A funding shortfall is putting millions of homes at risk of flooding, Whitehall's spending watchdog has warned.

The powerful Public Accounts Committee (PAC) said Government cash is being reduced by 10 per cent over the current spending period, despite experts warning the flood protection budget needed to increase by 9 per cent.

The committee also said it is "sceptical" the funding gap can be plugged through businesses and local authorities injecting cash, a flagship Government reform to get more defences built.

Meanwhile, the Labour MP for Exeter says thousands of the city's homes and businesses could be imperilled by cuts.

Former Environment Minister Ben Bradshaw says Whitehall will only provide half the £25 million needed to upgrade Exeter's 50-year-old flood protection system.

The South West, boasting steep valleys, is particularly susceptible to flash floods, as witnessed in Mid-Cornwall, Boscastle in North Cornwall, and Ottery St Mary in East Devon in recent years.

Margaret Hodge MP, chairman of the PAC, also said it is "unclear where the buck stops" between the Department for the Environment, Food and Rural Affairs (Defra), the Environment Agency and local authorities.

She said: "It is not acceptable that local people should be left in doubt about where responsibility and accountability lie."

The PAC further warned of uncertainty over future insurance cover for buildings in at-risk areas when the current agreement between the Government and industry expires next year.

Mr Bradshaw said: "I hope this important report is a wake up call for the Government. Exeter is a prime example of a vital scheme now at risk.

"Previously this money would have been provided by central Government, now the Government says half the money has to be raised locally. That's a huge sum for a small authority like Exeter. The Government has put the safety of those homes and businesses at risk by abdicating its responsibility for flood defence."

Stephen Gilbert, Liberal Democrat MP for St Austell and Newquay, whose constituency was hit hard by floods in 2010, said: "Still, there are people who haven't been able to return to their homes and are still seeking repairs and resolving disputes with insurers.

"I am calling on the Government to do all it can to ensure that funds are made available to maintain and improve our flood defences."

Defra hit back, arguing the country is better prepared than ever before to deal with a major flood.