Promoting economic growth locally - Public Accounts Committee Contents


Appendix: Funding and structures for local economic growth: update report from the National Audit Office to the Public Accounts Committee


Introduction

1. Our report, Funding and structures for local economic growth, was published in December 2013. This briefing note sets out the subsequent changes to the funding data and numbers of jobs created quoted in our report which have been provided by the Department for Communities and Local Government and the Department for Business, Innovation & Skills. An amended version of Appendix Three, summarising spending on local growth programmes, is attached. There are no changes to our conclusions and recommendations.

2. The main changes to data, and reasons for changes, are as follows:

ENTERPRISE ZONES

  • Overall funding for Enterprise Zones for the period 2012-13 to 2014-15 has decreased from £325 million to £300 million.
  • Funding from national non-domestic rates, known as business rates. The Department for Communities and Local Government has published revised information on the level of business rate increases from Enterprise Zones retained by local authorities and the business rates discounts awarded to business in Enterprise Zones. This has resulted in a reduction in funding for Enterprise Zones in 2012-13, 2013-14 and 2014-15. Funding data for 2012-13 is now based on information certified by auditors; data estimates for 2013-14 have been revised by local authorities; and the Department has revised its estimates for 2014-15.
  • Other funding for Enterprise Zones. The Department for Communities and Local Government has provided updated information on other funding for Enterprise Zones. The main change is an increase to 'Pinchpoint funding' in 2013-14 and a slight increase from other funds in 2014-15.
  • Jobs created in Enterprise Zones. In our report we said that by the end of 2012-13 the zones had created 3,080 jobs. The Department for Communities and Local Government, based on information from Enterprise Zones, has reported that between April 2012 and December 2013 the zones had created 4,649 jobs. The Department also reports 2,965 construction jobs filled in the period April to December 2013.

GROWING PLACES FUND

·  Survey. The information in our report is based on a survey conducted by the Department for Communities and Local Government in June 2013 which they published in a report, The Growing Places Fund Investing in Infrastructure, in November 2013. The Department conducted a new survey in January 2014.

·  Funding from the Growing Places Fund. From the January 2014 survey, the Department's estimate of payments to end beneficiaries in 2012-13 has increased from £56 million to £69 million; their estimate of payments in subsequent years has reduced with an increase in funds remaining to be paid after 2014-15.

·  Jobs and other outputs from the Growing Places Fund. In our report we note that the fund had created 112 jobs in 2012-13. From the January survey, the Department reports that the fund had created 419 jobs by December 2013, including 381 jobs in 2012-13. The Department has also reduced its estimate of the jobs, businesses and houses to be created through the Fund.

REGIONAL GROWTH FUND

·  Jobs created through the Regional Growth Fund. In our report we note that 32,000 monitored jobs were created or safeguarded by the end of 2012-13. In Progress report on the Regional Growth Fund we report that the total to the end of December 2013 is 44,400.

·  Funding from the Regional Growth Fund. Twenty-nine bids for projects and programmes, totaling some £74 million, have withdrawn since the data in our report was compiled. As a result we cannot identify where this money has been allocated geographically. In Progress report on the Regional Growth Fund we report that a total of £136 million of withdrawn projects and programmes from rounds one to four have not yet been awarded to alternative bids. The total value of the Regional Growth Fund is unchanged and the Department advises that there is no impact on the spending profile.

3. Updates to individual paragraphs and figures in our report are set out below. Changes in the text are underlined.

Key facts

4. Updates to key facts on page 4 of our report are as follows:
32,000jobs reported to have been created or safeguarded directly through the Regional Growth Fund by the end of 2012-13
44,400jobs reported to have been created or safeguarded directly through the Regional Growth Fund by the end of December 2013
£599 million (89 per cent) capital element of the Growing Places Fund allocated to local projects by Local Enterprise Partnerships from the Department's June 2013 survey
£606 million (90 per cent)   capital element of the Growing Places Fund allocated to local projects by Local Enterprise Partnerships from the Department's January 2014 survey

Summary

5. Figure 1 has been updated to reflect the changes in funding for Enterprise Zones.

Figure 1

Changes to funding for local economic growth, 2011-12 to 2014-15


NOTES

1.  Reflects actual (before 2013-14) and forecast (2013-14 onwards) spending by departments on the new local growth programmes covered in this report; Regional Development Agency legacy spend is forecasts only. City Deal spend is estimates only. Recycling of funds used for loans is not reflected. The data is also at Appendix Three.

2.  Wider growth-related spending by central and local government (see paragraphs 2.14 to 2.15) is shown as context but is not available for 2012-13 onwards.

Source: National Audit Office analysis of departmental data

6. Information in Paragraph 11 has been updated to reflect a change in the profile of funding provided to end beneficiaries via the new local growth programmes with an increase in 2012-13 and 2014-15.
11 The transition from the Regional Development Agencies to the new local growth landscape covered in this report shows a marked dip in funding. In 2012-13, £330 million was provided to end beneficiaries via the new growth programmes, alongside £66 million of Regional Development Agency legacy spending. This compares to £1.5 billion spent by the Regional Development Agencies two years previously in 2010-11, and estimated payments to end beneficiaries of £2 billion through the new local growth programmes in 2014-15. There are two main reasons for this dip. First, government closed the Regional Development Agencies rapidly, as planned to realise savings, but introduced the new local growth programmes gradually over a different time frame. Second, the Regional Growth Fund had a slow start and government has not allocated funding as quickly as originally planned (paragraphs 2.5 to 2.11).

7. Paragraph 14, third bullet reports, based on its June 2013 survey, the Department for Communities and Local Government's estimate of spend and jobs created through the Growing Places Fund in 2012-13 as follows:

·  Local Enterprise Partnerships allocated £599 million (89 per cent) of capital funds to 305 local infrastructure projects by mid-2013. However these projects only spent an estimated £¬56 million and created 112 jobs in 2012-13 (paragraphs 3.17 to 3.19).

8. From its January 2014 survey, the Department for Communities and Local Government now estimates that projects spent £69 million and created 381 jobs in 2012-13. The Department also reports that Local Enterprise Partnerships had allocated £606 million (90 per cent) of capital funds to 309 projects by December 2013 and that these projects created 419 jobs by December 2013.

9. Paragraph 14, fourth bullet reports the number of jobs created through the Regional Growth Fund. With respect to the Regional Growth Fund, our report says:

·  The Department reported that the fund created 32,000 jobs by the end of 2012-13 against a target of 31,500.

10. The Department for Business, Innovation & Skills reports that a total of 44,400 jobs had been generated by the end of December 2013.

11. The Departments have provided the following update to paragraphs 16 and 4.3 regarding the governance of local economic growth initiatives:

·  Single local growth team: The Departments have established a single local growth team, comprising officials from the Department for Business, Innovation & Skills, the Department for Communities and Local Government, and the Cabinet Office cities policy unit under a single director.

·  Growth Deals: Governance arrangements are in place for Growth Deals. The new local growth director is the Senior Responsible Owner and chair of the programme board, which held its first meeting on 6 February.

·  The Departments are forming a senior Local Growth Strategy Board to work across the wider local growth agenda. The first meeting will be held in March 2014.

·  The Departments have also formed a senior officials group to support the local growth cabinet committee. The group held its first meeting on 20 February 2014.

Part Two

12. Figure 4 in our report has been updated to reflect changes in funding.

Figure 4

Government spending on Regional Development Agencies and new local growth funds and structures, 2005-06 to 2014-15 - payments by departments. There has been a marked dip in government funding


Notes

1.  Spending by Regional Development Agencies is from their annual reports and accounts and excludes closure costs.

2.  Data for 2013-14 onwards is budget data. Earlier data is outturn.

3.  Figures have been rounded.

Source: National Audit Office analysis of departmental data

13. Paragraph 2.6 has been updated to reflect a reduction in spend on local growth programmes in years 2012-13 and 2013-14.
2.6. Spending of £1.2 billion on the new schemes in 2011-12, alongside spending linked to Regional Development Agencies, raised total spending on local growth programmes to £2 billion for that year. This compares with spending of £269 million the following year, and £757 million in 2013-14.

14. Paragraph 2.8 has been updated to reflect a reduction in spend reaching end beneficiaries in 2012-13.

2.8. Consequently, while the departments spent £1.2 billion on the new funds and structures in 2011-12, only £53 million reached end beneficiaries in that year (see Figure 5 overleaf and Appendix Three). An estimated £330 million reached end beneficiaries from the new funds and structures in 2012-13. This means that of the funding currently allocated by government to these programmes, a further £3.5 billion remains to be paid to local projects; £1 billion by intermediaries and the balance held by the departments.

15. Figure 5 in our report has been updated to reflect a reduction in spend on local growth programmes in years 2012-13 and 2013-14.

Figure 5

Government spending on Regional Development Agencies and new local growth funds and structures, 2005-06 to 2014-15 - payments to end beneficiaries. An estimated £330 million reached end beneficiaries from new schemes in 2012-13

Notes

1.  Spending by Regional Development Agencies is from their annual reports and accounts and excludes closure costs.

2.  £357 million of Regional Growth Fund currently remains with intermediaries. It is not included in this figure but has to be paid to end beneficiaries by the end of 2014-15.

3.  Excludes £57 million in revenue funding via the Growing Places Fund.

4.  Figures have been rounded.

Source: National Audit Office analysis of departmental data

16. Figure 7 in our report has been updated:

·  due to changes in the funding of Enterprise Zones;

·  to reflect new information from the Department for Communities and Local Government providing more of the funding data broken down by Local Enterprise Partnership area;

·  to reflect the withdrawal of successful bids from the Regional Growth Fund; and

·  to use the latest available 2012 population estimates published by the Office for National Statistics since our report, which used estimates for 2011.

17. The category ranges used in Figure 7 are based on half the standard deviation from the mean for the Local Enterprise Partnership growth funding per head of population. The ranges have been adjusted to reflect the new mean and standard deviation.

Figure 7

Funding per capita from local growth initiatives covered in this report. Areas with highest growth funding tend to be in the North, major cities and the South West



Notes

1.  Funding 2011-12 to 2014--15 per head of population aged 16 to 64 by Local Enterprise Partnership area.

2.  Excludes 'exceptional' Regional Growth Fund, funding through national Regional Growth Fund programmes and non-allocated Enterprise Zone funding.

Source: National Audit Office analysis of departmental data

Part Three

18. Paragraph 3.4, bullet three, and paragraph 3.14 report the number of jobs created in Enterprise Zones. Our report says:

·  The government announced the new Enterprise Zones in March 2011. They were operational from April 2012. The Department for Communities and Local Government reported that only 3,080 jobs were created in 2012-13. Seventy-five per cent of these jobs were from seven of the twenty-four zones, while six zones produced ten jobs or fewer.

19. In their update, the Department for Communities and Local Government reports that 4,649 jobs have been created in Enterprise Zones in the period April 2012 to December 2013. From this updated information, two-thirds of these jobs were from seven of the twenty-four zones, while two zones produced ten jobs or fewer. The Department also reports 2,965 construction jobs filled in the period April to December 2013.

20. Paragraph 3.4, bullet three reports the total number of infrastructure projects supported by the Growing Places Fund, alongside the number which are under way, and jobs created in 2012-13. Our report says:

·  From information provided to the Department by Local Enterprise Partnerships in its June 2013 survey, the fund is supporting 305 infrastructure projects, 159 of which are under way, and created 112 jobs in 2012-13.

21. From its January 2014 survey, the Department for Communities and Local Government reports that by December 2013, of the 309 infrastructure projects supported by the Growing Places Fund, 155 are under way and that the Fund has created 419 jobs, of which 381 were created in 2012-13.

22. Paragraph 3.4, bullet four, and paragraph 3.23 report the number of jobs created through the Regional Growth Fund. With respect to the Regional Growth Fund, our report says:

·  The government announced the Regional Growth Fund in October 2010 and four bidding rounds have been completed with the fifth currently under way. However, the Department reported that the scheme had generated only 2,145 new monitored gross jobs by the end of 2011-12. A total of 32,000 jobs had been generated by the end of 2012-13.

23. The Department for Business, Innovation & Skills reports that a total of 44,400 jobs had been generated by the end of December 2013.

24. Paragraphs 3.18 and 3.19 report the allocation of funding and estimates of outputs from the Growing Places Fund in 2012-13 as follows:

3.18 From the June survey the Department calculates that of the capital funds provided by government, Local Enterprise Partnerships have allocated £599 million (89 per cent) to local projects. Those local projects spent an estimated £56 million in 2012-13. Local Enterprise Partnerships have allocated 82 per cent of capital funds to projects as loans and will be able to reuse those funds as loans are repaid. The Department did not ask how the £57 million of revenue spend has been used.

3.19 The Department reported, from the June survey, that 305 projects are being supported including site preparation, transport infrastructure, housing, office and commercial floor space. Based on responses covering some 70 per cent of projects, the Department estimates that 217,000 jobs, 5,300 businesses and 77,000 houses will be created through the fund and at least 21 projects fund transport infrastructure. The Department reports that the fund had created 112 jobs in 2012-13 with no information on new businesses and houses or improved transport. The Department emphasises that the figures are 'gross' estimates. They do not consider, for example, how the addition of the fund could reduce development elsewhere.

25. The Department for Communities and Local Government collates and reports information (including estimates) submitted by Local Enterprise Partnerships. From its January 2014 survey, the Department now reports that projects spent £69 million and created 381 jobs, three business and 57 houses in 2012-13. The Department also reports that the Growing Places Fund had created a total of 419 jobs, 3 businesses and 155 houses by December 2013. The Department estimates that of the capital funds provided by government, Local Enterprise Partnerships have allocated £606 million (90 per cent) to local projects to December 2013, and that partnerships have allocated 83 per cent of capital funds to projects as loans and will be able to reuse those funds as loans are repaid. The Department reports that there are 309 projects now being supported by the Fund and that 70 projects are funding transport infrastructure.

26. In the Department's January 2014 survey, the Local Enterprise Partnerships have also reduced their estimates of the outputs (jobs, businesses and houses) expected to be created through the Fund, and have provided information on the number created to date, as shown in the following table.
Growing Places Fund output estimates
Output category Total number of outputs expected to be created by the Fund Proportion of projects creating outputs as a percentage of total projects (%) Number of outputs created to December 2013 Date by which outputs total expected to be reached
Jobs142,300 70419 2033
Businesses1,400 173 2026
Housing61,100 27155 2033
Source: Department for Communities and Local Government survey, January 2014

27. The Departments have provided the following update to paragraphs 3.26 and 3.27 with respect to Growth Deals:

·  All 39 Local Enterprise Partnerships submitted draft strategic economic plans to government in December 2013. Officials from across a number of government departments and agencies have reviewed these plans against the criteria set out in the guidance. These criteria are: ambition and rationale for intervention; value for money; and delivery and risk.

·  Ministers have been holding challenge sessions with Local Enterprise Partnerships and government has provided written feedback to each of the partnerships.

·  Local Enterprise Partnerships are due to submit their final strategic economic plans to government by the end of March 2014.

Part Four

28. The Departments have provided the following update to paragraphs 16 and 4.3 regarding the governance of local economic growth initiatives:

·  Single local growth team: The Departments have established a single local growth team, comprising officials from the Department for Business, Innovation & Skills, the Department for Communities and Local Government, and the Cabinet Office cities policy unit under a single director.

·  Growth Deals: Governance arrangements are in place for Growth Deals. The new local growth director is the Senior Responsible Owner and chair of the programme board which held its first meeting on 6 February.

·  The Departments are forming a senior Local Growth Strategy Board to work across the wider local growth agenda. The first meeting will be held in March 2014.

·  The Departments have also formed a senior officials group to support the local growth cabinet committee. The group held its first meeting on 20 February 2014.

Appendix Three

29. Appendix Three has been updated with the new spending profiles for Enterprise Zone funding and payments to beneficiaries from the Growing Places Fund. These changes have been reflected below.
Spending on local growth programmes
Spend by Departments (£ million) 2010-112011-12 2012-132013-14 2014-15Total to 2014-15 Funds remaining after 2014-15
Regional Growth Fund rounds 1-4 0465 160529 1,3932,547 63
Of which paid to intermediaries 0418 72- -- -
Growing Places Fund 0730 00 0730 0
Of which paid to intermediaries 0730 00 0730 0
Enterprise Zones 0 04 66230 3000
City Deals 0 033 11872 2230
Local Enterprise Partnerships 06 621 2154 0
Total spend by departments on new local growth programmes 01,201 203734 1,7163,854 63
Regional Development Agencies—direct spend 1,461585 00 02,046 0
Regional Development Agencies—legacy spend 0230 6623 5324 0
Total1,461 2,016269 7571,721 6,22463

Payments to end beneficiaries
Regional Growth Fund 047 218529 1,3932,187 63
Of which from intermediaries 03 130- -- -
Growing Places Fund1 00 69151 251470 203
Of which from intermediaries2 00 69151 251470 203
Other new local growth programmes 06 43205 323577 0
Total payments to end beneficiaries from new local growth programmes 053 330885 1,9673,234 266
Regional Development Agencies—direct & legacy spend 1,461815 6623 52,370 0
Total3 1,461868 396908 1,9725,604 266
Notes

1.  The Department monitored the allocation of £673 million in capital funding from Local Enterprise Partnerships to local schemes. A further £57 million in revenue funding is not recorded here.

2.  Estimated based on the January 2014 survey and adjusted to remove 'over-programming' where partnerships allocate more than they have been awarded in the expectation that not all projects will go ahead.

3.  Total payments to end beneficiaries from 2013-14 to 2015-16 will be larger as £357 million remained with Regional Growth Fund intermediaries at the end of 2012-13.

Source: National Audit Office analysis of departmental data



 
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