Article by Sam Bowman and originally posted on Capx.
Last week gave us a picture of things to come in Britain. First, the Government raised National Insurance contributions by 2.5%. This was ostensibly to pay for “social care”, but the money will mostly go to the NHS, with social care’s problems left largely unaddressed. Then, on Saturday, The Times reported that the Government will abandon many of its plans for planning reform, under pressure from Tory backbenchers and voters.
The second of these should not be a surprise. In May, I argued that the Government was overreaching in its plans to bring zoning to England, eliminating the de facto veto that locals usually have over new developments. It seemed clear to me that the Government would abandon the more ambitious parts of its plans, because voters and their MPs would object. Well-intentioned planning reformers ignored an iron law of British politics: that we don’t smash the NIMBYs, the NIMBYs smash us.
The Government had already raised other proposals, like building on damaged green belt land, or using an ‘algorithm’ to better match housing targets with market demand. It dropped these in the face of backbench opposition from MPs led by Theresa May, but even MPs who normally support more housing, like Neil O’Brien, opposed some of these ideas.
O’Brien’s point was that the algorithm as proposed would mean imposing housing on Tory-run shires, not Labour-run urban areas, threatening the Conservative vote. Even after the algorithm was dropped, that danger was still felt when the Tories lost the Chesham and Amersham by-election, in a result that some Tories saw as driven by concerns about new housing in the constituency.
Now that the Government may drop most of its other plans, last week’s tax hike shows Britain’s likely economic future. Weak economic growth will mean taxing the working age population more and more to pay the bill to cover care for the country’s ageing population. There is no pretence anymore that the goal in social care is about finding a market-based solution, in which the state just pays the bills – the current ‘solution’ to funding social care is to raise taxes and slowly absorb the private care home sector into local council and NHS-provided care, with conditions and efficiency likely worsening in the process.
Along with the planned rise in corporation tax and phase-out of the Super-Deduction planned for the end of this Parliament, by the time the next election comes around, taxes in Britain will be higher than they have been since the 1950s, and much higher than they were under even Gordon Brown. There are rumours that capital gains tax will be raised soon.
This is the path Boris Johnson has chosen. With the exception of the Super-Deduction, which is a smart but short-lived policy, his government is doing little to nothing for growth. Even if raising taxes on work while we’re emerging from the worst recession in living memory might weaken the recovery, nobody in power seems to care.
And they are kidding themselves about what they’re doing. The Government says it wants to deregulate, while introducing root-and-branch regulation of Big Tech that will micromanage Google and Amazon like they’re British Gas or Thames Water. And over time this will grow to encompass more and more of the digital economy. It is fixated on Net Zero but is unwilling to introduce the one thing that would achieve that with minimal economic damage – a carbon tax – preferring an incoherent whack-a-mole of prohibitions on things like gas boilers and petrol cars long before their electric alternatives may be viable, along with inconsequential bans on single-use plastics.
It has bowed to Treasury officials on curbing self-employment, capturing so many self-employed workers within IR35 that half of hauliers even blame it for the current shortage of truck drivers. It has adopted ludicrous rules on biodiversity that require every new development to add a ‘net gain’ to get approval, adding costs, uncertainty and bureaucracy to the one thing everyone agrees we need more of.
The list goes on. But all is not quite lost on the growth front. The UK’s planning regime is so bad that even marginal improvements could still deliver quite a lot of economic growth. And while most of the Government’s original plans may be dead, there is still a more realistic proposal on the table that could make it through Parliament if the Government adopts it.
Today, a group of backbench Tory MPs led by John Penrose – who understands the importance of making planning work to strengthen the British economy – is bringing forward a bill that would bring Street Votes onto the parliamentary agenda, ready to be adopted by the Government if it wishes later on.
Street Votes would let individual streets vote on their design and density rules as a supplementary way to allow new developments, when residents normally have development forced on them by housing targets and the local council. This would, of course, allow most streets to vote not to add anything, keeping even England’s most hardcore NIMBYs happy.
But it would also mean that there is a huge financial reward for places that vote for greater density. A street of semi-detached houses in a London suburb would become vastly more valuable if residents chose to allow themselves to densify into four-storey Georgian-style terraces. Every property owner on the street would become a millionaire overnight.
Even with robust safeguards against abuses – requirements that a supermajority of long-term residents approve any changes, say – this would create incentives to encourage people to vote for greater density for their areas. That would provide massive, market-driven compensation for the disruption and loss of amenity associated with new developments that is often the biggest complaint of people who oppose new construction near them.
The current regime and the Government’s previous plans both work on the principle of imposing new houses on unwilling locals, and giving them little or nothing in return. Street Votes, in contrast, use incentives and local consent to put new housing where people object to it least, and where the market wants it most.
Because Street Votes do not try to smash the NIMBYs, they are a planning reform that can make it into law, so that economic incentives can deliver the housing we need. And they will tend to do so in Labour-held areas, not Tory ones, so the risk to the Conservatives is low. Another demonstration of their viability came today, when the national Community Planning Alliance of groups opposed to the original White Paper proposals endorsed the plan, joining many others from across the ideological spectrum.
Street Votes are a ‘minimum viable policy’ that can actually survive the political process and still deliver more housing supply. After today’s bill is introduced, it will be up to the Government to decide what to do with it and the Planning Bill itself. Does it give up, and settle for stagnation and further tax rises? Or does it take this final chance at meaningful planning reform, and try to use that to drive growth? If there is any one cure for Britain’s economic sclerosis, this is it.