Nick Clegg outlines £1bn fund for areas hit by cuts

The government says it is creating a £1bn fund to help English regions which depend on the public sector for jobs.

Firms will be able to bid for money for plans which increase investment, jobs and growth in their area.

The government is axing nine Regional Development Agencies - set up by Labour to support local businesses.

They will be replaced by partnerships between councils and firms - who have been asked for their views on the proposals.

Labour accused the coalition government of policies which risk increasing unemployment and sending the UK into a "double dip" recession and said ministers had broken their promise to keep Regional Development Agencies (RDAs) where they were popular.

Private sector growth

Plans for the new "regional growth fund" were in the Budget. Deputy Prime Minister Nick Clegg announced some of the details on Tuesday after a cabinet meeting in Bradford - the first to be held outside London by the new coalition government.

Prime Minister David Cameron has decided to continue Gordon Brown's policy of holding Cabinet meetings in regional centres with ministers travelling by train - standard class - and by coach for a series of visits.

To coincide with the trip to Yorkshire the government said the fund would be available for 2011-12 and 2012-3 to help "areas most dependent on public sector employment as the country makes the transition to private sector-led growth and prosperity".

Mr Clegg said: "The regional growth fund will create the conditions for growth and enterprise in the regions by stimulating investment and create sustainable private sector jobs."

In the Budget the government also pledged that people setting up new businesses outside London, the South East and the east of England will be exempt from £5,000 of National Insurance payments for the first 10 workers.

'Right environment'

Mr Clegg said both measures would "make a real difference to companies during difficult times".

Plans for new local enterprise partnerships - which will replace RDAs - were also outlined by Business Secretary Vince Cable and Communities Secretary Eric Pickles in a letter to councils and businesses.

They wrote that they expected the new partnerships to provide "strategic leadership" on their areas' economic priorities and to create the "right environment for business and growth" by looking at issues like planning, housing and transport. They also said most should have an equal number of business and council leaders on the board.

But they said some of the functions of the old RDAs could better be done nationally - like inward investment and access to finance like venture capital funds.

The letter comes ahead of a white paper on "sub-national growth" later in the summer.

Shadow business secretary Pat McFadden said: "Is the £1bn growth fund additional money over and above the current RDA budget of £1.5bn per year, or is it instead of it?

"It is important that the government clarify whether this is new money or is, in fact, a cut in support for the regions compared to what is being spent at the moment."

But Mr Cameron, questioned by BBC Tees about the future of the area's RDA, said: "What we've said is that there are certain things the regional development agency does at the moment, like housing targets and planning policies and the rest of it, we think belong with the local authorities.

"From then on it will be up to local authorities and people in the North East whether to keep a regional development agency or whether to say, actually, local authorities coming together in enterprise partnerships can spend that money more effectively."