Support grants to private companies do not create as many jobs as official figures suggest, according to the National Audit Office.

The impact of the subsidies on local job markets could be overestimated once administration costs are taken into consideration, parliament's spending watchdog said.

In a report published on Tuesday, the NAO warned that these costs - estimated to total around 10 per cent of grant values - have not been fully considered by the Department for Trade and Industry's evaluations of the schemes.

Regional selective assistance grants have been offered to areas suffering from high unemployment or undergoing industrial restructuring since the 1970s and cost taxpayers around £300 million.

An analysis of the scheme in 2000 found that between 1991 and 1995 an estimated 110,000 jobs were either safeguarded or created in England, of which 21,000 were regarded as permanent and additional to those previously available in the area.

DTI studies have suggested that additional employment came at a net cost of £21,000 to the tax payer.

However, the NAO research concludes "that it is probable that fewer additional jobs have been created or safeguarded than the evaluation estimated, and at higher cost."

The new research did not cover the similar but more widely-available scheme of offering "enterprise grants", launched in 2000.

However, the NAO found that the benefits of the regional selective assistance grants could be overestimated given the bias of companies that receive funding and complete official questionnaires.

"The regional grants from the DTI to industry in areas of significant unemployment in England have resulted in a number of additional jobs but, according to the department's evaluations, there is a substantial difference between the number of jobs initially supported and the number which are truly extra," said NAO chief Sir John Bourn.

"It is important that the DTI takes steps to ensure the grant assistance is effectively meeting its objectives and to reduce further the administrative burdens involved."