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Planning Power to the People 25/04/2006

Planning Power to the People

Why and How We Should Return Land Use Planning Rights to Local People and Businesses in Rural Scotland

A Speech to the Scottish Countryside Alliance by Tom Miers, Executive Director, Policy Institute 25th April 2006

The prospects for the rural economy in Scotland are good.


At times in the post war period it seemed as if the indigenous creation of wealth had all but ceased in rural Scotland.

The only lucrative careers appeared to be provided by state-financed or regulated professional services - legal, medical, educational – to a declining population whose main activity, farming, was itself increasingly dependent on state subsidy.

Things are still tough in many places. But I believe that the broad economic trends in our society and further afield are now very promising for rural Scotland.

At home growing prosperity is leading to increasing demand for specialist food and drink which is well suited to Scottish agriculture.

This is against a background of overall increases in global agricultural demand driven by the escape from poverty of India & China. For example, demand for meat from the latter is set to treble if it follows trends in neighbouring Taiwan.

Meanwhile a revolution in communications is making rural life much more practicable and accessible for people from different walks of life.

Better roads, air travel, phone systems and the Internet make it easier for businesses to base themselves at a distance from their customers, and for tourists to visit our unmatched countryside.

But the purpose of my talk is not to look at trends in the rural economy of Scotland in detail.

Instead I want to examine one aspect of rural life which underpins its economic performance, and that is the rules governing the use of land.

I don’t need to tell this audience that land use is the essence of rural life. If the inhabitants of rural Scotland are to exploit the opportunities I describe to the full, they’ll need the flexibility to change and develop land use over the coming decades.

The dominant distinguishing feature of rural life is space, and our efficient use of it.

Cities exist because it is important for urban dwellers to be close together to conduct their business and social lives. Urban space in small quantities is desirable but comparatively unimportant.

People pursue a rural life because they are using land as an essential ingredient of their business or leisure lives.

So it follows that the rules on land use are absolutely essential to the rural economy in a way that they are not in the cities.

It is a great irony, therefore, that this aspect of the economy – land use planning – is utterly dominated by Big Government.

The rights to change the use of land were nationalized in 1947 by the Town & Country Planning Acts and have remained under state control with only minor reforms ever since.

It is as if we had learnt the lessons of the failure of Communism, but kept one industry in the Urals making left foot boots at the behest not of market forces but of the guesswork of bureaucrats.

For similar problems occur with planning rights as when the state controls and distributes other economically valuable assets, goods or services.

First there is an information problem.

Government has no way of knowing what to provide where. The best it can do is rely on professional estimates, and a four yearly voter verdict on their general performance. It is equally futile for bureaucrats to guess how many left footed boots we need as how parcels of land should be used.

Do the economic benefits of a power line in terms of lower energy costs outweigh the visual beauty it impairs? – the planners have no idea.

Should we build a factory if it means draining some wetland? - a bureaucrat can only guess.

Under the current arrangements, these vital judgments are made as part of a process essentially of guesswork subject to political pressures.

And this brings me to the second main problem with government control, and that is a lack of suitable incentives for decision makers.

Managers in a state owned industry are not rewarded financially by their customers, but by their political bosses, who are in turn subject to political pressures. These come only indirectly from voters as we have seen, and more directly from lobbyists.

So in the case of land use planning rights, these are distributed with huge economic implications for those affected with no reward for the planners in getting it right.

These problems are exacerbated by the nature of land use, which almost always has external effects on other people apart from the titular landowner.

So a bureaucratic decision on granting land use rights has net economic benefits for some people and net costs for others.

This intensifies the political lobbying process since the outcome of the decision is an all or nothing affair for those affected.

Those who are good at lobbying, or who can afford to expend significant resources on it, have the advantage. This tends to be the wealthy, powerful charitable and environmental groups, the state itself, and industries which have managed to win the particular backing of the state.

Of course, sometimes this process will get things roughly right, and reforms over the years, including the current Bill going through the Scottish Parliament, attempt to make the process more accountable.

But these tinkerings are like Glasnost to the Soviet system, when what is needed is root and branch reform. The truth is that many of the problems which beset the rural economy in Scotland have at their root this perverse planning system.

The shortage and subsequent high cost of rural homes;

Low quality and unsightly municipal buildings;

Overuse of certain roads;

Urban sprawl into attractive green spaces;

Underused wasteland in green belts;

Inappropriate industrial development, particularly in the field of energy;

Difficulties in adapting buildings or land for other commercial purposes;

The slow planning decision making process;

We all have our bug-bears.

All these are the products of an immensely complicated, inflexible and inefficient planning system which costs the UK taxpayer some ₤1 billion every year to administer.

So what’s the answer?

Well, our essential problem is that we are trying to compare apples with pears – to weigh measurable economic factors of development against environmental considerations that are thought of only emotionally and politically. It therefore follows that the pricing of those environmental considerations has to be at the centre of the solution.

This means that we must create a market in planning rights, taking them out of the political process and making them tradeable between individuals, businesses and communities.

For it is the market that provides us with the discovery process that gives us the knowledge to establish the value of one thing compared to another – in this case our love of our physical environment versus our need for material progress.

So planning rights should be devolved away from the state to private ownership by those in the locality. Once they were handed over, these rights would be feely tradeable. So a developer would need to buy the rights to develop if it affected his neighbours, or act under covenants or rules set by them.

If the former, he would negotiate a price with those neighbours based on the likely income stream of his development. For their part, his neighbours would negotiate according to the likely effect the development would have on their quality of their environment, reflected for example in its impact on the value of their own property.

Any payment made by the developer would be a far more accurate reflection of the potential developed value of the site than any combination of planning gain tax, the cost of lobbying, or the risks of the current planning process.

While the payment received by its neighbours would be accurate compensation for any environmental damage done, far better than any benefits receivable under current arrangements by the local authority.

In many cases, of course, no agreement would be reached. Here, the environmental amenity of the area would be worth more than the benefits accruable from the development. The developer would search out a less environmentally sensitive area, or else design his plant in a less intrusive way.

In other words, correct incentives would induce both developers and those who actually benefit from the environment to find the right balance between growth and amenity. The artificial divide between the economy and the environment would be bridged.

The planners, bureaucrats and lobbyists could pack their bags and earn a living in a more productive way.

How should we implement these principles in practice? How do we privatize these property rights in a way that makes them easily tradable so that we strike the right balance between development and environmental amenity?

For let me be clear: I am not suggesting a planning free-for-all of the kind that has blighted so many developing countries, but a market in regulation, which would serve both the economy and the environment better.

We need to overcome three problems in particular:

-First, that the myriad interests are so atomized as to make accurate compensation payments impossible, or prone to exhaustive legal proceedings in the courts
-Second, that major projects which affect people beyond the immediate area are not held to ransom by nimbyist local interests
-And third that distant voters do not ride roughshod over local sensibilities.

The answer being put forward by a number of economists in this field lies in devolving planning rights away from central government to small geographical units that cover natural communities of environmental amenity.

On the whole current local authority areas, particularly in rural Scotland, are much too big for this. There’s no way, for example, that people in Caithness need have a say over local planning matters in Lochaber, or people in Berwickshire over Liddesdale.

A more appropriate size for these units might be some of the smaller islands, large villages, small towns, or perhaps parish sized areas in more sparsely populated parts.

This would follow effective precedent in some of our neighbouring countries such as France, Norway or the Faeroes, where significant planning powers are vested in quite small communes whose size is based not on population but on communality of interests.

Or to look at our own history, urban development in the Industrial Revolution was governed by rules, covenants and easements set in quite small areas, resulting in such gems as the Edinburgh New Town.

Such small units are liable to be much more accountable and representative of individual interests. Indeed, government in this scale tends towards behaviour akin to voluntary membership organizations because social pressures, common interests and knowledge of local issues press executives to take neighbourly interests into account.

But like membership organizations, we need to go far beyond the norms of inadequate local government accountability. The executives who represent our units should be subject to much more regular election, and members should able to convene meetings at need to bring them to account.

Let us call these entities Local Amenity Companies, or LACs. To summarize, they would be controlled by their inhabitants and have powers over the physical development of their areas, They could therefore draw revenue from developers, including road and rail operators, or indeed pay to attract development of certain types.

As with memberships clubs or companies, their small size would expose them to competition which would discourage the NIMBY instinct and promote innovation. For markets work not only in goods and services, but also with institutions and sets of rules. Developers would have plenty of choice of where to invest. Residents themselves would have more power of exit than current council tax payers.

A useful analogy is that of a shopping mall such as the Gyle centre near here. The mall sets overall rules governing security, access, infrastructure and so on. Its inhabitants, the shops, go about their normal business within that framework of rules. But both they and the customer can go elsewhere to a better run site.

Again like clubs or companies, their size need not be fixed. LACs could amalgamate or secede as circumstances required.

Larger, regional or national planning concerns would be well served by this system, because it would be flexible enough to ensure that big projects were designed to benefit the greatest number of people.

For example, LACs could co-operate to attract or manage certain pieces of infrastructure such as roads or railways. And they could influence each other to maintain environmental features of regional or national importance. So urban LACs might contribute to the maintenance of national park rules in rural LACs which might otherwise find them economically too burdensome. Likewise nearby rural LACs could compensate urban ones to allow an airport in their town, thus sharing the costs as well as the benefits of major development among those actually affected by both.

But above all LACs would give local people control over the physical, land use side of economic development in their area. All too often rural Scotland is held back by strict rules imposed from above. Lobbied for by large, unaccountable quangoes and special interest groups.

Remote and rural communities thrive in Scandinavia and elsewhere when they are given the breathing space to experiment and develop by setting their own rules. Its time to bring that freedom to the Scottish countryside.

Now you may consider me an idealist in describing a utopia which has little chance of being implemented in Scotland.

But it is worthwhile to encourage people to think the unthinkable in the hope and expectation that public opinion and eventually the politicians will follow along.

Besides, this is not just pie in the sky, and there are some useful signs that things might just be starting to shift in this direction.

The principle of compensation is now well established, albeit with the state as an unsatisfactory middle man as with section 75 rules and the moves afoot to reintroduce a planning gain tax.

Meanwhile, the Executive has announced the creation of Business Improvement Districts in its current planning bill, albeit again in a rather half hearted way, with councils again taking all the cash.

Finally, there are practical precedents of how small rural communities can work in places like France and Norway.

Add these concepts together and you’re not a million miles away from a LAC. Perhaps one day we’ll persuade the Executive to give them a try.
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