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Testing the foundations of the Government’s Productivity Plan

31 July 2015

Michael Harris

Alongside the Summer Budget in early July, the UK Government published a ‘productivity plan’ that was used as the basis for announcing further changes to planning in England. But how strong are its foundations in terms of evidence?

The plan, Fixing the Foundations: Creating a More Prosperous Nation, was presented as a comprehensive strategy setting out a cross-government agenda to increase living standards and improve people’s wellbeing. The Government rightly noted that there is a ‘productivity gap' between the UK and other leading economies – a long-standing problem of course, and one that successive governments have largely failed to close.

The Government’s plan is built around two ‘pillars’: encouraging long-term investment and promoting a dynamic economy. Greater ‘planning freedoms’ were described as contributing primarily to the latter (I’ll return to this point later), and linked especially to housing. Whether or not, individually or collectively, the measures announced by the Government are helpful is not the main focus of this post (the RTPI issued a detailed response to the announcements at the time).

But we did say as part of our response that quoting selective research on “the costs of planning” (and repeating similar statements made by the Treasury), as the plan does, derives from a particular viewpoint and is certainly not helpful. Good planning has “benefits” as well as “costs” which need to be considered alongside each other. Planning helps to ensure the coordination of infrastructure investment and housing growth; in this and other ways it is critical to economically successful places. The absence of this coordination continues to be a serious problem which contributes to opposition to some housing development – a point the RTPI President made in a letter published in The Times.

The evidence cited in the producticity plan is selective in two main ways.

The first is in which research is cited. It would seem that for parts of government, when it comes to planning there are only a couple of researchers and only a couple of pieces of research worth citing.

The productivity plan includes yet another outing (on p.43) for the figure put forward by Professor Michael Ball from the University of Reading of £3 billion for the “transaction costs for major housing developments”. As noted in our report on The Value of Planning (p.35-6), this figure has been much criticised, methodologically and for its reliance on old data. It’s also somewhat hard to verify, since it’s not very clearly broken-down. As authoritative commentators have suggested, some amount of time is obviously required to evaluate development proposals, making the real challenge that of distinguishing between reasonable and avoidable delay.

Professor Ball is then referenced twice (for the same report) a couple of pages later on in the plan, including a quote from him that the planning system can create a “slow, expensive and uncertain process” that reduces house building. No evidence is included for this assertion. The other researchers referenced in the plan are from the LSE, for their characterisation of “planning constraints” as a kind of 'tax' on office space.

The second respect in which the productivity plan is selective relates to this but is more fundamental. It’s about what we understand by planning.

As we’ve argued before, if 'planning' is only understood as regulation, then at least we should also recognise that regulation has benefits as well as costs (for an analogy, think about food hygiene regulations: how many people would eat in restaurants if there were no standards for food storage and preparation?)

Government could understand planning as a key component in the good design and efficient functioning of successful cities, including generating the homes and jobs they need. This would lead it to a rather larger and more substantive evidence base about planning – by researchers who know about planning in practice...

This isn’t enough however. Good planning goes beyond regulation, but this isn’t reflected in the productivity plan, where the planning system is regarded as “one of the most significant constraints facing the economy” (p.41).

Instead of this, the Government could understand planning as a key component in the good design and efficient functioning of successful cities, including generating the homes and jobs they need. This would lead it to a rather larger and more substantive evidence base about planning – by researchers who know about planning in practice – and how it can help to make cities productive (for example, the work of Sir Peter Hall, among others). 

The result might be a perspective on planning not as something that needs to be weakened in the name of a ‘dynamic economy’, but as something that needs to be strengthened as a ‘long-term investment’ in the success of our cities. Maybe that’s what successive governments have been missing in their attempts to close the UK’s productivity gap.

About Michael Harris

Dr Michael Harris is Deputy Head of Policy and Research at the Royal Town Planning Institute, where he leads on the RTPI’s research activities. Previously he was a senior associate at the new economics foundation (nef) think tank, and Director of Public and Social Innovation at Nesta (the National Endowment for Science, Technology and the Arts). He has also worked in local government and academia. Michael has an on-going interest in localism, health and wellbeing, and community engagement.