Regional Growth Fund: return to bidding warfare

There was some good news this week in regeneration and economic development. The announcement of the Regional Growth Fund ‘winners’ was a welcome respite from the ongoing doom and gloom of unemployment stats, abolitions and redundancies.

Interesting too was the inclusion of projects such as the Prince’s Regeneration Trust’s initiative at Middleport Pottery in Stoke-on-Trent which aims to support jobs in the Potteries. The Keepmoat homes project in Hull which builds on the work of the pathfinders.

Particularly welcome was funding for the Community Development Finance Association which will help to provide much needed microfinance for small businesses and social enterprise.

However, what’s disappointing about RGF is that it marks a return to ‘bidding warfare’ which pitches area against area and idea against idea. In the current context of economic stagnation and decline in some areas, localities need to work more closely together to consolidate their strengths and opportunities rather work in competition against each other which smacks of a ‘divide and rule’ strategy.

There is also a challenge to be made around the leverage power of the RGF. The government has made great play of the fact that the fund is levering in £2.5bn of private sector investment. However, the now defunct Grant for Business Investment (GBI), which I’m sure many of the successful RGF applications were originally bound for, managed to lever in £4.2bn of private sector investment almost nine times the original public investment. In addition, the GBI was administered by the regional development agencies and specifically targeted on businesses in areas furthest from growth.

The focus of GBI on deprived areas was important as it went to the heart of the government’s desire to rebalance the economy and support those areas which have found it more difficult to grow. The RGF isn’t targeted on particular geographies and its narrow mantra around growth may mean that we will fail to get to grips with some of the real challenges that act as drags on growth potential, particularly long-term unemployment, which continues to grow, particularly among our young people.

What is also frustrating is that the RGF is highly centralised, requiring applicants to bid to a centrally managed government pot of cash. This seems to fly in the face of the government’s aspirations for decentralisation and particularly their desire to ‘increase local control of public finance’ one of the key actions set out in the localism bill.

However, we must be careful not to mistake RGF as a strategic economic fund. RGF is not linked to local enterprise partnership boards, enterprise zones nor the Work Programme. Is this lack of integration important? Does it matter that partnerships like LEPs are not aware of RGF bids in their areas? Do we need to understand how bids fit into an area’s wider strategy to grow the economy and counteract the swelling numbers of unemployed?

These and many other questions will need to asked and answered over the coming months if we are start to rebuild and repair our economies sustainably, for the long term.

• Read Adrian Nolan’s analysis of the first round of RGF here.