Wednesday, 14 November 2012

Throwing away jobs and economic growth

Earlier this year, I chaired an all-party committee which looked at regional economic growth. In particular, we were looking at the use of the regional development funds in a context where the government had abolished the regional development agencies.

The European Regional Development Fund (ERDF) is the EU's main tool to reduce economic disparities between the regions. Worth €201 billion between 2007-13, most of the funding goes to the poorer regions in eastern and southern Europe. England's allocation during this period was nearly £3bn, with the largest share of the funds going to Cornwall and the Isles of Scilly, Merseyside and South Yorkshire, all of which face significant and long-standing challenges to economic growth.

It has contributed to major schemes such as the Eden Project in Cornwall, the Sage concert hall and the Baltic art gallery in Gateshead and the Kings Dock redevelopment in Liverpool and, many years ago, the renewal of the Lyceum Theatre in Sheffield. It has also supported many smaller projects across the country to boost enterprise and support small businesses.

However, ERDF funds have to be matched by public bodies in the UK – for every £ in ERDF grant, a public body – like a council – has to invest a similar amount. The abolition of the Regional Development Agencies removed the main source of match funding for ERDF projects, and the economic downturn has reduced the options for match funding even further.

We concluded that the Government simply did not seem to appreciate the problems that projects are facing in securing the match funding needed for them to go ahead. It failed to deliver on its promise to make it easier for projects to use its Regional Growth Fund (RGF) as match funding.  We urged the Government to set aside RGF money specifically for this purpose.

We were quite clear that if urgent action wasn’t taken to spend each region's ERDF allocation before 2015, the UK would not only be returning unspent ERDF grant, but also that value for money would suffer and ERDF would not make the significant impact it might do to generate economic growth in areas with the highest unemployment.

We believed the government was being totally complacent about the matter. Having abolished the Regional Development Agencies in a fit of ideological pique, it simply didn’t understand – or perhaps even care – how important ERDF funds were to local economic regeneration.
Last week, I reminded Michael Fallon - the Business Minister responsible – about the Committee’s recommendations which would have ensured that all the ERDF resources would be used and which the government had rejected.

For the first time he confirmed that ERDF would be underspent. In other words, grant-aid from the EU budget specifically designed to secure economic regeneration in the UK’s poorest areas was going to be returned to Europe.

Thus, at a time when we need to use every endeavor to increase local jobs and to support economic renewal, this government – through sheer incompetence and ideological indifference – has thrown away millions of pounds in grant which would have made a significant difference to the poorest areas in the UK.

Yet the media ignore it. Of course, it doesn’t involve sex, scandal or chocolate. It’s just about a huge loss of jobs and economic growth in communities which need it most. It’s about thousands of people who will remain on the dole instead of working in productive jobs.
It’s a scandal.