Ministers' flagship growth fund 'shockingly wasteful'

The government’s £1.4bn Regional Growth Fund has wasted money and is likely to create just 41,000 jobs, the National Audit Office has said.

A new report from the NAO said the fund, which ministers originally said would either create or safeguard some 328,000 private-sector jobs, had “not optimised value for money” because it had allocated a significant portion of funds to projects that “offered relatively few jobs for the money invested”.

It said that while the cost of creating some jobs had been less than £4,000, others had cost more than £200,000 and that tighter controls over value for money could have resulted in thousands more jobs for the same money.

The NAO said its estimate of 41,000 jobs were full-time equivalent posts in the private sector and that the average cost of creating each job would be £33,000.

The NAO said this compared with an average job cost of £28,000 per job under the regional development agencies, which were scrapped by the coalition government, with ministers slamming them as costly and wasteful.

Data included in the report showed a region-by-region breakdown of full-time equivalent jobs expected to be contracted. The north east had the highest number, with 14,800, next was the north west with 13,200, and third was the west midlands with 8,600.

It also found that the fund had taken longer than expected to turn conditional offers of grants for projects into final offers, meaning that despite the government’s intention to get projects up and running quickly, only around one-third had so far received final offers of funding.

NAO head Amyas Morse said the government needed to weight its additional Regional Growth Fund cash more carefully towards volume job-creation.

“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,” he said.

Public Accounts Committee chair Margaret Hodge said there were “serious concerns” about whether the fund was providing value for money.

“It is truly shocking that in some cases creating a new job will cost the taxpayer over £200,000,” she said.

“Stronger controls over the value for money of individual bids are urgently needed to prevent any more money being wasted, particularly given the additional £1 billion allocated to the fund in the Chancellor’s Autumn Statement.

“We will be looking at the Regional Growth Fund later this month and we will expect officials to tell us what steps they are taking.”