North-west regeneration hit by RDA budget crisis

Some of the North-west's largest regeneration projects hang in the balance because the region's development agency has promised to fund more projects that it can afford.

The North-west Development Agency has frozen funding for the past month after it discovered it had over-pledged its £400m budget by millions of pounds.

The snarl-up also throws into doubt up to £70m of European Objective One funding, which is matched to the RDA's spending.

The agency's board members are to be locked into an all-day meeting today to decide which of the RDA's projects – which include Liverpool's Fourth Grace and Kings Docks Arena – will still get cash.

One director of a major North-western regeneration scheme said: "We can't do anything right now. The NWDA is absolutely central to what we do, and currently the whole region is in limbo. The worry is that schemes on which people have been working for years will be cut."

A source close to the situation said the RDA was over-committed by 50%, equivalent to more than £200m. "Worthy projects will have to be cut," he said.

NWDA director of operations Bernice Law denied the 50% figure, but refused to divulge the actual level of over-commitment.

All the NWDA's schemes – up to 3000 – have been analysed to see if they still meet spending criteria.

The RDA said the projects to which it was legally committed were guaranteed to receive their promised funding, although possibly not to the planned timescale. But projects that have only informal approval for their bids face possible cuts.

Law said: "Over the past month we've looked again at every scheme in detail, as the situation has changed over the past couple of years. So many good schemes have come forward that we've got more schemes than money, and we've got to prioritise."

She said the matter would be decided at today's meeting.

However, the NWDA stressed that the government had raised its funding because of how successful it was. Law said next year's budget would be £429m, and today's meeting would approve a three-year programme of £1.45bn.

The NWDA hopes to get round the problem by delaying spending until later years' budgets.

This could jeopardise up to £70m of Objective One funds, which are matched to NWDA spending. But the funds are due to run out in the next few years so by the time the later budgets come round, they may no longer be available. Law, though, said match-funded projects would be given priority in the review.

John Pugh, Liberal Democrat MP for Southport, called for action from the government. He said: "They appear to have agreed in principle to a lot of things that far exceed their ability to supply – this puts £60m-70m of European money at risk. All the councils in the region are concerned. If the NWDA money goes and the Objective One money goes, in most cases so will the investment package for a scheme."

Richard Kemp, the Local Government Association's housing portfolio holder, also called for government action.