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

Memorandum by Tom Russell (ERF 25)


  1.1  I am Chief Executive of the New East Manchester urban regeneration company, a not-for-profit public/private partnership established to spearhead the regeneration of the east Manchester area. I have occupied this position since August 2000, having previously been Deputy Chief Executive (Regeneration) for Manchester City Council. I have worked on the management and administration of urban regeneration projects continuously since 1984, in London and Oldham as well as in Manchester.


  2.1  During the time I have worked in urban regeneration there have been countless new policy initiatives and funding programmes aimed at tackling the problems of urban decline in our inner city areas. Whilst there have been many changes in emphasis over this period, there have been some principles which have remained relatively consistent:

  2.1.1  The need for a comprehensive approach which recognises the inter-relationship between economic, social and physical or environmental issues, and which aims to tackle these problems in an integrated manner.

  2.1.2  The importance of community involvement in, and ownership of, the changes, developments and improvements taking place within their neighbourhoods.

  2.1.3  The use of additional, time-limited public funding of whatever kind to lever resources from other public sources and, crucially, from the private sector to both tackle the problems and exploit the opportunities in regeneration areas.

  2.1.4  The critical importance, in terms of sustainable regeneration, of private sector investment. One of the best benchmarks of success of initiatives aimed at improving areas which have been starved of investment and development is the extent to which they have created the conditions in which the private sector will continue to invest, and take a return on that investment, beyond the period of special assistance.

  2.2  Manchester can claim some success in the application of these principles. In Hulme, for example, £37.5 million of City Challenge funding levered around £70 million from other public sources and well over £100 million of private sector investment over the five-year period from 1992 to 1997. Since the closure of the programme, Hulme has continued to develop as a successful neighbourhood characterised by increasing land and property values, and a continuing momentum for development led by the private sector without the need for special forms of assistance. Gap funding, no longer needed, was absolutely essential in kick-starting this process.

  2.3  In the city centre, equally, the serious threat to the economic performance and capacity of the regional centre in the wake of the terrorist bomb in June 1996 has not merely been alleviated but reversed. Through the strategic use of public funds, in which Europe played a key role, massive private sector investment in improved commercial, retail, leisure and residential uses has been achieved.

  2.4  It is worth noting the substantial growth in the influence of the European Union over this period. It has become effectively one of, if not the, main source of funding for some aspects of regeneration particularly business support, employment and training, and EU funding is an essential component of most major physical development projects. It is also increasingly influential in policy terms through the Single Programme Documents and other regulatory frameworks which govern the use of EU funds and, in procurement terms, through OJEC requirements.


  3.1  The East Manchester area is one of the most deprived areas in the country. As a base for the traditional manufacturing industries on which the wealth of the City was built, the area experienced severe economic decline in the recessions of the late 1970s/early 1980s, with a loss of business, jobs, skills and population which has continued over the last quarter century. The Commonwealth Games—and specifically, the decision to locate the major new facilities for the Games in the heart of the area—has provided the stimulus for the physical transformation of the area, the reconstruction of its economic base and the improvement of social conditions for local communities. New East Manchester's role is to develop and lead this regeneration strategy.

  3.2  The scale and severity of the post-individual dereliction and its economic and social consequences is such in East Manchester that major transformational change is not simply desirable but essential, to change the image and perception of the area and to create a level of confidence in its future that is needed to secure private sector investment. In these circumstances, clarity as to the level and scope of pump-priming support that can be offered is very important in developing positive and effective working relationships with the private sector.


  4.1  I would not wish to exaggerate the effect of some two years in which it has not been possible to bring forward gap funding schemes, in that I do not believe that we have yet lost development partners or projects as a result of the EU's decision. To some extent, the timing of this has been fortuitous for East Manchester in that:

  4.1.1  Certain projects in course of development during 1999 managed to get "under the wire" before the EU embargo on gap funding schemes took effect, and this has enabled a degree of momentum to be maintained in the intervening period.

  4.1.2  Much of 2000 was taken up by the development of, and consultation upon, a strategic Regeneration Framework for East Manchester which is intended to provide clear guidance to development partners as to the nature, scale and scope of future development. In January 2000 we were at a comparatively early stage in the development of most of our early major initiatives—notably our new housing programme—and we have continued to make progress on these in the intervening period in the expectation that some form of assistance, gap funding or otherwise, would ultimately be available.

  4.2  Nevertheless, we are now nearing a crucial stage in the development of neighbourhood plans for four areas in East Manchester, in conjunction with private sector partners, where it will be necessary to be clear about the extent to which public funding can be deployed to bridge the gap between cost and value, and the terms under which this can be done. In these circumstances, EU's approval of the five gap funding projects is welcome but will only go part of the way to resolving the impasse that has existed since December 1999. In particular:

  4.2.1  Rigid differentiation between bespoke and speculative schemes, between SMEs and larger companies as beneficiaries of grant, and between different tiers of assisted area are confusing, unnecessary and, in some circumstances, militate against the achievement of regeneration objectives. The encouragement offered to, for example, RDAs to undertake direct development may well be beneficial in certain circumstances, and would not be a problem in East Manchester, where the NWDA is so firmly committed to the NEM strategy. However, it needs to be recognised that direct development is not necessarily, in all circumstances, the most efficient or cost-effective means of facilitating development and RDAs will themselves need to build capacity, in resources and skills, to take on this role.

  4.2.2  The severe limitations on residential schemes—as I understand it, residential development will only be eligible as part of mixed use schemes with a strong commercial component—is a major problem in East Manchester, where the failure of the housing market is one of the principal symptoms of economic decline and where large scale intervention in the housing market (we have a target of up to 12,000 new homes over a 10-15 year period) is an essential component of the regeneration strategy. We are currently working with four developers on three initiatives, which involve the remodelling and reconstruction of neighbourhoods with a strong residential component, and where we anticipate the need for significant public sector incentives to unlock private sector investment.

  4.2.3  The continuing uncertainty around gap funding is, in itself, problematic. Whilst progress on the five schemes is most welcome, Government has signalled its intention to continue to press for a more comprehensive framework. This has to be right, but it needs to be recognised also that one of the private sector's most consistent complaints is about uncertainty and shifting goal posts. A degree of urgency therefore needs to be attached to this framework if we are not to begin to lose potential development partners and investment.


  5.1  The Sub-Committee's interest in the role of the EU in regeneration in the UK is welcome and timely. It is patently absurd that European regulation aimed fundamentally at anti-competitive practices by member states is being used in such a way as to jeopardise even further the prospects for investment and development in economically marginal and uncompetitive areas.

  5.2  There is an urgent need to build upon the five "temporary" schemes recently announced and move towards a more comprehensive framework for providing essential pump-priming incentives for the private sector. Such a framework needs to be flexible; based on subsidiarity which recognises the differences between areas and the primacy of local regeneration frameworks and partnership; operated through processes which maximise private investment; and comprehensive in nature, covering all types of development which can be shown to contribute towards the achievement of regeneration objectives.

  5.3  A comprehensive EU regeneration framework might also usefully consider two other important dimensions of the EU's impact on regeneration activity in the UK, ie procurement and policy. The first of these is least problematic. The requirement to allow for competition across Europe for major contracts cannot be gainsaid, although there may be scope for examining ways in which the process of advertising through the Official Journal could be streamlined.

  5.4  In policy terms, whilst the new ware of Objective 1 and 2 programmes have seen significant advances in structural subsidiarity—ie the Commission playing a less significant part in regional and sub-regional partnerships—policies governing the use of Structural Funds are still over rigid, centrally determined and insensitive to local regeneration initiatives in many respects. This makes it more difficult to integrate European funds with domestic sources of funding and increases the overhead costs to local authorities and regeneration agencies.

Tom Russell

Chief Executive

New East Manchester Urban Regeneration Company

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