Are Regional Growth Fund claims out-of-date?

The Public Accounts Committee (PAC) this morning caused a stir, by criticising one of the Government's flagship growth policies: the Regional Growth Fund.

The Fund is an initiative aimed at boosting jobs beyond London and the South East by investing public funds into job-creating projects alongside private sector partners. £1.4 billion has been allocated to be spent across 236 projects in the first two waves of the scheme, with a third wave set to allocate a further £1 billion.

According to the PAC, it has taken the Government "far too long for the Regional Growth Fund to get off the ground," with the Independent singling out the claim that the scheme had created just 2,400 jobs, at a cost - according to the headline - of £200,000 per job.

A closer reading of the article reveals that this is actually an upper bound - the cost of creating these jobs was up to £200,000 each - and the Times filled in the detail, telling its readers that the "cost per job was £60,000 or less in three quarters of the schemes given money" under the initiative.

But is there a more fundamental problem with these stories?

Both the Independent and the Times also hint that there could be, with the former writing that "the Government last night responded that the PAC's figures were out of date", while the latter quoted Business Minister Michael Fallon as saying that "the PAC report... fails to recognise the significant progress that has been made over the past four months."

We got in touch with the Department for Business, Innovation and Skills (BIS) to see if they could provide us with any more up-to-date figures.

Although the Department couldn't give us any update on the number of additional jobs directly created by the Fund - the 2,442 jobs referenced in this morning's reports is drawn from the Department's own evidence to the Committee, based upon its monitoring reports - a spokesman did claim that the scheme was "on target" and that it would ultimately support 330,000 jobs.

The claim that 330,000 jobs would be supported is not new either, coming directly from the National Audit Office's report on the Fund's progress, which found that "the projects the Fund is supporting could create or safeguard 328,000 jobs." the NAO did qualify this, noting that:

"This was an estimate of the maximum number of jobs over projects' lifetimes. Each job was counted equally, regardless of how long it was expected to last. Around 20 per cent of these jobs would be created directly by supported projects. The remainder would be created indirectly, through programmes, or where bidders identified potential for knock-on employment effects in their supply chains. It will be difficult to monitor these wider indirect impacts, which will make evaluating the Fund's total impact harder."

While this might add weight to BIS's case, it doesn't help to show that the information in the PAC report is out-of-date, as the NAO made its judgement in May this year, the same point at which the Department gave evidence to the committee.

However BIS also claims that "£779 million [of the £1.4 billion] for projects has now been approved." This does appear to supercede the information presented in the PAC report, which notes that £610 million worth of funding had been arranged through the Fund, which would suggest that a further £169 million has been allocated over the summer.

We don't know of course how this translates into extra jobs and project starts under the scheme, however it is worth bearing in mind that in setting targets for the number of extra jobs it expects to create as a result of the scheme, the Government has also taken account of the length of time each job lasts.

For example, if a project funded under the Regional Growth Fund is expected to last five years and create 300 jobs over its lifetime, 100 of which last for the full duration but a further 200 for only two years, the target set for the project is 180 jobs (that is (500*5 years)/5years + (200*2 years)/5 years).

The target number of jobs due to be created by the 88 projects approved at the time the PAC took evidence was 36,779. However given that according to the NAO the average length of the schemes approved so far is seven years, we won't necessarily know whether these are likely to be hit for some time yet.

Based upon the information BIS was able to provide us with, it seems the Department may have allocated more funds to projects since May, although we don't know if this means more jobs are in existence as a result. This doesn't negate the criticisms made in the PAC report, and we would need more information to judge whether or not the Department is succesfully addressing the issues identified.