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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