Regional Growth Fund failure “nothing short of scandalous”

The government’s flagship Regional Growth Fund policy has fallen on its face and been reduced to a money-saving exercise.

 

A coruscating parliamentary report into the government’s flagship £1.4 billion Regional Growth Fund finds it has only created 2,442 new jobs and that just 13 per cent of the budget has so far been spent on the frontline.

In hard-hitting comments, the chair of the House of Commons public accounts committee, Labour MP Margret Hodge, says it is “nothing short of scandalous” that so few projects funded by the RGF have actually started “given the dire state of the economy”.

Two years into the fund, only £60 million has reached frontline projects. The rest of the £470 million spent so far is “parked in intermediary bodies” over which the Department of Business has limited control. She said it was “unclear” what is being done to make sure money is not wasted but spent on creating real jobs.

She goes on to say:

At the time of our hearing, the departments could not tell us how many jobs had actually been created. They then wrote to us admitting that only 2,442 new jobs had been delivered in projects with final offers of funding in place, while another 2,762 existing jobs had been protected. That is against a target of 36,800 over the lifetime of these projects”

“For projects to count as value for money under the rules of the fund, the economic benefits simply had to outweigh the public cost. This low threshold allowed projects to be selected that offered at best marginal benefits for the taxpayer”.

The report say that while the cost per job created was £60,000 or less in three quarter of cases, there were examples where it reached more than £200,000 per job.

Hodge added:

“It is unacceptable that the departments involved [BIS and DCLG], despite decades of experience with similar programmes, still do not know how they will evaluate the success or otherwise of the fund in producing jobs and growth. We want to know in detail by the end of the year how they intend to do so” she warned.

Today’s report should come as no surprise. The National Audit Office made similar findings back in May. It estimated 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.

The RGF was meant to assist areas of the country traditionally reliant on public sector jobs to develop stronger private sectors. The government’s central mistake was to start tinkering with how it delivered support for regional development at the same time as the economy was in the doldrums. In any event, the creation of the RGF was a smokescreen for scrapping regional development agencies and their much larger budgets.

The £1.4 billion that the RGF is spending over three years is equivalent to what RDAs were spending every year.

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

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