Spending watchdog slams Regional Growth Fund waste

The government’s flagship Regional Growth Fund has today been slammed by the National Audit Office, reports Left Foot Forward’s Kevin Meagher.

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The government’s flagship Regional Growth Fund has today been slammed by the National Audit Office for falling short of creating the number of new jobs ministers predicted.

The government spending watchdog estimates that an additional 41,000 jobs will be created over the next seven years as a result of the RGF – a long way short of the 330,000 jobs BIS claims will be created, as Chart 1 shows.

Chart 1:

The NAO is also critical of the fund’s value for money, finding:

“The cost per net additional job supported by the fund varies from under £4,000 to over £200,000.”

The study examines the RGF’s first two bidding rounds, which have seen £1.4 billion distributed to 176 projects.

Damningly, however, it finds value for money was not “optimised” because:

“…a significant proportion of the fund was allocated to projects that offered relatively few jobs for the public money invested.

“Over 90% of the net additional jobs could have been delivered for 75% of the cost, with the cost of each job then being £26,000. Applying tighter controls over the value for money offered by individual bids would improve the fund’s overall cost-effectiveness.”

Chair of the public accounts committee, Labour’s Margaret Hodge MP, said it was “truly shocking” some new jobs were costing up to £200,000 to create, adding:

“Stronger controls over the value for money of individual bids are urgently needed to prevent any more money being wasted.”

Responding to the report, business secretary Vince Cable said:

“We have already put in place some of the NAO’s recommendations such as making more administrative resources available, which means projects are being processed even faster.”

The RGF was launched amid much fanfare by deputy prime minister Nick Clegg two years ago after ministers rashly dismantled Labour’s regional development agencies (RDAs), which had a proven track record in both creating new jobs and providing a sound return on investment.


See also:

RGF’s foot-dragging and half-measures leave regional economies in the cold 3 Nov 2011

Cable should concentrate on promoting growth not Goa 26 Aug 2011

Huge demand for Regional Growth Fund shows desperate need for business credit 3 Aug 2011

Round two for the Regional Growth Fund – but is the cupboard now bare? 2 Jul 2011

Coalition’s regional growth fund sweetener leaves a bitter taste 12 Apr 2011


A report by PwC back in 2009 found that for every £1 spent by the RDAs a return of £4.50 could be expected. The report also found that, from 2002 to 2007, the nine RDAs together created or safeguarded 472,900 jobs.

However, the regional growth fund – worth only a third of what the RDAs spent on regeneration – has been heavily oversubscribed and many areas have missed out as a result. The first round saw just 50 projects out of the 464 bids submitted receiving any money; furthermore, there have been long delays in green-lighting projects, especially damaging against a backdrop of economic stagnation.

Stung by criticism, the chancellor announced a third bidding round in last December’s autumn statement – a suggestion first made by shadow chancellor Ed Balls. The deadline closes next month.


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