EC funds hold-up will not harm regeneration projects

10 May 07
The Department for Communities and Local Government has reassured local regeneration projects that their funding is safe, despite the European Commission's decision to suspend some payments under the European Regional Development Fund.

11 May 2007

The Department for Communities and Local Government has reassured local regeneration projects that their funding is safe, despite the European Commission's decision to suspend some payments under the European Regional Development Fund.

The EC action, which affects five out of the nine English regions, follows concerns about 'infringement of rules' and accounting shortcomings by the government offices and regional development agencies responsible for administering the funds.

David Sparks, the Local Government Association spokesman on regeneration, said the ERDF was worth around £600m a year in total.

The three-month suspension of funds could mean that 'tens of millions of pounds of money for some of the country's most deprived areas' could become 'bogged down in a bureaucratic quagmire', he added. 'This deeply worrying delay threatens to hold up regeneration projects in areas that may rely on this money.'

But a DCLG spokesman told Public Finance that the suspension was not the same as a cut in funds.

'The DCLG will continue to pay all eligible projects and claim the money back in arrears from the EC as normal. They have just temporarily postponed that reimbursement process; regions will not lose out,' he said.

The EC's concerns relate to some projects not meeting the criteria for the number of on-site checks in 2004/05, the DCLG spokesman said. 'There is no suggestion of dodgy fraud or of the projects not being value for money.'

He said that in one case a project had infringed EC rules by not properly attributing the ERDF on the plaque outside the organisation's office.

Sparks echoed that, saying: 'The real problem lies with the hugely complex regulations to which the government and councils have to adhere. The red tape and bureaucracy must be cut.'

The affected regions are: London, the Northwest, Northeast, West Midlands and Yorkshire and the Humber. One project in Peterborough will also be formally suspended. The DCLG is confident it will appease the EC's concerns by the summer.

Announcing the measure to the European Parliament on April 24, Siim Kallas, vice president of the EC, said: 'If no or insufficient action is taken, a flat-rate correction [or cut] ranging from 5% to… 25% of the amounts paid out and specific to each programme will be decided by the commission to address the infringement of the rules and extent and financial implications of the remaining shortcomings.'

PFmay2007

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