The presumption in favour of development

With the aim of making the UK one of the best places to start, finance and grow a business the Chancellor announced “radical changes to the planning system”. The primary change is the introduction of “a powerful presumption in favour of sustainable development”. He went on to say: “The default answer to development is ‘yes’”. This is a big change. First, it is not just a presumption, but a “powerful presumption”. That suggests it will be given a lot of weight. You can argue convincingly that the presumption is now in place – Government policy is what ministers say. We currently have a statutory presumption in favour of the plan unless material considerations indicate otherwise. Surely this is such a material consideration.

The next question will be “how does this work with localism?”. The CLG website may carry a clue on this - a ministerial statement from Eric Pickles and Grant Shapps. While it decries the current system “plagued by conflict and appeals” it fleshes out the “twelve month guarantee” that planning applications will spend no more than twelve months in the system where the appeal is timely. That suggests that local choice will not be predominant (else why would one appeal?). The Secretary of State and Planning Inspectorate will surely have to apply the new “powerful presumption”.

Enterprise Zones: The Basics

Enterprise Zones are not a new phenomenon but the current Government hopes that the creation of 21 new zones will spur on private sector growth in the areas which it considers need it most. All zones will be in LEP areas and these partnerships are to be "at the heart of" the Enterprise Zones model, according to Mr Pickles. The broad locations for the first eleven Enterprise Zones have been established and the relevant LEPs for four of those have already identified more precise locations, as announced on the CLG’s website. The remaining ten locations will be decided in the summer, following a competitive tender process (with LEPs being invited to bid accordingly).

The zones are to benefit from tax breaks (including 100 per cent business rate discounts, the retention of business rates growth and enhanced capital allowances in some circumstances) as well as planning incentives. We do not yet know much about these planning incentives but The Plan for Growth speaks of using Local Development Order powers. We are told that there will be “radically simplified planning approaches” .

The Budget lays the way for the Enterprise Zone model to be rolled out across the UK, should it prove successful.

Enterprise Zones and Tax Increment Financing

Most of the Enterprise Zone benefits will flow to the businesses located within its boundaries, but the local authorities in the relevant LEP will benefit too. They will retain any increment in business rates generated by the Enterprise Zones and will have the flexibility to invest those proceeds anywhere within the LEP area. LEPs will be supported if they want to use that revenue stream to set up a Tax Increment Finance scheme and forward-fund infrastructure projects, although whether these projects would have to be Enterprise Zone linked is not clear. Clearly, the initial tranche of Enterprise Zones must stand a good chance of being in the first wave of TIF projects once enabling legislation has gone through.

The Local Government Resource Review demonstrated the Government's desire to incentivise local authorities to promote growth. However, until that review is concluded, those authorities located in the growth areas which could deliver the kind of increased revenues needed to run a TIF project (and deliver the kind of growth the Government is looking for) may remain unable to access those funds and unlock their development potential. It remains to be seen whether the enterprise zones announced so far can really generate the type of growth needed to make a TIF project work

Green issues

The Government repeats its commitment to be “the greenest ever” in the supplementary The Plan for Growth document.

A key Budget commitment is to capitalise the Green Investment Bank with an initial £3 billion. The bank is due to open for business a year earlier than originally proposed - in 2012/13.

The bank is being established to bridge the perceived gap between what is likely to be on offer from private finance and the investment needed in low carbon technologies. The hope is that it will be pump-priming and gap-filling; it is not intended to replace what the Government hopes will be a growing willingness of investors to look at green innovation.

The Government has also signalled its intention to allow the bank to have borrowing powers in due course – once it is satisfied that national debt has fallen satisfactorily.

Although the Government has introduced a “carbon price floor” for electricity generation, starting at £16 per tonne of C02 from 1 April 2013, this relates to the generation of electricity (which will mean higher prices in due course). The proposed cost for emission of one tonne of C02 under the Carbon Reduction Energy Efficiency Scheme stays at £12 per tonne for the introductory phase (now until 2014) and first allocations will be on sale for obligated parties from next spring.

Use Class upset?

It was rumoured before the Budget that the Government intended to make changes to the planning system including a reform of the Use Classes Order. This intention has now been confirmed. Mr Osborne told us there will be an urgent review of the Use Classes Order and new provisions will be bought in to enable a change of use of a premises from commercial to residential without the need for planning permission.

The most obvious benefit of this relaxation of the Use Class Order is that it could help reduce the acute housing shortage in the UK. At the same time, the number of vacant, run-down and derelict commercial premises would decline as the planning restrictions on redeveloping such premises are eased. Economic growth will ultimately be encouraged and the construction industry could see a much needed revival. Even better, new residential development could be focused more in urban areas in these vacant commercial premises rather than encroaching into rural areas.

However, with the good comes the bad. Inevitably such a reform can only come about if suitable safeguards are in place – we will have to wait and see how the Government intend to prevent any abuse of the system. Furthermore, this move could result in windfall gains being made by commercial property owners - surely there will be some method for collecting part of this gain for the public benefit? Perhaps CIL could be of some assistance here.

Land auctions

We picked this up last month – it was trailed by Vince Cable. You can read our first post on it in Plan-it Law by following this link. Basically councils will call for “bids” from landowners giving the price at which they will sell their land. The council decides which bids to accept and then applies for planning permission. If granted, Councils will then auction the land and the rise in development value will belong to the council/community. There’s a lot of room there for serious local disquiet and the planning process for this is a bit more technical than usual. The Government is going to pilot this with publicly owned land in the next twelve months.

Read this post on Plan-it Law for more detail and comment. Land auctions are high on George Osborne’s list of planning reforms in The Plan for Growth. An issue we identified on Plan-it Law was whether landowners would be interested in selling at what we expect would be current use value (or less). The proposal now includes auctioning planning permission so maybe owners can sell with permission. But we have a feeling that some more thinking is being done on this and that schemes will need careful legal advice. We’ll be watching the announcements from BIS and the Treasury.

Scientific injection for Cambridge, Norwich and Oxfordshire

The Babraham Research Campus in Cambridge and the Norwich Research Park are amongst sites the Government has selected in the Budget to benefit from an additional injection of £100 million over the next year. The aim behind this is to stimulate science capital development by providing facilities for the commercialisation of research, accommodation for innovative SMEs and new research capabilities. This is clear acknowledgement by the Government of the contribution which science can make to economic growth.