Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by East Midlands Development Agency and supported by England's Regional Development Agencies (ERF 16)


  These are not programmes with new powers or budgets as such, but restrictions on the operation of RDA powers under the Act to make them compliant with current State Aid rules. The understanding has been that the DTLR were to negotiate a new framework with the EU for partnership mechanisms with the private sector, which would substantially restore previous flexibility.


  This scheme offers the most flexibility to an RDA in that an RDA may acquire a site and undertake reclamation and remediation works either directly or in partnership with another public body. Additional flexibility is provided by the fact that Direct Development is not confined to Assisted Areas but may be used anywhere within an RDAs geographical area.

  East Midlands Development Agency (emda) is being pro-active with this scheme by working closely with Local Authority partners, both directly and through our emerging Strategic Sub-Regional Partnerships, to bring forward opportunities for regeneration. emda has also identified a number of regeneration opportunities, in its Corporate Plan, that it will undertake directly.

  The Direct Development scheme allows RDAs to be more effective in prioritising opportunities. Its usage will, no doubt, increase due to the fact that it may be used anywhere.

  At the present, emda is actively involved in 13 Direct Development projects (to be undertaken by emda) in addition to working closely with two Urban Regeneration Companies and undertaking work on various master-planning and feasibility studies. emda is also working on 11 projects with Local Authority partners.

  This scheme provides RDAs with more direct control over the delivery of outputs and outcomes. However, the major issue with this scheme is the 100 per cent cost to the public purse.


  These schemes do not offer the flexibility provided by English Partnerships' former Partnership Investment Programme (PIP). The fact that grant is limited to Tier 1 and Tier 2 Assisted Areas immediately imposes a geographical restriction that was not applicable to PIP projects. Further restrictions imposed by the Aid Intensity Ceilings mean that support that an RDA may give to a private sector project is extremely limited as there is no guarantee that the gap between the costs of a project and its value on completion can be met.

  Together, these restrictions combine to reduce the effectiveness, usage and coverage of these schemes with the result that it will be difficult for emda and the other RDAs to engage the private sector in the physical regeneration process. The consequences of operating these schemes will be a reduction in outputs and outcomes compared to those achieved under PIP rules. With less private sector investment being levered into regeneration it will become questionable as to whether RDAs can achieve value for money in line with levels achieved under PIP.

  Since the demise of PIP, emda has had little commitment from the private sector to bring forward land and buildings that require public sector funding to make projects viable.

  To date, three projects are being considered under the new guidelines. Two of these will require the maximum Aid Intensity Ceiling (25 per cent) within the Region. Even then, the two separate Local Authorities will have to compromise their desired planning positions and allow higher value land uses in order to bridge the cost—value gap. On one project, the Local Authority will have to allow retailing on part of the site. On the other project, the developer will require an element of housing in the Green Belt in order to make the project viable.


  This builds on the work formerly allowed under English Partnerships' Community Investment Programme and provides RDAs with increased flexibility to work in partnership with the local communities, particularly in the areas of training provision and the development of resource centres. The ability to provide revenue funding by way of contributing towards start-up staffing costs for up to three years is considered to be a significant improvement.

  This scheme meets the needs of the community more effectively than the previous scheme.


  The new scheme has provided emda and the other RDAs with greater flexibility in the way it can operate environmental regeneration projects. The scheme is an effective tool particularly in respect of allowing RDAs to work, indirectly, with the private sector on Public Realm Works. It is, however, likely that outputs will either be reduced, if funding levels remain constant, or funding will have to increase to achieve a constant level. This is because of the cost nature of urban renaissance as opposed to other less restrictive, and less costly, greening options.


  The Speculative and Non-Speculative Gap Funding Schemes are the two schemes that give rise to most concern within emda and the other RDAs. They are both far more restrictive in nature than the previous PIP scheme. Further, they only cover development for business use although a minority element of residential may be included. They do not cover residential development per se. This is seen as a major problem.

  If these two schemes are allowed to stand, as drafted, then RDAs will encounter problems with engaging the private sector. For this reason, the RDAs consider that there is a need for a new European Regeneration Framework, one which recognises the cost-value gap and the reasons for it and allows us to operate flexibly in support of projects without impacting on market value and true competition, and which will therefore result in partnership working between the public and private sectors on a less restricted basis.

  As yet, it is too early to quantify outputs and outcomes during the period since the five new schemes were introduced.

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Prepared 25 February 2002