While the £450 million investment is welcome, it is a drop in the ocean compared with the budgets of the regional development agencies that the government is winding up. Moreover, the successful bids are far out-numbered by the unsuccessful ones by a ratio of ten to one. If Clegg is so ‘bowled over’ by the quality of bids and is so sure of the private sector money that this investment will leverage, then does he not agree with shadow business Secretary, John Denham, that the funding for regional economic growth should match the government’s rhetoric? Labour has proposed that by re-instating the tax on bank bonuses £200 million extra could be allocated to the regional growth fund so that we have the chance to build the economy of the future that we should all be striving for.
We have heard warm words from this government about the need to build jobs and growth. Indeed, launching his ‘budget for growth’ chancellor George Osborne said it was ‘a Budget that encourages enterprise; that supports exports, manufacturing and investment; that is based on robust independent figures: a budget for making things, not for making things up…’. But the government’s own Office of Budget Responsibility was underwhelmed by the rhetoric, knocking a further 0.4 percentage points off the UK growth forecast for 2011, taking it from 2.6% before the chancellor’s first budget to 2.3%, then to 2.1% in November and now to 1.7% – down by almost a startling one per cent in less than a year.
Britain is now expected to grow at a slower rate than the United States, Germany and the Eurozone this year, following the contraction of UK economy by 0.5% in the last quarter of 2010. On top of that, today’s retail sales numbers recorded the worst drop in total sales since records began, unemployment is forecast to rise to 8.2% this year, while employment is now expected to be lower even in 2015 when the recovery should be fully embedded. Tomorrow unemployment numbers for the three months to February come out, and the chances are that youth unemployment would have edged a little further towards the million mark, with more job losses across the country. And business leaders are increasingly anxious about the government’s growth credentials – over the weekend business chiefs at the Carphone Warehouse, ITV and Next said that projections for private sector growth were too optimistic, and the former head of the CBI, Sir Richard Lambert, said the government had ‘failed to articulate in big-picture terms its vision of what the UK economy might become under its stewardship’
The think-tank, Centre for Cities have sketched out what they think is needed for a better-balanced economy and growth across the UK and point to 11 cities that they say must be the engines for growth. Leeds is one of those cities, and indeed is cited as one of the five ‘ones to watch’ for potential too. Yet, in the allocation of regional growth fund largesse, Leeds gets nothing, despite our creaking transport infrastructure, shortage of housing and growth potential. Another city that the Centre for Cities says is crucial for recovery and for private sector job growth is Sheffield, home of Sheffield Forgemasters who had their loan of £80mn pulled back in June. Cable said that Sheffield Forgemasters could instead get support from the Regional Growth Fund, but they are not on the list of today’s winners either.
So while the £450 million will be welcomed by the 50 successful schemes, and will be lauded by the government as a sign of their commitment to growth, the reality is that the rhetoric on growth outstrips practical policies to secure the investment and jobs across the government that we need. Employers and employees are crying out for a vision of what the economy might look like post-austerity, a hope that we may be sewing the seeds of a sustainable recovery. But, today’s announcements will do very little to provide the confidence that the government understands the scale of the challenge, or the scope of the opportunities.
Given the government’s admission that the quality of bids is so high, I urge them to do two things now.
First, match Labour’s commitment to increase the size of the Regional Growth Fund by £200 million by repeating the tax on bank bonuses. And second, instead of requiring the outgoing regional development agencies to sell their assets – including office space and fantastic assets like Tower Works in Leeds, let the local enterprise partnerships use those assets to fund innovative and entrepreneurial projects in the regions. These assets, across England, are worth £500 million – exceeding the value of the successful bids unveiled today – and could kick-start the jobs and growth that are needed to build a stronger and more secure economic recovery in Leeds, Yorkshire and across England.