Money set to be given to communities as part of the government’s levelling up fund will be reduced due to inflation.

Council bids will be affected due to rising prices and the knock-on effect of the conflict between Russia and Ukraine.

Levelling up secretary Simon Clarke made the admission in the House of Commons as he was forced to defend the government’s scheme, while responding to claims that the scheme is “a sham”.

The winners of the latest round of funding are expected to be announced before the end of this year, with councils throughout the North East submitting bids for significant investment.

Read more: New pot of levelling up cash available for bidding North East projects

Mr Clarke, who is also Tory MP for Middlesbrough South and East Cleveland, was challenged by Labour’s Alex Norris on the future of the scheme and how it will be financed.

He said: “It is absolutely the case that, owing to the consequences of Putin’s war, prices are rising.

“Neither central Government nor local government can expect to buck inflation, or to accommodate the cost of inflation in our settlements.

“There is therefore a mechanism within the levelling-up fund to allow bids to be resized for inflation.”

The response came after Nottingham North MP Norris asked Clarke: “The Government have taken £431 per head in funding from local authorities. Now, through the programme that the Secretary of State trumpets, they will be handing back just £31 per head from the levelling-up fund. Even the winners lose.

“Those who have been promised money are now concerned that Downing Street’s economic crisis and soaring inflation will mean their bids are no longer affordable. Will the Secretary of State commit that no bid either submitted or approved will have to be downgraded to accommodate the mess the Government have made of the economy?”

Mr Clarke added that the government is committed in realising its levelling up ambitions. He said: “Colleagues on both sides of the House have spoken about the projects they want to see delivered, which shows the appetite for this programme to succeed.”

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