European Union funding for a heating system for people on an estate in Oxford is being withdrawn, four years after the scheme was launched.

In 1998, the council agreed to install central heating to about 500 homes in Barton.

But the rocky ground beneath the estate meant it would cost too much to set up a combined heat and power heating system, and the council's housing department opted to install a combination of central heating and ventilation.

About 100 homes are still waiting for central heating but, four years after the scheme was agreed, EU managers have asked for repayment of a £377,000 contribution towards the total costs of £2.3m.

The city council paid more than £1.3m towards the project.

Val Johnson, the city council's business manager for neighbourhood renewal, said the EU funding had not been spent.

But Cllr David Connett, who runs the city council's housing portfolio, said he was appalled by the EU decision.

He said: "It's appalling that the European Union should be asking for their money back, four years on.

"Apparently, they don't think the heating system we opted for was innovative enough. But we couldn't go ahead with the original plan for geological reasons.

"The council will have to think twice next time it is offered a grant from Europe."

Cllr Connett said he had instructed officers not to repay the money immediately.

Cllr Hollingsworth, who represents the Headington ward and is leader of the council's Labour group, said: "From what I can make out, the money has been sitting in a bank, earning interest, so there should be no problem returning it."

He added: "Everyone on the estate who needs new central heating is going to get it."

The council's executive board is expected to discuss the issue at a meeting next Tuesday, or after the local elections on May 2.

European Commission spokesman Gilles Gantelet said: "The EU has funded more than 700 similar projects. It is difficult to respond to these allegations."