Examination of Witnesses (Questions 320-339)|
TUESDAY 5 MARCH 2002
320. So what kind of budget Direct Development
best equal to?
(Ms Hancock) I think you have to be very clear in
that about what you mean by "Direct Development" and
I think one of the things that the RDAs share is the view as John
has expressed, that we have a very constrained role in pure Direct
Development. I think we are all looking as quickly as possible
to get the private sector into a scheme and frankly to get us
out of a scheme. I think the areas where we have most to contribute
from experience of using CPO powers or other options for acquiring
land on sites and overseeing infrastructure and also on larger
sites are doing, I suppose, the leg-work upfront with private
sector partners on the strategic future for that site, so putting
the resource at that element which is an area where the private
sector is less willing to invest.
321. I will not bother asking the question of
whether Direct Development has delivered less value for money,
but do all of you agree with that figure?
(Mr Piper) I would like to make a point on it because
I think the key thing there is that it requires more resources
upfront, but very often what you will then see is that when you
have actually serviced the land you will have an asset to dispose
of to a developer and we can recycle those revenues and actually
the end result should not be that different, but the key difference
is that it needs resources upfront.
322. It should not be that different or it should
actually be more profitable?
(Mr Piper) Well, it could be beneficial to the public
sector because if the joint venture with the private sector is
structured correctly, we can actually then get the benefit of
the longer-term improvement in values which gap funding was less
well able to do and that is the type of framework and approach
that we are trying to use in the South West.
(Mr Edwards) It is also worth adding to that that
as we go forward into the single pot and as we invest in site
assembly and remediation, making assets available to the private
sector, the money that flows back into that can be reused by the
regional development agencies.
323. It can be reused, but it is a question
of how quickly it can be recycled and it does take quite a long
time to get the money back, does it not?
(Mr Edwards) Well, it will take time to get the money
back. That, I think, is an argument potentially for the public
sector through the regional development agencies intervening to
bring difficult sites forward for development and recognising
that there is a constraint because of the time required for the
private sector then to take an interest.
324. But then it is very much an issue of resources,
is it not?
(Mr Edwards) Well, it is an issue of resources. It
is also an issue of very sound financial planning.
325. Are receipts from Direct Development ring-fenced
for future regeneration?
(Mr Piper) The rules will change from April where
now we are able to retain those receipts within the RDA and use
them as part of our single financial framework, so they will be
used for all the RDA's activities.
(Ms Hancock) It is worth mentioning there that there
is still a slight imperfection in how that works in terms of one
would expect the incentive to be for the public sector to extract
itself and let the market take the lead as quickly as possible
as we want to see the market operate fully. At the moment it is
proposed that looking forward there will be some element of the
returns on that investment being recycled, but that will simply
be deducted from our grant-in-aid, so we do not actually get any
net benefit from recycling the investment as quickly as possible
and that for us seemed to be a disincentive to operate efficiently.
326. Can I ask all three of you if you are actually
comfortable with and do you feel it is appropriate that the same
body that develops economic development strategies also is the
developer of the subsequent construction projects?
(Mr Edwards) Yes, I do. The regional development agencies
have a clear input to develop an economic strategy which is used
to influence the spending of all economic development and regeneration
monies in the region. If we take the West Midlands as an example,
we estimate that over the next ten years there will be something
like £30 billion of public sector investment in economic
development and regeneration in the region and only 5 per cent
of that will come from the Regional Development Agency, so it
is how we brigade those resources collectively over that period
to lever an improvement in regional economic performance. The
regional economic strategy is not the RDA's economic strategy;
it is the region's economic strategy. We have developed it in
partnership. Ours certainly in the West Midlands is a joint document
with the regional chamber, now the regional assembly, so it is
the region's economic strategy. We just happened to help develop
it and help to implement it and we look after it on behalf of
the region, but it is the region's, not ours.
327. And you agree with that point of view?
(Ms Hancock) Yes.
328. Can I go on to ask you how you ensure that
your Direct Development is not directly competing with the private
(Ms Hancock) The approach we take is always to challenge
why is Yorkshire Forward becoming involved at all and what is
the actual market area, the obstacle to development that require
us to become involved, be it with simply our money or with other
of our resources. The second approach we take is always then to
look for the earliest possible relationship with the private sector
in taking forward a scheme and agreeing our exit strategy. Of,
I think, the seven new schemes we have got coming forward under
the single pot which would fall within the Direct Development
definition and the replacement gap funding scheme, PIP schemes,
only one of those is not a joint venture or will not be a joint
venture with the private sector and that is simply because of
a complication over the inward investor.
(Mr Piper) If I can add to that, many of the Direct
Development schemes that we are actually pursuing have come about
because the private sector have actually failed to deliver on
a particular piece of land, the land has lain idle for ten years
or more, or in fact where particular land or property was in the
ownership of a private developer and they actually failed to deliver
and we took control and ownership in order to stimulate the investment.
Like Heather, we are looking then to sort the problems out and
get the private sector and their skills back involved in the development
as quickly as possible.
329. Are there not occasions where you are actually
directly competing or is what you are trying to say to the Committee
that you only go in to a site where the private sector has no
interest in it, it is too difficult a site?
(Mr Edwards) I think it will certainly be the latter
where the site is very difficult to develop and the only way to
bring it forward is for the RDA to intervene. To give you another
example, one of the latest sites that we are looking to acquire
at the moment which is linked to our strategy for technology corridors
in the West Midlands, we are purchasing from the receiver a difficult
and contaminated site. Now, the private sector would snap it up
tomorrow if it were to be entirely a housing development, but
the local authority wants to see clear mixed use taking place
and less than 20 per cent of that site going for housing, so in
that context we are supporting the strategy set out in Regional
Planning Guidance and the Local Development Plan to deliver a
mixed-use development on that site. We will bring the site in,
"remediate" it, put it out to the market with a development
brief attached to it, so it is not direct competition necessarily,
but it is delivering a good that the region requires.
330. Do you consider that all three RDAs that
you represent have staff on board who have the right kind of skills
which are necessary for Direct Development work?
(Mr Piper) Well, we have got 25 qualified surveyors
in the South West RDA and I would doubt
331. So why is the Royal Institute or whatever
critical of the fact that, they argue, you do not have the skilled
people? Why are they saying that if you have got 25 surveyors?
(Mr Piper) I cannot speak obviously for their experience
elsewhere, but certainly we are heavily involved with the RICS.
We have held common property seminars with them and our Director
of Development is actually on the regional board of the RICS,
so we have a strong relationship. I would suspect that 25 qualified
surveyors is probably more than most developers in the region
have actually got.
332. It is of course the mix of skills, is it
not, to bring forward some of these fairly complex schemes? It
is not just necessarily the surveyors.
(Ms Hancock) I think the difficult skills to bring
on board, where we have spent a long time in the market looking
for the right people who are willing to make a move into the public
sector and at the minute into RDAs who have a relatively unproven
track record in this is in the commercial negotiation and development
project management skills. Those are the areas where it is hardest
to recruit and that is partly pay and it is partly track record.
Having said that, there are ways in that if you are in a relationship
with the private sector, they will bring those skills, so you
do not actually necessarily need it and we only have a property
team of ten.
(Mr Edwards) Can I just add one point which is that
I think there is actually a general skill shortage in this area,
in the whole regeneration agenda, which is one of the reasons
that the regional development agencies are looking to establish
regeneration centres of excellence in the region, which is to
pick up the Chairman's point, that it is more than just surveying
skills, and that it is negotiation skills, it is an understanding
of community enterprise, community development, so you need a
very broad range of skills to deliver proper sustainable regeneration.
We do what others do. We do find it difficult in the West Midlands
to recruit at the moment partly for the points that Heather has
made, but also because we happen to be based in the only hot-spot
in the West Midlands region, right in the centre of Birmingham
where those sorts of skills are in short supply, so we have to
work with the private sector to use their skills to deliver the
sorts of schemes that we want to see delivered.
333. Presumably you should have moved to Tipton
or somewhere like that.
(Mr Edwards) That would be a very good idea, Chairman,
and I will mention that when I get back.
334. Do you think it is right that the RDAs
are put in a position where they appear to be defensive about
Direct Development? Should not RDAs be entrepreneurial? Should
they not consider the development assets against which the borrowing
can take place? Why are they all so defensive?
(Mr Edwards) I do not necessarily feel that we are
being defensive. I think what we are doing is trying to explain
where we believe Direct Development plays a critical role in helping
to deliver the regional economic agenda. I think where the problem
is is that it is seen as some sort of either/or; you can only
have one or the other, either Direct Development or gap funding.
There is a role for both of them to play. We would certainly welcome
a more flexible regional framework than the current one we have
and we will still use it to deliver the regional economic strategy
and not necessarily to be project-led all the time, but to be
driven by strategies to which the region collectively, the public,
private and voluntary sector, have signed up.
335. I do not know if you saw the transcript
from last week's Select Committeewhat a shame!but
we were very surprised when we were asking developers where they
would get information on what funding is available and what criteria.
They just did not know, that they could not find out. In theory,
it is the RDAs, but in practice, it is a bit of a nightmare. What
is your situation? Do you have clear statements?
(Ms Hancock) I have got mine with me. We held a property
conference last year and we repeat it annually. There are 300
of the main property players in the region at it jointly with
the RICS. We have an annual easy-to-access leaflet which sets
out what we do, why we do it and who to talk to about it.
336. So why do you think they just could not
find anything out? Perhaps they live in the wrong place.
(Ms Hancock) I do not know.
337. Does that explain then how to go about
the new gap funding schemes?
(Ms Hancock) No, it explains that we are not interested
in operating reactive grant programmes. It says, "This is
the kind of property issue that we are concerned about in the
regional economic strategy and these are the kind of techniques
we have got to tackle it. Please come and talk to us if you are
dealing with a property constrained which fits within that sort
of system". Then we say, "We will find a solution to
338. So that is why they have no idea what you
are talking about! Frankly that is nonsense, is it not? You are
not saying firstly you have a conference at which you arrange
for people to come along. Fine. Secondly, when you are asked,
"Do you have easily accessible information?", because
frankly if property developers are sitting in an office trying
to decide where their project is going to go, they are not really
going to want to spend time having a long discussion if they are
not clear what the terms and conditions are, how much is available,
when it would be available, how it is payable and how to use the
scheme, the reality is that you have not got that information
(Ms Hancock) Our experience is that they are very
happy to come and have those discussions and they would rather
have them and to understand what the drivers are for the RDA agreeing
to make an investment into a scheme and the drivers for us, the
criteria are a secondary issue, the drivers for us how much brownfield
land is involved, how is it going to contribute to the regional
economic strategy and how many jobs will it create.
339. With the greatest respect, that was not
actually what you were asked. We know what the drivers are or
we hope we know what the drivers are for you because we hope we
know what your responsibilities are, but you were asked how would
a developer know easily, quickly where to go to find out what
the terms and conditions were.
(Ms Hancock) Because they have got all the contacts