THE region could lose out on hundreds of millions of pounds of European cash because of public spending cuts, a Euro MP has warned.

North-East Labour MEP Stephen Hughes has said the loss of regional development agency One North East and huge reductions in local authorities’ budgets mean only 62 per cent of a £313m regional aid budget has been allocated because of a lack of match-funding.

As a result, the North-East could miss out on the next tranche of funding, worth £400m, if the money is not spent by 2013, said Mr Hughes.

However, the Government has said that it has met all of its funding targets in the region and any future European budget allocation will not be judged on past performance.

Mr Hughes has said he has met European Policy Chief Commissioner Johannes Hahn to discuss the issue with him as he said the money is drastically needed to help improve environmental performance and employment, particularly jobs for young people.

He is also meeting with representatives from local authorities and Tees Valley Unlimited in an effort to resolve the problem.

He said: “Together with local councils and other local groups, Labour Euro MPs warned the Government before Christmas that closing down One North East and cuts to economic regeneration grants were jeopardising this much-needed cash source for our region. The Government has now come forward with a list of projects in the pipeline which is says it will mean all the money is spent, but we must remain vigilant.”

The European Commission is reviewing all spending this month to see whether all the money was being spent and will make an announcement in July.

Mr Hughes said he and his fellow MEPs would be closely monitoring the findings.

A Department for Business spokesman said: “The North- East European Regional Development Fund (ERDF) programme has met all of its spending targets to date, meaning that no funds have been returned to the European Commission and all available funds are being used to boost growth and employment in the region.

“Overall, about 63 per cent of the programme is contractually committed already, with a healthy pipeline of projects being developed for approval.

“The size of the future structural funding programmes is still being negotiated as part of wider EU budget discussions. The future allocation of ERDF by region will be determined by an objective set of criteria and not on past performance, although it should be noted that the UK has met all of its ERDF spending targets to date in the current programmes.”