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Mr. Crispin Blunt (Reigate): Does the hon. Lady acknowledge that the ending of the partnership investment

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programme, set against the extra money that has been made available for the RDAs, sets £3 billion alongside £600 million? That is the scale--the order of magnitude--of the hole that has been punched in urban regeneration by the effect of the ruling of the European Commission.

Mrs. Ellman: I accept that the increased funding and flexibility provided to RDAs by the Government should be used to increase the capacity of the agencies. I am extremely unhappy at the prospect that it might be seen as a complete replacement for the previous private sector funding. I shall return to that subject later in my speech.

Major issues must be addressed--but in the context of the progress and improvement that we are experiencing in my constituency, in the north-west and throughout the country. I agree with hon. Members who point out that national, regional and local initiatives must be more effectively co-ordinated. There are a plethora of initiatives; each is much to be welcomed in its own right, but there must be much more national, regional and local coherence. More explicit consideration should be given to the local and regional implications of national decisions. A directly elected north-west assembly working with strengthened local government would be one step in that direction. Will my right hon. Friend the Minister for Local Government and the Regions tell us how such issues might be dealt with in the interim before such an assembly is set up?

In his important comments at the opening of the debate, my hon. Friend the Member for Denton and Reddish (Mr. Bennett) referred to one of the other vital issues that must be resolved--the problem of the removal of gap funding. The change in the interpretation by the European Commission of state aid poses a major problem for regeneration--certainly in my constituency and, I suspect, in many areas.

The ruling on the removal of gap funding, already decided by the Commission, has had an important and damaging impact on my constituency. Important developments in Liverpool, such as those in Concert square, Queens square and Speke-Garston, were dependent on gap funding in the past. I am extremely concerned as to what its removal might mean for the future. I do not accept that the increased funding for the RDAs--welcome as it is--will provide a complete replacement for gap funding. Will my right hon. Friend give us information on the Government's efforts to bridge that gap?

The situation is even more serious. The principles on the interpretation of state aid adopted by the Competition Directorate of the European Commission have been extended and are being applied to structural funding. I understand that, under the objective 1 programme currently being considered for Merseyside, about 14 projects specifically designed for Liverpool have been referred to the state aid unit of the Department of Trade and Industry. Will my right hon. Friend confirm whether that is correct? Can she tell us what is happening?

I am extremely anxious, because those projects include an important proposed development for my constituency and for the inner city--a business centre in Toxteth. That development has been able to attract essential private sector investment that had been lacking in the past.

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The private sector is willing to invest, yet I understand that that project and others are being closely scrutinised by the state aid unit because of concern about EU rulings on state aid. The matter is extremely important. Other projects are also involved--the north Liverpool resource centre and the Scotland road gateway. Will the Government resolve the matter with great urgency?

Hon. Members have referred to the problem of derelict property in regeneration. That is of special importance in my constituency. I praise the Liverpool Echo for its "Stop the Rot" campaign, which has highlighted that critical problem in Liverpool, although there are wider ramifications. What progress has been made on changing the compulsory purchase order regime?

Other bodies also have responsibilities--including local authorities, which are responsible for addressing issues of immediate concern. I call on the property-owning company, Frenson, to face up to its public responsibilities in the Ropewalks area of the city centre. Frenson is sitting on property, allowing it to rot. When it is let to tenants, rents are forced up wholly unacceptably. It is not good enough to leave listed properties in Seel street, listed merchants' houses in Duke street and the Scandinavian hotel to decline. I call on Frenson to face up to its public responsibilities and to assist in the regeneration of Liverpool, not to impede it.

I have drawn attention to several national and local issues. I am convinced that the Government's comprehensive approach to regeneration is right and that the creation of regional development agencies and the institution of regional chambers and regional assemblies is the right way to proceed, but greater focus is needed. I ask the Minister to address those issues nationally and specifically in terms of Liverpool and the north-west.

8 pm

Mr. David Curry (Skipton and Ripon): I am sorry that I begin my remarks with a small quarrel with an hon. Member with whom I normally agree and for whom I have great respect. The hon. Member for Denton and Reddish (Mr. Bennett) made remarks about Commissioner Mario Monti. The decision that he took was wrong and damaging. I agree with the hon. Gentleman's assessment of the consequences, but I do not think that describing him as evil or somehow power crazed helps the argument. We accord courtesies to colleagues in the House, and it is sensible to do so to people outside as well. No doubt, I shall be labelled as flying my frightful Europhiliac flag yet again, but in the circumstances I will plead guilty.

Regeneration policy has tended to oscillate over the years. I shall not talk about particular cases; my constituency is very much a rural one, but I had responsibility for such matters for four years and the emphasis was on physical regeneration, then on social regeneration and then city challenge and the single regeneration budget. The emphasis is now on social exclusion, and the policy is beginning to come together in the realisation that physical regeneration must go hand in hand with trying to help communities in a more personal sense. As a result, the policy tends to be bitty; it tends to be a bottom-up policy and is difficult to describe in broad, sweeping terms, but we have all learned the lesson that regeneration policies have to be built on a neighbourhood basis. The time is long past when politicians could drop strategies on to communities in the hope that they would work.

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We have accepted that design is important. The key to regeneration is creating a critical mass in compact, socially mixed neighbourhoods with a mixture of uses, so that a market is created for public and private services. If no market place is created--in other words, if there is no mass of people who demand the schools, who can serve on public transport and who need the local barber's shop and betting shop--we will not produce those polycentric cities that actually work. It would do no harm to go back and read Jane Jacob's book, "The Death and Life of Great American Cities", which shows what went wrong when the mixed uses and all the informal relationships that existed in neighbours gave way to monochromatic uses.

Mr. John M. Taylor (Solihull): I am following my right hon. Friend's remarks with my customary interest; he is a man of fertile mind and interesting thought. He knows France far better than I do, and various quarters are dedicated to particular activities in the planning of French cities. How does he reconcile that policy, which clearly works, with what he is saying about multiple-use areas?

Mr. Curry: My hon. Friend would find that many French cities have a zone industrielle on their edge, and people commute out to them. The difference between many British and French cities is that many people live on top of the activities in the cities themselves and the densities of the cities is much greater. He would also find that street markets are much more frequent and used by all sorts of people, which makes French cities function better. However, the French countryside is a catastrophe because anyone who is anybody has gone to the cities. That is the fault of Louis XIV. We could have a long dissertation on the consequences of Louis XIV on French rural decay, which still continues today.

Dr. Stephen Ladyman (South Thanet): I agree with the right hon. Gentleman's comment that we cannot impose solutions on neighbourhoods. Solutions must come from neighbourhoods. It is fashionable to say that politicians cannot impose such things, but does he agree that politicians have a clear role because, in areas of urban blight, communities often have low morale and believe that they cannot contribute to their own regeneration and that it is important that politicians show them leadership to get them to the point where they can contribute to their regeneration?

Mr. Curry: I absolutely agree with the hon. Gentleman. We must not fall into believing the cheerful myth that suggests that regeneration is waiting to happen in every neighbourhood and that if people are given the tools, by gosh, they will be on their way. Some neighbourhoods are pretty grim for all sorts of reasons, and people are very incompetent in those neighbourhoods. That can be seen in the some schools' catchment areas, which I wish to deal with in a moment. Politicians have a job to do; they must try to ensure that people can use the instruments of help that they devise in a way that lasts and creates a cycle of improvement. That is not impossible.

The White Paper and the Pre-Budget statement must be viewed in that context. The White Paper was written by this Government, so it is windy and wordy and there is no grand sweep of ideas. The Minister for Housing and

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Planning has just entered the Chamber, and he may have had a hand in it because his housing Green Paper, which suffered from similar problems, will have given him good practice. However, that is not necessary a failing; there is much that is welcome, such as the VAT changes for residential conversions, although that is applicable universally and is not specific to inner cities. It could be applied in the smallest village in my constituency, were it relevant. The changed tax treatment for contaminated land is welcome and overdue. The smaller incentives on stamp duty and the 100 per cent. capital allowances to create flats over shops are useful, small changes.

As the hon. Member for Liverpool, Riverside (Mrs. Ellman) said, we still await two key policies--first, the codification and reform on the law compulsory purchase, which will facilitate land assembly. It would be interesting to know whether the DETR has drawn any conclusion from the recent court case that set the Secretary of State's planning powers against the European convention on human rights and threw into doubt the way in which that system operates. Clearly, that will need consideration. Secondly, we await the revision of planning policy guidance 1--the book of Genesis of the planning system that sets the tone for the way in which planning proceeds. To mention what is welcome in the urban White Paper highlights how much policy is still tentative and timid.

The hon. Member for Denton and Reddish referred to the funding problem. As I have said, I agree with his condemnation of the decision that was taken. The RDAs can now invest directly, but that does not provide the answer because it does not produce the leverage, as the hon. Member for Riverside has said. We must be careful that the RDAs do not have too many functions placed on them, otherwise the next phase will simply involve differentiating those functions. I should be interested to know how many of the skilled staff of English Partnerships have gone into the RDAs and how many of them have taken flight into the private sector.

The White Paper does not address the long-term funding issues of the inner city programmes and it fails properly to tackle the perverse workings of the tax system. I do not blame the DETR; it had a noble battle with the Treasury--but a few months from the election, it lost. That is not surprising; we have all had battles with the Treasury, and most of us have lost them. That is the nature of political geometry. However, we have ended up with half a carrot and no stick. Tax on renovation has not been equalised. It would have been sensible to put a levy on greenfield development and 17.5 per cent. VAT is still paid on conversion between uses. The conversion of an inner-city office block into accommodation still attracts 17.5 per cent. VAT. The Government have shown that they have spotted the problem, and have nibbled at a bit of the solution, but there is still some distance to travel.

There is of course a vast land bank of greenfield sites ready for development. The south-east regional planning committee reckons that sites capable of taking almost 225,000 homes have already been earmarked in the south-east. That is a different debate and those of us who represent Yorkshire constituencies ought to be somewhat tentative before we venture into that minefield.

There are still problems with contaminated land. The tax treatment proposed in the Chancellor's statement is welcome, but there are still problems relating to regimes for waste and for water, which are not always working

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and pulling in the same direction. The Government need to consider such matters in the round if they are to address the complex disincentive that still operates for development on some contaminated land.

To turn to a broader issue, there is a lack of joined-up government. I see in the DETR annual report a chapter picturesquely entitled:

and some very endearing pictures of the ministerial team. However, the joining up between Departments is not immediately apparent. I am glad that the Minister for Housing and Planning is present. He has been busy proposing in his Green Paper rent increases under the formula of the retail prices index plus 0 per cent., which would have shot to pieces many of the development plans of registered social landlords at the time we were being told how important it was that more people lived in inner cities. I see that he has pulled back to a formula of RPI plus 0.5 per cent., which at least shows that he has done some listening.

I turn to the transfer programme. I agree with the Minister that transfer is a central issue. We should not allow local authorities arm's-length companies. They are, on the whole, for rather dismal local authorities that cannot hack it, and we should not give such authorities a way out. However, we need a wider menu.

I want to know the Government's view on proposals for securitisation. It is a way of raising money directly against the rent stream, cutting out the landlord. It is made difficult owing to section 47 of the Local Government and Housing Act 1989, which stipulates that all a local authority's liabilities must be charged against all its assets. Therefore, a council cannot provide security in favour of a particular lender. The Government could help in the short term by amending the 1995 European system of accounts rules. I would be interested to know whether the Government would like to consider securitisation as one part of the menu of getting to grips with the regeneration of housing.

We have all had problems with binding education to the regeneration process. I would have made the same reproach of the Conservative Government because the Department of Education was not even represented in the regional offices. There are many specific initiatives on education, but nobody has successfully married it to wider regeneration issues.

Clearly, DETR Front Benchers are reading their annual report for the first time, since they are entranced by their own photographs in it. I am glad to have been the bearer of such happy tidings. I hope that the cult of personality will not strike too deeply. The pictures are very small, but Ministers can always live in hope.

Many inner city schools with multi-ethnic catchment areas are often characterised by violence against children, parents and teachers. There is a great deal of abuse, much deprivation and enormous disintegration of society in such schools. The kids often do not know where they are going home of a night, and the teachers do not know whether the kids have come to school on a breakfast in the morning. I have never thought of free school meals as a satisfactory indicator of deprivation, but some such schools have a very high proportion of children eating free school meals.

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The problem is that, often, parents are incompetent in many ways. Any policy based on an educational strategy that assumes a competent and caring parental force must come to terms with some reality.

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