Written evidence submitted by Professor
Peter Tyler and Colin Warnock
SECTION 1. INTRODUCTION[152],[153]
We are grateful for the opportunity to submit evidence
to the Select Committee Inquiry into Regeneration. At a time of
significant change in how regeneration policy is to be delivered
it is important that new approaches recognise the strengths and
weaknesses of previous policy and that key lessons are not lost.
The next section provides a short discussion about
the rationale for regeneration policy. Section three considers
what regeneration funding has been spent on in recent years and
then section four addresses issues around Value for Money. Section
five reviews some of the factors that have influenced the effectiveness
of regeneration policy and section six concludes by considering
whether the proposed changes to the shape and form of regeneration
policy by HM Government are likely to be able to fund the amount
of regeneration needed in England at the present time.
SECTION 2. THE
NATURE OF
THE PROBLEM
AND THE
RATIONALE FOR
REGENERATION
Pronounced and persistent spatial disparities in
the incidence of worklessness and income poverty have been a prominent
feature of the United Kingdom for many decades. The extent of
the problem can vary considerably between areas. The problem is
often characterised by three inter-related components. There is
a weak economic base, relatively high concentrations of unemployed
and socially disadvantaged residents and often a poor physical
environment. Within cities, housing, infrastructure and historic
patterns of land use concentrate those on low incomes into particular
neighbourhoods. The tendency for this to happen is, if anything,
increasing (Tyler, 2011). This places disproportionate demands
on the provision of public services in these areas, which then
find it hard to adjust, and are often overwhelmed.
Once underway, the economic decline of an area tends
to have a momentum of its own passing from one generation to the
next. In some places there is sufficient access to new economic
opportunity to ensure that following the loss of traditional industries
new jobs are found quite quickly. However, in others there may
be significant impediments that inhibit the pace of positive change.
The rationale for regeneration policy is that the actions of the
market and mainstream public services are not able to bring about
significant improvement within an acceptable timetable without
extra intervention. The extent to which it is possible for policy
to produce sustainable and long term improvement depends on the
scale of resources that can be levered and, importantly, whether
a strategic approach is adopted that builds on the assets of the
area and its residents.
SECTION 3. WHAT
HAS BEEN
THE THRUST
OF REGENERATION
POLICY?
There have been a number of different approaches
to regeneration policy over the last thirty years across the United
Kingdom. Many of the early initiatives had a land and property
orientation with a prominent example being the original Enterprise
Zones (Department of the Environment, 1995). In the early 1990s
the policy moved more to encourage local authorities to work with
an extensive range of other partners to bid for regeneration funding
to assist with the "holistic" regeneration of run-down
areas (Department of Land Economy, 2009) through initiatives such
as City Challenge and later the Single Regeneration Budget Challenge
Fund (SRB).
The focus changed again in the late 1990s following
the Review of Government Interventions in Deprived Areas and the
publication in England of the National Strategy for Neighbourhood
Renewal (Cabinet Office, 2001). The emphasis moved to the regeneration
of deprived neighbourhoods and a shift from housing and physical
dereliction to problems associated with worklessness, crime and
poor public services (Lawless, et al 2010), but by the end of
the last decade housing-related initiatives had once again become
a more central feature.
As Table (1) shows by the end of the last decade
about one fifth of what was mainly urban focused regeneration
expenditure in England was assigned to worklessness, skills and
development activities, around 11% went to improving industrial,
commercial and infrastructure and the remainder to activities
associated with homes, communities and the environment with the
largest share assigned to housing growth and improvement.
Table (1)
ESTIMATE OF CORE REGENERATION EXPENDITURE
BY ACTIVITY, ESTIMATED AVERAGE ANNUAL EXPENDITURE IN ENGLAND.
(AVERAGE SPEND OVER 2009-10 AND 2010-11)
| Regeneration Activity (Theme, Activity Category, Activity Type)
| £m p.a. | %
|
| Theme 1. Worklessness, skills and business development
| 1,949 | 19.2% |
| Worklessness, skills and training, of which:
| 629 | 6.2% |
| Helping employees and businesses with skills development in the workplace
| 259 | 2.6% |
| Enterprise and business development, of which:
| 1,320 | 13.0% |
| Promotion of business enterprise research and development
| 654 | 6.4% |
| | | |
| Theme 2. Industrial and commercial property and infrastructure
| 1,143 | 11.3% |
| Industrial and commercial property | 761
| 7.5% |
| Infrastructure | 382 | 3.8%
|
| | | |
| Theme 3. Homes, communities and the environment
| 7,052 | 69.5% |
| Housing growth and improvement, of which: |
6,479 | 63.9% |
| New build | 5,296 | 52.2%
|
| Improving existing stock | 1,017
| 10.0% |
| Demolition and new build | 148
| 1.5% |
| Reducing homelessness | 19 |
0.2% |
| Community development | 35 |
0.3% |
| Environmental improvement | 430
| 4.2% |
| Neighbourhood renewal | 109 |
1.1% |
| | | |
| Total | 10,144
| 100% |
Source: Authors' analysis of expenditure data for 2009-10
and 2010-11 provided by Department for Communities and Local Government,
RDA Finance and Governance data published on Department for Business,
Innovation and Skills website (February 2010) and Homes and Communities
Agency Corporate Plan (2009-10 to 2010-11)
SECTION 4. VALUING
THE BENEFITS
OF REGENERATION
EXPENDITURE
Recent research that we have undertaken has sought to value the
benefits of regeneration policy on the areas that have been targeted
(Tyler et al, 2011). The emphasis has been on developing an approach
and producing illustrative Benefit Cost Ratios drawing on available
evidence.
The first thing to note is that there has been considerable variation
in the public sector cost per additional output associated with
regeneration expenditure. Table (A1) in the Appendix presents
provides the broad orders of magnitude for each of the main types
of intervention. This variation is to be expected and will reflect
the nature and severity of the problems being addressed and the
intensity of the intervention being delivered as well as its effectiveness.
On the basis of the valuation approach described in Tyler et al
(2011) Table (2) presents estimates of Benefit Cost Ratios for
Regeneration Expenditure in England by main activity type. Based
on cautious valuation assumptions, the overall Benefit Cost Ratio
associated with all regeneration expenditure on all types of activities
is estimated to be 2.4. In the round, this represents a substantial
pay-back in real resource terms to society from regeneration policy.
While BCRs for some activities are higher than others, it is important
to stress that for virtually all areas in need of regeneration,
a mix of support is required. This will include some activities,
such as business development and land and property regeneration,
which generate higher BCRs by virtue of their job-creating effects.
Other regeneration activities, such as those aimed at tackling
worklessness, skills development, housing improvements and the
environment have a vital role to play. What is crucial in regeneration,
as we note below, is the degree to which an appropriate, well-resource
package can be put together which tackles the problem on all fronts.
Table (2)
BENEFIT COST RATIOS BY ACTIVITY TYPE—CENTRAL AND
CAUTIOUS VALUATION APPLIED TO OUTPUTS DERIVED USING AVERAGE UNIT
COSTS
| Activity type | Valuation basis
| Central valuation | Cautious valuation
|
| Theme 1: Worklessness, skills and business development
| |
| Tackling worklessness | Consumption benefits (earnings) plus indirect crime and health benefits
| 1.1 | 1.1 |
| Skills and training | Production benefit—Earnings uplift arising from skills enhancement
| 2.2 | 1.6 |
| General business support | Production benefit—GVA
| 9.4 | 6.4 |
| Start-up and spin-outs | "
| 10.2 | 7.4 |
| Business enterprise research & development
| " | 2.6 | 1.9
|
| | |
| |
| Theme 2: Industrial and commercial property
| |
| Industrial and commercial property | Production benefit—GVA
| 7.9 | 5.9 |
| | |
| |
| Theme 3: Homes, communities and environment
| |
| New build housing | Consumption (property betterment) and production benefits (GVA)
| 2.8 | 1.9 |
| Housing improvement | Consumption benefits—property betterment and social benefits
| 2.0 | 1.3 |
| Acquisition, demolition and new build | Consumption benefits—property betterment and visual amenity enhancement
| 5.7 | 3.9 |
| Communities: Volunteering | Shadow price of volunteer inputs—minimum wage
| 1.1 | 1.1 |
| Communities: investing in community organisations
| Shadow price of social enterprise "GVA"
| 1.9 | 1.3 |
| Environmental: open space | Consumption benefits—Willingness To Pay
| 2.8 | 1.8 |
| Environmental: public realm | Consumption benefits—Willingness To Pay
| 1.5 | 1.0 |
| Neighbourhood renewal | Consumption benefits—value transfer from NDC evaluation which adopted shadow pricing approach
| 3.0 | 3.0 |
| | |
| |
| All Activity Types (real resource)
| 3.5 | 2.4 |
Source: Authors
SECTION 5. FACTORS
THAT HAVE
INFLUENCED THE
EFFECTIVENESS OF
REGENERATION POLICY
IN ENGLAND
Much is now known about the factors that have influenced the effectiveness
of regeneration policy in England and it is clearly important
to ensure that key lessons are learned in deploying new initiatives.
Unrealistic expectations
There often seem to have been unrealistic expectations as to what
can be delivered by expenditure on local area regeneration given
the scale of the problems being addressed and, importantly, how
they are continuing to change. As has been argued elsewhere (Tyler,
2011), area based regeneration initiatives are mainly operating
at the margin to bring about change. The overall position in an
area is determined by what is happening in the national economy
and the actions of mainstream service providers. An area-based
regeneration initiative relies for its impact on its ability to
lever-in resources from the private and public sector.
Too often insufficient attention has been given to how such leverage
can be achieved.
The focus has to be on how successful regeneration policy is at
getting business, mainstream service providers and ultimately
households (through their consumption and housing decisions) to
put more investment into declining places. However, in many cases
the incentive to change behaviour has been too weak, too diffused
or insufficiently targeted. As a result too little investment
has been brought to bear and the relevant outcomes have not been
altered sufficiently.
Moreover, the arbitrary timescales associated with most regeneration
programmes have rarely, if ever, been grounded in a thorough analysis
of how long it may take for regeneration to take effect. On numerous
occasions, policies and the associated delivery chain have been
disbanded before change could be secured or, even more common,
a sustainable legacy fully embedded.
Inadequate understanding of how places relate to other places
and the dynamics of the local economy
The targeting and design of regeneration initiatives has not been
given enough attention to how the place that is the subject of
the regeneration relates to the wider economy of which it is a
part. Three key elements here are displacement (the extent to
which support for new economic activity may displace that from
other areas (eg through boundary hopping), leakage of employment
opportunity to residents outside of a target population and population
churn, whereby those residents who can, leave a target area in
search of economic opportunity or better living conditions elsewhere.
There has also not been enough research into how expenditure by
Government (central and local), households and business impact
on relatively under-performing places. Recent developments in
the way local authorities and other agencies of government are
going to plan and deliver their services in the future through
the Total Place Agenda (HM Treasury Total Place, 2010) offer a
way in which this can be addressed.
A lack of a strategic approach, good evaluation and insufficient
attention to capacity
Other factors that have tended to constrain achievement have been
the failure to pay enough attention to the need to adopt a strategic
approach, build on what has been learned from the evaluation of
previous initiatives (See Chadwick, Tyler and Warnock, 2011) and
to ensure that enough attention is given to the capacity
of partnerships to deliver the programme of change required. Even
well designed policies can fail to help under-performing areas
if they are delivered poorly and are not part of a clear and strategic
approach to regeneration.
Too often there has been insufficient customisation of the local
delivery response and enough focus on the pathways between intervention
and the final impacts on target beneficiaries (See Department
of Land Economy, 2009). The opportunities to pool staff and financial
resources and break the mould of generic programme delivery have
been few, and while there are some encouraging examples (eg Community
Budgets (DCLG, 2010)), there remains much to do. Key constraints
include a performance management and target regime which has ebbed
and flowed with different governments but in any case has rarely
been clearly directed at targeting the needs of particular deprived
areas or groups for long enough to make a lasting difference.
SECTION 6. MAINTAINING
THE MOMENTUM—THE
FUNDING OUTLOOK
Regeneration policy in England is currently undergoing considerable
change. We conclude with some observations on where we believe
attention is required if momentum in tackling regeneration problems
is not to be lost.
The Coalition Government has dismantled the Local Area Agreement
and National Performance Framework of the previous Labour Government.
It is in the process of abolishing the Regional Development Agencies.
The emphasis is on devolving responsibility for local economic
regeneration to local authorities. The Localism Bill that was
presented to Parliament in December 2010 provides new freedoms
and flexibilities to Local Government in this respect.
The abolition of the Regional Development Agencies means the removal
of approximately £1.8 billion a year of support for regeneration
initiatives that covered a range of policy instruments including
the Business Grant. Budget 2011 also announced the removal of
the Working Neighbourhood Fund (approximately £500 million
per year) and the Local Enterprise Growth Initiative (worth approximately
£100 million per annum).
New regeneration measures have been announced. Businesses are
exempt from NICs payments in the regions outside London, the East
and South East. Local Enterprise Partnerships (LEPs) have been
established between local authorities and business in areas and
are reported to cover more than 90% of England's population (DCLG,
2010). LEPs and other organisations can make bids to a new Regional
Growth Fund that has £1.4 billion available over three years—a
substantial reduction on the resources available to the RDAs.
Plans have also been announced for 21 new Enterprise Zones in
England (DCLG, 2011). These zones will benefit from a simplified
planning approach available on the zone land. Businesses that
locate on the zone will not be required to pay business rates
for a five-year period and any growth in business rates within
the zone for a period of at least 25 years can be retained by
the local authority to support the economic priorities of its
LEP. HM Government has also suggested that it is open to the possibility
of LEPs obtaining enhanced capital allowances for plant and machinery
in limited cases and subject to State Aid rules. However, the
suite of new EZ incentives does not appear to include capital
allowances to support investment in property which was a very
successful component of the original EZ policy in the United Kingdom.
The time-limited nature of the business rate incentive, and the
market's general reluctance to fund speculative industrial and
commercial at the present time, may well constrain what can be
achieved from this policy in its present form for some time.
These changes to the way in which local area regeneration policy
will be delivered are taking place against a harsh economic background.
There is much reduced economic growth compared with the earlier
part of this century. Public expenditure is under severe restraint.
Moreover, the "credit crunch" affected the viability
of the traditional approach of property-led regeneration to fund
local area regeneration (Parkinson et. al., 2009). This relied
on a relatively buoyant housing market, significant amounts of
retail investment, relatively generous public sector financial
contributions and, in some cases, significant financial assistance
from European Structural Funds.
There are also worrying signs that some parts of England are still
finding it very difficult to shake off the effects of deindustrialisation
and turn things around given the scale of the new investment required
in land reclamation, new transformational infrastructure, and
people (See Fenton et al, 2010, Tyler, 2011).
HM Government is currently reviewing the scope for allowing local
authorities to have more control of their local tax base (HM Treasury,
2010). One option that has been flagged and which has been moved
forward in Scotland is the use of Tax Incremental Financing. However,
at the present time progress in this direction looks to be proceeding
relatively slowly in England. More generally, HM Treasury has
also made it clear that it will not look favourably on significant
local authority borrowing. Given the relative decline in the volume
of government expenditure on regeneration that is now taking place,
new ways have to be found relatively quickly that will allow local
authorities, together with their regeneration partners to finance
regeneration.
May 2011
REFERENCES
Cabinet Office, 2001. A New Commitment to Neighbourhood Renewal.
National Strategy Action Plan. Report by the Social Exclusion
Unit.
Chadwick, Tyler and Warnock (2011). How to raise the Bar on Impact
Evaluation: Challenges for Local enterprise Partnerships and the
Regional Growth Fund. Discussion Paper available from the authors.
Department of the Environment (1995) Final evaluation of Enterprise
Zones, by PA Cambridge Economic Consultants in association with
Richard Ellis and Gillespies, London: HMSO.
DCLG (2010). Press Notice: "16 areas get 'Community Budgets'
to help the vulnerable"
http://www.communities.gov.uk/news/corporate/1748111
DCLG (2011). Enterprise Zone Prospectus. London.
http://www.communities.gov.uk/documents/localgovernment/pdf/1872724.pdf
Department of Land Economy (2009). A. National Evaluation of the
Single Regeneration Budget. Department of Land Economy, University
of Cambridge. Communities and Local Government.
http://www.landecon.cam.ac.uk/research/reuag/uars/pdf/part1_final_eval_feb_07.pdf
http://www.landecon.cam.ac.uk/research/reuag/uars/pdf/part2_final_eval_feb_07.pdf
http://www.landecon.cam.ac.uk/research/reuag/uars/pdf/part3_final_eval_feb_07.pdf
http://www.landecon.cam.ac.uk/research/reuag/uars/pdf/annexes_10april.pdf
DCLG (2010). Local Enterprise Partnerships.
(http://www.communities.gov.uk/localgovernment/local/localenterprisepartnerships/).
Fenton, A. Tyler, P. Markkanen, S, Clarke, A. Whitehead, C. (2010).
The Ward Penalty: race, Place and Poverty in Birmingham. Barrow
Cadbury Trust.
HM Treasury (2010). Total place: a whole area approach to public
services.
HM Treasury 20 September 2010. More Financial Freedom for Local
Authorities (http://www.hm-treasury.gov.uk/press_47_10.htm).
Lawless, P, Foden, M, Wilson, I and Beatty, C. Understanding Area-based
Regeneration: The New Deal for Communities Programme in England.
Urban Studies 47(2) 257-275, February 2010.
Parkinson, M, Ball, M, Blake, N and Key, T (2009). The credit
crunch and Regeneration: Impact and Implications. CLG ISBN: 978
1 4098 1090 2.
Tyler, P, Warnock, C and Provins, A DCLG (2011). Valuing the Benefits
of Urban Regeneration. Discussion Paper available from the authors.
Tyler, P (2011). What should be the Long-Term Strategy for Places
with Patterns of Decline and Underperformance? In Strategies for
Underperforming Places. SERC Policy Paper No 6. LSE. London.
APPENDIX (1)
THE PUBLIC SECTOR COST PER ADDITIONAL OUTPUT FOR MAINLY
URBAN REGENERATION IN ENGLAND 2001-09
Table (A1)
PUBLIC SECTOR COST PER ADDITIONAL OUTPUT FOR URBAN REGENERATION
IN ENGLAND 2001-09 (2009-10 PRICES)
| Activity type | Unit cost measure
| Low | Average |
High | Comment on factors influencing variation
|
| Theme 1: Worklessness, skills and business development
|
| Tackling worklessness | Public sector cost per net additional positive outcome into employment
| £7,230 | £13,098 |
£18,965 | Work-readiness of the individuals being targeted and the extent of support required to move them into sustainable employment.
|
| Skills and training | Public sector cost per net skills assist leading to NVQ Level 2+
| £5,175 | £8,690 |
£12,204 | The subject of training being provided, the NVQ Level of the training and the training delivery method.
|
| General business support | Public sector cost per net additional job
| £5,873 | £12,329 |
£18,785 | Highly dependent on the nature of the support being offered, from limited advice on marketing or web development through intensive management consultancy activity to capital investment in plant and equipment. The severity of the market failure dictates how significant public sector investment has been relative to private sector commitment.
|
| Start-up and spin-outs | Public sector cost per net additional job
| £1,849 | £9,664 |
£17,479 | In some ways similar to tackling worklessness - dependent on the start-up readiness of the applicant and their individual s-kills as much as the specific requirements of the business.
|
| Promotion of business enterprise research & development
| Public sector cost per net additional job |
£34,029 | £54,802 | £75,574
| Very large range dictated by the innovative nature of much of the activity being supported and the higher expense typically associated with R&D equipment and personnel.
|
| | |
| | | |
| Theme 2: Industrial and commercial property
|
| Industrial and commercial property | Public sector cost per net additional job
| £18,981 | £31,788 |
£48,024 | Influenced by property market conditions (thus how much the private sector is willing to contribute and the gap the public sector must meet) linked to the physical condition of the sites and premises and the proposed intervention, where higher sustainability standards can increase costs quite significantly.
|
| | |
| | | |
| Theme 3: Homes, communities and environment
|
| New build | Public sector cost per net additional dwelling
| £57,276 | £74,113 |
£90,949 | See industrial and commercial property. Geography and property market variation, combined with variations in tenure mix are also likely to be significant factors.
|
| Improving existing housing stock | Public sector cost per net additional dwelling refurbished
| £8,800 | £17,750 |
£26,699 | The specific nature of the works required, e.g. to bring homes up to Decent Homes standard.
|
| Acquisition, demolition and new build | Public sector cost per net additional dwelling replaced
| £93,479 | £110,316
| £127,152 | Highly site/location specific. Abnormal costs are key, but a very significant cost driver is the costs of acquiring properties. This can be very significant, particularly in areas with stronger property markets.
|
| Communities: Volunteering | Public sector cost per net additional volunteer
| £299 | £929 | £1,558
| Dependent on the level of intensity of marketing, recruitment, training and other support.
|
| Communities: investing in community organisations (existing enterprises)
| Public sector cost per net additional social enterprise assist
| £7,659 | £12,924 |
£18,188 | As with business support activity, costs will vary depending on the intensity of the support provided, ranging from limited signposting through marketing support to in depth business planning, mentoring and capital investment.
|
| Communities: investing in community organisations (new enterprises)
| | £5,019 | £14,322
| £23,624 | As with mainstream start-up activity, with community enterprises expected to require more intensive support to reflect the greater challenges associated with business planning.
|
| Environmental: open space improved (ha) |
Public sector cost per net additional hectare of open space improved
| £71,302 | £117,085
| £188,387 | Highly project specific, with costs likely to be available from project design work. The scale and quality of the works specification in terms of the type and extent of planting or nature of public realm improvements are key cost drivers.
|
| Environmental: new public realm (ha) | Public sector cost per net additional hectare of new public realm provided
| £600,000 | £1,500,000
| £3,000,000 | |
| Neighbourhood renewal | It is not possible to suggest a single unit cost measure given the breadth of this activity
| - | - | - |
This activity type embraces many different activities, each with their own unit costs and influencing factors.
|
Source: Authors' analysis of over 280 published and unpublished
evaluations commissioned between 2000 and 2009 by England's Regional
Development Agencies, Scottish Enterprise, the Department for
Communities and Local Government and the Department for Business,
Innovation and Skills; open space and public realm unit costs
informed by discussions with landscape architects and published
data on local authority planning contributions requirements
152
Department of Land Economy, University of Cambridge, pt23@cam.ac.uk Back
153
Colin Warnock Associates Ltd, cw@colin-warnock.co.uk Back
|
