Memorandum by Barnsley Metropolitan Council
1. Barnsley MBC welcomes the opportunity
to present evidence on the subject of this inquiry. Written and
verbal evidence was presented for the similar inquiry on the demise
of the Partnership Investment Programme (PIP) in 2000 and used
to secure a partial reinstatement of funding under the PIP replacement
schemes which currently operate in respect of land and property
development for economic end uses.
2. Whilst the five current schemes, operating
within EU State Aid rules, are welcome, it is becoming increasingly
evident that these schemes only go part way to restoring the position
that existed prior to the demise of the original PIP scheme. This,
inevitably, has resulted in negative consequences for the regeneration
of economically disadvantaged areas such as Barnsley.
3. As part of the South Yorkshire Objective
1 area, Barnsley and the adjacent coalfield districts suffers
from the economic and social consequences of restructuring in
the coal and manufacturing industries over the past 20 years.
South Yorkshire as a whole has a GDP level below the 75 per cent
EU average GDP threshold for Objective 1 status. The estimated
figure for Barnsley is 62 per cent of EU average GDP. This is
reflected in a weak property market in virtually all parts of
the Borough, including the urban centre and the former coalfield
to the east, despite good access to the M1 motorway. So called
"gap funding" schemes, such as PIP and its replacements,
have provided a vital tool in addressing this market failure in
a variety of situations.
4. However, the PIP replacement schemes,
currently operating in South Yorkshire (and elsewhere) provide
only a partial reinstatement of previous provision. Although the
schemes were only approved relatively recently it is becoming
clear that they do not provide the means to overcome all the barriers
to investment. This is most apparent in respect of the Speculative
and Non-speculative ("bespoke") Gap Funding Schemes,
which relate to land and property.
5. As an Objective 1 area South Yorkshire
automatically enjoys a higher (Tier 1) state aid ceiling of 35
per cent total costs (50 per cent for SMEs), under EU Regulations
(Article 93a), compared with non Tier 1 areas. Even with this
more generous allowance it is apparent that the funding gap on
some schemes is larger than this and, therefore, such schemes
will not proceed. The list of projects attached at Appendix 1
incorporates those employment sites (including urban centre sites),
which are potentially "at risk" because of the scale
of funding gap. More work is being carried out on these to identify
the scale of funding gap which applies in each case, but some
schemes involving "large companies" are already known
to be in excess of 35 per cent and therefore highly vulnerable.
Schemes involving SMEs (less than 250 employees) are generally
safer on account of the additional 15 per cent "top up"
allowed in addition to the 35 per cent ceiling for large companies.
6. There are some additional problems with
the existing schemes. One such problem is the exclusion of Rental
Guarantees, which in the past have proved to be a useful incentive
to attract investment in property development. Another issue is
the uncertainty about what sources of public funding have been
notified to the European Commission. A recent example to attract
press attention has been funding through the Heritage Lottery
Fund. There is a worry that there may be others which have not
been notified and approved, but which may be used as part of gap
funding packages. The main source in south Yorkshire is the Objective
1 funding for Speculative and Bespoke schemes which has been notified
jointly with Merseyside.
7. One major issue arising from the demise
of the original PIP scheme is the lack of approved schemes to
support the development of brownfield land for housing development.
The abnormalities of site development in such cases, due to contamination
etc, impose additional development costs, which make schemes unprofitable
for the developer. Whereas the PIP replacement schemes provide
gap funding for economic and environmental end uses, they do not
allow for housing as such. This is likely to prove a major barrier
to regeneration in coalfield and inner urban areas where such
brownfield sites are prevalent and form an explicit plank in Government
regeneration policy. A recent study by the University of Birmingham
ranked Barnsley (alongside Rotherham and Doncaster in South Yorkshire)
as on the second tier of market risk, below the inner city areas
of Sheffield and Hull. Major examples of this problem existing
in Barnsley are to be found at Grimethorpe (former coalfield)
and Kendray (urban centre). Without an approved gap funding scheme
work in regenerating old and dilapidated housing stock has come
to an abrupt end threatening to limit the impact of more direct
economic regeneration activity and, in the case of Grimethorpe,
leading to depopulation.
8. Turning to the need for a new European
Regeneration framework, Barnsley Council and its partners, through
the Local Strategic Partnership, would welcome a change of thinking
within the European Commission, in particular DG Competition.
Over many years we have worked positively using the European Regional
Development Fund alongside domestic funding sources to meet the
objectives of EU regional policy. The demise of the PIP scheme,
even with replacements now available, has hampered our efforts
and ability to contribute to EU economic and social cohesion.
DG Competition need to be persuaded by all Member States collectively
through the Council of Ministers that regeneration is a "special
case" and should not be subjected to the normal rules of
competition policy. A comprehensive EU Framework needs to be worked
out with the relevant Directorates General which meets the objectives
of regional policy whilst not distorting competition in the private
sector. This needs to incorporate all aspects of regeneration:
economic, social and environmental.
9. In conclusion, Barnsley Council would
be pleased to assist the efforts of the UK Government in making
a convincing case for such a framework, including provision of
further evidence, based upon examples of problems and opportunities
within the Borough.