Examination of Witnesses (Questions 199-249)
Q199 Chair: Good
afternoon, and welcome to you all to our fourth evidence session
in the inquiry into regeneration. Just for the sake of our records,
could I ask you to say who you are and the organisation that you
represent?
Ken Dytor: Ken
Dytor, representing the British Property Federation.
Chris Brown: Chris
Brown from Igloo Regeneration.
Dennis Seal: Dennis
Seal from Kier Residential Regeneration.
Q200 Chair: Right,
you are all most welcome. Thank you for the written evidence
you have given us so far and for coming today to give oral evidence
as well. The Government have issued their paper Regeneration
to enable growth. Do you think that a sufficient way forward
is identified to stimulate regeneration and enable it to happen?
Ken Dytor: Absolutely.
I think that the DCLG paper sets out the current range of Government
initiatives quite comprehensively. What is refreshing is the
fact that regeneration is back on the agenda. At the BPF, we
were disheartened that, at the last election, regeneration fell
off the manifesto of whatever party. I think it is very important
that we bring it back on to the agenda, because it is crucial
for the economic sustainability of this country that we take a
comprehensive approach to regeneration.
Chris Brown: I
would just add to that that perhaps you might describe the paper
as a statement rather than a policy. I think this inquiry is
really welcome, because hopefully it will start a debate with
Government, although I am slightly worried that they may be defensive
rather than proactive in the debate. I would like to see them
moving towards a proper regeneration policy, and I hope this process
can help take us there.
Q201 Chair: "Proper"
can mean a lot of things.
Chris Brown: Better
worked out than four pages of A4.
Dennis Seal: Within
the document, I think that there is a risk of not knowing what
works and, as a result, not knowing what needs to be done. I
think there is a lot of change happening within the report. Things
like reduction of grants, the switch from social to rented housing,
the move to localism and a lot more are confusing in some respects,
and we have yet to get to grips with that. An analogy is that
it is like ducks on a pond and how we put them in a row. That
still has to emerge.
Q202 Chair: You
just mentioned the issue of public funding. Obviously there are
reductions in public funding right throughout, including with
local authorities and central Government schemes. Also there
is a national economic situation where the building industry does
not have an awful lot of work. Do you think the Government's
proposals in Regeneration to enable growth really address
the situation that the country finds itself in, both in regard
to the spending cuts and the economic situation that the industry
faces?
Dennis Seal: In
there is the basis by which that could be achieved, but we in
our industry have a learning curve to understand all the different
parameters within that document and all of the different changes
that have occurred. As a result, it will take us a little bit
of time to respond.
Q203 Chair: How
long?
Dennis Seal: We
have to work up live schemes and understand how they work through
the system. In regeneration terms, that can be anything from
six to 18 months.
Chris Brown: I
do not think that the document faces up to the lack of private
sector funding that is out there at the moment. It is not just
the lack of public funding for regeneration; it is the lack of
private funding for regeneration as well. The mechanisms that
you would need to bring what private funding there is available
to bear on regeneration are just not talked about in the document,
so that is things like aligning the public funding flows from
all sorts of different programmes so that we can use what public
money there is to attract private money, and doing things like
rental guarantees perhaps, or using public assets to attract what
private money is out there. None of that stuff is really picked
up in the document.
Ken Dytor: I would
endorse that and go further. One of the things that we are doing
well as a country is attracting internal investment into the UK
from abroad. There are great opportunities at the moment to attract
investment into the UK. I think that UKTI could be doing more
to manage the process of talking to foreign Governments and wealth
funds to parcel up the opportunities so that we can work with
them to attract investment from abroad. I work a lot in China
and at the moment, for example, there is a great opportunity to
attract investment from there. We should be doing more comprehensively
as a country, through UKTI, to patch up the cash flows into the
UK and to start selling these UK regeneration schemes. There
are some very good stories to tell.
Dennis Seal: I
agree absolutely.
Q204 Heidi Alexander:
Chair, may I ask the witnesses for some context nationally? In
my constituency, there were a number of regeneration schemes that
were always on the edge of viability and required public sector
funding to make them stack up. In your experience, how big a
problem is that across the country, with stalled regeneration
schemes that may have taken four or five years, but now might
take 14 to 15 years? That would give us a sense of the scale
of the problem.
Chris Brown: We
are very much a national organisation. For us, by definition,
a regeneration project requires public subsidy, otherwise it is
just a property development and it happens in the normal course
of events. Our experience at the moment is that because of the
lack of public funding to subsidise such projects, there are almost
no projects anywhere in the country that can go forward at the
moment. For us, pretty much every regeneration project in the
country has stalled. There are a few exceptions, because there
might be a major occupier that is prepared to go to a site, but
I would say that something like 90% of major regeneration projects
are stalled at the moment.
Ken Dytor: I would
endorse that.
Q205 George Hollingbery:
As a corollary of that, over the past 10 or 15 years, an awful
lot of public money has been available for regeneration? The
more I talk to people about this, I suspect that that has actually
stymied creative thinking in the private sector about financing
options. Are there financing models out there that require some
flexibility in the public approach that you could bring to bear
if the public sector could open up itself to a bit more creativity?
Dennis Seal: I
think that we are beginning to see some evidence that there are
products that may come to market in the near future, but I still
think that some of them may be six months away.
Q206 George Hollingbery:
Nevertheless, there is a well of private money out there. Should
it be able to be allied to certain cash streams to shape investment
that does not currently exist so that we might be able to find
our way forward?
Dennis Seal: From
what I understand, there is money available through institutional
investment.
Chris Brown: Can
I just jump in there? The answer is that there is not for something
that is called "regeneration", but there is for something
that is seen as lowrisk cash flow. It is turning regeneration
opportunities into lowrisk cash flows that we need to do,
if we are going to get private money.
Q207 George Hollingbery:
Is there not a confluence between affordable housing, housing
benefit, local housing allowance and lowrisk cash flow?
Chris Brown: That
is definitely one of the places to look, yes.
Ken Dytor: We need
to be getting cleverer at the way we package the cash that is
coming out of Government. I have long been arguing about the
fact that there are capital cash flows going into health, education,
housing, etc. We need to be looking more cleverly at how we harness
those cash flows. They are in silos still, such as university
funding, and there are opportunities to break down the barriers
for mixedused developments. A lot of this—universities
and education—can be in areas where you need regeneration.
Let us be a lot cleverer about how we use those cash flows and
how the schemes are put together. The silo mentality still exists.
Q208 George Hollingbery:
Sure. If we could leverage the massive cash flows across Government
going into one regeneration area, we could achieve an enormous
amount of fabric being put in place.
Ken Dytor: Yes.
Q209 Mark Pawsey:
We have touched on the need for regeneration across a broad field.
There are some schemes that are very serious, where there are
massive demands, and others that are quite marginal. Does the
Government's approach effectively identify those areas that are
in greatest need? Does it enable us, if we have fewer resources,
to target those resources and the areas where we can achieve the
best results?
Chris Brown: One
of the concerns we have is that there are various policies coming
through that are not regeneration policies per se. They are tending
to shift capital to the areas that already have—the highervalue
areas. These are things such as the New Homes Bonus. More money
will be released by the New Homes Bonus in areas where building
homes is already viable. That almost automatically unlevels
the playing field, so regeneration areas find it harder and the
more prosperous areas find it easier. That is my major concern
in this area at the moment.
Dennis Seal: That
is correct. Most of my experience is more confined to London
and the south-east, but it is perhaps easier to make opportunities
work in those areas.
Ken Dytor: I think
it is a question of identifying the resources available. I still
feel very strongly that there is a need for an audit over resources
in areas. The Regional Development Agencies have now gone—I
am not commenting at this moment about that—but there is
a need to identify the resources in areas that can be applied.
Until we do that and we can see the cash flows around that, talking
about what goes into deprived areas becomes slightly meaningless.
We need to look at the overall piece of what is there, in terms
of what resources are available in an area, how they can be harnessed
and how they can be harnessed into those areas where there is
a need for such investment.
Q210 Mark Pawsey:
Do you think the Government are sufficiently clear about what
regeneration should take place and where, compared with redevelopment
and where economic growth should take place? Are these terms
mixed up in the document, or are you happy that the Government
are sufficiently clear in their own mind about what they mean
by regeneration?
Chris Brown: The
Government always used to be clear and had a very clear definition,
but the policy narrative at the moment is so much dominated by
growth that the issues around deprived neighbourhoods have been
forgotten. The document reflects that.
Q211 Mark Pawsey:
So do you think there is a danger that, in some areas, the cost
of regenerating is so high that they might be left on one side
in the present climate?
Chris Brown: It
is a really difficult decision as to where you focus limited funds
for regeneration. We have had a discussion about how to focus
funds, but the question of where is also very difficult. There
are undoubtedly some areas—often the areas of greatest deprivation—that
are the most expensive to do that. If you do not have unlimited
resources, it might be better to put money into those areas that
are less expensive to bring back into the market rather than the
most deprived.
Q212 Mark Pawsey:
In the present climate, would you be happy to put those on one
side and wait for the general economic climate to become better,
and then come back to them properly later on, rather than having
a halfhearted attempt at them now?
Chris Brown: You
cannot completely put them to one side. There are people living
in those areas who are in desperate need. If you cannot bring
them back to the market, you have to have a different strategy
for managing them.
Dennis Seal: That
is very appropriate. It is incredibly difficult to make schemes
work in certain areas—this is the viability of schemes—but
it is those areas that often need the most effort and time. The
question is really approaching this with a cando mentality—to
find ways of making this work. We have an obligation to grow
our market, so we need to bring along the investors, funders and
the whole complex system. Going back to the first question, we
have to understand this ourselves to be able to make it work,
and to bring along the resource, skills and expertise that enable
that to happen.
Ken Dytor: I would
endorse that. There are limited resources available; we have
to make best use of them. I am not sure that we have identified
the outcomes sufficiently—this is what makes a good outcome—because
we do not want to waste money. We have to use our resources very
carefully.
Q213 Simon Danczuk:
Just in terms of limited resources, do you think competition among
areas—a formal competition that we now see with enterprise
zones and also with the regional growth fund, and as we saw originally
with city challenge, where areas are competing for a limited budget—is
a good way of doling out the money from the Government? Should
it be down to Government identifying which areas should get it,
as opposed to having formal competitions?
Chris Brown: I
think it is a bit of both.
Ken Dytor: I was
going to say both—very much so. I think you need both.
Competition is a good thing, because that is where we all need
to raise our game. We need to get better outcomes collectively,
wherever it is. Equally, however, we actually need to identify
those areas that, for whatever reason, cannot survive. We do
need to make sure that that angle is covered at the same time.
Q214 Simon Danczuk: Are
you saying that better bid writers get the cash rather than those
who need it?
Chris Brown: I
would agree with my colleagues that a competitive process is valuable,
but the onus is then on the people judging the competition, because
what you cannot have are the hardest places losing all the time.
You have to be very good at judging those competitions and understanding
where their starting point is.
Ken Dytor: Procurement
process and bidding are areas where we need to improve. We have
wasted far too much money in competitions that have gone nowhere.
Q215 Heather Wheeler:
I am the new girl on the Committee, so I have been following this
with great interest. My background is that I have been dealing
with regeneration issues for 30 years. The conundrum for
me is: are we talking about regenerating an area and making it
greener, or are we actually talking about economic well-being
and numbers of jobs? Then, are we talking about apprenticeships?
Which bits of the packages ought to be put together, or should
we be talking about only one element?
Ken Dytor: No,
you have to look at it in the round. First and foremost, we have
to go for economic health and sustainability because from that
flows these other equally important agendas. If you take away
economic sustainability, you are on very weak ground, in my opinion.
We need to drive forward the economic strength of areas, but
that does not mean that sustainability, education and health go
by the board. They do not, because there are outcomes that are
as fundamental.
Chris Brown: May
I address that slightly differently? There are two precursors
before you can start doing regeneration. One is subregional
economic prosperity. A lot of what the LEPs are doing is around
that agenda. The other is people having the incentive to work.
What the Government are doing in relation to Universal Credit
is around that. If you have those two in place, you have to do
the social, the economic and the physical. We have learned over
decades that if you only do two of those three, it does not work.
You have to do all three.
Dennis Seal: The
act of building creates opportunity in itself. The act of regeneration
creates opportunity. It creates apprenticeships and training
programmes, but the longer term is actually the physical—what
we physically put in there to ensure that there are employment
opportunities that last for a lifetime.
Q216 Chair: Do
you think that the Government have that balance right at present?
Chris Brown: I
think that the Government are actually doing quite well on the
preparatory side. I do not underestimate the challenge around
universal credit and the subregional prosperity challenge.
That probably is the place to start but, once you have made progress
on those two, you then have to come to regeneration. I do not
think they have got to the starting line there yet.
Q217 Mark Pawsey:
Have we got the physical right though, because we took evidence
in Manchester that the physical regeneration can be done badly
and can actually make things worse? Are we using this time when
things are a little bit quieter to make certain that the plans
that we are bringing forward are the right plans?
Chris Brown: No,
we are not. One of the things that I am concerned about is that,
as part of the localist agenda, the Government have abdicated
on standards, particularly design and environmental standards.
They have said, "These will henceforth be local."
Actually, it is a huge challenge for local government or communities
to come up with design and environmental sustainability standards.
Q218 George Hollingbery:
Is that true? We have not seen the National Planning Policy Framework
yet, so how do you know that?
Chris Brown: The
Government have made that statement. HCA standards have been
dropped.
Q219 George Hollingbery:
We have not seen the National Planning Policy Framework yet, and
I suspect there will be a great deal in it about design and sustainability.
Chris Brown: All
Government statements are about local standards. The Government
may well say in the National Planning Policy Framework that design
is important but, in terms of the standards to which we operate,
they have said, "They need to be local." Our challenge
will be that we might have 300 to 400 different sets of standards
around the country, which will be very difficult for the private
sector.
Dennis Seal: There
is a distinct difference at the moment between the LDA standards
and standards outside London, which is quite marked in terms of
size and area.
Ken Dytor: This
is very important if we are going to attract external investors
in as well. We need standards people can understand.
Q220 James Morris:
There have been a lot of changes in the institutional framework
in the regions. You were alluding to the abolition of the RDAs
and the creation of Local Enterprise Partnerships. What is your
initial assessment of the impact of that institutional change
on regeneration, just as an initial thought?
Chris Brown: May
I just introduce that with a very short bit of history? Probably
about 15 years ago, we got the institutional framework for
regeneration wrong and we split economic from housing from social.
Where we are now is potentially moving to a better place. That
is not so much with LEPs as far as regeneration is concerned,
because LEPs are primarily about economic development and not
about areabased regeneration, but the framework I see emerging
is local authorities in the lead with HCA in support. If we can
get HCA to be a more holistic regeneration agency, and not just
housing-focused, I think that that combination might work.
Q221 James Morris:
Mr Seal, you were quite critical about the potential of Local
Enterprise Partnerships in the evidence that you presented to
us, saying that you did not think they would be able to provide
the kind of environment for regeneration. Will you just elaborate
a little bit more about that?
Dennis Seal: It
is an area in which we are looking at how a business such as ours
can fit within the delivery. Actually, LEPs are more positive.
We understand them more. We are now involved in working with
a number of LEPs and have seen the benefits from that. In fact,
I think our view is positive, as opposed to what we originally
put in the report, so we changed our minds.
Q222 James Morris:
What made you change your mind?
Dennis Seal: Because
we have a better understanding, but also because we are working
with them. As I think I said at the beginning, the more we understand
and the more we work these new initiatives, and the more understanding
we get from working within them, the better we are able to measure
their ability, success and what they can deliver in the wider
field.
Ken Dytor: I agree.
LEPs are seen as a good thing in principle. There is a need
for local bodies with a focus on delivering economic development.
The bottom line is actually how local authorities work with local
organisations and also business. What this does do is to force
an emphasis on publicprivate partnership, which actually
I think is much needed. Historically, there was too much activity
taking place that actually was not true publicprivate partnership.
The detail will prove whether or not that works, but it has the
potential to deliver much better solutions.
Dennis Seal: One
of our concerns was also that as the skill base for the RDAs was
actually transferred as part of the process, we should not lose
the skills and the knowledge base that we had.
Q223 James Morris: There
is just one further question. A couple of you have made allusions
to the Government's localism agenda. I cannot quite work out
whether you see it as a barrier or an opportunity. I know that
is slightly tangential from my first question.
Chris Brown: My
response would be: in regeneration, you absolutely have to have
a locally-led process, so localism is absolutely the right approach
to regeneration. However, you also have to transfer resources
from wealthy places to places in need. The danger of the localism
agenda is that neighbourhoods are left to sink or swim, and the
deprived neighbourhoods will sink.
Q224 David Heyes: You
mentioned concerns about the skills base. May I try to tease
out a bit more about that? These public sector bodies—the
RDAs, the local authorities, HCA and the other local bodies that
you mentioned—are really the repositories of specialist
expertise in regeneration. Is there enough of it about? Does
it exist in the right type and the right quantity for you to be
able to work with?
Dennis Seal: There
are certainly some difficulties at the moment. Again, we are
looking at a range of regeneration initiatives across London and
the south-east, and into the midlands, and we deal with a number
of public sector bodies and local authorities. Within those,
the skill base is completely different. No one area is the same
as another. It is very difficult to generalise. The important
thing is that there is a need to maintain skills and to bring
skills in. If we are looking at the localism issues—where
the best decisionmaking processes are going to be at a local
level—it is not very good having something sitting in London
making a decision for down on the south coast. However, we do
need to have support and skills that are able, and can be brought,
to support localism and its delivery in local communities.
Chris Brown: As
a generalisation, we have lost a huge quantity of people with
regeneration skills, and that is in not just the public sector,
but also the private sector. However, as we are also doing a
lot less regeneration, it will become a problem only if we try
to ramp regeneration up, and then in some places it will become
a problem very quickly.
Ken Dytor: There
is a potential tragedy here, because we actually had built up
a skill base, particularly in urban regeneration companies and
so on. I went to see a number of them a couple of years ago,
and there are some really dedicated people in these pockets—Blackpool,
wherever it might be. They have just been closed down en masse.
A lot of those people were towards the end of their working careers
and have just gone into retirement or whatever. That is a great
shame, because there was an enormous amount of skill and we should
be looking hard at what we can be doing to harness those sort
of people and bring them back in to make sure that there is a
crossover with the new younger breed of people coming through
into regeneration when, as Chris says, we get recovery.
Q225 David Heyes: You
pose the question, so what can we do to retain those skills?
Is the damage too deep? Has what has happened so far been so
damaging that this is beyond repair? What shall we do?
Dennis Seal: I
do not think that the damage is so deep it is beyond repair, because
I still see evidence of very good and capable people working in
the sector. The danger is that if we are not able to continue
the stimulation of regeneration, we will lose those very good
people as well.
Q226 George Hollingbery:
Chair, I am sorry to be a little wonkish, although I would not
say it was deliberate, but the question I was asking earlier about
financing models—
Chris Brown: You
are talking to three wonks, by the way.
George Hollingbery: I
do not mind; I feel at home.
On public sector land sales, I have had the opinion
given to me from several commercial quarters that there is a potentially
enormous opportunity being missed here in that if you just have
a fire sale—a garage sale; a bringandbuy sale—of
lumps of public land, you are basically going to get a few quid
for the public coffers and not much of a result. There is real
potential here for new models of working: co-operation between
private and public; different ways of using that land; mixed tenures;
financing across; and the 80% market—all of these things
working together. Kier was particularly voluble about this.
Can you elaborate a little about what you think we might do and
how we might use this opportunity more effectively?
Dennis Seal: I
think Chris put it quite well earlier: it is cash flow and projects.
We are looking at derisking schemes. Some of that derisking
might be through deferring the land payments, such as is available
within the HCA's Public Land Initiative and Development Panel,
which I think is a very good and positive scheme. It is something
that we can quickly get to identify opportunities. We can engage
quickly as part of the procurement process and get the schemes
to site very quickly. The opportunity is there to look at how
we can deliver through the rented market—whatever that rented
use may be—to build and develop those schemes now, perhaps
to cash flow the building works of those schemes as a contractor
would, and then to look at how we can bring on the institutional
investors to take those units.
Q227 George Hollingbery:
In effect, what you are saying is that there is a real opportunity
here to carry out experiments in unitising, securitising, and
sorting out something to do with rental flows on those properties
in these areas.
Dennis Seal: A
lot of the industry today—my colleagues will comment—has
been looking at this for some time and will be moving forward
with that as part of their business plan.
Q228 George Hollingbery:
So it is "needs must", but there is real room for innovation
here.
Dennis Seal: There
is very real room for innovation.
Ken Dytor: It has
been there for a while. BPF worked very closely with the HCA
two to three years ago on raising the private rented sector initiative.
It was very unfortunate that it never really got off the ground.
We went out to the market jointly. We found that there were
something like 67 expressions of interest from institutions—from
Legal and General and others—to invest in the private rented
sector initiative. Probably more than ever, we need a strong,
solid private rented sector initiative in the UK. It would help
to stimulate building. The investment is there for it. In that
situation, you can put the land into joint venture with those
investors and the contractors, and definitely create a new model.
Q229 George Hollingbery:
I presume that you gave the local authority or whoever had that
land a kicker at the end of it.
Dennis Seal: It
is a good use of the assets because one can look at the appreciable
changes that will occur in the future. If, as one hopes, growth
returns, there will then be an upside.
George Hollingbery: And
hopefully off balance sheet for the Government as well, which
no doubt would be welcomed.
Chris Brown: Can
I just jump in with a techie point picking up Dennis's thing about
the HCA delivery partner panel? When that was originally designed,
the kind of innovation you are talking about was designed into
it. It is not actually being used like that. It is being used
primarily just to sell sites in the normal way.
Q230 George Hollingbery:
That brings me right on to the next question—why? Is it
the public sector not trusting the private sector? Is it some
sort of mistrust of the motive—"We are just trying
to get our sticky fingers on public assets"? What is it,
and how do we get over the problem that means that these things
have not happened in the past 10 years when they should have
done?
Chris Brown: For
me, it is primarily cultural. The development industry tends
to give public sector landowners the feeling they are being raped—and
generally they are. We need to find transparent processes whereby
the public sector in particular can have confidence that that
is not happening. It is actually a huge challenge. Changing
the minds of local authority estates directors that there is a
new way of doing things is a really big ask.
George Hollingbery: This
is exactly where I sit. It is a very exciting model, because
there is a pool of money out there that is looking for steady
cash flow, but this is a real barrier. I am just not quite sure
I see how we get over it, other than by the Government instructing,
but as we know this Government are not keen on instructing. I
shall leave that hanging.
Q231 Bob Blackman:
We know that public sector finance is going to mean smaller amounts
of money. You have given us evidence that private sector money
will also be in short supply. Every regeneration scheme that
I have ever heard of has required not only public funding, but
private sector money to be invested—to be leveraged—as
a result. Given the circumstances, what does the public sector
have to do to lever in the private sector money?
Chris Brown: The
gap for me is at the first stage of the regeneration process.
If we can get an area regenerated, there is plenty of private
sector investment to come and take out the initial capital. It
is that first stage. We have talked a bit about innovation and
flexibility. Probably the thing I would describe it as is "guarantees"
or "risksharing". If the public sector is prepared
to take part of that risk at that first stage, the private sector
will finance and that will get us through to where the bulk of
the money is. It is actually not that difficult, but it does
require a different mindset from the public sector.
Dennis Seal: Again
it goes back to the delay process. If a scheme does not get on
to site for 18 months or two years, that is the issue, as Chris
said. How can we lock into funding today that we do not need
for two years? It is almost the chickenandegg scenario—which
comes first? For us, it is actually securing the opportunity
and then being able to go to the market to deliver the financial
aspects of it. What we need to know is that the market is actually
going to be there in 12 months or two years' time.
Q232 Bob Blackman: One
of the key concerns from the public sector's perspective is going
to be, "We do not have much money, so we want to concentrate
on certain areas that are going to produce the best potential."
Who decides what that best potential is, given that the public
sector is going to invest up front in the hope and expectation
that the private sector invests afterwards, but it does not have
a great track record of identifying where that is going to happen?
As you say, it is a chickenandegg situation.
Dennis Seal: The
alternative is to try to bring it along at the same time.
Ken Dytor: I was
going to say that it is all about confidence and getting public
and private partners working together. There was a letter that
went to the DCLG Secretary on Friday from BPF and the Local Government
Association about how we move forward the process for relocation
of business rates, enterprise zones and tax increment financing.
These are measures that ought to help to improve confidence and
to bring finance to the table in different ways, but they are
all moving very slowly. We need to move things faster. It might
be 2013 or 2014 until we see tax increment financing coming through.
The letter was saying can we please—on both the public
and private sector side—move these initiatives forward,
because that would help to give confidence.
Chris Brown: In
relation to who decides, the process with which we have success
in the past has been when the public sector sets out its priorities
very clearly and then goes to market and says, "Help us deliver."
You have two stages. The public sector is saying, "Out
of the universe of opportunities, these are the ones that we want
to do," and then the market comes in and says, "Out
of that group, these are the ones we think we can do."
Q233 Bob Blackman:
In your written evidence, Chris, you said that complexity has
to be taken out of this whole process. What are you talking about
there? What has to be done to remove these barriers?[1]
Chris Brown: Maybe
this is completely naïve, but I would like a very simple
situation where a local authority says to me, "That is the
area we want to regenerate. We are prepared to guarantee 70%
of the rental income from your development. Come and develop."
If the public sector is prepared to take that level of risk,
I can finance it. Actually, it is not using any cash and it is
very unlikely to make a loss if it is only 70%. I am looking
for a simple tool along those lines. There is a lot of complexity
in some of these financing arrangements, which are going to be
very hard for some of us to navigate through.
Ken Dytor: We need
to change the culture. We have to get away from "them and
us", because actually it is in our mutual interest. At the
moment, the private sector is finding it very difficult to get
anything under way. The public sector wants to get things under
way. We have to find a better way of working together.
Q234 Bob Blackman:
This all covers initiating schemes. By their very definition,
regeneration schemes tend to be longterm investments and
longterm development. We have already heard evidence of
areas of the country that have had 30 years in which millions
of pounds have been poured into them, yet the deprivation is still
the same. Their evidence to us is, "You have to keep pouring
the money in otherwise nothing will happen." Do we carry
on with that? Is that your view, or should we take some radical
steps and say, "Sorry, you've had enough," and cut it
off?
Chris Brown: I
am not sure about the 30 years, but certainly over the past 15 years,
we have had some substandard regeneration programmes in this country.
I know you have Lord Heseltine here next week, so you might
want to ask him this, but from my perspective, the best we ever
got was City Challenge, which was probably about 20 years or so
ago. A number of the City Challenge areas actually have been
successfully regenerated. If what we are looking at are small
areas that we now do not think about, because they are operating
as normal places, it was the case that when we had those areafocused
teams and we did the social, economic and physical together, we
succeeded. I was here when Robin Wales was here, and there are
parts of Newham where, given some of the rubbish that is being
built, we are going to have to re-do it in 20 years' time.
It has not been done well.
Q235 Mark Pawsey: Why
did we not learn the lessons of City Challenge, if it went wrong?
How did it go so wrong?
Chris Brown: I
hate to say this but it was political. There was a view that
focusing large amounts of capital on particular neighbourhoods
was less attractive politically than spreading it. Through the
Single Regeneration Budget, we spread a lot of money very thinly,
so we failed to regenerate a lot of those places.
Q236 Heidi Alexander:
I just want to come back to the issue about derisking regeneration
projects at the beginning. Some of the mechanisms for doing that
will involve money. I am thinking of a regeneration scheme in
my own constituency in Catford. If you are going to decamp 300
properties, you are going to have to use the private rented sector
to put people in to get a site ready for regeneration. Where
is that money coming from? The local authority is looking at
its budgets thinking, "We are going to have to try to cough
this up some way to do it." You talk about a combined capital
pot if you can put all the stuff that is coming in through education
and health together. That will not work in Lewisham. A lot of
that investment has already taken place. We have had BSF; we
have had the lift schemes. I would just ask you where that money
is going to come from to derisk the scheme.
Ken Dytor: Just
going back on BSF, because I actually I did a lot of work on it,
the trouble was that it was siloed. Now, if you had those same
capital flows coming through on BSF, you could do a lot more with
them.
Q237 Heidi Alexander:
They are not there.
Ken Dytor: They
are not there anymore—I appreciate that absolutely—but
we need to go out and see what is there going forward. It may
be in your area it is not there, but there are other locations
where there is money. We just have to be a lot cleverer about
the resource that is available. We also need to bring confidence
back to put in place new structures, whether or not we put the
land in. We have already heard from Chris and Dennis that investment
will come into those situations in key locations where the land
is put in. An income flow can be created. Affordable housing
is an area in which people will invest.
Dennis Seal: There
is an opportunity, with the assets being put into new initiatives,
for contractors to build, for institutional investors and investors
to buy, and for local authorities and RPs to manage. There are
innovative vehicles for delivery that can be created around that
scenario, and that is very simple. It is commercial leases; head
leases.
Q238 George Hollingbery:
It is not beyond the will of man to create a product that creates
300 dwellings elsewhere. It may be in a caravan park to begin
with.
Dennis Seal: The
question actually comes back to the end. Again, this is a point
that was well made by Chris: who takes the lease? Who takes that
lease at the end? If it is the Government, that is fine.
Q239 Simon Danczuk: I
wanted to ask about enterprise zones, particularly starting with
you, Ken, because the British Property Federation evidence seemed
to suggest that they were a good idea.[2]
That is not the impression I get. One academic described them
as a "recycled experiment". The Work Foundation core
cities group think-tank said that they create displacement in
terms of jobs and design standards in some of the locations were
not very good. Somebody else said that they benefited property
owners at the expense of local people—I do not know if that
is why your organisation is in favour of them. What is the panel's
view of enterprise zones?
Ken Dytor: Our
view is that we have not got a problem with the concept of enterprise
zones but, at the moment, they offer very little that would stimulate
new development. There is not a lot in enterprise zones that
local authorities could not do themselves, to be perfectly honest.
There are no real incentives; there is no pumppriming.
Enterprise zones are okay in principle, but I can understand
some of the concerns that are coming out elsewhere because we
have them as well. There needs to be a lot more detail in and
support of the enterprise zones to make them successful.
Chris Brown: I
would say something very similar to Ken, but come to a slightly
different conclusion. I would say that, on balance, they are
a bad thing. They are bad either because they are located out
of town—they will undoubtedly move occupiers from inner
urban areas to out of town—or because when they are in town,
there will be huge displacement effects across the boundaries.
Actually, "huge" is probably an overstatement, but
there will be displacement effects at the margin with occupiers.
Our concern is that, for example, the enterprise zone plan for
Birmingham is around the city centre. The area that is going
to be negatively affected by occupiers who will no longer go there
is much bigger than the area of the enterprise zone. We are actually
seeing developers losing confidence because they are outside the
boundary, and there are many more of those than there are developers
inside the boundary. On balance, we think they will be negative.
Dennis Seal: My
main experience of them is in looking at the Royals.[3]
Perhaps for that area and location, it might have some merit,
because there is the opportunity in the Royals. They are large
areas—they are very sizeable sites—but there is also
potential for a lot of residential development. Without the regeneration
in a more commercial vein, it would be very difficult to stimulate
extra growth for the residential sector. That is perhaps evidence
of where, personally, I think it might work. In other areas,
and certainly in respect of Birmingham, however, I think there
are issues.
Q240 Chair: We
have just talked in the last few questions about the need for
local authorities perhaps to rethink how they do things and to
take different approaches. Are there any good examples around
the country of authorities of which you can say either that they
have got it right, or that they are beginning to get it right
and to think in the right direction?
Chris Brown: I
will give you a couple. To be very boring, I will start with
Manchester.
Chair: We have just been
there on a visit, actually.
Chris Brown: The
example I would use is what they are doing with their Evergreen
fund, which is JESSICA funding. They have built what I think
will be quite an effective financing mechanism on the back of
quite a small amount of European money. The other example I would
give would be Wales. Wales has confidence about its ability to
work within the constraints of European funding rules. It has
done things like giving guarantees on buildings and it has taken
risks. In the past couple of years, it has made some good projects
happen, and we do not really see that with many English local
authorities.
Q241 George Hollingbery:
I am sorry to interject, Chair. We took evidence in Manchester
that there was some reluctance in the Treasury to sanction schemes
that were innovative and leveraging out for private capital.
Is that also the case in your experience?
Chris Brown: We
work within a framework of European and Treasuryinspired
rules, which we kick against on a regular basis and get very frustrated
by. If they were flexed and moved, we would be able to do a lot
more.
Ken Dytor: On the
other side, we, at BPF, had a meeting with DCLG recently. The
DCLG officers told us that they had certain local authorities
that did not even know what JESSICA was, which I think is almost
criminal, if not negligent. We certainly need to ensure that
the knowledge base about the tools that are available is improved
by far.
Dennis Seal: I
do not have any examples.
Q242 Steve Rotheram:
This actually follows on from what has just been said. Despite
the document admitting funding schemes such as JESSICA—and
also, from a Merseyside perspective, things like the son or daughter
of Objective 1[4]—the
question is really how the Government best capture European funding
for regeneration projects in England.
Chris Brown: I
have two responses to that. One is that I think it would be horrendous
if we sent ERDF money back to Brussels. There seems to be some
mood music from the Government that that is potentially an acceptable
outcome. We need to be using local authority assets, the regional
growth fund and private money to match the ERDF money and get
it spent. That is about now. In the future, the next programme
is going to be very challenging, but there is a reasonable chance
that JESSICA will be the model for the use of European money in
urban areas in the future. What we should be doing now is learning
how to use JESSICA. We are doing that in some parts of the country,
but not everywhere, and that is a real shame.
Dennis Seal: I
have not used JESSICA at all, so I cannot comment on that.
Q243 Bob Blackman:
What evidence have you got that the Government are leaning towards
ERDF money going back to Europe? Is this an inclination or a
published policy?
Chris Brown: I
think this achieves the status of gossip at the moment. We have
been involved in JESSICA initiatives, particularly—actually
Merseyside would be one of the examples—where it has been
incredibly difficult to align the matched funding to allow us
to capture the JESSICA money. The only outcome, if we cannot
have the matched funding, is the ERDF money goes back.
Q244 Bob Blackman: That
is just bizarre. Can we also have a copy of the letter that has
gone to DCLG on these issues?
Ken Dytor: Yes.
Q245 Heidi Alexander:
Can you tell me how important you think it is that the planning
system is reformed for effective regeneration?
Dennis Seal: I
thought to some degree it had been. I worked for a while with
SECBE—South East Centre for the Built Environment—and
we worked with 70 local planning officers, I think, as part of
that region. We had a number of proposals that we submitted through
SEEDA to look at some of the planning issues. The problem we
faced was that very few of those were ever really adopted. In
the way in which we are moving forward now, and again with looking
at localism, there is a general fear that the planning system
will not serve the market. It will be too slow to react, and
it will take too long to deliver planning consents through that
local agenda.
Q246 Heidi Alexander:
You are concerned about neighbourhood plans, neighbourhood forums
and bringing forward comprehensive regeneration schemes. You
think they will slow that process down.
Dennis Seal: Yes,
very much so.
Chris Brown: I
would have a couple. I am actually a great fan of neighbourhood
planning, but the amendments that have been introduced in the
Lords have horrified me—Ken will have a different view.
You are trying to encourage communities to get involved in this
stuff, but in my view, offering the prospect of businessrun
neighbourhood plans that are there only to promote business will
scare a lot of communities off. Actually, it would probably have
been better for regeneration if we had just left the planning
system alone, because the planning system has not really been
a problem for regeneration.
There are a couple of specifics that I am very concerned
about: one is the proposed change to the Use Classes Order. That
is allowing business use to become residential use. That could
desolate places like Silicon roundabout,[5]
and all sorts of really great mixeduse regeneration would
just disappear. The other one is the mismatch between planning
policies on affordable housing and the new Affordable Rent Grant
system. What we effectively have to do now is that, every time
we do a project, we have to have two negotiations. If you were
designing a system to slow things down, as Dennis says, that is
the one we have now gone into.
Ken Dytor: The
members of BPF would probably have mixed views about it. Some
would probably say that the planning system is not a problem;
others would be spitting and cursing saying it is a major problem.
My own personal view is that, in fact, I do not think the planning
is the problem—it is the attitude of mind of various councils.
Some councils are actually brilliant in seeing through schemes,
and others are actually hopeless. That is the big problem; it
is the culture that exists in certain councils of how they apply
themselves to the process. My own concern is more about the procurement
process than the planning process.
Q247 Chair: That is a
general problem, is it?
Ken Dytor: Yes.
Q248 Chair: Does that
need a more general national solution? In that case, who should
be giving it to us and who should be taking the lead on it?
Ken Dytor: Very
much so. We had a number of meetings with DCLG on procurement
issues where we highlighted various issues around procurement—the
need for streamlining and for reducing cost. Those needs are
still in place. We need to give people confidence. At the moment,
you will find that investors going into a public-private partnership
situation will say, "Right, do we really want to incur those
sorts of fees?" The answer quite often is, "No, we
do not want to take that risk," so people will sit it out.
Q249 Chair: That
probably leads on to the final question, although you have probably
answered the first part of it. If you had two measures that the
Government could take to ensure better and quicker—and more—regeneration
schemes, what would they be?
Ken Dytor: I think
you would actually change the culture of publicprivate partnership
and ensure that people work together to get as much money into
the system by whatever means possible. We have heard the situation
around the problems of European funding. We need to fast track
TIFs. We need to get greater confidence in the market for bringing
in external investors. Sorry, that is one and a half.
Dennis Seal: I
would go back to an earlier point: stimulate innovation, certainly
in funding and the delivery. Also, look very carefully at how
to speed up the procurement process, whether that is through continued
frameworks such as the HCA, or local authority frameworks.
Chris Brown: My
two. We have quite a lot of regulation around public asset sales—general
disposal consent and the OGC guidance. I would align those with
the European regulation, which is the Land Sale Directive, and
also overlay that with some quality procurement guidance about
how you get good standards when you are selling land for regeneration.
That would be one. The other one, which is perhaps slightly
off the mainstream, is that a lot of public assets are owned by
utility companies and organisations such as Network Rail and British
Waterways. I would give those organisations a regeneration objective
because a lot of their land is in regeneration areas. They could
be very effective and they have massive cash flows as well.
Chair: Thank you very
much indeed for your evidence today.
1 Ev 212 Back
2
Ev 207 Back
3
The Royals, Manchester. Back
4
http://ec.europa.eu/regional_policy/objective1/index_en.htm Back
5
http://www.silliconroundabout.org.uk Back
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