The Liberal Democrat vision for sustainable rural communities and how local authorities play a part

Speech by Chris Huhne MP Shadow Environment Food and Rural Affairs secretary delivered to Local Government Association Rural Commission on Tue 14th Mar 2006

Let me start by helping to shake up some conventional wisdoms about the sustainability of rural communities. The first that needs attacking is that they are declining and unsuccessful: wrong and wrong again. England's rural areas attracted half of the country's total population growth over the last two decades. Rural areas account for a fifth of England's population, and are growing in population by more than 100,000 a year. If we had the figures for economic growth for rural areas, they would clearly show much higher than average growth.

This is important, because it is the ultimate test of whether areas are attractive or not. Economists have a doctrine called revealed preference. Translated into English, that broadly means that you should judge people by what they do, not what they say. And what people are doing is moving to rural areas in very large numbers. This is a substantial reversal of the general European trend towards our towns and cities that began with the industrial revolution.

The reason is not hard to find. Rural areas clearly have a higher quality of life than urban ones. People live longer in rural areas, and are in generally better health. Rural areas are also a good place to bring up children: education is better. Nearly two thirds of rural children achieve A* to C grades at GCSE, whereas just fewer than half of urban children do. Crime levels are less than half those in urban areas. Rural people are more active in voluntary organisations, from which we can conclude that the sense of community is stronger.

Nor are people making a financial sacrifice by living in rural areas. Although weekly earnings are lower than in urban areas, this does not take account of other sources of income such as self-employment. Household income in rural areas is now similar to that in urban ones. Unemployment is lower. The proportion of men and women who are economically active is higher in rural areas than in urban ones. Income poverty is the same as urban areas. Overall, the rural economy is performing better than for many years.

This is, of course, just as well. Farmers are in the process of undergoing one of the biggest changes in their economic environment since the abolition of the corn laws in 1846. The single farm payment will now be made regardless of production, so that farmers will decide what to produce according to the market for the first time since the inter-war period. Moreover, this comes after some very tough years indeed for farmers, whose profitability has been under sustained attack since 1996-7.

The difficulties of the farming sector warrant careful attention and support. It is in no-one's interest to see a succession of serious shocks wipe out skills and capacity that are not just viable but essential in any normal year, and there is always a strong argument given the highly cyclical nature of agricultural prices either for good forward and futures markets or for smoothing by public policy if those markets fail to work.

One survival strategy, as in so many other business areas where cheap competition enters the market, is to move up market. The trend to organic production - now particularly significant in the South-West where it accounts for more than 5 per cent of output - is a sensible response to premium prices. So is the development of local farmers' markets guaranteeing the freshness of local produce.

The establishment of the English Food and Farming Partnerships, which seek to encourage and develop cooperation amongst farming businesses and to improve supply chain relationships, is also welcome. So is the likely referral of the supermarkets to the Competition Commission, announced by the Office of Fair Trading last week, for their dominance of the grocery trade.

There have been too many examples of supermarkets suddenly shifting vast buying contracts to the detriment of large numbers of farms who had become reliant on their purchases. We all know about monopoly - the dominant seller in a market - and why they need to be tackled to protect the consumer. We need also to know about monopsony - the dominant buyer - who can be just as predatory as a monopoly and needs to be tackled just as firmly.

We need a full scale Competition Commission inquiry into supermarket power. We would also appoint a food trade inspector to protect suppliers from abuses of supermarket power within the Office of Fair Trading.

But another part of the survival of farm businesses is diversification. Rural areas are already much less reliant on farming than many suppose . In fact, the last census showed that agriculture and fishing accounted for just 2.6 per cent of employment even in rural areas. Manufacturing was far more important - and indeed more important than in the country as a whole - with nearly six times as much employment in rural areas as farming.

Banking, insurance and finance accounted for about the same amount as manufacturing, And hotels, leisure industries and distribution accounted for no less than a quarter of total employment in rural areas.

Small businesses have been sprouting in rural areas. Self-employment is substantially higher than across the country. On all these counts, the rural economy is a relatively successful part of the UK economy, and is likely to continue to grow.

Why? I suspect that it is because technology has begun to reverse some of the traditional economic disadvantages of rural areas. We are used to hearing about the death of distance in promoting globalisation, but the death of distance also benefits those parts of the country that were until recently regarded as isolated by their geography. Suddenly, rural areas have all their traditional advantages of closeness to nature and quality of life, but their disadvantages are dwindling daily.

Better transport infrastructure -roads, rail, and regional air connections - and perhaps even more crucially better information technology infrastructure - through broadband access - has meant that the need for a business to be near its markets in the big cities has become ever less pressing. Because the workforce is relatively mobile, manufacturers can start and grow in rural areas with fewer space constraints than elsewhere.

And because of broadband, creative businesses that are adding value through sales, marketing or design can work without any constraints of geography. Why put a recording studio in Abbey Road, Camden when it could be in Abbey Road, Llangollen? Why run an internet bookseller out of Birmingham rather than Hay on Wye? Why base the sales director in Bristol when she could be happier in St Ives? These trends are likely to accelerate as both IT and transport infrastructure diminish the disadvantages of working in rural areas.

There are of course problems thrown up by these new trends, although it is worth highlighting them as what the Americans call "high class problems" - problems of success rather than failure. The big strategic question that has to be tackled by local authorities is how to handle the pressure of inward migration and development while preserving the very qualities that attract people to rural areas in the first place.

Development must be sensitive and in keeping with the character of existing communities: any industrial sites and offices must be carefully situated and screened. If an area is allowed to become merely a great etiolated suburb of some nearby conurbation, the seeds of failure will have been sown.

Getting the balance right is best left to local authorities, where the local electorate can chuck out those who fail to deliver what they want. Decisions should be taken as closely as possible to those affected by them, but they should also be influenced by all the considerations of those with interests in the local community.

The pressure of those who want to resist development at any cost needs to be met democratically by the pressure of those on the lengthening housing list, and who need in particular social housing because they are unable to afford either private rented accommodation or to get a foot on the housing ladder to owner occupation. Although homelessness in rural areas is lower than the national average, it is rising sharply.

We need to bite the bullet on this issue, particularly in those areas where local young people are being priced out by an influx of the urban elite buying second homes. The recommendations of the Affordable Rural Housing Commission will need to be considered carefully. It is a clear threat to the sustainability of rural communities if they cannot retain those on relatively low incomes. In ten years, the supply of social housing has been halved. More social housing is a key need.

Nor is housing the only problem. Rural areas generally suffer difficulties in the delivery of public services that urban dwellers take for granted: the failure of an out of hours service for the local GP can have more extreme consequences if you live sixty miles from the nearest accident and emergency department in a general hospital.

Moreover, government protection for the rural post office network to prevent avoidable closures is due to end, and only the Liberal Democrats now propose a fund of £2 billion raised from the sale of a part of the capital of Royal Mail to develop new lines of business that can make rural post offices sustainable.

Let me also mention transport. The collapse of rural public transport has left increasing numbers of people reliant on their car: just 8 per cent of rural households are carless compared with 30 per cent in urban areas. People living in rural areas spend the most on transport. Households in rural areas (outside towns) spend more than £70 a week on transport compared with £45 a week in regional built-up areas, and it is the operating costs of cars including fuel that make up the difference.

This is why any reliance on green taxes to change behaviour has to take account of the high dependency of all households, including poor ones, on fuel in rural areas, and I hope that the tax commission that is considering Liberal Democrat policy in this area will look at potential offsets for rural areas if the burden of fuel taxes rises.

It is also important to point out that not all rural areas are successful. The more sparsely populated parts of the UK - in England, areas of Cornwall, Devon, Cumbria, Northumberland and the Fens - have not benefited as much from the rural revival. Some are still declining. About 600,000 people live in these sparsely populated English areas out of a combined rural population of some 9.5 million, and these areas have particular problems in achieving one definition of sustainability, which is somewhere that people want to live and work.

An underlying problem is remoteness: there are dramatic differences for example in broadband connectivity with just 33.4 per cent of households in villages in these areas having access against more than 75.4 per cent in the villages in the less sparsely populated rural areas. People are further from services like the GP, hospital, secondary schools. Bus transport is even less frequent than in less remote areas. The economy is clearly less successful, and income poverty is higher than in other rural areas.

As a result, house prices have been lower and therefore more attractive to second homers. In sparse villages, almost one in every ten household spaces is recorded as a second or holiday home. This is around five times the level found in similar sized settlements in the less sparse areas. Everything I said about the need for social housing in rural areas applies in these sparsely populated areas in spades.

It is extraordinary, for example, that in South Lakeland there are now more second homes - 3, 767 - than council houses. In some Cornish villages, second homes now take up a third or more of the housing stock. That is a symptom of an unbalanced and ultimately unsustainable community, and it needs to be addressed.

We have proposed new powers for local authorities to refuse planning permission for the conversion of a full-time home into a holiday home, and we fought off the Labour government change that would have allowed people to add second homes and holiday lets to their pension fund with full up front tax relief. Another relevant proposal is the equalisation of Value Added Tax on new build and renovation, which should help bring empty buildings and brownfield land into use, and also to sustain the traditional character of areas.

But the appropriate response to these problems from local authorities is also likely to be an attack on the underlying cause - on remoteness - through the use of economic development powers. Business incubation units can be a real boost to a local economy, and in a remote area could also be the trigger for broadband connectivity.

Local authorities in rural areas also have a crucial role in ensuring environmental sustainability. This cannot be seen as an add-on or an optional extra, because the integrity of the rural environment is exactly what makes rural areas attractive. Rural areas lose that environmental quality at their peril. There are many elements to this: landfill, infill development, quality control on the finish and look of new developments, road-building, traffic, bio-diversity and noise and light pollution.

Although other bodies are involved in some of this agenda - English Nature for example in monitoring bio-diversity and sites of special scientific interest - local authorities are likely to be the key public defenders in their area. Rurality - the complex mix that makes a rural area attractive - is an important objective for rural local authorities.

Rural areas face new problems and new challenges. They no longer face the spectre of long-term decline because of the shift in the terms of trade against agriculture, but they face instead the danger that they will lose their attractiveness because urban Britain loves them too much. The danger is that rural areas are killed with kindness and success. Getting the balance right is crucial, and local authorities are the key bodies to make the call.