Are we at the back of long queue for money? Government may launch raid on budget.

Byline: William Green Political Editor

THE Government may grab cash allocated to the North East because of a "long queue" of struggling companies seeking bailouts, it emerged last night.

Business Minister Pat McFadden admitted the Government is being deluged by requests for help as the recession bites and signalled another cash raid on regional development agencies was possible.

Blyth Valley MP Ronnie Campbell said such a move would be a "disaster" for the region as development agency One North East strives to deal with the recession.

The Government has already taken pounds 34m from One North East to pay for a housing scheme mostly benefiting the South.

And last night Newcastle City Council leader John Shipley, who sits on the agency's board, warned the region needed all the money it could get to withstand the recession.

The comments of Mr McFadden will cause concern because he is the second most senior minister at the Department for Business, Enterprise and Regulatory Reform (BERR) after Secretary of State Lord Mandelson. Speaking before the Commons business and enterprise committee, Mr McFadden said: "At BERR at the moment and indeed I am sure at the Treasury too there is quite a long queue of people saying we need help because of the economic circumstances."

He added the Government had to take "careful judgments" on who to help and signalled further cash could be taken from RDAs to pay for Whitehall's response to the economic downturn.

"If we decide there are things we need to help the economy through the downturn, we will do that," said Mr McFadden as he was grilled by MPs about RDA funding in the current economic climate.

The minister added: "Whether I am going to go back on the formulas we used previously to fund RDAs, I am not sure.

But obviously when it is all hands to the pumps, yes you need to be flexible in your decision-making."

Mr McFadden defended the previous RDA raid, saying such decisions were not easy but warned there was "never unlimited money". He said development agencies were only one part of the Government's "armoury" in dealing with the recession, which included a bailout of the banking sector.

Mr Campbell said: "One raid is bad enough but more raids on money for the North East would be a disaster for us."

Mr Shipley said: "I sincerely hope that there are no further cuts in One North East's budgets.

"We need all the money we have to help the region withstand the current recession. Any further cuts just make our job all the harder," added the Liberal Democrat leader of Newcastle Council.

Peter Atkinson, Tory MP for Hexham, said RDAs were at the frontline of helping local businesses and warned cash grabbed by ministers could disappear into a central "trough".

Labour's Tyne Bridge MP David Clelland said the Government was focussing its efforts on dealing with the recession and it was not surprising that RDAs would have to switch priorities.

BACK TO WORK

THE North East must remain "positive" that ministers will support Nissan and the UK car industry hit by a sales slump, according to a Labour MP.

Fraser Kemp, MP for Houghton and Washington East, spoke as workers at Nissan's Washington plant returned to work yesterday after a temporary shutdown of the facto ry.

The company sent home all 3,500 production workers last Tuesday and revealed lines were being closed for six more days before the Christmas break.

Workers remained on full pay, but concerns remain of job cuts at Nissan and its suppliers if the car market fails to improve.

Speculation is also continuing that ministers may announce support for the car industry as soon as this week.

Leaders of the automotive industry called for short-term loans and measures to improve credit flows when they met Business Secretary Lord Mandelson last month.

And the Prime Minister's official spokesman yesterday said: "This is something that Lord Mandelson and his department are considering.

"They did have a successful meeting with the car industry a few weeks ago and they are considering their response in light of that."

He also refused to rule out an announcement being made soon.

Mr Kemp said: "Nissan and the supply chain is of crucial importance to the North East.

"And I believe we have to look at practical ways of giving help and support to get through the extraordinary times that we face and remain positive that following discussions between Government and the motor manufacturers a way can be found to offer assistance".

The Society of Motor Manufacturers and Traders, which represents firms including Nissan, said it was hoping for news from ministers soon.

"They recognised the urgency of the situation and that gives us hope of something coming sooner rather than later, but they haven't given us a specific date," said a spokeswoman.

Nissan yesterday confirmed staff had returned to work but had nothing to add to last week's announcement of non-production days at the Washington plant.

CAPTION(S):

LONG QUEUE Pat McFadden with Business Secretary Lord Mandelson.