Dodgy grants row damages us, admits City Hall chief

Manny Lewis, who is responsible for £3.2 billion in funds, pledged to bring in a new monitoring regime with tougher reviews of LDA projects.

The economic agency has faced a barrage of criticism after claims, first made in the Evening Standard, that it awarded millions of pounds in grants to organisations with links to Lee Jasper, one of Ken Livingstone's senior aides, which then did little in return.

Police are investigating five separate projects that received public funding and the row has threatened to destabilise the Mayor's bid for re-election.

Mr Lewis, who was appearing before a special session of the London Assembly today, admitted the affair was "potentially damaging".

An internal LDA inquiry has rejected the claims that it awarded millions of pounds in grants inappropriately, but a cross-party group of London MPs has called for a separate independent investigation.

Mr Lewis outlined a tougher project review system and pledged to increase partnership with the private sector and work more closely with London's biggest companies.

In what appeared to be a damage limitation exercise, Mr Lewis told the Financial Times that the allegations were "politically driven" and "undoubtedly" timed to coincide with the mayoral election race.

He claimed the row had "taken up a significant amount of capacity" and that the focus on the allegations was "disproportionate", but that it had not diverted the LDA from its day-to-day work.

"Those processes and procedures were less strong historically, but have been improved dramatically with the new ways of working we implemented from 2006 onwards," he said.

"The agency is now unrecognisable to the one that existed when most of the projects that they are criticising now were [started]."

The LDA has accelerated plans to introduce better ways of checking correct procedures are being followed. The new measures were put to the board on Wednesday.

Andrew Travers, group director for resources and risk, promised the LDA would be "a little more intensive about how we follow up".

A London Assembly report earlier this week said an investigation of six large cultural projects, which received £18 million of LDA funding, showed the systems at the agency were seriously flawed.

However, the Mayor today defended his record in power, citing the success of securing funding for Crossrail and bringing the Olympics to the capital.

He also claimed to have boosted journeys on the buses, cut crime overall and relaxed planning laws to allow more high-level buildings on the skyline.

"They form a clear and integrated set of policies, which have not only had a big impact in the UK but also in a number of cases internationally," he said.

It came as Boris Johnson unveiled his plans to "clean up" City Hall. The Tory candidate promised to make his top officials more accountable to Londoners than those in the present administration if he was elected in May.

His pledge capitalised on the Mayor's difficulties after the LDA grants affair and some of his aides being accused of campaigning for him on taxpayers' time.

Mr Johnson said: "It is ludicrous that the Mayor's own advisers have had free rein to do whatever they like and answer solely to the Mayor himself."

Mr Livingstone has up to 10 special advisers at any time, including two - Mr Jasper and his colleague John Duffy - who are directly appointed by the Mayor.