£64m axe threat to Yorkshire Forward budget

The Government has given officials at the agency – which has already had 40m cut from this year's budget – just four days to draw up and submit plans to reduce next year's budget by 40 per cent.

Business support programmes, designed to help the region's private sector recover from the recession, are likely to be badly hit as its spending power dwindles further when the impact of this autumn's Comprehensive Spending Review begins to take hold next year

There are also concerns that the agency, which is to be abolished in 2012, may end up sending some of this year's remaining budget back to the Government instead of it being spent in the region because of Whitehall interference, the Yorkshire Post has learnt.

Instead of allowing officials in the region freedom over any money left over from this year's budget, civil servants are being accused of micro-managing the winding down of regional development agencies. Even if more savings are found, the Treasury is said to be demanding the money back rather than it being invested in alternative programmes which could boost business.

One source close to Yorkshire Forward warned that although officials accepted the decision to replace regional development agencies and the need to cut public spending, strict control by Whitehall risked "unintended consequences" where the wrong programmes were axed and money could not be redirected into higher-value schemes. The coalition Government has waged war on regional development agencies since coming to power, first deciding to abolish them from 2012 and then slashing a combined 270m from their budgets, including the 40m from Yorkshire Forward.

Ministers argue they have failed in their main task of closing the north-south divide and have been inefficient – charges disputed by Labour and Yorkshire Forward.

After the last round of cuts, Yorkshire Forward's overall budget was reduced to 230m, of which 160m is from Whitehall and most of the rest from European funding.

One hundred projects were affected including flagship schemes such as Tower Works in Leeds, Bradford City Park and the Spa redevelopment in Scarborough.

Now Whitehall Departments have begun negotiating with the Treasury as part of the Comprehensive Spending Review which will set their budgets for the next four years – and Vince Cable's Department of Business, Innovation and Skills (BIS), which is responsible for regional development agencies, likely to be badly hit.

On Thursday, the Department ordered Yorkshire Forward and the other regional development agencies to draw up detailed plans for cuts of another 40 per cent in next year's budget and submit them by Monday, just four days later – to the frustration of RDA officials.

If imposed in full, the cuts would mean the agency's budget from Whitehall is reduced to just 96m next year but there are fears there is insufficient time to assess which schemes should be prioritised. Officials would prefer to be told how much money is available, then decide how it should be spent.

There is also understood to be frustration that the Government has blocked spending on any new projects, demanding any extra savings are returned to the Treasury rather than invested in economic development in the region.

Monday also marks the deadline for councils and business leaders to submit proposals on local enterprise partnerships, organisations led jointly by businesses and local authorities to fill the gap when Yorkshire Forward goes. Bids for five partnerships in the region are set to be submitted.