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.
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
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 expertiseacross all partiesof
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
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
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
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 coverageand therefore fundingfor Scotland in the new objective
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
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
||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
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
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 speculationsome 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 isif anythingperhaps 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
||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 agreedand
it was lobbied for hard by the British Governmentwill 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 communitieswhether
those are on NUTS 4 or on NUTS 5will 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 twoand I would expect threeyears 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 benefitedperhaps, 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
announcementwhich has not yet been agreed
||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 fundingeven though it is a new programme periodwill 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
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 moneyobjective
3 moneycovers 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?
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
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 mapor 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
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
Mr McConnell: Yes, but it is important
that we recognise, on the fisheries side, for example, that
||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
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
answersand it is entirely up to him whether he doesI 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,
||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 ignoranceI have
not read the briefing sheets properlybut 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.
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 areathe convener would
not let me do that and I am aware that other areas experience similar problemsbut
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
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 developmentsone
good example is the situation
||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
The Convener: I will open the discussion
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
||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
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
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 needa 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".
||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 saidcorrect me if I am wrongthat 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
wayone 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
||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
committeewhether of this Parliament or Westminstertries 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.
||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
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 moneyexactly the same
amount as we received under the old disbursement of grantsfewer 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
||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 fiton this and on the use of additional resourceswill
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 fundsthat
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 significantif not more significantto
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 prioritieson issues, not just on
areas on mapsand 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 expendituredirectly or indirectlyin a way that has not been
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
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 andas I understand itthat 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
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.
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
The next meeting is on 14 September at
Meeting closed at 16:35.