RGF: Why the trophy projects are struggling

The plot thickens on the Regional Growth Fund.
There was widespread disappointment earlier this week when all but a handful of the bids for money to back projects in the East Midlands was rejected.
There are some sniffs emerging which suggest to me that disappointment may be something we have to get used to.
Of the successful projects, the key question is how it was that bids from business got the nod, but bids from the [government-backed] Local Enterprise Partnership didn’t. So here’s a puzzle: were the private sector bids ones which government was already familiar with because these firms had previously applied for money from other public funding streams?
In other words, was this money they were already going to get, now repackaged under another banner? To be absolutely clear, the businesses involved have done nothing wrong, but there is an interesting political question hanging over the way these decisions were arrived at by Government.
The answer isn’t straightforward. One source involved in the process has told me that the issue is that business found RGF more attractive because there was uncertainty surrounding the other funding streams, which would originally have been dealt with by the now-doomed regional development agencies.
There’s some truth in that. Money previously allocated to the RDAs has been disappearing back into a Whitehall-shaped black hole. Indeed, there’s an argument which says it has re-emerged from that black hole in the slimmed-down shape of the Regional Growth Fund. So what goes around comes around, financially at least.
The other question is whether some of these projects will actually go ahead. You’ll note that all over the country the bids that have got the nod have been accepted ‘conditionally’. This is because they still have to clear a number of legal hurdles – the businesses involved must be able to deliver their side of the financial bargain in a match-funded scheme, they’ve got to be what they say they are (in other words, not a widget company dressed up as an aerospace engineer), and, inevitably, they’ve got to conform to a European Union directive.
These are the EU regulations about government aid to business, the basic rule being that state aid should not distort the market.
So it’s not impossible that some of the projects which have won RGF backing may have to be modified in some way before they can proceed. Or that one or two of them might fall over completely.
It also seems pretty obvious that there IS a regional bias in where the RGF money goes. Most of the bids accepted so far have been tilted towards the north, in areas where the public sector is a big chunk of the economy. So the South East, South West, East and East Midlands had fewer bids accepted. I suspect it will end up being the same in round two, when most of the RGF money will be allocated.
From my inquiries, it seems pretty obvious that in the first round there was an emphasis on schemes which were going to fit the Government’s immediate growth agenda – schemes which directly created jobs rather than encouraged them in the longer-term
This is probably why some of the grander, trophy projects – projects which local politicians can’t resist, because they are seen as monuments to achievement - didn’t make it.
They may still struggle in the second round. We’ll see.