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.

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