European and External Affairs Committee

EUR(3)-03-07 - EIB5

Scrutiny Inquiry: Welsh Local Government Association

Introduction

1. The Welsh Local Government Association (WLGA) represents the 22 local authorities in Wales, and the three national park authorities, the three fire and rescue authorities, and four police authorities are associate members.  

2. It seeks to provide representation to local authorities within an emerging policy framework that satisfies the key priorities of our members and delivers a broad range of services that add value to Welsh Local Government and the communities they serve.

3. We welcome this inquiry into the role of the European Investment Bank (EIB) and the opportunities presented to Wales.  Given the recent discussions with the Welsh Assembly Government on the draft budget settlement for the next three years, it is important that we maximise the opportunities from other sources and types of funding.  We therefore support a comprehensive inquiry into the role of the EIB and the opportunities it provides.

What type of investment opportunities and support are offered by the European Investment Bank for projects in Wales?

4. Local government is naturally interested in the contribution the EIB can make to assist those policy areas in which it has statutory and other responsibilities.  It is quite interesting to see the range of support provided by the EIB and the types of sectors it works with.  Between 2002 and 2006, more than £11 billion has been provided in loans to projects in the UK.  Of this, 24% has been given to transport projects, 16% to education and health, 15% to energy, 14% to telecoms and RDI, 12% to water and waste, 10% for global loans for SMEs and 9% for urban renewal.  

5. We aware of some projects the EIB has been involved with in the UK.  For example, it has supported the Building Schools for the Future Programme in England, has worked with the Highways Agency and local authorities on road projects as well as on hospitals.  Also, the EIB has been providing support for housing associations - a notable example of this has been the indirect support provided to Valleys to Coast in Bridgend, who presented evidence to the committee in October 2007.  The EIB is also getting more involved in the waste sector - for example, we would be interested to know more about the Cornwall waste Public Private Partnership (PPP) which was agreed in 2006 and has involved a loan of £82 million.  

6. We welcomed the financial engineering proposals put forward by the European Commission and EIB to be used in the new round of EU Structural Fund Programmes for 2007-2013, particularly JESSICA and JEREMIE.  We believe that these mechanisms provide opportunities to make Structural Fund support more efficient and effective by moving away from grants to loans, by focusing on the recycability and legacy of the Funds and by leveraging in additional financial resources.

What are the benefits, or otherwise, of working with the Bank?

7. There appear to be a number of benefits of working with the EIB.  Firstly, the EIB clearly supports projects and schemes which promote European Union objectives, particularly the Lisbon strategy of growth and jobs.  It is also a non-profit institution, with excellent credit rating, operating on sound banking principles and offers a range of financial and managerial expertise.  

8. However, an issue for local government is that it isn’t the only way of borrowing money and there is competition from other financial institutions and systems such as the Public Works Loans Board which can also lend money at competitive rates.  Also, many of the projects supported by the EIB are Public Private Partnerships, which are not as prevalent in Wales as they are in England.  This may restrict the opportunities to attract EIB investment. However, this should not rule out consideration of utilising EIB funds, in particular over the next few years as, due to the extremely challenging financial settlement for local government, and indeed the Welsh Assembly Governments, consideration has to be given to ways of involving both the private and third sectors in delivering some aspects of public services across Wales.

To what extent are public and private organisations in Wales benefiting from funding provided by the Bank?

9. According to the evidence provided by the Welsh Assembly Government, in the last five years (2002-2006), the EIB has lent around £250m directly to projects in Wales.  All of the recent direct lending has been to private companies e.g. Ford, Glas Cymru.  We would welcome further discussions on the opportunities available to the public sector and certain services within it, in particular waste, housing and education.

10. A number of Welsh local authorities (Rhondda Cynon Taf, Bridgend, Torfaen, Monmouthshire) who are involved in social housing stock transfer have worked with the Welsh Assembly Government to discuss the programme of transfers with the EIB.

To what extent is the Welsh Assembly Government engaging with the Bank, to explore investment opportunities in Wales?

11. We are aware of the discussions between WAG and the EIB on the JEREMIE initiative and have welcomed the creation of the JESSICA Stakeholder Steering Group in Wales which involves local government representatives. We sincerely hope that progress will be made soon on ensuring that Wales will be in a position during 2008 to benefit from both these initiatives.

12. We believe that utilising these new financial instruments will be of great benefit to Wales and is something we all need to have experience of during the current Structural Funding Programming period (2007-2013) as this will be the last time that Wales will qualify for such high levels of grants. The move from grants to loans provides an opportunity to secure more of a sustainable legacy in terms of the Structural Fund expenditure from 2007-2013.

How are these opportunities promoted and facilitated in Wales?

13. The WLGA Brussels office has been involved in meetings with EIB staff on a regular basis, to discuss the JESSICA initiative in particular.  There have been limited discussions on wider forms of borrowing from the EIB.  We would welcome a more strategic approach between Welsh organisations, led by the National Assembly for Wales and the Welsh Assembly Government, to get a more detailed analysis of the opportunities presented by the EIB on various topics. This needs to involve awareness raising across the public sector in Wales.

14. We welcome the commitment in the One Wales agreement to exploring options for a public sector investment agreement with the EIB and look forward to receiving further information regarding this. Further, we are also looking forward to seeing how the new Strategic Capital Investment Board will consider opportunities to utilise assistance from the EIB. We sincerely hope that both of these initiatives will lead to an increased awareness and understanding of the opportunities offered by the EIB across Wales.

What lessons can we learn from other United Kingdom and European regions?

15. We attended the "Working with the EIB: a seminar for city, regional and development bodies in the UK” organised by the Department for Communities and Local Government in London on the 9^th of March 2007.  The seminar brought together stakeholders from across the UK interested in urban development.  

16. One of the most interesting aspects of that event was the realisation that there is currently a number of examples across England of innovative new partnerships developing between the public and private sectors that enable public sector bodies to lever in additional resources and maximise the return on their investments. For example, there are a number of Property Regeneration Partnerships and other similar local asset backed vehicles, evolving across England which have the potential to grow into major regeneration funds delivering significant physical, economic and social renewal goals. These aim to re-invest returns from Local Authority assets into wider public sector outputs. These include Blueprint, which is a public/private regeneration vehicle between the East Midlands Regional Development Agency and Igloo Regeneration Limited, and numerous Urban Regeneration Vehicles, such as the recently established vehicle in the London Borough of Croydon. This approach towards regeneration has been held up by the European Commission as an example of best practice as a vehicle for utilising the JESSICA initiative.

17. During 2007 we worked with the Regeneration Skills Collective Wales and King Sturge to raise awareness of the opportunities that local asset backed vehicles offer to the public sector in terms of levering additional resources and maximising return on their investment. We held a seminar for local authorities, which also involved the private sector, which had a number of presentations on the most recent examples of Property Regeneration Partnerships that have emerged in England. As a result a number of Welsh local authorities are very keen to consider opportunities to establish similar vehicles, this is now progressing in the context of the discussions on the JESSICA initiative.

18. We have also made initial contact with the Saxony Office in Brussels regarding the JESSICA initiative.  Saxony was the first region in Europe to sign a memorandum of understanding with the EIB on JESSICA.

Please feel free to make any other comments or observations which you consider to be pertinent to our inquiry

19. We look forward to the Committee’s consideration of these issues in the New Year and to it’s recommendations to the Welsh Assembly Government to facilitate EIB investment in Wales. We sincerely hope that the opportunities offered by the EIB will be fully recognised and look forward to working with the Welsh Assembly Government during 2008 and beyond to progress the opportunities and raise awareness of them across the public sector in Wales.

For further information please contact:

Dr Tim Peppin, Director of Regeneration and Sustainable Development

tim.peppin@wlga.gov.uk
Welsh Local Government Association
Local Government House
Drake walk
Cardiff
CF10 4LG

Tel: 029 2046 8669