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Why the government’s claims on regional growth don’t stack up

The shadow business secretary Chuka Umunna on why Labour's plans for regional growth are a better solution than the government's flagship Regional Growth Fund.

By Chuka Umunna

It is easy to forget that David Cameron came to office promising to rebalance Britain’s economy – the Tories’ 2010 manifesto even included a section on the need for a “more balanced economy”.

But instead we have seen regional imbalances become even more stark and local areas held back. For example, while the number of young people claiming Jobseeker’s Allowance for more than 12 months nationally has increased by 60 per cent since May 2010, in the North East that figure is 263 per cent. Just one in five of the 646 infrastructure projects listed in the government’s infrastructure pipeline are in the North East, North West or Yorkshire and the Humber. 

Ministers’ flagship Regional Growth Fund has been mired in chaos and delay, creating more losers than winners while successful bidders have been left waiting up to two years to receive their money. Hundreds of millions of pounds have been left gathering dust in Whitehall and hasn’t reached winning bidders: over half of funds in the first four rounds of the RGF are yet to be drawn down and the Government has admitted that some of these funds aren’t scheduled to be drawn down until the next Parliament.

More than two thirds of RGF funding which was allocated through intermediaries – £308m out of £452m – is still being held by them. And many Local Enterprise Partnerships have already seen bids for RGF funding be rejected.

The NAO also pointed out earlier this year that “most of the Fund remains unspent”, with just £917m of the £2.6 billion allocated by the end of last year. The average cost of each net additional job through the RGF was £37,400 – an increase of 13 per cent on the first two rounds.

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The Tory-led government abolished the Regional Development Agencies – which had played an important role in marshalling and channelling funding – without putting in place an adequate replacement.  And rather thanputting the RDAs’ assets to use to power local growth, they oversaw a fire sale. Even Vince Cable himself described the government’s abolition of the RDAs as “Maoist and chaotic” and their replacement as “messy”.

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Last week, Labour announced bold plans to devolve £30bn of budgets away from Whitehall, making it easier for LEPs, combined authorities and councils to deliver growth, better-paid jobs and improved public services in their areas.

After four years in which the situation has gone into reverse, ministers are now desperately trying to play catch up. But their announcement today falls far short of Labour’s ambition: they are only giving away a small fraction of the budgets which Labour will devolve, and they are refusing to give local areas new powers over business rates revenue, infrastructure, skills and employment.

Only the next Labour government can deliver the better-balanced growth we need, built on the talents of all and benefitting all areas of Britain.

Chuka Umunna is shadow secretary of state for Business, Innovation and Skills and Labour MP for Streatham

Correction: This article originally wrongly referred to youth unemployment, rather than long-term youth unemployment, in the second paragraph.