Regional Growth Fund is no more effective than the scheme it replaced

Replacing Regional Development Agencies with a more-aspirational Regional Growth Fund has not produced any evidential improvements for regional economies.

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Ed Cox is the director of IPPR North, IPPR’s dedicated think tank for the north of England

Replacing Regional Development Agencies with a more-aspirational Regional Growth Fund has not produced any evidential improvements for communities, a National Audit Office report (pdf) has shown. Yet another Conservative shake-up has proved to be a waste of resources and taxpayers’ money.

As Figure 7 shows, last week’s NAO report on the Regional Growth Fund highlighted the fact that only 41,000 jobs are likely to be created by the first £1.4bn tranche of spending – well short of the 330,000 jobs the Department for Business, Innovation and Skills claims it will create.

Figure 7:

Figure-7
For a scheme hailed by the government as the answer to suffering regions prayers, the fund actually appears to be as effective (and maybe not even that) as the Regional Development Agencies it replaced.

The NAO report includes a revealing chart showing comparisons between the average cost per job with similar programmes in recent decades, including those run by the abolished Regional Development Agencies with the average cost per job coming out at £33,000 for the RGF, compared to £28,000 for the RDAs.

What’s more, the range of expected costs per job varies considerably between projects under the RGF, from under £4,000 per job to over £200,000 in some cases.

Some would argue that such costs are to be expected given that the programme was focused on creating jobs in some of the most challenging places. But equally, government was clear that the primary focus of the programme was delivering the greatest number of private sector jobs in the fastest possible time in those areas most vulnerable to public sector job losses, irrespective of local growth strategies.

To quote one key protagonist when the scheme was announced:

“A job is a job.”

The relative failure of the scheme lies in a combination of factors. Civil servants were overwhelmed with applications and Vince Cable has admitted that additional administrators have had to be brought in to cope with assessment and implementation after complaints that it was taking too long even for successful projects to get off the ground.

In such conditions it is easy to see how mistakes could be made with too much speed and not enough haste.

 


See also:

Spending watchdog slams Regional Growth Fund waste 11 May 2012

Regional Growth Fund leaves regional economies in the cold 3 Nov 2011

What is Vince Cable? 26 Aug 2011


 

But more importantly, the RGF plans were not connected to local growth strategies. In round two, small amounts of Regional Growth Fund have been delegated to Liverpool and Greater Manchester as part of their ‘city deals’ but there is a strong case that (if there are to be further rounds) all future RGF should be allocated this way.

Local Enterprise Partnerships (LEPs) are far better placed to understand the opportunities and needs of local businesses and are far more likely to tie investments into emerging local growth strategies too. At the very least, LEPs should have a greater contribution to RGF decision-making for any future RGF investment.

Balancing administrative and economic logic is a problem that won’t go away. There can be no perfect fit and so in such conditions, stability and continuity is probably the top priority. But just as this NAO report reveals problems with RGF, so too there are similar challenges concerning transport funds and inward investment.

It is becoming increasingly clear that LEPs are too small to go it alone in building some of the key foundations of economic growth and centralised solutions are not working either. The nature and form of LEP collaboration is a topic that requires urgent attention.

 


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