Regeneration

Regen 11

Written evidence submitted by NewcastleGateshead

Summary

NewcastleGateshead are pleased to see that the Select Committee are conducting an inquiry into this important issue and are grateful for the opportunity to submit evidence to it.

Our main conclusions are:

· The successful regeneration of certain areas in Newcastle and Gateshead has been-and remains-a key local priority. Due to the extent of issues of low demand housing and loss of population, we have been a Housing Market Renewal (HMR) area since 2002.

· We have been successfully delivering a long term, complex programme and are at the stage we expected to be at eight years into the programme. Much is in place to facilitate private sector led transformation of our areas-but not all.

· The abrupt ending of HMR funding without any phased withdrawal causes us significant problems.

o Neighbourhoods will have to face incomplete investment activities-derelict and boarded up houses, homes not improved, demolition and new build not carried out;

o Community reaction to perceived ‘abandonment’ will be strong, especially as HMR has secured unprecedented levels of local engagement and support;

o The economic benefits of existing investment on jobs created and retained may wither away;

o Value for money for past public investment, and its ability to bring in other public and private finance, will be challenged and economic potential undermined;

o Regeneration skills and experience with their emphasis on cross cutting professionalism and people engagement will be lost to the local community.

· While there are positive aspects to the proposed way forward, overall it represents an inadequate response to the scale and complexity of the challenge that Newcastle and Gateshead are tackling; and the lack of recognition of the point that we have reached in a carefully phased programme.

· Successful bids to the Regional Growth Fund would be helpful, although we recognise the extent of competition, as well as the challenge of fitting the Fund’s criteria (which was understated by officials and Ministers initially).

· New incentives such as the New Homes Bonus work less well in areas such as ours and mean there will be minimal benefits to us. Gateshead’s initial allocation is £68,000 and Newcastle’s is £455,000, compared to an HMR programme of £220m over the past 8 years. Alongside the loss of HMR, this is a double challenge. Overall, there are not likely to be enough available resources.

· Furthermore, the strategic thrust of a number of the new policies may have unintended consequences unless carefully planned. The chief of these is that development will only be economic in green field, peripheral sites, with the burden on established infrastructure and the need to provide new infrastructure which that brings.

· The long term costs of not regenerating are likely to be more than actually undertaking the regeneration.

· The importance of using robust evidence to inform strategy development – and resourcing the collecting of this-is vital.

· Effective partnership working and community involvement and engagement are key.

· Attracting private finance and support is critical, but this is challenging in our areas without public support. The establishment of Joint Ventures in NewcastleGateshead offer a local solution to this problem; there is also a great deal of local expertise and learning that has been gained from their creation which can be shared.

· The government’s focus on localism and the lack of any national regeneration priorities means the task of judging success is difficult.

Context

The task of regenerating our most deprived neighbourhoods has been a long term priority for Newcastle and Gateshead. It forms a key part of our wider economic and spatial strategy to both strengthen the economic core of the Tyne and Wear city region and to reduce future demands on the Exchequer.

Since 2002, we have been one of the Housing Market Renewal areas and are now eight years into what was intended to be a fifteen year strategy. This is a strategy that we are making good progress with, as evidenced by our consistent assessment of "Performing Strongly" from the Audit Commission.

Thanks to our efforts, the foundations have been established for the private sector led transformation of our priority areas, while outcomes are beginning to improve in these areas. £224million of HMR resources has been invested in our areas, alongside a further £137million of other public and private complementary funding-an overall sum of £361million.

These plans have the support of local politicians, officers and-most importantly-local residents. We are able to demonstrate improvements in numbers of empty properties, house prices and many key deprivation indicators. In short, we are at the stage that we thought we would be in the programme. Any stopping or loss of momentum at this point was always likely to cause significant issues, including potential collapse of what remain very fragile housing markets. We have done substantial research, and can demonstrate that in some of our renewal areas market provision is unlikely to be viable in the next 15 years. We would be happy to share this research with the committee.

We obviously understand the overall financial issues that the country is facing at this time, but are concerned that abruptly cutting HMR resources in the unprecedented way that has happened, with no transitional funding, puts at risk the considerable investment that has been made to date. We fear a repeat of failed regeneration activity of the past where fragile progress is not sustained and slips back, bringing a further cost to the Exchequer in the future.

Of most pressing concern is the issue of blight and the quality of life of our residents where neighbourhood plans are either part way through or about to start being delivered. Community reaction to perceived ‘abandonment’ will be strong, especially as HMR has worked hard to secure local engagement and support-which was acknowledged in Building Houses or Creating Communities? A review of government progress on Sustainable Communities, (May 2007), which states "Engagement processes in almost every other area … have not met the standard set in NewcastleGateshead."

Response to Specific Questions

We do agree with certain issues in the new framework, as set out in the detailed answers below, however overall we feel that it is not an adequate response to the extent of the long term structural issues that we are tackling.

Most of the new potential sources of funding will see minimal benefits to us and, combined with the removal of HMR, cause a significant disruption to our plans. Furthermore, the strategic thrust of much of the new framework is in danger of exacerbating many of the issues that led to the need for regeneration in NewcastleGateshead-namely encouraging decentralisation of jobs, housing and people out of the urban core to surrounding areas. This has had the effect of leaving issues of low demand for housing and high levels of deprivation in many of our central neighbourhoods. It will put pressure on existing roads and other infrastructure, and create demand for new schools, shops and community facilities which are unlikely to be affordable.

If our neighbourhoods are not supported and we cannot finish the job we started-to create a transformational offer to retain and attract population-and we are further undermined by national policy changes, we risk wasting the considerable resources invested to date and will continue to be a cost to the Exchequer in terms of mainstream resources and future regeneration funding.

In short, as well as the immediate issues of residents being left living in blighted conditions, we risk missing this once-in-a-generation opportunity to finish the job and create self sustaining neighbourhoods that fully contribute to economic growth.

Q. How effective is the Government’s approach to regeneration likely to be? What benefits will the new approach bring?

The Government clearly is faced with a challenging situation in terms of tackling the national financial situation and this would have been true of any government. Even under previous arrangements, funding for regeneration would have had to reduce.

There are aspects of the new approach that we feel are likely to have benefits. We agree with the proposal for un-ringfencing of budgets to enable local pooling of resources. This is likely to be of significant benefit for us and other areas. We also feel that it is valuable, for example, that the HCA is working with the Regional Development Agencies to ensure that the land and property assets of the latter are managed in a way which delivers the best outcomes for regeneration.

Wider changes such as the creation of Local Enterprise Partnerships, the granting of new borrowing powers in the form of Tax Increment Financing and the creation of new Enterprise Zones will need time to bed in before any potential benefits can be judged, although we remain hopeful.

Overall, however, we feel that the current set of national funding and policy proposals for areas facing deep seated social and physical structural issues are inadequate. As well as the cuts to funding, the abolition of Regional Spatial Strategies and the thrust of many of the policies could result in the further weakening of fragile neighbourhoods. There is no recognition of either the stage that we are at in long term, carefully planned programmes or the complexity of delivering the necessary transformational change in some of the most deprived areas of the country.

While successful bids to the Regional Growth Fund would be a help, we recognise that this fund is substantially over subscribed in the first round. We have bid into this fund for one of our priority HMR areas as we were advised to, while other bids are being considered for future rounds of this fund. Further bids have gone in for other projects in Newcastle and Gateshead.

Other incentives such as the New Homes Bonus work less well in our areas because of both the stage we are at in our carefully phased programme with further demolition being needed, and the historic challenge of increasing effective housing supply in Newcastle and Gateshead. Also because New Homes Bonus is most likely to go to areas where housing demand and viability are highest, and because future allocations are top-sliced from formula grant to Local Authorities, there will be a further redistributive effect from poorer to richer regions of the country. We have a long term aspiration to increase housing supply but are working towards this through a carefully phased programme of Renewal and Growth. We will be penalised by the New Homes Bonus as many of our potential sites suffer from physical constraints or are in low value areas and can be unattractive to developers. Our research on viability shows that there is currently a requirement for gap funding to fund new build in our more deprived, inner urban areas.

The projected income figures show that Gateshead is projected to receive £68,283 in year 1, the lowest in the North East. This compares to £10million of HMR resource in the last financial year. Similarly, Newcastle’s figure is likely to be £455,753-compared to HMR grant of £14million last year. These are huge reductions in funding. Added to the loss of HMR, this is a double blow.

Finally, and potentially most damaging, is the strategic thrust of the Bonus. Rewarding net development and larger housing units, regardless of the sub regional nature of housing markets and the level of need in both individual boroughs and adjacent ones, risks exacerbating the long term processes that have actively contributed to the decline in the HMR area.

Removing the need for strategic planning and potentially allowing unfettered development to take place in surrounding areas is arguably the biggest risk to Newcastle and Gateshead overall, but particularly the HMR area, running the risk of further exacerbating the decline of the core. There are clear sustainability and economic arguments for prioritising development in NewcastleGateshead.

All of this runs the risk of furthering the long term processes that led to the decline of our neighbourhoods, leaving the risk of future increased costs to the Exchequer.

Q. Will it ensure that progress made by past regeneration projects is not lost and can, where appropriate, be built on? Will it ensure that sufficient public funds are made available for future town centre and city regeneration projects as well as for more localised projects?

As set out above, the loss of funding together with the new framework give a severe risk that progress is lost and causes significant problems. Newcastle and Gateshead remain determined to secure the long term sustainability of our priority neighbourhoods, and have much of the groundwork laid for future private sector led transformation-but not all. Our ability to complete the task has been made substantially more difficult.

In addition, the economic benefits of existing investment on jobs created and retained may wither away, value for money for past public investment, and its ability to bring in other public and private finance, will be challenged and economic potential undermined, while regeneration skills and experience with their emphasis on cross cutting professionalism and people engagement will be lost to the local community.

The loss of HMR funding together with the minimal benefits of new schemes for NewcastleGateshead means that there are not sufficient funds available at present. We have always been realistic about the level of resources required and clearly HMR funding was going to have to finish at some time. This would ideally have been in a managed and phased way with a focus on each area’s priorities, rather than the abrupt end that has happened.

Q. What lessons should be learnt from the past and existing regeneration projects to the Government’s new approach?

The Government’s new approach needs to understand the scale of the regeneration challenge in certain parts of the country. There are deep seated geographic differences and drivers in different parts of the country caused by historically uneven patterns of economic change.

The key lessons therefore are that policy changes and churn are profoundly unhelpful. They lead to political waste of resources, market uncertainty, and short term planning and decision-making.

The most deprived areas, particularly in the North and Midlands have been further undermined by the recent recession and are at considerable risk from public sector cuts.

Many of the measures set out in the new framework are peripheral to the reality of the regeneration needs of these areas. Regeneration resources and strategy needs to be tailored to the needs and scale of the challenge in different localities.

While current resources are clearly stretched, the government may also consider the costs of not intervening. These create considerable direct economic benefits in activities such as construction, they create indirect economic and social benefits in terms of creating a housing offer close to economic centres to encourage both businesses and people to locate-and they prevent longer term costs to the Exchequer.

Both Newcastle and Gateshead spend disproportionate amounts of stretched mainstream budgets just on managing decline-and the social consequences of that.

A lesson that is likely to be learnt is the need to provide longer term certainty on funding streams and to avoid rapid closure of existing regeneration schemes without a sensible exit strategy. This can cause significant problems for local authorities, private developers and-most importantly-existing residents.

The importance of evidence-and resourcing the collection of it-is vital. Understanding the needs of areas to design appropriate strategies, then to actively monitor and ultimately evaluate success is a key point to mention.

Partnership working is a key part of successful regeneration. Depending on the scale, this might include working across local authority boundaries, as well as with other agencies, community groups, private partners and local residents.

Finally, particularly in Area Based Initiatives, the need to engage with local communities and keep them onside is a critical aspect of regeneration. There are a number of aspects to this from involving them in the early stages of scheme design and masterplanning as well as finding mechanisms to feed their views in on an ongoing basis.

For example, in Gateshead, to ensure that the longer-term strategic direction for each of the BNG priority neighbourhoods were based on a sound evidence base and reflected the views of local residents, four Neighbourhood Planning exercises were started in 2004. Drop-in sessions at key times during the process were the main point of contact for residents, with a total of 3,289 individual recorded visits to 35 different events.

Further outreach work with faith communities, BME groups and sections of the community deemed hard to reach, promotion of a free telephone number, use of the Council website and a number of household surveys and exhibitions meant that over 4,000 contributions were received across the four areas. Development of the Neighbourhood Planning in Schools programme working with head teachers and classes within the communities also provided information and useful contribution from the children.

The Council also developed community capacity in the form of Street Reps , engaging residents as the ‘eyes and ears’ of their communities, and accessing those individuals who are not members of formal groups; and a Residents’ Design Reference Group, working with Gateshead Council to create community awareness of urban regeneration through good urban design.

In Scotswood, a governance model for the regeneration of the Scotswood Benwell area has been established based upon a partnership approach to planning and implementation. This acts as the Project Board and has responsibility for the strategic direction of Scotswood regeneration and for the management of the Area Action Plan and major investments, including BNG schemes, in Scotswood Benwell. The Project Board comprises of elected members from Newcastle City Council, local community representatives and key partners and stakeholders. Regular meetings are supplemented by special meetings and workshops to consider the preparation of key documents and strategies in detail.

There is also a resident focused Scotswood Joint Working Group which has been actively engaged in the development and progress of the plans for Scotswood Benwell since the original publication of regeneration plans in 2001. The JWG worked closely with councillors and Council officers to agree realistic proposals for the location and scale of housing clearance that are still the basis for HMR pathfinder activity in the neighbourhood.

An inclusive community engagement event called ‘One Big Month’ was held in Walker Riverside between February and April 2007, and generated 1500 responses from local residents about plans for a new district centre in Walker. For the Walker Riverside Design Code, residents participated in a 5 day Enquiry by Design process which allowed community members to visualise the features they wanted to see included in the projects. Recently, an artist has been employed to help residents design attractive and welcoming features to Harbottle Park.

Their views are also key throughout as projects are monitored and evaluated. For example, the BNG Residents’ Panel has played a key role in HMR strategy development since 2008.

Q. What action should the Government be taking to attract money from (a) public and (b) private sources into regeneration schemes?

Attracting other public and, particularly, private sector resources is a key facet of any successful regeneration programme. This has been a key focus and expectation of the HMR scheme, as well as many past regeneration programmes.

Going forward, attracting specific public resources will be more problematic given current financial constraints. The concept of mainstreaming can be considered by local authorities and other organisations, and other services and parts of budgets can be used to help regeneration objectives. The un-ringfencing of local authority budgets should assist with this.

Equally important is the need to align public funding to secure increased value for money.

Securing private investment is both more important-particularly at the current time-and more difficult to achieve. Private finance and activity has always been particularly difficult to attract to our regeneration areas. However, BNG has been particularly successful, as for every £100 of HMR spent, we have attracted £69 of additional investment. Private housebuilding had been absent from our neighbourhoods for decades. Securing it, however, clearly represents a key success in being able to fully regenerate neighbourhoods-reflected by our support for, funding of and involvement in the various joint venture initiatives across NewcastleGateshead.

The key point to recognise is that private organisations need an incentive to invest-as profit is what ultimately counts and they are unlikely to get involved if it is not viable or risks cannot be shared. This is part of the original rationale for HMR, that public resources would both prepare the land and, if necessary, gap fund development in the most challenging neighbourhoods.

Negotiation and business skills are key, and we have had particular successes in these fields through the creation of Joint Venture Vehicles in both Newcastle and Gateshead.

Hitherto, new homes and communities have required high levels of grant intervention in deprived / brownfield areas. Without that, alternative mechanisms such as fiscal incentives, Tax Incremental Financing, or further support for Prudential Borrowing are essential if development is to proceed. An affordable homes bonus of £350 per unit for 6 years does not equate to past gap funding grants of £30–£40,000 per unit.

Q. How should the success of the Government’s approach be assessed in future?

The Local Growth White Paper set out a number of high level ambitions for locally driven growth, encouraging business investment and promoting economic development. The White Paper says the policy set out will be successful if "…it delivers strong, sustainable and balanced growth of income and employment over the long-term; that is broad-based industrially and geographically; creating a business environment that competes with the best internationally; and ensuring everyone has access, including future generations, to the opportunities that growth brings."

There is little in this paper or indeed in the Regeneration proposal about the specific regeneration challenges from a government perspective, other than that it can be at the heart of driving economic growth.

As such, this makes the task of judging the success of the government’s approach problematic. A pragmatic way of doing this would be to design an evaluation framework around these broad points, to assess a basket of local economic, labour market, housing and demographic outcome indicators and analyse them at different spatial geographies across the country to look for both temporal and spatial change.

Other key indicators will be capturing amounts of match funding-especially private-and outputs achieved.

Specific evaluations (both formative and summative) of RGF projects as well as policies such as the New Homes Bonus will also be important.

Given the government’s focus on locally driven solutions, there is a need for robust monitoring and evaluation for particular local schemes and approaches-whether undertaken by local authorities, LEPs or other sub regional bodies.

Findings from these could inform any national synthesising of policy impacts.

For the reasons set out above, it will be vital that negative changes to places, whether through unintended consequences of policy, adjacency effects or other factors are monitored and, where necessary, responded to or mitigated.

March 2011