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

Supplementary memorandum by the Minister for Housing, Planning and Regeneration (AP 03)

  At the hearing on 20 November you requested further information about a number of subjects which were raised by the Committee. I now attach notes covering the following points:

    —  Gap funding

    —  The Cabinet Committee for Urban Affairs

    —  City Challenge

  I hope that the information provided in these notes will answer the Committee's questions, however I stand ready to provide further information should this be required.

Meetings of the Cabinet Sub-Committee for Urban Affairs (Question 80)

  The Cabinet Sub-Committee dealing with urban regeneration issues, the Domestic Affairs (Social Exclusion and the Regions) DA(SER), was established after the general election and is chaired by the Deputy Prime Minister, its members are:

    Deputy Prime Minister (Chair)

    Home Secretary

    Lord Chancellor

    SofS, Department for Environment, Food and Rural Affairs

    SofS, Department of Work and Pensions

    SofS, Department for Transport, Local Government and the Regions

    SofS, Department of Health

    SofS, Ministry of Defence

    SofS, Department of Trade and Industry

    SofS, Department of Education and Skills

    SofS, Department of Culture, Media and Sport

    CST, Treasury

    MofS, Department for Transport, Local Government and the Regions

    MofS, Cabinet Office

  Its terms of reference are:

  "To oversee the development and implementation of the Government's policies on social exclusion, neighbourhood renewal, and area-based initiatives; to oversee the follow-up to the Urban White Paper, and to report as necessary to Domestic Affairs (DA) Committee."

  At the time of the Committee meeting, DA(SER) had met once since the general election and not twice as the Committee were informed in error. The Committee has met once more since that time.

  Papers or information relating to the proceedings of Cabinet Committees are classified and are exempted from the commitment to disclose information under the code of practice on access to government information. It is, therefore, not possible to disclose further information on the Committee's business.

Evaluation of City Challenge (Question 141)


  Outputs: The evaluation estimated that almost 25 per cent of the activity supported by City Challenge would have gone ahead anyway. In future programmes, greater emphasis should be given to their verification.

  Programme aims: Each of the Programme's six aims was at least reasonably well achieved but there were concerns over the creation of employment opportunities for local people, the degree to which an enterprise culture had been created and the level of integration between projects. KPMG felt that the programme's aims lacked precision and could have been more specific.

  Performance of partnerships: Partnerships varied significantly in terms of the characteristics of their areas, partnership arrangements, programmes, delivery and succession strategies. Performance also varied significantly and KPMG identified a number of related factors to inform future regeneration policy:

    —  Getting a clear, robust and realistic strategy is important. Precise objectives at partnership level are needed for assessing progress. Most partnerships did not do this and in some cases problems were encountered with projects or aspects of their strategy.

    —  Successful regeneration partnerships need good practitioners and strong leadership. Some partnerships experienced a high turnover of staff and lack of strong leadership that hampered performance.

    —  There was a link between low levels of community involvement and poor partnership performance.

    —  Generating an early success and a flagship project is important. Some partnerships had problems getting the local programme underway. There was need for better contingency planning to reduce the risks of losing flagship projects.

    —  Linking projects together increases the benefits. Some partnerships had weak links and missed the opportunities.

    —  There is a need to spend time in the earliest days of the partnership developing effective management systems. Often initially weak systems were strengthened during City Challenge.

    —  Developing a (post-funding) forward strategy at the outset is important. Overall this was thought to be unsatisfactory.

  City Challenge succeeded in tackling many of the local causes of social exclusion but the extent of the problems meant that a full reversal of the downward spiral could not be achieved, although many partnerships created the foundations for sustainable regeneration.


  City Challenge was the first main partnership-based regeneration programme. There were 31 City Challenge Partnerships that operated in deprived urban areas between 1992 and 1998. Each was eligible to bid for £37.5 million over five years and, including levered-in funds, the Partnerships on average spent over £240 million in each of their targeted areas. The Programme was the forerunner to the Single Regeneration Budget.

National evaluation

  KPMG Consulting evaluated the programme on the Department's behalf. The final evaluation was published in February 2000. Key findings were:

Successful features

  Leverage: The £1.14 billion of City Challenge funding resulted in a total investment of about £7.58 billion. Every £1 of expenditure by City Challenge levered in a further £3.78 of private sector funding and £1.45 from other public sector partners.

  Outputs Achieved:

    —  over 110,000 dwellings built or improved;

    —  nearly 170,000 gross new permanent jobs created or safeguarded;

    —  almost 4,000 hectares of land reclaimed or improved;

    —  over 3.6 million square metres of business space created or improved; and

    —  8,700 businesses started;

    —  130,000 qualifications secured by residents.

  Overall, the original forecast outputs were all exceeded by the end of the programme, although some over-estimation of outputs was identified (see key lessons). Almost two thirds of jobs created in the City Challenge areas went to residents in the same area.

  Outcomes: The programme had very significant and positive effects on the well being of local people and firms, as well as improving the performance of a number of local markets by addressing market failures. Amongst the key outcomes were:

    —  increased economic activity and investment;

    —  substantial improvements to the physical infrastructure and environment;

    —  improvements in the quality of housing;

    —  increased "citizenship" and empowerment within communities;

    —  reduced unemployment;

    —  an improvement in the ability of local residents to secure a job;

    —  reductions in recorded crime;

    —  increased confidence of those involved in City Challenge; and

    —  creating the potential for sustainability.

  Efficiency: KPMG's cost effectiveness analysis focused on the relationship between the inputs (costs) and outputs and outcomes. It showed that City Challenge performed well against benchmark figures. Furthermore, on average a collection of individual programmes would have been less cost effective in delivering a similar basket of outputs and outcomes.

  Economy: The programme was delivered to within 2 per cent of its overall budget. KPMG considered that for such a large programme covering six years of expenditure and disbursed over 31 partnerships, this was an impressive performance.

  Overall value for money: This was considered in terms of a composite assessment of the effectiveness, efficiency and economy of the programme. On this basis, KPMG concluded that it provided very good value for money and, compared with previous value for money assessments, achieved above average results.

  Positive features of the programme (many adopted by the successor Single Regeneration Budget programme):

    —  Competition for funding—on balance the advantages outweigh the disadvantages provided it is set within a supportive, narrowly-defined and needs-based framework.

    —  In the majority of schemes the partnership approach added significant value, although in a few cases it did not work effectively and was a lost opportunity.

    —  The benefits of a comprehensive and strategic approach to regeneration were maximised and complex integrated problems were addressed in a comprehensive and co-ordinated way.

    —  £37.5 million per partnership provided a "critical mass" of resources to help reverse extended periods of decline, although local conditions should determine the local requirements.

    —  Time-limited life of the programme retained interest and concentrated effort. The timescale should be determined by local circumstances.

    —  Output driven—provides a useful indication of activity but more emphasis should be on longer term outcomes.

    —  Sustainable regeneration—delivering long-lasting benefits where improvements can be sustained beyond the life of the programme is a key aim.

Lessons for learning

  City Challenge was a ground-breaking and very successful programme. It provided the basis for a step change in regeneration policy and many of its features have been incorporated into subsequent regeneration and area-based programmes.

Gap funding (Questions 155 and 160)

Take-up of replacement land and property regeneration schemes.

  All of the five replacement schemes are now in place and available for use by RDAs and EP. The schemes cover direct development, speculative gap funding, community regeneration, environmental regeneration and non-speculative gap funding. There has been expenditure in the current financial year on projects which fall within the parameters of the new schemes. However, none of these projects involve gap funding. This is because the RDAs and EP had already finalised their spending plans for 2001-02 by the time the schemes were approved earlier this year. We expect a higher take-up of the schemes in 2002-03. For example, SW RDA expect to spend £2 million on gap funding projects in the next financial year.

Continued operation of the Partnership Investment Programme (PIP) until such time as the European Court of Justice had reviewed the Commission's decision.

  It was not open to the UK Government to continue operating PIP until the Commission's decision that it was an unlawful State aid could be challenged in the European Court of Justice. The decision that PIP breached the State aid rules took immediate effect. Even if we had challenged it, the decision would still have been in force and PIP would have been closed to all new projects.

  We are working closely with the Commission and other Member States on proposals for a new regeneration framework under the State aid rules. The framework would permit the payment of State aid for the regeneration of land suffering from market failure anywhere in the EU. We are making good progress on this issue. At the 9 October 2001 Council of European Regeneration Ministers in Brussels, the UK stressed the urgent need for a regeneration framework and was strongly supported by several other Member States. The UK will host a conference on this issue in March next year, to which the Commission and all Member States will be invited.

Charles Falconer

20 December 2001

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