PAC slams ‘scandalous’ delay in spending Regional Growth Fund
By Mark Smulian | 11 September 2012
Hardly any of the £1.4bn Regional Growth Fund has been spent and Whitehall has little idea of whether it will provide value for money, the Commons Public Accounts Committee has found.
The fund was set up in 2010 to channel investment to areas in need of economic help, in particular those with high dependency on public sector jobs.
It was intended as a partial replacement for funding provided by the former regional development agencies.
Two bidding rounds were held in 2011 and a further £1bn is earmarked for a future round.
The PAC found that of the £1.4bn, only £530m had so far been spent and of that £470m was parked with intermediaries – such as local authorities and quangos – pending its actual use. Only £60m had reached job-creating projects.
Committee chair Margaret Hodge said: ‘Given the dire state of the economy, it is nothing short of scandalous that so few projects funded by the Regional Growth Fund have actually got off the ground.’
She said it was unclear whether anything was being done to ensure that the £470m held by intermediaries would eventually be put to productive use.
The committee was also strongly critical of the Department for Communities and Local Government and the Department for Business, Innovation and Skills, which share responsibility for the fund.
They were initially unable to tell the PAC how many jobs the fund had created.
In later evidence the departments said the fund had backed 2,442 new jobs and safeguarded a further 2,762 existing ones, far adrift of its target of 36,800 over the lifetime of the projects supported.
Hodge also criticised the definition of value for money used by the departments, which judged projects worthwhile if they merely provided economic benefits in excess of the public money spent.
‘This low threshold allowed projects to be selected that offered at best marginal benefits for the taxpayer,’ she said
‘It is unacceptable that the departments involved, 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.’
Ministers chose which projects to support based on advice from a panel chaired by former deputy prime minister Lord Heseltine.
Value for money in creating jobs was only one of the factors considered, the PAC said.
Some projects were chosen for their location, or assumptions about wider benefits, but the reasons for these decisions was ‘not sufficiently clear or transparent’, the committee said.
Business and enterprise minister Michael Fallon said the PAC’s conclusions were based on hearings held last May. The MPs ignored subsequent progress, with more than two-thirds of approved projects starting, and some £6 of private investment pulled in for every £1 of public spending, he added.
‘The RGF is delivering at the pace that companies can expand and create new jobs. To rush companies into expanding before they are ready would be unsustainable and would put public money at risk.’
Money placed with intermediaries was ‘not parked idly but is being used to support growth priorities through local expertise and the grass roots of business’.
Fallon added: ‘We will of course evaluate the overall impact of the RGF once projects have drawn down their funds.’