Employment scheme may cost up to £200,000 per job, says watchdog
Each new job created by a flagship government scheme could cost taxpayers as much as £200,000, say auditors.
The Regional Jobs Fund was designed to help businesses create private sector jobs in parts of the country with high levels of public sector employment.
But the National Audit Office (NAO) questioned its value for money.
A senior Labour MP said the projected cost was "shocking" but ministers said the £200,000 figure was "misleading" as the average would be about £33,000.
The NAO, the government's spending watchdog, examined the first £1.4bn awarded from the fund and found it could lead to an extra 41,000 jobs over the next seven years.
It said the fund - which is being spearheaded by deputy prime minister Nick Clegg and Conservative peer Lord Heseltine - was successfully being targeted at those areas more reliant on the state to provide jobs, but value for money had been undermined.
This was because "a significant proportion of the £1.4bn was allocated to projects that offer relatively few jobs for the money invested".
Tighter controls and "allocating funding across more bidding rounds could have created thousands more jobs from the same resources," the report added.
The average cost per job created was £33,000, but the watchdog said the cost could vary "from under £4,000 to over £200,000". With more effective administration, the average cost could have been reduced, it added.
"Over 90% of the net additional jobs could have been delivered for 75% of the cost, with the cost of each job then being £26,000."
Comparing the Regional Growth Fund with similar schemes under Labour, the NAO concluded that the average cost of a job was similar.
It said: "Based on the information available, a cost of £33,000 per net additional job is similar to the cost per net additional job achieved by programmes with comparable objectives."
The report questioned the impact of the fund over the long-term saying it was unclear if the jobs would be sustained.
In response, Business Secretary Vince Cable said the report recognised the scheme was "working".
He added: "We have already put in place some of the NAO's recommendations such as making more administrative resources available, which means projects are being processed even faster."
On the issue of cost, business and enterprise minister Mark Prisk said the £200,000 figure was "misleading" and may only apply in "one or two cases".
"The average is £33,000," he told Radio 4's Today programme.
"The NAO recognise, they say themselves, that this is typical of this kind of programme and they are comfortable with this point."
The government was not trying to create jobs itself, he stressed, but help businesses achieve their expansion plans.
"I think taxpayers will be encouraged to know that for every £1 we are putting on their behalf, we are getting £6 from the private sector."
But Labour MP Margaret Hodge, chair of the cross-party Public Accounts Committee, said the cost of the scheme was "shocking".
"Stronger controls over the value for money of individual bids are urgently needed to prevent any more money being wasted," she said.
In November, George Osborne announced a further £1bn would be available for future bidding rounds over the next two years.