Flagship fund spent £200,000 creating single job

An independent report by the National Audit Office (NAO) found only one in eight of the 328,000 jobs due to be generated through the £1.4bn regional growth fund would not have happened without the Government’s intervention.

Warning “value for money was not optimised” by fund managers, the auditors said in some cases more than £200,000 has been spent creating a single job.

Amid concerns the scheme has been beset by delays, the report confirmed too few resources were initially put in to administering the fund.

The report is the latest blow to the Government’s regional strategy after another flagship scheme – to create powerful elected mayors in England’s 10 largest cities – was roundly rejected by voters last week.

Senior Government aides attacked the report’s conclusions last night, insisting its estimates are based on pure “hypothesis”.

But Labour has seized upon the study as further proof the Government is not delivering on its pledge to boost regional economies and narrow the North-South divide since dismantling regional development agencies.

Rachel Reeves, the Leeds West MP and Shadow Chief Secretary to the Treasury, said: “We feared the regional growth fund would prove a poor replacement for Yorkshire Forward, and this report shows we were right to worry.

“The fund is failing to deliver on the promises made by the coalition, beset by delays and a haphazard bidding process.

“The whole process has been run from Whitehall – no substitute for the way Yorkshire Forward enabled the development of a coherent economic strategy by local business leaders in collaboration with public bodies.”

The regional growth fund was launched nearly two years ago to support enterprise and promote business in parts of England traditionally reliant upon the state.

Firms and other bodies bid for funds to support specific schemes where they can show large numbers of jobs will be created.

The NAO report on the first £1.4bn of awards did find the fund was being targeted at parts of the country most in need.

But it estimated that of the 328,000 jobs to be created, only 41,000 could be directly attributed to the fund’s operation.

The study also suggested that cash did not always go to the best bidders, and that the taxpayer would have received much better value for money if bids had been more closely scrutinised.

“Over 90 per cent of the net additional jobs could have been delivered for 75 per cent of the cost,” the report said. “The cost per net additional job supported by the fund varies from under £4,000 to over £200,000.”

The fund has previously faced criticism for being slow to distribute cash.

The report reveals no dedicated administrative team was set up to implement the fund – a mistake that has now been rectified.

Shadow Business Secretary Chuka Umunna said: “The scale of incompetence and confusion is staggering. It is no wonder the fund has been beset by delays.”

Ministers last night tried to highlight the positive aspects of the report, which does confirm that 328,000 jobs could be created through schemes getting cash.

“The report recognises the fund is working,” said Business Secretary Vince Cable. “It shows the fund is set to create and protect 328,000 jobs for people in communities that need the most support and help companies grow.

“It shows we chose to support the highest quality bids offering best value for money.”

Tory peer Lord Heseltine, chair of the fund’s advisory panel, rejected the finding that only 41,000 extra jobs are being created.

“It’s a series of assumptions based on a worst-case scenario,” he said. “The bids that we accepted, we did on the condition they would create 328,000 jobs. That was the basis of the deals.”