THE Government admitted last night it is unlikely that any action will be taken against board members of the defunct Teesside Development Corporation - despite a damning report which blamed the quango for wasting up to £40m.

But furious local MPs demanded the "severest penalties" against those responsible for the failings of the flagship development body.

Earlier this summer, a National Audit Office report revealed the corporation had left a potential deficit of about £23m, which could rise to as much as £40m.

It was condemned for "poor risk taking", disregarding Treasury rules, and granting loans that were not officially allowed.

Last night, the Government made its official response to the report and recognised that "better oversight could have prevented many of these incidences occurring".

A Government spokes-man said that, although it was unlikely any action would be taken against the individuals concerned, it had not been ruled out. The lessons of Teesside had been learned. "This case has specifically affected the way we operate these bodies," he said.

"There is a balance to be struck, though, between allowing people to get on with the job and controlling from the centre."

However, Ashok Kumar, MP for South Middlesbrough, said he and other MPs would now seek a meeting with the minister responsible, Jeff Rooker. "I am delighted the Government has accepted the recommendations of the report, but we want to take action. The matter is not going to be allowed to rest.

"I am going to try and impress upon the minister that the severest penalties must be taken against former members of the TDC board, who allowed this waste of public money to take place."