase slightly as previous commitments work their way through the system.

We face some decisions as an Executive and correspondingly as a Parliament in the final years of the new seven-year programme as the amount of money will taper off with the population coverage dropping, but the money will still be there in the Scottish budget. It will be for the Executive, subject to the authorisation and 

Col 93 agreement of the Parliament, to propose what to do with any moneys that are freed up by the reduction in population coverage. An issue that committees of the Parliament could usefully discuss in the months and years ahead is possible uses of that money to help areas that have lost out because of their relative prosperity in relation to communities elsewhere in Scotland and Europe.

It is important to recognise that a significant amount of transitional funding is available. No area in Scotland covered by the new objective 2 will lose out entirely as a result of the reduction in population in the next period, because the transitional funding agreed—and it was lobbied for hard by the British Government—will allow some coverage for those areas in terms of approvals in the years ahead.

Allan Wilson: We discussed that latter point briefly when we had a briefing at our previous meeting. Can you give us the reassurance that there is sufficient flexibility in the disbursement process within the block grant to ensure that communities—whether those are on NUTS 4 or on NUTS 5—will be able to access public money for those purposes, whether it is classed as objective 2 money?

Mr McConnell: I have to be careful, because I cannot tie the hands of the Parliament, which has to make the decisions on the budget, or of the next Parliament, because our session lasts for four years and this programme lasts for seven. What I can say is that for the first two—and I would expect three—years of this programme, the amount spent on European structural fund projects in Scotland will be roughly the same as, and perhaps in year two slightly higher than, it is at the moment. For the years following that, it will be up to the Executive and the Parliament to decide what the moneys will be spent on, which will be freed up by the reduction in population coverage. One of the options would be to ensure that some kind of funding package was available to areas that had benefited—perhaps, for example, working in partnership to attract industry and develop new projects from the previous objectives 1 and 5b.

The Convener: I might come back to that at the end of this process.

Ms Oldfather: One of the problems that has plagued European structural funding, and particularly European social funding, has been late payment. The voluntary sector is dependent on that problem being resolved. Given that the time scale is tight in agreeing those regulations, can the minister give an assurance that contingency plans are in place, should there be any slippage in the programme?

Mr McConnell: I hope to make an announcement—which has not yet been agreed—

Col 94 within the next two to three weeks, about the period between the end of the current programme and the start of the new one, which is likely to be some way into next year. I estimate that that gap could be between four and six months. We want to ensure that organisations that currently benefit from grant aid will be aware, at an early date, of their likely situation in the new year. I cannot commit myself to an announcement today, but I can commit myself to a firm announcement on that in the next three weeks.

Ms Oldfather: Can we be reassured that organisations whose staff and programmes are dependent on European social funding—even though it is a new programme period—will be viewed sympathetically? Knowing that this funding will come, even if it will be late, is the cornerstone of much of their work.

Mr McConnell: I do not think that I can make a firm announcement today about what will happen next year, but I can commit myself to making an announcement within the next three weeks. I can also say that when that announcement is made, it will be communicated as quickly as possible to everyone who is affected by it, so that they can know clearly how they will stand at the end of the year.

Ms MacDonald: The last meeting of this committee coincided with the announcement of the loss of jobs at Newbridge. We discovered that, in that situation, folk could fall between the two stools of the old and the new programme. I was therefore interested to hear your remarks about your own time scale for your announcement of starting dates for the new programme and the tailing-off in funding for people who might have been able to use that funding under the old programme. That was certainly the case in respect of retraining at Newbridge.

Can you give me an assurance that if there is still money in that pot, it will be accessible under the old system? You are talking about making a firm announcement in two or three weeks' time. The matter is so urgent that we would also want firm notice of whether the old moneys could be accessed to tail off the programme, as no start date is yet available for the new programme.

Mr McConnell: That is not quite the same question that Irene Oldfather raised, as it involves a different set of circumstances, and I want to be absolutely clear in my reply. There are two issues. First, activity is already under way involving officials to ensure that where packages are possible, they can be put in place. If that is possible within the existing funding programmes, it will be considered.

Secondly, we must examine what will happen in the future. One of the questions that the 

Col 95 committee raised was whether it would be possible to access funds for assistance in such circumstances in the future. I hope that when we examine the new plans, we will ensure that that is a clear priority within those plans. Also, we recognise that some of the flexibility in the overall Scottish budget, which might exist because of the reduction in the population coverage, might free up resources for a flexible response in areas that are not necessarily covered by the new population map but that are affected by economic decisions which cause such an impact on local communities.

Ms MacDonald: The continental situation provides a good example of the switch from one programme to the other. When I spoke to the member for Edinburgh West, Margaret Smith, she said that on the new map Newbridge might just manage to squeeze into the Kirkliston ward. However, it might not manage to squeeze into that ward; it might still be in West Lothian. That is what I mean by falling between two stools. If you do not mind my telling you, that is a good example to show why you must target closely. I am concerned that the timetabling might mean that we miss the boat.

Mr McConnell: On the day after the announcement about the Newbridge plant was made, I announced some new moneys for European social fund projects in Stirling. Some of the people who were present were on their way to Newbridge to take part in a meeting about that kind of initiative. It is important to recognise that ESF money—objective 3 money—covers the whole of Scotland, so regardless of the population coverage of the map for objective 2, the training money that exists for such a situation covers all those areas. It is important to ensure that priority is given in the plan to areas that suffer an immediate economic impact.

Dennis Canavan: I would like to ask about the objective 2 map and, in particular, about the geographical unit for eligibility. There were reports last month about a Cabinet sub-committee meeting having to be cancelled or postponed because of some disagreement among various Cabinet ministers. The report said that the Secretary of State for Trade and Industry, Stephen Byers, demanded that eligibility for objective 2 status be based on the boundaries of entire councils rather than on those of smaller council wards. The same report said that Mr Byers's proposal would release more money for Scotland, yet when the Secretary of State for Scotland, John Reid, appeared before the Scottish Affairs Committee at about the same time, he indicated his preference for the electoral wards as the best units of measurement for objective 2 status. Does the Scottish Executive agree with the Stephen Byers proposal or with the John Reid proposal? Why?

Col 96 Mr McConnell: The confusion between what were reportedly the views of ministers at the Department of Trade and Industry and the clear view that was expressed by the Secretary of State for Scotland at the Scottish Affairs Committee in the House of Commons is a good example of why it is not always helpful for me or anybody else to speculate about what might be happening between different departments. That is particularly true when the departments are in Whitehall.

It is clear that both the Scottish Executive and the Scotland Office ministers support a ward-based approach. Whether that approach results in the overall Scottish population coverage being up or down by the odd 10,000 of population is not the issue. What is important is whether the result is that the neediest parts of Scotland are targeted effectively or that population coverage is wasted on areas that would never receive grant aid because of their relative economic prosperity. The announcement of the assisted areas map showed that, although there was a reduction in the overall coverage, the areas that were covered by the new map were the ones that had received grants through assisted areas map status. The Scotland Office ministers and the Scottish Executive have been keen to ensure that we target as much as possible the areas that deserve and need that approach most, in as many parts of Scotland as possible. We are continuing to press for that approach behind the scenes and publicly.

Dennis Canavan: You mentioned the assisted areas map. We were told by one of your senior officials, when he came to give evidence to us just a few weeks ago, that there are two completely different maps. There is the assisted areas map and the objective 2 map. Surely there must be some kind of relationship between the objective 2 map and the assisted areas map. The assisted areas map is based on electoral wards. For example, would it be possible, either in theory or in practice, for an electoral ward that is excluded from assisted area status to be included on the objective 2 map—or the other way about?


Mr McConnell: In theory, yes. However, while there is flexibility, and the two maps are essentially separate, the Commission would like the closest possible correlation between the two. That is taken into account by the UK Government when it submits the second map.

Dennis Canavan: Could you answer this specific question: is it possible for a ward that is excluded from the assisted areas map to be included on the objective 2 map, and vice versa?

Mr McConnell: Yes, but it is important that we recognise, on the fisheries side, for example, that 

Col 97 there is a difference between the two maps. They cannot be identical, but we and the European Commission want them to be as close as possible.

The Convener: At the end of the round of questions we return to the first question, which was about funding. I want to explore further your comment that, even if areas are excluded from the objective 2 map, there should be the financial flexibility to assist some of those areas. That is an important point for us, and is a shift in thinking that must be teased out further.

David Mundell: Given what you have just said about the inappropriateness of speculating on what Dr Reid and others said, and given that Dr Reid is a member of the sub-committee that will decide the issue, do you agree that it would be wholly appropriate for Dr Reid to agree to meet this committee, so that we could avail him of our views and he could let us know what his current thinking is?

Mr McConnell: That is entirely a matter for Dr Reid and for the committee.

David Mundell: You have no view on that?

Mr McConnell: No, it is entirely a matter for Dr Reid and for the committee. The relationships between the Executive and Dr Reid's and Mr Wilson's offices are strong in terms of communication and joint action on the matter. At the same time, it is entirely a matter for this committee as to whether it wants to invite Dr Reid and entirely a matter for him and for you as to whether and when he appears.

Ben Wallace: At the beginning of your evidence you alluded to the fact that Scotland can interpret EU regulations and directives differently from England. That was confirmed for me by the European Commission last week. That being the case, do you recognise that in future there might be an element of conflict? For example, if the Scottish Executive party was different from the party that was running Westminster, our interpretation of EU legislation might be different. If our interpretation was regarded as void by the EU, it would take action against Westminster, not us. For example, if the Scottish Executive refused to implement an EU directive on fisheries because it would damage our industry, the EU would fine or sanction Westminster, and it would be up to Westminster to take action against us. Who would police our implementation of EU regulations from the Westminster end? That could be a point for friction in the future.

The Convener: Before the minister answers—and it is entirely up to him whether he does—I would like to point out that we agreed to discuss objective 2. The area that you are touching on is much wider than objective 2 and is not what we are here to debate. I will leave it to the minister, 

Col 98 but I would like the discussion to focus on objective 2.

Mr McConnell: I have great faith in the people of Scotland not to elect representatives to this Parliament who would do that sort of thing.

Ben Wallace: I raised the question because you alluded to it earlier.

Mr McConnell: I am happy to answer the question, and that is my answer. I do not believe that the people of Scotland would ever elect a majority of members to this Parliament who would take that sort of action.

Dr Sylvia Jackson: I am sure that we are all relieved that you intend to focus on the areas of most need through the ward approach.

It might be because of ignorance—I have not read the briefing sheets properly—but I am still unclear about the transitional arrangements and the flexible approach that we have discussed, nor am I clear about what is referred to in the briefing as an agreement for a "safety net", which will lead to a reduction in population coverage under objective 2 of not more than a third. How does the safety net relate to the transitional arrangements for funding?

Mr McConnell: The safety net was an agreement that was reached following negotiations between the UK and Berlin. The rationale for the safety net was that, although it was correct for the European Union to target the funds to areas that needed the money most, other areas that benefited from high population coverage would lose out. Britain was able to ensure that we would have high funding for the next seven-year period, although our population coverage might fall dramatically. That does not apply across every region or nation of the UK because there are relative levels of need and prosperity.

Over the past 15 years, Scotland has done well out of the structural funds. Our population coverage has been high and our economic position relative to the rest of the UK has improved since about 1988. That is a good news story for Scotland and reflects favourably on people of many political persuasions, local authorities, the voluntary sector, the Scottish Office and both political Administrations. We have a duty to secure the best population coverage for Scotland. Although Scotland's economic performance has improved and although, on any comparison of gross domestic product or other economic indicators, we will get less, the Scottish population coverage under objective 2 is likely to be about 40 per cent, while the population coverage south of the border is likely to be about 24 per cent. Scotland has been successful both in securing funding and in spending that money well.

Col 99 Cathy Jamieson: I welcome the fact that you mentioned targeting resources to the areas of greatest need. There has been a lot of concern that areas that currently receive funding might lose out under what people assume to be the current proposals. I am not making a special plea for my area—the convener would not let me do that and I am aware that other areas experience similar problems—but places such as South Ayrshire, which have a mix of rural and urban areas and use funding for skills training for tourism and business development, could lose out.

I seek an assurance that the areas of greatest need that you mentioned would be defined by poverty indicators such as high unemployment and high incidences of social exclusion, and would include areas linked to the social inclusion partnership areas as well as areas where there was an opportunity for development based on what had already been undertaken.

Mr McConnell: As committee members will be aware, it would be wrong of me to speculate about individual areas. It remains to be seen what decisions are made by the UK Government, but the Executive and the Scotland Office are clear that the best way to distribute the population coverage and therefore the funding is on a grouped ward basis, which would allow the most targeted approach at a local level. It would also allow more communities in different parts of Scotland to be included rather than only whole local authority areas.

I have received a letter from the member for Ayr, Ian Welsh, about the South Ayrshire position. My response to him will be the same as the response I gave to Mr Canavan and that I give today, that it is wrong to comment on speculation or on what may be leaked documents, but it is important that when the final decisions are made and the map is sent to Brussels, Scotland is reflected as well as is possible and the individual communities of Scotland are treated as fairly as is possible.

However, this is not an exact science; neither are the percentages in the population distribution across Europe. There is a degree of negotiation and compromise in the different countries; otherwise, we would not have got the Highlands and Islands agreement, Britain would not have got the safety net. Nor is it an exact science within the UK because we have to take account of different factors. The population and economic statistics of the mid-1990s are there to use as a benchmark, but we must try to match up the relative importance of issues like fisheries or rural depopulation, industrial decline and the difficulties in the inner cities. What relative weight can we give to these?

We also have to take account of developments—one good example is the situation 

Col 100 in the Scottish Borders, which, if we went by straight statistics from the mid-1990s, would probably not even be on the table for discussion. However, it is obvious to anyone who looks at the current economic circumstances and what is likely to happen over the next six or seven years that it has to be included in discussion. We have to take account of current circumstances as well as statistics that may be four or five years out of date. I would be very happy to come back to the committee and talk in some detail about the final representations made by the UK and the Commission decisions and our role within that, although I cannot comment today on where we are in discussions behind the scenes.

Cathy Jamieson: That is helpful in terms of a commitment to looking at the indicators as well as developments. I welcome the opportunity to hear more about the actual map.

I wonder if in the longer term there are any plans to look at integrating the various strands of funding to avoid the sort of confusion that arises at present but also in terms of equity and making sure that everybody gets a fair deal.

Mr McConnell: I will mention here our ideas to integrate the strands of funding. There are a lot of initiatives in Scotland, not least the social inclusion partnerships, as well as a number of initiatives from the Executive and the UK Government targeting poverty and social exclusion. As we look at the new plans and the priorities for projects for the next seven years we need to ensure that we maximise their impact. We also need to make sure that we are linking what we are doing in the Scottish Executive to try to tackle the communities in Scotland that are currently suffering most in terms of economic deprivation and social exclusion with what is being done at a local government level, in the voluntary sector and in the UK Government. I am very keen that we do that and in the course of the next few months there is likely to be an opportunity for the committee to be involved in discussions on how we might approach that.

The Convener: I will open the discussion up.


Allan Wilson: On that last point, there was a lot of concentration on maps, and rightly so. Correct me if I am wrong, but the point that Mr McConnell just made is probably the most important. Whether individual communities or areas of defined need find themselves included or excluded from either the assisted areas or from the objective 2 map, what is important is how we facilitate access for those communities to the moneys that are available to them. Will the Scottish Executive implement plans to facilitate that process for those 

Col 101 areas of need that we can all identify?

Mr McConnell: I would like to stress one or two points, as I understand that the committee is due to finish about now.

The Convener: I am going to cut you off in full flow.

Mr McConnell: Am I all right?

The Convener: Yes, you are okay.

Mr McConnell: This programme offers a lot of opportunities over the next seven years. The population coverage decreases in Scotland were always going to happen, as we were benefiting from these funds more than any other part of Europe in the late 1980s, as a result of the efforts of Strathclyde Regional Council and Highland Regional Council. We can benefit again over the next seven years. We can do that best by streamlining the administration, targeting resources, monitoring the projects in order to ensure that those that are more successful in terms of outcomes receive continued funding, and by ensuring that the areas that perhaps miss out on being included in the map not only receive traditional funding but also are supported by the work of the Scottish Executive in order to ensure the continuation of the good work that they have done over the years that has improved their relative economic position.

It is important that we deal with the situation in a flexible way, in order to tackle the problems that arise from time to time in particular areas. We must also use statistics and a scientific approach to criteria, and yet be flexible enough to respond to the problems that need to be tackled in different communities in Scotland. We must do that in a cross-cutting way, to use the jargon of the day, and in using that approach, we must involve other levels of government and other forms of funding. If we do that, the level of population coverage that exists will be sufficient to allow us to benefit from European funding. That overall approach by the Executive and the different arms of the Government in Scotland will be of benefit to local communities, and we can establish an applications process and an intervention process that will produce real benefits for local communities.

The Convener: Just before I bring Dennis in, I want to follow through on that point. There is a strand that brings together earlier points made by Dennis Canavan, Allan Wilson and Cathy Jamieson. Mr McConnell answered Cathy Jamieson's point about better integration and targeting resources on areas of greatest need—a point raised by other members. Dennis Canavan asked whether there could be areas that are eligible under assisted area status but that are not eligible under objective 2 status, to which Mr McConnell replied, "Yes".

Col 102 As for rumour, leaks and speculation, my own area qualifies under assisted area status but, although I hope that this is not the case, it might not qualify under objective 2. Mr McConnell introduced a new dimension early on in his comments. Can he confirm that, while there would be a reduction in coverage under objective 2, with European rules applying to the distribution of funds, he also said—correct me if I am wrong—that under the current budget settlement, there would be no reduction in funding to Scotland? That would, potentially, give this Parliament the opportunity to respond flexibly to the areas of greatest need. If any areas lose out in the way that Dennis was hinting at, the Scottish Executive and, probably more crucially, the Scottish Parliament could influence the distribution of the same budget, but in a different way—one that follows our agenda rather than an agenda established elsewhere. Am I correct on that point?

Mr McConnell: I do not like using the phrase "best of both worlds" in relation to devolution, although others have used it in the past. I think that Scotland will get two benefits from the final decisions that are about to be made on European structural funds.

First, despite an overall reduction in population coverage, and, in the longer term, in funding for programme approvals, we will still receive a higher level of population coverage than colleagues in England will. I do not like making those comparisons, but others make them so I respond. We will also receive a far higher level of population coverage than any other country in Europe, with the exception of the four countries that have been identified as those requiring specific assistance: Ireland, Spain, Portugal and Greece.

Scotland comes out well in the European funding settlement and, as a result of the devolution funding settlement, we have the opportunity and the flexibility to use any moneys that are freed up from that process for purposes that we determine. Scotland will not lose out financially from those decisions. We will be able to maintain our high level of activity on European structural funds. We will have some flexibility to use the other moneys that are available. The Parliament and the Executive could decide to target those moneys that are released either in the same areas as those that are covered by the map, or in the areas that have been removed from the map, or in another programme or department altogether. That is a decision for the Executive to recommend to the Parliament.

The Convener: To clarify, irrespective of any decisions already made by the Commission or the UK Government, the same amount of money will still be spent in Scotland. In the element that is not European-funded, the Parliament, in discussion 

Col 103 with the Scottish Executive, will be able to establish and determine our own priorities. In other words, there will be no financial loss to Scotland but, for at least part of that expenditure, there will be greater influence for the Parliament in determining how the money is spent.

Mr McConnell: Yes, the assigned budget is there, it is published and it will remain as published. The level of expenditure in Scotland will be roughly the same for the next three years because of the commitments that are already in the budget. What the overall picture is in the Scottish budget, where the priorities are, and any resources that are released, will be up to the Executive, and the annual discussions between the Executive and the UK Government.

Dennis Canavan: In order for the Scottish Parliament to come to an informed decision about whether the Executive has made the correct recommendation to the UK Government, we need maximum information about what is going on in the Executive. There must be a considerable amount of documentation about all this, for example, internal communications, and communications between the Executive and the UK Government. We seriously cannot expect Whitehall departments to reveal their documentation. They get very concerned when there are leaks or alleged leaks, or when any parliamentary committee—whether of this Parliament or Westminster—tries to find out what is going on in the corridors of power.

The advent of the Scottish Parliament and the Scottish Executive was meant to herald a new era of open democracy and transparency. Could we have access to the relevant documents from Mr McConnell, to see whether he is making an informed decision? Then people will be able to look at the map that eventually comes out and decide whether it was a good or a bad decision and whether it was justified by the evidence before the Executive.

Mr McConnell: The answer that I am about to give Mr Canavan will not surprise him, but I would like to justify it. It is not possible to release those documents. Although that may largely be as a result of convention and the need for us to build a relationship of trust between the new Executive, Whitehall departments and UK ministers, we have to recognise that the UK Government, once its proposals for the map are agreed, has to take its proposals to the European Commission. It is important that it goes on behalf of the whole UK, including Scotland, to get the best deal for us all. That case may be damaged by internal positions, statements of pros and cons, or different options that have been debated in advance. I understand the need for that position and I am not able to release the documents.

Col 104 However, it is important that we find a way of building a strong relationship between the ministerial positions in the new Parliament and the parliamentary committees. First, I repeat my clear, firm assurance that I will, as far as I can, keep the convener informed at all times of developments in this area. Furthermore, I have no difficulty whatever in making the same efforts to keep the Opposition spokespersons on the issues informed. I am happy to do that. There will be limits to what can be discussed at different stages, but I am happy to make my best efforts to build a relationship and to ensure that members have as much knowledge as possible and can, where possible, influence what we are doing.

Dennis Canavan: But you have not even given us one document, Mr McConnell. Even at Westminster, when ministers come before the select committees, they bring some documentation for public consumption and for the committee.

Mr McConnell: I understood that committee members already had documentation on the subject and that, the week before last, members received a specific briefing from Mr Millard on this topic. It is not reasonable to say that information was restricted before my presentation and this question and answer session.

Ms MacDonald: I am just a seeker after knowledge.

Mr McConnell: As ever.

Ms MacDonald: I want to ask, on behalf of my colleague Winnie Ewing, how much money we are talking about. No one has mentioned any figures, Jack, and you may be able to explain to me the disparity between two figures. Sometimes we read that the total amount of the funds available under the proposed settlement is 300 million, while the next figure that is mentioned is 200 million. I wish that Winnie were here, because she seemed to think that someone, somewhere, had lost the small change.

How long is the long term, Mr McConnell? You said that although we were getting a lot of money—exactly the same amount as we received under the old disbursement of grants—fewer projects would be approved in the longer term. Does that mean in two and a half to three years?

Mr McConnell: The reduction in approvals would start immediately because the population reduction starts immediately, but that takes two or three years to feed into the system. Approvals that have already been given will be paid for out of the Scottish budget over the next year, the year after that and the year after that. The amount of money that we spend on European structural fund initiatives in Scotland will remain roughly the same for the next three years. After that, it will be for the 

Col 105 Parliament to decide how money is distributed over and above the level that will be covered by the funding.

Ms MacDonald: But it will be reduced?

Mr McConnell: The amount of money that goes directly to local projects will be reduced as a result of the population reduction. However, the amount of money available to the Parliament to spend as it sees fit—on this and on the use of additional resources—will not automatically be reduced.

Ms MacDonald: I am still seeking knowledge. It is up to us to determine what we spend on individual projects—

Mr McConnell: It is up to us to determine how we spend the Scottish budget. Within that budget, there is a sum based on the historical position for European structural funds—that provision remains. The provision is not an identified amount within the overall Scottish budget. For example, if the amount of money that we can allocate on European structural funds in Scotland for the next seven years were to be reduced, in theory, by 10 million a year, that would not mean that 70 million came out of the Scottish budget that we got from the Treasury. The 70 million would still be in the Scottish budget; we would just have more freedom on how we spent it. That is what I mean about our having the best of both worlds.

The Convener: Up to now, the debate has focused on the financial loss to Scotland in terms of structural funds, but it would perhaps be helpful for us to have a briefing on the concept that you have introduced, Mr McConnell. What I take from this discussion is that, if Scotland loses European structural funds on one line, the equivalent loss will still be available for spend from the total Scottish block. I think that we need to examine that equation. From what you said, I have understood that, irrespective of any cut in the allocation of European funding, there will be no loss to Scotland in expenditure.


As significant—if not more significant—to me is your assurance that, within the money that will now be spent through the Scottish Executive rather than directly from European funding, we will be able to participate with you in influencing how the money is allocated. That includes choosing the strategic priorities—on issues, not just on areas on maps—and gives us the potential to examine, with other committees, how to integrate funding with other expenditure. That is worthy of a future discussion, because it gives us the ability to influence a significant source of expenditure—directly or indirectly—in a way that has not been possible before.

Col 106 Mr McConnell: I am happy to make supplementary information available if that is helpful. As I understand it, the role of the committees in relation to the annual budget will depend on whatever liaison arrangements exist between the conveners and the Parliamentary Bureau. I am happy to discuss the future use of funding with the European Committee but I want to be sensitive to the role of the Finance Committee and to the determination of who is discussing what.

The Convener: We in no way want to step on to the remit of other committees. However, if we in the European Committee see replacement expenditure for the reduction in European funding starting to come in under another heading, I think, from the discussions today and at previous meetings, that we could request that the Parliament address certain aspects of the gaps between the assisted area status and current objective 2 status maps and integration. That is not our responsibility but we could flag up indicators for other committees. You have given us something new to think about today, Mr McConnell, and that has been very helpful.

Mr McConnell: Those options definitely exist, but are clearly going to be subject to discussion and decision within the Executive and, ultimately, to the Parliament's decision-making processes for the annual budget rounds over the next seven years.

David Mundell: I want to clarify something that you said, Mr McConnell, in answer to a point that Dennis raised about NUTS funding. Were you saying that NUTS 5 funding would give Scotland more money, whereas NUTS 4 would give less but spread it round more, and that, in your view, NUTS 4 is the favourable route?

Mr McConnell: Neither guarantees more coverage. Ultimately, coverage will be based on a comparison with similar areas elsewhere in the UK. The point that I was hoping to make was that the more the geographical scale is broken down, the better the targeting of resources. I would rather have 1.5 million across Scotland, clearly targeted on the areas that need it most, than 2.5 million spread across Scotland with much of the coverage wasted. Neither of the two options exists, so I can give them as an example.

My view and—as I understand it—that of Dr Reid and Mr Wilson is that the coverage should be targeted as much as possible and broken down into groups of wards in as many areas as possible. That is not always straightforward. Three local authority areas in Scotland qualify automatically as a whole under the European Commission criteria; one option that may exist in discussion with the Commission would be to break down the areas of those local authorities. We need to examine that 

Col 107 possibility and do what we can.

Our objective is clear: we want to secure the maximum funding, use the flexibility to best effect and ensure that existing funding is targeted on the communities that need it most. Having got that agreed by October, I want to ensure that the way in which the programmes are administered is as efficient and effective as possible so as to get the maximum benefit for Scotland over the next seven years.

Col 108 The Convener: Thank you very much, minister. Given some of the issues that you raised and that came up in discussion, we would welcome your attendance at a future meeting.

The next meeting is on 14 September at 2 o'clock.

Meeting closed at 16:35.

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Scottish Parliament 1999
Prepared 31 August 1999