Examination of Witnesses (Questions 120-135)
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
120. Do you intend to audit the successful or unsuccessful bids that you have in order to find out what opinion is on this or other issues so that you can alter them in the three-yearly review?
(Mr Morgan) Yes, but the biggest problem that we had with the private sector was the complete misunderstanding of what Objective 1 was and people believing that in some way it substituted for the regional selective assistance grants that we give to the private sector. They thought that it was some sort of cash card, push it into the wall and £500,000 comes out. It is not like that. The private sector benefit indirectly from an improvement of skills, improvement in infrastructure, improvement in work space or something of that sort rather than directly, but past the first 12 months that is fine now.
(Mr Clarke) We were taking constant feedback from the partnerships with their views on a whole range of subjects. Christine Chapman, the Chair of the Monitoring Committee, and myself have just finished a complete circuit of all the partnerships in Wales over the last three months. We had a lot of good feedback from them, much of which has already been instituted, so changes have been made to certain aspects of the way the partnerships work. Equally, my own staff in WEFO are working constantly with the partnerships and go to all the partnership meetings, and again are in a position to feed back any worries there may be. Certainly we also do take a look at unsuccessful project applications to see what sort of customer feedback we get.
121. In that respect I think you may be ahead of the three English regions. They said that they had yet to make that virtuous link, that they were not taking it up, they were not doing enough auditing or monitoring or, if they were, it was not feeding back into the whole process.
(Mr Clarke) It is quite possible that we may be ahead. The predecessor organisation, WEPE, used to take regular feedback. WEFO at the moment is working with the National Audit Office with whom we are doing a pilot study of applicants. That will be reporting in the next two or three months and then WEFO will take over that pilot study and run it in a much bigger way. The National Audit Office are working on a wider value for money study for us at the moment. It is an applicant survey that we are engaged in.
122. I will ask this question in Welsh. I would like to go forward to the process of making an application if I may. I wonder if you could describe the process an applicant must go through before a bid is successful. How long roughly on average does it take for a project to go from submission to the stage when it is approved, and what scope do you think there is for simplifying the application process because those are the complaints we have received, that it is an excessively complex and lengthy process?
(Mr Morgan) I will ask John to answer that one.
(Mr Clarke) If you are doing an academic study of the process and taking a helicopter view of it I think undoubtedly it can look extremely complex. Many Government schemes do when viewed from that angle. If you are an applicant completely new to the world of structural funds then I believe we have made it about as simple as it can get because it only takes one phone call to WEFO or to your local partnership essentially. You are then, if you are a complete novice, conducted through the entire process and you really do not have to worry too much about it.
123. Can I stop you there? If what you are saying is true why do we as Members of Parliament and councillors have complaints from prospective applicants, if it is so simple?
(Mr Clarke) I think it was not always so simple. When we first got the show on the road back in the latter part of 2000 our partnership system was not as well defined as it currently is. The processes still had to be properly defined and we made major progress in refining all those matters as a result of a task and finish group that was set up towards the end of 2000. In September 2000 we had the very last of the bidding rounds when literally hundreds of applications arrived in a great heap and the processes for dealing with them were not as well refined as they might have been. There was some confusion and I think that accounts for a lot of complaints that you as Members of Parliament will have received. We have made a lot of progress since then in profiling the system. Indeed, by removing the ferrets in a sack syndrome that goes with a massive bidding round and everybody rushing their applications in, to the more measured tread of a rolling programme has improved people's sentiments as well because they do not have rush to get their application in and there is plenty of guidance available along the way.
(Mr Morgan) As I am a politician, just like yourself, Betty, perhaps I have had some elements of the same experience. One other thing which still has not been mentioned is that WEFO now has the level of staffing that it was originally intended that they should have. It is very difficult to build immediately up to 150 members of staff who are specialists in dealing with the bids, and so about a year ago there was only half the present staff, 75 members of staff. Obviously if you have 75 civil servants rather than 150 the answers will be much slower in getting to you. Also of course the number of offices available or contact points is another factor. There was only Machynlleth and Cym Cynon, and there are now other offices in Carmarthen and Colwyn Bay, and the payments one in Cardiff, so there are now four points rather than two. One other thing is that the expectations were higher than the reality. People said of Objective one that it was a way of getting free money if you like for anything. It was your choice of what you wanted the funding for rather than reading about the schemes and seeing whether they had an idea that fitted with the criteria before applying. In a way now that the expectations have lessened people do realise what has to be done and there is one contact point for WEFO. Also people are much more familiar with the partnerships and certainly the local partnerships. I am not quite certain to date whether they are as familiar with the regional partnerships.
124. John has not answered the whole question. I also asked how long on average does it take from the time of submission up to the time that you get approval or rejection?
(Mr Clarke) We aim, from the time that a fully completed application bounces through the letter box to when it gets its approval letter, at 90 days. I am not saying for one moment that we meet that in every case. We do in some. In fact, we had one only the other day, a massive private sector-led application for ERDF funding in the south west of the country which was done in 90 days and we can do it in even less than that sometimes. I am sure that is the experience in the English regions as well. I am sure our counterparts in England have also said to you that so much does depend on how big and complex the application is because we do not just tick boxes. It would be very easy to tick boxes and say, "You can have it and you cannot". Our attitude is to find something that we can do and sometimes that process of re-shaping an application can take longer than simply ticking boxes and saying yes or not.
125. Do you have readily available statistics to tell us how many applications meet that aim of yours, that is, 90 days? I can understand the problems but do you keep statistics to show how many meet that aim?
(Mr Clarke) I do not have those statistics readily available.
(Mr Morgan) Are they collectable in principle so that they could be supplied in writing?
(Mr Clarke) Yes, they are collectable in principle.
(Mr Morgan) Shall we try and supply a memorandum? How long have you got on this inquiry? How many days, weeks, months?
126. It is a bit open-ended, Rhodri. We have certainly got another month or so.
(Mr Morgan) We can try and supply a written memorandum on that.
127. We need to be clear if we are going to be comparing with the English regions because the information we got from Merseyside in particular was that in the circumstances you were talking about, John, where the application was not acceptable, they would then reject that application, give the advice, go back to the pre-application stage and help them build it into a proper application, but they would not count your 90 days. They talk about eight to ten weeks. They would not count that as starting until the application was acceptable to them and did not need to be trimmed at all, so we need to be careful that we are going to be making comparisons with the English regions that are like with like.
(Mr Clarke) That is absolutely correct: it is an absolute minefield. I am just reading the evidence that my counterparts gave you. It is a very difficult area indeed to draw comparisons on. There are some who say that when the application needs to be re-shaped fundamentally one should stop the clock. Then you are in danger of almost spending more time measuring how long it is taking to do it than actually doing it.
128. You referred to the 90 day target, John, and I am certainly aware of applications in my own constituency that are still outstanding and have taken between nine and 16 months in some cases. We are aware of the private sector losing interest out of frustration. I think it is beginning to happen with the public sector. I am aware of one application that took so long that when the offer letter finally arrived the public sector match funding had already been spent on another area. Clearly the long wait is a problem but also people raise with me the issue of transparency. It is not just the wait; it is also that when the application is in the system there is no way of finding out when you are likely to get an answer. Could you explain why WEFO could not be a little bit forthcoming in giving some kind of indication of how the application is proceeding and when people are likely to get a final answer?
(Mr Clarke) As the First Minister mentioned, all us, the entire partnership, have been gaining experience on the mechanics and the operation of this programme but it is increasingly possible for us in WEFO, indeed for any member of the partnership, to anticipate the speed with which a project will go through the system. We now know the dynamics of the strategy partnerships. We understand their personalities, we understand their proclivities and their strategies and we are better able to forecast how quickly the project will go through the system. We are all gaining in experience. We will get better at it. It is like any team working really. It takes a little while to bed down.
(Mr Morgan) Can I beg your forgiveness and leave in about two minutes' time?
129. Can you give us an overview of how match funding is managed in Wales? What is the application process for match funding? What match funds are available from individual public bodies such as the WDA and ELWa?
(Mr Morgan) I will say briefly before I leave that the basic principle is that we made an original estimate of how much match funding was available in the system, in the budgets of ELWa, the WDA, etc, and, allowing for the fact that there were arguments about whether there was a sufficiency, some people saying there was and other people claiming there was not, we did put some additional money in as match funding pots but we said that this was to be used as a last resort on account of the political statement that we had made, the promise we had made to the people of Objective 1 Wales, that no tidy project was going to fail for want of money and for want of match funding. We are glad to observe that by and large it is only about one tenth of that match funding pots that has been drawn down and therefore we think that the previous more optimistic estimates that there was plenty of match funding in the system has proved to be true and we have been able to adhere quite successfully to this idea that the additional match funding that we have put in, the £75 million a year or so, has not been drawn down and we have been able to successfully earmark it and say, "Look: it is there as a last resort. It will be used as a last resort if you cannot find match funding in any other way and it is a good project in danger of going down".
130. I should say that before I entered Parliament the previous report of the Committee on structural funds recommended that the Government should respond positively to proposals for schemes in Wales which make use of the provisions of the relaxed state aid rules in Objective 1 areas, including the use of tax credits. The Government in its response said that it had refused to permit any geographical variation in the R&D tax credit. Have there been any further developments in this area?
(Mr Murphy) As far as I am concerned, no. You and I debated this issue not so very long ago in the Welsh Grand Committee. Obviously the Government is always open to listen to representations made to it by the National Assembly or indeed by other public bodies in the United Kingdom and doubtless the Assembly will be making further representations on different matters. As far as we are concerned in Government it is important to say that we think that firstly the way in which we have treated Objective 1 funding in Wales in the very special and unique way in which we started this afternoon off, is an indicator of how important we feel we have treated Wales, especially with regard to those areas that you and I represent. Secondly, we think that in the last PBR a number of things happened which in fact do ensure that those deprived parts of Wales will benefit by the actions of the Government. They may not come within the precise scope of what you might define as operating aids but certainly in terms of those people who wish to take advantage of them they are very important indeed for those parts of Wales. They are, for example, the whole question of the Community investment tax credit, the Urban Regeneration Corporations, the 10p corporation tax starting rate, the stamp duty relief, other measures to help training and lower skilled people, further consultations on tax incentives to boost research and development by large companies, extending from existing SMEs to all companies, in addition to which we believe that measures such as the national minimum wage, the working family tax credit and the 10p starting rate of income tax and the New Deal are all special helps to people in Wales. Add all those together and with a very good Spending Review and the special way in which we dealt with Objective 1 structural funding, we think that we have done a great deal to try and ensure that we alleviate the problems of those areas to which you refer. As to the specific points you made regarding other forms of operating aids, it is for the Assembly obviously to put their point to the Government and then for the Government to look at those in the next number of months.
131. It is a shame though, is it not, that here is an opportunity to return toa regional policy with real teeth? I am thinking in particular of the operation of the old regional employment premium under the Wilson Government which was very effective in bringing investment and jobs to areas like Wales. Would it not be a shame if this was another wasted opportunity to have really specific incentives for those lagging regions of the UK?
(Mr Murphy) First of all it is not as simple for operating aids only to come to Wales because obviously we have to think of other Objective 1 areas in the United Kingdom as well, where do they stand in all this? Secondly, we have to work within the remit of the European Union and the Commission's own rules on these things. Thirdly, as I say, the regime as it now stands gives a particular advantage to Wales in the sense of the Objective 1 area covering the great mass of Wales's land in addition to its population, in addition to the measures I have just mentioned, in addition to that the regional selective assistance which now goes to many parts of Wales, including my own constituency. I think that the fact that we have got all those aids, the ones we have already got, together with the special help, together with the Spending Review, has meant for example that constituencies such as mine and others too have benefited enormously in the last number of years to such an extent that, as you appreciated when you read the unemployment figures last week, that relative to England, Wales has done better. Part of that is because of those measures to which I have referred.
132. What preparations are you making for the period when Objective 1 funding is no longer available?
(Mr Murphy) I think that is probably more for the Assembly.
133. My follow-on question will be, are the Assembly or the Welsh Office working to build strategic alliances with other UK and EU regions in negotiations over the future of Objective 1 at UK and EU level?
(Mr Murphy) I assume you refer to the whole question of structural funding generally and cohesion funds within Europe after the next few years are over and this particular six year period is over?
(Mr Murphy) I think it is fair to say that the Government itself has not yet made its position clear on this. One of the reasons is that it is so very important to listen and to consult with the National Assembly as to what it thinks might be the impact on Wales were the regional structural funding systems to change. Evidently, with European enlargement there will be changes but I think it is right that Government should not make an instant decision as to how best to react to it but rather to reflect and to talk to and consult with, particularly in our case, the National Assembly to see what they feel would be the impact upon Wales. That is why we have not rushed into any decision on that and we look very carefully at the impact of changes in European policy in the months ahead.
(Mr Jones) I have hardly anything I can add to that. It is very early days. The Assembly I know will be consulted by the UK Government which is leading as the Member State. The Commission is also consulting at Member State level but also directly with devolved Governments, including the Assembly. We are actively participating in those processes.
135. There are two key issues, it seems to me, in relation to the future of the structural funds. One is the size of the pot. I would like to know what the position of the UK Government is, for instance, on whether the proportion of EU GDP allocated to the structural funds should be increased from 0.45 per cent currently. The second is the issue raised by the UK Government of the balance between the role of Member States and the role of regions within regional policy and whether this should be effectively a re-nationalisation if you like of regional policy. What is the position of the UK Government on those two issues? If the position of the UK Government on those issues is different from that of the Government of the National Assembly, will Wales be allowed to speak in its own voice in the relevant meetings of the Council of Ministers?
(Mr Murphy) You know that it is essentially a matter for all Member States to negotiate on behalf of their own countries and to represent their own countries, by which I mean in this case the United Kingdom, not Wales, at those meetings. You will also know that on a number of occasions ministers from the National Assembly have sat alongside and with UK delegations on various issues such as education, but in all cases did so on the basis that they were representing the UK Government. I think everybody accepts that that is the way in which it happened. I repeat that any decisions that the Government will eventually come to regarding structural funding will be taking into account the views that will have been expressed to me by the National Assembly. As I said before, after all we represent the same place. I will ask Ros to come in on some of those other details, or John, with regard to the cohesion funds, but it might be worth mentioning to you that when I did my Minister of State job in Northern Ireland I was there when Objective 1 was being phased out and at the end the Objective 1 period of course there was a transitional period, which we are still under at the moment, in order to cushion the phase-out of Objective 1. The same applies to the Republic of Ireland. In a way, and I think it is certainly the case in the Republic of Ireland, the structural funding has partly done its job, and there are other reasons why Ireland became such an important economic power in its own right within Europe, but Objective 1 was one of those reasons, and in a sense it has worked; it has done what it was there to do. From then on there are other ways in which membership of the European Union will help the way in which Ireland develops economically in the years ahead. I would sincerely hope that it applies to us, but the Objective 1 funding within six or seven years will transform our economy and we will have a second phase in Wales when we will take advantage of our membership of the European Union.
(Mr Neve) On the future of the funds, the present funds will come to an end in 2006 so there will need to be negotiation on what comes after from 2007 onwards. We should not forget that we are still at a fairly early stage in implementing our present funding programme and one of the priorities for now must be to make sure that the UK makes the best use of the funds which are available in the present funding period. At some point, and we do not expect this to happen until the second half of 2004 or early 2005, the Commission will come forward with some formal proposals for the period from 2007 onwards. As I said, that is still some way ahead but that is not to say that individual Member States and the Commission themselves are not already beginning to think informally about what should happen next. The Germans have already come forward with some ideas, the Dutch have put forward some tentative proposals, the Spaniards have made their views known. Within the UK Government we are beginning to think about what the UK position should be. The future of the structural funds, like other EU issues, is not a devolved matter and therefore it will be for the UK Government to formulate a position in the debate on behalf of the UK. As the Secretary of State has said, there will be a full and detailed process of consultation within the United Kingdom with the devolved administrations, with other Government departments, within the English regions about what the UK position should be in those negotiations. As I said, we are very much in the early stages of thinking about what that position should be. We would hope that a process of consultation will begin in the coming months but it is going to be a process which takes place over many months, indeed several years, I think, before it comes to a conclusion.
Chairman: It has been a marathon but very helpful session. Thank you all for coming. We keep making history with this Committee. This is the first time we have had both the First Minister and the Secretary of State before a committee in Wales. As I said, it has been very helpful; thank you very much indeed.