Written evidence submitted by the Construction
Industry Council
— Regeneration
which is focussed on locally-driven initiatives (rather than a
top-down approach) is a logical policy progression in line with
similar Government moves such as: the general direction of the
Localism Bill; the New Homes Bonus and the LEPs strategy. It is
also in line with the over-arching aims of the "Big Society".
— While
much policy details is still outstanding, a key element in the
success of any such strategy has to be the ability to access new
sources of finance, as public spending will be limited.
— The
transition from, (the soon to be abolished) RDAs, to LEPs needs
to be carefully managed. If the nine RDAs were simply replaced
by up to six times as many LEPs, they may be too small to be effective.
A larger co-ordinating mechanism may be required for large scale
urban regeneration projects. In this way, some regional specialisms
developed under the RDAs may be retained.
— Localism
might quickly degenerate into parochialism especially in competition
for scarce resources. Regeneration funding to kick-start private/public
sector partnerships needs to have an element of targeting. An
urban regeneration, growth hub strategy is preferable to a counter-productive
proliferation of LEPs.
— The
devolution of power to LEPs has been announced in a piece-meal
uncoordinated way. While there is much information as to what
they could do, it is less clear what they actually will do. One
thing certain is that the level of funding will be much less than
with the RDAs.
— Regeneration
as an on-going, self perpetuating, largely privately funded exercise
will depend on an initial kick-start from public sources, with
the construction sector a key element in this process. Clear strategic
direction, the co-ordination of activities and the creation of
innovative funding mechanisms are other elements in the process.
— Structural
frameworks (such as Enterprise Zones) are potentially a step in
the right direction and initiatives such as Tax Incremental Financing
are to be applauded, but the best approach is probably the creation
of a range of tools which could for instance include local tax
raising powers, taking localism to its logical conclusion.
— A commitment
to Regeneration is a vital part of the declared intention of encouraging
development outside the south-east of England.
— There
must be a commitment to "seed funding" regeneration.
The amounts committed in the Regional Growth Fund (RGF) are much
less than those received by the RDAs. There also needs to be a
commitment to the RGF for more than three years.
— Meaningful
consultation at community level needs good information. Whether
large scale urban regeneration or neighbourhood plans the Planning
Aid scheme run by the RTPI needs to be continued. Under present
plans, it is to be abolished.
Regeneration is a cyclical process with on some levels
is constantly occurring. Buildings and infrastructure have to
be constantly renewed and employment patterns change over time.
There has been a long history of urban regeneration
in the UK. In the past, the focus tended to be on physical regeneration,
particularly in relation to housing. Examples of substantial projects
particularly involving regenerated dockland areas are in London,
Cardiff and Liverpool, although in some of these cases, there
are those who question the degree of involvement of the existing
local communities within the new developments.
Regeneration within the built environment is a multi-stranded
task. Transportation infrastructure, neighbourhood renewal, the
treatment of "brown field" land (often contaminated);
the creation of funds for land assembly, re-cycling buildings,
the creation of the mix of housing, and attracting the all-important
new jobs are part of a complex urban planning process. Co-ordinating
all this on a large scale requires the establishment of a suitable
organisational framework and innovation in raising finance. In
this context, news of a renewed interest in the concept of "Enterprise
Zones" and the establishment of the UK's first Tax Incremental
Financing initiative for Edinburgh's Waterfront are encouraging
developments.
Funding regeneration in a regime of spending constraints
will depend on targeting for maximum effect. Essentially this
will involve a focus on urban regeneration, probably involving
some sort of growth hub strategy. If, for instance, the UK is
serious about carbon targets and wishes to develop an off-shore
wind industry, development of coastal manufacturing hubs would
be a positive development. These could be centres for producing
the turbines, towers and cable needed, as well as acting as a
base for shipping. In the 1970s and 1980s, Aberdeen performed
this function for the North Sea oil and gas industry. With a certain
amount of regional planning, the off-shore renewable industry
can have a profound multiplier effect. Money could be accessed
from the new Green Investment Bank or from the European Regional
Development Funds, formerly administered by the RDAs.
THE CURRENT
SITUATION
Commenting on regeneration issues at present is difficult
as the structure which formerly facilitated regeneration is in
a state of flux. The Regional Development Agencies which operated
on a top down basis are soon to be abolished. Their role to an
extent may be taken over by Local Enterprise Partnerships, although
the scope and funding of these new bodies is not yet clear.
In addition to this, the Localism Bill, currently
going through Parliament, has abolished regional spatial planning
and also the concept of housing targets. While this Bill takes
account of nationally significant infrastructure programmes, and
discusses the concept of local neighbourhood planning at length,
the position of "larger than local" planning is still
in some doubt. There are fears that the Bill allows a "strategic
gap" between the neighbourhood level and the national one.
It is true that within the Localism Bill, there is a duty on local
authorities to co-operate but it is not clear how this will work.
Underlying all this confusion is the effect of the
recession. Nowhere is this more evident than in relation to house-building.
The credit crunch has made borrowing difficult for developers
and buyers, the result being that the national level of house-building
is at a record low. In 2010 there were just 102,570 completions,
the lowest level of house building in peace time since 1923. As
a reflection of this situation, some mechanisms, such as the Community
Infrastructure Levy (CIL) and the so-called Section 106 agreements,
by which private sector developers undertook to fund infrastructure
development and even some affordable housing, no longer work in
the way in which they did in the past.
REGIONAL DEVELOPMENT
AUTHORITIES
The Regional Development Authorities (of which nine
were established from 2000) were set up specifically to promote
employment and further both economic development and regeneration.
These statutory bodies are now going to be abolished.
At present the core activities of the RDAs are financed
through a single pot of money from contributing Government Departments
such as BIS, CLG, DECC, DEFRA, DCMS and UKTI. RDA budgets for
2009-10 were £2,263 million and £1,748 million in 2010-11.
RDAs also have responsibility for managing the distribution of
the European Regional Development Fund (ERDF) and the Rural Development
Programme for England (RDPE), which both run from 2007-13 and
combined are worth £9 billion over the period. These programmes
operate on a regional basis and there have been some concerns
regarding administration and the securing of match funding under
new arrangements.
Some £1.4 billion has been identified over the
Spending Review period to wind down the RDAs. This funding will
see that economic development contracts are concluded, along with
money for redundancies, cancelling facilities contracts and closing
down buildings. The stated intention of the Government as indicated
on the BIS website is that the "wealth of knowledge and experience"
of the 3,000 RDA staff is captured and handed over to Local Enterprise
Partnerships and other successor bodies. The Regional Development
Agencies will be wound up by March 2012.
LOCAL DEVELOPMENT
PARTNERSHIPS
The shape of the landscape to replace RDAs is not
yet clear. A key element in the new situation will be the newly
established Local Enterprise Partnerships (LEPs). These are joint
local authority/ business bodies, which will have a private sector
chair in most cases. Local enterprise partnerships are supposed
to provide strategic leadership in relation: housing; planning;
local transport and infrastructure priorities; employment and
enterprise and; the transition to the
low carbon economy.
Local Enterprise Partnerships (LEPs) will fill some
but not all of the roles formerly exercised by the RDAs. The Government
is not proposing that local enterprise partnerships should take
on all existing RDA functions, as some are best led at the national
level. These include inward investment, sector leadership, and
responsibility for business support, innovation, and access to
finance. However, the intention is that local enterprise partnerships
will support the local delivery with many of these functions.
To date 31 LEPs have been approved in England, which
collectively represent 87% of England's population. The economic
geography of some of these LEPs is a little curious and there
are certain gaps in coverage. For small-scale regeneration projects,
LEPs may have a role, provided they can assess funds but the major
limitation is that most of the funding will require privately
generation. One possible route for public "seed funding"
may be through the Regional Growth Fund, which has been set up
specifically for areas that are overly dependent on the public
sector. This however is only a three-year fund, running from January
2011 and only has £1.4 billion. Long term commitment to sustained
regeneration will require public funding, to generate momentum
in economically depressed areas.
The Local Growth White Paper published last October
made clear that LEPs will be self-financing in terms of day-to-day
running costs. It also stated that, although they may bid for
the Regional Growth Fund, they would not receive preferential
treatment. How the new LEPs will rise to the challenge is uncertain
but reports in February 2011 that just two LEPs have firm intentions
to lead on strategic economic planning, are not encouraging.
Further clarification on funding will come in the
budget due on 23 March 2011. This will set out a new delivery
structure for ERDF funds. In relation to the disposal of RDA assets,
CLG will be in charge of disposal. It is claimed that this exercise
will however, not be in favour of either local councils or LEPs.
Leeds City Region LEP councillor, Stephen Houghton,
summarised the situation when he said that
"There is going to be very little money, so government has
to let go of powers instead. LEPs have to be thin and small, acting
as commissioners, because of the current economic circumstances."
Houghton also urged ministers to decentralise powers over skills,
housing and transport to LEPs—perhaps, through three-year
franchises, while they prove their worth.
Some of the ideas that are emerging which will play
a part in filling the funding gap include: Tax Incremental Funding;
Enterprise Zones; and the proposal to allow councils to keep locally-raised
business rates.
TAX INCREMENTAL
FINANCING
Tax Incremental Financing (TIF) is a tool to use
future gains in taxes to finance current improvements (which theoretically
will create the conditions for those future gains). When a public
project such as a road or school is constructed, there is often
an increase in the value of surrounding land and perhaps new investment
(new or rehabilitated buildings, for example). This increased
site value and investment sometimes generates increased tax revenues,
which are the notional "tax increment." Tax Increment
Financing dedicates tax increments within a certain defined district
to finance debt issued to pay for the project.
Widely used within the US, TIF is to be welcomed
as another tool in relation to regeneration but is probably only
applicable in relation to very large projects. Questions are already
being asked how the numbers "stack up" in relation to
the regeneration of the Battersea Power station, a leading TIF
site in London. With this project, there seems to be a funding
gap between the £1,059 million infrastructure costs (£563
million for the Northern Line Extension and another half billion
for new roads, bridges, services, schools and clinics) and the
£1,001 million anticipated income from a development levy.
LOCALLY RAISED
BUSINESS RATES
Ultimately, reducing local authorities' heavy reliance
on central funding might only be possible if other sources of
local funding such as: local sales and fuel taxes; reformed parking
levies and; wider borrowing powers, are developed. Within the
coalition these are matters of some contention. The debate as
to how far localism will go has only just begun but it is of profound
importance for regeneration.
One idea discussed at present is to cut many richer
local councils loose from Whitehall control. At present business
rates are collected by local government, but then all sent to
central government for redistribution using a complex and little
understood formula. Business rates raised £24 billion in
2009-10; £20 billion of this applies to England. It is estimated
that at present about 300 councils receive subsidies from business
rate redistribution and approximately 80 councils, such as Westminster
and the big metropolitan authorities, put money in from the business
rate.
The Conservatives and the Liberal Democrats have
differing views on these matters and it is a topic of lively debate
at present. It should be noted that business organisations want
to maintain a nationally set uniform business rate. Whatever happens,
an effective form of cross-subsidy has to be retained so that
poorer councils with a low business base are not damaged.
The development of local financing options needs
to be opened up. A much larger basket of measures is needed. Local
bond issues, tax breaks for infrastructure financing and perhaps
even regional stock exchanges are options which need to be investigated
for regeneration programmes.
ENTERPRISE ZONES
As a way of encouraging growth without funding either
the purchase of land or expensive secretariats (as in the old
RDA model), it is interesting to see that the 1980s idea of the
Enterprise Zone is being recycled. George Osbourne promised that
23 March budget would include an announcement introducing these
zones.
The idea behind Enterprise Zones is simple. For small
areas, tax would be cut and planning rules stripped back to attract
new businesses and create jobs. The Government is planning to
invest at least £100 million in this idea before the next
general election, targeting mainly poorer areas of the Midlands
and the North of England. Up to ten zones are to be created in
England and the idea is that councils will be allowed to keep
all the business rates they raise in these zones.
Thirty eight enterprise zones where created between
1981 and 1996 and some (most famously the Isle of Dogs—now
Canary Wharf were very successful) but reports from the Centre
for Cities and the Work Foundation, which were issued before the
Chancellor's recent announcement, argued that these zones were
expensive and ineffective. In response to this, it can be said
that the new zones are supposed to be sited in areas of high growth
potential rather than simply those just in physical decline, although
no definite locations can be identified as yet.
The Enterprise Zone approach can be criticised in
that while on one hand, it encourages early action and the concentration
of resources, on the other it serves to suck finance from "harder
to treat" areas. Infrastructure provision (generally mostly
publically funded) and skills development so that the local population
are not left behind in the new environment, are other elements
in what needs to be a "holistic approach". Large-scale
regeneration cannot simply be a "gentrification" exercise
with an imported labour force.
CREATING THE
RIGHT STRUCTURE
As noted earlier, there is a history of urban renewal
and redevelopment going back many years. Entire new towns were
created by Urban Development Corporations (URCs), although these
bodies were taken over by the Homes and Communities Agency (HCA)
in 2008. Up to April 2010, there was a complex evolving architecture
of Urban Regeneration Companies (URCs) and Economic Development
Companies (EDCs) which worked with the HCA. This approach has
now changed completely. The HCA budget has been drastically reduced
and the HCA itself has been refocused to that of a smaller, more
strategic body, working at the request of local authorities and
their communities.
As with the RDAs, there is still a legacy of the
former approach. One key element in the future will be how HCA
deals with some 8,500 hectares of land, which it has inherited.
Much of this land is in former new towns and regeneration areas.
The announcement, of a new model for the disposal of publically
owned sites under the Public Land Initiative, with the public
land owner sharing in the rise or fall of house prices when homes
are completed, is an interesting model of how public land might
be disposed of in future.
While the last Government thought in terms of a very
large scale approach, the new emphasis is on efficient working
on a local or sub-regional level. One interesting template for
the new approach might be the example of the Cricklewood, Brent
Cross regeneration in North West London.
CRICKLEWOOD BRENT
CROSS REGENERATION
The Cricklewood Brent Cross regeneration project
is one of London's largest regeneration schemes (covering 150
hectares) which aims to create 27,000 jobs, 7,500 homes, three
schools, new health facilities, high quality parks and open spaces
together with more than £400 million in improving transport.
The whole project will take around 20 years to complete. Delivering
the scheme in stages is designed to help to minimise disruption
to local people, while a series of agreed "triggers"
will ensure that community and other facilities are delivered
in parallel with the new homes, shops and offices. Construction
is planned to start around 2012-13.
This scheme is also an interesting collaboration
between the private and public sector. The private sector is represented
by Brent Cross Cricklewood Partners which brings together the
owners of Brent Cross Shopping Center, Hammerson and the Standard
Life Investments UK Shopping Centre Trust, with a separate joint
venture between Hammerson and Multiplex. All three principal partners
are global companies with a formidable track record. They are
working with the London Borough of Barnet in relation to this
project.
In 2004, Barnet Council adopted the Cricklewood,
Brent Cross and West Hendon Development Framework as Supplementary
Planning Guidance. This framework was drawn up in collaboration
with the Council's partners in consultation with local residents,
community groups, businesses and statutory organizations. It includes
the key strategic principles for future development in the regeneration
area and serves as a working document to guide developers, prospective
purchasers and investors.
Barnet Council owns the freehold of the shopping
centre, and much of the land to the south of the North Circular
Road. This gave the Council considerable leverage in negotiating
a £1 billion Section 106 agreement in December 2010 which
will provide major new transport and community facilities including
state of the art waste recycling.
In March 2010, the Mayor of London gave his support
to the project but in the same month, Labour Minister John Denham
called a halt to it, perhaps a reflection of the considerable
local opposition to the scheme. However, in June 2010, Eric Pickles
the new Secretary of State for Communities and Local Government
confirmed that he would not call in the £4.5 billion scheme
for further scrutiny on the grounds that the planning issues identified
had been properly addressed by the council and "the application
did not raise issues of more than local importance which would
be more appropriately decided by him rather than the local planning
authorities".
The Brent Cross Cricklewood regeneration is proof
that large scale projects are possible but it should be noted
that the whole scheme was ten years in preparation and there was
considerable effort put into communicating with the local residents.
Would such a model work within more economically deprived areas
outside of the South-East, it might be asked?
LOOKING TOWARDS
THE FUTURE
While we may be in a time of constrained public finance,
there are some interesting pointers ahead. One device for stimulating
urban regeneration in more marginal economically challenged area
involves a European financing mechanism known as Joint European
Support for Sustainable Investment in City Areas (JESSICA)
European Funding
JESSICA has been developed by the European Commission
and the European Investment Bank (EIB), in collaboration with
the Council of Europe Development Bank. It allows the use some
ERDF grant allocation as a source of loans, equity investment
and guarantees that, alongside complementary resources from the
EIB and others, will help de-risk developments in regeneration
areas currently considered too marginal for commercial lenders
or investors. A range of activity that directly supports employment
can be supported through JESSICA; along with measures to support
growth industries, such as renewable energy.
The fund has the potential to lever in additional
sources of public and private investment; and to create a sustainable
fund to support regeneration activity well into the future. The
underlying principle is to use ERDF to invest in projects with
the expectation of a return on the investment, rather than following
the traditional grant approach that allocates ERDF funding with
no expectation of repayment.
Planning Obligations
Financing social infrastructure is always an issue
in large scale regeneration. All the political parties in recent
years have favoured the use of tariff schemes whereby a planning
obligation is introduced so that there is payment by a land owner
to the local planning authority. The use of planning obligations
(such as Section 106 agreements) were a feature of the Brent Cross
Cricklewood regeneration which the new Government has said will
continue but will be scaled back so that they relate directly
to the proposed development. The report Valuing Planning Obligations
in England: Update Study for 2005-06 published by Sheffield University
in 2008 showed that only six per cent of planning permissions
made any contribution to the cost of new infrastructure via planning
obligations.
The last Government also launched the Community Infrastructure
Levy (CIL) just before the election in April 2010. On 18 November
2010, CLG announced that it will retain CIL but it will be amended
to allow more control for councils over the levy. There is, however,
to be a system of independent examiners to ensure councils do
not set unreasonably high levies.
Other Mechanisms
Smaller scale regeneration can be facilitated through
"design, finance build and operate" arrangements. While
there are examples within the transportation sphere, the concept
can also be used on a multi-scheme basis. The Kent "Better
Homes Active Lives" Care PFI Project was a design, build,
finance and operate contract consisting of 12 schemes over 16
sites providing extra care sheltered housing for older people,
and supported living for people with learning disabilities and
other health problems. The project is one of the largest of its
type consisting of 340 specialist homes, receiving £72 million
in PFI credits and was the first of its kind to be procured in
partnership with 11 local authorities when finished in 2007.
WHERE CONSTRUCTION
FITS IN
Construction is at the core of any regeneration effort
and construction activity produces jobs at many skill levels throughout
the country from unskilled through to high specification design
work. Research by the economic consultants, LEK, have shown that
every £1 spent on construction output generates £2.84
in total economic activity when the knock-on effects of manufacturing,
real estate and business services (such as architecture and surveying)
are taken into effect. This research also showed that of every
£1 spent, 92 pence stayed in the UK, which still retains
a major construction products' industry.
Construction lies at the heart of any physical regeneration
of any area, but physical regeneration will only work in conjunction
with economic regeneration and in tandem with a functioning social
infrastructure. The complexity of producing co-ordinated re-development
in sequence and in tandem requires extensive consultation with
local communities. These communities can only give a meaningful
contribution if they have adequate information and the means to
evaluate it. Whether in the context of large scale urban regeneration,
or just neighbourhood plans, the Planning Aid scheme run by the
RTPI ought to be continued. Under present plans, it is to be abolished.
March 2011
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