Select Committee on Public Accounts Sixty-Second Report


4  Engaging the private sector

26. Most of the finance for the development of the Thames Gateway will be provided by the private sector, either through direct investment or through contributions negotiated under planning law (section 106 contributions). The Department sees its role as coordinating the public sector interventions necessary to attract and facilitate private investment. It estimates that £35 billion will be needed to develop all the sites in the Thames Gateway, most of which will be provided by private developers. Individual investments into specific sites can be quite large: Bellway Homes are investing £175 million in Barking Riverside, and Land Securities have put in an initial investment of £80 million just for the land remediation at Ebbsfleet Valley. There will also be private sector investment stimulated by the Government focus on the region and the investment in infrastructure such as the Channel Tunnel Rail Link.[26]

27. The housing market in the Thames Gateway is weak compared to surrounding regions. The number of homes built each year in the Thames Gateway has increased since 2001, but less so than in surrounding regions. The average annual rate of home building in the Thames Gateway will need to double if it is to achieve the Department's target of 160,000 homes built by 2016 (Figure 2). The Department hopes the rate will increase to meet their target when larger sites come on stream, but whilst it can influence the rate at which land is brought forward for development it has little influence on how quickly developers build homes on that land.[27]

Figure 2: The rate of house building will have to accelerate if the Department is to reach its target of 160,000 homes by 2016

Source: National Audit Office analysis of Department's housing statistics as shown in Thames Gateway Interim Plan, 2006

28. The Department aims only to invest as much in the Thames Gateway as is necessary to stimulate the market. It expects that as the market's confidence in the Thames Gateway improves, the Department's investment in the area will decrease.[28]

29. Some of the taxpayers' investment will be recouped if the market takes off. The Department has spent £152 million so far on land assembly and remediation. Further land is held by Local Authorities and Regional Development Agencies. Taxpayers' investment in land will be at least partially recouped because the site will either be sold directly to a developer who will invest further in it, or be developed jointly with the developer so the taxpayer will get an equity stake in the profits of the venture.[29]

30. The ratio of private to public sector investment in the Thames Gateway is unclear. Some sites, such as Barking Riverside and Medway are being developed by joint ventures of the private and public sector where costs and profits will be shared. The Department has not assessed how much private sector investment has already been achieved. Nor has it established guidance on such ventures including how much investment from the private sector local partners should expect in return for public sector investment, or what return on the public investment the taxpayer should expect.[30]

31. Other local public sector bodies in the Thames Gateway are also seeking to establish ventures with private developers to regenerate their area, including Basildon Council and Thurrock Thames Gateway Development Corporation.[31] But the Department has not provided support for local partners, and improvements are needed to the way the Department goes about its monitoring, funding and support. The Department has yet to establish a strategy to that end. It has ensured local partners have brought business and developer experience on to their boards, but the Department's Thames Gateway team lacks business experience or experience of working with public-private partnerships. The National Audit Office found that local investors, developers and public sector partners were looking for better engagement of the private sector and a better grasp of what investors want.[32]

32. Attracting investment to the Thames Gateway will require much better marketing of the area. The six inward investment agencies involved in the Thames Gateway compete with each other and disagree on whether to promote the Thames Gateway as a whole. The Department has not developed a marketing strategy and has not assessed brand recognition outside the area. In response to the Comptroller and Auditor General's Report, the Department now aims to establish wide-spread public recognition of the programme within 3 years.[33]


26   C&AG's Report, para 1.7; Appendix 4; Qq 79-80 Back

27   C&AG's Report, paras 4.2, 4.4; Figure 21; Q 57 Back

28   Q 49 Back

29   C&AG's Report, Figure 14; Qq 79-80 Back

30   C&AG's Report, para 3.22; Appendix four: Barking Riverside para 8; Qq 26, 76-80 Back

31   C&AG's Report, Appendix four: Purfleet para 14; Q 76 Back

32   C&AG's Report, paras 3.21, 3.22, 4.11 Back

33   C&AG's Report, paras 4.12; Qq 38, 40-41 Back


 
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