Regeneration - Communities and Local Government Committee Contents

Examination of Witnesses (Questions 1-40)

Q1 Chair: Good afternoon and welcome to our first evidence session in our inquiry into Regeneration. Just for the sake of our records, could you identify yourselves and say which organisation you represent?

Neil McInroy: I am Neil McInroy from the Centre for Local Economic Strategies.

Katie Schmuecker: I am Katie Schmuecker from the Institute for Public Policy Research North.

Josh Stott: I am Josh Stott from the Joseph Rowntree Foundation.

Q2 Chair: You are all welcome. The Government has issued a document about regeneration to enable growth.[1] Do you think there is anything missing from that document that you would have liked to have seen in it if you had been responsible for writing it?

Neil McInroy: To talk about the document first, I think that the proposals in the document are, from our point of view, weak and disappointing on five main counts. First, there is no strategic direction in the document as such; it is very piecemeal; it has nothing about how growth, social inclusion, work within environmental limits connect up. So, on the first count there is no strong narrative or strategic direction within it. Second, it has poor connections between strategy and delivery and I am unsure exactly what the document sets out to do. It is quite fragmented; there is no vision there, and it does not address the big questions, for instance how economic development links to planning.

The Centre believes that the third thing missing is that there is not enough talk about local enterprise partnerships; there is not enough consideration of business rates; there is not enough around enterprise zones, tax increment financing, local government finance review or even how all this connects up to the Work programme. So, there are bits missing and in that sense it is weak. Fourth, there is nothing on the pure assets of place in terms of social assets, financial assets, public assets, private assets; there is nothing on how we connect up those various positive aspects within any given locality. Fifth, there is an overriding physical focus in the document, and it does not say how those physical assets would connect up to public or social assets within any given locality. So, we at the centre believe that it is quite weak and disappointing. What needs to happen is something that is much more strategic and embedded in each locality, and which tries to build on the assets within any given locality.

Katie Schmuecker: We would endorse much of what we have just heard. Looking at the document, there seems to be a very strong focus on a market-led approach and on places where there is the greatest potential for growth. I think that leaves us with the question of what that means for places that fall outside that, such as peripheral towns outside of our great centres of growth, which are often located in the cities. Perhaps they are places like Barnsley or Blackpool, to give just a couple of examples. What is the strategy for those places, and also for the deprived communities as well? We would like to see a lot more specific details there. I think we would agree that, if the document is meant as a strategy, it is weak; it reads rather more like a collection of Government policies and the way in which they may apply to some deprived places.

We would also like to see something a little more ambitious in terms of a cross-governmental approach. Neil mentioned the links with the Work programme. That is something we absolutely endorse, in the sense that there is discussion about the central role of local authorities in terms of a more localist approach to regeneration—the role of local authorities in co-ordinating that. We are very supportive of that, but local authorities need to be adequately resourced to do that and to be able to influence other areas of local public service delivery. Absolutely essential to that is employment services in the Work programme.

Josh Stott: I would endorse most of what has been said so far, particularly in terms of what Katie said about a lack of strategy for places that will not be able to benefit from the proposed growth incentives. To our mind, regeneration is about reversing decline and tackling disadvantage, not simply about promoting growth. This seems to be a major gap in the regeneration document that has been produced. There seems to be an assumption that the trickle-down effect will work and growth will benefit all. Our evidence certainly suggests contrary to that, and that a rising tide will not lift all boats. There have been plenty of areas, even in areas of strong economic growth, where persistent deprivation is still occurring in deprived neighbourhoods, and there does not seem to be an acknowledgement or a forward strategy for dealing with these places. It seems to be about promoting personal mobility and incentivising growth, and a big part of the equation has been missed in terms of disadvantaged places.

Q3 Chair: You also drew attention in your evidence to the Scottish Government's approach. It might be a bit uncomfortable for some of us to mention that, but you felt that they had had a much better shot at trying to look at these issues in the document they produced.[2] Can you explain why you say that?

Josh Stott: I do not know whether people are aware of it, but it is a much fuller document; it is the beginnings of a strategy. Critically it attempts to define regeneration first and foremost, which the coalition Government's document does not attempt to do. We are left questioning quite what it is, let alone how it is to be delivered. The document fails to outline the current challenges facing the regeneration sector, and it also fails to reference the past 15 years previously in terms of what has gone on in regeneration, and what success stories and lessons we should be learning and drawing from. It is silent on all those issues.

Q4 Chair: On the point of definition, do you think it is important that we have a definition? Should we be trying to distinguish between something called regeneration and something that might be called economic development?

Neil McInroy: I think that is very important, because there is a slipperiness. I think one needs to be quite clear what one is talking about. It seems to us at the Centre, having had 25 years' experience of working in regeneration and economic development, that there is no silver bullet here. We have tried lots of different initiatives over the years. We have thrown money at the issue; we have established partnerships on the issue, but the lessons from all those past activities and from abroad tell us that there are perhaps a couple of abiding things that mean you can regenerate places and make them successful and resilient in perpetuity. Those two things are: the connectivity between commercial, public and social activity within any given place. We, at the Centre, believe that it is the connectivity and relationships between those three elements that is fundamentally important. If you have a weakness in one of those particular elements, or there is not a good connection between those elements, then a place is more likely to go into decline. So, the thing that we focus on is the relationships between those three elements in any given locality.

The second thing is that we need to have greater emphasis on the assets and capital within those places: financial, human, social, environmental and production capital, particularly around manufacturing. Those two elements of a place-based blend of social, commercial and the public and the focus on assets are how you can regenerate places. It has been proven in this country and elsewhere. One needs to have a focus on those things as a starting point for regeneration.

Katie Schmuecker: Regeneration is about the intersection between the social, economic and physical. One of the promising things about this approach is the localist approach that is endorsed, as much as we can tell what it is so far. But what is important about that is, as Neil says, context really does matter. Quite what blend of those three elements is required will vary from place to place; how ready a community is to be engaged in regeneration will vary from place to place. Our research certainly shows that it is not as simple as deprived neighbourhoods not having the capacity to engage with regeneration, whereas slightly better off neighbourhoods do. It is not that straightforward. There are some very deprived neighbourhoods that have excellent examples of community-led regeneration, and the reverse is also true. The definition of regeneration is important because it helps people come together around an understood idea of what it is they are trying to achieve.

The other thing I would say about regeneration is that we should regard it as a process and not an event. That is something we tend to say about devolution quite often; you mentioned Scotland before. But in terms of regeneration, too often we have looked at it as an event: it has been a project, a pot of money that is there to be spent, rather than an ongoing build up of relationships within an area to deliver on a vision for a place in partnership between the different players that Neil mentioned. It is that ongoing and sustained element of regeneration that is vital for it to be successful.

Josh Stott: Picking up on some of those points, I think the key reason the definition of regeneration is important is that it means different things to different people. A community worker in Bradford will have a very different view from a property developer in Newham, so trying to define and have a common understanding of regeneration and its different elements is really important. Historically there has been a great disconnect across the different elements and strands of regeneration, its different governance arrangements, different spatial levels and between economic, social and physical investment and interventions. We are all saying the need is for those three elements to come together and join up. Without a common understanding and strategy, that will never happen.

To pick up the point as to whether regeneration is distinct or should be seen as distinct from economic development, our strong view is that it should. Economic development is obviously crucial and is the name of the game at the moment, but for us regeneration starts in areas of decline and in priority disadvantaged areas; it is about reversing that decline and stabilising economies. At that point you can build the foundations for future growth. For me this what distinguishes regeneration from economic development. It is about targeting deprived and disadvantaged areas.

Q5 James Morris: Perhaps I may probe a little more the lessons that we can learn from the past. All of you have talked about regeneration playing a role within deprived communities, but if you looked at the evidence over the last 15 to 20 years, a lot of the indicators of deprivation in many of our most deprived communities in, say, Greater Manchester or areas of the Black Country that I represent have stayed broadly the same; in fact they may have got slightly worse. Why do you think that is? Why have previous schemes failed to get underneath some of those underlying issues of deprivation?

Katie Schmuecker: Unfortunately, there is no straightforward answer to that. If there was, we would have sorted this out years ago. Deprivation is by its very nature complex. As I was talking about previously, the context of the area will be very important. This is why we think a more localist approach to regeneration is a helpful one. But what we need to understand is that deprived neighbourhoods are not islands. They are where they are partly as a result of their relationships with the wider labour and housing markets. One thing I would stress very strongly is that, while we strongly support and endorse a community-led notion of regeneration, on its own that will not suffice, because we have to make the links between what is going on in a deprived neighbourhood and what is happening in the wider economy of the area and wider housing market of the area, and the way in which those two things operate will have implications for the prospects of people in those areas.

Q6 James Morris: What I am trying to get at is: what was in the nature of regeneration schemes—it would be good to get some examples from the last 15 years—that did not understand that, where money was applied, a scheme with all the best intentions was applied to a particular area and it did not have the impact that was hoped for. Are there some examples we can focus on where previous regeneration schemes have failed?

Neil McInroy: I think I will cover your question, James. To start off very briefly, it is quite clear why regeneration has failed in the past. I think it is fairly obvious that what we have here is money being thrown at a problem without due understanding of the connectivity and relationships that take place in any given locality. It seems to us that what needs to take place is that, when money is thrown at an issue, there is a clear headed network and connectivity and galvanised vision of how that place should turn around. Money has been thrown at physical initiatives or community regeneration initiatives without a proper connectivity between all the elements within a place. If you look at the regeneration that has been successful, you will find there is a good community buy-in; there is a public sector intervening and creating a co-ordinating role; and there is a private sector that understands the issues in that locality and offers supports in different ways for the success of that location.

To move on to where there have been good things happening in previous schemes, there needs to be co-ordination of spatial scales. The worry is that we have got rid of the Regional Development Agencies (RDAs)—we now have Local Enterprise Partnerships (LEPs)—and there could be a lack of co-ordination in any given locality because of the absence of the RDAs and at the same time a weakening of the approach. Some people say local strategic partnerships were a bureaucratic process-driven thing, but they did provide that key co-ordinating role within any given locality.

Q7 James Morris: I just want to get underneath this. Are you both saying that one of the failures of previous regeneration schemes was a lack of understanding of the dynamics of particular locations and communities, and an assumption that if you applied money at a certain scale it would necessarily lead to regeneration? If you take Hulme in Manchester as an example, which we discussed, it was a success but only because it was very much community-based, but it was very local in terms of the way it understood the dynamics of that particular part of Manchester. Is that what historical failure was about—lack of understanding of local community dynamics and an assumption that, if you just flow money from the centre, that would solve the problem?

Neil McInroy: I think that is one of the reasons why it would go wrong. When it goes right there is an understanding of community-demand dynamics. I also think that, if you are talking of environmental or economic regeneration or cultural regeneration, one needs equally to understand the dynamics relating to those particular aspects for it to be a success. That requires a much deeper, voracious awareness of the dynamics in any given locality.

Katie Schmuecker: To add to that, on the point of community dynamics, certainly failing to understand those linkages between neighbourhood and the wider labour market in particular explains some of the regeneration failures in the past. Some of our research looked at the area of Speke in Liverpool, which is one of the most deprived neighbourhoods in the country. The amount of economic development that has gone on around Speke is enormous, yet the area itself has not improved economically to the extent you might expect it to have done. Clearly, there are some social elements to regeneration that need to be addressed in that example.

However, there is a danger of the pendulum swinging too far the other way if we are not careful. If you look at New Deal for Communities, for example, the evaluation of that, which was extremely community-led in its approach, suggests that too often neighbourhood representatives did not have an excellent grasp of the issues facing their area, and sometimes professionals were not robust enough in challenging the anecdotal evidence and assumptions of those communities. I think that helps to explain one of the reasons why perhaps the New Deal for Communities did not deliver quite as much as we might have hoped it would have done.

Josh Stott: Where Katie started is that there are not any magic bullets here, and the outcomes of our research into area-and place-based regeneration initiatives are very mixed. So, I am not sitting here saying that we have the answers, but the critical thing is that we do not give up on these places. Just because a previous policy has not worked does not mean we should not develop alternative policies in order to try to deal with them. There is a big question about the long-term costs of doing this.

Q8 James Morris: I certainly was not suggesting that we should give up on deprived communities.

Josh Stott: Sorry. I was not suggesting you were.

Q9 Heidi Alexander: To follow up the question of learning from past programmes and initiatives, in the Government's three-and-a-half pages of text that introduce their Regeneration to Enable Growth document, one of the things they put past failure down to is barriers that thwart local ambition and limit agencies' room to manoeuvre. There is a suggestion there that perhaps different elements of bureaucracy and the planning system may have got in the way of regeneration in the past. Do you agree with the Government in that?

Neil McInroy: To an extent, yes, in that they did become a bureaucracy and became process driven. There was a managerialism about all the processes that were a burden. To move forward, however, one cannot get rid of planning, local Government and interventionist policy. One needs to have those but of a different type. I think the new direction for regeneration needs to learn from that bureaucratic machine that became regeneration and be lighter on its feet, be smarter and more bespoke and deeper at certain points where it needs to be. I think that does require a more localist perspective.

It seems to us at CLES that regeneration is one of those things with which you need to be very careful about when you want to intervene. Then you need to be careful about how deep you intervene; you need to know how long you hang around for and then you need to know how to get out. I think in the past all those four elements were not understood very well. We need to do all those four elements but in much smarter ways, and effective local Government, effective localism, should give an advantage for that to occur.

Josh Stott: Just to pick up the point in terms of there being barriers, I think that sometimes people perceive barriers, and it comes back to the idea that regeneration needs to be integrated, because we are talking about different sectors with different languages, skills sets and objectives operating at different spatial levels. It is incredibly complex. Inevitably, there will be barriers. It is the ability to be able to bridge those different levels and areas of interest that regeneration is all about. Without the right resource and capacity, it cannot happen.

Katie Schmuecker: From our research, one of the barriers that has been an issue in the past is the attitude of other Government agencies and Departments, which play a critical but sometimes not a central role in regeneration. I am thinking particularly of issues to do with skills, welfare to work and transport. Pushing forward the Government's localist agenda across Whitehall would be one issue I would like to see raised as one of the potential barriers.

Q10 Simon Danczuk: One of the key words that I think all of our witnesses have used so far is the need to co-ordinate activity within regeneration. There is a change of attitude from the Government, which is that the public sector is not going to do everything. The impression you have given me is that previously the public sector did everything, and the co-ordination was between the series of public-sector agencies. Now the private sector is coming in and the vehicle for that is local enterprise partnerships, where we have much smaller and more manageable units that are working with public sector and private sector people at a more local level than previously. To what extent do you think the LEPs will be able to pull things together to provide that more joined-up approach?

Josh Stott: It is very early days and time will tell. They have no statutory powers or funding. I think they are a very important voice for business, a voice that perhaps has been missing previously. Obviously, operating at the functional economic area is the correct area in which to operate. Our concern is in terms of their remit. It is about growth and economics; it does not cover the social and environmental parts of regeneration we have been talking about, and there is no explicit remit to target deprived areas and concentrations of deprivation.

Q11 Simon Danczuk: You do not subscribe in any way to the trickle-down theory, that if we can build economic growth, the more deprived areas will benefit. You are saying that will not happen?

Josh Stott: I certainly do not subscribe to it in full. There are persistent areas of deprivation and concentrations of worklessness, within affluent towns and cities enjoying economic growth. Unless you connect individuals to the labour market effectively, the more deprived areas will not benefit. The LEPs do not have a remit to tackle deprivation, if it is not high on their agenda, then it is unlikely that it will happen.

Katie Schmuecker: I would entirely endorse that. I would also slightly challenge what is behind your question. I certainly would not want to give you the impression that we thought regeneration in the past had been all about the public sector. It has not; it has been about a partnership between the public sector and the private sector and the voluntary and community sector, or at least it certainly works well if that has been the case. I think that potentially LEPs have a vital co-ordination role. Having said that, it is actually the role of local authorities within LEPs that is very important here, because local authorities have roots in the neighbourhoods we might be talking about in terms of places that require regeneration, but they also have a presence on the LEP boards. Local authorities are potentially the fulcrum of this task of co-ordinating and linking between the neighbourhood and the wider functional economic area.

Q12 Simon Danczuk: But the LEP itself cannot do that; you still need the local authority in your view to be the driver of change here?

Katie Schmuecker: The local authority plays a fundamental part on the LEP of course, and I think part of that role should be to drive that change, yes.

Neil McInroy: The key thing here is stewardship of place. At CLES we are easy about who does that stewarding role, but it needs to be strategic, voracious and powerful to do that. My feeling of the LEPs when they first came out was, "Fantastic; here we go. We have got a turbo-charged chamber of commerce sitting in any given locality that will drive economic success as you see in a Japanese, German or US model." They have since become a bit more of a partnership, a kind of local strategic partnership, with a focus on the economic. They are on a moving journey clearly, but the danger is that they are even more remote because they have a narrow focus around business and are business-led. They could be even more remote from what the locality requires in terms of all that other stuff and all the connection between the economic success and community activity and so on.

I think that LEPs need to move forward quickly, and they already are, and start to receive powers through the decentralisation process from Whitehall. I think they need to draw down powers from Whitehall and not necessarily suck power away from local Government. I think that working with local Government you should be able to draw down powers from the centre, and we need to do that speedily, particularly in those areas that need regeneration. Areas like Oldham, for instance, did not do very well even in the good times, so the trickle down did not work even in the really good times. One needs to move very fast in these difficult times. LEPs need to get those powers and co-ordinate and be strategic; they need to steward a place in a broader palette of activities than was initially proposed for them.

Q13 Simon Danczuk: Let's assume they get those powers. Are they going to be able to drive regeneration forward without substantial amounts of public money? I was interested in one of your earlier remarks. You said that in the past we had thrown money at this problem without necessarily solving it. There will certainly be less money available this time round. Does that mean regeneration cannot be successful in your view?

Neil McInroy: I think regeneration can be successful with less money. I believe it is about the connections between different facets within places I outlined earlier. If you did get better co-ordination between the commercial activity, including greater levels of giving and philanthropy within that sector, and had an enabling, entrepreneurial, innovative council and you had a respect for and tried to harness the social and human capital in those places, and made great heady connection between all those three, that does not necessarily mean lots and lots of money. If you look at regeneration success round the world, you will find there is great regeneration done without lots of public money being thrown at it, but what it does need is a strong stewardship of place, be it from the local authority or from a LEP that has the power and some resources to act as a steward effectively.

Katie Schmuecker: As to less public money being available, I think that is simply a reality that has to be accepted. The question becomes: what do you do with the smaller pot of money that is available? I think the question we would ask is: on what should that be targeted? The Government's approach it appears is to target that money on those places with the greatest potential for growth. To our mind that leads to the question: what of those places that do not demonstrate such great potential for growth? What is the policy and strategy for those places?

Q14 Heidi Alexander: I am interested in you, Neil, talking about the stewardship of place and saying that is absolutely essential. I think that all three of you in your written evidence referred to concerns about capacity within the regeneration sector—skills, expertise, knowledge and experience—and what is happening currently given the Government's approach.[3] Can you say something about what evidence you see out there of those skills and that expertise being lost at the moment?

Neil McInroy: We are in quite a worrying place in many localities because LEPs and other activities have not managed to pick up the slack swiftly enough, so what you have is a hollowing out of street wardens, of neighbourhood wardens, regeneration officers or economic development people. All that industry has been hollowed out. What you have is a deficit there, and also in terms of connecting up services at a local level. That is why there is an urgency both to move quickly with LEPs and also to move quickly in terms of supporting the social and human capital in communities themselves. At present we have, of course, the big society and this re-energisation of civil society. That is not making a connection with regeneration at this point in time, and clearly it needs to. I would argue that LEPs particularly need to engage with the re-energisation of the civil society to ensure that some of the activity that took place in the public sector has a chance of growing more within the social sector.

Josh Stott: I will not point to specific examples, but as the cuts kick in there are increasing skills gaps in planning, housing and economic development and regeneration across local authorities. It will be the areas that face the most severe challenges or most complex problems that will be most stretched. It is not simply about throwing money at it, but if you do not have the resource and the capacity, as we have said previously, those areas that face the most severe challenges will spiral into decline essentially.

Q15 Heidi Alexander: What do you think the Government should be doing now to ensure that those skills and expertise are not lost and are maintained? Do you think it could be doing anything now? Neil has talked about making sure the LEPs come forward a bit more quickly.

Josh Stott: The LEPs seem to be the only show in town at the moment, and it is what everybody in the regeneration and economic development sector talks about. It is all about the LEPs now. It is such early days. Inevitably, there are places that have got well-established partnerships—Leeds city region, Manchester city region—and places that have got strong and established business voices that are connected into the public sphere which will be able to form LEPs, but the coverage is not widespread at the moment, so there are areas that have not even got LEPs in their infancy at the moment, let alone a strong LEP. In terms of what the Government could do, I guess a starting point would be the regeneration document that we are discussing today, which, as you refer to, is three or four pages of text supported by some appendix tables. So, in terms of the message that sends out and providing answers to some of the questions that we are raising, it seems to fall a long way short.

Neil McInroy: It strikes me that the Government need to get more spatially and socially aware; they need to recognise that not every locality will be able to build the new civil society in similar ways. If you are strapped for time and money, with lots of pressures of life—as some localities face more than others—you are unlikely to be able to build the big civil society more than other localities. It needs to be spatially and socially aware. In that, you would hope it could focus or at least relax some of the pressures, particularly in local Government, in those particular localities. That would need an awareness of the social and spatial ramifications of the cuts to a much greater degree. In particular the RDA assets are something that could be utilised, in how they are divested or disposed, in a more creative way locally to assist regeneration, and also making it a statutory duty for regeneration or local economic development would help in putting emphasis on regeneration and economic development in certain localities.

Katie Schmuecker: To pick up on that, those local authorities that have seen the deepest cuts to their budgets are struggling to implement those, and some of those places are arguably often those that most need economic development and regeneration. Functions outside the statutory core of what local government has to do inevitably come under greater pressure. Certainly, the Institute for Economic Development has found from a survey of its members that jobs are going, and in some cases entire economic development regeneration departments within councils are going, so clearly there is an issue of capacity here. It is not just the public sector but the private sector to some degree. A lot of the private sector companies that are engaged in regeneration were extremely hard hit as a result of the credit crunch and recession.

Q16 George Hollingbery: I am a self-confessed ingénue; I know nothing about regeneration at all. To be quite straight with you, I come from a privileged part of the country and it is not something I have experienced. I find myself continually confused by what I am hearing. I do not really find myself illuminated today about what regeneration really is and what is standing in its way. I am surprised not to hear you talking so much about individuals and inspirational individuals and people driving the process forward themselves. To come back to Heidi's question, which is about capacity and so on, has the capacity been in place to negotiate the structures and get round the complexities of the work programme as it will be, or the planning process as was? Is that what the structures are there to do—to allow people to negotiate the extraordinary road blocks that stand in their way to helping themselves—or is there a real need to create the social capital that does not exist in a lot of these places, and help people over the hump so they can help themselves?

Neil McInroy: Earlier I alluded to the fact that the structures have been too cumbersome, and, if you like, cowed or suppressed some of that individual talent and energy to get on and do things in a community within any given place. Clearly, the Government is going in the right direction when it seeks to get rid of some of that bureaucracy and heavy-handedness. However, an individual's role needs to be supported in some localities by particular ways of working and policy interventions. I think that a greater awareness of that in certain localities needs to be recognised, and there needs to be heavier and perhaps more deeper intervention in some localities compared with others. I think that is what I am broadly saying.

Katie Schmuecker: You have touched on the role of people there. One of the big debates within regeneration is whether it is about people and supporting deprived individuals or about places and geographic areas. Our research tells us that it is fundamentally about both. You cannot look at one without looking at the other. Certainly, if you focus only on individual mobility, clearly that can have some very positive effects for the individuals concerned. We certainly would not want to suppress that.

Do not misunderstand me. This is not a counsel against supporting individual mobility, but what you have to do alongside that is develop places as well because, if people do not have a positive reason to stay within a deprived neighbourhood, if their circumstances change, they will move out. The result of that can be a spiralling decline of a place as the physical fabric of the area declines; it is a less appealing place to live; crime goes up; the reputation is tarnished, and the result is that it becomes an area of last resort. We have seen that sort of vicious spiral of decline in the past. It was seen in the 1980s and early 1990s; it was a big problem in a lot of our communities. A lot of work has been done. A lot of the regeneration that has taken place has stalled and in some places reversed that spiral of decline. We need to be extremely careful that we do not re-enter something like that. That is why, in our view, while individual mobility and supporting people to improve their personal circumstances is extremely important, improving places has to go hand in hand with that.

Josh Stott: To pick up the point about personal mobility, again we would fully endorse some of the proposals put forward. We certainly would not argue with providing people with access to greater opportunity, but there also needs to be a recognition that people have attachments to places and it does not always pay to relocate or travel for work. In many instances, if you have strong social and family connections, covering childcare costs for example, people are attached to a place. As Kate outlined, it will be the more mobile who leave and you will have the residualisation effect of the most deprived and least skilled people concentrated in severely failing areas.

Katie Schmuecker: There is an issue of sustainability for those places that are the most economically prosperous and growing. If our approach is simply to support individual mobility out of lagging places and encourage them to move to places that are growing, the consequence of that would be severe strain on the sustainability of some places. It seems to me a better approach for the UK as a whole is for us to support places to achieve their potential.

Q17 Mark Pawsey: Both Katie and Josh used the expression "spiral into decline". You explained it a little, but, Josh, how would we recognise a place that is spiralling into decline? Would that be happening simply because of the lack of a regeneration policy?

Josh Stott: It is difficult to say this is simply due to a lack of regeneration policy. There will be lots of complex factors that will influence a spiral of decline. A simple way of understanding when you have a spiral of decline would be to look at population change and the proportion of out-of-work benefit claimants in an area. If that is increasing over time, you will see, as I have talked about, there is this residualisation and concentration of deprivation in an area.

Q18 Bob Blackman: The proposition, obviously, is that the Government are taking the view that the resources available for regeneration will be reduced. Therefore, if you read the document, they are saying their approach is to concentrate on fewer targeted areas rather than a broad swath of things to allow local regeneration to take place. That is one way of paraphrasing the Government's approach. What do you think will be the effect on the areas that have the targeted investment? Do you think that will work?

Neil McInroy: The key thing about the targeted investment is to understand how that money or input connects up within any given locality. In that, if money is given through the public sector, for instance, you would look to have a greater understanding of public sector spend in terms of supply chains and all those local economic multiplier activity effects. One needs to look at procurement, particularly public-sector procurement, to understand what benefits can be extracted through that process in any given locality.

You also need to look at social return on investment and different ways of measuring the inputs to any given locality. The local area needs to be much more clever or smart at understanding the ripple effects of any given investment, and needs to be much more voracious in trying to look at where that spend goes, what the social return on that spend would be, how it builds up capacity and resilience for it not to decline in the future.

Q19 Bob Blackman: Is it your view that there should be specific objectives associated with any targeted investment—that is, this is what you have to achieve to get this money?

Neil McInroy: Clearly, there needs to be that, so clear outcomes.

Q20 Bob Blackman: At the moment in the document, as I read it, it is a bit vague and open, which leads to the belief that you could succeed without really knowing about it or fail without understanding that you have.

Neil McInroy: There definitely need to be outcomes that relate to the document, but not just outcomes in terms of a number who entered work or whatever. It needs also to relate to process outcomes in terms of how that money and those resources will be utilised, and an understanding of its ripple effect at any given locality.

Q21 Bob Blackman: What is your view of the new homes bonus in encouraging regeneration?

Katie Schmuecker: It is not clear that it provides a huge incentive to many local authorities. What will be interesting is the way in which the new homes bonus intersects with the new neighbourhood planning powers. That is an interesting question to look at. In broader terms, we have a couple of concerns about the new homes bonus. One is the potential for it to act as a disincentive to physical regeneration where that means housing demolition, if it is based on net additions. The result of that may well be that building on greenfield sites becomes more appealing. There are some big questions there about thinking about what sort of development and regeneration we might want to see in places, and some of those issues around targeting areas of greatest deprivation and also issues of sustainability.

The other concern is that the new homes bonus will favour those parts of the country where the market is stronger and there is a much greater market demand to build more houses. That is less likely to benefit some of the sorts of places that we are talking about when we talk about regeneration. Finally, the prospect of top-slicing the formula grant to pay the new homes bonus could be interpreted as a reverse redistribution, so instead of being from wealthier authorities to authorities with a lower resource base, as formula grant currently operates, we could see money flowing in the opposite direction if—I say "if"—it is wealthier authorities that benefit disproportionately from the new homes bonus.

Q22 Bob Blackman: You specifically said in your evidence to us that the Government's approach was likely to contribute towards long-term decline of many deprived areas.[4] What evidence do you have that this approach will lead to that, or is it just your presumption?

Josh Stott: I said earlier, hands up, Joseph Rowntree Foundation (JRF) are not suggesting we have got the answers to regeneration, and indeed all of our evidence has got mixed outcomes in terms of the assessment of area-based initiatives. The point that was really emphasised in the submission was that the Government's proposals are about promoting and incentivising growth. I do not have a problem with that. The problem is about the areas that will not grow. Our concern is that you have areas that are in decline and have the weakest housing markets, where the new homes bonus will not act as an incentive because, without public subsidy to begin with, the houses will not be built. The key issue is around connecting people in deprived areas to jobs.

Q23 Bob Blackman: Is not the evidence there that people in deprived areas that get jobs move, because they are more economically mobile and therefore choose to take a step up rather than staying put?

Josh Stott: Inevitably, some people do that, but the danger is that you end up with high concentrations of out-of-work deprived people. If you just focus on backing growth and winners, there will be losers and, wrapped up in that, severe social costs and costs to the Exchequer.

Q24 Bob Blackman: The problem is that, if you look across areas of London that I know very well, the same thing will be true. Millions of pounds have been thrust into them through regeneration schemes; the claimant counts have hardly varied.

Josh Stott: I think we all agree that what has gone before has not necessarily worked. I do not think anyone promotes a continuation of the policies of the past. I think what we are very much emphasising is that there needs to be a better connection between the neighbourhood level and the functional economic area level. There is a disconnect there.

Q25 Bob Blackman: There is a disconnect. Perhaps I may ask all of you what you think should be done to arrest the decline.

Katie Schmuecker: To arrest the decline of?

Q26 Bob Blackman: These particular areas. Clearly, there will be a position whereby, if you have targeted investment, other areas that are not targeted will not get investment, and potentially there will be decline.

Katie Schmuecker: I think the question is: who and how do you target? Currently, that is not very clear in the Government's approach. The Government's approach appears to be to target growth. As I have said once or twice already, that leads to the question in our minds: what happens to those places that fall outside of that, often places that are lagging and, if anything, are potentially going backwards? I think the question is: what is the additional effect that public money can bring? In the context of very limited public resources, does it make sense to spend that limited resource in places where growth would happen anyway because it is a growing area? We would argue that perhaps the priority should be to focus public money on where there is market failure to address those failures.

Q27 Bob Blackman: Just to take that example, Government would argue that it is going to implement high-speed rail, and therefore there will be regeneration and growth in all the areas where there will be stations that have high-speed rail. The Government invests and the private sector invests around it. That is a "creation" approach.

Katie Schmuecker: You raise an interesting point. If you look at the targeted investments listed within the document—Crossrail, high-speed rail, the Olympics—there is a very heavy greater south-east bias listed in those particular programmes that they have decided to highlight. We have to look at how this supports the Government's wider objective of rebalancing the economy. I mean that in spatial terms. The Government has talked about rebalancing the economy away from an over-reliance on the greater south-east, but if you begin to look at how the detail of some of these policies is likely to stack up in practice, you get a picture of continuing over-reliance on the greater south-east of England and also a focus on those areas where growth is more likely to happen anyway. I think that is an issue.

Neil McInroy: CLES undertook some work—this is a shameless plug, by the way— in eight economic areas in 16 local authorities around the UK, including affluent and not so affluent places.[5] The work was a diagnostic; it worked out how those places operated and the effectiveness of the connection between the commercial, social and the public in those localities. We found that, in those areas where there was a good connection between those strengths, there was more likely to be effective use of investment and more effective regeneration schemes than in the past. We found that the conditions in those localities were perhaps more ripe to benefit from any ongoing investment. I would say to the Government—a shameless plug—that they should look at doing a diagnostic of localities and become spatially and socially aware, and not focus on the traditional deprivation indicators as much. They should focus on the relationships, networks and connectivity between the various elements in those places.

Q28 Chair: So, you will just abandon those areas that do not have that in place, because the money is not being put in?

Neil McInroy: If you have to have prioritisation in terms where regeneration money should go, clearly you need to set criteria where it goes and where you focus your activities. What I am saying is that there is more likelihood in those areas where there is a bigger bang for the buck, if you like—where there are better connections, relationships and networks—then you may wish to focus on those; or, if you do need to focus on those that are particularly deprived, one seeks to put in place interventions that build up the networks and connections in those places.

Q29 George Hollingbery: Neil, I think your organisation is very clear that Tax Increment Funding (TIFs) and enterprise zones are something you favour. Can you say why?

Neil McInroy: We favour TIFs. We favour any mechanism that allows a greater level of autonomy and control over the economic destination of place, and thus enterprise zones allow more local powers over breaks in tax and those sorts of things. Again, TIF allows a different mechanism for those benefits to be accrued by appreciation of land value to be harnessed by that locality. So, we are supportive of them on that basis.

They are, however, in our view limited. TIF is predicated on levels of land appreciation and some areas may not have that. The enterprise zones can have perverse effects in a given locality. What happens when you stop the period of tax breaks? They do not come without their flaws, but certainly they are welcome. I would advocate a whole suite of other types of local economic instruments to be placed at a local level.

Q30 George Hollingbery: Others have given us evidence that enterprise zones particularly can attract all the investment in a particular area and then abandon the harder-to-reach areas. Is that a reasonable view?

Neil McInroy: Very much so. It is like the earlier response I gave. It is about when you put in place these mechanisms, how long you allow them to last and then how you decant and over what period. Those are very careful calibrations. I believe that in the 1980s they were deployed in a clunky way rather than a very bespoke and adroit way. That was part of the problem then. I hope that this time they are much more careful, selective and lighter on their feet in terms of when and how and how deep they do things.

Q31 George Hollingbery: On enterprise zones, are there any particular lessons from the 1980s we should look at?

Katie Schmuecker: On enterprise zones, we have concerns, because certainly our evidence from using them in the past is that they are much better at attracting employers from the surrounding area to relocate than they are at creating new employment opportunities. That is our big concern with enterprise zones. If that can be overcome, great, but I have not yet seen any convincing means of doing that.

Q32 George Hollingbery: A little earlier I was asking about that block to innovation and regeneration. What more could enterprise zones do? What could the zone do that would really help regeneration?

Katie Schmuecker: One potential thing would be for an enterprise zone perhaps to come with other supporting services to support growing businesses and perhaps be specifically targeted on a growing business rather than any business to relocate, and perhaps having some rules around who can move into the area. One slightly disappointing thing about the enterprise zones, as I understand it, is that there is an expectation that they will be around about 100 hectares, which is a relatively small area. I think that, if they were larger, it might help to overcome some of these issues about displacement.

Q33 George Hollingbery: Is there anything you would do about less rules?

Katie Schmuecker: Specifically relating to enterprise zones?

Q34 George Hollingbery: Yes. What would be taken away to make those jobs and lives easier to regenerate an area?

Katie Schmuecker: Specifically in relation to an enterprise zone?

Q35 George Hollingbery: Let's not worry so much about enterprise zones as specific measures the Government would take in a certain geographic area to make things easier.

Neil McInroy: Growth and enterprise come in many guises. Clearly, there are things that you may wish to remove to stimulate a whole sea of different creativity and energies. Clearly, you could have temporary relaxation of a whole range of legislation that is forced upon any given place. If that is determined locally, and done on the understanding that it is being relaxed for a certain period, clearly you could have a look at a whole sea of legislation pertaining to any given locality. That would be welcome. It would be a free space, an innovative space, a free zone. Let's explore that. Of course, there are powers you would not want to overstep, in terms of health and safety and other elements, but you could relax some elements I think within a period of time, at least to animate in any given locality.

Q36 George Hollingbery: Do you have any thoughts on land auctions?

Josh Stott: It is not an area that JRF have researched in great detail.

Q37 George Hollingbery: What about the other areas we were just talking about?

Josh Stott: Katie has picked up the key point I would raise in terms of the displacement effect. Essentially, you are moving jobs around an area rather than creating new jobs. As I say, land auctions is not an area about which I know a great deal, but there could be a danger that they promote development in unsustainable locations as these sites may generate the biggest receipts.

Q38 Simon Danczuk: In terms of the Government's document, you have used very polite and sophisticated language to describe your thoughts. Like you, I have read many hundreds of Government documents of various kinds. I have to say that I find this a more unusual one in terms of its content and what it does and does not include. In all seriousness, using tabloid language, in a few words how would you describe this document?

Neil McInroy: I think I go back to the very first question: there is no narrative, no connections, bits missing and nothing on assets, physical focus. If one of our junior members of staff had written this after two weeks, I would be disappointed.

Katie Schmuecker: I think we can safely say it is not a strategy. My question would be: is this implicitly suggesting some kind of sink or swim approach for places? Lots of opportunities are outlined in this document, many of which we would welcome. Some of which, though, are for areas that do not currently have the capacity—I am aware that I am moving away from "tabloid".

Q39 Simon Danczuk: We were going to point that out to you. You won't get a job with the Sun, that is for sure. Go on, Josh. What is your response?

Josh Stott: I think the three words I would use are: thin, weak and disappointing. There is a failure to recognise the importance of place and the complex challenges faced by the most disadvantaged communities.

Q40 Chair: On that point, thank you all very much for your evidence.

1   Regeneration to enable growth: what Government is doing in support of community-led regeneration. Back

2   The Scottish Government's regeneration discussion paper can be found at Back

3   Evs 133, 143, 154 Back

4   Ev 133 Back

5   Productive local economies: creating resilient places can be found at Back

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Prepared 3 November 2011