Examination of Witnesses (Questions 480-499)
LORD FALCONER OF THOROTON, MR PAUL HOUSTON AND MR STEPHEN STRINGER
TUESDAY 30 APRIL 2002
480. Their civil service was a bit more dynamic than ours?
(Lord Falconer of Thoroton) I would not like to say that. The civil service in Scotland came up with the idea and the DTI then put it in. We, sensibly, have built on that.
481. In fact, it was their ministers that drove it more vigorously than you have done?
(Lord Falconer of Thoroton) That may be right. I think it is a combination. It is team work in Scotland, I am quite sure.
482. You are announcing this sort of pathfinder market renewal scheme. Has that been cleared as far as Europe is concerned?
(Lord Falconer of Thoroton) No, it has not, because there is an insufficiently detailed proposal in relation to individual places. So, for example, we do not know the extent to which it would be Direct Development and we do not know the extent to which there would be partnerships. I think it would vary from place to place what the position would be. Equally, we do not know the extent to which some will be in Assisted Areas and some will not.
483. So that might run into problems.
(Lord Falconer of Thoroton) I cannot say it will not. I very much hope it will not. It would very much depend upon the particular schemes.
484. Presumably the Government has got targets about the percentage of housing it wants to see built on brownfield sites. Is that likely to be affected by the problems we have had with the funding of schemes over the last two or three years?
(Lord Falconer of Thoroton) The problem about it is that if there are these schemes available there are probably less of the difficult sites being addressed. That might have an effect. I do not think, overall, it will significantly affect the Government's progress in getting to the 60 per cent brownfield land target that they set in PPG 3. However, it is an unavoidable fact that easier access to gap funding than now meant there would be more money available for those difficult sites which, obviously, tend to be the contaminated or brownfield sites.
485. Just going back to the issue of the Scottish Executive and its scheme, was any thought given to doing it together?
(Lord Falconer of Thoroton) I do not know.
(Mr Houston) As I understand it there was a particular issue that they wanted to address in Scotland and, as it happened, around that time the Risk Capital guidelines came out from the Commission, last autumn, which appeared to provide them with a window of opportunity for pursuing that particular, rather constrained scheme, which they did. They told us about it, but they went ahead on their own. Having seen their success in getting the scheme through, it seemed to us to be the obvious thing to build on that and notify a substantially wider scheme, which is where we are at the moment.
486. In hindsight, would it not have been a good idea to piggy-back on their scheme and, at least, get that through at the same time as Scotland achieved their agreement with the Commission in November? In terms of the scheme that now is being put to the Commission, will it be able to take account, in terms of the gap that exists on schemes, of both abnormal costs and low values?
(Mr Houston) The gap that exists in schemes?
487. Sometimes you can have a gap in one of these schemes because the value in that area of housing is fairly low and developers are not going to make a profit on it without some assistance. On other occasions the problems can be due to the high costs of reclaiming derelict land or refurbishing a listed building which is in a derelict condition, or whatever.
(Mr Houston) In both those circumstances it will be a gap-funded scheme, in the same way that PIP was.
488. When do we expect approval?
(Mr Houston) I think the minimum is two months. With the Commission it can be, as we have heard, anything up to a year or more. We are optimistic it will be, say, less than six months.
489. And the housing market renewal approach that has been looked at now? That will be allowed under the scheme, will it? No problems with that?
(Lord Falconer of Thoroton) As I said to Andrew's question, it will depend upon the detail of each individual scheme that is put together, because in some cases it will be Direct Development that will deal with market renewal and in other places it might be in partnership with the private sector. We would have to look at each scheme to see the extent to which there was a State Aid problem. I hope there would not be, but I cannot say there would not be because there will be different schemes in different places.
490. Is this an issue you will be trying to look at in the wider reform of the whole regeneration approach?
(Lord Falconer of Thoroton) Very much so. I do not think you saw the document that was put to the meeting in March but it is based on the proposition that State Aid should not apply where what the State is dealing with is a market failure. That, critically, is what the market failure funded housing is all about. It is basically saying that if we convince the Commission that there should be a regeneration framework which allows the State to assist in those markets which have absolutely died, and that is made clear by the framework, then there would not be any problem in relation to it. As you established with Arlene, we cannot give any real indication as to when that framework might come about.
491. Who in central government takes the responsibility for innovative or lateral thinking to develop ways in which regeneration projects can be supported, consistent with the State Aid rules?
(Lord Falconer of Thoroton) That is what is going on in the Department of Transport, Local Government and the Regions, and it is the ministerial team supported by the group that Paul and Stephen represent within the officials at DTLR.
492. Does DTLR have the capacity for such thinking?
(Lord Falconer of Thoroton) Yes, it does, but it has to recogniseas we all recognisethat you will get a lot of help by asking from outside what schemes there are and what ideas can be put together, and we will do very well if we extend our reach beyond our own resources, which is, I think, the sensible way that any organisation should operate when it needs to think of innovative schemes (because you are right we need innovative schemes) to try to expand the range of possibilities for developers as much as possible.
493. Who would take the lead in this? Would it be your particular department?
(Lord Falconer of Thoroton) It would be my department, yes.
494. How does the DTLR use the expertise on micro-economics, State Aid and competition policy in the DTI and Treasury when developing its case to promote the UK's position on State Aid in regeneration?
(Lord Falconer of Thoroton) The DTI, as I have said, is the sort of expert on the rules and regulations position and we liaise with them on their advice on State Aid issues. Obviously, regeneration is an important economic and financial issue and the Treasury supports and helps us in developing the schemes that we have in mind.
495. Could you give the Committee an example of who takes the lead in such activities?
(Lord Falconer of Thoroton) Individuals?
496. Which particular department, which particular desk, which particular individual?
(Lord Falconer of Thoroton) First of all, it is ministerial responsibility to drive the thing forward, but we ministers are not experts in thinking up innovative regeneration schemes; we look to advice from Paul and his team. Paul and his team discuss widely with the outside world the development of these schemes.
497. Between the DTLR and the DTI who takes the lead?
(Lord Falconer of Thoroton) In relation to regeneration and housing schemes, it is the DTLR.
498. It could be suggested that, really, there are enough schemes in Europe to do a lot of these things, just a lack of imagination by ministers and civil servants. What about the Environmental Framework Scheme, which was introduced in February 2001? Have you used that yet?
(Lord Falconer of Thoroton) It is there. Again, I have asked if there is any scheme that I could, perhaps, draw attention to where it has been used and, unfortunately, no such information was available. So I cannot draw your attention to any scheme where it has been used.
499. So there is something that was in the mechanism and no one has bothered to use it.
(Lord Falconer of Thoroton) Well, yes.