Monthly Archives: September 2012
Sorry didnt post this earlier have been sick
Lib Dem activists have called on the coalition to withdraw plans to permit larger home extensions in England.
Party members backed a motion opposing the proposal to allow domestic extensions of up to eight metres without planning approval.
Activists described the plans as “unnecessary”, “daft” and a “grotesque over-centralisation”.
Communities minister Don Foster said he would “listen” to their concerns and the proposals could be “improved”.
The vote is not binding on the coalition government, in which the Lib Dems are the smaller party.
A month-long consultation is taking place on the plan to ease rules, for a three-year period, on developments including home extensions of up to eight metres.
This compares with the current 3-4 metre limit on extensions without planning permission.
The proposals were part of a package of measures announced by Conservative Prime Minister David Cameron and Lib Dem Deputy Prime Minister Nick Clegg earlier this month to help boost the economy.
In an emergency debate at the conference, a string of Lib Dem activists criticised the plans and urged them to be rethought.
Chris White, a councillor from St Albans, said councils should be the ones to decide whether extensions should be approved, and said the plans flew in the face of the coalition’s localism agenda.
He said it was a lack of demand and finance that was holding construction back, not planning obstacles.
He added: “It frankly beggars belief that a surge in large extensions built will do more to stimulate the local economy.”
Instead, he said likely disputes over developments could do much to “ruin relations between neighbours”.
Another member, Prue Bray, said the proposals could result in inappropriate developments that would last for 40 or 50 years.
She said it ignored a crucial liberal principle that people “could do whatever they like unless it does harm to others”.
In response, Mr Foster said the housing package included much-needed measures to build more affordable homes and get stalled projects going.
“As part of measures to get Britain moving again, we have to get Britain building again,” he said.
However, he said it was a “coalition package, not a Lib Dem package” and he understood concerns about “some aspects”.
There was a full consultation taking place, he sought to reassure activists, and it was not a “done deal”.
“We can push to make some improvements to the proposals,” he added.
The vote is the second defeat for the leadership at this year’s conference, after activists urged ministers to abandon plans for secret court hearings in certain civil cases.
In a subsequent debate on housing policy, deputy leader Simon Hughes said the UK faced the prospect of a “social crisis” if there was not a huge increase in the supply of good quality, affordable homes.
Improving housing must be a “national priority” alongside stabilising the UK’s finances and boosting growth and jobs, he said.
He urged Lib Dem ministers to oppose the sale of council houses, increase tenants’ rights and tighten controls on irresponsible private landlords.
The party has set a long-term goal of building 300,000 houses a year, three times the current figure.
Lib Dem councils are expected to line up to criticise the plans during an emergency debate at the party’s conference in Brighton today.
Local Government minister Don Foster admitted that concerns were “deeply concerned” and said he would take back the worries to Whitehall.
Ministers also unveiled plans yesterday to double the size of home extensions that can be built without planning permission on Sept 6.
Home owners could build 6m (19ft) beyond the back wall of their home in the case of a terrace or semi-detached house, or 8m (26ft) in the case of a detached house.
However there is a growing rebellion among councils over the plans, which could be in force early next year, amid fears they will allow unsightly building to go ahead in middle class suburbs across England, and create a surge in rows between neighbours.
A motion to be debated today at the Lib Dem conference calls on the Coalition to withdraw the plans, claiming that they “ignore local democracy, will fail to protect local communities and will encourage more neighbourhood disputes”.
It adds that that the proposals, which are backed by David Cameron and Nick Clegg, “go against the spirit of the Localism Act 2011 which encourages more local control of planning policies”.
Speaking to The Daily Telegraph, Mr Foster – who is in charge of housing and build regulations policy – said he had met with five separate groups of councils – including the association of Liberal Democrat councils and the Local Government Association – from across the country over the past three days.
He said: “While there is much in the overall package announced on 6 September, with which they are happy or willing to work with, there is one idea – putting extensions in people’s gardens – with which they are deeply concerned.”
Mr Foster said the debate on Wednesday would be an “opportunity for them to express what their concerns are, or any changes that they think and I will be there to listen and my key message will be ‘there is a consultation, it is not a done deal’.”
He added that he would be “feeding in the views of the party” into the consultation, but would not be mandated to block the plans if delegates backed the motion.
The push on planning, coming only months after a huge row over the last major reform, has alarmed rural campaigners and raised fears of a new attempt to build on large areas of the countryside.
But Mr Foster insisted that the green belt was safe under the Coalition, despite suggestions from Chancellor George Osborne that ministers want to relax protections to encourage building and boost the economy.
He said the Government had to “look at innovative ideas” to persuade construction forms to build more homes.
Asked if the green belt was safe under the Coalition Mr Foster said that it was “crucially important”, adding: “That does not mean to say that there can’t be as there are under the current rules, variations in the green belt.
“The green belt is there to protect places and if we can find ways of protecting them by making a change – reductions in the green belt with an extension somewhere else – that makes sense.”
Mr Foster continued: “Saying that the green belt is sacrosanct does not mean to say there won’t be changes to it.”
Under a new economic regeneration bill, to be published next month, minsters are set to unveil some tweaks to planning rules to speed up planning decisions and give ministers a more hands-on role in waiving through big projects.
Ring up you local councillors and tell them about the ballot.
There will be a ballot to select two of the following [four] motions to be debated as F37 and F43. Ballot
papers will be published in Sunday’s Conference Daily, and should be returned to the ballot box in
the auditorium between 09.00 and 13.00 on Sunday 23rd September.
Emergency Motion 4: Relaxation of Planning Laws
a) The recent announcement by the coalition government of the proposal to relax certain
planning laws relating to housing for a three-year period.
b) That this announcement includes the intention to allow extensions of up to eight metres to
be permitted development and the proposal to waive rules and existing commitments on
affordable housing from proposed housing developments in certain circumstances.
Conference believes that:
1. The current planning laws are not the reason for a failure to proceed with existing approved
2. These proposals go against the spirit of the Localism Act 2011 which encourages more local
control of planning policies.
3. These proposals ignore local democracy, will fail to protect local communities and will
encourage more neighbourhood disputes.
Conference therefore calls on the Coalition Government to withdraw these proposals
Thats dead in the water then – refusing to support a policy attacked in a motion. Like Osborne’s Green Belt proposals killed off by the Lib-Dem partner.
New Liberal Democrat local government minister Don Foster faces his first challenge in office with a motion at his party’s conference in Brighton to oppose the government’s plans to relax controls over building conservatories and extensions.
The motion, due tomorrow morning (Wednesday), aims to block plans to allow new extensions to go ahead without planning permission. The plans aim to boost local building jobs as part of a wider infrastructure growth agenda.
The former Liberal Democrat councillor and now MP for Bath, who was a surprise appointment as minister in the government reshuffle three weeks ago, said he could only ‘guess’ which way the motion would go, adding: ‘Many of my colleagues are concerned and they’ll make their views forcefully.. But the government is consulting on the issue.’
Speaking at a Localis conference fringe meeting in Brighton on September 24 Mr Foster pledged to roll out the localism agenda by encouraging more community groups to exercise their right to bid for council services.
He added: ‘I am not here just to defend councils. My role is to defend the individuals whom local government serves. I’m here to ensure communities have the opportunity to engage in decision-making.’
In an interview with The MJ afterwards Mr Foster emphasised he was ‘very pro-local government’ but that he aimed to help councils deliver the localism agenda. He also admitted that his appointment came as ‘a total surprise.’
Eugen von Böhm-Bawerk we are told demolished the logical basis of Senior’s Abstinence theory of interest in his History and Critique of Interest Theories. This critique was instrumental in leading to the later bifurcation of interest rate theory into those of pure time preference or pure monetary forms.
But his criticism was deeply flawed. I had sketched out this post when in checking references I came across the following in Schumpeter’s History of Economic Analysis.
Böhm-Bawerk’s attack was not successful, not only in the sense that it failed to convince but also in the sense that it was unconvincing…[My arguments] do not salvage the abstinence theory nor is it intended that they should. But they absolve it from the charge of logical error and again bear witness to what we have called the logical strength of the abstinence theory. But a theory may be wrong for reasons other than logical error. [P895]
But Schumpter did not present a counter argument- simply stating that ‘I have never been able to understand’ Böhm-Bawerk’s accusation that the abstinence theory involved double counting.
This post does present an argument that Böhm-Bawerk’s reasoning is flawed, it does not attempt to defend the Abstinence theory in the form that Senior presented it – which was rightly ridiculed by left-ricardian writers and Marx as a reward for sitting on one’s arse; but this theory was radically developed by subsequent writers such as Scrope, Mill (less so), Carver and even Marshall in a form then depended not on subjective utility costs of waiting but instead of opportunity costs of capital formation and consumption, and it was in the Marshallian form that it formed the basis of Keynes theory of investment and liquidity preference.
It is important then to resolve the ‘late classical’ theory of interest of false accusations of error – important because the Sraffan revival of classical cost of production theory simply leaves the interest rate issue unresolved and is entirely non-monetary. By reviving the approach of seeing interest as a cost we can take a step towards resolving this.
1. The Abstinence Theory and Its Critics
Senior’s original presentation of the concept of ‘abstinence’ was utilitarian. Consumption was a utility, abstinence from consumption a disututility, however abstinence from consumption enabled saving to create capital – the factor reward of which was interest. This approach then solely focussed on savings and was compatible with Smith’s classical theory of growth in which growth was caused by savings to create capital goods.
MacCulloch and Mill criticised this as it seemed to give time in and of itself a role in the creation of value
A mere word a sound – is nothing – can do nothing
2. Scrope and the Unification of Productivity and Abstinence Theories
Scrope called this a ‘very great mistake’ in his unification of the abstinence theory with productivity theory.
No-one will sacrifice time by [merely] allowing it to operate on his property…that they do this acquire additional value due to natural laws –the sown wheat multiplying itself in its crop, the kept wine improving its flavour – is notorious. [p147]
Therefore the value of time is that it provides a period during which productivity can create value.
There are too elements to this ‘sacrifice of time’. Firstly a period of saving of an income stream to acquire the capital (fixed and working) necessary to fund production until profitable (what Austrian Economists would later call the ‘pool of funding) – the turnover period of capital – secondly the period of production itself after the period of saving.
This need not imply any moral presumption about the justice of factor returns, we simply assume that the ownership of a resource brings with it the opportunity to benefit from any income stream generated by that resource.
Senior stated that if price is equal to the cost of factors of production then the period of time that elapses during production must generate the additional cost. Whilst for Senior the cost of this waiting was disutility Scrope was more specific it was the opportunity cost of the income stream during that period that would otherwise have been consumed.
Scrope’s approach towards saving and consumption was quite advanced (he introduced the term ‘propensity to save’ , stressed the balance between saving and consumption and the paradox of thrift, and noted how general gluts were caused by insufficient supply of money) – but he does indiscriminately use the term ‘saving’ for both not consuming and capital accumulation for investment which laid him open to criticism from Austrians such as Rothbard-Pg105 (note this criticism is not valid because during the process of accumulation idle balances do not add to aggregate demand, only once spent on working or fixed capital. Though these balances (if excess) can be lent (which does add to aggregate demand) the demand from any increase in propensity to save reduces profits and the demand for loans. During periods of a steady balance between saving and consumption the law of large numbers ensures that the coming on stream of new loans balances out exactly the accumulation of savings (we are not assuming loanable funds here), but where there is a shift in the propensity to save or the propensity to lend this results in an imbalance, including, as Scrope noted, between input and output prices, creating either an excess demand or excess supply of money over goods and a parallel slackening or rising of aggregate demand and prices)
3. Böhm-Bawerk’s criticism of the Cost Approach
But this did not satisfy Eugen von Böhm-Bawerk who disputed that abstinence had a ‘cost’ .
Böhm-Bawerk took from Rae the idea that sacrifice of present consumption goods for future consumption goods, to the extent that the sacrifice led to production sufficient to compensate for that sacrifice.
The kernel of Böhm-Bawerk’s system was that a capitalist must have wait for an income stream from capital to mature, or either sell it to someone else, in which case it is the buyer who waits. The waiting consists of giving up the opportunity of buying present consumer goods, and receiving in return the means of securing consumer goods at some point in the future. It is ‘virtually’ an exchange of present consumers’ good for future consumers’ goods. Scope and Rae, followed by Böhm-Bawerk and later Fisher were effectively seeking to integrate the abstinence and productivity approaches.
This insight was accepted but proponents of the abstinence cost theory, such as Thomas Nixon Carver, that disagreed with the inference that Böhm-Bawerk drew from this.
Böhm-Bawerk strongly argued that abstinence did not have a ‘cost’. For him the key problem was why factor price inputs were not bid up to the price of factor outputs – what was the cause of this ‘agio’. Senior explained this in terms of a missing factor of production which has a ‘cost’. Böhm-Bawerk disagreed
Böhm-Bawerk argued then this explanation involves a double counting.
That is, the cost of abstinence (if it exists) is already included in the cost of the other factors of production. Thus Senior’s theory is faulty. He has not explained the higher price of final goods relative to their costs of production, because his alleged missing component of abstinence is already accounted for.
Böhm-Bawerk gave an example:
He poses the case of a man choosing whether to spend a days labour planting apple seeds. If the cost theory is correct then the cost of apples is the cost of a days labour plus the cost of the long period of abstinence whilst the tree grows. Murphy completes the story
Suppose that our man chooses in favor of the apples, and devotes his day to planting seeds. That evening, a great storm comes and completely ruins his field. In this unfortunate case, what is the cost of the man’s decision to plant the seeds? It is quite clearly one day’s labor: the man has wasted a day toiling, and now (because of the storm) has nothing to show for it. He could have spent the day relaxing, and would have been in the same position after the storm. Since there will now be no apples forthcoming, the mental anguish associated with waiting for their arrival forms no part of the costs of his decision to plant the seeds.
The argument is that the anguish of waiting is counted in the wrong place it should solely be counted on the demand side in terms of the subjective disbenefits of the consumer of waiting many years for the apple tree to grow. This insight provided the basis of arguments from future writers such as Fetter that interest should be solely considered a subjective matter of the consumer – pure time preference – and has nothing to do with cost or productivity.
4. The Flaw in Böhm-Bawerk’s Non-Monetary Approach
There is a crucial mistake in this account however, it is one without money or debt. It is the interest cost of money we are seeking to explain. There is some irony here as Murphy, like Locke and Fisher, argues that interest is nothing more than the discount on the price of money.
Böhm-Bawerk is asking us to imagine an investor not consuming a days labour worth of apples today for the present value of an income stream of apples that comes on stream in 10 years time or so. But that makes the presumption that the investor has already saved a days labour worth of apples in the first instance, which they are indifferent to consume at the anticipated price of apples today and in the future. But an investor will decide whether it is worth such a sacrifice of consumption at a specific interest rate, his argues presumes what it sets out to prove. If an investor has not saved a days worth of labour then they will be forced to borrow, if they have borrowed then they will not be indifferent to the impact of a storm as this may wipe out the crop but the debt remains to be paid. The repayment of this debt will add to the cost of hiring each factor of production and this cost of the money borrowed will reflect the risks the creditor undertakes including the risk of a storm wiping out the crop. Such a storm would reduce, in terms of probabilities, the physical return of apples. It is only because there is likely to be a physical return, on items of value that an investor is likely to give up the certainty of a stock of consumer goods today for the uncertainty of a potentially higher amount of consumer goods in the future.
A traditional Austrian response here is that interest is a physical phenomenon that exists also in a moneyless world. We all know of the example of Crusoe alone conducting saving to construct a fishing rod, but what is we add exchange into the equation and Friday lends Crusoe his days coconuts with the aim of repayment from sales of fish to another island. Friday may totally trust Crusoe to repay but at any time Friday might emigrate to another island. So therefore some units of account is needed to measure the debt, and that measure of debt may subsequently be traded. We see then in any mythological fantasy of a pure barter economy units of account for debt intrude, indeed many modern authors such as Graber see measurement of debt as a store of value as the true origin of money, and indeed early forms of money took the form of debt tallies. We can therefore reject the Austrian theory and see that in any economy with debt waiting has a true factor cost to input prices.
Confirmation of that is that for someone who has accumulated capital the opportunity cost of leaving it leaving it as an idle balance is the return you would earn from investing it or lending it out. In value terms money left idle will depreciate in purchasing power terms by the risk free return rate in the economy. Therefore waiting has a ‘cost’ in value terms because money left waiting loses purchasing power.
This also deals with Fisher’s very similar objections (chapter 3) to abstinence theories, that to be a true cost it had to be an out of pocket expense.
A sidenote. Waiting – or to be strict waiting services, is not the only cost attracted by the passage of time, there is also depreciation services. Both together make the aggregate cost of time. This is one key way in which land rent differs from rent on money used for capital investment. If the condition of land is maintained it does not depreciate.
Each time cost factor will act in different ways on each factor product, applying a discount rate. It is therefore the sum of the discounted factor products that creates the total cost of production.
In any economy there will be differential between those that own outright the means of production and those that borrowed to produce. In this case interest acts rather like differential rent – reducing the maximum profit on physical capital and diverting that as rent to the holders of money capital.
5. Carver – The Marginal Sacrifice of Saving
Carver contemporaneous with Böhm-Bawerk‘s key writings was also critical of his attack on the abstinence theory.
Carver argues that:
Interest does not correspond to any general discounting of future consumption of commodities, but only to the marginal discount or to the marginal sacrifice of saving [investing]. It must be sufficient to compensate the capitalist for saving [investing] the last increment of capital. [pgs 239-240]
So from the perspective of the lender of money the cost is the opportunity cost of that money, from the perspective of the borrower it is the future opportunity cost of making payments on the loan. If a process is productive then the future income stream from the investment will exceed the opportunity cost of the loan payments. For the lender the future income from the productive process must match or exceed the average rate of profit and be of a sufficiently high level to overcome any preference for liquidity.
6. Potential Objections to a Revived Cost Approach
The base case that Carver used though was less than convincing. He imagined a zero profit baseline where there would be no incentive to save via investment. Here future consumption via an investment channel would be zero so an increment of funding for new productive processes would need to attract savings at the margin via an increment to the rate of interest.
Four objections could be made to this approach. Firstly that a baseline case of zero profits is not realistic. The average rate of profit could be at a range of level or negative. Secondly in this pre-Keynesian form there is the assumption of a loanable fund of savings preceding investment. Thirdly that an assumption of productivity of capital has fallen into a capital theory fallacy. Finally Fisher’s objection that interest did not add to cost of production.
On the first point we do not have to assume a zero rate of profit, we simply need a system for determining the relationship between changes in investment and changes in savings. Let us assume that a productive system has a rate of investment sufficient to pay for all depreciation of capital stock but not for any expansion of capital stock. Utilising our double entry model of banking if all bank profits are returned as dividends then the change in lending must be funded by a change in savings. This saving can utilise idle/excess reserves, reserves that will in time be generated by the act of lending. But as our modelling has found those reserves are likely to be in another bank so an expansion of bank lending must be found through funding, either a short term intra bank or central bank loan or through equity. Both of these will be set through the opportunity cost of capital in the market. We can therefore deal with the first two potential objections simultaneously. In order to attract finance capital the rate of interest, after accounting for depreciation, must be able to compete with the average rate of profit from other investments.
Note at no point are we talking of a marginal productivity of ‘capital’ as a thing, rather each factor of production will have a cost which interest rates will enter into. This can be illustrated visually as follows:
Interest enters into the cost structure of every other factor of production. It is the discount of the cost of those factors. Note we are speaking here of the perspective of the individual firm which sees (differential) rent costs as price determining, rather than that of the whole of society. Arbtitrage ensures that the interest rate – costs of lending is equal to the average rate of profit.
Fixed capital goods will depreciate, and variable capital goods will be used up in the process of production. We can term these elements together capital destruction. The cost of these inputs will in turn be determined by the cost of intermediate goods created and then used up in the process of creating final consumer goods. The top layer here represents consumer goods.
This is also a visual expression of Bose’s theorem, that all intermediate goods have labour/capital composition and there is no such thing as a pure labour good, so capital contributes to value as well as labour. This line of argument has weaknesses, crucially when taken back to ‘originary factors’ that capital residuum is original interaction of land with labour – rent – which is not value creating. Secondly there is Marx’s argument that depreciation simply maintains capital and does not add value – this omits of course working capital used up in production and maintained in the final good – which again can be tracked back to rent. The issue is how capital goods are valued – to the extent to which they can augment labour. The real factor that this monetary exposition of Bose’s theorem exposes is the role of finance capital used in production. Ironically if you maintain the position that money results from surplus created by augmented labour, and that interest is rent of money, then interest becomes price determined when viewed from the perspective of society as a whole. The issue then becomes one of measurement of units of augmented labour and whether or not these are aggregatable.
We can also see Sraffa’s argument that there is no such thing as a single undifferentiated ‘capital’ earning a factor return, rather there is the discounted cost of capital consumed in production and secondly the interest rate on each individual factor. It is impossible to determine the overall cost of production, and profit rate, without knowing the interest rate – leading to Wicksell effects.
This is not necessarily incompatible with a marginal productivity approach to factor costs. This can be applied to interest rates and rent, the area of caution is over capital and labour which must always be used in conjunction and where it is only possible to talk of the discounted marginal productivity of augmented labour. This relationship is not however monotonic and linear, varying capital/labour rations and relative costs of each will have interest entering differently into the cost of each will will effect choice of technique – reswitching.
There is a close relation here to ‘Van’ Rowe’s Dutch theory of Capital – where land as the only resource is fixed, it produces Wheat which is not stored:
There is a very simple relationship between: the price of land P (measured in tons of wheat); the annual rent on an acre of land R (measured in tons of wheat per acre per year); and the rate of interest r (the extra tons of wheat per year you have to pay as interest to borrow one ton of wheat). It’s P=R/r. Or you can think of it as r=R/P. Arbitrage ensures that equation holds true. If r>R/P, the rate of return on owning land and renting it out would be less than the rate of interest, so everybody would want to sell land, driving P down. If r<R/P, the rate of return on owning land and renting it out would be greater than the rate of interest, so everybody would want to buy land, driving P up.
Or you can set the price of land equal to the Net Present Value of the rents, and get exactly the same answer, if you assume that rents are never expected to change and interest rates are never expected to change.
Rowe assumes that this proves that interest is solely determined by time preference. But note here the factor input – seed – is presumed to arrive by magic and labour input is assumed to proceed without having to eat. We can simply reformulate this however into a one product corn economy model. Here rent of land can be determined in value terms solely in relation to productivity.
“What’s any of this got to do with Capital Theory? You still don’t have any capital in the model. You’ve only got land!”…
“Yes we do! “Capital” is just a strange name for land that we drained ourselves, instead of waiting for God to reduce the sea-level. Saving and investment is just like having a flood this year, and so consuming less wheat, barley, or whatever, this year, and a lower sea level and more land next year. ..
My Dutch ancestor was right, of course. But he did leave one thing out. The quantity of new land produced each year would be where the Price of land equals the Marginal Cost of producing new land. So the position of that Marginal Cost curve would also affect how much new land gets produced each year
So capital can be seen as rent – where rent, and interest, is set by the cost of an additional unit of output where the marginal cost equals the marginal opportunity cost of investing a marginal increment of deferred consumption elsewhere. Interest as the rent of money, the thesis we set out to prove in the ‘four factor model’ we starting setting out a few months ago.
Does this rent enter into price, or like land is it price determined? Fisher strongly argued that that it did not enter into price when viewed from society as a whole as expense to a debtor is income to a creditor (assuming of course they have the same preferences). Note this is not an argument of the debts=credits form inapplicable with endogenous money, rather one of where debt payments=creditor income, which is an accounting identity true at any instant of time. Like rent the fact that a cost does not contribute to price does not disprove a cost of production theory of value.
We can also see the relationship to concepts of liquidity preference and the demand for money. Active investment by an accumulator of capital has to compete with other demands for money including paying down existing debt.
1. von Böhm-Bawerk, E., Capital and interest. 1959: Libertarian Press.
2. Schumpeter, J., History of Economic Analysis. 1987: Taylor & Francis.
3. Carver, T.N., Distribution of Wealth (1904),’The Place of Abstinence in
the Theory of Interest,’ Quarterly Journal of Economics, October 1893.
4. Scrope, G.P., Principles of Political Economy. 1833: Longman, Rees, Orme, Brown, Green, & Longman.
5. Rothbard, M.N., Economic Thought Before Adam Smith. 2006: Ludwig von Mises Institute.
Daily Mail -’ministers have little understanding of the lives of families residing in suburban streets ‘
There are times when ministers must wonder if they can do anything right.
For two years, they were rightly criticised for failing to produce the radical policies so desperately needed to return the flat-lining economy to growth.
Now they are being attacked for one of the few ideas they have managed to come up with: relaxing planning laws to allow large home extensions and conservatories to be built without the need for planning permission.
Undoubtedly, the Government was correct to focus on the need to create more work for the construction sector, which has been hit by a lack of house-building and infrastructure projects.
But, with Tory councils and MPs in revolt over the proposal, it’s increasingly apparent that David Cameron did not properly consider the consequences of unleashing a planning free-for-all on the residential streets of England.
For example, isn’t the building of extensions of up to eight metres in length – double the current limit – bound to pitch homeowners into battles with neighbours over the loss of privacy and natural light, not to mention destroying the architectural integrity of the neighbourhood?
Indeed, to deny homeowners the right to object to what amounts to dramatic changes, taking place in their own backyard, is the exact opposite of the localism the Tories claim to preach.
The entire policy suggests ministers have little understanding of the lives of families residing in suburban streets where properties are packed closely together.
Last night Planning Minister Nick Boles was in the early stages of a retreat – saying some councils would be allowed to ignore the edict if they could make a case their area was already over-developed.
He and Mr Cameron would be better served ditching the idea altogether.
The feeling had been that DCLG simply had not thought through its back of the envelope plan that A4D directions could be used to stop the doubling of PD rights – as unless 12 months notice is given full compensation for loss of house value is payable.
Now it seems that to avoid embaressment to express this as a virtue. Of course there is no plan to allow the two adjoining neighbours to sue for loss of their house value, very dangerous for a minister to set down this as a material consideration in determining planning policy.
Eric Pickles has declared war on Tory councils opposing his planning free-for-all by urging residents to sue if they are not allowed to build large extensions in their back gardens.
The Communities Secretary said he was ‘surprised’ that councils had opposed Government plans to allow homeowners to build out as far as 26ft without the need for planning permission.
A growing number of authorities – including planning minister Nick Boles’s local Lincolnshire council – have criticised the move, saying it will blight communities, slash house prices and set neighbour against neighbour.
But in a provocative intervention, Mr Pickles said those whose plans were turned down could seek damages against their local authority.
Town halls can invoke a rule called Article Four if they want to protect their neighbourhood from any Whitehall relaxation in planning restrictions.
But they are supposed to give a year’s notice. It means homeowners denied the right to build a large extension would be able to seek compensation after the new rules come into force.
Mr Pickles said: ‘If [councils] decide not to do this, then they have a thing called an Article Four arrangement.
‘If they do that, then a member of the public can seek damages against them.
‘So it’ll be the public that will be taking on the councils if they decide to go against what will be a very reasoned, very civilised and very straightforward change.’
Homeowners are currently allowed to build a single-storey 10ft extension if they live in a terraced property and one of 13ft if they live in a detached house.
But David Cameron wants the limits doubled to 20ft and 26ft for three years, in an attempt to boost the economy.
The revolt against the plans began last Tuesday when Tory-run Richmond council in London voted to oppose them. It was soon followed by neighbouring Sutton council, run by the Lib Dems.
On Friday, the county council of Lincolnshire – where Mr Boles’s Grantham and Stamford constituency is located – also made its opposition public.
Perhaps Pickles is being deliberately provocative seeking to maximise opposition to a policy forced on his own department. Like many other Treasury initiatives in Planning if you want to block them simply consult on exactly the half assessed scheme they propose.
People with a history of mental health problems are being excluded from social housing built in one of Europe’s biggest inner city regeneration projects.
The developers and local council behind the central London development have also set quotas for the number of homeless and unemployed people who can live there, an investigation by Corporate Watch and The Independent has found.
In what critics have described as a “crude exercise of social engineering” extra limits have been placed on the number of families with children who will be allowed to live in the 500 social housing units under construction at King’s Cross Central, while those with drug and alcohol problems or in rent arrears have also been excluded.
The exclusions – which have been unveiled in a series of freedom of information requests – are a departure from the usual points-based allocation process, which aims to let social housing to “those who are in the greatest housing need”. Mental health problems and homelessness would usually increase an applicant’s points total and position on the housing register. The King’s Cross Central homes will be let through Camden’s allocation scheme, but anybody who does not meet the special criteria will not be able to bid.
Mental health charities and housing groups have criticised the criteria. “I am shocked to see such a crude exercise in social engineering,” said Alison Gelder, the chief executive of Housing Justice.
Social housing construction was a condition for Camden Council granting planning permission for the £2bn development in 2006. Argent, the property company leading the consortium, says it will bring major community benefits to the area, which has been given its own postcode – N1C.
A total of 1,700 residential homes will be built, the majority of which will be sold privately. In addition to 500 social housing units and 250 “intermediate affordable homes”, 950 units will be sold privately.
When complete in 2020, the 67-acre site will contain the UK headquarters of companies, including Google and BNP Paribas, retail outlets, sports facilities, cultural spaces and the Central Saint Martin’s College of Art and Design.
The Council, developers and One Housing Group housing association, agreed a Local Lettings Plan for the allocation of the social and affordable housing in November 2010 to “establish a mixed, stable and sustainable community at the development”.
The plan specifies “a maximum of 20 per cent of social housing lettings to be made to homeless applicants” and that children can account for only 23 per cent. Unemployed households can only account for 25 per cent.
When questioned by The Independent, Camden Council admitted people with mental health problems had not been allocated any social housing, but said the Freedom of Information response had been taken “out of context”.
“In allocating the first tranche of flats at Kings Cross we were concerned that, as the infrastructure and social provision, which will come at a later date in the development, were not in place, vulnerable residents may have insufficient support to manage in these homes,” a spokesperson said.
The council insisted it had a strong record of providing for vulnerable people elsewhere in the borough but it would not definitively confirm whether people with a history of mental health problems would be able to bid for future lettings at Kings Cross Central when they come up. Instead they said they “may be able to move to the development when the next lettings become available”.
The site will also contain 55 supported housing units. Of these, 15 have been allocated to people with severe mental health problems, with the rest reserved for elderly people. However supported housing is not the same as social housing and is usually reserved for people who need regular or around the clock care.
Paul Farmer, chief executive of Mind, the mental health charity, said: “No one should be excluded from social housing or any other public service solely by reference to their mental health status. We have come a long way since the days of asylums, and segregation on the grounds of mental health is completely unacceptable.”
Dr Stuart Hodkinson, an academic at University of Leeds specialising in housing privatisation, believes the development is a sign of things to come: “This is what ‘localism’ is really all about when combined with cuts to social housing and housing benefit – empowering private developers and big social landlords to be able ‘cherry pick’ their social tenants.”
King’s Cross Central is being developed by Argent and Hermes Real Estate, owned by the BT Pension Scheme. The land is owned by the state-owned London & Continental Railways and German logistics company DHL.
Robert Evans, a board member of King’s Cross Central Limited Partnership said: “KCCLP has no policy of excluding people with mental health problems from the social housing at King’s Cross.”
Danny Alexander, the Liberal Democrat Treasury chief secretary, has accused his Conservative coalition partners of waging a “constant war of attrition” on green issues, warning that it is endangering billions in green investment, as well as the whole government growth strategy…
Alexander marks out his clearest differences with the Conservatives on green issues. “The thing that in this job and in this government I find most frustrating is what often feels like a constant war of attrition on green issues, on renewable energy and renewable investment which is so important to our economy. I think that just has to come to an end.
“It seems to me that green investment is one of the fastest routes to getting investment, growth and jobs going in this country, and we just need to have a very, very clear position and a very, very clear plan. I don’t think as a government we can afford to send mixed messages on that point.”
Alexander describes how the government is having to deal with Tory backbenchers – including those he calls “luddite” climate change deniers – opposing green technologies such as windfarms. “I just don’t think the British economy can any more afford to have a blue roadblock to green growth,” he says.
“They worry about the pressure going on amongst the backbenchers in one of the governing parties and what does it mean for the future.
“It means we have to deal with some of the luddites that continue to deny climate change and who think this is all a myth. I am not saying these views are held in government, but you do hear those noises in the wider debate, and the only way to deal with them is not for the government to pander to those ideas, but to get on and deliver our agenda.”
As the economy falters the government is not so much pursuing a comprehensive growth strategy as frantically searching for things to throw out of the basket before the balloon hits the ground. Local government controls are among the first objects to hand.
Planning rules are a major target for the deregulators. But in their haste to stimulate economic activity ministers are ignoring the fact that planning is a great deal more than red tape. It is, in part, about conflict resolution – between competing strategic priorities when looking at the big picture, and about personal wellbeing when it comes to your neighbours plans for their house.
Now leafy, Conservative-run Richmond upon Thames council in south-west London is in open revolt against the government’s relaxation of conservatory planning rules. Conservatories are a big issue in Richmond. Other councils will follow.
The much publicised move to make it easier to change section 106 agreements requiring new developments to include social housing are yet another example of communities secretary Eric Pickles diverting attention from the real issue.
The construction industry pointed out the agreements could be changed already, and the real problem for developers was weak mortgage lending. Pickles may secure a few headlines with this stunt, but he won’t shift the growth figures.
New environment secretary Owen Paterson has rightly railed against low broadband speeds in rural areas, but the government’s solution –allowing cable companies much freer rein to rip up streets and install ugly junction boxes in towns and villages – is a short-sighted solution that will offend many traditional Tory voters.
Yet the most dangerous proposal may still be to come: the thinktank Policy Exchange has floated the idea of bribing people to accept building on nearby greenfield sites, including the green belt.
The report is called, Why Aren’t We Building Enough Attractive Homes?; a better title would be, Is Urban Sprawl Really So Bad? The whole point of the near-inviolability of green belts is that they improve the quality of life in cities and protect the countryside from generation to generation. Shoving money into the pockets of people who just happen to live nearby at a particular moment is a squalid way to inflict lasting damage.
Remember that Nick Boles, the new planning minister, was Policy Exchange’s founder. What is striking is how major parts of the planning proposals are likely to be most fiercely resisted by the Tories’ core vote. It highlights the tension between the party’s free market wing and its traditional small “c” conservative base.
…In the current frenetic climate, with ministers increasingly desperate to find something – anything – that will spur growth or improve public sector efficiency, the government is often showing poor judgment. Regulations and guidance are easy political targets but they are also the means by which we resolve disputes, treat people fairly and keep people safe.