Localism

Memorandum from BCSC (LOCO 103)

1. BCSC

BCSC represents businesses operating in the retail property sector, our mission being to promote industry best practice and advance the professional aims of the retail property industry. Our membership is a broad church of around 2,600 property professionals including owners, developers, retailers, surveyors, architects and public sector managers.

The retail and retail property industries together play a strategic role in sustaining communities, with 7.6 million people currently employed in the UK. In 2008 alone around £6 billion was invested in the UK by the retail property industry, creating tens of thousands of new jobs.

Given our unique position at the heart of the retail property industry - an industry which has played a crucial part in revitalising many of our towns and cities, including in recent years Liverpool, Manchester and Bristol - we would welcome the opportunity to explore with you the issues raised in this submission at a future oral evidence session.

2. Summary of BCSC position on localism agenda

During the last 2 years, we have seen a radical change in the fortunes of retail led development. The stark consequences of the UK banking crisis, combined with falling capital values and consumer demand has had a profound effect. Add to this the reluctance of banks to provide loan facilities to commercial property, and in particular, development, and we have the recipe for stagnation. Our research shows that virtually all development that is not under construction at present is unlikely to be delivered for several years. This will have a dramatic impact on the regeneration prospects for many towns and cities in the UK, and will undermine hopes of imminent job creation in our part of the private sector.

Against this backdrop, we welcome your Committee’s Inquiry into localism and are pleased to offer our industry’s initial thoughts on the likely consequences of moving towards a decentralised model for the delivery of public services and a localised framework for sub-national growth.

Our submission focuses primarily on the possible consequences of a localised framework for sub-national growth as it is within this policy area that our industry has the most experience and expertise to offer.

To summarise;

· We welcome the Government’s decision to look at ways to enable communities to better take a lead in the direction of the development of their local area

· We urge Government to make the transition to the new governance structures as straight forward as possible – whilst recognising that the full transition may take some time

· Our industry needs further clarity from Government to be able to adapt internal processes to engage with new points in the governance structures

· We welcome the Government’s commitment to seeing businesses lead Local Enterprise Partnerships (LEPs), however we urge Government to ensure that the new system does not suffer from a perceived democratic deficit as this could undermine the new setup and lead to public calls for a rethink at a future date

· We believe that the planning system works best when clarity exists for both applicant and developer

· Planning departments need to be adequately funded and resourced in order to prevent both delays and unnecessary application refusals

· Looking to delivering a sustainable built environment, we continue to believe that the national building regulations, rather than localised interpretations of the Merton rule, are the best mechanism for meeting our climate change obligations

· We fully support proposals to extend to the discretionary measures for providing business rate relief

· We welcome the recent announcements on Tax Increment Finance (TIF) proposals, and look forward to working with Government to identify the best model for the UK market

3. The extent to which decentralisation leads to more effective public service delivery; and what the limits are, or should be, of localism

As stated in our opening remarks, we are keen to comment only on the areas of public service delivery that impact directly on our industry’s ability to thrive and bring about regeneration benefits for the country’s many towns and cities. With this in mind, we have restricted our comments to the planning system, the sustainability agenda and the possible adjustment of business rates arrangements.

Planning

Irrespective of the tier of government that is designated the decision maker/arbitrator for planning decisions, we urge Government to ensure that all parties – developer and potential critic – are fully aware of the channels of engagement open to them.

With this in mind, we would welcome clarity from Government as to how far the functions of the LEPs will in fact extend. In the 29 June letter to Local Authority Leaders and Chief Executives, the Government noted that some of the functions of Regional Development Agencies are "best led nationally, such as inward investment, sector leadership, business support and access to finance". We believe that it would be of huge benefit to those establishing LEPs and those seeking to engage and work with them in the future if Government could be more explicit in this division of responsibility.

To give some context to this, it is crucial to understand that our industry, like many, centralised its operations as Government centralised its own. This enabled our companies to engage with the relevant decision makers and build effective relationships which have helped to create some hugely beneficial regeneration projects.

With the dismantling of the RDAs set to be completed by 2012 (24 months), our members are keen to ensure that our own internal operations are realigned to match the new central/local governance arrangements. To minimise disruption, and delays to regeneration projects and the positive consequences thereof, we are keen to begin the transition now.

One factor that has contributed to the cumbersome character of the current planning system is the lack of officers available to process applications on the ground. Further Government cutbacks to local authorities’ budgets will further put pressure on the resourcing of planning departments. This could lead to an even slower process due to fewer officers being able to process applications, resulting in increased delays in bringing forward schemes at a time when delivery of investments needs to be accelerated to safeguard and create jobs.

Notwithstanding some of the concerns about the current planning regime, our industry has welcomed the recent shift in attitude towards development at a national level. The planning system has become more open to a positive view of development, recognising the regenerative benefits that come about from significant private sector investment in local areas. We would be keen to ensure that this pro-development attitude is not lost in the transition as responsibilities are devolved.

Sustainability

We recognise that there are many ways in which shopping centres can reduce carbon emissions, via both behavioural and technological changes, and we are committed to the Government’s target that all non-domestic property should be zero carbon by 2019.

We continue to support the use of Building Regulations as the mechanism to deliver sustainability advances, and urge Government to resist handing more powers in this area to the planning system.

The introduction of policies designed similar to that of the Merton Rule do not deliver the required flexibility to work towards meeting the 2019 target. It is crucial that each development is assessed on its own merit, and local authority-wide (often arbitrary) sustainability targets have not been shown to deliver the best results.

The Merton Rule is clearly popular with local authorities and is seen to be quick win to deliver energy reductions and improve a council’s reputation in this area. However, the rule is restrictive in its application, and in certain circumstances introduces an element of risk in enabling developments to move forward.

A move towards such policies could serve to complicate matters and create further regional inconsistencies between different local authorities. This, we feel, could undermine the power of larger landlords and developers to make strategic decisions relating to the sustainability of more than one shopping centre at any one time, thus reducing economies of scale.

Business Rates

Retailers contributed around 25% of Government’s annual £25 billion in business rate receipts in 2009/2010, and with a revaluation in 2010 along with powers given to local authorities to raise addition rates revenue through a Business Rate Supplement (BRS), the cost of business rates to retailers is likely to increase. Escalating business rates at a time of falling sales driven by weak consumer confidence continues to have a detrimental impact on retailers’ ability to remain profitable. This has resulted in large numbers of retailers going into administration and an increase in the amount of empty property on our high streets.

Against this backdrop, we fully welcomed the Government’s proposal, as published earlier this year, to establish a broad new power allowing a local authority to grant relief to any ratepayer, subject to local eligibility criteria. We believe that this would help support town centres during the current difficult economic climate. We strongly believe that any relief should also be made available on empty property. This is an area where the localism agenda can enable communities to seize the initiative and act to protect local retailers and landlords and thus preserve their own high streets.

Turning to the recent announcement by the Deputy Prime Minister on Tax Increment Financing (TIF), we firmly believe that a specific TIF variant – known as Local Tax Re-investment Programme (LTRIP) - should be introduced urgently. Unlike other tax increment proposals, including ADZs, we believe that the introduction of LTRIP transfers risk to the private sector for upfront infrastructure investment without relying on public sector money and in our view does not require primary legislation given, as you will be aware, that the Local Government Act 2003 s70(4a) gave powers to Ministers to allow additional business rates, over and above those assumed in annual financial settlements and which would normally be retained by Government, to be returned to local government and allocated to principal authorities.

As indicated above the key point to note about LTRIP is that it does not require any initial borrowing by the local authority. Instead, the expenditure can be financed by the developer’s own resources, and the developer is then repaid out of a tax increment, from increased business rates, as and when it arises. Thus the local authority can entirely transfer to the developer the construction risk and the risk that the tax increment will fall short of expectations.

4. The lessons for decentralisation from Total Place, and the potential to build on the work done under that initiative, particularly through place-based budgeting;

We welcome the LGA’s June 2010 report Placed based budgets the future governance of local public services. Whilst we recognise aspects of the description of a "public service architecture created on a flawed and over-centralised model, with a public budget for every issue, and an inspection and control regime for each one", we do not believe that the role for centralised streams of funding is completely defunct.

There will continue to be a role for a central department to share best practice and guidance with local authorities around the country. This in itself should not be seen as an unnecessary additional cost. This should be seen as a means of saving money, albeit the local authorities’ money rather than central government’s. To expect each local authority to undertake the same learning curve for each and every new planning application (for example) that comes into its realm would be an inefficient use of public funds. It would be more sensible for the central department to be able to share the experience and expertise of the whole country with all the respective authorities.

We fully accept that there is also a role for trade bodies in the dissemination of best practice and education, and this is a core function of our own organisation. We would be particularly keen to explore ways in which we, and other industry bodies, can help to provide local authorities and other local decision makers with the necessary education and experience that they require to make informed choices for their communities.

5. The role of local government in a decentralised model of local public service delivery, and the extent to which localism can and should extend to other local agents;

Local authorities will clearly have a crucial role to play in the decentralised model of local public service delivery. We also welcome the proposed LEP structure which is set to include local business representation.

That said, we do acknowledge the perceived accountability deficit in the RDA model. With this in mind, we are keen to ensure that the replacement LEPs are not left vulnerable to similar perceptions. We would therefore urge Government to issue robust guidance in relation to the balance of the LEP Boards.

We fully support the suggestion that "business and civic leaders work together", however, we believe that it is essential that there is no space whatsoever for a public perception that the new LEPs are anything other than democratic organisations.

We believe that there do need to be in place some guidelines to ensure that all LEPs are able to demonstrate democratic accountability to their local areas. To give each LEP the ability to construct its own Board without such guidance could undermine effective delivery in the future, with opponents of decisions exploiting the perception of a democratic deficit to challenge plans.

6. The action which will be necessary on the part of Whitehall departments to achieve effective decentralised public service delivery;

The transition to decentralised public service delivery cannot and will not take place over night. It is fundamental that the Whitehall structures remain in place, and properly resourced, until such time as the new arrangements are fully operational. We cannot allow a situation to arise where there is a shortfall of service provision, be it a shortfall that causes delay to the planning system, or indeed one that undermines social care provision. To allow such a hole in service provision to occur will undermine the public’s support for localism and thereby could cause the very same resentment that came to be levied at the soon to be extinct RDAs.

Our industry is particularly keen to ensure that we do not have to undergo a further remodelling of the governance arrangements in the future as this would only serve to create further delays to development processes and thereby exacerbate delays to realising the full benefits of some retail-led regeneration projects that are currently in the pipeline.

7. The impact of decentralisation on the achievement of savings in the cost of local public services and the effective targeting of cuts to those services;

We recognise the constraint on public finances at the present time, and we do understand that delivery of public services at a local level may reduce some costs. However, we cannot begin to estimate these cost savings for Government or indeed those for our own industry until such time as further clarity is available on the Government’s localism proposals.

8. What, if any, arrangements for the oversight of local authority performance will be necessary to ensure effective local public service delivery.

The LGA’s place based budgets report recommended that each place should be accountable to Parliament for its budget. Whilst in principle this sounds relatively straightforward and removes layers of bureaucracy, we are sceptical as to whether this could become a realistic proposition.

Given the planned reduction in the number of MPs, and therefore the increase in each MP’s workload, we would welcome further explanation of how this proposal would be taken forward. We would question whether there would be sufficient Parliamentary time for MPs to scrutinise each local authority’s budget. Equally, we would welcome further clarity on where accountability would lie should a budget be misspent – would it be with the place, or with the scrutiny committee of MPs.

9. How effective and appropriate accountability can be achieved for expenditure on the delivery of local services, especially for that voted by Parliament rather than raised locally.

As noted above, we would welcome further exploration of this issue. We are concerned that Parliament will not alone have the capacity to regulate the funding streams. This is an area where there may well continue to be a role for some arms length bodies with limited regulatory functions.

October 2010