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

Examination of Witnesses (Questions 266-279)




  266. May I welcome you to the third session this morning. Would you identify yourselves for the record.
  (Ms Souter) I am Carole Souter from English Heritage.
  (Mr West) Jeff West, Director of Conservation Management, English Heritage.

  (Mr Shelton) I am David Shelton, English Partnerships' Development Director.
  (Mr Hall) Euan Hall, Director of Coalfields Regeneration and Joint Ventures at English Partnerships.

Dr Pugh

  267. My first question is for Mr Shelton. It took a long time to establish the English Cities Fund, I believe—exactly how long, and what were the main problems?
  (Mr Shelton) It took nearly two years of processes to create the English Cities Fund to move from a twinkle in the eye to formal approval from Europe to the creation of the English Cities Fund.

  268. I am particularly interested in the problems you had with the Commission.
  (Mr Hall) I think the biggest problem was that now the English Cities Fund has actually been confined to operate within the Assisted Areas, which goes substantially away from where the English Cities Fund was originally intended to operate. We saw the ECF as a tool that could promote inner city regeneration anywhere in England, wherever it was needed. The property market responds not to indexes of deprivation but to the profit motive, and profits follow cities where they are economically active. They do not go to the regeneration areas of cities. The ECF therefore was very much targeted at those, but now that it is restricted to the Assisted Areas, its potential impact on England is substantially reduced, I would suggest.

  269. Your press notice for the Fund originally talked about areas located on the fringes of towns and city centres. That is quite off the agenda now?
  (Mr Hall) It will operate within assisted areas where they are on the fringes of towns.

  270. And that is a disappointment to you?
  (Mr Hall) Yes.

  271. In terms of the percentage of the grant that can be paid, is that capped?
  (Mr Hall) It would be capped within State Aid rules, so traditionally a tier one assisted area, that is 35 per cent and within a tier two, 15 to 20 per cent.

  272. And the Commission are perfectly aware of the high level of private sector finance and have taken that into account?
  (Mr Hall) Yes.

  273. Given all of that, in terms of the objectives set by the Urban Task Force, something like £1 billion of private investment and a minimum of 50 per cent resources from the private sector, are we going to get anywhere near that target by English Cities?
  (Mr Hall) I think it is very early days since the Fund was actually approved. It has been approved at a far lower level at the moment and I think only time will tell on that. It is going to be a struggle, I think, to get to that level.

Mrs Dunwoody

  274. Why could you not convince the Commission of what your real task was and why did they restrict you to the assisted areas?
  (Mr Hall) Because it is very much dealt with in the State Aid side of the Commission and the Competition Directorate and we are considered to be promoting development which is intra-Community activity.

  275. But why were you not able to establish the fact that your brief was much wider than that?
  (Mr Hall) I think it fell very much under the partnership investment programme ruling and it was seen as yet again another way around State Aid.

Dr Pugh

  276. So is the ambition set both by the Urban Task Force and by your yourselves now unlikely to be fulfilled in the way that was expected or hoped?
  (Mr Hall) Yes.

Ms King

  277. Moving beyond the Cities Fund, more generally, how far do you think English Partnerships' activities and programmes will be limited to assisted areas?
  (Mr Hall) Well, I have looked at our coalfields programme, which was set up by the Government in 1997. We at the moment have got sites across seven RDA areas. Seventy per cent of those ward sites are within 30 per cent of the most deprived wards by the Index of Deprivation, yet only a quarter of the sites, 25 per cent, are in tier one assisted areas, so our ability actually to effect comprehensive regeneration in coalfield areas, which are very deprived communities, is severely restricted. As an example, I mentioned priority sites, our joint venture with the Royal Bank of Scotland. On one particular coalfield site, not within the programme, but in Wansbeck in the north-east, the initial scale of gap funding that was required by priority sites, our own joint venture set up to develop these areas, was 58 per cent of cost to develop and within the current State Aid rules that would not happen, so approximately 50 new jobs would not exist in Wansbeck from that scheme. The second phase scheme by the company needed 38 per cent gap funding and again it would fall foul of State Aid rules, and it is only when we have proved the market sufficiently that we have done a third phase scheme which has fallen to 32 per cent gap funding that that could actually happen, but without the original two projects, the third would not have happened. We are now at a state where we have promoted market adjustment there and it is quite likely that the private sector will now follow and develop.

  278. So would you say that urban regeneration companies are essentially unable to succeed if they are not in assisted areas?
  (Mr Hall) I think their abilities will be constrained.
  (Mr Shelton) EP can still operate as a direct developer outside the assisted areas and we still do operate as a direct developer, acquiring land, servicing it ourselves and disposing of land at market value to private sector partners. What we have lost, however, through the demise of the original Partnership Investment Programme is the ability to have literally hundreds of private sector partners out there in the marketplace, working up the schemes, so the size of the programme that we are able to resource is significantly less than a programme that is run on a Partnership Investment Programme basis. That is not simply a question of the funding availability; it is simply the manpower resources available within English Partnerships.

  279. I am sorry, we are a bit pressed for time, so taking no hostages, can you tell us how PFI can operate within regeneration?
  (Mr Shelton) PFIs, in their true sense of the private sector providing a service in return for an underwriting of the cost of that service from the public sector, are very difficult to make work in a regeneration context, particularly a physical regeneration context where we are undertaking site assembly, site reclamation and infrastructure works. We are about to commission a pilot feasibility study to see if we can use the PFI approach to support regeneration but our early indications show that it is going to be very difficult to stretch the PFI mechanism into a physical regeneration programme.

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