THE way Whitehall devolves spending to local authorities needs completely redrawing, Lord Heseltine said yesterday.

He said spending was functioning like monopolies in the form of government departments deciding how money was spent, instead of local decision makers.

Instead of individual departments dictating how money was spent this should be done by mayors he said.

“Each year £20bn of money will be spent on capital projects in local government.

“Suppose you thought differently. Say you took £5bn and didn’t spend it in the conventional way.

“Instead you said to the mayors: ‘we have got £5bn per year to spend, what are you prepared to do if you get some of it?’ The effect would be electric.”

He said his proposal could lead to the funding of projects that would transform local areas.

Lord Heseltine chairs the advisory panel of the £1.4bn Regional Growth Fund (RGF), which has recently handed out the last batch of its funding.

Critics say the scheme hands out nothing like the amount of money the Regional Development Agencies it partly replaced.

He defended the money it hands out: “The RGF is a competitive process. Between £5 and £6 of private money is invested for every pound of public money.

“The £1.4bn actually leads to £7bn of investment.”