Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Memoranda

Memorandum by Audit Commission (GRI 33)

  1.  The Audit Commission for local authorities and the NHS in England and Wales is an independent body established under the provisions of the Local Government Finance Act 1982 and the NHS and Community Care Act 1990. Its duties are to appoint auditors to all local and health authorities and to help them bring about improvements in economy, efficiency and effectiveness directly through the audit process and through value for money studies. It also has a duty to carry out Best Value inspections of certain local government services and functions. We are pleased to make this submission to the Select Committee's inquiry into the Effectiveness of Government Regeneration Initiatives.

  2.  The Audit Commission has considerable experience in these areas. In putting together this memorandum, it has drawn on the findings from a series of relevant reports[21] and its ongoing inspection programme of local authorities' activity in regeneration.[22]

  3.  The concentration of poverty and lack of opportunity in particular places has many complex causes, in particular economic restructuring, the decline of community activity and poor quality public services. It has equally complex consequences, such as a growing fear of crime and increasing disaffection among the young. These, in turn, reinforce the problems facing deprived neighbourhoods as those people who have the power to choose where to live, work and invest go elsewhere.

  4.  A major factor in effecting change in deprived communities is the local capacity to bring together the skills, know-how, assets, services and spending of individuals, grass-roots and voluntary groups, businesses and the public sector.

  5.  The activity to bring about change operates in a regional and national context, where economic and social trends bring into question the sustainability of some local economies and the provision of services to them. One of the challenges facing communities, politicians and public service providers is how to establish a co-ordinated response to these trends based on a thorough-going analysis of the situation to inform local and regional policies, resource allocation and service delivery. Such a response should help avoid errors over the provision of housing, education, health and policing services as it will be clear where areas are facing "managed decline", "stabilisation" or renewed economic growth.

  6.  It is within this context that the Commission wishes to respond to the following issues raised in the Select Committee's terms of reference for this inquiry:

    —  The characteristics of successful regeneration schemes;

    —  What arrangements need to be put in place at the end of a regeneration initiative to ensure that benefits to local residents continue;

    —  Whether initiatives have had an effect on the major Government and local government programmes;

    —  Whether lessons have been learned from past initiatives, like City Challenge, and applied to new regeneration initiatives, such as New Deal for Communities and Local Strategic Partnerships; and

    —  How the Government should decide when to introduce an area-based initiative and whether there are successful alternatives.

What are the characteristics of successful regeneration schemes?

  7.  In order to be successful, local agencies engaged in regeneration need to determine areas' problems and opportunities and the level of resources they have to address them. For example, those working in areas facing extensive deprivation view their challenges differently to those tackling concentrated "pockets" of deprivation in an otherwise relatively affluent area.

  8.  A single initiative is unlikely to bring about lasting change if it is not supported by the work of a range of public, private and community organisations. Successful regeneration schemes integrate their activities with key public, private and community activity in order to use the resources and knowledge available and link their activity to those who will remain once the initiative has ended. The key to success, therefore, is not the design of a national initiative but the local circumstances in which the initiative operates. Thus, local discretion in determining priorities and the timing of key phases of activity is essential to successful regeneration—that is, sustainable improvements in the local quality of life.

  9.  Our experience of inspecting local authorities' regeneration activity also gives some pointers about what does and does not work. The most successful schemes are those which contribute to a "needs based" strategy, which has been developed by the council working with its partners and local people. For example, the success of regeneration schemes in Gateshead in closing the gap in unemployment rates between the most deprived parts of the authority and the rest was attributed to having a regeneration strategy with "clear aims based on needs" and targets to monitor achievements.

  10.  Where approaches have been less successful, schemes have been designed to fit in with national priorities and the availability of funding rather than trying to address locally identified needs.

What arrangements need to be put in place at the end of a regeneration initiative to ensure that benefits to local residents continue?

  11.  As noted above, successful regeneration initiatives need to mesh with local public, private, voluntary and community sector activity. In order for this to occur effectively, local organisations need to establish a clear vision of what they want to achieve at the end of the initial initiative. They have clear lines of accountability to indicate who decides which parts of an initiative's work have been completed and which require continued activity. They also make it clear who is responsible for maintaining activities that are still required. These arrangements need to be made during the regeneration initiative rather than waiting until the end. Effective arrangements often also have transition periods where funding of activities is included in the mainstream budgets and work programmes of local organisations involved in the regeneration of the area in the run-up to actual transfer.

  12.  Our inspection work also highlighted the importance of monitoring and performance management systems. These are essential to assess the impact of regeneration initiatives and can be used to make the case for the subsequent inclusion of such initiatives in mainstream budgets. Unfortunately the majority of agencies have poor monitoring arrangements. While they collect the information on activity levels and milestones required by programmes such as the Single Regeneration Budget (SRB), they often fail to assess whether the initiative is making a difference to key priorities. It is therefore difficult to demonstrate that a scheme has been successful. Hartlepool Borough Council is a rare exception. For a range of SRB and European funded regeneration schemes (business support, inward investment and training), the Council collected detailed information, including job creation. The latter was broken down according to age, gender, postcode, etc to demonstrate where the real gains accrued. This provided a strong basis to argue for the continued funding of some of the more successful schemes. The fact that the Council is clear that they need to prove success of projects and have put in place robust monitoring arrangements is one of the reasons it received an "excellent" rating for its economic development service.

Whether initiatives have had an effect on major Government and local government programmes

  13.  Short term initiatives can have a range of impacts. In relation to the way they interact with mainstream programmes they can:

    —  be incorporated as projects into local mainstream budgets as discussed above; and/or

    —  inform local practice or national government programmes.

  14.  There is some evidence of each. The Commission's research on neighbourhood renewal found a number of projects funded under regimes such as Health Action Zones, SRB or City Challenge, which had been incorporated locally into mainstream budgets. For example, SRB-funded mentoring projects in failing schools have now been adopted by a local authority as best practice to support headteachers in all its schools. And many capital investments, such as business workshops, or Healthy Living Centres, have been developed using short term funding, but sustained under mainstream revenue funding.

  15.  One of the advantages of using short term funding regimes is to allow providers the "space" to pilot new ways of working. Such experimental work can be valuable in developing new solutions to problems. It can also be useful in improving the way partner organisations work together. We found some examples of local service providers changing the way services are delivered or accessed as a result of a successful short term project. For example, a Health Action Zone (HAZ) project offering a free contraception service was funded by local primary care trusts once the HAZ funding ended. It was also rolled out across three primary care trust areas and was ultimately instrumental in the development and design of a nationwide service. The winning of a health-themed SRB6 programme in one deprived London borough focused partners' minds on the widening health inequalities in the borough and this has subsequently raised awareness of the issues, informed local activity and improved inter-agency working.

  16.  As these and other examples show, there is evidence that individual initiatives and projects can influence local and national activity. However, progress is patchy and changes are often made in a very local area only: there is little sharing of new approaches between areas. Nationally, while the experience of successful SRB or HAZ projects, for example, may influence planning and policy in the sponsor Government departments, again there is little sharing of this learning across Government departments. For example we found that neighbourhood renewal was a priority in ODPM, but that the policy had not produced change in other Government departments. In some cases little appears to have changed since the "patchwork quilt" identified in the Commission's report of 1989.[23]

Whether lessons have been learned from past initiatives, like City Challenge, and applied to new regeneration initiatives, such as New Deal for Communities and Local Strategic Partnerships

  17.  If you look at the way regeneration policy has evolved over the last 20-30 years, it is clear that lessons have been learnt from past experience. This is true both at the broad policy level and in relation to the design of individual initiatives.

  18.  The Social Exclusion Unit (SEU) explicitly sought to learn from the experiences of past interventions when formulating policy. It looked at the evaluations of initiatives and found a strong rationale for the continuation of an area based approach, but questioned the effectiveness of short-term interventions. These were criticised for achieving only partial improvements which were not sustained.

  19.  The Unit went on to proffer two explanations for this. First, communities were not sufficiently engaged and, therefore, did not and could not continue the work of the initiative. Second, local service providers lacked either the vision to transform their day-to-day operations, and/or the skills and resources to maintain the improvements once the funding has run out.

  20.  The Government's New Commitment to Neighbourhood Renewal tried to respond to these two criticisms by requiring (a) local agencies to engage better with local communities and (b) government departments and local service providers to reflect the needs of deprived neighbourhoods in their mainstream activities. In these two important aspects policy-makers can be said to be learning lessons from the past.

  21.  More specifically, round after round of regeneration initiatives have been designed to build on the strengths of previous programmes and to avoid the pitfalls. For example, the evaluations of early rounds of the Single Regeneration Budget Challenge Fund informed later rounds in several ways including the creation of a separate rural regeneration strand. The evaluation of SRB also influenced the Government's most recent policy for addressing deprivation—neighbourhood renewal. It suggested that a proportion of funding should be ear-marked for community capacity building and that a single over-arching partnership should be created for an area. The latter proposal was also put forward in the evaluation of the Coalfield Regeneration programme which made more detailed suggestions for the development of local strategic partnerships.

  22.  Similarly, the work done to assess the effectiveness of the Housing Action Trusts and the City Challenge programme found that a long term initiative which can focus substantial resources on a relatively small area can be effective. This is the type of approach adopted by the Government when designing the New Deal for Communities initiative.

  23.  While these and other examples indicate a desire to learn from the past, this is sometimes undermined by political and other realities at both the local and national levels. The pressure to launch new initiatives quickly may mean that new schemes are designed which do repeat past mistakes. For example, the Neighbourhood Renewal Fund has been criticised for its short deadlines which has made it difficult for applicants to develop and properly consult on proposals. The Fund is also seen by many as a "distraction" because the effort expended in applying is not justified by the levels of funding which are available.

How the Government should decide when to introduce an area-based initiative and whether there are successful alternatives

  24.  There is a local appetite for a rationalisation in the number of special and area-based initiatives. However, there is little support for their complete cessation. Therefore a balance needs to be struck between retaining those initiatives which serve a useful purpose and increasing mainstream budgets for those agencies operating in the most deprived areas.

  25.  The current system poses a range of practical problems, as illustrated by the quotes below. The reliance on area-based initiatives injects a large degree of uncertainty into the planning process. Progression in policies, resources and service planning is therefore difficult, as agencies feel obliged to respond to the launching of initiatives with different criteria, planning cycles, objectives, geographical coverage and reporting and evaluation arrangements. Further problems, such as retaining staff in the run-up to the end of a project's funding, cause operational difficulties.

    "There are so many initiatives to respond to and this has to be done on top of people's day job. The system is currently too complex and not user-friendly".

    Councillor, local authority

    "We would welcome fewer thunderbolts from Whitehall with pots of money to spend immediately".

    Officer, local authority

    "We are ambivalent about the value of short-term initiatives—politicians only seem to be interested in the new. This can be very demotivating for voluntary organisations delivering core services".

    Officer, Council for Voluntary Services

  26.  The plethora of initiatives distracts providers from the task of aligning their mainstream services with the needs of those living in priority neighbourhoods. Local organisations do not have time to incorporate the lessons from short-term initiatives into their local policies, spending, services and methods of service delivery. A reduction would therefore seem a prerequisite for a shift to using mainstream programmes to tackle deprivation.

  27.  While recognising the advantages of area-based initiatives, such as the extra ring-fenced funds for deprived areas and the freedom to innovate outside "mainstream" budgets, the Commission believes that central government should signal its commitment to a reduction in its reliance on special and area-based initiatives in tackling long-term problems by introducing clear criteria for their introduction. An initiative should either:

    —  enable local innovation otherwise blocked by legislative or regulatory controls;

    —  or tackle a "crisis", in other words a specific time bound problem like a mass redundancy, where immediate support is essential or a specific physical problem, like contaminated land.

  28.  The introduction of such criteria should—in the short term at least—put a block on the introduction of new initiatives and encourage the use of existing routes to deliver changes. It should also encourage the pooling of initiatives so that the administration and the purpose of the initiatives that remain is streamlined within a coherent local regeneration strategy.

  29.  In order to ensure deprived areas don't lose out as a result of the reduction in the number of initiatives, the Commission recommends a transition period of three to five years. This period should see a rise in core budgets to compensate for any decline in the resources coming to an area via special and area-based initiatives. It should also be used to ensure that local agencies take account of the needs of deprived areas in their core budgets, policies and services. Local agencies should then be required to monitor and evaluate the impact of their work. This may be done using traditional measures of performance, such as response times to calls, educational attainment etc. It should also use "outcomes" associated with particular initiatives, such as people into jobs, and broader impacts such as employment rates and changes in crime/fear of crime, which are not reliant solely on the performance of local services, but do reflect the quality of life in an area.

  30.  In summary,

    —  those schemes which are successful are carefully designed to respond to local circumstances—thus local discretion in determining priorities is essential to successful regeneration;

    —  there are a range of factors which can ensure that benefits are sustained after funding runs out including proper transition arrangements and robust monitoring in order to assess which projects should continue;

    —  the lessons from past policy and initiatives have influenced activity and new policy, but this is undermined by several factors including a pressure to launch new initiatives quickly; and

    —  while there is still a role for ABIs in addressing particular problems, the Government should reduce its reliance on them by introducing clear criteria for their introduction to encourage the use of core budgets to secure regeneration.

21   Audit Commission, 2002, Policy Focus: Neighbourhood Renewal; Audit Commission, 1999, A Life's Work; and Audit Commission, 1989, Urban regeneration and economic development, The local government dimension. Back

22   To date, the Audit Commission Inspection Service has carried out 60 inspections of local authorities' regeneration activities. Back

23   Audit Commission, 1989, Urban regeneration and economic development, The local government dimension. Back

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