MD2325 Business Rates Retention Pilot - GGF local economies/workspace

The Mayor approved (under cover of MD2217) set out the GLA’s participation in the 100% London Business Rates Retention Pilot in 2018-19. Through the pilot the GLA and the 33 London local authorities, with the agreement of Government, have established a London Business Rates Pool. As a result, in 2018-19 London Government will receive 100% of London’s Business Rates growth compared to its Government set Business Rates Baseline. Government, the Mayor, and London Councils, have agreed that approximately half of the total net additional benefit from pooling should be spent on ‘strategic investment projects’ that contribute to the sustainable growth of London’s economy and leverage additional investment from other private or public sources.

The GLA’s share of the net benefit of pooling is forecast to be £107m and he has chosen to top this up by a further £5m, providing a Strategic Investment Fund totalling £112m. The GLA has established criteria to identify projects that:

• Directly or indirectly lead to an increase in sustainable, successful commercial floorspace; and
• Address the key risks facing businesses in London: including housing affordability for employees.

This initial decision on two linked Business Rates Retention Pilot proposals aligns with the live bidding Round 2 Good Growth Fund process. Alignment with the live bidding round means we can ensure a comprehensive selection process, undertake detailed scoping and development of proposals, and enter into project contracts by quarter four 2018/19.

The first proposal (‘intensifying London’s local economies’) identifies £5m revenue funding to be made available alongside the existing £20m capital funding for the current Round 2 of the GGF. This will enable projects that support and intensify diverse and accessible local economies across London to be delivered. The second proposal (‘workspace investment’) funds two projects on the reserve list from Round 1 of the GGF (£1.16m). Further projects drawing on the Strategic Investment Fund will be confirmed in due course.

Intensifying London’s local economies

We have incorporated a specific action within the Round 2 prospectus that invites submissions which support the diverse and accessible local economies accommodated on London’s 600 high streets, 239 town centres, and 7,000Ha of industrial land. Using existing GGF processes, this funding will increase capacity for the economy within the development pipeline through place-specific delivery strategies and projects.

Constrained public sector finances, and the fact that the GGF is a capital programme, mean there is extremely limited funding available for interventions that trial and test the innovative approaches to development required to deliver the Mayor’s vision of good growth.

The leveraging of incentives created by the new London Business Rates Pool arrangements, which seek to enable local authorities to support and grow local economies, when combined with capital funding, will help grow prosperity and empower local people. In so doing it will support implementation of London Plan policies on town centres, high streets, industry, suburban intensification and support Good Growth.

Competitive bidding for Round 2 of the GGF is underway, supported by significant outreach and communications. By securing Business Rates Pilot Funding at this stage of the process, we can encourage bidders to respond to the opportunity created by the availability of revenue funding, this will enable delivery of the best demonstrator projects from across London, supporting the case for further devolution of business rates to London in the future. In line with MD2163, approval of detailed funding allocations within the GGF programme, are delegated to the Executive Director of Development, Enterprise and Environment, in consultation with LEAP.

Workspace Investment

This proposal will assist with the delivery of two capital projects that support the long-term development of affordable workspace. Deptford Foundry will provide 80 studios (20,686 sq ft) for 250 years. Studio Voltaire will provide affordable workspace (7,900 sq ft) and an incubator programme for artists in addition to commercial space, public realm and education space. Both will make a significant impact on the level of long term artists’ workspace provision in London, helping to stem the loss of 30% of artists’ workspace predicted by 2019.

Having been through a competitive bidding process for Round 1 of the GGF and only just falling short of selection to proceed, both of these projects have been subject to evaluation of the proposition against the aims of the fund, as well as deliverability and are therefore ready to deliver.

*A summary of the expected spend profile is set out in the decision file.

Intensifying London’s local economies

Objectives

London’s local economies are diverse, accessible, and a key feature of Londoners’ everyday lives. Accommodated on 600 high streets, 239 town centres, and 7,000 hectares of industrial land across the city, they are facing significant challenges particularly in terms of affordability and availability of space. High streets are significant and growing places of employment with 47 per cent of businesses outside Central London located on a high street . Meanwhile, after years of decline, demand for London’s industrial land is stabilising, with industrial businesses finding it increasingly difficult to find suitable premises . At the same time London needs to accommodate 49,000 new jobs annually, 1.6m sqm comparison floorspace and 4.7-6.1m sqm office space, within the next 20 years .

The draft London Plan establishes a new policy framework for industry, town centres, and high streets to address some of these challenges. The Mayor’s draft Economic Development Strategy focuses on creating a fairer, more inclusive economy and recognises the critical role of these dispersed economies in delivering Good Growth.

Using existing processes and resources, this project will support partners across the city to deliver area based strategies and demonstrator projects that trial and test the innovative approaches to development required to deliver the Mayor’s vision of good growth.

Expert regeneration advice, design support and knowledge sharing opportunities on offer from the Regeneration Unit will ensure best practice is delivered. These projects will in turn become a resource to learn from and to make the case for further devolution of business rates to London.

An indicative list of activities, outlined below, is included in the GGF prospectus to help frame the type of interventions we would support. The list will not be definitive – the process remains open to innovation from the sector. The process also remains competitive meaning the best proposals are supported increasing the likelihood of delivering high impact projects.

The Good Growth Fund could be used to support:

• Developing and implementing area-based renewal and intensification strategies to realise the full potential of opportunity areas, high streets, town centres and industrial areas;
• Increasing appropriately specified and affordable commercial floorspace in future developments;
• Developing and delivering asset management plans for publicly owned commercial property;
• Co-designing and funding investments in publicly owned assets that generate and secure social, economic, and environmental benefits;
• Supporting partners to acquire leases to intensify and diversify commercial activity;
• Overcoming marginal viability and accelerating delivery of commercial floor space; and
• Delivering sector-specific workspaces such as open kitchens, workshops or labs.

Outputs and outcomes

In order to ensure GGF funding is awarded to the most compelling projects a two-stage assessment process will be undertaken:

Stage 1: Review - A panel drawing on expertise from across the GLA will review, score, and rank stage one application forms against the criteria below.

Stage 2: Decision - The Deputy Mayor for Planning, Skills and Regeneration and LEAP will recommend projects for (i) further development or (ii) full application. The final decision rests with the Mayor.

Suitability for funding and support will be assessed based on responses to the following criteria set out in the application:

Project description (40 per cent) – What do you want to do, where and why? The best applications will show a good fit with the aims of the Good Growth Fund and have clearly defined outputs and outcomes. The application should demonstrate an understanding of the target group/area/business sector and the extent to which proposed delivery meets their needs. An assessment will be made of the project’s potential to deliver high-quality provision/activity and outcomes, and the contribution it will make to cross-cutting themes of Empowering People, Making Better Places and Growing Prosperity.

Deliverability (30 per cent) - How can we be confident that the project will be a success? Your project should have a clear plan, underpinned by capacity and skills in the team to deliver on time and budget. We will look for evidence of effective collaborative working and intention to work in partnership and the ability to implement, manage, monitor and deliver the project.

Value for money (30 per cent) – Does your project make optimal use of resources to achieve a high-quality project? Your application should include a clear description that demonstrates all costs associated with the project have been identified and why you believe the costs to be reasonable should be provided. However, value for money is not just about achieving the lowest price; the greater weight will be given to the delivery of high-quality projects.

The Good Growth Fund is a strategic programme that aims to deliver across several themes and to support a range of activities across London. In making funding decisions, we will assess how applications received map across stated priorities and London's communities so that we can deliver a balanced programme of exemplary projects.

Based on experience of previous funding programmes, and continued cross GLA collaboration, we expect this funding to support the delivery of up to:

• 12,500 m2 new commercial space
• 5,000 m2 commercial space/25 units back in to use
• 250 jobs created
• 30 jobs safeguarded
• 60 local people accessing jobs
• 125 businesses moving into an area
• 125 start-ups with local ownership
• 2,500 people from diverse backgrounds collaborating to influence local decisions/projects

Workspace Investment

Objectives

Deptford Foundry will provide 20,686 sq ft affordable artists’ workspace on a 250-year lease, substantially increasing the amount of permanent affordable workspace in the city.

Studio Voltaire will create and secure an additional 2,325 sq ft of affordable artist workspace; 5,543 sq ft of existing affordable workspace will be improved and secured for future use. New micro–workspaces will ensure support for a diverse range of cultural practitioners. The project will drive innovation and build skills and employability as the workspaces will be within a supportive environment that offers opportunities for networking and skills exchange.

The Mayor has created a Creative Enterprise Zones programme, supported through the draft London Plan, with a focus on providing dedicated creative workspace, so that creative industries and artists are given extra support to flourish. Both projects are linked to potential Creative Enterprise Zones – with development grants committed to those areas through the programme.

Affordable creative workspace sites consistently show very high and continuous occupancy rates but continue to be at risk. 13,780 people are currently on waiting lists operated by just 27 workspace providers. Recent research conducted by the GLA as part of the Cultural Infrastructure Plan shows that provision of this type of space is becoming increasingly blended, with more expensive space enabling the provision of affordable space within individual buildings. This impacts directly on the number of artists within a building, and therefore the level of innovation and R&D taking place.

Creative spaces and communities have also been shown to have a wider economic and social value, helping to regenerate areas by stimulating local business growth and attracting inward investment and infrastructure development. This in turn boosts local property markets by making surrounding neighbourhoods more desirable places in which to live, so attracting a broader community and creating a broader mix of people in these communities. This impact has been demonstrated through examples such as SPACE studios’ ‘The Triangle’ in Hackney, which became a key player in the growth of Hackney’s creative economy. The Triangle was acquired on a 25-year-lease in 2001. The long-term presence of the building on this prominent corner has been an important local asset in the context of change that has swept east London, evidenced by the breweries, bars, music venues, galleries, cafes and shops that have sprung up around London Fields in the last ten years. The building itself often attracts visitors, art collectors and members of the press. In front of the gallery entrance public realm improvements have been led by Hackney Council, fuelling the development of this area.

The projects remove financial barriers for London–based artists by providing space at significantly lower than market rates and supporting a diverse range of creative practitioners.

Outputs and Outcomes

Supports growth in sustainable commercial floorspace for SMEs (artists and creative businesses)

Project 1 – Deptford Foundry – 78 permanent and affordable artists’ studios, (20,686 sq ft), gallery and community space, shared skills timebank within a new housing development. All secured for 250 years.

Project 2 – Studio Voltaire – 1292 sq ft new commercial space, 7857sq ft affordable workspace safeguarded, 2414 sq ft new affordable workspace, 100% increase in footfall, 50 artists with learning difficulties supported, 300 sq ft public realm improved. 1065 sq ft of new participation and events space for programmes that support community cohesion (to deliver community–led regeneration) and lifelong learning (to build skills and employability). The space will also be available for community groups.

Under section 149 of the Equality Act 2010 (the “Equality Act”), as public authority, the Mayor and the GLA must have due regard to the need to eliminate unlawful discrimination, harassment and victimisation, and to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not. Protected characteristics under the Equality Act comprise age, disability, gender re-assignment, pregnancy and maternity, race, religion or belief, sex, sexual orientation, and marriage or civil partnership status (the duty in respect of this last characteristic is to eliminate unlawful discrimination only).

The GGF is designed to deliver on the Mayor’s commitment to Good Growth by helping to make London a city that is socially and economically inclusive and environmentally sustainable. At the heart of Good Growth is making sure that Londoners of all backgrounds have a say in shaping the future of their city.

The GGF is open to a broad range of public, private and third-sector organisations including: London boroughs, sub-regional partnerships, town teams and business improvement districts, workspace providers, community groups, social enterprises, small and medium-sized enterprises, and charities within London that wish to play a role in making London a better place for all. Proposals from partnerships that build on the strengths of different organisations are encouraged.

A number of measures within the GGF appraisal and selection processes are designed to ensure that supported projects take account of the duties of the Mayor and the GLA under section 149 of the Equality Act:

• The application requires applicants to evaluate the potential impacts regarding protected characteristic groups.
• Project appraisal draws on input from a range of teams including the Communities and Social Policy Team to ensure that applications support the delivery of Mayoral objectives for social integration, equalities, and fairness.
• As a condition of GGF funding agreements, projects awarded funding will be required to meet the Public Sector Equality Duty and demonstrate this through regular reporting of progress.

As a baseline we expect that those that share protected characteristics should be encouraged to fully integrate and therefore project activities within the GGF programme should be designed to accommodate and reflect the needs of the existing community and those that will live, work and visit an area. This includes the design for those with physical disabilities and mental health problems and older persons.

As a result of these measures we do not anticipate that delivery of the projects outlined in the main body of this report will have any negative impact on persons with a protected characteristic under the Equality Act.

Key risks and issues

Governance arrangements - these projects will be subject to established GGF processes of scrutiny, evaluation, and ongoing monitoring. In line with MD 2163, approval of detailed funding allocations are delegated to the Executive Director of Development, Enterprise and Environment in consultation with LEAP. The Regeneration Economic Development Unit’s central programme team will oversee compliance, and monitor delivery progress through monthly Budget and Performance Review meetings, where known issues and proposed recovery plans are discussed. Regeneration project leads will have day-to-day responsibility for working with delivery partners to ensure the successful design and delivery of each project in line with the agreed programme and the original approval.

Risks associated with individual projects are identified as part of application process, and the evaluation criteria considers risk and deliverability when prioritising projects. All capital projects will be subject to design review during the design and implementation phase. Reviews will be undertaken by the independent panel of Mayor’s Design Advocates – a newly appointed pool of experts with skills across the breadth of the built environment disciplines. Design review will be in line with the Mayor’s Design Review Charter, following best practice principles of proportionality, timeliness, continuity and independence. Officers will ensure that appropriate and meaningful scrutiny is applied to each project as required.

Links to Mayoral strategies and priorities

Manifesto

Supporting small business, protecting business space and the character of high streets – These proposals will help realise the full potential of our high streets, town centres, industrial, and opportunity areas through clear delivery focussed strategies at a local level that ensure appropriately-specified and affordable commercial floorspace in future developments.

Supporting and helping to protect creative and artist workspaces, particularly where they are affordable. The proposals will help to strengthen planning protections for small industrial and creative workspaces and incorporate a pro-cultural planning framework, safeguarding existing cultural facilities.

A Fairer and more equal city - By connecting the strategic with the local, working in partnership with local experts, and ensuring local communities can influence and benefit from growth in their area these proposals will help deliver this manifesto commitment.

Taking action on London’s housing crisis – Area-based delivery strategies and demonstrator projects will enable intensification and release land for housing delivery.

City for All Londoners

These proposals, structured around the principle of Good Growth, provide support to ensure Londoners can play an active part in their communities and the decisions that affect them. They support the priorities set out in a City for All Londoners, particularly under ‘Accommodating Growth’, ‘Economy’, ‘A City for all Londoners’, and ‘Housing’.

Emerging Strategies and priorities

This project addresses a number of Mayoral priorities:

• It directly supports draft London Plan policies: E4 (No net loss of industrial floorspace capacity), E7 (Intensification, co-location and substitution of land for industry), E8 (Sector growth opportunities and clusters), SD1 (Opportunity Areas), SD6 (Town Centres), SD10 (Strategic and local regeneration), and T2 (Healthy Streets).
• It aligns with and develops priorities set out in the draft Economic Development Strategy, in particular,’ A fairer, more inclusive economy’, ‘Creating the conditions for growth’, and ‘Supporting London’s sectors’.
• It directly supports the Participation and Equality strands of the Mayor’s Strategy for Social Integration
• It directly delivers against the Mayor’s draft Culture Strategy, delivering access to culture, and crucial cultural infrastructure.

Impact assessments and consultations

Definition of the GGF objectives drew on policy input from across the GLA and TfL. The Round 2 GGF prospectus was developed following assessment of Round 1 in consultation with LEAP. This process allows us to take stock on how the programme is meeting Mayoral objectives round by round. It enables us to check that we are meeting the needs of target and underrepresented groups and to build a balanced programme across rounds. Interim evaluation of the GGF programme will be undertaken in 2019.

A number of teams within the GLA will be involved in the appraisal and moderation of applications to the Good Growth Fund, including Economics, Culture, the Economic Business Policy Unit, Environment, Transport, Housing & Land, Planning, Community Engagement, Education and Youth, Health, Diversity and Social Policy.

This decision will commit £6.16 million of the £112 million available from the Strategic Investment Fund of the Business Rate Retention Pilot for 2018-19. This funding from business rates can be used for capital or revenue expenditure. The £1.16 million to support delivery of two Good Growth Fund Round 1 reserve projects will be capital expenditure and the estimated profile is: £410,000 in 2018-19; £498,000 in 2019-20; and £252,000 in 2019-20. The £5 million to support the delivery of Round 2 Good Growth projects will be revenue expenditure and the estimated profile is £2 million in 2019-20 and £3 million in 2020-21.

The detailed allocations of funding for Round 2 Good Growth Fund projects will be delegated to the Executive Director of Development, Enterprise & Environment, in consultation with the LEAP and will be approved via the Authority’s formal decision-making process.

The decision sought concerns two Business Rates Retention Pilot proposals, for the expenditure of £6,160,000 on projects delivered through the Good Growth Fund.

Under sections 30 and 34 of the Greater London Authority Act 1999 (the GLA Act) the GLA (acting through the Mayor) has power to do anything which it considers will further its purposes, including the promotion of economic development and wealth creation, and social development, in Greater London, and to do anything which is calculated to facilitate, or is conducive or incidental to the exercise of its functions.

It appears that the expenditure proposed in this paper is intended to “deliver new workspace”, and to “support and intensify diverse and accessible local economies across London”. The realisation of these intentions would tend to promote economic development and wealth creation, and social development, in Greater London.

In taking the decisions requested, the Mayor must have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity and foster good relations between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not share it (section 149 of the Equality Act 2010). To this end, the Mayor should have particular regard to section 3 (above) of this decision form.

It is understood that the expenditure proposed amounts to the provision of grant funding as a contribution to the project costs of the successful GGF applicants and not a payment for services to be provided. If correct officers must ensure that the proposed funding is disbursed in a fair and transparent manner in accordance with the GLA’s Contracts and Funding Code and appropriate funding agreements are put in place between and executed by the GLA and recipients of funding before any commitment to the provide funding is made.

To the extent that it is proposed that ESF funding is to be utilised in relation to the projects officers must ensure that such use corresponds with all DWP requirements in this regard and liaise with the GLA’s European Programmes Management unit accordingly.

Intensifying local economies

Delivering Workspace