Myth number 3: planning is costly

Background to the myth

MYTH: The Chancellor and other ministers keep claiming that the current planning system is costing the economy £3bn a year.

Planning costs in Britain are among the highest in the world Rt Hon George Osborn, Chancellor of the Exchequer.

Planning delays cost the economy around £3 billion a year, Rt Hon George Osborn, Chancellor of the Exchequer.

when delays cost the economy around three billion pounds each year, Rt Hon Eric Pickles MP, Secretary of State for Communities & Local Government in a joint article in the Financial Times.

The figure of £3bn was used in the Treasury and BIS Plan for Growth, issued in March this year, which said that:

recent research by Reading University suggests that the costs to the economy associated with delays in processing applications may be up to £3 billion a year. 

Our Freedom of Information (FOI) request to the Treasury asked for information to substantiate the Chancellor's claims about the costs of planning and dramatically revealed the following answer HM Treasury does not hold any recorded information on the scope of your request. We were then guided to look at the evidence in the Government's Plan for Growth for the costs imposed by the planning system. The Reading University research cited in the Plan for Growth itself stated that this £3b figure comes from the 2006 Interim Report of the Barker Review of Land Use Planning.  As the 5 year old Barker Interim Report itself states, "there have only been a few studies, and no recent ones, investigating the extent of costs associated with delay for the economy as a whole". The only figure in that interim report approaching £3 billion was that of £2.7 billion from a 1992 CBI study (updated to 2004/05 prices) which included the cost of delays in permitting infrastructure. At the time of that CBI report, major infrastructure was not dealt with through the planning system but through a number of other pieces of legislation. So the £3bn figure which seems to form a cornerstone of the statements about the costs of planning delay comes from a study 19 years ago which looked at a planning system that no longer exists.

Planning has established a reputation for being expensive.The Government has stated that Last year, local authorities spent 13 per cent more in real terms on planning than they did five years ago - despite a 32 per cent drop in the number of applications received (Minister for Decentralisation & Planning, speech to TCPA annual conference 2010).

A Department for Communities and Local Government (DCLG) presentation on the Localism Bill and Planning reform referred to the planning system being costly, at over £2bn a year.

The Governments Plan for Growth document sates that: Gross costs of regulation associated with building office property are estimated to be 12 times higher in the City of London than in Brussels, and higher in Manchester than Milan, Paris, Barcelona or Amsterdam.

Evidence base

However it is unclear which costs are being referred to. Is it:

• Costs to the local authority - (hence council tax payer)
• Costs to the applicant seeking planning permission - fees
• 'Costs' of Section 106  

Cost to the local authority / cost to the tax payer

Any discussion on the costs of planning needs to consider all the resources available, including staff and skills and the need to invest in these if planning is to be even more effective in addressing complex issues.  A study undertaken for the DCLG before the current round of public sector spending restrictions found that:

• Across those authorities that were able to supply staffing information for the four-year period (from 2006-07 to 2009-10 ), around two-thirds of local planning authorities had seen a decline in staffing levels, with almost 29 per cent of local planning authorities having lost more than 10 per cent of their staff in the last four years.
• It is also evident that costs have risen in all local authorities by around 4 per cent per annum since 2006-07. This largely reflects inflation, principally of staff costs, and no real increases in resources.

Cost to the applicant

• In terms of planning being costly for developers (applicants) when considering what a developer can earn from a scheme, it is arguable that planning costs are relatively small.
• The abstract of the statement cited in the Plan for Growth document indicates that the findings relate to business rates and not to the cost of planning.

Costs of section 106

Local planning authorites have been reviewing and re-negotiating Section 106 agreements in the light of the difficult economic circumstances (Homes and Communities Agency 'T1.3.1 Reviewing s106 agreements' ).

• A number of local planning authorities have also published details of their draft  Community Infrastructure Levy (CIL) charging schedules. The CIL allows local planning authorities to choose to charge on new development in their local area. The CIL is better value for money as it allows costs to be spread amongst a greater number of developments.

Our view

Studies of the resources available to planning even before the current spending restrictions have shown both a reduction in staffing levels and fears that a lack of investment in skills will hamper the achievement of community aspirations and government priorities. The RTPI feels that anything that is worth doing costs money: planning means that development does not have to cost the earth.