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Building a Sustainable Future: Regeneration Discussion Paper

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Chapter 2: Investing in the economic potential of our communities

27. The financial model that underpinned much physical regeneration during the last decade is now fractured. The banks and investors that financed developments in the past are unlikely to do so in the same way in the future. Risk aversion among developers will make it difficult to attract interest in regeneration sites. Regeneration projects that previously relied on residential development to prop up riskier speculative commercial developments have had to recalibrate their approach as funding sources have dried up. Similarly there is a risk that speculative infrastructure and site development by the public sector fails to attract further private investment, leaving vacant sites and empty premises.

28. Commentators report a flight from risk and flight to quality. This means that marginal places, projects, partners and people are most threatened. Research on the credit crunch for the UK Department for Communities and Local Government 8, which surveyed 250 partnerships delivering regeneration projects across England, found that residential-led developments had been hardest hit, with a reduction of 50% or more over the previous 12 months. Commercial property - retail, industrial, leisure and mixed-use developments - was less pressed but activity was still considerably slowed. All places had been affected but economically and financially marginal places, projects and people are most vulnerable.

29. Regeneration has traditionally been an activity which takes place in marginal communities, though we are interested in views as to whether it should remain so or whether we should widen our focus, for example, by intervening in areas experiencing economic decline. There are difficult choices and decisions to be made about where we derive the greatest impact from our investment. There is still considerable need in our most disadvantaged areas but preventing other areas from slipping into economic decline is also important.

30. It is clear that an over-reliance on government grant will not be feasible as public finances tighten. It is also questionable whether private sector investment in such schemes will ever return on a like-for-like basis. Partnerships between the public, private and third sectors and the use of public resources in those partnerships will become increasingly important. Commentators have noted that the public sector should become more of an investor in long-term regeneration, sharing the risk and rewards and recycling them for future projects. 9

31. In this chapter we are interested in looking at new approaches to funding development; how we maximise the impact of our existing investments including, for example, our housing budgets; how we link opportunity and need and ensure that our investments are benefitting the wider community; and how we support delivery of regeneration.

Our approach

32. The Scottish Government's Economic Strategy is focussed on stimulating lasting improvements in Scotland's long-term economic potential. The Government's Economic Recovery Plan - developed through an ongoing dialogue with Scotland's businesses, academics, community groups and individuals, along with our partners in local government and the third sectors - sets out our approach to bringing about economic recovery and growth. 10 The Plan has recently been updated.

33. We are already investing record levels of funding to improve the physical and economic fabric of our cities, towns and villages. Despite a cut to the Scottish Government's budget of over 11% in real terms between this financial year and 2014-15 - that means a real terms cut of £3.3 billion - and a reduction in capital funding of 33% by 2014-15, we have ensured that our most disadvantaged areas will not lose out.

34. We have prioritised our investment to achieve maximum impact. Subject to Parliamentary approval of the budget, in 2011-12 the Scottish Government, working with a range of partners, will:

  • Continue to support our Urban Regeneration Companies ( URCs) in some of our poorest communities, with priority investment in the Clyde Gateway URC, given its importance to delivering the 2014 Commonwealth Games and providing a lasting economic legacy for the east end of Glasgow. Over £25 million will be made available for 2011-12 from the Scottish Government and Scottish Enterprise.
  • Continue to invest in vacant and derelict land in some of our most deprived communities but re-focus the fund's objectives on stimulating economic growth and job creation in a small number of priority sites of national or local importance. Approximately £10 million will be made available for 2011-12.
  • Use the £50 million Joint European Support for Sustainable Investment in City Areas ( JESSICA) Holding fund established in partnership with the European Investment Bank to invest in revenue-generating regeneration projects in 13 ERDF eligible local authority areas.
  • Continue to support the contribution made by Registered Social Landlords ( RSLs) to the regeneration of communities. Approximately £6 million will be made available through the Wider Role fund for RSLs in 2011-12.
  • Continue to invest in our learning networks to support those working to deliver regeneration to identify, share and apply practice and innovation .
  • Introduce a new £50m competitive funding arrangement to maximise the delivery of new affordable homes from RSLs and local authorities.
  • Through the National Housing Trust ( NHT), in 11 Local Authority areas, make available around 1,000 affordable houses for the next 5-10 years. This will help to kick-start construction on stalled housing sites and it is anticipated that there will be later phases of the NHT.
  • Position Scotland at the forefront of developing sectors through our National Renewables Infrastructure Fund which has been established to support the development of port and near-port manufacturing locations to stimulate an offshore wind supply chain in Scotland.
  • Complete the £445 million M74 Completion project. At its peak, construction of the project will employ 900 people. When completed, the project will improve the accessibility of large areas of the Clyde Corridor and provide major opportunities for urban regeneration and new development. Studies suggest that the M74 Completion project will act as a catalyst for new developments, creating up to 20,000 jobs and further enhancing the economic prospects of the Clyde Gateway URC area.
  • Encourage other local authorities, working with the Scottish Futures Trust, to bring forward Tax Incremental Finance ( TIF) proposals to kick-start economic development, where viable.
  • Continue to invest over £250 million in our Enterprise Agencies so they can contribute to the delivery of sustainable economic growth.
  • Continue to work with the private sector to investigate how we can work together to support the financing of development infrastructure.

35. Maximising our investments and ensuring we are creating synergies between investment programmes is important. Effective spatial planning can help to ensure that disadvantaged communities are able to access new opportunities.

36. We recognise the importance of town centres and local high streets to the economic, social and cultural fabric of our country. Working with our partners, the £60 million Town Centre Regeneration Fund ( TCRF) has supported projects up and down Scotland's high streets which, at their core, aimed to create the right environment to support better town centre retail, business, community and leisure facilities. Research is underway to assess the impact of various types of town centre regeneration activity, including activities funded through the TCRF, to learn from the fund and draw lessons for town centre regeneration in general. In addition, we are working closely to support those regenerating our town centres and to share practice through our Town Centres and Local High Streets learning network.

37. We are interested in hearing views on how we could further support town centres, including whether any national or local regulation or powers could be used to assist with this.

38. We are committed to supporting business and the local family businesses which are the most prevalent type of business on Scottish high streets. Access to the right support and advice is important, whether starting up or growing a business, and Business Gateway - delivered through local authorities - aims to give individuals good quality informed advice relevant to their business.

39. Alongside this, we have been reducing the business rates bill burden for the majority of Scottish businesses and the Small Business Bonus Scheme is helping to sustain tens of thousands of small high street businesses through the economic downturn.

40. We want to ensure that our investment has a lasting impact. How we harness the potential of key events, sporting or otherwise, is important. For example, we are working closely with Glasgow City Council and its partners to ensure that the 2014 Commonwealth Games is more than a major sporting event for the people of the east end of Glasgow, and delivers and long and lasting economic legacy for the area.

Challenges for the future

41. Despite these important measures and other action to help the economy weather the storm of the recession, the challenges facing the development industry over the next few years are considerable. National and local government and the wider public sector will also need to find ways of making limited resources go further. Fundamentally, there will not be enough capital grant to sustain previous regeneration models or activity. We will need to make difficult choices about where and why we intervene, and the rationale for doing so. This could include connectivity, opportunities for additional investment and resource, likely private sector involvement, and the economic impact of our investment. We are interested in views on how priorities might be decided in the future.

42. We need to make best use of existing pots of funding and maximise resource where possible, including European funding. Scotland's Structural Funds allocation is likely to reduce beyond the current programme period (2007-13); but we will work to ensure that urban regeneration remains a priority and that European investment ( ERDF, ESF, RSA, JESSICA) continues to make a contribution to the regeneration of our most deprived communities, alongside the Scottish Rural Development Programme ( SRDP) and funding for business support.

43. We are also interested in hearing views on how the Scottish Government can provide funding for regeneration in a way which supports flexibility and long-term partnerships but still achieves key deliverables and outcomes. For example, should we rationalise the various regeneration funding streams and provide flexible support to local partnerships who may, for example, wish to use resources to prepare sites and put infrastructure in place, or should we continue to support specific ventures and initiatives?

44. URCs have been a key regeneration model in Scotland which has allowed us to test a variety of approaches. To date, the URCs have relied largely on Scottish Government and Scottish Enterprise for their core funding. Whilst a significant amount has been achieved, the dramatic deterioration in market conditions has posed a number of economic challenges and has had an impact on their ability to lever in private sector investment. Looking ahead, we need to consider whether the current approach to supporting URCs is sustainable in the longer term, given the continued pressure on budgets. We also need to consider how we support other areas, and whether channelling our funding into a small number of projects is the most effective use of resources. Do we need to develop a different approach to funding and supporting regeneration that provides an alternative to core grant funding, moving towards an investment-led model that enables delivery by a range of new private and public sector partnerships?

45. New and sustainable partnerships and funding models with the private sector are needed. Regeneration areas need private sector investment to boost the local economy and provide sustainable growth and jobs, but investors need to be encouraged to do this. We need to think about how we package risk and reward, and how we can incentivise development. We are interested in hearing from potential investors, developers, businesses and others in the private sector about barriers to regeneration investment and how the public and private sectors can work more effectively together.

46. There are already a number of new and interesting models being developed at a national and local level, and these follow below. We are interested in hearing about other possible approaches and ideas.

Innovative approaches to funding development

JESSICA

47. The Scottish Government and the European Investment Bank have established a £50 million JESSICA Holding Fund, with investment to be delivered from 2011 via one or more Urban Development Funds, run by specialist fund managers. These funds will offer debt or equity investment to projects capable of generating sufficient revenues. There are 13 ERDF eligible local authority areas.

48. JESSICA is a new way of funding regeneration activity which aims to balance commercial, social and economic objectives, and could be a valuable tool in fostering an "investment-not-grant" culture. It will need to be used alongside grant or other sources of finance. However, it can bring private sector investment, perspectives and skills to bear on public land opportunities at a time of constraint in public finances, when market lending can make it difficult to get projects started or re-started. The evergreen nature of the fund is a major benefit when public resources are scarce.

49. For the Urban Development Fund to be successful, it must operate as a genuine investment fund, albeit one that balances various objectives - notably the need to generate returns and deliver economic / regeneration outcomes. There will be winners and losers but it should focus resources on those projects that have the best chance of succeeding in the longer term.

50. This will require something of a culture shift - for project sponsors, the wider development community and even within government. Project sponsors will not apply to the Government; and politicians or civil servants will not take investment decisions. JESSICA is a genuine partnership with the private sector; one that we hope will unlock stalled projects, de-risk developments currently considered too marginal for commercial lenders or investors, and deliver jobs and economic benefits in some of our most deprived areas.

Tax Incremental Financing ( TIF)

51. TIF is an innovative way of kick-starting local economic growth by allowing the public sector to fund public infrastructure judged to be vital to unlock regeneration in an area, and which may otherwise be unaffordable to local authorities or undeliverable through the private sector. TIF is a partnership approach with the private sector which enables local authority borrowing for such upfront infrastructure on the basis of a predicted uplift in future revenues (non-domestic rates in Scotland) resulting from additional new development generated by the new infrastructure. The use of NDR means that the proposed infrastructure must be able to unlock appropriate commercial development.

52. Scottish Ministers are supportive of up to six pilot projects to test applicability of TIF to Scottish circumstances, and have asked the Scottish Futures Trust to work in conjunction with interested public bodies to develop appropriate schemes that can be put forward for Ministerial consideration. Legislation allowing TIF pilots to proceed came into force in December 2010.

53. Any proposal for a TIF project must demonstrate to Scottish Ministers that the enabling infrastructure will unlock regeneration and sustainable economic growth; generate additional (or incremental) public sector revenues (net of a displacement effect); and be capable of repaying, over an agreed timescale, the financing requirements of the enabling infrastructure from the incremental revenues. Ministers recognise that the TIF approach may only be suitable in certain circumstances.

Scottish Ministers announced in September 2010 their provisional agreement for City of Edinburgh Council to use Tax Incremental Financing ( TIF) to fund the Edinburgh Waterfront regeneration project, the first of its kind in the UK. This decision was based on a clear value for money rationale set out in the Council's business case. According to the Council's business case, this TIF has the potential to unlock an additional £660 million of private investment, creating up to 4,900 Full Time Equivalent jobs. Final agreement is expected early in 2011, with work on infrastructure commencing in 2011-12.

As well as its involvement with City of Edinburgh Council, the Scottish Futures Trust ( SFT) is actively engaged with other local authorities, helping them understand TIF applications and, where appropriate, to develop business cases for their respective TIF proposals.

Glasgow and North Lanarkshire Councils, in conjunction with SFT, have advanced business cases for their respective TIF proposals, Buchannan Galleries and Ravenscraig. Both councils are expected to submit these for Ministerial approval early in 2011, with Glasgow proposing to commence work in 2011-12.

Loans, leverage models, equity shares

54. JESSICA is an emerging model for channelling loans and equity investment to regeneration projects. Public sector leverage models may be another option. The most prominent example of a leverage model in action is the National Housing Trust, which seeks a shift from traditional grant-based models for funding affordable homes by providing Scottish Government guarantees to local authorities, which in turn leverage additional investment from public and private sectors. We are interested in ideas about how these models might work in a regeneration context at local or national level.

Local Asset-Backed Vehicles ( LABVs)

55. LABVs allow local authorities to use their assets, usually land, to lever long-term investment from the private sector for regeneration projects. They are designed to bring together a range of public and private sector partners in order to pool finance, planning powers, land and expertise and to ensure an acceptable balance of risk and return for all partners. Private sector partners invest cash and/or equity, with the LABV providing returns, a share of which is reinvested in future regeneration activity. Revenue-generating sites can be packaged with poorer sites, spreading risk across the portfolio. Investments can be attractive to pension funds and other long-term investors.

One of the first LABVs developed was ISIS British Waterways. British Waterways own a range of land holdings near to canals. ISIS is a property regeneration partnership established in 2002 by British Waterways, AMEC and Igloo Regeneration Fund (an investment fund of Aviva) to transform this land into mixed-use developments. One of its projects is a joint venture with Glasgow City Council on the Glasgow Canal Regeneration project.

More recently, Glasgow City Council transferred its non-operational property portfolio into a new property company, City Property (Glasgow) LLP. The new company secured borrowing of £120 million against the assets held. This money was then paid to GCC, with the revenue income generated by the property portfolio repaying the loan over a 20 year period. The Council plans to use the capital income generated from the transaction to boost expenditure in priority areas, including education and social work.

56. We are aware that other councils are considering the feasibility of setting up a LABV to coordinate and manage delivery of economic development or to secure borrowing against assets held for use in other council activities. We are interested to hear from councils as plans develop.

Governance

57. Forming strong partnerships with the private sector at an earlier stage in development will be important to delivering regeneration in the future, rather than the public sector selling terms. We are interested in hearing about models which involve the private sector more in governance and decision-making and the role the Scottish Government might play in facilitating this. JESSICA is a good example of investment decisions which will be made by a board representing private, as well as public investment interests.

Manchester's Commission for the New Economy is private-sector led and consists of both public and private sector members, reflecting the diversity of the business base in Greater Manchester. This gives New Economy a significant connection to business needs and desires, whilst also reflecting the priorities of local government through the Greater Manchester Strategy. New Economy provides a focussed, strategic, coordinated and joined-up approach to tackling economic prosperity across the Manchester City Region.

Business Improvement Districts ( BIDs)

58. The Business Improvement Districts ( BIDs) model remains an important and unique source of funding for our high streets. BIDs serve two key purposes: not only improving the trading environment and commercial potential for those businesses involved in the BIDs but contributing to the local community's wider regeneration aspirations.

59. There are currently ten BIDs in Scotland - nine town centres (Bathgate, Alloa, Kirkcaldy, Falkirk, Inverness, Elgin, Dunfermline, Clarkston and Edinburgh) and one business park BID in Clackmannanshire. A further 13 are currently in development.

Bathgate is the largest town in West Lothian. The decline of manufacturing, the expansion of a nearby new town, and the development of retail parks in the surrounding area have impacted on the economy. However, there is a wealth of independent shops in the area, with over 400 businesses in the town centre.

Enterprising Bathgate Ltd was established to run and manage a new BID in March 2008. The company worked closely with local businesses to introduce a Premises Improvement Scheme and a Public Realm Design Guide for Bathgate town centre. These schemes linked to the priorities identified by local businesses at the outset of the BID, and offered the opportunity to highlight the impact of introducing a BID in Bathgate.

In March 2009, the Premises Improvement Scheme was implemented; grants of up to £1,000 were offered to businesses for shop front improvements or other external and internal improvements to business premises. Those occupying vacant properties received additional support and maximum grants increased up to £1,500.

In one year, this scheme awarded £54,144 in grants to 93 businesses, with the average grant being £582. It resulted in total expenditure on premises improvement of £412,862. For every £1 invested by the BID, businesses invested over £6 in premises improvement.

60. The use of BIDS is not necessarily restricted to large towns or cities. A BID can also focus on a particular sector or theme rather than a district, for example, tourism or agriculture in rural areas. BIDs Scotland is currently working with Development Trusts Association Scotland with the aim of developing rural BIDs which will sit within an existing local development trust structure.

Bonds

61. Bonds are loans to companies, local authorities or the government. They usually pay a fixed rate of interest each year and aim to pay back the capital at the end of a stated period. Corporate and government bonds are traded on the stock market, so their value can rise and fall.

62. Bond investments can include:

  • corporate bonds - issued by companies
  • gilts - bonds issued by the UK Government
  • bond funds - pooled investments covering a range of bonds

63. The Scottish Government has no powers to borrow for capital investment purposes at present, whether through issuing bonds or by any other means.

The Scottish Futures Trust is currently working with local authority partners to examine whether bonds issues could be a way of financing capital expenditure. Bonds are a method of borrowing, which require repayment. They need to be administered, which could make them less attractive to local authorities than alternative sources, such as the Public Works Loan Board ( PWLB).

The statutory restrictions on local authority borrowing applies equally to bonds as to borrowing from the PWLB - i.e. they can only be used for capital expenditure of the local authority. The statutory duties that allow local authorities to borrow money through the issue of bonds also ensure that they determine and keep under review the maximum amount they can afford to allocate to capital expenditure. This requires a local authority to determine the maximum it can afford to borrow, irrespective of the type of borrowing.

64. Bonds are not necessarily a new financing option but could be an alternative way for interested local authorities to borrow money.

Planning policy, conditions and agreements

65. The Government is continuing a programme of work to ensure that the planning system is proportionate, efficient and properly resourced, enabling faster decision making, and delivery of the right development in the right place.

  • Development Delivery - The Government has published a Development Delivery and Viability Report which includes the findings of the Scotland-wide audit of the issues affecting development and infrastructure and the action the Government has taken to support the delivery of development 11.
  • Compulsory Purchase Order - Compulsory purchase is a valuable tool that local authorities can use to free up "blocked" land and assemble sites. Compulsory purchase can facilitate regeneration and other projects in the public interest that would otherwise not be possible. In the summer we will issue new guidance to help local authorities make the best use of the compulsory purchase powers available to them. In 2011 we will also facilitate further training events and other opportunities to share and promote compulsory purchase good practice.
  • Planning Obligations - The Government commenced sections of the Planning etc. (Scotland) Act 2006 dealing with Planning Obligations (previously known as planning agreements). The relevant sections and associated regulations came into force on February 1 2011. We will update Circular 1/2010: Planning Agreements, in light of these new procedures.
  • Development charges - The Government has commissioned a research study into development charges. The research will explore the potential of a "phased" or "tariff" style approach to pay for infrastructure which will assist with developers' cash flow and ensure the requirement for infrastructure provision does not impede development. The researchers will report their findings in March 2011.
  • Planning fees - Public consultation on "Resourcing a High Quality Planning System" closed at the end of 2010. We are now working with COSLA, SOLACE and Heads of Planning Scotland to develop a fee structure and performance framework that is more proportionate and delivers a more effective planning system.

66. The spatial planning implications of developments in regeneration policy will be reflected in the third National Planning Framework ( NPF3). It is important to consider whether the spatial priorities currently identified are likely to remain the right ones looking forward and how spatial priorities can best be articulated.

Questions

  • Should regeneration activity remain something which takes place in marginal communities or should we widen our scope? What else should we consider?
  • Which funding models do you feel have the most potential to deliver regeneration projects in the future?
  • What other innovative approaches to funding development and infrastructure should we be considering and how would these be funded?
  • Given the reliance on core public sector grant funding, is the URC model the most sustainable model to deliver regeneration in the longer term?
  • How should spatial regeneration priorities be selected in the future?
  • How can we encourage private sector investment in regeneration in the future and how far should the public sector go in securing this, i.e., should the public sector minimise risk and provide a guaranteed return?

Maximising our housing investment

67. We need to ensure that through our investments we are creating the right opportunities and the right synergies to maximise the benefit of limited public funds. The locus and role of housing associations, for example, in helping deliver wider regeneration objectives is important.

68. There has been a strong tradition in Scotland of housing-led regeneration. This includes the New Life for Urban Scotland Areas (including Castlemilk and Wester Hailes) during the 1990s along with multi-agency projects with large housing investment at Crown St, Gorbals and New Monklands in Lanarkshire. Although the evaluations of these 12 and other initiatives point to the positive impact on the physical amenity and appearance of the areas, improvements in the quality of life of residents (for example in education and employment skills) was less successful. While the core housing contribution is critical as a stimulus and catalyst for energising local residents and showing practical and tangible improvements in local communities, we are interested in exploring how housing associations could do more to deliver social and economic outcomes, particularly in relation to tackling poverty and creating training and employment opportunities.

In the 1990s Glasgow City Council, Glasgow Development Agency ( GDA) and Scottish Homes developed a vision for the 40-acre gap site left behind after the demolition of high rise blocks in the Gorbals.

The masterplan included mixed tenure, high quality housing served by a range of local shops, public services and leisure facilities. Strong public / private partnerships were formed, with nearly £100m of private sector investment levered over the course of the development.

20 years later and 1500 new homes have been built, with 75% for home ownership as well as social renting. New facilities for the community include a new supermarket and local shops, a hotel development, library, arts installations, the Gorbals Park and other landscaped areas. The project has rebuilt the community, engaging local people and returning a sense of civic pride, including the return of former residents. The project has also rebranded and revitalised the wider Gorbals through integrated urban design, housing and community facilities, as well as improving economic outcomes through a range of jobs, training and employment initiatives.

69. We would also like to encourage better connections between local RSLs and wider Community Planning arrangements. The experience of RSLs looking beyond their core housing functions - even with the existence of Wider Role funding - is mixed. The majority of RSLs have some role in local regeneration activity but others are less able/interested in wider community regeneration issues. It is also the case that not every Community Planning Partnership ( CPP) fully understands the potential of RSLs in their area to contribute to wider regeneration outcomes. Closer working would bring benefits to all concerned.

70. A Scottish Centre for Regeneration guide for Housing Associations on how to work successfully within local structures and processes to deliver regeneration may be helpful in this respect. 13

Cunninghame Housing Association has used a £30 million housing-led regeneration programme to develop training and employment opportunities for local people in North Ayrshire. The RSL will replace 300 poor quality properties in the Vineburgh area of Irvine with new energy efficient homes over a five-year period. On the back of the capital investment the RSL has developed two employability programmes.

The Jobs From Construction project will ensure that the Vineburgh construction contract delivers benefits for local unemployed people. 15% of the total labour requirement for the project is sourced from the local community. In particular the RSL joined Wider Role funding with ESF monies, Fairer Scotland Fund, contributions from North Ayrshire Council and its own resources to support construction training places for 12 previously workless individuals.

The Housing Careers Training Programme is aimed at unemployed young people and school leavers and provides ten places. Using the modern apprenticeship model, participants develop skills and experience through placements in professional environments offered by Cunninghame HA, North Ayrshire Council and Ayrshire North Community HA. They also study for CIH Housing Certificate Levels 2 and 3 at Kilmarnock College on a part-time basis.

Question

  • How can we encourage RSLs to play a greater role in local regeneration strategies?

Linking opportunity and need

71. We also need to ensure that our investment is benefitting local people, supporting the local economy and providing jobs and training opportunities. How we procure goods and services matters. Done in particular ways, procurement promotes and secures high quality design, creates diversity of products and contributes to local economies by using local products and labour and avoiding unnecessary leakage of resources.

72. This can be particularly important for rural areas, where fewer employment options means that the sustainability of local firms is all the more important.

73. The current economic climate may make securing community benefits more challenging but it is also important that we don't miss opportunities for the longer term.

Community Benefits in Procurement ( CBiP)

74. The Scottish Government and local authorities promote the use of Community Benefit clauses - contract clauses which deliver targeted training and recruitment, SME and social enterprise development in (principally construction) contracts. Contracts can achieve a mixture of apprenticeships, work placements and up-skilling of staff.

75. Targeting training and job opportunities at local residents means that they not only benefit from the physical improvements in their area, but social and economic outcomes are also improved.

R3, a consortium of Taylor Wimpey and Cruden Homes, was appointed in January 2007 as the private sector development partner for Raploch URC's house-building programme.

The URC's legally binding contract with R3 secured:

  • A target of 225 jobs and training opportunities for those out of work
  • New tender opportunities and support for Stirling businesses
  • New tender opportunities, support and mentoring for social enterprises
  • A specifically devised Community Engagement Strategy

The developer also provided a Community Resource Centre. The resource centre showcases information on local housing developments (both for sale and rent) and houses a recruitment office, where local people can register for jobs and training on the site.

The URC has also established a Community Enterprise which is a Learndirect and SQA accredited learning centre. The centre provides training and work experience opportunities in both construction and horticulture in addition to personal and employability development. Trainees are then better able to access the jobs created through the CBiP with R3 and other employers.

Support for local business

76. Building the capacity of local businesses to help them bid for development contracts supports the local economy and increases the sustainability and confidence of the local construction sector.

77. Public Contracts Scotland ( PCS) was launched in July 2008 to provide businesses with easy access to contract opportunities. Since the launch:

  • 49,000 suppliers have registered (84% are SMEs);
  • 83% of notes of interest in contracts advertised come from SMEs;
  • as of October 2010, 74% of contracts awarded through PCS go to SMEs.

Riverside Inverclyde (ri) initially set up the Inverclyde Construction Forum ( ICF) in September 2008 having secured partnership support from Inverclyde Council and River Clyde Homes. ri worked to evolve the forum into a more active community and, in late 2009, helped the
forum's transition to an independent, constituted body with registered members run by a Steering Committee representing a balanced cross-section of the local construction industry and the community.

ICFaims to improve the competitiveness of its membership, encourage company development and thereby enhance members' potential for winning new contracts. Key activities include:

  • Providing the mechanism for debate, discussion and networking;
  • Visibility/awareness of tender opportunities;
  • The promotion of Community Benefits Clauses in Pre-Qualification Questionnaires ( PQQs) and tenders;
  • Ensuring local businesses are ready for, and skilled in, the PQQ and tendering processes;
  • Acting as a conduit for all relevant industry information from national organisations and representing the views and concerns of ICF;
  • Sharing best practice and innovation;
  • Creating an enhanced industry perception and image of Inverclyde construction and supply chain thereby increasing opportunity for business awards;
  • Facilitating business expertise improvement and workforce development opportunities; and
  • Using available information from a range of organisations to improve access to the construction industry network

Local materials and suppliers

78. The Scottish Government and local authorities recognise the importance of using local materials and suppliers in regeneration activity, both in terms of the quality of materials and economic vitality.

East Ayrshire Council received a grant from the Government's Town Centre Regeneration Fund to carry out extensive street surface works in Kilmarnock town centre. The works were completed using three materials: Caithness stone slabs, silver-grey granite cubes, and pink Altamira granite kerbs. The Caithness slabs are quarried in Scotland and represent approximately 70% of the total materials used in the surface finish. All the road stone forming the sub-base onto which the surface finish is placed is sourced from local quarries. Bespoke metalwork for pedestrian guardrails and railings was manufactured and installed by Kilmarnock company, Annandale Design.

Question

  • Are there any procurement issues or other barriers which prevent you using local goods and services?

Supporting delivery

The role of the Enterprise Agencies: Scottish Enterprise and Highlands and Islands Enterprise

79. There has been a significant shift in responsibility for the delivery of regeneration and local economic development over recent years. Under the 2007 Concordat with local government a range of reforms designed to support the implementation of the Scottish Government Economic Strategy were announced. This included a reform of the enterprise network intended to increase the rate of Scotland's sustainable economic growth, to simplify the delivery landscape, reduce duplication and drive up effectiveness and efficiency.

80. Scottish Enterprise and Highlands and Islands Enterprise were refocused to concentrate on interventions which would make the most economic impact. The Local Enterprise Companies ( LECs) and Local Enterprise Forums ( LEFs) were abolished and replaced with a regional delivery model for enterprise support to reduce bureaucracy and improve local delivery. This saw responsibility (and resources) for local economic development, including the Business Gateway, and local regeneration go to local authorities, with Scottish Enterprise retaining lead responsibility for regeneration projects of regional or national significance 14.

81. These reforms were designed to recognise the role of local authorities in developing local economies and to ensure better integration with other services provided to businesses by local authorities such as planning, environmental health, consumer and trading standards. It also reflected the Government's belief that wherever possible local services to local areas should be based on an assessment of local need and be delivered by local authorities and their community planning, private and third sector partners.

82. Highlands and Islands Enterprise retains its remit to strengthen local communities, in addition to generating sustainable economic growth. The agency is involved in a number of initiatives to support fragile communities in the Highlands and Islands, including assisting them to acquire and develop land and assets. Reflecting the different economic structure in lowland Scotland, Scottish Enterprise does not have a specific communities remit but it works to ensure all communities can access the opportunities available in the wider economy. It assists community initiatives which have the potential to realise regional or national economic impact.

83. Given Scottish Enterprise's remit, its commitment to regeneration is on projects that hold the greatest prospect of making an additional impact on the overall Scottish economy. Such projects include: the Edinburgh Bio-Quarter, Clyde Waterfront, Fife Energy Park, Dundee Waterfront and Energetica in Aberdeen. Scottish Enterprise also continues to provide funding for Urban Regeneration Companies following the 2007 reforms.

84. Various grants schemes operated by the enterprise agencies have an impact on local economies. For example, Regional Selective Assistance ( RSA) is the main investment grant scheme for business in designated areas of Scotland, the assisted areas. The grants help to create and safeguard jobs and encourage investment in the assisted areas, which would not otherwise be made, making a positive contribution to both the local and national economy. The grants help business take forward development that would not go ahead without the RSA investment. In 2009-10, RSA grants of around £53.4 million helped to create or safeguard 5,300 jobs across Scotland.

85. Local authorities spend an estimated £200 million per year on economic development activities. These cover a very broad range of activities including: town centre and place regeneration; area marketing and promotion; strategy development; research and economic intelligence; support for business starts; specific sector initiatives; inward investment activities; trade promotion; business property and infrastructure and development of employment skills.

86. Local authorities have also been able to lever additional resources through the European Structural Funds ( ESF), enhancing local economies and contributing to sustainable economic growth. For example, on 30 December 2010 more than £6.6 million was made available from the European Regional Development Fund ( ERDF) to support organisations, including the Business Gateway, to offer advice and support to small business and entrepreneurs. Projects include initiatives that will build on existing provision such as Enterprise Creation in Disadvantaged Communities in Glasgow encouraging entrepreneurship in deprived communities and hard to reach groups with targeted workshops and aftercare support.

Impact of the reforms

87. The Economy, Energy and Tourism Committee is carrying out a fundamental review of the purpose of an enterprise agency and the success of the 2007 reforms. It is looking at the impact of the reforms and businesses' experience of them and how the partnership between local authorities and national agencies is working. It is specifically looking at definitions of local, regional and national regeneration and delivery of projects since the reforms. The Committee is also looking at the potential of different delivery models.

88. The Government believes that the reforms have enabled the enterprise agencies to focus on interventions that will most help to grow Scotland's economy and local authorities to deliver integrated economic and enterprise development services. Clearly the refocusing has had an impact on the way that these services are delivered. We recognise that there is still progress and improvement to be made and would welcome comments on how this might be achieved.

Building capacity in local authorities to tackle challenges

89. The changing nature of Scottish Enterprise, and, in particular, the disappearance of the Local Enterprise Company network, has altered the way that local economic development activity is delivered. We are keen to hear from councils about how this activity is progressing, including any challenges or barriers experienced, and how the Scottish Government could best support this work.

90. We are working with the Scottish Local Authorities Economic Development Group ( SLAED) and the Improvement Service ( IS) to deliver a framework that will enable local authorities to be proactive in economic development, both in and across local authority areas. Each of the 32 Single Outcome Agreements contains priority outcomes relating to economic development. Taking a holistic approach we know that achieving economic outcomes can often improve wider social outcomes for communities. Economic development is therefore central to a number of key outcomes for local authorities and their community planning partners. This work will help refine and focus services and resources where they can be of most benefit across the range of economic development interventions, to eliminate waste and maximise resources. The framework will be finalised by 1 April 2011 and rolled out across local authorities shortly thereafter.

91. We are also working with local authorities through the Development and Infrastructure Partners' group to encourage development, including:

  • Promoting Economic growth - a Planning and Economic Recovery Summit was held in July 2010 - which brought together the Scottish Government, local authorities, enterprise agencies and business. A follow up joint Government/ COSLA working session will be held in spring 2011.
  • Development finance - we will continue to work with COSLA and local authorities to share innovative approaches to development finance. For example, work is progressing with Fife council to investigate potential financial models to deliver the infrastructure required for developments.
  • Investing in Skills - work has already been undertaken on this as part of "Delivering Planning Reform". This has included delivery of a range of skills and training events through the Scottish Government's Planning Development Programme including development economics and viability. Consideration is being given to continue this skills requirement.

Questions

  • How could the Scottish Government and its economic development agencies best support regeneration activity in the future?
  • Have we got the balance right between supporting investments which stand to make the greatest contribution to the Scottish economy and delivering local and regional regeneration projects?
  • What more could the Scottish Government do to support its regeneration delivery partners and ensure practitioners have the necessary skills and knowledge needed?

Questions Summary

  • Should regeneration activity remain something which takes place in marginal communities or should we widen our scope? What else should we consider?
  • Which funding models do you feel have the most potential to deliver regeneration projects in the future?
  • What other innovative approaches to funding development and infrastructure should we be considering and how would these be funded?
  • Given the reliance on core public sector grant funding, is the URC model the most sustainable model to deliver regeneration in the longer term?
  • How can we encourage private sector investment in regeneration in the future and how far should the public sector go in securing this, i.e., should the public sector provide minimal risk and a guaranteed return?
  • How should spatial regeneration priorities be selected in the future?
  • How can we encourage RSLs to play a greater role in local regeneration strategies?
  • Are there any procurement issues or other barriers which prevent you using local goods and services?
  • How could the Scottish Government and its economic development agencies best support regeneration activity in the future?
  • Have we got the balance right between supporting investments which stand to make the greatest contribution to the Scottish economy and delivering local and regional regeneration projects?
  • What more could the Scottish Government do to support its regeneration delivery partners and ensure practitioners have the necessary skills and knowledge needed?