Britannia Radio

The £1.4bn cost of winding down the RDAs

October 25, 2010 10:55 pm by Jim Pickard

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When Francis Maude said a few weeks ago that he was culling 192 quangos he couldn’t put a number on how much money the coalition would save. And no wonder. The cost of any government reorganisation can quickly mount in terms of redundancy payments, closing down offices and so on – before you get any net benefits.

Regional Development Agencies will require a further £1.4bn-plus of state funding over the next four years despite their abolition in the spending review, officials have just confirmed.

The nine regional quangos, which are to be replaced with a patchwork of “local enterprise partnerships” – loose networks of councils and companies – cannot be axed immediately and instead will be wound down gradually with heavy redundancy costs for staff.

The business department, which has provided a large share of the RDAs’ annual £1.4bn funding, will pay 30 per cent of the costs of winding down the nine bodies. It alone will pay £435m over the four years to meet legal commitments, complete various projects and shut the bodies down.

The communities department, which made the largest contribution to their running costs, is also likely to have to pay a large sum as they are wound down. Lesser contributions will be made by the departments of environment, energy and transport.

The huge costs illustrate just how cumbersome, time-consuming and costly the wider process of shutting down close to 200 quangos across Britain is likely to prove for the coalition.

However government sources pointed out that only part of the £1.4bn would be used for redundancies, cancelling facilities contracts and closing down buildings. The “vast majority” of the money would be required to see economic development projects through to conclusion – meaning it was an investment and not “dead money”, said one Whitehall official.

A spokeswoman for the business department said it would pay £297m towards the package in 2011/12, £69m in 2012/13, £37m in 2013/14 and £32m in 2014/15. But the point remains; the remnants of the RDAs will still be absorbing large amounts of taxpayers’ money – even at the end of this Parliament.

UPDATE: I should clarify that it is only a co-incidence that the £1.4bn annual funding for RDAs in the past is the same figure as the total £1.4bn which they will need to wind up over the next four years. An even stranger co-incidence is that £1.4bn is also the figure for David Cameron’s new regional development fund, designed to take the sting out of the scrapping of the RDAs. I hope that’s clear.