More than three quarters of a government fund set up to boost regional economies remains unspent, according to a new report.The National Audit Office (NAO) also says the cost of creating new jobs via the fund has increased.

Its progress report says that of the £2.6bn allocated via the Regional Growth Fund (RGF), only £492m has so far actually reached projects.

However, it does say cash is starting to get to businesses more quickly.

The UK’s spending watchdog also says the number of jobs created or protected since the fund was set up in 2012 had increased by 22,100 to 44,400.

But it reports the average cost of creating each additional job now stands at £37,400 – an increase of 13% since the fund started.

Around half of those jobs, the NAO says, were covered by just five of the 291 operational schemes.

Of the £917m paid out from the fund by the end of December last year, £425m is being held by intermediaries, the report finds.

‘Significant challenge’

That means only 19% of the total fund has actually reached the regional projects that have submitted successful bids.

The NAO does report that the fund is now better managed, and that the process of making final offers to bidders has sped up.

But it says the Department for Communities and Local Government and Department for Business, Innovation and Skills, which run the fund, face a “significant challenge” to spend the money as quickly as originally expected.

The fund was set up to help companies in England create jobs, particularly in areas dependent on public sector employment.

Business Minister Michael Fallon said the fund was working.

“Over £2.6bn of RGF investment has now been allocated to 400 local projects and programmes, which is unlocking nearly £15bn of private investment and delivering 550,000 jobs,” he added.

Shadow minister for small business, Toby Perkins, said more than a third of winning bidders under the scheme’s first round had lost patience and pulled out.

He added: “This report highlights ongoing concerns over bureaucracy and delays in money getting out of the door to the businesses which need it.

“The RGF was set up to boost private sector growth in deprived areas but instead we are seeing areas and regions held back.”