Tens of millions of pounds in EU funding earmarked for the West Midlands could go to waste, MPs have warned.

They urged the government to intervene to ensure cash designed to promote economic development in the regions of England was spent.

The West Midlands has been offered £345 million from the European Regional Development Fund between 2007 and 2013, but 40 per cent of the cash has still not been allocated to specific schemes.

Under EU rules, the money must be contracted by the end of 2013 and spent by the end of 2015, otherwise it returns to the European Commission.

But the rules also state that projects receiving European Regional Development Fund cash must also have a matched funding from another source. In the past, this usually came from Advantage West Midlands, the regional development agency set up by Labour, which was abolished by the Coalition government.

It means it has become much harder for local councils to bid successfully for EU funds. But Birmingham City Council has warned MPs that the money made a massive contribution to the city’s economy, when it was easier to obtain.

Advantage West Midlands also used to manage the region’s European Regional Development Fund allocation - but this responsibilty has now transferred to civil servants in London, who are reluctant to agree to deals.

Concerns were raised by the Commons Communities and Local Government committee, which includes Midland MPs James Morris (Con, Halesowen and Rowley Regis) and Mark Pawsey (Con, Rugby).

It followed an inquiry in which the MPs received evidence from Birmingham City Council and other West Midland local authorities.

The MPs warned in a report: “The abolition of the Regional Development Agencies removed the main source of match funding for European Regional Development Fund projects, and the economic downturn has reduced the options for match funding even further.

“The Government does not seem to appreciate the problems that projects are facing in securing the match funding needed for them to go ahead.”

Ministers had promised to make it easier for councils to use a new national fund - called the Regional Growth Fund - as a source of the matched funding they needed, the MPs said.

But they warned that the Government had “not delivered” on this promise.

The MPs said: “All these factors, together with the pressing need to spend each region’s European Regional Development Fund allocation before 2015, increases the risk that value for money will suffer and European Regional Development Fund will not make the impact it might have done.”

Projects were now assessed by officials in the Department for Communities and Local Government in London, while they were previously assessed by staff in regional development agencies, such as Birmingham-based Advantage West Midlands, the MPs said.

A written submission to the committee from Birmingham City Council warned that this had made it harder to obtain funding.

It said: “Response times to getting projects assessed can be slow which then has knock on impacts on achieving spend and results. We are concerned that there are not enough staff resources in place given their new role.”

But EU development funding had made a huge contribution to the city’s economy in the past, the city council said.

The authority said: “ERDF has helped Birmingham over the years create new sectors – for instance the whole visitor economy – aspect of Birmingham’s economy has grown significantly as a result of significant investments in facilities, marketing and in improving the business and leisure offer. The visitor economy now supports over 25,000 employees in Birmingham alone.

“Much of Birmingham’s renaissance has been funded from Europe and it has proven to be an effective funding tool in the long run.”

Committee chairman Clive Betts MP said: “The European Regional Development Fund (ERDF) is a highly valued source of money for large regeneration and small business development schemes alike, but it can only be used to part-fund projects.

“The abolition of the Regional Development Agencies removed the main source of match funding for ERDF sponsored projects, and the economic downturn has curbed alternative options for match funding even further.

“There is a pressing need to spend each region’s ERDF allocation before 2015, but unless ministers take urgent steps to deliver on the Government’s promise to make it easier for projects to secure match funding through the Regional Growth Fund, there is a significant risk that value for money will suffer and ERDF will not make the impact it could to help rebalance the UK’s economy.”

In the long term, the European Regional Development Fund should be reformed, the MPs said. Because the UK is a net contributor to the fund, it was effectively sending money to Brussels and then trying to claim it back again.

Instead, the UK Government should simply keep the money and allocate it to the regions directly, although it should still give the EU money to help develop the poorer countries of Europe, the MPs said.

A spokesman for the Department for Communities and Local Government said: “The Committee’s findings are not borne out by the facts. More than 93% of the total programme is already spent, contracted or in the pipeline. Projects are required to identify their sources of match funding before they can enter the contracting process and more projects are continuing to come forward for funding. Money can be paid out until the end of 2015

“The Government realises how important match funding is which is why, in December, Mark Prisk and Baroness Hanham wrote to all the chairs and vice chairs of the Local Management Committees which oversee ERDF funding locally to ensure they were aware of the availability of match funds from within government programmes.”