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The elephant in the room  There are some policy areas that are so complicated that the public prefer to ignore them and politicians feel reluctant to address them.  I want to tackle some of these "elephants in the room" in this "Too Difficult" series.  I have a little list which starts with planning, pensions, social care and local government finance but I suspect there will be others. The views expressed in this Blog are mine and do not necessarily represent County Council policy or Conservative Party policy

I am not clever enough to create a reply function on this site.  If you would like to e-mail a response to me on anything below, here is my  e-mail address and I will consider uploading.  If I do upload it, I will do so without alteration and with the author's name. 

Introduction: There are some national policy issues that have enormous ramifications for politicians locally, whether MPs in their constituencies or local councillors in their ward or division.  Planning and housing is one of them.  Most people in the UK want to own their own home; many have chosen to acquire several additional houses, treating them as pension pots and letting them out. Others have invested in properties in Europe or further afield.  This is no longer the preserve of the mega-rich.  In the mid 1970s, only half of all UK households were owner-occupiers. Since Margaret Thatcher’s “right to buy” in the 1980s, ongoing policy has encouraged more people onto the property ladder. By 2003, this had risen to more than 70%, higher than the US and many European countries. Since this peak, home ownership has fallen back to 67%.  [The End of the Affair - Smith Institute]

North-South Divide: I served as Chairman of the English Regions Network from July 2006 to July 2008 and took the opportunity to visit each of England's regions during these two years.  What was striking was the difference in approach to housing, planning and the economy in these regions. In much of the north, midlands and south west, housing was seen as a key to economic recovery; in the south east and the east, housing was just "too difficult".  Rising house prices and ratios of earnings to house prices suggested a dire shortage of housing supply and a threat to continued economic growth while those on the housing ladder generally did all they could to oppose housing development in their locality.

Englishmen, homes and castles:  There is a strange element in the English psyche by which everyone aspires to own their own home and will move heaven and earth and beggar themselves to get onto the housing ladder.  As soon as they are there, their home becomes a castle where they insist on pulling up the drawbridge, are incensed when a developer proposes a new housing estate on the green fields next to the estate they occupy and which was built on more green fields just a few years ago!

The regional experiment: It is ironic that John Major was the promoter of regional government with the creation of the Regional Government Offices in 1994 but it was Peter Mandelson in 1999 [RDAs: The Politics - Centre for Cities] and John Prescott's doomed bid for elected regional assemblies in 2003  that were the precursors of a top down approach to planning and the promotion of spatial planning for housing and economic development.  I spent six years of my life steering through the South East Plan, first as Chairman of the SE Regional Planning Committee and later as Chairman of the SE Regional Assembly. It was probably always doomed as a concept both because of the sincere hatred of the "R" word in the Conservative Party and a failure to secure buy-in to regional planning and top-down housing targets, particularly in the Greater South East of England.  Coming to power after the 2010 General Election, the Conservative-Liberal coalition lost no time in abolishing swathes of regional governance including Government Offices, Regional Assemblies and Regional Development Agencies.

The great planning reforms: I find it fascinating to consider the many reforms of the Cameron-Clegg coalition and their reception in the political and public arenas.  Andrew Lansley's health reforms are hugely controversial and David Cameron has had to insert a "pause and reflect period" into the parliamentary process - pretty unheard of - but clearly necessary here to make progress.  Ken Clarke has had a rough time at justice and been pushed into a U-turn over sentencing policy.  Michael Gove has had some difficult times in implementing his bold education reforms - possibly reflecting on the capabilities of his sprawling department.  David Willetts has struggled with higher education funding and has been censured by Oxford dons - Margaret Thatcher would no doubt approve after her experience with her alma mater!  The coalition's planning reforms are equally radical and quite likely to cause huge concerns among many Conservative voters. How have they survived scrutiny to date?   

Meet the great planning reform authors:  I suspect the name that would come to most politico's lips first would be Grant Shapps as Housing Minister but Greg Clark is variously described as "Minister for Decentralisation and Housing" and as "Minister for Decentralisation and Cities".  A key contributor to the Conservative Party Open Source Planning paper which was published before the General Election and on which the reforms are based was John Howell, MP for Henley and previously a member of my County Council Cabinet.  Of course, lurking behind all is Eric Pickles with his own strong views on localism and planning.

Presumption of Sustainable Development: This innocent-sounding phrase lies at the heart of the planning reforms.  It means more than an assumption that development proposals will be based on sustainable transport or sustainable construction methods.  At the heart of the presumption is a requirement that local government development plans must be realistic in the context of the local economy and housing needs.  Here is a link to Greg Clark's letter of 25/07/11 about Simplification of Whitehall Planning Guidance and here is the coalition government's  Draft National Planning Policy Framework.

x   Councils will not be able to say "no more housing here", much as many of their voters might wish, particularly in the Greater South East.  Any development plan that seeks to stifle necessary housing growth will be found by the Secretary of State to be non-sustainable and will leave developers free to secure planning permission on appeal by default. Top-down housing targets have gone but this coalition government is far too alert to the need to grow the economy and to promote affordable housing, particularly in the Greater South East to allow a downward free-for-all in house building.

Decentralisation and Empowering Neighbourhoods:  The Localism Bill includes a "new right for communities to draw up a neighbourhood development plan" and a Community Right to Build.   The former "will allow communities to come together through a local parish council or neighbourhood forum and say where they think houses, businesses and shops should go - and what they should look like".  The latter will "give groups of local people the power to deliver the development that their local community want".

x   Local town and parish councils have read this provision as giving them power to impose their views into the planning system.  In particular, they believe it will give them power to say "no more housing here" in general or to determine rather than simply comment on planning applications in their locality.  They are in for a rude awakening.  Town and parish councils will be encouraged to advocate for housing development locally, providing they secure approval in a local referendum and will even be able to grant themselves planning permission in such circumstances.  However, I cannot imagine many areas in the south east where a referendum on local housing provision would be won.  

The demise of Section 106 Planning Obligations:  Until legislation provides for the Community Infrastructure Levy, councils have relied on Section 106 Planning Obligations to secure funding from developers towards the cost of infrastructure necessitated by the granting of planning permission.  Securing Section 106 agreements can be a very time consuming process with protracted negotiations with developers who will seek to minimise their liability. In two tier areas the planning authority (district council) and the strategic authority (county council) will both seek contributions to their respective obligations to provide related infrastructure.  Sums demanded must be demonstrably related to the development in question.

x   Few will regret the passing of Section 106 as a system although it will remain for site specific infrastructure.  I am encountering growing concerns from parish councils in my patch - and I suspect this is not unique - who expect to be consulted before Section 106 agreements are negotiated to ensure the views of town and parish councils and their infrastructure needs are taken into account.  Their frustration is both with the complication of having to deal with their district and county councils and that the need to relate closely with a specific site and the infrastructure needs it generates leads to a gulf between what the town or parish council would like to see done and what the Section 106 agreement permits.  Given that Oxfordshire has more than 300 town and parish councils, you may imagine the difficulty of combining the negotiation of agreements with developers and listening to the needs of those town and parish councils.    Transition to a reformed system (described below) means town and parish councils may have to be patient for a little longer until the new system beds in.  

Incentivising the planning system:  This lies at the heart of the planning reforms.  Ministers have heard people complain that housing growth has been imposed on them without the necessary infrastructure. They talk about schools being built well after new houses have been sold and children arrived; they also talk about traffic congestion as more cars come with new housing, inadequate public transport and pressure on health and other facilities.  How much this is true and how much is a way of arguing against housing growth per se is difficult to analyse.    Ministers believe linking cash rewards explicitly with planning permission can solve this problem and are proposing several policy initiatives to incentivise and make more popular housing and economic growth.  The main items are:

x   I am fearful that ministers have under-estimated the inherent (small "C") conservatism of a great number of citizens, particularly the middle class who are already on the home ownership ladder.  I suspect their real opposition to housing growth is based on suspicion of change; loss of a view; concern that social housing will bring neighbours from hell and anti-social behaviour; not to mention a threat to the value of their investment in their home.  I am not sure that cash in return for planning permission will translate into greater willingness to accept housing development.  Everyone wants affordable housing but "not near my home, please"; everyone wants their children and friends to be able to continue to live where they grew up but "not at the expense of more urban sprawl or losing green fields".  Pressures are particularly acute in the Greater South East and I am not convinced that cash bribes will change deeply entrenched attitudes.  Only time will tell.  As usual, the devil is in the detail and there is plenty of detail to sort, particularly in two-tier local government areas.

New Homes Bonus: This is a sum equal to the national average council tax band on each new property built (calculated in arrears) which is paid to local authorities for the six years following completion as an un-ring-fenced grant. Here is a link to the CLG publication: New Homes Bonus: Final Scheme Design.   The national average Band D council tax is currently £1,439 pa.  For example, if Cherwell District Council has 384 houses built between October 2010 and October 2011, the New Homes Bonus for 2011/12 will be 384 X £1,439 = £573K pa for the next six years. 

Here is the amount of the New Homes Bonus for the Cherwell area, assuming there is no increase in the national average council tax and no increase in the number of units built in Cherwell.

You will see from the above that, even given a zero increase in housing numbers and the national amount of council tax, the New Homes Bonus grows for six years and then levels out.  The New Homes Bonus in two tier areas is split 80% to the planning authority (district council) and 20% to the county council.  this gives the following split for the above:

Here is the New Homes Bonus if Cherwell is able to increase the number of homes completed by 2% in each year and the national average Band D council tax is unchanged:

Here is the New Homes Bonus if Cherwell is able to increase the number of homes completed by 5% in each year and the national average Band D council tax is unchanged:

Here is the New Homes Bonus if Cherwell is able to increase the number of homes completed by 5% in each year and the national average Band D council tax rises by 3% pa:

I have a number of serious concerns about the New Homes Bonus.

x  In 2011/12, the New Homes Bonus will be funded out of CLG Planning Delivery Grant.  However, in later years this source will dry up and the cost of funding the New Homes Bonus will grow as the above figures demonstrate.  The New Homes Bonus is to be funded by a top slice of local government's formula funding grant.  In other words, planning authorities will receive the bulk of this incentivising New Homes Bonus out of local government's own funding.  In particular, county councils of necessity share a much larger part of the formula grant than district council because of the difference in their scale.  Despite this 80% of the New Homes Bonus will be paid over to district councils who are, at the end of the day, receiving this bribe out of what is largely county council money!       

x  It is unclear whether the New Homes Bonus is seen as revenue funding or capital funding although the way in which it is being distributed suggests that CLG consider it to be revenue funding.  The CLG publication says councils "may wish to offer council tax discounts to local residents, support frontline services like bin collections or improve local facilities like playgrounds and parks".  It is interesting to note that two of the three suggestions are revenue-based with consequences for ongoing funding and all three are much more related to district council functions than to county council ones.  The steady-state model above shows the funding build up year-by-year for six years after which it levels out to a constant annual sum. Clearly, maintaining even that constant annual sum depends on no reduction in the rate of house building and it is clearly very dangerous to become over-reliant on New Homes Bonus to fund regular revenue spending.   

x   It is a matter of fact that, in two tier areas, the burden of infrastructure funding relating to the granting of planning permission is approx 80% to county council services such as roads & pavements, schools, libraries and other community facilities with the remaining 20% falling to district council services.  While the New Homes Bonus is clearly seen as an incentive to the authority granting the planning permission, there is a perversity in the complete reversal of the percentage of funding needs between district and county councils. 

x   I think there is an urgent need for some monitoring on the spending of the New Homes Bonus which is now a recognised part of the overall  finances available to councils to identify whether it is meeting the perceived need of  increasing housing supply and accommodating local and strategic infrastructure needs.

Community Infrastructure Levy: This is a tariff-based charge, applicable to a much wider range of developments than the Section 106 scheme.  It mirrors the levy that has operated in Milton Keynes and other locations for some time and should be capable of much speedier resolution of planning applications.  The proposed legislation constitutes "charging authorities" which, in England, are the district councils, metropolitan district councils , London boroughs, unitary councils, the national parks, the Broads Authority and the Mayor of London. The levy is to be applied to all but the smallest developments and, therefore, to increase significantly the funds for necessary infrastructure.

Charging authorities are required to allocate a "meaningful proportion of levy raised in each neighbourhood to that neighbourhood". The levy can be used to fund a wide range of infrastructure including "transport, flood defences, schools, hospitals and other health and social care facilities".  It also covers "play areas, parks and green spaces, cultural and sports facilities, district heating schemes, police stations and other community safety schemes".  Levy cannot be used to fund affordable housing.

To raise a levy, charging authorities must have an up-to-date development plan and will then produce a charging schedule setting out the rates for their area.  They will need to strike a balance between infrastructure needs and the impact of a levy on economic viability.

London is treated as a two-tier area, enabling both London boroughs and the London mayor to charge a levy "to support the provision of both local and strategic infrastructure in London".  Shire counties do not have the same facility.  Preparation of the charging schedule is subject to appropriate consultation of local communities and stakeholders.  The schedule is then examined in public by an independent person.  The levy is normally collected by the charging authorities. 

Social housing within a development is exempted from Community Infrastructure Levy.

Here is a link to the CLG publication entitled: Community Infrastructure Levy - An Overview.

While welcoming the general principle of a wide ranging levy on the majority of new developments, I have two serious concerns about the Community Infrastructure Levy.

x   London is treated as a two-tier area with the Mayor of London to be responsible for strategic infrastructure and the London boroughs for local infrastructure and both are to be charging authorities.  The shire areas have exactly the same relationship between county councils as strategic authorities and district councils as local infrastructure authorities but only district councils are to be charging authorities.  This is illogical and unfair and potentially unsustainable if strategic infrastructure needs are starved of investment.

x   Exemption of social housing from the CIL means that between 30% and 50% of housing developments will make no contribution to the costs of schools, transport and other social infrastructure this housing will generate.  This is seriously worrying and could lead to social housing having insufficient education, transport and social infrastructure.

Tax Increment Financing (TIF): This enables local councils to borrow on the strength of expected future funds to fund infrastructure.  Here is a link to the Treasury press statement on Tax Increment Financing.

x  This is a welcome reduction in centralised control of local government borrowing and may enable councils to forward fund necessary infrastructure against the certainty of future cash flows arising from development funding.  It is essential that there is some certainty around future funding streams if TIF is to work.

Business Rates Localisation:  This is a recent coalition policy which claims to provide significantly greater financial freedom to local government by allowing councils to retain their business rates after deducting an initial levy to provide some equalisation between business rates-rich councils and those that are business rates-poor.