Examination of Witnesses (Questions 266-279)|
TUESDAY 5 MARCH 2002
266. May I welcome you to the third session
this morning. Would you identify yourselves for the record.
(Ms Souter) I am Carole Souter from English Heritage.
(Mr West) Jeff West, Director of Conservation Management,
(Mr Shelton) I am David Shelton, English
Partnerships' Development Director.
(Mr Hall) Euan Hall, Director of Coalfields Regeneration
and Joint Ventures at English Partnerships.
267. My first question is for Mr Shelton. It
took a long time to establish the English Cities Fund, I believeexactly
how long, and what were the main problems?
(Mr Shelton) It took nearly two years of processes
to create the English Cities Fund to move from a twinkle in the
eye to formal approval from Europe to the creation of the English
268. I am particularly interested in the problems
you had with the Commission.
(Mr Hall) I think the biggest problem was that now
the English Cities Fund has actually been confined to operate
within the Assisted Areas, which goes substantially away from
where the English Cities Fund was originally intended to operate.
We saw the ECF as a tool that could promote inner city regeneration
anywhere in England, wherever it was needed. The property market
responds not to indexes of deprivation but to the profit motive,
and profits follow cities where they are economically active.
They do not go to the regeneration areas of cities. The ECF therefore
was very much targeted at those, but now that it is restricted
to the Assisted Areas, its potential impact on England is substantially
reduced, I would suggest.
269. Your press notice for the Fund originally
talked about areas located on the fringes of towns and city centres.
That is quite off the agenda now?
(Mr Hall) It will operate within assisted areas where
they are on the fringes of towns.
270. And that is a disappointment to you?
(Mr Hall) Yes.
271. In terms of the percentage of the grant
that can be paid, is that capped?
(Mr Hall) It would be capped within State Aid rules,
so traditionally a tier one assisted area, that is 35 per cent
and within a tier two, 15 to 20 per cent.
272. And the Commission are perfectly aware
of the high level of private sector finance and have taken that
(Mr Hall) Yes.
273. Given all of that, in terms of the objectives
set by the Urban Task Force, something like £1 billion of
private investment and a minimum of 50 per cent resources from
the private sector, are we going to get anywhere near that target
by English Cities?
(Mr Hall) I think it is very early days since the
Fund was actually approved. It has been approved at a far lower
level at the moment and I think only time will tell on that. It
is going to be a struggle, I think, to get to that level.
274. Why could you not convince the Commission
of what your real task was and why did they restrict you to the
(Mr Hall) Because it is very much dealt with in the
State Aid side of the Commission and the Competition Directorate
and we are considered to be promoting development which is intra-Community
275. But why were you not able to establish
the fact that your brief was much wider than that?
(Mr Hall) I think it fell very much under the partnership
investment programme ruling and it was seen as yet again another
way around State Aid.
276. So is the ambition set both by the Urban
Task Force and by your yourselves now unlikely to be fulfilled
in the way that was expected or hoped?
(Mr Hall) Yes.
277. Moving beyond the Cities Fund, more generally,
how far do you think English Partnerships' activities and programmes
will be limited to assisted areas?
(Mr Hall) Well, I have looked at our coalfields programme,
which was set up by the Government in 1997. We at the moment have
got sites across seven RDA areas. Seventy per cent of those ward
sites are within 30 per cent of the most deprived wards by the
Index of Deprivation, yet only a quarter of the sites, 25 per
cent, are in tier one assisted areas, so our ability actually
to effect comprehensive regeneration in coalfield areas, which
are very deprived communities, is severely restricted. As an example,
I mentioned priority sites, our joint venture with the Royal Bank
of Scotland. On one particular coalfield site, not within the
programme, but in Wansbeck in the north-east, the initial scale
of gap funding that was required by priority sites, our own joint
venture set up to develop these areas, was 58 per cent of cost
to develop and within the current State Aid rules that would not
happen, so approximately 50 new jobs would not exist in Wansbeck
from that scheme. The second phase scheme by the company needed
38 per cent gap funding and again it would fall foul of State
Aid rules, and it is only when we have proved the market sufficiently
that we have done a third phase scheme which has fallen to 32
per cent gap funding that that could actually happen, but without
the original two projects, the third would not have happened.
We are now at a state where we have promoted market adjustment
there and it is quite likely that the private sector will now
follow and develop.
278. So would you say that urban regeneration
companies are essentially unable to succeed if they are not in
(Mr Hall) I think their abilities will be constrained.
(Mr Shelton) EP can still operate as a direct developer
outside the assisted areas and we still do operate as a direct
developer, acquiring land, servicing it ourselves and disposing
of land at market value to private sector partners. What we have
lost, however, through the demise of the original Partnership
Investment Programme is the ability to have literally hundreds
of private sector partners out there in the marketplace, working
up the schemes, so the size of the programme that we are able
to resource is significantly less than a programme that is run
on a Partnership Investment Programme basis. That is not simply
a question of the funding availability; it is simply the manpower
resources available within English Partnerships.
279. I am sorry, we are a bit pressed for time,
so taking no hostages, can you tell us how PFI can operate within
(Mr Shelton) PFIs, in their true sense of the private
sector providing a service in return for an underwriting of the
cost of that service from the public sector, are very difficult
to make work in a regeneration context, particularly a physical
regeneration context where we are undertaking site assembly, site
reclamation and infrastructure works. We are about to commission
a pilot feasibility study to see if we can use the PFI approach
to support regeneration but our early indications show that it
is going to be very difficult to stretch the PFI mechanism into
a physical regeneration programme.