Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Supplementary memorandum by Department for Transport, Local Government and the Regions (ERF 17(a))

  1.  The Department for Transport Local Government and the Regions would like to provide the following supplementary information in the light of developments subsequent to submitting its memorandum to the Committee on 30 January 2002.


  2.  On 18 March the Department notified to the European Commission under Article 87(3) a scheme under which grants would be available for housing projects in England. Based upon, but not identical to, a recent Scottish scheme approved last November, it would allow gap funding for housing schemes anywhere in the country up to a maximum of 60 per cent of eligible costs. As with the Scottish scheme it argues that any aid to the developer of housing should be approvable by reference to the principle enunciated in the Risk Capital Guidelines that:

    "where a transfer made by the State would be compatible with the State aid rules, the Commission believes that a measure which provides a minimum incentive to other economic operators to make the same transfer should also be authorised, even if technically an aid to those operators is involved."

  3.  Approval of this scheme would be a major step forward because it would enable Government to provide gap funding support for housing schemes even if a project was located outside an Assisted Area or the beneficiary of the aid was not a small- or medium-sized enterprise.


  4.  In consultation with the RDAs and EP the Department has been developing two further notifications. They will allow grant to be payable by RDAs and EP for:

    —  the remediation of derelict land up to 100 per cent of eligible costs. This will also be based on arguing for extending the approach used for contaminated land in the Guidelines on Environmental Protection; and

    —  projects to support the preservation of heritage sites and conservation areas. This will refer to article 38(3)(d) of the Treaty; which states that in certain circumstances aid to promote culture and heritage conservation may be compatible with the common market.


  5.  As agreed at the October 2001 Informal Ministerial Meeting, the Department hosted a meeting of European Member States, UK devolved administrations and the European Commission on 21 March. The objective of the meeting was to share experiences of State aids difficulties in relation to regeneration, in order to move eventually towards new European guidelines. The meeting was a private event, in order to encourage representatives to speak freely.

  6.  In addition to a number of UK interests (including Scotland, Wales and the Permanent Representative to the European Union), the following attended:








    European Commission—Directorate General of Regional Affairs;

    European Commission—Directorate General of Competition; and

    European Commission—London office.

  7.  Germany and Belgium gave presentations. The Department presented a paper on market failure, outlining some of the concepts on which a future regeneration framework might be built, as well as a note on PPPs. Other representatives provided a lot of useful information, including personal views, which will be used to support development of policy. In one case, the information provided is being followed up through a consultancy exercise. DG Competition gave a substantial and helpful indication of its position.

  8.  Support was expressed for the UK's ambition to have new regeneration guidelines. This support was largely drawn from Northern European states. Some opposition was also expressed.

  9.  There was a frank and open exchange of views on a range of issues, in particular the need for a holistic approach to regeneration, the nature of market failure that leads to deprivation and the need for regeneration and Public Private Partnerships. The meeting noted the interesting differences in approach to regeneration, some involving State aid and others not. The Commission base any new guidelines or framework on case law and the position would be no different in the case of a new regeneration framework. Our new notifications will help expand the existing case law. The Commission has sole competence in approving State aid frameworks but recognise that in an ever-changing environment new guidelines, such as those on risk capital, may be necessary.


  10.  Following the meeting on 21 March the Department will be writing to the Commission, with an agenda for future action. This letter will emphasise the importance which the UK attaches to this issue and will set out our strategy of a twin track approach whereby:

    —  we propose to continue to make notifications, eg the Housing Aid scheme, the Dereliction Aid Scheme and the Heritage Aid scheme; and

    —  we formally submit a paper which will be based on the paper tabled at the meeting, but going further towards ideas for new guidelines, drawing on ideas which emerged at the meeting. The paper sets out the economic rationale for paying regeneration aid and will be the subject of further meetings with the Commission and other Member States both in the Urban Development Group and in other fora.

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