Memorandum by Alison Nimmo, Sheffield
One (ERF 24)
BACKGROUND/INTRODUCTION
This written evidence is submitted by Alison
Nimmo, Chief Executive of Sheffield One. Sheffield One was established
in February 2000 as one of three pilot Urban Regeneration Companies.
Its role is to spearhead the regeneration of Sheffield City Centre.
Prior to Sheffield One Alison was Project Director of Manchester
Millennium Ltd and played a lead role in the £1 billion rebuilding
of Manchester City Centre following the June 1996 terrorist bomb.
Alison is a town planner and chartered surveyor, with over 15
year's experience of delivering major urban regeneration projects
from: Whitehaven to Woolwich; Liverpool to London Docklands; and
Bristol to the Black Country. Her experience spans both the public
and private sectors.
EVIDENCE
Barriers to Regeneration Caused by the Current
Framework
The Committee's review of the need for a new
European regeneration framework is timely. The history of the
debate leading to the cessation of the PIP gap-funding mechanism
in 2000 and the subsequent impact has sent shock waves through
the regeneration industry. The issue has now gone well beyond
that of the loss of PIP and opened up a more fundamental debate
about how we approach regeneration in the UK and the issue of
State Aid. State Aid used to be confined to strategic public sector
intervention in industries such as steel and shipbuilding. The
notion that public private partnerships and property-based schemes
in deprived areas in the UK could contravene these rules is still
not understood. Yes, regeneration regimes do try to give some
economic advantage to private developers, investors and occupiers—that
is the whole basis on which our regional economic strategy and
regeneration programmes are based.
The EU needs a better understanding of how regeneration
is delivered in the UK. Given the EU principle of subsidiarity
the government should be afforded sufficient flexibility to operate
within acceptable limits and be able to take a view on what would
constitute unfair State Aid. This would ensure that, in an EU
context, no single company/industry would receive a disproportionate
or unfair advantage.
An increasing lack of understanding and level
of confusion with regard to State Aid is having a very damaging
impact on regeneration in the UK. Almost all regeneration related
programmes that involve private sector partners have been under
the spotlight—Single Regeneration Budget (round six), Heritage
Lottery Fund, English Cities Fund etc. Recent government initiatives
such as stamp duty exemptions have had to be carefully crafted
to avoid falling foul of the rules.
A new EU framework is critical to allow the
UK to deliver the regeneration of its most deprived areas. The
current framework militates against a partnership approach with
the private sector—an approach that has taken a long time
to develop and has proved to be successful and an effective use
of public resources.
The five new, EU approved, land and property regeneration
schemes
The new EU approved schemes are more complex
and more limited—geographically, in terms of uses and in
respect of the level of intervention allowed—than the former
PIP regime. Given their limitations there seems little appetite
from a number of the RDAs to use them and to encourage the private
sector to bring forward appropriate schemes. The private sector
view has been a nostalgia for the previous PIP regime that they
understood and had used with reasonable success. The former PIP
regime (and before that City Grant) had some very notable successes
and provided an effective way of leveraging the resources of the
private sector. A number of projects were genuinely catalytic
in their impact, though many were promoted in the absence of a
clear strategy. The main problem with the former PIP regime was
that it was reactive and led to a culture of projects being grant
driven.
A new regeneration framework has been developed
in Sheffield, driven by a partnership approach. Sheffield One
is a good example of how this is being delivered on the ground.
The RDA (Yorkshire Forward), Sheffield City Council and English
Partnerships are all equal partners in Sheffield One. A City Centre
masterplan has been developed to drive the economic regeneration
of the City Centre. This provides the framework within which key
investment decisions are made and the partners agree key priorities
and funding commitments. In this way the programme is strategy
led and project led. The decision is then made on a project by
project basis as to the optimal vehicle for delivery—be
it direct development, site assembly, gap funding etc.
Sheffield One's approach to delivery is, in
essence, direct development, but not in the traditional sense.
Working closely with our partners, we are undertaking a hands
on approach to dealing with the twin problems of market failure
and abnormals which create the funding "gap" and an
unacceptable risk profile for the private sector. We are doing
this in a number of ways, for example:
— Site Assembly: This is the
single biggest hurdle to urban regeneration. Our activities include:
the acquisition of a number of sites and buildings by our partners;
the pro-active use of the City Council's assets; and the assembling
of a number of difficult sites by using CPO;
— Demonstration Projects: We
are pro-actively bringing on board private sector partners to
deliver innovative regeneration projects. For example the regeneration
of the City Council's former education offices in Leopold Street—a
magnificent complex of listed buildings—for a mixed-use
development which will act as a catalyst to the regeneration of
the wider City Hall/Barkers Pool area;
— Preparing the Ground: On a
number of strategic sites we are working with our partners to
deal with "abnormals". Examples include demolitions,
site remediation and decontamination, relocating tenants, utility
diversions and investing in infrastructure. This activity not
only reduces the cost to the private sector, it reduces timescales
and it reduces risk; and
— Masterplan: Through the production
of a masterplan we are seeking to create a level of certainty
and confidence that will encourage the private sector to invest.
It creates a basis for the public sector to deliver investment
in infrastructure (transport, utilities and ICT) and creating
a quality public environment which lifts confidence and values
to the point at which the private sector will commit. The real
added value comes from the interplay of the masterplan and having
a dedicated vehicle in the URC to co-ordinate and facilitate delivery.
The above approach is capital intensive and
needs significant upfront resource—cash as well as people
with the right commercial/development skills. At the moment URCs
have a relatively tight budget and no long term committed funding.
I can understand that towns and cities that
do not have the benefit of Assisted Area and Objective 1/2 status
are concerned as to how to deliver regeneration. Nevertheless
there is an argument here about prioritisation and focussing resources
on those areas that most need it.
The other difficult area is that of housing.
Whilst the replacement regimes allow projects with an element
of residential, the threshold is relatively low and, in certain
circumstances, this could well cut across government aspirations
to create mixed-use areas and mixed-use developments in our urban
areas. If the rest of government policy works effectively in encouraging
developers to reinvest in our urban areas then I can understand
why there is some reluctance to provide public subsidy for private
housing. There is, as always, however some special circumstances
eg Millennium Villages and in the regeneration of major public
sector housing estates, where there is a need to lever in private
sector activity and investment. PIP has been used very effectively
to regenerate and diversify some of Sheffield's key public housing
estates. A replacement mechanism now needs to be found urgently
to help bridge the cost/value and risk gap if private sector solutions
are to be found.
Consequences for the urban renaissance in terms
of outputs, outcomes and value for money
There is absolutely no doubt that the most effective
use of public money to regenerate our deprived areas lies in working
with the private sector. The private sector brings commercial
skills, but most importantly a relatively small amount of public
money can lever in significant amounts of private sector money.
The net cost to the public purse of many public/private ventures
is actually quite small compared with the outputs and benefits
delivered (particularly when clawback is accounted for). In investing
in such partnerships the public sector only invests in bridging
the gap between cost and value. In a direct development scenario
the public sector upfront investment is significant ie the total
project cost, albeit the assets can subsequently sold and the
money "recycled" back into future projects. The difficulty
is that it ties up a very significant amount of public capital
and people resources. It cannot realistically deliver anything
like the overall outputs and benefits of a leveraged-based approach.
In addition the direct development approach runs the risk of being
seen to compete with and to distort the market. In contrast the
leverage approach, working with the private sector, is seen as
a more constructive and joint approach to delivery—working
with the market rather than in competition.
The impact of this on value for money is self-evident.
The Case for a new European Regeneration Framework
A new European framework is urgently needed.
This framework should provide the government with sufficient flexibility
to determine its own programme for economic and physical regeneration.
This absolutely must resolve the issue of State Aid and provide
clear guidance on the rules governing what is deemed compliant.
The other area that needs to be reviewed relates
to the whole area of public procurement. The process has become
incredibly bureaucratic and complex, and in particular the OJEC
process.
The Urban Regeneration Company model is working
well in Sheffield. In the context of having the highest levels
of grant assistance, some of the issues faced by other areas are
not relevant. This means that we have been able to work within
the existing framework and have made significant progress. However,
there are a number of areas where we would welcome government
help and assistance so that we can deliver more regeneration,
more effectively within our existing financial and people resources.
These are summarised below:
— a new EU framework which gives government
flexibility and clarity on the State Aid issue;
— a continued government acknowledgement
and commitment to the powerful role that our leading cities have
to play in economic prosperity and regional competitiveness. And
a continued policy emphasis on brownfield development, with restrictions
on greenfield development;
— Government action in seeking to modernise,
streamline and simplify the CPO process is very welcome. In advance
of Parliamentary time we need to focus on making early progress.
This could quite simply be in the form of guidance or a revised
circular, which actively encourages the RDAs and local authorities
to use their powers (and that if they do government will support
them at inquiry). Local authority powers need to be broadened
to give them the regeneration-based powers enjoyed by the RDAs
and English Partnerships;
— a co-ordinated approach to the development
of public sector land in areas that are a priority for regeneration
eg Ministry of Defence, the NHS/Trusts, the SRA etc. Too often
regeneration being sponsored by one Department is held back by
another Department acting under a different set of objectives
and targets.
— the move to create a "Single
Pot" approach in the RDA plans is very welcome. We would
like to see a more flexible approach across the board. There is
considerably more potential for various grant regimes to work
more effectively together. Annuality remains a problem where funding
relates to property and physical based regeneration programmes.
— we would encourage government to
continue to examine fiscal incentives in delivering its urban
renaissance. The recent stamp duty relief in selected wards is
welcomed, but the upper threshold for commercial properties needs
to be raised if it is to have significant impact. We would like
to see the introduction of a range of fiscal measures to secure
investment in tightly defined priority areas and targeted to public
sector owned sites; and
— if the URC model is to succeed, there
needs to be dedicated funding provision in the English Partnerships
and RDA Corporate plans to support delivery.
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