Officials furious after being told to scale back schemes because of overbudgeting in three years to April 2006

The government’s flagship regeneration programme is facing a cut in funding of up to 15%.

The cutbacks to the nine housing market renewal pathfinders are to be implemented in this financial year. They are required because the ODPM gave the green light for the pathfinders to spend more than their initial £500m budget.

An ODPM spokesperson said the department had pledged an additional £100m in the three years to April 2006 but that this needed to be reduced. He said: “We are now working closely with the pathfinders to manage any overspend. We anticipate that £535m will have been spent by March 2006.” This would mean the overall spend being cut 11%.

He added that there would be no over-programming in future.

Some unspent funds have been found from other ODPM budgets to make good the shortfall, but a source said: “The bottom line is that we cannot afford it so there is going to have to be a spending hit somewhere.”

Pathfinder leaders said this week said that the cuts could not have come at a worse time, as they were fighting a “credibility battle” with local communities over upgrading and demolition plans.

One said: “We have been working hard to try to win people’s hearts and minds, so a 15% cut, with refurbishment work being postponed, does not look good.”

An ODPM source said officials were meeting representatives from the nine pathfinders and examining individual contracts to find out where the savings could be made.

Margaret Jackson, director of the Urban Living pathfinder in Birmingham and Sandwell, said: “We are looking at cutting or reprofiling our spending. We are not delighted but we think we can handle it.

“There are three or four others, however, a bit further down the line than us, who are finding the cuts harder to make.”

These are understood to include Manchester Salford, Newcastle, Gateshead, Liverpool and South Yorkshire.

Jeff Goode, director of Transform South Yorkshire, said: “It is hard to say whether we’ll need to drop certain projects – we’d prefer to postpone rather than drop them.”