MPs have slammed the government for failing to find money for urban regeneration.

In a report published on Wednesday, the transport, local government and the regions committee described a European ruling which led to the loss of vital funding as "a disaster".

Ministers have since failed to plug the gap in spending that the ruling created, the MPs say.

Despite pledging to help create an "urban renaissance", the government has not been quick enough in finding new ways to support private regeneration projects, the MPs conclude.

The problem was created by a European Commission ruling which came into effect in December 1999. It ruled that a central fund run by English Partnerships and the Regional Development Agencies for regeneration projects was illegal.

The MPs raise concerns that the Regional Development Agencies (RDAs) are not advertising the funding schemes available to private firms.

The report criticises the fact that many projects have been abandoned or scaled down.

Time has been lost as a result, says the committee's report.

Many developers were now less inclined to take on the brownfield sites that the government believes will be crucial in meeting demand for new homes because of the lack of funding.

Committee chairman Andrew Bennett said: "Two years ago we said that the European Commission's closure of the PIP was a disaster.

"The consequences have been even worse than we had anticipated as housing, heritage and National Lottery projects have all been hit.

"There has been a loss of momentum and private sector interest, with many developers closing their regeneration arms.

Two years on, no meaningful alternative funds had been developed."