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

Examination of Witnesses (Questions 238-259)




  238. May I welcome you to the second session of our inquiry this morning. Can I ask you to identify yourselves for the record, please.

  (Mr Russell) I am Tom Russell. I am the Chief Executive of the New East Manchester Urban Regeneration Company.

  (Ms Nimmo) I am Alison Nimmo, Chief Executive of Sheffield One, the urban regeneration company for Sheffield City centre.

Mr Betts

  239. First of all, can you explain to us how you go about using the powers of your partners in the regeneration process? I understand that you do not have any powers of your own. Indeed, would it be an improvement if you did have powers given to you?
  (Ms Nimmo) In Sheffield One, obviously the partners are slightly different than with some of the other urban regeneration companies. We have English Partnerships, Yorkshire Forward, the Regional Development Agency and Sheffield City Council. Urban regeneration companies have unkindly been called "urban development corporations" but without the power and without the cash, and to a certain extent, from a strictly legal point of view, that is the case. The trick with urban regeneration companies, however, is leveraging in partners' money and powers, because collectively around the board table there are more than enough powers and resources to move the regeneration agenda forward. In Sheffield One's case, we have been using English Partnerships very proactively, although there has been a lot of uncertainty with the review at the moment as to what their existing role is and what their future role will be. As with the previous speakers, we are very keen to have a positive outcome, and an early outcome to the English Partnerships review. They have already made one strategic purchase in the city centre to help deliver our master plan and hopefully before the end of the financial year they will be making another three or four. So they have put significant effort into helping move forward the site assembly agenda. Yorkshire Forward have been supporting us very positively on some of our economic-led projects, and they are looking to undertake a number of strategic acquisitions. We are hoping that there will be two made by the end of the financial year. We are hoping later on this month they will take an issue to their board where they will actually progress the first RDA CPO in Yorkshire to help move forward and help us implement our master plan. The City Council has been using its own assets as well as its own powers, CPO Planning and highway powers, to help move forward the agenda. So while Sheffield One in its own legal sense does not have these powers, all the partners round the table are very committed and are using their powers in exactly the way envisaged to move forward the agenda. Certainly from the Sheffield perspective, the model is working.
  (Mr Russell) I think the position in East Manchester is broadly similar. I too on my board of directors have representatives of English Partnerships, the North West Development Agency and the City Council. Round about 15 per cent of the land mass of East Manchester is currently under compulsory purchase order of one shape or form. We are promoting three. When I say "we", actually North West Development Agency is pursuing two on our behalf and the City Council is pursuing a third. So we are certainly receiving assistance in terms of assembling sites. There is no particular problem over that. I think there may be a problem further down the track when we come to trying to acquire smaller sites in less strategic areas. That is something that awaits us in the future. There is certainly no lack of willingness on the part of our funding partners to actually exercise their powers of land assembling on behalf of New East Manchester. We have a ten-year funding profile, an ambitious investment programme. The three principal funders of that are the Regional Development Agency, English Partnerships and the City Council, and again, in as far as any public body can commit itself to funding beyond one year, or three years maximum, they are committed to supporting us over that ten-year period. As Alison has said, by and large, the process is working well in East Manchester. The only thing I would add is that I actually believe it is a strength not to have compulsory purchase powers in our own right. Partnership is essential in making urban regeneration work. Partnership between the three tiers of government, which is what we have in East Manchester, is a very powerful partnership, but it is more powerful if partners choose to use their own powers and resources to support the partnership as opposed to East Manchester having powers in its own right.

  240. Let us come on to the issue of gap funding. You have mentioned that this has been a useful tool in the past to get regeneration projects moved forward. Is it the case at present that we really have a hiatus and not much is happening? Is this a problem for you?
  (Ms Nimmo) I think in a Sheffield context, because we are Tier 1 and we have Objective 1 status and Assisted Area status, it is not as much of a problem as, say, in a Leicester or a Corby type situation where they have urban regeneration companies and not full access to gap funding. In Sheffield we have a number of projects still coming through that were on the PIP survivors list, so we are still seeing the tail end of activity coming through in the city centre, and those are principally residential schemes. We have one that was on the PIP survivor list, a major project,—Castlegate - which eventually could not be brought to delivery, so we have renegotiated that with the Regional Development Agency, Yorkshire Forward, and we are now delivering a different scheme through a Direct Development route. So we have taken the PIP money and converted it into works. Basically we are taking the lead on that with the City Council, demolishing buildings, remediating the site, clearing it up ready for development, and flipping the original development partner into a different role. Yorkshire Forward is one of the RDAs that is not that keen on promoting gap funding. They want to take what they believe to be a much more proactive role, and they feel that the former PIP scheme was a bit reactive. They are happy to use it when it is needed, but they feel that a more Direct Development, more hands-on role is more appropriate. I would echo some of the comments made earlier that in order to do that, that is incredibly resource-intensive up front, and you need the right skills within the RDA to do that.

  241. And better resources for the developers perhaps if they are going to have to re-invent a scheme each time they put a project up.
  (Ms Nimmo) In that specific example, the scheme went away. The anchor tenant pulled out and it is now a very different scheme that we are pursuing. One of the concerns with the RDAs is whether they do have the property-based skills to deliver the urban renaissance. What we are doing in Sheffield is using the urban regeneration company to spearhead that physical delivery, and we are actually putting property-based skills within the team at a local level to deliver. So we are using the framework of the RDA to drive the economic agenda, and the local urban regeneration skills and resources to deliver the physical part of that agenda. It is absolutely critical that the physical and economic agenda are delivered in tandem. That is a real problem in other cities that do not have a URC-type vehicle to bring those agendas together.
  (Mr Russell) As I have said in my written submission, I do not want to exaggerate or claim that we have lost development over the two-year hiatus. We have not. We continue to work up schemes. But in my view, we will face very serious issues in East Manchester in delivering the programme unless there is some progress made on gap funding beyond the five schemes already introduced in the near future. We have very high abnormal costs in East Manchester. It is ex-industrial land, a good deal of it is derelict and contaminated, so there is an additional cost to development for the private sector. We have been working on four neighbourhood redevelopments, which all involve a very strong residential component. East Manchester has a strong existing residential population of over 30,000 and we are looking to increase that substantially. It is an area where the housing market has serious difficulties, and my expectation as we develop these schemes with our private sector partners is that there will be a substantial gap between cost and value and there may not be an appropriate mechanism for unlocking that within the confines of the current system.


  242. So the message to the Government really is to get a move on with sorting out the housing element at least.
  (Mr Russell) As soon as possible.

Mr Betts

  243. Coming back to the Sheffield situation, you have given an example of the abnormal site assembly and decontamination nd those issues. Once those issues are sorted out, are the market values around the sites sufficient then to get the private sector going in to provide the catalyst to make things happen?
  (Ms Nimmo) We are hoping that will be the case, but there may well still be a need for some kind of grant funding mechanism. A number of the projects we are pursuing are economic based, so Yorkshire Forward have said in principle that the gap funding regimes, the PIP replacement regimes, could be used and could be applicable. The concern we have at this stage, without any of them having been tested in Yorkshire, is firstly how complicated they are, and secondly how quickly we can actually get projects through the system.

  244. You have not got to the point of testing them yet?
  (Ms Nimmo) We have not got to that point, no.

  245. One of the issues we have heard about, looking at empty homes, is not just the problems of regeneration in the city centre itself, but the so-called doughnut area around it. Are the mechanisms available at present for regeneration in the replacement gap schemes going to be useful in trying to regenerate those sorts of areas, or is there a gap there which needs to be sorted out?
  (Ms Nimmo) In a Sheffield context certainly that is where the fundamental gap arises. There is a wave of deprivation, as in many cites through the City centre. You have estates like Parkhill, the largest grade 2 star listed building in Europe, but there is no mechanism to get the investment that is needed in that estate over the next 10-15 years. I know the City Council and others are talking to the Department and English Heritage about whether the scale of the problem merits a special circumstance and perhaps some sort of housing renewal fund. Certainly other areas in the city have benefited in the past from housing PIP schemes through English Partnerships, now inherited by Yorkshire Forward, as a way of bringing private investment into some very difficult low-value fringe areas around the city centre, and that has actually been very successful in the early phases. But of course, the whole point was to use PIP to close the gap between cost and value and but to kick-start the market in those areas, so that by the time you got to the later phases of those schemes, you would not actually need any public sector support.


  246. As has happened in Hulme.
  (Ms Nimmo) Absolutely. I think there is a real worry in Sheffield though that a lot of good work has been done but they cannot actually physically see how the next phases are going to be delivered. There is a real worry that these very good, early proposals, where the tenants are very happy and the private sector that have come in are very happy, will just stop dead in their tracks.

Christine Russell

  247. Can I ask you about Manchester and about the same kind of inner urban areas that we have just been talking about in Sheffield. Are the sites being acquired in Manchester, and if they are being acquired, what are you doing with them? Are you confident that the values of those sites will be sufficiently high then to engage the interest of developers?
  (Mr Russell) Yes, the sites are being acquired. As I say, whether it is through agreement or through compulsory purchase, we have already assembled, subject to a Public Inquiry—which in fact commences this morning—a 90-acre site for new employment generating uses in the area rather than residential accommodation. Through the local authority we have acquired and demolished an area of older terraced housing of some 30 acres in total which can sustain 500 units of housing, and we have other housing schemes which we are actively working on in the area which can deliver up to another 1,000 units. So the acquisition of land thus far has not been a problem, although I must say there are limits to it. The local authority certainly has limited resources and the 30-acre site, which it has invested considerably in, could only be done as a first phase. In terms of the response of the private sector to this, I would have to say that so far I have been really encouraged by the response of the private sector. East Manchester is a very tough area for those that know it, and in some cases values almost no longer exist for certain types of usage. But notwithstanding that, we have been through a process of competition in the private sector to select development partners for all of these opportunities, and we have had a very strong response.


  248. Surely East Manchester was not as tough as Hulme.
  (Mr Russell) I think East Manchester in some senses is a great deal tougher than Hulme. There were enormous advantages in Hulme in having £37,500,000 of dedicated City Challenge resources, and the huge advantage that the local authority owned Hulme lock stock and barrel. In East Manchester we are working with a very diffuse pattern of land ownership, which makes it in some senses a more difficult area to deal with. It also lacks some of the locational advantages that Hulme had, on the fringe of the city centre, dissected by the major radial route to Manchester Airport. So I would dispute the fact that East Manchester is any easier than Hulme.

Mrs Ellman

  249. How seriously have you been held back by the absence of a housing gap funding scheme?
  (Mr Russell) I would say to date we have not been, but we have been proceeding on an act of faith that by the time we get to the point of having done the financial appraisals, there will be some mechanism in place to enable us to provide a subsidy of some sort to enable the development to take place. As you would expect, private developers want to know on day one what the public sector is going to pay for, and what we have had to say to them in these circumstances is that we cannot answer that at this stage, but that there is a 100 per cent commitment to delivering a scheme, and we have proceeded on the basis of developing plans for these schemes—not just residential, but we are trying to look at the totality of what creates a sustainable neighbourhood.


  250. That is a bit like someone buying a lottery ticket with a 100 per cent commitment that they are going to win!
  (Mr Russell) I hope not, or I am going to be out of a job fairly soon. I do not think it is like that. The private sector will always take a view about what it is being asked to commit and what its chances are of achieving a return on its investment at the end of the day. I have no doubt that we will find a way of unlocking subsidy. It will be made much easier if there is an adequate gap funding scheme which covers housing, although I think the demarcation of gap funding into particular types of development or tiers of authority is part of the problem. To my mind, the real solution to this is to have a gap funding regime which enables local partnerships to do that cost/value assessment for themselves—of course to satisfy government and the European Commission that value for money is being achieved, but not to concentrate so much on particular forms of development.

  251. In other words, to go back to the old scheme?
  (Mr Russell) I would say with one modification. Alison mentioned it in her written submission. The old scheme was perfectly adequate, but it needed a strong strategic framework in which development could be brought forward. Where it has failed to achieve regeneration in the sense of sustaining values in the long term, it is because it has been very project-oriented; there has not been that broader strategic framework, and values have slipped back over a period of time. I could take you to gap-funded housing schemes in East Manchester which were limited in scope and ambition, which delivered benefits immediately but where ten years on we are almost back to square one, because they lacked that critical mass and that strategic framework.

Mrs Ellman

  252. What about Sheffield? Is it any different?
  (Ms Nimmo) No. I would echo Tom's comments, save to add that one of the real problems that we are facing now is this link between regeneration and state aid. It is now like a virus that is going through everything that we are doing. To a certain extent we could deal with the PIP issue with Yorkshire Forward—we are very resourceful people in regeneration; you can find clever ways to do things and be very creative—but we are now being told that our Single Regeneration Budget (round 6) bid for the city centre cannot be used for gap funding. Rounds 1-5 are OK but round 6 cannot be used to gap-fund any projects that are owned by the private sector.

  253. Who is giving you that advice?
  (Ms Nimmo) We have been told that from the RDA and they have been given advice from the Department, as I understand it.

Mrs Dunwoody

  254. Have you seen it in writing or is this still a matter of faith?
  (Ms Nimmo) This is advice we have been given in meetings in terms of now trying to generate detailed delivery plans for the next year of our SRB6 programme. We also have a Town Heritage Initiative in Sheffield in the cultural industries quarter, and now there is a lot of uncertainty with Heritage Lottery funding and exactly what the position on that is. We have some fantastic old "little mester" buildings, old cutlery workshops that are listed, and there are some real issues now about how we get Heritage Lottery funding into private sector buildings.

Mr Betts

  255. You stressed in your submission, Ms Nimmo, the importance of having a strategic framework. Is there a concern though that that might simply lead to a number of large projects and to some smaller elements of regeneration going by the wayside?
  (Ms Nimmo) I would hope not, no. What we have in Sheffield probably should not be called a master plan; that sounds very grand and it sounds like a real blueprint for development. It is actually a well thought through regeneration framework that is supported by all of the partners, which provides the confidence and the certainty for all the other agencies, public and private, in the city to come in and invest. So yes, we are promoting a number of major, large projects, because we are looking at transformational change in Sheffield, not just change at the margins, but that is also providing the certainty and the framework for voluntary sector organisations, housing associations and private sector developers to bring forward smaller scale developments. We are also directly involved in a number of relatively small-scale developments to try and kick-start the market, principally using the City Council's assets to actually underpin the delivery of regeneration. So we are not just trying to do the really big, difficult things, although that is what we are there for; we are trying to gain a sense of momentum and confidence in the city by doing some smaller, easier, early-win things to try and start to turn around confidence in the city.

  256. Coming to the issue of Assisted Area status, what has been said before was that now that the gap funding is a real problem, many projects are only going ahead in Sheffield—Manchester is different—because of the money from the Assisted Area status. Does that effectively mean in some ways that the priorities in the country for regeneration have been driven by Assisted Area status, which are not necessarily the most appropriate things to put together? Assisted Area status may be one reason. Cities still have regeneration needs which now cannot be met if that Assisted Area status is not there.
  (Ms Nimmo) I think that is right. I am a great advocate that if UK plc is going to be competitive, that cities and our urban areas have an absolutely fundamental role to play in that, be they inside Assisted Areas or not. Every large city has regeneration problems, serious areas of deprivation. I think it goes back to the point that Tom made, that we need Europe to understand how we do regeneration in this country, and I think we have been very successful in certain instances, and we must break this stupid link between state aid and regeneration, because I do not see how regenerating our most deprived communities can be skewing or giving the private sector any market lead or any kind of market advantage in a European sense. That is daft really. What we need is a very flexible framework that allows UK government plc and local and regional regeneration agencies to decide the priorities for their area and how they want to use those mechanisms, and if we carry on down the route that we seem to now be locked in, we are going to spend so much time and effort on the bureaucracy that we are actually going to stop delivering the scale of regeneration that we need to deliver in our towns and cities.

Mr Cummings

  257. How effective has Direct Development by the public sector been in your URC?
  (Mr Russell) We have not undertaken Direct Development to any great extent, other than some large-scale environmental improvements to clean up dereliction. But you could not expect the private sector to come in and undertake that form of development. As a general rule, I believe that partnership with the private sector is a more effective means of delivering development than Direct Development by the public sector.

  258. Why?
  (Mr Russell) Because I think the private sector has the skills, the capacity and the experience to undertake it, and I think that has been lost in the public sector over a period of time and it will take a period to recapture.

  259. Are there some types of project that work particularly well in the Direct Development?
  (Ms Nimmo) Probably economic projects, a small workshop, the type of activity that English Partnerships used to engage in. Really, what they did was deliver cheap and cheerful but reasonably good quality business space in the Assisted Areas, and now what many of the RDAs are doing is actually selling on that portfolio. What they need to be able to do is recycle that money back into regeneration. I am not sure that direcr development really works for any other commercial sector.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 28 March 2002