Highlands are now too rich for handouts

THE SCOTTISH Highlands will lose out to poverty-stricken English regions such as Cornwall, South Yorkshire and Merseyside under the terms of an EU austerity deal emerging from the Berlin summit last night.

With the cash for regional aid to be frozen at about pounds 140bn over the next seven years as a prelude to EU expansion into eastern Europe, hopes that substantial sums of money would still be available for the remotest parts of Scotland were fading.

Income per head in the Highlands and Islands has increased to the point where the region narrowly fails to qualify for classification as one of Europe's poorest. To qualify, income per head must be at or below 75 per cent of the EU average.

But South Yorkshire, Cornwall and West Wales have sunk into such decline that for the first time they automatically qualify for the same rates of assistance as parts of the former East Germany, rural Greece and the west of Ireland.

But the freeze on spending means hopes of special treatment for regions that no longer qualify for the highest rates of assistance have been all but dashed. The Scottish Highlands received more than pounds 240m from 1994 to 1999.

Government strategy in the negotiations on EU finances has been to try to maximise the percentage of the overall population that qualifies for the highest rates of aid. Bringing Cornwall, South Yorkshire and West Wales into the "extremely poor" bracket ensures that 3.7 million extra people are covered. Merseyside already qualifies and will continue in that category.

Northern Ireland will also fall victim to its new prosperity, losing claim to maximum regional grants. But the expectation last night was that a special deal worth about pounds 400m a year would be granted to underpin the peace process.

This made it even more difficult for Tony Blair to argue for special treatment for Scotland. Sparse population in the Highlands is the other big obstacle to consideration for concessions.

Twelve UK regions in industrial decline are also likely to lose under the financial squeeze, although where the axe falls will be a matter for the Government. Regional development and agriculture absorb three quarters of the EU annual budget of pounds 60bn so were obvious targets for reform ahead of EU expansion into former Communist countries where income per head is not even half the current EU average.

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