Only £31m of the £110m approved by the European Union to help repair areas damaged in last summer's floods will actually make it to this country, the Government has admitted.

One MEP who campaigned to win the money said he was very angry and laid the blame firmly at the feet of former Prime Minister Tony Blair.

There was also anger that Ministers had trumpeted the £110m grant from the EU Solidarity Fund without pointing out two- thirds would be siphoned off.

It comes as a report by a powerful Commons committee tells environment Ministers to "stop suggesting that all will be well" simply because they are to spend £800m a year – an inadequate amount – on flood defences, and brands the infrastructure for dealing with surface water flooding "confused and chaotic".

It warns "the public will not forgive the Government" if it is not seen to be responding to the lessons of last summer's floods which forced thousands of people out of their homes in Hull and parts of South Yorkshire.

The admission about the EU cash came from Local Government Minister John Healey, who said it resulted from the terms of a funding deal – the "abatement" mechanism – dating from 1984 which means part of the payment needs to be returned as a condition of the UK rebate from Europe, secured by Margaret Thatcher to cut Britain's financial contributions to Brussels.

But last night Tory MEPs turned the blame on Tony Blair, who in December 2005 renegotiated the deal in a trade with other countries to grant more money to the 10 Eastern European nations joining the EU. They claim that Britain now receives smaller grants and pays more to the EU, with the money redirected to Eastern Europe.

Timothy Kirkhope, the Conservative MEP for Yorkshire who led the campaign to secure money from the EU solidarity fund for natural disasters, said last night: "Blair sold out and we are now seeing the consequences of that.

"I am very, very angry indeed. The abatement mechanism was in our favour until he reversed it, and now we're being cheated by our own Government.

"They were very triumphant when the money was secured but they must have been well aware then that they would not be receiving anywhere close to all of it. By the time communities in Yorkshire receive this funding it will hardly worth the candle."

Edward McMillan-Scott, a fellow Conservative MEP for Yorkshire and vice-president of the European Parliament, said: "There was a cave-in by Blair on the deal made by Margaret Thatcher.

"If the Government had negotiated this deal better the money being secured for the communities worst hit would be far better than the drop in the ocean it now is."

But Mr Healey insisted their claims were nonsense, saying the Blair deal had not yet been implemented and would leave the solidarity fund "largely intact". He said it was the first time a UK application had been successful and is channelling all money to areas affected instead of using it for central government costs.

"The EU Solidarity Fund grant is set up to help with the public costs incurred in the immediate recovery from the floods," he said. "However it is right that communities themselves should benefit from all of this additional money and so I am today confirming a new Restoration Fund of almost £31m for local authorities."

But Rotherham Labour MP Denis Macshane, a former Europe Minister, said: "Clearly Treasury accountants in London and Brussels should have got their act together earlier rather than announce the larger sum if that was never going to come to the UK."

The Environment, Food and Rural Affairs Select Committee pulls no punches in its report into how the country prepared for and dealt with the floods, in which 13 people lost their lives, 44,600 homes were flooded and £3bn of damage was caused.

The cross-party committee is particularly critical of Ministers' boasts about spending on flood defences, saying: "Ministers have got to stop suggesting that all will be well because the Government will by 2010/11 have increased spending on flood risk management to £800m.

"This settlement looks far less impressive under close analysis and is not fully adequate to cope with the risks the country faces."

The report calls for the Government to consider ring-fencing a portion of the spending for rural schemes while also questioning the Government's claim that implementing the recommendations of the Pitt Review into the floods will cost £34.5m.

Ministers are urged to tackle a shortage of flood risk engineers, demand developers install sustainable drainage systems and improve advice and warnings for those in flood hit areas.

Utility companies should also be forced to protect their infrastructure without making consumers pay for companies' "past inadequacies".

Defra said it would study the report, but said it was already taking action in several areas.