Coalition's EU billion blunder hits the regions?

There is frustration for Rotherham's Renaissance over regional aid

Did the Conservative party's rush to get rid of what it considered John Prescott's most expensive folly make it forget that by doing so it would lose hundreds of millions of pounds in European regional aid?

Former Deputy Prime Minister John Prescott launched Regional Development Agencies across England with annual budgets of around a quarter of a million pounds each.

They were highly tempting targets for the cost cutting Conservative-led coalition.

But losing them means that around £1.1bn of European Regional Development Funding earmarked for some of the most industrially blighted parts of England might now have to stay in the bank.

Match makers

Regional Development Agency budgets required "match funding" before any promised EU grants could be spent.

It means that dozens of schemes aimed at kick-starting growth in these deprived areas have had to be abandoned.

Rotherham in South Yorkshire is a typical case.

Karl Battersby says the rug was pulled from under the council

The town which once made its living from coal and steel successfully bid for £3m from the European Development Fund to replace dereliction from a riverside site in the town centre.

Rotherham Councill had lined up commercial partners to build a commercial and leisure complex on the site.

The Regional Development Agency Yorkshire Forward had agreed to provide the match funding when the European Commission agreed to the grant as part of its 2007-2013 round of allocations.

Pulling the rug

By the time the cash was needed the coalition had come into power and taken away regional development agency budgets.

The Rotherham scheme collapsed.

"It was extremely frustrating," said Karl Battersby Rotherham's strategic director for development.

"The Council was providing the land, commercial partners were lined up and architects' drawings had been published. We had the rug pulled out from under us at the 11th hour."

The Barnsley-based Industrial Communities Alliance is convinced the coalition government had no idea that shutting down the Regional Development Agencies would put promised European funding in limbo.

The Organisation, funded by 60 local authorities in industrial parts of England, says some of the most economically blighted parts of the country are paying for the coalition's blinkered rush to make savings.

Billion blunder

Across all the English regions it has identified £1.1bn of European regeneration cash sitting in a bank account that can't be touched unless the government forks out the "match funding".

Yorkshire and the Humber appears to be the biggest loser.

The Alliance believes £300m of European money is in limbo.

"It means that desperately needed regeneration projects in many of our poorest and most industrially blighted communities are missing out," the Alliance's research officer Dave Parry told the BBC's Politics Show for Yorkshire and Lincolnshire.

Time is running out for the regions to get their hands on the cash.

The money has to be spent by the end of next year or Brussels will withdraw the offers and take it all back.

So far, according to the Alliance, just 40% of the total amount earmarked for the period 2007-13 has been spent.

Puzzled MEP

The government's position is even a puzzle to the Yorkshire and Humber MEP Timothy Kirkhope who leads the Conservatives in the European Parliament.

He points out that scarcity of match funding is not a new problem.

Successive Conservative and Labour administrations have missed out on the ability to access earmarked European funding since the 1980s.

"We did not draw down all of the funds available for South Yorkshire when it had Objective One status under the last round of Regional Development grants before 2007.

"Match funding has always been problem," he says.

"It is a shame. I have always believed that we should use as much European money as is on offer and I would hope that we could find some better way of dealing with this issue."

The government says that local authorities could try and obtain "match funding" by making bids to its new Regional Growth Fund.

That causes a few wry comments in town halls in industrial areas.

It has not escaped their attention that the £1.4bn being made available by the Treasury for the Fund is less than a third of the collective budgets of the Regional Development Agencies.

There is also another potential knock-on effect looming.

On 5 October the European Commission will announce the criteria for the next round of Regional Development Fund applications for the period 2013-2020.

If English regions have not used all the money already on the table European bureaucrats could not be blamed for thinking we never needed it in the first place.