Lord Heseltine mounted a staunch defence of the financial services industry yesterday on a visit to South Yorkshire to promote the Government fund designed to spur private sector job creation in the areas that will be hit hardest by public spending cuts.
The multi-millionaire Tory grandee said the 1.4bn regional fund will be allocated to select projects across the country which can demonstrate strong potential for economic growth.
It is part of the coalition's strategy to rebalance the economy away from an over-dependence on the public sector as ministers try to reign in a massive budget deficit following the credit crunch and recession.
In an interview with the Yorkshire Post, Lord Heseltine, who chairs the fund's advisory panel, attacked suggestions that the Government had failed to tackle the issue of bankers' bonuses at a time when many public servants face losing their jobs.
"Would you like to see the financial services industry hammered with all the additional losses of jobs that would create?
"The financial services industry is one of the success stories of this country and while there is no doubt at all there have been practices which can be criticised, you can't run a successful economy without the banks," he said.
Yorkshire is likely to be badly affected by spending cuts and is losing hundreds of millions of pounds following the decision to axe its regional development agency, government office and Business Link service.
James Newman, an influential Yorkshire businessman who chaired yesterday's roadshow event at the Advanced Manufacturing Park, told delegates that the withdrawal of public sector funding has left a "vacuum" in Yorkshire and created "a very uncertain business environment", which has damaged business confidence.
But Lord Heseltine said the UK private sector is recovering significantly, which will continue throughout 2011 and 2012, and Yorkshire "is one area that's very much in our minds" for the fund.
"There will be, with or without our fund, significant private sector jobs created, but I think what we want to do is to give an extra push in those areas where the public sector has been disproportionately important," he said.
He said the advisory panel would look for projects where there is already private sector investment lined up and he predicted the total expenditure would far exceed the Government's contribution.
Lord Heseltine said he was keen to see Government efforts to reduce the North-South divide. He added: "I come from Swansea in South Wales, so all my life I have been aware of the predominance of London and the South East and for all sorts of reasons over my lifetime the concentration of resource in London has been an ongoing process. I'm personally very enthusiastic to see things done by Government either to reduce that or to reverse it. To reduce it would be the first step."
He dismissed the possibility of a double-dip recession in the North of England, which had billions of pounds of public sector investment over the last decade.
Pointing to forecasts that the UK economy will grow by two per cent this year, he said this would create 400,000 new private sector jobs, against an expected loss of up to 80,000 jobs in the public sector.
"If you want to take a relatively optimistic situation, 2010 has been a very difficult year," he added. "A lot of private sector companies have been shedding jobs, the public sector has been shedding jobs, and yet unemployment has hardly moved. Much, much less than people forecast. So something has been going on in the job creation world, even though in those difficult circumstances. My guess is most of the private sector has done the job shedding that it had to do and is now moving into a much more favourable climate."
Asked how today's challenge compared to that faced by the Government in the early 1980s, he said: "It was worse in the 1980s. The trade union situation was diabolical. The inflationary levels were horrendous and the mood in the country was much more difficult.
"People understand there has been a world crisis, aggravated
in many ways by the previous government domestically here, but as David Cameron has rightly said, we are all in this together – the banks were too lax, the Government didn't regulate enough, people borrowed too much money, it was part of a culture across the world which has had to be changed."
The first round of bids to the regional growth fund must be submitted by January 21.
The Government has said there will be at least two more rounds for bids, but has yet to set a full timetable.
Lord Heseltine said it was too early to say what effect the growth fund would have on Yorkshire, but added that "the enterprise culture here will ensure we get some very exciting bids".
End to culture of 'dependency'
Compare the regional growth fund to the regional development agencies at your peril, one of its masters warned yesterday.
Sir Ian Wrigglesworth, deputy chairman of the advisory panel, said the fund would not invest in property or employ hundreds of staff.
Instead, it will leverage in investment from the private sector and financial institutions to create jobs in areas that need them most.
The North East businessman and former MP told yesterday's roadshow that there is "almost a dependency culture" in some parts of the business community on public sector funding.
"Some businesses seem to think they need a grant just to run a business," he said. "That's the exact opposite of what we're about. What we want to see are the regions standing on their own feet without Government support, because if you don't have a market, if you have a subsidised situation, you are never going to get the innovation and dynamism."