Memorandum by The Regeneration Practice
(ERF 03)
For clarity, I have dealt with these issues
under three headings; economic regeneration, social regeneration
environmental regeneration and "other areas for Government
Action":
ECONOMIC REGENERATION
In response to the riots in Brixton and Toxteth
in 1981, Michael Heseltine created the Enterprise Zone's (EZs),
a new regeneration framework based upon stimulation of large scale
urban development by relaxing the fiscal and planning environment.
This initiative was predicated in the belief that regeneration
was achieved simply by redevelopment of derelict urban land, relieving
development pressure on the Green Belt, to reverse out-migration
from cities. The EZs were successful in facilitating expansion
of the office sector, apartments to house staff and associated
leisure facilities, but failed to prevent significant progress
in reversing out-migration from cities. Their impact on the social,
environmental and economic causes underlying the 1981 riots, upon
deprived neighbourhoods immediately surrounding the growth areas,
or upon the ability of local councils to improve public services
burdened by growth was insignificant.
English Partnerships (EP) took over the City
Grant Programme from the Department of the Environment (DOE) in
the early 1990s, and renamed it Gap Funding. EP was successful
taking forward economic regeneration on a strategic and local
level:
— strategic economic regeneration in
areas of failed former coal and steel industries to attract international
companies such as vehicle and electronics manufacturers to the
UK using Gap Funding. This was either by speculative construction
of factory floorspace, or site preparation and infrastructure
to attract strategic inward investors.
— local economic regeneration on contaminated
land and/or former industrial sites to allow development to proceed
in inner city areas by bridging the gap between value and cost
in cases where the market would not otherwise enter, due to lack
of confidence. This took forward the successful DOE grant programme.
The record of Gap Funding (and City Grant) in
creating jobs and physical regeneration is impressive and well
documented. The decision of the EU Competition Commissioner to
ban Gap Funding in December 1999 on grounds it distorts the common
market, and is therefore contrary to Article 87 of the Treaty
of Rome, was based primarily upon evidence in connection with
strategic inward investment projects involving companies with
significant inter-state trade, rather than local projects.
The removal of Gap Funding and its replacement
by the hybrids; "Speculative and Non- Speculative Gap Funding"
with pitiful limits on funding for the whole of England of E32
million (20 million) each, is a major blow to failing local economies
in England, particularly where large scale development and micro-development,
cannot proceed, due to a combination of expensive abnormal development
costs, and depressed end values. At these funding levels, not
only will the new programmes have little measurable impact, but
they will simply not become well known enough for significant
take up to occur.
In the absence of a properly resourced mechanism
to bring about physical regeneration, England is left relying
substantially on the European Grant Programme ERDF, which is only
effective in defined assisted areas, or private investment, which
is only effective in areas of economic success. There is a major
concern that in applying the State Aid veto, the European Commission
has not understood the diverse nature of property ownership in
this country, which simply does not lend itself to a map-based
economic regeneration programme. The economic fortunes of the
regions and urban areas, vary dramatically from place to place,
and street to street, and these differences are becoming ever
more sharply defined in England. It is also a concern that the
Commission has confused a perceived distortion in a handful of
strategic inward investment projects, with a diverse and effective
economic regeneration programme. A programme which has delivered
thousands of jobs and physical regeneration on a large scale across
the country.
In 1998, the Government commissioned the Urban
Task Force (UTF) under Lord Rogers to identify the causes of urban
decline in England. In its Report the UTF made over 100 recommendations.
However the Government has clearly not whole-heartedly supported
the approach of the Task Force, based as it was, primarily on
the market-led principal that urban regeneration could be achieved
by economic regeneration. The UTF saw this being achieved by redevelopment
to construct attractive inner cities, and to reverse out-migration,
along the lines of the EZs.
The Government has offered tacit support to
a major UTF recommendation—the fifteen approved Urban Regeneration
Companies (URCs) in English cities—an Area Based Initiative
(ABI) with many similarities to the EZ programme. Many have judged
these developer-led partnerships a failure, because they have
no remit for social regeneration. However, such expectations of
public patronage from private developers are misplaced. The ability
of public organisations such as RSLs, Local Councils, Regeneration
Companies, or Community Organisations working "in partnership"
with developers, to have any real influence upon development activity,
beyond adding `public style' to the process of large scale urban
redevelopment, is a myth. Others have criticised the blueprint
used by the URC, the spatial masterplan, as being simply a tool
to present large scale market solutions, and circumvent the public
planning system. However, creating an effective means to channel
some of the fruits of growth into public goods and services, and
the means to deliver these, is clearly more of a failure of Government
to reform the planning and public delivery systems, than of the
URCs, which are solely concerned with market activity. The URCs
hold the potential to provide a vital economic stimulus in many
inner cities blighted by economic failure, providing our social
expectations of them are realistic.
The need to retain an effective economic regeneration
strategy is clear. We await the fruits of the Governments policy,
which sees economic regeneration as an issue best led by the Regional
Development Agencies (RDAs). They have been set targets to oversee
training and skills creation and increasing enterprise to reduce
deprivation in the worst 20% of wards by 10%. The RDAs are also
charged with delivery of the Governments 60% target for new homes
on brownfield land. In the 2000 Budget, the Chancellor announced
a welcome measure of greater control for RDAs, in how they spend
their £1.2 billion budgets.
What is clear, are the very differing regeneration
requirements, in regions of varying economic strength:
Areas of rapid economic growth
Unless development is free to proceed in areas
of growth, due to shortage of space, prices will rise to a level
which threatens a raft of social outcomes: affordable employment
for business start-ups, affordable housing for key workers; excessive
migration of the workforce causing a strain on people, public
transport and the road systems; the destruction of the civic environment,
and an unsustainable strain on our public health and education
systems, contributing to soaring crime and teenage pregnancy rates—a
pattern now sadly well established in London.
The principle issue in areas of rapid growth
is not economic regeneration, but an efficient development control
system, planning skills in civic design and property valuation,
effective delivery frameworks and effective agencies for construction
of public infrastructure and other public goods—particularly
affordable housing. There is a strong argument for zoning affordable
housing in these areas, as part of an overall regeneration framework,
due to the acute difficulties RSLs find in acquiring land in an
overheated property market.
The market value of land in these areas is so
high, that there is no argument for intervention by Compulsory
Purchase Order (CPO), except where land is needed for infrastructure.
The argument put forward for CPO of land for direct development—that
the public can "share in the uplifted value" is erroneous
as, under (former) Gap Funding rules, a tried and tested mechanism
already exists for public clawback of the increased value of adjoining
owners land, generated by installation of infrastructure.
There will always be some projects, even in
areas of rapid market growth, where public investment is needed
to deliver a combination of economic and social regeneration.
For example, Listed Buildings with high repair costs, or buildings
to be developed into uses with low market value, such as affordable
workspace or housing. This "keyhole surgery" is vital
to the civic well being in areas of strong growth, but many projects
are blocked by a public grant programme which only recognises
Assisted Area status. An adapted and properly resourced Gap Funding
Programme offers an ideal model to meet this need.
Areas of sluggish economic growth
CPO and direct development could be applied
in these areas where land is in diverse private ownership, and
the market is weak. But again, it is difficult to see justification
for intervention by extended powers for the RDAs for direct development,
beyond the basics needed for installation of access roads for
two reasons: firstly, Direct Development by CPO involves relatively
high costs and is therefore poor value for money. The major costs
being compensation to existing owners, often equal to the value
of the land; the high cost of legal and agents professional fees
and delays of up to three years. Secondly, development led by
the market will always act more efficiently to create sustainable
employment, than development led by the public sector.
The principle issue in areas of sluggish growth
is economic regeneration. Attracting development into such areas
by tax credits and an effective Gap Funding mechanism could meet
the market gap in such areas. A new European Regeneration Framework
should allow Gap Funding at a properly funded level, within State
borders, to stimulate economic and social regeneration in areas
of market failure. Planning reforms are important, but skewing
development into such areas is the priority. Fiscal measures could
also help to attract inward investment, for example, an increased
level of tax credits to companies undertaking decontamination,
or the offer of Community Development loans—see CDFI
below.
SOCIAL REGENERATION
Building upon the eleven City Challenge pilots,
the Single Regeneration Budget (SRB) Area Based Initiatives introduced
in 1994, were the first attempt by Government at drawing together
partnerships between public and private sectors, competitively
bidding for funding, to deliver a mixture of social and physical
regeneration. Public funding came mainly from central Government,
ERDF and Gap Funding for the six annual SRB rounds, and was balanced
with private investment.
The capacity of these non-governmental partnerships
to deliver was never fully realised due to direct control over
funding by central Government and Europe through a series of complicated
checkbox procedures to audit regeneration outcomes and timetables,
as a pre-condition of funding. This led to their performance in
acquiring land, property and skills in the marketplace being severely
hampered. More recently, these agencies were criticised for skewing
local service priorities on an area basis, and for targeting regeneration
funding, not on the basis of need, but of ability to prepare successful
funding bids. It is difficult to see the rationale behind this
argument, given that every regeneration programme undertaken in
this Country has been area based, and that the essence of Best
Value, is itself competition.
Despite a lack of autonomy, with central Government
controls over funding, and involvement of Local Authorities in
their administration, these non-governmental local regeneration
companies have established a strong reputation for delivery. They
have also spawned a network of "social entrepreneurs",
with skills and experience to tackle a range of social and infrastructure
problems in deprived areas. It is a major concern that the SRB
Programme is now terminated, casting doubt upon the future of
the skills and experience developed over many years within these
organisations.
With the November 2000 Budget, and the launch
of the National Strategy for Neighbourhood Renewal in April 2001,
the Governments' regeneration agenda became clear. New Deal for
Communities is the first major regeneration initiative of the
Social Exclusion Unit, targeted at the 88 most deprived neighbourhoods.
It is now in its second round with seventeen schemes over three
years. This programme is intended to achieve broad social goals,
on our most deprived "sink estates", and to allay fears
that previous regeneration programmes are too much based on physical
regeneration without addressing underlying social problems. These
concerns were set out in a Report by the Joseph Rowntree Foundation
(JRF): "Social Cohesion and Urban Inclusion for Disadvantaged
Neighbourhoods" published in April 1999: "in many
cases, it was felt that broader social and economic problems had
not been addressed, throwing into doubt the long-term sustainability
of regeneration". The Report recommended that new ways are
found to involve residents, including handing over all or part
of the regeneration budget to ensure their priorities are met.
However, management of the NDC Programme has not lived up to the
Government's hopes.
The ability of community groups to show an interest
in NDC has been a failure, with most programmes involving local
authorities in their bidding and administration. In a further
report by the Audit Commission published in September 1999, the
efficiency of Local Authority run regeneration partnerships, such
as NDC and SRB, was heavily criticised. Citing, amongst other
ills, duplication of work, lack of clear targets and monitoring.
Efficient management remains a major concern which continues to
challenge the NDC Programme.
The Government's new regeneration initiative
to administer regeneration funding locally, Local Strategic Partnerships
(LSPs), is intended to reduce "partnership fatigue"
caused from the proliferation of ABIs, particularly in the areas
of Education, Employment, Crime, Health and Housing. LSPs will
also take on co-ordination of public service delivery, and (non
EU) regeneration in deprived areas. The LSPs will comprise representatives
from business, community, public and voluntary sectors. A total
of £900 million over three years will be spent from a "single
regeneration pot" administered by the LSPs from a new Neighbourhood
Renewal Fund (NRF). A further £35 million Community Empowerment
Fund is intended to support community and voluntary sector involvement
in the LSPs, £50 million Community Chest for "grass
roots" renewal projects, and £45 million to fund Neighbourhood
Wardens on deprived estates.
It is a precondition of Government accreditation,
that the LSPs have a good basis of community and voluntary sector
participation, and "a realistic action plan to sustain this".
However, a study by the Centre for Local Economic Strategies (CLES)
on behalf of the Government Office for the North West, published
in April 2000, reveals that the Local Authorities again dominate
the management of LSPs. Both in their operational style, and in
their community plans which are often prepared by local authorities
and rubber stamped by the LSP. A situation encouraged in the implied
duplication of the requirement to write the same Community Plan,
both under section four of the Local Government Act 2000, and
in the LSP Guidance Notes. A requirement now potentially triplicated
in the Local Development Frameworks suggested in the Green Paper
on Planning Reform.
It is clearly a concern that a key plank of
the Governments' strategy to improve public service delivery to
achieve regeneration, is again being administered by local authorities,
themselves heavily criticised in this role by the Audit Commission
for duplication of work, lack of clear targets and monitoring.
But an even more serious concern is, there appears little interest
from residents to getting involved in the management of regeneration
initiatives affecting their lives. Especially as lack of community
connection between Government inspired regeneration programmes
was blamed on exacerbating existing tensions and divisions in
the JRF Report of April 1999, concerns now confirmed in reports
following the recent Oldham riots.
The issue of effective management of regeneration
has emerged as the key challenge to the Government's regeneration
programme. The problem is that existing regeneration programmes
are controlled centrally, from above. Using funding to fashion
delivery partnerships, and a series of complicated check box procedures
and timetables to oversee success, has resulted in duplication
of responsibilities, confusion and widespread disengagement of
those tasked with delivery. The problem is studied in a report
by Demos: "Working Together: Creating a better environment
for cross-sector partnerships", dated May 2000. This
research addressed, amongst other matters, the effectiveness of
non-sectorial partnerships brought together for the purposes of
funding. I quote from the Report, "Only half of the local
councils of voluntary service thought that the sector was included
for its expertise. Over nine out of 10 said that voluntary organisations
were included because they were a funding requirement". Until
the skills, and the right expertise exists on the estates, any
social regeneration programme will fail to connect.
This situation can only be remedied by genuine
devolution of planning, responsibilities and budgets to local
organisations with skills and expertise to deliver, drawn from
within local communities. Government needs to figure out how to
harness local hopes and dreams for positive change and self-betterment,
to encourage practical people, with the ability to deliver. This
suggests a culture of self ownership, both of individual destiny
and place, rather than a plethora of management groups, working
to complete applications, timetables, monitoring reports and audits,
simply to report a pre-determined social return on public investment
back to Government.
ENVIRONMENTAL REGENERATION
The programme is not significant enough for
wide knowledge, or take up. There is a strong case that this matter
is better dealt with by general reforms to the Building Regulations,
and the Tax Credit system, and is not a suitable candidate for
grants.
OTHER AREAS
FOR GOVERNMENT
ACTION
Business Improvement Districts (BID's)
These are a US concept, now widely accepted
there, and proposed in a hybrid form as Town Improvement Zones
by the UTF. They are simple fiscal zones, akin to the EZs but
set up primarily to fund public goods, and not to simply stimulate
development, as in the EZs. Funding comes either from a Supplementary
Business Rate, or by hypothecation of the Business Rate directly
into the BID to pay for additional street cleaning, security,
marketing or special events. Five pilots have received £4.5
million from the London Development Agency (LDA). However, these
are effectively set up to fail due to lack of Government support,
as they rely on voluntary contributions from landlords to supplement
their funding. The BID is clearly a workable vehicle and has achieved
spectacular results in cleaning up Times Square and downtown Pittsburgh.
As a fiscal measure, like the EZs, BIDs can be a very "unsticky"
vehicle for civic regeneration, with minimal administration other
than that already in place. It is important they are taken seriously,
and therefore are not voluntary measures, and that business rates
are hypothecated to avoid small businesses carrying an increased
business rate burden.
Community Development Finance Initiatives (CDFI)
There is a reluctance in the UK to legislate
for publication of league tables of bank investments into deprived
areas. Under the US 1977 Community Reinvestment Act (CRA), banks
are required to disclose lending patterns and are rated by performance
in reaching deprived areas. Since the 1970s, US CDFI's have offered
soft loans for investment in deprived areas in small businesses,
venture capital investment, personal loans, private enterprises,
not-for-profit businesses, community groups, childcare facilities,
schemes to fight loan sharks, credit for schools and affordable
housing. Bank Enterprise Awards are given to reward US banks for
improving their performance in deprived areas. The UK Government
supported CDFIs after a study by the Social Investment Task Force
in February 2000. In the 2000 Budget, the Chancellor announced
a plan to offer 5% tax credits per annum to private, corporate
and charitable investors in CDFIs, however we still await implementation.
The Government must go much further in promoting these excellent
vehicles.
Targeted fiscal measures
The Chancellor has made an excellent start with
the changes in VAT (although these should obviously extend to
all Listed buildings), the changes in Stamp Duty, Tax Credits
for CDFIs and for Land Reclamation. However, there is still more
scope to skew market led growth using tax credits to create more
civic space or affordable housing within private development,
and other public goods which contribute to making our cities more
attractive. Fiscal measures have the obvious attraction they are
non-negotiable, requiring no more audit than already exists, and
thus are highly efficient measures to skew market growth into
more sustainable patterns. But there should be increased hypothecation
direct to delivery agencies like RSLs and Regeneration Companies.
THE NEED
FOR A
NEW EUROPEAN
REGENERATION FRAMEWORK
English cities are characterised by many attributes
which we consider generate wasteful use of human and economic
resources; abandonment by better off families to sprawling suburbs;
concentrations of the poor in high rise public housing ghettos;
a gridlocked transport system; a decaying civic realm clogged
with traffic; noise, litter, pavement fouling and air pollution;
an over-stretched public health, housing, education and police
services and spiralling housing costs—especially for key
workers in essential public services. Within the English regions,
there is increasing economic disparity between north and south,
and increasingly, across each region. A process which feeds itself
as labour is forced more and more to migrate to employment, depressing
prices which frighten off the market in some areas, and causing
price inflation and excessive development activity in others.
These unwelcome by-products of economic success
continue to challenge Governments' to search for more effective
frameworks for regeneration. In the Laeken Declaration on 15 December
2001, European leaders committed to forming a European Constitution
by 2004 to cope with expansion of the Community from 15 to 25
member states. Many of these will require economic and social
investment, and a workable European Regeneration Framework which
applies across Europe, is therefore essential, as a part of any
European Convention. Given the vital importance, and diversity
of mechanisms needed to deliver economic and social regeneration
in England, and the damage which has been already inflicted by
ill-fitting European State Aid Rules, it is essential that the
Government leads Europe in this debate, if only to secure workable
solutions for the UK.
Paul Latham
Director
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