Pennie Varvarides 16 May 2014

Millions in local economic growth funding not being used warn MPs

Only 10% of available government funding to promote local economic growth has been allocated, according to a new report.

The Public Accounts Committee (PAC) has today warned that the two departments responsible for this programme now face a huge challenge in meeting spending targets by the end of this financial year.

Margaret Hodge MP, chair of the Committee, said: ‘Despite the large sums available for for promoting economic growth locally, little money has actually reached businesses.

‘Of the £3.9bn that has been allocated in total to these initiatives, only nearly £400 million had made it to local projects by the end of 2012-13.’

The report also found that under the Regional Growth Fund the departments will need to spend £1.4 billion this year – compared to £1.2 billion spend over the previous three years.

It also warned that in the rush to spend cash, there’s a danger of departments compromising on quality in favour of projects that can spend the money quickly. The committee recommends that departments do more to ensure beneficiaries are ready to receive the money and deliver the extra jobs in the timescales envisaged.

‘Some £1bn of the remaining £3.5bn allocated to initiatives is currently parked with intermediary bodies such as local authorities, Local Enterprise Partnerships and backs - and the rest with the departments,’ Hodge explained.

‘One Regional Growth Fund programme, run by Santander UK, has distributed only £2.3m so far out of the £53.5m. The same scheme will be able to claim up to nine per cent (£5 million) administration costs over its lifetime.’

The committee is calling for the departments to address the problem of slow distribution to front-line projects, as well as improve the monitoring systems in place to distinguish the impact of individual schemes and prepare for the future.

‘The departments should introduce binding milestones for distributing funds and move quickly to claw back money not being spent – or spend disproportionately on administration – and redistribute to better performers,’ Hodge added.

She thinks the ‘progress in creating jobs is falling well short of the department’s initial expectations’. The Regional Growth Fund is expected to created 555,000 jobs across England between 2011 and the mid-2020s. So far it has safeguarded 65,000. Hodge says, ‘The departments’ estimate of the cost per job created has risen from £30,400 in round one to £52,300 in round four – a 72% increase’.

The report concludes that the departments must learn from the current programme and adopt a more coordinated and strategic approach.

In response to the report, local growth minister Kris Hopkins said the figures in the report were old and money was getting to local projects. Hopkins said: 'The Regional Growth Fund is working – over £1.2bn has been paid to projects and companies across England – helping businesses create thousands of jobs up and down the country. We’ve sped up the process - companies get the money when they need it and after all the necessary checks have been carried out. Anything else would be irresponsible and a waste of taxpayers’ money.

'Local enterprise partnerships and enterprise zones are proving their worth. Designed and run locally, in contrast to the distant and unwieldy Regional Development Agencies, they are accountable through the elected council that co-chairs them.

'Enterprise zones have harnessed government funding to secure £1.2bn of private sector investment and to create more than 9,000 local jobs. £652m of Growing Places funding has been allocated to 305 projects that will create 4,900 businesses, 94,000 jobs and 27,000 houses.

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