Bob Blackman: Voters are understandably wary about planning reforms. Here’s why a street plans scheme is a viable alternative.

22 Jun

Bob Blackman is MP for Harrow East.

I have worked in local politics for over 30 years: 24 as a councillor leading Brent council, or the Conservative grouping there, and 11 as MP. My seat, Harrow East, is about nine miles away from Chesham and Amersham, with two Conservative constituencies in between – one of them the Prime Minister’s own constituency of Uxbridge and South Ruislip. While Harrow is more suburban than Buckinghamshire, we treasure the fields and green open spaces in the area no less and are no more willing to see them concreted over.

The notion that everyone is Conservative about what they know best is a pretty good summary of the results in the Chesham and Amersham by-election. Given the impression that planning changes would lose them control of development in their green and pleasant land, voters reacted with a protest vote, in good by-election tradition.

This does not mean, however, that locals are opposed to any and every bit of development that happens. Most of my constituents understand that the country needs more homes, and that some development must happen in their area. What they object to is development foisted on them, and which they feel they have no control over. They are worried when even members of our own party say that local democracy will be overruled to force through new development.

The Housing, Communities, and Local Government committee, on which I have sat since 2010, has a Tory majority and yet our report on the upcoming Planning Bill, or at least on those bits of it that have been released to the public or heavily signposted, could be described as “wary”. Many of us do not want to force sprawling new developments on places that cannot cope with them, leaving both new and existing residents badly off in terms of congestion, school places, and access to natural amenity.

The party may find itself at an impasse. We know that the country needs more homes – so people can live closer to the best jobs and afford to buy a home and raise a family. We know that the Conservative Party needs more homes – as homeowners with families always end up being the ones who vote for us. However, if more homes mean building over the landscapes that our voters hold dear, it may risk our core voters in places like Chesham and Amersham turning on us.

I think there’s another way. Earlier this year I contributed to a Policy Exchange paper called Strong Suburbs which outlines an extension to neighbourhood planning called “street plans”. These would allow individual streets, when a large majority of homeowners agree, to give themselves permission to increase the size of their houses. They could add bedrooms for children, granny, or a lodger, or even turn a large semi-detached house into two larger terraced homes. In many areas the value uplift, after building costs, could be several hundred thousand pounds for every homeowner on the street.

There are encouraging signs that this alternative to towers on the skyline, or building over fields, can carry a wide coalition of supporters. Six Tory MPs, including me and my colleague David Simmonds, whose constituency lies directly between mine and Amersham, have endorsed the idea. So has Tony Burton, the key inventor of neighbourhood planning, and chairman of the London branch of the Campaign to Protect Rural England (CPRE). The idea also boasts the support of the London Forum of Amenity and Civic Societies, with more than 100,000 underlying members. Indeed, CPRE’s Hampshire branch recommended the report as part of its submission for the Winchester local plan.

These point the way to a compromise solution on housing, where we make it easier to build, but give local communities the final say, directly, about what goes where. Streets that want to retain their existing character can vote to do so. Those that opt to build more can do that, reaping the benefits, just as many homes opt for more limited loft extensions under the current system. This means that we will be developing places that are already built on and protecting green fields and other natural spaces. Locals always have the final say and cannot have their wishes overridden by the local council or Westminster.

If the idea works, it will be because it gives full control to the local people who are affected most by development. Instead of bearing only the burden of housing, they share in the benefits it delivers, and control the shape and form it takes. If we give power back to communities in this way, we can create a new generation of homeowners, without letting down our most loyal voters.

David Gauke: My Budget advice to the Chancellor. Raise income tax, not corporation tax.

27 Feb

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

If there is one tax that the Chancellor is likely to increase when he stands up to deliver his Budget on Wednesday, it is corporation tax. Speculation that the corporation tax rate is going to rise has been running for months and if the Treasury wanted to dispel such speculation it could have done so. In contrast to George Osborne’s time as Chancellor – when reductions from 28 per cent to 17 per cent were announced – Rishi Sunak is expected to announce a Corporation Tax rate in the region of 23 to 25 per cent.

Is this a good idea? My view – as the Minister of Tax throughout the Osborne Chancellorship – is that it is not. But it is worth examining the arguments for and against such an approach.

The first argument that will be made is that we might not need tax rises at all. I wish that this was true but sadly this is unrealistic. It is true to say that we can live with higher levels of debt than was the case in the past. Interest rates are low and likely to remain so. Even if they increase, the long dated maturity of our debt gives us a chance to respond. The markets are happy to lend to us, the risk of a sovereign debt crisis is remote. The Covid crisis is the type of event in which governments should be willing to borrow and the consequences can and should be dealt with over a long period of time. In short, we needn’t be in a hurry to pay off the Covid-19 debt.

Even accepting all of this – that ‘this time is different’ – there is still an issue. Even after we are put the economic consequences of Covid-19 behind us, the OBR forecasts a deficit of £100 billion or 4 per cent of GDP. Our debt to GDP ratio would continue growing. Given these forecasts assume tight control over public spending that will be hard to deliver and the significant demographic challenges that face the country in the 2030s, some kind of fiscal tightening in the form of tax rises will be necessary eventually.

The second argument is that now is not the time. I would agree that now is not the time for a fiscal tightening. The economy is currently shrinking and unemployment is likely to increase substantially in the months ahead. The markets are not jittery so there is less of a pressing need to take action. Nonetheless, the Government could increase some taxes without engaging in a fiscal tightening if long term tax increases are accompanied by short term tax cuts or spending rises. So one can announce and even implement tax rises without engaging in an immediate fiscal tightening.

There is also a political issue. Delaying action on fiscal consolidation might make economic sense but it would push tax increases into the last years of a Parliament. Leave it a year or so and the Chancellor might find that his Parliamentary colleagues – not least the Right Honourable Member for the marginal seat of Uxbridge and South Ruislip – might become rather resistant. Now might be the last chance to take action.

The third unconvincing argument is that cutting corporation tax has not cost us any money and increasing it will not raise you any money. Look at how corporation tax revenues have increased since 2010, the argument goes. Sadly, life is more complicated than that. Yes, rates have fallen and revenue has increased but corporation tax receipts reflects where we are on the economic cycle (in 2010, businesses were not making much by way of profits and if they were they had big losses to offset). Furthermore, the post-2010 reforms were Lawsonian in their approach in broadening the base at the same time as lowering the rate (so these were not simply cuts). In addition, lower corporation tax rates have unintended behavioural changes in that more people pay themselves through companies (diverting tax revenues from income tax and national insurance contributions). To put it another way, increasing corporation tax rates really will bring in more revenue.

So, to summarise, it will be necessary to increase tax revenue, it is reasonable to make a careful start on that process now (albeit in a way that does not tighten fiscal policy in the short term) and that increasing the corporation tax rate will bring in additional revenue. I could also add that, of all the potential revenue-raisers, this is likely to be politically less painful than other options. Even businesses will not squeal much because, for many of them, making a profit appears to be a remote eventuality and paying more tax on those profits would be a relatively nice problem to have.

It would still be a bad idea.

Why? If we are going to raise more in taxes – and we are already at historically high levels – we need to have a debate about which taxes are least damaging to economic growth. Over the long term, corporation tax ranks as being one of the worst.

Corporation tax is a tax on profits. Profits are the return on investment; the higher the tax on profits, the lower the rate of return. All other things being equal, the lower the rate of return on investment, the less investment you get.

There is also a tendency to think that corporation tax is something that is paid by, well, corporations. At one level that is true but – to state the bleeding obvious – all taxes are paid by people in the end. Corporation tax is ultimately paid by shareholders in lower dividends, consumers in higher prices and employees in lower wages. There is plenty of evidence to suggest that in an open economy like the UK, it is the workers who lose out the most. Investment goes elsewhere, productivity does not increase as quickly as it would otherwise do and, in the end, wages and salaries reflect productivity.

It is no coincidence that, in the era of globalisation, corporation tax rates have fallen around the world. I spent much of my time as a Treasury minister trying to persuade international businesses to locate more investment and activity in the UK as a consequence of the competitiveness of our corporate tax system. We were starting to see success but there was always a question as to whether the UK was truly committed to corporation tax competitiveness in the way that, say, the Republic of Ireland was. Given the current speculation, it was a fair question. On top of Brexit, a sharp hike in corporation tax rates will be yet another blow to our international reputation as a place in which to do business.

If we need more tax revenue – and we do – we have to make use of our big, broad-based revenue raisers – income tax, national insurance contributions and VAT. The manifesto pledge made in 2019 not to increase the rates of these taxes was unwise at the time but it was made in good faith. However, much has happened since and the Government would be justified in recognising that. Attempting to fill the fiscal black hole by swingeing increases in corporation tax will reduce business investment and damage our international competitiveness. Not for the first time, the politically expedient choice will come with a painful economic cost.