Millions of pounds of regeneration cash could be clawed back by the European Union unless social housing providers get involved.
Funding agencies have been told to "get their act together" after European objective two funding was found to be unspent.

The situation is critical in the North-east, where of £440m set aside for demolition, community development, social inclusion, training and local business aid, only 3% has been allocated.

Newcastle council opposition spokesman on regeneration Greg Stone said 2003's spending review could prove disastrous. "If money has not been committed, the EU could invoke a penalty clause and we risk losing it," he warned.

He said the fault lay with bureaucratic systems that deterred organisations from applying, allowing bids to "disappear in the system".

Figures from Liberal Democrat MP Alan Beith revealed that the North-west has allocated 42% of its £213m, Scotland 22% of its £493m, and Yorkshire and Humberside 20% of its £323m. He said: "The Government Office should get its act together."

The problemof cash for rural areas being spent promptly and urban aid being slow to filter through is recognised across Europe, and will be a hot topic at the government's Urban Summit, set for October in Birmingham.

The National Housing Federation wants members to help get projects moving. Projects director Stephen Duckworth said: "We will be studying projects in France, where they make creative use of these funds for demolition and social inclusion work. We urge housing providers to work closely with regional organisations to speed up spending."

Urban regeneration investor Igloo Regeneration said pressure is building within the EU to bring funding sources into a single pot for streamlined working.

Igloo chief executive Chris Brown said: "There is invariably an underspend followed by a rush to complete. These people are not experienced at delivering projects – they are administrators. Getting the funding streams in line is a nightmare for project managers."