Wellington, Sept 1 NZPA - The Government has confirmed the Drinking Water Subsidy Scheme is being put on hold and reviewed.

Last week in Parliament, Health Minister Tony Ryall indicated the fund set up to subsidise small communities of under 5000 people to improve their drinking water supplies would be changed.

Today Mr Ryall said in a statement no more new applications would be considered while a review took place to ensure the best use of the money.

The fund originally had $117.8 million in funding for 10 years from 2006, of this about $30 million had already been allocated and applications made for another $27.5 million.

"The current applications will be the last to be assessed under the existing criteria, before the review of the scheme targets it on communities most in need and ensures best value for money," Mr Ryall said.

The Government was concerned that the first-come first-served nature of the scheme did not target those in the most need.

The review would be completed by early next year and then reopened with new criteria.

Last week Labour MP Brendon Burns said Mr Ryall had deferred applications from 71 small communities for projects to meet minimum water standards.

National has already put in a place a three year moratorium on councils meeting the standard because of the burden it would place on rates.

Mr Burns said it was wrong for Mr Ryall to suggest that the current scheme did not target disadvantaged communities.

"They were able to get up to 95 percent of the funding to make their drinking water safe. A wealthier community might currently get only 5 percent. What is being signalled is that many moderate-income communities will get next to nothing from the Government when they seek to improve their water supply," Mr Burns said.

"Mr Ryall should explain that to small communities with high populations of retired people or Maori who now face little or no support when, inevitably, they have to meet World Health Organisation minimum standards for water."