Nick Clegg has launched a £1bn regional fund to promote private enterprise in regions heavily dependent on the public sector.
The coalition is also ditching the regional development agencies in favour of local enterprise partnerships.
The deputy prime minister has warned that the economy is dangerously imbalanced, with the private sector disproportionately represented in the south and a high percentage of employment in the north accounted for by the public sector. "While we sort out the nation's finances we can also help to foster a thriving and more balanced economy, so that no region or community gets left behind," Clegg said yesterday.
The Regional Growth Fund, which will operate in the first two years of the spending period beginning in April next year, will be open to businesses and public-private partnerships in areas most dependent on public sector employment.
Over the last 10 years for every one job the private sector created in the north or Midlands, 10 jobs were created in the south-east and London
Chancellor George Osborne
Meanwhile, the remit of the new local enterprise partnerships was outlined in a joint letter to councils and business leaders from the business secretary Vince Cable and communities secretary Eric Pickles, who said: "If you want to rebuild a fragile national economy, you don't strangle business with red tape and let bloated regional quangos make all the decisions."
Aspects of planning and housing, local transport, infrastructure, employment and enterprise will all fall under their auspices of the agencies.
Government plans to stimulate private-sector growth beyond the affluent south-east attracted criticism from the Federation of Small Businesses (FSB) last week, which said they could spark an exodus of businesses out of London.
Most prominent in the package of measures announced in the budget was a £5,000 tax break on national insurance contributions for each of the first 10 people employed by start-ups in areas such as the north-east and Wales.
Speaking to the Times CEO summit on Monday, chancellor George Osborne asked "whether it is sustainable for the public sector to consume almost half of our national income, whether it is sustainable to have the current regional imbalances in our economy – so that over the last 10 years for every one job the private sector created in the north or Midlands, 10 jobs were created in the south-east and London".
He concluded: "The new government has to engage with those problems and not shy away from them, and to do so with a real mandate from the British people to sort these problems out.”
