The Scottish Government

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Executive Summary

Introduction and purpose

1.1 Urban Regeneration Companies ( URCs) are a relatively new and exciting development in Scottish regeneration policy. The Companies themselves - as this report will demonstrate - provide an important opportunity to bring focus, integration, strong coordination and of course increased investment to areas of Scotland that have significant and complex regeneration needs. How they have gone about doing this is the focus of this report. Commissioned by the Scottish Executive, this document looks specifically at "best practice" in the set up and early operation of URCs in Scotland. It throws light on what works well - from governance structures through to structures for community involvement - and it also outlines some potential pitfalls for newer or even future URCs to avoid.

The context surrounding URCs

1.2 The full report sets out the policy and strategic context for the establishment of URCs in Scotland as well as that which surrounds their work currently. The Companies were established following the recommendations made in the Cities Review, which emphasised the potential of URCs to boost Scotland's regeneration efforts in the major Cities and beyond. In its response to the Cities Review, Building Better Cities: Delivering Growth and Opportunities, the Scottish Executive indicated its support for innovative delivery structures, such as URCs, where these to come forward from consultation. The consultation also sought expressions of interest in Pathfinder URC status from local partnerships.

1.3 The Scottish Executive has underlined its position in respect of what it wants to see from URCs as:

• To provide a single vision and strategic focus for the regeneration of an area
• To act as a catalyst for private sector investment by raising investor confidence
• To guide investment by the public and private sectors towards an agreed set of objectives and outcomes
• To speed up the pace of delivery
• To maximise the use of public sector assets, including land
• To provide a strategic approach to tackling infrastructure issues such as transport and land assembly

1.4 Importantly, the emphasis of Scottish URCs is on their "catalytic" abilities. The Companies are expected to deliver outcomes across economic, social and environmental as well as physical regeneration. However, whilst the Executive do not see the URC as being responsible for the direct delivery of outcomes related to the Regeneration Outcome Agreement ( ROA) themes of worklessness, employability, health, education and quality of life it does expect the URC to act as catalyst to bring partners together to ensure that the opportunities created by physical regeneration are adequately planned for and that local people are linked into them, via existing funding streams or agencies.

The companies

1.5 In all there are now five URCs formally established in Scotland (Raploch, Craigmillar, Clydebank, Inverclyde and Irvine Bay). The sixth, Clyde Gateway, is being actively developed and due to be formally established in 2007. The review and commentary provided in our report highlights that:

• All of the Companies have adopted objectives and programmes for themselves that actively mirror the underlying aspirations of the Scottish Executive, as articulated at the outset of the URC "movement". Specifically, all five of those now formally established are working to ensure that they achieve the six purposes articulated by the Scottish Executive and summarised at 3 (above) and elaborated in section 2 of the main report.
• That said, whilst all of the Companies are pursuing similar overall objectives, they have all established designs for themselves that are different. This degree of variation - as the main body of our report highlights - should generally be seen as a "good thing". It exemplifies how the Companies are creating innovative structures that creatively balance an alignment with the national policy objectives with the need to address issues that are contingent to individual localities.
• In a procedural sense, all of the Companies are operating in a similar way. Generally, each company has worked to establish a regeneration strategy or framework, which has been followed by a spatial plan / masterplan. The relevance of the former is to set a socio-economic context for the area, whereas the latter sets out a spatial development framework for its regeneration, that is based on that context (and the needs / opportunities articulated therein).
• Levels of private sector representation on the Boards of the URCs are variable. This degree of variation is mainly attributable to the choices made by the individual companies (and specifically their members) at the outset for forming the Companies. One of the five Pathfinder Companies has no private sector representation, while another has a very strong representation (five out of eleven) of local authority members and officials as a result of the nature of city's joint venture partner ( a wholly city council owned development company). Whilst not a criticism per se, the fact that the Companies operate on this basis does beg questions about the appropriateness of the "brand" in these instances. PARC (Craigmillar) have made the point that that their councillor members are board members of a private limited company, which operates on a commercial basis, albeit with the local authority as its one shareholder. However, some partners feel that the relationship of these board members to the Council means that they are unable to offer the same 'constructive challenge' that other private sector board members provide elsewhere. We understand also that Raploch is now reviewing the composition of its Board to include an independent member, which may very well come from the private sector.
• Without doubt all of the Companies have recognised that community involvement is important. The models that have been adopted to reflect that recognition vary. That variation is in part attributable to the specific situations that characterise the Companies area of operation. Raploch and Craigmillar for example are both predominately residential areas. The models through which the community is involved in these areas generally reflect links back into well established community groups. To an extent, Clydebank reflects a greater variety of interests (specifically landowners, businesses, other stakeholders and so on) and the models for engagement reflect that additional dimension, which has necessitated the formation of new groups. This has taken time, but the experience of doing so is itself valuable for other URCs.

Best practice - a basis for learning

1.6 The analysis exemplifies the diversity and innovation that the URC movement in Scotland has created. It has similarly identified a range of steps that have been taken by one of more of the five established URCs that can be regarded as "good practice". Amongst the headline issues are:

• The legal structure - and its appropriateness to the aims and objectives of the Company - is arguably more important than the URC badge itself. The structure must be capable of properly reflecting and where necessary integrating with local circumstances and be similarly configured to acknowledge the requirement for accessing private finance. This can be in the form of bank finance (debt or equity) or via the formation of asset trading subsidiaries.
• Early capital funding is nearly always going to be key. It signals confidence to the marketplace and gives the URC the wherewithal to initiate early actions which will be central to the overall programme ( e.g. strategic land acquisitions). Where early capital funding is limited, partners must leverage their land stock ( e.g. via joint venture ( JV) agreements and/or debt security).
• There should be private sector or independent representation on the URC Board. It provides a counterbalance to political pressure and can similarly help the Company to remain focused on its plan and outputs. Even where the role for the private sector is limited, its representation can provide scrutiny, a different perspective and expertise.
• Where significant amounts of multi-agency public sector funding are required, the processes for programme and project appraisal should be aligned. Ideally programme funding should be committed for a long period (say three years with annual reviews). Where this is not possible, then expert officers (from within member organisations) should offer their expertise to support with project appraisal. The URC should not be distracted.
• In a similar vein, the local authority (or authorities) should look closely at the alignment of their planning system and policies with the objectives and masterplan of the URC. Whilst the Pathfinders have yet to fully test this system, what is already becoming clear is:
  • The need for Section 75 requirements to be stated clearly. Where appropriate, the URC and Planning Authority should work jointly to agree a menu of planning requirements that are important.
  • The need to align processes and procedures to support the URC's focus on quickening the pace of delivery. Where appropriate, URC projects should be ring-fenced and given priority.
  • The value of the URC and local authority working together to produce the masterplan and the quality / design framework that surrounds that plan. Clydebank is a genuine exemplar in this area and its approach can be built upon.
• The focus and effectiveness of leadership is perhaps the key factor in the success of a URC or indeed any regeneration body. An organisation which is led with energy and clarity of vision is much more likely to succeed. Quality leadership at either executive or board level - and ideally at both - impacts particularly on delivery.
• Stakeholders must want the URC and the attributes it brings. They must be willing to cede authority to it, and to support it with their own powers and resources. The support of the local authority is particularly important, but other stakeholders, particularly Scottish Enterprise and Communities Scotland are also important.
• All of the URCs should be thinking more than they are currently in relation to monitoring and evaluation. The newer URCs should actively think about how policies and procedures for this should be built into their plan and structure. In the future as the Executive's evaluation programme commences, the URCs will need to be in a position to demonstrate what they have achieved. Good systems and processes are required now to enable that.
• Community involvement has emerged as a key requirement of success. This is about more than consultation and instead reflects an organisational commitment to working with local people and businesses. Both Raploch and Clydebank can point to models that work well.

Taking stock - the policy lessons

1.7 The report identified six key "policy" lessons which its authors highlight as being important in both continuing to improve the existing Companies in Scotland and also in terms of informing the development of new URCs in the future. The lessons relate to:

• Vision and focus: A key underlying component of the rationale for the establishment of URCs in Scotland was their ability to bring strong vision and focus to their respective areas. Without doubt each has been instrumental in creating a new / renewed vision for their designated areas through: master-planning; assembling and analysing baseline data; engaging with the market, including soft market testing; using specialist advisors; and the creation of new legal structures, that help to both signal the intent and seriousness of the partner organisations whilst concurrently placing a new emphasis on the roles and legal responsibilities of board 'members' to act in the best interest of the Company itself. These too have also created a new model for enabling joint ventures with the private sector (developers and investors).
• Raising investor confidence: there is some embryonic evidence, particularly in Clydebank, that investor confidence has been boosted. The arrangements in place within PARC have also demonstrated how under the Scottish model new frameworks / structures can be built that encourage the participation of investors (in this case private loan finance). This is a huge leap forward relative to the URC model in place within England - where ostensibly most URCs are reliant on their partner organisations to contract with third parties and create models for equity participation in physical development projects. The future URC movement or approach in Scotland should seek to build on the models that have emerged in the United States. Here new approaches are being developed that involve the mobilisation of large amounts of private finance to support complex urban renewal projects. The rationale for building on these is a strong one and the Scottish Executive is already exploring the issue. The outcome from its investigations should be shared with the URCs.
• Brand marketing and PR: Clydebank Rebuilt ( CR) has had an exemplary programme, involving design events and competitions, high quality publications and public realm investment. In terms of PR, appropriate use has been made of skilled professionals. Feedback from design consultation events has been fully and honestly reported and the evidence suggests that the URC has succeeded in interesting the local population. While public consultation events have, as always, been most heavily attended by older people, this has been balanced out by an intensive programme of engagement in schools. CR has created a high quality website, on which a great deal of material about the URC and its plans is available. The openness and accessibility which this generates is impressive.
• Quickening the pace of delivery: The evidence is that the benefits that the URCs have conferred have been in other areas, such as focus, co-ordination, quality and engagement as opposed to accelerating the delivery process. For areas where there is a long history of unsuccessful regeneration attempts, this can be a key issue. The best practice lesson is that what the URC may consider to be Year 1 may be perceived by the community to be Year 4, 5, 6 or even more. In this type of location, URCs are unlikely to be seen as a success unless they can start to deliver early and on a considerable scale. The pace and scale of development is also a key issue in areas where the funding model depends on sales of residential land at increasing values to fund other elements of the masterplan. Unless sufficient critical mass is achieved, land values may remain stubbornly low for many years.
• Procurement and cost effectiveness: Importantly, whilst the URC model has proven itself to be an effective one in many areas, it is by far from the only structure available to deliver large scale regeneration programmes. In our view the URC model should not for example be the only model considered for large scale major housing renewal programmes, and simpler and lower cost delivery mechanisms may be more appropriate in certain cases. Our attention has recently been drawn to a case study that shows considerable achievements elsewhere, albeit using very modest staff resources within the local authority itself. The need for separate legal entities and structures and the "brand itself" is not then always a prerequisite. However, a URC may have advantages where deprivation is multi-faceted and entrenched, and the regeneration process will take 10 years or more. For example, the "entrenched" nature of deprivation in places like Craigmillar or Raploch and the requirement to engage large scale capital finance from the private sector (as opposed for say HAG funded schemes) have proven themselves to warrant a new approach and one that the URC is well suited to. Similarly, from a cost effectiveness standpoint, Raploch does emerge as "much more than a housing renewal project". The design quality commitments, and the local labour aspirations are different from what we have grown to expect in many urban regeneration projects and both indicate that the URC can create "added value".
• Design quality: A key objective of URCs is to achieve a better design outcome than would otherwise have been the case. Recent evidence for CABE about the quality of new housing developments in England ¹ suggests that the 'counterfactual' standard of housing development is unlikely to be good - fewer than one in five were rated as good or very good, and in the East and West Midlands and the South West, 40% of developments were rated as poor. The URCs have each pursued an objective of design quality through master planning and urban design guidance, and in the case of CR and PARC, by exemplar high quality developments. All of the URCs have won awards for both their developments and for the quality of their policies and processes. However, it will be important for the URCs and their local authority partners to follow through when the developments reach planning application stage - the ultimate and only important test will be the quality of the development which is actually built. It is generally accepted that several of the URCs have pursued the objective of design quality - and innovative design - more vigorously than would have been the case with most mainstream developers. It is recognised that the pursuit of design quality has the potential to impact on the speed of delivery and on cost.

1.8 A final point of analysis the authors would like to highlight relates to accountability. The link between the masterplan and organisation responsible for its delivery is clearly much more clearly defined under the URC set up. Because of this, the URCs themselves should continue to be encouraged to work and behave in a focused way. Implicit here is a requirement not to "burden" the companies with responsibilities and tasks that can either become a major distraction or otherwise can be easily dealt with by other partners / stakeholders. The dedicated Executive team in Raploch and Clydebank makes a key difference to delivery. This is also true of both Riverside Inverclyde and Irvine Bay, where results are already being delivered on the ground. This drive should be encouraged.

1.9 The continued involvement of highly experienced and individually credible Board members is also important in creating success. There is plenty of evidence that a board with external members helps to maintain a focus on delivery and to increase accountability for it happening. When the almost inevitable difficulties break out between the URC and its principal stakeholders, the presence of outsiders helps to maintain a focus on delivery and results. The Board - particularly if well represented by independent members - also helps to reinforce a demonstrable separation of responsibilities and identities of say the Council and the URC. Not only does this encourage a type of behaviour that can in many cases be more entrepreneurial, it also helps to reinforce a perceived independence in the marketplace and a stronger conduit between what has been promised in delivery terms and who is directly responsible for that delivery.

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