The estimated £2.5bn cost of scrapping regional development agencies has not taken ministers by surprise and the process is being managed in an “orderly” way, business minister Mark Prisk has told LGC.
As revealed by LGC last month, the cost of scraping the regional development agencies could rise as high as £2.5bn - more than the entire budget for the network over 2010-11.
The £2.5bn figure includes the RDA liabilities - ranging from land such as former coalfield sites needing remediation, to ongoing public-private partnerships and long-term contractual commitments that could extend for 20 years - as well as costs such as redundancy payments and the cancellation of leases.
LGC has been told that ministers and Treasury officials were “shocked” by the extent of the RDA liabilities with business secretary Vince Cable, under pressure from Treasury, calling in the auditors KPMG to take control of the situation.
The £2.5bn blackhole has caused serious problems with the Spending Review settlements of the Department for Communities & Local Government and the Department for Business, Innovation and Skills.
Both departments are RDA sponsors and ministers have had parcel out the liabilities within each department’s budget. The total threatens to eat up whatever little regeneration funding might be available for the new local enterprise partnerships.
But speaking to LGC on the fringe of the Conservative Party conference Mr Prisk, left, denied that the extent of the liabilities had been a surprise and said the closure of the agencies was being undertaken through a “managed and orderly process”.
He said: “We have team working in Whitehall, looking at all of the RDAs, looking at all the different elements they have - assets, liabilities, contracts and so on - and are steadily working with them to steadily wind down those operations.”
But he said there were difficulties in the closure progamme, as the process was complex, but would not comment on the £2.5bn figure.
“It is too early to say- there are a lot of speculative stories around it - some of them are true some may not be true,” he said.
He added: “What I’m trying to focus on is the new landscape and how we draw down the existing system so its orderly and sensible and is fair to those people who are obviously going to be moving on out of the RDAs.”