NEARLY £100m in European regeneration cash could go unspent as council leaders refuse to free up millions of pounds in cash needed to kickstart jobs projects.
City leaders across the North East have been warned they need to start spending some of the £300m built up in council cash reserves if they want to save the regional economy.
Hugh Morgan Williams, chairman of the Washington-based Canford Group and senior CBI member, said the almost £100m in Euro cash left for the region to spend on regeneration projects can only be used if there is match funding provided by either big firms or councils.
If the money is not spent by the end of 2014 it will be reclaimed by the European Commission.
It is thought the fund could create thousands of jobs, but with banks refusing to free up lending it would need councils to intervene.
Writing in today’s Journal, Mr Morgan Williams, who also chairs the North East Access to Finance Fund, said that while there was sometimes a good argument for councils to have the multi-million pound rainy day funds, the current financial climate should force a rethink.
Urging councils to act before time runs out, Mr Morgan Williams said: “Local authorities sit on many hundreds of millions of pounds in cash reserves to meet day to day requirements, but that money earns a pitiful rate of interest, and it could be argued could be better invested for a higher return.”
He added: “Without more investment, the possibility of a double dip recession will increase, and significantly delay the time when a rebalancing of the economy is achieved.” Two councils, Durham and Sunderland, have reserves worth more than £180m sitting in various bank accounts.
Earlier this year Communities Secretary Eric Pickles made a plea to council to start spending their cash reserves in order to save or create jobs.
Figures provided by the Department for Communities and Local Government reveal more than £313m is held by the region’s seven council.
At Newcastle Council, which has some £28m in reserves, treasurer Paul Woods insisted the city was already contributing to regeneration projects.
He said: “We currently have a below average level of reserves compared to other local authorities. We keep the minimum reserves necessary to cover our statutory requirements and the prudent management of the council’s £1bn annual budget.” Mr Woods added that the council had already carried out a review to see if it could do more to match spending to European projects, and spent more money as a result.
In Durham Don McLure, corporate director for resources, said that while the overall reserves were £91m, reserves that hadn’t been earmarked were only £17.3m, and also pointed to the authority’s legal duty to keep some cash back for emergencies.
He added: “With regard to the North East’s European Regional Development Programme, the local management committee is committed to achieving full allocated spend by the end of the Programme.
“The committee is currently developing a robust action plan to bring forward a pipeline of projects to be supported and is working very hard with both public and private sector partners across the Region to optimise best use of the funding available in order to stimulate the local economy.”
The Journal asked Sunderland Council for a comment but was told an IT problem would prevent one being issued.