Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Local Government Association (ERF 13)


  1.  The Local Government Association (LGA) is the representative body for all local authorities in England and Wales. The LGA is committed to working closely with its member authorities to support reform and improvement in local government. The Association welcomes the announcement by the Urban Affairs Sub-Committee of the House of Commons Select Committee on Transport, Local Government and Regional Affairs, that it is to carry out an inquiry into the need for a new European regeneration framework. In the short time available, the LGA has invited local authorities, to comment on the areas for investigation as set out in the Inquiry's press release. This memorandum also draws on evidence submitted to the LGA's current hearing into the barriers surrounding Brownfield land re-development. This short memorandum follows the format of the topics for investigation as outlined in the Committee's press notice 23/2001-2, dated 11 December 2001.


  2.  The outlawing of the previous Partnership Investment Programme (PIP) "gap funding" scheme and its replacement with five new land and property schemes has had a major impact on "brownfield" re-development in England. Some examples of impact on land and property regeneration of the Commission's decision to outlaw the PIP scheme were included in the LGAs evidence to the previous Inquiry by the Environment, Transport and Regional Affairs Committee on the Implications of the European Commission Ruling on Gap Funding Schemes for Urban Regeneration in England carried out in 2000.[3]

  3.  Although the evidence from the LGA's member local authorities does not permit a detailed analysis of the five replacement schemes to PIP, the Association would make the following comments on the current situation.

  4.  Discussions between the LGA and the Government's national regeneration agency, English Partnerships (EP) have indicated that the level of funding directed towards brownfield land redevelopment has substantially declined following the demise of PIP (previously administered by EP). Information relayed to the LGA indicate that whereas EP invested approximately £200 million per annum through PIP, investment in land and property by the nine English Regional Development Agencies has meant a substantial decline in this figure (ie by around 90 per cent).

  5.  Another effect of the EC decision is to allow a far more limited range of instruments available for carrying out physical regeneration. More particularly, outside areas eligible for State Aid within the UK "Assisted Areas" map, to eliminate gap funding as a mechanism. Even within these "Assisted Areas", use of public funds as gap funding is limited to the Commission's state aid limits applying within these areas.

  6.  One issue raised by member authorities is the inability of the replacement schemes to address the issue of pockets of deprivation at ward level, often situated within otherwise prosperous areas. An example of this in practice is the Oxfordshire village of Berinsfield, which although falling within the top quartile of wards in the index of multiple deprivation, does not qualify for funding from the five replacement schemes.

  7.  There are also many areas such as historic town centres, which may be in need of considerable physical regeneration, but which are extremely unlikely to enjoy Assisted Area or ERDF Objective 1 or 2 status. In such areas the prospects for employing gap funding measures under the replacement schemes are likely to be bleak.


  8.  Evidence from local authorities has indicated that the main barriers to the redevelopment of brownfield sites resulting from the new framework are fourfold:

    —  Schemes involving a substantial amount of housing in the end use are now ineligible for gap funding support. This has had a major impact on many schemes for mixed-use development or aimed at re-populating town centres, for example. Three schemes implemented under the PIP scheme but unlikely to now qualify are set out in an appendix to this memorandum.

    —  The 15 per cent EU aid intensity ceiling has effectively eliminated sites/buildings which require a higher level of public support to be viable.

    —  Brownfield sites situated outside Assisted Areas but requiring public subsidy to become viable no longer qualify for gap funding. While this could be seen as a rightful consequence of the desire to target gap funding aid to areas most in need, it wholly ignores the argument that many people living in Assisted Areas may rely on employment or other services situated within adjoining non-assisted areas. Gap funding assistance may therefore be required for these sites to enable them to play this strategic role.

    —  Administration of the five replacement schemes is now by the RDAs who have a tendency to support regionally significant developments to the detriment of sites which, although not of regional significance, may be able to bring major local benefits.

The St George's Warehouse is a five storey vacant/derelict listed building situated in the centre of Huddersfield next to the town's railway station. It has the potential to provide a mix of uses to help regeneration that would be sustainable due to good access for rail travel and contribute to an improved environment. It has been bought by a developer but requires grant subsidy to make it viable. However, because the barriers outlined above the current gap funding schemes cannot help.


  9.  The impact of the five replacement gap funding schemes as outlined above could have major consequences for the achievement of the Government's urban renaissance objectives. In particular, the national target of achieving a minimum of 60 per cent of new housing development on brownfield land does not sit well with the very restrictive limits placed on housing as an end use by the rules governing the replacement schemes. Also small pockets of deprivation, although in need of an urban renaissance, will not benefit from the funding available through the five replacement schemes. Broadly, far fewer brownfield land and buildings in dire need of regeneration will benefit from funding available under the replacement schemes, than did so under the previous PIP strand.


  10.  From the examples provided by local authorities and from the evidence submitted to the LGAs Brownfield Land Inquiry it is clear that the five new PIP-replacement schemes have left a noticeable void in the range of incentives to bring about the sustainable regeneration of previously used land and property in England. The recent DTLR funded evaluation into Urban Regeneration Companies has also concluded that in addition to the PIP replacement schemes there is a need for: "a comprehensive package of interventions of which fiscal incentives should be a part."[4] It is clear that the current situation is not sustainable in the long-term and that the awaited new European-wide regeneration framework should be introduced as soon as possible. Such a new framework must meet certain requirements as set out in the next section.


  11.  Any new European regeneration framework needs to link with other policy initiatives eg the development of EU-wide "balanced development" policy within which urban and rural areas can formulate mutually supportive plans. A future regeneration framework also needs to be able to take into account of needs at neighbourhood and ward level in order to address the issue of "pockets" of deprivation as outlined above.

  12.  In terms of increasing the amount of housing possible in any scheme while not jeopardising receipt of EU-approved gap funding, any future regeneration framework could include a suitable "claw-back" mechanism whereby any increases in land value due to new housing development over the short-medium term could be reclaimed.

  13.  The LGA also agrees with the following list of characteristics of a new regeneration framework as outlined by the RICS.[5] Any long-term European framework for urban regeneration funding should contain:

    —  a strategic policy framework that is supported at national and regional level and is fully understood by a full range of public and private sector partners;

    —  application to a range of themes and spatial priority areas, including non-Assisted areas;

    —  an outcome-driven approach linked specifically to RDA strategic objectives and outcomes;

    —  co-ordinated funding bringing together, as a minimum, the RDAs land and property budget and English Partnership programmes into a single scheme; and

    —  competitive procurement processes to enable the public sector to intervene at the level necessary to achieve the required outputs via private sector partners at "best value" and thus be compatible with State Aid restrictions.

3   LGA Memorandum to the House of Commons Environment, Transport and Regional Affairs Committee, 2001. Back

4   Urban Regeneration Companies: Learning the Lessons', DTLR (2001). Back

5   Alternatives to the Partnership Investment Programme, RICS, February 2000. Back

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