Grow the Economy!
Rachel Reeves said (in her first speech after assuming her post as Chancellor of the Exchequer) that it was the new Labour administration’s ‘national mission’ to grow the economy. One of the central planks in this strategy was to reform the planning system because ‘our antiquated planning system leaves too many important projects getting tied up in years and years of red tape before shovels ever get into the ground’. The theory is that more building means more jobs and more economic activity. The UK planning system has been identified by many, including the incoming government, as one of the obstacles to an accelerated building programme.
Constructing new infrastructure (for transportation, energy and water) is one form of building-based economic activity and this is in Labour’s plans. However, it is increasing the amount of housebuilding that is particularly popular with Reeves. This is useful because more housebuilding not only gets the economy going but it solves another inherited headache for this new government, the chronic under-supply of housing.
There is no doubt that successive governments in the UK have neglected the need to build more houses, and housing that is affordable for everyone in particular. Reeves’ stated intention is to initially accelerate stalled housing sites, and hold local authorities to delivering housing quotas, something the previous Conservative administration stopped doing.
The Pitfalls of Placing Economic Growth Above Social Value
The new Chancellor wanting economic growth to be placed at the centre of the planning system means that, in planning speak, there would be a presumption in favour of certain kinds of development, such as housing, infrastructure etc., if it was seen to boost the economy. To do this would require changes to the main guiding document for planning, the National Planning Policy Framework (NPPF) and to the way that ministers use our powers for direct intervention.
There are a lot of houses that need to be built. According to a study commissioned by the National Housing Federation (NHF) and Crisis from Heriot-Watt University, around 340,000 new homes need to be supplied in England each year, of which 145,000 should be affordable. Labour has pledged to build around 370,000 a year which, should they achieve this, matches this demand and exceeds it.
From a social value perspective, the issue is not about whether there is a need for more housing and infrastructure – that much is obvious. But if there is a presumption in favour of development, then is there a danger that, in the process of trying to make people’s lives better, we make their lives worse?
Economic Growth Is Not Without Its Social Consequences
As a former Bank of England economist and Shadow Chancellor, Rachel Reeves will be well aware of a potential pitfall of growing the economy without thinking about the consequences for people. This is something economists refer to as ‘gross decoupling’.
Gross decoupling is the term used when GDP rises, but average weekly earnings does not follow. The chart below shows that since 2010, when the economy has grown, average earnings have actually fell, or risen at a much slower rate. This is largely why the UK and many other mature economies are facing voter dissatisfaction, despite reasonable macro-economic performance. Politicians may tell us that things are not that bad at a national level, but if it does not feel that way to proverbial ‘working families’ trying to make ends meet then the economic policy cannot really be deemed an electoral or (more importantly) a societal success.
Source: NEF and the FT
We can illustrate why an understanding of the social value implications of economic policy decisions is so important by looking at the destructive effect of austerity policies. In Britain, this was largely a result of the failure to test how the policy of ‘austerity’ would affect all the people living in Britain. The economist Paul Krugman explains why the ‘unforced error’ was such a mistake, claiming that a fiscal strategy to reduce spending in public services appears to be responsible, particularly if you are reacting to fears about national debt or the trade deficit. But Krugman explains that even if these things were a serious threat to the economy (he argues that in Britain they were not) austerity ends up being a deeply irresponsible policy because it directly leads to crumbling infrastructure and deteriorating public services. In other words, even if the economy did pick up, people would be worse off leading to net negative social effects.
Returning to housebuilding, The TCPA contends that poor housing leading to a deterioration in health costs the British taxpayer £1.4 billion a year. There is currently no requirement that homes should safeguard our health. The TCPA say that we need compulsory minimum standards. Without them, we are building the ‘slums of the future’. Poor housebuilding is not confined to old stock. There are many examples of poorly built new homes, or estates that are constructed without the social infrastructure and amenities that rob them of the potential to become neighbourhoods.
It is fine for politicians to say that they would not support sub-standard or inappropriate development. The problems start when a policy directive that seeks to strip away ‘red tape’ loses any nuance of judging cases on their merits – a British planning totem.
Solving the Problem the Social Value Way
The obvious way to avoid building for growth that coincidently undermines the social value of those who live near it is to require every significant planning application to be accompanied by a Social Value Statement. This was done recently by the Earls Court Development Company for its regeneration scheme on the border between Kensington and Chelsea, and Hammersmith and Fulham. The Statement requires developers to explain how the development will deliver social value for the majority of people living, visiting and working on their site for the duration of the use period of the scheme – not just the construction period. Inevitably, this means not only ensuring that the area around the new development becomes better than it was before building started, but it also requires a strategy that shows how each layer of society will benefit from development. Often this means a thoughtful approach that will need to stretch beyond the boundary (the red line) and into surrounding communities.
This approach may well sound like more ‘red tape’ to impatient Chancellors and will definitely displease some developers. However, the history of built environment projects across Europe is littered with examples that show how a lack of thought and low pro-social investment at the design stage leads to an extremely expensive price tag for local authorities and governments down the line. A little bit of patience and thought could both stimulate economic growth and better produce social outcomes. Let us hope the Treasury is not in too much of a hurry and gets it right this time.
