The MP for Morecambe has accused Lancaster City Council of being “dishonest” over a £4m regeneration grant.
David Morris claims the money was given to the council in 2004 as funding for a much-delayed housing scheme in the West End – but the council denies it ever received the cash.
The row broke out after Mr Morris asked a question in Parliament about delays to the Chatsworth Gardens project.
Brandon Lewis, Minister of State for Communities and Local Government, told Mr Morris the city council was given £11.9m in 2004 to regenerate houses in the Chatsworth Road and Albert Road area of town, then returned £4m after the original plans stalled.
Mr Morris said: “Again this highlights that Lancaster City Council have not been honest with the people in the West End of Morecambe.
“To send £4m back to Government on an area which needs investment is not acceptable.
“To spend £7.8m on 47 properties which are now in no better state than they were is a vast waste of money which could have put these properties back into use.”
Mark Cullinan, chief executive for Lancaster City Council, said he “rejected” the claims of dishonesty.
He said the scheme was delayed due to the recession and original developer Places For People pulling out, not due to “inertia on behalf of the council”.
Mr Cullinan said: “I realise this is no comfort for local residents but equally it is not a reason to imply wrongdoing.”
He said more than £5m was spent on buying up houses on the Chatsworth Gardens site, £1.4m was spent on other regeneration projects in the West End, and the rest of the £7.8m total was spent on “the project delivery team, the West End Masterplan and 10 years of council tax, insurance, security, environmental maintenance and essential safety repairs”.
The council received a further £1.9m from the Government in 2012 and brought in a fresh developer, Manchester-based PlaceFirst. A deal was finally struck in late 2014 and work is due to start in March.
PlaceFirst will renovate 48 old terraces creating 92 houses and apartments for rent.