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Is the Regional Growth Fund value for money?

The National Audit Office has published a report on the Government’s Regional Growth Fund, suggesting there was scope to have generated more jobs relative to the amount of grant awarded.

While the report finds the initial £1.4bn investment in the Regional Growth Fund could result in some 41,000 more full-time-equivalent private sector jobs, it also states the Fund has not optimised value for money because a significant proportion was allocated to projects that offer relatively few jobs.

The expected cost per job varies considerably between projects, from under £4,000 per job to over £200,000 per job.

If the Fund delivers the expected 41,000 extra jobs, the report suggests then the average cost per job would be £33,000; broadly similar to the average cost of jobs under past programmes with comparable objectives.

The report concludes that applying tighter controls over the value for money offered by individual bids and then allocating funding across more bidding rounds could have created thousands more jobs from the same resources.

Rigorous evaluation will be needed to properly quantify the Fund’s overall employment impact, as more than two thirds of the 41,000 additional jobs are expected to be delivered indirectly, for example through companies’ supply chains or the wider economy.

The average project will last at least seven years, however it is not clear how much of the Fund’s boost to the private sector will be sustained in the longer term.

Amyas Morse, head of the National Audit Office, said today: “The Regional Growth Fund, which was set up to support growth and jobs in areas that rely on the public sector, could result in 41,000 additional jobs.

“However, some of the funding was allocated to projects that offered relatively few jobs for the money invested.

“To achieve better value for money from the further £1 billion now available, the government should develop more challenging targets for the number of jobs projects should generate relative to their cost.”

Secretary of State for Business, Vince Cable said: “The NAO’s report recognises that the Regional Growth Fund is working.

“Round three will create thousands more jobs, and businesses have until June 13 to submit their bids.”

Lord Heseltine, chair of the Regional Growth Fund’s Independent Advisory Panel added: “The NAO report shows the positive impact that the Regional Growth Fund is having on some of the most disadvantaged parts of England.

“The report clearly states that 328,000 jobs will be created or safeguarded by companies like Bentley, Bridon and Haribo. RGF awards are conditional on these employment benefits being delivered.”

The report suggests tt has taken longer than expected to turn conditional offers of grants for projects into final offers.

A statement from BIS said: “The process the projects go through once they have a conditional offer allows businesses to assess whether being involved in the fund is right for them. It also then ensures that the Government is using taxpayer money to best effect.

“The 70 projects across rounds one and two confirmed as having received a final offer of support have started accessing around £540 million of funding to create and support more than 70,000 jobs.

“A further 10 bids have just signed final offer letters and details of these will be available shortly.

“The £2.4 billion Regional Growth Fund uses public money to leverage private sector investment in the projects. For every £1 put in by Government, the private sector invests at least £6.”

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, said: “The Regional Growth Fund will doubtless do some good work in creating new private sector jobs in areas of need which have traditionally depended on public sector employment.

“However, I am concerned that, out of the 328,000 jobs the Government promised to secure with the Fund, the NAO reports that only 41,000 are real additional jobs to those which would exist without the Fund. This raises serious concerns about whether the Fund is providing value for money.

“And it is truly shocking that in some cases creating a new job will cost the taxpayer over £200,000.

“Stronger controls over the value for money of individual bids are urgently needed to prevent any more money being wasted, particularly given the additional £1 billion allocated to the Fund in the Chancellor’s Autumn Statement.

“We will be looking at the Regional Growth Fund later this month and we will expect officials to tell us what steps they are taking.”

Alexander Ehmann, Head of Enterprise Policy at the Institute of Directors, said: “It is disappointing that the Regional Growth Fund does not seem to be as efficient in spending taxpayers’ money as it should be.

“Some of the projects that have been invested in are clearly very expensive in terms of the cost per job created. However, other schemes the RGF supports are proving very efficient, so the potential is there.

“The Fund’s administrators must learn from this experience, and shift money from underperforming schemes to those which are delivering the best results.”

Rhian Kelly, CBI Director for Business Environment, said: “The RGF can act as a catalyst for much-needed jobs and growth in those areas of the country most affected by the difficult economic conditions.

“While the NAO’s report shows that broadly the programme is working, it is essential that the taxpayer gets value for money, especially when public finances are so tight.

“There are some projects where the public cost may have been too high and these lessons will need to be learnt for the third round of funding bids.”

This was posted in Bdaily's Members' News section by Tom Keighley .