Public sector needs to take lead on new developments

IF we want to provide more affordable housing, generate new employment, create better quality places for people in Scotland, we need to be braver, bolder and be prepared to accept more risk and uncertainty than now.

The state needs to act as the

“prime mover”, to make development happen, where it would otherwise not do so, or ensure higher quality development, where mediocre development might otherwise occur.

Almost always, public interest-led development (Pild) as it is called – development designed to deliver specific public-policy objectives – involves partnership between the public sector and private sector. It has a number of advantages over relying primarily on the market, as we mostly do now.

In most cases, it involves land acquisition and assembly by public authorities, often followed by putting in infrastructure – roads, utilities, and so on – so that the land can then be split up into different parcels to be sold on if appropriate. The creative, visionary regeneration of the Dundee waterfront led by Dundee City Council is probably the best example of this approach in Scotland.

Direct control of land ownership puts the public sector in a much stronger position to ensure development is properly coordinated, well-integrated and well-designed – especially so for major projects and regeneration of large areas of vacant/ derelict land – than where this is controlled simply through the planning system. It also provides a mechanism for the public sector to capture any value uplift from urban development through buying land at a fair price that takes account of all the public investment needed for major new projects, and in due course, recouping at least that investment through land sales. But it requires particular skills and expertise, such as development experience and market awareness, which are no longer always available within the public sector. By definition, it involves some form of risk sharing with the private

Over time, profits from land sales could be used to finance projects

sector, and robust risk management.

In the decades immediately after the Second World War, public interest-led development was the model used to build new towns and redevelop many obsolete or bombdamaged town and city centres. But it fell out of fashion and we now rely – almost entirely – on the market to deliver. It has led to a situation where we are not revitalising or enlarging the physical fabric of Scotland’s towns and cities well enough or fast enough.

As Scottish Government’s Council of Economic Advisers said 10 years ago, much of what has been built in Scotland over the last three or four decades, “is a missed opportunity and of mediocre or indifferent quality” By contrast, Sweden, Netherlands and Germany all provide recent, inspiring exemplars of what we could achieve in Scotland with a fresh approach.

Pild requires up-front public investment, which could be financed from the sale of bonds or from other potential investment sources. Scottish local authorities are – in principle – well placed to raise funds at competitive rates of interest. Moreover, over time, profits from land sales could be used to finance new projects, making the process self-sustaining.

Rather than expecting the private sector to take on all the risk of major urban development, a shared approach in which the public sector plays an important leadership role – especially on major urban regeneration or development projects – is more likely to produce greater benefits for all.

As the two authors of the discussion paper The Delivery of Public Interest Led Development in Scotland published today by the Scottish Land Commission conclude: “Successful public interest-led development needs a commitment to doing things differently, a need to be radical and take some risks in order to achieve the goal of achieving places that people deserve.”

Agenda is a column for outside contributors.

Contact: agenda@theherald.co.uk