Just 2,400 jobs have been created so far by a £1.4bn scheme that Nick Clegg predicted would lead to hundreds of thousands of new posts in the country's unemployment blackspots, a damning report by MPs disclosed last night.
Condemning the performance of the Regional Growth Fund as "scandalous", the Commons Public Accounts Committee (PAC) protested that only £60m had reached businesses, with a further £240m "parked" with councils and banks over which ministers have little control.
The PAC's withering assessment of the Deputy Prime Minister's job-creation scheme, which was launched in April 2011, came as Vince Cable, the Business Secretary, today sets out the Government's business strategy over coming years, singling out the industries that it will champion in the drive to boost the economy.
The Regional Growth Fund is aimed at creating, or safeguarding, jobs in areas heavily reliant on the public sector and particularly vulnerable to the squeeze on public spending. Ministers set a target of delivering 36,800 jobs during the lifetime of the scheme, but Mr Clegg forecast last year that it would provide a "snowball effect that creates hundreds of thousands of jobs".
But the PAC found that just 2,442 new jobs had been generated and a further 2,762 existing posts had been protected, while only a fraction of cash earmarked for the scheme had reached employers to date. It cast doubt on whether the departments set adequate value-for-money checks on cash handed out, noting that in some cases it cost more than £200,000 to create a job under the fund.
It was also critical that the Departments of Business and Communities, which oversees the fund, had been slow to allocate staff to processing applications for money.
Margaret Hodge, its chairman, said: "Given the dire state of the economy, it is scandalous that so few projects funded by the Regional Growth Fund have got off the ground." She added: "It is unclear what is being done to make sure that money is not wasted but spent on creating real jobs."
The Government last night responded that the PAC's figures were out of date, adding that the fund had already "unlocked" 200,000 jobs, while more than two-thirds of projects have started.
Michael Fallon, the new Business minister, said: "The fund is delivering at the pace that companies can expand and create new jobs. To rush companies into expanding before they are ready would be unsustainable and would put public money at risk."
Dr Cable will today argue that there are lessons to drawn for business from the country's sporting success at the Olympics. "Our athletes achieved what they did because of their years of commitment and planning," he will say. "We need to take the same approach: a clear, ambitious vision, the courage to take decisions that bear fruit decades later."
The Business Secretary said the Government intended to build a "strategic partnership with key sectors", citing aerospace, automotives, life sciences, the creative industries and professional and business services.
Meanwhile, Labour claimed yesterday that Dr Cable's strategy was not supported by David Cameron or George Osborne – and that Mr Fallon, who was sent by the Prime Minister to the department in last week's reshuffle, was really in charge.
What he said... Ministers set a target of delivering 36,800 jobs during the lifetime of the scheme
[The fund will create] "a huge snowball effect which ... creates hundreds of thousands of jobs"
Two tranches of money totalling £1.4bn were made available last year for bids from potential employers. They are assessed by a panel headed by the former Deputy Prime Minister Lord Heseltine.
Nick Clegg predicted the private sector would stump up £6 for every £1 provided from the Regional Growth Fund from the public purse. He estimated that more than 325,000 jobs would be created or protected.
...and what's happened: The scheme has got off to a sluggish start, according to the report, with just £60m reaching the front line so far and another £470m "parked" in other bodies. Only one-third of offers of funding have been finalised.
Just over 5,000 jobs have been generated or safeguarded so far, with some new jobs estimated to have cost the taxpayer £200,000 to create.