The Best Laid Plans – How planning prevents economic growth

Policy Exchange (London), January 2007 (PDF)

Key facts

  • In all English regions the price of land for residential, commercial and industrial development is many times higher than the price of land for agricultural use. Whereas a hectare of farmland will cost around £10,000 in England and Wales (excluding London), land for residential purposes will sell for on average £2.6m.
  • British cities have much higher office and industrial occupation costs than international cities of comparable sizes. Prime industrial space is more expensive in Birmingham than in Barcelona, and office space is costlier in Manchester than in Munich.
  • High land prices have contributed to the decline of UK manufacturing. British exports of manufactured goods are worth less than 40 per cent of Germany’s goods exports. London is now the most expensive city in the world.
  • Hotels, restaurants and retail prices are much higher than in other major international cities. A weekend break in London now costs 28 per cent more than in New York and 37 per cent more than in Milan.
  • Planning has delayed the delivery of new major transport infrastructure. Planning a new terminal for Heathrow took longer than building new large airports in Hong Kong or Dubai.
  • To keep a check on house price inflation, Bank of England interest rates have consistently been above Euroland interest rates, on average 1.8 percentage points since 1999.

What’s wrong

  • Planning and high land prices have become one of the main obstacles to social mobility in the UK. Those who already own land or property benefit at the expense of others who do not. The property ladder has lost its bottom rungs.
  • The UK is losing out on economic opportunities because of high land prices. Jobs which could have been created here are moving abroad where land is cheaper, planning less complex and infrastructure is better.
  • Consumers suffer because planning has contributed to high retail prices and less competition in the retail sector.
  • The quality of life has been reduced through policies of containment which have turned out to be policies of congestion. While cities are ‘greying’, transport networks (roads, rail and air) are no longer adequate for a modern economy.
  • Interest rates kept high to control house price inflation are highly regressive. They favour property-owners and disadvantage others struggling to pay off their mortgages.

What needs to be done

  • Planning for development should be controlled and incentivised at the local level so that communities are confronted with the full costs and benefits of their planning decisions. We suggest the introduction of a Social Cost Tariff at £500,000 a hectare, but variable downwards. This would replace all existing development charges and would go entirely to local government.
  • The national green belt policy should be abolished. Local communities should take sole responsibility for their environment.
  • Projects of national significance such as large transport infrastructure investment should be decided at the national level to speed up development.
  • Simplified planning zones should be reintroduced to reduce delay and speed up the planning system. In such zones planning applications would only have to be given in outline.
  • The level of complexity should be reduced. The planning system should only aim to coordinate development, not to restrict it.
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