Fun with the Regional Growth Fund

October 31, 2011 6:59 PM

Today the Department for Business, Innovation and Skills announced the results of the second round of the Regional Growth Fund - which we last looked at when we uncovered that one of the directors is from an organisation that doesn't support growth.  Nick Clegg told the BBC that the £950 million would help create or safeguard "hundreds of thousands of jobs".  The opposition's only criticism was that the money was too late, or not enough.  That it wouldn't match the scale of the wasteful and ineffective Regional Development Agencies.  That means it is up to the media and groups like the TaxPayers' Alliance to scrutinise how the money is being spent, and whether it will deliver on the hype.  After all, we've seen enough dodgy claims that policies will create jobs before.  So what did we find when we looked at the projects approved?

Nothing.  There is a list of recipients and an estimate of the number of jobs that will be created in each region but no suggestion of how much each recipient is getting or what projects are being funded.  All we have are questions:  Why are British taxpayers funding Santander UK plc, a subsidiary of the major Spanish banking group Santander?  How will funding for miscellaneous national projects that they expect to create 200 jobs directly create 16,500 indirectly? What are any of the 119 firms getting our cash doing with the money?

As Jim Pickard has pointed out in a blog for the Financial Times, even the names of ten of the winning companies haven't been disclosed.  At some point apparently we will be able to see where the money is going.  But until then grand claims about the numbers of jobs that will be created are a complete joke.  As far as we know, the money is all being spent on procuring the latest generation of the Turbo Encabulator (above).

Maybe the money is all going to projects that will be incredibly economically valuable but, for some reason, can't generate a return for private investors and therefore need support at taxpayers' expense.  Or maybe this is just ugly corporatism.  Taxing all businesses then giving the money to a few who have won the favour of politicians or bureaucrats.  No one knows and until we do I would assume the worst, that this announcement was calculated to get the jobs figure out there and reported before anyone could judge for themselves looking at the actual plan.

The only mitigating factor is that many of the projects are being required to raise private capital as well.  That means it is less likely the taxpayer is being sold a complete lemon.  But it could equally mean that these projects would have gone ahead anyway, so public funding hasn't achieved anything.

As Fraser Nelson has written for the Spectator this morning there is a critical contradiction between this funding and the Government's wider narrative on how economic growth is best encouraged:
No wonder that so much confusion surrounds the government’s growth strategy. The government is sending out conflicting messages all the time. Osborne talks about tax cuts, while delivering tax increases. It says “there is no money left” while doubling the international aid budget. Clegg talks about the problem of the Man in Whitehall trying to direct regional economies, before going on to direct regional economies. In Vince Cable we have a Business Secretary who seems to regard his job as complaining about businesses. He is perhaps the only business secretary who disparages capitalism as a system which “takes no prisoners”.

If people really want to fight crony capitalism, the answer isn't moralising about misleading figures on pay for FTSE100 directors.  It is properly scrutinising schemes like this that make a company's success more about their ability to convince politicians they're worthwhile and less about their ability to efficiently produce goods and services we need or want.Today the Department for Business, Innovation and Skills announced the results of the second round of the Regional Growth Fund - which we last looked at when we uncovered that one of the directors is from an organisation that doesn't support growth.  Nick Clegg told the BBC that the £950 million would help create or safeguard "hundreds of thousands of jobs".  The opposition's only criticism was that the money was too late, or not enough.  That it wouldn't match the scale of the wasteful and ineffective Regional Development Agencies.  That means it is up to the media and groups like the TaxPayers' Alliance to scrutinise how the money is being spent, and whether it will deliver on the hype.  After all, we've seen enough dodgy claims that policies will create jobs before.  So what did we find when we looked at the projects approved?

Nothing.  There is a list of recipients and an estimate of the number of jobs that will be created in each region but no suggestion of how much each recipient is getting or what projects are being funded.  All we have are questions:  Why are British taxpayers funding Santander UK plc, a subsidiary of the major Spanish banking group Santander?  How will funding for miscellaneous national projects that they expect to create 200 jobs directly create 16,500 indirectly? What are any of the 119 firms getting our cash doing with the money?

As Jim Pickard has pointed out in a blog for the Financial Times, even the names of ten of the winning companies haven't been disclosed.  At some point apparently we will be able to see where the money is going.  But until then grand claims about the numbers of jobs that will be created are a complete joke.  As far as we know, the money is all being spent on procuring the latest generation of the Turbo Encabulator (above).

Maybe the money is all going to projects that will be incredibly economically valuable but, for some reason, can't generate a return for private investors and therefore need support at taxpayers' expense.  Or maybe this is just ugly corporatism.  Taxing all businesses then giving the money to a few who have won the favour of politicians or bureaucrats.  No one knows and until we do I would assume the worst, that this announcement was calculated to get the jobs figure out there and reported before anyone could judge for themselves looking at the actual plan.

The only mitigating factor is that many of the projects are being required to raise private capital as well.  That means it is less likely the taxpayer is being sold a complete lemon.  But it could equally mean that these projects would have gone ahead anyway, so public funding hasn't achieved anything.

As Fraser Nelson has written for the Spectator this morning there is a critical contradiction between this funding and the Government's wider narrative on how economic growth is best encouraged:
No wonder that so much confusion surrounds the government’s growth strategy. The government is sending out conflicting messages all the time. Osborne talks about tax cuts, while delivering tax increases. It says “there is no money left” while doubling the international aid budget. Clegg talks about the problem of the Man in Whitehall trying to direct regional economies, before going on to direct regional economies. In Vince Cable we have a Business Secretary who seems to regard his job as complaining about businesses. He is perhaps the only business secretary who disparages capitalism as a system which “takes no prisoners”.

If people really want to fight crony capitalism, the answer isn't moralising about misleading figures on pay for FTSE100 directors.  It is properly scrutinising schemes like this that make a company's success more about their ability to convince politicians they're worthwhile and less about their ability to efficiently produce goods and services we need or want.

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