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City council denies sitting on £60m RGF funding

The lack of progress distributing cash provided by the Treasury was revealed in a report from the National Audit Office (NAO), the official auditor of Government accounts

Adam Fradgley/Exposure
Birmingham Council House.

Birmingham City Council is holding more than £60 million designed to boost manufacturing and create jobs in the private sector, according to the government’s spending watchdog.

The lack of progress distributing cash provided by the Treasury was revealed in a report from the National Audit Office (NAO), the official auditor of Government accounts.

The NAO said the Council was awarded £70 million in December 2011 to pass on to employers.

But it said that only £7.6 million had actually been allocated to business as of December 2013.

The report said the cash came from round two of the Regional Growth Fund, the Government’s flagship job creation project that promised more than £300 million for West Midland firms.

It appeared to be referring to the Advanced Manufacturing Supply Chain Initiative, a scheme administered by the council to support both local and national manufacturing firms which did indeed receive £70 million from round two of the Regional Growth Fund.

Birmingham City Council said it was distributing funding in line with the timetable agreed with government and was on course to get all the money to businesses within agreed targets.

The Regional Growth Fund is a government scheme overseen by Conservative peer Lord Heseltine and is designed to help the private sector create jobs, particularly in areas which have been hit by the loss of jobs in the public sector.

Across the country, funding of £2.6 billion has been allocated since the Regional Growth Fund began in 2011 – but only £492 million has reached the projects it was supposed to support, the NAO said.

And £425 million is being held by intermediaries such as banks and local authorities, who had bid on the grounds that they would not spend the money themselves but would parcel up their grant between local businesses.

They got involved because the minimum bid from the fund is £1 million, effectively excluding smaller businesses. But intermediaries could bid to create their own, local funds, which could then be distributed to small and medium-sized firms.

The Advanced Manufacturing Supply Chain Initiative, overseen by Birmingham City Council on behalf of the Government, is designed to support firms in the manufacturing supply chain. It has received total funding of £125 million, including £70 million from the Regional Growth Fund and £55 million directly from the Department for Business, Innovation and Skills.

But the NAO report states that of £70 million from the Regional Growth Fund, just £7.6 million has been distributed to projects.

Council officials were unable to confirm the figures last night.

But an official said: “It would be wrong to suggest that we are falling behind on getting Advanced Manufacturing Supply Chain Initiative money out to businesses. It is being distributed in phases, as agreed with government.”

The National Audit Office report, which looks at the Regional Growth Fund nationwide, warns that £1.55 billion of the £2.6 billion allocated was simply still held by the Treasury. Another £136 million from bids had been successful but had now been withdrawn was also held by government.

The NAO warned that the Government departments managing the scheme “face a significant challenge, particularly in 2014-15 where the budget is £1.4 billion, to spend money as quickly as originally expected.”

Labour MP Steve McCabe (Lab Selly Oak) said: “At the current rate, it will be 20 years before this money actually gets to the businesses where it is needed.

“We need this funding to be distributed now.

“As the MP for a constituency which is in the top 20 per cent for unemployment, I know how urgent it is. But people looking for work are paying the price for the Government’s inefficiency.”

Government figures show that bidders from the West Midlands region were allocated £255 million in the first three rounds of funding and £57 million in the fourth round, which was announced last year. There are no figures showing exactly how much has actually been awarded to firms in the region. Nationally, just under a fifth of the allocated funding has made its way to businesses.

Applications for a fifth round of funding worth £300 million opened last October and closed on 9 December 2013. Selected bidders will be announced soon.

Bidding for round 6 will open in the summer of 2014.

The National Audit Office found that the Regional Growth Fund had created or safeguarded 44,000 jobs so far, although half of these came from just five projects out of almost 400 successful bids. The five include a Jaguar Land Rover project to increase the manufacturing capacity of its West Midlands’ plants and enhance research and development work in the regions.

A total of 77,000 jobs were expected eventually from the first four rounds of funding.

Each additional job cost taxpayers £37,400 on average.

Business Minister Michael Fallon said the fund’s management had improved, adding: “The Regional Growth Fund is working. Over £2.6 billion of investment has now been allocated to 400 local projects and programmes which is unlocking nearly £15 billion of private investment and delivering 550,000 jobs.”

 
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