The forgotten £1 billion

While the economy continues to struggle, over £1.2bn of money earmarked to help stimulate some of England’s least prosperous regions is lying unspent, and no one seems to be shouting out about it.

The money comes from the European Regional Development Fund which is meant to help promote investment growth and jobs in those regions whose economic performance is weaker. In Wales and Scotland, monies allocated from the EU are largely committed. It is not the same case in England, where the EU allocated the regions £2.9bn in the current spending round (2007-13).

The Industrial Communities Alliance has discovered that with only two years to go a staggering £1.2bn of ERDF money lies unallocated. Why is this?

Part of the reason lies with the abolition of the regional development agencies. Not only did the RDAs administer this funding, their budgets for economic development provided the main source of match funding to draw these monies down. The government and local authorities have tried to find other sources of match funding without much success. New sources of funding such as the Regional Growth Fund are not suited to match with ERDF funds.

Many of the areas that would benefit from ERDF have suffered from the decline of their local economies and industries involved in coal, steel, engineering and manufacturing, with the midlands, Yorkshire, the north east and north west being the hardest hit. Throughout these regions, economic development projects are being shelved through lack of match funding. The amounts at stake are substantial in these hard pressed times.

In the west midlands, for example, a staggering £185m of funding was uncommitted in September 2011, according to CLG. That is 53% of the overall funding available. A similar situation exists in Yorkshire and Humber where £245 m, that is 48%, is unallocated. This pattern is replicated throughout the north.

One could be cynical about why there seems no urgency in government to rectify this. If the money remains unspent, under the terms of a rebate negotiated by the UK government, two thirds of the money will revert back to the Treasury. Therefore the Treasury is set to profit directly from funding intended to create jobs and growth in England’s most deprived regions with no guarantee that the money will be invested in these areas.

Certainly it is a travesty that in these economically hard times the government might not spend monies designed to create the very things it says it is keen to promote. Action needs be to taken action now to ensure that adequate match funding is made available to draw down this money to help England’s poorest regions to pull out of the recession. With two years to go, the next six months is crucial to turn this underspend around.

• Download a full copy of the Industrial Communities Alliance briefing.