Beckett back-pedals on investment `gazumping'

Government plans to prevent rival regions of the country from gazumping each other for high-profile inward investment projects look like being watered down. As Michael Harrison reports, some regional development agencies think the measures should go much further.

The Prime Minister, Tony Blair, personally pledged last year to put a stop to the "turf wars" that have erupted between rival investment agencies after claims that millions of pounds of taxpayers' money was being wasted on excessive inducements to foreign investors.

The complaints came to a head after the Welsh Office persuaded the South Korean conglomerate Lucky Goldstar to build a pounds 1.6bn computer chip and electronics plant in Wales rather than the North-east.

The chairman of the Northern Development Company, Sir George Russell, accused the then Welsh Secretary, William Hague, of "gazumping his own Cabinet colleagues and the DTI" and showing a blatant disregard for the way the inward investment rules worked. The Welsh Development Agency is thought to have offered LG pounds 247m in grants - twice the amount on offer from the North-east.

To prevent further such incidents, the plan had been to set up a high- powered committee under the chairmanship of the President of the Board of Trade, Margaret Beckett, to vet all aid packages and set a ceiling for the maximum that could be offered.

Now, however, the so-called concordat being devised in Whitehall looks like being watered down so that investment agencies will only have to justify the inducements they have offered after the location of the investment has been decided.

Devolution for Scotland and Wales and the creation of a separate parliament and assembly have added to the problems of attempting to exert control centrally through the DTI.

The latest suggestion is that the committee be made up of one representative from each of the Scottish, Welsh and Northern Ireland offices and the Department of Trade and Industry.

The hope is that by making the amounts offered "transparent" it will deter competing regions of the country from overpaying for inward investment projects in the first place.

The head of one large agency said the Government had chosen the "soft option". He added: "The concordat ought to say that when an inward investor comes to the UK the first port of call should always be the DTI, who can decide what the appropriate level of aid is and then invite the investor to find a suitable site."

However, James Turner, the WDA's international director, said the current guidelines worked well. "We don't need a huge new rulebook, otherwise we are going to get detached from the market place."