People, Planning and participation

Speech by Chris Huhne MP, Liberal Democrat shadow Environment secretary delivered to conference of the Town and Country Planning Association, London on Wed 29th Mar 2006

One of the great unspoken accusations against those of us who want local authorities to have more control over the decisions that affect their areas is that we are naïve about the effects. On planning matters, the accusation is that nimbyism - not in my back yardism - will run riot. And if it is not nimbyism, it is bananas - build anything anywhere as long as it is not here. Local authorities, left to their own devices, will consistently toughen planning application approvals until there is scarcely anything left, the cynics say. The result will be even fewer homes being built, a worsening gap between those who can afford to get on the housing ladder and those who cannot, and increasing homelessness and hardship.

This is a doctrine of despair. It is the agenda for Whitehall knows best. The first question therefore is whether this scenario is at all likely, and what are the incentives that bring it about. The honest answer is that many local authorities are likely to act in this way, but the open-minded answer is that they will do so because their democratic and financial incentives have become horribly contorted by the history of the suppression of local government power. Local authorities succumb to nimbyism because there is no reward for development: there is neither a political reward (since the homeless, however desperate, are a marginal electoral force) nor a financial one (since any economic and financial benefits of development accrue overwhelmingly to central government).

It is not hard, though, to imagine a far more responsive local system, and to look north of the border at electorally-reformed local authorities from 2007. In any system where the value of your vote depends on where you live, as it does under first past the post, then the little people will be marginalised. The poor, dispossessed and needy have votes that too often pile up in safe Labour wards and seats, while they have precious little influence in the key Labour-Tory marginals of middle England. When housing was the concern of the majority - as in the fifties - the political parties vied with each other to compete on new building. Now that it is a minority issue, they shun it. That is the way with first past the post. But if the electoral system gave everyone a vote of equal weight, minorities like the homeless would be better able to force their concerns onto the national agenda and onto the local one.

The second change to incentives should be financial. At present, the average local council raises just a quarter of its expenditure from local sources, and there is no local tax to which it is entitled that gives it some stake in the area's income or wealth. I predict that councils will take new building far more seriously as soon as they are able to retain a greater slice of the action. If they have the right to keep more of the council tax and other taxes on any new property in the long term, they can expect an economic reward from development. Local decision-takers who are able to take into account the full range of interests, and the full range of rewards, are likely to reach much more balanced decisions. More development can be balanced, say, against lower council taxes and improved services.

I am also a firm believer that decentralised power is the answer to a great conundrum when it comes to the public sector: how do we introduce the same creativity, innovation and experimentation into the public sector that we habitually see in the private sector? It cannot, whatever some say, be introduced through markets because the public sector provides goods and services that have traditionally failed to be provided by markets (such as street-lighting, policing, public health measures, defence, poverty reduction and so forth). But it can be provided through discrete decision-making units empowered to differ, and able to try new solutions to old problems. This works as well with planning decisions as it works elsewhere.

Faced with global catastrophe if we fail to deal with carbon emissions, there is a clear case for a rapid move at national level to effective standards for new building that are far more sustainable. National policy needs to be clear that local authorities can and should set the pace with sustainability. Developers have used the phrasing of Planning Policy Statement 1 Delivering Sustainable Development to argue that energy efficiency should only be a matter for Building Regulations, and that planners cannot therefore insist on higher standards. It states that "Planning policies should not replicate, cut across, or detrimentally affect matters within the scope of other legislative requirements, such as those set out in Building Regulations for energy efficiency". Clearly, authorities that want to move faster than any changes in the Building Regulations could be hindered, and this was surely not the intention of the PPS.

It seems particularly important that environmentally aware local authorities are allowed to go further and faster precisely because of the unambitious nature of the new Building Regulations, which may raise energy efficiency by less than a fifth despite more grandiose earlier claims. UK Building Regulations are consistently less stringent than those in other European countries, and this will remain the case after April. Moreover, the traditional UK excuse that our climate is milder and less extreme than the continental climate may not survive any further climate change-driven slowing of the Gulf Stream, already down in power by 30 per cent since 1992 and which brings more heat to these islands each winter than the sunshine. If we are to meet the challenge of climate change, planning has to be a key element of the solution.

Many local authorities - Woking, Milton Keynes and Aberdeenshire to name but three - have pioneered interesting ways of extending the green agenda that could usefully be taken up elsewhere, and which I believe also show how the involvement of local communities can be improved. The Aberdeenshire Sustainability Research Trust, for example, developed Index21 as a way in which a planner, architect, developer or house buyer can recognise an environmentally friendly housing layout. It took eight years with support from the European LIFE programme, and the Index provides a practical method of assessing sustainability. In effect, it is a scoring sheet that summarises how well a layout may perform based on indicators of climate, energy, resources such as water, biodiversity and social sustainability.

One of the results of that work is to highlight the importance of participation in the process, not just before the plan is approved but afterwards too. A demonstration site was built in a wind defensive pattern with hedges and trees planted to reduce the effects of wind. The only snag was that no one explained what was going on to the residents who moved in, who promptly proceeded to replace the hedges with the usual timber fencing. Result: wind has been funnelled back through the passageways, whereas hedges clearly damp wind down. Overall, though, the use of the Index has now been mandated in several planning briefs and work has begun on other aspects of sustainability such as the constituent components of houses and of locations.

Milton Keynes council has also set out an ambitious policy for any new development of more than 5 homes or with more than 1000 square metres of floorspace. This requires energy efficiency by siting, design, layout and orientation to maximise sunlight and daylight; grouped building forms to minimise external wall exposure; landscaping to improve thermal performance; renewable energy production through solar and wind; sustainable drainage with waste water collection and recycling; recycled building materials. In short, there is a capacity to move beyond national standards, and this should clearly be encouraged. Indeed, there could even be an iteration, as there has been in some standard setting internationally, between best practice and the next leg up of minimum standards. A green ratchet could improve sustainability.

Woking has been awarded beacon status for its work on energy in particular. There have been an interesting range of initiatives including the adoption of a comprehensive Climate Change Strategy, the development of a town centre energy station which provides electricity, heating and cooling to a number of large buildings, and the launch of a sustainable energy fuel cell which provides heat and power to the Pool in the Park and lighting for Woking Park. In all these cases, local authorities have pushed out the boundary of what was previously regarded as possible and practical, and have performed a signal service as a result. Ambition matters.

I have mentioned the importance of giving local authorities the discretion to act and innovate and experiment, but in the planning field there is one other power that is crucial to success. There are particularly two types of cases where local authorities are currently hamstrung by a lack of instruments at their disposal. The first is in the funding of infrastructure, including transport infrastructure. The second is where there are inadequate incentives on private owners to bring unused and under-used land into development, possibly with serious consequences of blight for inner city and run-down areas.

One important solution is to give the business rate back to local authorities, and also to base it on the value of the land rather than the development on that land. This ensures that commercial land-owners have an incentive to build to the level desired by planners: vacant or derelict land would pay the same amount of business rate as if it were developed, and under-used land would pay the same amount as a plot developed to the maximum allowed by the planning authority. Such a scheme could be crucial in encouraging the natural and organic development of communities rather than the top down solutions occasionally beloved by town planners but too often disliked by their users.

This proposal would also ensure that communities have a means of funding necessary transport and other infrastructure. An example in London is the building of the Jubilee line, which the property developer Don Riley estimated to have added more than £13 billion to property values in direct consequence of improved transport and shorter journey times. Given that the cost of the Jubilee line was just £3.5 billion even with its substantial over-runs, the net gain was very nearly £10 billion. However, only an insignificant part of that gain - just £180 million - was paid by the developers of just one small area affected by the line - Canary Wharf - towards the cost. The vast majority of developers along the route enjoyed a large windfall gain with no extra contribution whatsoever. A similar windfall is operating for property owners around London Kings Cross, Ebbsfleet and Stratford because of the construction of the high speed link. And property prices have been catching up with the south east average in east Kent because of the prospect of rapid commuter services using the high speed link from Ashford.

Of course, Section 106 of the 1990 Town and Country planning act empowers local authorities to reach agreements with developers. But the difficulty is that the gains are dispersed too widely for any realistic negotiation. Short of developers actually buying land around the line that they built - the situation with the Metropolitan line suburbs between the wars - it is difficult for companies or public authorities to capture the potential land value gains from their investment. Stephen Glaister and Tony Travers have proposed an infrastructure fund for London financed by a hypothecated levy on the national non-domestic rate, and that would at least have the benefit of spreading the cost across the whole of the capital's business community. Similarly, CB Hillier Parker has suggested that Crossrail could be financed by a levy of 2p per pound on the rate. But in both cases, the proposal spreads the extra burden of tax too widely.

These proposals fail to recognise the particular value of locations close to new infrastructure, which should surely make a greater contribution that some remote business that will be barely affected. Only a tax system that allows public authorities to tax the rental value of land will capture these specific gains. By periodic revaluations, any rises (and falls) in land prices due to changes in physical infrastructure such as new tube lines would be reflected in the rateable value and hence in rating income. Such a site value rate allows a precise tailoring of contributions to the benefits that property owners actually receive. Moreover, it would allow local authorities to fund schemes that presently are impossible: by matching need and resources, it would make a dramatic difference to the quality of urban life in this country.

My main contention in this speech is that local communities should have far greater powers to shape their own futures and, properly elected, they would do so responsibly. Indeed, they would do so far better than any central government regime could allow. More revenue would mean more incentives to develop, rather than succumb to nimbyism. More electoral participation would mean minorities as well as the majority would put their concerns on the political table. More power would mean more successes, and yes some failures too. But experiment is the source of all progress. More tailored policy instruments like the site value rate would give planners a key incentive to influence private behaviour. But most all, the Liberal Democrat view is about giving power away from the centre, away from Whitehall, and away from the "Minister knows best" mentality. The Minister does not. People do, and it is time we trusted local people to make the best judgements about their own communities.