Details of the loan emerged as Michael Heseltine, the Deputy Prime Minister, pledged financial assistance to help rebuild the centre of Manchester in the wake of last month's IRA bomb attack.
The Docklands explosion caused serious damage to parts of the Barkantine Estate, near South Quay. The pounds 6m will go towards demolishing Lantern House, a 1960s council block, and building 40 low-rise flats in their place. An additional 49 new homes will be built on nearby sites made available by the London Docklands Development Corporation.
The four tower blocks on the estate, which suffered considerable damage, will also benefit from the money, which has been awarded by the Department of the Environment. In addition, a small garden is to be developed "in recognition of the courage of local residents".
In the days after the bomb, residents of the Isle of Dogs complained that government attention was centred on repairing damage to the commercial buildings at the expense of local people who had seen their home wrecked.
David Curry, the Housing Minister, said: "This additional money fulfils the commitment we gave immediately following the bombing, that the necessary funding would be made available to tackle urgently the bomb damaged blocks and accelerate the existing Estate Action scheme." The money will bring total government support for the national Estate Action scheme, which aims to regenerate run-down estates, to pounds 30m.
A majority of local residents have still received no compensation or assistance from the government for damage to personal possessions, however. A handful have been offered loans by the Department of Social Security, which most have had to turn down because they cannot afford repayments. Stephen Molyneaux, a local councillor, said: "It is a pity that the DSS have not shown the same spirit towards bomb victims that the Department of the Environment have shown."
Campaigners in Manchester and Tower Hamlets have suggested a central fund to cover future bomb-damage, but Mr Heseltine last week ruled out blanket help for bomb victims. Announcing a pounds 50,000 donation to the Lord Mayor's appeal to help Manchester cope with immediate problems, he said he had to make it clear the Government could not introduce a "post-hoc" insurance scheme. "If I were to do that no [business] would ever insure again."Reuse content