What does the focus on ‘overheating’ mean for Strategic Planning

Boris’s recent speech on ‘levelling up’ had a strong focus on ‘overheating’ in a spatial, rather than national economic sense, it is many years, since the mid 1980s, that we have heard much of that in planning.

Then we had a couple of examples. In Hampshire it had a no growth policy, restricting economic growth in case it generated more need for housing. A few counties such as Hertfordshire briefly adopted similar policies. SERPLAN also adopted a special policy for the so called ‘Western Arc’ west of London, where defense orientated industries were the major growth force. Neither lasted long in the face of GOSE objections.

In economics ‘overheating’ means price rises when shortages of a factor of production, land, labour or capital, leads to excessive rises in cost. Then the owners of that factor can charge a scarcity price for that factor, reducing overall consumer surplus in favour of excess profits and rising economic inequality.

In spatial terms the key issue is the reason for the shortage. Labour shortage can be caused by shortage of land for housing. The key issue is what causes the shortage, lack of land allocated for housing, lack of infrastructure so housing lags behind economic growth or a genuine shortage of lack of land suitable for housing. The last of the three is rarest but does exist on coastal areas, islands and areas with strong nature conservation and landscape constraints.

Thinking for two generation had been shaped by the flawed analysis of the Barlow report. It commissioned two background papers by pioneer of economic geography Sir Donald Mc Dougall, later head of the Government Economic Service and author of George Brown’s National Plan.

Dr Daniel o Donohue

The regional policies that followed the Barlow Report were heavily influenced by papers written for the Barlow Commission by Sir Donald MacDougall. The first of these papers was included as an appendix to the report itself and introduced the shift-share methodology to the analysis of regional employment growth, and has subsequently been shown to be flawed.

The second paper considered the urban hierarchy and growth but was never fully developed. Consequently, post-war regional policy focussed on the contribution of industrial structure to employment growth (industry-mix effect) without fully taking into account the urban hierarchy or regional locations of that employment (region-effect).

This is very wonkish but very important, if you analyse shift share (the industry effect) without fully looking at the urban/region effect., you get spatial autocorrelation. What seems like excessive concentration (at the time) of small industries in London and the West Midlands, which by implication would creates new industry economies of they were restricted to grow and forced to move, has been shown by more sophisticated analysis to be just residues of an urbanisation effect. These cities had productivity advantages from their growth that declining cities lacked. What poorer areas lacked was fast growing cities as incubators for growing industries. The New Towns programme only partially locked onto this, it did well in Telford and Scotland, ok in Runcorn and spectacularly poorly in Peterlee and Skelmersdale (until recent years).

Of course overheating is only ever a concern at the peak of booms. In recessions it soon becomes forgotten.

What this means is a careful analysis of the causes of land shortages. No one for example could seriously claim in the relatively ‘left behind’ Thames Estuary that there is a shortage of land, it is just almost all the land needed to meet the growth needs is Green Belt, and there hasn’t been a plan since the 1960s to meet the infrastructure needs of the area.

In parts of Surrey though there are genuine constraints such as AONB and SPA, which requires other areas to mop up the growth. The areas suitable for major growth are few, a Crawley-Horsham supercity maybe, we just have to go for if the housing market London to Brighton is not to overheat forever.

Beyond the Green Belt the ‘shortage of cities’ between the Metropolitan Green Belt and West/Midlands- South-Yorkshire needs acknowledging by creation of new cities in less constrained areas, like in the Arc, West of Swindon and South of Norwich. There are candidates in the North too, like around Crewe and a couple of satellite cities around York. The arc is just the start.

Just when did the Government Back Down from ‘1 million homes’ for Arc – or Have they Backed down at all?

The origin was the NIC report of course published alongside the Budget in 2017.

Which was criticised in the house a ciuple of weeks ago as being ‘balirite’ and ‘not conservative’ simply because Andrew Adonis used to be its chair. I.e. Go on Boris do another U Turn.

The Commission’s central finding is that rates of house building will need to double if the arc is to
achieve its economic potential.

If the arc is to maximise its economic potential, current rates of house building will need to double –
delivering up to one million new homes by 2050. It is equally important that new development
improves quality of life – this means engaging architects, developers and designers in the process of
building new homes in well-designed, liveable and connected communities which respect and enhance
the natural environment and the quality of life enjoyed by existing residents.
It is unlikely that this level or quality of development can be delivered if growth is focused exclusively
on the fringes of existing towns and cities, or through the development of small garden towns and
villages. Government and local authorities will need to plan for, and work with investors, developers
and housebuilders to deliver, large new settlements and major urban extensions – including the first
new towns in over a generation.

We have not had such a clear and simple statement since.

In the budget itself Hammond botched it.

Last week the National Infrastructure Commission published their report on the Cambridge-Milton Keynes-Oxford corridor.

Today we back their vision and commit to building up to 1 million homes by 2050.

Completing the road and rail infrastructure to support them.

And as a down-payment on this plan, we have agreed an ambitious Housing Deal with Oxfordshire to deliver 100,000 homes by 2031.

The speech didn’t mention why 1 million, nothing about job creation.

The red book was clearer

The government recognises the need, highlighted by the NIC’s report, to build up to 1 million new homes in the area by 2050 to maximise its economic potential, starting with a housing deal with Oxfordshire for 100,000 homes by 2031, and working with Central and Eastern sections on commitments in 2018. The government will also consider significant
new settlements and the potential role of development corporations to deliver these using private finance.

Note this was referring to the research element of the NIC report. As a need figure based on the transformational economic model projection plus an element of overspill from land constrained areas in and around London and other constrained town in the south east. A need figure NOT a target. The chancellors speech made it a target, probably without proper consultation with MCHLG.

Things were more nuanced in the 2018 red book

The government supports the NIC’s ambition to deliver up to 1 million new homes in the Arc by 2050 to maximise sustainable economic growth. The government recognises that the environmental requirements to underpin sustainable growth need to be considered at a pan-Arc level, and that the Arc is valued for its wildlife and natural
places. The Arc is an opportunity to demonstrate the ambitions of the government’s 25 Year Environment Plan.

Note this was the Budget where the Government made its full policy reponse, as opposed to initial reaction, to the NIC report.

So when the May government fell was there a change – well no.

Look at the March 2019 Government ambition and joint declaration between Government and local partners.

Signed by none other than Robert Jenryk.

Following its response to the National Infrastructure Commission’s report on the Arc in October 2018, the Government re-affirms in this document its long-term economic ambitions for the Arc, including an ambition for up to one million high-quality new homes by 2050, to tackle the severe housing affordability issues faced by many, and unlock the Arc’s full potential.

Note this was a government AMBITION, not a shared one, nor a government target or a shared target.

However every single government policy statement since has not mentioned a number, rather they all say

‘housing needs to be met in full’

Picher has twice said in parliment, its not a target

I have always been at pains to express that this is not about house building; it is about economic development of a very large region for jobs, skills and the transport and other infrastructure required to build the hopes and opportunities of the people who live there. It is about housing too, but housing is not the central thrust of what we are trying to achieve. When I hear talk from the Chamber of 1 million additional homes, points that were made in a report of some five years’ standing, I reply by saying that is not a Government target and it is not a Government policy.

I pointed that out to my hon. Friend the Member for North East Bedfordshire in this Chamber, but I suppose the best way to keep a secret is to make a statement in the House of Commons. I think the only way that we can put to bed or break open this particular secret is to keep repeating the point that 1 million homes is not a Government target. More homes are what we need and require, because in certain parts of the arc space, Cambridge being an example, average house prices are 12 times the average salary of a local resident. In other parts of the arc, house prices are as expensive, so we do need to build more homes with the right infrastructure for the people who need to live in this space.

Lets be clear about this.

Since the 2018 Budget the government has never described it as a target but an Ambition.

Jenryk has used that phrase and never withdrawn it.

The govrnment has described the NIC report as a needs figure, the description of a ‘report of 5 years standing’ is not disowning the NIC report but simply describing that the evience is 5 years old. Almost certainly with the new census the need will be much higher.

The government has never withdrawn the statement that the one million figure is an ambition.

All Pincher has done is stated the one million figure was not a government target, which it has never been since 2018.

So is it still a government AMBITION. Of course if Jenryk withdraws this what incentive is their for local leaders to keep their half of the joint declaration. If the government withdraws its ambition local authorities will reduce housing numbers and still say, give us the growth funding as its no longer part of the deal.

Hence why its much more important to look at what Pincher did not say rather than what he did say.