1. In 2010, the Government set out its plan for achieving
local economic growth in the White Paper, Local growth: realising
every place's potential.[1]
In it, the Government set out its objective "to
achieve strong, sustainable and balanced growth that is more evenly
shared across the country and between industries". The White
Paper also introduced Local Enterprise Partnerships and the Regional
Growth Fund, to which the Department for Communities and Local
Government and the Department for Business, Innovation and Skills
(the Departments) have since added further structures and funding
arrangements (Figure 1). On the basis of two Reports by
the Comptroller and Auditor General, we took evidence from the
Departments on the setup, performance and management of the four
largest new local growth programmes and Local Enterprise Partnerships,
the key new strategic body.[2]
2. The Departments are spending £3.9 billion
through these arrangements over the four years from 2011-12 to
2014-15.[4] A further £600
million will be available through rounds five and six of the Regional
Growth Fund from 2015-16 and, in that year, the majority of local
growth funding will be through a new Local Growth Fund totalling
£2 billion.[5]
3. Despite the large sums available, little money
has actually reached businesses. It is disappointing that this
situation has persisted since our September 2012 report on the
Regional Growth Fund.[6]
Of the £3.9 billion currently available to all the schemes
we examined, £3.5 billion remains to be paid to local projects.
Some £1 billion of the £3.9 billion to be spent by 2014-15
is currently parked with intermediary bodies such as local authorities,
Local Enterprise Partnerships and banks.[7]
4. We asked the Departments about progress with the
top ten largest programmes within the Regional Growth Fund. Of
these, the Royal Bank of Scotland is the only programme to have
distributed more than a small proportion of the funding available:
£69.8 million of the £70 million paid from the Fund.
The other nine programmes have distributed only £34.7 million
of the £350.6 million the Departments have paid to them.
In particular, Santander UK has only distributed £2.3 million
of the £53.3 million the Departments provided.[8]
The Departments explained that this programme is two years into
a nine-year scheme but admitted that it had underperformed against
expectations, and that the Departments have had experts working
with Santander. The Departments informed us that they are tracking
closely the programmes run by intermediaries and that they have
the ability to claw back funds from intermediaries that do not
distribute the funding quickly enough. To date, the Departments
have not clawed back any funding from programmes, including the
ten highest-value programmes. As this funding needs to be spent
by the end of 2014-15, there is a risk that it is already too
late for the Departments to claw back and re-distribute funding,
in time for it to be spent in a manner that would create the private
sector jobs intended and achieve value for money.[9]
5. A consequence of the slower than expected spending
is that the overall budget for the schemes has now backed up into
later years. We are concerned particularly about the significant
increase in spend needed through the Regional Growth Fund in 2014-15.
We asked the Departments how they are going to manage spending
£1.4 billion from the Regional Growth Fund in 2014-15 alone,
as this is more than the £1.2 billion they spent in total
over the previous three years. The Departments explained that
they now have signed agreements in place with recipients. They
recognised that it would be a challenge to spend the money by
the end of 2014-15, but did not consider it to be insurmountable.
We also heard that the Departments are reviewing the risk status
of every project and programme in receipt of money from the Regional
Growth Fund. Of approximately 400 projects, around 30 (8%) are
rated red, 110 (28%) are rated amber and 260 (65%) are rated green.[10]
6. We concluded in September 2012 that the Treasury's
decision to allow the Departments to use endowments to avoid surrendering
unspent monies from the Regional Growth Fund at the end of the
year risked value for money.[11]
Since then, HM Treasury has issued a revised version of Managing
Public Money and the Department told us that endowments will
not be used in the future. However, the Departments have continued
to find ways to meet their budget targets, including using Section
31 grants to local authorities, moving budgets into later years,
and making exceptional awards. We asked the Departments how they
were going to avoid shovelling money out at speed to meet the
budget target, as they have done in the past. The Departments
told us that the test of success is not spending to the penny,
but that they run an effective process; that they capture and
properly evaluate the schemes and that they get to a signed final
agreement as quickly as they can, and then support projects that
are ready to take the money.[12]
7. The Departments have also allocated around £18
million of the Regional Growth Fund for intermediary bodies running
the programmes to spend on administration. The Departments have
paid out £10 million for administration costs to date. The
amount allowed varies considerably across the ten largest programmes.
The Royal Bank of Scotland has distributed £69.8 million
of the £70 million allocated, and charged nothing for administration.
In contrast, of the £53.5 million allocated by the Departments
to Santander UK, some £5 million (9%), is allowed for administration
but Santander has paid out only £2.3 million to businesses.[13]
8. The schemes' progress in creating jobs, and other
outputs, has fallen well short of the Departments' expectations
(Figure 2). To the end of 2013, Enterprise Zones created
4,649 jobs, whilst the Growing Places Fund has secured 419 jobs.[14]
The Department for Communities and Local Government has also reduced
the estimate of jobs to be created in Enterprise Zones by 2015
from 54,000 to between 6,000 and 18,000. The Department acknowledged
that the initial estimate was wildly over-optimistic. The Department
told us that the original estimate of 54,000 jobs came from information
reported by Local Enterprise Partnerships, and that the Department
should have challenged the numbers before they were published.
The Department was "pretty confident" that Enterprise
Zones would deliver numbers of jobs in line with the original
estimate, but over a longer time period.[15]
| Initiative | Initial output expected
| Current Output expected
| Progress to December 2013
|
| Enterprise Zones | 54,000 additional jobs by 2015.
| Between 6,000 and 18,000 additional jobs expected by 2015.
| 4,649 jobs |
| Growing Places Fund |
217,000 jobs, 5,300 businesses and 77,000 houses will be created through the fund.
| 142,300 jobs, 1,400 businesses and 61,100 houses will be created through the fund.
| 419 jobs, 3 businesses and 155 houses.
|
| Regional Growth Fund |
328,000 jobs throughout England between 2011 and the mid-2020s, of which 41,000 will be additional. Cost per job averaged £30,400 in Round One.
| 550,000 jobs throughout England between 2011 and the mid-2020s, of which 77,700 will be additional. Cost per job averaged £52,300 in Round Four.
| 65,749 monitored jobs |
