Memorandum by the Regional Development
Agencies (GF 14)
THE IMPLICATIONS OF THE EUROPEAN COMMISSION
RULING ON GAP FUNDING SCHEMES FOR URBAN REGENERATION IN ENGLAND
INTRODUCTION
The RDAs were established in April 1999 to improve
the economic performance of the English Regions. A key aim is
to bring greater coherence to National Government programmes by
helping to integrate them regionally and locally, and to bring
about a better attunement of national policies and programmes
to local needs and concerns. In addition to our own programmes
our underlying principle is to work in partnership to promote
sustainable economic development and regeneration.
Working in partnership is a fundamental cornerstone
of programmes for the regeneration of brownfield and problem sites
in England. The values of partnership working are widely acknowledged
and include establishing communication channels to permit the
identification of local problems and opportunities, promoting
local ownership of a project and utilising a wider range of skills
and expertise. There are also financial advantages including increasing
leverage, risk sharing and permitting a wider ranging, quicker
and more comprehensive solution to identified problems to be pursued.
Regeneration partnerships have become established and the private
and voluntary sectors are well informed as to the availability
of public funding in support of identified projects, which would
not otherwise proceed. The management of these programmes by RDAs
can further promote this approach by integrating them to provide
a simpler introduction to available funding and a more local focus.
A first key priority for the RDAs has been to
prepare with partners a Regional Economic Strategy for each region
to provide an overarching framework to focus activity on shared
regional priorities and objectives. This will steer not only our
own funding programmes but also harness the resources and expertise
from other sectors maximising the impact of RDAs' limited resources.
It was intended that PIP would be one of the
programmes to transfer to the RDAs alongside the other regional
regeneration programmes of EP, the Rural Development Commission's
Rural Programme and the Single Regeneration Budget Challenge Fund.
The aim was to achieve greater integration of these programmes,
enabling better focus on regional issues and a holistic approach
to regeneration.
Within this PIP was intended to provide the
land and property based element of regeneration tackling brownfield
sites in areas of market failure.
1. THE CONTRIBUTION
THAT GAP FUNDING
HAS MADE
IN REGENERATING
DERELICT AND
OTHER DIFFICULT
SITES IN
AREAS OF
"MARKET FAILURE.
From a regional perspective, the value of PIP
was that it enabled regeneration of a range of sites which the
market would not bring forward and which could not be funded solely
from the resources of an RDA. Tackling these sites in partnership
with the private sector has enabled us to harness not only the
resources of the private sector, but equally importantly to harness
their skill and expertise, sharing the risk and maximising value
for money achieved from public expenditure. The ability to draw
private landowners into regeneration partnerships has facilitated
site preparation. The availability of a willing partner obviates
any requirement for compulsory purchase, a time consuming and
expensive procedure and reduces up front financial liability and
risk. Partnership arrangements also achieve local support for
and promotion of regeneration initiatives.
We estimate that across all the English Regions
every £1 million, which we would be able to invest through
PIP, would attract £3 to £4 million of private sector
resource enabling four to five times the regeneration, which would
otherwise be possible. In 1998-99 £200 million of PIP investment
is estimated to have attracted £767 million attracting from
the private sector regenerating 1,300 hectares of land and creating
or safeguarding 29,000 jobs.
2. THE CONSEQUENCES
OF THE
EUROPEAN RULING
FOR URBAN
REGENERATION.
Significant schemes which are underway which
would not have proceeded without a partnership approach include
Grainger Town, Newcastle upon Tyne strategic employment sites
in the North West RDA and Eye Airfield, Mid Suffolk. The former
two schemes are examples of projects which fit with the "Urban
Renaissance" report.
The RDAs have looked for alternative partnership
arrangements, which might satisfy the apparent concerns of the
Commission and have not found any satisfactory solution. The loss
of partnership working is regarded as a step backwards to the
operations of the former English Estates where all development
was funded directly by that body. Such a move in particular would
not permit the broadened range of projects which have been possible
since the partnership approach was introduced with English Partnerships.
Funding available without partnership leverage would severely
restrict the number and scale of regeneration projects which could
be achieved and diminish the role of the regions in procuring
regeneration. There are other concerns over being restricted to
direct development based on the increased cost and risk to the
public sector, and the commensurate reduction in value for money
and private involvement, expertise and support. This approach
would also involve working contrary to the grain of the English
property market, and would generate windfall gains to parties
owning property in areas benefiting from public investment, which
would represent market distortion.
In the short term it will be difficult to complete
many area based urban renaissance schemes such as Grainger Town,
which rely almost exclusively on PIP for the property regeneration
element.
The proposed alternatives to PIP will not provide
a satisfactory alternative to enable the private sector to play
its part in such regeneration. Alternative schemes operating within
State Aid limits in Tier 2 Assisted Areas are unlikely to provide
the level of GAP funding required to bridge the gap between cost
and end value in many regeneration initiatives, particularly in
northern towns and cities. Direct development is not seen as a
viable solution to such urban renaissance where regeneration of
a multitude of buildings in separate ownerships is the objective.
It is estimated that any replacement of PIP
which was restricted to Assisted Areas and to within State Aid
Rule limits would exclude approximately 80 per cent of current
projects.
A list of projects which are still eligible
for GAP funding under the Partnership Investment Programme has
recently been agreed with DETR. The RDAs request that additional
financial resources are made available to enable all projects
on this list to be funded.
3. WHAT ALTERNATIVE
SCHEMES SHOULD
BE CONSIDERED
TO REPLACE
GAP FUNDING?
Despite much brainstorming within the RDAs no
single suitable replacement for PIP which would enable the private
sector to play its full part in urban regeneration has been found.
However, in the short term the following schemes
are being considered:
— a GAP funding scheme similar to PIP
but operating within State Aid Rules, ie 40 per cent of the cost
of projects within Tier 1 Areas and 20 per cent in Tier 2 Areas;
— the ability to fund projects on land
owned by the public sector. Hard end use land reclamation and
servicing;
— the competitive procurement of projects
on public sector owned land. The private sector would be invited
to bid for projects against a brief determined by RDAs. The successful
applicant/developer would be the one offering the best value for
money/requiring the lowest level of GAP funding;
— direct development by RDAs on land
in their ownership.
In the longer term it is felt that GAP funding
private sector investment offers considerable benefits, particularly
for larger scale urban renaissance projects. Support from the
European Commission should be sought for a new public private
partnership framework.
4. THE SCALE
OF PUBLIC
FUNDING REQUIRED
TO ENABLE
ALTERNATIVE SCHEMES
TO PRODUCE
EQUIVALENT RESULTS
On the assumption that direct development will
have a major part to play in delivering urban regeneration in
the future, the scale of public funding will need to increase
dramatically if RDAs are to maintain the current momentum. With
the current leverage of private sector investment through the
PIP scheme of approximately £1 PIP to £3 private sector
investment, then a four-fold increase in funding for the RDA's
Land and Property Budget could be justified.
In future years as projects are completed and
sold then increased receipts would be available to recycle further
investment into regeneration.
5. WHAT PROVISIONS
SHOULD BE
CONTAINED IN
A NEW
REGENERATION FRAMEWORK?
Any new framework should not restrict RDAs to
investment solely in Assisted Areas.
They should allow RDAs to address the worst
abnormal costs and pollution issues outside State Aid. The current
Environmental Aid guidelines give very little scope for action
on privately owned land and the opportunity should be taken to
widen the range of activities permitted.
30 June 2000
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