1 The impact of the Regional Growth
Fund
1. In its emergency budget of June 2010, the Government
established a Regional Growth Fund (the Fund) to support projects
with significant potential for economic growth and create additional
sustainable private sector employment, particularly in areas and
communities that are currently dependent on the public sector.
Private sector firms and public-private partnerships were invited
to bid for a share of the £1.4 billion Fund, which was allocated
in two bidding rounds during 2011. A third bidding round was subsequently
opened, offering an additional £1 billion, with applications
to be received by mid-June 2012.[2]
2. The Accounting Officer for the Department for
Communities and Local Government (CLG) has overall accountability
for ensuring delivery of value for money allocated from the first
two bidding rounds. The Secretary of State for Business Innovation
and Skills has ministerial accountability. For future bidding
rounds, accountability is likely to be shared between the Accounting
Officers of the CLG and the Department for Business, Innovation
and Skills (BIS).[3]
3. Departments intended to act quickly, in order
to make an impact in areas that were likely to suffer more from
public sector cuts.[4]
Given the current economic context, this type of support has potential
to help generate and support private sector employment in areas
which currently rely on the public sector for jobs.[5]
However, after two years, only 88 out of 236 offers of funding
made in the first two bidding rounds had been finalised (with
a combined value of £610 million) and only £470 million
has actually been paid out.[6]
4. Most of the £470 million the Departments
have paid out to date has been to intermediary bodies, such as
banks, Local Enterprise Partnerships and local authorities, rather
than businesses directly.[7]
Around £364 million was paid to intermediary bodies via endowments
and a further £57 million through other means.[8]
Of the total paid to intermediaries, some £222 million went
to 'private/public partnerships' where the accountable body is
actually in the public sector.[9]
BIS and CLG assured us that all intermediaries had been tasked
with setting up programmes to fund private sector projects, and
that they would track intermediaries' use of funds.[10]
The Departments reported that intermediaries had so far paid out
just £12.5 million to front-line projects. The Departments
themselves had paid out a further £47.5 million directly
to front-line projects, meaning only £60 million of the Fund
has actually reached businesses. [11]
5. The speed at which money can be paid out is not
wholly under departments' control because firms may delay projects
for commercial reasons.[12]
The departments noted that the nature of some of the projects
means that the private money will be invested first and that public
money will come later.[13]
They also noted that grants are subject to due diligence on the
firms to which the money will be paid and this can take some time.[14]
They acknowledged that the departments did not make available
enough staff with the necessary skills to turn conditional offers
into firm contracts promptly. CLG assured us that more staff had
been provided for this process for later rounds.[15]
A representative from a former Regional Development Agency told
us that in his view the lack of capacity within the central civil
service to manage this type of programme was not surprising, given
that for years the Regional Development Agencies managed this
type of initiative.[16]
6. The number of jobs created is a very important
measure of the Fund's impact. The departments told us that some
of the Fund's impact would not be measured in terms of job impacts,
but would affect less tangible factors such as research and development.[17]
Witnesses claimed that the projects and programmes supported by
the Fund could create or safeguard around 330,000 jobs in total,
including jobs supported in the wider economy. However, the departments'
own estimate of the number of net additional jobs, taking account
of additionality and how long the jobs are likely to last, is
41,000.[18]
7. We were surprised that BIS and CLG were unable
to tell the Committee how many jobs had actually been created
or safeguarded through investment to date, or how many people
had actually been recruited to those jobs.[19]
Instead we were told about 135,000 jobs 'unlocked' as offers
to companies have been finalised.[20]
We were concerned that this does not reflect actual jobs on the
ground. The Departments later clarified that, according to monitoring
reports from the 88 projects where funding offers had been finalised,
2,442 new jobs had been created and 2,762 existing jobs had been
safeguarded.[21] Their
target for these projects was that 36,779 jobs would be created
or safeguarded over the economic life of the projects. The Departments
also referred to employment safeguarded in a further 73 projects
which have started on the promise of funding but where a final
offer is not yet in place.[22]
It is important that management information is sufficiently clear
on this point so that the Fund's actual impact can be measured
appropriately in future.[23]
8. The uncertainty about the number of jobs created,
and the difficulty of tracking employment and other impacts make
it even more important that the Fund is evaluated properly. Plans
for a full evaluation should have been made at the outset so that
there is a baseline in place to measure progress.[24]
However, evaluation plans are not yet in place which is particularly
disappointing given departments' long experience running similar
initiatives.[25] There
is a risk that the Fund's total costs and the wider benefits claimed
will not be measured accurately if departments do not define promptly
the data they need to collect.[26]
2 C&AG's Report, paras 1-3 Back
3
Qq 155-158 Back
4
Q 45 Back
5
Qq 35-37 Back
6
Qq 61-62, 180, 186; Ev 26 Back
7
Q 66 Back
8
Ev 29, 39 Back
9
Ev 26 Back
10
Qq 175-176, 184 Back
11
Ev 28-29 Back
12
Q 45 Back
13
Q 54; C&AG's report, para 3.17 Back
14
Q 65 Back
15
Qq 65-66 Back
16
Q 1 Back
17
Q 132 Back
18
Qq 51, 53; C&AG's report, paras 14, 2.5-2.6 Back
19
Qq 55-59 Back
20
Qq 51-55 Back
21
Ev 28 Back
22
Ev 28 Back
23
Qq 58-60 Back
24
Qq 191; C&AG's Report para 22 Back
25
Qq 187, 191, 192 Back
26
Qq 191 Back
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