Un CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1014-vi

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Communities and Local Government Committee

Regeneration

Monday 4 July 2011

Pat Richie and Richard Hill

rIGHT hON. Grant Shapps MP and Andrew Stunell MP

Evidence heard in Public Questions 317 - 413

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Oral Evidence

Taken before the Communities and Local Government Committee

on Monday 4 July 2011

Members present:

Mr Clive Betts (Chair)

Heidi Alexander

Bob Blackman

Simon Danczuk

David Heyes

George Hollingbery

James Morris

Mark Pawsey

Steve Rotheram

Heather Wheeler

________________

Examination of Witnesses

Witnesses: Pat Richie, Chief Executive, Homes and Communities Agency, and Richard Hill, Deputy Chief Executive, Homes and Communities Agency, gave evidence.

Q317 Chair: Good afternoon, thank you very much for coming. Welcome to the sixth evidence session of our inquiry into Regeneration. Just for the sake of our records , could you say who you are and the organisation you represent?

Pat Richie: Yes; I am Pat Richie, Chief Executive of the Homes and Communities Agency.

Richard Hill: I am Richard Hill. I am Executive Director of Programmes and Deputy Chief Exec at the Homes and Communities Agency.

Q318 Chair: Thank you very much for coming and the evidence you have already given to us in writing. These days, you have not got much money to do anything with, have you, in terms of regeneration?

Pat Richie: We still have significant investment available through our investment programmes within the agency. We have £4.5 billion of investment in the new Affordable Rent programme across the spending review period, £420 million available through our property and regeneration budget, and over £2 billion to support Decent Homes. We are changing as an organisation to reflect the fact that we have less resource, and our focus will be on continuing to deliver with local authorities on their priorities, but combined with our investment, we will look to play a greater enabling role, supporting local partners to restructure priorities and to bring forward proposals. Our role is investment, enabling and support at a local level, combined with a greater use of public land to bring forward investment. There is a combination of money, expertise and land that we will focus on delivering with local partners through the local investment plans that we have developed with local partners from when the agency was first established.

Q319 Chair: If I was being very blunt, I would say that that sounded like a preprepared answer. It did not really give me the feeling that you are a major player anymore in regeneration. Some of it is straightforward housing schemes; how much of that is real regeneration money? How much do you think you are going to attract in from the private sector to go with it?

Pat Richie: It is difficult to separate out regeneration from housing, because the most effective regeneration is investment in a place that includes physical regeneration and investment in housing linked to investment in economic development and the physical fabric of a place. Our focus on regeneration has been to use our resource to lever in private sector money and to work with local partners to develop a holistic approach to regeneration, although our role specifically is the investment in physical regeneration with a view to levering in private sector investment.

Q320 Chair: Okay; I will throw that one straight back at you then: you are no doubt aware of priority sites. I think they are partly owned by you and partly owned by RBS. There is the potential for quite a significant sum of private sector finance from RBS, millions of pounds. They can access ERDF funding. You have not got the grant to go with it at present, I understand, the sort of typical gap funding you would have had a couple of years ago or three years ago maybe. The suggestion is you might put land in and take the value out once the site has been developed. You are a bit risk averse, aren’t you, in terms of those sorts of proposals?

Pat Richie: We have been working with priority sites over a number of years to bring forward often risky economic development and regeneration schemes where the market will not always go. We have learnt from that experience in the work that we are now doing, using our own land and broader public sector land to match to resources from the private sector and European resources to bring forward projects. Various examples of that include the work we have been doing in Scotswood in Newcastle in the former Housing Market Pathfinder areas, where we put some investment in alongside the Pathfinder to derisk the site in Scotswood to then bring in investment from a consortium of developers, Barratt, Keepmoat and Yuill, who have then levered in significant investment on the back of the resource that we have put in. We have worked with the local authority to structure that deal and to bring in their land and to bring in the land at key stages within the development, with a view to then taking a return as different parts of the site are played out.

Q321 Chair: In that scheme are you putting your land in, or are there other schemes where you are putting your land in and not wanting an up-front price for it?

Pat Richie: There are a number of schemes where we have been using our own land to support development, and we recently launched our disposal strategy for the HCA land, all of which is now available on our website, and local authorities and developers are able to see the range of land that we own. Within the strategy we identified £30 million of investment to derisk some of our own land, with a view to then bringing it forward for development to ensure that there is regeneration and housing linked to our land development.

An example of that might include the work we have been doing in Sunderland to derisk the Cherry Knowle site, which is a former hospital site, where some of our investment will go into improving access to the site with a view to then drawing on our development partner panel to bring forward private sector investment to support the regeneration of that part of Sunderland. That is our own land. We have a clear two-year strategy for the next stage of our sites, which will support investment. Another example would be the work we have been doing in Dover with some of our land.

Richard Hill: Yes, there is a big site in Dover, Connaught Barracks, which is on the list of schemes for disposal. These schemes are not straightforward vanilla housing schemes. There is a mixture of schemes where they are prime sites for residential or they are mixed-use regeneration schemes. Connaught Barracks is a good example of the latter: you cannot do it as a straightforward housing scheme. In Dover they still have stock retention; they still have a 20% rate of nondecency. It is quite a poor housing offer. We think we can use that land as a way of levering private sector investment and doing some of the things you were talking about in terms of priority site. You lever private sector investment, you use public sector assets, land and structure the deal so that the return is shared between the public and the private sector.

Q322 Chair: You would not sell the land or take any reward for the land at the beginning? You would wait for the increase in value to come later on, which you are sharing?

Richard Hill: What we do is we put the land in at day one on the basis of a deferred receipt. We are helping the cash flow of the project by making sure that people can get on site. We take a building lease to ensure that there is development-it does not add to somebody’s land bank, it does not just sit there, it does move quickly into development-and then we take our return on sales. We would still be ensuring value, but we would be deferring the receipt until later in the project.

Q323 Simon Danczuk: You talked about the need to lever in private sector investment, and the Government has poured in millions of pounds of public money into housing market renewal over the last few years. You are both professionals who have worked in regeneration for many years. Do you think cutting housing market renewal so suddenly will result in the loss of the value of all that public investment that has gone before?

Pat Richie: In the 10 Housing Market Pathfinder areas last year we were investing around £260 million, and you cannot stop that directly without it then having an impact on places. Through our local teams, we have been working with the local Pathfinder areas to look at a number of things. One is dealing with those individual families and individual households who have been left in very difficult conditions through the halt of that programme, and we have identified £30 million of investment that would be matched by local government to deal with those people in some of the worst conditions in some of the housing market areas. We have also been looking at working to develop the legacy of the housing market renewal areas. In a number of the Pathfinder areas there are cleared sides that can be brought forward for development, and we have been looking at ways in which they can attract private sector investment. I talked about the example in Scotswood, which is a legacy of HCA investment and housing renewal investment, and we will invest affordable housing and other funding in the continuation of that long-term strategy, which was started by the housing market renewal area.

In other parts of the country, for example in Sheffield, we have been doing some work with a local housing company with the local authority. To continue the legacy in Gateshead, some of the sites from the housing market renewal area are part of a joint venture with Home Group and Galliford Try, where we have put land in and the local authority have put land in. We will do the earlier sites that make some funding, with a view to then recycling that investment into the sites that are maybe more challenging within the market.

Q324 Simon Danczuk: But before you go on, I am just wary of getting into too much detail, Pat. It is a broadbrush question really. You mentioned the £30 million; it is a bid-competitive process and not all HMR areas can bid into it: Manchester, Salford and Rochdale cannot even bid into it. It does not compare anywhere near to the money. My question broadly speaking is, with all your experience in regeneration, is it fair to assume that by cutting HMR funding suddenly so dramatically and drastically, it will result in us not getting real value out of the public money that has been put in before? You are basically saying yes, it has that effect. Is that right, Pat?

Pat Richie: I am saying that it is very difficult to suddenly stop a programme-

Simon Danczuk: Well it has just been suddenly stopped, hasn’t it?

Pat Richie: -and not have an impact on the places where that investment has gone. We have been working to try to deal with some of those issues through the investment in helping people who are living in some of the worst conditions in the housing market renewal areas. I am also, however, saying that in a number of housing market areas there will be sites that have been cleared, that are ready for development and that we will work with local authorities over a period of time to bring them forward for development. It is a combination of dealing with some of the families who are left in the middle of areas like Anfield and parts of Hull and supporting them to be relocated while we look at building on the legacy of the Housing Market Pathfinder areas in terms of development sites that, as the market improves, could be brought forward for development.

Q325 Simon Danczuk: So you are saying that, had the Government invested more money and wound the project down over a more gradual period, we would have got better value for the public investment that has gone in before?

Pat Richie: You also have to see that the housing market renewal sector, like lots of other investment in housing and in regeneration, has been operating in a very challenging market over the last couple of years, and a market that still remains challenging. When some of the original plans were predicated, they were based on the ability to be able to sell housing, they were based on individuals’ ability to be able to access mortgages, and they have had to be reconfigured and changed over the last couple of years to reflect the fact that it is much more difficult to get investment in mixed-use schemes, and it is also very difficult to ensure demand for housing for sale when there are such constraints on the availability of mortgages. We have worked with Housing Market Pathfinder areas and other parts of the country to try to respond to those changes in the market.

Richard Hill: One of the things I think is quite difficult is to respond to that question about all the HMR areas, given the difference in places that Pat was just describing. On the private sector leverage point, the range of leverage that was happening across the areas was very different, ranging from every pound of HMR investment to 72 pence in some areas, up to £2.37 in others. They were at different stages of development; they were in different stages in relationships with the private sector. Clearly in some places like Scotswood, where there is the joint venture, you can imagine things proceeding in a much more seamless way than in other places that are more challenged. I think part of the answer has to be, as Pat says, ourselves and others engaging with local authorities in the Pathfinders, both to learn the lessons of the programme but also to see what can be added to now, either through public funding or through private sector funding.

Q326 Heidi Alexander: I have some questions about the local investment plan process, but before I ask that I would just quickly like to follow up on the HMR point. You mentioned the £30 million fund that exists. Could you tell me as a percentage of the outstanding investment needs in the HMR area what that £30 million represents?

Richard Hill: We expect the £30 million to be stretched to £60 million through match funding from the local authorities.

Q327 Heidi Alexander: Are local authorities coming forward and saying that they have those funds now?

Richard Hill: Our deadline for bids is Wednesday, so I cannot answer that question with absolute confidence until Wednesday, but based on the conversations we have had with them up till now, we think there will be matched funding to be able to stretch the fund to the £60 million. We are also very careful to say in the guidance that we are fully expecting to spend the full £60 million. We expected that there would be need out there to spend that resource. The fund is only available in the five Pathfinders you referred to: Liverpool, Hull, Stoke, Tees Valley and East Lancshire, where we thought there was that particular need. We have also been quite careful to say, as part of the fund, it is there to fund rehousing of households isolated in schemes, where there has been a closure and people left in very difficult situations, and to have a structured exit from the programme in the way that Pat was describing. What we are not saying is that funding is intended to fund additional new build or additional refurbishment. It is a very tightly controlled set of conditions for the funding, and we expect to spend the £60 million for that purpose.

Q328 Heidi Alexander: Okay, so say there is £60 million and the local authorities come forward, that money is available. If the HMR programme was to be completed, what would that £60 million represent in terms of the money it would take to complete the HMR programme, roughly, as a percentage?

Richard Hill: If you mean to complete the programme to do additional new build and site acquisition and move some of the sites forward, I think that is probably a much bigger number than the £60 million. If it is to do what I have said the fund is designed to do-help households in very difficult circumstances and have a structured exit from the programme-we think the £60 million in those five areas should be able to cover it.

Q329 Heidi Alexander: I am just trying to get a picture nationally-I am sorry to labour this point, Chair-of what this money represents in terms of the overall scale of the challenge that is being faced by the areas that have lost HMR. I am asking you for a rough ballpark figure as to what this amount of money enables you to do in terms of the amount of money that is really needed.

Richard Hill: I think for the purposes for which the fund has been set up-to achieve that sort of structured exit and to help households-we expect the £60 million will be sufficient in those five areas, and that is what we said and what the Government have said in the guidance. If it is a broader question about the wider needs, as Mr Danczuk was referring to in other areas, then it is a different number and I cannot give you a ballpark estimate for that.

Pat Richie: We can say that last year about £260 million was invested in the Pathfinder areas across the 10. That was expected to go down over time.

Heidi Alexander: So it is roughly 20%. Okay, just in terms-

Chair: J ust let Steve come in on t his point, and then I will come back to you .

Q330 Steve Rotheram: I do not know whether it helps to encapsulate the three questions that you were asked, which I though were really important, but Liverpool has had £127 million withdrawn from the HMR programme, just Liverpool alone. So we are bidding in for part of the £30 million to do part of a scheme that is currently ongoing, not to do all the rest of it that we would have done had the £127 million been available.

Q331 Heidi Alexander: Just in terms of the local investment plans, I know the HCA has been working on that sort of process for the last year, couple of years now-

Pat Richie: Since we were established.

Q332 Heidi Alexander: Since you were established. Could you just tell me in your view how successful that process has been in levering in investment from other sources, from the private sector, from perhaps other parts of the public sector, and just give me your view on how successful that process has been?

Pat Richie: Since we were established we have established a local investment planning process, so right at the very beginning we have said that we will be driven by local priorities through the development of local investment plans for places. We asked local authorities to organise around the groupings that they felt reflected their housing market and the economy of their places. By and large local authorities have tended to organise around similar boundaries to the emerging local enterprise partnerships. The work we have done on the local investment plans is similar to the geography that is coming out of the local investment partnerships. They are locally driven, so they are owned by the local partners-the plans belong to local authorities-so we have enabled, facilitated, challenged and worked with the development of the plans, but they come from local partners developing their own priorities, and they tend to be across areas like Tees Valley, AGMA-the association of Manchester councils-and others. They are typically economically driven, so the starting point is a clear economic strategy for that place and then housing and broader regeneration investment sits within that economic strategy.

What I think we have learned from the process is that this has been something that local authorities have welcomed doing but it has not always been easy. It is quite difficult for local authorities to set priorities that make a decision that another place should gain from investment prior to their local authority area, so often there has been difficult choices and tradeoffs in terms of phasing for the prioritisation of the local investment plans. We now have full coverage of all of the local authorities in England with the local investment plans, so there is a clear set of local strategies that attempt to join up money.

They have been successful in giving certainty to the private sector in terms of long-term priorities, and that supports more likely investment from the private sector, so if they know there is a clear priority for that set of local authorities it gives them certainty in terms of where they look at their investment. We spent a lot of time working with places on whether or not priorities are viable within the market, and we use a lot of our expertise to look at how the LIPs can bring forward viable propositions that lever private sector investment. Having said all of that, the local investment plans are now being revisited in the light of the available public sector resource and in the light of the enabling role for HCA, so we are agreeing with local authorities where they will use our commercial expertise to help bring forward local investment plans, and they are also used to look at the way in which we can use public sector land to support the development of "regen" priorities.

It has been a learning process for local partners, and I think the other thing to say is that it is different in different parts of the country. For some places, working in partnership across local authority boundaries was a new way of working. For some places, like Tees Valley and some of the authorities in the north-west, this was something that they did more naturally. It is different in different parts of the country, but I think their experience has been very helpful in terms of being clear about longer term priorities.

Q333 Heidi Alexander: My question very specifically was about the private sector funding that has been levered in to date through the local investment plan process. I know in my own local authority-I represent Lewisham in south-east London-we have huge aspirations in terms of regenerating our neighbourhoods and our economy. Much of what is in our local investment plan that we have agreed with the HCA we have not been able to bring forward because of the financial climate, so I am asking specifically, nationally, how much private sector funding has been levered in through these plans? Have you got a global figure?

Richard Hill: Over the last two years, 2009/10 and 2010/11, which are the first two years of operation, we estimate about £600 million of private sector leverage. That is just on our regeneration programme, so I am not including any of the affordable housing schemes. That includes a property regeneration budget and housing market renewal in that category.

Is it worth just describing how that process works in a particular place? If you take Corby for example, we have worked with a local authority-English Partnerships did, and then the HCA-on a regeneration scheme in the town centre that has been very successful: there is a new railway station and a new retail site in the centre of Corby. There is big private sector investment from Land Sec, who have been engaged in the scheme to date, and clearly in terms of their local investment plan that has been the conversation we have been having.

More recently we have been trying to move on to phase 2, but we cannot proceed with it as it was originally planned. Essentially, we were looking to do flatted housing development in the centre of Corby. That was felt to be the priority. In a context where the market is more flat than perhaps people had anticipated, and there is quite a lot of consented development around the edge of Corby, we are working with the local authority. So we are not doing flatted development; we are doing more of a mix of commercial and leisure, including a new cinema. We are altering the plans and the local investment plan to cope with that market reality, but in conversation with the local authority, and we are still, as a priority, trying to get private sector leverage and investment, because we cannot do it just through public sector funding alone.

Q334 David Heyes: It is pretty clear from the style of the evidence you have given so far that you are keeping your chins up in this very difficult financial climate that you are now operating in. I have to say, the evidence you are giving us, the style of what you are presenting us, is very different from what we have had from many of our other witnesses, particularly from the private sector people who have been before us. We have had a very pessimistic view from them that the reason why the private sector is failing to engage is that public sector money has dried up in many cases. We have had comments about 90% of major regeneration projects in the country being stalled at the moment. Is that a more accurate picture than what you have been trying to paint to us so far?

Pat Richie: HCA was launched a couple of years ago, at a time when there was a significant housing downturn and a collapse in investment in mixed-use schemes in particular. Our expertise has been used in a number of instances to restructure a lot of those schemes to try to ensure that we keep activity going. That might mean rephasing of some of the schemes; it might mean looking at deferred return compared with what had originally been anticipated. We have spent a long time, I think, working with local partners to try to ensure that, in a challenging market, activities kept going in particular places.

An example of that would be the work we have been doing with Sheffield City Council to restructure the retail scheme in the centre of Sheffield, where we have looked at taking a different, longer term return on land and investment in order to ensure that there is a rephasing of that site to bring forward investment in potentially 2,000-plus jobs in the city centre in Sheffield. Our experience has been that whilst it is difficult and there is still a challenge in being able to lever in private sector investment, if you can look at restructuring, rephasing, doing things in smaller chunks, you can keep activity going within the market. We think that over the last couple of years our investment probably was responsible for around about two-thirds of the housing that was built in the UK over the period from when we were first launched. We particularly used investment in affordable housing, in low-cost home ownership, to ensure that activity was continued in keeping sites going, particularly in regeneration areas, for example in some of the schemes in Manchester and in other northern cities.

Richard Hill: May I just add to that briefly? I think that is right: one does not want to underestimate the scale of the challenge, because most regeneration over the last 10 years has either been supported by commercial or residential, and clearly both markets are still difficult. I know the Committee went to New Islington, and clearly that is an example of where we have put some investment both into that site and the neighbouring Ancoats site to fund affordable housing to try to keep some schemes running. Essentially, because the market in east Manchester is relatively flat, some of the things that we hoped to do in 2007 cannot be done in the current market. We have been keeping things going and trying to keep the scheme alive through engaging on the master plan and thinking about what we can do, but it is still a challenging market in some areas more than others.

Q335 David Heyes: The question was really trying to get a feel of your view of the extent to which the market has stalled. We have had private sector expert opinion that it is as bad as 90% of major schemes stalled at the moment. You mentioned New Islington; it is a splendid, inspirational sort of development, but it is stalled, very definitely stalled, at the moment, and there is little prospect of that picking up again in the near future. What I am trying to get is your assessment of the scale of that stalling. I guess from what you have said that you do not think it is as much as 90%. What percentage is it?

Pat Richie: I think it is different in different parts of the country, and I think if you talk to housebuilders, you get a slightly different perspective than if you talk to mixed-use developers, particularly those who have been working in some of the northern cities. The experience from talking to housebuilders is that they are still interested in looking at buying land, and they are starting to purchase more sites. They tend to want to do smaller scale development, rather than big, large-scale, long-term schemes, so we have done quite a bit of work in looking at structuring things in bitesized chunks, if you like, to be able to bring in investment, and the investment that the Government recently announced in First Buy-which is an initiative to support first-time buyers to come into the market-will help investment in housing developments in particular, where about 10,500 individuals will be supported to access a mortgage by help from the Government and from the HCA to get 20% deposit to allow them then to borrow against that from a mortgage lender.

It varies, I think, across different parts of the country, but certainly in some of the schemes you have mentioned, through investment in market rent, through investment in affordable homes, we have been able to ensure that some of the properties that were already built have been occupied, and we have been able to ensure that some of the phases are brought forward to ensure that development is kept going. It is, however, still challenging, particularly for mixed-use development.

Q336 James Morris: You have a role in disposing of assets previously held by the RDA. Is your role going to be as a broker to facilitate a fire sale, or have you got a more strategic view about how those assets should be deployed for regeneration?

Pat Richie: We are working with the Department for Business, Innovation and Skills and CLG to look at the options for the disposal of the RDA assets. That is subject to ministerial announcement fairly imminently. The proposal at the moment is to look at the development of something called the stewardship model, which would involve working with local authorities, through local enterprise partnerships, to bring forward the development of the RDA assets in a way that is informed by local partners. Our role, subject to ministerial approval, will be to work with local authorities to ensure that the RDA assets are used for the purpose for which they were purchased, which is to create jobs and to support local business development.

Q337 James Morris: Just to be clear, when you talk about stewardship, does that mean control?

Pat Richie: It means that we will work with local partnerships to agree a long-term plan for the use of the RDA sites, often sites that are alongside our own ownerships in a number of regeneration schemes. That plan would then be subject to what we are calling a co-operation agreement with that local partnership, and any income from the assets would be then used at a local level to support the development of those assets that need investment.

We have also been working with the Department for Business, Innovation and Skills and with CLG to look at whether some of the existing sites that the RDAs currently own can be then transferred to local partners at market value. One example of that is in Gloucester, where we have worked with the RDA and the local authorities to transfer assets in what we are calling a balanced package, where the income from the assets supports the development of some of those assets that need investment moving forward. The stewardship model is really a way of working with local partners to deliver on the economic outcomes but also over time to dispose of the assets when the time is right, when the market might be right, but more importantly to really deliver the economic outcome.

Q338 James Morris: Is there any particular reason why the asset should not just be directly transferred to the local enterprise partnerships? Is not the role of your organisation just merely adding a level of bureaucratic oversight that is unnecessary?

Pat Richie: Over the period of the development of the stewardship model that is an option for local enterprise partnerships. Should they be able to acquire the assets at market value and be able then to deliver those assets, then that is an option that we would look at through the stewardship model. For example, the local authority in Newcastle on Tyne purchased the former Newcastle Brewery site, which was jointly owned by the RDA, the University and the city council, and the city council have purchased the RDA’s interest in order to bring forward the regeneration of that part of the city. The stewardship model, in effect, captures the asset through the HCA so that we can then work with the local enterprise partnerships or groupings of local authorities to then deliver on particularly the business and job outcomes that the RDA assets were designed to achieve.

Q339 James Morris: You have talked a lot about working with local authorities and public sector organisations. What about the private sector? What role do you perceive them to have in developing these assets?

Pat Richie: Ultimately we look for the private sector investment to come in to take the development of the assets forward, but prior to that, in most places where we have been looking at how the stewardship model will work, they will link to private sector-led local enterprise partnerships, so they will sit within the responsibility of the LIP to develop the local strategy, and that includes local councils working alongside often private sector-chaired boards.

Richard Hill: It is worth just adding that what we are doing in terms of our own land at the moment, in terms of trying to encourage private sector investment, is we set out in our disposal strategy how we want to use that land to promote development-not to add to people’s land banks but to see activity. The structure of the deal essentially is, the objectives are set by the local planning system and by the local authority-that is not a topdown process, it is a locally driven process. We think we can attract private sector investment by derisking to add certainty, providing some certainty in terms of planning, perhaps going to outline planning, thinking about demolition on the site, if that is necessary, potentially the provision of some limited amount of infrastructure, but looking to the private sector to come in to take the sales and commercial risk and do what they do best. The financial structure of the deal, as I was saying earlier, is potentially to allow the cash flow of the scheme to work with us recovering the receipt on sale and structuring an overage deal, so if that is better than expected there is some return to the public sector as well as sharing with the private sector to recognise the amount of risk. That is the model we are establishing, but it already does work.

We have a scheme, Severalls in Colchester: we have done an extension road off the A12. The local authorities borrowed to help fund that road. The site is now going to a private sector developer to build out the site. Essex County Council take the priority return to recognise their investment, because they borrowed against the scheme. There is then an overage deal where some investment comes to us. You can get private sector activity if you structure the deal in that way, and that is what we are doing on our own land, and that is broadly what we would expect to do on other public sector land if we were asked to.

Q340 Chair: Coming back to the point, like James, I was struggling a bit with this term "stewardship". I had not heard it before. It seemed to imply in the end you wanted market value for the land, but isn’t one of the problems at present that the private sector has got difficult problems. It is probably not going to take all the risks, so the one in Essex might work, and I would probably suggest there is quite a lot around the country that are not getting off the ground. Why can’t you take an element of the risk and say, "Okay, let’s have an asset-backed vehicle, we will put our land in and if it works we get something out of it; if it does not, we do not." Whatever you are trying to say, we have to have market value. Are you not constraining what is going to happen and maybe stop these schemes altogether?

Richard Hill: I think we are not saying that we will always take a view of obtaining maximum market value on a scheme. We are looking to achieve the value consistent with the agreed use of the site with the local authority.

Q341 Chair: What is the difference?

Richard Hill: If the local authority has particular priorities for its site, whether they are housing or retail-

Q342 Chair: Then it is the market value that you agree with the local authority.

Richard Hill: That is right, but that is not seeking to secure always maximum market value.

Q343 Chair: No, but it is still market value, isn’t it, and it is still not taking the risk.

Richard Hill: And in that context we can structure both finance and potentially the vehicle, so there is a risk-sharing approach on that land. Clearly, we have to work within the guidelines that we are given by Treasury and others to ensure value for the public purse from those investments.

Q344 Chair: Are you restricted, then, in not being able to do the sort of arrangement that I suggested by Treasury?

Richard Hill: It would depend on, I think, the detail of what you were proposing. We clearly have to work within the framework that Treasury gives us, but that does give us some flexibility to do things for different uses and to structure vehicles in different ways, and potentially to put the land into asset-backed vehicles if that was something we wanted to do.

Pat Richie: I think linked to that we would need to go through as we do an economic appraisal with Treasury to ensure that any investment delivers on a range of economic outcomes, particularly in the RDA assets, where in a number of cases, if not the majority, they are subject to development agreements, they are part of joint, broader regeneration strategies where there has already been a tradeoff, I think, in terms of the return from a market return compared with the economic outcomes in terms of jobs and investment in a place. That would normally be worked through as part of any economic appraisal and value-for-money work that we would do on looking at options.

In a number of areas we have taken significant risks. For example, we are landowners in a number of the large northern cities, where we have looked at restructuring proposals. For example, in Liverpool we own land adjacent to the conference centre. We have looked at ways in which we can use that land more flexibly to support the extension of the conference centre in order to create jobs and take a deferred or a lower return depending on the tradeoff in relation to the achievements of the investment, but that would be worked through through the option and economic appraisal.

Q345 Mark Pawsey: You have introduced the concept of market reality and market value. Isn’t it the case that market values now are much lower than they were before, and if the land is worth rather less, the projects should be able to go ahead, because the land is then cheaper-is in at lower value. Or are you being held back by the fact that you are having to work with the historic value and the values that land was acquired at?

Pat Richie: Some of the land in our disposal strategy was acquired at a particular time in the market.

Q346 Mark Pawsey: At high prices.

Pat Richie: At high prices.

Q347 Mark Pawsey: And is not reality that those times have gone, values are lower now and you just have to accept that?

Pat Richie: We do accept that, and we are working through that as part of the way in which we have structured deals, for example on our public land initiative and a range of the work that we have done with our development partner panel. But at some stage, if there is an upturn and the market comes back and there are greater returns to be made in later phases of the site, we would normally structure an overage deal so that the public purse gets some return on taking the risk on that investment.

Q348 Mark Pawsey: But isn’t it better to take the hit and have things happen than to sit and wait for the market to come back up again?

Pat Richie: It is a balance, I think, and it depends on different propositions.

Richard Hill: Certainly over the last two years we have taken write-downs on our books in terms of land, so we are confident now that the land in our books represents the real value. When we have looked at the sites we have taken for disposal, we have done that on the basis that those are viable sites where housing can go ahead; it would not be sensible to do anything else.

I think there is a slightly separate question, though. There are a number of developers who still have land on their books at historic prices. Clearly that is a drag on investment if they want to recover those values. There is clearly a balance between what can be done on our land and what can be done on privately owned land.

Q349 Steve Rotheram: Despite the apparent constraints that you identified in the previous question, what single recommendation would you make to this Committee about the best way to sustain regeneration in these economically challenging times?

Chair: Single, and very brief, please.

Pat Richie: My single recommendation I think would be to have a clear long-term strategy for a place linked to the sort of work we have doing in the local investment plans, and to be prepared to then rephase, prioritise and bend that according to the market and according to the various different means that there are of delivering that long-term strategy. But the key important thing is to have a very clear economically driven strategy that you can then adapt to both the market conditions and the public sector conditions that prevail at that time to be able to rephase and prioritise that according to the conditions, but have a strong, clear focus on the priorities and the leadership of place.

Chair: Thank you both very much.

Examination of Witnesses

Witnesses: Right hon. Grant Shapps MP, Minister of State for Housing and Local Government, DCLG, and Andrew Stunell MP, Parliamentary UnderSecretary of State, DCLG, gave evidence.

Q350 Chair: Good afternoon M inisters , and welcome to our sixth evidence session of the inquiry into Regeneration . T hank you for the evidence your Department has given us so far and for coming this afternoon. We have been paying some attention to the Government’s proposal : the regeneration to enable grow th. I am sure you have both read the document , unlike Lord Heseltine . But I have to say some of the comments we have had so far from those who have read it have hardly been terribly flattering. O ne of our witnesses said , " I f one of our junior members of staff had written this after two weeks , I would have been disappointed." Are you both satisfied with it - that it represents a proper and adequate statement of the Government’s policy on generation?

Grant Shapps: Shall I kick off? This is a regeneration toolkit: it is largely about the graphs and tables at the back of it. It is not about the narrative at the front of it, otherwise we would have written a 20, 50 or 100-page document, which would have been fine, warm words without any purpose to it. We nicknamed it a toolkit because it is devised for those purposes, and it is certainly not intended to be the be all and end all when it comes to regeneration. It is supposed to be a very deliberate attempt to move from the topdown, centrally driven, bluntly unaffordable and certainly unsustainable approach to redevelopment and regeneration that has not always delivered what was intended despite the many thousands of pages of words.

Q351 Chair: Would it not be helpful then to have a little bit more narrative to explain that that is now the Government’s strategy?

Grant Shapps: I am delighted that you are carrying out this work because it gives us the opportunity, but it was not our only statement either. We have published other documents as well on the subject.

Q352 Chair: Could you identify the other documents and how we might read them together with the toolkit?

Grant Shapps: This Select Committee is a great opportunity to help describe and disseminate information. Put very simply, we want local communities to take control of their regeneration. We think that is enormously important. We do not think regeneration is something that can be done to you; we think you have to be active participants. We think that too much of the regeneration in the past was divisive. Indeed, I have sat in the council offices in Liverpool, for example, with the leave of the council and residents on both sides of the regeneration argument, literally having an argument about whether it should have been done for them as it was.

Q353 Steve Rotheram: Discussions.

Grant Shapps: You may call it discussions; it was pretty heated. It is quite clear to us that that top-down approach is not a sensible way to achieve regeneration, and of course this is all against a context of the debt reduction programme. We want to provide the tools, enable people-some of the things that I know you have been discussing-to make sure that local communities have the power and the tools and the various different policies in place to be able to create their own regeneration that is locally owned as well as delivered.

Q354 Heidi Alexander: Minister, you said the document was more about the table at the back as opposed to the three and a half pages of text at the front. From what I can gather, the table at the back has been cut and pasted from other Department’s websites, and I just wonder in terms of the communities that exist in towns and cities across the country where the economy is struggling, people are out of work, there are big housing challenges, whether you honestly think that that cut-and-paste table is sufficient as a regeneration strategy for the UK.

Grant Shapps: Look, we obviously have a very different view of the way that we think regeneration should be carried out. The previous Administration believed it could be done top down, and that of course involves setting up a whole bureaucracy, with, by the way, 5% to 7% of the expenditure on regeneration not spent regenerating anyone or anything but just on administering the bureaucratic institutions that it created. That is not our approach, and so if you are saying the accusation is we have pulled together policies from across Government: guilty.

Q355 Heidi Alexander: I am saying that you are advocating a new approach, but to be honest it is very different to be saying, "We have adopted a new approach," rather than "We have stopped the old one." What it looks like is that all you are saying is, "We have stopped the old one and we are going to gather everything that other Government Departments are doing and claim that that together is a regeneration strategy."

Grant Shapps: I think it was Lord Heseltine who said to you that one department on its own, DCLG he said, would never have the ability to regenerate the country on its own. Of course, that is obvious-that is clear. Regeneration, just like everything to do with housing, by the way, and things like homelessness, is to do with bringing Departments together so that Government is working in the same direction.

There are many things that our Department is doing; I hope, believe, that we are leading by example. The New Homes Bonus, which will bring billions of pounds into the business of building homes in the community, and of specific use in regeneration areas, and former HMR areas, by the way, is a very good example of a Department-led initiative. The move to ensure that local authorities get to keep their business rates, and therefore set out a vision and expand; that is an example of something from our Department that is developing at speed. There are many others, but it is undeniable that there are things that are cross-Government, like the Regional Growth Fund, the European development funding and many other things besides. I think any document that was restricted-if this is what you are calling for-to a toolkit only of DCLG measures would be missing the vast part of regeneration possibilities. Our objective is to bring that altogether in a set of tables and tools that, out there, I can tell you-I am sure Andrew will tell you the same-when you visit these areas are being picked up, used and, in some quite surprising circumstances, delivering faster regeneration on the ground than was available through the top-down approach. I can see you are shaking your head, but let me give you one simple example.

One of the previous Government’s policies was PFI rounds of funding: private finance initiative. I went up to Collyhurst in Manchester after two Members in the Chamber challenged the Prime Minister over not winning round 6 bidding for the Collyhurst estate there. It is true; they did not win round 6 bidding. It is also true they did not win round 5 or 4, and that it had been held out as a redevelopment, a regeneration for Collyhurst estate, for so many years that people on that estate have unsurprisingly become pretty sceptical. They were disappointed not to get round 6. It was a quarter of a billion pounds of Government funding that was offered through round 6.

When I got there, I discovered that what was required was not strictly a quarter of a billion pounds of other taxpayers’ money to regenerate this estate, but a sensible common-sense approach-just the kind of thing you will find in our toolkit, by the way-to regenerating that estate, which absolutely starts with two things. Number one, it starts with decent homes funding, because the homes required investment, and secondly the local authority leading that regeneration with absolute clarity. When I got there, contrary to what the two Members of Parliament had suggested at PMQs, I found a local authority who completely got that, who had read the toolkit, were saying, "Minister, we think we have the solutions. Not only is Collyhurst now going to be our number one housing project, not only our number one regeneration project, but our number one project for our council to get this area regenerated."

Now, I am going back up there in the autumn to see homes being improved on the ground. By the way, it includes investment from other departments, including for example the transport infrastructure, and so whilst others can poohpooh the idea that this should only be done through some DCLG programmes, like the top-down regeneration of old, what I can tell you is that on the ground it is delivering in Collyhurst private sector potential to an estate where six different housing companies have been interested in bidding to help regenerate this estate. It would have been wrong for taxpayers’ money to have been used in this particular instance because there was another possibility, and that possibility is coming to fruition much faster than the nevernever programme of top-down regeneration.

Andrew Stunell: I just wanted to emphasise the point that Grant had made, that it is not a single departmental initiative. The plan for growth was launched by the Secretary of State for Business, Innovation and Skills and the Chancellor at Budget time, and it is a very comprehensive, crossGovernment approach to getting the economy going and getting growth going. This, the regeneration that is the responsibility of this Department, is a part of that. It is not superseding it or different from it. The Local Enterprise Partnerships are going to be very important vehicles for making sure that these regeneration schemes and regeneration in a broader sense get under way and are facilitated over the coming years.

I also think it is quite important to pick up a second of the points that Grant has just made, which is that it is not just sufficient to have physical regeneration. You have to have social regeneration as well. The interesting thing about some of the schemes that I have visited is it is where that community involvement happens, where the community is engaged, that you get the biggest addon, the biggest multipliers for what investment is made. Just last week I was at St. Peter’s in AshtonunderLyme in Greater Manchester, looking at the schemes that they have there. They claim they have a 77-to-1 multiplier. You could divide that by 10 and halve it again and it would still be better than the multipliers that are coming from other schemes. We should not underestimate, and we should not patronise, what happens at the local community level.

I would also just draw the Committee’s attention to the report by Baroness Newlove-I am sure you have had it in any case-Our Vision for Safe and Active Communities. It is not specifically related to regeneration with a capital R, but it is very much about how local communities have capacities that are often suppressed and disabled by the kind of topdown schemes that we have been familiar with in the past. It is about changing the mindset at the top as well as changing the mindset at the bottom to get added value for the money we do spend.

Q356 Simon Danczuk: Briefly, practically everyone we have spoken to about this document has implied that it suggests you do not really care about regeneration. Just briefly, do you both regret the nature and style of the document, or is it something that you are particularly proud of?

Grant Shapps: Very proud of it, because, do you know what, it is not about how many pages you write, and I would have thought if we have learnt anything over the past goodness knows how many years, the size of the Government document does not deliver the strategy. It is the determination to deliver it that matters. I am passionate about regeneration; I have probably spent more time than many travelling around the country to see regeneration projects. Andrew has spent a great deal of time visiting others. Between us, I would probably challenge anyone on the Committee to say they have seen or talked to more people about it, and we passionately care about it. We are living within very different times. We do not have the money that they did not actually have before but they thought they did when they were spending it, so therefore the response has to be different. And by the way, the response before was riddled with holes. The hope value that a ton of Government cash, sometimes spent and sometimes misspent, would create in a community would delay the point of regeneration. Those schemes were controversial-I mention, for example, the Welsh streets in Liverpool situation-and on other occasions have left people completely stranded in half regenerated, half-knocked down locations, many of which I have seen over long periods of time, Nelson in Lancashire, for example.

So if I were not writing a report about our slim but useful document, but instead writing one about the reams that were written about regeneration under the previous strategy, I would be pretty damning of the value per word of that previous strategy.

Q357 Bob Blackman: Could I invite Grant to just give us your definition of what regeneration is, and what the purpose is? I think that will start us in the direction for the Committee later on.

Grant Shapps: I think as Andrew said, it is about transforming lives. From my point of view as Housing Minister, this is about the home that you live in and having a decent roof over your head. But it is also about much wider issues to do with health, education, expectations in life, aspiration and those types of things, and it is also about living in communities that properly function. It is one thing to be regenerated, but to live in a soulless place is not any great achievement. That equally applies to brand-new estates that are sometimes built. So I take regeneration to be the very widest possible context, which again is why I say you cannot look at regeneration-as I fear is suggested from one or two of the opening questions-on the narrow basis of "What budget is DCLG putting into which quango to deliver what has narrowly been thought of regeneration?" and forget about health, education, levels of crime and all the other quality of life issues in a local community.

Q358 Bob Blackman: Some witnesses and other people we have spoken to would say that regeneration is all about the Government interfering where the market has failed. Would you agree with that?

Grant Shapps: I absolutely take the view that Government cannot turn its back and walk away from problems in this country. I absolutely believe that with a passion, which is why, even with the really difficult decisions that we had to make, we continued to fund £1.3 billion of budgets to complete things that had already been contractually agreed. It is why we then said that there would be a further £5 million as a transition for some of the HMR areas, and then actually announced another £30 million, match-funded to £60 million, for areas where you have ended up-we have both been to see them-with one or two people pepperpotted in a street that has otherwise been abandoned, half-knocked down, decanted, where life is a misery. So I am keen to help from a Government point of view.

But you are absolutely right. The track record for Government doing this on its own has not been spectacular, and has been subject to much criticism. In fact we think there are better ways to do it. On Friday we saw a very significant announcement from UK Regeneration of a pilot scheme of £150 million backed by Barclays Capital, which will go to help to regenerate. This is absolutely the kind of thing that we want to see. It is a very exciting development, and very timely considering the work that you are doing.

UK Regeneration have a network, they help to promote the lessons learned. They publish a very good bi-weekly newsletter that you should all get hold of. And they are saying that they have the potential to regenerate 20,000 homes by 2020. Even in a Government programme scheme, 20,000 would be a pretty big deal. We have just announced First Buy for 10,000 homes in England, for example. So this is pretty significant stuff. I agree with the proposition that, communities, sometimes local government, sometimes UK Regeneration or other community projects-I know that Andrew has been to see some recently as well-are a very sensible way to lead regeneration.

Q359 Bob Blackman: No doubt we will explore some of those. You have been critical of the past Government’s regeneration programmes. I can understand that. But equally you could be critical of all regeneration programmes that have taken place over the past 30 years. One of the criticisms that has been made, which I have certainly made and other witnesses have made as well, is that we have had one programme after another. Different Ministers come and go with different ideas and schemes, but there is never an evaluation of how successful or otherwise those schemes have been. So have you conducted any evaluation on the previous Government’s schemes, and what are the lessons you have learned?

Andrew Stunell: First of all, the last Government did commission an evaluation, I think in 2006. It was called the evaluation of the National Strategy for Neighbourhood Renewal. And as you quite rightly say, that found some criticisms of the way that things had happened, and hopefully we will be learning from that. One way of defining regeneration is in terms of housing market failure, but I think you need to go behind that. Why has the housing market failed? It may be about crime, education or health, but very commonly it is also about jobs, employment, opportunities and skills in those communities. So I do not think it is possible to have a regeneration strategy which does not spread out into other Departments’ policy areas, but takes a holistic view. And I come back to my starting point about the plan for growth. That is absolutely vital to get many of these communities to a point where they are in some sense self-sustaining. We have got stuck communities, communities which generation after generation are basically going nowhere, and that requires more than simply the traditional renewal process to be undertaken.

Grant Shapps: If you think about it, right at its very heart the previous approach to regeneration was unsustainable. If your approach is Government money going in and that is the only way to keep the show on the road, eventually it is going to run out. Of course that is what we have seen. I think the results for 10 years’ worth of massive investment were modest to say the least. I do not want to say that there were no successes, I have been to places and seen some successes for sure. But I think any rational analysis that has been done suggests that it did not always work out as well as it should have done. I think there was a failure to tailor to local circumstances, so the attempt to measure outcomes here in Westminster over things like crime, health and education often tried to impose a national template on local situations not very sympathetically. There was a failure to involve local people. I have talked about some of the disengagement that I have seen and the rancour that it caused. There was too much bureaucracy, and I have talked about some of the costs involved in some of that. I know Andrew has seen Liverpool, where 30 different Government regeneration initiatives were trying to run side by side, all from Westminster into the locality.

I think, frankly, it sometimes ended up blighting areas, and, perversely, pushed private investment further away rather than nearer. That could have been because land prices started to increase even though nothing had happened, because everybody knew the Government’s cheque book was in town, and that so-called hope value prevented developments from going ahead. So there were problems with that as well. But it was not a spectacular, unmitigated failure; it helped lots of people. The problem we have today is that that kind of cash is not available, and bluntly, even if we could go back 10 or 15 years, that is not the programme that we would want to put in place today because it is not sustainable, almost by default, because you cannot just run a community by pumping in Government cash. You have to shift it to being tailored around jobs.

Q360 Bob Blackman: Clearly the issue of cash is important, and we understand the financial position. And equally clearly there are two versions of money available, either capital funding to initiate schemes, or revenue funding to keep them ongoing. If you had more money, what would you do with it?

Grant Shapps: There’s a good question. If the Government had more money there are all sorts of things you would do.

Q361 Chair: You can both give the same answer as well.

Grant Shapps: Let us just concentrate on regeneration.

Andrew Stunell: I think it is a question we were not expecting.

Grant Shapps: We know that outcomes are more successful when they are owned locally, and it is a decision of that local community. I gave the Manchester, Collyhurst example before.

Q362 Bob Blackman: Just to cut across you, clearly the issue is going to be that, without capital, you will not be able to get anything underway for some of these schemes .

Grant Shapps: No, I do not think that is right.

Q363 Bob Blackman: Equally, the witnesses we have seen would say the same thing. One of the problems about this is the gap in funding. There is just a gap required to fulfil it. Are you prepared to go along with some of these schemes?

Grant Shapps: Perhaps they have not all had the advantage of seeing quite as many of these as we have. It is fascinating to watch. I will give you an example: Merseyside, the housing market renewal there at Sefton. You could not think of a tougher environment from which to try to assist given the economic backdrop we face: part-finished housing market renewal. There is a very innovative guy out there called Alan Lunt. He has decided to use the toolkit, which includes, for example, the New Homes Bonus, and realised that if he were to clear and prepare homes that are now largely abandoned, he would be creating a development area for 450 homes. For the few that were occupied, he is eligible to use another part of the toolkit, the £30 million match funded-£60 million-money to clear the areas where people are still pepper-potted in homes. He is in the process of borrowing against the New Homes Bonus in order to fund the clearance in order to bring in private developers. There is another aspect, also in the toolkit, which is affordable rent. Suddenly he has the ability to leverage in higher rents, supported where required by the housing benefit for people who have probably come out of the private rented sector on even higher rents, in order to support the mix of homes on that land.

So here we have an example of using not one, New Homes Bonus, not two, mixed with the £30 million/£60 million match funded money coming in for the transition that I announced, but another one as well to bring these three different aspects together in order to achieve the continuation of housing market renewal areas.

Q364 Bob Blackman: I am sure some of these other areas will be explored. So as far as you are concerned no more Government is required for regeneration above and beyond what you have got.

Grant Shapps: The reality is we do not have more money.

Q365 Bob Blackman: But be clear. You have an opportunity to put it on record.

Grant Shapps: You are saying, "If money was no object what would you do?" If money was no object, then quite clearly it would be ridiculous to say there is never anything else that you could do. However, money is an object. We do not have any further resources. What I tried to explain in the Sefton example is how not one or two but three different Government policies in the toolkit are being used. I firmly believe and expect that will create the regeneration in a difficulttoregenerate neighbourhood because, actually, stack these policies up and they make sense for regeneration.

Q366 Heidi Alexander: Minister, I think you have clearly come armed with some examples of where your regeneration toolkit has worked. Some of the places we visited and some of the witnesses that we had evidence from might say to us that the spanner or the chisel in the toolkit is not enough, and what they really need is a pneumatic drill in their areas. What would you say exists in this document for the areas of greatest deprivation? Would you agree with people who say that this regeneration strategy is more about supporting areas that are capable of high growth and therefore closer to getting that break than those areas of greatest deprivation?

Grant Shapps: We know that of the regeneration areas, five are still in higher need of assistance than that £30 million/£60 million fund.

Q367 Heidi Alexander: That is only housing market renewal, not regeneration areas.

Grant Shapps: Yes, that is right. It depends how you measure the needs of regeneration. But if we are going to talk about in totality, let’s switch to that and say that there are a range of policies which either were not around at the time of the launch of this in January, or subsequent to it, such as local enterprise partnerships that now cover 95% of the population and are really good at focusing assistance in a way that most people did not find the RDAs were able to. We have got the Enterprise Zones. There will be 21 of them, and 11 have already been announced. Again, that would not have been taken into account there. We have got the financial vehicles, such as tax increment finance, which has serious ability to unlock areas that previously looked undevelopable. And in addition, again, subsequent to this, which shows how fast things move along, we have got the business rate retention, which is about to have the biggest impact on local government finance of anything that we have seen for a very long time because it is all about being able to keep the proceeds, the benefits, of growing your area. This is a massive part of the toolkit.

You might say that is okay but authority x, in this ward which is particularly deprived, does not have businesses. Sure, but, you know what, this area over here happens to be the business district for that local authority. And with vision, foresight and the ability to control these matters locally, the local authority will be able to do that. But there is more still, again not in there because this is a later policy. For example, the Homes and Communities Agency are spearheading a cross-Government scheme to ensure we are releasing Government land. We have introduced a scheme called Build Now, Pay Later, which means that you can actually get on with the regeneration and not pay until you have something successful on there: homes, businesses and so on. I have mentioned the affordable rent. That was not fully covered in the toolkit because that is a very important part of being able to bring a better mix of housing and make projects which previously would not have been sustainable or workable, or were on ice, work.

So Barking and Dagenham, for example, have a large regeneration project where the housing element, which leads the regeneration, has been stalled for quite some time. Now affordable rent may well be the key to unlocking that stalled development because it provides more money into the area, a better combination. I could go on. There is the Regional Growth Fund and the European Development money. This is why when people say surely it is wrong just to add all these things up and call it a regeneration policy, I say that is absolutely wrong. Of course somebody has to think about it and explain to local authorities and local people how to put all of that together. That is our job and the job of the Homes and Communities Agency, UK Regeneration and many others. But it is the case that these programmes work in partnership with each other.

Q368 Heidi Alexander: You are talking a good game, but in the evidence that the CLG Department submitted to the Committee, paragraph 41, you said, "Ultimately the success of our approach will be measured by the strength and balance of the UK economy." So if the UK economy is strong, is it fine for deprived parts of London, Liverpool and Manchester to lag behind?

Grant Shapps: No, and you have got me onto another list now, which is rebalancing the economy. You are absolutely right. With things like high-speed rail, being prepared to put the infrastructure in place to join the country together is absolutely a really important part of regeneration. Crossrail is an excellent example. It is absolutely unsatisfactory-worse, unacceptable-to leave areas languishing and not being regenerated. But you have to ask yourself, after all those years and all that money, if the old programme was that good we would be out of the woods by now. We are not because there are some fundamental flaws with that top-down approach that we are trying to address, not least rebalancing the economy.

Chair: All right, the train is coming down the track in about 20 years’ time.

Q369 James Morris: Can I just pick up on that point? I had a rather interesting interchange with the Mayor of Newham about this issue of representing a constituency in the Black Country in the West Midlands. In terms of some of these large infrastructure projects, which again we could broadly put into a regeneration pot, there is quite a lot of emphasis on the south-east. The Mayor of Newham was arguing that despite 15 years of large amounts of money coming into his area and Olympic regeneration that was not quite sufficient. How do we ensure that we do properly rebalance the economy? Considering areas like the Black Country, an old industrial area that has some areas of strength but some of deprivation, how do we ensure that we are not creating this two-speed situation and exacerbating some of the regional balances that have been around for such a long time?

Grant Shapps: I think the Regional Growth Fund is a very important part of that. It is largely to do with areas that need to shift from being based on the public sector to private enterprise. That is why it is very jobs focused and orientated. That is a very important key. Regarding high-speed rail, if you are really going to join the country together, you need to be prepared to make some quite difficult and controversial investment decisions to make that happen.

Andrew Stunell: I think we need to go back and say the Government’s analysis is that the efforts of previous Governments to narrow the gap between rich and poor communities and between rich and poor regions was unsuccessful. The gap got wider. Even if we had had the same amount of money I think it would have been wise for any incoming Government to take a look at the strategy-not the intention, but the strategy and the outcomes-and to reach an inevitable conclusion that it was not all perfect, and therefore you need to take another look at it. With the creation of the local enterprise partnerships, and the Black Country is an obvious example, there are opportunities there for local authorities in that area working with the business community to work out what they see as being the right priorities for them to make bids to the Regional Growth Fund, and to be successful. I do not have in my head whether you were successful in round 1, but I am sure you will be making bids in round 2 to ensure that you are. I think that is a very important starting point. If you have an analysis that says it was all going fine, it is like the young lad at Las Vegas who sends the text home, "System working well, send more money." That was kind of how it was.

Q370 James Morris: Just as a final point, the Mayor of Newham’s comments did raise a slightly more fundamental question, because he was saying that despite 20/30 years of very high levels of investment into Newham, and the Olympic Games, and other things, the deprivation index had not shifted. Therefore it was just circulating the same problem.

Grant Shapps: This is why I said in my earlier comments that there is nothing sustainable about simply continuing with what you think at the time is pump priming but turns out to be fundamentally changing the model of the economy and the local area to be reliant on continuous pump priming. I think that this approach to regeneration, locally led with answers that are based on the reality of needing to create local economies that are sustainable is really at the heart of what we are trying to do with the shift.

Q371 David Heyes: I am the MP for Ashton-under-Lyne, as you know, and I was really pleased that you made a visit to my constituency last week, particularly to see St. Peter’s Partnership. You talked about it in glowing terms, and you were right to do so; it is really an exemplar of community-led and selfsustaining regeneration partnerships. Partnerships are very much what it is about. For the benefit of my colleagues who do not know my constituency as well as I do, by way of background about 12 years ago it was certainly in the top 5% of the most deprived communities, possibly the top 1%. And it has been transformed. It is a very different place from what it was. I think the reason for that is it did not just happen spontaneously as a result of some good people in the local community. It was the culmination of a 10-year Ashton renewal programme, a classic case of a holistic regeneration programme. Several hundred million pounds was spent over those 10 years. It was used as a model, a precursor for the housing market renewal programme. The experience in that fairly tightly defined area of that ward was rolled out into the housing market renewal Pathfinders. So it has been a great success. In fact during those 10 years there was huge investment in housing, refurbishing and new build, in education, in schools, policing, recreation, sporting activities, that kind of thing, and in particular job training. Massive investment in the area. That ended two years ago.

There was an intelligent exit strategy, and part of that strategy was the creation of what you went to see, the St . Peter’s Partnership. So I am glad I have had the opportunity to put that on the record, but at the end of it there is a question. What we found over and over again as we have gone round the country is the problem for programmes that are only part - way through. If you had pulled the Ashton renewal programme five years in , you would not have found a St . Peter’s Partnership to go and visit last week, it would not have existed. And the problem we have encountered over and over again is about the scale and the speed of the reduction in regeneration funding wherever we go. And one thing that has been said to us over and over again is that you may be saving money today, but you are actually storing up problems for tomorrow.

Andrew Stunell: I think that is a question that I am very happy to answer. I am glad we have got a shared view about St. Peter’s Partnership. If the Committee have not been there you might want to invite them to go because I was very impressed with it.

David Heyes: The Prime Minister has been and described it as a classic example of the Big Society, and I agree with him.

Andrew Stunell: They were very proud to show me the photograph, I have to say. But I would just say two things to you, Mr Heyes. They have now been invited to replicate what they have done in St. Peter’s in Hyde, which is a community a little bit further away but similar. And they have discovered that what they built the hard way in St. Peter’s is a scalable model that can be used in Hyde, and they have been working in Hyde now for 18 months on contract to Tameside Metropolitan Borough to deliver the same kind of community benefits there that they have successful established in St. Peter’s. As Mr Heyes has said, it is a deprived community, but it is also a divided community. Part of the work that St. Peter’s Partnership has done is to bring those two very different communities together in common work. Not so much incidentally as centrally, they are employing people from the local community, and young people from the local community, to deliver the services to other people in the local community I understand, from what I was told when I visited, not without some controversy as far as the local authority was concerned. But eventually a model has been developed there, which shows that you can have community engagement, community ownership and even community delivery of the kind of benefits that Mr. Heyes and I have quite correctly identified.

I certainly do not deny that they have had a lot of money spent, and it has been to good effect. My learning point out of that was that actually there was the capacity inside that community to deliver far more than experts from 200 miles away probably thought was possible. Certainly it is not just a one-off, it is one that they themselves have been able to go to an entirely different community with and develop a parallel project delivering similar benefits. I think that is an illustration of the fact that if you think a man behind a desk in Whitehall somehow miraculously on taking over Ministerial office knows the answer to everything in the whole world then you are making a mistake. We have to go back and look at how we can empower local communities, give them the skills and the opportunities. When we have got a good model, let’s stick it in the toolkit and make sure that people understand what is scalable and what can be replicated and then do it.

Q372 David Heyes: The point of my question was that that good model required several hundred million pounds worth of investment over a 10-year period. There are many other communities that were on the same track as St. Peter’s Partnerships, but a lot less far down that path, who suddenly had the money cut. That is the reason why they are not going to have the outcomes that we have seen in St. Peter’s.

Andrew Stunell: And my point was that it certainly took time and investment for St. Peter’s to take root and flourish. Having done that, they produced seed which has been planted in Hyde where there has not been that expenditure of money. Now I do not say that means no money ever needs to be spent, but I also think we need to get away from the view that unless we have spent several hundred million pounds on a particular project we are not going to get a good return.

Grant Shapps: I will just add to that because I hope the Committee is not getting the impression that we think this can all be done without any taxpayers’ money, far from it. Just looking at the figures for 2011-2012 year, we are spending getting close to £4 billion on regeneration-related work, with, over the spending period, funding streams of another £12.5 billion in addition. And that does not take into account the repetitive years of things like the New Homes Bonus. It is annexed here. I can send that back to make you aware of exactly what we’re talking about.

Q373 Chair: The difficulties with things like high-speed rail is you might have slight difficulty including it in a regeneration scheme.

Grant Shapps: The longer term ones? But we have just had this whole debate about whether rebalancing the economy is part of the solution, and we have all agreed it is. But I am not including that in this year’s expenditure; the £4 billion I am talking about does not include high-speed rail as far as I can see. And so it is not true that the budget is zero. There is a lot of money still going in to regenerating communities. I went up earlier in the year to see the Coalfield Regeneration Trust.

Q374 David Heyes: Can I have one final go at my question? When you do a very longwinded preamble it does deflect attention from your question. The question ultimately is pretty clear. Is it wise to have chopped off these existing programmes in the way we have? Are we not storing up problems for the future by having done that?

Grant Shapps: My answer is that there is still £400 billion going into things which are regeneration. I am not talking about the longer term ones. You can debate whether it is regenerating the country or not to provide high-speed rail, let’s leave that aside. I am just talking about 2011-2012 funding through things like housing growth and housing market renewal, the continuation and transition funds, etc, etc, and I will provide the table to the Committee. So I know £4 billion may seem like small change when it comes to regeneration spending. I think it is a significant amount of taxpayers’ money that is being put into this, and rightly so. But if we had more, as Bob has asked, we may well be tempted to send it regeneration’s way. But the truth is we live in a country which was dangerously, perilously close to going the way of Greece.

Chair: We will not go down that road.

Q375 Heidi Alexander: Just a very quick question. I think your Department has very kindly provided that table for us. The figure you quoted does include a substantial amount of Regional Growth Fund, and the Chair to the Advisory Panel told us last week that that categorically was not about regeneration.

Grant Shapps: You have spent the first part of this meeting asking me about things like how the economy rebalances itself. In those answers I have talked about the Regional Growth Fund, and now you are saying that is nothing to do with this subject. And actually-

Heidi Alexander: No, I am not saying that. The Chair of the Advisory Panel said that.

Grant Shapps: I see. Well let me just get one correction on record. I think the comment was made that none of this money is going into regeneration areas or housing market renewal areas perhaps, which is not in fact the case. Two of the bids-one of them goes to Hull, one of them to Wakefield-are actually housing-led regeneration projects. So to get the facts on the table, some of that money will certainly help. I think a lot of that money will help because it is typically being spent to rebalance the economy in areas that struggle to do market things because the private sector is not in the lead generating wealth and so on. So I think it would be wrong on either definition to exclude it, but specifically it is included in both the Hull housing market renewal and the Wakefield one.

Q376 Simon Danczuk: I thought we should continue this theme. Lord Heseltine said last week that the Regional Growth Fund is not about regeneration, and it is not intended to support housing market renewal schemes. Do you agree with Lord Heseltine, Andrew?

Andrew Stunell: Funnily enough, its terms of reference are largely defined by its title. It is a Regional Growth Fund, and, quite understandably, Lord Heseltine is defending that title. There will be occasions when funding of housing renewal will be a way of promoting growth, and the Hull project evidently met the criteria set for the Regional Growth Fund, and has achieved success. The same is true of Wakefield. But on the other hand, if I look at spending in Greater Manchester, the bid put in by the local enterprise partnership there did not relate directly to regeneration or to housing. They were successful in a number of projects that were about promoting employment growth.

Q377 Simon Danczuk: So Andrew, sorry to cut across you there, you agree with Lord Heseltine, your RGF tsar, that the Regional Growth Fund is nothing to do with regeneration. That is what he said. Do you agree with him?

Andrew Stunell: I agree with the terms of reference of the Regional Growth Fund, which you can see I do not actually have in front of me. They do not exclude anything, but they do put the emphasis on promoting regional growth. And primarily, as you can see from the bids that are being accepted, that has been about providing additional employment opportunities. In the case of Hull and Wakefield the criteria of that had been met and investment has been made.

Q378 Simon Danczuk: But as we all accept, there is a difference between stimulating economic growth and regeneration. What Government spending would you not include in your regeneration budget then if all public spending had some sort of economic impact? It would be a lot higher than £3.8 billion.

Grant Shapps: You have really hit the nub of the issue here, which is that you do not think that regional growth is anything to do with regeneration. If you take that view and do not believe that the two are intrinsically connected, then I can see why you would be struggling with an approach that says we need the economy to be successful in order to have this country regenerate in areas where it has struggled. The two are absolutely intrinsically linked. We cannot and will not ever manage in isolation to regenerate communities if we do not understand that in order for that regeneration to be a true success, as has been the case with all the ones that we have seen and you have seen as well, you have to have the jobs, the employment, the enterprise to go alongside and make the thing function. So I think the two are absolutely inextricably linked. As it happens, a couple of the regeneration projects are housing market renewal areas and housing related.

And to answer your last point, if you were to take the broadest possible definition-I know the answer to this because I have done the work on it-if you were to look at some of the programmes to try to remove, for example, educational disadvantages and so on, you end up with a loose title of £20 billion. That is how much Government funding goes in to making sure that communities regenerate and are able to grow. I am not here trying to present a figure of £20 billion to you; I would suggest it is £4 billion. But it does show how difficult it is to define precisely what is regeneration, what is promoting growth, and it turns out that all these things are very tightly interlinked. I believe the definition should be that good regeneration of funding is sustainable. That is my definition of where we should be going. My criticism is that too much of it in the past was great on the surface, but there were no plans to sustain that community afterwards, and too often the communities were the ones who really suffered.

Q379 Simon Danczuk: That is the point I want to come to. I am happy for you both to disagree with Lord Heseltine. But the points that you made in October last year, Grant, are that housing market renewal would be picked up in the Regional Growth Fund. Last week Lord Heseltine said that the Regional Growth Fund was not in any way a replacement for HMR funding. This is the key point, the people who live in these HMR areas heard one thing last October and another thing last week from Lord Heseltine. Do you not feel sorry for these people in terms of the mixed messages that they are receiving in these communities?

Grant Shapps: First of all, I realise that everyone is absolutely hooked on every word we utter, but the truth is that people are going to judge it most by their own circumstances and what is happening in their own community. The fact on the ground, if you happen to live in Hull or Wakefield in the housing market renewal area, is by hook or by crook, and you probably will not really care which, your area is about to receive some very significant investment through the Regional Growth Fund. You do not have to sit on either side of who is right and who is wrong to know what it feels like when you are fortunate enough not to have to live in a home that has been partially abandoned as a result of the programme that got rather out of control previously, such as the Pathfinder programme. So I do not feel any need to adjudicate on behalf of that resident.

To answer your question, yes, I feel absolutely passionately about people who are left stranded in streets where there is nobody else there. I could not be more critical of how we ended up in a situation where, without any guarantee of funding whatsoever, that was the path that was followed, because the previous Government were saying they were going to cut regeneration in their manifesto. So why did we end up in this situation? And that is the position, and we are having to pick up the pieces and put the local communities in the lead.

Q380 Heather Wheeler: This takes us onto quite an interesting area about social capacity in areas where there has been regeneration. The perception is the money has stopped, the tap has been turned off. Because social capacity is so important, because the local communities ought to be the people and could be the people leading this regeneration, what do you think the Government needs to do? In your paper do you think you show leadership where you are saying we will not lose these skills? Where are the answers to those questions?

Andrew Stunell: Perhaps I can have a first go at that. I have already referred to Baroness Newlove’s report. I am sure she would not want to over claim for it, but I think it is a very useful report because it explores what the capacity is in what might be described as disadvantaged or deprived neighbourhoods. I think it has got some excellent examples, which followed her research and visits. The message that comes out of it is one that probably will not surprise members of the Committee if they think about their own constituencies, but perhaps needs to be learned a bit behind the desks in Whitehall: there is a lot of suppressed capacity and ambition in communities. It is true that not everybody has got the time, capacity or willingness to volunteer and do all these things, but there is a lot of capacity there, and she has illustrated some very good examples and is doing some work in conjunction with the Department about how we can develop that.

As we have already announced, we will be producing a paper on integration and social cohesion in a few weeks’ time. We are looking there at what the things are that need to be addressed to tackle the problems with what we have called stuck communities. I have referred to this before; they are communities that have quite often had regeneration done to them not just once but twice. I am thinking of places like the Moss Side area or the Hulme area in Manchester where the underlying social and economic problems still have not been addressed. I think we have to take a quite fresh approach to this that recognises that a lot of local communities have got capacity that the present systems and the top down direction of decision making are actually disabling rather than enabling. I will put in a plug for localism and all that that means, about turning things round so that more decisions are back in the hands of local communities. I really would not want this Committee to take a patronising view about the capacity of many local communities-I go back to St. Peter’s as one example-to find solutions and actually be able to export them to other places and situations.

Grant Shapps: It would probably be helpful to give some specifics. UK Regeneration, as we have talked about already, have created a knowledge network to share some of what they are picking up. The Local Government Association have their planning advisory service, which they are developing and which is very much about assisting in these sorts of situations. I know you heard from Pat this afternoon; the Homes and Communities Agency have all sorts of programmes. In fact, on the Homes and Communities Agency, it is very much a reformed agency. I have charged them with the responsibility of being there to enable and support local communities however they possibly can. In terms of capacity building, I think this is one of the most important ways to get it done. They are real experts, they know what they are doing, they have been through this many times before and they can help local authorities take the lead. In the past occasionally it was in danger of telling local authorities how they should take the lead, but instead they are facilitating that.

Q381 Chair: Andrew, you mentioned Hulme. We went to Hulme the other day as part of our Committee visit to look at regeneration schemes. City Challenge Hulme is generally held up to be one of the success stories of regeneration. A lot of money was spent, but there is evidence on the ground of a lot of physical improvement. We talked to people in the local communities there who were clearly enthusiastic about the role they had been given as part of that development. The public and private sector are working together. Unemployment is still too high but it is lower than it was. So if you had had your approach to this, without that expenditure of public money that went into it, do you think Hulme would have been as good a place today as it is?

Andrew Stunell: To go back to what Grant said, we are certainly not discounting that there are some good outcomes from some of the investment in the past. My point about Hulme was not as to whether the last lot of money was successfully used, but I think you and I would both recognise that it was a second time round for Hulme in terms of redevelopment and rebuilding. Indeed, it might even be the third time round, because I remember as an architecture student at Manchester, more-or-less in the heart of it, measuring up some of the original back-to-back terraced houses there.

Q382 Chair: So are you one of those responsible for the initial failures then?

Andrew Stunell: I do not think my student project could be blamed on anybody except me. I have to say that.

Q383 Chair: But it still took public money to do that.

Andrew Stunell: There will be places where it is right and proper to spend money, which is why we have a budget that is £3.94 billion. That is a substantial amount of money. We are not saying at all that regeneration can always be achieved without the input of any public money. Returning to Mr Blackman’s question before, which perhaps slightly stunned us, if we had a lot more money could we spend it on even more regeneration-

Q384 Bob Blackman: I did not say necessarily a lot more. Some more.

Andrew Stunell: -the obvious answer to that is yes, of course we could. But we are constrained by the economic circumstances of the day, and the Government has taken a view about how resources should be allocated. The plan for growth that was announced at the Budget sets out very clearly the way ahead, getting jobs, growth and employment going, as an absolutely fundamental part of getting these stuck communities, areas that are now defined by regeneration areas, back on their feet, not just getting their physical environment right, but also getting the social and economic framework in which they exist right as well.

Q385 Steve Rotheram:I know that proceedings are minuted and recorded. So that people do not get the wrong impression if myself and the Minister have a difference of opinion, that is called a debate. But in Liverpool if you have a difference of opinion that is called an argument. I would just like to pick that up. Ministers met many of the people this Committee have met, including Ros Groves. What can you both offer the people who feel let down by your decision to scrap HMR?

Grant Shapps: To say that this is an inevitable consequence of an unsustainable approach, which I appreciate is not much help to somebody who is stuck in the middle of all of this, and that we will not just turn our backs and walk away. That is why, when I went to Liverpool, I announced that £30 million /£60 million fund. What really strikes me about so many of the communities that I visit-if we are back to housing market renewal, this is not true in all cases-is that quite often geographically the regeneration areas can be incredibly well placed. I used to live in Rusholme, next door to Moss Side and Hulme, and these places are in walking distance of town. Collyhurst in Manchester is literally a 10 minute walk into town; it should be a prime location. Guess what? Once you have stripped away a £250,000 PFI, which was probably never going to quite end up happening anyway, it turns out there are private sector developers who want to come in and make this thing work in conjunction with Government investment and decent homes.

It is the same in Liverpool. I cannot remember the name of the main road that runs into town, but it is a large regeneration area.

Steve Rotheram: Edge Lane.

Grant Shapps: Yes. It has really good proximity and is absolutely ideal. I made the point earlier that, when money was flowing as if there was no tomorrow, too much money was spent in situations where it was not required, to the detriment of places where it desperately was required. It was thought that regeneration could only be done through a very large endowment of public cash. Actually it often turns out to be quite an unsustainable way, so we have to find other ways to do it. I will give you a Liverpool example. There is a football club right in the middle of an HMR area that has not made a decision about whether it should expand or not, and I have been to talk to some of the residents nearby. That decision alone could unlock redevelopment for hundreds of houses over a number of different streets and allow the community to develop. Government has a role in these things, and so does the local leadership of the local authority. It is a very good indication of how you could lead a different path on regeneration by just helping to get some certainty. I am interested and committed, and I intend to go back and help that get that process underway.

Q386 Chair: So we are just speculating, if we spent the Torres transfer money on regeneration-but we won’t go into that.

Grant Shapps: We will agree to nothing. I think there is a really urgent decision required there, which you have lobbied me about before, Steve. If these decisions are not made that holds back regeneration. In this particular case it is not about: has the Government got several hundred million pounds to put in this minute? It is about an outside issue. If you think about the Bullring in Birmingham, which I think is the biggest retail regeneration anywhere, or was at the time, it would have been quite tempting to conclude that this really rundown, horrible old Bullring that was long past its sell by date could only be regenerated through public funds. No, there was another way of doing it. Sometimes you need to allow the space for those things to happen. Again, I pay tribute to UK Regeneration for appreciating the possibilities that I think have been too often cast to one side.

Q387 Bob Blackman: Can I just get a flavour from you? James asked you earlier on about some of the schemes we know about, where they have had literally millions of pounds of public money for the last 30 years. Yet the answer is, "Yes, you can cut us off in about 20 years’ time." So basically we have got a dependency culture. At the same time we have seen evidence of schemes that have completely stalled for want of what they would call relatively small amounts of money to get the private sector to invest. There is clearly a rebalancing to be done. Is your message to the people that have had these long-term subsidies, "Do not worry, they will carry on," and to the schemes that are stalled, "Very sorry, but unfortunately we have not got the funds to help you."

Grant Shapps: When you come to those schemes that have stalled, as you rightly say, people have been misled into believing they could just carry on indefinitely and often they were just not producing the results. My message to those people is that we are not going to just walk away from their community. Neither of us will be satisfied until the regeneration has taken place. That is why we have put real money behind it, even in difficult times. We are sometimes having to balance that with other budgets, of course. I almost take offence at somebody who scoffs at the range of different tools that are available, outlined in that toolkit, and actually as we have discussed today, since and beyond then in many other ways, because where you have really proactive leadership you can deliver a huge amount. I have seen that for myself in Manchester, where they say that they have set a regeneration scheme as their number one priority as an authority. I have seen it in Liverpool in a different way. Steve has left now, but the leader there could not understand what I was talking about at all and just simply said, "When is the next cheque coming?" But again, in Merseyside I have seen it in a positive way. Alan Lunt, who is in charge of regeneration in Sefton, has said, "Right, I understand what you’re on about, where’s the toolkit? Right, which bits can we pull together to make this work?" It is all about the leadership now, and our job is making sure that people realise that they are now in control and can pull these tools together to make the regeneration happen at a local level.

Q388 Bob Blackman: But clearly there is still an issue. I will come back to this issue and I will keep nagging away until I get an answer on this. You can go to parts of London, which I know extremely well, where they have had literally millions of pounds spent over many years, and still they have the highest levels of deprivation in the country. Despite all this public subsidy nothing has changed. Yet we still have the begging bowl out, "Give us more public money." Are you saying that that will continue, or are you going to take action about it?

Grant Shapps: You could say that just not having the money is the action being taken. By the way, I entirely agree with your analysis that there are some very stark examples, which you and I probably know with Brent backgrounds, for example, where we have just not been able to get out of and improve areas despite the amounts of money being spent. The position ultimately has been forced on us. Our determination to stop the country having its credit rating downgraded and worse has meant that this has become an inevitability. I will not be satisfied sleeping at night until we know that people are not living in streets that are half abandoned in communities that are not functioning. We have to find ways of making this happen. I have not added up the total number of different ways that that can happen, but as we have heard today, and I know that you will have seen and taken evidence on this, there are all sorts of different ways that the regeneration could take place and it is not the same in every place. Sometimes the New Homes Bonus is ideal; you can borrow, get the land prepared and handed over. Other times that still will not work. Sometimes, coincidentally or otherwise, it is Regional Growth Fund led, or European Development money, or UK Regeneration coming in, or people like that in the future. Sometimes it is a Coin Street regeneration where the community gets together and, I hope increasingly, will use the powers contained within our Localism Bill, for example, the community right to buy.

I will just give you an early insight into this. This is not a launched policy, I have an idea where communities will be able to access further sums of money through a local process that could enable them to regenerate in ways that suit their local authority. I’m afraid you will have to wait for that one, I am not ready to announce yet. But what you are seeing here, through the Localism Bill and through the practice of localising these issues, is you can get a lot more done much more flexibly, much more appropriately for the community that is on the ground, and it will not be one single template solution where you will be "Pathfindered" with HMR funding in the future. It will be many different paths depending on where you are.

Q389 Bob Blackman: That sounds like good news, but it is going to take time. Clearly the position is the Localism Bill is not through all its passages and there will be time for that to ramp up.

Grant Shapps: It is not dependent on that. Things like the New Homes Bonus are in place. We have already paid out.

Q390 Bob Blackman: The evidence that we have had from our witnesses is that up to 90% of different regeneration schemes have stalled for want of finance. That may be private or public sector finance. Whatever it is, it is finance that is not flowing to these schemes, which is preventing things from happening. Clearly you have set out a stall, there are these various elements of the toolkit that can be provided and used to assist. But obviously the people out there in the wider community are not hearing the message, otherwise these schemes would be up, running and operational. So what are you going to do to turn this round?

Grant Shapps: I will just have a go at this and leave Andrew to finish off. There have always been very high numbers of regeneration schemes that have not been going ahead on the never never. I am thinking of the Collyhurst and the many other PFI projects, for example, who have been told for years they were on the verge of regeneration. Has it happened? No, funnily enough it has not. I do not have to go any further than Hatfield, my own town centre, to see a stalled regeneration scheme. We were in the same position of looking for tools to try to lever some investment into the area. So there are no simple answers. I suppose my pitch it, now you know, if you are in one of these areas, that there is no simple top-down solution that is going to come and save the day, get on with finding the solution yourselves by digging into the toolkit plus these other announcements since, and finding the ones that work for you.

It might be pulling three together, as in Sefton; it might be one specific scheme; it might be bringing in private sector capital. At least you have now had removed, in some senses, the uncertainty of the never never always being promised on the horizon through Rounds 1, 2, 3, 4, 5, 6, up here, so now you can get on with leading this locally, and there are absolutely a tonne of different ways to do it. I offer this invitation to anyone in that position. If it is a local authority they should contact the HCA or our Department, Ministers directly; just write to us directly. If it is a local person, and this is where the Localism Bill will get really exciting, you will have a whole range of new powers through things like community right to buy, enabling you to get your hands on land and development through community in a way that was never possible before.

Andrew Stunell: I would just say that you have posed a false choice to us really in asking whether it should be the London model, where we are going to somehow carry on giving them money, or, for example, the Burnley model where we are not. That is just not the case at all. In each year of the Comprehensive Spending Review we will still be spending in excess of £3 billion on regeneration related expenditure and projects. We will be doing it in partnership with local authorities, the private sector and local communities in a way that has not been the norm in the past. And when it was not the norm it often meant that the money that was spent was not spent in a way that was appropriate to those local communities. So I think it is absolutely going to be the case that there will be regeneration projects in London and Liverpool that get off the ground and go. We are not going to have a geographical set of criteria that says "It’s going to be spent here, it’s not going to be spent there". We are going to be looking at what local communities, local councils and those with concerns about regeneration in their areas, no doubt including Members of Parliament, bring forward using the toolkit we have got; not just the toolkit we published in January, but the additional levers, the additional tools that Grant has talked about.

Q391 Bob Blackman: But the point I was making, which is very important in this whole process, is unless money is given with outcomes that are built in and delivered, all you are doing is building in a public subsidy for ever. By the sound of it there are no strings attached.

Andrew Stunell: If you look at the Affordable Homes Programme, that is not true. If you look at the New Homes Bonus I suppose you could say it is true, but you have got to produce the new home before you get the bonus, then you can spend the money on whatever is seen as appropriate in that local authority or local community area. If it is about monitoring and evaluation, there are criteria there that the Homes and Communities Agency may well have spoken to you about in their earlier evidence in terms of the index of multiple deprivation and so on. There will be an external system that allows measurement and monitoring, but it is not going to be delivered, or that will not be a criterion that is directed, by the Department.

Q392 Mark Pawsey: One of the consistent messages we have heard from witnesses is the need for a longer time horizon in terms of regeneration. Do you believe that the landscape has changed in the regeneration industry and the private sector, and that there will not be any return to the good old days? Or do you think this figure of 90% of regeneration that has stalled is simply because people are waiting for the electoral cycle to swing back and to go back to where we were before. Is this a radical one off change or will we return to where we were?

Grant Shapps: First of all, I do want to challenge the 90% figure, not that it may not be the case that 90% of regeneration is delayed-my own town centre is delayed-but that it always has been. The fact of the matter is that an awful lot of projects have been delayed for an awful long time. Many of the ones that have been delayed are the ones who were most holding out hope that eventually they would get funded and actually created the delay itself sometimes through that hope value that I was talking about earlier on. So at least people know where they are. Of course people will say, "This is good policy but do not do it yet." I have never heard a Government policy or any reduction in spending that we have had to make where somebody has not said, "But don’t you realise, Ministers, spend it today and you will save tomorrow." This is something that we all hear an awful lot, and at some point, to stop the country from going bust, you have to realise you cannot buy that argument at every turn; there will have to a point at which we say we need to stop spending it today. We have taken our choice as a Government, which happens to be a coalition of two of the parties. But just for reference for the Committee, the opposition had also taken that choice, and Ed Miliband very clearly told Andy Marr before the election that regeneration spending would be one of the things taking the brunt.

Q393 Mark Pawsey: So you think there is a permanent change of the general landscape?

Grant Shapps: Yes, that is right. Going back to what I was saying in my opening comments, when you have a situation and you set up a top-down process to resolve these things, what you end up with is a body like Regeneration Pennine Lancashire, which spent £3.5 million administering itself. I went there and saw the offices and the cars. I saw the lead officer for this, that and the other. I do not think it was great value for money. The same goes for Transform South Yorkshire and Birmingham, each spending 7% of the money we poured into regeneration in very big sums on their own bureaucracy and administration. This is not a great return on public sector money, and I do not want us to go back to those particular days, all those top-down schemes, even if, as in Bob Blackman’s world, we had the money. It would not work. I think we have set out a far more rational, locally based and owned approach to regeneration. Of course I would love to have more money.

Q394 Chair: We might not quite recognise in South Yorkshire that description, because 27% includes things like fees and other costs.

Grant Shapps: Staff costs, office accommodation, publicity, IT services are all things which exist within a local authority structure, and so the need to replicate these things was always quite dubious.

Chair: It is not additional. We can go into that later. I think it is about having an analysis of what worked, isn’t it? And if it actually worked in transforming communities, and I think some of that money did in South Yorkshire, then perhaps it is worthwhile. Anyway, let’s move on.

Q395 James Morris: I have a question about two things in the toolbox that you have been describing. The Chancellor announced Enterprise Zones. We have got mixed evidence from people who have been to the Committee and historically about the function of Enterprise Zones. Do you think there is a danger that Enterprise Zones could suck out jobs and investment from other areas? I am thinking of the Black Country area that I represent again; there is the potential of an Enterprise Zone, but where do you locate it most efficiently such that it helps to regenerate and drive growth across the whole of the Black Country area rather than one specific area? How do we avoid that? The second thing is about TIF; there has been a lot of discussion about TIF over the last few years, and a lot of local authorities are waiting to be able to go ahead with TIF schemes. When do you expect the first TIF scheme to actually come on stream?

Grant Shapps: First of all on Enterprise Zones, I read Lord Heseltine’s evidence to you with some interest because I think he partly accepted the point; he didn’t think the Enterprise Zones would suck in from around the sides. But I think he said something like, if it does, that may not be a bad thing. I assume he meant that you create a centre of enterprise or skills, and as you see in Silicon Valley or the Old Street roundabouts, sometimes when you get people culminating around a particular area it actually makes business more dynamic and growth easier. So I suppose that is what he was driving at there. But overall I think we have to be careful to learn the lessons of history with things like Enterprise Zones. We are keen to make the entire country as enterprising as possible.

I know my area will not be in an Enterprise Zone, but I do not think that people in my bit of Hertfordshire are walking round feeling as if we have been done. Actually we think it is our job to get on with making it an attractive place to do business. And one of the great things about reforming business rates and the way that that operates, and allowing those to be kept locally, means that my authority outside of an Enterprise Zone will have a very strong incentive to be enterprising and to set a course of trying to attract business to the area because it will be the way to help increase the funding for the area under this future scheme. So I think the balance is about right on the Enterprise Zone front; I think it will be a big boost to areas that may struggle, but not a massive disadvantage to others who will have other policies coming down the line.

And you asked about the timing of the financing.

Q396 James Morris: Some of our witnesses are a bit concerned that TIF has been lost a little bit in your Resource Review, and that we will have to wait for legislation and the outcome of that review, whereas they have actually got schemes that they think they could get underway now. I am wondering when you see the first schemes being able to be operational for TIF.

Andrew Stunell: I can add a little bit of information in that, in a speech to the Local Government Association last week, the Deputy Prime Minister again underlined the Government’s intention to press ahead with this and set out a view about the legislation that would be needed to implement it. It may be sensible for us to write to the Committee with whatever detail lies behind that.

Q397 Chair: I think it’s fair to say that much of the private sector evidence we have had has been slightly less optimistic than you have been this afternoon about the current state of regeneration in this country. One thing that they would argue is that the public sector could probably do more in terms of use of land. I know the Government is keen to make sure that where land is not needed for other purposes it is made available for partnership and other schemes. When we talked to the HCA Chief Executive earlier, it was not clear to me that they had the degree of freedom they might have, say, to put land into projects like joint ventures and take a risk; not have the money handed over at the highest price the Government can extract for it, but actually say, "Okay, if the scheme works we will get a share of the increase in value of the land, which comes about because of the scheme being developed."

Grant Shapps: I would just like to put a bit of meat on the bones of this idea. You are absolutely right that we are really keen to see Government land developed. Bluntly, it is of little use to us as unused, underdeveloped brownfield or whatever it happens to be at the moment. And the Treasury is not getting any money for that, so we actually advantage everybody by getting economic growth going, a receipt for the land and so on. By the way, the Treasury, and Downing Street in particular, are very much signed up to this, so much so that you may not be aware, but on the day I launched this drive to get other Government Departments involved, Number 10 actually wrote to all the Government Departments asking them to bring forward their Government land and, furthermore, setting up what you might describe as a star chamber, that Francis Maude, the Cabinet Office and I will sit on, that will have the various Departments in front of us to challenge them over how that process is going, and we intend to do that in the autumn. So this is a process that has the full weight of 10 and 11 Downing Street, where we are intending to follow through. This is not just an announcement that is out there and everyone will go off and forget it. In fact we will have the Departments showing us the land.

To make this whole thing work, I recognise that maximum flexibility is required. I am going to be very clear with the Homes and Communities Agency that they should take a strategic business view on this, and understand that their goal is to enable development, not to stop it. It is in the interest of the Growth Review that we published at the time of the Budget to make this stuff happen. So we will certainly have them go full tilt for it.

The last thing I would say is I think the Build Now, Pay Later has enormous possibilities. We have already released some land on Build Now, Pay Later. If you just think about the principle that goes to the heart of your question behind Build Now, Pay Later, what it means is that you are able to release the land, a developer is able to get the work done without having to worry about the cash flow aspects of having paid for that land, develop it out, and only then pay for that piece of land. So this is a win, win. Developers get to do it quicker because they do not have to raise the finance up front or stretch their resources up front. The Treasury wins because this is a piece of land that otherwise was not going to get developed but, this way, in a year/18 months/two years does get developed and they get a receipt for. And we all win, if it is housing for example, by having more homes or more businesses or whatever goes on there.

Q398 Chair: Just to be precise, the pay later idea could involve a proposal where the pay later was not simply an agreed price at the beginning, but depended on the uprated value, and a share in that.

Grant Shapps: We are looking for really innovative ideas that stack up and that we believe can work. By the way, I want to see that not just going to the major developers but being spread to smaller players as well. I am very keen to see that happen, absolutely.

Q399 Chair: The other question we were pushing on is about the RDA assets, why they could not be used in that way. It seems that London has had the whole lot transferred over free, gratis, to the Mayor. In the rest of the country local authorities will have to go round trying to raise the money to buy them. Could we not be looking at these sort of approaches for RDA assets as well?

Grant Shapps: I thought this was more your area?

Chair: Just say yes.

Grant Shapps: There is further work being done. This is obviously a complicated picture because RDA assets, remember, were made up of lots of different inheritances from different places. So there is further work going on as to exactly how that can be transferred. But again, the Government’s intention is absolutely clear. Everything we are doing is about the growth agenda. We are trying to get this country building again. We understand that construction is a very important part of GDP and that this can bring in capital receipts, and we are working on the way that that transfer works. Now I know Andrew is desperate to get in.

Andrew Stunell: We have not dropped the ball so far, sorry about that. It is also worth spotting that not everything that the RDA holds are assets. Some are liabilities, and they have a lot of contingent expenditure to bring them into productive use. So there is a balance there in terms of making sure that, so to speak, the Government is not left with the liabilities and other people walk away with the assets. So we have to look carefully at how that is balanced in the development of this.

Grant Shapps: Just as a footnote on this, incidentally, I am very keen to divest the national control of land to the local authorities and even community bodies who could in many cases do a better job of managing or exploiting it. So we have cases of endowments, for example, being provided in order to long-term manage a piece of land or be gifted a piece of land with the ability to manage it depending on the circumstances and whether the land is a liability or not. That is a very active programme. The HCA are leading on this and we are encouraging other Government Departments to follow suit. We have no desire to hoard land at a national level when it could be used far better to aid local communities and all sorts of local ambitions from housing to economic development.

Q400 Chair: The other source of money that actually is still quite readily available is European funding. A number of witnesses have said to us, "We know the European money is there but we cannot get hold of it because central Government money is being reduced, and match funding elements are a difficulty." In particular we went to Greater Manchester. They have a very ambitious model to use JESSICA funding, public and private sector together, and they are saying essentially it has been stalled, perhaps because different Government Departments are not willing to come together and engage.

Grant Shapps: Just to be absolutely clear, we intend to spend every single penny of it. There is no desire to do anything other. Goodness knows we pay enough in, and we would like the ERDF money out again. So I am not aware of the particular Manchester example, but we would be very keen to hear from them about it.

Chair: Perhaps have a look at that and maybe come back with a note on that rather than spending more time on it today.

Q401 Mark Pawsey: We took evidence from the Planning Association that their planning should not be an obstacle to growth, and there is a view that in planning where there is a will there is a way. Why are changes to the planning system so important to deliver regeneration?

Grant Shapps: I am really pleased you have raised the planning issues, because it has been untouched this afternoon, and it would be wrong to conclude without it. We see the planning changes being absolutely fundamental to this regeneration approach. The idea of having a sustainable pro-growth agenda is to enable more economic activity, to make it easier to grow if that is what the community wants to do, and the planning reform, as you know, is rather like our toolkit. It takes something like 6,000 pages of planning law and guidance and crunches it down to about 50 pages of a new national planning policy framework. And I guess in percentage terms, in ratio terms, that is an even bigger cut down than on the planning toolkit guidance. We believe in letting communities get on with the job, and we think that is why it is important to rationalise it.

Q402 Mark Pawsey: So would you contend that some regeneration programmes have stalled because of the planning system being too cumbersome and it has been too difficult to navigate a way around it?

Grant Shapps: Undoubtedly. Planning in this country, as we all know as Members of Parliament in our local patches, is one of the most endlessly complex, needlessly bureaucratic, horribly confrontational systems that you could possibly invent. I know of relatively few people who do not think the system is broken and in need of urgent fixing. Right at the core of what we propose in what we will consult on soon, the National Planning Policy Framework, is the concept that you decide on how you want your area to develop, get the local buy in at that stage, set it out on paper weighing up all the economic reasons for doing both including things like the New Homes Bonus and retention of business rates. Then having set that out, you have literally got red lines on a map that say, if you are coming forward with a development within this area that meets the criteria that is already in our plan, you can do it. We will get away from this crazy situation where in this country-I have not looked at the latest figures so I will take a stab, last time I looked there was 80%-let’s say 75% of areas have not filed their local development frameworks, and that must be a blockage to growth, as your question suggests.

Q403 Simon Danczuk: Andrew, how will you know whether your approach to regeneration has worked?

Andrew Stunell: Obviously there will be the index of multiple deprivation I have mentioned already, which samples how communities are functioning. But I guess we will know in much more practical and direct ways by the report back that we get from local government, local communities and no doubt Members of Parliament. The key issues that we will be measuring there are obviously things like employment, health, educational outcomes and of course housing as well. So there are certainly going to be plenty of opportunities to see progress or a lack of progress in individual areas, and of course across the country.

Q404 Simon Danczuk: So in two/three/four/five years fewer people in deprivation will mean that your regeneration strategy has been successful?

Andrew Stunell: It would certainly mean it was going in the right direction.

Q405 Simon Danczuk: And is that what you expect?

Andrew Stunell: Well it is certainly what we have set out, to make sure that we have more prosperous communities at every level, and particularly, in the context of this inquiry, in communities in areas that are defined as regeneration areas.

Grant Shapps: I should just add, I talked about all these different things in the toolkit, and every programme is monitored as well. So with the New Homes Bonus, for example, we will be monitoring the success of the programme. And I can tell you in year 1 there is a 22% increase in housing starts.

Q406 Simon Danczuk: Just on the New Homes Bonus, you are counting that as part of the £3.84 billion in terms of the regeneration spend, but the reality is in future years that is being top-sliced off local authorities anyway, isn’t it? And the other point is that some would see it as a case of stuffing money into the back pockets of local authorities in wealthy areas. Not all that money will go to regeneration areas, will it?

Grant Shapps: I think that is-

Andrew Stunell: We are both going for the same ball here.

Grant Shapps: I know. You go first, go on.

Andrew Stunell: First of all, the amount that appears in Annex B relates to the money in authorities with regeneration areas.

Q407 Simon Danczuk: Not all local authority areas?

Andrew Stunell: Yes.

Q408 Simon Danczuk: All local authority areas?

Andrew Stunell: Let me just be quite clear. I might need to take a second glance at that to be sure I am not misleading the Committee. But certainly the intention there is to set out the money that is available for regeneration areas, or for local authorities with regeneration within their areas. So from that point of view there is no intention to downplay the need for investment that includes the New Homes Bonus. I think that was the point.

Grant Shapps: The 199 is actually the entire package. You are right, Simon.

Q409 Simon Danczuk: You are including this £4 billion in regeneration spend. But the reality is that some of it is, to coin a phrase, stuffed in the pockets of local authorities in wealthy areas that do not need regeneration.

Grant Shapps: Let me clarify this. Part of that is right; let me explain. First of all, you are right that the 199 is the entire New Homes Bonus, you are right about that. I just wanted to mention and therefore explain that that is the case and always has been for all the regeneration expenditure, so if you compare it with previous years, the Decent Homes Programme, for example, would have been classed as a regeneration programme. There are many different programmes that you could class as regeneration, some of which will be in regeneration areas and some will not.

Q410 Simon Danczuk: But there is a dramatic difference, because the Decent Homes Programme was spent on council estates repairing kitchens, sinks, baths and stuff like that. But some of the New Homes Bonus will be spent by a local authority on a whole range of things.

Grant Shapps: I accept that. Again, let me take another example, groundwork money is sometimes spent in regeneration areas, it sometimes is not, but it has always been included in the figures. All I am trying to say is actually defining regeneration proves to be quite tricky because some things are included and some things are not. But you have the tables, so you can come to your own conclusions. I do accept your point there, but you would accept that other columns, some of which will be going into regeneration, some would not, have already been included in here.

The other thing is when you look at the second half of Annex B, on the subtotal for the spending across the Spending Review period, you will notice, for example, we have not included any further regeneration New Homes Bonus spending at all in that figure. So you could take the first figure to be an overestimate and the second one to be an under. It just goes to show how difficult it is to narrow some of this down.

Coming back to your other point, your accusation was that this is stuffing money into wealthy areas. Other people would have said that, in the past, wealthy areas do not want to build homes. Now we have got a policy that you are saying is going to encourage people to build homes in areas where actually they are not always wealthy at all, they just happen to be areas who are ambitious about building homes. I do not think we can have this both ways. If areas are prepared to accept and build homes that is great, that is what the New Homes Bonus is for. I just want to correct something. We have paid out a couple of hundred million on the New Homes Bonus so far. Over the Spending Review period nearly a billion is being put into that programme. We haven’t anywhere near come to the end of the money that is not top-sliced. You said next year it will be top-sliced. That is not the case at all, we have only spent a fifth of what will not be top-sliced.

Q411 George Hollingbery: I am becoming very boring on the Committee about community budgets and about the spend across Government Departments and the key that gives us to regeneration. It does strike me that an awful lot of the money you are talking about spending in the future is leveraged. TIF, by definition, is leveraged tax. We have got leveraged tax in the Enterprise Zones. The New Homes Bonus is being leveraged in Liverpool to borrow against. Still, 80% of market rents is housing benefit being leveraged. It seems to me there is another huge pot of money in local communities that is not considered to be leveraged, and that is in many other spending Departments like Health and so on. I also contend that there are two strands to regeneration in this instance. There is a very clear physical regeneration, like we saw in Hulme. There were horrendous buildings that needed to be taken down before you could do anything. Leveraging the spending could really help there, but at the same time would give those Departments a buy in into the long-term regeneration of these areas, which must be keyed on all those Departments working together across Government in those local areas. Can you achieve that? Can the Department of Communities and Local Government truly achieve de-siloing across Government? Because without it I cannot see regeneration working. Do you have the clout as a Department to make that happen?

Grant Shapps: The simple answer is no Department can make it happen on their own, but we have some really great Pathfinder type programmes on community budgets, place based budgets as they were called in the past. These are just an idea whose time has come, and we absolutely must deliver on it. It is crazy to have so many completely unlinked funding streams, often not appreciating that the other one is there. I do not have the information today I’m afraid to give you the update off the top of my head, but I do know that we are well progressed with a whole range of pilot schemes with details that I can probably forward the Committee, if that is helpful.

Andrew Stunell: There are 16 pilots that are specifically in action at the moment, and we recently announced at last week’s Local Government Conference that we would be recruiting another 50 or 60 for next year, with a view to expanding that as quickly as we can. But to answer Mr Hollingbery’s point, we certainly recognise that there is a long way to go, and it will require a huge cooperative effort across Whitehall to deliver it as effectively as we believe it should be. I do not think it is a secret that there is a silo mentality in policy delivery terms in central Government. And I think, Chairman, you were perhaps acknowledging that with your eyebrows. So getting past that is a really significant challenge, but there is real energy behind it both inside the Department and across Departments to make sure that we can deliver, initially with quite a small number of local authorities and quite a confined set of policy areas, but very quickly we need to get that to be looking holistically at neighbourhoods and all the public funding going to specific neighbourhoods.

Q412 Chair: I think we understand you have to leave.

Grant Shapps: Yes, I do. But there is no point in my writing on that point now; that is what I wanted to find out, the numbers for you.

Q413 Chair: I think it would be helpful if you could particularly respond to the points that Manchester put to us when we were there about pooled budgets for housing, transport and skills. It was actually the private sector representatives who were with us in the room who said "We think we would get a much better deal if that was a pooled budget we could spend locally talking to our local councillors about rather than with different Government Departments spending separately in Whitehall."

Grant Shapps: I would be really keen to do that. I have to say, just as a general message, a bit like that day at Prime Minister’s Questions, where an MP stood up and said the situation is x because a PFI project to do with regeneration had not gone ahead, it was not until we actually went up there and talked to people and really understood the issues that we got a full understanding. So I would appeal to anybody who thinks they have got a particular issue to approach us. We are very accessible to the idea of trying to remove any blockages. One of the things that comes into this category is the barrier busting that we are keen to do. Again, community budgets often is a barrier, an imaginary silo based department barrier, that could be actually very real, but it should not be, it should be imaginary and could be busted, and we are very keen to do that.

Chair: And if you could let us have a note about the Manchester proposals that would be very helpful indeed. Thank you both very much indeed for spending so much time with us this afternoon, we really appreciate it.

Prepared 8th July 2011