Levelling-up and Regeneration Bill

Written evidence subm itted by the Chartered Institute of Building on the Levelling-up and Regeneration Bill (LRB37)

Introduction

1. The Chartered Institute of Building (CIOB) is the world's largest and most influential professional body for construction management and leadership. We have a Royal Charter to promote the science and practice of building and construction for the benefit of society, and we have been doing that since 1834.

2. Our members work worldwide in the development, conservation , and improvement of the built environment. We accredit university degrees, educational courses , and training. Our professional and vocational qualifications are a mark of the highest levels of competence and professionalism, providing assurance to clients and other professionals procuring built assets.

3. CIOB works with other professional bodies such as the Royal Institute of British Architects (RIBA), Royal Institution of Chartered Surveyors (RICS) and the Royal Town Planning Institute (RTPI), to ensure that the built environment works in the best interest of those using it.

Summary

4. As a professional body, CIOB recognises that the construction industry has a significant role to play in delivering levelling up and is well-placed to advise on immediate and long-term strategies for future regeneration, improving the quality of housing and building the necessary knowledge and skills to match the levelling up ambition.

5. However, we are concerned about a lack of detail and clarity in the Bill on substantive issues such as:

a. The necessary skills and labour available to deliver levelling up in a meaningful way

b. Targets which prioritise the quantity of new homes, rather than their quality

c. The potential implications of proposed planning reforms on the role of SMEs in the development market

d. The potential implications of the Infrastructure Levy on new developments

e. The absence of strategic objectives, such as net zero, and how they will be measured

6. Construction officially accounts for approximately 6% of economic output in the UK and provides employment for 2.3 million people. [1] It is recognised as a vital cog within the economy, but it is far more than just an economic driver. The built environment continues to influence and shape how we live, work, and play at community levels. Therefore, the Government must not underestimate the importance of listening to the industry on how best to deliver levelling up at a practical level.

7. CIOB has set out recommendations, of what we believe the Levelling-up and Regeneration Bill should strive to achieve:

a. Place the quality of new homes as a primary objective of reforming the planning system instead of focusing narrowly on quantity of homes provided

b. Link in with existing legislation such as the Building Safety Act 2022 to create a cohesive suite of policy for the built environment

c. Review the existing land value calculations with a view of fostering a more inclusive planning system for SME housebuilders

d. Utilise the Government’s housing accelerator, Homes England, to provide SMEs with opportunities to develop small parcels of land as part of larger strategic developments to learn best practice and protect market involvement

e. Address the falling rate of SME housing development by implementing quotas for SME built sites as part of the local plan process

f. Provide greater clarity on the Infrastructure Levy prior to the release of secondary legislation

g. Consult with built environment stakeholders, to understand whether the Infrastructure Levy process would be best implemented as a phased payment or upfront payment system to provide local authorities with the funding for crucial local infrastructure early in the development process

h. Develop immediate strategies to recruit, retain, and progress workers within the construction industry to practically deliver levelling up

i. Introduce a Built Environment GCSE in England to support and inspire future generations of talent to meet our infrastructure, housing, and environmental needs

Background to Levelling Up

8. The concept of ‘levelling up’ is not a new one. Throughout history, there has been a constant cycle of regeneration, development, and improvement initiatives, which have appeared across the House in various guises. These include, the 1934 Special Areas Act, 1969 Urban Aid Programme, 1979 Urban Economic Development Programme, 1998 New Deal for Communities, and 2010 Northern Powerhouse strategy to name but a few. It is telling that, most designated ‘special areas’ under the 1934 Act, are the same as those targeted by the current levelling up agenda.

9. Often, such initiatives have been introduced as a response to deep-rooted changes in the industrial and economic structure of society; and have typically been underpinned by three key objectives:

1) To bring about a more even spread of economic activity throughout the country

2) To maintain the individual character, versatility, and diversity of the regions, and ensure they play a part in national life and affairs

3) To improve the general quality of life in all its aspects. This extends beyond employment, and includes an improvement in amenities, social and cultural activities

10. Furthermore, the common threads through most of these initiatives are:

1) The concept of ‘economic growth zones’ and ‘geographical industrial clusters’

2) The implementation of national policies at a regional and local level

3) Public and private investment in infrastructure to stimulate development, employment, and productivity

11. Ultimately, this demonstrates that the concept of ‘levelling up’ has long been focused on solutions to rebalance the economy. According to the Institute for Government (IfG), the Government must therefore ‘set out why – in its view – previous attempts failed, and how this strategy will be different’. [2] Indeed, the development of previous policies has been well documented; however, little has been achieved in terms of evaluating their impact, primarily due to the difficulty in producing measurables for levelling up.

12. CIOB agrees that current policy objectives to address stark geographical imbalances in the UK economy, must examine historical policies and lessons learned. At this present time, the UK is experiencing technological advancement as well as altered living and labour conditions, both of which have been accelerated by the Covid-19 pandemic. Therefore, alongside the comprehensive treatment of historical challenges, the current agenda must also identify viable responses, and implement appropriate mechanisms to address contemporary ones.

13. CIOB also believes that international comparison is necessary; for example, while the UK Government has announced £11 billion of funding to be allocated over the next five years; Germany, by comparison, spent €2 trillion between 1990 and 2004 on similar regional levelling up measures. [3] This indisputable funding disparity raises significant concerns over the UK Government’s ambition to generate real change. Likewise, the timeframe for delivery should also be re-considered; as demonstrated in Germany, genuine levelling up requires long-term strategies and investment, as well as buy-in from all mainstream political parties and cooperation across public and private sectors, so that it is sustained over multiple Governments.

Levelling Up Missions

14. The Bill, in its current form, revolves around the setting of twelve ‘missions’, which were broadly set out in the [4] During the Queen’s Speech, further details of how the progress of each mission will be monitored and evaluated were provided, with the announcement of a government duty to prepare and publish annual ‘progress’ reports, to be laid before the House.

15. Missions primarily centre around initiatives to narrow spatial inequalities and raise socio-economic outcomes across the UK through investment in the built, social, and economic environment. These include empowering local decision makers though greater devolved powers, securing paths to homeownership, improving the transport and digital connectivity of communities new and existing, investing in research and development, and increasing the number of people completing high-quality skills training, amongst others.

16. Each of the missions set out by Government will require long-term commitment beyond a single parliamentary session. CIOB welcomes sustained, joined up policy making, and is keen to see the construction industry engaged on the areas where it can make a significant contribution to achieving the levelling up missions, from providing direct employment, investment, and revenue to local and national economies, to delivering housing, transport, and fundamental infrastructure.

17. For example, in terms of alleviating the shortfall of housebuilding, and achieving the ambition of guaranteeing access to decent quality homes for everyone, the construction industry has a vital role to play. However, to ensure the effective and efficient delivery of housebuilding and wider infrastructure projects, the Government must work with the construction supply chain and more importantly, support its transformation and modernisation, so that it can adopt more innovative approaches, techniques, and methods, which can act as a catalyst to accelerate levelling up.

18. Overall, CIOB is supportive of the twelve missions, and the opportunities they present for the built, social, and economic environment. We believe that better buildings and infrastructure will contribute to improved productivity across the country, not just through their primary function or by increasing economic output, but also by making communities happier, safer, and healthier.

19. We are also broadly supportive of the need for Government to report back on the progress of each mission through a report issued to the House every 12 months. However, we believe that Government requires checks and balances when assessing its progress against each mission. To ensure fair and impartial assessment of progress, we endorse Amendment 3 in Clause 1 of the Bill as proposed by Alex Norris MP. This amendment requires Government to commission an independent body to scrutinise their progress against each levelling up mission.

20. Alongside this, we support Alex Norris MP’s amendment 13 in Clause 1, which would see a commitment from Government to publish in-depth reports on how each levelling up mission will be resourced to ensure transparency is maintained. Given that many of the levelling up missions are underpinned by investment in infrastructure, we believe it is vital that the Government develops a detailed plan, in consultation with the built environment sector, to detail how the missions will be delivered in practice. Providing this pipeline of proposed activity will enable the industry to build workforce capacity and develop relationships with local contractors, designers and manufacturers.

21. Ultimately, to avoid levelling up and regeneration policies becoming a political football, where the need for constant ‘improvement’ reflects moving goal posts, cross-party consensus, sustained over multiple Government’s is necessary. The country cannot level up on rhetoric. A programme to address regional inequalities requires urgent action, a long-term commitment, and investment at scale, which goes beyond 2030.

Constructions Role in Levelling Up

22. The construction industr y has historically play ed a unique role in UK growth and has a profound economic, social , and environmental impact . It represents around over 6% of all GDP and 7% of the UK’s total workforce which is spread right across the country . [5] Construction also provides a substantive growth stimulus to other industries and thus contributes directly and indirectly to the achieve ment of national socio-economic objectives such as the improved health and well-being of individuals and communities.

23. Within the Bill, the government has made it clear that it will utilise infrastructure and construction to deliver the complex a nd transformational change required to tackle geographical disparities in a meaningful and sustainable way. Indeed, the industry stands to gain from levelling up, most notably from the £4.8 billion for infrastructure investment, £2.4 billion Towns Fund, and £830 million Future High Street Fund, which will generate significant work and contracts for the industry. 6

24. However, while CIOB supports the political rhetoric of unlocking economic growth and job creation through infrastructure projects, we are concerned that the funding strategy falls short of what is required to deliver transformational change. For example, no new major funding or sustainable built environment initiatives were announced within the context of the relevant missions or reforms, such as plans for a National Retrofit Strategy.  Ultimately, long-term industry investment is needed to address issues such as skills and will enable the industry to better achieve the levelling up missions.

25. The Bill also presents an opportunity to accelerate change and reshape the construction industry, changing its focus from lowest cost to highest value and to increase its uptake of labour-saving technologies. The Government has made it clear that it wants to create community pride and address the housing crisis, both in terms of affordability and quality. To do so will require greater cooperation and collaboration between local supply chains. The regions of the North of England along with the Midlands individually and jointly have a deep and rich industrial heritage. These regions are home to numerous product assemblers and their supply chains, which include a raft of businesses spanning from high-tech specialists to major heavy engineering operations. Embedded within this industrial network are the engineers, managers and entrepreneurs that support the necessary development and innovations that keep these businesses relevant to ever changing demand and policy drivers.

26. This provides an ideal platform on which to build strong foundations for a construction industry that is rapidly moving towards greater integration, with work shifting from the point of assembly – the construction sites – to the design offices and offsite factories. Many of the offsite factories are already being set up in the north of England, such as Ilke Homes in Knaresborough, North Yorkshire and Legal & General Modular Homes, near Leeds and Laing O’Rourke’s Explore Industrial Park, in Nottinghamshire.

27. The need for integration and the benefits of ‘clustering’ related firms suggests that policies promoting increased engagement and encouragement could, at this period of rapid change, benefit both the wider construction sector, the economies of these regions and the nation. Now is the time to provide resources to nurture what looks set to become a significant job-creating, value-generating part of the construction industry and the overall economy.

28. We recommend that the Government uses incentives such as low rents or low rates and provision of other services such as business mentoring that support the development of the sector. These should be provided for a diverse range of businesses such as engineers, architects, surveyors, contractors, specialists, and product manufacturers. These clusters should be near to and linked to centres of education and training. Incentives should, however, where appropriate, be tied to engagement and training centres with detailed assessments of their effectiveness.

Potential Barriers to Levelling Up

29. Historically, a lack of confidence in long-term policy direction has impeded the built environment sector’s ability to invest in low carbon technologies and skills, weakened the resilience of the construction supply chain and reinforced a lowest-cost procurement model which leaves no room for social value. This has been exacerbated by stop-start policy and eroded consumer and industry trust due to the failure of past initiatives such as the Green Deal and most recently, the Green Homes Grant (GHG).

30. The Bill also makes a case for increasing home ownership and housing quality through a reformed planning system. CIOB has previously commented on the Department for Levelling Up, Housing and Communities planning reforms, noting the diagnosis of barriers to housing delivery is overly simplistic.

31. We are particularly concerned by the collapse of the role of SMEs in the housebuilding industry, which is hindering competition, quality, and diversity in the market. We believe that a reformed planning system must therefore include clear proposals for long-term changes, including addressing the structural issues in the housing delivery system, imp roving access to SME housebuilders, and reducing the reliance on volume housebuilders as well the accompanying negative impact on build out rates.

32. Finally, we are concerned about the current resource and staff shortages within and across local authorities, which could significantly hinder their ability to make progress on levelling up. The Government must therefore provide greater certainty around local authorities long-term funding and decision-making powers, so that they can plan more strategically, and create dedicated teams to lead on and deliver levelling up missions efficiently. CIOB believe that encouraging local authorities to foster, and secure partnerships with the private sector could enhance their capacity to deliver levelling up.

The Skills Impact on Levelling Up

33. Government investment in major infrastructure projects and programmes is encouraging. However, CIOB is cautiously optimistic, as, currently there is a significant gulf between the skills which exist, and those which are required to practically deliver levelling up. This concern is reinforced by the latest CITB Construction Skills Network report, which contends that, if projected growth output is to be achieved, "over a quarter of a million extra construction workers may be needed by 2026". [6]

34. To avoid this, Government must assess how the industry can strategically continue with its current resources, whilst simultaneously planning for the future . We urge Government to develop immediate strategies to recruit, retain, and progress workers within the industry. Further to this, we believe any investment made in the built environment should be geared to the long-term aim of developing young people. Ultimately, improving the quality of, and access to, education and training is crucial to ensure future growth and prosperity in the built environment, and to improve the quality of services and facilities on which we all rely.

35. In addition, we believe a tailored, place-based approach to bridging the gaps in education, employment and skills is necessary, as often, local leaders and combined authorities have a better grasp of the skills requirements in their areas. As part of enhanced devolution measures within the Bill, we would therefore encourage further powers and flexibility to not only co-design and deliver the national curriculum, but also, to build on local potential, so that the regions and nations of the UK benefit from equal access to skills and training.

36. We are pleased to see that, as part of the levelling up missions, new Institutes of Technology's (IoT) will be established in England, to increase the supply of the higher-level technical training at level 4 and 5 in STEM subjects, which provide clear pathways to skilled jobs in key industries like construction. However, we hold concerns over the current bidding process, which requires institutes to hold an Ofsted ‘good’ or ‘outstanding’ rating at the time the licence and capital funding agreements are signed. According to the Further Education, Skills and Apprenticeships Sector, [7] this has resulted in a lack of broad geographical coverage, with major cities in the North failing to meet the high-quality thresholds to progress to IoT’s.

37. We therefore urge the Government to review the extent of geographical ‘cold spots’ to determine whether an alternative bidding and funding competition should be considered. Ultimately, if the Government is serious about ‘levelling up’ the country, and addressing the skills gap between the North and South, then there must be better representation of IoT’s across the UK. Likewise, we believe that IoT’s should receive sustainable, long-term funding to guarantee quality teaching, research and innovation. The world of work is changing fast, driven by new and disruptive technologies, therefore, IoT’s must be properly funded to meet this demand.

38. To cater for industry specific requirements for construction, CIOB already provides an educational framework to accredit undergraduate courses across the UK and has well-established relationships with a range of higher education institutions, including Birmingham City, Leeds Beckett, Liverpool John Moores, and Salford University. Our educational framework is based on policy creation from the Construction Industry Council (CIC), National Occupational Standards (NOS), and the Quality Assurance Agency for Higher Education (QAA). The CIC common learning outcomes cover a range of built environment higher education programmes and are designed to reflect the changing needs of the construction industry.

39. We therefore support current Government initiatives to establish IoT’s to enhance accessibility and visibility of technical and practical skills through further and higher-level vocational qualifications. This is because IoT’s, champion an industry-academic led curriculum, and incorporate work-placements, which we believe, is a step in the right direction to address the skills gap in construction, but also, to demonstrate how technical education is a credible route to secure jobs.

40. As a professional, accreditation body, we recognise the vital importance of ensuring graduates meet the necessary industry requirements and can effectively transition to the workplace environment. However, we believe more built environment courses need to be introduced at a secondary school level as part of the national curriculum. In Autumn 2021, a GCSE in the built environment became available to centres in Wales for teaching. [8] This has provided tangible opportunities for students to practically apply their learning of mandatory subjects, including Maths, English, and Science, as well as optional subjects, such as Design and Technology, Computer Technology, Geography, and Art and Design. CIOB urges the Government to follow suit and introduce this vocation in England to support and inspire future generations of talent to meet our infrastructure, housing and environmental needs.

41. Ultimately, we believe that the levelling up agenda has the potential to address skills gaps in the construction industry, and it is important that the Government capitalises on this opportunity. The Government should therefore work with the industry to develop unique, sustainable, employment skills and opportunities that reflect local priorities; as well as ensure construction projects provide opportunities that create social value and support local economic growth.

42. A commitment from the Government early in the process to work with industry experts as well as trade and professional bodies will help establish buy-in and help understand capacity demands to deliver on the levelling up missions.

Changes to the Planning System

43. CIOB is not best placed to comment on the number of new homes needed in the UK or the calculations that are made to determine planning need. However, our position is clear on the need to focus on the quality of home provided, as opposed to simply focusing on quantity.

44. We are strong advocates of the Building Safety Act 2022, which is the largest comprehensive reform of building safety since the 1984 Building Act. Although the Act is focused on building safety, it also establishes powers to require developers to become members of the New Homes Ombudsman Service (NHOS), enforcing higher standards in new build homes and placing sanctions on developers should they breach these requirements. In recent years, consumer satisfaction with new homes has diminished and we welcome the move to raise quality, improve consumer outcomes and hold housebuilders to account. This step change to improve the overall quality of new homes should be highlighted with the draft Bill.

45. Builders of all sizes – SMEs and larger developers – are clear that the most significant constraint on design and quality is not the absence of local design codes, but the high cost of land. The inflated land market means costs must be driven down in the latter stages of the housebuilding process for housebuilders to fund the initial land purchase. This results in poorly designed housing.

46. The high cost of land means housebuilders are required to dedicate a disproportionate amount of their budget to fund the initial land purchase in a highly competitive market. To fund this purchase, developers must drive down costs elsewhere in the process, typically on design and quality, thus negatively impacting the final product. If land were available at a more reasonable rate – for example, existing use value plus a 25% premium – developers would be incentivised to compete on the design and quality of the final product, rather than their ability to fund the initial land purchase.

The Role in SMEs in Levelling Up

47. We have highlighted above some of the key challenges facing organisations who are trying to compete to develop land in the UK. These challenges are especially prevalent from the perspective of SME housebuilders who have previously played a significant role in meeting the UK’s housing demand.

48. The Federation of Master Builders (FMB) annual House Builders’ Survey 2021 highlighted some of the key issues currently facing SME housebuilders. These included, a lack of available land, the ongoing materials shortages, access to development finance, opportunities for small sites, a lack of interest in custom and self-build homes as well a lack of certainty over the outcome of planning applications. [9]

49. While some of these aspects are addressed as part of the proposed planning reforms, there are still concerns about the crucial role SMEs play in the development market as we continue to see SMEs priced out of the market in the efforts to compete with volume housebuilders. This is evidenced in a recent report on international construction costs by engineering company Arcadis, which noted some materials, such as copper and aluminium, rose in cost by around 70% and 40% respectively in 2022 so far. [10]

50. With this in mind, there must be due consideration in protecting SMEs to ensure competitiveness as diversification of the housing delivery market is crucial to maintaining a consistent stream of new home completions. The recently announced, Procurement Bill should be developed in tandem with the Levelling Up and Regeneration Bill to benefit SME builders, ensuring that delivering social value through employing local people, for example, are key points as part of future pre-qualification.

 

51. One of the key suggestions levelled by Government is a renewed emphasis on local plan creation. A greater emphasis on gaining site allocations will ensure developers are able to progress through the outline planning permission stage with ease. This will help increase the overall quality of housing as local authorities will be able to set rules dictating appearance and outcomes though consultation with residents.

52. This is one potential solution to ensuring a more consistent delivery of the right homes in the right places. However, this may further constrain SMEs ability to participate in the housing market. The need for an allocation in a local plan will increase the competitiveness from those large-scale developers who have not previously relied on allocated sites to provide much of their housing output annually. This may further squeeze SMEs as they will struggle to compete with developers who are able to pour resources into influencing the local plan process. To address this, we recommend that Government implements a quota of allocations per local plan for local SMEs to ensure that they continue to play a role in the housing market.

53. Additionally, the Government’s housing accelerator, Homes England, should be used to help provide SMEs with an opportunity to access land at a lower market value as well as work alongside experts to deliver key areas of large strategic sites. Unlike many strategic land developers Homes England does not deliver the homes itself. Instead, it acts as a master developer, achieving the outline planning permission and then parcelling out areas of the sites to several developers for them to apply for reserved matters and full planning permission.

54. As part of the strategic master planning process, Homes England sets out a series of design codes that must be followed throughout the development process including best practise measures on quality, safety and good design. At present many of the parcels on Homes England strategic sites have been allocated to large housebuilders such as Bloor Homes and Taylor Wimpey. However, these organisations already have numerous ongoing sites and routes into the housebuilding market through their significant financial portfolios.

55. There is a unique opportunity for Homes England to allocate parcels within their strategic developments to local SME housebuilders. Not only will this present them with an opportunity to participate in an increasingly constrained housing market but also provide them with the opportunity to work alongside larger developers with greater resources pools to learn from best practice.

Making the Planning System Plan Led

56. As mentioned in point 51, at the heart of the Government’s proposed planning reforms is the intention to strengthen the existing local plan system. This includes making the planning system more ‘plan led’ with local plans becoming easier to produce, more inclusive and stronger in weight in deciding on planning applications.

57. CIOB supports the intention to make the creation of local plans a more streamlined process as data gathered in 2020 suggested that fewer than one-third of local planning authorities had an up-to-date local plan (adopted within the past five years). [11] Making local plans easier to produce will help local authorities progress their strategic vision for housing and infrastructure growth without the need to accept inappropriate speculative development.

58. We are also concerned about what the nature of speeding up the process may mean for the quality and overall strength of a local plan. Scrapping the Duty to Cooperate may have the unintended consequence of local authorities producing plans with allocations far below their expected housing need. Without clear direction on how local authorities will need to manage expected housing need versus the need to produce a plan within a specified timeframe may lead to many prospective local plans being dropped by the Planning Inspectorate during examination. We are also concerned with the reference to ‘gateway checks’ included within the Bill. We are aware that these will be put in place to ensure that any issues arising from a local plan are addressed early in the process. However, there is currently a lack of detail on what these checks would include or how they will be monitored throughout the creation of a local plan.

59. The Bill also includes reference to consult residents on planning matters, including through the local plan process. We understand and support the need to digitise much of the local plan process to make them more accessible for residents, allowing them to help shape the strategic growth in their areas. However, we would like further detail from Government and PropTech on how this will be deployed in ‘hard to reach’ communities or those without access to internet.

60. A further concern is on the implementation of the proposed Local Plan Commissioner role. According to the draft Bill, these commissioners will be deployed to support or take over a local plan making process if local authorities fail to meet their statutory requirements. It must be acknowledged by the commissioning body that the local plan making process is not a ‘one-size-fits-all’ approach. Local authorities, in more heavily constrained areas, may face different challenges in the plan making process. Therefore, greater clarity on how the application of this role will take into account the varying circumstances and need for flexibility in creating a local plan is needed. Alongside this, there is little detail on who the decision-making body will be.

Community Involvement in Planning

61. CIOB welcomes the emphasis on community consultation within the draft Bill. Residents have an important role to play in shaping the outcome of planning applications to ensure that they reflect the needs of the community. However, there are issues with the way in which community consultations are carried out by developers seeking to build homes or infrastructure in a local area. Predominantly, consultation is seen as a tick box exercise for developers to progress planning applications.

62. CIOB recognises that there is no ‘one-size fits all’ approach to planning consultation. However, we believe improved guidance must be given by both Government and local authorities on the length and depth of consultation that is required with residents during the planning process. There is an opportunity, through the proposed reforms to the National Planning Policy Framework, for Government to set out this framework for community consultation.

63. We recommend that planning consultations must require, that developers, as a minimum, inform the community of any development plans within an agreed geographical area with the relevant local authority. This should involve consistent communication throughout the planning process where local communities have an opportunity to view any draft development plans and provide comment. Developers should also provide a point of contact for any questions or concerns.

Enable ‘ Street Votes ’

64. The Bill in its current form proposes a new system of community involvement in the planning process known as Street Votes. These votes will provide a system allowing residents to propose development on their street and determine, by means of a vote, whether a development should be given planning permission if certain conditions are met. While we are supportive of the overall democratisation of the planning process, we are concerned that the Street Votes system will create an additional layer of red tape that may delay the delivery of new homes and proposed planning applications. We echo the concerns of Paul Miners, Policy Director at CPRE who stated that the policy may just lead to homeowners unnecessarily extending their properties to inflate value, making existing homes in urban areas less affordable and not guaranteeing new homes are delivered. [12]

Infrastructure Levy

65. As a key part of the proposed planning reforms, the Government has suggested an overhaul of the existing Section 106 (S106) process. The new process, referred to as the Infrastructure Levy (IL), will require a financial contribution from developers towards infrastructure as a part of the planning application process.

66. CIOB supports the need for a financial contribution to fund associated infrastructure necessary to create stronger communities. We also support initiatives to decrease the frequency in which developers submit viability assessments to wave responsibility for providing affordable housing and infrastructure monies through the implementation of the IL as a flat tax. However, we have some concerns about the level of detail that the IL goes into as part of the Bill as well as aspects of how it will operate.

67. At present, it is unclear from our perspective (as well as consultants such as Savills), which system will be replaced as part of the planning reforms. Clarity is needed on whether the IL will replace S106 or if it will replace both Community Infrastructure Levy (CIL) and S106. In discussion with developers, it is also suggested that while the IL may replace the existing systems entirely, S106 will be retained for large strategic sites. This uncertainty creates a fundamental issue for SME developers who are seeking to purchase land with the intention of developing new homes or infrastructure.

68. There are already significant risks associated with the planning process and these risks are slowly squeezing SME housebuilders out of the market in favour of large volume housebuilders. Data from the FMB indicates that SMEs built 40% of new homes in the 1980s, 23% in 2008, but now only build 12%. [13] Placing SMEs at a competitive disadvantage is therefore at odds with the Government’s levelling up objectives. We believe that opportunities must be afforded to locally grounded developers to build new homes and other construction and infrastructure projects in their areas. Increasing the ability for SMEs to participate in the planning process will help foster the healthy economy that the Government is aiming for. Therefore, we wish to see greater clarity on the operation of the IL process long before any associated secondary legislation on the matter is released.

69. Alongside this, we echo some of the concerns raised by MPs during the second reading of the Levelling Up and Regeneration Bill. Rachel Hopkins MP highlighted that under the new IL, the payments towards associated infrastructure and social housing would be required on completion of the development, not at the point in which planning permission is granted. This creates issues, as there is no certainty in the current market that developers will be able to stick to the estimated completion dates set out in any planning application.

70. According to the CEO of housebuilder Redrow, rates of completions are falling as a result of under-resourcing, rising costs of materials and rising labour costs. In the six months to January 2022, Redrow’s total completions decreased to 2,749 new homes against a previous 3,065 in the same period previously. [14] This, once again, highlights part of the risk of relying heavily on one mechanism of meeting housing demand, it also demonstrates the risk for local authorities that are presented by decreasing completion rates. If an infrastructure contribution is required on the completion of a development, necessary and in some case, crucial infrastructure will be delayed as local authorities wait for news on when the last dwelling will be built.

71. We welcome the suggestion by Siobhan Baillie MP who stated that the system would be more effective if infrastructure requirements were required at the start or phased throughout the process of the development being built out. This will allow local authorities to plan further ahead for the provision of social housing and associated infrastructure to cope with an increase in population.

72. It must be noted that there are risks associated with this as the value calculations for the IL contribution will fluctuate depending on the stage of the development. For example, when setting the charging rate, local authorities must consider the extent to which the land value has increased as the development is built out. This will mean that the land value will be highest once the development is fully completed, meaning that the IL amount charged will be higher.

73. However, this does not consider the need for key infrastructure, such as schools and medical facilities to be delivered early in the development process. Therefore, the built environment must be consulted with to understand the most appropriate trigger points within the development process for the IL to be collected, i.e., on gaining successful planning permission, on development of the first home, on completion of 50% of the development, etc.

74. As an alternative, CIOB endorses the view of the Royal Town Planning Institute who have recommended that local authorities be given the power to borrow against future development contributions so that public services and infrastructure can be provided effectively for new and existing communities.

75. CIOB notes that, when initially introduced in the previous Planning for the Future White Paper, the IL would not apply to custom and self-build properties. However, this has been omitted from the draft Bill. We would be keen to understand from Government whether this will still apply. CIOB has consistently supported the need to explore creative solutions for diversifying housing supply. As noted in our response to Richard Bacon’s review into scaling up self-build and custom housebuilding, consumers do not turn to alternatives because those alternatives are not currently available to them. [15]

Levelling Up and Net Zero

76. The Prime Minister’s Ten Point Plan for a Green Industrial Revolution and the UK Government’s Net Zero Strategy highlights the role of innovation in delivering both emissions reductions and future growth, emphasising the need for ‘greener buildings’   . However, we are concerned that the pace and scale of change is not enough to address the climate emergency and there is a lack of consistent policy making with large scale policy areas, such as levelling up.

77. Research from the Resolution Foundation claims investment in carbon-cutting tools and technologies is not enough by itself to reshape the UK economy for the long haul. [16] Therefore, there is a need to address net zero in wider-policy objectives, such as levelling up to help address regional inequalities, reverse economic stagnation and address the UK’s poor record on productivity.

78. The Bill, in its current state, appears to be a m issed opportunity to explicitly align the Government’s flagship policies on levelling up and net zero . Instead, the Bill should be used as a driver for addressing sustainable development and to align planning reforms with our legally binding climate targets.

79. The construction sector has a major role to play in connecting the two ambitions . With the energy price cap rise from April 2022 and further rises predicted, significantly more households are at risk of experiencing fuel poverty. Data from the National Energy Action (NEA) suggests the energy crisis means 6.5 million UK households are in fuel poverty, with its effects felt unequally across the UK. [17] Old and inefficient housing causes an estimated £1.4-£2bn additional annual NHS costs, and the inevitable conclusion from recent evidence of poor quality in new homes, including ineffective ventilation and mould growth, is that poor quality in new housing has negative consequences for occupants’ health.

80. W e believe that upgrading the energy efficiency of existing homes through repair, maintenance and improvement (RMI) work is an example of a socially valuable project that will support the economy, while providing an unprecedented opportunity to address the health and wellbeing of residents and make progress on the decarbonisation of existing homes as a key strategy to meet our net zero obligations. This type of work is labour intensive and grounded within local supply chains, making it an ideal project to maximise employment within the construction sector, support regional growth and provide opportunities for training and retraining in low-carbon construction skills. Retrofitting to improve energy efficiency will also reduce consumer utility bills, helping take people out of fuel poverty and thus freeing up disposable income to be spent within local economies , a key principle of levelling up.

81. Developing skills to deliver net zero should be a key tenant of the levelling up strategy. Ho wever, as mentioned in point 33 the construction industry is already facing difficulties in recruiting the numbers required to deliver existing projects and retaining them – whether that involves leaving the sector entirely or relocating to other geographical regions with opportunities for better pay and conditions. Furthermore, there is a chronic shortage of skills in the retrofit sector, with the Construction Leadership Council (CLC) estimating that the existing workforce needs to be more than doubled, developing around 500,000 new professionals, to address this challenge. This will, however, not be possible without a long-term roadmap which gives the industry certainty in the future direction of travel and confidence that there will be an ongoing market for retrofit.

82. We recommend that the Government follows up on the recommendations made in the Green Jobs Taskforce’s , July 2021 report, particularly to build on existing work to review green apprenticeshi ps and mapping, reviewing and enhancing other training pathways (for example traineeships, T-levels, internships and skills bootcamps) to ensure they support a diverse, inclusive and net zero aligned workforce across the UK. [18]

Environmental Outcome Reports (EOR)

83. Also included within the Bill is the provision for the Secretary of State to create a new regime to assessment the environmental impact and mitigation of new developments. CIOB understands that the primary reason for straying away from the existing Environmental Impact Assessment system is to depart from EU laws that have are still in place in the UK.

84. Similar to the existing system EORs will be required for proposed planning consents and will require an assessment of the effects of a proposed development against clear and tangible environmental outcomes. Broadly, the outcomes will cover protection of the natural environment, cultural heritage and the landscape in the UK and offshore areas. [19]

85. As with other areas of the Bill, there is a clear lack of detail about the difference between EORs and the existing assessment system. While CIOB supports strengthening the need to protect the natural environment within the planning system, we are concerned that the new system may add additional barriers within the planning process, slowing down the delivery of new homes and exacerbating the existing housing crisis.

86. We understand that a consultation will be launched on the exact outcomes required by EORs through secondary legislation, however, we would be keen to see further details on this before the Bill becomes law to ensure that it is a marked improvement to the existing system.

Levelling Up in the Devolved Nations

87. The Bill has outlined provisions to enhance devolution powers, through the establishment of new County Deals, expansion of Mayoral powers, encouragement of public-private partnerships and use of Local Growth Funds. This presents an opportunity to strengthen the relationship between central and local government while also enabling councils to deliver projects that provide local economic, social and environmental benefits, such as target infrastructure investments and business clusters.

88. CIOB welcomes initiatives to empower local leaders to drive growth, shape their communities, develop business clusters and deliver socially valuable projects. We believe that greater devolution will improve local and combined authorities' ability to understand local needs and make decisions on future infrastructure, from housing to transport; renew efforts to encourage private investment; and continue to bear down on the drivers that halt progress and prevent innovation.

89. However, part of the challenge in implementing legislation targeting left-behind regions and communities includes balancing the different responsibilities managed by various legislators across England, both at a local and national scale. To facilitate the transition of levelling up from rhetoric to reality, more must be done to incentivise strategic planning at a local level and strengthen mechanisms for cross-boundary collaboration for national assets, infrastructure investment, housing distribution and employment opportunities. Mechanisms and incentives should be put in place for mayoral combined authorities to manage shared assets to ensure all regions work together collaboratively to reap the benefits that levelling up offers.

90. A further challenge that must be addressed is the historical issues with fiscal responsibilities. For example, under the current devolution model, in order to make decisions on infrastructure investment, metro mayors require the consent of council leaders, and agreement from Whitehall. While CIOB recognise the importance of upholding accountability and scrutiny of performance, we are concerned that bureaucracy is hindering progress.

91. A recent IfG report highlights the limitations of existing mayoral combined authorities to "reallocate budgets across departmental siloes and control revenue streams", [20] which inevitably hinders their ability to deliver local solutions for policy objectives such as addressing skills gaps and achieving net zero. Ultimately, if levelling up and devolution are to succeed, the Government must provide stronger incentives for mayors to take decisions that boost local economic growth, including enhanced fiscal powers, increased flexibility, and greater long-term funding settlements.

92. If a complex and inconsistent funding model persist, we fear that local government will be forced to rely on greater private investment to drive inward investment and deliver initiatives on key issue areas to prop up the lack of funding received by central government. This model will inevitably exacerbate disparities between and within regions, as cities will be at a greater advantage for attracting and securing private investment compared to towns and rural areas.

93. Alongside greater fiscal powers, we call for considerations to be made by Mayors and Local Authorities to ensure investment in towns and rural areas receives similar attention to cities in their region as this is often where we see large numbers of disadvantaged groups.

94. Another key point is strengthening transparency for local people when it comes to local decision making that is intended to benefit the local community. The Bill will provide greater autonomy to LEPs, which has input from both businesses and local authorities, however it has a lack of community engagement and therefore this will need to be part of the new process when creating Economic Plans and prioritising how money is spent.

July 2022