Return of a desperate urban policy?

Article published: Thursday, November 10th 2011

Greater Manchester Local Enterprise Partnership (GMLEP) is set to receive £24.7m from the Department for Communities and Local Government (CLG) as part of a £500m ‘Growing Places Fund’ package launched this week by Secretary of State Eric Pickles. In a seeming hark back to the policies of the dying Labour government, the scheme is designed to “get Britain building again” and kickstart stalled housing and infrastructure projects across the country.

Activity in the construction industry is often seen as a barometer of economic health and figures have been particularly bad for the government of late. While the UK economy continues to stutter the construction industry has been contracting and shedding jobs due to the virtual freeze on school and hospital building, a collapse in demand from the retail sector and a stagnant housing market. The future looks bleak, with the Construction Products Association’s latest forecast estimating the sector’s output will fall by 1.1 per cent in 2011 and 3.6 per cent next year, with no growth expected until 2014.

The coalition appears to want to buck that trend with some significant stimulus. The Growing Places Fund, according to Chief Secretary to the Treasury Danny Alexander, is a “flexible fix-it fund” that could be used for schemes such as new roads and flood defences to open up land for development.

“We’re making available half a billion pounds of public money to pay for that up front, so the developer can get on and invest billions of pounds more in building houses and employing people – in getting Britain building again,” he told The Andrew Marr Show on Sunday.

In a press release from CLG, Pickles said: “It will be local enterprise partnerships, made up of the people and businesses who know their local areas best, who will decide where this cash boost will be spent.”

Local Enterprise Partnerships (LEPs) across the North West will share over £60m of the £500m pot, with GMLEP potentially receiving £24.7m. LEPs must now submit proposals to CLG by 20 December on how they would spend the money and where they think local development priorities lie. The cash will all be distributed by the end of January 2012.

A role – or some money at least – for the LEP

The news has been warmly received by GMLEP, especially having come in for recent criticism along with other LEPs from the think tank Centre for Cities. Though it essentially replaced the Northwest Regional Development Agency and formalised the increasingly powerful role of the private sector in sub-regional governance, GMLEP has remained remarkably low-key in its first year. While quietly supporting schemes such as Manchester Airport City, it has suffered from lack of funds – as the former deputy chief executive of Manchester City Council said back in January, there was “no new money” for the LEP.

Last week however saw allocation of funds from the second round of the Regional Growth Fund. GMLEP was apportioned £30m to support schemes of its own choosing, coming out of almost £60m won by projects in Greater Manchester – with Airport City being the most high-profile loser having failed in its £10m bid. The fund has however been a source of considerable controversy, not least due to the lack of progress in the actual distribution of money but also because of the opaque nature both of its process and the job creation claims made. Conservative party pundit Tim Montgomerie tweeted how the “Regional Growth Fund looks a lot like tax-funded goodies for politically connected big business”, while others went as far as to claim the firms have effectively been blackmailing the government for money from the fund through thinly-veiled threats that they will relocate overseas.

Whatever has been going on behind closed doors, the Growing Places Fund has led Labour politicians to goad the coalition for what Shadow Secretary of State for CLG Hilary Benn has called “a huge admission…that abolishing the RDAs and the £1.4bn of funding they received each year was a mistake”.

Kickstarting more wealth transfer

Despite the smug statements now emanating from the opposition, the Growing Places Fund actually seems more reminiscent of the Kickstart programme initiated in Labour’s final term – a last desperate attempt to keep the propertied wheels of the economy turning. In 2009 the Brown government embarked on a largely unreported and under-scrutinised bail-out of property developers through the newly created Homes and Communities Agency (HCA). The HCA spent £2.8bn in just four months in 2009 to support the continued the building of ‘affordable homes’, but about half the money ended up basically re-capitalising private developers.

The Kickstart scheme followed, which bailed out stalled regeneration projects around the country. This time the vague ‘affordable housing’ proviso was dropped as approximately £1bn was pumped into the accounts of private developers to restart schemes which had run into trouble. Many were “very high risk” – meaning substandard – according to the Commission for Architecture and the Built Environment. Brown’s property bail-out not only involved transferring vast amounts of public money into private hands for poor quality housing though. It was quite literally throwing money away, misjudging just how broken the regeneration model and Britain’s property-fuelled urban economies were.

In Manchester for instance, the long-running redevelopment of the former site of the Maine Road stadium in Moss Side received £9.4m in late 2009 – the largest injection of cash in the North West under Kickstart – from the HCA, only for the developer Lowry Homes to go bust a year later. Earlier this year Town Hall insiders told MULE that significant amounts of public money had disappeared into a black hole and remained unaccounted for since the collapse of the council’s flagship regeneration scheme. Freedom of Information requests regarding the debacle have been roundly rejected by Manchester City Council on grounds of “commercial sensitivity” since the Maine Place was handed over to social housing giant Prospect, with appeals being ignored.

Different this time?

Alexander says the government expects the money back once developments are complete and are sold off. However, when – or if – that will be remains at the very best unpredictable. LEPs only have until the end of January to prove how expensive and previously ‘unaffordable’ projects will suddenly become viable with some up-front cash. CLG meanwhile will have just over one month as assess proposals and transfer the funds. Quality control is unlikely to be anything more than rudimentary, especially in what is an extremely depleted government department.

It’s unclear what kind of projects the GMLEP will put forward under the broad criteria of “infrastructure and development”. The housing market remains stagnant across Greater Manchester with the average price just over £105,000, down from the high-point of around £130,000 – still unaffordable, but not expensive enough to tempt developers to restart work, regardless of record-high rents. The summer saw an investment binge in the centre of Manchester, but this now looks more like an aberration with even the commercial property market going quiet – although some of those super-rich multinationals will no doubt be interested in this pot in the near future, as will MAG Developments in hope of some kickstart for Airport City.

The government just wants some building sites to make the cities and the economy look healthy again, but throwing money at developers didn’t do the trick last time. It isn’t going to work this time either.

Andy Lockhart

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More: Cuts, Features, Local economy

Comments

1. In the end, even the Tories have to turn to socialism!

   Comment by Dave on November 13, 2011 at 4:33 pm

2. It’s hardly socialism. Boosting the construction sector is a fashionable way of helping the plundering of decaying economies. That is how the whole mess began in the US. Here is the tale of the Spanish version:

   http://www.youtube.com/watch?v=xWrbAmtZuGc&feature=youtube_gdata_player

   Comment by Robinson Crusoe on December 6, 2011 at 10:04 pm

The comments are closed.