The Department of Trade and Industry has said that assisted area status can cover only about a third of the British workforce.
That effectively excludes the London travel-to-work-area which is too big because it stretches as far as Oxted in Surrey and Bushey in Hertfordshire.
But a spokesman for the Association of London Authorities (ALA) said last night that it had been told ministers were willing to consider designating parts of London for regional aid - worth an estimated pounds 170m in the next financial year for assisted areas.
The case for doing that has been illustrated by research done for Derek Fatchett, Labour's regional spokesman, by the House of Commons library. This shows that the huge London travel-to- work-area is worse off than many existing assisted areas in the North.
While London's average unemployment rate was 10.9 per cent last year, the rate for Scunthorpe was 9.5 per cent; Corby, 8.6 per cent; Swansea, 9.9 per cent; and Ayr, 8.7 per cent.
The proportion of London's unemployed out of work for more than a year - the long-term unemployment rate - was 35.2 per cent in October, compared with 30.6 per cent in Scunthorpe; 30 per cent in Corby; 34.9 per cent in Swansea; and 32.1 per cent in Ayr.
London's rate of unemployment in December was 11.8 per cent, again higher than any of the other four assisted areas.
But the ALA spokesman said they estimated unemployment rates of 23.1 per cent in Tower Hamlets, 23 per cent in Hackney, 21.5 per cent in Haringey, 20.4 per cent in Southwark, and 20.1 per cent in Lambeth.
The two worst travel-to-work- area rates in the whole of Britain were South Tyneside and Cumnock and Sanquhar - which both registered 19.7 per cent out of work in December.
But the political problem faced by Michael Heseltine, President of the Board of Trade, could be as severe as the one he is now wrestling with over pit closures. Corby and Ayr are both highly marginal Conservative constituencies.
There are also four Tory marginal seats at risk in the Bolton and Bury travel-to-work-area, an assisted area with average unemployment in 1992 of 10.1 per cent, a long-term unemployment rate of 31 per cent in October, and a December unemployment rate of 10.5 per cent - all better than London rates.
Mr Fatchett said last night: 'When Mr Heseltine announces his review conclusions, there are going to be a lot of unhappy people about. When this system was set up in the 1960s, it was designed to help the minority. Now the majority are hammering on Mr Heseltine's door.'
Fear forcing down pay, page 3
EC frustration, page 8
Leading article, page 16
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