Interview: Alex Neil

Interview: Alex Neil

Regeneration & Renewal


Unsurprisingly, Alex Neil wasn’t best pleased with last month’s Comprehensive Spending Review. But it wasn’t just that the Scottish Government’s budget was greatly reduced that upset the country’s housing and communities minister, it was also that many of the decisions made in London will have knock-on implications for areas of public policy that were devolved to Edinburgh years ago.


He highlights the changes to the Public Works Loans Board, the arm of the Treasury that provides loans to councils. In the spending review, chancellor George Osborne announced an immediate rise in the interest rate on these loans from 0.2 per cent to one per cent above the rate charged for UK government bonds, with huge implications for capital projects across the UK. "We weren’t consulted," says Neil. "It’s outrageous that we weren’t consulted on (a change that will affect) devolved areas of responsibility (such as housing and regeneration)."


As outraged as Neil may be, he also knows that he is going to have to make the most of a tough situation. The Scottish Government’s capital spending budget – which encompasses most housing and regeneration spending – will fall next financial year from £3.6 billion to £2.5 billion. As a result, Neil knows he is going to have to make the money he does have at his disposal go further and identify new funding sources.


To that end, Neil gave a keynote address to the National Association of Pension Funds annual conference in Liverpool in October in which he attempted to sell the idea that pension funds could invest in social housing. "I’m not asking them for charity. I’m not asking for a handout," he says. "I’m asking them to invest in an asset that will give them stability over 50 years and will give them a return that is competitive with the return that they would get from (government bonds) or a similar investment at the present time. What’s more, the risk involved is virtually zilch."


But attracting investment from pension funds is a long-term goal. In the short term, Scotland faces a significant – and growing – need for affordable homes. Neil estimates that Scotland already has a shortfall of about 100,000 family homes, and 19,000 new households are being formed each year due to population growth and a declining number of people per household. "We’ll be doing well if we can get housebuilding up to around 6,000 to 8,000 (a year)," says Neil. "I would like to get it higher, but in this financial climate it’s hard to see how we could manage that."


The Scottish Government’s Budget last week confirmed that the housing and regeneration budget will fall by about a fifth in 2011/12 and it is overwhelmingly likely that the grant available to housing associations for new homes will also fall significantly. It is clear that the traditional social housing model is unlikely to produce the numbers that Neil needs. So, where will the homes come from? Neil responds that they will have to come from a range of sources, saying that on top of housing association new build projects, councils are currently building around 3,500 homes, although not all of these will be completed this year or next. He also believes that the National Housing Trust Initiative should soon start to see results. Under the scheme, which is unlike anything attempted before in the UK, the Scottish Government borrows money on behalf of private housebuilders and pays 65 to 70 per cent of building costs. In return for the loan, the property will be kept as affordable rental housing for five to ten years, at which point the developer has the option to sell as long as the government loan is repaid. Ultimately, Neil claims, the initiative should result in an average cost to the Scottish Government of each new home of £4,000, as opposed to £64,000 per home when funded through housing association grants.


If responding to public spending cuts is partly about finding new sources of money, it is also about effectively targeting the resources that are already immediately available. But several senior regeneration figures in Scotland complained ahead of this interview that the Scottish Government is at the same time too focused and not focused enough when it comes to doling out funding. They pointed to the large sums being spent on and around the Commonwealth Games site in the east end of Glasgow and contrasted that with the relatively meagre funds that organisations can bid for in the rest of the country. The Town Centre Regeneration Fund, for instance, was worth just £60 million, but ended up being split 30 ways. How does Neil respond to such criticism?


"It’s true that Glasgow and the Glasgow area has had a high share of the funding. For instance, they get 27 per cent of the (available national) funding for social housing and four out of Scotland’s six urban regeneration companies are in Glasgow and west Scotland," he says. "The reason is the concentration of deprivation in that area. That justifies the investment and expenditure." However, Neil acknowledges that problems exist outside Glasgow – not least in Scotland’s former coalfield areas – and says that the limited funding currently available calls for a rethink. "We need a fairly fundamental debate about what our regeneration strategy should be for Scotland in the decade ahead against the backdrop of this difficult public finance situation and overall financial climate."


Part of the political reaction south of the border to the perceived need for massive, urgent cuts to public spending has been an upsurge in the rhetoric on localism: devolving power from central government to councils and from councils to community groups in an attempt to personalise services and save money. Representatives from the community sector in Scotland claim that, while the Scottish Nationalist Government has been good to its own localist promises in terms of passing on responsibilities to councils, the agenda has stalled, with councils seemingly reluctant to pass down powers to a community level. Here, Neil is willing to give some ground. "I would accept that people feel that we could perhaps go further or faster and we are looking at how we can do that," he says. "When we do have a fundamental look at the longer-term regeneration strategy, community empowerment will be a crucial element of that."


Ultimately, of course, Neil argues that whatever issues Scotland faces, it would be much better if the Scottish Government was free to respond as it sees fit, be it the need for more housing or tackling the budget deficit. Asked which powers currently in the hands of ministers in London would make the biggest difference to regeneration in Scotland if passed to Holyrood, Neil responds immediately. "The Treasury’s powers and some of its daft rules undermine our ability to deliver to our potential on devolved areas of policy," he says. "Give us control over our money. Let us decide how to run Scotland financially in terms of tax and spend and all the other aspects of economic policy and we could do a lot better than the London Treasury has ever done for us."


CV highlights
1967: Joins the Labour Party
1976: Leaves the Labour Party to help set up the Scottish Labour Party
1985: Joins the Scottish National Party
1989: Stands as the SNP’s candidate in the Glasgow Central by-election
1999: Elected member of the Scottish Parliament for Central Scotland
2009: Appointed Scottish Government minister for housing and communities.