CONCLUSIONS AND RECOMMENDATIONS
43. In recent years there have been signs of an
urban renaissance in several English cities, including Manchester,
Liverpool and Leeds. A crucial instrument in regenerating areas
where land and buildings have very little, if any value, has been
English Partnerships' Partnership Investment Programme. However,
in December 1999 to the dismay of everyone involved in urban regeneration
in England, the European Commission decided that the scheme was
illegal.
44. At a stroke urban regeneration in England
was seriously undermined. The consequences have been spelt out
clearly by our witnesses. They are nothing less than disastrous.
The Partnership Investment Programme has been a uniquely successful
public-private partnership, raising £2.5 billion in private
sector capital. While the Commission made much of the fact that
gap funded schemes will be permitted in some circumstances in
Assisted Areas (but not immediately), 80-90 per cent of the type
of projects approved under the Partnership Investment Programme
would be lost in the future. Even smaller projects such as the
conversion of old warehouses into flats in run-down areas of major
cities can no longer be supported by the Partnership Investment
Programme. We are also faced with the prospect of developers who
have built up great expertise in brownfield development losing
interest in such projects.
45. The Commission's decision is perverse and
bizarre. The previous Competition Commissioner found the Partnership
Investment Programme acceptable but, on the arrival of Commissioner
Monti, an academic with renewed zeal and determination to search
for breaches of the State Aid rules, the original Commission decision
was over-turned. Although we can see why the Commission could,
on the narrowest of grounds, construe circumstances in which it
might be imagined that the Partnership Investment Programme might
affect trade between member states, in practice no projects could
result in any form of significant distortion of the single market.
Moreover, the Commission's view that it is acceptable for the
public sector to bear risk using tax payers' money but not the
private sector is illogical. We must conclude that the European
Commission took its decision casually without regard for the consequences
of its action. As witnesses have stated, having made this disastrous
decision, the Competition Directorate General now considers that
sorting out the consequences for the deprived populations of England's
cities is someone else's problem.
46. It is extraordinary that while the Regional
Policy Directorate General of the Commission spends immense sums
throughout the European Union on regeneration, the Competition
Directorate General has decided effectively to abolish the most
efficient, effective and imaginative regeneration scheme in the
European Union.
47. Part of the problem is that the Commission
had not realised the differences between conditions in England
and continental Europe. The vast majority of land in England is
privately owned with landholdings in an area often being fragmented
between many landlords. This makes direct development by the public
sector very difficult. In contrast, a much higher proportion of
land in European cities is in public ownership.
48. The UK Government preferred to bargain to
keep in the pipeline all those schemes which had been submitted
to the Partnership Investment Programme by 22 December 1999, rather
than contest the Commission's decision. It is essential, however,
that new schemes are in place for Assisted Areas by the end of
the year, although the Commission does not have a record of moving
to solve urgent problems with dispatch. In any event, given the
intensity rules which limit the sums that can be provided by gap
funding even in Assisted Areas, fewer than 20 or 30 per cent of
schemes which would formerly have been funded in such areas would
go ahead.
49. Outside Assisted Areas it will be even more
difficult to find a suitable replacement for the Partnership Investment
Programme. Regeneration will have to be done by direct development.
However, it is doubtful whether the RDAs currently have the skilled
personnel to undertake such work, and it will take time to build
up this expertise. Direct development will also make new CPO powers
essential. We recommend that legislation to provide these powers
features in the Queen's Speech in the autumn. Consideration will
also need to be given to permitting RDAs and English Partnerships
to borrow against assets.
50. In the long term progress can only come about
through a new regeneration framework. The UK Government must work
with other European Governments to develop a co-ordinated approach
to such a framework. It must impress on the European Commission
the need to show unusual urgency, if our cities are to avoid further
degeneration. However, we have no confidence that the Commission
will allow a regeneration framework to be negotiated quickly.
The Minister confirmed that this was the case.[118]
51. Illogical and ill-considered Commission decisions
such as this on the Partnership Investment Programme bring the
European Union into disrepute.
118 QQ181, 184, 186 Back
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