Archive | Policy ideas

English sets out his housing rationale

Finance Minister Bill English delivered a frank speech on government direction yesterday, focusing on housing affordability when he addressed the Victoria University Business & Investment Club in Wellington.

This article is about context. Once Mr English hits the housing section of his speech, it’s verbatim & uninterrupted.

Opening with the view that “the Government takes the approach that the best thing we can do for the economy is work to improve its resilience – its capacity to adapt,” Mr English went on to recall the abrupt removal of farm subsidies in the mid-1980s: “That was a sharp personal lesson, and one that many New Zealanders also experienced.”

The lesson? “A strong focus of our policy is to make sure our markets work, and over the last 30 years New Zealand has done a reasonable job of this. Over the last 7 years our labour market has been tested. It has accommodated a significant recession in 2008, and a pickup in demand, particularly in Christchurch following the earthquakes.

“The labour market was able to respond quickly to those shifts in supply & demand conditions. Today, New Zealand’s proportion of the working-age population in employment is among the highest in the OECD.

“Another area that is now working well is the energy market. For a long time, New Zealand energy markets were over-regulated & poorly regulated. Extensive government ownership further stunted price signals. For instance, water management in the hydro-electricity system was, compared to today, very poor and advertising campaigns to urge the public to restrict their energy use were more frequent.

“In the last few months there have been a number of decisions in the energy industry which indicate a working market. We’re shutting down excess capacity, and excess capital is being withdrawn & returned to the owners of that capital. After years of litigation & legal contest over the rules, the energy market is now starting to work.

“Which brings me to the housing market.

Rules need to be reshaped

“This is probably the largest market in New Zealand where the rules need to be reshaped. The most evident indication of a problem is Auckland house prices. I’m yet to find a housing market anywhere in the world where prices go up at over 20%/year without stopping and then starting to come down again.

It may be that we are unique – but that seems unlikely. So we’re concerned about the housing market, because it’s a large asset on the New Zealand balance sheet, worth around $600 billion. And because what happens in our housing markets has a profound effect on every household.

“I want to go through a number of the reasons why the Government worries about housing, why it matters to the economy, and some of the key issues around the way that market is regulated.

Anti-planning, bad planning

“We have a better understanding of the significance of the planning process than we did in the past. The process probably looks unexciting to most people – something busy-bodies & councils do. But actually it’s the process by which one of our largest & most significant markets is regulated, and therefore we need to understand it.

“As a group of young people [his audience], it is critical for you as potential future homebuyers that we get this right. There are 3 reasons why the Government is focused on planning – and each of these matter for you. The first is that a housing market that is not properly functioning can have a significant effect on the macro-economy.

“Over the last 5 years, the Auckland housing market has been the single biggest imbalance in our macro-economic system. It takes around 8 years for the housing market to respond to a shock to demand. In part that is because changes to council plans can take years, in some cases over a decade. Resource consents on a housing development regularly take 18 months, including pre-application times excluded from the official statistics. When combined, those very real delays can exceed the length of the house price cycle.

“The point is that when the supply of housing is relatively fixed, shocks to demand – like migration flows increasing sharply as they have recently – are absorbed through higher prices rather than the supply of more houses. Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle, and those lead times increase the risk that 8 years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash.

US example

“This has been borne out by extensive studies in the US following the global financial crisis. What they’ve found is that, across different markets subject to rules which vary by state, more intense regulation of urban development is associated with higher house price volatility. That is, the steepest price increases & the sharpest falls are in areas where regulation is strongest.

“The effects of planning rules can extend to the macro-economy. Cities are one of the extraordinary inventions of the human race. Studies have shown that cities are an engineroom of growth. Incomes in cities are higher than elsewhere. That is one explanation for high rates of urbanisation. Research indicates that when planning rules prevent workers shifting to higher-productivity locations, then there is a cost in terms of foregone GDP.

“It’s only relatively recently that economists & politicians have understood the scale of those effects. So when we’re talking about something as apparently dry as the Auckland unitary plan, we’re talking about a set of rules that will have a major impact on the city, on current & future residents – but also on the wider economy.

“The second reason we focus on planning & its consequences is that poor planning drives inequality. In my view, poor urban planning is one of the significant drivers of inequality. Poor regulation of housing has the largest proportionate effect on the lowest quartile of housing costs & rents.

“So when we’re having the debate about whether there is sufficient land available, we have to recognise that the people who lose the most from getting that decision wrong – and who stand the most to gain from fixing those decisions – are those on the lowest incomes. Income inequality in New Zealand has been flat for 20 years, but the gap between incomes measured before housing costs & after housing costs is growing.

“Housing costs are becoming a larger proportion of incomes – and that matters the most at the bottom end of incomes among people who have few choices. And there are other measures of the effects on low-income households. 25 years ago, around 30% of new homes coming into the market were priced in the lowest quartile. Another 30% of new homes were priced in the upper quartile. Today, only 5% of new homes are priced in the lowest quartile. Nearly 60% of new homes are priced in the upper quartile.

“The new supply of lower-priced, affordable housing has dried up. There are parts of Auckland where no new houses are entering the market priced at the affordable end of the market. It is not surprising to see prices & rents rising disproportionately at the bottom end given this lack of supply.

‘Public good’ versus ‘favouring insiders’

“Planning is often seen as a public good activity that must address the needs of those who are most vulnerable and have the lowest income. In fact there is a strong argument to say it does exactly the opposite. Poor planning favours ‘insiders’ – homeowners – on high incomes and who have relatively high wealth.

“Developers have told me that in Auckland they need to build a house worth $600,000 to make a development commercially viable. That’s because it is difficult to build cheap housing on expensive land – particularly in view of the planning rules. Those rules include urban limits, minimum lot sizes which prevent subdivision below a certain size, and maximum site coverage rules which prevent a house covering more than a certain proportion of the lot. Working in combination, these rules reduce opportunities to develop affordable homes.

“Now that planners are recognising these consequences, they are now creating even more rules to offset these effects; for example, by requiring some developments to include up to 20% affordable housing. That is implicit recognition that planning rules have driven the costs up so much that another rule is required to offset it.

“The impact of these rules on inequality, and on household incomes, leads to a third reason for why the Government is focused on the housing market. That is the fiscal cost to Government. As households have the proportion of their income spent on housing grow, the political pressure goes on governments to fill the gaps. Today we spend $2 billion each year on accommodation subsidies. 60% of all rentals in New Zealand are subsidised by the Government.

“The state owns around $21 billion worth of houses. One house in every 16 in Auckland is a Housing NZ property. Many of these are 3-bedroom houses on quarter-acre sections only a few kilometres from the cbd – a massive misuse of scarce land. And all at the taxpayer’s expense.

Planning equals welfare-reducing

“So these are the reasons why the Government pays attention to the housing market & issues stemming from poor planning. For those among you who are economists, I would go so far as to say that while the justification for planning is to deal with externalities, what has actually happened is that planning in New Zealand has become the externality. It has become a welfare-reducing activity. And as with other externalities, such as pollution, the Government has a role to intervene, working with councils to manage the externality.

“We’re starting to get analysis that shows planning’s costs. Too often the discussion about how our cities are planned is couched in vague terms of general good. ‘A world-class city.’ ‘Quality urban design.’ ‘A liveable, walkable city.’ Those are all desirable, achievable objectives. But we need to understand the costs of achieving them so we can make the tradeoffs transparent.

“Many of you will be living in inner-city apartments. Recent studies have shown rules setting minimum floorspace requirements & minimum balcony requirements add $50-100,000 to the cost of an apartment. That’s in addition to costs associated with other rules, such as rules setting minimum ceiling heights.

“Some progress has been made. A study examining minimum carparking requirements in Auckland showed the costs of that planning rule exceeded benefits by a factor of at least 6. That’s a rule that should never have been made. It has probably cost the economy millions of dollars. Fortunately, now that we’re digging into these issues, that rule has been mostly scrapped – and credit is due to Auckland Council for doing so.


“Another indicator relates to Auckland’s former metropolitan urban limit, now called the rural:urban boundary. A study found that the value of land just inside the urban boundary was 10 times higher than the value of land just outside it. That huge price difference around an arbitrarily selected line on a map indicates that there are housing opportunities outside that boundary that cannot be taken because of planning restrictions. Consequently, first-homebuyers trying to access the housing market are being prevented by land prices inflated by an urban boundary.

“Some important objectives set by planners simply aren’t being achieved. In Auckland, it can be summed up this way. 15-20 years ago, the city set an objective to grow up, not out. It is easy to understand the logic behind this. Auckland wanted to make greater use of existing infrastructure, and get more people living around transport nodes. This has not happened. Most of the new building in Auckland has been out, not up.

“As we get more information about what actually happens, often we find planning doesn’t achieve what people think it is achieving. Planners & councils have a very difficult job in planning our urban areas. Cities are incredibly complex systems. They are the product of millions of individual choices. The idea that a small group of people could understand what choices we’re making is asking too much of them. Not because they are in any way incapable. But because the task is overwhelming.

Planning often doesn’t achieve what we think

“The Auckland unitary plan is 3000 pages long. It’s trying to regulate everything from the size of bedrooms to biodiversity in the Waitakere Ranges. No one person could possibly understand all the tradeoffs in that plan. Which means many of its effects will certainly be unintended.

“Planners can’t know everything – so of course they can’t be perfect in making tradeoffs on our behalf. Successful planning requires an understanding of its own limitations. One of the things that needs to change is extra accountability & transparency.

“Your prospects of being able to buy a house are directly related to the decisions made by planning officials about the availability of land, the environmental standards they apply to building and the way infrastructure is allocated. It’s very difficult to understand how planners do that, even though the consequences for the community & the economy are significant.

“Central government has had the opportunity to sit alongside councils to understand how they make their decisions. Some of those decisions appear quite arbitrary. They can be driven by the tastes of individuals who have the power to make decisions. Some decisions are contradictory within one planning system. Decisions might not fit together. Urban designers, for example, don’t always see things the same way as a council’s engineers.

Rules on infrastructure

“First-homebuyers will be subject to rules which are not transparent and cannot be known in advance. One of the areas this is most apparent is infrastructure. Like central government, councils have historically made decisions on substantial long-term infrastructure projects with a minimal understanding of costs & benefits, and how the infrastructure will be supported over time. Like central government, councils do not always know a lot about their infrastructure, and therefore they don’t know how to price it. Pricing infrastructure is difficult. The nature of the asset makes it difficult to price. How do you price a stormwater system?

“But that pricing matters. One of the big issues for getting a more flexible supply of land is connecting the financing of the next piece of infrastructure with the value of the land it services. Land is made more valuable when it is serviced by infrastructure. Infrastructure financing may sound a rather dry topic – but it is fundamental to allowing a city to grow. Because if planners believe infrastructure supporting growth is too expensive, they’ll be too reluctant to release land for development – up or out. That’s not a criticism – it’s an observation.

“The funding base for councils is increasingly people on low fixed incomes. That is a product of an ageing population. So you can understand why councils are under pressure not to expand if they think an expanding city is going to push up rates for existing ratepayers. Councils need clear funding models so development worth having can occur and future homeowners & current renters who might want to buy are taken into account.

“So that’s a brief overview of how important it is that housing is regulated in a way that enables flexible supply, and I hope some indication of the progress we’re making. That progress is necessarily slow, because these issues are complex. If we better understand the economics of what is happening we can make better choices about housing regulation. And that depends on one of the most important parts of public policy, which is the institutional arrangements by which those decisions are made.

“That means looking at the incentives confronting an individual sitting in a council when making a decision about whether to allow a new subdivision. We need to understand the incentives councils are reacting to.

“Next month the Productivity Commission will produce a further report on the regulation of land supply. It will be another input into further, ongoing improvements in this area. And we are seeing new thinking on a range of issues affecting housing, including from councils.

“Often politicians are accused of being focused on the short term. That’s one of the reasons this issue has never been dealt with properly in the past. The Government is taking a long-term view. All of the things I’ve talked about today will take 10-15 years to sort out. So it’s important that a broad group of people understand our single biggest asset class – the most important asset most of us will own – how it is valued, how it is regulated and how it can contribute to our general welfare.”

Link: English speechnotes

Attribution: Speechnotes.

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Vote me out of this traffic jam: The Green versus National views

It’s conceivable – though, on the multitude of poll results, improbable – that the Green Party will be part of the new government formed after the 20 September elections, so it’s prudent to pay some attention to the party’s view on the national transport network.

On the other hand, assuming National stays in power, the Green mix will be ignored and the road-dominant programme will continue.

The Greens proposed a big transport programme last week that would swing more money into public transport networks, especially in Auckland, and also into less grand improvements to roading, including highways, around the country.

National’s transport minister, Gerry Brownlee, seized on the Greens’ desire to end big-motorway thinking, saying: “The Green Party owes it to New Zealanders to identify which state highway projects would not proceed under its just-released transport policy. With $11 billion removed from planned state highway projects, it’s hard not to conclude it’s all of them.”

He said 97% of New Zealand’s passenger travel and 91% of freight movement was done on the roads.

And there you have it. One supposes that because the bulk of travel is by road, that’s the way it ought to be. The other supposes that opening up off-road alternatives would ease congestion, enabling better road movement as the alternatives provide cheaper transport.

What you are being given is a political option – the one in charge after 20 September does it their way. What you want is a better system, which may be more of a combination than National is offering both now & for the long-term future, and may be a different mix on closer investigation from that proposed by the Greens.

When Green MP Julie Anne Genter supports a transport proposal it might not just be because she’s green, the idea’s green. It might be because the idea is considered, practical, and would save the country billions of dollars while improving the overall transport network.

But it’s election time, so those in power feel obliged to mock. From another perspective, that mockery is cementing ignorance in place.

The alliance of alternative thinkers which has begun to lead debate on how people travel – the Congestion Free Network, a collaboration between the TransportBlog, Generation Zero and the Campaign for Better Transport – hasn’t just made an ideological proposal. They’ve said the country should apply the best means to the task, and that adding superhighways to fix congestion isn’t it.

They’ve said improving many other road connections would help, but the primary gains would come from increasing the off-road network. That includes providing off-road corridors for buses, and expanding the rail network in Auckland.

The minister’s response was that 97% of all passenger travel in the country is by road – and therefore road is best, not that that proportion might be better reduced.

Mr Brownlee said major roadworks around Auckland had reduced congestion, and completion of the western ring route would reduce it even more. Recent works, such as taking traffic off the Victoria Park viaduct by building the northbound tunnel, have given temporary respite, but congestion quickly resumed growing.

The Auckland peak traffic periods are longer than they’ve ever been because workers know they can’t make the job without leaving home in the dark, and the return is just as slow because all along the way there are exit bottlenecks.

What the transport network needs is considered – and transparent – evaluation, not ideological slagging.

As for ideology, you would have to wonder why travel needs to be ideologically based at all, but it is. Using the private car to drive to work equates to personal freedom. Providing mass transport that is comfortable & provides amenity (such as WiFi) could be even more personally uplifting, especially if it gets you to your destination more quickly & less harassed.

The Greens’ proposal, announced last Tuesday by party co-leader Russel Norman & Ms Genter, had 7 targets for Auckland to be completed by 2020:

  • Complete the city rail link, cutting train travel times by up to 28 minutes/trip
  • Build a rail extension to Mt Roskill (with further rail extensions to the airport by 2025 and the North Shore planned by 2030)
  • Electrify the rail network from Papakura to Pukekohe
  • Build a new bus lane on State Highway 16 (north-west)
  • Extend the Northern Busway to Albany & Newmarket
  • Establish a new high quality bus service across the upper harbour
  • Extend the Ameti (Auckland-Manukau, eastern) Busway into Ellerslie & Manukau.

The plan includes a $1.3 billion capital investment in the city rail link (60% of the cost) and $825 million into dedicated busways & city bus centre improvements. The party will follow up with plans for Wellington & Christchurch to be announced.

The Greens have taken their policy from the very independently minded participants in the Congestion Free Network, which they’ve proposed as a blueprint laying out an integrated public transport network in Auckland, staged at 5-yearly intervals through to 2030.

The network group said: “The current council’s $34 billion transport wishlist will not reduce congestion – even under its own analysis. However, the $10 billion congestion-free network will provide real choice. It’s better for people and cheaper to build.”

First, they asked: What makes a congestion-free network? The answers:

  1. It has high frequency of 5-10 minutes, no timetable required
  2. Physically separated from congestion, so it’s fast, like electric trains or the Northern Busway
  3. Works as a complete network, so it’s easy to transfer, like the London tube.

They added: “Quality public transport across Auckland will reduce traffic for when you need to use the road and provide relief from high fuel prices. It’s a real vision for a more liveable, low-carbon Auckland.

“Auckland’s current plan is contained in the integrated transport programme. This is both expensive & ineffectual – a road-heavy ‘build everything’ transport scheme that is currently unfunded.

“The Congestion Free Network will not only lead to a higher quality & better functioning city, but is also more affordable than the ineffective integrated transport programme. Investing in the ‘missing’ public transport network before further expansion of the road network will almost certainly turn out to be much cheaper & more efficient for Auckland, as well as being more in sync with the times.

“We think that many of the most expensive roading projects will prove to be unnecessary once Auckland has this powerful additional network in place. Our plan will also greatly improve Auckland’s performance in other harder-to-calculate but vital areas such as air quality, carbon emissions, oil dependency, urban form & public health outcomes.”

The Brownlee perspective

Mr Brownlee professed the Government’s support for public transport, said the Greens’ policy would take the country back decades, but lent on market choice to dictate the way forward. Market choice will not see anybody preferring a leap of faith into uncertainty; the status quo will prevail so long as that’s all that is realistically offered.

The minister said last week: “The National Government supports public transport and has provided $2.4 billion over the past 5 years. With the local government contribution, that is $3.5 billion spent on public transport, including commuter rail investment in Auckland & Wellington.

“The Green Party needs to explain which of the following roading projects it would axe first, or if it’s all of them. The Greens also propose to cut local road spending by over half a billion dollars, putting pressure on our communities and compromising safety.

“Since being elected in 2008, the National Government has been rectifying a 30-year deficit in road transport infrastructure. The Green Party proposal would put us back by decades.

“The National Government has a balanced land transport policy which gives commuters choice in the modes they use to travel and helps businesses to choose the most efficient way of getting their goods to domestic & international markets.”

Genter says let regions decide after proper assessment

Ms Genter said transport was the life-blood of the regions, and charged: “They have been starved under National. Over the next 10 years, we plan to increase regional transport funding by $423 million and we will invest $3 billion on state highways that will hugely improve safety.

“The bulk of National’s transport budget has gone on motorways as it pursues its obsession with roads of national significance, while regional transport needs have been ignored.

“Under the Green Party plan, regions will be able to bid for projects that best serve their transport needs, whether road, rail or a port project. That contrasts with National, which has indulged in naked pork-barrel politics. It announced 14 regional projects in June, paid for by the sale of state assets, which were selected on the basis of National’s political needs rather than any objective assessment of requirements.

“We will not direct the funding for the regions, as National has done. Regions will be able to bid to fund projects and they will go through Treasury for a rational assessment of the transport priorities & proper cost:benefit analysis – something completely lacking with National’s roads of national significance programme.”

Links: Green Party’s transport policy
Draft Government policy statement on land transport 2015/16-2024/25
Congestion Free Network
Transport Blog
Generation Zero
Campaign for Better Transport

Attribution: Party releases, Congestion Free Network website.

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Housing’s future – a look at the generations

As a property seller & commentator, Queensland’s Michael Matusik knows his boundaries. He also happens to look at things sideways a lot, so I keep an eye on his missives.

He writes most of his Matusik missives & outlook reports himself, with occasional help from guest writers: “We spend a lot of time thinking through the constraints of an issue rather than accepting what has already been reported about a certain property-related topic. We like to keep our sample to residential markets we know very well. That’s why we focus largely on Queensland real estate.”

That said, plenty of his topics are relevant in other markets, including ours. On Monday he tackled housing’s future. He thinks the generational segments such as baby boomers & gen X are too broad, and has broken age groups into 7 categories for his look at market changes. Worth a look, and the link’s below.

Fine as far as it goes, but I think even this outlook is a relatively short-term view. There is talk both in Australia & here of the 85-plus age group growing enormously as people live longer, and growing as a percentage of the total population because there are fewer children.

Retirement village developers & operators are building as fast as they can, but the absence of any other thought about what this means and how society should prepare to adapt is alarming. A society with a forever-reducing working population is likely to find, in due course, that the workers change the rules drastically: End the benevolence favouring old people, for example.

A society with too few children to maintain the population is a shrinking society. I’ve written a few times about the organisation Shrinking cities – was scorned several years ago when I suggested it could happen here. What would it mean if New Zealand’s overall population started to shrink, or if the working population or number of children shrank drastically?

Who would maintain, let alone pay for, roads? It’s conceivable that suburbs might shrink. Services such as sewers & water would cost more/household. In a changing society, would we need so many shops, offices, houses, schools, sportsfields? Would our housing be the right kind in the right place?

Alternatively, we would maintain our population by importing people. As Maori found, imports sometimes take control. We’ve been importing a large number of Chinese, and recently a rising number of Indians, fewer British. Do these new, potentially dominant, ethnic groups want the same things as those of the past?

Link: Michael Matusik, Housing’s future
Shrinking cities

Attribution: Matusik outlook, council committee meeting.

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UK inquiry into local-body financing reports on 27 March

Published 19 March 2007

The Lyons inquiry into the financing of local government in the UK releases its final report at a London conference on Tuesday 27 March.

Even without the final report in hand, the work put in over a long period to examining the hows & whys of government financing demonstrates the inadequacy of the Auckland approach to regional governance:

We, the politicians, don’t like what we’ve got
We’ll change it
We’ll change it quickly, so a new system’s in place before the next election
We, the politicians, will look at aspects of this exercise over several months, then give the public a few weeks to make submissions
We won’t stand back and look at public-sector financing in a wider context, and
We won’t look at public-sector financing & service from the consumer’s perspective.

One of the papers contributing to the Lyons study is International comparisons of local government finance: Propositions & analysis, a 17-page summary & discussion by Tony Travers, director of the greater London group at the London School of Economics & Political Science.

In the Travers paper, proposition 1 reads: “Overseas experience of local government finance systems provides a wide range of constitutional arrangements, options for tax systems, equalisation arrangements, grant types, charging regimes & capital control mechanisms. Each appears to have evolved over a long period to fit the needs of a particular country.”

For each proposition, there are a discussion and some conclusions.

The UK Government commissioned Sir Michael Lyons in July 2004 “to undertake an independent inquiry to consider the case for changes to the present system of local government funding in England and make recommendations, including on the reform of council tax. On 20 September 2005 the Government announced an extension to the inquiry’s terms of reference to cover questions relating to the function of local government and its future role as well as how it is funded.”

Sir Michael issued an interim report & consultation paper in December 2005. A year later came another short extension: On 11 December 2006, Sir Michael published a discussion document on the implications for local government of 3 other major reviews – Eddington on transport, Barker on planning, Leitch on skills.

At the 27 March conference, after conclusions, recommendations & report context sessions will come the session that might well be of greatest interest the Auckland context: Place-shaping & local choice.

Sir Michael has been arguing for greater local choice and that local government should be given greater freedom to “place-shape” – “where local government takes responsibility for the wellbeing of an area and the people who live there, promoting their interests & their future.”

The documents make it clear the styles of local government around the world vary widely, and there are distinct differences between local government in the UK & New Zealand. In many cases, a good idea in one country can’t simply be transplanted to another because it doesn’t fit the overall receiving context. But that hasn’t put Sir Michael off. He’s worked on options & adaptations.

Websites: Lyons Inquiry

Eddington Transport Study

Barker Review of Land-use Planning

Leitch Review of Skills


Want to comment? Click on The new BD Central Forum or email [email protected].


Attribution: Company statement, story written by Bob Dey for this website.

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Progressive thought: Now would that be lying on the North-western Motorway, or perhaps the Southdown branch line?

Published 23 May 2006

The Institute for Public Policy Research describes itself as “the UK’s leading progressive think tank” and it’s certainly leading where we are most unlikely to go: “Through our well researched & clearly argued policy analysis, reports & publications, our strong networks in government, academia & the corporate & voluntary sectors and our high media profile, we play a vital role in maintaining the momentum of progressive thought.”

In New Zealand, beyond a smattering of opinion opposite the editorial in daily newspapers, we have the strongly formed habit of not venturing into serious discussion about:

the environment we live in
what sort of environment we might live in if we treated or remodelled it better or worse, or
how we go about living in the environment we have.

Or, for that matter, who should live in it:

Should we have more or fewer of us?
Should we invite more migrants and where should we invite them from?
And why?

I wrote about the Institute for Public Policy Research in January when it issued a report criticising housing in the Thames Gateway area east of London. The related Centre for Cities research unit subsequently issued a report on city leadership – exploring the links between city governance, leadership & economic performance.

Centre for Cities suggested Greater Birmingham & Greater Manchester should have elected mayors that control spending on transport, regeneration, skills and the power to raise business tax.

The research unit also suggested other large city-regions such as Liverpool could follow Manchester & Birmingham’s lead. “Smaller cities & towns should gain greater financial flexibility through economic development contracts, which would devolve decision-making, limit central oversight & promote regeneration,” it said.

No guarantee on the outcomes, but the titles of many of the institute’s forthcoming reports & events are thought-provoking in themselves:

The institute began an economics & business exchange quarterly forums last September and the fourth of these forums, on 13 June, will be on tax policy.

“The exchange addresses issues of economic & business policy in the context of the institute’s broad objectives of furthering prosperity, social justice, environmental sustainability, progressive internationalism & democratic renewal. The forum focuses on the most important policy debates in business & economic policy, in particular debates where there is currently controversy & disagreement.

“This quarterly forum involves senior business economists, leading academics & key Government officials discussing topical economic & business policy issues.”

The first forum was on the UK Labour Government’s economic record & relationship to business, the second on regional economic productivity within the UK and on incentivising innovation, the third on European issues.

The institute’s next major report, City markets – business location in deprived areas, will be launched on Wednesday 21 June in London with Professor Michael Porter of Harvard Business School (Remember? He came here one day, long ago).

This report looks at the influences on business location & investment decisions in UK inner-city areas, focusing on firms located in enterprise areas within Derby, Doncaster & Sunderland. It analyses the business-investment model in the UK and proposes changes to the current policy toolkit to increase its effectiveness.

Pending publications:

Housing wealth: First timers to old timers, out on 29 May; the book presents policy solutions on young people’s dependence on their parents’ wealth to get a start in home ownership, and on retired homeowners’ struggle to cope with low incomes.

A new rural agenda: This book, out on 8 June, explores the key policy issues facing rural areas, addressing important issues in areas such as housing, social exclusion, rural politics, governance, economic development & public services and putting forward carefully developed policy proposals for each.

Sustainable communities & the growth areas: Who are we building these houses for? This book, out on 31 July, “analyses whom we are building the new housing in the growth areas for and whether or not the growth areas will be socially or economically sustainable. It brings together lessons from past mass housing developments, seeking to gain a better understanding of the needs & interests of those people who might live in the new developments.”

Rethinking Whitehall, by Guy Lodge, out in late July, “builds on over 60 interviews with senior civil servants, ex-civil servants, ministers & academics. Rethinking Whitehall makes the case for a fundamental rethink of the way Whitehall is governed. In particular, it argues that the central governing doctrine of ministerial responsibility – which holds that ministers and ministers alone are accountable for everything that happens in their departments – is no longer relevant. It sets out a blueprint for achieving a more accountable and better performing civil service.”Websites: Institute for Public Policy Research

Centre for Cities


Related story: UK policy institute recommends city-region mayors with tax-raising power


Want to comment? Click on The new BD Central Forum or email [email protected].


Attribution: IPPR release, websites, story written by Bob Dey for this website.

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UK policy institute recommends city-region mayors with tax-raising power

Published 23 May 2006

I wrote about the Institute for Public Policy Research in January when it issued a report criticising housing in the Thames Gateway area east of London. The related Centre for Cities research unit subsequently issued a report on city leadership – exploring the links between city governance, leadership & economic performance.


In that report, City leadership: Giving city-regions the power to grow, by Adam Marshall & Dermot Finch and launched in February, Centre for Cities suggested Greater Birmingham & Greater Manchester should have elected mayors that control spending on transport, regeneration, skills and the power to raise business tax.


The research unit also suggested other large city-regions such as Liverpool could follow Manchester & Birmingham’s lead. “Smaller cities & towns should gain greater financial flexibility through economic development contracts, which would devolve decision-making, limit central oversight & promote regeneration,” it said.


It argued for around £1.2 billion/year to be devolved from regional development agencies, transport boards and then the Learning & Skills Council. It suggested this could be topped up by a 5% levy on business rates, but that local government must first build a consensus with business over public spending priorities.


“International evidence from Bilbao in Spain to Portland in the US shows that mayors, with tax-raising & spending powers, can significantly improve economic performance & political accountability.”


Centre for Cities director Dermot Finch said: “Our biggest city-regions need more power. Greater Birmingham & Greater Manchester are big enough to control their own economic development. This is the best way for them to increase jobs, improve transport & drive economic growth. Unelected regional quangos are too big & undemocratic but local authorities are too small. Directly elected mayors will be controversial but they provide clear leadership & a visible line of accountability, as Ken Livingstone has shown in London.”


Centre for Cities said an economic development contract should be created to enable Liverpool to set its own regeneration spending priorities. The contract could replace the complex mix of 30 different funding agencies that currently control about £300 million of regeneration spending in the city. This contract would establish a single fund, managed by the city council, to spend on key regeneration priorities.


The report argued that increased financial freedom could help the city council to raise more money for development from private as well as public sources. This would also help drive forward regeneration in the strategic investment areas outside the city centre.


Website: Institute for Public Policy Research

Centre for Cities


Related story: Progressive thought: Now would that be lying on the North-western Motorway, or perhaps the Southdown branch line?


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Attribution: IPPR release, websites, story written by Bob Dey for this website.

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