Memorandum by Tom Russell (ERF 25)
1. INTRODUCTION
1.1 I am Chief Executive of the New East
Manchester urban regeneration company, a not-for-profit public/private
partnership established to spearhead the regeneration of the east
Manchester area. I have occupied this position since August 2000,
having previously been Deputy Chief Executive (Regeneration) for
Manchester City Council. I have worked on the management and administration
of urban regeneration projects continuously since 1984, in London
and Oldham as well as in Manchester.
2. PRIORITY CONTEXT
2.1 During the time I have worked in urban
regeneration there have been countless new policy initiatives
and funding programmes aimed at tackling the problems of urban
decline in our inner city areas. Whilst there have been many changes
in emphasis over this period, there have been some principles
which have remained relatively consistent:
2.1.1 The need for a comprehensive approach
which recognises the inter-relationship between economic, social
and physical or environmental issues, and which aims to tackle
these problems in an integrated manner.
2.1.2 The importance of community involvement
in, and ownership of, the changes, developments and improvements
taking place within their neighbourhoods.
2.1.3 The use of additional, time-limited
public funding of whatever kind to lever resources from other
public sources and, crucially, from the private sector to both
tackle the problems and exploit the opportunities in regeneration
areas.
2.1.4 The critical importance, in terms
of sustainable regeneration, of private sector investment. One
of the best benchmarks of success of initiatives aimed at improving
areas which have been starved of investment and development is
the extent to which they have created the conditions in which
the private sector will continue to invest, and take a return
on that investment, beyond the period of special assistance.
2.2 Manchester can claim some success in
the application of these principles. In Hulme, for example, £37.5
million of City Challenge funding levered around £70 million
from other public sources and well over £100 million of private
sector investment over the five-year period from 1992 to 1997.
Since the closure of the programme, Hulme has continued to develop
as a successful neighbourhood characterised by increasing land
and property values, and a continuing momentum for development
led by the private sector without the need for special forms of
assistance. Gap funding, no longer needed, was absolutely essential
in kick-starting this process.
2.3 In the city centre, equally, the serious
threat to the economic performance and capacity of the regional
centre in the wake of the terrorist bomb in June 1996 has not
merely been alleviated but reversed. Through the strategic use
of public funds, in which Europe played a key role, massive private
sector investment in improved commercial, retail, leisure and
residential uses has been achieved.
2.4 It is worth noting the substantial growth
in the influence of the European Union over this period. It has
become effectively one of, if not the, main source of funding
for some aspects of regeneration particularly business support,
employment and training, and EU funding is an essential component
of most major physical development projects. It is also increasingly
influential in policy terms through the Single Programme Documents
and other regulatory frameworks which govern the use of EU funds
and, in procurement terms, through OJEC requirements.
3. EAST MANCHESTER
3.1 The East Manchester area is one of the
most deprived areas in the country. As a base for the traditional
manufacturing industries on which the wealth of the City was built,
the area experienced severe economic decline in the recessions
of the late 1970s/early 1980s, with a loss of business, jobs,
skills and population which has continued over the last quarter
century. The Commonwealth Games—and specifically, the decision
to locate the major new facilities for the Games in the heart
of the area—has provided the stimulus for the physical transformation
of the area, the reconstruction of its economic base and the improvement
of social conditions for local communities. New East Manchester's
role is to develop and lead this regeneration strategy.
3.2 The scale and severity of the post-individual
dereliction and its economic and social consequences is such in
East Manchester that major transformational change is not simply
desirable but essential, to change the image and perception of
the area and to create a level of confidence in its future that
is needed to secure private sector investment. In these circumstances,
clarity as to the level and scope of pump-priming support that
can be offered is very important in developing positive and effective
working relationships with the private sector.
4. IMPACT OF
THE LOSS
OF GAP
FUNDING
4.1 I would not wish to exaggerate the effect
of some two years in which it has not been possible to bring forward
gap funding schemes, in that I do not believe that we have yet
lost development partners or projects as a result of the EU's
decision. To some extent, the timing of this has been fortuitous
for East Manchester in that:
4.1.1 Certain projects in course of development
during 1999 managed to get "under the wire" before the
EU embargo on gap funding schemes took effect, and this has enabled
a degree of momentum to be maintained in the intervening period.
4.1.2 Much of 2000 was taken up by the development
of, and consultation upon, a strategic Regeneration Framework
for East Manchester which is intended to provide clear guidance
to development partners as to the nature, scale and scope of future
development. In January 2000 we were at a comparatively early
stage in the development of most of our early major initiatives—notably
our new housing programme—and we have continued to make
progress on these in the intervening period in the expectation
that some form of assistance, gap funding or otherwise, would
ultimately be available.
4.2 Nevertheless, we are now nearing a crucial
stage in the development of neighbourhood plans for four areas
in East Manchester, in conjunction with private sector partners,
where it will be necessary to be clear about the extent to which
public funding can be deployed to bridge the gap between cost
and value, and the terms under which this can be done. In these
circumstances, EU's approval of the five gap funding projects
is welcome but will only go part of the way to resolving the impasse
that has existed since December 1999. In particular:
4.2.1 Rigid differentiation between bespoke
and speculative schemes, between SMEs and larger companies as
beneficiaries of grant, and between different tiers of assisted
area are confusing, unnecessary and, in some circumstances, militate
against the achievement of regeneration objectives. The encouragement
offered to, for example, RDAs to undertake direct development
may well be beneficial in certain circumstances, and would not
be a problem in East Manchester, where the NWDA is so firmly committed
to the NEM strategy. However, it needs to be recognised that direct
development is not necessarily, in all circumstances, the most
efficient or cost-effective means of facilitating development
and RDAs will themselves need to build capacity, in resources
and skills, to take on this role.
4.2.2 The severe limitations on residential
schemes—as I understand it, residential development will
only be eligible as part of mixed use schemes with a strong commercial
component—is a major problem in East Manchester, where the
failure of the housing market is one of the principal symptoms
of economic decline and where large scale intervention in the
housing market (we have a target of up to 12,000 new homes over
a 10-15 year period) is an essential component of the regeneration
strategy. We are currently working with four developers on three
initiatives, which involve the remodelling and reconstruction
of neighbourhoods with a strong residential component, and where
we anticipate the need for significant public sector incentives
to unlock private sector investment.
4.2.3 The continuing uncertainty around
gap funding is, in itself, problematic. Whilst progress on the
five schemes is most welcome, Government has signalled its intention
to continue to press for a more comprehensive framework. This
has to be right, but it needs to be recognised also that one of
the private sector's most consistent complaints is about uncertainty
and shifting goal posts. A degree of urgency therefore needs to
be attached to this framework if we are not to begin to lose potential
development partners and investment.
5. CONCLUSIONS
5.1 The Sub-Committee's interest in the
role of the EU in regeneration in the UK is welcome and timely.
It is patently absurd that European regulation aimed fundamentally
at anti-competitive practices by member states is being used in
such a way as to jeopardise even further the prospects for investment
and development in economically marginal and uncompetitive areas.
5.2 There is an urgent need to build upon
the five "temporary" schemes recently announced and
move towards a more comprehensive framework for providing essential
pump-priming incentives for the private sector. Such a framework
needs to be flexible; based on subsidiarity which recognises the
differences between areas and the primacy of local regeneration
frameworks and partnership; operated through processes which maximise
private investment; and comprehensive in nature, covering all
types of development which can be shown to contribute towards
the achievement of regeneration objectives.
5.3 A comprehensive EU regeneration framework
might also usefully consider two other important dimensions of
the EU's impact on regeneration activity in the UK, ie procurement
and policy. The first of these is least problematic. The requirement
to allow for competition across Europe for major contracts cannot
be gainsaid, although there may be scope for examining ways in
which the process of advertising through the Official Journal
could be streamlined.
5.4 In policy terms, whilst the new ware
of Objective 1 and 2 programmes have seen significant advances
in structural subsidiarity—ie the Commission playing a less
significant part in regional and sub-regional partnerships—policies
governing the use of Structural Funds are still over rigid, centrally
determined and insensitive to local regeneration initiatives in
many respects. This makes it more difficult to integrate European
funds with domestic sources of funding and increases the overhead
costs to local authorities and regeneration agencies.
Tom Russell
Chief Executive
New East Manchester Urban Regeneration Company
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