Supplementary memorandum by the Office
of the Deputy Prime Minister (AR 01(d))
RESPONSE TO COMMITTEE'S SUPPLEMENTARY QUESTIONS
ON ANNUAL REPORT 2005, FOLLOWING THE MINISTERIAL ORAL HEARING
ON 25 OCTOBER 2005
1. SIPPS and REITs. At Q206 the Chair asked
Yvette Cooper for a note on what the ODPM input has been into
the Treasury decisions on SIPPs and REITs, and what the implications
of those two schemes are for the housing market.
SELF INVESTED
PERSONAL PENSIONS
(SIPPS)
The changes to SIPPs come into effect in April
2006 and form part of a package of tax simplification reforms
of pensions. The aim of pensions tax simplification is to remove
unnecessary obstacles to retirement planning and saving by creating
a single set of investment rules for pension schemes. That is
a substantial prize which this Government believes is important.
Simplification has been widely welcomed by savers and the financial
services and pensions industry.
The majority of pension savers—over 15
million—are already members of schemes free to invest in
residential property. Simplification merely provides a level playing
field by allowing some specialised registered pension funds, held
currently by around 200,000 people, to invest in residential property
for the first time.
If a property is purchased through a SIPP it
will become an asset of the pension fund and all rental income
must go to the fund. Any private use of the property, for instance
if a parent buys a property for their child to live in whilst
at University will result in a benefits in kind tax charge, unless
the user pays a full market rent to the pension fund. Although
any rental income or capital gains from the disposal of the property
will be tax free in the pension fund when the money is extracted,
once the 25% tax free lump sum is taken, tax will be payable on
the pension at the marginal tax rate of the taxpayer.
The new rules do not put these investments in
a tax-privileged category over and above any other investments
in a pension scheme. The tax relief given works in exactly the
same way as any other contribution into a pension scheme. We are
aware of concerns that the changes may lead to an increase in
the number of second homes and about the impact that an increase
in second homes may have on the housing market. However, the number
of people for whom SIPPs are an appropriate type of pension fund
(currently just over 1% of pension funds are held in SIPPs) and
the inherent limitations attached to this type of investment mean
that it is unlikely that there will be any appreciable effect
in the housing market.
A recent report by the Royal Institute of Chartered
Surveyors, A-day—Implications for the Housing Market, concluded
that "there are few reasons to expect that the changes from
April 2006 will create an immediate swell of buy-to-let or second
home purchases from most taxpayers".
REAL ESTATE
INVESTMENT TRUSTS
(REITS)
Real Estate Investment Trusts or REITs (originally
known as Property Investment Funds or PIFs) are investment vehicles
for property, which pay little or no tax. The investment income
they generate is paid directly to investors who pay tax on it
in the normal way. This avoids the current system of double taxation
by the fund and again by investors.
The main focus for REITs is the commercial property
sector. However, REITs could support ODPM objectives by providing
a critical opportunity to diversify the residential Private Rented
Sector (PRS). Unlike the recent announced changes to Self-Invested
Personal Pensions, which apply to individual investment in residential
property, among other assets, REITs are expected to encourage
institutional investment. This would avoid over-reliance on the
buy-to-let market, which is dominated by small private investors
(fewer than 10 properties).
REITs could provide broader access to property
investment on a stable, well-regulated basis, and enhance the
quantity and quality of investment. Additional investment and
competition should reduce property costs to users, and improve
quality of buildings and their management. A number of institutions
and investors see direct development, rather than purchasing through
house builders as more attractive, which could broaden the housing
stock. There is also potential to diversify housing development
through the spreading of risk.
The market for residential REITs is expected
to be small initially, because existing institutional activity
in this sector is modest and will take time to build. ODPM recognises
the need for a supportive REIT framework to create an embryonic
residential investment market, and has provided advice to the
Treasury team engaged in REITs and as part of the consultation
process. In his Budget 2005, the Chancellor announced that, subject
to finding a workable solution that meets the stated objectives,
including a reform at no overall cost to the Exchequer, the Government
aims to legislate for a UK-REIT in the Finance Bill 2006.
2. Regeneration. At Q192 the Minister of
Communities asked Mr Bill Olner for further information relating
to a regeneration project where exceptional rises in house prices
had put completion of the final phase in doubt owing to insufficient
funds (the Pride in Camp Hill project, paper attached). What mechanisms
does the Department have in place to support regeneration projects
where there is a late risk of failure owing to genuinely unforeseen
costs? Is there any procedure for cases of particular urgency?
David Miliband will be responding personally
to Bill Olner on this point.
The Committee would be grateful if written answers
to the following supplementary questions could also be provided:
3. Liveability.
(i) What powers does the Minister for Communities
have to achieve the liveability target through cross-government
action?
Liveability issues cut across a number of Government
departments that share responsibilities for the quality of public
spaces—in particular, ODPM, Defra, Home Office, Department
for Transport, and DCMS. Ensuring that our policies and actions
work together and are effectively co-ordinated is vital to achieving
the liveability target—ODPM PSA8. We are doing this through
the Cleaner Safer Greener Communities (CSGC) programme.
Local authorities, working in conjunction with
public authorities and local communities, are mainly responsible
for delivering the improvements in services that underpin the
target. Therefore providing local authorities with the right powers
and tools to take action to improve the quality of local environments
is a top priority of the CSGC programme, and our strategy for
delivering PSA8.
ODPM supports and takes action to achieve the
PSA8 target through its responsibilities (and associated powers)
for:
— Local government policy, finance
and performance.
— Rationalising funding streams through
Local Area Agreements and the Safer and Stronger Communities Fund
which are giving local authorities flexibility to put in place
innovative ways to organise and deliver liveability type services.
— The planning system and design policies,
which are key to ensuring that new developments are of a high
quality and encourage a strategic approach to the provision, management
and maintenance of parks and public space.
— Sustainable Communities and regeneration
programmes, which go beyond "bricks and mortar" solutions
by mainstreaming liveability principles to help create attractive,
decent places that people want to live in now and in the future.
— Supporting community-led environmental
regeneration which engages and involves people in transforming
the quality of their neighbourhoods and can encourage greater
responsibility and a sense of local pride.
— Tackling inequality by prioritising
our actions on liveability in deprived areas—where people
are more likely to live in a poor quality environment—and
introducing a new liveability floor target to ODPM's neighbourhood
renewal target—PSA1.
— Good practice and innovation in tackling
liveability issues. We launched the "How To" programme
in March to engage with practitioners to encourage greater take-up
and use of new and existing powers and tools for example powers
under the Clean Neighbourhoods and Environment Act 2005 to help
tackle litter, graffiti and abandoned vehicles.
(ii) What tangible benefits will citizens
receive from the liveability PSA? How will progress be monitored?
Achieving the target will make a significant
difference to peoples' experience of where they work, live and
play and respond to the priorities they identify for improvement.
It will mean:
— Cleaner and more attractive streets
with less litter and rubbish and with fewer abandoned vehicles.
— Better quality parks and green spaces
with more achieving the Green Flag Award standard for management
and maintenance.
— Local authorities across the board
delivering better quality and more effective environmental services,
with no more than 10% rated as "poor".
— Fewer households in a poor-quality
environment, where they encounter problems like graffiti, vandalism,
dereliction and neglect.
— As a result of tangible improvements,
higher levels of public satisfaction with their local area.
Progress will be monitored against the suite
of success indicators set out in the Technical Note, published
on the ODPM website at http://www.odpm.gov.uk/index.asp?id=1123014.
Performance management will be undertaken by the ODPM Board and
Ministers.
4. Community cohesion.
(i) What planning is being done to make sure
that the new communities will be mixed and cohesive?
PLANNING
— Planning policies on the delivery
of sustainable development through the planning system state that
development plans should promote development that creates socially
inclusive communities, including suitable mixes of housing.
— Planning Policy Guidance Note 3:
Housing (March 2000) sets out the Government's planning for housing
policies. One of the objectives of PPG3 is to create mixed and
inclusive communities which offer a choice of housing and lifestyle.
Local planning authorities are required to create mixed and balanced
communities and should avoid large areas of housing of similar
characteristics.
— ODPM has announced that it will be
consulting on a new PPS3. It is intended that draft PPS3 will
be published by the end of the year. Draft PPS3 will set out the
Government's proposals for planning for mixed communities, having
regard to the consultation responses to "Planning for Mixed
Communities".
GROWTH AREAS
— The Growth Areas provide an exciting
opportunity to reinvigorate existing communities as well as forming
new ones—by building infill developments and urban extensions
to well-established growth locations and also directing growth
to regeneration priorities, providing urban renaissance.
— As part of the Growth Area development/regeneration,
a range of housing provision is called for; a variety of housing
tenures is required to help provide wider housing opportunities
for mixed communities. Affordable housing is being built into
local delivery plans and is a priority in the major growth locations.
— A central part of the Growth Area
proposals is to work with local communities, Government agencies
and the private and voluntary sectors to develop our proposals,
taking account of the impact on existing communities and ensuring
that the social, economic and environmental factors are taken
into consideration. A vision of the future of the community is
needed, but cannot simply be imposed from above—it must
be developed taking into account the circumstances and views of
the locality.
THAMES GATEWAY
— Several areas of the Thames Gateway
suffer from relatively high levels of social deprivation, with
residents suffering poverty, poor health and low educational levels.
The Gateway programme of investment and growth provides a unique
opportunity to improve life chances and outcomes for residents
in these communities.
— The Thames Gateway Programme is funding
a range of local projects to help achieve these aims. These include
community facilities, cultural, health and educational facilities,
and environmental and town centre improvements.
— To support the changes, the Government
is funding a range of community and cultural projects that will
bring people together socially; cementing relationships and making
them feel part of the community.
— ODPM work through Local Authorities
and Local Regeneration Partnerships who are familiar with local
conditions and needs which, are being developed in consultation
with local people. ODPM also engage at a variety of levels with
Voluntary and Community Sector organisations across the Gateway
to ensure that the needs of vulnerable groups are addressed.
— ODPM funds a range of local projects
from the Thames Gateway Programme Fund to unlock development and
support the delivery of sustainable communities and discourage
anti-social behaviour.
— 35% of new housing will be affordable
for rent or purchase, giving more people more housing choice.
(ii) How can ODPM's contribution to community
cohesion be measured and monitored?
THROUGH LOCAL
GOVERNMENT
— The Audit Commission's Comprehensive
Performance Assessment (CPA) 2005 Key Lines of Enquiry for Corporate
Assessment (KLOE) cover community cohesion. This is the key means
of measuring and monitoring cohesion within local authorities,
although we believe that Local Public Service Agreements and Local
Area Agreements can also deliver measurable improvements in community
cohesion where cohesion is identified as a local priority. In
relation to CPA, within sub theme 5.2 on the council's achievement
in relation to Safer Stronger Communities, key question 5.2.6
asks what the council, with its partners, achieved in its ambitions
for building stronger communities.
— Under this question, inspection focuses
on whether the council has made progress towards achieving its
ambitions for civil renewal and active citizenship; and for community
cohesion, race equality, addressing disadvantage, and better-integrated
communities.
THE CRITERIA
FOR JUDGEMENT
IS:
— Whether the council uses effective
forms of engagement which empower local people. Whether there
are formal structures and resources in place which ensure that
community engagement and cohesion are reflected in the decisions
taken by the council and constitute a standard feature in the
development of new policies.
— Whether the council listens and responds
to the local community and the voluntary and community sector,
and involves them extensively in service delivery. Whether the
voluntary and community sector recognises that the council supports
their delivery of public services and helps them to build capacity.
— Whether the council has negotiated
a compact for partnership working with the voluntary and community
sector and whether it is applying compact principles across the
organisation.
— Whether the council has demonstrable
and sound knowledge about community cohesion issues in the area
and its strategy, delivered in partnership with other agencies
and stakeholders, is leading communities to be more active, cohesive
and empowered. Whether it is delivering on its responsibilities
under race equality and disability legislation.
— Whether the council funds voluntary
and community organisations for more than one year at a time where
appropriate, and ensures equal access to funding opportunities.
SUSTAINABLE COMMUNITIES
— Monitoring arrangements are being
made by ODPM in the Growth Areas. For the Thames Gateway, ODPM
is currently developing an evaluation framework. It is expected
that this framework will be based largely on the State of the
Cities database, which will include measurements of community
cohesion. In the newer Growth Areas, monitoring of the business
plans will begin once a full set is in place for the main growth
locations, which is expected next year. ODPM has also committed
to undertake Race Equality Impact Assessments in the newer Growth
Areas in 2006.
— In terms of the mixed communities
demonstration projects, ODPM is currently working with a selection
of potential areas to develop large scale proposals for the redevelopment
of these areas into a more mixed community. ODPM will ensure that
cohesion is central to their plans and this will form part of
the initiative's evaluation programme. ODPM will use current data
collection on tenure mix and ethnicity as a proxy to map progress
on cohesion and other issues in these areas and more widely. We
will ask local projects to collect their own local data if a specific
need is required. ODPM will discuss specific data requirements
with each Demonstration Project in our ongoing discussions with
them.
— The Learning Action Framework (LAF)
project, although still in its infancy, will be used as a practical
guidance by Housing Managers once it is set up. The framework
will be used to review local authority data and strategic plans
to identify emerging community cohesion priorities for the locality
and assess a range of activities for social landlords that impact
on community cohesion through best practice examples.
NEIGHBOURHOOD RENEWAL—ETHNICITY
MONITORING
— The Neighbourhood Renewal Unit (NRU)
recognises that improving outcomes for BME groups relies on adequate
data being available to secure a better picture of the nature
of the problem. Better monitoring of ethnicity in service and
outcome delivery is therefore critical and, for this reason, NRU
has written and published ethnicity monitoring guidance to support
practitioners in their work on securing better data. This is all
the more important given the lack of consistent ethnicity monitoring
across public service delivery. We believe that better ethnicity
monitoring will enable practitioners to ensure that they are better
able to meet needs of BME groups, which should in turn contribute
to addressing some of the underlying causes of tensions which
can undermine community cohesion.
5. Bus travel for vulnerable groups. At
the evidence session on 25 October Members raised the Chancellor's
plans to provide free bus travel universally for the elderly and
disabled, from April 2006 (QQ214-217). However, under the Public
Service Vehicles Accessibility Regulations 2000 (SI, 2000, No.
1970) many buses currently in use will not have to comply with
the Disability Discrimination Act until the period 2015-20. What
steps is the Department taking to encourage bus operators to comply
early with the DDA? Is the Government considering formally bringing
forward the date of compliance, to support the free travel scheme?
RESPONSE BY
THE DEPARTMENT
FOR TRANSPORT
The Public Service Vehicles Accessibility Regulations
2000 (PSVAR), SI 2000 No. 1970 were introduced under powers granted
to Government by the Disability Discrimination Act 1995. The Regulations
apply to new buses and coaches with a capacity of more than 22
passengers used to operate local or scheduled services, and require
that they are accessible to disabled people, including wheelchair
users. Smaller buses up to 7.5 tonnes, and coaches, are required
to provide access for wheelchair users from 1 January 2005.
The regulations allow operators to achieve the
full economic life from each vehicle type and therefore end dates
of 2015, 2016, 2017 and 2020 are specified for small buses, large
single-deck buses, double-deck buses and coaches respectively,
by which time all such vehicles must meet the requirements of
the PSVAR. It is important that the regulations are affordable
and sustainable and following both informal and formal consultation,
which included a full Regulatory Impact Assessment, these dates
were considered to represent a reasonable compromise between the
needs of disabled passengers, and the vehicle manufacturers and
operators.
The transition to a fully compliant fleet will
take place over time and operators will inevitably use a mixed
fleet of low floor accessible vehicles and older, non-accessible
vehicles. How that fleet is allocated and replaced is entirely
a matter for the vehicle operator, and neither the Regulations
nor the Act permit the Department for Transport to intervene in
this respect. Local Authorities may specify requirements for tendered
services and this can include the provision of accessible vehicles
as a contract condition, if they wish to do so.
Nevertheless, to ensure industry was well placed
to meet these end dates, DfT negotiated a voluntary agreement
with industry that 50% of the full size bus fleet should be low
floor and accessible (though not necessarily DDA compliant) by
2010. Therefore, DfT does not intend to formally bring forward
the date of compliance.
6. Local area agreements. IDeA has recently
published an assessment of the East Midlands pilot LAA which found
that "central government departments are not seen as engaging
with the spirit of the Local Area Agreement and are not expected
to change significantly in this regard; they are characterised
as `anonymous and faceless' and `unwilling to let go'". What
is the Department doing to address these problems?
LAAs represent a radical new approach to relations
between central government and local areas, and we expected there
to be learning points arising from the changes. Research into
the LAA pilots, commissioned by ODPM and led by the Office for
Public Management, elicited a broad range of views about respective
roles and responsibilities. These views have been captured in
refreshed guidance, a good practice toolkit and learning events
involving representatives from central government departments,
government offices and local areas. We are continuing to evaluate
progress with the implementation of LAAs and to work with central
government departments and government offices to help resolve
issues that arise.
7. Local Government efficiency savings
(i) Public Servant magazine reported on 23
September that local authorities will be asked to make even more
substantial efficiency savings in the second wave of the Gershon
agenda. What level of savings is the Department expecting, and
in which service sectors are future savings likely to be made?
The article in question refers to a speech made
by the Minister for Local Government, in which the Minister recognised
the significant achievement by local authorities in delivering
efficiency gains to date and also the challenge that lies ahead
to maintain that good progress through the remainder of the Spending
Review 2004 period.
The speech did not suggest that new or harder
targets were being set for local authorities. The target for at
least £6.45 billion annual efficiency gains by 2007-08 remains
unchanged. The handling of the efficiency agenda beyond 2007-08
will be dependent on the outcomes of the CSR07 process.
(ii) It was reported in the same article that
many local authority efficiency savings to date had been made
on small short-term projects, rather than mainstream activities.
What action is the Department taking to encourage local authorities
to apply saving measures to mainstream services, and achieve real
cultural change?
The point that was being made in the speech
was that, so far, the majority of efficiency gains achieved could
be characterised as the "quick wins"; discrete projects
to reduce administrative costs in a particular delivery chain.
Clearly there is a limit to the opportunity for this kind of efficiency
gain and local authorities need to be thinking about longer-term
projects now that will deliver both better services and efficiency
gains in future years.
ODPM is working with other departments, the
Regional Centres of Excellence and other partners to help develop
and support projects that will give local authorities the tools
they need to implement this kind of project.
The local e-government national projects are
a case in point; they should help enable significant improvements
in the way that services are delivered, making them more customer-focused
and accessible, while also providing efficiency gains in the major
workstreams of corporate services, procurement, productive time
and transactions.
(iii) Reference was made during the meeting
on 17 October to the importance of joint procurement as an efficiency
measure. What evidence is there for the success of joint procurement,
and have local authorities expressed any concerns over efficiency
and quality control?
The term "joint procurement" encompasses
a range of activities, including (but not limited to) involvement
with purchasing consortia and development of framework agreements.
These types of arrangement have existed for some time in local
government, and are widely seen as possible ways to increase efficiency
and provide opportunities to focus local authority spending on
frontline services.
ODPM's recent evaluation of the local government
procurement agenda found that 76% of respondent authorities were
using purchasing consortia, and 56% were involved in open framework
agreements. Furthermore, 60% of councils organise contracts and
framework agreements that are available to others.
It is for local authorities to decide how to
make their efficiencies within their agreed target, and in this
regard we have not prescribed any particular route that councils
should take. Any joint procurement activity—in particular
high risk projects and long term partnerships—should be
subject to an authority's business planning process.
8. Planning delivery grant.
(i) ODPM's own research shows that local authorities
are becoming increasingly dependent on Planning Delivery Grant
to achieve the Department's objectives for planning services,
with little chance of maintaining standards were the grant to
be withdrawn. What is the Department's solution to this?
PDG was introduced in SR02 to make up the shortfall
that had been identified because local authority planning resources
had declined over the period 1996-2001. The grant was not intended
to be a long term solution to shortfalls in planning budgets.
It was designed to incentivise and provide resource for Local
Planning Authorities (LPAs) to invest in performance improvement,
and to assist them in resourcing the introduction of the new planning
system. In addition, following research commissioned by ODPM into
costs and fees in the planning system,[1]
which found that fees were falling short of cost recovery levels
in most cases, planning fees were increased on 1 April 2005. These
fee changes entailed an average 39% rise in planning application
fees across application types. These fee increases have been introduced
to reflect more fully the costs of handling planning applications,
and should help compensate for the reductions in PDG over the
next two years.[2]
The Office is currently exploring with stakeholders
how to ensure that the planning service continues to be properly
funded beyond 2007-08, which is the last year for which there
is currently provision for PDG. These discussions, together with
the evidence base from the PDG impact studies which we have commissioned,
will inform the Office's submissions on CSR07.
(ii) As success is rewarded, local authority
planning performance is becoming more polarised: poorly-performing
authorities are unable to gain much PDG. What is the Department
doing for those residents in areas with weaker planning services?
With funding from ODPM, IDeA is hosting the
Planning Advisory Service, which is helping local planning authorities
in England improve their performance and provide better quality
services. Working with the Government Offices, we closely monitor
the performance of individual local planning authorities to identify
those that are under-performing as soon as this becomes apparent.
We are working with those authorities to diagnose problems and
support performance improvement, through the Planning Advisory
Service and through commissioned consultants. The package being
offered to under-performing authorities includes a diagnostic
tool to identify areas of weakness and the type of support that
individual services can use to improve their performance; and
a range of support measures designed to improve performance and
quality of service. The nature and intensity of support varies
according to need, with those authorities with greatest need receiving
tailored one-to-one support. We intend to use a proportion of
PDG in 2006-07 to help fund this support work.
(iii) What powers does ODPM have to prevent
authorities from taking actions like: reducing their own mainstream
planning budgets as the grant increases; holding over PDG for
future years; and asking developers to withdraw applications?
Other than specifying that 25% must be spent
on capital, ODPM does not direct how PDG is spent or how authorities
set their budgets for planning. PDG is designed to incentivise
investment and culture change in planning departments. As this
grant is strongly performance-related, those who fail to use it
for these purposes are unlikely to attract grant in the future.
Authorities are encouraged to hold over PDG
for future years to allow for continuity of funding, especially
where PDG has been used for funding temporary staff positions
and where grant monies cannot be effectively spent in the year
they are allocated.
ODPM has no specific powers to prevent authorities
from asking developers to withdraw applications. The decision
to withdraw an application is up to the applicant. Where they
do withdraw, applicants have the opportunity to make use of the
"one free go" option and resubmit their application
free of charge once they have made any necessary changes. If an
applicant declines to withdraw an application and it is subsequently
refused, the applicant has the right to appeal the decision. ODPM
has a performance indicator to measure LPAs' performance on appeal
and, where performance is poor, they have their PDG reduced as
a disincentive to take poor decisions that are not based on policy
considerations. Additionally, poor decisions open up an authority
to claims for costs in the case of a successful appeal.
ODPM encourages all parties to engage in pre-application
discussions so as to ensure that proposals are discussed at an
early stage when changes can be made more easily than later in
the process. Pre-application discussions also help to ensure that
the formal stages of a planning application can be handled with
greater speed and certainty. Where developers fail to engage in
pre-application discussions, and submit poor quality applications
which require substantial amendment, then withdrawal may be the
only alternative to a refusal.
9. Countryside protection. One indicator
of "protection of the countryside" in the Annual Report
is "net change in the area of Green Belt in each region"
(pp64-65). Why does this accept loss of Green Belt on its inner
edges if it is matched by additions on the outer edges, contrary
to established planning policy?
The indicator is "net change in the area
of designated Green Belt in each region". The Government
expects areas of existing Green Belt land to be de-designated
only exceptionally, in line with policy in Planning Policy Guidance
note 2 (PPG2), "Green Belts". Any such areas that are
de-designated could be removed from any part of the Green Belt
and not just its inner edge. But where de-designations of Green
Belt land do occur, the Government expects the relevant regional
and local authorities to ensure that the overall area of designated
Green Belt within the region is at least maintained, in line with
the Government's target. Increases in the area of designated Green
Belt may come about as a result of land added to existing Green
Belts, or as a result of any newly designated Green Belts within
the region.
Changes to Green Belts are not in themselves
contrary to national policies. PPG2 recognises that the general
extent of the Green Belt may be altered, but only in exceptional
circumstances. If such an alteration is proposed through a review
of the regional spatial strategy, the Secretary of State will
wish to be satisfied that consideration has been given to the
opportunities for development within the urban areas contained
by and beyond the Green Belt.
Similarly, PPG2 makes clear that detailed Green
Belt boundaries defined in adopted development plans should be
altered only exceptionally. This should occur only where a change
to the general extent of the Green Belt has been agreed through
the regional spatial strategy, or if other exceptional circumstances
exist which necessitate such a revision.
10. Role and powers of the Environment Agency.
(i) At Q169 the Minister of Communities noted
the "absolute key role" of the Environment Agency in
ensuring housing developments are implemented in a sustainable
way. The Agency published in October 2004 a set of proposals to
ensure that development in the Growth Areas will be sustainable
(Position Statement: Sustainable Communities). What plans does
the Department have to implement these proposals?
The Environment Agency's position statement
clarifies the Agency's role in land development processes; key
areas of interest and makes suggestions for future actions that
could be made to improve the sustainability of housing.
We agree with a number of the suggestions that
the statement makes. We are working with the Agency on the environmental
impacts of Sustainable Communities through the arrangements laid
out in our Concordat.
ODPM have undertaken further work to: (a) improve
flooding considerations in the planning process (revised PPG 25
to be released for consultation before end of 2005); (b) develop
the Code for Sustainable Buildings (draft to be released for consultation
shortly) and (c) explore in detail how other environmental initiatives
can better support the Government's growth agenda. Further details
on this will be released as part of the Government's response
to Barker Report.
(ii) In its latest report on development and
flood risk the Agency pointed out that on 323 planning applications
in 2003-04 its views on flood plain development were ignored,
even though it is a statutory consultee. Does the Government plan
to give the Agency any further powers to direct local authorities
to implement its comments? Does the Government have any plans
to strengthen the Agency's powers to be consulted on development
proposals in the flood plains?
Ministers announced on 24 March the revision
and strengthening of PPG25, as part of the Government's overall
approach to managing future flood and coastal erosion risks. We
will issue a consultation draft of the new PPS25 in late 2005,
with a draft standing planning Direction on flooding and proposals
for extending the Environment Agency's statutory consultee role.
In order to ensure Agency advice is heeded in
planning decisions, the consultation will include a proposal for
a standing planning Direction on flooding, to require planning
authorities to refer applications for major development that they
are minded to approve against sustained objections from the Environment
Agency to the Government Office to decide whether to call in the
application for decision by Ministers.
To strengthen the Agency's powers to be consulted
on development proposals in flood plains, the consultation will
include a proposal to make the Agency a statutory consultee for
certain categories of planning applications in flood risk areas,
as agreed with the Agency.
(iii) The same document points out that, in
51% of the cases where the Agency raised objections, the council
had not prepared a flood risk assessment. How does the Government
plan to increase the number of councils preparing such assessments?
The new PPS25 will be focussed on core policies
that are clearer and easier to understand, providing a more strategic
approach which emphasises the need to consider flood risk as early
as possible in the planning process. It will strengthen guidance
on the need to include Flood Risk Assessments at all levels of
the planning process.
11. Housing supply
(i) The Annual Report states (p63) that the
main level for reducing house prices in relation to incomes will
be by providing an increased number of new homes. By how much
do you expect house prices to come down for every extra 1000 houses
built above the rate in 2004-05?
House prices are determined through the interaction
of supply and demand for housing. Demand has been rising as a
result of the following factors: demographic changes, shrinking
size of households, increasing incomes and a stable economic environment
characterised by low inflation and low interest rates. In parallel,
supply has not been keeping pace with increasing demand. Over
the last 30 years housebuilding rates have dropped by over 50%
whereas over the same period demand for new homes has increased
by 30%. This has led to a shortage of homes in some areas and
a corresponding increase in house prices.
Demand will continue to rise: as people get
richer their demand for housing services increases; and there
will be pressure from increasing numbers of households wanting
to form, as the latest ODPM household projections indicate. If
housing supply is constrained, then increasing demand will mean
house prices continuing to rise, relative to incomes, over the
long-term.
Calculations done for the Barker Review (2004)
indicated that increases in housing supply would be needed to
slow the increases in house prices and improve affordability.
For example, the Review concludes that up to 120,000 extra homes
per annum would be needed to reduce the trend rate of house price
growth to 1.1% (the European average).
Forthcoming ODPM-commissioned research into
the relationship between housing supply and affordability ("Affordability
Project") confirms that long term house prices are influenced
through the housing stock. Estimates of the impact of housing
supply on prices are broadly consistent with those presented in
the Barker Review.
However, it is not that straightforward to say
what the impact would be per thousand dwellings. The research
tells us that the impact of housebuilding on prices depends not
only on numbers of houses but also on their spatial distribution
and characteristics, including size and type. Secondly, the impact
per thousand dwellings depends on the overall scale of additional
housing supply.
Some commentators have suggested that supply
increases might not need to be so large. Expectations have a significant
influence on house prices. A "step change" in housing
supply, as recommended by Kate Barker, might alter households'
expectations of future increases, which in itself could reduce
demand for housing. Therefore a smaller increase in housing supply
would be required to achieve any given trend in real house prices.
Expectations are part of the modelling described above, but policy
changes could alter the role of these expectations.
(ii) When will the Government publish the
results of the research led by Professor Geoff Mean of the University
of Reading, into the relationship between changes in housing supply
and affordability?
The research findings will be made publicly
available at the time of the Pre-Budget Report.
(iii) ODPM identifies land supply as one of the
key constraints on house building. As housing land supply has
been rising for many years in the South East, what is the evidence
for this assertion?
The Government is committed to responding to
the recommendations of the Barker Review, which concluded that
a key constraint on delivering additional housing supply was an
inadequate supply of developable land in plans. The Review indicated
that the constraints were a consequence of not enough land being
allocated in plans, a weak response to changes in the market and
barriers to developing allocated land.
There is evidence of a positive relationship
between planning permissions and housing completions, suggesting
that releasing more land leads to increased levels of housebuilding.
This link suggests that land supply may act as a constraint on
housebuilding. However, the relationship is not a simple one-for-one.
Not all land that is allocated for housing in plans will attract
a planning permission and not all land that has planning permission
will be developed. A number of explanations exist for this implementation
gap, including changes in the housing market, negotiations over
planning permissions and site-specific characteristics. The implementation
gap provides part of the justification for ensuring that plans
provide for a flexible supply of land for housing.
Of course, allocation of land in plans is not
the only issue. Fragmented ownership, availability of infrastructure
and site remediation costs can all act as a barrier to development
even where land is allocated. To deliver an increase in housing
supply, plans need to identify and allocate land which is suitable
and available for development.
Furthermore, although the number of units in
allocated plans and with planning permission in the South East
has increase in recent years, at least part of this increase is
a consequence of more flats and greater densities, rather than
an overall increase the overall supply of land.
ODPM's consultation paper Planning for Housing
Provision sets out a proposed way for delivering better supply
of housing through the planning system and the Government will
be consulting on a new draft Planning Policy Statement on Planning
for Housing (PPS3).
1 The Planning Service: Costs and Fees by Arup Economics
and Planning with the Bailey Consultancy, Addison & Associates
and Professor Malcolm Grant (ODPM: Nov 2003). Back
2
PDG amounts reached a peak in 2005-06 at £170 million and
will reduce over the next two years, at £135 million for
2006-07 and £120 million for 2007-08. Back
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