Clegg’s Regional Growth Fund slammed as a waste of money

Posted on 11 May 2012

The National Audit Office, which monitors government spending, has reported that thousands more jobs could have been created if the £1.4bn funding already sanctioned through the Regional Development Fund had been used elsewhere.

The Regional Growth Fund (RGF), 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, with another £1bn designated to round three of the RGF, a report published today by the National Audit Office stated that 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 £1bn now available, the government should develop more challenging targets for the number of jobs projects should generate relative to their cost,” said Amyas Morse, head of the National Audit Office.

Overall, in line with the objectives of the RGF, the projects selected for investment offer more jobs for taxpayers’ money than the projects that were rejected and support private sector employment in places that rely more on the public sector.

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

Nick Clegg, Deputy Prime Minister and Vince Cable, Business Secretary, visiting GKN
Nick Clegg and Vince Cable visiting an RGF beneficiary, aerospace firm GKN, which has experienced growing orders over the last year.

But the fund has not optimised value for money because a significant proportion of the £1.4bn was allocated to projects that offer relatively few jobs for the money invested. The expected cost per job varies considerably between projects, from under £4,000 per job to over £200,000 per job.

Today’s 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 required to quantify precisely the RGF’s overall employment impact. More than two thirds, around 28,000, of the 41,000 additional jobs are expected to be delivered indirectly, for example through knock-on effects in 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.

It has taken longer than expected to turn conditional offers of grants for projects into final offers. Therefore, despite the government’s intention to get projects up and running quickly, only around a third have so far received final offers of funding.

Chuka Umunna, the shadow business secretary, was furious with the Deputy Prime Minister’s overly enthusiastic claims about the number new jobs that would be created.

“While Nick Clegg said the fund would lead to half a million jobs, the report forecasts that it will create only up to 41,000 jobs,” he said.

Rhian Kelly, director at business organisation CBI, said: “While the report shows that 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,” she added.

Emma Boon of the Taxpayers Alliance, said: “Despite grand claims it looks like this [the RGF] has been poorly managed and there is little to show for all the taxpayers’ money that has been spent.”