Q&A with Birmingham’s Waheed Nazir

Waheed Nazir, director of regeneration at Birmingham City Council, talks to Room151 about enterprise zone status as a financial lever to tackle the city’s growth challenges.

Room 151: What are the growth challenges facing Birmingham?

Wahid Nazir: Official estimates predict that the city will grow by 150,000 by 2031 from the population in 2011. Every year we monitor that and it seems to be happening slightly quicker. This is about natural growth – not inward migration. It is a great opportunity, but a challenge. I have to build around 80,000 new homes within the city boundary, and to support that create 100,000 new jobs. We need 407ha to support employment growth. Our development plan looks at capacity on brownfield sites and identifies how much land we have. This demonstrates that we only have the capacity for 45,000 new homes and only 253ha of land for employment. I haven’t got enough land to meet the projections of demand. In order to cope, we are working with adjoining local authorities, and have also proposed the release of green belt land to provide 6,000 more homes.

R151: What are your plans for the city centre?

WH: In 2010 we launched the Big City Plan, which was a revised version of an earlier plan which had been prepared in the context of the boom. The principle was to grow the city centre core by 25% and extend it into surrounding districts. We outlined five areas of growth – around New Street station, Westside, Snowhill, Eastside and the Southern Gateway. We took the plan to market and the vast majority of firms loved it.

R151: How is your enterprise zone helping to deliver the plan?

WH: In 2010 the coalition government put out a call for enterprise zones. We immediately saw an opportunity to deliver our existing Big City Plan strategy, rather than starting from scratch. I immediately saw a big opportunity because the zones allow the retention of business rate growth for 25 years. We decided to create a scheme which is essentially a tax incremental finance (TIF) scheme – borrowing against the future income from these rates to fund infrastructure to enable development.

R151: How much is the TIF expected to raise?

WH: Having developed the model, we ran some scenario testing. The optimistic scenario will see us raise £1.2bn over 25 years, and the really pessimistic view sees us raising between £600m and £700m. We decided to use £800m as the basis for our model. We are drawing down £128m for the first five years’ work as the money is needed, from the Public Works Loan Board.

R151: Who is responsible for the LEP?

WH: Birmingham City Council is the accountable body for the enterprise zone, but Greater Birmingham and Solihull Local Enterprise Partnership is the decision making body. It decides where the money goes. In theory, the city council could say that a particular decision is too risky and veto it. In practice, it is a partnership. We have agreed a set of principles with the LEP which will guarantee that the business rates income will be spent repaying the TIF debt.

R151: How will the TIF money be spent?

WH: About £60m will go to enable the Paradise Circus development of one million square feet of new office space. This investment on roads, public realm and other infrastructure should help get the first two phases off the ground. The second big intervention is that £25m will go towards extending the metro scheme, which is already connecting Snow Hill to New Street. This is a good connection but not a game changer. We have used the TIF money to pay for new track to run from New Street to the International Convention Centre. We are also appraising bids from within the rest of the enterprise zones for the rest of the £128m.

R151: Are you using other funds as well as the TIF scheme?

WH: Our strategy is to use other funds first and then use the enterprise zone funding to fill in the gaps. We have secured a large amount of European funding, which has helped developed some buildings inside the enterprise zone area. We are also using funding from the Regional Growth Fund and Growing Places Fund.

R151: Have you started receiving money back from business rates?

WH: Last year – 2013/14 – we got just under £1m in. It steps up each year, as you would expect. On average it raises £36m over 25 years.

R151: How much certainty do you have that the money is going to come in as expected?

WH: We have given money to our partners and said to developers that you can have money to deliver the infrastructure but you need to complete building by a set date because we need the rates to fund the borrowing. The chancellor has also removed empty rates relief, so once a building is up then it has to start paying the business rates after a few months. Without this requirement our financial models wouldn’t work.

R151: How is High Speed 2 going to help enable regeneration in Birmingham?

WH: We are looking to produce a business case by the end of this year to look at models of how to fund the station. We want to create a station of international design standard, and infrasturcutre to enable it connects to the city properly – the base cost for the station that HS2 has allocated is not sufficient to achieve both of these aims. We will be asking to expand the boundary of the enterprise zone to cover a bigger area, taking in the station. But we will need a cocktail of funding that might include some funds from the community infrastructure levy.