The commission said the government had identified small specific areas for help, but it wants larger areas with populations of around 100,000 to get the Assisted Areas money instead.

Richard Caborn: Government will submit revised proposals

The Conservatives have accused ministers of "bungling" after they were told to re-submit the plan for funding in deprived areas.

The commission said the government's proposals would have given the UK an "unfair advantage" against other EU members.

And it warned that unless the UK redrew the plans, agreements on the funding could be delayed for six months.

Trade Minister Richard Caborn said: "In light of this situation and the damage that would be caused by an extended delay in the approval of the new Assisted Areas, the government intends to submit revised proposals to meet the commission's concerns."

'Humiliating climbdown'

The biggest losers are in eastern England, particularly around King's Lynn and Wisbech in East Anglia, northern Kent and parts of Scotland.

The Assisted Areas would be the final part of a package of European funding for 16.5m people in Britain's most deprived areas.

Businesses in each area would be able to apply for grants during the seven years that the map is in place, from funds currently exceeding �250m a year.

'Nonsense'

But in Bradford, one area which will miss out on cash, council leader Ian Greenwood placed the blame for the affair on the European Commission, which he said had "altered the ground rules".

He said: "My own ward is the second most deprived ward in Britain. To claim those people live in a small area and you should not assist them is nonsense.

"The issue should be the need and not the geographical size or location."

'CompliBut a European Commission spokesman said: "We do not want member states to be able to pick out very small areas and be too selective in the aid because the more you are selective in subsidies the more you distort competition.

"If you pick out a very small area and give aid to a company there but do not open the same opportunities to a company located very nearby just because it happens to be in another zone, clearly you don't have a level playing field between companies which are in the same geographical area."

Prime Minister Tony Blair's official spokesman said: "These are very, very complicated discussions that go on, and the re-drawn map now enables us to draw down a considerable amount of aid to many parts of the country."

And the department of trade and industry said it had always expected that its plans would need some revision, while other countries had found themselves in a similar position.

A spokesman said aid to the Longbridge car plant in Birmingham was subject to separate consideration by the European Commission.