THE North-East took a step closer to hosting the European Capital of Culture 2008 with the announcement that the Newcastle and Gateshead entry had been shortlisted for the prize.

The decision, revealed by Culture Secretary Tessa Jowell at 8.30am yesterday, was greeted with jubilation by dignitaries gathered at the Baltic arts centre, on Gateshead Quay.

Newcastle and Gateshead Initiative chairman Sir Ian Wrigglesworth said: "We are delighted.

"This is great news, not only for Gateshead and Newcastle, but for the whole of the North-East.

"It is a testament to the quality of the bid and to the attributes of Newcastle Gateshead, which have proved so attractive to the judging panel."

Northern Arts regional director Andrew Dixon said: "Capital of Culture status would enable the North-East to deliver a cultural equivalent of the Industrial Revolution."

North-East Assembly chairman Councillor Tony Flynn said: "The Capital of Culture bid has engaged thousands of people, united communities, crossed boundaries, won broad-based support and fundamentally changed people's perceptions of the North-East.

"Today's announcement is in recognition of the region's potential and the way in which the region's investment in culture is already making a perceptible difference."

The bid contains plans for more than £3bn investment in transport, leisure, housing and commercial development, with the title carrying the potential for £700m extra income in tourism and 17,000 jobs across the region.

The panel visited 12 cities and examined the bids in detail, with the help of consultants.

The finalists face further scrutiny as the judges look in greater depth at what they have to offer and the events they plan during the year as European Capital of Culture. The winner will be revealed by Prime Minister Tony Blair in May.

Bookmaker William Hill has made Newcastle Gateshead favourite to win the title with odds of 7/4. Liverpool is second favourite at 5/2, followed by Cardiff at 4/1, Birmingham 9/2, Bristol 8/1 and Oxford 9/1. Glasgow, in 1990, was the last British city to hold the title.

The unsuccessful bids were from Belfast, Bradford, Brighton and Hove, Canterbury and East Kent, Inverness and the Highlands, and Norwich.

Each member state of the EU takes turns to nominate a city to hold the title, which is this year held by Bruges and Salamanca.

Our towns are the best in Britain

ONE of the region's market towns is coming to terms with the news it is among the top ten places to live in Britain.

A survey by Country Life magazine puts Richmond, in North Yorkshire, in eighth place and Alnwick, in Northumberland, at the top of the tree.

Reasonable house prices, good local amenities and a low crime rate were all factors which played a part.

The Mayor of Richmond, Councillor Stuart Parsons, said yesterday he was delighted the town had managed an impressive place in the league.

"It's wonderful news as I understand the criteria are quite extensive," he said.

"If we can finish eighth in Britain, then others must be a lot worse off than we are.

"I feel I am one of the luckiest people because positive things are beginning to happen in my year in office."

Alnwick's mayor, Coun Ken Gray, said: "My first reaction is one of pleasant surprise. Alnwick is one of the most unspoilt towns that we have left in the country."

The survey rated Midhurst, in West Sussex, home to rock stars, as second best.