£1bn fund 'smokescreen' denied

Amid concern spending cuts will cost thousands of jobs and cause lasting damage because of the reliance on the public sector in parts of Yorkshire, the coalition yesterday unveiled its Regional Growth Fund.

It will allow businesses and companies to apply for funding over two years to set up or expand projects which create employment and help tackle the North-South divide. David Cameron has ordered ministers to take more action to get banks lending again, saying "we need to go further", and the lack of lending was the "biggest thing" hindering firms.

The Government has set a September deadline for council leaders and businesses to decide how they want to replace regional development agencies (RDAs) with local enterprise partnerships. The move will see a business leader chairing a board of councillors and business figures. The partnerships are likely to cover smaller areas to devolve more power.

The announcements prompt-ed criticism from Labour and business leaders amid concern the 1bn fund will be the sole source of funding for boosting regional economies, effectively cutting 2bn from the amount spent on regional development agencies like Yorkshire Forward over two years and starving the new partnerships of cash.

But Mr Cameron insisted extra money would still be available, telling the Yorkshire Post: "Local enterprise partnerships will get additional money in the same ways that regional development agencies did. Obviously there are reductions in spending taking place. The point about local enterprise partnerships is regional policy hasn't worked.

"Regional disparities have got worse and also there's greater disparities within a region than there are between regions."

As he was quizzed by Yorkshire Post readers, Mr Cameron repeated his antipathy to regional government, insisting even promoting tourism could be at a more local level. Council bosses are set to establish several partnerships, including one around Leeds, one around Sheffield, one for York and North Yorkshire, and another one or two covering the Humber and East Yorkshire. There are mixed views over whether there should be any region-wide body – albeit vastly slimmed down – as well.

Labour Shadow Business Secretary Pat McFadden demanded to know whether the funding for the Regional Growth Fund was effectively a cut. "The Government seems to be vacating the pitch when it comes to having a plan for economic growth."

Hayley Johnson, of Leeds, York and North Yorkshire Chamber of Commerce, said: "It is disappointing that the Regional Growth Fund has been slashed in comparison to that of the RDAs. This is a big cut to business and there will be significantly less resources to support private sector growth."

Mr Cameron said having the Cabinet meeting in Yorkshire "focuses the mind" on the need to get economies growing across the country, as Ministers agreed to put as much emphasis on securing growth as has been placed on cutting the deficit.

But he cautioned against hopes that cost-cutting could lead to scores of civil servants arriving in Yorkshire from Whitehall, something Labour had been planning. "Some level of relocations, yes, but what we should be asking first is this something Government needs to do, or something we can do more efficiently?" he added.