Examination of Witnesses (Questions 220-237)|
TUESDAY 5 MARCH 2002
220. Do you think that can be delivered within
the current EU rules?
(Mr Smith) I think it can. I do not think it is going
to affect inter-European competition.
221. When did it first emerge that houses could
not be supported under the old scheme?
(Mr Smith) The whole scheme was devised within the
umbrella of competition rules, and an economic framework, so what
we are using is the wrong tool for the job. As I see it, we just
gave up on housing; we ought to have stood our ground on housing.
But at the moment what we have is born of the economic and competition
regime that is there. It is a bit like using a hammer to drive
in a screw: it works sometimes but it does not work on most occasions.
222. Have you been in dialogue with the Department
during this period?
(Mr Smith) Since we saw the early guidance in about
May/June, we have been in dialogue with the Department.
223. What has their response been?
(Mr Smith) To move ahead slowly.
(Mr Hood) Can I add that I have also been in touch
with the Department, because I have a number of residential schemes
that are ready to go but cannot because of the existing rules.
I have spoken to the Department to get their interpretation of
matters, and they have said that they do not foresee any difficulty
in getting a change to the rules to allow residential development
to be covered by gap funding. They felt it would only take a couple
of months to push through, and they were going through the process
of canvassing the RDAs to find out their attitude to change. That
was about four or five months ago.
224. Has anything happened?
(Mr Hood) No. As far as I am aware, nothing has happened.
225. So, to sum up, they do not believe in it,
they are not doing a great deal, they did not understand it in
the first place, and they are not actually actively trying to
change it. Apart from that, all is well.
(Mr Smith) That is very succinct. It is not quite
as harsh as that, but there or thereabouts.
226. You probably saw in the Financial Times
yesterday the article saying that we were 65,000 houses per annum
adrift of what was required. How is this going to impact?
(Mr Smith) Is this a new grant regime or the lack
of a grant regime?
227. Actually both.
(Mr Smith) The lack of grant regime will make a considerable
difference, and I think there is also another issue that will
impact, which is compulsory purchase, as I mentioned earlier,
particularly in places where housing values are not that high.
Development should be coming forward in places like Leicester,
but it just is not. There is not the incentive there, the site
assembly has not been put together, so places like that will be
hard hit. If you have a site somewhere in London or the South
East, someone will come along and build on it.
228. Is not the urban regeneration company in
Leicester just a waste of time because it is not an Assisted Area?
(Mr Smith) No, it is not, because hopefully it can
persuade its partners to focus its resources and powers on the
problems of the area. So we may get Direct Development, we may
get compulsory acquisition by the East Midlands Development Agency.
I am saying "we" because I was acting chief executive
until a short while ago. One of the problems we have encountered
there, for example, is that we have had a developer with a large
site that needs access. We wanted to compulsory purchase that
access for the developer, and indeed, the developer's own land,
and sell it back to him under a development agreement. He would
have reimbursed the Regional Development Agency's costs there
of acquisition, which would have been the full market rate. EMDA
have found problems there and they have gone to DTI and said,
"Does this contravene state aid rules?" This is just
going everywhere. We have taken an opinion from a top legal firm,
a professor in Brussels, saying "No problem." But the
DTI think it might, be so EMDA are running scared of that sort
of situation. There are several situations like that in Leicester.
229. Does that have a detrimental effect on
people around the area?
(Mr Smith) If you sit next to a site that is covered
in old mattresses and is rat-infested, I should think it would
have a highly detrimental effect!
230. If you wanted a definitive ruling on state
aid rules, who would you go to?
(Mr Brown) I did meet the individual in the Commission
who is dealing with it, an incredibly intelligent person, who
I think probably regrets to an extent his first decision, but
these are very difficult people to get to. They are not open and
listening in the way that we might want.
231. Can I invite you all to be positive rather
than negative. Within these vague state aid rules that we have,
what more could be done both by the Government and by the RDAs
to improve the situation?
(Mr Smith) First of all, the Government could take
things seriously at a higher level than it has done hitherto.
232. What level is that? Are you talking about
the Prime Minister making a fuss in Europe, or are you talking
about the Secretary of State?
(Mr Smith) I would say at least the Secretary of State,
and if the Prime Minister can help too, so much the better. I
think the RDAs have to use their Direct Development powers more
proactively, particularly with regard to land acquisition; they
have to be prepared to use compulsory purchase. I think they should
promote the sub-optimal regime such as we have more proactively.
233. Mr Hood, do you agree with that?
(Mr Hood) Yes. I think there also has to be a change
to allow the housing development to be gap funded, but there is
a need to look at the whole system, and to change it so that it
is not just limited to Tier 1 and Tier 2 areas and have this ridiculous
situation where there is a differentiation between large, small
and medium sized developers, and not to have the ceilings on the
amount of assistance that can be paid, because in many areas the
amount of assistance that is needed is way above that which the
current ceilings allow. Schemes like that never happen, or else,
as Nigel was saying, they result in a sub-optimal scheme by a
use being introduced into the scheme for higher values in order
to increase the value.
Christine Russell: What about your organisation?
What in the longer term do you think we can do to ensure that
the rules are changed to bring about this urban renaissance that
everyone is talking about, both from the Commission and nationally?
234. What response did you get from this esteemed
bureaucrat? Not just that he understood it vaguely now and did
not before, but any suggestion that there was any movement within
(Mr Brown) This was some time ago, but yes. In fact,
at the time we did talk about residential, and he expressed the
viewvery much off the record, but he was encouragingto
say "We don't really think there will be a problem with residential."
235. But there has not been any movement since
(Mr Brown) There has not been any movement, but I
think, to be fair to the bureaucrat in Brussels, he has not been
pushed very hard from this end.
236. No, but there has not been any movement.
(Mr Brown) No.
237. So what you are really saying is Brussels
made a mess of the old regime, but you are very firmly saying
that the Department has made a mess of sorting out the problem.
(Mr Smith) I think the Department also could have
challenged the original decision much more toughly. What we have
now in its place is a real mess, and the Department must accept
some responsibility for that.