The financing of Birmingham’s regeneration isn’t exactly going to plan, argues Alan Clawley.

There was a time around the year 2000, when I was a postgraduate student on a course entitled Property Business and Management at the University of Central England, when property developers were doing very well. They borrowed the capital they needed from financial institutions and made plenty of money without help from the state. Not any more, judging by the cases of Arena Central and Paradise Circus.

In 2007 Birmingham’s biggest redevelopment project was known as Arena Central and was to occupy the site of the old ATV studios south of Centenary Square. This massive scheme would incorporate the city’s tallest building, the 50-storey V Tower. As was normal when developers were making huge profits after getting planning permission, the city planners asked them to ‘donate’ some of them to the ‘community’. This arrangement, known as Section 106, was legally binding. The developers duly agreed to pay £5 million toward the cost of a new Metro station in Centenary Square, a deal that became news later when the council’s chief executive, Stephen Hughes, tried to grab the money to make up the shortfall in the funding of the new Library of Birmingham. However, by 2009 the developers had concluded that Arena Central would not go ahead as planned for many years and asked to be excused from their agreement. The council would have to look elsewhere for money for the Metro in Centenary Square.

The idea of redeveloping the whole of Paradise Circus using private finance went back to 1999 when the property business was booming. At that time the council thought it could sell off all of its property interests in Paradise Circus including the Central Library and the Conservatoire, to a property developer, put the proceeds towards a new library, and leave the private sector to finance the £1 billion Paradise Circus project. Perhaps, the council even believed that it would emerge from the deal with a profit. The problem was that none of this happened.

Today the sums don’t add up for private developers. They can’t make enough money out of certain developments without help from the taxpayer. The planners can’t extract Section 106 payments when developers plead hardship. So, riding to their rescue is the latest public funding initiative, the Greater Birmingham and Solihull Local Enterprise Partnership.

Sir Albert Bore has unveiled a new Metro tram and announced this week that proposals to extend the Metro line to Centenary Square will take another step forward by becoming the first development to get funding from the Enterprise Zone Investment Plan for the city centre. The sum mentioned was £42.4 million. And just to show how the tables have turned, he went on to explain that the scheme was ‘essential’ to boost the impending developments at Paradise Circus and Arena Central. He didn’t mention that the council is already banking on a grant of £61.3 million from the same source to make Paradise Circus ready for Argent, its chosen developer and partner.

Milking the Enterprise Zone regime is not the only way in which the Council is getting the taxpayer to underwrite or indirectly support activities that were once financed by the private sector. As we have been told many times, the Library of Birmingham is more than a library. Indeed the chair of the Trust for the new library, businessman Keith Bradshaw, was pictured in the Post recently beside the headline “Trust boss: Library can be catalyst for city’s economic recovery”.  And when, a couple of years ago, Mike (now Lord) Whitby went round the world promoting Paradise Circus as an opportunity for private and sovereign fund investors, he pointed with typical braggadocio to the new library as a shining symbol of defiance amidst the surrounding economic gloom. It remains to be seen whether his confidence was well-judged.