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

Memorandum by Alison Nimmo, Sheffield One (ERF 24)


  This written evidence is submitted by Alison Nimmo, Chief Executive of Sheffield One. Sheffield One was established in February 2000 as one of three pilot Urban Regeneration Companies. Its role is to spearhead the regeneration of Sheffield City Centre. Prior to Sheffield One Alison was Project Director of Manchester Millennium Ltd and played a lead role in the £1 billion rebuilding of Manchester City Centre following the June 1996 terrorist bomb. Alison is a town planner and chartered surveyor, with over 15 year's experience of delivering major urban regeneration projects from: Whitehaven to Woolwich; Liverpool to London Docklands; and Bristol to the Black Country. Her experience spans both the public and private sectors.


Barriers to Regeneration Caused by the Current Framework

  The Committee's review of the need for a new European regeneration framework is timely. The history of the debate leading to the cessation of the PIP gap-funding mechanism in 2000 and the subsequent impact has sent shock waves through the regeneration industry. The issue has now gone well beyond that of the loss of PIP and opened up a more fundamental debate about how we approach regeneration in the UK and the issue of State Aid. State Aid used to be confined to strategic public sector intervention in industries such as steel and shipbuilding. The notion that public private partnerships and property-based schemes in deprived areas in the UK could contravene these rules is still not understood. Yes, regeneration regimes do try to give some economic advantage to private developers, investors and occupiers—that is the whole basis on which our regional economic strategy and regeneration programmes are based.

  The EU needs a better understanding of how regeneration is delivered in the UK. Given the EU principle of subsidiarity the government should be afforded sufficient flexibility to operate within acceptable limits and be able to take a view on what would constitute unfair State Aid. This would ensure that, in an EU context, no single company/industry would receive a disproportionate or unfair advantage.

  An increasing lack of understanding and level of confusion with regard to State Aid is having a very damaging impact on regeneration in the UK. Almost all regeneration related programmes that involve private sector partners have been under the spotlight—Single Regeneration Budget (round six), Heritage Lottery Fund, English Cities Fund etc. Recent government initiatives such as stamp duty exemptions have had to be carefully crafted to avoid falling foul of the rules.

  A new EU framework is critical to allow the UK to deliver the regeneration of its most deprived areas. The current framework militates against a partnership approach with the private sector—an approach that has taken a long time to develop and has proved to be successful and an effective use of public resources.

The five new, EU approved, land and property regeneration schemes

  The new EU approved schemes are more complex and more limited—geographically, in terms of uses and in respect of the level of intervention allowed—than the former PIP regime. Given their limitations there seems little appetite from a number of the RDAs to use them and to encourage the private sector to bring forward appropriate schemes. The private sector view has been a nostalgia for the previous PIP regime that they understood and had used with reasonable success. The former PIP regime (and before that City Grant) had some very notable successes and provided an effective way of leveraging the resources of the private sector. A number of projects were genuinely catalytic in their impact, though many were promoted in the absence of a clear strategy. The main problem with the former PIP regime was that it was reactive and led to a culture of projects being grant driven.

  A new regeneration framework has been developed in Sheffield, driven by a partnership approach. Sheffield One is a good example of how this is being delivered on the ground. The RDA (Yorkshire Forward), Sheffield City Council and English Partnerships are all equal partners in Sheffield One. A City Centre masterplan has been developed to drive the economic regeneration of the City Centre. This provides the framework within which key investment decisions are made and the partners agree key priorities and funding commitments. In this way the programme is strategy led and project led. The decision is then made on a project by project basis as to the optimal vehicle for delivery—be it direct development, site assembly, gap funding etc.

  Sheffield One's approach to delivery is, in essence, direct development, but not in the traditional sense. Working closely with our partners, we are undertaking a hands on approach to dealing with the twin problems of market failure and abnormals which create the funding "gap" and an unacceptable risk profile for the private sector. We are doing this in a number of ways, for example:

    —  Site Assembly: This is the single biggest hurdle to urban regeneration. Our activities include: the acquisition of a number of sites and buildings by our partners; the pro-active use of the City Council's assets; and the assembling of a number of difficult sites by using CPO;

    —  Demonstration Projects: We are pro-actively bringing on board private sector partners to deliver innovative regeneration projects. For example the regeneration of the City Council's former education offices in Leopold Street—a magnificent complex of listed buildings—for a mixed-use development which will act as a catalyst to the regeneration of the wider City Hall/Barkers Pool area;

    —  Preparing the Ground: On a number of strategic sites we are working with our partners to deal with "abnormals". Examples include demolitions, site remediation and decontamination, relocating tenants, utility diversions and investing in infrastructure. This activity not only reduces the cost to the private sector, it reduces timescales and it reduces risk; and

    —  Masterplan: Through the production of a masterplan we are seeking to create a level of certainty and confidence that will encourage the private sector to invest. It creates a basis for the public sector to deliver investment in infrastructure (transport, utilities and ICT) and creating a quality public environment which lifts confidence and values to the point at which the private sector will commit. The real added value comes from the interplay of the masterplan and having a dedicated vehicle in the URC to co-ordinate and facilitate delivery.

  The above approach is capital intensive and needs significant upfront resource—cash as well as people with the right commercial/development skills. At the moment URCs have a relatively tight budget and no long term committed funding.

  I can understand that towns and cities that do not have the benefit of Assisted Area and Objective 1/2 status are concerned as to how to deliver regeneration. Nevertheless there is an argument here about prioritisation and focussing resources on those areas that most need it.

  The other difficult area is that of housing. Whilst the replacement regimes allow projects with an element of residential, the threshold is relatively low and, in certain circumstances, this could well cut across government aspirations to create mixed-use areas and mixed-use developments in our urban areas. If the rest of government policy works effectively in encouraging developers to reinvest in our urban areas then I can understand why there is some reluctance to provide public subsidy for private housing. There is, as always, however some special circumstances eg Millennium Villages and in the regeneration of major public sector housing estates, where there is a need to lever in private sector activity and investment. PIP has been used very effectively to regenerate and diversify some of Sheffield's key public housing estates. A replacement mechanism now needs to be found urgently to help bridge the cost/value and risk gap if private sector solutions are to be found.

Consequences for the urban renaissance in terms of outputs, outcomes and value for money

  There is absolutely no doubt that the most effective use of public money to regenerate our deprived areas lies in working with the private sector. The private sector brings commercial skills, but most importantly a relatively small amount of public money can lever in significant amounts of private sector money. The net cost to the public purse of many public/private ventures is actually quite small compared with the outputs and benefits delivered (particularly when clawback is accounted for). In investing in such partnerships the public sector only invests in bridging the gap between cost and value. In a direct development scenario the public sector upfront investment is significant ie the total project cost, albeit the assets can subsequently sold and the money "recycled" back into future projects. The difficulty is that it ties up a very significant amount of public capital and people resources. It cannot realistically deliver anything like the overall outputs and benefits of a leveraged-based approach. In addition the direct development approach runs the risk of being seen to compete with and to distort the market. In contrast the leverage approach, working with the private sector, is seen as a more constructive and joint approach to delivery—working with the market rather than in competition.

  The impact of this on value for money is self-evident.

The Case for a new European Regeneration Framework

  A new European framework is urgently needed. This framework should provide the government with sufficient flexibility to determine its own programme for economic and physical regeneration. This absolutely must resolve the issue of State Aid and provide clear guidance on the rules governing what is deemed compliant.

  The other area that needs to be reviewed relates to the whole area of public procurement. The process has become incredibly bureaucratic and complex, and in particular the OJEC process.

  The Urban Regeneration Company model is working well in Sheffield. In the context of having the highest levels of grant assistance, some of the issues faced by other areas are not relevant. This means that we have been able to work within the existing framework and have made significant progress. However, there are a number of areas where we would welcome government help and assistance so that we can deliver more regeneration, more effectively within our existing financial and people resources. These are summarised below:

    —  a new EU framework which gives government flexibility and clarity on the State Aid issue;

    —  a continued government acknowledgement and commitment to the powerful role that our leading cities have to play in economic prosperity and regional competitiveness. And a continued policy emphasis on brownfield development, with restrictions on greenfield development;

    —  Government action in seeking to modernise, streamline and simplify the CPO process is very welcome. In advance of Parliamentary time we need to focus on making early progress. This could quite simply be in the form of guidance or a revised circular, which actively encourages the RDAs and local authorities to use their powers (and that if they do government will support them at inquiry). Local authority powers need to be broadened to give them the regeneration-based powers enjoyed by the RDAs and English Partnerships;

    —  a co-ordinated approach to the development of public sector land in areas that are a priority for regeneration eg Ministry of Defence, the NHS/Trusts, the SRA etc. Too often regeneration being sponsored by one Department is held back by another Department acting under a different set of objectives and targets.

    —  the move to create a "Single Pot" approach in the RDA plans is very welcome. We would like to see a more flexible approach across the board. There is considerably more potential for various grant regimes to work more effectively together. Annuality remains a problem where funding relates to property and physical based regeneration programmes.

    —  we would encourage government to continue to examine fiscal incentives in delivering its urban renaissance. The recent stamp duty relief in selected wards is welcomed, but the upper threshold for commercial properties needs to be raised if it is to have significant impact. We would like to see the introduction of a range of fiscal measures to secure investment in tightly defined priority areas and targeted to public sector owned sites; and

    —  if the URC model is to succeed, there needs to be dedicated funding provision in the English Partnerships and RDA Corporate plans to support delivery.

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