May I ask Mr Lowman whether the certainty of the delay of the revaluation and knowing what your costs will be would be convenient for convenience stores and similar small businesses?
James Lowman: There are some benefits with that certainty. There are many things that are not certain about what those rates bills will be in those additional two years. First, it is not clear what transitional arrangement will be made. Currently, if you have an increase or a decrease in your rates bill in terms of a revaluation, that is spread out over the five-year period and it is not clear what will happen for the additional two years. Secondly, the multiplier remains uncertain and based on inflation in the previous September. This year, our members and other retailers and businesses face a 5.6% increase on the multiplier, based on inflation. This year it will be 2.6%. If the Government wanted to do something to bring certainty, they should bring certainty around that multiplier. Our view would be that a starting point would be to cap it at the 2% inflation target.
I am interested in knowing from all three witnesses whether they think that the planning system in England is holding back growth and, if so, how the Bill will address that.
Councillor Jones: The planning system under the changes made under the Localism Act 2011 and the national planning policy framework will support significant improvements in the planning system. The problem we have is that it has been such a massive change—probably the largest change in some 40 years—that it is only just starting to settle down. In the past 12 months, there have been 2,500 applications approved, which amounts to 135,000 houses—and 100,000 houses are worth approximately 1% in GDP. The system is working, but houses are not being built, because developers cannot get development finance and people cannot borrow money on mortgages to pay for the houses.
What do you think the impact will be of the potential threat to planning authorities of decision making being taken to a national level if they do not make the decisions quickly?
Councillor Jones: First, there is a point of principle. The Secretary of State made two significant promises to local government. The first was that there was less money for local government, which is clearly panning out and will no doubt do so for the next five or six years. The second promise was that, in lieu of that, local government will get more powers to enable things to happen and reduce the bureaucracy and centralisation that has been implicit with local and central Government for the past 20 or 30 years. The Localism Act 2011 made huge steps towards that and we started to see a system that had settled down and created certainty for developers. This Bill, in our view, starts to create uncertainty again and starts to bring in centralised targets that restrict local government from getting on and making things happen.
Councillor Jones: I personally think that is the wrong question. I think what Government is doing is setting up the finances of local government, where we will only see increases in our income if we develop houses through the new homes bonus and additional council tax, and through changes of council tax due to extensions in properties and non-domestic rates. Therefore those councils that fail to grasp the growth agenda will see their income fall and will be forced to change the way they do things, and that, to me, is the way that Government should be operating with local government. Allow local government to do what it believes is right for its local area and let the electorate make the decisions on that local council, if they are failing to deliver what they should be delivering for their residents. That, to me, is the right approach—not what this Bill does.
Paul Raynes: If I may just come in on the back of that, to reinforce the point Councillor Jones was making. The Government has put a system in place that has very strong incentives in it to make councils pro-development, and the thing that has slightly knocked us back about this Bill is that, obviously, it is taking a rather different approach and is trying to incentivise councils through what feels more like the old-style centralised control.
To go directly to Mr Blackman’s question, one of our concerns is that, obviously, local authorities are facing tough resource constraints. The Bill enlarges the role of the inspectorate. There is a significant risk, actually, that the inspectorate starts to leach out precious talent from the front line in councils and creates a vicious circle, where the central control itself is then going to impact on front-line performance.
Mr Raynes, with regard to clause 7 of the Bill on electronic communications, are there any concerns that the terminology to add the need to promote economic growth in the United Kingdom might trump other parts of the Communications Act 2003, with regard to areas of natural beauty? Is there concern that this may be used to install lots of infrastructure, in respect of the wide term “electronic communications”, in areas of natural beauty in the countryside?
Paul Raynes: There is genuine concern here. I acknowledge that Ministers and their officials are making reassuring noises about the limited scope of the policy intention here, but it is clear—it appears to us—that the text of the clause effectively gives Ministers the power to remake the communications code with growth as a criterion in it. If you then look at what the communications code does, and the prior approval process, there is a broad spectrum, as it were, of telecommunications kit to which that applies. I think we will need, as the Bill goes forward, to really test what safeguards Ministers are putting in place in other parts of the system to restrict this to their declared policy intention, all of which is without prejudice to whether or not councils are actually supportive of the policy intention of removing planning control on broadband in the first place.
Given the resource constraints that we know exist, and which will exist, and given that the incentive regime that you set out and thought would be the most appropriate way to act is not delivering in any time frame that is going to realise an economic impact, is it not therefore right that the Bill seeks to make targeted interventions to speed up the delivery of the outcomes that we all want?
Councillor Jones: I would suggest to you, on the delivery of the outcome, that the outcome is a house being built and somebody being in a position to be able to purchase that house or rent it. What this Bill does not do is deliver that liquidity in the finance market to enable people to buy the houses and enable the developers to build them.
The Government are attempting to stimulate growth; that is in the title of the Bill. Let me create a dichotomy. I want to ask the panel this. The Government are proposing to amend the planning rules and tinker with business rates. Is the issue not really about the economy, getting people to get mortgages, businesses being able to borrow and improving retail confidence? Which is it? Is it the need to tinker with planning, James, or is it the need to stimulate the economy and get people borrowing? Which would you choose in terms of stimulating growth?
James Lowman: I can say, from our members’ point of view, what are the priorities for them, which are the costs affecting their businesses. So they are concerned about rates increases and minimum wage increases and want to try and control those costs. I would not say that our sector was recession proof but it is to some extent sheltered from some of the worst excesses—either way actually—of the economy. We are dealing in local essentials, so we are perhaps not as affected by some of those macro issues as much as some sectors are.
Looking at the content of the Bill, we are pleased that—I was grateful for the Minister’s reassurance in the last evidence session—retail is not included in the planning provisions, because we fear that that would potentially lead to more unsustainable development. We like the idea of local plans dictating what gets built where in terms of retail, so we are grateful for that. We still have concerns about the elements around rates and whether the delay will on balance be good, notwithstanding the fact that we accept that there will be winners and losers.
I want to turn to the issue of section 106 renegotiation. Can we hear what the LGA view of that is? And perhaps Councillor Jones will say something about Cheshire West and whether its experience is that renegotiation takes place, what the outcomes are and so on.
Councillor Jones: We are quite disappointed about this particular clause because we think that it is already causing some uncertainty in the markets. What we have is an established position of more than 400,000 houses with planning permission in England. The problem is that there is now anecdotal evidence that developers are postponing starting on those sites because if they wait 12 months they can probably remove a great deal of the cost called affordable housing. That is causing us some problems.
Where there is some substantial evidence, which we have provided, is of the many local authorities willingly engaged with developers—where there are significant on-site viability problems—to renegotiate the 106. In my own authority we have done that on a number of occasions, the most significant being the Winnington urban village, where we have a substantial 106 agreement, which was about £12.5 million in value, but we have reduced that in value to about £2.5 million. We are just about to agree that with the developers, mainly Taylor Wimpey.
Councils are renegotiating 106 agreements where viability has proved to be an issue. Do not forget that the planning process says that if applicants are unhappy with the 106, they can go to appeal and it is sorted out through the appeal process, so there is already a mechanism in there based on viability. It is absolutely fundamental that, in the NPPF, viability is an important part of the planning system. We are caught every way anyway, so we do not need this superfluous clause, which causes more uncertainty when the planning system, as I said, was settling down and starting to work effectively under the new planning rules.
Councillor, do you think it is okay for authorities to refuse to negotiate at all on affordable housing agreements that were reached at a time when values were much higher so viability was a very different picture from what it is now? Would you support them?
Councillor Jones: That is the democratic right of local councils to come to that decision. If they want to do that, that is entirely up to them. The fact is that the planning system is working, and we have 400,000 houses with planning permission. If we look at the strategic view, from a Government point of view, the system is working. If one or two councils want to be a bit awkward with their developers, it is their democratic right to do that.
Is it not the case that in your survey you found that 40% of councils were willingly renegotiating, but 60% were not? So it is not one or two, is it?
Paul Raynes: I am not sure that Mr Boles has quite the same reading of our survey as we do. On our reading, only 2% of councils were giving a flat refusal. The other element in all this of course—I am sure that people around the table are experienced negotiators—is that there is a world of difference between genuinely being unwilling to negotiate and being in a situation in which your negotiating partners are walking away saying, “They are being terribly difficult.” We need to aim more for some of the dynamics of individual negotiation situations.
Councillor Jones’s earlier comment suggested that there was evidence available in local government that the prospect of this provision is already having an impact in discouraging developers who may see an opportunity not to have to meet obligations that have been previously negotiated but that may well be viable. Is that in fact the case? Do you agree with the evidence we have received from expert witnesses that the effect of this provision in clause 5 is likely to reduce the amount of affordable housing generated?
Councillor Jones: There is anecdotal evidence that it is potentially causing delay in the system, because developers will not start on site until they can renegotiate costs. Our experience is that there are sites throughout the country with zero affordable housing where there are viability issues, particularly brownfield land when reclamation of that land is a key cost—up to 40% in some cases. Of course, the council is able to use its own land, and is doing so in many cases, to develop more affordable housing in percentage terms. An example in our scheme is that to achieve 60% affordable for an extra care facility we sold the land for £1. We took that decision to increase the affordable element of the scheme.
The system is working, and it does not need the clause to tell councils. Our agreement with the Government was that councils would be given more powers, which you were doing, but you are now taking them away. You are acting contrary to the Localism Act 2012 of less than 12 months ago. That is why it is a backward step, and creating uncertainly in the planning system.
Do you think the Government are justified in changing the planning system to allow large commercial and business developments to go through the national infrastructure planning system?
Councillor Jones: I find it difficult to see the justification, and I can give a recent example from my council. We had an application on 11 September for a 1 million square feet shed, which was given permission on 23 October. I would go further and say that if you would allow simpler processes for local development orders when councils could simply designate an area for industry or particular types of housing and say if you build within these criteria, you do not need planning permission. Under the new financing system, I would rather give permission for a 1 million square feet shed with all the business rates that it will attract than try to get a fee of £60,000 for a planning application, because hopefully I will keep 50% or 60% of the business rates, which is more valuable to the council from a business point of view than a £60,000 planning fee.
Because the Government are changing the financial framework within which local government is operating, there are different justifications now for different things in the planning system. Local government needs flexibility to be able to use them in a way that supports growth within our economy.
James Lowman: I would be concerned if including business developments would allow a Trojan horse for some retail development, so that a large out-of-town retail development could come alongside another business element, which often happens, and that that could move into this process, instead of the local planning process, where we think those developments should sit.
Councillor Jones: This is a long-standing issue for many local authorities, and I thought the Minister expressed it rather well. Effectively, two systems are running in parallel. That introduces complexity and extra cost, and there are case studies of costs being in the high tens of thousands each time for the council and the applicants. You also create situations in which, as Mike has said a number of times, the Government put in place a plan-driven, democratically driven planning system but—I do not want to be prejudicial—some of the ways in which the provisions covering town and village greens are used obscure the clarity of that democratic process. We think that what is in the Bill tidies that up, is useful, and will allow proper democratic processes to forge ahead.
May I return the panel to the point about designating local planning authorities as failing? I heard what you said earlier, Councillor Jones, but have the Government had any discussions with the LGA about what criteria should be used if they designate local planning authorities as failing? If they have not had such discussions, should they, and what is your opinion of the criteria that should be taken into consideration?
Before we go any further, can I just check whether there are any questions that members of the Committee wanted to ask that they do not feel they have had the opportunity to?
I want to follow up on village greens. I understand what you are saying about democratic accountability. It is brave for a councillor to dob in their local constituents to their planning authority. As you will know as a councillor, planning is possibly one of the most difficult areas in representing your local area. There are examples out there of people coming up with questionable claims about the use of pastimes in the past, whether that is someone walking their dog or something like that, simply because they do not want allotments or housing right next to their houses. Is it not the case that councillors find it hard to go against their residents?
Can I get Councillor Jones’s and Mr Raynes’s reflections on how the involvement of the Planning Inspectorate would hasten or slow the process of decision making? I am conscious, for example, that in taking appeals over the past year, the Planning Inspectorate operated at perhaps the same level as local councils on householder appeals, but was slower on non-householder appeals.
Councillor Jones: That is our understanding. When there is a glut of appeals, the Planning Inspectorate’s process seems to get extended quite significantly. We are coming up to a bow wave of local plans being developed. I know an enormous number are coming through the system this year; I do not know exactly, but we have been notified that there is quite a lot. The Planning Inspectorate is going to be pretty busy over the next 12 months agreeing local plans, and I guess it would the same for the following year. There is a resource constraint issue, I would imagine, but I do not know the details of it.
To follow up on my earlier question, I wonder whether any consideration has been given to how the provisions in the Bill might affect decision making in local authorities on planning applications. Is it likely to lead to more applications being approved even if they are inappropriate, because councils will be worried about the decision being overturned on appeal?
Councillor Jones: I suspect that it may do, because we approve 87% of applications. I am not sure that I would want one of the 13% done next to my house or yours. There is a system of checks and balances where people feel that they have a fair crack at the whip, even though the decision might be different from what they want. That element of fairness, combined with local democracy, is powerful in local councils. To take it out of the system unilaterally would be detriment to the good will within communities, between the Government and communities and between local government and communities. I think this will put us on a bit of a downward path again in terms of the targeting of councils and the perverse behaviour that targeting has seemed to produce.
We have made good time, not least because the witnesses were so concise in their responses. If there is anything that any of the witnesses feel that they would like to answer questions on and have not had the opportunity, I am happy to give them a chance now.
James Lowman: To clarify the issues around our sector and the delay of rates revaluation, it is absolutely correct that there are winners and losers. We are grateful for the publication of the valuation office analysis, which came out yesterday, albeit if that information is, by its own admission, based on aggregate estimates and is limited in how far it can go in assessing the identity of those winners and losers, as probably only a full revaluation could do.
I am concerned, however, that what the Valuation Office Agency has identified is a 13% average reduction in rental values between 2008 and 2012, so that was broadly a proxy for how those may have moved over the intended revaluation cycle. My worry is that many small stores that we represent would have experienced greater rental value declines, not so much in major centres, the south, or on major high streets; I am thinking about neighbourhood areas, particularly in the north. To pick up on points made by previous witnesses, the VOA identified the north-east and the north-west as areas that would be most affected by revaluation. They would have the most to gain by prompt revaluation, and therefore, the most to lose by the delay, and that concerns me. Some 64% of our members operate in suburban or rural locations, rather than in high streets and 88% of them are under 2,000 square feet, which is small, so we believe that small, more remote, non-central locations would disproportionately have seen rental value declines.
We welcome the information provided thus far, but at the moment, unless more information is provided, there is concern that there would be a greater decline in those businesses, particularly against the background of a high-street vacancy rate that was 3.1% in 2008 and is now 14.6%. Our concern, acknowledging the absolutely correct points made about being revenue neutral, is that our members, and smaller stores—neighbourhood stores, village stores and local shops—may suffer disproportionately.
Councillor Jones: We believe that the Localism Act has enabled local government in a way that has not happened for a number of decades. We welcome the opportunity to work with and help the Government to solve problems, because local government are very good at solving problems. We want to see a mature relationship developing on the back of the Localism Act, and not one where we are dictated to, which this Bill seems to introduce again. We believe we can help to solve problems and work with the Government to stimulate the economy, in order to get people into the housing market through developers building and people being able to buy houses. I think that by working together, we will do that. The Bill seems to go against that will to work together and deliver what we all want for our economy.
I was going to ask Mr Lowman if there is anything in the Bill that he would like to see for his own members, but he has answered that question already.