We have heard much from the Government—indeed, it is the premise underpinning the Bill—that the planning system is holding up development. Do you agree with the Government’s assessment? If so, what evidence base are you using for that?
Katja Hall: We agree that planning is a major barrier to investment in infrastructure in the UK. We do a survey once a year on the infrastructure of businesses. In this year’s survey, 97%—I think that is the correct figure—said that planning is a barrier to investment. So absolutely, yes it is. We think that the measures in the Bill will help to speed up and streamline the planning system, but still safeguard local communities and ensure that they have a say in what happens in their areas.
Mike Spicer: I would add to that point. We draw on a number of different sources of evidence. First, we take evidence from our own membership. Like the CBI, we regularly survey our members on the issue of barriers to growth. We conducted an extensive survey in 2011, to which we had about 5,500 member responses specifically on the issue of planning. The message that came out of that was that there were three issues in particular that they had with the planning system, if you want to categorise them more broadly. First, there is the cost of negotiating the planning system. I was glad to see that in the impact assessment for the Bill, which was released this morning, there was further evidence about the costs that businesses encounter. In his review, Professor Ball looked at the amount that businesses pay annually in legal fees, for example. About three quarters of our members, when they put in a planning application, draw on outside consultancy support, so it is an expensive business.
Secondly, there is the complexity of the process, and we would point particularly to the impact that that might have on discouraging businesses from applying for planning permission in the first place. We were speaking outside earlier and I said that there is an analogy to what we see in access to finance. You cannot get a true taste of what is going on just by looking, for example, at the share of applications for loans or planning permission that actually go through the system, because there will be businesses out there that choose not to put an application forward because of the perceived cost or complexity of the process. If they have past experience, that will feed into that.
Lastly, there is the consistency of the system, which the Bill addresses to some extent. On the evidence of planning applications overturned on appeal, there is a strong perception that there is often inconsistency between what planning officers advise and what the planning committees decide. Whether or not that is right—it is a democratic process—the signal it can send out to business is that we are not necessarily sure that what planning officers tell us will come to pass, it if goes to a planning committee and it finds something else.
Those are the three points from the evidence from our members, the evidence in the impact assessment for this Bill and the evidence that was put forward by Professor Ball.
Is the assessment of your members that the Bill is helpful because it helps to bypass some of the aspects of the democratic process that might slightly slow down the system?
Mike Spicer: I do not think they would see it as bypassing the democratic process, but the Bill addresses situations where a local authority has consistent underperformance either in terms of speed or consistency, where the planning system has been overturned on appeal or where it is persistently taking longer than the statutory time frame for decisions. The democratic process is still there, in the sense that the Secretary of State, a democratically elected politician, is the one who decides. We would like the movement towards more localism in recent planning changes—making the local plan the centrepiece of the planning system—and the benefits that that should bring in terms of speed and consistency, extended to all parts of the country. In a country that has about 260 local planning authorities, you are going to have some kind of inconsistency, and that is what members tell us. In extreme cases—we are talking about extreme cases here—there is an argument, which I think our members would support, that the Secretary of State working with the Planning Inspectorate can help to ensure that the benefits that businesses get in other parts of the country are extended.
Have you been advising the Government on the criteria to be used in judging whether a local authority should be designated? That is a question for both of you.
Katja Hall: We have some anecdotal evidence that sometimes—not in a majority of cases—the information asked for seems to have little relevance to the application. We would support this clause and the test of reasonableness, but for us the issue is more about making sure that the information required is relevant to the application.
Mike Spicer: I would make two points. First, the evidence from our members and from Professor Ball about the extent to which companies going through the planning application process have to rely on outside consultancy support is a reflection of the complexity of the system and how much information is required. Businesses are in a situation in which they have to hire outside experts just to understand the requirements.
The other point I will refer to is the finding from our survey in 2011: 46% of our members who had been through a planning process in the past three years found that they were asked for additional pieces of information at various points in the process. The totality of the information that they would have to provide, throughout the process, was not made clear to them. Having that kind of uncertainty feeds a narrative of inconsistency and cost.
You will be familiar with the retail sector’s major campaign to get a freeze on business rate increases. How satisfied do you think the sector will be with the Government’s solution, which is to postpone the business rate revaluation?
Katja Hall: On the proposal in the Bill, we think that some businesses will be pleased with it; others will not be pleased with it. We were a little surprised that there was not more consultation on the issue before it was introduced, but more generally we think that there is a case for looking at capping the increase in business rates.
Mike Spicer: I would like to build on Katja’s point about having the information to hand for us to take an evidence-based position. We only received the published figures from the Valuation Office Agency yesterday. Our members understand that, when we are talking about playing around with business rates, there is a degree of complexity. A rate bill consists of three things: the rateable value of the premises occupied; the national multiplier, or the small business multiplier, if applicable; and any reliefs. There are transitional reliefs and a deferral scheme as well. Whether a revaluation leads to a lower rate bill, which is what our members want, will depend on how those three factors combine and play out. That is a complex calculation for businesses to make.
There is a degree of uncertainty. I agree with Katja. We were a little surprised that there was not further consultation and earlier publication of some of the figures that the Valuation Office Agency has now published. Now that the figures have been published, they seem to indicate, if you look at the assessment of rateable values from January of this year, that if the revaluation were to go ahead as planned, based on the values for April 2013, there would be more losers than winners if, in 2015, those values were to be adjusted in that way. However, it is a case of how that plays out across the country. Revaluations are fiscally neutral, so are we saying that businesses, for example, in non-prime areas that had seen a big drop-off in their commercial rents will be swamped by any increase in the multiplier that would have to occur nationally for the measure to remain fiscally neutral? The reality is that some businesses will be and some will not be.
Finally, the Bill as it is currently put together does not provide any clarity on how transitional relief measures will extend over the additional two years. That is an additional area of uncertainty that we would like to see cleared up.
A final quick question on this. The Government have introduced legislation on business rates. Is it a missed opportunity? Could they have done something different on business rates?
Mike Spicer: There was one major area where there was a missed opportunity—to look at the whole process of uprating the multiplier every April. Currently it is based on one figure—the RPI outturn for September—and we saw that spike of 5.6% in 2011, which then became the uprating in 2012. You can get big movements like that and you then have to introduce transitional relief schemes to smooth that out. A more sensible way would be to look at an average of the consumer prices index over the whole year. That would give businesses a bit more certainty and a sense of greater fairness.
On the provisions in the Bill for employee owners, do you think that the proposals will help develop a more entrepreneurial culture in Britain, encouraging companies to take on new employees and overcoming some of the barriers?
Katja Hall: Some companies will find the proposal helpful. It is likely to be mostly used by particular types of company that are entrepreneurial. They are probably fairly young, fast-growing companies, where there is a high tolerance of risk in the employee profile. For those companies, this is likely to be an attractive option.
In that regard, do you mean a small company where there appears to be a clear path to a good valuation on the potential shares that are offered and a pathway to a kind of reward at the end?
Mike Spicer: Building on what Katja has said, it depends on the type of company and at what stage in its life cycle it is at. You can imagine a scenario where a very small technology company is just coming together. It wants a small cadre of highly skilled staff who are really invested in the growth of the business—a Silicon valley-type situation—and really motivated to grow the company. A company like that, of course, may reach a point when it needs to bring in outside investment. At that point, having a structure of employment where you have a number of employee owners might prove problematic at that stage of the business cycle. Typically, outside investors, angel investors and so on tend to prefer a smaller number of shareholders.
May I continue with that theme of employee ownership? Mr Spicer, you said that you think that it may encourage more start-ups. Are there any views from your organisation or your members that it may do the opposite, in the sense that small, high-growth start-ups may be reluctant to use these schemes on the basis that they want to restrict the number of shareholders they have or, indeed, the entrepreneurial organisation that is growing is at very, very high risk and, therefore, the employees may end up with nothing at the end of the day?
Mike Spicer: What I should say from the outset is that we have only had three weeks’ consultation on this measure and, although we are consulting members at the moment, we would certainly prefer to have longer to consult, given that what we are talking about is a new category of employment. It is a big measure and we would have certainly preferred to consult more widely.
On your question specifically, I think that there is an issue. Yes, certain types of businesses will find it a useful way of identifying or attracting a self-selecting pool of candidates who are highly motivated, who are willing to take a risk and who view the growth of the company as something that they want to be part of, and all the rest of it. However, that very same company down the line may find, at that point, when it is looking to bring in investors from outside the company, that it struggles if those investors tend to prefer situations where there are smaller numbers of shareholders, where they don’t want to see their shareholding diluted. A number of complex issues have to be balanced and, certainly over the coming weeks, we will be consulting our members to try to identify what kinds of business our membership would view as something that they would want to take forward.
So there could be a set of circumstances in which employees are weaving in and out of these particular schemes as a company changes and grows, with different parts of investment coming in, diluting shareholding and so on?
Directing a question more to the CBI, I do not know whether the chief executive of Sainsbury’s is one of your members, but he did say that the reputation of business in the current climate has been damaged by the economic problems, and that any view of buying off people’s rights for cash essentially or, indeed, the prospect of cash, may damage business reputation further. What is the CBI’s view on that?
Katja Hall: It is true to say that trust in business has been damaged. We have seen that clearly, particularly in certain sectors, but more broadly as well. The companies most likely to take up this scheme are small, fast-growing entrepreneurial companies, and I do not think that those companies using the scheme will damage trust in broader businesses. Clearly, a lot of our larger companies will not be using the scheme. They wouldn’t think that it was appropriate for them. It is very important that the proposal on employee owners goes hand in hand with more wide-ranging reform of employment law.
One final, quick question on this particular topic: if, in your view, these schemes will be directed towards a certain class of company, do you feel that perhaps the view that these will be voluntary may be slightly overcooked in the sense that a small, fast-growing software company that is in that particular marketplace may just advertise for employee-owner staff and, therefore, the voluntary element is slightly diluted?
Mike Spicer: That touches on our broader concern about the proposal: one of the concerns that we would expect a lot of businesses, certainly within our membership, to have is that, if we make that kind of advertisement, are we actually voluntarily restricting the pool of available candidates? Clearly, for some employees or potential employee owners, that is not going to be attractive to them. Taking on new staff is something that costs a lot. It takes time and they would evaluate carefully, I expect, whether that is something that works for them. I certainly think that that would be one of the concerns our members have raised: whether it would restrict the talent pool for companies that are really looking to get a particular type of person with a particular set of skills.
Building on that, there is the potential with employee share ownership that you could have two streams of employees, one that owns the business and another that does not. Does that cause you any concern?
Katja Hall: No, I do not think so. Not potentially. I think there is an issue around not confusing the employment relationship, and some companies might be worried that, if they go down this route and use this category, that could then be challenged in an employment tribunal. Could it be somehow unpicked, and could there be rulings to say that this person was in fact an employee and therefore had protection? I think it is about getting the wording right to give those firms that want to use it the confidence that they can go ahead, but I do not think the issue around whether some are owners and some are not is a big problem. Certainly nothing of that has come up in our discussions with companies.
Katja Hall: We need to make sure that it is legally watertight. One example that came up is the idea around 16 weeks’ return notice from maternity leave. If, for example, one company required only eight weeks, could that then be used in an employment tribunal to unpick the employment status of an individual? We need to make sure we have thought through all those implications.
Mike Spicer: I think what Katja says, and what you have asked, highlights the complexity of the proposal and the number of things that would have to be taken into account. As I said, these are the sorts of issues that we are discussing with our members in the short time we have to do that, but I think that there are a whole range of areas where we need more clarity. One is precisely the scenario that you have just outlined. Another is the technical side of how you exit a status like that, and so on.
Mike Spicer: First, although we are talking about one part of a Bill, if this goes through in its current form we are clearly talking about an entirely new status of employment. That is a major change to the labour market in this country—a huge change. It is the Government’s job to communicate that to the public as a whole. Of course, it is our job as business organisations to make sure that our members are fully cognisant of all the issues surrounding it and so on, but there is certainly a need for wider and longer consultation, and, should the measure pass, there also needs to be a lot more public awareness of it.
You are very clear in expounding the advantage of share ownership to certain types of company or employer, what is less clear to me is the value to the employer of getting away with certain employment rights. From what you are saying, it sounds like that is a problematic area, so what would be the value to an employer in doing that?
Katja Hall: Ultimately, this is about encouraging growth and jobs, and it is certainly true that employment law and the fear of tribunals is an issue for all companies, and it is particularly an issue for small and medium-sized firms. They are worried about getting caught out on technicalities, or getting processes slightly wrong and therefore ending up in a tribunal. We should not underestimate that; it is a real issue. Both of our surveys show that it comes up as one of the key issues whenever we talk to our members about the barriers to taking on more people into jobs. Asking people to sign away, or not to have, their rights to unfair dismissal and redundancy will just increase the legal certainty for companies who want to take on people, and as a quid pro quo those people then get shares; but as I said earlier it is part of the solution. The key issue for nearly all CBI members is tribunals, and reforming tribunals.
Mike Spicer: Just to add to that, it would potentially reduce the cost of employment by removing certain employment-related burdens and risks. To give one example of that, if we are talking about the right to request flexible working, when we surveyed our members about this last year, what we found was the vast majority of them do grant the right to request flexible working and when applications are put in to them, typically they do say yes. Not having to conform to a formal process around that, and being allowed to take it purely on business grounds, as they have in the past, could potentially save costs as well.
If I could just take you back a bit further, I think you have said that really you are talking about small companies with a high-skilled work force and shared values, and so on. I think some of the critics outside have seen it as being a big-company, low-wage, low-skill risk. Are you ruling that out? Are you saying that for a company whose work force is essentially low wage and low skill this is not at all an attractive option?
Katja Hall: Out of all the companies we have spoken to, the ones who have said that they would find it attractive are all in the first category that you described: on the smaller side, fast growing, and usually in the kind of creative technology sectors where they are employing highly skilled workers.
Mike Spicer: In the short period of time we have had to talk to our members about this we do not get the sense that there is a huge groundswell of support generally, across our membership, for this. The main issue, I think, that they have with it is the idea that it could reduce the available talent pool to them. It is how it would interfere, potentially, with their process of employing people. Having said that, though, as we discussed before, for certain types of companies and particularly those at the very start of their life—such as new technology companies—this could be a very innovative proposal for them that would work in a way that would allow them to really grow their company.
To return to the planning process and your opening comment that 97% of your members expressed concern about the planning process, the Minister has gone out of his way to assure us that actually the provisions of this legislation will affect a tiny number of local authorities—I think he said this morning not more than 10. How will that address the concerns of 97% of your members?
Katja Hall: I think there are probably two separate issues. One is the new framework that has been introduced, with the PPF, which businesses support, and the major infrastructure planning procedures. Businesses support those, but I think it will take a little bit of time for it to feel different on the ground. Secondly, I think the proposals in the Bill are tweaks to the system that will help in two ways, and I think they will incentivise local authorities to make sure they have good processes in place for looking at planning applications; and in most cases businesses will have good relationships with their local planning departments. I guess our hope is that therefore this clause would not need to be used very often; but it is useful to have there as a backstop.
I think on the major infrastructure side, around the special parliamentary procedure, we think there are enough checks and balances built into the process early on, that actually limiting this use of an open-ended special parliamentary procedure at the end will be helpful; and of course we know there are examples of companies like Avanta where this is adding a lot of delay and cost.
What confidence would you have that the Planning Inspectorate would be able to deal with decisions more quickly than local councils? For example, I am conscious that in non-householder applications over the past year the Planning Inspectorate was something like 30% slower than councils in dealing with appeals.
Katja Hall: I think we would have some confidence that the Planning Inspectorate would be able to look at these issues in cases where the local authority has taken a very long time or where it has perhaps not considered a case as well as the developer would like. Clearly, I also do not think that it will be used in a huge number of cases, and if it were used in a huge number of cases it would be difficult for it to process all the applications. However, it is there as a backstop and as I said I think that is its main benefit; hopefully, it will not need to be used very often, but it will make local authorities just think about the processes that they have in place.
I have two different questions to ask, if that is possible.
First, this Bill very much focuses on the planning authorities. Has it been your experience with your members that some of the other consultees—say, the Marine Management Organisation, Natural England and the Environment Agency—can also add complexity, delay and cost to planning applications?
Mike Spicer: Yes is the answer to that. There are a large number of statutory consultees that are part of the wider planning system. With some of the things that we have heard, it depends on the type of application. For example, within our membership we have companies that are involved in the installation of renewable energy—wind farms, and so on. In that particular case, the kind of statutory consultees that they are going to come up against are the likes of Natural England, the Environment Agency and so on. But again, there is definitely a feeling—this is something that I think we have fed back to DEFRA and others before—that sometimes the system is not as joined-up as it could be. That came through very strongly in the Penfold review, that there is a need to rationalise the number of non-planning consents and to make sure that the processes are as aligned as they could be.
Also, some of the processes that statutory consultees such as Natural England are responsible for overlooking, for example habitat regulations assessments, are incredibly complex non-planning issues. Again, they are the very kind of thing that really encourage businesses to seek outside consultancy support for. Although we are not necessarily saying that the processes that the statutory consultees are responsible for overlooking are in themselves wrong, there is clearly scope for making sure that the system works in a more aligned way. In that respect, we agree quite strongly with some of the views that came through in the Penfold review and I know that some of the recommendations from that review are taken forward in the Bill.
Katja Hall: I would agree with those comments. The only broader point that I would make, if I may, is that of course planning is a really important issue to address if we want to get infrastructure built and growth going in the UK. It is part of the solution; this Bill is part of the solution; and there are other issues around finance, for example, that are also crucial.
May I move on to clause 7, which is about installation of telecoms equipment? About 40% of my constituency is in an area of outstanding natural beauty, but business is crying out for better broadband. Are there any concerns that have been raised by your members about the changes that the Bill will make, or are they welcoming them with open arms?
Katja Hall: We are very supportive of clause 7 and our members welcome it. The UK ought to be at the forefront of the digital economy in the future, and clearly broadband is a key part of that transition. We have got some catching up to do as a country, and one of the issues that a lot of our members have raised is that of planning at a local level, so I think this clause will be very much welcomed.
I assume from what you have both said already that you are in favour of clause 21, which will allow planning decisions on large commercial and business developments to be taken at national level through the national infrastructure planning system. Perhaps you will confirm whether you are in favour of that, and tell the Committee whether you have given any consideration to where the threshold should be for determining what is a nationally significant project?
Mike Spicer: I would agree with that completely. Broadly speaking, yes, we would be in favour, but there are clearly some complex issues to be taken into account about the kinds of developments that would be appropriate. For example, if you are talking about a large retail park that might be of national significance, such as a large shopping centre, how does that play out with a “town centre first” policy? There are clearly areas that need to be looked at more closely, and that is something that we will go back to our members about.
More broadly, the kind of development that we would like to see benefit from the clause would be, for example, where you have a large industrial development that is nationally significant not necessarily in the sense of floor space, but in the sense of being a company that is really contributing to getting Britain’s trade deficit down through its export activities. We would like to see companies in those kinds of situations benefit from a faster planning regime, of course. I think that it is going to be about how we express that in terms of the thresholds, so that those kinds of commercial developments—ones that are really about contributing to Britain’s growth, particularly export-related growth—benefit from this kind of clause.
Katja Hall: We have spoken to manufacturing companies and we have spoken to companies that are R and D-intensive, and they see scope to use the clause, for example to build new manufacturing plants and R and D centres. To support Mike’s comments, I would have thought that those kinds of developments are very much in Britain’s interest not only from a local point of view in creating local jobs, but in terms of driving growth and developing Britain’s industrial strengths.
To come back to the issue of broadband, obviously one area of criticism is that we might see poles and cables across areas of outstanding natural beauty and national parks. If the legislation were to be amended, either in primary legislation or by regulation, to require those cables to be buried in ducts, what would be the reaction of your members?
Katja Hall: It would clearly come down to cost. We were a little bemused by some of the processes around the broadband issue. We saw Surrey, for example, taking quite a proactive approach in encouraging investment, whereas Kensington and Chelsea rejected the vast majority of planning applications. Yet it seems to us that the residents of Kensington and Chelsea would benefit from broadband, and that having a cabinet outside in certain places would not be a big problem. However, there clearly need to be some safeguards.
Mike Spicer: The strong feedback from members, particularly in rural areas, is that broadband is a central issue for them. It is also a central issue for their employees, who may be working from home. What we have not had is any feedback on specifically what their reaction would be if you had installations that were ugly or whatever, and on what the relative benefits would be from paying the extra amount to bury those facilities underground. That is something we would have to get back to our members on. But the strong message is they want broadband and they want it now. Anything that can move that along is something they would see as a positive development, I think.
Do you have any current views or survey data that would show whether any of your members have concerns about the potential increase in discrimination cases, which of course are more costly and lengthy, as a result of removing some basic rights while protecting the day one rights in terms of discrimination?
Katja Hall: That survey was our employment trends survey; I can certainly submit that. I guess it is important to remember that, under the new scheme, this category of employee would still be protected against discrimination. In terms of that as an issue for companies, there is a concern when discrimination claims are sometimes tagged on to other claims; we need to make sure they are used in genuine cases, when employees absolutely should be protected against all forms of discrimination.
Would it be a worry for your members that there could be a propensity to tag discrimination cases on more regularly if someone felt that they have been unfairly dismissed but had given up their rights for, say, a nominal number of shares?
Katja Hall: I think they would be two separate issues. What happens at the moment is that somebody puts in a claim for unfair dismissal, and then sometimes—we think, on the advice of their lawyers—they tag on a discrimination case to the claim at a later stage, perhaps because it increases the potential compensation. The issue here would be to make it really clear to the employer that that person is still protected against discrimination.
I hope this will be the last question from me. If I can take you back, in a sense, to where we started, when I asked you both about evidence that planning was impeding growth, you both replied by telling us about surveys of your members. When the members were completing the surveys and saying that they thought planning was an issue in terms of growth, did they have to demonstrate that they had been in contact with the planning system in any way at all in the past three or four years? If so, have you got those data, and are they something that the Committee can see?
Mike Spicer: The answer is yes, we do. That was the question we asked our members. There are 104,000 businesses in our membership, and not all of them will have been through the planning system—the majority will not have been. When we carried out our survey, we asked them to categorise themselves in terms of whether they had submitted a planning application over a certain period of time, whether they had submitted more than one and whether they had submitted applications across different local planning authorities. If they had not, and did not fall into any of those camps, we asked what their perception of the planning system was. That is always the danger with that kind of survey: you have to recognise that most businesses will not have had direct experience.
Before I bring proceedings to a close, if there is anything the two witnesses want to add to the evidence they have already given, on the basis that they have not been asked the appropriate question, they should by all means feel free to do so.