Exclusive: Fears for 7,000 jobs as agency forced into cuts

Councils have been warned that projects face "substantial cuts" in funding, business support schemes will have to be scrapped and regeneration projects will no longer be able to rely on handouts.

Officials at the regional development agency were ordered to draw up a list of potential savings – amounting to 15 per cent of this year's 277m budget – for Whitehall as part of the 6.2bn package of cuts unveiled by Chancellor George Osborne.

The list has now been presented to the Government and officials in Yorkshire are waiting to find out whether they will have to make all the savings – calculated to cost 7,000 jobs – or whether Business Secretary Vince Cable's pledge to give northern regions "preferential treatment" will mean they are spared some of the pain.

But even before those decisions are made, the belt-tightening was hitting home yesterday as Hull Forward, a quango designed to boost the city's economy, became the first organisation in the region to be axed. Its funding was pulled as part of a review of spending which had already begun.

Several more quangos are likely to be scrapped over the coming months.

Businesses expressed concern that major projects like the redevelopment of the Fruit Market on Hull waterfront could suffer after Yorkshire Forward and the Homes and Communities Agency pulled the plug on funding and Hull City Council said it could not shoulder the 2m running costs alone.

But Hull City Council leader Carl Minns played down the fears and insisted there were enough other organisations who would still "bat for Hull". Ten staff are seconded from the council and are likely to be offered redeployment. But 24 others are facing redundancy.

The scale of the possible budget cuts facing Yorkshire Forward can be revealed for the first time today, although it was known regional development agencies (RDAs) across the country were facing a 293m funding cut. And councils could find out today how much their budgets will be cut as part of a 1.2bn raid on local government spending.

A raid on RDA budgets by Labour last year to pay for housing schemes had already resulted in Yorkshire Forward's budget being cut from 360m in 2009-10 to 277m this year, before any further savings are accounted for.

Although officials are hopeful Mr Cable's pledge that agencies in the east of England and the south-east should bear the brunt of cuts the Yorkshire Post has been told that "nothing is sacrosanct" in the agency's budget and the cuts are "too big to be able to exclude some of the vital areas".

Dozens of projects have been identified and face cuts ranging from 2,000 to several millions. Schemes affected range from support for business – such as help for graduates with promising business ideas – to grants for regeneration projects, with some contracts already agreed being renegotiated or cancelled.

The leader of North Yorkshire Council and a board member of Yorkshire Forward, John Weighell, said: "We are looking for some major cuts. It is clear there will be substantial cuts in funding."

Yorkshire Forward chairman Terry Hodgkinson said: "Hull Forward played an important role in Hull, but when you get to this stage and the cuts are quite distinct and severe, something has to go.

"We are already a third of the way through the financial year and the budgets are suddenly being looked at – that means difficult times for all."

In a statement the agency said Hull Forward would be wound up by the end of September. "All of the funding partners remain committed to ensuring the continued regeneration and economic development of Hull and are looking at what we can do in the current financial climate to deliver a secure and successful future for the city, for the benefit of our residents, businesses and visitors," it added.

Richard Kendall, from the Hull and Humber Chamber of Commerce, said businesses would be concerned about the loss of momentum on projects like the Fruit Market, a major mixed use residential, work and leisure scheme on Hull's waterfront, which has already been hit by the recession.

Liberal Democrat council leader Carl Minns said suggestions Hull could lose out on future funding were "utter nonsense", adding: "There's still enough organisations in the city who can bat for Hull. To say Hull is going to collapse because of this one organisation is overegging the pudding."

Hull Forward said in the past financial year it had helped bring in or safeguard nearly 1,000 jobs and were involved in securing 2.6m of grants.

But the recession has seen a number of key regeneration projects stall, including the Fruit Market and phase two of the Humber Quays business quarter.

Chairman Ian McIntosh said: "It is clearly disappointing news but we remain proud of the significant achievements made by our team in providing a vital interface between the public and private sectors to drive Hull's ambitious regeneration programme."