£120m North East regeneration cash left to go to waste

CHANCELLOR George Osborne will today be told it is “nothing short of an absolute scandal” that more than £120m in European jobs cash is at risk in the North East.

George Osborne
George Osborne

CHANCELLOR George Osborne will today be told it is “nothing short of an absolute scandal” that more than £120m in European jobs cash is at risk in the North East.

Mr Osborne faces criticism that his spending cuts have meant it is increasingly difficult for firms and councils to access the £123m left in the North East’s slice of the European Regional Development Fund – a regeneration super-pot which has created thousands of jobs through projects such as building the Sage Gateshead.

Strict European Union rules mean the cash can only be spent if it is “match-funded” with UK cash contributions, from quangos, councils or businesses.

Newcastle North MP Catherine McKinnell is one of many warning the Chancellor he must “bang some heads together” to bring forward job-creating projects because the region’s remaining funding must be earmarked by 2013.

If the cash is not committed by then it will be handed back to the Treasury for use in its efforts to reduce the national deficit.

Ms McKinnell has written to the Chancellor warning against further delay.

In her letter she said: “It is nothing short of an absolute scandal that over £120m of potential investment in jobs, growth, innovation and business support in the North East is being jeopardised in this way, as a direct result of ill-thought through and hastily-implemented Government policies, and particularly when my region faces the highest unemployment rate in the country.

“I am therefore strongly urging you to consider how this situation can be addressed, and as a matter of urgency.”

In her letter Ms McKinnell says the Government’s flagship job creation programme, the Regional Growth Fund, has proved of little use to those wishing to unlock European regeneration money.

Out of more than 170 firms benefiting from growth fund cash just 13 have used it to match fund the European investment, with only two of those in the North East.

Ms McKinnell told The Journal: “The fact that this funding is being jeopardised is doubly shocking when the North East faces the highest unemployment rate in the country.

“The Chancellor needs to bang some heads together within Government – and quick – if this important investment isn’t going to be simply lost to the region.”

Warnings over European jobs cash have also been sounded by the Industrial Communities Alliance, a group whose 60 council members include Sunderland, Durham, Northumberland, Gateshead and South Tyneside.

The Alliance has said nationally more than £1.1bn was at risk, adding that “the Government does not yet have a convincing solution to the matching finance problem and time is ticking by.”

Alliance officers say the situation was created when the Government decided to scrap regional development agencies such as One North East, which had around £200m each every year to spend on major schemes.

The Alliance report adds: “The Treasury is therefore set to profit directly from funding intended to promote jobs and growth in England’s most disadvantaged areas”.

The Department for Communities and Local Government, now responsible for spending the European cash, has repeatedly said it is on course to meet deadlines.

Speaking in the Commons, Mr Osborne said: “If there are good projects that need European support and we can put together a joint bid and the resources to do that, of course we will do that.

“But let me make a broader point: disparity between the regions of this country grew over the past decade and ultimately, what we have got to do is to help the private sector across the regions to grow, as well.”

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