Memorandum by East Midlands Development
Agency and supported by England's Regional Development Agencies
(ERF 16)
INTRODUCTION
These are not programmes with new powers or
budgets as such, but restrictions on the operation of RDA powers
under the Act to make them compliant with current State Aid rules.
The understanding has been that the DTLR were to negotiate a new
framework with the EU for partnership mechanisms with the private
sector, which would substantially restore previous flexibility.
DIRECT DEVELOPMENT
This scheme offers the most flexibility to an
RDA in that an RDA may acquire a site and undertake reclamation
and remediation works either directly or in partnership with another
public body. Additional flexibility is provided by the fact that
Direct Development is not confined to Assisted Areas but may be
used anywhere within an RDAs geographical area.
East Midlands Development Agency (emda)
is being pro-active with this scheme by working closely with Local
Authority partners, both directly and through our emerging Strategic
Sub-Regional Partnerships, to bring forward opportunities for
regeneration. emda has also identified a number of regeneration
opportunities, in its Corporate Plan, that it will undertake directly.
The Direct Development scheme allows RDAs to
be more effective in prioritising opportunities. Its usage will,
no doubt, increase due to the fact that it may be used anywhere.
At the present, emda is actively involved
in 13 Direct Development projects (to be undertaken by emda)
in addition to working closely with two Urban Regeneration Companies
and undertaking work on various master-planning and feasibility
studies. emda is also working on 11 projects with Local
Authority partners.
This scheme provides RDAs with more direct control
over the delivery of outputs and outcomes. However, the major
issue with this scheme is the 100 per cent cost to the public
purse.
SPECULATIVE AND
NON-SPECULATIVE
GAP FUNDING
SCHEMES
These schemes do not offer the flexibility provided
by English Partnerships' former Partnership Investment Programme
(PIP). The fact that grant is limited to Tier 1 and Tier 2 Assisted
Areas immediately imposes a geographical restriction that was
not applicable to PIP projects. Further restrictions imposed by
the Aid Intensity Ceilings mean that support that an RDA may give
to a private sector project is extremely limited as there is no
guarantee that the gap between the costs of a project and its
value on completion can be met.
Together, these restrictions combine to reduce
the effectiveness, usage and coverage of these schemes with the
result that it will be difficult for emda and the other
RDAs to engage the private sector in the physical regeneration
process. The consequences of operating these schemes will be a
reduction in outputs and outcomes compared to those achieved under
PIP rules. With less private sector investment being levered into
regeneration it will become questionable as to whether RDAs can
achieve value for money in line with levels achieved under PIP.
Since the demise of PIP, emda has had
little commitment from the private sector to bring forward land
and buildings that require public sector funding to make projects
viable.
To date, three projects are being considered
under the new guidelines. Two of these will require the maximum
Aid Intensity Ceiling (25 per cent) within the Region. Even then,
the two separate Local Authorities will have to compromise their
desired planning positions and allow higher value land uses in
order to bridge the cost—value gap. On one project, the
Local Authority will have to allow retailing on part of the site.
On the other project, the developer will require an element of
housing in the Green Belt in order to make the project viable.
COMMUNITY REGENERATION
This builds on the work formerly allowed under
English Partnerships' Community Investment Programme and provides
RDAs with increased flexibility to work in partnership with the
local communities, particularly in the areas of training provision
and the development of resource centres. The ability to provide
revenue funding by way of contributing towards start-up staffing
costs for up to three years is considered to be a significant
improvement.
This scheme meets the needs of the community
more effectively than the previous scheme.
ENVIRONMENTAL REGENERATION
The new scheme has provided emda and
the other RDAs with greater flexibility in the way it can operate
environmental regeneration projects. The scheme is an effective
tool particularly in respect of allowing RDAs to work, indirectly,
with the private sector on Public Realm Works. It is, however,
likely that outputs will either be reduced, if funding levels
remain constant, or funding will have to increase to achieve a
constant level. This is because of the cost nature of urban renaissance
as opposed to other less restrictive, and less costly, greening
options.
SUMMARY
The Speculative and Non-Speculative Gap Funding
Schemes are the two schemes that give rise to most concern within
emda and the other RDAs. They are both far more restrictive
in nature than the previous PIP scheme. Further, they only cover
development for business use although a minority element of residential
may be included. They do not cover residential development per
se. This is seen as a major problem.
If these two schemes are allowed to stand, as
drafted, then RDAs will encounter problems with engaging the private
sector. For this reason, the RDAs consider that there is a need
for a new European Regeneration Framework, one which recognises
the cost-value gap and the reasons for it and allows us to operate
flexibly in support of projects without impacting on market value
and true competition, and which will therefore result in partnership
working between the public and private sectors on a less restricted
basis.
As yet, it is too early to quantify outputs
and outcomes during the period since the five new schemes were
introduced.
| 
