£125m of regional funding put at risk by ministers' failure to act

Stephen Hughes MEP - photoMillions of pounds earmarked for the North East lie unallocated while growth has flatlined


Labour is calling on the Tory-led Government to get a grip and sort out the mess surrounding EU funds for regional growth, which is putting £125m for the North East at risk.


The unallocated funds are part of the European Regional Development Fund (ERDF), which exists to boost growth and jobs regionally, particularly in disadvantaged areas.


The Government has yet to put in place a mechanism for allocating the funds, following the hasty and chaotic abolition of One North East which used to manage the process. European Commissioners have raised real concerns that the funding could be jeopardised as a result.


If this does not take place in time, two thirds will automatically revert to the Treasury's coffers. According to the most recent government figures, £1,160m - 41 per cent - of ERDF funding for England is still unallocated.


Last month, BIS Minister Mark Prisk felt compelled to write to local decision makers urging them to look at national matched funding opportunities given the slow progress on allocating the funds in the past year and the RDA abolition which in his own words has ‘provided an additional challenge to your work.'


Gordon Marsden MP, Labour's Shadow Minister for Further Education, Skills & Regional Growth, commenting, said:


‘It beggars belief that when the North East is crying out for cash and investment to boost jobs and growth, this Government's actions is putting £125m of potential funding at risk, and over £1billion across England.


"It is symptomatic of the shambolic and chaotic way in which the regional development agencies were abolished, that they had no plan to allocate this cash for jobs and growth to where it is needed. There are real concerns that if the Government drags its feet longer, the money could be clawed back centrally by the Treasury.


"Ministers need to get a grip to ensure this money gets out to the English regions and helps boost growth and jobs which are flatlining as a result of the Tory-led Government's policies. We need leadership and urgency from ministers, but instead we have seen dither, delay and uncertainty demonstrating how out of touch they have become with the needs of businesses up and down the country."


"Labour's five point plan would help boost regional growth now with a one year National Insurance tax break for small firms taking on extra workers and bringing forward long-term investment projects."


Stephen Hughes, Labour's MEP for the North East said: 


"This demonstrates again that the Tories and Lib Dem's decision to axe One North East was short-sighted and reckless. This funding from the Europe Union is vital for the North East and I amazed that the government doesn't seem to have any real plan on how to access it or how to use it to help the North East economy.  


"In a week when we've seen hundreds more jobs lost in the area, government ministers urgently need to come forward with a plan for growth in this region."




Editor's notes: 

 1.    Table of regional statistics - Industrial Communities Alliance- http://www.industrialcommunitiesalliance.org/uploads/2/6/2/0/2620193/eu_funding_briefing_nov_2011.pdf

2.    The UK was allocated £2.97billion under the EU Regional Development Fund for the period 2007-13. This was previously delivered via the Regional Development Agencies  

3.    Following notice of their abolition, RDAs were effectively forbidden for committing to any new projects or accessing ERDF cash.  This has left over 1billion at risk if it is not spent within the period or if the new delivery methods proposed by this Government do not meet EU Commission rules.

4.    EU Commissioner Johannes Hahn has expressed concerns that this Government's change in delivery mechanisms for ERDF could put the funding at risk and jeopardise future projects: "Potential delays could create risks for timely project implementation, with implications in terms of potential loss of funding ... The situation is therefore being closely monitored."


Johannes Hahn  in ‘Brussels fires warning over RDA abolition' Allister Hayman, Local Government Chronicle - 29th September 2010 http://www.lgcplus.com/briefings/services/economic-development/brussels-fires-warning-over-rda-abolition/5019873.article


5.    Mark Prisk wrote to all Local Management Committees for ERDF funding on 8th December to suggest the take up of national matched funding opportunities in light of the RDA abolition. Progress on this so far has been minimal with only 1 of the 50 first round bids to the RGF successfully applying for ERDF matched funding and only 12 from the 139 in round two.

6.    If ERDF funding is not fully allocated in time before the end of 2013, two thirds will automatically revert to HM Treasury under the terms of the UK's rebate.