27 June 2003
MPs this week called for a radical overhaul of regional grant distribution in England following fierce criticism of the current system.
Members of the Commons' Public Accounts Committee have suggested wide-ranging reforms, including devolving responsibility for regional payments to local authorities and subsidising employers by slashing National Insurance contributions.
Frank Field and George Howarth, both Labour members of the PAC, led calls for reform in the wake of a National Audit Office report highlighting failures in the Department of Trade and Industry's regional policies.
The NAO study, published on June 17, assessed the impact of two DTI support schemes – Regional Selective Assistance and Enterprise Grants – designed to improve employment and economic performance in deprived areas.
Giving evidence to the PAC on June 23, DTI permanent secretary Sir Robin Young acknowledged that some government regeneration initiatives had been 'failures' and claimed ministers could announce reforms before the summer parliamentary recess.
PAC chair Edward Leigh told Young that the current setup was 'overly and unnecessarily complex', involved too much paperwork and discouraged firms from applying for grants. Others said the schemes had not delivered the number of new jobs or the degree of regeneration that the DTI had hoped for.
Field urged the Treasury to consider cutting some employers' NI contributions so that they can employ new staff and increase productivity.
He told Public Finance: 'These schemes need to focus on what makes a region economically successful. For years ministers have assumed that the way to inject life into them is to subsidise capital, to no great effect.'
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