Democratic Unionists would not oppose moves to withdraw official funding for UDA-linked community building, Gregory Campbell said tonight.
The senior party figure was speaking as Social Development Minister Margaret Ritchie's 60-day deadline for decommissioning arms passed today.
He warned that the £1.2 million windfall would have to be directed to Protestant neighbourhoods via another means.
There have been reports tonight that the SDLP MLA has met with General John de Chastelain's International Independent Commission on Decommissioning.
The Northern Ireland office and the US Administration have noted "meaningful" steps by the paramilitary organisation in response to Ms Ritchie's threat.
Mr Campbell said: "We don't want the deprived loyalist community to suffer as a result of the UDA's failure to decommission. "If she ensures that it will happen then that at least will be a step forward but I think she could have done that much earlier in the process."
He was responding to suggestions that the minister would find alternative channels to distribute the cash to struggling unionist areas. The Conflict Transformation Initiative was launched by the NIO and promised over a million pounds to improve economic black-spots where the UDA has influence.
Ms Ritchie has insisted that they end criminality like drug-dealing and decommission as a signal of their commitment to peace. This summer the UDA has been blamed for violence in Carrickfergus, County Antrim and Bangor, County Down.