Examination of Witnesses (Questions 238-259)|
TUESDAY 5 MARCH 2002
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
(Ms Nimmo) I am Alison Nimmo, Chief Executive
of Sheffield One, the urban regeneration company for Sheffield
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
(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.
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
(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
(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
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 Inquirywhich
in fact commences this morninga 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
(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.
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
schemesnot 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 themselvesof 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.
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 Forwardwe
are very resourceful people in regeneration; you can find clever
ways to do things and be very creativebut 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
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.
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 SheffieldManchester
is differentbecause 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.
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.
(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.