NEWPORT council underspent its budget for private sector housing by £3 million in the last financial year.

Of that money, £154,000 was lost to the council for good and had to be returned to the National Assembly.

The part of the budget that was underspent is used for grants for renovations, disabled facilities, help with home repairs, and repair of groups of properties.

The council has now brought in changes to reflect the pressures they face in controlling such a large budget.

But Plaid Cymru AM Jocelyn Davies said she had received a letter about the underspend from a concerned resident.

Mrs Davies said: "It is incredible that the Labour-controlled Newport council has only spent 53 per cent of its budget for private sector housing for 2001 to 2002.

"This, in real terms, is £3 million not spent which should have been spent on renovation grants, disabled facility grants and home repair assistance grants."

Mrs Davies added that a finance officer from the council was quoted in a report on the budget as saying it was "a very significant underspending".

The AM for South Wales East added that she found it especially worrying that more than £150,000 of the money had been permanently lost to the council, despite being available for spending for two years.

"This is council mismanagement on a grand scale," she said. "I wonder what those people who are awaiting such grants would make of this?"

Robert Lynbeck, head of housing at Newport council, said applicants who are awarded such grants have 12 months to arrange for the work to be done.

He said: "If that 12-month period crosses the council's financial year we have to retain the money we have awarded until the work has been done.

"So whilst appearing to be an underspend, this is money that the council has to retain until such time in the 12-month period that an applicant is ready for the grant work to go ahead."

Measures brought in to try to prevent another underspend this year - April 2002 to March 2003 - include: * targeting the types of grants where the council has its greatest backlog; * frequently updating and chasing outstanding information; * completing survey work as early as possible within the financial year.