Category: Blog

We have been debating three proposals for better decisions on building and planning.

The first is my proposal to pay compensation for loss of amenity, view, and worse quality of life to existing homeowners. This proposal has several advantages. It can be done under the current law. Where I have seen it used it works. People accept the compensation, allowing planners to grant the permssion without objections from those closest to the proposed development. It can speed up the planning permission and avoid long appeals and court battles. It pays the money to those who otherwise lose out. It can be a cheaper solution for the developer.

The second is the idea put forward that we should auction planning permissions, with the money going to the state, probably in the form of the Council. This is a more formal version of Section 106 Agreements which we have today, which are individual negotiations with developers by Councils to make an infrastructure contribution. I have no objection in principle to an auction to determine the value of a planning permission. It is not, however, entitrely straightforward.

If the state already owns the land then it works very well. The state grants itself planning permission and then sells the land with permission, capturing the gain through the auction sale. This already happens.

If the land is privately held the problem is who will bid in the auction other than the current landowner? There would be no point in offering to pay a large sum for planning permission unless you already had secured the land so you could sell the package on or develop it yourself. An auction of one is a negotiation, which is what we have at the moment.

You could create a more serious auction if Council announced it was prepared to grant so many permissions to allow building of a specified number of homes or a speficied fllor area of commercial property. Competing landowners could then submit bids for how much they were prepared to pay to be one of those allowed to develop. Some areas would be ruled out for other palnning reasons – Green belt etc.

The third proposal is to go over to a system of LVT. Proponents of this see it as an easy answer to all our problems. Others see it as land nationalisation.

The full scheme replaces some taxes with a rental charge on all property payable to the state. It is therefore a more penal tax on all those who have already bought freehold interests in property, and may still be paying off the bank loan or mortgage, as their freehold effectively is taken away from them as the state becomes their landlord. I have never seen a satisfactory explanaiton of how the transition would be handled fairly, given the huge numbers of property claims that underpin the banking system and the current pattern of widely spread property ownership.

Mr Hughes thinks Lib Dem backbenchers should have a veto on Coalition policies. Some would say only if Conservative backbenchers as well can have one, to be fair.

The truth is simple. If all Lib Dem backbenchers vote against a Coaltion government proposal, even with Labour support, the government will still win the vote.

If a large number of Conservatives rebel, but Labour supports the government, the government will win the vote.

It is only if more than 40 Conservatives vote against the government and Labour opportunistically agrees that the government might lose.

Democratic politics is about numbers as well as arguments.

Today we hear that Mr Clegg will set out his proposals and vision for a more equal and just society. Here are some of the things he could address.

The main reason too many people are poor in the UK is they do not have jobs. During the long Labour years around 5 million people of working age stayed on benefits, even during the good times. Many people were invited in from abroad to take new jobs through a liberal immigration policy.

Tackling unemployment requires a growing and recovering economy, a more sensible immigration policy, benefit reform and improved results from money spent on education and training.

Much inequality begins from school days. The rich can choose to send their children to good schools which they pay for. A select few obtain places at grammar schools, giving the children of the not so well off similar chances in life to the children of the rich. In some parts of the country there are excellent comprehensives which can be a good platform for success. In other localities people on low income are sentenced to sending their children to low performing schools where expectations are low and often self vindicating.

Central to the task of promoting greater justice must be the task of widening choice and quality in state schools serving families on low incomes. The government’s school reforms and pupil premia are designed to tackle this. It may take more than the proposals announced so far, but they are a step in the right direction. Poor performing schools often do not lack money or numbers of staff. They lack the right ambition and direction from the top. They may also be working with unsupportive parents.

Central to the aim of getting more people into work must be sensitive but firm reforms to the benefits system. I am sure Mr Clegg and I agree that our benefit system should be generous and supportive of people who cannot work owing to incapacity. We might also agree that if someone has duvet disease, the inability to get up and out in the morning to hold down a job, they need to face the reality that there will be no benefit if they turn down gainful employment.
Getting the present “availability for work test” or its successor to function well is not easy. Each different case is a judgement. Did the individual knowingly or unknowingly put off the employer from offering the job? Did the person lose the job through no fault of his own, or because he didn’t want to carry on doing it? These are difficult balances to strike.

Labour will also say poverty can be the result of low incomes in work. That is true, and that is why both main parties in power have for a long time paid benefits to people in work to top up working incomes. A minimum income protects the poor. The Minimum wage can protect the taxpayer to some extent, requiring a higher proportion of the minimum income to come from the wage packet. The Minimum wage, if set too high, will cut the number of jobs available, and force more people to be reliant on the state entirely rather than partially for their income.

The good news about low pay is for many it is a temporary not a permanent phenomenon. The best way to get a job is to already have a job. The best way to get a better paid job is to start with a less well paid one and work up. It is this spirit of self improvement which is lacking in some benefit recipients. They say if they went to work they might be little or no better off. That is to miss two points. The first is, if you can earn the money you should. The second is, if you take a not very good or well paid job it might lead to a better one. You can travel with pride and in hope if you have a job.

Recent programmes showing bosses going under cover have, I hear, usually ended in the bosses discovering the greater worth of some of their less well paid employees and giving them new duties, rewards or better jobs. You need to put yourself in the way of something better happening. I have been impressed in recent visits to local supermarkets how keen they are to establish a possible career path from shelf stacking to store manager. We need more to make those journeys.

Ending poverty may require different policies from the state. It also requires different attitudes and contributions from some who feel they are locked in benefit but may not have to be.

We will never create an entirely equal society. We will not even create pure equality of opportunity. Some are born with a better natural endowment, and others with a better inheritance. We should strive to do better, whilst recognising the limits to what benefits can do.

One of the main issues which embitters many a planning dispute is who pockets the large windfall gains from the conversion of cheap land to dear land with building permission?

There are three models on offer or regularly debated. The first is that the developer or land owner should claim the gain , because it is their land or their activity which is leading to improved value and the new homes.

The second is that the community should seek a substantial portion of the gain. This currently happens on larger developments through Section 106 agreements. A developer negotiates with a planning authority, offering to give the Council money for public facilities, or offering to build public facilities as part of the plans. The developer may offer roads, flood schemes, leisure facilities or whatever the Council thinks the community wants.

The third is that the wider nation should pocket the gain, through moving to a system of land nationalisation, where everyone just rents their property from the state and the state collects all the rents and therefore benefits from new construction. Effectively land values are abolished as no-one is allowed to be a freeholder apart from the state. Various Labour figures are pressing for a variant or starting point for this, proposing for example that the state should levy a tax on all properties adjacent to new infrastructure improvements in cities, on the grounds they are benefitting from this state investment and their property values have gone up as a result.

I am not keen on any of these three versions. The first leaves many people feeling it is unfair that large landowners can make huge sums out of the artificial scarcity created by planning permissions. A true free market system would leave the land owner free to profit, but it would also allow any landowner the right to build as they wished, creating much more competition and lower prices for buildings than a planned system does. Our current system allows enterprising people to make money out of rationing.

The second leaves many feeling the relationship between Council and big developers is too cosy, as the Council will make a profit out of the development if it allows it to go ahead more or less as the developer wishes. Quite often the 106 money or infrastructure contribution is spent in ways that do not help the home owners who feel they are disadvantaged by the new development. It is, for example, a final insult to the houseowner objecting to new homes on the greenfields next to his house, if the development goes ahead and the Council places a noisy play area adjacent to his house, paid for out of the Section 106 money.

The third if done in full is so radical that no-one has satisfactorily explained how you could get to it from where we are today, even if you wanted to. Partial implementation is just another kind of tax on those unlucky enough to live near “improvements”.

It seesm to me the large profits thrown up by scarce planning permissions should be shared with those most immediately affected by the development. The way to make people feel a new development near them is fair would be to give them a share of the winnings by way of compensation. They would then be able to decide for themselves whether to accept it gracefully or to spend the money on the costs of moving if they really cannot stand the change in their local environment.

The planning system in the Uk doesn’t work well.

Many people dislike it because they still end up with too much development on their doorsteps. They do not like the density, location and style of much of the building near them.

Many developers dislike it, because it entails them spending a lot of money on planning advisers and lawyers. The system is prone to delay and cost before they get the permissions they seek.

In recent years the planning system and the general economic circumstances have conspired to produce very high house prices and a very low build rate by historical standards. The last government forced large numbers of prospective new houses on parts of the country that did not want them through their regional plans, but still the build rate remained way below what they said they wanted. People seeking a home do not like the system as a result.

Because house prices are high and planning permissions for new homes limited, land values with planning permission are also very high. Many people feel the system is unfair. They feel that only the rich and powerful developers at one end and those who are prepared to break or bend the law at the other get the valuable permissions. Success in the planning lottery can turn cheap land into a very valuable commodity, making a six figure or even a seven figure sum of profit from just one acre with permission to build houses.

The big developers just spend and spend on planning advice and lawyers, pushing until the system in enough places gives them the permssions they need to carry on their business. Some people build on land without permssion, or push and push from a barn or commercial premises or a single property until they have dwellings on the plot they have acquired at agricultural or derelict land or other lower prices. This is why so many law abiding people who stick to the rules feel it is unfair. They might have their application for a conservatory or garden wall turned down for dubious reasons and have to live with the decision.

I will not restate the long arguments we had on this site under the last government which set out why high house prices were largely the result of the crazy money policy pursued up to 2007. It was the authorities approach to money, credit and bank regulation which led to the mortgage bonanza, lending more money at ever higher multiples of income driving house prices up.

This week I want to look at the issue of how the planning system should be changed to try to make more people happy with it.

The government has proposed two main changes. The first is a democratic override to deal with the sense that many have that the system allows too many homes to be built in the wrong places. Local communities will be able to have a referendum to approve or veto new development in a village. It will require 80% to vote in favour. The second is an incentive to Council planning authorities to allow more homes to be built by offering them extra money to spend based on how many extra homes they build.

What do you think of these ideas? I will set out some other possibilities later this week.

Most progress is being made by the government with demolishing the architecture of top down control and centralisation that the last government imposed on Councils. This week the Audit Commission was added to the RDAs, the regional housing targets and plans, the Comprehensive Area Assessments and many of the requirements and monitors placed on local government.

The Audit Commission was revealed to spend liberally on itself. It was also urging Councils to go over to fortnightly bin collections, when most of us want to keep the weekly collection – or more frequent – that is common in most of the country.

I am delighted to see the back of this apparatus. It now poses the challenge to Councils to shape better policies for themselves and to be properly answerable to their local electors. The UK has become so overgoverned, with far too many layers of government. The complexity made it difficult to know who was responsible for what, and the presence of so much power in the hands of unelected reigons and quangos could thwart effective accountability if you did find out these intermediate layers were to blame.

It will be cheaper, and easier to understand. Some Councils will thrive with the new freedoms and others will find them difficult to grasp. It will be more worthwhile and more interesting to be a Councillor, as there will be more opportunity to do well- or not so well – for your local community. The system of black marks and gold stars, of constant outside interference, ticking of boxes and comprehensive advice, guidance, audit and regulation stifled innovation and often killed commonsense. Can they be born again in Town Hall and County Hall?

In the USA the latest move from the Fed to say it will buy up some more Treasury bonds to try to stave off another slowdown or worse has been dubbed by some wags as QE2. Some here in the UK want the Bank of England to also run up another phase of quantitative easing so they too can have QE2 headlines.

The reaction of the markets to it was at first sight perverse. The dollar strengthened, when you might have thought it would weaken on news of more money printing. The Stock market weakened, when the authorities hoped that more QE would send a message of hope for a stronger recovery. The share market first of all took it as sign of weakness that it was needed. Poeple bought the dollar, perhaps because they have been borrowing too much in low interest rate dollars to invest elsewhere and want to cut their bets.

One of the problems the authorities on both sides of the Atlantic have trouble grasping is the move to make the banks hold more cash and capital is preventing much of the money they are printing from circulating in the private sector and adding to credit. If the banks were working as normal the amounts printed would already be offering a huge kick to activity and would be on course to trigger another bout of inflation. As the commercial banks are constrained,a Central bank buying in more bonds will not necessarily fix it in the way intended.

In the Uk the money printing was on an extreme scale. Most of the money simply fed excess public spending. It was inflationary only because it helped lower the value of the pound, and inflationary in the public sector where it was used to finance another round of pay increases and sloppy buying. We then imported some inflation. Local wages have not taken off in an inflationary spiral because the banks cannot lend the money on recklessly to the corporate sector, who cannot therefore pay much higher wages.

If the authorities really want to ensure higher growth rates next year they need to relax the controls on the banks, so more of the high powered money that is out there can be lent on.They need to do so at a sensible pace, to avoid an inflationary blow out again. the good news is that the leading commercial banks now have levels of cash and capital last seen in the prudent 1990s, before the extraordinary relaxation of money and bank capital controls seen in the period 2000-2007.

For some the £150 milllion fine on the Uk for not displaying the EU flag on projects which received “EU” money is the last straw. It is certainly more proof of Labour incompetence. I remember investigating the use of the EU logo on Welsh projects when I was in office there. The legal advice was clear – the symbol had to appear where money had been received. I was even advised against putting the Union flag on the project as well to show that British taxpayers had also contributed directly as well as indirectly through the EU. The rules on these schemes just demonstrate the lop sided deal we have with the EU, and their attempt to buy our love with our own money.

It is time Mr Hague went to Brussels and tackled some of the issues which feed our sense of unfairness. Many people in the UK are fed up with power seeping away. We did not like Mr Hague’s acceptance of an enlarged EU diplomatic service. That is more cost for the member states, seeking to undermine our own Foreign office and diplomatic service. We did not like Mr Hague’s opting in to more of the EU’s movement into criminal justice affairs. We do not wish to see the UK have to pay out £150 million for a technical infringement, at a time of public spending restraint. We would like the EU to cut its budget to help with our spending review, and would like to see EU spending cut back rather than important domestic programmes.

Throughout the Thatcher era Labour claimed public spending was being cut. Each year it rose. In 1978-9, the last Labour year, total public spending was £75 billion. By 1989-90, the last Thatcher year, public spending was £200 billion. This was up every year and up after allowing for general inflation.

According to this year’s budget plans, public current spending will rise from £600.6 billion in 2009-10, the last Labour year, to £692.7 billion in 2014-15, the last planned year of the Coalition government in this Parliament. That’s a rise of £92.7 billion, or more than 15%: a rise of £1500 for every man,woman and child in the UK.

Total spending including capital will rise from £669.3 billion in 2009-10 to £737.5 billion, a rise of £68.2 billion. This shows that capital spending will be cut, according to the plans inherited from the last Labour government which the Coalition government has accepted.

So why then do we hear so much about cuts?

There are three main reasons.

1. Some departments and Councils had wildly optimistic plans for increased public spending over the next five years. They are now having to cut the increases in the plans. This is very different from having to cut important things they are already spending on.

2. Many public sector managers believe in the “parade of the bleeding stumps” to try to frighten or shock the Treasury and the Cabinet into making more money available. They deliberately claim they have to cut important things to force the hand of the paymasters. It was always thus. When it comes it to it, if they do not get more money, they often then manage things more sensibly and avoid the bad cut. Sometimes they go ahead regardless, cutting clumsily to make a point.

3. The Treasury has asked to see what larger cuts in spending would look like, as they presumably wish to establish new priorities and need to see what could be achieved by cutting in one place to spend more in another. The Treasury’s requests have given departments more scope to play the “inappropriate cuts” game under item 2.

If a major private sector company needs to cut its costs – or reduce its forecast increases in spending in future years – it usually does so in private, hammering out what is feasible without worrying customers and shareholders. A leading retailer, for example, would not start off by saying in public they would have to open the store for shorter hours, cut out a couple of departments or worsen the quality of the service. They would normally look at how they can they cut stocks without cutting product availability, how they can do all the back office functions with fewer staff, how they can they buy better.

We need a new tone and approach to public sector budgets. It is bizarre to listen to this debate about massive cuts, when we know that overall spending will rise. It will be a sign of very bad public sector management in individual Councils and quangos if we end up with clumsy cuts in services, when the overall spending totals allow us to avoid such an outcome.

Listening to parts of the public sector, it’s as if they want things to go wrong.

Yesterday we had to be treated to a leaked letter from the Department of Justice, enabling the media to have another round of discussions of “deep and damaging cuts”. Few point out that current public spending in cash terms will rise by 15% over the period 2010-15 overall, which should give plenty of scope to protect everything worth protecting.

I often had to “cut” budgets in companies I helped lead. We never cut the quality or reduced customer service, and never treated the customers or the wider public to a running commentary on how we were going to cut budgets to make ourselves more efficient. Cutting waste, inefficiency and overall unit costs is just part of good management. It’s what you have to do if you want to compete with China.

Today the Bank of England will confirm the barrage of gloomy briefing about how it needs to cut its forecast of growth and increase its forecast of inflation. It will be implied that the “cuts” and the VAT increase are to blame. It could just be that once again the Bank has made lousy forecasts and needs to get its act together.

After all, it was the Bank which recommended the ERM which did so much economic damage in the early 1990s. It was the same Bank which fuelled the credit boom in 2005-7 with too much easy money, and the same Bank which helped bring the bloated banks down by starving the markets of money and hiking interest rates in 2007-8.

The “cuts” – a slower rate of increase in cash spending – should have come as no surprise as Labour enacted prospective cuts before they left office, and Conservatives made clear they wanted to speed these up. That should not have been difficult to forecast. The current high inflation has nothing to do with Mr Osborne’s future VAT increase, and everything to do with the Bank’s erratic monetary policy.

Finally, why does the Bank expect its QE and low interest rate strategies to produce faster growth in credit and in output, when the banking regulator is insisting on the banks holding so much more cash and capital? The Bank prints more, then the banks have to sit on it to satisfy the authorities. It also forces the commercial banks to put up prices and write less business.

The Bank seems to be following a growth rather than an inflation target. If it wants to do that more successfully it needs to mend the banks, and change the regulations.