A EUROPEAN COMMISSION ban on funding is set to axe half the urban regeneration schemes being promoted by regional development agencies, a new report reveals this week.
According to the Environment, Transport & Regional Affairs Committee report, the UK Government has contravened European Union competition guidelines by boosting Regional Development Agency cash to kick start redevelopment on contaminated and derelict brownfield sites.
It says that unless a replacement for so-called 'gap funding' - vital to the success of schemes but banned by EU since December last year - is found the RDAs will be forced to drop regeneration schemes.
Gap funding is paid by Government to developers to kick start regeneration schemes and is now only available in areas deemed by the EC to be economically disadvantaged. But under this criteria the number of regeneration schemes that could be undertaken in the UK is less than 20% of the RDAs' plan.
The funding was designed to protect private sector investors from loss when developing commercially unviable land. Since its introduction in 1994 some £1.1bn of 'front end' Government funding has encouraged £2.5bn investment from the private sector.
The Department for the Environment Transport and the Regions, which until the ban was responsible for allocating gap funding, said 'urgent discussions' were being held with the EC to find an alternative.
However, the report states that none of the alternatives so far identified will make up the funding shortfall.
The Commission's clampdown on gap funding came after fears that that land value increases could provide a windfall for owners and could subsidise the developers.