Growth fund ‘created too few jobs at too high cost’

11 May 12
Thousands more private sector jobs could have been created if money from the Regional Growth Fund had been better allocated, auditors said today.
By Richard Johnstone | 11 May 2012

Thousands more private sector jobs could have been created if money from the Regional Growth Fund had been better allocated, auditors said today.

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The Department for Business, Innovation and Skills launched the fund in 2010 to boost private sector growth in areas of England that rely more on the public sector for employment. Companies or public-private partnerships were invited to bid for a share of the cash, with the money awarded to projects deemed to have significant potential for economic growth.

A total of £1.4bn was allocated in the first two funding rounds. The National Audit Office found this was set to create or protect 328,000 full or part-time private sector jobs over the lifetime of the projects. However, this equates to just 41,000 extra full-time equivalent private sector jobs, at an average cost of £33,000 per job. It is also significantly below the government’s initial aim of providing 117,000 full-time equivalent jobs.

Auditors said a significant proportion of the funding had been allocated to projects that offered relatively few new posts.

There was also considerable variation in the costs of creating a new job, from under £4,000 to over £200,000. The 27 least cost-effective awards, totalling some £160m, will cost the fund £106,000 per job.

Concerns were also raised about the sustainability of the jobs created. The NAO said it was not clear how much the effect of the funding boost would endure beyond the seven-year lifetime of the awards.

A total of £1bn will be allocated in the third round awards. Bids need to be submitted next month.

Auditor general Amyas Morse said: ‘To achieve better value for money from the further £1bn now available, the government should develop more challenging targets for the number of jobs that projects should generate relative to their cost.’

Business Secretary Vince Cable insisted that the fund was working. He said the report showed that it was ‘set to create and protect 328,000 jobs for people in communities that need the most support – and to help companies grow’.

He added: ‘We have already put in place some of the NAO’s recommendations, such as making more administrative resources available, which means projects are being processed even faster. Round three will create thousands more jobs, and businesses have until June 13 to submit their bids.’

Awards to date have included funding for Bentley Motors in Crewe to expand, and cash to boost firms developing wind turbines.

Tighter controls over the new £1bn of funding were announced by Chancellor George Osborne in last year’s Autumn Statement. These include better assessments of value for money.

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