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An £81m pot for Supporting People "pipeline" services was announced last Thursday – but the fund is believed to be one-third smaller than the amount bid for.

Pipeline services are Supporting People-funded schemes that will come into operation by March 2006. Those starting this year will get £29m in 2003/04 and £52m in 2004/05. Funding for 2004/05 schemes will be announced in September – too late for schemes tied to building contracts, housing professionals have warned.

The long-awaited announcement follows the £1.4bn funding pot for existing supported housing schemes unveiled in February (HT 28 February, page 12).

However, a source said councils had asked for a total of £330m, with £44m of bids for 2003/4.

New housing minister Keith Hill described some of the proposals that did not win funding as "unrealistic", with costs in excess of £50,000 a person per year.

High-cost mental health and learning disabilities projects are also believed to have lost out.

Nick Whitton, Supporting People lead officer for Newcastle council, said only two of its 30 pipeline schemes had funding confirmed.

He said: "It doesn't look like we will get capital for all schemes with revenue funding. We have revenue for two schemes with capital attached and they have not given us revenue for other schemes that seem exactly the same."

But, speaking at the Chartered Institute of Housing Conference in Harrogate on Thursday Bert Provan, the civil servant with overall responsibility for Supporting People, said the government would fund schemes that already had Housing Corporation capital funding.

He said "questions would be asked" if councils diverted Supporting People funds away from corporation-backed schemes. However, councils and housing associations thought schemes with council, corporation and charity capital had lost out.

In a letter to councils on Friday, Provan told councils how much money to allocate to which schemes but he cannot force the authorities to obey.

Diane Henderson, head of care and support for the National Housing Federation, said: "This is a strong steer to allocate funding to schemes with capital approval but does not tell them exactly what to do."

Provan's letter set out funding ceilings of £380 a bed per week in London, £354 in the South-east and £330 in the rest of the country. He said nobody should get less than 55% of what they asked for if councils stuck to these costs.

Provan took a tough line with councils telling them that they could afford to make cutbacks on some schemes to pay for others.

He said: "If you say we cannot cut anything at all … nobody will believe you. We need to sit down, be radical, be focused, be clear and assess the things we need and some things have got to give."