10 November 2006
Up to a quarter of government grants designed to attract businesses into deprived areas have to be returned as firms fail to keep their promises to bring new jobs and investment into the area, government figures have revealed.
Regional Selective Assistance grants can cover up to 30% of a company's capital expenditure, but to keep that funding, it must create or safeguard an agreed number of jobs, stay in the area for a specified period and meet investment targets.
In 2004/05, approximately £150m was awarded to companies to set up or remain in Britain. Foreign companies represent just a third of the value of allocated grants, yet figures reported to Parliament show that £37m – a quarter of the annual grant payout – had to be returned by multinationals.
A similar amount was repaid in 2001/02 and 1999/2000. In total, £120m has been repaid from foreign companies since 1999/2000.
RSA grants are administered by the Department of Trade and Industry, Welsh Assembly Government and the Scottish Executive.
A spokesman for the DTI denied that the large amount of repayments showed the scheme was failing.
'The fact that a lot of money was recovered shows that the scheme is working as it should, and that we are protecting taxpayers' money,' he said.
'The investments are known to be riskier ventures, which is why they use this funding rather than normal commercial lending, and why we get protection.
'The majority of investments are successful, and have been shown by evaluations to have brought employment to some of the poorest areas.'
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