Sorting out regional growth
It is no wonder that growth is flatlining. Today the public accounts committee published its report on the regional growth fund and found scandalous mismanagement of a programme vital to the economy’s future recovery.
Although the fund has a budget of £1.4bn only £60m has been spent on frontline projects – creating less than 15 per cent of the jobs forecast. The rest is presumably sitting in Vince Cable’s office gathering dust as the economy slumps back into double-dip recession and millions queue for the dole.
Even where money has been spent the government has wasted taxpayers’ money. The value for money threshold, set by ministers, only required the project’s benefits to outweigh the public cost. This should have allowed projects with the highest marginal benefit to the taxpayer to be chosen, but in some cases each additional job has cost over £200,000. The committee criticised the government for not making value for money judgements transparent enough.
This report comes days after the OECD revised down its forecast for UK growth this year to 0.7 per cent. It is possible to invest in key projects at the same time as managing public spending prudently by combining short-term Keynesian stimuli with more responsible medium-term management. The cabinet refuses to consider anything other than austerity, even as the withering of this fig-leaf of a growth plan has exposed the complete lack of ambition and imagination at the heart of the government’s economic policy.
By seemingly refusing to invest in British business, the government is sending a depressing message to the private sector – if the government will not invest in projects to create growth, private investors will be put off too. Despite what some Tory MPs say British businesses are working tirelessly to stay afloat in the choppy economic waters the cabinet seems to have accepted.
Perhaps the most worrying thing about this report is that it shows how the government has given up on any economic growth outside London. Before the last election Policy Exchange, David Cameron’s favourite thinktank, wrote off some northern cities as ‘beyond revival’ making many fear about the attitude of a Tory-led government to regional growth. These fears were compounded when the government abolished regional development agencies.
Too much of the country seems to have been left behind as the City made up such a high proportion of the UK’s income. As I visit some of Britain’s deserted town centres and industrial estates it is easy to see the real need for investment that the regional growth fund was supposed to provide.
The government should be looking to promote growth throughout the country, encouraging firms with the potential to bring business to Britain. This report should be a wake-up call for government and everyone who wants to see the economy grow.
Nick Smith is member of parliament for Blaenau Gwent and a member of the public accounts committee
economy, growth, OECD, Vince Cable