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NEW DRAFT ASSISTED AREAS MAP PUBLISHED

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The government today published a draft map of assisted areas where companies will be eligible for regional aid in f...
The government today published a draft map of assisted areas where companies will be eligible for regional aid in future.

The current map has been in force for seven years and under EU rules expires on January 1st 2007. The new map follows a full first stage consultation and will be subject to further consultation over the next four weeks.

Map

Margaret Hodge, minister for industry and the regions, said:

'We have drawn up this map with the explicit aim of ensuring aid is available in the areas where it is most needed to help improve competitiveness and reduce regional inequalities.

'This is one of many ways in which we can support areas in maintaining and expanding industry and jobs. The decisions we have taken have been difficult because the UK has received reduced coverage. However we believe our proposals reflect a good balance between the needs of Britain and the opportunities in Britain. By taking advantage of these facilities we can support enterprises to compete effectively in the global environment and provide more jobs in the deprived areas of the country.'

Under EU rules regional state aid can only be paid by governments to enterprises located within the areas designated.

In the UK the percentage of population covered will be reduced from

30.9 per cent to 23.9 per cent. This is partly because of Britain's strong economic performance and partly because aid has been redistributed to the poorer areas of the now enlarged Europe.

All western member states will see their coverage fall, many of them more sharply than in the UK. Coverage in France will reduce from 36.7 per cent to 18.4 per cent and coverage in the Republic of Ireland from 100 per cent to 50 per cent.

After considering responses to the initial consultation the UK government has based the new draft map on areas which will have the greatest impact on promoting growth, productivity, skills and jobs.

Four measures were used to decide how to prioritise Britain's

coverage:

* the employment rate

* the level of skills

* the number of people claiming incapacity benefit

* manufacturing as a share of employment

These measures allow a focus on those areas where the impact of state aid can be maximised.

Three disadvantaged regions automatically qualify: Cornwall and the Scilly Isles, West Wales and the Valleys, and the Scottish Highlands and Islands. It was decided before the initial consultation that the whole of Northern Ireland would continue as an assisted area.

The EU rules agreed by all member states mean some areas are not eligible to be included by the government as assisted areas because overall their economies are too strong. Six regions were excluded in this way: Halton and Ellesmere Port; South Manchester; North Warwickshire; Lowestoft; Brighton and Hove; and, Edinburgh and West Lothian.

Notes

1. Map and full details available here.

2. The government will consult on the draft map, and its rationale,

for a further four weeks.

3. The new guidelines will apply from 2007 to 2013 and replace

current guidelines, which expire in December 2006. The commission guidelines aim for less and better targeted state aid, in line with the conclusions of successive European Councils and agreed by all EU member states.

4. Assisted Areas are those areas where regional aid may be granted

under Community law. In Great Britain the main forms of such aid are the following discretionary grant schemes:

- Selective Finance for Investment in England (SFIE) - which helps fund new investment projects that lead to long-term improvements in productivity, skills and employment.

- Regional Selective Assistance (RSA) - administered by RSA Scotland, part of the Scottish Executive, aimed at encouraging new investment projects, strengthening existing employment and new job creation.

- RSA Cymru Wales (Regional Selective Assistance) - delivered by the Welsh Assembly Government to help support new commercially viable capital investment projects that create or safeguard permanent jobs.

Under the schemes, the levels of assistance which can be paid are higher in economically weaker regions covered by assisted areas status.

5. Under EU rules, areas included in the assisted areas had to be based on units of at least 100,000 population. Areas of deprivation smaller than that are not eligible.

6. The government has been consulting separately on the draft National Strategic Reference Framework (NSRF), which outlines the UK's broad strategy for using its Structural Funds allocations in the 2007-2013 budgetary cycle. A draft proposal is due to be published by the government in the Autumn after responses to an initial consultation have been considered. All areas of the UK will be eligible to apply for funding through the Structural Funds.

7. The new EU Guidelines apply a 'filter', disqualifying better performing areas from coverage based on comparisons of GDP per capita and unemployment. Full coverage can only be designated outside this filter by demonstrating 'major structural change' using EU-wide comparisons. The government has taken the view that, given the strong economy and robust labour market performance in recent years, the UK would not be able to justify coverage in those areas that fall outside the filter.

8. Northern Ireland is to retain full coverage because of its particular circumstances, including its boundary with areas of the Republic of Ireland regions retaining full coverage, the unique difficulty in targeting aid in the province, and its current eligibility for a higher rate of aid - 40 per cent- than any other UK region.

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