No wonder the economy is stalling – the growth fund is a mirage


10:30 am - November 1st 2011

by Sunny Hundal    


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Yesterday morning the front-page of the Telegraph blared: ‘£1bn on 100 projects to kick-start the economy‘ – which revolved around the ‘Regional Growth Fund’ (RGF).

For two parties that vociferously attacked New Labour for ‘spin and gimmicks’ – the announcement illustrated how they are now willing to try the same tricks. And the Telegraph faithfully helped to prop them up.

Let me explain how.

Last month, LC contributor Paul Cotterill revealed that even 15 months after the Coalition had announced this RGF – not a single penny had been released to companies. Our story got picked up by the Guardian and the Independent – clearly forcing the government to get its act together.

Already, the initiative is hopelessly late.

Secondly, the investment is a drop from earlier years. The RGF replaced Regional Development Agencies that were more decentralised and had a budget of £1.4bn a year. This government’s ‘growth fund’ will invest only around a billion over two years.

Third – the companies awarded seem to be mostly established big businesses rather than new investment. Even ConHome editor Tim Montgomerie tweeted:

The Regional Growth Fund looks a lot like tax-funded goodies for politically connected big business

Fourth – the investment offered to companies is opaque. The FT’s Jim Pickard pointed out:

The only downside is that you can’t see how much money each company or council is getting or – necessarily – what for. In fact there are 10 successful bids where no details whatsoever have been disclosed: even the names of the winning companies.

It does seem as if the announcement has been rushed out at ministers’ behest to enhance the impression that the government is taking action on growth.

And there’s more to come on this opaque process.

Fifth – and this is a key issue – it isn’t clear whether new jobs will actually be created.

FOI requests and other information uncovered by Paul Cotterill for this blog show that some bids were essentially black-mailing the government into giving them money. Quite explicitly, they pointed out that unless the RGF gave them some money – they would take their investment to other countries.

It’s not clear whether these companies will create new jobs or simply used the opportunity to get government money for jobs they were planning to create anyway. Details of this will be published here tomorrow.

Needless to say, the government’s ‘growth plan’ has more holes than a sieve.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


Is it not the same as labour said they would do, so now taking the rug from under labour feet…..

Sunny

Our story got picked up by the Guardian and the Independent – clearly forcing the government to get its act together.

This one really takes the biscuit.

The problem with your “it was LC wot done it” boast is that the timetable for RGF bids and announcements was clearly set out on the BIS website ages ago:

The second round of bidding to the Regional Growth Fund ended on the 1 July 2011. 492 bids were received with a combined total value of £3.3 bn. The Government welcomed this positive response to the Fund.

Bids will be assessed over the summer with a view to Ministers taking final decisions and making announcements in the autumn.

So, far from being an on-the-hoof political response to pressure from Messrs Cotterill & Hundal, civil servants have been quietly evaluating almost 500 bids since July and narrowing them down to a successful list of just over 50.

And they’ve kept to their promise to announce “in the autumn”. In fact, 31st October is earlier than some expected.

In fact, the FOI request was submitted by Planning magazine and published in August: http://www.planningresource.co.uk/news/1086968/Exclusive—Fund-bid-review-progress-slow/?

Spin and gimmicks? Take a look in the mirror.

“Last month, LC contributor Paul Cotterill revealed that even 15 months after the Coalition had announced this RGF – not a single penny had been released to companies.”

Yup. That’s the problem with fiscal stimulus through infrastructure spending really. There are no shovel ready projects.

Clive @3:

See http://www.scribd.com/doc/65905256/BiS-FOI-Request addressed from BIS to me.

My FOI was real enough, and was made in May (it was refused initially and I then got the info, some of which will be published tomorrow) after internal review by BIS, which I demanded on the basis that they weren’t following their own guidance. This is all documented at my dull site.

Yes, Planning Resource and LGC plus did publish first, on the basis of their investigations, and I fully accept that the early ‘exclusive’ was not in fact one – I just happened not to have spotted the specialist mags’ coverage at that point (and I think Alistair Hayman’s coverage was excellent).

However, it is documented (via weblinks) that the Guardian/Indy picked the story up from LibCon.

The extent to which that coverage has driven the agenda through to yesterday’s apparently hurried announcement is of course contestable, but on the whole I support Sunny’s interpretation (of course I would).

Hope that clears it up.

FP @2:

You’ve confused round 1 with round 2 a bit there. In any events, announcement of bid success is not as relevant as when the funding is green lit after due diligence. This is where the main delays have lain, not least because this has been ‘outsourced’ from BIS (presumably even for the grant that BIS awarded to itself)

It’s not clear whether these companies will create new jobs or simply used the opportunity to get government money for jobs they were planning to create anyway. Details of this will be published here tomorrow.

Should be interesting to see. If nothing else, proof once more that this sort of government funding could lead to corruption (so long as this is being trailled correctly).

Watchman @7:

Sunny is writing up the story so I won’t steal his thunder, but I can say there is no suggestion of corruption here (though questions might validly be asked by a multi-million pound grant went from BIS to a company 100% owned by BIS). The issue really is about the design of the Fund.

9. Leon Wolfson

@1 – No, the RDA’s were established, running, more transparent and actually handing money out.

11. Northern Worker

Totally agree! As soon as I saw Clegg spouting it was obviously spin. Moulton on Newsnight was unimpressed and he’s been involved.

12. Leon Wolfson

@10 – Possibly! Although it’s far more likely I’ll freelance for companies remotely.

Canada already drains off much of the talent, though. (Not worked out for me. So far…)


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/OLCwWqzn

  2. Jordan Millward

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/OLCwWqzn

  3. Feral_britain

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/OLCwWqzn

  4. Alex Braithwaite

    No wonder the economy is stalling – the growth fund is a mirage | Liberal Conspiracy http://t.co/ryqhbZPr via @libcon

  5. Janet Graham

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/OLCwWqzn

  6. sunny hundal

    No wonder the economy is stalling: five reasons why the govt's "growth fund" is a mirage http://t.co/ZhERvIi5 < by me

  7. Declan Burns

    No wonder the economy is stalling: five reasons why the govt's "growth fund" is a mirage http://t.co/ZhERvIi5 < by me

  8. Jane Phillips

    No wonder the economy is stalling: five reasons why the govt's "growth fund" is a mirage http://t.co/ZhERvIi5 < by me

  9. Jason Mcintyre

    No wonder the economy is stalling: five reasons why the govt's "growth fund" is a mirage http://t.co/ZhERvIi5 < by me

  10. House Of Twits

    RT @sunny_hundal No wonder the economy is stalling: five reasons why the govt's "growth fund" is a mirage http://t.co/12LGnArX < by me

  11. Kieron Flanagan

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/OLCwWqzn

  12. Molly

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/OLCwWqzn

  13. Wikio UK

    (Liberal Conspiracy) No wonder the economy is stalling – the growth fund is a mirage : http://t.co/DsNaxgGt

  14. Justanother Postgrad

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/mbIpSVSy Money in the hands of cronies? Colour me unsurprised.

  15. sunny hundal

    Anyway, the Regional Growth Fund is full of holes, as I said this morning http://t.co/ZhERvIi5

  16. Christopher Peacock

    No wonder the economy is stalling – the growth fund is a mirage http://t.co/8Bkx0mkC via @libcon

  17. Poison Popcorn

    No wonder the economy is stalling – the growth fund is a mirage | Liberal Conspiracy http://t.co/lwiTzoPO via @libcon

  18. Owen Blacker

    No wonder the economy is stalling: five reasons why the govt's "growth fund" is a mirage http://t.co/ZhERvIi5 < by me

  19. Shruti Tripathi

    Anyway, the Regional Growth Fund is full of holes, as I said this morning http://t.co/ZhERvIi5

  20. Companies arm twisting Westminster on ‘growth fund’? « Slugger O'Toole

    […] Pickard highlights some digging Sunny Hundal’s been doing over at Liberal Conspiracy on some pretty heavy duty lobbying over Cameron’s new loan scheme. For instance: CQME, a Chinese technology company, has […]

  21. Exclusive: How firms are ‘blackmailing’ the govt’s ‘growth fund’ | Liberal Conspiracy

    […] government said on Monday it planned to invest £1bn in 100 companies to create new […]





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