Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence

Memorandum by the British Property Federation (IT 45)



The British Property Federation

  1. The British Property Federation is the trade association of the property industry in the UK. As such, it speaks for a broad membership of companies and individuals who own, develop, manage and invest in property. The BPF promotes the views of the whole industry, both commercial and residential. Its membership comprises all the major property companies and property owning financial institutions, together with the professions serving the property industry, giving the Federation its unique ability to represent the views of owners of existing developments as well as future. The property assets held by the BPF's members are in excess of £70 billion.

The Role of Property in the Economy

  2. Property plays a crucial, but frequently overlooked role in the economy, both as an essential factor of production and as an investment asset. The commercial property industry provides the basic infrastructure of the economy, and so the efficiency and competitiveness of the UK economy depends to a significant extent on the efficiency and competitiveness of the UK property industry. Nearly every business needs some form of premises from which to function. The property industry develops and holds a stock of capital-intensive assets which provide a flow of services to the industry's customers, primarily through bearing the risk involved in developing office, retail and industrial buildings, which are often large and always long-lived, and then making them available to rent in smaller units for shorter periods to suit the individual needs of businesses. As a result, businesses do not need to tie up scarce working capital providing themselves with working space. As an asset class, property offers a relatively secure investment from which rent provides a secure income, and the physical asset can form part of the collateral against which funds for further investment can be borrowed. London Economics have estimated that some 9 per cent of GDP in 1994 was directly related to the provision of commercial property. This compares with 21 per cent for manufacturing.

  3. The property industry is an active working industry, which responds to the needs of its customers and the opportunities in the marketplace in order to offer a modern, efficient space in which the country lives, works and plays. As such, it is making a vital contribution to the realisation of a wide range of Government policies, including recycling previously-used land, creating opportunities for employment, enhancing national competitiveness, promoting sustainable development, ensuring the vitality and viability of town centres and combatting social exclusion.

  4. Property investment and development is acutely sensitive to the competitive factors which influence occupiers' choices of buildings and location, one of the most important of which is transport provision. Ideally, development will follow transport infrastructure, and not vice-versa. Consequently, the property industry has a direct interest in how transport is planned, funded and managed.

Property and Transport

  5. The British Property Federation supports the objective of developing a sustainable integrated transport policy: integrated not only between transport modes, but also with other related policies, as part of a coherent, holistic vision of land-usage, spatial development and economic activity. A sustainable transport policy must reconcile the need to protect and preserve the environment with the drive to create wealth through economic activity and the social desirability of the opportunities created by greater individual mobility.

  6. For the Federation's members, the crucial consideration will be whether transport policies ensure the appropriate transport accessibility necessary to sustain the economic activity and use of a development. Some areas or industries can only achieve the appropriate level of access by road, and will face major competitive difficulties if this is curtailed. The motorway and trunk road network has developed as the conduits of economic activity. Business has responded by relocating to peripheral estates, such as Park Royal on the A40 and Stockley Park on the M4 in order to have access to the road network. This migration was encouraged by the prevailing planning policies of the time. Changes in policies which do not take account of the forces which underpinned the locational decisions of the time threaten effectively to ossify certain sectors of the economy as a consequence of their current situation, and will damage the economy as a whole. Research conducted by Symonds Travers Morgan for the BPF on business attitudes when taking locational decisions found that companies were prepared to find alternative locations or not move at all, even if this meant foregoing the wider benefits of a move, rather than accept the lower parking standards which would prevail.


The Integration of Transport and Land-Use Planning

  7. Transport policy cannot be divorced from land-use policy. The BPF's primary concern is in the relationship between the two, and their consequential influence on development, PPG13 (Transport) recognises that "The location and the nature of . . . development affect the amount and method of travel; and the pattern of development itself is influenced by transport infrastructure and transport policies." Changes in transport policy will have clear implications for land-use at transport nodes, the degree of preference for brownfield or greenfield sites for particular developments, and for the prospects for town and city centres. By the same token, therefore, if land-use policies are to be changed, the changes must be supported by transport policies.

  8. This essential relationship is already understood and reflected in existing Planning Policy Guidance. PPG1 (General Policy and Principles) states that:

    "In order to achieve sustainable patterns of development and to help reduce the environmental impacts of transport, local authorities should integrate their transport programmes and land use policies in ways which help to

    —  reduce growth in the length and number of journeys;

    —  encourage alternative means of travel which have less environmental impact; and hence

    —  reduce reliance on the private car.

    The key objectives for the planning system are to:

    —  influence the location of different types of development relative to transport (and vice versa); and

    —  foster forms of development which encourage walking, cycling and public transport use."

  9. These general principles are reflected in PPG13, which sets out general guidance on integrating transport and land-use policies, and offers specific guidance on locational policies for particular developments. Taking retail development as an example, it stresses the importance of promoting the vitality and viability of existing centres, and advises that "Shopping should be promoted in centres which are more likely to offer a choice of access, particularly for those without the use of a private car". In practical terms, this means that local plans should aim to maintain and revitalise existing centres, promote development in or around existing centres in preference to out-of-town locations, and promote mixed retail and residential uses where feasible.

  10. This then feeds into the specific guidance on town centres and retail developments in PPG6, which states explicitly that "Towns and district centres should be the preferred locations for developments that attract many trips and local planning authorities should adopt planning policies to locate major generators of travel in existing centres, where access by a choice of means of transport, not only by car, is easy and convenient; enable town, district and local centres to meet the needs of residents of their area; [and] safeguard and strengthen existing local centres . . . ;" These considerations are reflected in subsequent guidance aimed at ensuring that town centres can compete with out-of-town retailing in attracting car shoppers, while encouraging taking one car journey for several purposes, that traffic management and public transport systems are more closely integrated to offer alternatives to car travel, and to provide an appropriate level of car parking to support this.

  11. It would appear from this brief examination of current planning policy guidance that the principal intention of land use planning policy in relation to transport is to reduce the length and overall number of road journeys. We do not dispute this as a policy; however, we do not believe that it should be applied universally to all sectors of the economy. There is already an implicit recognition in the White Paper that certain types of journey, such as car commuting, are more problematic than others. Several statements in the White Paper do not sit comfortably with PPG13. For example, out-of-town shopping centres can reduce congestion by drawing traffic away from town centres, and by encouraging linked trips, can reduce the number of journeys made.

  12. The planning assumptions of both PPGs 6 and 13 are recognised as resting on the findings of the 1993 Research Report Reducing Transport Emissions Through Planning. This report has had a profound impact on planning policy in the UK since its publication, yet it is remarkable to recall how cautious the researchers were in placing caveats as to how much could be read into their findings. For example, in the final chapter, which sets out priorities for future research, the report says:

    "There remain, however, many areas of uncertainty and the study has had to rely upon data sets which are somewhat out-of-date and in many respects insufficient to illuminate key questions on the relationship between land use and transport emissions."

  The findings on density, settlement size and urban structure and centralisation also make clear the factors which limit the certainty of the conclusions which can be drawn from the evidence available. These made the simulations highly susceptible to changes in assumptions, which could in turn affect the conclusions. Nevertheless, these conclusions are now asserted as the accepted wisdom on Transport and Planning Policy, and fundamentally underpin the policies in Planning Guidance and in the White Paper.


The Objectives of the White Paper

  13. The key proposals of the White Paper from the perspective of the property industry relate to:

    —  Workplace car parking;

    —  Congestion charging; and

    —  Investment in public transport (both enhancing existing systems and constructing new schemes).

  14. The White Paper seems uncertain as to its ultimate objective, in that,while there is a clear desire to reduce the number of cars on the road, it is not clear for what reason. On the one hand, the White Paper argues for traffic reduction on environmental grounds; however, there are already adequate mechanisms to reduce the level of pollution through emissions and noise through improved technologies. On the other hand, it argues that traffic congestion must be reduced by achieving a better spread of the total demand for road space and making the best use of available resources. This begs the question whether "use" can be equated with " need to use".

  15. There is an apparent lack of differentiation between road users. Consider the different needs of:

    —  Individual vehicles—Should private use, especially for primarily leisure purposes, have equal priority for access to the roads as a direct business use or as a Public Service Vehicle?

    —  Sectors of the economy—Office-based/Retail shoppers and distributors/Industrial/Leisure/ Residential.

    —  Geographical areas—London is densely built and has the most comprehensive and closely integrated public transport system in the country. Many provincial towns and cities are not so fortunate. The Committee is also well aware from the report of its predecessor on the rural economy that cars assume a vital importance in rural areas.

  16. From the point of view of the property industry, there is a balance to be struck between the transport requirements of business services and of those who use them. We can see a justifiable logic to the restriction of road use by private cars in order to free up the space for appropriate economic uses, such as distribution. There is also an economic consequence of forcing businesses to transport their goods by rail or other modes when the most economically efficient and appropriate method is by road. Equally, it is important that consumers are able to access the services offered by business, and hampering accessibility by restricting private car use could have a deleterious effect on many sectors of the economy.


Local Transport Plans

  17. The Federation understands, and with some initial reservations accepts, the argument for developing integrated local transport solutions through the Local Transport Plan (LTP). A fuller understanding of the efficacy of this policy will only truly emerge through the process of preparing and implementing the LTPs. In the light of the experience of the production of local development plans, we are not confident that local authorities can be expected to produce them with any greater speed or efficiency. It follows from previous comments that we expect LTPs to be closely integrated with local development plans. This will mean that national companies with an interest in and expectation of development will in future have the extra burden of monitoring the development of local transport plans across the country as well as local development plans.

  18. Local authorities will have to understand and reconcile the needs and aspirations of local people, businesses and transport operators with what is actually achievable. This renders the scale of participation vitally important to ensure that account is taken of the views of all sectors of the community. While we appreciate the importance of local accountability, we are concerned that there may be a tension between the wider needs of business and the development of the transport system. On the local level, this could lead to LTPs representing a layman's view (or even wish-list) for the transport system, which could manifest itself as an attachment to what might be a redundant network arrangement, and lead to the development of proposals to revive it, coupled with an unwillingness to allow it to develop into new areas which more properly matched business needs. It may also provide a mechanism to institutionalise the NIMBYism which is notorious in the transport sector, and enable local opposition to prevent important strategic transport needs being met. There have already been several examples of this, including the Channel Tunnel Rail Link, the Tonbridge by-pass and through-traffic restraint measures in outer London boroughs, such as Richmond.


  19. The Federation recognises that the primary purpose of the proposed new charges on road usage and workplace car parking is to reduce peak-hour car commuting and the consequential congestion which arises, and welcomes the Government seeking to target journeys which are deemed to present particular problems, rather than imposing a general levy. It will be important to ensure that the road charging schemes are piloted in all relevant situations. We are concerned that it will prove easiest to operate the pilot schemes in towns with cordons, which will lead to difficulties in applying the conclusions to areas which do not. We believe that road user charging is preferable to parking charges, since it targets use and there is greater choice over whether, where and when to make a journey by car, whereas all cars require the certainty of at least two parking spaces: the one from which it starts and the one to which it will travel.

  20. The White Paper has not taken full account of the evolution towards the 24-hour society. Congestion charging may result in altering the timing of movements, but not necessarily reduce the absolute number of journeys. If congestion charges are applied in certain areas at certain times of pressure, this may add to the pressures towards greater flexibility in working and shopping hours to enable people to travel outside the charged times. This will spread the number of journeys over the day, and is likely to reduce the congestion during the charged periods. It will of course increase the amount of traffic on the road at other times, which may in return cause problems for residential amenity, or for the distribution network, which operates on the assumption that it can deliver "just in time" by transporting goods at offpeak periods.

  21. Charges will ultimately always be paid by the customer. The businesses questioned by STM as part of the research project indicated for the most part that they would simply absorb in overheads the additional cost of workplace car parking if this were subject to a tax of up to £1,000. It is only to be expected that these companies would seek to cover the extra staff costs in the prices paid by their customers. The charges are intended to raise the cost of motoring in order to render alternative modes more price-competitive. Nevertheless, as experience since the first oil-shock onwards has demonstrated, the public shows a remarkable ability and willingness to pay in order to continue to use their cars. The increases in Road Fund Licence Duty and the fuel price escalator seem to have had little effect on the desire of the population to own and run cars, as is shown by the record car sales in 1996 and 1998.

  22. The proposal to levy charges on workplace spaces will, in effect, become a tax on existing owners and occupiers, and a planning cost for new developments. We recognise that the intention is for the overall impact of the charges to be revenue-neutral and transport-beneficial, in that the monies raised should be re-directed into the provision of new transport scheme. The realisation of this intention depends absolutely on the detail of the implementation of individual LTPs, and we look to the Secretary of State to ensure rigorous scrutiny of the proposals submitted to him so as to avoid adverse economic effects on local businesses. We are concerned that larger operators will prove to be better able to adapt to the demands of producing staff travel plans and the like, at the expense of smaller and medium-sized enterprises.

  23. The introduction of workplace car parking is fraught with difficulties for owners and occupiers of existing developments, who will be compelled to address the consequential problems which will arise in a number of sensitive areas, such as the absence of alternative transport provision for shift workers, security and safety, particularly of female staff, and how to manage and compensate for loss of the perceived benefit of a free workplace car parking place. Given that private companies will inevitably encounter these sensitivities, we hope that Government and public sector employers will take a lead in demonstrating how these issues can be addressed and resolved.

  24. Few UK employers take cycling seriously as a transport mode at present. However, cycling offers the same flexibility and independence as the motor car, and may become increasingly important as a means of travelling to work, especially if the UK were to follow the example of many other northern European cities in promoting cycling as vigorously as public transport. We understand from STM that a study undertaken for an M25 business park in 1997 showed that more people lived within the 30 minute cycling isochrone than within the 30 minute public transport isochrone. In Holland, for example, more people cycle to work than travel by public transport. Large areas of cities within the UK are as flat as those in Holland, and the levels of rainfall and temperature in England are in fact more favourable for cycling.


  25. No one should underestimate the importance of at long last securing the agreement of the Treasury to the principle of hypothecation. It is essential to ensure that there is a transparent relationship between the funds raised and spent. The establishment of an explicit relationship between the cost of owning and running a car and the cost of alternative travel modes is to be welcomed. The car parking and congestion charges are not simply revenue raising measures, but are primarily mechanisms aimed to achieve specific and explicit policy goals. For this reason, the monies raised must be spent in a meaningful way, which delivers clear improvements to local transport.

  26. The BPF believes that the principle of hypothecation should be extended to national level. If the nation wishes for improvements in public transport, then it must be prepared to bear the cost. If hypothecated charges are an acceptable mechanism to achieve this end at local level, there is no reason why it should not be at national level.

Public Transport

  27. Public transport services must offer a viable, economic alternative if they are to attract people away from using their cars as the preferred means of travel.

  28. Government must take the lead in providing the investment for public transport, not least to ensure that in new developments the provision is adequate and available from the start. The property industry acknowledges that it is appropriate for investors and developers to make some contribution towards ensuring public transport access and provision, but the primary responsibility for providing the social capital of the nation must rest with society as a whole through the elected Government. The funds can be found from hypothecation of national strategic transport charges, or by raising the priority accorded to transport expenditure in relation to other areas in Government spending plans.

  29. Ideally, transport infrastructure should lead development rather than follow it: compare the very different experiences of the regeneration of London Docklands in the early 1980s prior to the construction of the Docklands Light Railway, and the North Greenwich peninsula in the late 1990s, responding to the decision to build the Jubilee Line extension. The services should be sustainable at a fare level which makes it a realistic alternative to the car. This may be achieved in part by pricing mechanisms, such as road-use or parking charges, externalising environmental costs, and ensuring the public is more conscious of the overhead cost of running a car. However, public transport in the UK is now a public service business run on private sector principles, and so will expect to cover its costs one way or another. Even if the capital costs of development or refurbishment are borne from public subsidy in whatever form, fares cannot necessarily be assumed to cover the operating costs. It is self-defeating to operate a public transport system at prohibitive fare levels, so Government will have to overcome its historic reluctance to subsidise revenue costs.

  30. It is also worth bearing in mind that public transport can become the victim of its own success if more people use the system than can be comfortably accommodated. In these circumstances, the usual response is to seek to price users off the system, as happens on some heavily used rail commuter lines. The principal alternative for most people is likely to be the car.

  31. The greatest difficulty in encouraging greater use of public transport will be in designing it to accommodate the needs of passengers. To attract someone from their car onto public transport means persuading them to give up a perceived level of comfort and convenience. Public transport inevitably runs on fixed routes, which thereby limits the overall catchment area. This will be further restricted by limited integration of modes. STM found several factors mentioned in defining what was "good" public transport accessibility: a limited walking distance; limited requirement for interchange; high frequency; good quality of service; wide area coverage; and above all, reliability. One or two bad experiences rapidly disillusions the new public transport user, who soon reverts to the car. Furthermore, public transport services will need to respond to longer opening hours, so that it provides the option at the time when people wish to travel.

Developers' Contributions to Transport Infrastructure

  32. There is an argument that providing transport services and infrastructure through planning gain actually upsets the local transport equilibrium, since they are obtained because the opportunity to do so presents itself rather than as part of an overall planned system.

  33. When the property industry is asked to contribute to improve public transport provision, it is in effect being required to make good a shortcoming over which it had no control and no ability to prevent arising. We question the fairness of this approach. First, it places the entire burden on the present-day investor, although future generations will reap the benefits of the investment, and the benefits of the transport provided is enjoyed by the wider community, not simply the customers of the investor. Secondly, the property industry is required to pay standard business taxes (corporation tax, capital gains tax, stamp duty, VAT) in the same way as any other industry; but other industries are not expected to make this form of contribution. It therefore has the impact of an additional (and arguably extra-parliamentary) tax on the industry. If the property industry is increasingly expected to make contributions in this form, it will expect a greater say in how the funds are spent.

  34. The property industry is already heavily taxed, and yet is the focus of proposals for new direct sectoral taxation, such as a greenfield development tax or impact taxes, as well as these other contributions which are not formally taxes, but which have an identical impact on a property business. We are concerned that these levies are being contemplated without any thought being given to the overall burden of taxation and obligation on the property industry, and the consequent effects on its viability. While the industry may be able to absorb these extra costs in the upswing of the property cycle, they will inevitably deepen the troughs of any downturn. We acknowledge that some of these new proposals are being considered as economic instruments, intended to achieve a specific policy goal. It is incumbent upon those proposing such instruments to demonstrate that they will achieve the desired objective, and that they are broadly revenue neutral in their overall impact. We are also concerned that the debate on economic instruments has so far tended to focus on penalties rather than incentives.


The Impact of Transport Policy on Broader Government Policies

  35. The Federation remains concerned that there has been insufficient thought given to the consequences for other Government policies of the impacts arising from the proposals in the White Paper. These include:

    —  the impact of transport constraints on business competitiveness;

    —  the consequences for investment in regeneration of potentially restricting accessibility or requiring greater contributions to transport infrastructure from developers;

    —  the inconsistency between promoting town centres, while making it more difficult to drive or park in them and not necessarily guaranteeing the provision of attractive, high quality public transport.


  36. Above all, London's position and attractiveness as a World City must not be compromised. London's economy rests on the effectiveness of its public transport system, and it is vital that London Transport receives the level of investment and support to meet the demands made upon it. A clear appreciation of the strategic transport needs of the Greater London conurbation will help to sustain the capital as a centre for investment and business. The Cross-Rail project has been delayed for too long, and the completion of the Heathrow-Paddington Expressway now illustrates all the more forcefully the need for a East-West through-link. Failing to build it will suggest to foreign investors a reluctance to invest in our own future. Equally, investors may be deterred by transport restrictions which do not exist elsewhere, or by requirements to contribute to unrelated infrastructure costs.

The Importance of Nodality

  37. If the intention of the integrated transport policy is to discourage and restrict the use of the private car in favour of public transport, public transport nodes will develop an increasing economic importance. Planning policies will need to adapt to these consequences to allow more efficient use of the land around nodal points. For example, outer London suburban rail stations are not usually central to the areas they serve, and so are generally considered unattractive as commercial sites. This may change if planning permission becomes more difficult to obtain elsewhere. Nevertheless, it is pointless promoting the importance of developing transport nodes if commercial development is effectively hampered by development plan policies. It will be necessary to raise development densities in these areas to achieve greater concentration of development, which may in turn have implications for related policies, such as conservation areas, residential amenity, parking standards and technical development control.

  38. Certain locations, such as major town centres or out-of-town retail centres, have, and will retain, such a gravity of attraction to shoppers, that the demand to shop there will not be reduced by the increasing the cost of shopping there through parking or congestion charges. Shoppers will not divert to nearer, but inferior centres merely because it is more expensive to continue to shop in the larger centres. Indeed, it is possible that the demand for the larger centres will actually increase at the expense of the business of other less attractive centres, since shoppers will reason that if they must pay extra to travel by car to shop at all, then it is more worth their while to travel to the biggest, most attractive shopping centre within reach, rather than to the nearest which may not have the same facilities.

Nodality and The Impact of Workplace Parking Charges

  39. Local authorities which are not well served by public transport, and do not offer the same level of nodality as their neighbours will find themselves at a disadvantage in competing to attract new business and investment. STM found that some London local authorities were concerned that the Government Office for London's insistence on compliance with the very restrictive parking levels set in RPG3 would damage the economic viability of their area. Restricting private non-residential car parking in areas without good public transport accessibility will lead to increased on-street parking, and the consequence of the borough's action to deal with that will lead to business occupiers locating in neighbouring boroughs where parking may be as restricted, but public transport accessibility is better. Occupiers of buildings where access is difficult, will undoubtedly find themselves under pressure as a result of the constraints and the additional pressure over time.

  40. If development is increasingly restricted to nodal points, the competing authorities will divide into those which have nodality and those which have not. This will have consequences for future investment in the area which the non-nodal authorities are unlikely to accept as unavoidable. The Government will undoubtedly be called upon to mitigate the effects. If business and industry does tend to locate in the more nodal boroughs, this will increase the need for the populations of non-nodal boroughs to travel for all purposes. A form of social exclusion could be effectively created as a consequence of transport policies.

  41. No doubt we can expect in due course to see local authorities setting the level of the workplace parking levy in order to compete with their neighbours, and businesses' locational decisions being increasingly influenced by the cost and availability of car parking facilities. Planning Guidance must establish a clear link between low car parking ratios and good public transport accessibility. According to the STM research, 48 per cent of local authorities responding to the survey were in the process of reviewing their parking standard, and all those who were able to give a view expected the standard to tighten. Only 46 per cent of those expecting to tighten their standards had carried out a public transport accessibility study, or expected to.


The Mobility of Investment

  42. As with any investing industry, the property industry requires a level of return on its investment. While the profitability of the industry will depend on the overall property cycle, the industry operates on a low-risk, low-return basis. The London Economics study found that the commercial property industry does not make super-profits. On average, property has a lower return on capital employed than industry as a whole or when compared with other industries. Property's average rate of return on capital between 1986 and 1995 was 10 per cent, compared with 21 per cent for retailers, 24 per cent for the electricity industry and 40 per cent for pharmaceuticals. When extra demands are placed on the industry, whether in terms of section 106 agreements, planning obligation contributions towards public transport provision, commuted car park contributions or impact taxes, they will affect the economic viability of a development, and may ultimately result in the scheme being abandoned, or undertaken elsewhere.

  43. Property investment is increasingly a global marketplace, as the investment and property communities seek to respond to the demands of national and international business requirements. Provincial cities in the UK are competing with other cities across Europe for investment, which can be made as easily in Dusseldorf as in Don Valley. The investing institutions will commit their funds on their own terms, and no one else's, and there should be no doubt that if the risk of investing in the UK increases, or the attractiveness of any location or centre is reduced, as a result of any given factor, transport or otherwise, the investment will go elsewhere.


September 1998

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