Nov 2007 08

The failure of regeneration schemes1

Policy Exchange have released a report (PDF) examing the effectiveness of expensive regeneration schemes designed to create a renaissance in poor inner cities.  Their research team’s findings offer a fascinating insight into how the divide between successful suburb and poor inner city has actually grown over time:

"On GVA, the gap between ‘urban policy towns’ and the national average has widened from them being 9% behind in 1997 to 13% behind in 2004 (the latest year for which figures are calculable). The successful towns sample set, conversely, increased their lead over the national average.

On personal income, the ‘urban policy towns’ began 17% behind the UK average in 1997 and ended 18% behind in 2005. Again, successful towns which do not receive substantial urban regeneration funding improved on their position of a decade ago.   

Nor has there been any improvement in unemployment levels in our urban policy sample since 1997, relative either to the national average or to the sample of successful towns. Unemployment is still a stubborn 50% higher in ‘urban policy towns’ than it is nationally or in successful towns suggesting that Britain does not have an economy-wide unemployment problem, but rather quite marked pockets of unemployment in some big cities."

At £30 billion we have spent a lot of money on these schemes for them to be failing so thoroughly.  These regions have still not recovered from the decline of the old staple industries at the start of the twentieth century and outside money appears unable to help.  The truth is that rather than big new industrial projects what these regions really need is the freedom for new, private-sector, industries to develop.  An urban renaissance will have to be driven by the entrepreneurial citizens of that town itself.

David B Smith set out how big government gets in the way of such renewal earlier this year in the Economic Research Council’s Britain and Overseas (PDF).  Unfortunately, national government – which sets a minimum wage too high for these areas and offers salaries that, in these areas, can outcompete the private sector – crowds out the private enterprise.  Each city’s entrepreneurial talent is devoted to securing a better political deal rather than creating new enterprises and employment.

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  • David Eyles

    There is a sibling to urban regeneration in the form of so-called rural regeneration. A good deal of the money to fund this comes from deductions from the Single Payment Scheme paid to farmers.
    To my knowlegde, no-one has audited this. There are a plethora of little quangos devoted to, say, the marketing of farm produce from a particular area or region. There are hundreds of quangos offering cash to farmers and other rural businesses for development, but the rules are usually so arcane and convoluted that you need a “consultant” to do market research and business plans and then there is a grave risk that they move the goalposts after your application has been presented – so, no cash.
    I would really like to know how much these organisations receive in funding, and how much they actually hand out to worthy schemes. I am willing to bet that that the amounts paid out are but a tiny proportion of total costs. If they were charities, they would attract the opprobrium of the Charities Commission.