The Chamberlain News

Spotlight on LEPs as most of £2.6 billion Regional Growth Fund remains unspent

Critics of Local Enterprise Partnerships have been given fresh ammunition after it emerged more than three-quarters of a government fund set up to boost regional economies remains unspent.

Of the £2.6 billion allocated through the Regional Growth Fund in June 2010, only £492 million has actually found its way to local schemes according to the National Audit Office.

Business-led Local Enterprise Partnerships are responsible for putting forward projects and making bids for funding from the RGF.

But two government departments – Communities and Local Government and the Department for Business, Innovation & Skills – decide whether the applications represent value for money and should be approved.

The National Audit Office report says that after slow progress cash is starting to get to businesses more quickly.

The spending watchdog also says the number of jobs created or protected since the fund was set up in 2012 had increased by 22,100 to 44,400.

But the average cost of creating each additional job now stands at £37,400 – an increase of 13 per cent since the fund started.

And about half of those jobs, the NAO says, were covered by just five of the 291 operational schemes. Only 19 per cent of the total fund has actually reached the regional projects that have submitted successful bids.

The Greater Birmingham and Solihull LEP is one of a small number of local enterprise partnerships to have had projects and funding approved. Schemes include a mezzanine loan fund to help businesses grow, as well as investment for Birmingham Airport, Jaguar Land Rover, NVC Lighting in Rubery and TRW Automotive in Birmingham.

West Midlands LEPs were allocated £124 million of RGF money in October 2012. This included a £20m allocation for a business support project called Green Bridge.

Controversy over the NAO report deepened after Birmingham Labour MP Steve McCabe accused the city council of ‘hoarding’ more than  £60 million of RGF money designed to boost the automotive supply chain.

Mr McCabe told the that only £7.6 million of the £60 million had been passed on to businesses. The council denied the claim, insisting it was keeping to agreed timetables.

A GBSLEP spokesman explained that the LEP had no direct responsibility for spending RGF money. It simply supported bids from firms and organisations.

He added: “The LEP supported a bid for the Advanced Manufacturing Supply Chain programme which is worth £25m from Round 2 and covers GBSLEP, Coventry and Warwickshire, Black Country and Liverpool.

Eighteen projects have been supported by GBSLEP to date, creating 91 jobs and safeguarding 226 jobs.

GBSLEP also supported the bid for the Green Bridge Programme, worth £19 million which was launched in July last year, covering Greater Birmingham, Coventry and Warwickshire, Stoke and Staffordshire, Marches and Worcestershire, delivered by Birmingham City Council.

This has supported 151 business, created 1,691 jobs and safeguarded 938 jobs, according to GBSLEP.

The NAO report says the Department for Communities and Local Government and Department for Business, Innovation and Skills face a “significant challenge” to spend the money as quickly as was expected.

The Government established the Fund in June 2010 to encourage private sector enterprise by providing support for projects with significant potential for economic growth; and to support public sector dependent areas and communities to make the transition to sustainable growth and prosperity led by the private sector.

The NAO report finds that, following concern by the Public Accounts Committee that the cost benefit threshold for projects has been set at too low a level, the departments have introduced a revised expectation that the ratio of benefits to costs should be at least 2:1 before final offer letters are signed.

Business Minister Michael Fallon insisted the fund was working.

Mr Fallon said: “Over £2.6 billion of RGF investment has now been allocated to 400 local projects and programmes, which is unlocking nearly £15 billion of private investment and delivering 550,000 jobs.”

However, shadow minister for small business, Toby Perkins, said more than a third of winning bidders under the scheme’s first round had lost patience and pulled out.

He said: “This report highlights ongoing concerns over bureaucracy and delays in money getting out of the door to the businesses which need it.

“The RGF was set up to boost private sector growth in deprived areas but instead we are seeing areas and regions held back.”