Under starters orders

The part of the commission responsible for the regions – DG Regions (DG stands for Directorate General in Eurospeak) – is slowly doling out large sums of money to help some of our most deprived areas to restructure and become competitive. The money could make a huge difference in places like Merseyside and South Yorkshire where much of it is targeted.

But the commission's snail-like progress in approving some of the funding, the Objective 2 programme of the European Regional Development Fund in North-west England for example, is storing up big problems for us all. Theoretically, the programme started on 1 January last year, despite not having been approved. Over a year later, not a penny has been spent, many project plans are awaiting approval and the timescales for spending the money have not changed. Another mad rush to spend at the end of the programme is inevitable even before the money has started flowing.

At the same time, another part of the commission, DG Competition, banned the English gap funding programme in December 1999, which effectively stopped all new private sector physical regeneration projects. Its reasoning was that grants given to developers created unfair competition inconsistent with the single market. The House of Commons select committee investigation into this affair described the decision as perverse and bizarre. Last week, more than a year after the programme was dropped, the commission finally gave the green light to two gap funding schemes.

And it gets even better. The state aid concerns of DG Competition have been used to hold up a large number of regional development fund projects that were to be undertaken by public–private partnerships. The commission appears to be having considerable difficulty creating and administering a coherent policy that achieves its twin goals of increasing economic activity in less developed regions and creating a level playing field for member states.

This confusion appears to be reinforced in the UK where the DETR's attempt to support regeneration is made more difficult by its inability to talk directly to its commission counterparts, having instead to negotiate via the Department of Trade and Industry, whose support for anti–state aid enforcement by the commission is very strong (at least as long as enforcement is against other European countries).

In the middle of this mess, our deprived communities in deteriorating neighbourhoods continue to decline

All this would be funny if it wasn't so serious. Elsewhere in Europe, urban regeneration is undertaken solely by local and regional government, which builds the factories, houses and offices with vast amounts of public funding and sells them off at the market value, even where this is substantially lower than cost (as it usually is). The development industry doesn't get a look in and tax rates have to be substantially higher to pay for all this public spending.

In fact, these continental regeneration agencies were regularly visiting the UK to help them understand how we operate public–private partnerships, as they recognised that this was a much better approach to regeneration.

In the UK we are now in considerable difficulty, with most of the private sector's skilled regeneration people doing more commercial things with their time. No new projects, which require grants, are coming through, as there is no clear way of financing them. Regional development agencies intending to spend next year's substantially increased budgets on the first land assembly stage of the regeneration process, which will almost certainly need to use compulsory purchase (given the fragmented nature of brownfield sites) will therefore take some years to get up to speed.

Unfortunately, the compulsory-purchase system was not intended for urban regeneration and the government is redesigning it for use in this way. Unfortunate too is that the Europe-inspired Human Rights Act now appears to require a complete restructuring to achieve an independent judicial appeal process, but that's another "it could only happen in Europe" story.