THE European Commission has sounded a dire warning over the region's future as the Government considers withdrawing millions of pounds in European funding.
Senior officers at the commission have said the coalition Government’s policies will leave English regions such as the North East without a voice, a situation almost unique in Europe.
They also questioned the merits of depriving the region of a dedicated jobs fund.
Since the general election, ministers led by Communities Secretary Eric Pickles have axed job-creating agency One North East and scrapped the region’s voice in Whitehall, Government Office North East. They are also reported to have banned the word “region”.
Last year, the agency spent more than £340m, including substantial European funds, but by 2012 it will be closed down, with no successor to pick up its work.
Paul Callaghan, ONE’s chairman, is leading a battle to secure for the North East a business loan fund which was set up last year with £125m worth of dedicated regional support.
Using European Investment Bank cash, the Finance for Business fund should have had a long lasting impact as repaid loans were recycled into another loan fund, providing job support for another decade.
But as a result of the development agency being scrapped, the fund is now at risk, with the Government considering administering it from London and using repaid loans to help Southern firms.
Speaking to The Journal, a senior commission director said it was concerned its work in the region would be undermined: “We do not know what the impact will be of the removal of the regional development agencies and the changes that are to come.
“Yes, any delay could impact on how the funding is spent and we are watching the situation.”
The spokesman went on: “It is an odd situation. England is probably the largest bulk of population in the EU that is not devolved into regions, that is governed so centrally. Remarkable, really.
“Looking ahead, we are quite worried about the impact of changes to public expenditure.
“The Government is on record as saying it wants to end regional funding. I don’t think they stand a chance of getting that, but they may well move to try and phase it out.”
Asked about the region’s Finance for Business fund, the senior official said: “It has to be spent in the region for the first cycle, but after that there is nothing to stop the Government doing what it wants with it, using it nationally or whatever.
“If I was in the North East, I would want the money to stay there for future regional investment and I would be concerned that it looks like it will not be.” As well as the long-term future of the Finance for Business cash, there is also the fate of some £150m left in the European Regional Development Funding that helped build The Sage Gateshead and the Baltic Centre for Contemporary Art.
Last night, former Newcastle City council leader Lord Shipley said he had received assurances from the Government that the region would remain in charge of the two funds.
The Liberal Democrat local government peer said: “Discussions are ongoing, and I am as concerned as anyone else about the possible outcome.
“However, only 10 days ago I was reassured that measures are being taken to ensure the region retains a voice in European funding.
“I understand there will be a future for European Regional Development Funding in the North East, based within the region and with expert staff kept here. Clearly that is everyone’s interest.
“We continue to put the case to ministers that the region must retain some say over its future and over both the European Regional Development Fund and the Finance for Business grants.”