Written evidence submitted by British
Council of Shopping Centres
1. BCSC
BCSC represents businesses operating in the retail
property sector. Our mission is to promote industry best practice
and advance the professional aims of the retail property industry.
Our membership is 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. Since 2008, as a consequence
of the economic crisis the retail property pipeline has faltered,
with 50 million sq ft effectively on hold, awaiting a significant
improvement in economic conditions before building can commence.
The consequence of this is that jobs, in construction and in retail,
are not being created, public spaces are not being renovated,
and, in some cases, town centres are suffering further degradation
and decline.
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 welcome
the opportunity to put forward our response to the CLG Select
Committee's Inquiry.
2. SUMMARY
— BCSC
is committed to working with the Coalition Government to develop
the most suitable policies and frameworks for the successful regeneration
of the UK's towns and cities.
— We
recognise that the Government is keen to introduce a fresh approach
to regeneration and that this requires a significant policy shift
in the areas of: localism/decentralisation, planning, business
rates, and funding.
— Whilst
supportive of the principles underpinning the Government's commitment
to a more decentralised framework for decision making, we do have
some concerns about certain aspects of the Localism Bill, including
local referendums, neighbourhood planning and neighbourhood forums.
— We
welcome the decision to review National Planning Policy, however,
we must work to ensure that, in haste, we do not remove from the
planning system elements that were working well.
— We
are strongly in favour of a presumption of sustainable development
and of Town Centre First policy.
— BCSC
fully welcomed the Government's proposal to establish a broad
new power allowing a local authority to grant relief to any ratepayer,
but we do have some questions regarding a fully re-localised business
rate.
— We
welcome indications that the Government is committed to the roll
out of Tax Increment Financing (TIF). We firmly believe that a
specific TIF variant - known as Local Tax Re-investment Programme
(LTRIP) —should
be introduced urgently.
— The
main lesson that can be drawn from our industry's retail-led regeneration
experience is that it is crucial that the Government does not
create uncertainty and add to risk in times of limited new development
by tinkering with town centres first policy or introducing new
hurdles which could delay planning.
3. REGENERATION—RETAIL
PROPERTY CONTEXT
The continuing effects of the recession have had
a dramatic effect on the UK's Shopping Centre Development Pipeline.
In 2010, the total additional retail space built was 2.2 million
sq ft, the lowest proportion of new space for some 18 years and
the situation is likely to get worse.
In 2011 the total new space will be 2.55 million
sq ft, which can give the impression of an improvement in supply.
However, this is an anomaly as it is skewed by the 1.75 million
sq ft Stratford City opening in September, where construction
commenced before the recession.
The future from 2012 onwards is very bleak. The most
optimistic predictions for 2014 show 1 million sq ft open and
trading and 3.4 million sq ft in 2015. In reality these figures
are optimistic as they rely on a growing UK economy during the
next two years, which at present, would appear to be uncertain.
The reason for no new centres opening in 2012 is
clearly the recession. The construction period for new shopping
centres is usually two to three years and the recession of late
2008-09 effectively prevented the implementation of any new centres.
Trinity Leeds, which is being developed by Land Securities, is
standing proudly on its own for 2013, with a total development
of 1 million sq ft in the centre of Leeds.
Against this backdrop, it is worth noting that the
focus of our industry is on renewal and upgrading of the existing
retail floorspace, and not just on the pipeline of new space.
Renewal and the repositioning of existing centres should be understood
as a significant part of regeneration strategies and planning
policy.
4. How effective is
the Government's approach to regeneration likely to be? What benefits
is the new approach likely to bring?
BCSC is committed to working with the Coalition Government
to develop the most suitable policies and frameworks for the successful
regeneration of the UK's towns and cities. We recognise that the
Government is keen to introduce a fresh approach to regeneration,
and we clearly acknowledge, as outlined in the Government's January
2011 publication Regeneration to enable growth, that this approach
requires a significant policy shift, particularly, but not exclusively,
in the areas of: localism/decentralisation,
planning, business
rates, and funding.
To take the benefits and challenges of each of these
in turn:
Localism/Decentralisation
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, with the proposed creation
of Local Enterprise Partnerships (LEP) to replace Regional Development
Agencies (RDA) and increased powers for local neighbourhoods.
The retail property industry is broadly supportive
of the principle that local communities will set out local economic
priorities. This clearly makes sense, as those closest to an area
are best placed to determine what is best for it. We have always
supported local consultation processes, as these serve to better
development outputs for both the communities involved and the
business partners. There is no commercial benefit to delivering
a scheme that the local community does not support and therefore
will not visit. The lengths to which companies go to involve communities
in the decision making process already can be seen in the example
of the Liverpool One regeneration project. The Grosvenor team
undertook many rounds of consultation with local communities.
For more information on this, please see http://www.liverpool1.co.uk.
Whilst supportive of the principles underpinning
the Government's commitment to a more decentralised framework
for decision making, we do have some reservations about certain
aspects of the Localism Bill as it currently reads. There are
some parts that, if progressed without amendment, may in turn
hinder future regeneration prospects.
We have significant concerns about the proposal for
local referendums,
as outlined in clauses 40, 41, 42 of the Bill. Given the stifled
development pipeline that exists today, as outlined at the beginning
of this document, our industry is concerned that enabling petitions
to trigger referendums on local planning decisions could add a
significant delay to the planning process. The prospect of such
a delay, and the associated costs, would need to be included in
the risk assessment when determining whether or not to take forward
a development. This will impact on the viability of some schemes
and tip them over into the unviable category. This is clearly
a damaging consequence of the proposal at it means some retail-led
regeneration projects will not be progressed.
The planning process, unlike other functions of local
government, already provides many clear opportunities for interested
parties to lodge opinion and shape outcomes. We would therefore
urge all MPs to consider excluding planning applications from
the scope of local referendums. There will be an opportunity to
revisit these clauses at the Third Reading of the Bill and again
as it proceeds through the House of Lords.
That said, if Government is minded to keep planning
within the scope, we would strongly recommend that the practical
application of referendums is more vigorously interrogated. We
have significant concerns about the low percentage of the electorate
required to trigger a referendum. If the number of electors of
an area were that of an average sized council ward, the 5% threshold
required could be as small as 600 signatories - and even fewer
if one were to look at a neighbourhood level. We believe that
this would be a NIMBY's charter—enabling a minority to significantly
delay a planning process that could create jobs and opportunities
for a less vocal majority. We also recommend that the proposed
number of councillors required to call a referendum is revisited.
At present, the Bill requires only one councillor to call for
a referendum which could then delay a planning decision for many,
many months.
Turning to the Government's flagship policy of neighbourhood
planning, as indicated above, we are cautiously
supportive of the need to increase the role and engagement of
local neighbourhoods in planning decisions. That said, we do have
some reservations about the resources available to support such
neighbourhoods in their decision making processes. In times of
public sector constraint, we would welcome further clarity from
Government to clarify how neighbourhoods will be able to resource
their planning activities. We would also appreciate more information
on the status of the neighbourhood plan. For example to what extent
it must be considered by the local planning authority and to whom
a neighbourhood could complain if it felt its plan had been ignored
by a relevant authority. As things stand, there remain a number
of unanswered questions which, if not dealt with, may serve to
derail some regeneration prospects.
We have publicly welcomed the role of neighbourhood
forums in
neighbourhood planning. However, we are particularly concerned
to note that at present there is no requirement/ability for local
business to take a seat on a forum. Again, we believe that this
could undermine the intention of the Government to encourage businesses
and communities to work together to revitalise local areas. We
would urge the Select Committee to call for Government to adapt
schedule 9 of the Localism Bill to allow for local business leaders
to take seats, where appropriate, on neighbourhood forums. BCSC
believes that the rollout of BIDs across the country has demonstrated
the significant benefits of involving local businesses in the
management and development of local areas.
Planning
Planning Minister Greg Clark has announced a review
of planning policy, designed to consolidate
policy statements, circulars and guidance documents into a single
consolidated National Planning Policy Framework. It has been announced
that the new Framework will be localist in its approach, handing
power back to local communities to decide what is right for them,
and accessible, providing clear policies on making robust local
and neighbourhood plans and development management decisions.
We fully acknowledge that this rationalisation of planning policy
is being undertaken with the best intentions to create a climate
in which Britain will re-enter a period of growth, enabling regeneration
schemes to prosper.
We welcomed the Prime Minister's recent comments
in which he outlined his determination to take on "the
enemies of enterprise…. The town hall officials who take
forever with those planning decisions that can be make or break
for a business - and the investment and jobs that go with it."
However, we must work to ensure that, in haste, we do not remove
from the planning system elements that were working well.
With this in mind, we have responded to Government's
calls for comments regarding the planning review. We welcomed
this opportunity to outline some of the key principles that we
believe should be explicitly retained in the new planning framework.
We stressed that BCSC favours a clear and transparent
plan-led approach to sustainable economic development. We believe
that plan making and development management should be evidence
based and take full account of the views of local communities,
of which local businesses are a key component. We also believe
that neighbourhood planning has to be compatible with the rationale
for a presumption
in favour of sustainable
economic development and that it must
not add additional bureaucracy and cost for businesses.
Specifically we endorse the intention of Government
to make the current "town
centres first" policy more robust,
as set out in a ministerial statement on 17 February 2011, and
reiterated more recently by Bob Neill MP. The firm application
of an impact assessment is also something that we are strongly
in favour of. This considers both positive and negative indicators
so that any significant adverse effects can form the basis for
refusal of out-of-centre schemes that are not in line with the
local development plan. We are strongly of the belief that to
truly enhance the UK's regeneration prospects promoting
the vitality and viability of town centres
must be explicitly included as one of the primary spatial planning
objectives of the National Planning Policy Framework.
Business Rates
Retailers contributed around 25% of Government's
annual £25 billion in business rate receipts in 2009-10,
and with the 2010 revaluation and the power for local authorities
to raise additional 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 many 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.
A recent publication by the Local Data Company (LDC), entitled
Terminal Illness or Gradual Decline, concluded that the
number of empty shops on the UK's high streets continues to increase
(with a national average of 14.5% of the UK's shops vacant) and
the "North/South" divide is large, and is growing. The
full report is available at www.localdatacompany.com. Vacancy
rates, made worse by the imposition of empty property rates, impacts
on the value of retail property as an asset class, and thereby
reduces its appeal to investors, who now, instead of financing
regeneration schemes, may seek to move their funds elsewhere.
We have made representations to Ministers on the
subject of this year's Uniform Business Rate (UBR) uplift and
have argued that a lower rate than RPI should be applied given
the fragile state of the economic recovery coupled with the tax
rises and public spending cuts.
Against this backdrop, we fully welcomed the Government's
proposal, as published last 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 will
help support town centres during the current difficult economic
climate. We are particularly pleased to note that relief will
also be 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 specific proposal to empower some
local authorities
to retain their rates, we would welcome
further explanation from Government on the exact workings of this.
In principle it seems fair to the local authorities involved,
but we would like to learn more as to how areas that are currently
net beneficiaries of the business rate redistribution mechanism
would be adequately financed were the overall rates pool reduced.
In addition it should be noted that previous Inquiries into local
government finance, most recently the report undertaken by Sir
Michael Lyons in 2007, occupiers strongly favoured the retention
on a UBR. We see no reason why this position should have changed.
A large number of business rate multipliers across jurisdictions
results in administrative and systems costs that create costly
business inefficiencies. In addition the uncertainly that might
be created by councils having the power to set the business rate
makes it more difficult of retail and retail property businesses
to forward plan investment. The private sector needs Government
support in establishing the most efficient regulatory and fiscal
framework within which it operates to ultimately create business
growth and all the subsequent economic and social benefits this
brings.
On a positive note, we do welcome the commitment
from Government that any local supplements on business rates will
be subject to a binding business vote in order to ensure that
business rate income is spent on activity that will have a material
impact on private sector growth. This is a crucial, particularly
given the Government's aspirations for future economic growth
to be very much private sector led.
Finally on business rates, BCSC strongly believes
that Government should take this opportunity, as part of the Local
Government Resource Review, to revisit its approach to empty property
taxation. Our industry has the capacity to create employment and
regenerate towns and cities but remains handicapped by this financial
burden that significantly adds to the risk of speculative development.
Funding
BCSC acknowledges that crude public sector investment
is no longer a viable funding option for many retail-led regeneration
projects. We welcome the Government's commitment to continue to
deliver some funding for regeneration via the Regional Growth
Fund, however, it must be stressed that this will still leave
many schemes unsupported. With this in mind, we do believe that
there is still a role for Government to play in creating a broader
framework in which local authorities and commercial organisations
can come together to leverage funds to deliver regeneration schemes
from the realm of unviable into the sanctuary of viability.
We therefore welcome indications that the Government
is committed to the roll out of 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.
There is every reason to assume that an LTRIP model
will be attractive to private sector funders given the parallels
with traditional development finance, which relies on payback
from a developer from future rental flows whereas LTRIP would
require payback from future tax receipts. Given future tax flows
are safer than future rental flows (the latter being subject to
void periods), there is every reason to believe that the private
sector may more readily support LTRIP than traditional development
finance tools.
5. Will it ensure that
the progress made by past regeneration projects is not lost and
can, where appropriate, be built on?
We welcome the Government's previous attempts to
quantify the benefits of previous regeneration projects, most
recently in the publication Valuing
the benefits of Regeneration, published
in December 2010. Documents such as this do help to ensure that
previous lessons are not lost.
We fully accept that there is also a role for trade
bodies in the collation and 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 regeneration choices for their
communities. We are currently undertaking some research alongside
BiTC (Business in the Community) to try and quantify the wider
benefits of regeneration to communities and their local areas.
We would be more than happy to share this work with the committee
at a later date if useful.
6. Will it ensure that
sufficient public funds are made available for future major town
and city regeneration projects as well as for more localised projects?
As discussed above, we note the Government's decision
to establish the Regional Growth Fund to support local projects.
Our understanding of this fund is that it can be directed to any
size of community so we do not believe that it favours town and
city over smaller communities.
To ensure that there is sufficient funding for large
and small regeneration schemes we must again stress that the Government
should introduce the LTRIP model, as part of a suite of TIF options,
without further delay.
7. What lessons should
be learnt from past and existing regeneration projects to apply
to the Government's new approach?
Over the years, BCSC has produced a number of publications
which touch on the benefits of new schemes and so help to pass
past learning on to newer projects. For a full list of these publications,
please see: www.bcsc.org.uk/research
The main lesson that can be drawn from our industry's
retail-led regeneration experience is that it is crucial that
the Government does not create uncertainty and add to risk in
times of limited new development by tinkering with town centres
first policy or introducing new hurdles which could delay planning.
Successful projects—like Exeter (Princesshay), Bristol Cabot
Circus and Bath Southgate have all required consistency to give
investment confidence.
On a separate point, we have previously provided
the Government with our opinion on the adverse implications for
the financial viability of regeneration schemes of requiring excessive
counter-terrorism measures through town planning.
BCSC made representations on the previous Government's
proposals for requiring the physical hardening of "Crowded
Places" in May 2009 but the policy seems to have been maintained.
The economic position has deteriorated since made those representations
and therefore getting regeneration schemes to fly in the current
climate is, as noted previously, even more difficult - delaying
or completely frustrating town/city centre improvements and employment
generation. Our experience would suggest that more flexible approaches
to counter terrorism, perhaps involving more and smarter use of
"human factors", is likely to mean more regeneration
schemes being able to start.
8. What action should
the Government be taking to attract money from (a) public and
(b) private sources into regeneration schemes?
As outlined above in part 4.
9. How should the success
of the Government's approach be assessed in future?
We would welcome a commitment from Government to
evaluate the localism agenda at a reasonable point in the future,
to thoroughly assess whether the framework has indeed released
enterprise from the shackles of bureaucrats as is hoped. It is
crucial that the Government does commit to review its policies,
perhaps at five yearly intervals, as to continue further along
this policy path without an understanding of the consequences
would be ill-advised and possibly undermine regeneration aspirations
in the long run.
10. TO
CONCLUDE
BCSC would be pleased to expand on some of the points
raised in this submission at an oral evidence session.
March 2011
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