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[1st Allotted Day, first part]


Class III, Vote 1

Urban Regeneration

[Relevant documents: Sixteenth Report from the Environment, Transport and Regional Affairs Committee, Session 1999-2000, on the Implications of the European Commission Ruling on Gap Funding Schemes for Urban Regeneration in England, HC 714, and the Government's response thereto, Cm. 4923; and The Department of the Environment, Transport and the Regions: Annual Report 2000, Cm. 4604.]

Motion made, and Question proposed,

7.13 pm

Mr. Andrew F. Bennett (Denton and Reddish): I am delighted to have the chance to debate the report of the Select Committee on the Environment, Transport and Regional Affairs on gap funding and the Government's response to our report. I thank all those who helped with the report, including those who sent in evidence or agreed to be questioned by the Committee, our specialist adviser David Lunts, and all the Committee staff.

In politics, I usually have respect for my opponents. Although they may be misguided or just plain wrong, they usually believe very firmly in what they are doing. Only occasionally, one comes across someone who can be described as really evil--enjoying power for its own sake and using it in an entirely capricious manner with no concern or regard for the consequent destruction and misery. The European Union Competition Commissioner, Commissioner Monti, is such a man.

In deciding to stop the United Kingdom's gap funding programme, Commissioner Monti has dealt a blow to much of urban Britain that is equal to the damage that was caused in many of our urban centres by Axis bombing during the second world war. He has done so because of

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a perverse belief in an economic theory of competition that is totally divorced from reality. As we said in our report,

We go on to state:

In paragraph 46, we state:

on regional aid, the Competition Directorate could destroy that aid.

I should explain the background. For the past 30 years, more and more sites in urban Britain--particularly in our big cities, urban conurbations and small towns, and sometimes even in villages--have outlived their original purpose. However, it has been too expensive for anyone to do remedial work on that land and to restore buildings for new uses on a purely commercial basis. To put it simply, the possible rent from such new development would not cover the costs of the development itself.

Consequently, the Government, using English Partnerships, came up with the partnership investment programme, which is more commonly known as gap funding. When English Partnerships felt that the PIP scheme could help with urban regeneration, it offered a grant intended to bridge the gap between the cost of the development and the potential rent generated by the development.

Such schemes have been increasingly important in the past 10 years, under both the previous Administration and the current one. Many witnesses emphasised to us that not only were the schemes important in their own right, but they acted as seedcorn to encourage other developers to develop nearby sites on a purely commercial basis.

For much of 1997, 1998 and 1999, Commissioner Monti and his officials were questioning whether such schemes broke European Union competition policy. This time last year, he scored a double-whammy by deciding that the scheme was illegal under EU rules. At a stroke, he destroyed the main plank of the United Kingdom's urban regeneration policy and reinforced a view which is very strongly held by many of my constituents that the EU is a bureaucrats' bonanza.

I have to say that I am disappointed that United Kingdom Ministers did not make a much greater fuss about the decision. I appreciate the difficulty that 300 schemes were in the pipeline and could, without a compromise, have been put at risk. I understand those pressures.

The compromise was that, although no new schemes could be approved, the 300 schemes in the pipeline could continue. However, that seems to be absolutely illogical. Either the schemes are legal and we should be able to continue with them or they are illegal. We cannot have

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such a compromise. Moreover, there is always the risk that someone will go to the Court of Auditors and it will decide that money provided to the schemes has to be repaid.

The Commission suggests that, instead of the schemes being operated by private companies, with state aid bridging the gap in future, they will have to be run by the Government, the regional development agencies or other local bodies such as councils and regeneration companies. Such a proposal seems totally illogical. Those bodies would have to lay out the full cost of running a scheme, and then sell the scheme on at a loss. The problem is that the public sector will have to find 10 or even 20 times as much money to get the schemes going as they would if they merely had to bridge the gap.

I know that the Government have given the RDAs some extra money and that schemes are in the pipeline, but serious problems remain. I do not believe that the RDAs have the staff or the skills to pick up all the good schemes that should come forward.

In addition, there is doubt about whether the RDAs can be effective in regions outside assisted areas. We need to emphasise that some of the most successful gap funding schemes have been in towns that are totally outside the assisted areas. Cities that are very prosperous in general often have a rundown inner core. Gap funding could make a major difference to such areas.

I shall not detain the House, but I hope that, when she replies to the debate, my hon. Friend the Minister will say where the negotiations with the EU, and particularly with Commissioner Monti, have got to. How soon will a replacement scheme be in place? What is happening to ensure that the RDAs have the skilled personnel to carry out schemes in future? What is being done to avoid the waste that occurs when private companies develop people's skills for the schemes? Will they be able to offer the RDAs contracts to do the work for them?

In their response, the Government said that they were looking at compulsory purchase order procedures, but a key element in gap funding has been the way in which private developers have been able to put together packages of land. I hope that the Government will make it clear that the RDAs will be able to use speeded-up CPO procedures to secure the land assembly that is so crucial.

Will the Minister say whether the new schemes will be available in all those parts of the country where otherwise thriving cities have disadvantaged urban communities? Will they be available only in development areas? Will there be limits on the amount of funding made available to them? The suggestion is that, even in development areas, the amount of state aid will be severely limited.

Finally, does the Minister really appreciate the anger felt by so many people in Britain, and the contempt that they have for the behaviour of Commissioner Monti? He has acted out of academic spite, and destroyed an important part of the lifeline that would have secured urban regeneration in Britain. I hope that the Minister will get the message over to Brussels that most of us are disgusted with the behaviour that we have seen.

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