Regeneration - Communities and Local Government Committee Contents

Examination of Witnesses (Questions 41-76)

Q41 Chair: Thank you very much for joining us. For the sake of our records could you indicate who you are and the organisation you represent?

David Orr: David Orr, Chief Executive of the National Housing Federation.

Julian Dobson: Julian Dobson, Urban Pollinators, an organisation for sharing learning about regeneration.

Michael Gahagan: Mike Gahagan, I represent the HMR Chairs; I was Chair of South Yorkshire.

Jim Coulter: Jim Coulter, I was Chair of Bridging NewcastleGateshead until we closed a month ago.

Q42 Chair: If you do agree with what has been said before you don't have to go into great lengths to explain why. How effective did you think proposal in the Government's document, Regeneration to Enable Growth, will actually be? Do you see that there are risks attached to the approach? Certainly some of you have read the Scottish Government's approach and have a better view of that. Perhaps you could also say why, while you are summarising the points.

Julian Dobson: I am not sure that you could say that the Government's document is an approach; it does not have any clarity about it. As Neil said, it lacks a narrative. It is not clear what regeneration is or why regeneration is needed. It is not clear how regeneration is to be attained, so it is really difficult to know where to start with it. I think the Scottish Government document, while I would say it is far from perfect, does at least make a pretty good stab at saying what regeneration is, why it is needed and what we are trying to do with it. If anyone from CLG is going to be reflecting on this, that would be a very good place for them to get back and start.

David Orr: I start slightly earlier. The Comprehensive Spending Review is the Government's statement of where it intends to invest money over a four-year period. I think the Report of the Comprehensive Spending Review runs to 104 pages, and the word "regeneration" does not appear in it anywhere. I think that is quite a telling indicator of the starting point for Government consideration of regeneration. I think the documents that we have seen are a post hoc attempt to say, "Measures that we are putting in place elsewhere for different reasons might themselves make some contribution to regeneration," but I think that is rather a heroic assumption at present. If regeneration and the whole growth agenda are about ensuring that places work effectively—not just about those places that are economically viable at present, but those that are not and need to be in the future—I really don't think that there is a strategic approach to addressing the economic failure, and some of the related housing market and other failures, in some of those areas.

Michael Gahagan: I think it is fair to acknowledge there are good some points in the document that have not come out: some of the issues around decentralisation; some of the policy elements; the RDAs' assets going to the HCA; ending some of the ring fences. All of those are very valuable and contribute. But as our evidence said, that is more than offset by the absence of resources that there now is, and the lack of coherence in the document.[6] I have an additional sadness about the document, which is it does not make the most of what we have, and I would not have given the same answer to Mr Morris's question, for example. We have a pretty good track record. I was President of the International Urban Development Association, so I have looked at regeneration around the world. None of them are ideal, all of them have faults. We are better at it than most. We have got a lot of the structures and skills in place in the public and the private sector, and in a lot of communities, and we need to build on that. And that was not recognised in this document. It is almost as if we are starting afresh, whereas we are not bad at it actually.

Jim Coulter: I won't repeat everything everybody else has said on the basis of your invitation, but I can't resist saying in the context of Mike's last comment that the year zero approach, which elements of the language in this document seem to represent, is a very poor account of what CLG as a department has achieved over the years, and it ought to have reflected rather more on what past strategies have been successful and unsuccessful at in order to get a better handle on a strategic framework that can have objectives set for it and outcomes established and, underneath that, measures agreed to be able to judge whether they have been successful or not.

Q43 Chair: That information is available isn't it—

Jim Coulter: Absolutely so.

Q44 Chair: —not merely in terms of overall analysis programmes, but comparing one new deal programme against another, and why one works and one does not?

Jim Coulter: Yes, there is a tonne and a half of evaluations around including, in terms of housing market renewal, very substantial pieces of work have commissioned by CLG itself, done independently by the NAO, done independently by the Audit Commission.

Q45 Chair: Obviously there is less public money around; that is a fact. The Government's view seems to be that we have therefore got to get the private sector to come in and take the slack up. Is there a worry that that may happen in some areas which are probably slightly more affluent, where the possibilities for growth are more obvious, but in the real deprived communities that simply isn't going to happen, or do you think some of the measures in the document may stimulate private money to come in?

Michael Gahagan: They will help, but I don't think they will be enough. You are absolutely right, you have got to have public money; for example, in development terms you have got to have money to take the risks out of a site, because in a time of recession developers go, understandably and quite rightly from their point of view, to the lowest risk areas. They will not go to regeneration areas. You have to improve the quality of the housing stock and the retail offer around the area where they are going to develop otherwise they will not go there. So it needs that mix of public and private investment in these areas, and it will not happen just through the private sector. Quite the reverse, there is a risk of some of the investment we have put in, in the past in some areas, where they have not reached the tipping point, going backwards.

David Orr: I think almost everyone who has been involved in this conversation has said something along these lines: in those places where there is a viable, relatively thriving economy at present, there is a realistic opportunity for the private sector to be the catalyst and the driver for greater economic growth. But in those places that are characterised by economic failure, by market failure, it is highly unlikely that the market, the private sector, will go to those areas to seek to generate a new economic benefit for itself. So if you want to have a nation where every part of the country is benefitting from growth, it is almost certainly the case that to attract that kind of private investment, there will need to be a hook that brings it in.

Julian Dobson: I would echo that. I refer you back to the Scottish Government's Regeneration Discussion Paper, which said that the property based regeneration model of the last 10 to 15 years is no longer viable, certainly in Scotland. That is a model financed by speculative development where a private developer will come in and there will be sufficient profit to finance regeneration activities. That is not just unique for Scotland. The British Property Federation's written evidence to this Committee makes the same point.[7] I was looking at Knight Frank's recent assessment of the commercial market, and their assessment as of April was "The market has to get a bit worse in order to get better. However, the pain this time will be localised to lesser quality stock in certain parts of the country, and not the general pain seen in 2008." In other words the markets that are doing well will do well over the next few years; the markets that are not doing well will continue to decline. Now if you are looking at a property based model for regeneration, looking at where people are going to putting their investments in future, the investments that are doing really well at the moment are houses over £10 million in Central London and English farmland, but I do not see any regeneration benefits accruing from either of those. So if investors work on the principle that they are going to put their money where they can get the greatest return, then I think our most deprived communities with the most difficult economies are likely to be at the bottom of the pecking order.

Jim Coulter: Could I slightly qualify that and, as they say, put a gloss on what my learned friend says? I will give you an illustration of where the public/private mix in housing market renewal has actually worked, but over a timescale that took a considerable amount of investment to get there. In Newcastle a few months ago the local authority and a consortium of three house builders signed a joint venture deal worth over £200 million on the back of housing market renewal, Homes and Communities Agency investment. In Gateshead the parallel process has almost concluded—it has got to the preferred partner stage of the tendering process—again on the back of pre-existing public investment to de-risk sites, to provide infrastructure to get to a market clearing position. Roughly £600 million of private investment over the next 15 years will be built on the back of about £150 million of the public investment. So it will vary from place to place. Those are still deprived areas, but there is a substantial opportunity that has been created by the amount of public investment. I think the question going forward is: over what timescale and in what areas is a comparable level of activity actually needed?

Julian Dobson: And I think the important thing to say about that is that it is the public investment that de-risks it for the private sector. So if you are talking about reducing public investment or taking it out of the equation, then the capacity to do that kind of thing is reduced.

Q46 Chair: You were saying about the private sector following on. Is there any way in which we might be able to develop models—such as the gap funding of the 1980s—where the public sector puts money in to stimulate the private investment and help it happen, then there is an opportunity for the public sector to recoup some of the eventual gains so we can make better use of public money?

Michael Gahagan: Yes, we are doing that all over the place, or we did until the recession. Now most of the agreements with developers are open book agreements with an overage element in them so that the public sector gets back where they are successful. The problem is that that has become extraordinarily difficult to negotiate in the recession. All the Section 106s are being renegotiated.[8] All those sort of deals are being renegotiated in these areas because the risks have grown.

Q47 James Morris: Mike, you made the assertion, "Actually we are not bad at doing it," and I was struck, again, by the definitional point. What is the "it" in that particular sentence?

Michael Gahagan: That is a good question; I wish I had an answer. I was thinking that earlier. I think it is taking lousy neighbourhoods, and people who have got all sorts of disadvantages within those neighbourhoods, and bringing them to a state where they can participate fully in an economy and look after themselves. That is my definition of it, which is a working definition.

Julian Dobson: I would agree with Michael that we are not bad at doing it, but I would also say we are not good enough.

Q48 James Morris: How do we evaluate "not bad"? I know you said you have international experience.

Julian Dobson: Well there have been, as Josh was saying in the first session, huge amounts of research that the Joseph Rowntree Foundation has done. It is well worth looking at. I think that tells you an awful lot about working in the most difficult neighbourhoods and communities, and what needs to be done in order to make it work. This conversation has started around property, but I really want to make the point that regeneration is not just about property. Sorting out property is an aspect of regeneration. If I was to put it in terms that everyone can understand, I would say regeneration is about making places that are fit for our kids and grandkids to live in, so that everyone who lives there would be happy to bring their children up in that area. Now of course there are things that stop that. Number 1 is crime. A lot of crime tends to accumulate when you have poor housing problems.

Q49 James Morris: Sorry to interrupt, I just have one more point. If we are not bad at that, what does "not bad" mean in terms of concrete measurement?

Julian Dobson: If you take somewhere like the Brackenhall Estate in Huddersfield, 12 years ago, out of 1,000 council homes, 200 were tinned up. People were moving into those homes, which were being re-let by Kirklees Council, and they were being robbed on the day that they moved in. Clearly that is not a sustainable neighbourhood. Now that particular estate has benefitted from interventions that went with the grain of the rising housing market; they were lucky in some ways. The result has been to demolish a number of those houses, replace them with a number for owner occupation, and generally create a community where people had more of a stake in their community.

Now owner occupation is not the only way of doing that. There is a crude assumption that you just knock down council houses and replace them with private ones and you will get an okay community. I do not think that is regeneration. Regeneration is recreating a local economy that works and gives people opportunities. In the context of interventions like regional growth funds, you have to ask which of those opportunities that are coming out of that investment are going to the people living in the most difficult and disadvantaged areas. That goes back to the point that Neil McInroy was saying about connectivity: you have to be able to connect up opportunity with the places that are most disadvantaged, otherwise people do not have hope. When you do not have hope then you have a spiral of decline and areas that people just want to get out of.

Q50 Simon Danczuk: I want to pick up on a point that Jim alluded to. You said that public investment over a period of time—and I got the impression that it was a considerable period—eventually attracted private sector investment, which is a good thing. Is there a possibility that we are going to lose a return on the public investment, particularly in terms of Her Majesty's Revenue (HMR), but it could apply to selling off RDA assets at a time when we will not get much money for them. Is there a possibility that turning off the tap, as the Government have done immediately, creates a problem in terms of getting a return on public investment that has been going on for some years?

Michael Gahagan: Yes, that is my worry. Everybody expected cuts; we know we had to have cuts. It was the fact that last year it was £260 million, this year it is nothing. It is not just HMR, remember. Other associated budgets have also disappeared. One that springs to mind in the housing field is the single housing pot. In my area it was £26 million HMR, £13 million single housing pot; that is £39 million disappeared. The single housing pot funded loans to private sector and environmental improvement. Some areas have got beyond the tipping point. There are still issues there of employability and skills and so forth. Other areas exist—I have been to several in my area, Clive might know them—where in the worst case scenarios we have left families with houses boarded up next door to them, there is vandalism, there is anti-social behaviour, all sorts of problems. We should not leave families like that. Some of those areas we have had private investment in, we had private housing going in, and they were really starting to take off. Now there is a real danger that those areas will go backwards.

There is also the cost associated with these areas. Rotherham did an assessment in Canklow; it is going to cost them an extra £100,000 a year in additional callouts on the fire brigade and so forth just to try and keep the lid on that area to make it a half decent place to live. It is a real issue.

Q51 Simon Danczuk: Jim?

Jim Coulter: I agree with that. I do think it is a very serious risk that the value for money that has been delivered so far will be at risk. We will end up at some future point redoing things that have already been done, and that itself has been a historic problem of some elements of regeneration. If you look at, for example, the most placed-based regeneration in housing that I can remember in recent times, which is Estate Action, quite a large number of areas of Estate Action across the country have had to be reinvested in simply because the process was not continued, and the holistic nature of the more successful elements of later regeneration have not been secured. The other issue, which Mike has just alluded to, is quite significant: the additional revenue costs to local government to police local environmental harm, where there is incomplete demolition, for example, or vacant sites that have not got a good opportunity for alternative use in the short to medium term.

At the worst peak of the West End of Newcastle, in the 90s, when abandonment was really rife, the local authority was spending about 40% of its environmental budget in Scotswood and Benwell, a relatively small area of the population. I am not saying that is going to be repeated at scale, but that is the risk. Some of the points that we have been making in the short term to Ministers and to officials have been about making sure that this literal abandonment of the programme without an exit strategy is tackled and we get some resource into dealing with the problems of dereliction in the worst places now. It surely is no coincidence, but today the Minister announced an additional £30 million, when he visited Liverpool, for housing market renewal for five of the 10 areas. I guess if we came back every day for another seven days we might come back to the level. But it is only five, and we have got problems at a different scale across the whole of those areas, so that is the literal, physical cost of the suddenness of change.

David Orr: One of the things that most of us felt was absolutely right about the housing market renewal idea was that it was going to require investment over a sustained period of time. We have lots of examples of where public money has been spent and, because it has not been sustained to the point at which the communities in question are economically, socially and environmentally sustainable, the money has in practice been wasted, and there is a very severe danger that that is going to happen here. These are large scale complex things. Julian is absolutely right to say that property based regeneration is not sufficient. It is not. Property is a necessary, but not sufficient, condition. There are all kinds of things that are necessary but not sufficient. One of those is sustained investment, and I do think that there is a real danger that the value of the investment that has already been made will be made much less because of not just the fact of the disappearance, but the manner of it. The axe coming down and a complete stop is not good use of public funds.

Q52 Mark Pawsey: I was going to pick up on some points that Mike made, if I may. My colleague said you spoke about us having the structures and skills in place, us being good at it and being good about regeneration. You said there was lots of activity up until the recession. Isn't it the fact that the recession changed everything, and that operating in the present climate means that we are not going to be able to reproduce many of the good things that you saw happening in the early Noughties?

Michael Gahagan: No, I don't think it is. The scale will be different, but if you read the report that Michael Parkinson, sparing his blushing, was responsible for on the regeneration in the recession, what it basically said was developers will fly to quality, the public sector has to stick with it because we cannot afford for these neighbourhoods to become disengaged from the mainstream economy.[9] I think that is still the case. What I was trying to say was: whatever the level of resources—of course there is not going to be the same level, but there should be more than the zero there is at the moment—we now have, almost by accident, developed or evolved over 40 years a set of regeneration policies, governance structures and skills. We have got some very capable people in the private sector. We have got some very capable local authorities. We have got some well informed communities now. We have got the LEPs who can provide a strategic overview. We have got an agency in the HCA that understands regeneration. We can build on all these things. The foundation is there, and, as someone said earlier, everybody is looking for the silver bullet. There is none. It is a hard long-term slog of pulling everything together and getting it on the ground. We do now have the structures, and my worry is that we are going to try and invent more new things and take our eye off the ball of making work what we have got and what we have learned.

Q53 Mark Pawsey: I am getting conflicting messages then, because I am getting a message that regeneration cannot possibly take place because the Government are not putting any money into it and are not too bothered about it, and you say to us you have got engaged local authorities and great people at the private sector and that things can happen. Where does the truth lie?

Michael Gahagan: They are not mutually incompatible, because what I am saying is all the structures are there, but you do need that stimulus of a bit of public money. After all, these areas are only as they are because the private sector has fled. So you have got to have some public money in to provide that glue that holds everything together, and that then gets the private sector involved. They know how to get involved now. We know how to do the deals with them.

Q54 Mark Pawsey: How do we capture that information. Urban Pollinators have a proposal for a national learning body? Doesn't that contradict the whole principle of localism?

Julian Dobson: No, learning is about applying what you learn in a broad context to the local situation. I don't think a sensible view of localism would be to say you have all got to reinvent the wheel wherever you are. I think there is an awful lot of learning that has taken place in regeneration. JRF have a very good cache of regeneration learning, CLES similarly. What is lacking, which is inexcusable, is a way of bringing this all together at a national level to make it available. This is something that the Government did try to do, setting up the Academy for Sustainable Communities, the Regional Centres of Excellence, which were recommended in the Urban Taskforce Report. What we have seen, even prior to the change of government—and I certainly blame this Government's predecessors to some extent for this—is a disintegration of the Regional Centres of Excellence, a continual chopping and changing about the Academy for Sustainable Communities, which then went into the Homes and Communities Agency and has now been decimated within the HCA.

Generally there has been a failure to understand the importance of learning. As well as that there has been a failure to apply learning at ground level. For the last couple of years I have been doing a piece of work with Bradford Council on what they call their Regeneration Academy, training up frontline council officers to understand basically what makes a place work. The level of understanding among many people who are involved in planning, in economic development, in infrastructure related jobs about what regeneration is, why it is needed and what makes it work is very, very low. If we are going to move into an environment with much reduced resources, which clearly we are, then we need to up-skill the people who are out there at the moment, and we need to find ways of doing that. It doesn't really matter how that is done, whether it is through an exterior body like JRF or an independent body, but it does need to be done, and it needs to be a priority. There needs to be a way in which frontline council officers, developers, people who are actually involved in making things happen on the ground have access to learning. What we are finding at the moment with the reduction in public sector funding is the first thing local authorities and others cut back on is staff training and learning. We can see why they do it, but it is short-sighted and it will result in problems further down the line.

Q55 Mark Pawsey: Now I am confused. We have got the people there with those skills already, and a lot of them are going.

Michael Gahagan: Yes, I would not be quite that dismal. A lot of them are going. All my staff have been made redundant. The good local authorities are still struggling to retain their good staff, and they are managing, I think, to keep a corps of staff. That is what I am hanging on to. I agree with Julian across the piece that there is a need for better learning; there always will be. But it has happened; Pathfinders ran seminars and conferences amongst ourselves with private developers and with training providers. I do not know whether Jim's experience is the same. In my area they are just managing to keep that corps together. We did suffer from that in the 1960s. At the end of the 60s all the experience in slum clearance, in compulsory purchase disappeared, and we had to recreate that, to an extent. I think we might just avoid it this time. I am a bit Pollyanna-ish, sorry about that.

Q56 Mark Pawsey: Can you point to bad examples of regeneration that happened because of the loss of those skills?

Michael Gahagan: I always blank out of my mind the really bad ones. There were bad cases of Compulsory Purchase Orders (CPOs) that went on that were not properly prepared and that were not properly carried through the inspection process, the public inquiry and so forth.

Q57 Mark Pawsey: Would it be your fear that if we don't keep them, taking your point about not reinventing the wheel, what limited funds we can put into regeneration are going to get wasted because there are not going to be the people who know how to use them most effectively?

Julian Dobson: There is that risk.

David Orr: I'm going to tell you a good story. Because this whole question about localism has only recently become part of the public and political narrative, there's become an assumption that it didn't already exist, but of course it did. Successful regeneration: yes, it needs investment; yes, it needs to invest in housing and economic regeneration and those things; but it needs fantastic local leadership. You will not get sustainable long-term regeneration without there being effective local leadership. There are lots of small and large scale examples around the country where local leadership has made that difference. For example, in Wythenshawe in South Manchester there is a ward called Benchill, which was at one point assessed as being the most deprived council ward in the country. There was a stock transfer, and that stock transfer became the catalyst for a long-term strategic approach to reinvesting and reimagining what that area looked like. So the promise was about kitchens, bathrooms and double glazing. The reality was that first we have to make this safe. There was investment in CCTV, even mobile CCTV, so that people could begin to feel safe. There was investment in property, local facilities and the people who lived in Benchill. It is now a thriving community with a waiting list for the housing, and private developers building spec housing for sale, something that would have been unimaginable 10 years ago. It needed all of those things. You can take that fabulous local leadership and deprive it of investment and it will still be able to do things, but it will not be able to do things as comprehensively as they have been able to do.

Q58 Mark Pawsey: But to go back to the point about recession, did that happen because the economy was booming, the house prices were rising pretty fast? If we were to try to replicate that now would it still happen, in your view?

David Orr: It wouldn't happen in precisely the same way now. It would be harder to do from scratch now, but the fact of transfer created a mechanism to create investment potential. You could still do that now, although it would require some big decisions by the Treasury. But you have to have the mechanism to begin that process of investment. You need to have the cash up front that allows good things to happen, and thereby generate the kind of economic growth that makes that place sustainable and contributing to the economy rather than being a drain on it.

Q59 George Hollingbery: Did somewhere replace Benchill at the bottom of the list? Yes, somewhere did. Did you poke a balloon in one place and it stuck out somewhere else? It is something that has been intriguing me throughout all these discussions.

Michael Gahagan: If you improve an area does the one next door become a problem?

Q60 George Hollingbery: You are withdrawing resources from something somewhere else—you have to be—or some money that could have gone somewhere else. Do you poke the balloon on one side and it pokes out somewhere else?

Michael Gahagan: That is a danger, and that is why the LEPs have got a role in looking strategically across the piece. But you don't ignore the other areas; that is a very important element. The question was asked earlier about whether you invest in the areas that are likely to get over the tipping point, or do you invest in the worst first. In a sense you almost have to invest in the worst first, otherwise you will get them back into the difficulties that we faced 20 years ago. I don't think we are in that situation, but you do have that issue, and you don't ignore the other places.

Jim Coulter: The NAO looked at this in relation to the housing market renewal in 2007 and found that, on the whole, there wasn't a displacement effect because it was an anticipated effect that was more carefully managed than might otherwise have been the case.

Q61 James Morris: We have talked a little bit about localism. David, you said localism already existed. Is there anything distinctive or different about this Government's approach to localism and regeneration that you are seeing emerging?

Michael Gahagan: I think it is a difference in degree. The rhetoric is important. The ending of some ring fencing of budgets is immensely valuable, because a lot of time can be spent on trying to twist the budget to fit your local regeneration scheme. The support to some of the communities is also valuable, but I think the really important thing is the confidence of the local leadership. It has been talked about a lot. You mentioned Hulme. I was involved in Hulme, and there were a whole range of things that contributed to Hulme's success. But if I had to pick just one, it would be the quality of the political leadership and the leadership of the officers at the local authority. I think that is absolutely fundamental. They were confident enough to do it. I think if the localism can build up, generally, that confidence that exists in the best authorities, and the willingness to deal with the local communities—you have got to be confident to do that.

Q62 James Morris: There are still going to be some issues about cross-boundary regeneration. For example, the Black Country, part of which I represent, has lots of integrated economic geography, some deprived areas, some slightly less deprived areas. I think you said some positive things about the Local Enterprise Partnership's role. We talked about the Enterprise Zones earlier; the Black Country is going to have an Enterprise Zone, but you might have a situation where a lot of the regeneration just gets sucked into one place. So how do we deal with those issues? Will the LEP have the power and resources to deal with and overcome those cross-border issues, do you think?

Michael Gahagan: A LEP can be almost anything it wants to be. There is a huge variation at the moment between, at the one end, the Greater Manchester LEP followed by others such as Sheffield. Interestingly enough, Sheffield has got a subgroup, which is a joint board with the HCA on regeneration and housing, so they are not ignoring this, and they can take a strategic view across the piece. Enterprise Zones are a bit different. I was responsible for Enterprise Zones in their first incarnation, and I would recommend anybody read the Roger Tym evaluation of them.[10] They can stimulate activity in an area by bringing together a critical mass and focusing attention on that area, but there is a big dead-weight cost and there is boundary hopping. They are a mixed message and a mixed baggage, Enterprise Zones, and you do have to be very careful where they are located.

One of the interesting issues about the new Enterprise Zones is that the business rate is going to the LEP, and that will provide some resources.

Q63 Bob Blackman: Turning to the Regional Growth Fund, which obviously is the Government's view of saying, "We are going to target private sector investment in places where the public sector has been predominant," so we get the switch from public sector employment to private sector employment and grow through that. Do you think they have got it right? Is that the right approach?

Michael Gahagan: I think that is the right approach to tackling the loss of public sector jobs, but I don't think it is a regeneration approach. My personal view is the Regional Growth Fund is fine and it is serving a purpose. But you should not present it as being the answer to a regeneration problem.

Julian Dobson: I would echo that. It is about business support, and clearly, if you have business support that helps produce investment in regions of the country that are underinvested, that is a good thing. But there is a big, big question about whether that is going to produce jobs and opportunities in the most difficult and most disadvantaged areas.

Q64 Bob Blackman: If that is your view, what changes would the Government need to make in order to provide such opportunities, apart from increasing the amount of money?

Julian Dobson: The money from the Regional Growth Fund is going to businesses that have high prospects of growth, and interestingly a lot of them are subsidiaries of international and multinational companies. So there needs to be something different that is done at a very micro level, at the level of estates and neighbourhoods that are particularly stressed and distressed. That has to be about working with individuals and families to create skills, boost education, connect up with jobs where they are available and effectively to rebuild those economies from the ground up, and that will be very, very long-term.

Q65 Bob Blackman: I am sure if the Minister was sitting there he would say, "Well, yes, that's fine, but that is a local decision, that is local activity, that is not what the Government is intending to do. The Government is for the big picture issues, and those sort of things are absolutely relevant but should be done at local level."

Julian Dobson: Well if the Government is talking about strategic intervention and regeneration then it has to look at those very local areas. That does not mean it has to deliver actions in those areas, but it does need to take a strategic decision that additional investment of one sort or another needs to be applied to those areas. There is another issue, which is about the macro, much bigger picture, which we have not touched on yet but I think is relevant to this, and that is about the environmental imbalance in our economy, and the fact that areas of highest growth at the moment are the areas of highest environmental stress. There was a very interesting report that was produced quite recently by the Royal Commission on Environmental Pollution on demography and environmental change.[11] We are now seeing a situation where, for example, Thames Water is spending £250 million on a desalination plant in order to sustain the water infrastructure for London.

So at a macro level there is a very strong argument for the Government investing strategically in areas where there are fewer environmental pressures and in greening the economy in terms of new areas of business and technology that are going to provide opportunities in areas that have previously been underinvested. So, for example, there is no reason why an area like Sunderland should not be a centre of offshore wind manufacturing. So there are big strategic issues that could be done by Government that will have regeneration effects in the long term. But against that you must also link the very micro interventions that need to be connected up with the strategic interventions if benefits are to be felt by people in the most disadvantaged communities. I think you have to say: why bother with regeneration at all? Why bother with the most disadvantaged communities? And the answer to that is because they have been failed time and time again by both the private market and public sector interventions, so we have to find a way of reconnecting the interventions that we do as Government with those communities that have lost out as a result of poor planning and poor policy.

Michael Gahagan: It may be that in phase 2 the Growth Fund will move a bit more towards the regeneration dimension, but even if it does not, in answer to your question, there are things that could be done, not through the Growth Fund, but that can take off some of the benefit. I think customised training is a classic case where you train people particularly for the jobs that the Growth Fund is creating, and you try and target your training on particular communities. We have done it in the past; it is that sort of day-to-day thing that you need to do locally.

Q66 Heidi Alexander: Can I ask you all about the various new financial mechanisms that the Government are promoting to fund regeneration such as TIFs, New Homes Bonus, Community Infrastructure Levy (CIL). You don't have to say what you think about all of them. We have already touched on Enterprise Zones and we can probably leave those. What are your views on how effective these financial mechanisms will be in promoting regeneration?

David Orr: I do not think that any of these measures are specifically designed to stimulate regeneration. They are designed to do other things, and they may in the right circumstances be able to contribute to regeneration, but they are not themselves a strategic set of measures designed to create an environment for effective regeneration. Consider the construct of some of them. If Community Infrastructure Levy takes precedence over Section 106 then it might mean that there is a reduction in the delivery of new affordable housing. I don't think that would be a good outcome in housing or regeneration terms. It is almost inevitably the case that the way the New Homes Bonus is structured will lead to money being moved away from low value local authorities, mainly in the North, to high value local authorities, mainly in the South. I do not think that would contribute fundamentally to regeneration, so I think that they are measures that do, or may do, the things that they are designed to do. But I do not think they are really about regeneration.

Q67 Heidi Alexander: Would you agree with that assessment?

Julian Dobson: Yes, I would go along with that. I would say TIFs in particular work well in a rising market. It is significant that, in Scotland, the place that is piloting TIFs is in Edinburgh, which is the area with the highest values; again, is it going to address the issues that we are concerned about with regeneration? I could imagine the successor to this committee sitting here in 50 years' time saying, "Well they completely messed up about giving hope to our kids and our grandchildren, but boy, didn't they do some exciting stuff with taxing and financing?" I think a lot of it is tinkering, and there might be quite effective ways of tinkering, but they are not really addressing the important issues.

Jim Coulter: Can I just add on the New Homes Bonus, it is a point that has been made in this session and earlier, the approach of "net new" is substantially disadvantageous to areas that are going through the restructuring of their housing market stock. That is a process that will continue across the North and Midlands for quite some time to come, actually driven by communities and not simply by a technical appraisal.

The second point to make essentially is that, as well as its redistributive effects, the actual net cash coming out of New Homes Bonus is nothing compared to the interventions that we have been accustomed to. The figures for Newcastle and Gateshead for first year's allocation between the two authorities are just over £500,000. In the last financial year on new build investment through the Housing Market Renewal Programme we committed about £17 million to site preparation and infrastructure investment and so on. There is an absolutely enormous mismatch between the resource that we produced and what is actually required in order to get land to be development ready.

Michael Gahagan: We have done slightly better than that in South Yorkshire because we had more development, and we have lost about £26 million. This year's settlement is about £3.5 million through New Homes Bonus. So we are one of the better off, but still nothing like. I agree with Julian about TIF. It has got a role to play. All these things might have a role to play, largely in the city centre, but it is not what the Act is really about. I think CIF might help in the sense that it gives a developer more certainty about the tax he is facing. But I suspect that in areas like this, if you can get anything, and you may not be able to, anything you gain through CIF you will lose through Section 106. You can only tax a development once if you can tax it at all. So I think it will help the development industry a bit, but I do not think it will add to the sum total of investment or social good that comes out of the development.

Q68 Heidi Alexander: In some of your evidence you referred to other options that might be explored as well. Someone referred to Local Asset Backed Vehicles (LABV).

Michael Gahagan: Oh, yes, we did.[12]

Q69 Heidi Alexander: Could you say a little bit more about why you see potential in those?

Michael Gahagan: They are a scheme where the local authority puts in the land and a company is formed jointly with the private sector. Even with the market as it is now, there is still some activity in these. They are unproven as yet, but they might well be quite a useful vehicle. I am not absolutely sure how they balance up against the local authority borrowing. Where I have seen them—there is a similar sort of operation starting in Doncaster, for example, though it is not a full LABV—I think they could be a weapon in the armoury. But I keep coming back to this point: don't look for any single silver bullets, it is the long hard slog over a prolonged period of time with a prolonged commitment that is necessary.

Q70 Chair: My understanding is that strictly speaking 106 money has to be applied to the planning permission given for a particular development. That is what it is supposed to be, and local authorities do stretch it slightly.

Michael Gahagan: Well they are allowed to charge money instead, which can go into social housing, which I think is David's point.

Q71 Chair: But in terms of other infrastructure it shouldn't be so used, but CIL can be used, perhaps in different market conditions than today, to raise money for projects in more upmarket areas, and apply them to improving the infrastructure in more deprived areas. Isn't that one of the advantages of it? It probably won't be much use to them in the current market conditions, but in the future it might well be.

Michael Gahagan: Yes, I think that is true. I don't share David's concern that they might not put it in housing. If that is not their priority, fair enough; they are the elected representatives to decide what their priorities are. So I think it does give them that discretion, but they have quite a lot of discretion under Section 106 in many respects.

Q72 Simon Danczuk: How important is the planning system in terms of regeneration?

Michael Gahagan: It never impinged on me, to be honest, it is not a problem. In all my time in regeneration, I have only once known it be a problem. That was in Hulme, where the local authority soon overcame it. My experience of the planning system is, outside of Areas of Outstanding Natural Beauty (AONBs) and greenbelt, where there is a will, there is a way.

David Orr: I think that is probably true. It is often harder to get consent for half a dozen new homes. Regeneration schemes tend to be larger scale, tend to be a bit more strategic, and they tend to have the engagement of the local authority across the board so there is a greater understanding of what people are trying to do. No one suggests that the planning system is presently perfect, but in terms of regeneration it is not one of the major difficulties.

Julian Dobson: I will add one thing to that, which is that one aspect of the planning system has been particularly helpful: the concentration on town centres first, and the way that the planning system has militated against out of town developments over the last decade or so, and that has been hugely helpful in terms of keeping a lot of town centres alive and helping a lot of city centres to thrive that otherwise would have lost a lot of trade to out of town shopping.

Jim Coulter: Can I just add one further point on this? One of the reasons—and I agree entirely with what Mike said about planning not having been a problem, certainly in housing market renewal—is that a substantial commitment to know what you are planning, with significant community engagement, has been a critical part of making sure that people understand the process of what is going on, and support for it gets generated through that means. The decisions at the end have become more formal as a result of that in their action plans. Certainly Newcastle and Gateshead have been supported by significant majorities on local polls and local surveys: well over 60% in areas where the turnout at a local election would be at best half of that.

Q73 Bob Blackman: Given the resources are limited, given that there is a whole range of different areas to be addressed in terms of areas of the country, should we be taking the view that some areas are beyond regeneration, just leave them as they are and concentrate on areas which can be regenerated with smaller sums of money?

Julian Dobson: I think the question has to be asked because it concentrates the mind. We then have to ask why we are doing this. It brings us back to the fact that regeneration is not about theory, it is not about property. It is actually about people, and people who live in particular places that have been distressed and disadvantaged for all sorts of reasons. Now, places change. So the question is how to work with natural changes that might occur as a result of market changes, but also how to complement that with a strategic overview which says, "At a Government level, we think that investment in such and such a region is more important for the good of society than to simply invest where the market is already strong." If the market is already strong there's a question, why put extra public investment in it anyway? If you are looking for areas to reduce public investment, why not reduce it in the areas that are most likely to succeed?

Q74 Bob Blackman: My counter argument to that would be that the investment of a certain amount of public money may then lever in large scale private investment, which then helps to regenerate the area for the benefit of everyone.

Julian Dobson: You have to work out those trades off. But what I would come back to is saying that in those areas where private market has failed and where public policy has failed, there are hundreds of thousands of people whose lives have been messed up for one reason or another, and it is ethically unacceptable just to say, "Fend for yourselves."

Michael Gahagan: There are some areas that were built up in the industrial revolution which you cannot sustain at their current level. If I was a North American, in some areas I would say, "Well, tough, let them go." I suspect in this country, if only because we all live within 50 miles of those areas, we can't bear the social and political cost of that, as well as just the sheer fairness that Julian mentioned. You do have to put some money into an orderly downsizing of those areas, you can't just walk away from them. But I agree, in a sense the more optimistic focus is on those areas where you think you can get them up to the level where they can look after themselves.

David Orr: I think Benchill might have been regarded as one of these places that you would abandon. There is often a theoretical construct that says, "We have got extra properties that we do not need." For a long time there was a debate that ran in Glasgow that said, "There are four major peripheral estates, now we only need three of them. Should we just decant, close one of them down and demolish it?" The difficulty is that if you go and speak to the people who live in those peripheral estates they say, "Me and my family have been here for 50 years. We like it here, we don't want to go." If localism and the views of local people are a driving consideration, you will find it very hard to find places that you can just abandon because people have connections to those places. So you can only do it—

Q75 Bob Blackman: Can I just interrupt? Is there not a risk that you are concentrating money on the areas where you have got money and you invest, and these places just go by the board? There is no investment, nothing happens to them, and then they just go nose-diving down into a terrible state of decline.

David Orr: There is a real risk of that happening. But this is a country where the population is growing, and where our focus needs to be on thinking how do we accommodate this growing population with different kinds of household formations and different needs. Abandoning useful housing is quite a difficult thing to do. The issue here is how you create a strategic environment where those decisions are part of a strategy rather than a kind of specific, "It doesn't look like this is going to work very well so let's just get rid of it." I do think that if localism is to be a driving concern you do have to pay attention even when people in the local area say things that you don't want to hear.

Julian Dobson: I think adding to that, it is really important to assess what kind of local economy can be created in some of these places. I think that is a really important job for the LEPs. If you look at somewhere like the Dearne Valley in South Yorkshire, a former coalfield area that never really recovered from the de-industrialisation of the 1980s despite huge amounts of public investment, there is a real issue about how do you create a working local economy in that area? However, I am pleased that it is one area that the Sheffield City regional LEP is looking at, coming up with a vision for creating a working economy in that area, and I hope that works. But that is the kind of exercise that the LEPs really need to be doing in all these sort of places.

Jim Coulter: But it does not have to be at the population level necessarily in all the places that it is now.

Julian Dobson: It is about creating the circumstances in which people and places change, accept change, work with change, and create the new opportunity to live, work, invest and learn.

Chair: Finally, just brief answers.

Q76 Simon Danczuk: So in tabloid language what do you think of the Government's document?

David Orr: The Emperor's New Clothes.

Julian Dobson: Vacuous.

Michael Gahagan: If I was still in CLG I would be disappointed. A bit strong, but—

Jim Coulter: I wrote down, "Spads rule okay."[13]

Chair: Okay, thank you all very much indeed for coming to this hearing.

6   Ev 111 Back

7   Ev 101 Back

8   Section 106 (S106) of the Town and Country Planning Act 1990. Back

9 Back

10 Back

11   Demographic change and the environment,  Back

12   Ev 114 Back

13   Spads = Specialist Advisers to ministerial departments. Back

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Prepared 3 November 2011