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Government “still do not know what fosters growth?

The performance of the Regional Growth Fund has been called “nothing short of scandalous,” in a report from The Commons Public Accounts Committee.

MPs have criticised the Government’s £1.4bn fund for England’s regions, after finding only £60m had reached front-line projects.

The report holds the Permanent Secretary for the Department for Communities and Local Government (CLG); the Secretary of State for Business Innovation and Skills; and the Department for Business, Innovation and Skills to account for the failings.

It suggests £364m of the fund is still “parked with intermediary bodies” such as banks.

As a result only 5,200 jobs can be claimed as having been created or safeguarded in projects where the offer of funding has been finalised, against targets of 36,800 over the lifetime of these projects.

The system in allocating funds also came under fire, as the report suggested the way in which broader judgements were applied was not sufficiently clear or transparent.

It also said the Fund’s threshold for acceptable value for money was far too low, and said it was not clear that departments took sufficient account of local expertise in deciding which projects would most benefit particular areas.

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today 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. Some two years into the programme, of the £1.4 billion allocated only £60 million had reached front-line projects.

“The rest of the £470 million spent so far had been parked in intermediary bodies, over which the departments have limited control. It is unclear what is being done to make sure that money is not wasted but spent on creating real jobs.

“At the time of our hearing, the departments could not tell us how many jobs had actually been created. They then wrote to us admitting that only 2,442 new jobs had been delivered in projects with final offers of funding in place, while another 2,762 existing jobs had been protected. That is against a target of 36,800 over the lifetime of these projects.

“For projects to count as value for money under the rules of the Fund, the economic benefits simply had to outweigh the public cost. This low threshold allowed projects to be selected that offered at best marginal benefits for the taxpayer. While the cost per job was £60,000 or less in three-quarters of the projects, in some cases it reached over £200,000.

“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. We want to know in detail by the end of the year how they intend to do so.”

The report follows in the steps of similarly scathing research from the National Audit Office, earlier this year.

A closing remark in the report read: “Despite decades of experience in delivering similar programmes, BIS and CLG still do not know what works best in fostering private sector growth.”

Katja Hall, CBI Chief Policy Director, said: “It is disappointing that the scheme has only awarded £60m since its inception in June 2010.

“It has the potential to act as a catalyst for much-needed jobs and growth. But we need to simplify the application process, which experience has shown is burdensome and deters companies from applying, so this needs to change.”

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