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Core Cities Liberal Democrat Fringe Event

“Financing the future of cities: Who pays? Summary

Liberal Democrat Treasury spokesperson Lord Newby has today attacked the Treasury for its relentless centralism and failure to give local authorities' the freedom they needed to compete internationally

He was speaking at the Liberal Democrat conference at a fringe event entitled 'Financing the Future of Cities, who pays?'. Joining Lord Newby were Cllr John Shipley, leader for Newcastle City Council, who used today’s fringe meeting on the financing challenges facing UK cities, to launch the Core Cities Group and PricewaterhouseCooper’s interm report on Funding Mechanisms for Unlocking City Growth.

Introducing the report, Chris Murray, from the Core Cities Group (CCG), outlined some of the main findings and challenges facing cities. The event was also attended by Colin Molton, Executive Director of Operations and Development for SouthWest Regional Development Agency (RDA).

Lord Newby attacked the 'dead hand' of the Treasury, complaining that it believed itself to be omnipotent, but in actual fact was being difficult. In order for UK cities to compete, the Treasury spokesperson continued, they need greater authority and the ability to raise financing locally. This was even more the case, he found, given that the age of UK cites and the cost of regenerating infrastructure would amount to considerably more than the cost faced by new emerging cities, with which the UK competes internationally. In order to facilitate this change, Lord Newby said there was a need for greater political will and not simply changing the minds of civil servants

The CCG interim report proposes two key points for helping UK cities improve their international competitiveness; facilitating work across administrative boundaries, and increasing the level of control at the local level, especially in terms of financing. Lord Newby stated that he did not know if these were the answers but that they needed to be tried.

The report emphasised the importance of cities in the UK, but, Mr Murray emphasised, they are still underperforming in comparison to their international counterparts. This point was reiterated by Lord Newby who criticised the government for abandoning any concept of regional authority. He condemned the government for setting up RDAs with limited financing and for failing to provide any direction.

The report’s solution to this second challenge is devolution for growth. Mr Murray identified several attempts already made to increase levels of funding available to cities, such as community infrastructure levies, and local authority business growth incentives but raised concerns that all of these faced opposition.

In contrast, CCG proposed an Accelerated Development Zone (ADZ) which, it was claimed, would allow local authorities to capture the increased value gained from development. Also proposed under this report was the Regional Infrastructure Fund (RIF) aimed at providing forward funding to provide investment.

The benefits of this approach, Mr Murray claimed, were to attract businesses, reduce the risk involved in investment and increase employment. The remaining problem, he stated, was concern over the long-term nature of such revenue which would require working with government.

Speaking in favour of the RIF, Colin Molton asserted that this fund aimed at getting more value out of public schemes by giving public authorities a share of the rewards. Based on his experiences with a project run in the South West, Mr Molton stated that the scheme aimed at speeding up regeneration by increasing capacity, improving skills and making use of a revolving regional infrastructure fund. This fund, he said, required private sector participation, but with the rewards sown back into public infrastructure.

Mr Motlon emphasised that the RIF envisioned a board comprising both public and private participants to ensure that projects were undertaken based on set criteria providing value for money, with the RDA acting as the accountable body directed by a business guide.

In the current economic crisis, Mr Molton stressed that businesses were receptive to government proposals for risk-sharing and that the panel-based approach would be an innovative tool for growth.

Rounding-up the comments made by the panellists, John Shipley, recognised that the Treasury is governed by short term rates of return, which fails to target cities which lack key infrastructure. He also criticised the Treasury for retaining business rates, in particular amounts recouped above expected rates, rather than returning them to local government.

During the Q&A session, the audience raised concerns over the lack of certainty from government and a lack of joined-up thinking. Mr Molton from the RDA stressed that long-term planning was a key part of regional development and that projects would need to be formulated in order to overcome the political and economic cycles that they would face. However, once locked into agreement, these schemes would then be protected by the contractual relationship. On the issue of certainty Lord Newby again criticised the current government, in particular the Prime Minister, for the lack of clarity and decision-making.

A spokesperson for Transport for London questioned whether, following the difficulties encountered in London over Private Finance Initiatives and Public Private Procurement, increasing the patchwork of sources was a wholly suitable idea. It was claimed that rather than simplifying the system, it allowed the government off the hook for providing such services. Colin Molton argued that the benefits of this system were that government was only being asked to invest in market failure, not where firms were already willing to invest. Mr Murray of CCG, asserted that on this point the report proposed selling on this risk to firms set-up to handle it.

All the participants agreed that a vacant land tax was inappropriate, however, the chair, John Shipley highlighted that more needed to be done on empty properties especially where this resulted in the demolition of good buildings. There were concerns that this would be felt even more acutely in the current economic down-turn.

In response to the issue of the economic climate, Lord Newby asserted that the private sector may find these proposals more attractive than mere speculation but all of the participants agreed that it would need to be accompanied by greater skills capacity. Adding to this comment, Colin Molton emphasised that this would need to include targeting social as well as physical infrastructure. On this point, Chris Murray recognised that the benefits of growth had not been equally shared and that areas of deprivation remained. He emphasised the need for greater integration between learning and skills councils, Jobcentre Plus and the Department for Work and Pensions.