MIDDLESBROUGH COUNCIL

Report:Regional Growth Fund Round 4 –Clawback Guarantee

Deputy Mayor / Executive Member for Resources: Cllr David Budd.

Director of Transformation: Tony Parkinson

Date: 7th March 2014

PURPOSE OF THE REPORT

  1. Middlesbrough Council has been asked to approve and guarantee clawback risks for both the Regional Growth Fund Round 4 Tees Valley Skills and Apprenticeship Programme and the Business Growth Hub grant. This would be based on the Tees Valley population split with the grants to be delivered by Tees Valley Unlimited (TVU) with Stockton-on-Tees Council acting as the accountable body for the grant.
SUMMARY OF RECOMMENDATION
  1. Approve the provision of a guarantee of £1.96m to Stockton-on-Tees Council in respect of the recent Regional Growth Fund bid.

IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?

It is over the financial threshold (£150,000) / X
It has a significant impact on 2 or more wards
Non Key

DECISION IMPLEMENTATION DEADLINE

  1. For the purposes of the scrutiny call in procedure this report is

Non-urgent
Urgent report / X

Tees Valley Unlimited has obtained £9.4million of Regional Growth Fund support for the Tees Valley area. The offer of grant must be accepted by the Local Authorities by 13th March 2014. All relevant Authorities are required to share the risk on a population basis.

BACKGROUND AND EXTERNAL CONSULTATION

  1. TVU has been successful in receiving two offers of grant from the Regional Growth Fund.
  1. The first grant element is for £7m to deliver a Tees Valley wide apprenticeship programme. This is a wage subsidy scheme which will pay a maximum of £11,000 or half a wage for an initial year and then the company must then retain that post for a further year after the grant payment. Overall 700 jobs must have been created or safeguarded by the end of 2016/17 and through companies paying the wage difference for the two years the project needs to yield £11.7m of private investment. The apprenticeships do not include retail and will focus more on engineering, chemical, logistics, health, social care and digital companies.
  1. Appendix 1 gives more details and outlines TVU’s approach to project risks and mitigation. There is a draft process manual with planned financial/credit checks to be carried out on companies, audits of progress, a separate appraisal panel and verification of all expenditure before the grant is released. Companies will also have to sign grant offer letters and where possible clawback risk would be passed to them. Quarterly updates on the scheme’s progress will be provided.
  1. The offer letter for this grant is dated the 13th February 2014 and needs to be signed by the 13th March 2014 or the grant offer will lapse.
  1. The second grant is for £2.4m and is for a Tees Valley growth hub. This project target is to yield 100 new jobs and bring in £4.8m of private sector investment by the end of 2014/2015. The hub project is split into two sub elements - a flexible grant project which offers grants between 25k and £1m for revenue and capital spend to support business growth and hence new jobs and secondly there will be creation of increased business support activities by a team who will advise local businesses on growth and signpost them to further support. This will be delivered locally by the Business Enterprise Group which is a third party.
  1. This project is led by Lancaster University. An offer letter was issued to TVU on the 17th January 2014 and was accepted by Stockton-on-Tees Council as accountable body on the 7th February 2014.
  1. TVU in respect of both grants issued a draft letter, on the 13th February to all councils which Middlesbrough has been asked to sign.The template letter which Middlesbrough and other councils are being asked to sign off is agreement to sharing the risks of any clawback on both grants based on the Tees Valley population split. It also gives approval to Stockton-on-Tees as the accountable body to sign off all beneficiary offer letters.

IMPACT ASSESSMENT (IA)

  1. Not Applicable.

OPTION APPRAISAL/RISK ASSESSMENT

  1. There are only two options available:
  • Option 1 – Sign the letter for the grant, this is the preferred option.
  • Option 2 – Do not sign the letter for the grant, this is not recommended.
  1. The risk in relation to the amount of clawback, is very hard to quantify and despite searches there is no average percentage or estimate percentage rate that can be readily provided. Further details of the potential risks and their mitigation are detailed intheAppendix.

FINANCIAL, LEGAL AND WARD IMPLICATIONS

  1. Financial - The two grants in total are £9.4m. Middlesbrough’s last quoted TVU population split was 20.88%. Middlesbrough’s stake in the grants is therefore an overall risk or guarantee of £1.96m.
  1. Ward Implications –This report will be of interest to all Members.
  1. Legal Implications – Any potential clawback will be based on the level eligible expenditure and delivery of target outputs, (Jobs and Investment). Copies of the offer letters also set out other conditions such as, the programme must also be delivered to the satisfaction of Business and Information Skills (BIS) and the Department for Communities and Local Government (DCLG) monitoring teams.
RECOMMENDATION
  1. That the provision of a guarantee of £1.96m to Stockton-on-Tees Council in respect of the recent Regional Growth Fund bid and the signing of relevant documentation as referred to in this report, be approved.
REASONS
  1. Additional funding of £9.4m is to be made available to the Tees Valley from the Regional Growth Fund. The grant requires a commitment to guarantee any clawback across the relevant local Authorities.
BACKGROUND PAPERS
  1. No background papers were used.

AUTHOR: Paul Slocombe, Director of Strategic Resources

TEL NO: 01642 729027

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Website:

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