Some of the most deprived towns in England were left out of a £3.6bn scheme to boost funding, fuelling suspicions in Labour that the money was diverted to Conservative marginal seats instead.
A report by the National Audit Office (NAO) found that hundreds of towns were ruled out of a competition to share in the Towns Fund without explanation.
Out of 101 places selected for the funds, ministers had a hand in choosing at least 60, according to Labour research – and many were either Tory target seats or Conservative-held seats with slim majorities.
Steve Reed, the shadow communities secretary, called on the housing secretary, Robert Jenrick, to give a full explanation on how the money was distributed.
“Government ministers shrouded the Town Deals scheme in mystery but this report shines a light on how funding was allocated, with many deprived communities losing out,” he said.
“There are now serious concerns that ministers may have allocated funding for political gain at the 2019 election, something which breaks strict rules on impartiality.
“The secretary of state must explain as a matter of urgency how ministers decided where to spend this money and why so many communities lost out. The public will not tolerate gerrymandering of public money for party political gain.”
The NAO report looked into how the Ministry of Housing, Communities and Local Government selected the 101 towns that it invited to bid last July for up to £25m, or up to £50m in exceptional circumstances, from the £3.6bn Towns Fund for England.
The fund was aimed at providing towns with money to tackle issues such as an ageing population, limited regional economic opportunities, and lack of investment.
The 101 selected towns were asked in the autumn to submit a plan on how they would spend the funding and what it will achieve.
The NAO report looked at how the department chose the selected locations using a system of scoring, filtering and prioritising 1,082 towns across England.
Ministers then selected the areas to be asked to bid for Town Deals using the assessments to guide them, the NAO said.
The NAO found that some towns classed as “low priority” areas, such as Cheadle in Greater Manchester, were selected and the reasons given by ministers for choosing them included criteria such as poor transport links that were not used by officials to score the towns.
The Conservatives held on to the seat with a 2,336 majority at the last election.
Newhaven, in the constituency of Lewes, East Sussex, was also selected for money despite being a low priority area. The Conservatives retained the seat with 47.9% of the vote.
Peterborough in Cambridgeshire was seen as a medium priority for the fund, but was also chosen. The Conservatives took the seat from Labour at the general election.
Other towns which received the cash included Grimsby in Lincolnshire, Corby in Northamptonshire, Kirkby-in-Ashfield and Sutton-in-Ashfield in Nottinghamshire, Redditch in Worcestershire, and Stevenage in Hertfordshire.
The report stated: “Officials acknowledged that the scoring of each town was designed as a guide for ministers and was not the only way to assess eligibility.
“Officials recognised that some towns would be in similar situations, and a degree of qualitative judgement between picking towns with similar characteristics was inevitable.
“Ministers’ selections resulted in towns being selected with lower scores than some other towns that were not selected.
“Officials concluded that the overall selection was acceptable because ministers had selected all 40 high-priority towns and provided a rationale for each of the towns selected from the medium- and low-priority groups.”
Meg Hillier, chair of the Commons public accounts committee, said: “Nine out of 10 towns were ruled out with no explanation before they even reached the competition’s starting line, while some relatively affluent towns are still in the running. Ministers relied on flimsy, cherry-picked evidence to choose the lucky towns.”
A spokeswoman for the Ministry of Housing, Communities and Local Government said: “It is completely untrue to suggest that nine out of 10 towns were ruled out with no explanation. This claim completely ignores the NAO’s detailed report, which shows that the government put in place a robust process to identify towns for Town Deals.
“Furthermore, the report shows that the more affluent half of towns were ruled out, and the 40 most deprived towns were rightly favoured, with the remainder selected from a shortlist considering of a wide range of evidence.
“There were many factors to consider in the selection of towns and we are confident the process we took was comprehensive, robust and fair. We will deliver on our commitment to level up this country.”