Ministers have rejected claims that the chaotic introduction of measures to boost regional economies has robbed industry of hundreds of millions of pounds in vital support.
Watchdog the National Audit Office criticised a patchwork of initiatives introduced by the Coalition government, saying they were brought in too slowly and without enough planning.
The Government scrapped Regional Development Agencies, the regional bodies set up by Labour which once distributed funding to improve infrastructure, provide training and in some cases give loans or cash support to employers.
The National Audit Office (NAO) found that government funding to boost economic growth in regions outside London fell from £1.4bn in 2010-11 to just £273m in 2012-13, although it is set to rise again to £1.714bn in 2014-15.
The North East’s Regional Development Agency, One North East, had an annual budget of £222m but was axed in 2012.
Local Growth Minister Kris Hopkins said: “We are investing billions through our growth programmes, supporting thousands of local businesses, securing billions in private sector investment, boosting skills and creating tens of thousands of much needed local jobs.”
“And we are now reaping the rewards, with the latest GDP figures showing the economy is back on track, with the deficit falling and employment at its lowest for more than three years.”
But Catherine McKinnell, MP for Newcastle North and a Labour Shadow Treasury spokesperson, said: “The NAO report confirms what Labour warned all along – that dismantling One North East would damage our region and the important work it did to support economic growth.
“The chaotic way in which this was done is rightly criticised by the report, and Ministers’ total failure to ensure the transition was an orderly one – during a period when we’ve had three years of flatlining growth, and the highest unemployment of any region in Britain – is totally unacceptable.”
Regional Development Agencies each served one of the nine English regions. They were abolished by the present Government, partly because Ministers wanted to move away from giant regional structures and introduce local initiatives instead.
But the NAO report warned that the replacement schemes had been slow to get money out where it was needed, and there had been very little co-ordination between them.
They include the Regional Growth Fund, which provides grants totalling £2.6bn to industry. But the NAO warned: “The Regional Growth Fund had a slow start and government has not allocated funding as quickly as originally planned.”
The Government has also created Enterprise Zones, which offer tax breaks to businesses as a way of attracting new employers.
They include the North Eastern Enterprise Zone, on ten sites in three clusters around the Port of Blyth, on the North Bank of the River Tyne and adjacent to the A19, south of the Nissan plant in Sunderland.
But the NAO warned: “The financial incentives currently available are short term, which creates uncertainty for businesses”.
Business and councils created new Local Enterprise Partnerships. But the report warned that some were less capable than others, adding: “Some partnerships continue to face significant capacity issues.”
The NAO was more positive about City Deals, another Government scheme which includes a deal in Newcastle, but it warned that overall, the introduction of new schemes let to “a marked dip in funding”.