Regional Growth Fund

Neil Carmichael Excerpts

Tuesday 1st November 2011 Westminster Hall

[Angela Smith]

This debate is not about the RDAs. The point that I will make, as the hon. Gentleman will see, relates to the level of investment made by RDAs, as compared to the regional growth fund. We now know what the Government’s alternative is—the regional growth fund. On the evidence to date, the fund represents chaos and confusion, with too little being awarded too late to make any significant contribution to promoting economic growth.

There are three aspects to the Government’s approach to regional investment. The first is local enterprise partnerships, which are unfunded apart from a small start-up fund, and have no clout. The second is enterprise zones, which are a tired blast from the past with a mixed track record when it comes to delivering jobs and growth. The third prong of the Government’s regional growth strategy is, of course, the regional growth fund, and yesterday the outcome of the second round of bids was announced.

[Neil Carmichael (Stroud) (Con)]

There are many other prongs, but the fourth prong that I would have mentioned is the enhanced role of local authorities—their powers of competence, and their capacity to deliver planning decisions that will build businesses.

[Angela Smith]

I thank the hon. Gentleman for his intervention, but it has already been established this morning that the Humber is actually going backwards because of the cuts to local authorities, so I do not think that that is quite true.

We were told yesterday, in a written parliamentary statement, that 119 bids had been awarded funding. That is just a quarter of the bids submitted. Clearly, there were far more losers than winners, with more than 370 bids rejected. Bids totalling more than £6 billion have been submitted in rounds 1 and 2 of the RGF. That says something about the scale of the unmet investment needs of business, and how little the Government are delivering to meet that need.

The RGF was announced on 29 June 2010, alongside the proposals for the LEPs. A Department for Business, Innovation and Skills press release described the RGF’s purpose as being

“to help areas and communities at risk of being particularly affected by public spending cuts”.

However, current guidance from the Department goes into a little more detail:

“The objective is to stimulate private sector investment by providing support for projects that offer significant potential for long term economic growth and the creation of additional sustainable private sector jobs.”

When announced, the original fund was £1 billion, but the 2010 spending review extended the total value to £1.4 billion over three years—from 2011 to 2014. To put those figures in perspective, as I mentioned earlier, the annual budget for the RDAs averaged £1.7 billion in their last few years of operation. The Government’s total spending on the RGF over a three-year period will be just £1.4 billion. One does not have to be Einstein to see that the RGF represents a two-thirds cut in regional investment, which is an indication of where the Government’s priorities lie and that they are certainly not supporting the regions. The Government use a lot of warm words, but deliver very little when it comes to economic investment. There is a really good northern phrase to describe a person who appears to have everything, but who in fact has nothing much to offer: “all fur coat and no knickers”. I have to say that that seems a rather good description of the Government’s approach to regional growth.

It will take more than warm words to persuade businesses up and down the country that the Government have what it takes to kick-start growth in the economy, which has flatlined since last autumn. It is obvious that there is much demand out there for regional investment; rounds 1 and 2 of the fund were over-subscribed many times over. In the first round of bidding, 478 bids were received, with a value of £2.78 billion. Only 50 bids were successful, and only five have received any money so far—hardly the success to which the Government lay claim. Given that so few bids from the first round have progressed to the point where they have fund money in the bank, how on earth can we expect the Government to deal effectively with the 119 announced yesterday?

On top of that, it is absolutely clear that the Government’s approach to regional investment is far too centralised. In an era of so-called localism, how can the Deputy Prime Minister, Lord Heseltine or the Secretary of State for Business, Innovation and Skills justify a bidding process that is governed and determined by Whitehall, particularly given that the investment framework that it replaced was regionally based and closely attuned to the strategic needs of the regions?