A leading think tank report, supported by the European Investment Bank, has urged the Government to establish a national ‘fund of funds' giving all cities access to regeneration cash.

According to a study issued today by Centre for Cities, continued government deficit-reduction measures and a shortage of private sector investment have rendered old models of regeneration unviable.

To plug the investment gap, the report ‘Developing Interest' calls for an extension of the nine regionally-based  Urban Development Funds (UDFs) to match the new situation of Local Enterprise Partnerships across England.

Currently some of England's largest cities - including Birmingham Bristol, Leeds and Newcastle – are not covered by such funds, potentially holding back regeneration and economic growth, the report states.

Such new long-term investment models would be based around financial instruments – using loans, equity or guarantees - which would, the authors advocate, enable commercial returns to be made from the investment of public money.

The £5.4bn ‘Help to Buy' scheme announced by chancellor George Osborne during last week's Budget is one example of using taxpayers cash to generate financial returns.

Under the model envisaged by the report, such a national fund would amalgamate European Union funding streams, public money and private sector investment to help deliver city centre regeneration, new offices and infrastructure projects.

Alexandra Jones, chief executive of Centre for Cities said: ‘As the chancellor looks for innovative ways to balance the books before the spending review this summer, a national investment fund could offer a complementary approach to traditional grant funding to support local development.

‘This national fund would also help to create a stronger pipeline of development projects over the long term, leaving cities better equipped to attract further investment in order to respond to the needs of residents and businesses.'