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The Minister for Housing and Planning (Keith Hill): First, let me congratulate my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on securing the debate and bringing this important issue to the attention of the House. He has shown that we cannot start too early to think about the possible impacts of significant new retailing trends.

I have to say to my hon. Friend that the Government are well aware of the increasing rate of growth in home shopping and of the increasing share of home shopping that is carried out on the internet. The Department of Trade and Industry and the Department for Transport have commissioned studies on these matters over the past few years. They show that the UK home shopping market had a value of approximately £18.9 billion
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in 2000. Commentators suggest that that will grow to £35 billion by 2005, with the internet taking an increasing share. In 2000, home shopping represented only 8 per cent. of total retail sales. It is estimated that that will rise to 13.8 per cent. in 2005.

UK shopping on the internet—or online shopping, as it is often referred to—is predicted to rise from £4.9 billion in 2000 to an estimated £11 billion in 2005. That is 4.3 per cent. of total retail sales. The number of people making purchases online grew from 1.8 million in 1998 to 4 million in 1999—in just one year.

While early results suggest that a number of retailers did poorly over the Christmas season and that retail sales over the internet grew significantly, I am not aware of any evidence to suggest that those two factors are connected. As well as internet traders, many manufacturers, mail order companies and other retailers, including supermarkets, are making use of the new technology to expand their market. Some manufacturers sell only to the public online, cutting out the middle man and offering lower prices.

While supermarkets tend to use their own fleet of vehicles to deliver groceries and other goods ordered by telephone or over the internet, the majority of internet suppliers use national carriers to transport goods or first-class post for smaller items. Some deliveries may require movement of goods over long distances and the trans-shipment of goods between vehicles. However, it is in the interests of supplier, carrier and customer to optimise these trips by combining deliveries from different suppliers and pooling deliveries for the same area.

The traffic implications of internet shopping are primarily for my right hon. Friend the Secretary of State for Transport to consider and the focus of today's debate is on urban planning. What is the impact of internet shopping on urban planning? I think it is too early to draw any firm conclusions. Internet shopping is still in its infancy and there is little empirical research on the effect that e-commerce and increased home delivery will have on towns and cities in the UK.

As a recent DTI report noted, the functions performed by e-commerce that replace physical transactions and sales take place in a virtual space, so they do not have the same physical presence as the services and functions that they may replicate or replace. The environmental impacts that those virtual spaces impose on the physical world are therefore less tangible and difficult to measure.

Although the implications of internet shopping have yet to work themselves through, recent research provides some insight on possible impacts, the most likely being the development of warehouses—known in the trade, I understand, as fulfilment centres—where orders are processed and packaged, as well as an increase in collection and delivery points. There is also evidence to suggest that the growth in internet shopping may lead to a reduction in the number of shopping trips to existing retail premises.

In common with most technological change, it seems likely that there will be both benefits and costs associated with the growth of internet shopping. For example, on energy consumption, Department of Trade and Industry research shows that 1 sq m of warehouse space holds far more goods than an equivalent area of
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retail space, and uses 16 times less energy. There might therefore be genuine savings in land take and energy consumption with internet shopping, but it is not yet clear whether internet shopping will reduce the need for retail floor space, or merely add to the range of retailing options.

Another possible consequence lies in the reuse of existing floor space. If there is a reduction in the need for retail floor space because of reduced retail activity in shops as a result of internet shopping, that could adversely affect the vitality and viability of existing shopping areas. On the other hand, in such a scenario, the existing floor space that is no longer needed could be put to alternative use. In the United States, for example, some banks that have suffered falling visitor numbers because of the growth in internet banking have given over floor space to café operators. A reduction in the need for floor space might therefore offer new opportunities for mixed-use development.

On social inclusion issues, there are other possible effects. Internet shopping and home deliveries offer advantages for people who do not own a car, who live in remote or deprived locations, or who are disabled to the extent that they are unable to visit shops. Many of the people in one or more of the above categories also tend to have relatively low incomes, which might present a barrier to using online shopping. There are concerns that certain groups of people, particularly the elderly and the poor, might remain relatively disconnected from the new technologies, with implications for social inclusion.

That said, access to new technology is growing fast. According to the Office for National Statistics, between 1998–99 and 2002–03, the proportion of households with a home computer increased from 33 to 55 per cent. and the proportion with internet access rose from 10 to 45 per cent. Take-up of new technologies is expected to continue, partly because of a growth in technical literacy, and partly because new technologies are becoming cheaper.

There are concerns about the increase in delivery vehicles in residential areas, but mechanisms exist, such as traffic regulation orders, for local authorities to control where vehicles park and in some instances the types of vehicles that may use a street. However, those mechanisms are outside the scope of the planning system. In addition, it must be remembered that an increase in home deliveries might lead to a reduction in car use by shoppers now receiving their goods directly.

It is not yet clear what degree of pressure will arise from increased warehouse development. While some internet retailers might use existing premises, such as mail order firms moving online and supermarkets delivering from existing stores or depots, others are likely to require warehouses for their "fulfilment centres". New warehouses will require planning permission, and local planning authorities will need to take into account the policies of planning policy guidance note 1 on delivering sustainable development, planning policy guidance note 6 on town centres, PPG13 on transport and other policy guidance in preparing their development plans and deciding on planning applications. Any increased demand for
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warehouse development will therefore be controlled through the planning system in the same way as it is at the moment.

As I have suggested, the possible impacts of the growth of internet shopping extend more widely than just urban planning. The Government have already funded a number of studies on home shopping, including internet shopping, which provide a valuable insight into this fast-growing sector. Further work is also planned: for example, the DTI is examining such issues as part of its Foresight project.

National planning policy addresses the issue of technological change and provides a strong framework for planning to harness those changes, to facilitate and promote sustainable and inclusive patterns of urban and rural development.

In planning policy guidance note 1, "Creating Sustainable Communities", which we published earlier this month, we made it clear that it is important for planning authorities, in helping to deliver sustainable economic development, to seek to provide for improved productivity, choice and competition, particularly when technological and other requirements of modern business are changing rapidly. Indeed, we specifically address the possible implications of a growth in internet shopping in planning policy guidance note 13, "Transport", where we make it clear that if the growth of internet shopping enables a reduction in the size of some retail outlets, it may present increased opportunities for shops to be located in existing town centres.

PPG13 also requires that planning authorities seize the opportunity to use new technology to promote urban renaissance and to reinforce the existing role of town, district and local centres. I know that many local authorities are already using the internet as a powerful marketing tool for attracting residents and visitors to their centres.

In draft PPG6 on town centre planning, we encourage planning authorities to actively manage change and focus new retail development in town centres first. As PPG13 acknowledges, if shop unit sizes decline as a result of internet shopping, this may provide a better opportunity for new retail development to be accommodated in town centres rather than out of centre.

My hon. Friend referred to so-called delivery offices or drop-off points. One of the complaints about home deliveries is about the number of failed deliveries—abortive journeys that need repeating either to redeliver goods or pick them up and arrange a distribution point. One suggestion has been to use delivery lockers or drop-off points, which a customer may choose as a delivery option. Such a situation has been trialled in Nottingham by Royal Mail plc, working with the city council. Royal Mail has conducted similar trials in other areas during 2004. We are not yet privy to the outcome of the trials, but studies suggest that encouraging greater use of drop-off centres could reduce the amount of home shopping delivery travel. However, the costs of providing such facilities may be quite substantial and it is unknown at this stage whether the private sector is likely to invest in them.

In conclusion, it seems clear that internet shopping is rapidly expanding and is becoming an increasingly well-established form of retail activity. The implications
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of internet commerce go beyond land use planning and, as I have explained, various arms of Government are investigating what impact the growth of home shopping and internet shopping may have on issues such as patterns of movement for people and goods. It is too early to judge what the full impact of internet shopping might be in terms of urban planning. However, we already address the issues of possible changes that may result from internet shopping in national planning guidance, for example in PPG13, and as we have made clear in PPG1 on sustainable development, we want the planning system to respond positively to technological
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change that delivers improved productivity, choice and competition while ensuring that any changes contribute towards sustainable development.

I recognise that the internet is developing rapidly and I can assure my hon. Friend that we will keep this issue under close review. I am grateful to him for giving me the opportunity to respond to this important debate, just as on an earlier and memorable occasion I was able to reply to him on the subject of short sea shipping.

Question put and agreed to.

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