While the industry has largely judged the broad-brush strokes of the government’s Growth Plan as sound, questions have been raised about the impact of deregulation, the cost of the tax cuts and the difficulties of delivery.
Melanie Leech, chief executive at the British Property Federation, praised the “bold ambition for growth” and for holding the aim to “get Britain building” at its “very heart”.
Following chancellor Kwasi Kwarteng’s statement, she said: “The property sector is fully committed to working with the government to unleash private capital, remove barriers to investment and accelerate the delivery of the workspaces and homes that we need to transform regional economies.”
Leech also endorsed the proposed investment zones, which aligned with the BPF’s own proposals, which setting out how a combination of planning flexibility and tax incentives can provide a powerful incentive for developers, institutional investors and major employers.
“We await details of the new planning and tax zones, but to truly succeed these must be public-private partnerships with a clear plan for creating sustainable communities as well as jobs, housing and infrastructure and we look forward to working with national and local public sector partners to turn the vision into reality.”
She added: “Accelerating the speed of delivery helps our members’ investment in housing and enables them to deliver more. We await the detail, but today’s announcement on planning reforms in investment zones sounds promising, and if properly resourced in local authorities, should deliver more investment in homes across the country in places that are bidding for investment zone status.”
Silas Willoughby, planning associate at Cluttons, said he was looking forward to a longer-term announcement “at some point that concerns levelling up or ‘trickling down’”, and “a reinvigoration of the White Paper and a tweaked NPPF to build on the high-level commitment today to making infrastructure easier and quicker to bring forward”.
But Willoughby cautioned against either ignoring local expertise or the role of the planning inspector. “A reduction in the powers of the Planning Inspectorate… would come at a strange time,” he said. “Greater thought centrally needs to be given to more inclusive planning consultations, fast-tracking of brownfield sites, flexible uses and affordable developments right now.”
Bruntwood director of strategy Jessica Bowles said the idea of investment zones was “a good one”, but the zones would only be “game-changers” if they were “properly rooted in the vision and opportunity of their towns and cities with strong connections to their communities, good quality jobs, great placemaking and with long-term investors from both public and private sector”.
Action, not words
Mike Derbyshire, head of planning at Bidwells, said action was more important than words. “Accelerated measures that translate these proposals into much-needed legislation will be vital,” he said. “This isn’t the time for dither or delay.”
He added that in areas like the Oxford-Cambridge Arc, which is responsible for 7% of England’s total output, “a lack of development is threatening to place a lid on the region’s huge potential”.
“To free up our fastest growing towns and cities, like Oxford and Cambridge, the government must consider development risks stunting their growth. That means reviewing the purpose of the Green Belt and championing opportunity areas for life sciences and technological advancement. Only then can the UK become a global exporter of innovation.”
Consistency
Trevor Morriss, principal at architecture studio SPPARC, said consistency was more important. “Over the last 12 years we have had 13 housing ministers. This is the fourth in 2022. New legislation like the Levelling Up Bill has fallen off the statute books faster than the time it takes to receive permission for new development. The revolving door of new decision-makers and the doubt that casts on promises of change is damaging to our economic growth and long-term prosperity – so we must see the government act swiftly to deliver in the months ahead to fulfil the much-needed outcome.”
Jason Towell, real estate partner at Cripps, flagged that the detail of the liberalised planning rules would only become clear “in due course”. “Previous attempts at relaxing planning rules have not always proved entirely successful,” he said. “For example, permitted development rights have created their own complexity and do not always deliver good development. The key will be whether the relaxed rules make it quicker and cheaper to deliver development and for that development to be of a suitable quality.”
Cadogan chief executive Hugh Seaborn was most impressed by the government’s reversal on tax-free shopping. “This is a huge relief after nearly two years of lobbying,” he said. “The reintroduction of VAT-free shopping for tourists is vital to boosting our retail, hospitality and tourism industries post-Covid and we now have a level-playing field alongside other European cities that never ceased to offer this incentive.”
Missed opportunity for green growth
But A/O Proptech founder Gregory Dewerpe said the £50bn of cuts and promises were tackling the wrong part of the equation. “Committing £150bn to prop up energy bills when it would cost £400bn to retrofit the country’s housing stock seems a missed opportunity to future-proof our buildings and spur green growth.”
And it is not as though the government would have to stump up all of the cash, he added, pointing to “$500bn of green finance waiting to be deployed to support green growth”.
Philippa Spence, managing director at Ramboll UK, agreed that more onus should be put on the environment, saying it cast “a shadow over the good news” of the energy support packages. “The commitment to reform the planning process risks unwinding key environmental protections unless these are retained,” she said. “The planning system does need reform, but not at the cost of our environment, already one of the most biodiversity-depleted in Europe.”
Jennet Siebrits, head of UK research at CBRE, added that the “levelling up in a new guise” was “generally positive”. However, she added: “We were hoping to see a greater focus on initiatives to support the delivery of net zero emissions. Removing “green levies” will help households, but relaxing environmental protections could be a backwards step in terms of the UK’s green ambitions.”
Tracy Lovejoy, planning partner at Irwin Mitchell, also issued a note of caution. “It is important that the government keeps the right balance between deregulation, which is necessary for growth, and the protections contained within the current planning and environmental framework. The factors that make deregulation desirable, or necessary, need to be considered in conjunction with, and not in isolation of, these issues.” She added that “environmental considerations are no less urgent because of the economic crisis”.
Business rates
And of course, there was the ever-present elephant in the room – business rates. The BPF’s Leech said the lack of movement on that issue was “disappointing”.
Leech said: “This archaic tax is one of the fundamental causes of high street and town centre decline and its current unsustainable burden on businesses does not fit with the government’s vision for a low tax, dynamic economy. We urge government to look again at how the system can be modernised.”
Keith Cooney, head of business rates at Knight Frank, said failure to do anything about the rise in business rates – except by cutting them altogether in investment zones – risked contradicting the chancellor’s attempts to support businesses. “This elephant in the room went unnoticed, but represents a possible increase in tax from £25bn to over £27.5bn from April, once the CPI inflation rate is applied.”
Colliers head of rating John Webber called it “the elephant in the room”, saying it was “disappointing” that it was, again, “largely ignored”. “With just six months to go before the next revaluation, businesses still have no idea what their rateable values will be, what the multiplier will be, nor how the government will respond to its summer consultation on transitional relief,” he said.
“With no clarity about how much they will be expected to pay in their rates bills come April, how can businesses be expected to plan sensibly ahead? Without this reassurance, any ‘levelling up agenda’ will be meaningless. And the high street unlikely to get back on its feet. It’s all very well giving reassurance over high energy bills and other taxes, but all this will be meaningless if business rates are allowed to soar.”
Josh Myerson, head of rating at Montagu Evans, added “The chancellor’s fiscal statement this morning was a missed opportunity to address the issue of business rates head on. We welcome the statement that newly occupied or extended premises within the new investment zones will not pay business rates, but in reality this will only help a small percentage of the business community that is struggling with their rates burden.”
High cost
The other elephant in the room was the cost of the proposals, at a time when government borrowing is already high and the cost of debt is soaring. The official costings say £37bn over the next financial year, but critics predicted it could be far more than that. Garry White, chief investment commentator at Charles Stanley, noted that housebuilders’ shares had initially jumped at the prospect of a cut to stamp duty, the release of more land and simplified planning. However, he said those gains “evaporated quickly as global investors concluded that the chancellor’s growth gamble was too risky – and the pound resumed its slide against the dollar”.
The Treasury is, of course, hoping to make some money back, not least by putting a rocket under land disposals. But Audley Villages land director John Nettleton said while the pledge to dispose of more public land would be a good for some, it “will do nothing to help the overarching need for specialist housing”, calling for specific measures to allocate land to elder living.
Tom Bromwich of Coventry agency Bromwich Hardy said the policies offered some “much-needed clarity” following a period of “considerable drift”. “The commercial property market remains strong despite this backdrop, and more clarity on business rates and the Exchequer’s approach to commercial tax will help provide more of the certainty that business needs. But we want to see serious moves to tackle inflation and help reverse the trend for ever-rising interest rates, as well as power being given to planning authorities and their partners to bring forward the new developments needed to meet demand. We at least have a starting point.”
Assetz Group chief executive Stuart Law said proposals of this nature have “come forward before many times, only for them to be kicked into the long grass”.
A 1980s classic
Alistair Watson, UK head of planning and environment at Taylor Wessing, said there was considerable support for investment zones, calling them “the 2022 version of a 1980s classic”, referring to Lord Heseltine’s former enterprise zones.
Richard Godmon, tax partner at Menzies, also noted that the new investment zones were reminiscent of enterprise zones, but that they will “provide a much more favourable tax environment for businesses and they promise to become a magnet for inward investment”.
Colin Brown, head of planning and development at Carter Jonas, drew the same comparison. “The most successful equivalent to investment zones over the last 40 years was the London Docklands Development Corporation,” he said.
“The investment zones announced today will provide certainty, greater freedoms and incentives to landowners, developers and investors, specifically in relation to environmental regulations, stamp duty exemptions on land purchases and potential lower affordable housing requirements. However, the governance is not yet clear and there remains the potential for issues of alignment between local authorities and investors and developers to impact the pace of development.”
Brown added that, on paper, few areas of the country seem to be untouched by today’s announcement. The supporting documents list 38 areas that are in talks about setting up an investment zone, including the whole of Greater London. However, Brown noted that “not all of those areas listed are currently administered by a combined authority”, so it “remains unclear how critical seed funding for enabling infrastructure will be deployed”.
Sounding like Heseltine is not enough, said Taylor Wessing’s Watson. The government has to deliver like Heseltine, too. “The previous government did not deliver on its own manifesto pledge of more sustainable development; it failed.”
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