Heseltine defends Regional Growth Fund for jobs

Place a limit on almost anything and you'll get competition and winners and losers.

After recently missing out on tickets for Radio One's Big Weekend and the Olympics, I'm feeling a bit sore about competing for what I want.

But of course the successful bidders may be feeling pretty chuffed.

And you can't help feeling the government's Regional Growth Fund has engendered similar feelings in companies up and down the country.

Winners and losers

The fund is designed to create new private sector jobs in areas like the North East and Cumbria which are heavily dependent on the public sector.

For the successful bidders, the contest seems worthwhile. The firms have secured vital investment and can press ahead with their plans.

But the losers are left scratching their heads, and wondering how they can fund their project.

The problem is that the Growth Fund has already produced far more losers than winners.

In the first round there were 468 bids for £2.8bn - more than twice the total amount in the fund.

So in the end 45 succeeded, gaining £450m - a one in 10 hit rate.

Oversubscription likely

A second round of bidding is now underway - with £950m available this time.

But yet again oversubscription seems likely.

Image copyright PA
Image caption A plan to build a conference centre on Gateshead's quayside failed to get funding.

I was at a Regional Growth Fund roadshow in Newcastle this week. Also there was the man who chairs the panel judging the bids - the former Deputy Prime Minister Lord Heseltine.

And there were also plenty of people wanting to find out how they can get a slice of the money on offer.

When asked how many were likely to put in bids, more than 100 hands went up.

Only a fraction of those are likely to be successful.

And that raises the question of whether the fund is just completely inadequate.

Labour and the trade unions say yes. They point out it amounts to a third of what used to be spent by regional development agencies.

In the North East, some high profile projects failed to get money first time round.

A bid towards the costs of a massive conference centre on the Gateshead quayside was rejected, as was an application for Newcastle's Science City development.

Both are regarded as crucial projects for the region - and seen as likely to create substantial numbers of jobs.

And then there was Cumbria, where all seven bids lost out in the first round.

Leverage value

Neil Foster from the Northern TUC says the fund needs to be made bigger to ensure projects like that don't miss out in the future.

He said: "It's down to the limited size of the Growth Fund. It doesn't do anywhere near enough for what we need in the region."

"The government should be supporting the conference centre and Science City, not walking away."

But Lord Heseltine is unrepentant. He sees the number of bids as a sign of the fund's success, and insists there have to be limits in any competition, particularly when public finances are under strain.

And he insists the North East has done well out of the fund.

Limited growth?

The region had a third of the successful bids in round one, netting around a fifth of the money on offer. It's hoped the grants given will help create around 13,000 jobs.

And he says the public money levers up to five times as much private sector money in.

Image copyright PA
Image caption Lord Heseltine and David Cameron - hoping to stimulate growth

He said: "The important judgement is whether we have used the money wisely and whether it will have an impact. On all the evidence, we are going to get a lot of new jobs and many of them will come to the North East."

But unless the government finds some more money, this second round of bidding is likely to mark the end of the Regional Growth Fund.

The question is - will a limited fund lead to limited growth at a time when the North East and Cumbria needs as much private investment as possible to offset redundancies in the public sector?

You can hear from Lord Heseltine, and see more debate about the fund on the Politics Show on 5 June at 12pm on BBC One.