Examination of Witnesses (Questions 140
TUESDAY 20 NOVEMBER 2001
QC, MIKE GAHAGAN,
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
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
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.
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.
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
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.
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 courtie, in the European Court of
Justicebut that would take years to get to a conclusion.