This relatively straightforward relationship enables development of funding mechanisms such as the Pay As You Save (PAYS) proposals where loans for the works are linked to the property. With community level energy and/or heat generation and distribution projects, the relationship is more complex. Assets could, for example, be independently held within a legal vehicle where multiple actors can invest in the equity of that vehicle. The vehicle could also receive grants and subsidies and be the recipient of loans. The beneficiaries would include the direct recipients of the product of the project (i.e. heat and power) and the equity holders – which could mean the local community, among others.
The picture can be more confusing still for many of the projects with uncosted benefits. As detailed in the Buro Happold report (Annex D), most of these are owned and funded by local authorities. It is clear from the range of potential benefits that these can deliver cost savings to a variety of public sector bodies (such as hospitals and the police), as well as individual homeowners. This they would achieve through increasing the value of an area, avoiding the costs of flood damage and reducing poor health. All these organisations could be a source of funding, with the incentive being that this would be a way of preventing or minimising these costs.
Experience from area-based initiatives such as New Deal for Communities programme, Urban Regeneration Companies and the Growth Areas programme, has demonstrated that there are benefits to identifying different bodies’ spend in an area and aligning this to deliver joined up outcomes. In recent years the previous Government supported this approach through creation of broad place-based outcomes for Local Strategic Partnerships, Local Area Agreements and Multi Area Agreements.
At a time when there is a desire to increase local control alongside daunting budget cuts, funding models such as the Total Place pilots hold significant appeal. The pilots have been a means of exploring the potential for rationalising local service delivery by mapping total spend on a theme within a geographic area and devolving control of funds to those who deliver the services. The idea is that this will enable them to develop and control a cheaper and more effective delivery mechanism.
The emerging findings are that there is potential to achieve these objectives, by devolving decision-making on how funds are spent.107 The scale of the projects allows conversations to be held between key players on what the intended outcomes of the funding are, and whether there are opportunities to rationalise public sector spending in these areas. For example, it makes sense for local communities to decide which local green areas require grass cutting on a regular basis – and if cutting is not required at all, or not so often, to identify where the savings should be spent.
Based on its experiences with Local Investment Plans as part of their Single Conversation, the Homes and Communities Agency (HCA) has been looking at how the Total Place principle can be expanded to cover capital investment in an area (Total Capital). From a review of spending in five case study areas, it found there was
potential for Total Capital to deliver investment more efficiently and with greater impact, and to leverage more private sector investment.108 The research showed that funding constraints of individual programmes were limiting the outcomes that could be delivered. For example, in Durham (where more than 38 major public funding programmes were deployed – 12 by HCA alone), wider benefits could have been achieved if literacy and skills had been addressed alongside physical regeneration.
As with Total Place, there is potential for the Total Capital approach to allow a focus on the outcomes for the place, rather than for individual organisations, as well as delivering savings through joined-up investment, procurement and asset management. Identifying clear agreed priorities can strengthen local partnership working on investment and delivery, which will in turn encourage private investor commitment.
We welcome the move towards outcome-focused delivery and are pleased this concept is being explored further through the Total Capital and Asset pathfinders (which will assess management of all public sector assets alongside capital funding streams).
We would also like to see these principles extended to neighbourhood partnerships (‘Total Neighbourhood’) to enable them to understand how public sector funding is currently spent in their area, identify potential funding sources and to influence decisions in their locality on how these could be used to achieve better outcomes. This may also enable communities to identify local inputs available to an area, but hidden to local authorities, such as investment by individuals, communities or local businesses. For this approach to be effective, neighbourhood partnerships will require improved information on local public sector expenditure, greater influence over how this money is spent and greater financial autonomy at the neighbourhood level.
When the residents and businesses of the small, rural community of Lyddington (population 400) decided that they wanted high-speed broadband access they were not put off by the disinclination of major service providers to provide for these cost- inefficient areas, or the seemingly prohibitive costs set out in Digital Britain. Instead the community clubbed together to raise £37,000 and loaned it to Rutland Telecom, a local business, to install the infrastructure and provide their access. The eleven investors will receive returns on their investment of 10 per cent a year and the return of their capital after 3 years.
Rutland Telecom gained planning permission from Rutland County Council and access from BT to their existing infrastructure, with high take-up rates and community support helping their case. Customers pay Rutland Telecom line rental and monthly charges as they would a major service provider, and the telecom company benefit as long as they meet their threshold of customers per central street hub, which differs in each case.
Lyddington now claims to have the fastest broadband of any UK village with broadband speeds up to 100 times faster (40Mbps) than previously. The company hopes to offer Sky TV services through its network resulting in the removal of satellite dishes from properties in this conservation village.
Rutland Telecom has been approached by over 150 communities across the UK to assess whether a similar scheme is viable in their village. Discussions are well underway with communities in Wales, Yorkshire and Leicestershire to establish street cabinets using private finance models.
Rutland costed the approach taken in Lyddington at under a third of the £1,750 per rural home quoted in Digital Britain. They estimate that the proposed relaxation of ducts and overhead fibre lines regulations should reduce costs further, possibly to £100 per home if Ofcom required BT to give all broadband companies such access.