Select Committee on Transport, Local Government and the Regions Minutes of Evidence


Examination of Witnesses (Questions 60-79)

MS IMELDA HAVERS AND MR DAVE CHETWYN

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 really.

Mr Betts

  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 financially.

Chairman

  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.

Mr Betts

  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 funding—de minimis—schemes but they are nowhere near.

Chairman

  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 opportunity—or they were an opportunity—from 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.

Mr Cummings

  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.

Chairman

  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 which—I unfortunately have not got the name but I could probably get back to you with that information.

  Chairman: That would be helpful.

Mr Cummings

  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 up.

  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 disturbing.

Dr Pugh

  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.

Chairman

  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 it.

  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 with it.


 
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