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

Examination of Witnesses (Questions 200-219)



Dr Pugh

  200. Regions differ, do they not? Do you think gap funding is needed more in some regions than in others?
  (Mr Smith) Yes, undoubtedly.

  201. Which ones?
  (Mr Smith) The North East; the North West; Yorkshire and Humberside; West Midlands; bits of the East Midlands which do not qualify such as Leicester at the moment, which is not an Assisted Area; bits of the South West. Actually, gap funding tends to be needed in very localised areas. Although you can generalise and say the South East by and large does not need much in the way of gap funding, and the South West does not either, there are pockets of deprivation. In fact, there is one huge area called Cornwall, there are places like St Paul's in Bristol, and there is the whole of Leicester. So although you can make sweeping generalisations as far as some regions need more gap funding than others, the gap funding issue is a much more fine-grained issue than regions, and it is much more fine-grained than Assisted Areas.

  202. Given this different level of need across regions, do you think the RDAs should be given discretion as to which schemes they operate in which area?
  (Mr Smith) I do not think that the RDAs should be operating this scheme. If you are saying should they be given discretion, if you are talking about this particular scheme, I do not think the scheme is good enough. They should be given discretion, but to operate a much more flexible and generous scheme.

  203. Do you think there should be an element of democratic accountability? Are they in a position to make up their own minds?
  (Mr Smith) They can make up their own minds as RDAs with or without accountability as far as their target areas are concerned, their broad strategy as to which areas they want to assist and which areas they do not want to assist. It is beyond our remit to say whether RDAs should be democratically accountable or not, but having gone for those areas, I think they ought to have a flexible scheme within those and permit everything that fulfils their criteria coming forward.

  204. Your memorandum mentioned something called "value engineering", which is a new term to most of us here.
  (Mr Smith) It is a horrible term! Management consultants wrote that.

  205. Can you describe what it is and why you think it is harmful?
  (Mr Smith) Bending a scheme to fit a grant regime or whatever other regime is about. For example, a local authority might, if it wants a scheme to come forward, be persuaded to grant planning for a scheme it did not really want in order to increase the profitability, shall we say retail to subsidise employment space. Under the old PIP scheme, they could have just said, "No. It is employment space and we will give you a grant."

  206. Under any scheme certain parameters have to be met. Are you not just complaining about something that would always be there in one form or another?
  (Mr Smith) Because the rules are tighter, the need for value engineering, where we are bending the scheme, is going to be that much greater.

  207. Is the true point that you are making then that the range of schemes you can produce has actually been severely reduced?
  (Mr Smith) No. That is something else. The range of schemes that you can produce profitably and that you will produce has been severely curtailed.

Mrs Ellman

  208. You made the comment earlier that the RDAs were now looking more to economic development than urban regeneration, but do you not think that the main purpose of RDAs is economic regeneration?
  (Mr Brown) Yes, I think that is right. I think that is what they are for, and that leaves a big gap. Who is going to do urban regeneration if it is not the RDAs? We are awaiting with interest the review of English Partnerships, because we have identified this gap, a government agency to enable the process of urban regeneration, and we feel the review of English Partnerships gives government the ability to think about that gap and how best to address it.

  209. Do you not feel that if English Partnerships were given a new remit, that would distract from the integrated approach the RDAs are charged with developing?
  (Mr Brown) I would much rather the RDAs were doing it. I was a big advocate of RDAs in the first place. I believe they should be democratically accountable, as it happens. I would like to see strong regional government with a strong executive and the ability to do urban regeneration properly, but it is not happening, and I regret that it is not happening. But because it is not happening, I think we have to do something about it.

Mrs Dunwoody

  210. But you are also implying that in fact they have so much to do that it is not going to happen.
  (Mr Brown) Absolutely, yes.

Chris Grayling

  211. Is it really also right to refer to strong regional government? Is there not a problem in this that the RDAs themselves at the moment are too remote? Surely, if you are going to do urban regeneration within, say, Liverpool or Manchester, it should be run by Greater Manchester or Liverpool rather than run by a nebulous north-western regional government?
  (Mr Brown) In practice, that is what is happening. Those are two good examples of where the RDAs are getting involved in urban regeneration, and they are doing that primarily by supporting the local authority in both cases through an urban regeneration company. That is their main way of getting into the process.

Mrs Ellman

  212. Would you say that there are sufficient mechanisms in place now to deliver the government's targets on reclamation of brownfield sites?
  (Mr Smith) The mechanisms are there. The skills and the financial resources are not, and perhaps a will.
  (Mr Hood) I would doubt whether the current gap funding grant system is going to help the Government at all in meeting its brownfield targets. Many of these brownfield sites are outside the Tier 1 and Tier 2 areas and cannot be given any assistance. These brownfield sites have problems of the abnormal costs of developing and cleaning up the site. It is also a market failure, where the value just is not within the area. So there is a need to gap fund in order to get the market going in that area. I do not think the current grant system will help that at all.
  (Mr Smith) If I can add to my reply, in those circumstances the RDA could use Direct Development. The problem is getting hold of the land, and compulsory purchase is a big issue that needs addressing very quickly. At the moment it is cumbersome, RDAs are very reluctant to use compulsory purchase, some local authorities are very reluctant, others less so, but it is a real mess and it needs sorting.

  213. Are the new proposals for compulsory purchase going to remedy that situation?
  (Mr Smith) They will go a long way to help, and the sooner somebody pushes this along, the better.

Mr Cummings

  214. I have been listening very carefully to your comments and responses to questions, and it does appear that you are quite scathing about the role of the Department. How do you see the way forward?
  (Mr Smith) I think there are at least two schemes to be moved forward. One which needs to be moved forward quickly is a housing scheme, and I do not think from the messages we get back that we would have any problem from Europe on that, but we just are not moving it quickly enough.

  215. Are you talking about a specific scheme here?
  (Mr Smith) No, a general gap funding, grant regime.

  216. What do you think the general problem is with the Department?
  (Mr Smith) If I can go back historically, the problem here—and I would invite you to see, if you have not done it, the submission to Europe for the PIP replacement scheme, the European response and the early guidance issued to the RDAs—is that, as far as we can make out, at no time in that process was it tainted by the opinion of anyone who knew anything about property.

  Mrs Dunwoody: We did isolate that in the intellectual exchange we had with the Minister at the time.

Mr Cummings

  217. Are you basically saying that the scheme is a mess?
  (Mr Smith) Yes, a mess. Perhaps up north you would use even stronger language.


  218. Can I be clear? What you are really saying is that the emphasis of the RDAs on economic development could well mean that in somewhere like Liverpool they get everybody a good job in Liverpool and therefore everybody moves out of Liverpool to live in Chester or somewhere like that, and actually makes urban regeneration in Liverpool worse? Is that fair?
  (Mr Brown) Yes, I would say that is fair. The North West is in a way a bad example of this, because it is run by someone who has very strong background in urban regeneration, the former chief executive of a development corporation. But they are in my view more interested in schemes, for example, to develop work space on greenfield sites next to motorway junctions where they believe they will attract businesses than they are to do urban regeneration. You cannot do urban regeneration unless the economy you are in is prospering. But getting that balance right is the key, and I am not sure they are getting it right at the moment.

Mr Betts

  219. To come back to the housing and mixed use issue, eventually the objective is to get a new EU regeneration framework, but you are saying in the mean time you think we desperately need a scheme for housing and mixed use.
  (Mr Smith) Yes.

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