Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 140 - 159)



Mrs Dunwoody

  140. Which your Lordship never looks at?  (Lord Falconer of Thoroton) I did not look at it before I came here today and indeed I have never looked at that particular one.


  141. Could you perhaps give us a note?  (Lord Falconer of Thoroton) Of course.

  142. It is a fairly serious issue that substantial amounts of money went into them. It appears that they are not being continued. Therefore, one assumes that they were not very successful. It would be interesting to know what lessons were learned. How far are those going to be used in looking at the urban regeneration companies?  (Lord Falconer of Thoroton) City Challenge is but one of a line of investments in particular areas. One question that we constantly address is why will our regeneration proposals work when others have not in the past.

  143. That is what you are about to explain to me: why the urban regeneration companies are going to work.  (Lord Falconer of Thoroton) Why will the urban regeneration companies or the national urban strategy work? Answer: because they seek to address the issue of regeneration in an across the board way, not just dealing with bricks and mortar; not just dealing with skills, health and community safety. Secondly, because they bring a strategic approach to regeneration and thirdly because they seek to engage the community in determining what the future of that particular place is.

  144. Going some way back now, enterprise zones appeared to work because they were given some privileges over the surrounding areas so they perhaps simply displaced business activity into them. Are the urban regeneration companies going to be given any privileges?  (Lord Falconer of Thoroton) You mean the planning privileges or the compulsory purchase privileges?

  145. Any privileges. How do you say this is an area we want to encourage?  (Lord Falconer of Thoroton) They are not going to be given those privileges that you identify in relation to enterprise zones but in order to work they have to work closely with the local authority. It may have other privileges in mind but the planning/compulsory purchase type privileges they will not have; the local authority will have. In every place that ones have been set up, there are good relations with the local authorities who are trying to work together to make the URCs work.

  146. What about giving them some concessions on levels of national insurance paid within the zones?  (Lord Falconer of Thoroton) At the moment we are not minded to do that. We think the right course is to allow them to bring all the players together to give a serious message that everybody is going to work together to try and regenerate that particular area.

Clive Betts

  147. Tell me the difference between the URCs and a UDC?  (Lord Falconer of Thoroton) In principle there is no difference in the sense that they are both an entity that gets together all the people in a particular area and has responsibility for regenerating that particular area.  (Ms Bridges) An urban development corporation like London Docklands, for example, had powers of land acquisition with compulsory purchase. It also had considerable streams of government funding. There is a significant difference. URCs are essentially not for profit companies that bring together the private sector, the public sector and other people to deal with a particular part of a city. For example, "Sheffield One" is dealing with Sheffield city centre. The idea is that you focus effort on that area. The first three pilot URCs which we set up last year in Liverpool, Sheffield and Manchester, according to the evaluation that has been done, have had quite considerable success in focusing investment into the particular area of concern. The Regional Development Agencies are important partners, so by agreeing to have an urban regeneration company they are also focusing their efforts on a particular geographical area.

Mrs Dunwoody

  148. The reality is that the enterprise zones created economic ghettoes where the people around had no connection. In Docklands you have very important, wealthy and rather ghastly flats all along the river and the population lives behind excluded by very large, electronic gates in large numbers of cases. How are you going to deal with that, because they used very specific amounts of the taxpayers' money; they circumvented large amounts of the existing machinery because they had powers of compulsory purchase; they produced results but for a very limited group who now are not integrated with the areas around them.  (Ms Bridges) I agree with that, but urban regeneration companies are completely different animals. The local authority, for example, is a major player in all the urban regeneration companies which they were not in the UDCs. It is not meant to be an area that has just special machinery with some sort of special administration. This is a focus on a particular part of the city that everybody is agreed should take place, including the local authority.

Mr Betts

  149. Last year we had problems with the EU Competition Commission in finding that the English Partnerships gap funding programme was illegal. It has been promised that alternatives will be found for this but there are some complaints that it has been slow to issue any guidance on the new schemes and there is not any earmarked, ring fenced money for the RDAs or English Partnerships now to use. Could you tell us where you think this issue is now? Is gap funding available? Is it working?  (Lord Falconer of Thoroton) There have been discussions with the European Commission about it. We have some support from other Member States in relation to the problem. Five new sorts of schemes have been approved by the European Commission. They do not solve the problem completely. We are continuing to discuss with the European Commission how we seek to resolve the problem. It is a real problem for which a solution requires to be found but in reaching that solution we need to reach agreement with the European Commission.

  150. Basically, nothing is happening on the ground at this stage?  (Lord Falconer of Thoroton) We have these five schemes that to some extent seek to get round the gap funding problem identified by the European Commission. They do not unlock the door to the extent that the door was unlocked before the gap funding problem had been identified by the European Commission, but we are working on it.


  151. We are going to come back to this in a separate inquiry but you are saying there are five new schemes but nothing has happened under these five new schemes. Is that right?  (Lord Falconer of Thoroton) You can operate under these particular schemes. The problem that the European Commission identified was that public private partnerships, where the public sector is making up the gap, are broadly state aids which are unlawful. There are various ways that you can try to get round it, but getting round it in one or other of the five schemes does not deliver a solution for the vast majority of schemes. What is happening at the moment is that we are in negotiations, along with other Member States, with the European Commission for seeking to establish a single regeneration framework that would unlock the door much more than it is unlocked at the moment. The five particular schemes I have referred to might help in a particular situation and we will provide all the help that we can to individual schemes to see whether they do, but I am not saying that is the answer. It is not the answer. There needs to be a much more profound agreement reached with the European Commission about a regeneration framework that will allow more gap funding of the sort that was going on before the end of last year.

Mrs Dunwoody

  152. With respect, my Lord, your predecessor came here and said, "Commissioner Monty looked at the schemes, said they were very efficient, they worked extremely well and they were totally illegal and they must stop."  (Lord Falconer of Thoroton) Is that the five?

  153. That was the one that existed at the time that we were told was illegal. Why, since that was some considerable time ago, has the department not apparently succeeded in finding any alternative which works?  (Lord Falconer of Thoroton) We have found the five. They do not meet the full problem.


  154. Has anyone used any of those five schemes?  (Lord Falconer of Thoroton) Yes. They have, apparently. They allow for gap funding for bespoke and speculative development so they can fit particular sorts.

  155. That is a description of the scheme. What I want to know is have they been used yet?  (Lord Falconer of Thoroton) As I understand it, they have, but can I confirm that in a note to the Committee?

  156. If we are going to enquire into gap funding in January/February, do you think by then we will have some good news from the EU Commissioner and from the other EU governments in getting a replacement scheme that really does a proper job?  (Lord Falconer of Thoroton) No, because I have a note here: they are working towards a conference with the Commission and Member States in March to discuss state aid, urban generation, especially the use of PPPs and physical regeneration. It sounds like the critical meeting will take place in March. Therefore, the answer is we will not be in a position to produce the sort of headway you are looking for before then.

  157. We were told that this was probably one of the most effective bits of regeneration that has taken place in this country; that it had been a real success. It has now been stopped for almost two years. Most of the people who were expert at putting these packages together have been dispersed. Are you really telling us that it is going to be another 12 months before we get anything in their place?  (Lord Falconer of Thoroton) On the basis of what the position appears to be, we are not going to make progress in reaching a solution before March. We are pressing as hard as we can in relation to a solution but it depends upon the Commission and other nations reaching an agreement in relation to it.

  158. One or two of the press on occasions have called you a fixer. Are you unable to fix this particular problem?  (Lord Falconer of Thoroton) We are not making progress as fast as we would like in relation to it. Your point about there having been a pause for well over a year is right. It is extremely difficult. What we are working to is to try to reach agreement with the European Commission in a way that will actually produce a result.

Mrs Dunwoody

  159. The European Commission were the ones who instigated this interpretation in the first place. There is considerable doubt as to whether the original scheme was illegal. It seems extraordinary to me, firstly, that Her Majesty's Government accepted this and, secondly, that we are still, all this time later, looking for an alternative that even begins to work, let alone works as efficiently as the one that was jumped on the say of Commissioner Monty.  (Lord Falconer of Thoroton) If the Commission say you are not allowed to do it, you cannot go on doing it. We could challenge it in court—ie, in the European Court of Justice—but that would take years to get to a conclusion.

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