The first item of business is a debate on motion S1M-1825, in the name of Angus MacKay, on structural funds, and one amendment to that motion.

The most recent parliamentary debate on structural funds took place in October 1999, when we were near the beginning of the process of preparing the programmes for submission to Brussels. The structural funds programmes for the Highlands and Islands, the three objective 2 regions in west, east and south Scotland and the objective 3 training and skills programme for lowland Scotland have now been approved by the European Commission.

Preparing those programmes has demonstrated successfully the important changes that devolution has brought to the way in which we do European business in Scotland. In particular, I pay tribute to the European Committee's close attention and substantial input to our work as each programme was prepared. We are confident that the committee's involvement in the process of democratic scrutiny has made our programmes more robust, in that they now clearly reflect the interests of the regions and Scotland as a whole, rather than just sectoral concerns. That gives us a firm basis on which to use the programmes to maximum strategic effect in future.

The distinctive Scottish approach to structural funds is notable for its partnership approach and for its commitment to community-level involvement. The involvement of the Scottish partnerships in strategic policy making—through the Scottish co-ordination team and its sub-groups, and the sustainable development and equal opportunities forums—is highly valued by the Scottish Executive.

I draw attention to the important steps that we have taken to improve the administration of the structural funds programmes to underpin our objective to make them more strategic and to leave a legacy from this round. The new monitoring committees for all five programmes are more strategic than they were before. For the first time, local authority elected members are serving on them, as well as representatives from the private sector and trade unions. The new monitoring committees have already demonstrated their ability to take a strategic approach to European programmes. I am certain that they will continue to develop that approach in the coming years, particularly through the new annual review process, which is demonstrating its value in concentrating minds on finding ways of continually improving the delivery and impact of the structural funds.

The bottom line is that the use of structural funds in Scotland should be about tackling poverty, through promoting social justice and a lifelong learning culture, and establishing equal opportunities for all. For example, in the field of social justice, the Scottish Executive set out its overall policy priorities for the current legislative period in its programme for government. We have developed our social justice agenda, first through the social inclusion strategy that was launched in March 2000, then through the report "Social Justice. . .a Scotland where everyone matters" in June 2000.

That report established priorities, such as empowering communities to make decisions and influence others, building skills and confidence, providing the right services and products and preventing any possibility of a digital divide. It emphasised also the role of social inclusion partnerships in regenerating Scotland's most deprived neighbourhoods, in tackling child poverty in partnership with the UK Government, in working to regenerate the most disadvantaged communities to ensure that decent affordable housing is available to everyone, and in promoting equality of opportunity and community development.

I am listening with great care to the minister's concept of funds being used to tackle poverty and influence social inclusion. Is he satisfied that within the voluntary sector, where European social funding is so vital, the elements of bureaucracy are not such as to deny the sector access to funds?

Yes, I am. As we move into the new round of awards, we are actively working with the voluntary sector on transitional arrangements, to ensure that the voluntary sector is equipped to cope with the changes and demands that are being made. I am satisfied that we are addressing the issue head on.

The issues that I have outlined coincide with the aims of the European structural funds, which are designed to improve the economic and social cohesion of the targeted regions. For example, the west of Scotland objective 2 programme will use all the available funding for community economic development to fund projects in social inclusion partnership strategies. Equally, European structural funds do, and should, help to underpin our enterprise strategy. The funds in Scotland reinforce and add value to the Executive's support package for small and medium enterprises through the many schemes that they part-fund, which are run by, among others, local authorities and enterprise companies, to support and develop small and medium enterprises. All programmes include priorities that address the establishment, support and growth of SMEs as fundamental elements in increasing the economic cohesion of the regions. Those are just two examples of how we can best deploy structural funds to help to create the Executive's vision of a fairer, more prosperous Scotland.

We are active also at local level. In particular, we now participate in the advisory groups, which are key bodies in preparing recommendations for project approval. That is an important development, because more direct involvement by the Executive helps us to engage more fully and at an earlier stage with the partnerships that put so much work into making a success of structural fund interventions. That active engagement will ensure consistency between what is proposed at local level and our aims at national level. It is an excellent example of partnership working between the Executive and local bodies.

We have taken further significant steps to ensure that the new programmes are implemented in a way that promotes best value. All applications for European funding must now demonstrate how the proposed project represents good value. That is a critical consideration in the appraisal process. We are also working closely with partners and the programme executives to develop a more strategic approach to project development and implementation, to avoid duplication and ensure that a focus is placed on performance and outputs. Increasingly, we will focus on area-based strategies. All those measures—binding together local economic forums, community planning and social inclusion partnerships—are critical to developing maximum value for money. We will need time to make that work in practice, but we are heading in the right direction.

We have also taken steps to streamline the process of administration of structural funds, as recommended by the review of project management executives that was carried out on the Executive's behalf by a team led by Lex Gold of the Scottish Chambers of Commerce in early 2000. The team's report considered that we should retain the best aspects of the Scottish model of implementing structural funds. In particular, we should continue to manage the programmes in an open and transparent way with strong input from local and regional bodies, rather than use them as an adjunct to central Government programmes, as is the case in some other parts of the European Union.

Those who are involved in implementing the structural funds programmes have done much work over the past year to implement the recommendations of the review. Changing how things work can be a difficult process in any circumstances, but it was particularly difficult for the many bodies throughout Scotland that have become dependent on structural funds for their operation. We are being as sympathetic as we can be during the transitional period. I mentioned that we are actively engaged with the voluntary sector, but we need to move to a system for the future whereby each project application can demonstrate that it reinforces and adds value to existing activities.

The attempt to leave a lasting effect is as important for the European Union as it is for us in Scotland. We are fortunate that the EU's priorities and ours chime extremely well together. We have been asked, as have all managing authorities, to embed the so-called horizontal themes of equal opportunities and sustainable development in the delivery of structural funds. We take that seriously. If we achieve our ambitions, the structural funds should produce a lasting impact for Scotland and Europe beyond the current generation.

The programmes are now being implemented and awards are being made. Over the past four months, important awards supporting projects in business development, infrastructure and training support have been made in the Highlands and Islands and objective 3 areas. I am particularly glad to be able to announce today a series of awards for the south of Scotland amounting to nearly £6.5 million—supporting nearly £16 million-worth of projects—which I hope will help to support the current process of recovery in the rural economy.

The Executive has announced an objective 2 support package of £6.5 million for the south of Scotland—I take it that that is what the minister has just announced and led on. Is that money a slice of the total European funding of £45 million for the south of Scotland?

That is correct. I could say more, but that answer is succinct.

We look forward to announcing further approved projects for the west and east of Scotland objective 2 programmes in the early summer. Objective 2 projects will be on business and social development and will support the economies of many parts of the country.

For most of us, structural funds are the most visible presence of the European Union in Europe's regions and countries. Structural funds are the key element of the EU's regional policy to support well-planned economic development where it is most needed. Awards of structural funds are therefore an important display of European commitment to supporting Scotland's regeneration.

However, we are not involved in European funding simply because of the resources that it brings to Scotland. We have a much wider agenda, which will ultimately act to Scotland's benefit. European funding programmes are designed to meet European objectives as well as UK, Scottish and local objectives. That is part of their strength. When the EU expands to include countries from central and eastern Europe, the relative balance of European support will flow to the new member states. It is essential that we work now to ensure that Scotland plays an effective role in helping to shape the new programmes. We must also work now to ensure that, when resources diminish, our involvement in the European Union pays practical dividends in other ways, through funding support in Scotland.

That is why we were delighted to welcome to Scotland last week the president of the European Investment Bank, Monsieur Philippe Maystadt. The European Investment Bank was established by the Treaty of Rome to provide loan support, guarantees and finance for regional development. It has invested in Scotland for many years, in projects such as the development of our oil and gas industry, transport infrastructure and, more recently, the development of the public-private partnerships that have been successfully implemented for schools in Falkirk and Glasgow.

I am especially glad that our discussions with Monsieur Maystadt helped to develop some important possible joint projects with the bank. Subjects that were covered included possible investment in the steps that our universities and enterprise bodies are taking to promote the commercialisation of research and work to develop the regeneration of Glasgow, public transport infrastructure and information and communications technology networks. Those are all important policy priorities for the Executive and I am delighted that the EIB is keen to work with us on them.

Another key strand in the development of our approach to the effect of enlargement on European finance is to try to work closely with the accession states to develop their institutional capacity to implement structural funds programmes. Those links are important for several reasons. They show important countries in central Europe and future EU partners the expertise that we have gained in the past 20 years in core elements of EU business. The links are a valuable opportunity for developing contacts on wider issues. We are receiving regular inquiries from other regions of Europe about the possibility of opening regional offices in Scotland House in Brussels. The links show that Scotland is willing to grasp fully the substantial commercial opportunities that enlargement will bring. They also provide a means of helping to shape the future debate on the development of European funding.

That point is particularly important to the Executive and should be important to all members. Structural funds are only part of Scotland's overall relationship with Europe, but they have helped to underpin a strong level of commitment to the EU from all parts of the country.

Scotland is becoming one of the Community's richer regions. That will be inevitable after 2006. We cannot expect to receive as much from structural funds as we do at present. Nevertheless, we retain a strong interest in ensuring that Scottish needs and concerns are properly factored into the process.

rose—

Against my better judgment, I will give way to Alex Neil.

I would like to get the picture straight. Scotland is not becoming relatively more prosperous; other areas are becoming relatively poorer, especially as the EU expands and brings in other Mediterranean and eastern European countries. The minister has not mentioned what will happen when the EU expands and the funding for all the programmes reduces dramatically in four, five or six years' time.

Alex Neil is wrong. Scotland is prospering and becoming a wealthier nation. That challenges us to find new ways forward. The accession states' economies have deep structural problems and those countries have lower gross domestic products than those of the UK and Scotland, so Alex Neil is right to say that when those countries join the EU, we will have to compete for funds in different ways. I do not like to contradict Mr Neil completely, but I just used at least two pages of my speech to outline the steps that we are taking, through contacts with the European Investment Bank, to ensure that future flow funds are available to us after the current round of structural funds ends in 2006 and before then as well. I hope that he accepts that I tried to address that point.

The minister has not mentioned the financial instrument for fisheries guidance. Last year, the relevant documents were sent out late, no applications were received and no money was paid out. This year, £4.1 million is available. The papers must be in by 20 April. Is the minister on course to ensure that the funds are delivered to Scotland's fishing communities?

I take seriously the point that Mr Davidson makes and I will pursue it to try to ensure that the funds are administered timeously. If Mr Davidson had intervened on a subject that was closer to the topic for debate, I had intended to deal with the Conservative party's record and policy position on Europe.

Our record is very good.

As Mr Davidson, from a sedentary position, has given me the opportunity, I will deal with that interesting policy position. Would Mr Davidson care to acknowledge that William Hague has some individuals with fairly extreme views in his shadow Cabinet? Those individuals' views would seriously and directly threaten Scotland's capacity to benefit not only from structural funds, but from Europe as a whole. Six members of the shadow Cabinet are vice-presidents of Conservatives Against a Federal Europe, or CAFE. That group's explicit aim is withdrawal from the EU.

rose—

I will give Mr Davidson the opportunity to intervene when I have finished covering Conservative policy. CAFE says that it wants Britain's relationship with Europe to be fundamentally renegotiated. Its adherents, including John Redwood, believe that we should leave Europe and join the North American Free Trade Agreement.

CAFE's website states:

"we must withdraw from the European Union and negotiate a series of trade treaties that allow us to do business competitively, not only in Europe but throughout the world."

Six shadow Cabinet members are vice-presidents of that group. I am not talking about a group of tinpot Conservative councillors in an English shire backwater. Perhaps Mr Davidson would care to comment.

I did not realise that the minister read the cultural pages about café society in London. He spoke earlier about federal Europe. The Conservatives have made it clear that we wish to be in Europe, but not run by it. A federal Europe takes away the country's sovereignty. That does not necessarily mean that we wish to leave the European Union. We just do not want it to take over how we run our lives.

That is an interesting byway, but we are beginning to stray somewhat from the motion.

Before the debate, several members told me of their concerns about my capacity to talk about structural funds for 20 minutes and their capacity to sustain the debate, so I am more than happy to explore that leafy and interesting byway of Conservative party policy.

I referred not to a federal Europe, but to the growth of Europe through the inclusion of the accession states. I will leave Conservative policy on the EU with this thought—a quotation from the venerable, extremely Euro-sympathetic and balanced Teresa Gorman:

"The Conservative Party under William Hague's leadership has come a very long way towards the position that I have always adopted"— whatever that is. She continued:

"I'm pleased by the way things are going."

I leave that quotation sticking to the wall.

rose—

I will not yield to the temptation to give way further on the Conservatives' European policy.

I do not have much time left, so I will say that I think that it is important to debate structural funds. I welcome today's debate. Structural funding has been extremely important to Scotland in the past 20 years. It has given lasting benefits to the development of our economy and society.

The importance of structural funds is recognised not only by us but by the Scottish nationalist party, which in its 1997 manifesto devoted an entire sentence to structural funds. It stated:

"We will ensure that rural and urban areas of Scotland receive maximum help from the appropriate EU funds."

What a radical and far-reaching strategy. By 1999, that policy had evolved down to 12 words—obviously as part of the new process of modernisation that is taking place within the Scottish National Party—with a new, improved and more robust line:

"We will also manage and evaluate European funds to Scotland's best advantage."

That had become the new position. I want to record the Scottish National Party's radical view on structural funds.

I will not intrude on the private grief of the Ewing dynasty with respect to objective 1. An outstanding deal was secured for the Highlands and Islands by the Labour Prime Minister in 1999, but it seemed that different husbands, wives, mothers, daughters, cousins and friends of the Ewing dynasty had different views on how objective 1 status for the Highlands and Islands should be evaluated and whether Inverness should be in, out or shaking it all about.

To conclude, we recognise that, after 2006 and following European Union enlargement, Scotland will receive reduced levels of investment from the structural funds. We should recognise that that reflects the economic progress that Scotland has made—which has been helped partly by structural funds—as well as the future accession of poorer states.

To build on the programmes' concrete achievements, we are already working actively to increase the synergy between structural funds programmes and wider Scottish Executive policies, so that the expertise that has been gained through the implementation of the funds can continue to be used in Scotland.

I move,

That the Parliament welcomes the progress made to develop Structural Funds Programmes in Scotland which will have a lasting effect and supports the steps being taken by the Scottish Executive to develop a broader strategy in relation to European funding issues in preparation for the enlargement of the European Union.

Perhaps, in response to CAFE, Mr Davidson could form TEA—Tories encouraging assimilation.

The SNP is pleased to state that we support the Scottish Executive's broad objectives on Europe: promoting new technology; the concept of working in partnership; mainstreaming equal opportunities and sustainable development; making social inclusion a critical element of economic development; promoting inclusiveness and sustainability.

Throughout the countries and regions of the European Union, there are disparities in the levels of wealth, economic development and social cohesion. To address those anomalies, the EU implements a major set of initiatives—commonly referred to as European structural funds—that support national policies in the least prosperous regions and in national and regional labour markets. Structural funds are the second-largest item of EU expenditure and consist of four main financial instruments: the European regional development fund, the European social fund, the European agricultural guidance and guarantee fund, and the financial instrument for fisheries guidance—which Mr Davidson touched on.

Funds are allocated on the basis of three objectives. Under agenda 2000, the number of objectives was reduced from six to three. Objective 1 includes NUTS level 2 regions—NUTS is the nomenclature of statistical territorial units—that have a per capita gross domestic product of less than 75 per cent of the Community average. Objective 1 also includes areas with high population sparsity as well as the most remote regions, which are included because of their peripherality. Objective 1 accounts for some 70 per cent of structural funding. The criteria for objective 1 remain unchanged except that the former objective 6 areas have now been included under objective 1. However, the proportion of the UK's population that is covered by objective 1 funding has fallen from a quarter to a fifth since 1999, because of the removal from eligibility of the Highlands and Islands.

Objective 2 includes regions that have major economic and social restructuring needs, rural decline, areas that are experiencing the decline of industrial fisheries, and urban areas in difficulty. Objective 2 funding accounts for approximately 11.5 per cent of structural fund allocations.

Objective 3 funding is for the development of human resources, the modernisation of educational training and employment systems, and combating social exclusion. Objective 3 funding accounts for about 12.5 per cent of structural funds.

The Highlands and Islands lost its objective 1 status in the final round of allocations. That could have been avoided if regional maps had been redrawn to exclude Inverness. Labour members may believe that to be fanciful, but Manfred Beschel, who is head of the unit for structural funds, explained to Mike Watson and me—when we met him a couple of weeks ago in Brussels—how the Republic of Ireland redrew its regional maps.

At the time of negotiation, the Republic of Ireland's gross domestic product stood at 97 per cent of the EU average. To secure objective 1 status, Ireland created a new, artificial region to the west of Dublin and its environs. That region had neither budget nor powers. The so-called border, midland and western region was drawn up to exclude areas of prosperity that could jeopardise access to objective 1 funding. As a result, Ireland will receive £360 million for that region in objective 1 funding and £67 million in transitional relief for the more prosperous southern and eastern region up to 2006.

In contrast, Scotland—a more populous, less prosperous country—will receive only £194 million in objective 1 moneys for transitional relief in the Highlands and Islands. Although that money is welcome, the opportunity to retain objective 1 in the Highlands and Islands and to create a region that would have centred on Glasgow and the Clyde valley was missed. I will develop that point, but the minister is desperate to intervene, so I will let him do so.

I am more than happy to provide an intervention for Mr Gibson.

I have in front of me an excerpt from the West Highland Free Press of, I think, 8 April 1999. I simply wish to quote from it the clearly expressed views of three SNP members of the Scottish Parliament. On tearing Inverness out of the Highlands and Islands—we know that the SNP likes to tear up maps and take things out of one place or another—does Mr Gibson agree with Dr Winnie Ewing, who described the objective 1 status as "a defeat" and a "terrible situation", or with Margaret Ewing, who rejected the idea of tearing Inverness out of the map, saying:

"It's difficult to take the capital of the Highlands and Islands out of the picture and I think they would be very angry about that. You can't talk about the Highlands and Islands without Inverness" or with Fergus Ewing, who was an SNP candidate at the time and simply

"could not be contacted for comment"?

I felt as if I was dying of old age listening to that intervention. I make the point that half a loaf is better than no bread.

Why did the Highlands and Islands lose objective 1 status? It lost it because a complacent Scottish Office took its eyes off the ball. Millions that could have gone towards meeting the Executive's laudable new structural fund programme objectives have been lost. Did the Irish just pull a flanker? Hardly. Sweden and Finland, both more prosperous than Scotland, used the same tactic to obtain objective 1 status, creating new regions that could secure funding by way of sparsity. My nationalist colleagues and perhaps even one or two members of the north British parties will conclude that that is because those independent nations of small population were able to use their seat at the top table to achieve success.

Even in our unitary state of the United Kingdom, the tactic was used successfully. The Welsh Office realised early in the restructuring process that Wales, if divided on a north-south basis, would not qualify for objective 1 funding under the new criteria. Such a division did not distinguish between the poor west and the prosperous east of the country. The Welsh Office worked to redraw the EU regional map of Wales and redivided the country on an east-west basis. The new western region, which had a GDP of 72 per cent of the EU average, qualified for objective 1.

If only the new Labour colleagues in the Scottish Office had been as switched on. Overall, Scotland will benefit to the tune of £1.094 billion in structural funds across all three objectives up to 2006. What is the beef? In the corresponding period up to 1999, we received £2.17 billion. The ineptitude of new Labour on structural funds has cost Scotland more than £1 billion.

Would Mr Gibson like to repeat those figures so that Labour and Liberal members understand what a good job we did for Scotland?

Perhaps the Conservatives did not do as good a job as they could have done, but they certainly did a better job than new Labour. New Labour has cost the country £1 billion.

On 13 November, Mr MacKay told the Convention of Scottish Local Authorities that structural funds programmes would bring 65,000 new jobs to Scotland. That is fantastic. However, the number of jobs could have been double that if we had received that extra £1 billion. Even our percentage share of UK structural funds has fallen by a third. At the meeting that I had with Mr Beschel, we discussed EU enlargement. The accession of mainly former Soviet bloc countries will provide many opportunities for Scottish industry and commerce—I am glad that Mr MacKay addressed that in his opening speech—but the low standard of living in those countries will inevitably shift almost all structural funds resources from the west to the east of the EU unless the structural funds criteria are altered.

The Scottish Executive must ensure that its voice, which has been something of a whisper to date, is heard in the discussions if Scotland is not to lose out completely. It would also help if an eye was kept on what other nations, including nations of the United Kingdom, are doing.

How are EU structural funds delivered? That question seemed to perplex Mr MacKay's predecessor as finance minister, and the rival for the succession, last year. According to Mr McConnell, the mechanism for EU structural fund allocation has changed since the devolution settlement. Pre-devolution, ESF moneys were transferred via the Treasury and other departments to the Scottish Office and then to local programmes.

In his evidence to the Finance Committee on 13 June 2000, Mr McConnell said that ESF money now comes from the European Commission directly to the Scottish Administration. He also said that ESF is part of the assigned Scottish budget that was agreed during the devolution settlement and can be identified as a separate budget heading in the Scottish budget. He then stated unequivocally that the Barnett formula plays no direct or indirect part in the allocation of ESF. At the same time, he said that allocations to Scotland are part of the comparable expenditure included in the calculation of the Barnett formula.

Mr McConnell further stated that the amount of ESF in the Scottish assigned budget over the next seven years will be greater than the amount that we are allowed to spend. Thus, not only have structural funds halved, but we may be prevented from spending even those moneys that have been allocated. It is hard to imagine how more money can be allocated to the ESF budget line if the money comes direct from the EU to the Scottish Executive. Mr McConnell acknowledged that the process is "complex", but aside from negotiations with the Commission, the transfer of funds would seem to be straightforward if there is, as the former finance minister said, a direct transfer from Brussels to Scotland.

On 13 June 2000, Mr McConnell said:

"The only thing in that which I want to correct is that when the European Commission pays the cheque"— that is, the structural funds—

"it does so directly to us, as the managing authority. It does not get paid to the Treasury to be passed on to us."

The illustrious David Davidson asked:

"So the Treasury has no place in this?"

Mr McConnell replied:

"The money from the European Commission goes directly to the Scottish Executive, and we pass it on to local projects."

He went on to say that

"the funds go directly to the devolved administration in the UK. We get the funds directly from the EC."—[Official Report, Finance Committee, 13 June 2000; c 654-63.]

Previously, on 30 May 2000, Mr McConnell had told the European Committee:

"The money is transferred via the UK Treasury to Scotland for spending on the structural funds. That money is allowed for in our budget clearly and identifiably and has been for many years, despite the initial difficulties with additionality."

He repeated that later in the meeting, when he said:

"The money is passed from the European Commission to the UK Treasury and then to the Scottish Executive".—[Official Report, European Committee, 30 May 2000; c 700-05.]

We need clarification on the process of transfer between Brussels and the Scottish Parliament and what role, if any, the Treasury plays.

Will the member take an intervention?

I would like to, but I am only two thirds of the way through my speech and I am down to my last four minutes. I am sorry, but Mr MacKay's rambling intervention cost me about one minute.

The then Secretary of State for Scotland, John Reid MP, was less than helpful when questioned on the matter by the Westminster Scottish Affairs Committee on 7 September. He refused an invitation to attend the European Committee of the Scottish Parliament, saying:

"I have no intention of speaking to committees or otherwise in the Scottish Parliament because I am accountable to this Parliament."

How humble of him. He recommended that there should be

"greater transparency in the publication of information on how the Barnett formula works in practice with respect to Structural Fund expenditure planning."

I hope that Mr Peacock can clarify the situation in his summing-up.

On 13 June last year, Professor David Bell told the European Committee:

"Additionality is the notion that European funds should be additional to whatever level of spending would have occurred in the relevant country. I am sure that the committee is aware that additionality is currently determined at UK level, which means, for example, that if all of Europe's funds were spent in Lesmahagow, the additionality criteria could still be satisfied for the whole of the UK."—[Official Report, European Committee, 13 June 2000; c 727.]

The European Committee was unable to establish additionality at regional level, thanks to the lack of co-operation from UK departments.

Angus MacKay himself said:

"The requirements and procedures for demonstrating additionality at the European level for the Member State are not compatible, and would not produce consistent outcomes, with programmes at a Scottish level. I therefore do not intend to publish this information in such a way as to 'verify' additionality at a Scottish level."

Yet surely the allocation of structural funds that Scotland receives must be able to be demonstrated as additional. We should be told whether, for example, UK structural funds have been traded off against the UK-EU rebate, as Mr Beschel suspects. Why would the Treasury do that? Because money rebated can be spent as the Treasury wishes. Structural funds cannot.

Funding must also be allocated to match structural fund receipts. For programmes undertaken by the Scottish Office, matching funds must also be found from within the departmental expenditure limit. For programmes undertaken by other bodies, matching funds must be provided from their own budgets. However, those may be largely provided by grants or grants in aid from the Scottish budget.

The European Committee seemed largely satisfied that match funding was being provided, but recommended that

"the Scottish Executive should: (a) investigate the likely availability of match-funding over the coming programming period; (b) monitor the flow of projects and co-funding from the various types of partners involved in the programmes; and (c) provide regular, transparent reports on programme performance with respect to match-funding."

However, it does not appear that any additional allocation within the Scottish departmental expenditure limit has been made for match funding.

On 6 June last year, the Scottish Parliament's Finance Committee and European Committee asked Gordon Brown to give evidence as part of their inquiry into European funds.

In a letter to the Finance Committee, the chancellor declined the invitation and stated that he would not even be sending a civil servant. The European Committee received a similar refusal. In the letter, Gordon Brown said that John Reid would be giving evidence at Westminster. He stated:

"I understand he"—

John Reid—

"has been asked to cover structural funds, among other issues. While I appreciate your wish to hear from Treasury ministers or officials, I feel that on this occasion this is the best way forward."

Mike Watson, convener of the Finance Committee, was not happy with the Chancellor of the Exchequer's response. In the Finance Committee, he said:

"I find the response from the Chancellor of the Exchequer disappointing, but not entirely surprising, particularly given his reluctance to give evidence to the European Committee on the same subject.

However, I do not regard being referred to a meeting that will take place between John Reid and the Scottish Affairs Select Committee at the House of Commons on 21 June as an adequate substitute for hearing the chancellor's evidence. I am open to members' views about how we should proceed. Given that a senior civil servant from the Treasury has already given evidence to the committee, I believe that we are entitled to at least that level of evidence for the inquiry. Otherwise, I fear that suggestions will be made that it is never appropriate for officials or ministers from the House of Commons to give evidence to Scottish Parliament committees. That should not be accepted.

That is my personal view of the matter. Before we decide how to proceed, I invite the views of members of the committee."

Needless to say, other members, such as Mr Davidson, Mr Raffan and Andrew Wilson agreed. Mike Watson added:

"We have asked for the benefit of the Chancellor of the Exchequer's knowledge of the system and our request has been declined."

Richard Simpson said:

"We cannot let the matter rest here because of the precedent that that will set—the Executive should take it up. We should ask the relevant joint ministerial committee to review the process and to ensure that appropriate officials or ministers will make every effort to assist Scottish Parliament committee inquiries. Gordon Brown's letter is unacceptable."—[Official Report, Finance Committee, 6 June 2000; c 628-30.]

I hope that the minister will pursue that matter, as the issues surrounding structural funds are too important for it not to be pursued.

I move amendment S1M-1825.1, to leave out from "the steps" to end and insert:

"steps being taken by the Scottish Executive to develop a broader strategy in relation to European funding issues in preparation for enlargement of the European Union, but notes the failure of the Scottish Office to secure the retention of Objective One status for any area of Scotland by re-drawing the regional map as was successfully done for their own regions by the Welsh Office, Ireland, Sweden and Finland, thus depriving the Executive of vital resources needed to develop its Structural Funds Programmes and reducing the scope, impact and likely success of the outcomes sought by both it and the Parliament."

We are obviously into panel games. To the SNP I offer NUTS: nationalists under threat in Scotland.

The minister will not be surprised that I cannot agree with the wording of his motion. I was disappointed that after "lasting effect" he did not put "on the Scottish economy", but we will come back to that. I take the opportunity once again to remind the chamber that we Conservatives managed to obtain a 20 per cent share of UK structural fund allocation in Scotland between 1979 and 1998. Members will agree that that is a fairly good record.

Does David Davidson recognise that, as Angus MacKay and Kenneth Gibson said, the allocation of structural funds is largely to areas that are underperforming and which suffer high levels of poverty and that the success that the Conservatives managed was directly related to their management of the economy?

I take Hugh Henry's point, but there were other factors, outside the UK economy, which he knows of only too well. Unfortunately, we appear to be approaching a recession—perhaps he would like to address those comments to the Minister for Finance and Local Government.

Unlike the SNP, we do not believe that Scotland should be run on an old-style, collective basis, dependent only on public funding and subsidy. That is why we seek skilful use of partnership funding—we share that view with the minister—especially in co-operation with the private sector.

It is just not good enough for the separatists to moan and groan about bad deals and to blame Westminster for everything. It would be refreshing and interesting to hear from them exactly what they would do if they dragged Scotland out of the UK, which has a voice in Europe, into a new existence of peripherality at the back end of a queue of emerging entrants. Independence in Europe is a joke—I believe some members on the benches opposite are beginning to think similarly about that.

Will Mr Davidson name the members of the SNP group who no longer believe in independence?

I did not actually say that. It is obvious that Mr Gibson was not listening.

Mr Davidson referred to "members opposite". Unless he has a very severe squint, he will have noticed that the SNP group sits directly opposite him.

I am sorry. Mr Gibson missed what I actually said, but he will be all right when he reads my speech tomorrow.

The UK has collective clout and partnership is the way forward. When Mr Peacock winds up the debate, I would like him to explain the strategy for future partnership with the private sector and not just the strategy for partnership with small and medium enterprises that was mentioned, although it is welcome. I happily agree with the minister on and acknowledge the hard work done by the various local authorities and agencies in preparing the submissions, but I remind him that he himself has a hand in the decisions about what programmes go ahead. If he seriously wants to review the application process, I hope that he will come back to the chamber so that we can discuss it further. I agree that there will be disappointment in some areas that will no longer get the support that they had in the past but, to respond to Mr Henry's question, I suggest that that is perhaps because those areas are now in a better state in comparison to Europe.

The funds must be focused on the areas of greatest need and there must be a definition of greatest need. There will always be winners and losers in that process, but we must target moneys at disadvantaged areas. Angus MacKay referred to certain disadvantaged areas, but the current rules miss certain pockets of disadvantaged housing in Aberdeen, because Aberdeen as a whole is perceived as being reasonably affluent. We must be more focused in our targeting of specific projects. Perhaps that could be dealt with when changes are considered in future.

The Conservatives are committed to enlargement. We may have our differences about involvement in Europe and how much Europe influences our affairs, but we have got a good deal for Scotland over the years and we look to the Government to continue with that. It would be helpful, of course, if the Commission could become more productive and cost-effective in its working, which would release more funds for dispersal.

As some SNP members have said, this Parliament must take responsibility for preparing for the day in five or six years' time when there will be tremendous stresses on our ability to get good resources from Europe. When we get those resources, we must focus them on the best areas for payback—areas that improve employment ability, lifelong learning and infrastructure—not just in the central belt, but in other parts of Scotland. We need the economic drivers to be delivered through those funds; they should not be used only for social projects. If we spend money only on social projects, the social costs of not taking action in the economy now will outweigh any benefit that we have received in the past when the long-term downturn in the economy happens. I would like to hear Peter Peacock's response to that point.

Parts of our economy are in deep trouble at the moment. The problems that face the fishing communities in the north-east are not new. It is just fishing that seems to be under pressure now, but in the past there were huge job losses in some of the driver industries and tool making. The problems must be dealt with as quickly as possible. I beg Angus MacKay to ensure that the objective moneys are used to get in early, to turn round the economy in the areas that are now badly damaged by the downturn in fishing, fish processing and associated industries.

Angus MacKay mentioned moneys for Dumfries and Galloway. I welcome the fact that that money is available and I am sure that my colleagues from that area will do exactly the same, but I also welcome the SNP's question that revealed that it is not in fact new money, but pre-announced money. I wish that the minister and the Executive would stop doing that. They should be specific and say, "This is what we will do with the money, which has already been announced," rather than make out that it is something new. The minister was caught out on that this morning.

I would like Mr Peacock to tell us about the Executive's long-term commitment to changing the rules on matched funding and about what leeway it has in Europe to do so. We are net contributors to Europe and our percentage return will diminish, as everybody has said. We must ensure that we do what we can within the rules to be creative and productive with the moneys that we receive. I said before that the cost of social support can wipe out any gain: I want Mr Peacock to tell us specifically about the points that Scottish ministers are currently considering in conjunction with their colleagues at Westminster for improving the process.

Money can be spent only once. That is a fact of life and something that we have to live with. We must not put off making decisions, as happened last year with the FIFG. It is important that we do not lose moneys at an early stage and it is vital that whatever allocations are made—to the Dumfries and Galloway area, for example—are based on current need. Some of the announcement that was made on Monday was obviously based on the conditions prior to the foot-and-mouth outbreak. I would like the minister to tell us how those figures have altered since the outbreak began and how the Executive perceives the required change. We have heard details of problems in the textile industry and in agriculture in that part of the country, and I know that the people down there will be very anxious to hear clearly from the minister today how he intends to deal fully with the situation.

I know that the Enterprise and Lifelong Learning Committee is looking at changes in the economy as a result of the new technologies, but we must realise that it is not just the old industries that are going down. Job losses have been announced this week in the semiconductor industry and in the manufacturing of personal computers. If those newer industries are also going down, the Executive must take a much more proactive position on the economic drivers that are needed to correct the situation. We must investigate ways of using the structural fund moneys in a sensible manner and we must do so early, rather than put it off. It would be interesting if the minister could tell us whether, because of the needs of the economy at this time, it is possible to draw down future funds. I am not sure of the rules about that, but can a special case be made? Perhaps the minister can enlighten us.

I welcome back Tavish Scott to the land of the living and I look forward to his speech. It would be nice to hear what the Liberals would do about structural funds. As with most policy areas, we have not had a clear statement from them as to what they would do in Europe. We would also like to know whether they still believe in a high-tax economy, because high-tax economies do not encourage economic and social development. The money that goes to Europe comes out of taxation—we agree about that—but the Liberals must explain their policies to us a little more clearly. Doing so this morning would be a good start.

We have done a good job in Europe. The SNP agreed with me about that—we all have our moments.

Mr Davidson has just praised the investment in Dumfries and Galloway. If the Conservatives have done such a good job in Europe, can he explain why, in 1982, as the map I have with me shows, assisted area status was removed from the very part of the world that he now says should benefit from the money? Can he explain why it took 17 years to recover that status?

Does he welcome the fact that it has been recovered?

If one looks at the fine print behind that map and at the changes that have taken place in the economy of the area—

It is all on the map.

I am sorry, but I cannot read the fine print from here. Yes, help was given to the economy of that area and it partially recovered and, yes, it has new sets of problems, not least foot-and-mouth. I admire the fact that Euan Robson was obviously a geography teacher; he has such wonderful maps to bring to the chamber.

The Conservatives are prepared to work with Europe. There is no doubt about that. What we would like Europe to do is to work with us. We need a Europe of sovereign states. They will work best together and will be able to maintain their identity, but we need to co-operate. We have no problems with that, despite the humour that comes from the SNP benches. We have proved that we can work in Europe. We can be strong for the UK in Europe and we will continue to be so after the next election.

And, after the next election, the Conservatives will continue to be so from the Opposition benches, where they are now and will be for many years.

Mr Davidson said it all: the Conservatives are prepared to work with Europe—pause—on their terms. Little more needs to be said on the European policy of the Conservative party.

On fishing, Mr Davidson and many of his MSP colleagues in Scotland take a reasonable line on the reform of fishing policy, in the European context, which is diametrically opposite to the position taken by their colleagues at Westminster. The Conservatives have two positions on reform of the common fisheries policy; if Struan Stevenson is added, arguably they have three positions. The Conservative position on Europe is clear: it is not clear.

Mr Davidson also did that classic Tory thing of running out a few hoary old myths about Europe. The one about bureaucracy is one that William Hague's Tories like to trot out now and again. It might interest Mr Davidson to observe that the staff directly employed by the European Commission number around 15,000, which is roughly equivalent to the average number of staff employed by a large local authority in the UK. Those old myths somewhat defeat the argument. When Mr Davidson challenges all the other parties to say what their policy is, the least that the Tories could do is admit that they have no policy on Europe, other than to seek to withdraw from it.

Mr Scott talks about the Tories down south having a different policy on fishing. Does he agree with his Liberal Democrat colleagues, who yesterday called for the abolition of the ministry of agriculture, fisheries and farming?

It is the Ministry of Agriculture, Fisheries and Food.

I know that Mr Wallace was in Westminster last night; I watched him having an interesting debate on "Newsnight" about the Army, which is a subject that he seems to speak on regularly. Perhaps he should try to find the seat that he seeks and he will eventually get down to Westminster to talk about it.

You have not answered the question.

Order.

On you go, Mr Scott.

I am sorry—you took me aback, Presiding Officer. I thought that it was Ben Wallace, not you, who was shouting at me.

He was shouting at you.

You shout better than he does.

My party argues for fundamental reform of MAFF at Westminster, but that is an issue in England and Wales, not in Scotland.

I thought that it would be good that Kenny Gibson was moving the SNP amendment today. I thought that it would raise the temperature of the debate, if not the tone. However, Kenny's heart was not in it today. He usually brings lots of passion to a debate, but I did not think that there was much passion in his speech. Many of his arguments were undermined.

Kenny Gibson did not give way to Hugh Henry. I was thinking, when Hugh was seeking to intervene, that if Kenny had considered the recommendations in the 6^th report 2000 by the European Committee, on European structural funds, that would have answered many of the questions that he asked in his speech.

The SNP cannot quite decide whether we are a prosperous nation or a poor nation. When we have a debate on Scotland generally, SNP members state that potentially we can be a great, prosperous nation, but when we discuss structural funds, we must be a poor nation as we are not getting enough funds.

It would be very important if the SNP could sort out its position.

I am delighted to take Tavish Scott out of the pain of his confusion. An independent Scotland would be prosperous, but under the union we are diminishing.

The two MSPs who are sitting behind Tavish Scott—Ian Jenkins and Euan Robson—represent, as constituency MSPs, the Scottish Borders, which is the poorest region in Scotland.

That is what the SNP likes to do, and Christine Grahame is probably the worst protagonist of that argument. She talks down an area of Scotland that she should try to talk up.

In fairness to Mr Gibson, at least he showed much more class than his colleague, Christine Grahame, and made a much more positive contribution. As usual, the SNP cannot decide what it believes on these matters.

Structural funds have been of significant benefit to Scotland in boosting economic development projects in areas of lower economic performance, especially in areas making the transition from traditional heavy industries, along with peripheral and rural areas such as the Highlands and Islands.

Over the coming six years, Scotland has been allocated more than £1 billion by the European Union. As other members have mentioned, that represents a major investment in economic regeneration, the labour market, education, training and development.

The latest programme will run until 2006 and, as the minister stated, it is unlikely to be repeated as regional development funds will focus on the new member states from eastern Europe. It is perhaps worth considering that the emerging democracies and economies of the former eastern bloc are in need of that investment. They pose huge challenges to Scotland in specific industrial sectors such as agriculture and in the new economy, with their propensity to offer cheaper wages in competition with Scottish companies.

Structural funds are vital in ensuring that the whole of the European Union benefits from closer economic integration. It is also important to recognise the European Commission's cohesion report, which was published in January. It considers the regional imbalances and the future of structural funds as enlargement looms large.

Those issues of how the wider Europe develops are important in a debate about how best to maximise the advantages of the funds that will come into Scotland before 2006.

I am sorry that I was not as passionate as usual, but I try not to be too predictable.

Can Tavish Scott advise the chamber whether the Liberal Democrats still believe in a united states of Europe?

The Liberal Democrats never believed in a united states of Europe.

The important development in constitutional politics, not only in the United Kingdom, but throughout Europe, is that the principle of subsidiarity must apply. That means that decision making is devolved to the lowest applicable level. That is the guiding principle that the Liberal Democrats take into the debate about Europe, as well as the debate about constitutional reform generally. That concept, and how it will work in Scotland and across Europe, is much more important than fragile and superfluous arguments about phrases such as a united states of Europe.

It is essential that the value of funding is maximised to close the economic gaps between the different regions of the European Union. Liberal Democrats support the concept of regional development programmes and see them as a major benefit of the European Union, which has recognised the need to manage and address economic imbalances. The programmes are in place to deliver the funds, but the Scottish Executive must work with and support local authorities to ensure that appropriate match funding is in place to deliver key projects.

Given the ghastly and profound difficulties facing the south of Scotland, especially Dumfries and Galloway, it is appropriate to consider what can be done to help in the short and long term. The Scottish Executive has rightly announced a package of funding for tourism and business development in the south of Scotland. I briefly attended the Scottish travel fair in Glasgow yesterday. There is a profound sense, among tourist boards in that area and across Scotland, that there is a need for aid. The Executive is taking that forward positively.

Is Tavish Scott aware of the LEADER programme, which has been operating in Dumfries and Galloway for some years? It has contributed about £20 million to a variety of projects in the area, including tourism development and farm diversification projects. We still await an announcement from the Executive on its future in Dumfries and Galloway.

I am not a minister in the Executive; I am sure that Mr Peacock will pick up that issue in his speech. Mr Ingram might want to intervene during Mr Peacock's speech at the end of the morning's proceedings.

Both the Borders and Dumfries and Galloway will benefit from structural funds. As Mr MacKay mentioned, some projects have already begun, with, I understand, a total value of some £16 million.

The minister referred to only £6.5 million.

No. It is £16 million in total. Perhaps Christine Grahame should check her figures.

The first tranche is a result of the Borders economic forum, a model that I understand the Minister for Enterprise and Lifelong Learning has taken forward in other parts of Scotland.

Unlike those who constantly whinge from the sidelines, I congratulate all the partners that have played a positive role in making progress, including Scottish Enterprise Borders, Scottish Borders Council, the tourist board and many others. I am sure that my colleague, Ian Jenkins, will elaborate on that if he catches your eye, Presiding Officer, later on. He and Euan Robson, along with local MPs, Mike Moore and Archy Kirkwood, have played a constructive role in making progress on those issues.

Funds need to be refocused towards rural areas that are affected by the foot-and-mouth crisis, taking into account the longer-term effect that the crisis will have on employment and specific business sectors. The important point for both the Borders and Dumfries and Galloway is that they can least afford the loss of economic activity and must not fall further behind.

I shall make a couple of brief comments on the Highlands and Islands transitional programme. Telecommunications have been greatly improved in the area with the help of structural fund support, as part of a £5 million investment. The original target was between 500 and 600 jobs, but several times more than that have been created.

Telephone networks are being upgraded from analogue to digital, and Scottish Telecom has introduced an element of competition against British Telecom. As a result, the region could soon be on a level playing field with the rest of Europe in its telecommunications infrastructure.

Will the member give way?

No; I shall carry on. I have given way to the member already.

It is worth recognising that much of that investment is the result of work by the former Highlands and Islands Development Board and Highlands and Islands Enterprise, both of which had the vision to put public money into information technology. I congratulate those who had such vision at that time. The modern telecommunications network has been a strong factor in attracting new teleservices and IT-based companies to the area. However, as Mr Peacock is aware, there is continuing concern that further upgrading of the network is required to prevent the loss of such advantages. In my constituency, I am involved in discussions that I hope might lead to a fibre-optic cable that will link Shetland to the mainland, with a spur to Orkney. Those areas have the positive attitude and approach that might lead to benefits for business and domestic customers.

Funding from the European regional development fund is available to assist the development of renewable energy potential. Although that includes assistance for improvements to network connections in remote areas, developing such energy resources on Scotland's west coast is dependent on exporting that power source to the national grid, and work must continue on that matter.

On other programmes, I note that, in the European Committee's report on the application and project appraisal process for European structural funds, it has commented on the need to co-ordinate activities between various programmes and objective 2 and 3 areas. I am sure that the minister will assure committee members and the Parliament about any progress on that issue. Indeed, I recollect that Lex Gold gave evidence on monitoring and other issues to the European Committee in Glasgow some months ago. This morning, the minister mentioned the implementation of the recommendations of Lex Gold's review.

I want to mention one constituency example in relation to the FIFG, about which David Davidson raised an important point. That funding mechanism has gained some notoriety of late. According to some representations that I received late last night, there is some confusion over the deadline for the first round, which was 28 February. I understand that some applicants were advised that they could submit applications after that date, which is at best unfair, as a number of Shetland businesses were told that they were too late. Although I do not expect the minister to respond to that point today, my letter is in the post and I hope that he will address the issue.

Structural funds must leave a lasting legacy of investment in Scotland. It is the role of the Scottish Executive, working—as in the Borders—with all relevant parties, to ensure that the investments made between now and 2006 stand the test of time for the communities that they serve.

I do not know whether the minister, fresh from the adrenaline buzz and emotional rollercoaster of watching Hibs, needed some balance in his life, but I am sure that the debate is providing an alternative to that kind of excitement.

I congratulate Kenny Gibson on his speech. Although he read it very well, I am not sure that he quite understood it, and there were several points on which he could have done with advice and counsel. In passing, I want to mention that, on the question of additionality, the European Committee's 6^th report—which was supported by SNP members—states that

"the Committee considers that Scotland is receiving an appropriate share of the Structural Funds allocated to the UK by the EU."

However, I should emphasise that a debate on structural funds sometimes brings out the worst aspects of the debate on Europe, because people start to judge Europe's contribution to Scotland merely in financial terms. Europe is much more important to us than that, and I hope that we will not judge success or failure by our ability to attract structural funds, important though they are.

That said, structural funds have been a success story. We started off with many impoverished and deprived areas, and although there is still much evidence that such areas exist, structural funds have made an important contribution to tackling some of their most pernicious problems. Although we should congratulate the Government and local government on their work over many years, we should also congratulate the European Union and the Commission on the structural funds initiative and the attempt to disburse money to areas of greatest need. Furthermore, the Commission has often shown imagination and flair in the management and application of structural funds, and many layers of government throughout Europe could copy its approach with some success.

There is evidence in Scotland that structural funds have been used well, and the country is cited as a good example of an area that can successfully apply for and manage such funds. From various comments to the European Committee, it is evident that other areas consider Scotland's management of structural funds as a role model.

I also want to congratulate the Executive. Much of the European Committee's first year was spent on structural funds issues, and we always found the Executive to be responsive and, through the previous minister, ready to give evidence to us. Furthermore, the Executive has been willing to respond to some of our concerns, particularly in relation to the problem of the application of funds to the voluntary sector.

However, the Executive still needs to address a number of issues. For example, I have received some representations from voluntary organisations on payments to the voluntary sector. In particular, the organisation One Plus has contacted me about the Scottish Executive payment schedule. Although the guidance note from the Executive states:

"Every effort will be made to ensure that correct claims are processed within a four-week time scale", a number of voluntary organisations have found that that is not being applied. In the case of One Plus, the first advance of 37 per cent requested from the Scottish Executive took seven weeks to arrive; and to date, the organisation has not received the remaining 63 per cent. If that process is not speeded up, it will have a serious effect on voluntary organisations throughout Scotland. I hope that the Executive will quickly address that issue.

Yesterday in Paisley, I spoke at a conference organised by the Scottish Council for Voluntary Organisations for many west of Scotland areas on the local social capital project, which is largely financed by the European social fund. We heard example after example of imagination in local communities, which were directly benefiting from the application of structural funds.

There is practical evidence that structural funds have been used to good effect. However, much more needs to be done, particularly on the LEADER programme and why the committee was not given sufficient opportunity to comment on it. Although we cannot rest on our laurels, we can build on some of the good examples that have been developed over many years.

As other members have dealt with the broad sweep of structural funds, I will be marginally parochial about the issue and talk about the Clyde urban waterfront regeneration zone, which I suspect will be unfamiliar to most members but which has been included in the URBAN II programme. That programme will focus on two areas—Port Glasgow and Clydebank south—and involves £8 million of ERDF investment that will run to the end of 2006. I am absolutely delighted that those areas have been chosen. The funding will be matched from domestic sources, which will give an overall total of £16 million.

However, I have stumbled across a little difficulty. According the EC guidelines of 28 April 2000, the minimum number of people for an URBAN II project is 20,000, although exceptions can be made for populations of 10,000. Clydebank south fits neatly into that special 10,000 limit category. However, the application is a joint submission for both Clydebank south and Port Glasgow, and we must add the populations of the two areas together to get a total for the project.

The guidelines make it clear that the EC lays down no upper limit on the size of the population in a single project to be funded by URBAN II; however, I understand that the United Kingdom Government arranges everything with the Commission. The Scottish Parliament information centre's note states:

"It is DTI that negotiates with the Commission over the amount of funding and the concomitant conditions for the UK."

I believe—although I am almost praying to be corrected by the minister—that the Department of Trade and Industry has set an upper population limit for an URBAN II project at 24,000 people. That is a serious proposition. Adding Port Glasgow's 18,000 people to Clydebank south's 10,000 people produces a total of 28,000 people. As the Clyde urban waterfront regeneration zone URBAN II project has been approved in principle as a single project and as detailed submissions are being completed for a deadline of the end of April, which I gather has already slipped from an original deadline in November, I sincerely hope that that limit of 24,000 people is not set in stone.

The EC indicates nine URBAN II areas in the UK. I cannot believe that all those areas will reach the UK's arbitrary maximum population total of 24,000; there should be some flexibility within the gross UK population total and the gross funding allowed by the Commission.

I pose the minister the following questions. Will he confirm or deny that the UK Government has imposed a 24,000 population maximum for each URBAN II project in the UK, and that that limit will apply in the west of Scotland? If that maximum figure is less than the joint population totals for Port Glasgow and Clydebank south, will he acknowledge that there is no upper limit in the Commission's URBAN II guidelines? Will he negotiate with the UK Government and the Commission to ensure flexibility in the application for Port Glasgow and Clydebank south?

Does the minister agree that, whatever happens, the promise of URBAN II for all the people of Port Glasgow and Clydebank south—which has already been given—must not founder, even in part, on the rock of administrative rigidity or because we are £1 billion short of previous funding in the UK? Each of those places has an identifiable community and should be treated as such: no ward or streets should be pulled from them to meet criteria that have been laid down by the UK Government, although the Commission has set no upper population limit.

I shall concentrate on the forward strategy, but I begin by looking back and acknowledging the role of partnership organisations throughout Scotland in maximising the benefits and opportunities of European funding. Without good planning and robust proposals, Scotland would not have been able to draw down from Europe the huge amounts of money that we have successfully managed to access and utilise. As Hugh Henry pointed out, the European Commission has described Scotland as a model of good practice. It is especially appropriate to recognise the efforts of voluntary sector organisations—some of which have limited staff resources—and their perseverance over the years in getting to grips with the complexity of applications and the difficulties of funding, to ensure that the most vulnerable in society have benefited.

The motion refers to the

"broader strategy ... in preparation for the enlargement of the European Union."

It is important to look forward as well as back. We should do so bearing in mind the objectives of structural funding. Structural funds are the European Union's regional policy tool to promote greater social and economic cohesion between the rich and the poor regions of Europe, and it is inevitable that, as Europe enlarges, some of that money will move east. We must consider strategies to maximise those opportunities.

The European Commission estimates that around 30 to 40 per cent of all EU funding expended in the poorest member states returns to the richer countries in the form of purchase of equipment or expertise. A House of Lords inquiry into structural funds also notes:

"There are obvious costs to the wider society of high unemployment and areas of concentrated multiple deprivation" across Europe. It continues:

"Equally, there are wider benefits from increasing cohesion".

Therefore, improving the quality of life in poorer regions brings benefits for us all. With the challenges of enlargement, there are opportunities for the sharing of public and private sector expertise and the expansion of markets. It is said that Germany stands to increase its gross domestic product by 0.5 per cent as a result of the enlargement of the EU, and I believe that Scotland can also benefit.

However, I issue a word of warning on two fronts and ask that, in future discussions, the minister make appropriate representations to UK colleagues. First, structural funds must not be used directly or indirectly to displace jobs from one part of the European Union to another. The Committee of the Regions has taken a close interest in that matter and, in a recent opinion on the impact of the policy, it concluded that it

"is concerned about distortions of the Structural Funds' fundamental aims. The aim of EU regional policy should be to ensure that direct subsidies do not simply lead to a shift in existing jobs from one area of Europe to another one."

There is a danger that a level playing field will not be in place in the transitional stages of accession, and that the lack of robust conditions of employment and workers' rights might disadvantage member states. National Governments and the Commission must be vigilant on that issue and must look for a way in which to reassure existing member states that social and environmental standards will be maintained throughout Europe.

Secondly, in developing future strategies on structural funds, the minister should give consideration to supporting the idea of a structural fund instrument to deal with the issue of asymmetric regional shocks. When a crisis emerges—whether a natural disaster, such as flooding, or an economic difficulty affecting employment in one European region—instead of people having crisis meetings day and night over three days and arriving at a conclusion at 5 o'clock in the morning, when everyone is worn out, there should be a regional policy instrument, supported by a fund and objective criteria, to allow speedy action to be taken.

The Presiding Officer is indicating that I should finish, so I shall have to leave the other points that I wanted to address. I conclude by saying that Scotland has benefited tremendously from its partnership with Europe and that we must continue to play an active role in determining the future disbursement of regional funds.

Speeches must be kept to four minutes, so that all members may speak.

Irene Oldfather is correct to say that structural funding makes a huge difference to the areas involved. I ask the minister to consider ensuring greater transparency in the awarding of funds. The recommendation of the European Committee's 6 ^th report 2000 was that there should be

"greater transparency and detail in the reporting of the relationship between annual Structural Fund expenditure and Departmental domestic spending in Scotland".

I note also that the sums that are being made available to Scotland through structural funds are now 10.8 per cent of the UK total whereas, between 1979 and 1999, the allocation to Scotland was some 20 per cent of the UK total. There has been a massive drop in the percentage of UK structural funds that are allocated to Scotland. The minister will argue that that is a result of changed circumstances. However, because of the change of circumstances for Scottish farming communities as a result of the foot-and-mouth outbreak, and for the tourism and fishing industries, I hope that the minister will fight for Scotland's interests. Some areas may once again satisfy the criteria for structural funding, and I hope that, in future discussions, he will fight our corner as hard as possible.

Because of the enlargement of the EU, this must be considered the last time that Scotland and Britain will gain such a substantial proportion of structural funding. In future, structural funding will inevitably be directed to member states that are less affluent than we are. Funds should therefore be targeted at strategies for sustainable economic development. It is also extremely important that we maximise the use of those funds while they are available. That is especially important considering that, in the past few days, redundancies have been announced at Compaq and there is a threat of additional job losses at Motorola. Long-term strategies with a lasting effect on the Scottish economy must be a top priority and the good work by agencies such as the Scottish Enterprise network must be built on.

We must not fail to recognise the essential importance of using EU funding in times of crisis. In that context, I again mention the fishing industry, which needs our support. In recognising the threat of a possible forthcoming recession and the problems that are faced by our electronics industry, it becomes apparent that the lion's share of the funding must be targeted towards employment opportunities and the Scottish infrastructure. In welcoming EU enlargement, we must also recognise the need to make use of the European structural funds for the maximum benefit to Scotland and prepare for the day when funds will be targeted on less-affluent members. I would be glad if the minister could assure Parliament that he will fight our corner as hard as possible in the light of rapidly changing circumstances.

Of course I will focus on the Scottish Borders. I never talk the area down but I am always straightforward and honest about it. The area has the lowest wages in Scotland—£50 a week less than the average—which is the legacy of 30 years of Liberal Democrat representation. No wonder Tavish Scott took a cheap and inaccurate verbal swipe at me. During his speech, I tried to ask him about the £6.5 million slice of the funding, and I say to the minister, who had better start paying attention, that I have before me two press releases from the Scottish Executive that are relevant in this context.

The second paragraph of the press release that is headlined

"Minister announces measures to assist businesses affected by foot and mouth" refers to details of a £6.5 million European objective 2 support package for foot-and-mouth disease. But, lo and behold, in the press release that is headlined

"Angus MacKay announces European structural funding for the south of Scotland" we once again read about the £6.5 million of EU money. That money has absolutely nothing to do with a rescue package for areas affected by foot-and-mouth disease but was structural funding that was going to the south of Scotland anyway. Confusing? Yes. Deliberately so? Yes. I look forward to clarification.

The money that has been earmarked for the south of Scotland—£45.7 million, which, after match funding, goes up to £90 million—is peanuts when one considers that it would cost £200 million to reinstate the Borders railway line to Carlisle, which is not a big task and one that I have been known to talk about on occasion. It is certainly peanuts compared to the £1 billion that has been spent on the millennium dome. Furthermore, one of the conditions that attaches to structural funding that previously did not—that it cannot be used for main capital funding projects—will limit the impact that it will have on the rural economies that are under stress.

The Borders has lost 1,000 textile jobs, and foot-and-mouth disease has put farming into suspended animation—that was an unfortunate slip of the tongue; I meant into suspension—at a time when the market was already economically depressed and tourism has stopped. Even the hope and glory that is the electronics industry is in trouble. The Southern Reporter today tells us that the sector is suffering a malaise throughout Scotland. Signum Circuits, a major employer in Selkirk and Galashiels, will put its 300-strong work-force on short time at the end of the week. Ernie Jamieson, the company's managing director, said that

"the situation is so fluid that no guarantees can be given on the ability of the firm to survive a sharp downturn".

Elsewhere on the front page, we read that at Sykes Europe, another electronics firm in Galashiels, 70 to 80 of the 240 workers may be made redundant this week.

Those problems are international and do not affect only the Borders.

I accept that there are problems to do with the electronics industry throughout Scotland, but the problems in the Borders compound the problems that are faced by an economy that has always been vulnerable.

To regenerate an economy, certain structures need to be put in place. Suitable roads are needed, as are rail connections and telecommunications. I wanted to ask Tavish Scott about ADSL provision, as I understand that capital funding cannot be used to set that up and there is none in the Borders, which means that telecommunications in that part of Scotland is only slightly removed from tin cans with a bit of string. As for roads, the A68, the major artery to the centre of the Borders, has only two crawler lanes and was impassable for four days this winter because of the weather. How can such a road be said to connect the Borders to anything?

Christine Grahame is good at talking down the Borders, but let us hear her talking it up.

Ian Jenkins should watch what he says. After 30 years of Liberal Democrat representation, the Borders has no railway, no proper roads and a failing economy that is not being invested in. I have never heard any member of his party campaigning on those points in all the years that I have been campaigning in the area. I am not talking down the Borders; I am telling the truth. It is time somebody did. Those are the problems that the area faces. I certainly intend to raise the temperature of this debate as I am fed up talking mince in this chamber.

Will the SNP ensure that the weather gets better?

I am not giving way. I am nearly at the end of my time.

You are not nearly at the end; you are at the end. Wind up, please.

Tarmac, trains and telecommunications. That is what the Scottish Borders needs and the small amount of structural funding that is being given will not deliver anything in the area.

Would it not be nice to hear Christine Grahame welcoming some good news for a change? Of course there is bad news in the Borders and of course the area needs some support, but Christine Grahame is rubbishing the news of support that we are hearing today.

Will the member give way?

No.

Members are well aware of the problems that the Borders faces. There is no doubt that all our major economic sectors are facing difficulties. The textile industry is restructuring and faces difficulties in relation to the cashmere export trade. As has been said, the electronics industry is in a volatile state worldwide. Signum Circuits, which was championed by Christine Grahame at one stage, is now in difficulties, not because of a fault with the company but because of world changes. Tourism and farming have been in difficulty and the foot-and-mouth outbreak is making the situation worse. I accept that we need improvements in transport and communications infrastructures.

Let me turn to the good news, however. Following the Viasystems case, all the relevant agencies and the Scottish Executive recognised the urgency of the situation and addressed the problem by creating an economic working party that led to a highly focused economic forum that implemented the new ways recovery strategy. Since then, every agency in the Borders has been working together in an attempt to maximise the access to European funding. My Westminster colleagues Archy Kirkwood and Michael Moore played a prominent role in that attempt.

As our objective 5b funding came to a close, we made strenuous efforts to secure assisted area status, which the Borders lost in the 1980s. The objective 5b funding had allowed various projects to come to fruition, including the preparation of Claridge Mill in Selkirk, which is now to be occupied as a call centre with the promise of up to 200 jobs and the land of creativity project that assisted the tourism industry by placing an emphasis on cultural activity and cultural events. However, it was the achievement of assisted area status that gave us the most recent and valuable boost to the excellent work of the economic forum, which, in spite of some of the criticisms that Christine Grahame has levelled at that body in the past, has been ably led by Scottish Borders Council convener, Drew Tulley, and the Scottish Enterprise Borders chief executive, Jim McFarlane.

Euan Robson and I, together with our Westminster colleagues, have worked with the south of Scotland partnership to prepare bids focusing on the criteria to win as much support as possible. That is why, today, the south of Scotland is benefiting from the first announcements of structural funding. We got our bids in early and were well prepared.

I am delighted that those preparations have come to fruition in the ministerial announcements that are being made today. We hope to hear more detail of the announcements that will help us across the south of Scotland. I would particularly welcome support for the work of Scottish Enterprise Borders and the local tourist board. We need real boosts at a time of real trouble.

I understand that almost £6.5 million is to be invested in the south of Scotland and I know that Scottish Enterprise Borders has sought funding for a company support programme, new market development and a property funding initiative as well as for projects supporting innovation in technology and e-business. Those would certainly help to modernise the business infrastructure that we clearly need. Marketing and promotion initiatives are being undertaken by the Scottish Borders Tourist Board, which will be extraordinarily valuable under the current circumstances.

We have heard positive announcements for the Borders and good news for Scotland. I look forward to finding out whether funding has been granted for the Eastgate arts centre in Peebles, close to my home place. That would do great things for the community and for tourism.

On a general note, it is unfortunate, as Christine Grahame said, that the criteria for funding do not allow investment in physical infrastructure, as they did before. There is a problem with the soft infrastructure, with communications. I hope that, in its future plans for regional development, the Scottish Executive will recognise that as an important element for the regeneration of the whole of the south of Scotland, and for the Borders in particular.

I wish to concentrate on the important issue of the European social fund, which can be accessed through structural funds. In response to an intervention, the minister said that he was satisfied that the bureaucracy involved was not disadvantageous to the voluntary sector. It will not surprise him—he is not in the chamber anyway—to realise that I disagree with him on that issue. I found his response extremely complacent, particularly as the Executive, in its various guises, goes round the whole of Scotland talking about social justice, social inclusion and everything that is being done to ensure that no section of our society is losing out.

Voluntary organisations are a vibrant, vital part of our communities. They provide support to the most vulnerable people and provide work for carers. Accessing European social funds is a complex procedure, however. I am sure that Mr Peacock will be aware that Moray Council, through its European unit, has helped more than 200 voluntary organisations access roughly £250,000 of ESF, which has been greatly appreciated by the organisations involved. Now, however, the situation is becoming even more difficult, and Moray Council is facing complexities. Onerous administrative burdens are being placed on committed, caring people.

For the benefit of fellow MSPs who perhaps do not understand the realities of this, I will highlight what has happened with regard to the new ESF regulations that the Executive has brought in. In the past, voluntary organisations that applied for social funding had to complete two two-page interim claim forms and, at the end of the financial year, one 13-page final claim form. Under the new programme that was introduced this month, every project has to produce four pages with 22 statistics. That has to be updated on a quarterly basis. Thereafter, organisations have only 20 working days—after that quarterly due date—to submit a 10-page progress report and a 19-page claim form. Otherwise, they will lose everything and have to repay any of the moneys that may already have been paid out.

I point out to Mr Peacock that those new procedures were introduced to this vital section of our community without consultation with voluntary organisations, and with no impact assessment.

I want to be constructive in this debate, and have two small recommendations that I hope the Executive will consider. Many of the small—they are small, but very important in small rural communities—organisations that I am talking about faithfully submitted their applications at the end of 1999 or early in 2000. They had no prior knowledge of the new regulations that were to be introduced. As a result, the statistics that they had were kept only as summaries. The Scottish Executive has imposed a deadline of April 2001—this month—for the individual beneficiary statistics to be provided. Otherwise, the organisations face decommitment, which, I think, would be wrong.

Could that deadline be reviewed by the Executive, so that a lifeline could be given to voluntary organisations? That would enable them to backtrack on their records in order to access structural funding.

We all accept the need to monitor carefully the disbursement of funds from the European Union, and the need for a level playing field among all EU member states. However, the detail now being required is out of proportion to the moneys that are received. Either the Executive could propose detailed annual monitoring, which would, as previously, suffice, or it could impose a de minimis rule. A level of about £50,000 could be set, over which annual returns would be required.

I hope that those are constructive suggestions for the voluntary sector, and that the minister will respond positively.

Many of the issues already raised in this debate have been technical. Rather than concentrate on the big picture, I want to examine the lasting effects that the funds are having on the ground. We should bear in mind the fact that the funds are given to provide sustainable development and to promote equal opportunities.

Last year, I visited North Highland College. Its staff showed me their jobs-for-all project, which preceded European funding. The project was set up to help people with disabilities and learning difficulties get back to work. The college brings in work from local companies to its on-site factory. The clients then become workers. They are paid a wage and work in a very sheltered environment. When they have built up their skills and confidence, they move to the employer's premises. They have a buddy with them, who ensures that they are not overwhelmed by the experience. When their confidence builds and they are happy with their working environment, their buddy leaves, and, employed by the company, they are left to get on with the job.

Bearing in mind the fact that many of those people have never had jobs before, the difference that is made is enormous. Not only do they gain employment; they gain confidence and new skills, and make friendships. The challenges that are set to the people in that situation mean that their self-development is enhanced. Some people have said that they are hardly recognisable as the folk who joined the project initially.

Structural funds also encourage equal opportunities in other ways, particularly with regard to the contribution of women in the workplace. In rural areas, it is important to consider that, given the male domination of traditional industries. Structural funds are being used to get women back to work after career breaks, when they are looking after young children or elderly relatives. The funding is used to give women choices, to introduce them to new skills, to give them assertiveness training and to make them aware of the fields that they can enter, showing them that they do not necessarily have to follow careers that are traditional for women, as most such jobs are low paid in the Highlands.

Work is also undertaken to make employers consider their working practices, not just in making them aware of the equal opportunities legislation, but in making them aware that they can change practices in order to allow women to continue working when they have dependants. That can lead to employers examining the question of working hours. Are the present working patterns necessary?

Employers are also encouraged to consider crèche provision for their employees, and ways in which they can allow women to progress their careers and meet their caring commitments. Child care training is given a priority. It is all very well to provide jobs for women, but if there are no facilities for child care, the women are pushed out of the working environment. Society has moved far enough to understand that women want to be able to look after children and relatives, but also want a satisfying career. We know that their contribution is not only necessary, but desirable.

This debate has given us a chance to highlight such issues: to show how the money makes a real difference to individuals in the Highlands and Islands. The funding there would be greatly reduced if we followed the SNP's calls for Inverness to be excluded. I am very happy that the Government fought for the additional funding, which has made a huge difference to people in the Highlands and Islands.

I will start by picking up some points made by Hugh Henry. European structural funds have been a positive contribution from the EU Commission—not just from the member states or regional Governments—towards developing and improving certain areas of Scotland. It is important that ESF is not used by the nationalists to make all sorts of spurious arguments by way of putting forward nationalism and trying to cause friction. That detracts from the good things that structural funds have brought to Scotland and the United Kingdom over their history. We should therefore deal first with the points that Kenny Gibson made.

On objective 1, it is perfectly fair to say that Scotland is very lucky to have some transitional objective 1 areas. Our gross domestic product is well above the level at which we would qualify for objective 1 funding. Credit is due to the Government that secured the transitional period. Winnie Ewing will say that we had a right to transitional funding. That is true, as when an area loses objective status, it gets a transitional period by right. However, it is also true that there have been tremendous pressures on our EU budget because it is fixed until 2006. Given the new demands that enlargement brings—

It was set in tablets of stone that objective 1 areas that lost that status would receive a fixed amount of transitional funding. It was claimed that the securing of transitional funding was a great result of Mr Blair's negotiation, but that is utter nonsense.

I said that there was a right to transitional funding. However, funding was given in excess of the original objective 1 level.

Kenny Gibson suggested that we should gerrymander the borders of the Highlands and Islands so that the rules change and we qualify for structural funds. I do not think that we want to go down that route, or we will start telling people in Inverness that they live in Kent.

Would Ben Wallace rather that objective 1 money comes to Scotland or that it goes to other parts of the European Union?

I would like that money to go where it is fair that it should go. I do not want to deprive people of money in other parts of Europe just because I am Scottish. If Scotland does not deserve it, it should not get it.

Will the member give way?

No.

I will move on to additionality. Kenny Gibson obviously failed to read the committee's report. As Hugh Henry said, Scotland is receiving an appropriate share of the structural funds that are allocated to the UK by the EU.

What does Ben Wallace understand by the term additionality?

I put that question to the director general of regional policy. He said that he was quite happy that Scotland follows the spirit of additionality to the full. It is for the EU, which is the referee on this matter, to decide, and it is perfectly happy. The Welsh academics who were wheeled out by the SNP forgot to ask the EU what its interpretation of additionality was. They pulled out a 1986 upgraded black-and-white rule on additionality. Obviously, when it was investigated, the argument fell apart as if it was made out of balsa wood.

It is a matter of regret that the Secretary of State for Scotland could not come before the committee. I do not take the view that it has to be the Chancellor of the Exchequer who gives evidence. If the secretary of state does not play a liaison role with the UK Government, future relations are not helped. It is important that Britain is a team, that we work together and that we get information. I press the ministers to ensure that that happens in future. The European Committee clerks and I went down to the House of Commons to see the Scottish Affairs Committee in action. It was important that we did that. There were not too many SNP members on the committee—they try to have the best of both worlds.

The civil servants have been very co-operative with us. Heather Koronka, who is now the chief executive of the Scottish ESF objective 3 programme management executive, has always been helpful to members who have asked for details on behalf of constituents. Jack McConnell was helpful and I thank him for his help. I am agreeing a bit much with the Executive—I feel a bit like a Liberal Democrat, but I will have a sit-down afterwards. However, I am agreeing on a point of principle, so I suppose that I will be all right.

The LEADER + programme is very important. The LEADER programme is important to many rural areas, such as Aberdeenshire. The lack of time and the consultation that the committee had on that should have been addressed. I urge the minister to give us a clear directive for the future.

In summing up, I will deal with what Christine Grahame said. The EU sets the rules. The Borders has problems and assisted areas schemes will help to solve them. However, will an independent Scotland not have foot-and-mouth disease or difficult weather? EU money will not solve the electronics glut in the world. The idea that, if we give a bit more EU money, everything will be all right is mistaken.

We support the motion and welcome the use of structural funds.

Ben Wallace has missed the point. The point is that the economic record of an independent Scotland would be such that we would not rely on subsidies from anywhere. Since 1963, when figures were first kept, the long-term growth of the Scottish economy has averaged 2.1 per cent, which is 50 per cent below the UK average. That is an indication of the economic mismanagement under successive unionist Governments, whether they were Tory unionist or Labour unionist.

What about Liberal unionist?

I will leave the kindergarten stuff to the Liberal Democrats.

I will deal with some specific issues such as bureaucracy. Margaret Ewing articulately outlined the problems that are faced by the voluntary sector because of the bureaucracy of the programmes. This morning, I met the economic development committee of the Convention of Scottish Local Authorities and was told that the level of bureaucracy is far higher in the new programmes than it was in the old ones. Although it is now April 2001, we are talking about a programme that runs from 2000 to 2006. Fifteen months after the start of the programme, no cheques have been written because of the bureaucracy—not at the European Union level, but at the Scottish Executive and UK Government levels.

An example of the problems that are caused by bureaucracy is the LEADER + programme in Dumfries and Galloway. The LEADER programme is one of the best ever European Community programmes and it has done an enormous amount. I know from my experience that it has been of enormous benefit to local authority and local enterprise company activity in Dumfries and Galloway in particular. However, although LEADER + was supposed to have completed applications by the end of last month, the action groups are not even up and running, and although the deadline for submitting applications and receiving approvals is supposed to be the end of this month, no applications have been made. I would like the minister to say why not, particularly given that Dumfries and Galloway is the epicentre of the rural crisis in Scotland.

I will widen the issues. The problems that we will face in 2006 and beyond as a result of the planned expansion of the European Union have been mentioned. I hope that the minister will listen to the points that I make and do something about them.

We do not need to wait until 2006 to feel the effects of the planned expansion of the European Union. Politically, I am wholly in favour of the eastern European countries' entry to the EU. The bigger political questions demand that that takes place. However, we are starting to lose some of our industrial base to eastern European countries. The Vesuvius-Premier Refractories brickworks in Falkirk, Volvo in Irvine and Compaq in Erskine are going to Poland and the Czech Republic. Those moves are perfectly understandable from the companies' point of view, as they will get bigger grants, cheaper labour and access to the European market, but it is the Executive's responsibility to look at what is happening as a political issue that needs to be addressed. It is a challenge to the whole of Scotland.

Hugh Aitken, the chairman of Electronics Scotland, has said that Compaq is the tip of the iceberg and that we could quickly lose another 4 per cent or 5 per cent of our electronics sector. I ask the minister, in summing up, to address that issue, tell us about LEADER + and say what he plans to do after 2006. At the current rate, it will take him until then to realise what is happening and write those plans.

I will deal specifically with the Highlands and Islands, but first I will address the criticism in Kenny Gibson's amendment that the Scottish Office failed to redraw the regional map to secure objective 1 status. We all know that that meant removing Inverness from the map in the Highlands and Islands. I do not remember a huge campaign to have Inverness removed from that map. This is an example of the SNP wanting to have it both ways. During the debate on the redrawing of the regional selective assistance map, I distinctly remember the SNP campaigning vigorously to ensure that Inverness was included in that map. The SNP cannot have it both ways.

I was somewhat involved in that issue, and I thought it important to take account of the views of all the local authorities in the Highlands and Islands. They may have wanted to take Inverness out of the map, but when it came to the bitter end, they were not prepared to say so publicly. After the event, the Western Isles Council expressed the view that it was sorry that it had not campaigned otherwise, but I took account of the views of all local authorities.

If Dr Ewing is arguing that the map should have been redrawn, and the obvious choice was the removal of Inverness—given its GDP—surely she should have stood up and argued that point forcibly, particularly if she wanted objective 1 status for the Highlands and Islands to continue. The important point is that the SNP cannot have it both ways.

Christine Grahame substantiated the point that was made by my colleague, Tavish Scott, as she devoted her whole speech to talking down the Borders. Indeed, she portrayed that area as a war zone where there are no roads, no railways and no jobs.

Rubbish.

Speeches must contain some balance, for goodness' sake.

I was talking about the reality.

Allegedly, Christine Grahame represents a particular area, but if she wishes to do so properly, she should take a balanced approach to how she represents that area to the wider world. That is only—

Will the member give way?

Okay.

Does George Lyon deny that the Scottish Borders has the lowest wages in Scotland, at £50 less than the Scottish average? Does he deny what I read in the Southern Reporter about the imminent redundancies, the downturn in farming and the general exodus of young people from the Scottish Borders? That is the reality test, which some Liberal Democrats should take.

Christine Grahame has just demonstrated that she is addicted to talking the area down—she cannot do anything but talk it down. Every time she opens her mouth, out it comes.

Ben Wallace gave a good speech that was very pro-Executive. In fact, I wonder whether his speech might endanger the good alliance between our colleagues on the Tory and SNP benches.

My good friend Alex Neil, who is the convener of the Enterprise and Lifelong Learning Committee, gave a constructive speech, as usual. He highlighted bureaucracy and made an important point when he alluded to the benefits of the LEADER programme. Many members who have worked with the enterprise companies and with the LEADER programme know how good that programme is.

Hugh Henry reminded Kenny Gibson—who had not read the European Committee's report in any great detail, if at all—about the facts in relation to additionality.

What evidence does George Lyon have that I did not read that report?

I am afraid that my evidence is the contents of Kenny Gibson's speech.

It is important to recognise that the objective 1 programme in the Highlands and Islands delivered many benefits to that part of the country. It delivered on a range of big infrastructure projects and on community projects, such as the five community halls in my constituency, which were funded out of the ERDF. Without that European help, those community halls would never have been built.

The European objective 1 money made a huge and significant difference to the Highlands and Islands, but a great deal more must still be done. Statistics for Argyll and Bute show that the area's GDP level is about 72 per cent of the Scottish average, and the same applies to the Western Isles and to Skye and Kyle of Lochalsh. The big challenge is to lift those areas out of the economic recession that they face. The £200 million of transitional relief money will aid that process in the Highlands, and that money must be used over the next six years to build on the achievements of the objective 1 funding programme.

A number of members made the point that the most important issue to which ministers must turn their minds is that of what we should do after 2006. It is clear that many parts of the Highlands and Islands will benefit over the next six years from the investment that will be made. However, I do not foresee that, in the next six years, there will be such a dramatic improvement in areas that have a GDP level of, for example, 72 per cent of the national average that they will not need further assistance. I ask ministers to concentrate on where we will go after 2006—that is the big challenge that will face the Scottish Executive over the next year or two.

We have had an interesting debate and, despite the early banter, a number of common themes came across. The question is whether everybody will buy into those themes.

Members on the Conservative benches are particularly concerned about the focus on sustainable economic opportunity and development, for which structural funds should be used wherever possible. We all agree that mass unemployment in particular areas is corrosive to society and damaging to the individual. It also lowers our skills base, and it is important that our skills base is such that people want to come here and invest. The skills base should also give individuals the opportunity to go further.

During the early part of the debate, the minister was caught out by Christine Grahame's question, which was about transparency. We all accept that the Executive and the UK Government must be totally honest about where money is coming from and how it is labelled. When I worked in England, I recall that I received money from Europe for an economic development scheme. We had to put a big sign on the wall that stated clearly where our funding had come from. The Government should take that health warning; if the source of funding is stated clearly, people might understand what that funding is meant to be for.

As usual, Kenny Gibson mentioned additionality, which was dealt with rather well by my colleague, Ben Wallace, and by Hugh Henry. Kenny Gibson also made a good point about the Scottish Executive's problems with handling ESF moneys. Members of all parties have made the point well that too much bureaucracy is involved, particularly in relation to the gold-plating of regulations and detail at the Scottish end. The important point is that people should be able to access the funds and to commit them speedily to the areas where they can do most good.

Irene Oldfather began her speech with a worrying comment about redistribution, but I realised thereafter where her speech was going. I agree with her about the displacement of jobs. We must address that matter now.

My colleague Lord James Douglas-Hamilton was absolutely right to highlight transparency, but the major point in his speech was that the economic circumstances in Scotland are changing now. There are problems with foot-and-mouth disease, with the fisheries and with the changing pattern of industry. There might also be a problem with our competitive position, which I am sure will not be assisted if taxes are raised. Where are we going? That is the crux of the issue. George Lyon and other members—including me—talked about the need to review where we are going. After the summer recess, will the minister lodge a motion for debate in the chamber on the Executive's thinking on the future? That will give the Executive two or three months to work up its plans and conduct its investigations, but we must have a picture of the Executive's plans for the future. That is the clear message from members.

Christine Grahame made an impassioned plea, to which Ian Jenkins responded defensively, to say the least. The Liberals complained about the fact that the changes that were made in the past disadvantaged certain areas, but we still do not know what they want to change in future. Despite members challenging the Liberals about that today, we heard nothing from them.

Other members spoke about the role of transitional funding, which is important. While successive Governments have done reasonably well, we always want more. It is true to say that those funds are meant to balance needs throughout the EU. On that basis, it is important that the Administration produces policies at home that are focused not only on depending on those funds, but on ensuring that additional support is keyed in from our budget, rather than relying on the European budget.

Mr Davidson's colleague, Ben Wallace, said that Scotland was lucky to receive structural funds.

: I referred to objective 1 funds.

However, both Mr Davidson and Lord James indicated that Scotland received more structural funds under the Conservatives. Who is right? Should we receive nothing, as Ben Wallace seemed to suggest, or should we receive more, as Mr Davidson and Lord James seem to think?

Ben Wallace suggested merely that a sense of fairness must come into play if we become better off, in European terms, and if the cake that is being divided is European. Today, the Conservatives are highlighting the negative developments in the Scottish economy and in Scotland's employment prospects, which mean that we must now look to the future.

Other countries, including Spain, are seeking to have the rules drawn up well in advance of 2006. Indeed, they are doing so after the next budget. We need to conduct that exercise in the Scottish Parliament. That is why I called for a debate soon after the summer recess.

We also need, when it comes to dealing with Europe and at a time when the country is under such great pressure, to seek areas of common approach. That would allow our representatives to negotiate sensibly on our behalf. If that common sense of bond and purpose exists, Scotland will be well represented when it comes to the next negotiations.

Given the unionist alliance that we see before us today, I find myself summing up for the only official Opposition. Debates on the subject of European structural funds should be useful, not least by holding the Executive to account in its role as the managing authority of the structural funds. They are worth around £1 billion over the next six years, so their application should have a significant and positive economic impact. However, notwithstanding this morning's announcement on the programme for the south of Scotland, I am puzzled as to the timing of the debate, because we have not yet heard the Executive's announcement of approved objective 2 projects.

To some extent, the debate has been informed by European Committee reports. I hope that the Executive has taken the conclusions of that committee's report on the application and project appraisal process for European structural funds on board, and that the Executive will implement the committee's recommendations. It should not be too much to ask the Executive—which is committed to a modernising government agenda—to streamline bureaucracy and iron out the wrinkles in IT systems. Margaret Ewing and Alex Neil underlined the importance of that issue.

The European Committee also made pertinent recommendations on improvements to the project appraisal and selection processes, which would ensure that there is a proper balance between programme priorities and geographical areas. It is unacceptable that some organisations continue to be in the position where, because decisions on their project applications are still pending, they may have to issue 90-day redundancy notices to staff. Hugh Henry and Margaret Ewing highlighted continuing problems for the voluntary sector and made constructive suggestions for change.

I hope that the Deputy Minister for Finance and Local Government will include an assurance in his summing-up speech that he will have an administrative system in place for the next round of applications that is, in his own words,

"robust, transparent and has the support of participants in the process".

We have no great quarrel with the Executive over its interpretation of community priorities, as set out in its priorities for development strategy. The key to economic and social cohesion in Scotland is the development of indigenous small and medium enterprises in order to regenerate local economies that are in decline. In particular, SMEs can reverse the decline in the traditional industries, both urban and rural.

We can all agree that sustainable development is our objective. Promoting equal opportunities and social justice will also unlock human and economic potential which, in the past, has all too often not been realised. In a similar vein, we support an operational strategy that emphasises continuity and durability for programme and project initiatives. That will mean that when enlargement comes—with the reduction in funds—most projects can be sustained well beyond 2006 without recourse to external support. That has been a theme of the debate. I look forward to the minister's comments on the situation post-2006.

Where the SNP departs from the Executive's viewpoint is in the Executive's craven dependence on the UK Government to look after Scotland's interests. There is strong evidence to suggest that the UK Treasury filched European funds, which should have come to Scotland in the past.

Will the member give way?

No, I will finish the point that I am making. Following devolution, the arrival of an assigned budget, with a European funding line that was greater than the amount of cash that we received from Europe, appears to be the result of accident rather than design. That accident could, of course, be the loss of objective 1 status for the Highlands and Islands. On reflection, that was not so much an accident as incompetence. My colleague, Kenny Gibson, said that and our amendment highlights it.

Incompetence or negligence might also be a charge to lay at the Executive's door on consideration of its failure to develop other programmes. David Davidson raised the issue of FIFG. We have still to hear a response from the Executive on that.

I want to highlight the community initiative for rural development, also known as LEADER +. Community initiatives form a relatively small proportion of structural funds, but LEADER + is worth £17 million to £18 million over the next six years. My understanding is that Scotland is well behind the rest of the UK and that local action groups that are responsible for the design and implementation of development strategies for their areas have not yet been formed. The Scottish programme should have been with the European Commission in November 2000 and project proposals for the local action groups should have been lodged last month. Parliament is entitled to an explanation today from the minister for the unconscionable delays in applying for LEADER + funding.

Rural communities such as Dumfries and Galloway have benefited greatly from predecessor programmes. I should not need to remind the minister of how valuable LEADER + projects would be in dealing with the economic crisis in rural Scotland, and in Dumfries and Galloway in particular. The previous LEADER programme in Dumfries and Galloway led to new investment of £11.6 million in the local economy. Several hundred new jobs in tourism were created and farm diversification projects featured heavily.

I ask the deputy minister to give prominence to the issue in his closing remarks. I urge him to come clean on the matter and to resist the temptation to treat Parliament in the dismissive manner of the UK's Chancellor of the Exchequer.

The debate is on an important matter that benefits Scotland greatly. I am sorry that the SNP, in its normal way, sought to reduce the subject with a display of unremitting mediocrity. However, many good points were made by other members and I will seek to answer them.

Scotland has, in the Executive, a Government that is committed to playing its full part in Europe with our UK colleagues. As Hugh Henry, Irene Oldfather and others mentioned, the development of the European Union since the second world war has been hugely significant. Some would argue that that union has been largely responsible for maintaining peace throughout Europe. As Hugh Henry said, we should always remember that Europe is about more than Scotland receiving structural funds. Europe is about a much bigger movement; it is about securing peace and new markets for our products and living in harmony together, for example. We should always keep that in the forefront of our minds.

With the development of the EU, a single market has developed across Europe. That has widened the marketplace within which we, as a nation within Europe, can trade goods. The maintenance of fair competition in Europe is an integral part of that marketplace. That development has contributed to the provision of more job opportunities for Scotland than it would otherwise have had.

As I said, we have also been significant beneficiaries of European structural funds. Those funds have offered—and they will continue to offer—real benefits to Scotland. They develop our physical infrastructure and they develop our people, by improving their skills and ensuring that they are more employable. Those funds help people back into the jobs market, add to their personal wealth and to the wealth and well-being of their communities. Irene Oldfather referred to the fact that structural funds are—above all—about European cohesion and tackling disparities within and between the regions of Europe.

I come from the Highlands and Islands and therefore I fully appreciate the impact that structural funds can have on an area. Part of the reason that the Highlands is in the midst of a renaissance in its fortunes is the investment of European structural funds. The evidence is all around in, for example, better roads, better bridges, better piers and jetties, and better airports and airstrips. People have more skills, there are more employable people, there is industrial development and land is being exploited for the first time. There are also better tourism facilities.

Will the member take an intervention?

In a moment.

As a result, population drift from the Highlands and Islands has halted and people have greater confidence. The prospects are better and GDP continues to grow.

That is an excellent illustration of what structural funds can do for an area of Scotland that was once plagued by difficulties and which is still facing challenges, but is now more capable than ever of holding its own in Europe. Such benefits, as Hugh Henry indicated, extend throughout Scotland through objective 2 and 3 programmes, and through various community initiatives.

Will Mr Peacock accept some responsibility for the loss of objective 1 status in the Highlands and Islands, given that he was the leader of Highland Council at the time?

I am delighted that Mr Gibson raised that point. I was about to come to a most extraordinary accusation by the SNP that the Highlands were let down—or betrayed—by the results of the last round of negotiations. The plain fact of the matter is that the Highlands and Islands have become too prosperous to fall into the category of the poorest parts of Europe. That is not something to complain about, but to celebrate. An area of Scotland that for generations was in decline is now in the midst of a renaissance in its fortunes—partly because of structural funds.

The SNP detests success stories in Scotland. SNP members require to talk down Scotland in order to talk up their own prospects. That is the only basis for their survival. Good news for Scotland is, of course, bad news for the SNP and now its members want to talk down the Highlands and Islands. We heard an extraordinary display from Christine Grahame, who talked down the Borders. We announced more resources for the Borders and money is going into the future of the rail industry there, but we still hear totally negative approaches.

Will the minister think back to the negotiations for the Highlands and Islands to retain objective 1 status? We were acknowledged, by a sympathetic Scottish Office, to be the only case in Europe that was on the borderline for the qualifying figure. Is not it the case that we had no competitors? The Scottish Office was optimistic and we had no competitors because the Scandinavians did a deal on entry. Why then was it hailed as a great victory when the Government could not deliver objective 1 status for us?

The plain fact of the matter is that the Highlands and Islands did not qualify for objective 1 status because the area's GDP was above the threshold. That is a matter not for regret, but for celebration. Despite the fact that we did not qualify for objective 1 status, the Prime Minister—Ben Wallace graciously acknowledged this—was able to negotiate a special transitional arrangement for the Highlands and Islands, which was worth £210 million. That is almost as much as we would have got had objective 1 status been secured.

Dr Ewing made the point that there was a right to transitional funding. In fact, when negotiations opened there was no such right and it was due largely to the Convention of Scottish Local Authorities—and people such as Hugh Henry and others who worked for COSLA at that time—and the representations that it made to the European Union about transition, that that right was won by the UK. As a consequence, the Highlands and Islands benefited. It is also the case that Scotland's being part of the UK gave it strength in the negotiations and secured that deal. Had we not been a part of the UK, it would have been almost impossible to secure that deal. That is something that the SNP wants—conveniently—to forget.

Over time, transitional funding is a good deal for the Highlands and Islands and for Scotland. The SNP's answer was to say, "Fiddle the maps." Every avenue was explored. The plain fact of the matter is that the NUTS level 2 territorial unit referred to the whole Highlands and Islands. Any area of Europe could take out its most prosperous city and try to claim that the rest of it fell below the threshold. The European Union simply would not wear that approach.

Why was that accepted for Ireland and for Wales?

Mr Gibson misunderstands.

Ireland has lost objective 1 status relative to its position prior to the previous round of negotiations. The Welsh position is a result of mandatory statistical reviews, in which the European Union accepted its case, but not Scotland's. As to Finland and Sweden, they have objective 1 status as a result of their terms of accession to the union. All those matters are fully catalogued and understood and, as usual, instead of welcoming the news the SNP is whingeing and moaning and girning and greeting about the fact that the Highlands is getting that extra aid.

An independent Scotland would have seven votes on the ministerial council. The largest recipients of objective 1 funding—the UK, Spain and Italy—have 29 votes. Does the minister agree that they simply would not listen to Scotland in any negotiations?

It is perfectly evident that, in the circumstances that I described, Scotland alone would simply not have had the clout that it did when the Prime Minister was able to secure the welcome deal for the Highlands and Islands.

There are several other points that I want to address in the time that is left to me. A number of members have mentioned the voluntary sector and have drawn attention to the role that that sector plays in spending the funds in ways that other parts of our society cannot, by tackling issues of social inclusion and so on. I recognise the real burden on a small organisation of applying for funds—to which Margaret Ewing referred—and that is why, in past European funding rounds, technical assistance has been available through the Scottish Council for Voluntary Organisations and other parts of the voluntary sector to help with the applications process. I am more than happy to look at the questions of bureaucracy that were raised. If the members who mentioned that matter will write to me, I will look at it in some detail. I am acutely conscious of the problems that are caused by delays in payments because of voluntary organisations' cash-flow problems. We are genuine in our desire to support the voluntary sector, and we will do anything that we reasonably can within the rules. I would be grateful for evidence from colleagues on that.

A significant issue of principle, raised by a number of speakers including Irene Oldfather, Lord James Douglas-Hamilton and Alex Neil, is the question of enlargement. It is a matter of principle and we support it, as members indicated. With enlargement, however, come challenges, such as the possibility of the displacement of jobs, which was mentioned by Irene Oldfather and Alex Neil. That is why it is important that, when we talk about future funds and structures in Europe, we do not talk only about structural funds. We must also talk about competition policy. That is why state aids rules—burdensome and troublesome though they can be at times—help to maintain a level playing field throughout the European Union on which we can all compete equally. It is important that we look at that, at employment law and at social policy in relation to both the future enlargement of Europe and those other matters.

Members also mentioned additionality. The European Committee, of which Hugh Henry is convener, has looked at that and has indicated that it is not seeking fundamental alteration to additionality. The European Union is entirely satisfied that what we do in Scotland meets the requirements of additionality. Scotland is held up by Europe as an exemplar of what ought to happen in relation to the deployment of those funds. In that context, it is simply wrong to suggest that Scotland loses out.

On future funds, members can be absolutely assured that the Executive will play a full part in the cohesion report discussions from now on. We must look more closely at how we target resources in future and at what happens when areas of Scotland are still facing difficulties and may decline in GDP terms. The LEADER programme is awaiting approval from Brussels. It is currently with the Commission and has been there for a number of weeks. We expect it to be cleared in a number of weeks' time so that we can make progress on it.

Within the wider context, members can depend on the Executive, with our UK partners, to fight Scotland's corner to ensure that we obtain whatever we can by way of structural funds. That will require us to think hard about the strategies that we deploy and to make some tough choices and decisions. Nonetheless, the Executive will continue to argue its corner: a strong Scotland, within a strong UK, within a strong Europe.