Why have Labour placed planning reform at the heart of their growth strategy?
The UK’s planning system faces significant challenges that hinder economic growth, including inefficiency, lengthy delays in processing applications, bureaucratic complexity, inconsistent decision-making by planning authorities, restrictive greenbelt policies, and strong local opposition. Additionally, many planning authorities are under-resourced, leading to inadequate handling of complex planning applications. These issues result in higher costs for developers, deter investment, and exacerbate housing shortages, contributing to increased property prices and reduced affordability.
Labour is placing planning reform at the core of its growth strategy, believing that a streamlined and efficient planning system is essential for economic development. By addressing inefficiencies, reducing bureaucratic complexity, and ensuring consistent decision-making, Labour aims to create a more predictable environment for investment and development. Effective planning reform is crucial for growth as it facilitates timely and cost-effective development of housing and infrastructure, attracting both domestic and international investment. Moreover, increasing the housing supply helps stabilise property prices, improve affordability, and enhance labour mobility, all of which boost productivity and economic output. Nevertheless, the scale of the challenge is significant, given the entrenched inefficiencies within the current system. Here’s how Labour plans to drive growth through planning reform.
Increasing Housing Supply
Labour aims to build 1.5 million new homes over the next five years to address the severe housing shortage in the UK. The housing shortage in high-demand areas like London, Oxford, and Cambridge has far-reaching implications for productivity. High housing costs in these regions restrict the labour supply by making it difficult for workers to live close to their places of employment. This situation leads to longer commutes, which not only reduce the effective working hours of employees but also increase stress levels, resulting in decreased overall productivity.
Long commutes have a well-documented negative impact on worker productivity. Time spent commuting is time not spent working or resting, which reduces overall efficiency. Moreover, long commutes are associated with higher levels of stress and fatigue, which can decrease cognitive function and work performance.
Importantly, housing shortages also create inefficiencies in the labour market by preventing workers from relocating to areas with better job opportunities. When affordable housing is scarce, workers are less mobile and less able to move to regions where their skills are in high demand. This immobility leads to a mismatch between job vacancies and available talent, hindering economic growth. By increasing the housing supply, Labour’s policy can enhance labour mobility, allowing workers to move to high-demand areas, thus improving the allocation of human resources and boosting productivity.
Achieving Labour’s target of building 1.5 million new homes over the next five years presents significant challenges, particularly given the historical context. The UK has not consistently built anywhere near 300,000 homes per year since the early 1970s, highlighting the scale of the ambition required.
Mandatory Housebuilding Targets
The government hopes to meet this 1.5 million home target by reintroducing mandatory housebuilding targets for local councils. This approach aims to create a consistent and predictable framework for housing growth, addressing the shortfall in new homes and boosting the construction sector.
The construction sector plays a crucial role in the UK economy, not only in terms of job creation but also as a driver of economic activity and growth. Mandatory housebuilding targets could stimulate significant growth within this sector. The direct impact of increased housebuilding on employment is substantial. According to the National Housing Federation, for every 50,000 homes built, around 75,000 direct construction jobs are created, and 50,000 indirect jobs are created.
Investment in construction has a high economic multiplier effect, meaning that the initial spending in the sector leads to further economic activity and growth. Moreover, new housing developments often require infrastructure improvements, such as roads, utilities, and public services, which further contribute to economic growth. The CBI/Oxford Economics estimates that every £1 spent on construction output generates £2.92 in total economic activity. This substantial multiplier effect underscores the importance of the construction sector in driving broader economic growth.
Labour’s policy to set housing targets for local councils also aims to hold them accountable for meeting these targets, ensuring consistent and predictable housing development. Holding local councils accountable for meeting housing targets could ensure that housing growth is distributed more evenly across the country.
Labour’s proposal to reintroduce mandatory housebuilding targets, along with the announcement of 300 new planning officers, has generally received a positive reaction from local councils. However, the increase in planning officers amounts to less than one new officer per council, which is unlikely to significantly impact the capacity and efficiency of local authorities.
Greenbelt and Grey-Belt Development
Labour’s policy includes a plan to review greenbelt boundaries to prioritise development on lower-quality, post-industrial ‘grey-belt’ land. This approach aims to unlock underutilised land for housing while preserving higher-quality greenbelt areas. Developing grey-belt areas can unlock significant economic value by transforming underutilised land into productive housing developments. Building on greenbelt land near public transport stations can enhance connectivity and promote sustainable development. Proximity to transport hubs makes these areas highly attractive for residential development, as it provides easy access to employment centres, reducing commute times and increasing productivity.
Balancing growth with conservation is crucial for sustainable development. While there is often resistance to building on greenbelt land, focusing on lower-quality grey-belt areas can address housing needs without compromising environmental integrity.
Infrastructure Development
The National Significant Infrastructure Project (NSIP) regime is a streamlined planning process in the UK designed to facilitate the development of major infrastructure projects deemed crucial to national interests. The regime aims to expedite the approval process for large-scale infrastructure developments such as airports, power stations, major roads, and railway projects. These projects are subject to an assessment process that balances economic benefits with environmental and community impacts. Labour plans to expand the NSIP regime to include a broader range of projects, such as 5G infrastructure and gigafactories.
Widening the NSIP regime offers broad economic and strategic benefits by accelerating the development of essential infrastructure projects. By including a wider array of projects under the NSIP framework, the UK can streamline approval processes, reduce administrative delays, and provide greater certainty for investors. This can attract significant domestic and international investment, fostering economic growth and job creation across various sectors. Furthermore, expanding the NSIP regime ensures that critical infrastructure keeps pace with technological advancements and growing demands, enhancing the country’s overall competitiveness. By centralising decision-making, the NSIP regime can facilitate more coordinated and efficient development.
Labour’s planning reform proposals represent a necessary and forward-thinking approach to tackling the UK’s housing and infrastructure challenges, embodying a pragmatic and balanced vision for economic growth. By reintroducing mandatory housebuilding targets, Labour aims to address the severe housing shortage, particularly in high-demand areas like London, Oxford, and Cambridge, where high housing costs have far-reaching implications for productivity and labour mobility. The strategic development of grey-belt land near public transport stations can enhance connectivity, promote sustainable development, and provide much-needed housing. Expanding the NSIP regime helps to ensure that the UK remains competitive and can attract significant investment.
However, the scale of the challenge is substantial. To achieve these ambitious aims, the government must engage effectively with communities to manage local opposition, and maintain clear, consistent policies to sustain investor confidence. If they can navigate these challenges, their planning reforms could contribute towards a more dynamic, resilient, and equitable economy.