Much of the regional growth fund remains unspent and the cost of creating jobs through it has rocketed, the National Audit Office has claimed.
In a progress report on the troubled fund, Parliament’s spending watchdog said Whitehall faces “a significant challenge, particularly in 2014-15 where the budget is £1.4bn, to spend money as quickly as originally expected”.
The fund was set up in June 2010 to back projects with significant potential for economic growth, in particular in areas heavily dependent on the public sector for employment.
Following a critical report on the fund published in December, the NAO said that out of the £2.6bn allocated in the fund’s first four bidding rounds, £917m had been paid out by the end of December but £425m of that was held by intermediaries and yet to be spent.
It said this was probably because “appraisal of later rounds is less optimistic and that applicants have submitted more realistic applications in the first place”.
The average cost of each net additional job it supported had now grown to £37,400 from £33,000 in its earlier rounds.
The number of jobs created or safeguarded has increased by 22,100 since September 2012, to 44,400, but just five schemes accounted for almost half that total, with the other 291 sharing the remainder.
Auditors said the departments of communities and local government and of business, innovation and skills should impose more sophisticated targets on the value for money offered, noting Whitehall had “the information it needs to provide this analysis but is not using it as effectively as it could”.
The departments were also urged to evaluate previous performance of repeat bidders so that those that failed were not awarded repeat funds.
Business minister Michael Fallon said: “The NAO report rightly recognises the steps we’ve taken to strengthen RGF by improving its governance and getting money into the hands of businesses more quickly to support economic growth.
“RGF is working. Over £2.6bn of RGF investment has now been allocated to 400 local projects and programmes which is unlocking nearly £15bn of private investment and delivering 550,000 jobs.”