The Regional Growth Fund
10 May 2012 03:58 PM
The National Audit Office has today published a report on the government fund to support private sector jobs and growth in places that rely on the public sector. The report finds that the initial £1.4 billion investment in the Regional Growth Fund could result in some 41,000 more full-time-equivalent private sector jobs in the economy than without the Fund. However, there was scope to have generated more jobs relative to the amount of grant awarded.
Overall, in line with the Fund’s objectives, the projects selected for investment offer more jobs for taxpayers’ money than the projects that were rejected and support private sector employment in places that rely more on the public sector. If the Fund delivers the expected 41,000 extra jobs, then the average cost per job would be £33,000, which would be broadly similar to the average cost of jobs under past programmes with comparable objectives.
The Fund has not optimised value for money because a significant proportion of the £1.4 billion was allocated to projects that offer relatively few jobs for the money invested. The expected cost per job varies considerably between projects, from under £4,000 per job to over £200,000 per job. Today's report concludes that applying tighter controls over the value for money offered by individual bids and then allocating funding across more bidding rounds could have created thousands more jobs from the same resources.
Rigorous evaluation will be required to quantify precisely the Fund’s overall employment impact. More than two thirds (28,000) of the 41,000 additional jobs are expected to be delivered indirectly, for example through knock-on effects in companies’ supply chains or the wider economy. The average project will last at least seven years. However, it is not clear how much of the Fund’s boost to the private sector will be sustained in the longer term.
It has taken longer than expected to turn conditional offers of grants for projects into final offers. Therefore, despite the government’s intention to get projects up and running quickly, only around a third have so far received final offers of funding.
Amyas Morse, head of the National Audit Office, said today:
“The Regional Growth Fund, which was set up to support growth and jobs in areas that rely on the public sector, could result in 41,000 additional jobs. However, some of the funding was allocated to projects that offered relatively few jobs for the money invested. To achieve better value for money from the further £1 billion now available, the government should develop more challenging targets for the number of jobs projects should generate relative to their cost.”
Notes for Editors
In its emergency budget of June 2010, the Government established a Regional Growth Fund. Private sector firms or public-private partnerships were invited to bid for a share of the £1.4 billion Fund for projects that supported the Fund’s objectives, and which would not have gone ahead otherwise. Applicants had to bid for at least £1 million each.
The Fund was initially allocated £1 billion to be spent between April 2011 and March 2014, increased to £1.4 billion in the October 2010 Spending Review. Originally, it was expected that funds would be allocated in at least three bidding rounds. In the event only two rounds were held. The Chancellor of the Exchequer announced a further £1 billion funding as part of his 2011Autumn Statement, to be allocated in future bidding rounds and released to successful bidders between 2012-13 and 2014-15.
Departmental estimates, based on figures from bids to the Fund, indicated that projects supported by the Regional Growth Fund could create or safeguard 328,000 private sector jobs, counting each job equally, regardless of how long that job lasts. This equates to 41,000 full-time equivalent jobs over at least seven years (the average economic life of supported projects), taking into account how many jobs might have been created had the Fund not been in place.
Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 880 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.