Labour attacks 'fig leaf' business fund

The government has been accused of slashing funding for regional growth after announcing plans to encourage private sector investment.

Business Secretary Vince Cable said 24 Local Enterprise Partnerships would promote businesses across England.

There will also be a new £1.4bn regional growth fund to help support private sector projects.

But shadow business secretary John Denham said it was "fig leaf" to hide the fact there was no plan for growth.

The government announced in May that the eight regional development agencies (RDAs) established by John Prescott in 1999 would be abolished and replaced by joint local authority and business partnerships.

Mr Cable gave the Commons details of the new Local Enterprise Partnerships (LEPs). They will help promote local business projects by working with the government, helping allocate funds and deal with planning issues and business regulation.

The £1.4bn regional growth fund will be available over the next three years to encourage private sector investment across England.

But Mr Denham said it amounted to a substantial cut in the regional aid budget.

He said: "This statement cuts the resources for regional development by at least two-thirds. Regional Development Agencies will receive about £1.4bn this year. The regional growth fund will have £1.4bn over three years.

"The regional growth fund is a pathetic fig leaf to cover the absence of any growth strategy."

Ministers claimed that 2.5 million private sector jobs would be created over the next four years but there was "no sign today they can live up to that claim", said Mr Denham.

'Balkanisation' fear

But Mr Cable said Labour's RDAs were centrally-led and unaccountable. They had cost £19bn but left the economy as regionally unbalanced as before.

Launching the Local Growth White Paper Mr Cable said the government had invited business and civic leaders, voluntary groups and universities to propose setting up LEPs.

Some 62 proposals had been received and 24 had been asked to progress and set up their boards. They represented more than 60% of the economy of England outside London.

Separate discussions were taking place about LEPs for the capital, Mr Cable said.

Ministers say the LEPs - which will also lead regeneration projects and promote training - will cost less to run and be more accountable than their predecessors.

Lord Heseltine, who will be responsible for the regional growth fund, said the aim was to boost the private sector and not rely on taxpayers' money.

He told BBC Radio 4's Today programme: "There isn't any public sector money left so you have got to rely on the growth of the private sector."

But former Labour Home Secretary David Blunkett has warned that the abolition of regional aid bodies could lead to the "Balkanisation" of England as resources shift to London leaving some regions hard hit by cuts.

Mr Blunkett told the Guardian that it could lead to a rise in virulent nationalism outside the south-east.

Many English regions are desperate for new private sector investment

Lord Heseltine acknowledged the last 60 years had seen "the transfer of wealth, decision making and power from the provinces to London".

He said: "It has gone on and on and it has certainly had an adverse effect.

"Something that has taken 50 or 60 years to make the profile of the British economy is not going to change in six months but it is important to recognise the imbalance and to pursue policies to do something about it."

The eight RDAs outside London have a combined budget of £1.1bn this year after their funding was cut by £270m.

Although many of their functions are expected to transfer to the new organisations, some could be taken on by government departments and up to 2,700 jobs are at risk from the shake-up.

An estimated 490,000 public sector jobs are expected to go as a result of cuts announced by Chancellor George Osborne last week and recent BBC research suggested Middlesbrough, Mansfield and Stoke-on-Trent are among the towns most vulnerable to economic shocks.

Lord Heseltine told the BBC: "Everyone is concentrating on the half million jobs lost in the public sector - that is about the same number of jobs that go because people retire every year in the public sector. If you see it over five years it is 100,000 jobs a year."

The bidding LEP partnerships which have been shortlisted are:

• Birmingham and Solihull with East Staffordshire, Lichfield and Tamworth

• Cheshire and Warrington

• Coast to Capital

• Cornwall and the Isles of Scilly

• Coventry and Warwickshire

• Cumbria

• Great Cambridge and Great Peterborough

• Greater Manchester

• Hertfordshire

• Kent, Greater Essex and East Sussex

• Leeds City Region

• Leicester and Leicestershire

• Lincolnshire

• Liverpool City Region

• Nottingham, Nottinghamshire, Derby, and Derbyshire

• Oxfordshire City Region

• Sheffield City Region

• Solent

• South East Midlands

• Stoke-on-Trent and Staffordshire

• Tees Valley

• Thames Valley Berkshire

• The Marches

• West of England