Rachel Reeves: We need less rhetoric and more action to secure crucial investment and jobs

While the £450m investment is welcome, it is a drop in the ocean compared with the budgets of the regional development agencies that the Government is winding up. Moreover, the successful bids are far out-numbered by the unsuccessful ones by a ratio of 10 to one. If Nick Clegg is so “bowled over” by the quality of bids and is so sure of the private sector money that this investment will leverage, then does he not agree with John Denham, the shadow Business Secretary, that the funding for regional economic growth should match the Government’s rhetoric?

Labour has proposed that, by re-instating the tax on bank bonuses, £200m extra could be allocated to the Regional Growth Fund so we have the chance to build the economy of the future for which we should all be striving.

We have heard warm words from the Government about the need to build jobs and growth. Indeed, launching his “Budget for growth”, George Osborne said it was “a Budget that encourages enterprise; that supports exports, manufacturing and investment; that is based on robust independent figures: a Budget for making things, not for making things up”.  But the Government’s own Office of Budget Responsibility was underwhelmed by the rhetoric, knocking a further 0.4 percentage points off the UK growth forecast for 2011, taking it from 2.6 per cent before the Chancellor’s first Budget to 2.3 per cent, then to 2.1 per cent in November and now to 1.7 per cent – startlingly down by almost one per cent in less than a year. 

Britain is now expected to grow at a slower rate than the US, Germany and the eurozone this year, following the contraction of UK economy by 0.5 per cent in the last quarter of 2010. On top of that, this week’s retail sales numbers recorded the worst drop in overall sales since records began, unemployment is forecast to rise to 8.2 per cent this year, while employment is now expected to be lower even in 2015 when the recovery should be fully embedded.

Yesterday’s unemployment figures showed that youth unemployment edged closer to one million in the three months to February and that the number of women claiming Jobseeker’s Allowance has reached a near 15-year high. Business leaders are increasingly anxious about the Government’s growth credentials – over the weekend business chiefs at the Carphone Warehouse, ITV and Next said that projections for private sector growth were too optimistic, and the former head of the CBI, Sir Richard Lambert, said the Government had “failed to articulate in big-picture terms its vision of what the UK economy might become under its stewardship”.

Centre for Cities, the think-tank, has sketched out what it thinks is needed for a better-balanced economy and growth across the UK and points to 11 cities that it says must be the engines for growth. Leeds is one of those cities, and indeed is cited as one of the five ones to watch for potential too.

Yet, in the allocation of regional growth fund largesse, Leeds gets nothing, despite our creaking transport infrastructure, shortage of housing and growth potential. Another city that the Centre for Cities says is crucial for recovery and for private sector job growth is Sheffield, home of Sheffield Forgemasters who had their loan of £80m pulled back in June. Dr Cable said that Sheffield Forgemasters could instead get support from the Regional Growth Fund, but they are not on the list of winners either.

So while the £450m will be welcomed by the 50 successful schemes, and will be lauded by the Government as a sign of their commitment to growth, the reality is that the rhetoric outstrips practical policies to secure the investment and jobs across the country that we need.

Employers and employees are crying out for a vision of what the economy might look like after the austerity measures, a hope that we may be sowing the seeds of a sustainable recovery. But this week’s growth fund announcements will do very little to provide the confidence that the Government understands the scale of the challenge, or the scope of the opportunities. 

Given the Government’s admission that the quality of bids is so high, I urge them to do two things now. 

First, match Labour’s commitment to increase the size of the Regional Growth Fund by £200m by repeating the tax on bank bonuses. And second, instead of requiring the outgoing regional development agencies to sell their assets – including office space and fantastic assets like Tower Works in Leeds, let the Local Enterprise Partnerships use those assets to fund innovative and entrepreneurial projects in the regions.

These assets, across England, are worth £500m – exceeding the value of the successful bids unveiled today – and could kick-start the jobs and growth that are needed to build a stronger and more secure economic recovery in Leeds, Yorkshire and across the country.

Rachel Reeves is Labour MP for Leeds West