Submission to 2014 Wolfson Essay Prize

Peter Fennell

Non-technical summary

Section 1: a new economic model

The great new town pitfall is to attempt in architecture what should be done in economics. Elevated walkways, fountains and parks can do little to eliminate hardship and inequality. Better economics can. But how can a city challenge systems set at a national level?

This submission set outs:

• What the new economic model should be
• How it will work within the existing national system
• How it can deliver a new town relieving pressure in existing urban hubs
• How it could be applied more widely to ease that pressure at source

 

Illustration: an outstanding school

Parents all know that a house in the catchment of an outstanding school commands a premium. Estate Agents do too but few of us reflect that:

• The uplift can total £40m over the school’s catchment
• This is added value created by the efforts of teachers
• For the teachers a consequence of their achievement is that they cannot afford to live where they work

Outstanding education is the product of teaching, not buildings however grand, or settings however green. On the other hand if part of the land value uplift could be returned to the schools that create it, then they can fund their own buildings and parks. Some would instead choose to employ more specialist teachers in sports, music or languages for instance; or pass back part of the value in higher wages to the teachers who created it. Probably they would do all three.

This illustrates the potential for a new economic model to make:

• Public services and infrastructure self-funding
• Effort reap more of its just reward in higher wages
• Additional employment – not through outside investment but self-generated locally in things we all want to see happen but which do not seem economically viable at present.

A liberally endowed new school will be the first element of the urban plan, supported by the economic model that forms the central proposition of this submission. Employment and schools are the prime reasons people relocate.

The finished city will have several schools, but other public services like a new railway station or light urban transit system create similar added value effects. The new economic model will apply across the city’s public services and will also reduce the tax burden on employers, to drive higher wages without higher payroll costs, create more employment and enable people to get things done.

 

Section 2: landmark projects for a visionary urban plan

The world’s most loved cities flower at the height of their economic liberalism. They define themselves in our memories by iconic landmark features. However cleverly clad, a shopping centre as the town focus fails to do this. It should be a religious, cultural or civic masterpiece, preferably seen across water, like San Marco on the Grand Canal, the Palace of Westminster over the Thames or the Opera House jutting into Sydney Harbour.

The church

The world’s first ‘cathedral in glass’ will be a spectacular icon attracting international renown. Far from the empty mirror plate of the modern high rise it will be a contemporary gothic structure of arches and spires in luminescent white ‘sand’ cast glass on an arcade base of local masonry.

New towns have this spiritual challenge to cultivate depth without history and a church can draw committed communities that give more than they take. 6% attend services but 25% of us visit cathedrals each year for their architecture or choral music. The school can provide the choristers.

This church leads the way. The town will open its doors to committed communities of all sorts and the economic model will make generous provision for any group wishing to found new community or religious buildings.

The canal

The glass church will shimmer over a created lake. The canal will provide for the town’s water needs, a space for poetry, rowing, sailing, cycling, all sorts of recreational and ecological benefits and transportation of the cast glass blocks. Level changes are opportunities for hydro-electric generation and mains services benefit from water-cooling. Subject to location, the canal can offer solutions to flooding for a wider hinterland, or help launch the ambitious North-South Grid proposed (by others) to relieve water stress in the Southeast.

The pods

A light urban transit system with electric pods quietly zipping around on slender elevated guideways provides a low energy transport system: personal like a taxi, less expensive than buses and producing zero emissions locally. It may sound like science fiction but is proven technology piloted at Heathrow and achieving the highest availability of all transport there. It will be a city of bridges in the air

Section 3: principles for the urban plan

Planning policies supplement the economic model to promote local employment, craftsmanship and diversity. Design will be constrained neither by modernist manufactured aesthetics nor nostalgic historicism. Visual unity will be established through a strictly limited palette of materials: local masonry (brick or stone), glass and a local roofing material.

Sections 4/5: location, delivery, popularity and viability

Selection principles define what makes an appropriate location and they are applied to a provisional location for illustration purposes. The actual location is to be selected by inviting communities to bid for the town. The economic model supports a governance model that will invigorate local democracy, conveying real choice and the benefits of growth in perpetuity to local people. The economic and governance models offer solutions to a community with a problem: whether that is flood risk, water stress or rapacious developers. This proposal combines those promises with iconic projects that will inspire some active groups, to present a package that would win a local referendum.

Delivery outlines 5 stages from village to embryonic town to city of 21,500 population on 450 hectares. Each stage is a finished self contained whole.

A first draft of the numbers demonstrates economic viability.

How would you deliver a new Garden City which is visionary, economically viable, and popular?

Main submission

Section 1: a new economic model

Section 2: landmark projects for a visionary urban plan

Section 3: principles for the urban plan

Section 4: location

Section 5: delivery, popularity and viability

 

Section 1: a new economic model

The great new town pitfall is to attempt in architecture what should be done in economics. Fountains and parks cheer us up but can do little to reverse the causes of hardship and inequality. The brief invites a more comprehensive response and the central vision of this proposal is a new economic model to do that.

The school example in the non-technical summary illustrates the potential for a new economic model to make:

• Public services and infrastructure self-funding
• Effort reap more of its just reward in higher wages
• Additional employment – not through outside investment but self-generated locally in things we all want to see happen but which do not seem economically viable at present.

Two components of the model

“The tax and benefit system should have a coherent structure based on clearly defined economic principles … in which unnecessary distortions have been eliminated”. Mirrlees

The leading assessment of our national economic system identifies distortionary forces throughout the tax system that stifle productive enterprise and employment. The challenge taken on here for the new Garden City is to identify a better way to fund its public services that meets that test: coherent and based on clearly defined principles. But to do that in a way that is feasible at city level within the existing national system. The new economic model described applies a two-pronged approach to meet that challenge.

Firstly it proposes a public services funding basis founded on the principle of land value capture applied on an ongoing basis to replace existing local forms of taxation.

Secondly it applies the surplus from that model to offset the worst distortionary effects of national taxation establishing the city as a new form of enterprise zone.

Two components of a new economic model at city level:

• A new funding basis for public services
• Enterprise Zone tax offsetting

1.1 A new funding basis for public services

Funding through land value capture is anticipated in the brief. The real opportunity though is to establish that funding principle as a durable and ongoing source of public revenue.

The school example in the non-technical summary illustrates how that value is created not once only as a windfall of planning consent but on an ongoing basis through the public benefits conveyed by teachers and other service provisions.

This section describes:

• Three methods of land value capture on an ongoing basis
• A case study: Hong Kong
• How the leasehold method will operate
• Benefits of the new funding basis

It would be a lost opportunity to build a city but let it go the way of those we already have, with hardship and inequality rising in proportion as the city grows.

Annual land value capture: 3 methods

The appropriate method depends on characteristics of land use, ownership and governance. Three approaches:

1. In traditional economies land is held by a chief on behalf of the community and allocated on a use or need basis.
2. ‘Land Value Tax’ is a market variant for developed and monetarised economies where land is registered in private freehold possession. LVT is practised to some extent in Denmark, Estonia, New Zealand, Taiwan, Australia and the US. Critics cite valuation difficulties but VOA Surveyors here valuing land and buildings regard the land only valuation as straight-forward. LVT is the method for which the most data is available, notably in Andy Wightman’s report A Land Value Tax for England, but we show how the data can be applied to an alternative method.

Mirrlees states: “The economic case for taxing land itself is very strong and there is a long history of arguments in favour of it. Taxing land ownership is equivalent to taxing an economic rent – to do so does not discourage any desirable activity. Land is not a produced input; its supply is fixed and cannot be affected by the introduction of a tax.” Ch 16 conclusions quoted by Andy Wightman.

Proposals for land value taxation have not fared well in England, diverted by ‘Garden tax’ headlines or concerns for ‘the widow in the 4-bed house’, that is, older people who are asset-rich but income-poor. Worked up LVT proposals have tended to set an unambitious target to replace NNDR and CT and therefore proposed a low rate – Andy Wightman proposes 1.85% of annual rental value. That is because they are trying to minimise stress on the key political measure of residential winners and losers.

3. In special circumstance where land is assembled but not released as freehold then a leasehold approach can deliver similar results. Instead of collecting the economic rent through taxation it is collected more directly by auctioning leases and collecting an annual ground rent.

 

Case study: Hong Kong

“Hong Kong consistently appears at the top of league tables measuring adherence to free market principles … has the 7^th largest sovereign wealth fund in the world £200bn … the more remarkable as it does not derive from natural resources … GDP per capita is similar to UK but unemployment half and 10-year growth double” Andrew Purves

All land is held by the state, most granted on 75 year leases or rented at 3% of annual lease valuation from which revenue in 12/13 was £600m. Perpetual leasehold (Nissim) auctions for new leases raised £5.3bn in 12/13 into a separate Capital Works Reserve Fund off balance sheet. Development rights around and over MTR (Mass Transit Railway / underground) stations are granted to MTR and fund its works off balance sheet.

Government spending appears to be lower in HK but many services funded directly from rent of land held by utility companies and therefore off balance sheet. Wages appear much lower 1/3^rd but Income Tax is zero for most families, there is no NIC, VAT, Council Tax or Excise so real wages are more like 2/3rds.

The people have comprehensive social security provision including hospital care, old age, disability, unemployed, single parents, education from 3-15 etc. Including for a massive influx of impoverished immigrants from China from 1953. 31% live in public rental housing. HK Housing Authority is also off balance sheet with $29bn of land.

The system has been allowed to deteriorate with ground rents becoming low and initial leasehold purchases very expensive – in other words moving toward freehold. However it illustrates that the leasehold model can work as a secure revenue model for funding public expenditure and infrastructure in a fully developed trading economy.

How the leasehold method will operate

Land acquired for the city will be vested in a Community Land Trust held on behalf of residents in perpetuity and made available on a leasehold basis, an approach consistent with Howard’s original ideals.

Lease values are established by the market in the usual way, at the best permitted planning use, but separated into two parts:

• Unimproved land value lease purchase and annual ground rent paid to the Trust in perpetuity.
• Capital improvements value, including the building, paid to the person who created it or his successors in title in the usual way.

Leases are auctioned to developers or to individuals for self-build and capital improvements (buildings etc) owned and marketed by the developer. Costs to households and firms do not change, only the economic rent of land is redirected into different hands.

Terms and reviews

Leases are for 99 years reviewed annually so that uplifts, whether from growth or improving infrastructure, are collected by the Trust. Letchworth’s experience was that 99yr leases with no reviews were more popular than 999yr leases with reviewed 5-yearly, indicating a preference for certainty. Accordingly a secondary market will be encouraged to provide fixed rate options as in the mortgage market. Lease reviews are not upward only.

Built-in compensation

Households suffering negative effects of development, such as loss of a nice view or noise from a new train link will see a reduced valuation and reduced ground rent providing ‘built-in compensation’. Likewise an economic downturn might see a general reduction in values that would act like a tax rebate.

Effect on normal revenue streams: Council Tax

Council Tax is highly regressive since it was never revalued after 1993. Valuation of the building also discriminates against improvements while unimproved properties are relatively under-taxed. Occupation criteria encourage under-utilisation. Low rate at 0.3-1% (of annual rental value) compared to 46% for business rates distorts the market in favour of conversion to residential uses.
Council Tax rate will be set to zero and the revenue to the LA supplemented from leasehold income.

 

National Non-Domestic Rates

LA entitlement to its formula calculated quantum of NNDR is unaffected but the valuation will be rebased on land only, on a revenue neutral basis.

Businesses complain that NNDR is regressive with marginal areas being relatively overcharged. The rebase fixes that distortion. NNDR is not replaced because 1. Commercial land values would rise causing difficulties of comparison with other places and 2. Not being a top value location the town benefits from redistribution of NNDR as currently organised.

Valuation, collection and enforcement mechanisms remain in place and will be extended to the valuation and collection of lease ground rents.

Letchworth

Letchworth is still owned collectively holding most of the commercial buildings in trust and leasing them to shopkeepers. Assets are £127m and leasehold income £7m a year. That is a significant 11% boost on top of normal local authority revenue, but it collects little of the economic rent of residential properties whose value far exceeds the shops.
In Letchworth it would be much higher. Local government expenditure is 102.2bn (budget England 2013-14) = £1900 per capita (England’s population 53m). Pro rata for Letchworth’s 33,000 population = 62.7m. (9x)

Affordable homes

Cost to households will be less than they would pay in rent or mortgage payments plus CT as it will not include a speculative element on the land value or interest payments to mortgage suppliers on the land element. A mortgage may be taken out to acquire the building which would be like a shared equity mortgage with the capital requirement up front lower as the is not acquired. This will make houses in the town generally relatively ‘affordable’. A proportion, up to 35%, may be retained by the Trust and managed by a Housing Association to supply a social rental market.

Enabling Act provisions

See Governance in Section 4

Benefits of the new funding basis

In ‘Taken for a ride’ Don Riley estimates that the £3.5bn Jubilee Line Extension completed in London in 2000 generated £13bn of uplift in the value of commercial land around the stations

Value uplift was 4x infrastructure construction cost but Riley measured only commercial land and only within 0.5 miles of stations. Ultimate value uplift would be far greater.

Location value is the product of local amenities including transport infrastructure, good schools, parks, cleanliness, street-lighting, parking, policing etc together with private ‘positive externalities’ such as good shops, cafes etc.

On this new funding basis uplifts resulting from improvements in public infrastructure are collected on lease revaluation.

Well conceived infrastructure is self funding.

Predicted uplift forms the business case for infrastructure proposals and a basis for comparing alternative proposals.

Future uplift provides ample collateral reducing cost of credit through normal channels if required to fund investment.

Removes the option of costless freehold that benefits bigger, older established businesses and enables them to outcompete smaller newer businesses, improving the prospects for new start-up enterprise.

Holding land is no longer costless. That improves land use efficiency, discourages land banking, increases supply and market liquidity and therefore can lower domestic and commercial rents

Lower rents will attract firms and reduce barriers to entry for new start-ups, artists and artisans

Surplus leasehold income is available to create a new form of Enterprise Zone tax credit.

Substantially removes the rewards of land speculation and ‘rent-seeking’.

Stabilises the property market. Ends or tempers the cycle of boom-bust and related credit liberalisations and contractions.

Redirects credit and investment from bidding up the price of extant assets, especially land, to providing credit for productive enterprise.

Change the banking sector’s fixation on land as collateral so that business plans and the integrity of their proposers would be the measure of credit worthiness.

1.2 Enterprise Zone tax offsetting

Tax reliefs are a standard feature of enterprise Zones and Development Corporation charters but always appear to be an arbitrary time limited subsidy in ‘special conditions’, establishing no improved understanding of what a pro-growth policy for normal conditions would look like.

A new public services funding basis was the first component of the economic model. It removes distortionary effects of local taxes but cannot alter national taxes. The second component is a method to ameliorate effects of national taxation starting with the most problematic: taxes on employment.

This section describes:

• Income Tax Credits: a local rebate on income taxes
• A review of other Enterprise Zone models
• A brief survey of other taxes
• Benefits of the credit: reducing payroll cost without reducing wages

The objective is to create an enhanced form of pro-growth Enterprise Zone that will deliver a broad-based flourishing of new local enterprise, creating new employment, new local services and demand.
And to fully set out the principles underpinning it and the benefits.

Income Tax Credits

The Trust will apply lease revenue after infrastructure costs to provide tax credits to firms, directly offsetting national taxation in priority order with the most destructive, distortionary taxes offset first. In offsetting a tax a full explanation will be given of the principles.

The first achievement will be a substantial offsetting of Income Tax to be claimable by firms as a credit against PAYE (IT and NIC) and ENIC they pay out. It will be up to the firm whether the rebate is invested in new capital, expanding employment or passed on to employees in higher wages to attract or retain the best staff. Or all three.

This is a genuine ‘tax credit’ unlike those that currently bear that name that are welfare payment to families unrelated to net tax contribution.

A fourth possibility is that firms retain the credit as profit. In this case super-profits will attract other businesses into the area willing to compete down prices and this will also deliver more employment locally and benefit local people as lower prices and cost of living savings.

Self employed will have a fiscal incentive to allocate themselves a wage rather than accounting all surplus as ‘profit’ for tax purposes. There may still be distortions between PAYE and SE (to be considered further) but less than currently.

A review of other enterprise zone models

Existing regeneration schemes recognise the critical relationship between location value and enterprise. Two are reviewed briefly here: BIDs and EZs.

Business Improvement Districts (BIDs) use the NNDR mechanism to draw 1-2% extra contribution from existing businesses to supplement public services.

Enterprise Zones (EZs) use the same mechanism to deliver a subsidy to attract new businesses. At first glance, these appear contradictory. They make sense when it is understood that rateable value is the only available proxy for location value, but a very imperfect one. In moderately prosperous business locations the only form of additional taxation that firms consider fair is one approximated to an LVT basis, hence the success of the BIDs model. (It also has well designed governance and introductory mechanisms that are drawn on for the bid proposals under Governance in Section 4)

The regressive aspect of NNDR is the extent to which it fails to approximate to LVT across regions. It is worst in the most marginal regions where industrial employment has collapsed and land values are accordingly low or zero. Here including building value into rateable value ensures that these areas are regressively overtaxed driving out any remnants of enterprise. These are the zones winning special measures and the rebate recognises what LVT predicts – that taxing enterprise in marginal locations will eradicate it.

Both schemes are unsatisfactory to the extent they lack a coherent fiscal philosophy and do not address the wider problems of taxes on employment.

Other distortionary taxes

Transaction-triggered tax are avoided by avoiding the transaction so tend to stifle growth. Stamp duty: increases cost of trading up or down as needs dictate, decreases market liquidity. Inheritance tax: creates incentives for complex trusts and vehicles and hits estates hard if deaths occur in succession. CIL: discourages development. VAT, Excise etc: Raise prices so reduce demand and reduce real wages or increase payroll costs, complicate trade, impose admin burdens on firms, can be avoided and off-shored leading to vast extent of evasion. Costly to collect and enforce.
Benefits of lower costs of employing people
Secondary benefits arise from reducing what is called the ‘Dead Loss Effect of taxation’ whereby activities and sites that would have been economically viable before taxation are uneconomic after.

Calculations in Section 4 do not take secondary effects into account but the additional growth arising would further enhance the model. ‘Wage restraint’, reducing real wages, undermines consumer demand and has a negative effect on growth. But reducing payroll costs without reducing wages:

– increases international competitiveness returning some production onshore.

– improves the viability of repairing things employing local labour relative to replacing with new from abroad produced with cheaper labour.

– reduces cost of labour relative to materials increasing recycling, reusing and repairing, reducing waste

– improves the built environment as maintenance and craftsmanship are viable

– improves the viability of skilled workmanship providing more creative, rewarding employment to many

– returns labour intensive industries to viability. Possibly steel, ship-building etc.

– improves the outlook for labour intensive agriculture in place of the industrialised version, could reduce mono-cropping, improve biodiversity, decrease chemical use and inhumane treatment of animals.

– return labour to agriculture and rural employments reversing the flow of population from countryside to cities. Therefore return rural shops and pubs to viability and improve return on investment outside cities, such as extending broadband.

– return labour to marginal locations including reverse the flow of economic migration from other regions to the Southeast.

– reduce requirement for state funded regeneration grants and interregional transfers.

– restore the option for young people to live and work in the communities where they grew up, reducing dislocation, restoring access to extended family and local support networks, strengthening families. This could reduce demands for state funding of childcare and care of the elderly.

 

Section 2: landmark projects

The architectural qualities of the world’s most loved cities have always come at the height of their economic liberalism so high expectations are vested in the radical economic model. In due course that will generate dynamism and civic ambition but in the meantime three landmark projects are outlined to put the town on the map and sew the seeds of a civic pride.

Great cities always have some iconic image that imprints them in our memory. Sydney is a classic example with the image of the Opera House jutting into Harbour against the backdrop of the Harbour Bridge. Three elements: a cultural or spiritual icon, a body of water and a landmark engineering structure.

The church

New towns have this spiritual challenge to cultivate depth without history. Churches create committed communities that give more than they take. 6% attend services but 25% visit cathedrals each year for their architecture or choral music. The school can provide choristers.

Descriptions of Britain’s favourite towns frequently mention views of a striking ecclesiastical building visible from several vantage points and a church adds value in its locale even for those who do not attend it.

The world’s first ‘cathedral in glass’ will be spectacular icon attracting international renown. Far from the empty mirror plate of the modern high rise it will be a contemporary gothic structure of arches and spires in luminescent white ‘sand’ cast glass on an arcade base in local masonry. Panels, and vault webs are in opal laminated float glass with arched windows and rose window in clear glass with geometric ribs in laminated glass.

Glass is surprisingly strongest in compression so well suited to gothic construction techniques. Cast glass can take a long time to cool but Nazeing Glass have a slow-moving conveyor based furnace facilitating rolling production. The cast slabs forming columns and ribs will be in thin slices of 60mm to reduce cooling times. The Atocha Station Memorial in Madrid proves that it is feasible.

This church leads the way. The town will open its doors to committed communities of all sorts and the leasehold model automatically helps: planning uses that generate low rental value like schools and religious buildings will be virtually exempt. Planning policies will favour such uses benefitting any group wishing to found new community or religious buildings.

 

The canal

The most admired towns invariably feature rivers or water in some form at their heart and some of the world’s most beautiful cities are canal towns: Venice obviously but also St Petersburg, Stockholm and less well known: Annecy in France and Tigre in Argentina. With an area of 430ha and population of 20,000 Bruges is an inspirational reference.

The glass church will shimmer over a created lake. The canal will provide for the town’s water needs, a poetic settings for landmark buildings, rowing, sailing, cycling, other recreational and ecological benefits and transportation of cast glass blocks for the church. Level changes are opportunities for hydro-electric generation and mains services benefit from water-cooling.

Subject to location the canal offers solutions to flooding as at York and Exeter and in the Netherlands or to relieve water stress (shortage) as in parts of the Southeast and East Anglia. In the right location it could help launch the ambitious North-South Grid Canal on to relieve water stress in the Southeast. (featured by Bloomberg Feb 20^th )

Paths along the canal can provide a margin between minimum and maximum water levels to provide capacity to relieve flooding. Where the canal runs through land subject to flooding ideally it should run on the lower side of adjacent land, to absorb some run off. In areas not liable to flooding but prone to water stress, it should run above fields to facilitate irrigation.

The pods

A light urban transit system with driverless electric pods quietly zipping around on slender elevated guideways provides a low energy transport system for the town: personal like a taxi, less expensive than buses and zero emissions locally. It sounds like science fiction but is proven technology piloted at Heathrow and achieving the highest availability of all transport systems there.

An elevated distribution spine will support spurs to suburban hubs and a network grid providing higher density of stations into the town centre grid. Infrastructure is inexpensive but in the higher rise central business district leases will include a licence or easement for the light transport system to take support from buildings with obligation for the developers to provide adequate support in the façade. It may become known as the city of bridges in the air.

The foundry

Planning policy (Section 4) will apply a requirement to use local masonry. A local foundry will be named or developed to supply the material. Initially it will be a monopoly supplier owned by the Trust, later if appropriate competition can be invited and the original foundry privatised or part privatised.

 

Section 3: principles for an urban plan

Planning policies supplement the economic model to promote local employment, craftsmanship and diversity. Design will be constrained neither by modernist manufactured aesthetics nor nostalgic historicism. Visual unity will be established through a strictly limited palette of materials: local masonry (brick or stone), glass and a local roofing material.

The urban plan will be shaped by its location and the location selected by bid. See Section 4. In the meantime some principles are outlined here, and in the next section applied to a provisional location to illustrate the approach.

Planning polices and quality controls can be delegated from the Local Authority, agreed through a Local Development Order or simply applied through the lease process with the Trust enshrining in the lease a Landlord Approval process.

Policy will favour high density at least in the central area, a liberal approach to ‘overlooking’ to encourage roof terraces and balconies; a liberal regime on change of use to encourage mixed use communities and growth of cottage industry,

Lessons from Poundbury

The Prince’s development at Poundbury phased sale of land so that developers could only secure later phases if they adhered to the masterplan for the earlier parts. Tenderers are required to provide detailed plans and no sales are permitted until all is complete. Development briefs combined with leased site sales are also used, as are licence agreements. Tightly controlled design codes ensure quality of design and workmanship regulated by legally binding Building Agreements with developer before freehold or leasehold release.

Mixed uses not zoning

Mixed uses are generally to be permitted or even encouraged. There may be some disadvantages but the opposite, zoning, an invention of central planning has had worse disadvantages.

Mixed uses bring benefits of:

• flexibility for cottage industry start-up to occur ‘from home’ initially and then to grow, maximising scope for flexible self-employment.
• opportunities for employment for people more locally to where they live facilitating the walkable town ideal, reducing car use and parking spaces.
• Vibrant mixed local character and interest where zoning creates monocultures: hollow dormitory suburbs with no employment and arid industrial parks with no human element
• Crime prevention. Dormitory zones that empty by day and employment zones that empty by night facilitate antisocial behaviour and crime.
• Poundbury features a mix of commercial buildings built among residential areas. This seems to be the right end result but with the limitation of what can be pre-empted and pre-planned. Preferable to achieve the same end by flexible change of use and natural evolution.

The case for Zoning: streamlined planning permission

The most persuasive claim for zoning is that it streamlines the planning process. eg. in a residential zone applicants or developers can be certain of consent for dwelling of a defined size and density. A more liberal approach is preferred with planning streamlined in the founding charter of the Trust.

Higher value uses drive out lower value uses

This is natural and positive in a growing economy and if permitted to proceed organically delivers mixed uses at some times and places and specialisation at others. It becomes artificial where one use is favoured in the tax system as described in Section 1 under CT and NNDR. It is then a blunt instrument to use planning controls to prevent change of use such as RBKC’s ‘presumption against loss of employment uses’.

Here the economic model removes that distortionary effect.

Neighbourly uses

Historically, industrial, chemical and biological operations have been separated from residential areas by planning restrictions and that would continue. But the approach has crept, tending to drive out small engineering shops, light industry and cottage industry activities.

Controlling effluents

It may be prudent to retain some controls on un-neighbourly operations but the original common law approach may be sufficient: controlling effluents (including noise) from one person’s tenancy onto another’s rather than controlling use.

Built-in compensation

With the different functioning of land values and taxation, those living next to antisocial uses would be compensated through the tax system and conversely those like artists seeking lower rents would have options.

Privacy threshold

Rules against overlooking have become draconian in towns, such that desirable properties and streets in Kensington and Chelsea and Westminster could not be built today under present guidelines. External terraces and balconies are being driven out.

It is an irony of our age that we share more of our lives online while becoming allergic to being seen by neighbours.

This city will favour balconies, terraces, habitable green roofs and outdoor amenity spaces of all sorts (within reason). In seeking city centre densities familiar to Paris, Rome, Venice and Westminster lower thresholds of privacy will be expected. Balanced by a robust approach to policing nuisance.

Style + materials: innovation with unity

Policy will eschewing constraints that can so easily fall under brief fashion trends, modernist orthodoxy or a retreating into nostalgic historicism. It will be markedly liberal on style and with encouragements for self build the town will be distinguished by its diversity.

Nevertheless a neighbourliness will be expected in design and strict limits on materials will be applied. This will establish a degree of consistency to the town that is one of the appeals of for instance the pan-tiled rooftops of Florence or the dry stone walls of Yorkshire hill towns.

All buildings will be required to use the local masonry (brick or stone) together with new materials such as cast glass. Speciallist proprietary materials like Kalwall, Glulam or others may be given favoured status and licensed. Materials that are unavoidable such as steel and concrete may be subject to appropriate restrictions. Designers are willing to work within constraints: it is notable for instance that the flowering of Islamic geometry arose out of constraints on representation of natural forms.

Hand-work will be more feasible due to the operation of the economic model.

The aim is to leave scope for the widest design diversity subject to quality controls but to ensure the town has a consistency and coherence that is notable.

The garden city ideal

40% of the land area will be allocated to green space and public functions. Of the built-up balance 1/3rd will be earmarked for non-residential uses. The town centre or central business district will have 50% flats typically in 3 storeys over retail, public squares etc
Section 4: location

the location will be selected by a bid process but in the interest of popularity and efficiency – the efficient use of existing infrastructure – it should meet some basic criteria.

This section sets out:

• Primary location selection criteria for a regional level 1-6
• Secondary location selection criteria at a local level 7-9
• An illustration of a location and some applications

Location selection criteria

1. Within 20 miles of a demand ‘red’ zone, not Green Belt

The new town must be near high demand, high value regions, otherwise instead of relieving pressure it risks diverting resources from existing centres in need of population and regeneration. High-value regions promise best returns to fund infrastructure but tend to be most resistant to development. Lower value islands in or near high value regions are ideal. Bucks/Beds was selected but the demand criterion would apply equally to Essex, Kent, Wiltshire and East Dorset. For popularity, safer to avoid urban green belts. The London Green Belt extends a zone over 7400sq kms, 42% of the red zone.

2. Within 5 miles of a motorway

Good existing road and rail links are necessary as it is costly and inefficient to create new ones.

3. Railways – preferably two lines within 1 mile

Existing stations are only ever in existing population centres but a new one could be built providing the primary infrastructure is within reach.

4. Capacity

As well as proximity, roads and railway lines must have spare capacity.

5. Avoid areas of outstanding natural beauty.

6. Water, flood risk & canals.

There should be a water supply or reasonable prospect of a canal solution

7. Meeting needs for the existing community

In the Southeast (where demand is highest) development is typically opposed even when new roads proposals are included to relieve traffic. It needs to bring benefits, deliver local aspirations and solve local problems. Communities objecting to developer-led proposals may have something to gain as the Trust model empowers them to shape development in their area. Relief of flood relief or water stress may be an option.

8. Local criteria

Brownfield land is ideal if restoration costs are not prohibitive.
Avoid engulfing existing villages or connecting up towns into a conurbation.
Avoid engulfing or adversely affecting Sites of Special Scientific Interest, Nature Reserves, National or Local Parks, Scheduled Monuments or Heritage Sites.
Preferably within 3.5 miles of a motorway junction but >1mile to minimise noise.

9. Nice to haves

Near a university if available, especially one not already associated with a town
Near an airfield
Hills and level changes provide opportunities.
Existing local industry, employment, power and waste facilities.
Proximity to cultural, heritage, landscape and leisure amenities.

 

Location illustration: Marston Vale

The above criteria applied to a provisional location for the purpose of illustration.

1. The illustration location is 15 miles outside the Zoopla Heat Map red zone in a hollow between higher demand zones to Oxford and Cambridge on either side.
2. It is 2 miles outside the London Green Belt and 2 miles from the M1 J13, 40 miles from central London and on the A421 dual carriageway to Milton Keynes and Bedford.
3. Marston Vale Line passes through the middle in a cutting and Midland Mainline nearby with future proposals for the Vale line to be extended to become an East-West link between Oxford and Cambridge.
4. Capacity: Central Bedfordshire Strategic Plan says:
   E-W Rail improvements will create enhanced accessibility to Milton Keynes and the West Coast Mainline. A421 will have been dualled, and M1 widened between J10 and 13 and the Ridgmont Bypass/Woburn Link provided reducing congestion. The A6 will be dualled, between A421 and Wixams.
5. The area is several miles north of the Chilterns AONB.
6. No flood risks. The location is on the intersection of proposed Bedford and Milton Keynes canal proposed to connect the Norfolk Broads to the Grand Union Canal and the Aecomm Natural Grid North-South canal proposed to relieve water stress in the Southeast. The town could fund Sections J and K of the B&MK canal delivering Internal Drainage Board aim to link Brogborough and Stewartby lakes and the dramatic Falkirk Wheel type engineering solution to the 30m step up to Fox Cove. The Falkirk Wheel attracts 400,000 tourists annually. The B&MK canal can be used to deliver bricks for construction from Stewartby and the NS canal glass blocks from Nazeing. Hydro-electricity generation may be possible at Fox Cove.
7. There are minor local issues of traffic, surface water and rail service locally but no significant problem that the town could solve. The development would strengthen the case for reinstating Ampthill station on the Midland Mainline. Under the EcoTowns programme in 2009 local residents objected to a London based owner developer OHP’s 15400 home new town proposal. The Trust model would secure the site against OHP’s overdevelopment putting it under the control of the local community.
8. The John Bunyan trail skirts the outside of the town. In Bunyan’s time the route would have been around a woodland as shown on the Saxton/Kip Bedford Comitatus map of 1637.

The location is a former brick pit area with effects of the industry still visible. Some have been turned to advantage and flooded to produce lakes. Some of the land is brownfield. A ‘forest town’ plan would commit dozens of acres to woodland surrounding the town, making a substantial contribution to a local project the ‘Forest of Marston Vale’ plan and create a surrounding buffer zone separating Brogborough (pop 340) and Lidlington (pop 1140) from the town, and serving as an acoustic baffle against the M1.
One edge of the town would engage Brogborough Lake. A surrounding range of ridges are arrayed like a Roman amphitheatre with views over the lake.

Existing waste facilities and landfill sites exist nearby and Rookery Pit 5 miles away is proposed to be developed into a 55MW renewable energy plant by Covanta. Employment: Marston Distribution Centre is adjacent with an Amazon warehouse, Millbrook Proving Ground, Millbrook Golf Club and, Centre Parcs are within 3 miles.

9. Cranfield University, known for its Business School, lies 3 miles north, linkable by the Pod. This would become the nearest town to Cranfield (Cranfield village pop 5000, Marston Moretaine 4000 3 miles, Wootton 4000 5 miles).
   Cranfield has an airfield and technology park.

Section 5: delivery, popularity, viability

This section describes:

• Governance
• Delivery: stages
• Popularity
• Economic viability: the numbers

5.1 Governance

From Trust to Borough Authority. The ultimate aim of the governance model would be to evolve into a fully participatory level of government.

The Trust can be modelled on the Letchworth Heritage Foundation (30 governors elect 9 trustees + county councillor). The model has evolved and designed to be proof against the corporate takeover that threatened in 1961. There may be benefits in it being an ALMO (Arms Length Management Organisation) part of government, from the outset.

For the purposes of local taxation the Local Authority remains the Collecting Authority and the Trust will be the Precepting Authority as provided in the existing model. Subsequently it should develop into a City or Borough Authority within the democratic system, when feasible.

A secure governance model can include elements of direct democracy, representative democracy and appointment.

The economic model provides for significant and diverse local infrastructure packages to be offered to the electorate each with a business plan built on projected land values offering real choice and the benefits of growth in perpetuity to local people. Local democracy will be invigorated and then choices can be arbitrated through the democratic process.

This will transform local democracy which generally in Britain faces voter apathy because the majority of local spending is determined at national level and so local elections have become just a confidence vote on the performance of Westminster.

The democratic brake currently operating against new house building through the planning system would be unlocked as residents would get exposure to the upside of population growth, not just the downside of development ‘in their backyard’. [ref O M Hartwich ‘Bigger Better Faster More’

Local Authority involvement

The success of NW Bicester Eco Town compared to the objections faced by Weston Otmoor on the other side of Bicester suggests that Local Authority and NGO engagement is instrumental to reassure local people that proposals are not motivated by private gain at the expense of wider interests.

Bid model

The illustration location has its merits measured against rational selection criteria but is intended mainly to show an approach and application of principles to particular circumstances. Circumstances are always unique and have a major impact on how the plan should develop. Any location in the Southeast will face opposition from residents who prefer to see no form of urbanisation, increased traffic or loss of farmland.

To address this popularity problem it is proposed to launch a public competition in which the town is built where locals want it and bid for it. The approach works for: the City of Culture award, Enterprise Zones and grants of letters patent for ‘City’ status.

As with those examples, existing local governance structures may be instrumental in preparing the bid and would provide some of the members for the Trust once formed.

At local level, an aspect of the approach could derive from the Business Improvement District model in which local businesses (in this case affected landowners) would be invited to support the bid. The Enabling Act would provide that if a majority either by number or by hereditament value vote in favour then the others are bound by the vote.

Because the model would work equally well in lower demand areas to generate growth, and because such growth would point the way to reducing pressure on the Southeast by addressing one of its causes, we believe that the spirit of the brief would still be met if the strongest bid came from outside the Southeast. Subject to the fudges endorsement therefore entrants would not be limited to high demand locations.

Enabling Act

A brief list of elements requiring primary legislation.

Compulsory purchase at agricultural value and exclusion of overage clauses.

Suspend operation of the Leasehold Reform etc Act 1993 right to enfranchise, individually for single dwellings and collectively for apartment blocks.

Land under government control if available. Revise any Treasury requirement or fiduciary duty to achieve maximum sale price in favour of longer term public benefit.

Powers devolved from Local Authority. Rebasing NNDR on land only. Zeroing Council Tax may be permissible within existing rules.

Bid model: imposition by majority vote by number or hereditament value.

Local banking

A number of financial instruments or specialised products will be required which would benefit from the existence of a specialist local bank. Germany’s regional banks could be looked at as a model.

Raising finance for CPOs and keeping the debt local?

Future land value rises as collateral for investment through normal channels.

Exploring options for direct Central Government interest free financing.

Potential for waiving of initial CPO if the Trust were an ALMO (Arms Length Management Organisation) of government and the land asset is on the Government account offsetting the cash expenditure.

Potential for a local currency

Credit for local SMEs and implications of leasehold model on land as collateral.

Secondary market in fixed rate options for households or firms that want certainty in the face of variable rate leases

Self build mortgages

5.2 Delivery stages

Target population 21,500, area 450ha + 50ha forest. 40% green and public land Average net density 44dph/ha, 120dph net in centre, 30/ha in suburbs.

1. Enabling legislation
2. Set up development corporation (Trust) shell
3. Location selection bid process
4. Add local delegates to Trust
5. Compulsory purchase land
6. Develop urban plan and process
7. Tender process for ‘enabling works’ contracts

Build/development stages

It is important that each stage is a self sustaining, complete whole. Accordingly Phases 1 and 2 deliver the essential elements of a self-sufficient and viable small community – ie. a well-endowed small village. School, post office, pub and village green, including facilities for community engagement supplied by the School.

Much of the later stages of development can be lead at least in part by the private sector. Many urban services such as banks, estate agents, cinemas etc will be delivered by the market on well-tried principles of laissez faire.

5.3 Popularity

The preceding sections all contribute parts to a package intended to win acceptance from a local community. Somewhere! We do not underestimate how difficult that challenge is. We believe the economic model in itself would achieve wide popularity if fully understood but it is technical and needs to be seen to be widely appreciated.

However it is supplemented by a comprehensive package:

Economic and governance models putting ownership of community created value in the hands of local people in perpetuity and eventually giving them control.

A growth model delivering employment and higher wages.

Exciting landmark projects.

An invited bid so that local people can make their own choice.

Generous CPO: we adopt the 3x multiplier suggestion in the brief although we it is not intended to be effective on its own. ‘Stuff their mouths with gold’ was Bevan’s vulgar claim for how he persuaded doctors to accept the NHS. An ugly but memorable phrase, and with an ugly ethic that imputed venal motives to good people. Will 3x CPO persuade owners to support the process? Or will they be seen by neighbours as ‘sell outs’?

Ultimate measure of popularity

The ultimate measure of popularity will be among a constituency that does not yet exist. If you build it, will people and businesses come? Population growth will measure popularity and success. People wanting a better life.

It should lead to rising land values as another measure.

Immigrants: higher wages, cheaper houses, good school

The proposal has all the elements to attract the needed population based on essentially the same principles that attracted European immigrant to America: higher wages and low rents. Today the two main drivers for families to relocate seem to be employment and a good school.

Popularity and rising house prices

Many people set their hearts on rising house prices as their route to prosperity or a form of pension. A scheme promising to remove speculation and stabilise the land market may not gain immediate popularity with that group.

All that can be said is that however long the run has been of rising land prices, it is a false Ponzi scheme funded by new entrants and will top out at the latest when population growth levels out; or it is a con on many young people who have been educated into believing in it. Those who cannot see an alternative will stay away, but the benefits should attract those who have already recognised they are far from getting onto the ladder and who want to prosper through their own effort and enterprise.

Aspiration to be mortgage free after 25 years

On this model, houses can be paid off and owned in the usual way but the land would not be.

Artist colonies

Grayson Perry in his 2013 Reith lecture described how in Hoxton, Shoreditch and elsewhere artists were attracted by low rents and create communes and they attracted young professionals (also attracted by low rents) eventually regenerating run-down areas.

Perhaps we should not need to attempt to manufacture this (as with schemes that claim to pursue regeneration through culture) but the essence is low rents at the margin. The rest follows organically.

Even so a PR drive to attract artists would be a good thing. Benjamin Britten’s adoption of Aldeburgh put it on the map and started a new culture. Later he said ‘My music now has its roots in where I live and work’ Snape Maltings 1967

Basket of goodies

If invited to the second stage we will review the several technologies and new era proposals that might be incorporated. Appeal to idealism / package of green measures / direct approach to related organisations.

Popularity for businesses

Enterprise Zones are designed to attract businesses. Compared to the existing 24 EZs this proposition offers:

Better tax breaks. Permanent NNDR exemption instead of capped reduction for 5 years

Lower employment costs. Reduction in IT/ENIC making employment generally cheaper, favouring especially labour-intense industry and facilitating high-skill industries to pay higher wages and attract better talent

Low rents at the margin.

Enhanced Capital Allowances would not be proposed. £25m+ capital infrastructure improvements funded by central government would not likely be available but some low cost credit may be able to be offered if a local banking model was built. There is no reason why Central Government, Regional or EU grants would not be won but the principles of this proposal are not built on grant seeking.

 

5.4 Economic viability: the numbers

Lower payroll cost, higher wages

Andy Wightman calculates that a Land Value Tax has the potential in the long term to contribute around 25% of total public expenditure. Current estimates indicate that the value of land is £1,841bn across the UK, which would raise £110bn at 6%.^[1]

The proposal in this submission uses a variant of Land Value Tax to offset Council Tax and NNDR. In 2013 they raised £27bn each, or £54bn combined. The benefits of taxing land in place of labour
Fiscal Boost:	Income tax and National Insurance totalled £262bn in 2013-14, the surplus from land value taxation could, at a national level, be used to lower income tax and national insurance by 20%.
Economic Boost:	Land Value Taxation is a more efficient tax. The amount of land available for use remains the same. However, the annual rental value would act as a price signal ensuring best use of the land.Lower taxes on labour would increase employment and boost enterprise.
Social Boost:	Benefits such as higher employment provide a social boost. In addition to this, a proportion could also be set aside to pay for inspiring public works (Church, Canal and Pods), community improvements (schools, teacher salaries), and charitable and community projects (rehabilitation).

The estimates present a conservative view of what this new economic model could achieve. If shortlisted, we would seek to estimate the secondary benefit of boost in economic activity, tangible social impacts and public service savings through lower unemployment.

Basing estimates on national figures, the city would use half of the revenue generated from annual land value capture to pay the Local Authority in place of Council Tax and NNDR. A portion of the additional income would support maintenance and improvements to the town and administration of the Trust. The remaining leasehold income would be used to offset taxes on labour.

The table below shows the income raised from the land as the town grows, and how it would be spent.

Annual rental value rises for two reasons, firstly because the Trust releases more land and secondly because land values increase as infrastructure is completed and the town grows.

There is a case for infrastructure (schools, hospitals, maintenance) to be funded from general taxation as usual. However, 10% of the budget is allocated for this purpose. By the time it becomes a town, more income is generated for public works and infrastructure than their annual cost, and Tax Credits can be more generous using remaining funds to increase payments to the Local Authority, (lowering local taxes in neighbouring towns) or subsidising the development of public infrastructure, accelerating and improving development and supporting additional inspiring public works projects.

This leaves 40% of leasehold income, or £22.6m each year. Based on national figures, this is estimated to fund a rebate of 16% of Income Tax and NIC paid out by employers.

The table below shows the impact direct taxes on labour have on payroll cost. Indirect taxes also have an impact, reducing the value of real wages further.

A 16% reduction in IT and NIC would, we estimate, reduce the cost of labour to employers in the city by 5.7%. This would boost enterprise and increase wages and employment.

 

 

^[1] Andy Wightman, A Land Value Tax for England, para 53; HM Treasury, Budget 2012, pp7-8