Examination of Witnesses (Questions 400-419)
LORD FALCONER OF THOROTON, MR PAUL HOUSTON AND MR STEPHEN STRINGER
TUESDAY 30 APRIL 2002
Mr Betts
400. We might well warm to the long term goals, but the current situation is a mess, is it not?
(Lord Falconer) The current situation is that PIP put a stop to a lot of gap funding schemes which everybody thinks should go ahead. The process by which we are trying to re-open the door for that is a process which at the moment has a piecemeal aspect to it, namely getting agreement for specific schemes, but it has the goal of getting a regeneration framework which will open the door which has been closed by the PIP decision. It is not a happy situation at all and, by the nature of what is going on at the moment, namely permission being sought for particular schemes by the Commission, it is piecemeal rather than overall.
401. Would it be a fair analogy to put the department in December 1999 as a little like a rabbit happily hopping across the road when somebody switches on the car headlights and for a rather long time it has sat there frozen and in fact doing very little?
(Lord Falconer) No, I do not think that would be a fair analogy at all. I was not there in December 1999; I do not know what specific advice was given. I do know that what motivated the decision was the fact that if agreement was not reached with the Commission, then there was a danger that the pipeline PIP schemes would be lost. So, a tricky tactical balance had to be struck by the department at that particular time. It is always possible in retrospect to say that the wrong balance was struck but, if the position had been that we lost both future schemes and the pipeline schemes as well as a result of not reaching agreement as we did in December 1999, then there would have been perhaps a whole section of people in addition to those presently complaining who would also be complaining about what happened. I think it is all too easy for me to say that the wrong decision was reached. I do not think that necessarily it was. It was a difficult tactical decision.
402. Since then, you have indicated that your department has been attempting to put things right in a variety of ways but given that we really need a cross-governmental approach, do you have the DTI and the Treasury on board because they have responsibilities on competitiveness and State Aid issues?
(Lord Falconer) The Chancellor Gordon Brown specifically raised the issue during the Belgian presidency as Arlene McCarthy was saying before. You had evidence from the DTI and the effect of their evidence was, "We are happy to push lines that other departments give to us." So they are happy to push the line that the DTLR wish in relation to gap funding schemes. So, I do not think there is any problem, looking across Government, at getting a coherent cross-governmental approach.
403. Were you not a little disappointed with the Treasury's recent White Paper on the economic review of this issue in which State Aid regeneration was not mentioned?
(Lord Falconer) The White Paper made it clear that they wanted the State Aid rules to be enforced in order that there should be a level playing field as far as economic competitiveness is concerned. That is what the White Paper was addressed to. I do not think that it remotely undermines the support that the Chancellor and the Treasury have given to getting a regeneration framework onto the table for debate which is very, very important as far as making progress with the European Union is concerned.
404. Surely this was an opportunity to flag up a problem that we have in a statement of government policy and to give it an additional push and it was missed.
(Lord Falconer) I do not think that is right. In order for the thing to be focused, it was focused on the competitiveness of the European Union and steps that we had taken to increase competitiveness. It maybe was not an appropriate place to deal with the regeneration framework issue.
405. An opportunity?
(Lord Falconer) If you are talking about the particular agenda that that White Paper has, it may well be that the regeneration framework was not really part of the mainstream of that debate.
Mrs Ellman
406. You mentioned the cross-departmental approach. Whose remit is it to be pro-active, not reacting to difficulties that arise but being pro-active and anticipating?
(Lord Falconer) It is the DTLR Department's role to be pro-active. In government, State Aid overall is the responsibility of the DTI but we are the department responsible for regeneration and, insofar as it is relevant, housing issues as well. We should be pushing the agenda and the evidence you received from DTI officials makes it absolutely clear that they are prepared to co-operate but that they expect us to push the issue.
407. So the new unit that you are setting up which you told us about at the beginning of your evidence will be responsible with ministers for anticipating issues, being pro-active and setting the European agenda that suits the needs of the UK?
(Lord Falconer) Yes and I think the implication of your question is that there does need to be a pro-active pushing of this agenda because—and this is no criticism whatsoever of the European Union—they, as it were, are waiting for things to happen rather than, as it were, casting around for solutions.
408. How many full time equivalent staff with specific regeneration experience were working on State Aid in the DTLR between January 2000 and February 2001?
(Mr Houston) I think one-and-a-half is the answer in terms of full time equivalents specifically engaged on this issue, but there were also a number of other expert staff, lawyers and so on, engaged from time to time around the department.
409. When the new unit is operating, what will the answer to that question be?
(Mr Stringer) There will be four people involved in State Aid regeneration work.
410. Four full-timers?
(Mr Stringer) Four full time supported by our economists and our lawyers.
411. When the two replacement PIP schemes were put forward, were they reviewed or discussed with anybody who had property and regeneration experience?
(Lord Falconer) They were not, no. The position was that they were put together within the department. There had been widespread canvassing of the issues in the specialist press. Mr Houston or Mr Stringer will correct me if I am wrong on this but my understanding is that they were not canvassed with the property industry, for example, before they were put.
(Mr Houston) The two replacement gap funding schemes were discussed extensively with the regional development agencies, English Partnerships and so on.
412. We have had evidence from practitioners who say that they were not consulted.
(Lord Falconer) I took your question to mean, were there people like Tom Bloxham who are actually engaged in the process of physical regeneration who were actually consulted about the speculative and non-speculative gap funding schemes and my understanding was that they were not. The people who were consulted were non-departmental public bodies such as English Partnerships and the Regional Development Agencies, but I did not understand your question to be covering them, you were asking whether the actual people on the ground who do it for a living were consulted and my understanding is that they were not.
413. We have had evidence from both of those sectors saying that neither of them were consulted, but maybe that is a matter of interpretation. Why did it take 14 months from the closure of PIP to the approval of the two new speculative schemes?
(Lord Falconer) It took some time for the department to work out what the right response would be to what had happened as a result of agreeing to the PIP decision in December 1999. There was then a period of time after the schemes were notified to the Commission, I think two or three months, when they considered them and then gave approval[1].
414. Do the RDAs have effective guidance on the operation of this scheme?
(Lord Falconer) There were difficulties about putting the guidance together; I think it took about nine months to get the guidance out and that was because there were complications and legal problems, which seems to me to indicate a part of the problem because, as a result of PIP going, the replacement schemes are all inevitably hedged about by various rules which would not apply to PIP schemes. That means that they are more complicated to enforce. It also means that writing guidance on them takes longer than it otherwise would in relation to the old PIP scheme.
415. Are you satisfied that the guidance is now accurate?
(Lord Falconer) I am not an expert in relation to this. I would be very unwise to say that I was satisfied with it because immediately 28 people would pop up and say, "What about this line?"
Chairman
416. Have you read them and do you think they are easy to understand?
(Lord Falconer) I have seen the guidance, I have turned the pages —
417. That is not the question I asked you.
(Lord Falconer) I could not say that I have read it, no, because the moment —
418. So we cannot ask you whether you could understand it when you did read it.
(Lord Falconer) When I saw it, I thought it looked very complicated, but then I thought that, if you knew what you were talking about, maybe it would be easier. I do not dissent from a proposition that is around which is that the rules of these schemes are complicated, but that was a necessary function of getting permission from them for the European Union. If they are complicated, then the guidance inevitably is complicated. I am very conscious of the fact that the more complicated the scheme is, the more complicated the guidance and the more of a turn-off it is for developers to start trying to access them.
Mrs Ellman
419. Is the guidance publicly available?
(Lord Falconer) It has been given to the RDAs and English Partnerships and I think it is for them to circulate the guidance. I think it is available on the website.
(Mr Stringer) I think it is, yes, but in addition to that we also did a joint piece of work with RICS for guidance for the industry itself because the guidance which the Minister has been talking about is internal guidance on how the RDAs and English Partnerships might use these schemes. We wanted to make sure that the industry understood it and did some work with the RICS and they produced guidance for us which would be targeted towards the industry and developers in a way which they would understand rather than the internal guidance about how you operate a scheme.
1 The schemes were notified to the Commission on 19 November 1999 and approved on 28 February 2001. Back
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