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Last Updated: Tuesday, 17 June, 2003, 14:15 GMT 15:15 UK
'Millions wasted' on job creation
Millions may have been wasted on attempts to create jobs in deprived areas, according to a damning report from the government's financial watchdog.

The National Audit Office (NAO) found ministers have "substantially" overestimated the number of jobs created by Regional Selective Assistance and the Enterprise Grant scheme.

Regional aid has been a key plank of UK economic policy since the 1970s and has flourished under Labour.

But the Department of Trade and Industry (DTI) has pledged to re-think the way the cash is allocated, to better boost employment and productivity in poor areas.

Administration costs

According to the NAO report, published on Tuesday, more than half the new jobs that have resulted from the current system would have been created anyway.

There is no way of telling whether the use of grants to create the extra jobs in any way represents value for money for the taxpayer
Edward Leigh, commons public accounts committee
At least a quarter of the jobs created had the knock-on effect of displacing other jobs in the disadvantaged areas in question, the report said.

The period under scrutiny is 1991 to 1995, but Selective Assistance - and the way its effectiveness is measured - has continued under the present government.

The NAO found about 10% of the grant aid was being swallowed up by administration costs - a situation which, it said, must improve.

Regional aid was also criticised by the NAO for failing to attract enough foreign investment or boost productivity.

The NAO found the schemes under scrutiny were also too heavily weighted towards the manufacturing sector.

'Big' discrepancy

And it highlighted examples of lame duck firms becoming dependent on repeated hand-outs.

(This report) will help us get the best use of taxpayers money at the same time as supporting viable investments in our poorest regions
Department of trade and industry
"It doesn't look like it has offered good value for money," an NAO spokesman told BBC News Online.

"We are not saying it hasn't done any good.

"But there is no clear indication of what good it has done."

He said there was a "big" discrepancy between the number of permanent jobs the government claims to have created and the actual figure.

The Department of Trade and Industry (DTI) own figures show that - of 110,000 jobs created by the 300m Regional Assistance programme - only 21,000 could be regarded as permanent.

This works out at 21,000 a job.


But the NAO says the actual number of jobs created is "substantially" lower - and so the cost of each job higher.

Sources have estimated the real figure could be as low as 10,000 permanent jobs, although the NAO would not confirm this.

Labour has enthusiastically embraced regional assistance, with 1.4bn being spent over the past seven years.

It claims this has created or protected 300,000 jobs, at a cost of 4,600 each.

But the NAO report is critical of the way such claims are calculated.

'Poor value'

Edward Leigh, Conservative chairman of the Commons public accounts committee, said the DTI does "not come out of today's report by the National Audit Office with flying colours".

"The scheme's cost effectiveness compared with other employment schemes is unclear.

"This means there is no way of telling whether the use of grants to create the extra jobs in any way represents value for money for the taxpayer.

"Where assessment has been possible, in the area of generating improved productivity, the schemes have been assessed as relatively poor value for money."

'Clearer vision'

He said not enough thought had been given to the objectives of the schemes.

"The award of 90% of grants by value to manufacturing companies is out of step with the marked move in our country towards a service economy.

"And some companies receive repeated awards which can make them grant dependent.

"The department must without delay examine its grant schemes with a much sharper eye and clearer vision of what they are intended to achieve."

New approach?

The DTI said it welcomed the report's findings, "which will help us get the best use of taxpayers money at the same time as supporting viable investments in our poorest regions".

In a statement, it said regional assistance had created a net increase in employment in poor areas dependent on manufacturing, a fact confirmed by the NAO.

It said the government would continue to "intervene when, for whatever reason, the private sector will not invest in what we consider to be a viable project that will increase wealth in those parts of the UK that need it most".

It said its new investment committee would meet for the first time next month to consider new ways of helping poor areas.

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