Examination of Witnesses (Questions 100-119)
RT HON PAUL MURPHY MP, MRS ROS DUNN, MR ANDREW BAYER, MR JOHN NEVE, RT HON RHODRI MORGAN AM, MR DEREK JONES AND MR JOHN CLARKE
MONDAY 21 JANUARY 2002
100. I was thinking of a job for the Prime Minister.
(Mr Morgan) It is simply that it was originally specified that the Minister for Economic Development would chair the Programme Monitoring Committee or his or her nominee. The job of chairing the Programme Monitoring Committee was then passed over to Christine Chapman 14 or 15 months ago because she was my nominee, and she has done a very good job. I do not know who chairs the Programme Monitoring Committees of the three English regions but they I guess would be nominees of a Government minister but I do not know which Government minister. Is it one of yours?
(Mr Bayer) It is the Regional Directors of the Government office concerned.
(Mr Morgan) But they do it on behalf of the DTI Minister?
(Mr Bayer) They do it on behalf of the managing authority which is DTLR.
(Mr Morgan) It is a matter of choice as to how these things are done. Clearly it is not a Government-run programme and is not allowed to be a Government-run programme, and if you tried to run it as a Government-run programme the EU would take all the money back and say, "Right; you obviously have not understood the partnership approach". Given that it is a partnership approach they want somebody with the authority of a Government minister to chair a Programme Monitoring Committee but they do not want it to go beyond that. It is not a Government-administered programme; it is done through a partnership. People in Wales, because it is two-thirds of Wales, tend to misunderstand it and see it as a Government-run programme but it is not. It has to be run as a partnership programme and therefore you have to have the private sector, the voluntary sector and the public sector various agencies, local government regulatory bodies, even the Environment Agency, the Countryside Council and so on. They have to be represented on the Programme Monitoring Committee for it to meet the European specification on what is a genuine partnership. It is easy to understand in South Yorkshire and Merseyside and Cornwall but it is very difficult to understand in Wales because the Objective 1 programme happens to cover probably three-quarters of our land area, 15 out of 22 local authorities and almost two-thirds of the population.
101. So in answer to my question you are going to carry on indefinitely?
(Mr Morgan) No, I am not carrying on indefinitely. I do not chair the Programme Monitoring Committee and have not done so for 15 months.
102. In reading the most recent report on progress what I was particularly struck by was the under-commitment and Priority 5 which covers rural development, and of course we are all aware of the particular problems of the rural economy at the moment. What specific action will you, Rhodri, as Economic Development Minister, be taking and WEFO to encourage quality projects to come forward under this measure?
(Mr Morgan) It is in between the two really. It is not my job and it is not WEFO's job. It is the Programme Monitoring Committee who would look at that and say, "Is there a problem here and, if so, what can we do about it?" It is not the Minister's job as I interpret it. It is a Programme Monitoring Committee job, is it not?
(Mr Clarke) It is a programme management job.
103. Is there a danger here that political accountability is falling in between these various committees? There are obviously 29 partnerships and various other committees. Is this not the problem, that nobody is taking the lead here? We are talked about the other agents in England where they are actively commissioning projects where they outline a gap in terms of commitment and are taking the lead and saying, "Okay; let us generate some ideas in order to meet this vacuum".
(Mr Morgan) There may be one or two exceptions here but we in general do not have an underspend problem caused by lack of demand. It is usually excess demand, paradoxical though it is, that causes underspend because of the savagery of the in-fighting where demand exceeds the supply of money by a factor of five or ten. As a result it would make the problem even worse if you then went out and tried to commission projects in an area where there was underspending where there are already far too many projects fighting for an inadequate pot. When it comes to the mid-year review which will start in six months' time or sowhen does the mid-year review take effect from?
(Mr Clarke) We are due to submit the mid-year review to the European Commission in the fourth quarter of 2003. We will be starting work on it in about six months' time.
104. Let us be clear on this. The problem with Priority 5 is that the partners are fighting like ferrets in a sack.
(Mr Morgan) I do not know whether that is true for Priority 5 and perhaps John should answer that. We were talking about infrastructure and about IT earlier but not necessarily about rural. I had better check on that.
(Mr Clarke) We reported to the Economic Development Committee and the Programme Monitoring Committee that we had committed 55 per cent of the indicative allocation in Priority 5. This priority has £131 million over the next five years. There area number of different reasons for that relatively low percentage. For example, we were expecting an application for a very large scheme of over two million pounds and that has now been sorted out and the increase has been agreed. There were some slight delays on Measure 7 of Priority 5 because we were waiting to put together a definition of an eligible rural area and that mean that we were temporarily five million behind the pace. The point one needs to emphasise here is that one of our strategic partnerships is called the Rural Assets Strategy Partnership and that very definitely is taking a proactive view, a commissioning view, a marketing-led view, if you like, of Priority 5. There are two essential roles for these strategy partnerships. One is to provide specialist advise to WEFO and individual projects and the way that they should be approved, and the second is to take, in business terminology, a marketing view of the priorities in Objective 1 that are assigned to them.
105. In the case of Priority 3, which is Community Economic Regeneration, you have adopted the distribution of funding on the basis of proportion to each ward and greatest need. Given that the rest of the programme funding has not been distributed geographically, what is the reason for this particular implementation strategy in Priority 3?
(Mr Jones) John may have to help me here. The underlying factor was that it was on a ward level that most of the relevant statistics were available for looking at the kind of local community regeneration needs that would be around. I think it was that which drove the decision to weave it into the programme rather more formally rather than simply have to the side, although there might have been more to it than that.
(Mr Clarke) There is a formula in the single programme document which is based on the index of multiple deprivation which we used. The key regulation here is found in the SPD (single programme document) which states that not more than 30 per cent of the population of the Objective 1 area can be covered by Priority 3 and thus, to arrive at that relevant 30 per cent we had to use the index of multiple deprivation with the concomitant ward approach to that.
106. So that is just particular to Priority 3? It does not apply to anywhere else or any other priority?
(Mr Clarke) What I gather is called in the trade "the spatial allocations" are broadly typical of Priority 3. We do use them in some other priorities and measures as well. There is one in Priority 5 where we use the spatial approach.
107. Are you finding that this is problematic with Priority 3 because there may be neighbouring wards where there is some deprivation? I find it difficult that they cannot apply.
(Mr Clarke) It was a very vigorous debate surrounding the use of the index of multiple deprivation at the time. It is basically a zero sum gain, this one.
(Mr Morgan) If it says 30 per cent, it is 30 per cent. You try to define the worst off 30 per cent and the people in the 31st and 32nd worst off areas in Wales are going to bitch about it and say, "Shame that we did not get into that worst off 30 per cent", but it does not matter where you draw the line; you would have that effect.
108. Is there any flexibility within it where there may be an underspend in certain areas so that it can be moved to other wards? Is there room for flexibility within the SPD?
(Mr Morgan) I would be very surprised if there was, knowing how European regulations are framed. Flexibility would not be the name of the game.
(Mr Bayer) There was a vigorous debate with the Commission because all the Objective 1 programmes have economic development priorities and there was discussion with the Commission as to how much of the Objective 1 area should be covered by these priorities. We wanted some flexibility. The Commission wanted to restrict the number of people to 25 per cent and departments and the devolved nations wanted to go more than that, up to 35. We settled on 30 after two meetings with the Commission with no flexibility and the words that are in the SPD took ten people three hours to reach a conclusion on. It was the last issue that came to be part of the negotiation, so there is no flexibility.
109. What is the size of the Priority 3 budget? Is it over-subscribed and was the budget big enough?
(Mr Jones) It is £110 million, just over, for the whole of the priority over the period of the programme.
110. Is it over-subscribed? Is £110 million enough?
(Mr Clarke) As yet it is not over-subscribed. Going back to our indicative allocations, at the end of 2001 we had committed just about 36 per cent of the indicative allocation. The reason for this is the same as the First Minister described under strategic infrastructure. It is a very small pot of money. I make no value judgement on whether it is enough, but it is a very small pot of money for which there is tremendous demand. It has in the main been allocated to local authority areas spatially and they are now undertaking the process of deciding how best to allocate it in the way that the First Minister described. It is a small sum so they are not rushing at it. There is no doubt that it will be used. It will achieve better value for money by using it with measured tread.
111. I believe the amount that you give is up to 75 per cent; is that right?
(Mr Clarke) That would be a fairly typical grant rate or intervention rate.
112. So the chance of bringing in additional money is only 25 per cent, is it not?
(Mr Clarke) In very broad terms, yes, very slightly measure by measure. It is also important to mention in the context of Priority 3 that there are some measures which relate to capacity building in a community. Those are motoring along much faster, which is a good thing because often the whole process starts with capacity building and then moves into bricks and mortar and more concrete projects.
Chairman: Could the witnesses, if they are not fluent in Welsh, put their headphones on at this point?
113. I hope you can hear the translation. We have heard the views of Andrew from the Department of Trade and Industry but I would like to ask both Rhodri and Paul what is the nature and the size of the co-operation with the other Objective 1 areas within the UK but also in Europe? Do you think that there is any scope for building some kind of strategic alliances between the Objective 1 areas in the UK for example to have a detailed and thorough discussion with other Government departments and with the EU as well?
(Mr Morgan) There is some kind of club element about it. There are four areas three in England and one in Wales, but we are a club and it is quite likely that there would be some benefit in collaborative working. Having said that, there are priorities which are not exactly the same in all the Objective 1 areas and what we have seen during the relatively short time when Objective 1 has existed in Wales is that there is an element where we have been operating where, having regard sometimes to four areas for working where everybody commissioned particular reports and also particular pieces of work, we have been very happy that Merseyside, for example, took the initiative there, and so there is collaboration and I am certain that once the present phase comes to a close with the mid-term review at the end of 2003 then this club aspect will be increasingly important.
(Mr Murphy) I have nothing to add to what I said before.
(Mr Neve) The DTI does have a co-ordinating role in this area of implementation and it is our intention to convene within the coming months and, as I said earlier, a meeting of representatives of all the Objective 1 and Objective 1 regions, so I hope that will go some ways towards meeting the kinds of concerns and objectives that have been voiced.
(Mr Morgan) I do not know whether there was any co-operation between Highlands and Islands and Northern Ireland and Merseyside in the previous seven-year period. Were you involved in that, Paul?
(Mr Murphy) No. It was the last year or two of the Objective 1 structural programme. I cannot recall any particular co-operation. There may have been.
(Mr Morgan) I did not think there was.
Chairman: Are you happy with that answer, Betty?
Mrs Williams: Yes.
114. We learned last week that the way that the partnerships are formed in the three English Objective 1 regions is different from that of Wales and we were told that, for example, in Cornwall the SME partnership consists solely of representatives from the private sector. Could you outline briefly the rules which the EU lays down governing the composition of the partnerships and why did Wales adopt the way it has gone forward with the "three-thirds" partner principle?
(Mr Morgan) Going on memory, two years ago there was at that time a great deal of co-operation between the Economic Development Committee and its chair, the late Val Feld, and myself as the Minister of Economic Development as to the best way of trying to meet the different encouragements, some of which were pretty strong encouragements but they were not laid down exactly as rules by the EU, and that is where the idea of the three-thirds rule of voluntary sector, private sector and public sector came out in the process of setting up the Programme Monitoring Committee between January and June 2000, although I cannot remember the exact dates now, and where the very strong encouragement to the partnerships, despite quite a lot of opposition here and there, to having gender balance or as close as dammit to gender balance (in other words a minimum of 40 per cent women on the partnerships themselves) arose from. We thought that was in the spirit of it. We were interpreting as best we could the words, which are not always absolutely crystal clear, in the EU regulations, so it was really a sort of Val Feld/Rhodri Morgan partnership and that was what got implemented.
115. What do you see as the advantages and disadvantages? Have there been any?
(Mr Morgan) I suppose you could say avoidance of challenge from Europe that we had failed to try to achieve gender balance, equality of representation between public, private and voluntary sectors, capacity building, getting as much involvement in the communities as possible. Some of it was obligatory and some of it was interpreting the spirit of the regulations where it says that we encourage or we wish to establish best practice. It was not absolutely obligatory but it was clear, reading between the lines, what Europe was looking for and therefore, for the avoidance of challenge and therefore loss of grant or delay in grant, we thought this was the best thing to do and to set it out pretty firmly in advance and say, "Do you want to participate in this programme or do you not want to participate int his programme? If you do, this is how we are going to do it", and by a relatively firm hand in that way at the start, in spite of some opposition, by and large we have achieved it.
116. Do you find that there is equal participation by the thirds?
(Mr Morgan) The problem we had at the beginning was that the public sector could have been far too great because there was a strong indication from Europe that they wanted the Countryside Council on it, they wanted the Tourist Board on it, they wanted the Forestry Commission, they wanted the Environment Agency on it to make sure everything was clean and green and so forth. Of course, to have done that and then have that only as a third, you would have had to have the private sector representation much bigger to match it and then you would have to have the voluntary sector much bigger, and of course the voluntary sector simply could not spare the people or make the car journeys necessary to go to all the meetings because they are much thinner, they do not have big headquarters staffed with lots and lots of people hanging round looking for committees to be on. They are just not made like that.
117. Have you got over that?
(Mr Morgan) We did, yes, by having some of the public sector representation there on a non-voting basis. They sit there but they are not full voting members.
118. What about the private sector?
(Mr Morgan) I am surprised at what you said about the private sector being in much greater representation than some of the English areas. We did not find it all that easy to get the private sector representation because there are so few company headquarters in Wales that it is almost like the voluntary sector in the thinness and therefore how much time are we going to spend going there? To come from North Wales to lots of meetings it is a four-hour journey, then a five-hour meeting and a four-hour journey back. That is a whole day out for somebody running their own business. It is not really on if the meetings are going to be very frequent. If you have a big company headquarters you can always spare a staff officer but you cannot spare line management and you cannot spare the boss. If you have not got any staff officers because of the nature of business in Wales it is pretty tough to do that. What we have done is to set up a Social Partners' Unit as a compensation for this to encourage both business and trade unions to be able to participate via the Social Partners' Unit which provides them with the number-crunching expertise, with the crunching of the huge agendas down to executive summaries for people not to have to the huge problem of the masses of reading of monstrously thick agendas, plus the travel. I do not know how long it takes you to drive from one end of Cornwall to another but from St David's to Prestatyn or from Cwmbran to Holyhead, these are much further journeys than getting across Merseyside or South Yorkshire and even in Cornwall you would only get journeys one third of the journeys that could be involved in participating in West Wales & the Valleys in Objective 1 Wales.
119. We have taken some evidence from business people in Wales and indeed from the voluntary sector and there was a feeling that this thirds principle was too rigid and that there was a need for greater flexibility. How do you feel about that?
(Mr Morgan) Any principle will always cause difficulties at the margin but we have stuck to it because we thought it would leave us completely clear of any challenge from Europe that we had failed to use best endeavours to get private, public and voluntary sectors equal with equality of opportunity, inclusion of people with disabilities etc. Right across the board, if it specified equality of opportunity objective and environmental sustainable objective we have tried to meet it in advance rather than face challenges down the line and, say, pay £500 million back to Europe because we had failed to abide by X, Y or Z.