John Prescott’s £2.2 billion plan to bulldoze tens of thousands of homes to smarten up areas in the North of England has had little impact “and heightened stress”, the public spending watchdog says today.

In a critical report the National Audit Office (NAO) says that so far 10,000 homes have been demolished and 40,000 refurbished, but only 1,000 houses have been built in the nine “Pathfinder” areas.

At the same time there has been huge local opposition to the scheme with many residents being forced to leave their homes and move to more expensive areas. Entire streets have been bulldozed in rundown areas of Liverpool, and Ringo Starr’s former house is one of those still under threat.

Edward Leigh, the chairman of the Public Accounts Committee, said that many residents felt that local authorities had “ridden roughshod” over their communities, with little clear evidence of improvements.

Landlords in some areas bought empty houses earmarked for demolition in the hope of making a profit from compulsory purchase orders, putting the overall bill up by £50 million over five years, the report said.

In addition residents who were forced to leave their homes under compulsory purchase orders found that there was a £35,000 gap between the compensation they received and the amount needed to buy a suitable alternative property.

The NAO says that the Government has already had to scale down the demolition projects from 90,000 to 57,100 homes because of rising property costs and recognition of the history attached to some houses.

The Pathfinder regeneration project in the North and the Midlands was started by Mr Prescott in 2003 and is due to run till 2018. Its aim was to address the problems of neighbourhoods with poor housing stock that had suffered longstanding deprivation. Houses were demolished or done up to boost the housing market, reduce empty properties and encourage people to live in the area.

But the report shows that progress has been mixed across the nine projects, and the overall increase in demand has been no greater than the national average.

The NAO admitted that house prices had risen in the nine Pathfinder areas, narrowing the gap with surrrounding communities. But it said it was “not possible to identify a causal link” between the Pathfinder programme and these changes in the housing market, which could be due to factors such as the influx of workers from Eastern Europe moving into cheap housing.

There was also concern in some areas that demolition projects were approved before they had been adequately explained to local people.

Vacancy rates in Pathfinder neighbourhoods in Birmingham and Sand-well; Oldham and Rochdale; Manches-ter and Salford; and South Yorkshire have fallen between 2002 and 2006 by comparison with surrounding regions, the report found.

But there was no improvement in relative vacancy rates in Hull, and the gap widened in Pathfinders in North Staffordshire; Newcastle upon Tyne and Gateshead; East Lancashire; and Merseyside.

Mr Leigh said that there was no evidence that Pathfinder projects were bringing about social cohesion or had helped to reduce low demand. “You have to wonder if these areas would see the same or greater regeneration if left to their own devices,” he said. “This is a 15-year initiative and £2.2 billion has already been committed to it. Given its performance to date it is hard to think of another programme that was trumpeted with as much fanfare but which has hit so many wrong notes.”

Sir John Bourn, head of the NAO, said: “Housing market renewal is a radical programme but it is a high-risk approach. While there have been physical improvements in some neighbourhoods, it is unclear whether intervention itself has led to improvement in the problems of low demand. And in some cases intervention has exacerbated problems in the short term.”

Eric Pickles, the Shadow Local Government Secretary, said: “The Government is picking the taxpayer’s pocket to the tune of £2.2 billion to bankroll some poorly thought-through scheme. The sheer scale of the demolitions taking place under Pathfinders is envi-ronmentally, socially and financially wasteful.”

A spokesman for the Department for Communities and Local Government said: “This programme has always been about improving the homes, communities and neighbourhoods where people live. A key part of that is refurbishing dilapidated properties to create homes where people really want to live. As a direct result of government investment, over 40,000 homes have now been refurbished, making them places people will continue to want to live for many years to come.”

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