Examination of Witnesses (Questions 60-79)|
TUESDAY 26 FEBRUARY 2002
60. And the Regional Development Agency does
not feel that that much money can be spent on housing?
(Ms Havers) It is not the amount of money. It is the
lack of mechanism to release the money. That is the nub of it
61. So without this mechanism are there any
other means that you are aware of whereby the site could be regenerated?
Direct public investment, has that been looked at? Joint ventures,
have they been considered? Where are you on those matters?
(Ms Havers) I am working with EP at the moment, English
Partnerships, and we have commissioned an options appraisal by
some independent consultants who have looked at a variety of options
from "do nothing" to joint venture to the situation
as it is trying to work with a developer and ultimately direct
development. No clear conclusions have come from that. There is
no one solution that stands up and says, "This is the solution".
We have looked fairly exhaustively at it, yes.
62. What is the RDA response to that?
(Ms Havers) A deafening silence so far. I have not
had a response from them.
63. Do you find there is any conflict between
English Partnerships and the RDA in these schemes?
(Ms Havers) I do not get that feeling. I think they
seem to have very different roles and be taking a very different
view on this particular project.
64. What happens if the scheme does not go ahead?
Have you got other similar schemes and other sites around which
are going to be badly affected?
(Ms Havers) I think they will. I think this particular
scheme, the Little Brickkiln site, is so important for the Urban
Village, it is very visible, it is very derelict, it is quite
big, that it will make or break the Urban Village. I think if
it does not happen what it will do is undermine any other public
investment that goes into the Urban Village and it will certainly
diminish the amount of private sector development that is attracted
to the area, so it will have a detrimental effect. If this went
ahead with a relatively small amount of gap funding then it would
actually encourage the private sector to be much more involved
in the Urban Village and diminish the public sector involvement
65. So the urban centre of regeneration that
has happened in Birmingham and Manchester and other places so
far has passed Wolverhampton by? Is that right?
(Ms Havers) There is a very good opportunity here
for Wolverhampton to jump on to the bandwagon, for want of a better
phrase. I think that Wolverhampton is happening later because
it is slightly peripheral, it is smaller and it has only recently
become a city. I think Wolverhampton has suffered from having
just caught on to urban regeneration at the time when the old
gap funding system fell apart. But I think Wolverhampton has tremendous
opportunities and does not need an awful lot of help to get going.
66. I should like to ask Mr Chetwyn about the
Middleport waterfront scheme. Perhaps you would tell us a bit
about the total cost and what proportion you were looking to come
from the public sector to try and make that scheme go ahead.
(Mr Chetwyn) The THI is a grant scheme basically.
We would set up a common fund of £1.8 million which will
comprise Heritage Lottery fund money and SRB6 money. That would
then allow the local authority to make individual grants to different
landowners in the THI area. They would seek to match fund those
grants, partly with their own money, partly through English Heritage
money, partly probably through the ERDF money. It varies site
to site how much intervention will be required, but you are looking
at very high percentages basically. The market in Middleport is
non-existent. There is no demand for land without very high intervention
rates, and we are talking sometimes of 70, 80, 90 per cent; the
market just will not operate.
67. So basically with the levels that are now
available the scheme is not going to happen?
(Mr Chetwyn) It is an Objective 2 area. SMEs in an
Objective 2 area receive 25 per cent of cost, 75 per cent having
to come privately. There are other limited fundingde
minimisschemes but they are nowhere near.
68. Why is it important to Stoke?
(Mr Chetwyn) It is about a mile stretch of canal.
It is part of the traditional industrial core and, as with many
areas over the past decades, industry has restructured, moved
out. Some industries have gone into decline. The pottery industry
is increasingly under pressure, so the economy is depressed. There
is very little investment. There are suppressed levels of economic
activity and high dereliction, which obviously affects the way
the area is perceived and the people who live in that area as
well. This particular area is based around the canal as well,
so there is obviously the tourism angle, people passing through
the canal and the waterway and the perceptions they have. I think
it is important from the point of view of regenerating Middleport
where I think I mentioned some of the problems residents have
in my previous evidence which underlines that. From the point
of view of regenerating the canal corridor, we have a strategy
to try and achieve in Stoke what has been achieved in Castlefield
and other cities, canal areas, Nottingham, etc. It is important
for a wide variety of reasons. It is just fundamental regeneration
basically. It is an area that has ground to a halt and continues
to decline, and without initiatives of this kind I cannot see
how it would be reversed.
69. One of the problems it seemed to me was
that, with the number and the quality of listed buildings you
have got there which you want to preserve, that was making the
scheme expensive and probably precluding some uses which might
get more private money in. Do you think the current rules do not
really reflect the needs of this sort of development in terms
of public support?
(Mr Chetwyn) I think in many respects the buildings
are an opportunityor they were an opportunityfrom
a funding point of view. It is a classic heritage-led regeneration
scheme where the character of the area is part of the potential
and part of the regeneration from the point of view of visitor
resources, canal based tourism, etc. Can you repeat the last part
of your question?
70. What I was trying to get at was that because
the buildings are listed because of their nature that precludes
maybe some development where the private sector might be able
to make a profit from it and demands a greater amount of public
money going to achieve successful regeneration, but the rules
do not allow that to happen.
(Mr Chetwyn) That is right. The buildings do open
certain funding potential but obviously they also limit what can
occur on the site. In regeneration terms they are an opportunity
if the funding is available. From a purely market led point of
view they are another barrier if you like.
71. Mr Chetwyn, in your memorandum you state
that "Throughout the development of the Middleport Townscape
Heritage Initiative project over the past 18 months both English
Heritage and the Heritage Lottery Fund have held the view that
heritage funding was exempt from European State Aid restrictions",
and yet the memorandum from the Department of Culture, Media and
Sport considers that proceeds from the Lottery "represent
a State Aid resource for the purposes of the European Community
State Aid rules". Could you perhaps tell the Committee what
advice on state aid did you originally receive from English Heritage
and the Heritage Lottery Fund and would you be aware of the basis
of their advice?
(Mr Chetwyn) I understand since writing that that
the official position of those organisations was to recognise
that heritage funding was subject to state aid rules and it undoubtedly
is subject to those rules. I think many of the people working
in those organisations probably were not aware of that. In fact,
speaking to various people in other local authorities and in different
organisations, there are many people who are unaware just how
hard state aid bites on project work. I know there are projects
under way which probably do not comply with the state aid rules.
72. Could you give us an example of a project
that has been funded by English Heritage or the Lottery Fund which
you think now conflicts with the state aid rules?
(Mr Chetwyn) I was speaking to a chap last week at
an IHBC meeting and I informed him about these state aid rules,
and his reaction to me was, "You are joking". There
really is surprise when people realise how they bite. He told
me that he had projects under way whichI unfortunately
have not got the name but I could probably get back to you with
Chairman: That would be helpful.
73. How long have the SRB partnership and the
RDA known about the project and how long did it take them to identify
that there was a state aid issue?
(Mr Chetwyn) We have been developing the THI for about
18 months. In fact, on some of the individual sites we have been
working with the owners for about five years. Project work is
extremely complicated, mind-splittingly complex in fact, and it
often takes five or ten years to really get things going. It is
18 months where we have been concentrating particularly on the
THI, so the SRB partnership have known about it, I would say,
for 18 months to two years perhaps. There would have been discussions
before that. We went through the local SRB6 full panel and the
issue was not raised. It was Advantage West Midlands who looked
at the application at the final stage who picked this problem
74. If the Heritage Lottery funding was approved
for state aid compatible by the Commission, would you, on the
basis of this experience, still have problems with matched funding
and the example being SRB?
(Mr Chetwyn) The HLF have actually approved their
funding. In May last year they approved £1.25 million, and
the state aid issue obviously was not considered a problem at
that time. SRB6 are providing around half a million of the funding.
Without that we cannot establish the common fund. With the HLF
money, to release that £1.25 million, we need the match funding
that we put down we would provide. They will not provide 100 per
cent of funding.
75. Have other projects in the SRB6 programme
similarly affected? How do you intend to extricate yourself from
the position in which you now find yourselves?
(Mr Chetwyn) There are two questions there. With regard
to not only the SRB6 but the ERDF other funding packages, it is
very hard to estimate the impact it has had on Stoke on Trent
so far. Myself and some colleagues have been looking into this
and we think there is probably around £100 million of funding
that has been affected. A large number of projects have been hit
by this in Stoke on Trent, probably around £100 million of
funding, which has either been prevented altogether or been reduced
or substantially modified. It is very hard to translate into jobs,
particularly without accurate figures, but we are measuring it
as 10,000 or more. The impact on Stoke on Trent has been particularly
76. You have done a very good job of outlining
your problems, both of you, but if you were to look at solutions
what changes would you like to see come from either Government
or the European Commission, either in the short term or the medium
term, in order to improve your situation?
(Mr Chetwyn) Just before we go on, I am afraid I forgot
the gentleman's second question.
77. It is encapsulated in the question I have
just asked: what would you do about it? What do you think the
Government or the European Commission should do in order to improve
the situation for you?
(Ms Havers) In the short term what I would suggest
is to get away from what seems to me an unhealthy preoccupation
with the 50 per cent rule on residential. If you are tasked with
delivering urban regeneration at the sharp end you do not care
whether it has got 49 per cent or 80 per cent residential. If
you want it to work, you want it to work in the long term. It
has to be a good project and it has to attract the private sector
if it possibly can. It also does not matter if it is an SME or
a multinational corporation which is doing the work. Again, there
seem to be, from my point of view, from an on-the-ground perspective,
some rather arbitrary criteria thrown out and I think that the
whole issue, even in the short term and certainly in the medium
term, needs to become a lot less criteria driven, a lot less intensely
bureaucratic and a lot less onerous on people who are just down
there on the ground trying to deliver.
(Mr Chetwyn) In the short term under the existing
situation I think the only option left open to me now is to submit
the scheme to the European Commission and try to get them to agree
higher intervention rates. That is a further eight months' delay
at least; the project is already delayed nine months so I will
just hope I can persuade the funders to stay with me during that
period while we test the case out. A further suggestion has been
to set up building preservation trusts for these trading companies
which are the ones hardest hit by state aid rules. We have looked
into that with the companies. There are a number of problems with
that. The companies would lose the assets, they would lose control
of their own land and site and become a renting body. The finance
does not really stack up and there are no funding sources to acquire
the building, so we feel that that is not a realistic option.
In terms of changes, we need to be able to obtain public funding
at the intervention rates that will trigger urban renewal and
regeneration. Twenty-five per cent rates, even considerably higher
than that, will not trigger this. There are large areas of Stoke
on Trent which are desperately in need of regeneration and under
the existing arrangements it simply is not realistic. The market
cannot cope with that without assistance.
78. Is it not wrong really for two towns or
cities to be looking at gap funding? Would it not be much better
for the councils just to do direct development on both those schemes
and then sell them on? We heard from Tom Bloxham earlier that
in the centre of Manchester, once you have done the scheme, it
becomes economically viable, so would it not be possible for either
of the councils to do direct development?
(Ms Havers) If I can speak for Wolverhampton, I do
not think that would be a good use of public money. I very strongly
believe that in this particular case, in any of the projects and
for any of the problems in the Urban Village, we are talking about
a light touch to just level the playing field so that the private
sector can come in and do the job they do best. They do it better
than the public sector. They know what they are doing. They need
to be allowed to get on with it. We are not talking about direct
development which is excellent in perhaps very contaminated sites
and sites that really will not stack up any other way. To have
that heavy, very much front-ended public sector approach, fine,
but it does not work in Wolverhampton and I would not suggest
79. But it does appear to have worked in most
other European countries where direct development by the local
authority or by the region appears to have solved the problem.
It only appears to have caused problems in Britain where we have
gone for a gap funding approach, does it not?
(Ms Havers) I cannot speak in detail for Europe, but
my assumption in Europe is that there is a tradition of a much
heavier public sector involvement in regeneration. In the UK we
have become more and more private-sector minded. The private sector
has had skills that have been built up over many, many years effectively
and positively to develop city centres, and where they can do
it, my personal view is that they should be allowed to get on