Assisted Area Status (Wisbech)

– in the House of Commons at 9:40 pm on 26th April 1999.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Allen.]

10 pm

Photo of Malcolm Moss Malcolm Moss Conservative, North East Cambridgeshire

I am grateful for this opportunity to put to the Minister for Small Firms, Trade and Industry an important case on behalf of my constituents and those of the hon. Member for North-West Norfolk (Dr. Turner). This is my sixth time of asking for the debate, and I am glad finally to have come up trumps in the ballot. I thank the Minister and his team for their co-operation, particularly in answering letters and in meeting a deputation from my local authority, Fenland district council.

I do not want to belittle the difficulties that the Minister and his team face. There have been parallel submissions from many other local authorities for objective 2 status under the structural fund budget. Those bids are not coterminous with bids for assisted area status, but the core criteria are, in many cases, coupled. The shared criteria include having 100 people per square kilometre, having a percentage share of agricultural employment equal to or higher than twice the European Union average in any year since 1985, and having an average unemployment rate over the past three years above the EU average.

When those stringent criteria are taken together, the present is not the most auspicious time at which to plead for my area. The major issue facing the fens is the fight against the perception that East Anglia is uniformly prosperous—a perception reinforced by the allocation of regional budgets. The east of England, containing a population of 5.3 million, will receive £28.8 million, but the south-east of England, where the population is 7.8 million, will receive £60 million. On a pro rata basis, the money for the south-east would be £45 million.

In August 1993, the Government designated the Wisbech travel-to-work area as an assisted area with intermediate status. The reasons were higher than average unemployment, measurable deprivation, staple industries that were mainly in declining sectors, and problems of isolation and peripherality. The same factors applied to the successful application by local authorities in North-East Cambridgeshire and North-West Norfolk for European objective 5b structural funds. We were also successful, under the same deprivation criteria, in applying for rural development area status.

I am not talking only of the Wisbech travel-to-work area, of course, because the submission made to the Minister by Fenland district council offered a twin-track approach. It included the idea of moving from wards upwards, aggregating areas across county boundaries and involving a large area in the constituency of my neighbour, the hon. Member for North-West Norfolk.

Having got assisted area status, what is the track record of my local district councils? We would say that we have been the most successful area in the eastern region. We have had about 60 offers of regional selective assistance, totalling almost £5 million, compared with just over £2 million in the Great Yarmouth assisted area, £750,000 in Harwich and £1.3 million in Tendring. So, the fenlands area has been by far the most successful in attracting Government grant and, as a result, in levering in substantial amounts of private sector investment. About £25 million of such investment has come in under that leverage.

The investment has safeguarded 1,015 jobs in the Wisbech travel-to-work area and has created 922 new jobs. It has also been successful in lowering unemployment, which stood at 11.5 per cent. in 1992 and was below 4 per cent. earlier this year.

Those figures do not take into account recent job losses in the area. A few months ago, Hazelwood Foods announced the loss of 420 jobs at one factory alone. Within several weeks of that announcement, Carnaud Metal Box announced 90 job losses at its plant, which makes cans for the canning industry. The company has since changed the figure to 75 job losses. None the less, that is a significant number for the travel-to-work area, given its size and population. With the losses in smaller firms, we will be facing more than 500 job losses in the next few months.

What are the employment prospects for that area of Cambridgeshire—a prosperous county, within a seemingly prosperous East Anglia? How is that pocket of deprivation likely to get out of the trough? A jobs deficit of about 9,800 is predicted by 2006, yet 6,300 jobs will be required merely to bring male and female activity rates up to the Great Britain average. On top of that, 3,500 will be needed to provide employment for the projected 7,300 growth in population by that year.

The area has a problem of structural decline. The Henley industrial structure index predicts that it will be one of the worst local authority areas for employment in Britain. The index ranks the fenlands 433rd out of a total of 459, so it is at the bottom end of that structural index.

Of course, it is an agricultural area, and we have uncertainty over reform of the common agricultural policy. Last year alone, we saw a 45 per cent. reduction in farm incomes and the National Farmers Union predicts a 50 per cent. reduction in farm holdings in the next five years. Therefore, it is unlikely that the base industry of agriculture will be able to take up any slack in unemployment in the next few years.

The capacity to create new jobs or to travel to such jobs in other parts of East Anglia is constrained by a number of factors. First, there is a concentration of businesses in declining sectors that risk rundown or closure. Some 60 per cent. of industries are in mature or declining sectors, and only 40 per cent. in growth sectors. Secondly, there are poor prospects for investment, particularly with the non-viability of commercial property. My constituency cannot attract speculative industrial build, certainly in the north, because when the factory or building is constructed, its value on the open market is three quarters of what was paid to put it up. There is, therefore, a problem in sale and lease-back arrangements, for example, and only with the intervention of the local authority or English Estates can the gap be made up so that we can have a viable commercial industrial sector.

There are constraints on water supply and disposal. We are talking about the fens of East Anglia and parts of my constituency that are below sea level. Getting the water off the land is a problem, but so is getting the water that industry uses into the rivers and out to sea. Unfortunately, while considerably more investment is going into water treatment and sewage systems—Anglian Water has a substantial investment programme —our relatively sparsely populated area is towards the back end of development. To my knowledge, we have lost the investment of two major European food processing firms who wanted to come to Fenland, but did not because Anglian Water could not cope with their water requirements.

The third factor is the uncompetitiveness of the work force, which is manifested by low educational attainment, skills in declining sectors, low pay and low entrepreneurial capacity. Educationally, 69 per cent. of 16-year-olds obtain fewer than five GCSEs or national vocational qualifications at grades A to C, against the national average of 55 per cent. On training, 23 per cent. of the work force do not have a nationally recognised qualification and only 19 per cent. have NVQI.

Low pay means average earnings of £321 against a Great Britain average of £354. Those figures relate to pre-minimum wage days, so I do not know the current figures. They reflect low added value and a low skill profile. On entrepreneurial capacity, between 1993 and 1996, VAT registrations fell by 13 per cent. That shows a decline in the business start-ups that we hoped would grow into companies that could take up the slack of unemployment.

Fourthly, we have a poor strategic transport infrastructure. We are outside the key north-south routes and have poor east-west routes. I single out the A47 trunk road, which comes across from the midlands, goes round Peterborough and then disintegrates into a very poor road through Wisbech. There is now some dual carriageway between Wisbech and King's Lynn, but there are problems further east towards Norwich. We do not have a decent east-west route to take our business and products quickly to the main north-south line of communication, the A1.

We suffer from peripherality. The area's lack of communication links is highlighted by a Henley hub index of 0 and a contiguity index of 0.8. Those are technical points, but I am sure that the Minister understands what they mean.

Photo of Dr George Turner Dr George Turner Labour, North West Norfolk

The hon. Gentleman will know, although the House may not, that the western part of my constituency is similar to the description that he gives of his area. Does he agree that, although there has been some success in acquiring support, our communities are extremely precarious at present? He has realistically described the threats faced by those communities. Does he agree that this would be almost the worst possible time to remove the support that they have enjoyed during recent years?

Photo of Malcolm Moss Malcolm Moss Conservative, North East Cambridgeshire

I am grateful for that intervention. The hon. Gentleman and I share the same problems in our communities. For six years, those communities have enjoyed and made good use of that support, which they will continue to receive until January 2000. The point of our submission to Ministers at the Department of Trade and Industry, of the meetings that we have held and even of the debate tonight is to impress on the Minister that to snatch that facility away from our community is the worst possible thing that could happen at this juncture.

I emphasise that we do not have any natural advantages to attract inward investment to the area. There has been no credible offer in the inward investment market and none of the inward investments secured by the East of England investment agency in its first 18 months of operation have located in our fenland area. That underlines the point made by the hon. Member for North-West Norfolk.

There has been a good response from my local authorities. Redesignation of regional selective assistance will be the centrepiece of the fenland partnership that has been set up. That partnership of local authorities, local businesses, the local chamber of commerce and the training and enterprise council has a four-point regeneration strategy. It aims to retain and enhance the competitiveness of existing industry—most notably, the fenlands food cluster, which is marketing under the name of Foodfen.

Through Cambridgeshire county council and the local education authority, we intend to raise levels of educational attainment. We shall address the barriers to investment created by infrastructure constraints. One aspect of the partnership's work is to hold on-going discussions with Anglian Water, the Government office of the eastern region and the Rural Development Commission.

In conclusion, the fundamental question, and the problem facing my constituents and their local authorities, is how they can meet the new criteria that have been laid down by the European Union and which the Minister and his Department have to implement. That is not only a problem for my constituents, but for representatives from about 51 other areas in the UK who have beaten a path to the Minister's door during the past few months.

The problems of pockets of local deprivation and disadvantage are often masked by selecting large geographical units. I hope that the Department will not go down the road of designating according to NUTS3 criteria. The criteria that the Government choose should reflect localised areas of deprivation, and take into account the endemic problems of industrial development that mitigate against self-help and free-market solutions. Fenland district council has mounted a twin-track approach in its submission; either starting with the local authority, which is a NUTS4 unit, or at grass roots, building up from the individual wards to create a sensible area that cuts across county boundaries, but shares the problems referred to by the hon. Member for North-West Norfolk.

Photo of Michael Wills Michael Wills Parliamentary Under-Secretary, Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) 10:19 pm, 26th April 1999

I congratulate the hon. Member for North-East Cambridgeshire (Mr. Moss) on securing the debate on assisted area status for Wisbech. I know that that is important to him and to his constituents. Indeed, the review is also important to many other areas of the country. The hon. Gentleman has eloquently put the case for his area—as, indeed, did my hon. Friend the Member for North-West Norfolk (Dr. Turner). I welcome the opportunity to reply to the points that have been made.

In recent years, Wisbech has been successful in attracting investment and, as the hon. Member for North-East Cambridgeshire described, assisted area status has played an important part in achieving that success. Since 1993, there have been 62 offers of regional selective assistance totalling more than £4.6 million, which has led to total investment of £29.6 million and the creation of 1,000 jobs; in addition, a further 1,000 jobs have been safeguarded. Fenland district council has put the case for continuing assisted area status under the current review, and the hon. Gentleman has written to Ministers and assiduously pressed that case on behalf of his area. It is true that the new assisted area map will be reduced from current levels, and there are some hard choices to be made when designating areas. We have yet to make final decisions, but I can assure the hon. Gentleman that his points about the claims of Wisbech will be, and are being, carefully considered in the review.

Let me set out where matters stand in respect of the review. Following new European Commission guidelines on regional aid, all member states must propose new assisted areas to operate from 1 January next year, so the Government announced on 30 July last year a review of the assisted areas in Great Britain. Because of its special problems, Northern Ireland retains special status under the guidelines and will be covered in its entirety. A great deal of work has been done since then: my officials have been working closely with their counterparts in other Departments, especially the Scottish Office, the Welsh Office and the Department of the Environment, Transport and the Regions; we have held a public consultation; and, since assuming ministerial responsibility for the matter in January, I have met about 50 Members of Parliament who wanted to discuss the case for their own areas.

The Government are now considering what proposals they will make for new assisted areas, and we shall put those to the Commission as soon as possible. We are carefully considering the needs of all areas, including Wisbech, but the task we have been set is not an easy one. The Commission's guidelines are part of its effort to reduce the overall level of state aids in Europe, and the UK, like the EU as a whole, faces a reduction in the population coverage of its map. The figure for the UK is about three quarters of current levels, so there are hard choices to be made and there will be some pain. However, we must bear in mind the wider picture: the UK is one of the lowest providers of state aids, so the removal of distortions to competition by lowering overall EU state aids will be beneficial to UK firms both inside and outside the assisted areas. The lower aid limits are expected to bear down especially heavily on other EU states, which should improve the UK's ability to attract inward investment.

We do not have an entirely free hand in drawing up our proposals. Areas measured at NUTS2 under the European system of units for regional statistics will automatically qualify for assisted area status if their gross domestic product per head is less than 75 per cent. of the EU average. However, in choosing other areas, the Commission guidelines require us to use up to five social or economic indicators and one common unit of geography for the country as a whole. There is also a penalty for proposing areas with a population of fewer than 100,000, as those will be counted as 100,000 against our population total, which would result in a further reduction in the coverage of the map.

In the review, we are trying to combine areas of need with opportunities for employment creation, investment and regeneration—in other words, we are targeting areas where regional industrial assistance is a sensible policy response to need. We are considering indicators for selection and designation of areas, and we have not made final decisions. However, in line with the outcome of the public consultation, we expect measures of labour market weakness —high unemployment or low employment rates—to be an important factor. Using a smaller, rather than a larger, geographical unit for the map will offer the most scope for targeting areas effectively within our overall population ceiling. Again, that is in line with the outcome of our consultation. It showed that there was most public support for the use of wards—which is the smallest unit—as the building block of the map. We are currently working on how we can achieve that effectively within the various rules set down by the Commission.

I shall conclude by saying a few words about the timetable from now on. The Commission asked originally for proposals to be submitted by 31 March. That was always going to be an ambitious date, and we are not alone in not having submitted them by the end of last month: we think about half of member states have not yet submitted their proposals to the Commission. We are working to complete the map as soon as possible. However, seeking the best outcome for Great Britain must be the key objective and we are not ready to submit our proposals. We do not want to rush this task. We could draw up a map easily and quickly that is based on five indicators and a unit of geography. However, the challenge is to draw up a map that is right for Britain and which provides coverage that most effectively meets our reduced population ceiling.

As to when we will be in a position to announce our proposals, we must work on them further. We must respect the purdah periods imposed before the local elections, the elections in Scotland and Wales and the European elections. As the hon. Gentleman said, in the early summer we shall develop our proposals for the European structural funds—the objective 2 areas—for the period from 1 January 2000. Public consultation is now under way. The Berlin Council decided—rightly in the Government's view—that there will not be an enforced link between the assisted areas and the structural funds maps. Those instruments have different purposes and are aimed at different goals. They do not need to be identical, but they should clearly make sense when they are put together. Announcements about our proposals for the structural funds map and for the assisted areas will be taken together to provide an effective strategy for tackling need through regional development.

As a result of various factors, we do not think any announcement is likely before mid-June. However, I assure the House that we will continue to move as quickly as we can towards finalising our proposals. In the meantime, I hope that my remarks this evening will provide comfort to the hon. Gentleman, my hon. Friend the Member for North-West Norfolk and to their constituents. We want very much to achieve the best result for this country, and I believe that we are moving in the right direction.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Ten o'clock.