South East England Development Agency (SEEDA)

MINUTES OF THE 54 th MEETING OF SOUTH
EAST ENGLAND DEVELOPMENT AGENCY

HELD ON 25 th FEBRUARY 2004 AT SEEDA HEADQUARTERS

Present
James Brathwaite CBE (Chairman)
Professor Sir Clive Booth (Deputy Chairman)
Robert Douglas (Deputy Chairman)
Cllr Rob Anderson
Elizabeth Brighouse
Poul Christensen
Cllr. Sarah Hohler
Cllr Peter Jones
Janis Kong OBE
Terry Mills
John Peel
Dr Peter Read
Phil Wood

In Attendance
Pam Alexander (SEEDA, Chief Executive)
Marianne Neville-Rolfe (Agency Secretary and Director, Strategy and Corporate Services)
Paul Hudson (SEEDA, Director, Development and Infrastructure)
John Parsonage (SEEDA, Director, Learning and Skills)
Charlotte Dixon (SEEDA, Director, Economic Inclusion and Sustainability)
Jeff Alexander (SEEDA, Director, Business and International)
Valerie Box (SEEDA, Head of Secretariat)
Mark Gibson Director General, Business Group and Regions, Dti (morning only)

Item 1 Welcome and Apologies for absence

Apologies were received from:-
Mary McAnally
Cllr. Keith House
Rob Douglas (morning)
Paul Martin, Regional Director, GOSE

The Chairman welcomed Mark Gibson, the RDAs' sponsor Director General in the Dti, to the meeting.

Item 2 Minutes of last meeting (22 nd January 2004)

Action Items:

1. Marianne Neville-Rolfe reported that a more detailed analysis of the web cast of the 2004 Open Meeting would be commissioned. The Chairman asked for more information to be obtained from the service provider for the 2003 meeting.
2. A dinner is being arranged with the LLSC and BL Chairs in the spring before the DfES sign off the FRESA Forum in May. Henry Ball, Regional Director of the LLSCs, will attend the Board meeting on May 12 th. As Regional Director, Henry Ball is a member of the National LSC senior board. RDA Skills and Enterprise Directors are meeting on 27 th February to ensure better linkages into the LSCs. Relationships are good in the South East.
3. All the other action items were reported to be either completed or in progress.

Approval of minutes:

4. The minutes were accepted as an accurate record of the meeting held on 22 nd January and signed by the Chairman.

Matters arising

5. Liz Brighouse reported that Royal Holloway College is holding a social enterprise event sponsored by the Royal Bank of Scotland as part of its drive to become a centre of expertise in social enterprise.

Item 3 Declarations of Interest

6. Janis Kong declared an interest in item 6 – transport. Peter Jones declared an interest in the budget paper as the Chair of the Ryde Partnership, Leader of East Sussex County Council and a board member of East Sussex Economic Partnership. He also noted, in relation to the energy presentations, that his council was objecting both in principle and to a specific site proposal for a wind farm on the border between East Sussex and Kent . As an audit commissioner, he declared an interest in item 17.

Item 4 Presentation by Paul Bevan, Chief Executive of SEERA, and Nick Skellett, Leader of the Assembly.

7. Paul Bevan circulated the Assembly's update on the South East Plan, the Regional Spatial Strategy, which will be prepared over the next 6 months. A draft consultation will go to the November meeting of the Assembly with public consultation starting in January 2005. The plan will be lodged with the Secretary of State in July 2005. The main issues are around the balance between jobs and homes; transport; waste and energy, taking forward the recently completed thematic reviews of planning guidance from 2016 to 2026. The county councils were fully engaged with the preparation of the Plan although there was concern at county level that their body of expertise should not be eroded by being overly replicated at regional level.
8. The Assembly and a range of stakeholders are taking forward the ‘Future Think' exercise that SEEDA conducted whilst developing the RES, looking at spatial options and levels of growth to see if the defined growth areas adequately meet the needs of the region. The Airports White Paper and the debate on any future development at Heathrow and Gatwick will influence how the plan develops, but the Assembly had accepted that there is no point in re-visiting the earlier options and had to address the uncertainties.
9. The Chairman welcomed the pragmatic approach being adopted towards airports, and suggested that the Assembly planned on the assumption that development would take place at Heathrow and at Gatwick once the current constraints ended. The extent of the environmental challenge at Heathrow was well known to all interested parties before the Government's announcement of its decision on airport development and it is for those with an interest in seeing the development take place to find acceptable solutions.
10. Members agreed that the South East Plan and the RES should be fully integrated and that it was important for SEEDA to be involved during the Plan's consultation phase.
11. Nick Skellett reported that Surrey County Council are pursuing ways of overcoming the current planning system which effectively discourages development by penalizing local authorities. Although their tax take increases following new development, the subsequent adjustment of grant results in insufficient funding to meet the demand for increased health, education and social services expenditure from a rising population. His council is suggesting that local authorities should be allowed to retain a proportion of the increase in the tax base in perpetuity to fund the necessary infrastructure that will never be met fully through development gain.
12. The Chairman agreed that this would be a useful incentive for local authorities, analogous to the current suggestions for business rates. He will ensure the idea is raised at his forthcoming meeting at Treasury so that it can contribute to the discussions on the current spending round. This initiative does not feature in the Regional Emphasis Document, which should be addressed by the Regional Assembly. Pam Alexander agreed to include this proposal in a letter to Richard McCarthy in ODPM on Section 106 as an example of how local authorities can bring forward their commitments to the Sustainable Communities Plan. Kate Barker has been invited to speak to the SEEDA Board. The Chairman has also suggested that a sales levy of 1% made on every house transaction in perpetuity in the growth areas could also contribute to an ongoing fund for community development and infrastructure.
13. Nick Skellett reported that the Assembly, along with London and Eastern region and with partial support from other regions, are looking again at the Central Railway proposal, but promoting the route to the east of London that will serve the Thames Gateway. He asked for SEEDA's support. He has had indications that there could be support from Ministers for a private investment initiative that would help reach the target of transferring freight from road to rail without public subsidy.
14. The Chairman said that he would raise this in his forthcoming meeting with Richard Bowker, Chairman of the Strategic Rail Authority, who had been previously unsupportive of the proposal. He will also discuss the proposal with the Chair of Advantage West Midlands who has the RDA transport lead and ask that any consideration of Central Rail should look at routes to both the east and west of London.
15. The Chairman thanked the Regional Assembly for their presentation.

ACTION: from SEERA presentation, paragraphs 12 and 14
Jim Brathwaite and Pam Alexander to pursue the Assembly's suggestions for keeping development tax gains with Whitehall and to promote the eastern route for Central Rail with the SRA and the other RDAs.

Item 5 Hampshire and Isle of Wight Area Team Report

16. Kathy Slack, Area Director for Hants and the Isle of Wight, presented her paper and provided members with further maps and statistics on her sub-region. Although Hampshire and the Isle of Wight have their challenges, they also present SEEDA with a considerable opportunity to contribute significant strategic value added. The area is one of the largest and represents a microcosm of the region, with its own spread of prosperity and deprivation.
17. The sub region has similar problems throughout which offers considerable scope for the area team to encourage cross boundary working and for the three Area Investment Frameworks (AIFs) to work together. The AIFs represent a shift away from SRB type schemes towards economic regeneration; developing a city image; workforce and skills; and developing the waterfronts. SEEDA's financial contribution is minimal, (0.5% of a total public investment of £2,254m) but the catalytic impact is dramatic.
18. The three coastal local authorities, with representatives from SEEDA and the Universities, recently went to San Diego to see examples of how cross boundary working, with education, can enable economic regeneration. This has had considerable impact and provided the coastal strip with a fresh opportunity to raise its aspirations and expectations towards developing as a ‘city region'. This ties in with the ‘global cities' project, which has SEEDA's Chief Executive on the steering group, to be launched at MIPIM in 2005.
19. The team is working with companies in the coastal areas and Isle of Wight to embed them into their communities. The main sectors represented are defence industry related; ICT; creative industries and marine technologies. The coastal strip has poor school performance and low motivation. SEEDA is working to lift the upper part of the skills equilibrium so that a rising skill level among a potential workforce will attract better jobs and retain existing employers. The composites academy proposal for the Isle of Wight contributes to the raising of aspirations and would provide research opportunities close to small companies.
20. GKN has its main composites research location on the Island and is a major employer. It is keen to expand on the island, but has to be mindful of the global economy. SEEDA is working with the Dti to encourage its composites research but the Island is not eligible for any Assisted Areas or objective 1 grants that would apply were it located in the other English regions. Mark Gibson was asked to support keeping GKN in the SE by discouraging approaches from other regions. There might be some materials research funding available from the Department.
21. The Ministry of Defence is rationalizing its training locations; currently three quarters of its £600m training budget is within SE establishments and much of this is likely to move northwards. There will be a large amount of MoD land on the market, much of it in poor condition and with poor quality buildings. Around 8,000 new homes are projected for the Bordon and Whitehill sites although there has been little consideration of accompanying facilities. This is within commuting distance of Basingstoke. SEEDA is encouraging the MoD to analyse the economic impact of the outflow of service personnel on the service economy in the area which currently benefits by £118m a year.
22. Members thanked Kathy for her informative presentation. John Peel reported that there is an impending procurement contract from Boeing that could greatly help the region's defence and aerospace companies.

Item 6 Transport

23. Members noted the transport report and congratulated Paul Hudson 's team for its success in attracting European funding. Mark Gibson agreed to facilitate getting clarification from Dti on whether the Department's funding for transport studies was in addition to, or part of, their contribution to the single pot. He also suggested that the Department of Transport would engage more favourably with the regions if they were presented with one or two properly prioritised proposals rather than wish lists. SINEI was seen as a start in the right direction and the South East RED has prioritised its transport proposals.

Item 7 Energy: overview of Government Energy Policy

24. The Chairman introduced Adrian Gault, Director of Strategy Development in the energy strategy unit at Dti who had been instrumental in preparing the Government's Energy White Paper. Copies of his slides are attached to the minutes.
25. The focus of the policy is to achieve a target of a 60% reduction in CO 2 emissions by 2050 against a background of the need to reduce greenhouse gas emissions and maintain a secure electricity supply whilst remaining industrially competitive. Dti sees all the targets, which exceed those set by the EU in line with the Kyoto agreement, as ambitious but realisable. The economic case for new build of nuclear supply is very cost sensitive and slight changes can dramatically affect the balance. Current models do not anticipate replacing the existing nuclear capacity after the existing power stations are decommissioned. Changes in transport usage and fuels will contribute in the longer term to achieving the necessary CO 2 reductions.
26. The Department is very aware of the need for wider international agreement on targets so that the UK is not put at a competitive disadvantage. The greater the involvement in emerging technologies, the lower the costs will be. There are opportunities for British companies to be developing these technologies. Biomass is not seen by the Department to be a viable option for at least 20 years.
27. There are also ancillary benefits to air quality from reducing CO 2 emissions, especially on sulphur levels through fuel switching, although not necessarily on NOX levels. Members asked about models from other countries, particularly France which generates a surplus of electricity from its nuclear installations and exports it to the SE, although this may reflect only a recovery of marginal costs.
28. Members expressed concern that the targets set by the UK government, if achieved, would be too expensive for businesses to compete, especially as the US , Russia and China will not even be attaining Kyoto targets. Energy costs currently in the UK represent <1% of production costs and are amongst the lowest in the G7 countries.
29. The RDAs are keen to be involved in a UK energy policy and in the necessary research and piloting. EEDA, where wind farming is seen as crucial to the development of Lowestoft , and the NWRDA are already involved. The amount of Dti money spent on research into renewables is small with the £1bn in grants that will be injected by 2010 mainly going to technologies that are still some way from the market. The SE is willing to develop mainstream programmes but SEEDA cannot match the funding available in other regions. Mark Gibson was asked to take back to the Department that the universities in the SE are concerned that they will miss out on research opportunities in general if bids go to locations where matched funding is available.
30. The Chairman thanked Adrian Gault for setting the scene for the energy discussion that would take place later.

Item 8 Energy discussion: presentation by Richard Mayson, Technical Director, BNFL

31. Richard Mayson, Technical Director of BNFL, is also a member of the NWRDA energy council. He said that he was speaking personally, not as a spokesman of BNFL. His view was that the Government had avoided the issues surrounding nuclear capacity in the White Paper but that it was an essential part of the mix of supply sources if the ambitious targets were to be met. It offered the surest way of reducing carbon emissions – current nuclear supply in the UK accounts for a carbon dioxide reduction equivalent to taking 10m cars off the road. By 2023, 2,000MW of power will be taken out of the SE from the closure of existing nuclear facilities. The target of supplying 20% of electricity from renewable sources by 2020 will be hard to meet if one existing carbon free source is taken out. To reach the 60% target, new resources and replacing existing nuclear capacity will both be needed.
32. Unlike wind energy, which is only available 30% of the time, nuclear is a constant supply. Current energy policy relies heavily on gas sources, but these are largely in politically sensitive countries, with potential risk to the security of the UK supply. Uranium comes from more stable countries, and there is already a 5-7 year supply in the UK . Renewables and nuclear both have to be part of a fuel mix if the UK is serious about cutting emissions.
33. The economics of new build have shown around the world that it can be competitive with other sources, although in the UK it would be difficult to find the initial capital cost of £1bn in the market place. The onset of emissions trading and the resulting effect on electricity prices could affect the trigger point of market acceptability. There are 3 designs used world wide, delivered on time and on budget.
34. The Chairman responded by questioning the environmental footprint and the disposal costs and problems at decommissioning. Richard Mayson replied that the waste liabilities mounted in the early years of the industry when the prime driver was broader than the civil programme. Since the mid 80s, waste is now produced in a form suitable for long term storage and internationally, facilities for storing exist. New build is much more efficient and if all the UK reactors were replaced, operated for 60years and then decommissioned, they would only add 10% to the existing problem. Members thought that the planning argument for new build would not be won on an additionality argument without the existing problem being successfully tackled. However, it was felt that places which already co-existed with a nuclear facility would prefer to see it rebuilt rather than replaced by an unfamiliar technology like a wind farm.
35. There is no government expenditure on research and development. BNFL's contribution is small and in international consortia, where UK expertises can contribute most. Waste research turning long lived waste to short lived waste is carried out but with very little contribution from BNFL.
36. The Chairman thanked Richard Mayson for his presentation.

Item 9 Energy ‘rummage' discussion

37. The board embarked on a ‘rummage' around the subject of energy, raising points for the Executive to take away and consider whilst drawing up a SE energy policy. All views were welcome, and no decisions expected.

Action: From item 9: energy rummage
Charlotte Dixon to bring energy strategy proposals back to the Board in the summer.

Item 10 Budget

38. The Chief Executive outlined the background to the budget for 2004- 05. A business plan will be presented at the next Board meeting, and a revised 3 year corporate plan will also be prepared once the outcome of the next spending review is known.
39. The Board endorsed the 2004/2005 budget for the Agency .

Item 12 Project report

40. The items scheduled under executive delegation and those projects reviewed and endorsed by the Major Projects Committee were noted by the Board, following satisfactory answers to questions.

Item 14 Chairman's Report

41. Members noted the Chairman's report.

Item 15 Chief Executive's General Report

42. The Chief Executive was reflecting on the difficulties which arose when she has to present a different view as a national RDA lead from her view as SEEDA's Chief Executive. There is often a rationale for the regionalisation of funds but if the allocation is formula driven in future years it would not be in SEEDA's interest to promote regonalisation. This is becoming an increasingly pressing issue of which members should be aware and on which we needed to take action in the context of our new responsibilities.
43. VAT liabilities and unrecovered VAT had been identified as a problem for Milton Keynes Business Link: this is a national problem that also affects SEEDA. RDAs would act as a national broker to encourage Dti to take it up with Customs and Excise.
44. Members noted the Chief Executive's general report.

Action: from Chief Executive's report, paragraph 55
Marianne Neville Rolfe to circulate a note on VAT liabilities and unrecovered VAT to members for information

Item 16 Major Project Update: Cowes Waterfront

45. Paul Hudson presented his update on the programme to build the economy of the Isle of Wight , centred around a cluster of composite and marine companies on the former GKN site at East Cowes . The site now has an anchor tenant, NEG Micron. EP has bought a neighbouring site, which along side SEEDA's land holding, forms a strategic portfolio. There is a good working relationship with the local council and the Isle of Wight Economic Partnership to review the suite of projects to raise the aspirations on the island by building on its strengths. The proposals link closely into existing SRB and proposed AIF programmes for the island to ensure that the economic benefit spreads into the rural heartland of the island as well as along the waterfront.
46. The Board noted the project update.

Item 17 Report of the Audit Committee

47. Rob Douglas, as Chair of the Audit Committee presented the annual report of the Audit Committee as recommended at the Committee's October meeting. He welcomed the role played by the NAO on the committee, which had been constructive throughout. He highlighted one case where the determination of the committee to monitor the case constantly had achieved a more favourable settlement and a review of the legal contracts taken out by the Agency that involve self insuring.
48. Members welcomed the report and asked that future reports should include examples of lessons that had been learnt during the year, not just average grades. Rob Douglas thanked the Internal Audit team for their hard work during the year. Members noted the report of the Audit Committee.

Item 18 Operational review: Finance Report

49. Marianne Neville-Rolfe presented the finance report to the end of January and the forecasts for the year end. She said that the rate of spend had slipped slightly during January but that this would recover before year end. The volatility of non cash costs has caused problems with accurately spending revenue: the Department are aware of and sympathetic to the problem.
50. Members noted the financial report.

Item 19 AOB

51. The Chairman drew members' attention to the promotional leaflets produced by Government Office for attracting candidates for appointment to the Board of SEEDA. He announced that Rob Douglas and Liz Brighouse had both been re-appointed, for 4 and 2 years respectively. There would be a higher education and a business vacancy this year. The advertisements would be published in March and he urged members to promote applications from amongst their networks.
52. John Parsonage clarified the position with regard to LSC regional councils. The chairs and chief executives of the six LLSCs in the SE have always had regular meetings, so their constitution as a regional board did not make any great changes to the status quo. The main difference is the appointment of a regional director, Henry Ball, the Chair of Sussex LSC, who is being invited to speak to the board in May. SEEDA is not allowed to participate in the regional board directly, but board members who sit on the boards of LSCs should act as conduits. It was suggested that the regional board had a reporting line to the regional skills productivity alliance.
53. John Peel notified the Executive that an inward investment mission from Iraq was coming to London. Jeff Alexander agreed to pursue this.
54. Paul Hudson told members that Chatham Maritime had been nominated for the RICS Building of the Year award.

Item 20 Date of Next Meeting

55. The next meeting of the SEEDA Board will be on 23 rd March 2004, at SEEDA Headquarters.