Shortage of cash for ERDF projects risks growth, MPs warn

Local economic growth risks stalling unless urgent steps are taken to allocate match funds through the Regional Growth Fund, MPs have warned.

According to a report into the management of the European Regional Development Fund (ERDF), issued today by the Commons communities and local government (CLG) Committee, the transfer of responsibilities from the defunct regional development agencies (RDAs) to the Department for Communities and Local Government (DCLG) had been managed well.

ERDF cash is made available to support large regeneration and small business development schemes, but can only be used to part-fund programmes. However, since the former RDAs were also the main sources of providing matching funds, the Government controlled replacement, the £1.9bn Regional Growth Fund (RGF) has not helped deliver cash as readily as projects require.

In urging ministers to set aside RGF money for matching funding, the report says ‘the Government does not seem to appreciate the problems that projects are facing in securing the match funding needed for them to go ahead’.

Clive Betts, chair of the CLG committee said: 'The abolition of the Regional Development Agencies removed the main source of match funding for ERDF sponsored projects, and the economic downturn has curbed alternative options for match funding even further.

‘There is a pressing need to spend each region’s ERDF allocation before 2015, but unless ministers take urgent steps to deliver on the Government’s promise to make it easier for projects to secure match funding through the Regional Growth Fund, there is a significant risk that value for money will suffer and ERDF will not make the impact it could to help rebalance the UK’s economy.’

Giving evidence to the MPs last April, European Commission regional policy director, José Palma Andres, said 93% of England’s proposed funds for the 2013 round were already committed, and explained that the deadline for spending the money extended to 2015.

In response, a DCLG spokesman said the Committee’s findings are not borne out by the facts, given the extent of the programme that is already spent, contracted or in the pipeline.

‘The Government realises how important match funding is which is why, in December, Mark Prisk and Baroness Hanham wrote to all the chairs and vice chairs of the Local Management Committees which oversee ERDF funding locally to ensure they were aware of the availability of match funds from within government programmes.’