Billions of pounds of government fund set up to create jobs and stimulate economy is still unspent, says ëThe Common Public Accounts Committeeí
Billions of pounds in a government fund that was created in order to stimulate local economic growth and job creation in regional areas have yet to be used by local authorities, a committee of MPís have said.
The Commons Public Accounts Committee identified that just 10% of the £3.9 billion fund, which has been available for local authorities to use since 2010, has actually been taken out, adding that the original forecasts about how many jobs would be created or protected through the fund were ìwildly over-optimisticî.
The Committee chairwoman, Margaret Hodge, MP, said that the underuse of the fund has been ëfrustratingí, and warned that the failure to promote it sufficiently could mean that two government departments who are in charge of allocating the fund - the Communities and Local Government department and the Business, Innovation and Skills Department- could now find it exceedingly difficult to reach their financial goals this year.
Ms Hodge added that under the Regional Growth Fund- that the aforementioned departments will be required to spend £1.4 billion in 2014, a considerable rise from the £1.2 billion spent in the last three years collectively.
"Some £1bn of the remaining £3.5bn allocated to initiatives is currently parked with intermediary bodies such as local authorities, Local Enterprise Partnerships and banks - and the rest with the Departments," Ms Hodge said.
She added: "Progress in creating jobs is falling well short of the Departments' initial expectations."
The Public Accounts Committee official report on the success of the fund so far had some stark findings for almost all of the programmes that have been running since 2010. One programme, instigated by Santander UK, has only had £2.3 million taken out of it, which is hugely disappointing considering the overall fund size of £53.4 million. Moreover, the bank will likely be able to reclaim around £5 million of all money dealt out through the scheme by the end of its run, as they will be reimbursed for administration costs.
And Ms Hodge highlighted that both departments charged with distributing the fund are able to reclaim money through administration fees, but so far have yet to capitalise on this, which suggests that they have taken an apathetic and disinterested stance towards the money in the fund and the allocation of it to local authorities.
This notion was reinforced by the PACís disclosure on the number of jobs that have been created through the fund so far, arguing that the 65,000 jobs created since 2011 has fallen ëwell shortí of previous forecasts, and downplayed the likelihood of the government reaching its target of 550,000 new jobs by the 2020ís.
This trend has also extended to enterprise zones, whose performance was branded ëparticularly underwhelmingí by the PAC. Original targets had aimed to create 54,000 new jobs by next year, though this estimate has now been downgraded to between 6,000 and 18,000.
The report said: "Despite the large sums available for promoting economic growth locally, little money has actually reached businesses.
"The departments have not managed the local growth initiatives as a coordinated programme with a common strategy, objectives or plan. The departments need to learn lessons from the current programme and adopt a more coordinated and strategic approach when introducing the new growth deals next year."
However, Local Growth Minister, Kris Hopkins, has dismissed the accuracy of the findings of the PACís report, arguing that they were based on ëold figuresí and that more recent statistics would paint a more favourable picture about just how much money was being pumped into local initiatives.
He said: "Britain's economy is growing and more people are in work today than ever before. Not only have we rebalanced the books, but we've created more jobs and growth outside of London."
He highlighted that Enterprise Zones have utilised the fund to obtain £1.2 billion of private sector investment and create almost 10,000 new employment opportunities in local areas.
He also pointed out that just over £650 million in the Growing Places Fund has been distributed to 305 projects across the UK in a move that is expected to create nearly 5,000 new businesses, 94,000 jobs and 27,000 houses.
Whilst Mr Hopkins may be right when highlighting that a lot of the PACís findings are based on outdated information, it is nevertheless just as valid to conclude that the usage levels and the performance of the departments charge with allocating of the fund are considerably lower than they should be.
The fund is an excellent way of bolstering local economies and creating jobs in areas that have struggled since the recession hit the UK back in 2008. Moreover, it is a great way to diversify the British economy, and end reliance on the
London economy, so it is surprising those government departments as prominent as the Department for Business, Innovation and Skills have yet to make the most out of the fund and allocate money out with a greater level of enthusiasm.
Clearly, government officials will have to look into the allocation practice that these departments are performing at present and find a way of optimising the way that the fund is distributed, otherwise the country will find itself in a far worse position financially than it could be, which would be a huge shame indeed.