One of the Housing Corporation’s major partners has said it will struggle to make the 10% spending cuts required by April 2008.

East Thames Group, which received £55m to build 1305 homes by next April, is expected to continue as one of the corporation’s 70 development groups for the next two-year spending round. But at a public meeting on the Thames Gateway, Steven Tarry, the development director of East Thames, said: “We can’t reduce our grant rates 10%. We have checked our business plan and we can’t do it. We will not be developing for long if we even try to.”

The corporation said in June that as part of the efficiency drive inspired by Sir Peter Gershon, the former head of the Office of Government Commerce, it would require associations or developers to cut their grant requirements 10% from current levels if they were selected.

Helen Williams, head of neighbourhoods at the National Housing Federation, said: “We must be aware that the amount of efficiency gains any individual association can report in any one year will depend on its business plan.”