Gordon Marsden
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Mr Gordon Marsden (Blackpool South) (Lab)
It is a pleasure to serve under your chairmanship, Mrs Riordan, as it was to serve under that of Mr Gray. I warmly congratulate my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith), not just on her timing, but on the excellence of the arguments that she put forward. Indeed, I welcome all the interventions and comments made by Labour Members, because we have been trying to address the issue in the round.
It is always important for hon. Members to speak up for their constituencies, as the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) and others on both sides of the Chamber have done. However, the debate is about the overall effectiveness of the regional growth fund, and it is on its overall effectiveness, compared with previous funding streams, that it should be judged. It is relevant in that context to say a little about the comparison between the regional development agencies and the regional growth fund.
I am sorry that the Government do not like the repetition, but I repeat that it is a fact that the regional growth fund will have only a third of the money that the RDAs would have had over the same period. It is not surprising, therefore, that both rounds were massively over-subscribed. More than £6 billion-worth of bids were submitted for the two rounds, with only £1.4 billion up for grabs. As my hon. Friend the Member for Penistone and Stocksbridge pointed out, in the second round, three out of every four bids put forward were—I will be charitable—not able to receive funding under the RGF. The Government have now rather slyly confirmed that there will not be a third round. The Minister might want to comment further on that, because it was certainly indicated previously that there would be. We must realise that the bids that have not succeeded face 18 months without the prospect of support from the regional growth fund, in what is probably the grimmest economic climate for many years.
Having said that, I should be charitable to the Government. It is perhaps not surprising that the regional growth fund has been so slow to get off the ground, and that the funding has been so slow to be allocated. Ministers from a number of Departments have spent months suggesting that the regional growth fund could be the cure for all ills. They are on record in Hansard as suggesting that the fund could pay for housing pathfinder projects, the York railway museum, and even the “silicon city” proposal in east London. Those plans were all lauded by Ministers as worthy bidders for the fund. Ministers have obviously been taking inspiration from the parable of the loaves and the fish in the Bible, but I have not seen either the Minister or the Secretary of State walk on water recently.
On 12 April, the Government announced the 45 winning bids, but well over six months later, nearly 90% of first-round bidders still had not received their cash from the Government. Doubtless that was why, on “The Daily Politics” show a couple of weeks ago, Andrew Neil rather unkindly, in his crisp fashion, asked the Secretary of State for Environment, Food and Rural Affairs a question to which she did not have a good answer. He said that:
“your coalition government, citing bureaucratic snags, has conceded that the £1.4 billion Regional Growth Fund has so far disbursed £5.8 million, why is government so useless?”
James Wharton
Earlier in this informative debate, the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) said that two and a half years of due diligence were conducted on the Sheffield Forgemasters loan, yet no money was given at that point. It is important that due diligence is conducted when Government money is given out. Regional growth fund money is often tied up with private investment, which can come first to allow projects to go ahead. Does the hon. Member for Blackpool South (Mr Marsden) acknowledge that?
Mr Marsden
It is important that there is due diligence. I will come on to explain why that is, and why the Government do not seem to have done it well.
As I was saying, nearly 90% of first-round bidders had not received their money. It is not only the Opposition saying that. In yesterday’s “Today” programme, the chief executive of the North East chamber of commerce, James Ramsbotham, was asked whether the money will help. Referring to the second round, he said:
“It’s…difficult to say, because of…the first tranche of the RGF…not a penny has been paid”.
I assume that he was referring to the north-east. He also said that
“the businesses that it’s going to are…already doing incredibly well…I do believe that it’s worth investing in success…although there is clearly a lot of debate about whether there should be more investment in jobs and in infrastructure”.
He said that the delay was serious and needed to be addressed. When asked about whether the Government should have scrapped the regional development agencies, he said that One North East had worked rather well to promote the area for tourism and business, that nobody would be doing that now, and that it would be a loss.
That brings us on to a broader point about the way in which the Government got rid of the RDAs and the impact on the regional growth fund. One of our criticisms is that the process of filtering the bids has had little regional input. The RDAs had good expert advisers, who could have been used either directly in the regional growth fund bids or in local enterprise partnerships. However, because the process has been driven by two of the horses of the apocalypse, in the shape of the Chancellor of the Exchequer and the Secretary of State for Communities and Local Government, who wanted the mention of anything regional blotted out, those people have been lost. That is a great loss.
The Government have tried to hide behind excuses for the delays. Lord Heseltine stated last month that RGF money was never expected to come first, and that businesses would proceed with other sources of cash first. Yet the guidance on the RGF’s bidding criteria, as Opposition Members have already said, states that bidders would usually expect to receive the cash in line with other payments.
In the article in The Times that has already been referred to, the Minister made precisely that point. He talked about the problems that there had been with certain bidders not being able to draw down private sector funds, which was holding up the Government’s release of cash. The Government cannot have it both ways—they cannot on the one hand say that it is perfectly all right for the money to come at the end of the process, and on the other concede to The Times that the fact that the money has not been forthcoming is a serious part of the problem. That is part and parcel of the blurred and confusing way in which the Government have proceeded.
The Minister said in the article that due diligence should take about six weeks on average, but clearly that has not been the case; 40 bidders were still waiting six months later. Sometimes the Department for Business, Innovation and Skills seems to resemble the Spanish empire of Philip II, where the bureaucracy was so labyrinthine and took so long that a famous quote said, “If death came from Madrid, I would be immortal”. We all know what happened to the Spanish armada, and I hope that its fate will not befall the Minister, the Department or its officials. There is a serious point about how the Government have handled the process. I would like to hear from the Minister what will happen to the money that he says may not be distributed under due diligence.
It is also important to ask what input there is into the process within BIS. How many people are working on it? The Minister needs to answer the questions raised by the Opposition about external factors and costs, but I know from his answer to a question of mine on 8 September that only 11 full-time officials in the Department were working on the regional growth fund at that time. I leave Members to consider whether that is reasonable. Given that it has taken the Department a long time to deal with only five bids from round 1, how long do Members think it will take to deal with 119?
Although the scheme is called a regional growth fund, there appears to have been little or no regional input in the process, with decisions taken in Whitehall. Taking the panel as an example, we know who is on it, but 15 months after the process was launched, we still do not know clearly what the panel does and how it does it. It would be helpful if the Minister could explain precisely the link between the panel’s advice and the decisions made. That is extremely important, particularly in light of two articles in The Times and the Financial Times today. The FT article dealt with an issue that the Opposition have already raised—the interests of one of the members on the panel. The article in The Times drew some conclusions on how there seemed to be a relationship between the distribution of bids, political areas in the country, and companies that are significant backers of the Conservative party. That is for The Times to say; it is not for me to comment on. I prefer to take up what is said at the end of the article. The Minister has to listen to this. The article states that the process is getting a lukewarm welcome from the CBI and from the director general of the British Chambers of Commerce, who said:
“The speed at which this funding is delivered will be fundamental to the success of the Regional Growth Fund.”
The Government must move faster. The deputy director general of the CBI said:
“Despite its size, this fund does not have the capacity to plug the finance gap. The Government needs to look at other funding options to help these firms grow.”
Those are exactly the points that the Opposition have made throughout the process. We believe in the principle that money that is meant for the regions should stay in the regions.
There are three key criteria regarding regional growth policy on which the Government should be judged: the conduct of the RGF and how adequate it is as a replacement for RDA funding; how adequate LEPs are to take over the RDA structures—I have already referred to the failings in the system—and mechanisms for releasing European funding to the regions. The Minister needs to address all those issues, particularly the role of investment in transport infrastructure.
The Minister and the Secretary of State preside over a fund into which they do not put any money—the money comes from the Department for Communities and Local Government, the Department for Environment, Food and Rural Affairs and the Department for Transport. That showed in the first few months, when, as I said, those Departments steamrollered the Department for Business, Innovation and Skills and pushed it out of the way. It is now trying to claw back the role, but too much time has been lost in that process, and too much time is still being lost because of the incompetence of the process of due diligence.
