Exclusive: EU chief warns of regions’ £650m suffering

Johannes Hahn, the European Commissioner for Regional Policy, said he will demand a “clear explanation” from the coalition Government over its decision to strip England’s most deprived areas of more than £650m allocated by Brussels for regeneration projects and hand the money to the devolved nations instead.

South Yorkshire will be hardest hit by the plan – viewed locally as a political move ahead of next year’s Scottish referendum – and now faces a 56 per cent cut in the money it receives from the European Union over the next six years, effectively losing out on more than £150m.

Speaking to the Yorkshire Post, Commissioner Hahn acknowledged the Government’s plan would have a “negative” impact on South Yorkshire, but stressed it has yet to be agreed by officials in Brussels.

“This is subject to negotiations – we will see,” he said. “For the moment we don’t know more than the announcement of the British Government.”

He added: “It is not only Yorkshire which might suffer. Some other English regions could also be affected. But this is something the British Government has to demonstrate – what is the idea behind it? What is the strategy?”

The EU hands out hundreds of billions of pounds in regeneration funds to regions across Europe as part of each six-year budget.

Yorkshire has received nearly £1bn over the past six years, to help fund major projects such as the Advanced Manufacturing Park near Sheffield, now home to firms such as Rolls-Royce. Mr Hahn said the next round will focus primarily on small businesses, as Europe moves out of recession.

The money is allocated to regions on the basis of need, using assessments based on population density and local GDP per head.

South Yorkshire has always received relatively large allocations as it remains one of the most deprived parts of England, with a GDP 84 per cent of the European average. Scotland, by contrast, enjoys a GDP 107 per cent that of the European average.

Nonetheless, the UK Government announced in March it would top up funds allocated to Scotland, Wales and Northern Ireland with £650m in the next EU budget round, which runs from 2014-2020, at the expense of the English regions. A Whitehall statement said it wanted to avoid the devolved nations suffering a “sudden and significant” reduction in funding as a result of David Cameron’s success in cutting the EU budget earlier this year.

South Yorkshire, however, will receive no such help. Local politicians have warned of a disastrous “cliff edge” as the region’s funding is cut from £345m over six years to £172m – making far less money available for future regeneration.

Commissioner Hahn made clear the decision could yet be changed.

“I know the feelings (in Yorkshire),” he said. “For the moment I cannot comment on the possible outcome of the negotiations.

“But I can tell you I personally am aware of the proposals about the negative effects in one part of the country – and the positive effects in other parts of the country.

“It is clearly something that is subject to discussion.”

The Government will submit detailed proposals of its plan to Brussels over the next few weeks.

There will then be a frantic negotiation process before a final funding deal for Yorkshire is unveiled around the end of the year.

Asked if he would be demanding a clear explanation for the Government’s plan to reallocate England’s funds, Mr Hahn said: “Of course. With every country, if there are changes to the allocations, we discuss the strategies being endorsed by the state.”