Departments ‘don’t know what they’re doing with RGF’

The head of the Commons Public Accounts Committee issued a withering attack on the Regional Growth Fund's management on Tuesday as the committee published a report stating only £60m had reached front-line projects out of £1.4bn allocated in June 2010.

Margaret Hodge MP, chairman of the Committee of Public Accounts, today said: "Given the dire state of the economy, it is nothing short of scandalous that so few projects funded by the Regional Growth Fund have actually got off the ground. Some two years into the programme, of the £1.4bn allocated only £60m had reached front-line projects.

"The rest of the £470 million spent so far had been parked in intermediary bodies, over which the departments have limited control. It is unclear what is being done to make sure that money is not wasted but spent on creating real jobs."

The intermediary bodies are often public-private partnerships such as local enterprise partnerships, where the accountable body is the public sector, often local authorities.

The committee's report was based on the evidence of accounting officers at the Department for Communities & Local Government and the Department for Business Innovation & Skills.

The committee said in its conclusions: "We were also surprised that the Accounting Officers could not tell us how or where intermediaries are holding cash or how much of the Fund could be used up on intermediaries' management charges. Information provided subsequently by the Departments shows that management fees vary significantly between programmes indicating that the Departments do not have a firm grip on this issue."

Hodge added: "At the time of our hearing, the departments could not tell us how many jobs had actually been created. They then wrote to us admitting that only 2,442 new jobs had been delivered in projects with final offers of funding in place, while another 2,762 existing jobs had been protected. That is against a target of 36,800 over the lifetime of these projects.

"For projects to count as value for money under the rules of the Fund, the economic benefits simply had to outweigh the public cost. This low threshold allowed projects to be selected that offered at best marginal benefits for the taxpayer. While the cost per job was £60,000 or less in three-quarters of the projects, in some cases it reached over £200,000.

"It is unacceptable that the departments involved, despite decades of experience with similar programmes, still do not know how they will evaluate the success or otherwise of the Fund in producing jobs and growth. We want to know in detail by the end of the year how they intend to do so."

Business lobby group the CBI responded to the report. Katja Hall, CBI chief policy director, said: "It is disappointing that the scheme has only awarded £60m since its inception in June 2010. It has the potential to act as a catalyst for much-needed jobs and growth. But we need to simplify the application process, which experience has shown is burdensome and deters companies from applying, so this needs to change."

The Government established the Regional Growth Fund in June 2010 to support projects with the potential to deliver economic growth and additional, sustainable private-sector jobs, particularly in areas that rely more on the public sector for employment. There was £1.4bn allocated for competing projects and programmes in two bidding rounds during 2011.

Ministers decided which projects and programmes to support based on advice from a panel chaired by Lord Heseltine and analysis from officials. The Permanent Secretary for DCLG has overall accountability for ensuring delivery of value for money from the Fund. The Secretary of State for Business Innovation & Skills has ministerial accountability. A further £1bn has been made available for future rounds, for which accountability is likely to be shared between DCLG and BIS.

View the report here http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/104/10402.htm