Annex
TIME FOR THE RDAs TO GET STUCK IN
1. The EC has put an end to gap-funding
with its ruling on PIP (Partnership Investment Programme). Government
is having to curtail grants to the private sector dramatically—down
to state aid limits (20 per cent in development areas) and is
now looking at other ways of getting development underway in areas
where it is needed but does not stack up.
2. The whole thing has been handled abysmally.
Government is pussy-footing round Brussels when the solutions
are staring it in the face. It even says grants cannot necessarily
be given to not-for profit organisations. But national governments
throughout Europe support cultural and heritage projects. Do we
stop handing out lottery funds? This is really silly. And when
DETR does eventually decide what it wants, the EC bureaucracy
will take years to grind through negotiations and the approval
process. Meanwhile regeneration will be stopped dead—unless
someone takes a lead.
3. Step forward the RDAs. They have a real
opportunity to do something at last. Up to now they have done
little more than produce wishy-washy motherhood and apple pie
strategies that amount to little more than a Utopian wish list.
They can take now the lead in helping secure the economic and
physical regeneration of their distressed areas and derelict sites—rather
than just talking about it.
4. In some ways a move away from gap-funding
could be a good thing. The eighties laissez-faire approach was
never the success it was cracked up to be. As far as employment
space was concerned, gap-funding failed to deliver on any scale.
The private sector was put off by an appraisal process that was
inevitably time-consuming and bureaucratic. Some applicants secured
offers of grant based on spec development and treated them like
options—to be implemented very profitably when they secured
a pre-let.
5. The laissez-faire experiment of the 80s,
when major developers such as BUD tried to undertake mega schemes,
often "in partnership" with local authorities, is largely
discredited. They found them too difficult and quite simply were
not prepared to take the risks required. At the first whiff of
the recession, such companies did a hasty retreat back down the
M1 and thence down the tubes. Those that stayed simply did nothing—regarding
the partnership as little more than a free option to be exercised
as and when the market picked up.
6. Developers are impatient and risk averse—that's
why they like green field sites. They want clean opportunities
on which they can make an early start. Rather than hand out grants
willy-nilly, RDAs, local authorities and other development agencies
can target resources on selected public sector owned sites and
either develop themselves or market them competitively for private
sector development. This allows them to put money into development
without falling foul of Europe—and does away with the unloved
appraisal process.
7. But to do this they need to secure sites
into public ownership. Many authorities are sitting on large tracts
of suitable land, but in the main any major development programme
would involve the public sector acquiring land from the private
sector—if need be using compulsory purchase.
8. RDAs must not be squeamish about using
CPOs for site assembly. And government must stop consulting the
world and his wife and do something about the crazy compulsory
acquisition procedures, which take forever and are open to all
sorts of abuse by difficult landowners and indeed anyone who wants
to put a spanner in the works. In the meantime it is worth RDAs
and local authorities using EP and its CPO powers which are akin
to those of the former UDCs. EP can acquire for regeneration purposes
without the need for a specific scheme and developer and with
a lesser burden of proof on funding and viability.
9. With standard, simple products like sheds
it is axiomatic that the only way of the public sector getting
what it wants, where it wants, when it wants, is to build it itself.
And it will probably get it cheaper, because it cuts out developer's
profit. There is no need for it to hold it forever. Once it's
up and let, it can just turn the investment and re-invest the
proceeds. Up to now, this inescapable logic is not something government
wants to hear. Yet direct development worked well for years with
the hugely successful advance factory programmes of English Estates
and the Welsh and Scottish development agencies.
10. Such an approach won't work with less
standard products—housing, leisure, retail, and to some
extent offices. The answer here is for the public sector to assemble
sites (using CPOs if needs be); undertake reclamation; put in
infrastructure and landscaping, and sell off attractive, manageable-sized,
serviced plots to the private sector under tight development agreements.
11. If the agencies really do not want to
get their hands dirty, they can market public sector owned sites
competitively for a specified scheme with an offer of grant. All
things being equal, the developer who put forward the lowest grant
requirement (or best offer for the site) would win the day. He
would be given a licence to develop the site with grant payable
on satisfactory completion of the scheme.
12. As a complementary measure, RDAs might
be give responsibility for allocating tax allowances. The agencies
have lobbied government to bring such incentives back on selected
schemes in particularly difficult areas and there is the possibility
that they might get an airing in the Urban White Paper.
13. Enterprise Zones (EZs) have been hugely
successful—if only in terms of generating development—perhaps
too successful. They have brought a whole new class of investor
to some of our most deprived areas. Investors' greed—and
perhaps stupidity—know no bounds when they see the words
"tax free". And from the developers' viewpoint, tax
allowances are automatic—they obviate the problem of a lengthy
and off-putting grant appraisal process.
14. However, the EZ is a blunt policy instrument.
Rate relief has been unnecessarily generous. Tax allowances have
gone to schemes that do not really need them. The EZ needs fine-tuning.
It needs limiting to schemes developed under building agreements
and to public sector-owned sites. Such restrictions would eliminate
land speculation and ensure that any "surplus" tax allowances
were clawed back by the public sector in the form of enhanced
land values.
15. To fulfil any new, wider and more interventionist
remit, RDAs need cash, clout and people in top positions who understand
property.
16. Come what may, they will have to take
a more pro-active role and brush up on their property development
skills. Many, if not most, local authorities do not have the necessary
hands on skills to implement major regeneration schemes. In fact
broadly-based regenerationists are pretty thin on the ground—the
RDAs will therefore need to become a centre of excellence and
expertise on which local authorities can draw.
17. Whitehall RDAs given them a pittance.
Although in theory they have a budget of nearly £1 billion
between them, most of this is already committed to on-going SRB
programmes. The amount of money they have at their disposal is
minimal—and much of it is taken up in running their administration.
18. Most of the agencies' top people wouldn't
recognise a house brick if it hit them on the head. The people
in charge know about training and competitiveness but simply do
not understand property—an equally important element in
any economic development strategy. They need to listen more to
what their property people have to say.
19. The loss of PIP will only be a disaster
if government chooses to turn it into one. It has the Regional
Development Agencies to hand which could and should take a more
hands on approach to development and mitigate the effects of the
loss of gap-funding.
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