Northern English regions are set to be the principal beneficiaries of the new £1.4bn fund set up to alleviate public sector job cuts, despite Treasury objections, it has emerged.

The Regional Growth Fund (RGF) was one of the few winners from last week’s Comprehensive Spending Review (CSR), seeing its budget increased by £400m to £1.4bn, spread over three years.

Sir Ian Wrigglesworth, deputy chairman of the RGF approval panel, told an MJ/NSA conference in Birmingham last week: ‘We’re about developing the private sector in areas where there is a disproportionate reliance on the public sector, such as in the North East. We won’t spend a lot of time looking at bids from London and the South East.’

When a delegate from Kent pointed out there were deprived areas in the south as well, Sir Ian replied: ‘Of course, we cover England. But if you have an oasis of unemployment in a sea of employment we’re not sure we’d be as enthusiastic about aid compared with an area where the disparity is right across the region.’

In principle, the RGF is supposed to boost private sector jobs in any area previously dependent on the public sector, and senior CLG officials this week confirmed the department’s RGF focus would be on ‘areas most affected by public sector cuts’.

But, they added that the Treasury was also keen to ensure that cash was allocated by the RGF in areas likely to contribute to UK economic growth, ‘to help drive the economy’.

One senior Whitehall official told The MJ: ‘While you could imagine that much of the RGF will go to northern areas, highly dependent on public employment, there’s little doubt that many localities driving economic growth over the next few years will be in the South or South East. So, there is a balance to strike using the RGF. It’s not obviously a northern bias.’

The RGF, under the chairmanship of Lord Heseltine, was announced in June, with the abolition of RDAs. It will allocate £495m next year, £505 the year after, and £420m in 2013/14.