Examination of Witnesses (Questions 520-539)
LORD FALCONER OF THOROTON, MR PAUL HOUSTON AND MR STEPHEN STRINGER
TUESDAY 30 APRIL 2002
520. Looking at the issues that were raised in the conference organised on 21 March, is there a feeling now that, perhaps, different to when the predecessor Committee took evidence on this issue, there is now a wider understanding of the whole issue of regeneration, and the difference between that and Regional Aid amongst many European Union countries?
(Lord Falconer of Thoroton) I think there is an increasing understanding, and the sense is that there was not a clear understanding in 1999 when the PIP decision was made about the British approach to regeneration. An understanding of the British approach and that it does not, in principle, offend against the State Aid rules is growing. The impression I have is that there is quite a long way to go in relation to that. Work needs to be done in that direction.
521. Are there any other countries in a similar position to us who have similar sorts of schemes they would like to develop?
(Lord Falconer of Thoroton) I do not think that there are any particular countries that have similar schemes to ours. We have support amongst some northern European countries and from other countries as well, but our approach to regeneration does appear to be different from most other countries.
522. In your supplementary memorandum you have indicated that you have engaged consultants to follow up on some of the information obtained from the March 21 conference. Can you tell us a bit more about that; what the consultants have been employed to do and what you hope to gain from them?
(Lord Falconer of Thoroton) What we want the consultants to do is look at other countries but, also, to put together details of the sort of market failure circumstances which could found the basis of a regeneration framework.
523. How quickly do you think the consultants are going to do this for you?
(Lord Falconer of Thoroton) They are going to report to us fairly soon.
(Mr Houston) A couple of months, I would think.
524. A couple of months from 21 March or a couple of months from today?
(Mr Houston) From now.
525. Can I ask you what types of activity you envisage will be contained in the new European framework?
(Lord Falconer of Thoroton) The purpose of the framework is, basically, to seek to draw a distinction between a scheme that is intended to be regenerative and one that helps a business and, therefore, should be a State Aid. The sorts of activities that one would like to see covered by the regeneration framework are things like housing, heritage regeneration, remediation of contaminated land, the building of both Speculative and Non-speculative premises for offices, both for SMEs and bigger organisationsthe whole range of things that have been covered by PIP but on a different basis, namely a basis that accepts this is regenerative rather than something that affects trade between Member States.
526. Realistically, what chance do you think there is of having that framework in place by the time of enlargement in 2006?
(Lord Falconer of Thoroton) I do not know. I think the quicker the understanding among other Member States that our regeneration principles do not threaten interstate trade and the quicker and clearer we establish the principles of market failure which underline the regeneration framework, the quicker it could happen. From all the people I have spoken to, I have had absolutely no indication about how long it will take. I heard Arlene at the end of her evidence giving you an indication of the various milestones one could look at, such as, for example, the reform of the State Aid rules in 2004. I think the way that we should approach this is we should treat it as urgent; it is a persuasion and a job of gaining support across Member States and we should, I think, not tie it to particular events in particular milestones for the future but seek to try and drive it as hard and as quickly as possible.
527. The recent review of English Partnerships states: "... Regeneration is not the primary focus of RDAs ...". Do you think that was a mistake?
(Lord Falconer of Thoroton) Regeneration is one of the focuses of RDAs. Whether it is primary or not, it is not the only focus of what they do.
528. It is not the only focus but it is not the primary focus. It seems to me to imply that something else is the primary focus and that is not.
(Lord Falconer of Thoroton) I think you are quoting from what KPMG have said.
(Lord Falconer of Thoroton) I think if that is what KPMG have said it is not right; it is one of the focuses and one of the main or primary focuses of the RDAs.
530. So would you fall back on the statements made last week by the RDAs and the DTLR in a joint statement?
(Lord Falconer of Thoroton) Yes, I would.
531. Just looking at the whole issue of English Partnerships, do you think there needs to be great clarity between the role of English Partnerships and the RDAs? Is there an element of confusion around them?
(Lord Falconer of Thoroton) I do, and I think the Stage One announcement about the review of English Partnerships was designed to try and do that. RDAs and EP should not be trying to do the same thing in the same place; RDAs should know that they are the people who should be driving the actual delivery agenda in the particular region. EP should become an expert on regeneration and brownfield developments. They should only hold national strategic sites or demonstration sites rather than overlapping in certain places with what the RDAs do. I think the lack of clarity about the roles of the RDAs and EP has not been particularly helpful.
532. How is it going to be resolved?
(Lord Falconer of Thoroton) The Stage One announcement indicates that they will be pulling out of all development save Sites of Strategic National Importance and demonstration sites, which means that their role in actually developing will be reduced but, also, they will gradually be giving up the land they have got in the new towns. So the way it will be resolved is that the activities of EP in actual regeneration terms will be restricted to those two areas.
533. Then you think there will be no more overlap?
(Lord Falconer of Thoroton) I think it will take sometime to get to a point where the precise roles of the two are clear, but I think we are moving in the right direction in that respect.
534. The review of English Partnerships recommended setting up a new Strategic Brownfield Sites Fund. How is that going to be taken forward to ensure it does not conflict with State Aid rules?
(Lord Falconer of Thoroton) Obviously that will be taken forward in relation to Stage Two of the EP review. How will it be clear that it is not in default of the State Aid rules? If the fund is used for Direct Development, there will be no problem in relation to that. If it is used for developments that fall within the current schemes, equally, no problem. It is a difficult question to answer without knowing the particular scheme that you are judging it against.
535. Part of the remit appears to be looking at joint ventures with the public and private sector.
(Lord Falconer of Thoroton) That is one thing they could look at, yes.
536. Are those going to be looked at before they are set to make sure that they do not conflict with State Aid?
(Lord Falconer of Thoroton) We would have to check in relation to each venture as to whether or not it did offend against State Aid rules. The Strategic Fund would be funding it. There would be specific proposals in particular areas of brownfield land and we would have to look at each one to see if it offended against the State Aid rules.
537. Which way on would you be dealing with this? Would you have a proposal and say "Does this conflict?" or would you be more pro-active in saying "How can we influence European rules to make sure that this investment works?"
(Lord Falconer of Thoroton) We should be doing the latter rather than the former. We should be trying to ensure that Europe is comfortable with the Strategic Fund in relation to brownfield land. If that requires persuading them then we should seek to do that. I do not think the setting up of such a Strategic Fund would of itself offend. The way the difficulty would arise would be then for the individual sites that you had invested in; how you would invest in those individual sites would be the point at which the question about State Aids would be raised.
538. English Partnerships also told us that their Cities Fund was restricted to Assisted Areas.
(Lord Falconer of Thoroton) Correct, and SMEs.
539. Is that something that gives you concern?
(Lord Falconer of Thoroton) Yes, it does give me real cause for concern, because the English Cities Fund was not intended, when it was set up, to be restricted to Assisted Areas; it was intended to cover all the range of places, all the built-up areas, because deprivation in our towns and cities and urban renaissance in our towns and cities is not simply restricted to those areas that are Assisted Areas. I think it is very problematic that that has happened, and it is an incredibly good example of what the practical effect of the PIP decision has been. There are people in English Partnerships who would say that the effect of the English Cities Fund being restricted is that it might have a detrimental impact on delivering some of the goals in the Urban White Paper. I think we have got to fight really hard to ensure that that does not happen, but there is absolutely no doubt that the English Cities Fund was set up on the basis that it would cover potentially all cities, not just some cities but all cities, and that is obviously a problem.