Review of the Assisted Areas Map

A Consultation Paper

Consultation paper issued jointly by the:

Department of Trade and Industry Scottish Office Welsh Office Department of the Environment, Transport and the Regions

July 1998

Review of the Assisted Areas of Great Britain

1.	The Government has announced that it is carrying out a review of the Assisted Areas of Great Britain in response to new European Commission guidelines on regional aid. The current Assisted Areas were designated in August 1993. This document seeks views on the designation of future Assisted Areas.
Assisted Areas
2.	The Assisted Areas are those areas of Great Britain where regional aid may be granted under Community law. Regional Selective Assistance (RSA) is currently the main form of such aid in Great Britain. It is granted to secure employment opportunities and increase regional competitiveness and prosperity, particularly in areas of deprivation. RSA is a discretionary scheme which provides grants in support of investment projects that will create or safeguard jobs, and generate benefits for the wider regional economy.
3.	The legal basis for designating Assisted Areas in Great Britain is Section 1 of the Industrial Development Act 1982.
The European Guidelines
4.	The new European Commission guidelines on regional aid were adopted on 16 December 1997 and published in the Official Journal of the European Communities on 10 March 1998 (reference 98/C 74/06). A brief summary of European Union regional aid rules is given in the Annex. The Commission Guidelines form part of its drive to reduce the overall level of aid to industry in the Community and to prepare for the possible accession of new Member States. The Government supports this. The guidelines are designed to make it possible to introduce, as from 1 January 2000, a regional aid system which is both transparent and comparable across all Member States.
5.	The guidelines lower the permitted limits on aid (as a percentage of eligible costs) and reduce the proportion of the European Union's population covered by areas where regional industrial aid is permissible. They require that Member States submit proposals for future Assisted Areas to the Commission by 31 March 1999 and that different aid ceilings should apply in different categories of eligible areas across the Community.
Structural Funds
6.	The Commission has also issued proposals for the designation of Structural Fund areas; these proposals have been the subject of separate consultations and are currently the subject of negotiations within the Community. The Commission has suggested that the Assisted Areas should include those areas that will be eligible for Structural Funds. The Government does not accept that the areas eligible for Structural Funds and the Assisted Areas need be identical, or that one set of areas needs to contain the other. There are likely to be some geographical areas where the economic and social conditions make one type of regional aid more suitable than the other; constraining the relationship between the two sets of areas could reduce the effectiveness of both types of aid.
Conduct of the review
7.	The review of the Assisted Areas will be carried out for Great Britain as a whole. All parts of Great Britain will be assessed for inclusion against common criteria, even if no specific representations are made.
Choice of criteria and geographical units
8.	The Industrial Development Act 1982 requires that in designating Assisted Areas Ministers have regard to "all the circumstances, actual and expected, including the state of employment and unemployment, population changes, migration and the objectives of regional policies."
9.	The Commission guidelines state that the choice of Assisted Areas should be based on up to five indicators. The indicators must be available on a national basis and from reliable statistical sources. Paragraph 4 of the Annex gives further details.
10.	Labour market indicators will be used in the designation of Assisted Areas but indicators reflecting regional competitiveness, deprivation and peripherality might also play a role. Different indicators may be given varying importance and weight in the final assessment. The current review is seeking to identify those areas where assistance is both needed and regional industrial aid an appropriate policy response.
11.	The choice of geographical unit to be used in designating Assisted Areas remains open, although only one type of unit may be submitted by each Member State. The Commission proposes use of NUTS 3 areas or, if justified, another homogeneous unit. NUTS (Nomenclature of Units for Territorial Statistics) areas are used by Eurostat, the European Commission's Statistical Office, for presenting regional and local statistics. Other possible geographical units would be local authority areas, travel to work areas or wards. In practice the guidelines would require smaller geographical units to be aggregated to larger areas to meet the provision for a minimum 100,000 population.
Population coverage
12.	Under the new European guidelines, the proportion of Great Britain's working population covered by the Assisted Areas, currently some 34%, must be significantly reduced, perhaps by as much as a quarter. This reduction reflects the fall in UK unemployment in recent years and the relatively low level of regional income disparities in the UK. The Commission will set the limit on Great Britain's population coverage late this year.
13.	The Commission will also decide later this year, based on available GDP data, the NUTS 2 areas in Great Britain which will qualify automatically for Assisted Area status under the Article 92(3)a derogation (see Annex). The population of these 92(3)a areas will correspondingly reduce the share of the overall population ceiling available to 92(3)c areas.
14.	Interested parties are invited to submit their views on the areas which might be designated as Assisted Areas, under the 92(3) c derogation. Given the requirement for a common methodology for assessing potential Assisted Areas, interested parties should also comment on: the geographical unit that should be used; and the criteria that should be used in designating the new Assisted Areas.
15.	Interested parties considering making representations for Assisted Area status should consider whether the area is likely to be among those where assistance is most needed and regional industrial aid an appropriate policy response. Respondents should also consider what information it would be useful to provide on site availability in their area.
Consultation arrangements
16.	Interested parties should send their views (6 copies) to the appropriate Government Office in England, or to the Scottish or Welsh Office as appropriate. The addresses are given below. The closing date for representations will be 30 October 1998.
17.	It will be assumed that representations may be made publicly available unless respondents indicate that they want all, or part, of their document to be treated in confidence. Copies of the representations will be made available for public inspection, on request to the contact points shown below.
Documents available on the Internet
18.	This consultation document is available on the Internet at http://www.dti.gov.uk/assistedareas. The European Commission's Guidelines on national regional aid can be accessed via DGIV's site at http://europa.eu.int/comm/dg04/lawaid/en/regaid.pdf
Addresses to which representations should be sent:

Scottish Office Mr Jim McCulloch 6th Floor Meridian Court Cadogan Street Glasgow G2 6AT Telephone: 0141 242 5699 E-mail: jim.McCulloch@SO049.scotoff.gov.uk	Government Office for Merseyside Mr Colin Rushby Sunley Tower Piccadilly Plaza Manchester M1 4BE Telephone: 0161 952 4129 E-mail: crushby.gonw@go-regions.gov.uk
Government Office for the South West Mr Bob Punchard Mast House Shepherds Wharf 24 Sutton Road Plymouth PL4 0HJ Telephone: 01752 635 075 E-mail: bpunchard.gosw@go-regions.gov.uk	Welsh Office Ms Claire Griffiths Cathays Park Cardiff CF1 3NQ Telephone: 029 20825111 E-mail: assistedarea@wales.gov.uk
Government Office for Yorkshire and the Humber Mr Llew Owen City House PO Box 213 New Station Street Leeds LS1 4US Telephone: 0113 283 6304 E-mail: lowen.goyh@go-regions.gov.uk	Government Office for the South East Ms Faith Charnock or Mr Chris Farthing Bridge House 1 Walnut Tree Close Guildford Surrey GU1 4GA Telephone: 01483 882543 E-mail: cfarthing.gose@go-regions.gov.uk
Government Office for the North East Mr Rick O' Farrell or Mr Keith Raine Wellbar House Gallowgate Newcastle upon Tyne NE1 4TD Telephone: 0191 202 3817 or 0191 202 3833 E-mail: aareviewmap.ne.gone@go-regions.gov.uk	Government Office for the West Midlands Mr Chris Marsh 77 Paradise Circus Queensway Birmingham B1 2DT Telephone: 0121 212 5206 E-mail: cmarsh.gowm@go-regions.gov.uk
Government Office for London Mr Harshad Dave Riverwalk House 5th Floor 157-161 Millbank London SW1P 4RR Telephone: 020 7217 3208 E-mail: hdave.gol@go-regions.gov.uk	Government Office for the North West Mr Colin Rushby Sunley Tower Piccadilly Plaza Manchester M1 4BE Telephone: 0161 952 4129 E-mail: crushby.gonw@go-regions.gov.uk
Government Office for the East Midlands Mr Peter Dale Belgrave Centre Talbot Street Nottingham NG1 5GG Telephone: 0115 971 2592 E-mail: pdale.goem@go-regions.gov.uk	Government Office for Eastern Region Ms Claire Keck Building A Westbrook Centre Milton Road Cambridge CB4 1YG Telephone: 01223 346713 E-mail: ckeck.goer@go-regions.gov.uk

ANNEX
EUROPEAN UNION REGIONAL AID RULES
1.	The Treaty on the European Union lays down the principle that if aid to industry distorts or threatens to distort competition and trade between Member States then it is incompatible with the common market. The Treaty does however allow for the Commission to approve aid, at its discretion, where the aid fulfils certain objectives, one of which is regional economic development.
Article 92(3)a
2.	Article 92(3)a provides that aid to promote economic development of areas where the standard of living is abnormally low or where there is serious underemployment may be considered compatible with the common market. The Commission defines such areas as regions, at NUTS level 2, that have Gross Domestic Product per capita, measured in purchasing power parity terms, of less than 75% of the Community average over the last three years for which data is available. This is similar to the criterion that has been proposed by the Commission for defining future Objective 1 Structural Funds areas. Areas that meet the 92(3)a criterion will be automatically granted Assisted Areas status. The areas that meet the 92(3)a criterion will be identified by the Commission later this year.
Article 92(3)C
3.	Article 92(3)c permits aid to develop certain regions where such aid does not adversely affect the operation of the single market. Unlike Article 92(3)a, there is no single Community criterion for defining such areas. Each Member State designates the regions which are disadvantaged in relation to the rest of that country, subject to a population ceiling determined by the Commission.
4.	Member States do not have complete discretion over how their Assisted Areas are chosen. Their methodology for designating areas must satisfy two principal conditions: it must be objective; and it must make it possible to highlight significant economic and social disparities between areas.
Member States may use up to five simple or complex indicators in their methodology. The indicators must be objective and relevant to the measurement of economic and social differences. They must also be drawn up by reliable statistical sources and be based on the last three years of available data or the latest survey if annual data are not available.
5.	The areas proposed to the Commission by the Member State must show significant disparities with areas designated scoring at least half a standard deviation from the average across all potential 92(3)c areas in one or more indicators.
Aid limits
6.	The new guidelines on regional aid have set limits on the level of aid, measured as a percentage of net eligible project costs, that may be granted in the different categories of assisted area. The main aid limits are set out below:

Area	Aid limit
92(3)a areas with per capita
GDP less than 60% of Community average	50%
92(3)a areas with per capita GDP greater than 60% of Community average	40%
92(3)c areas	20%
92(3)c areas in NUTS 3 areas with higher per capita GDP and lower unemployment than the Community average	10%

7.	The limits are 15 and 10 percentage points higher for Small and Medium Enterprise aid schemes operating in 92(3)a and 92(3)c areas respectively.
Implementation
8.	Under the guidelines the new Assisted Areas must be designated by 1 January 2000.