Shift in Governance Arrangements

3.4.1 Hierarchies and shift from Government to Governance

As the economic theories require an institutional framework to assist the analysis of the operation of property markets, the governance structure in an area emerges as important. Governance has also been an evolving process as with economic theory, from the formal government structures to the “hollowing out” of the state (Rhodes, 1994) of today. Planning itself as part of local governance of an area has also changed from the rational planning of the 1940s to 1960s, with its emphasis on a welfare role and land use planning to the spatial planning of today which is more about coordinating delivery, enabling the market and a collective attempt to improve places (Healey, 2010).

Hierarchies are governance usually by Government, with the assumption that the rules and decisions made at a high level will be followed by those at a lower level, hence the hierarchy description. It is a form of command and control type of delivery, an example of which is the state driving development, such as in the New Town programme in the UK in the 1940s to 1960s (Adams and Tiesdell, 2013). This style of governance has declined in the UK since the 1980s and has been reflected in the changing nature of planning as well. There remains however some central control by Government through the issuing of policy guidance which is expected to be delivered at the local level. CIL is perhaps an example of that, although even here there has been some local discretion given to local authorities as to whether to implement CIL or not and the ability to tailor it to reflect local conditions.

3.4.2 Governance and the emphasis of Networks

The concept of network governance (Rhodes, 1997) and the move from Government to governance has necessitated new ways of working and new approaches to

analysing decision making by developers. As a result of the neo-liberal changes and the emergence of the market as the dominant mode of governance, there have also

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emerged networks as an alternative mode of governance, representing communities of interest, and partly due to the reduced ability of a much reduced state to deliver.

Network governance also reflected a move away from the dichotomous relationship between hierarchy (state) and markets, although that boundary between state and market is often fuzzy and blurred (Buitelaar, 2007). Networks are sometimes referred to as relational structures and whilst they can emerge around an issue or common cause, they also have sometimes been encouraged by governments via the planning system such as in Collaborative Planning approaches (Healey, 2006a). Collective attempts to co-ordinate social life to a common end became known as “Network Governance” (Rhodes, 1997). These deliberative approaches rely on voluntary commitment, trust and reputation to be successful and above all social relationships (Adams and Tiesdell, 2013).

These approaches seek to reach a consensus and to give all stakeholders a voice in the process of decision making and have been particularly prevalent in planning since the 1990s. Yet they have in some quarters been criticised as reflecting the dominance of market governance and in some way accepting this. Furthermore, the issue of power relations is a significant factor in any form of network governance and in planning can be particularly relevant due to the political nature of the decisions (Hillier, 2000). “It is the preliminary, backstage power play……which is the real politics of planning” (Flyvbjerg, 1998, p. 83). Network governance also requires new ways of working and this involves an understanding of identities of actors within a strategic context, both individually and collectively (Hillier, 2000).

Whilst these three broad modes of governance, hierarchies, markets and networks are often presented in chronological order as they emerged, it would be inappropriate to consider one as a replacement for another; rather they can all exist together.

Accordingly, it would be wrong to consider the state in the form of hierarchy as no longer powerful or that the market as an institution or mode of governance as unable to be influenced by networks such as communities of interest (Buitelaar, 2007).

What these alternative modes of governance do is to highlight for the research, that the operation of markets and the behaviour of developers which the CIL policy will influence, take place within a social as well as an economic context.

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3.4.3 Markets have emerged as the prevailing mechanism

The governance by markets reflects the neo-liberal trend in governance that has taken place especially since the 1980s and the so termed “hollowing out of the state”

(Rhodes, 1994). There has been a conscious effort of some governments to reduce the size of government and to roll back the state. Examples in the UK would be the establishment of Enterprise Zones and Urban Development Corporations in the 1980s, covering areas with reduced planning and state regulation (Adams and Tiesdell, 2013). There has also been a scaling back of the planning system since the 1980s with increasing emphasis on delivery as discussed in the last chapter, and sometimes portraying the planning system as stopping development (Rydin 2014).

The role of the state (and of the planning system) became more one of an enabler to the private sector to deliver, especially as virtually all development is now carried out by the private sector, the CIL policy is part of that shift. The state as it has been reduced has also been fragmented, and this institutional fragmentation has led to the entrepreneurial city (Harvey, 1989).

As part of this neoliberal approach two theories have been prominent and based on NIE introduced above, namely transaction cost theory which contends that all organisations will seek to minimise the costs of transactions and this will promote market efficiency, the involvement of the state increases costs and therefore reduces efficiency (Webster and Lai, 2003). There is also the property rights theory which is closely related, which states that all disputes between private parties will be resolved by negotiation between those parties and that only a legal and financial framework protecting the private rights is required (Alexander, 2001).

It has been argued by theories such as transaction cost theory and property rights theory that externalities would be negotiated between private parties (Alexander, 2001). However, due to market boundaries and administrative boundaries often not being the same, problems emerge. Infrastructure has not always been provided satisfactorily, coordination between separate private developments has not always been satisfactory, accordingly the issue of externalities emerge as a problem (Adams and Tiesdell, 2013). What also emerges in this mode of governance is the concepts of place competition and social exclusion as the rights of some people are excluded, introducing the notion of power.

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Others argue that price signalling should be given greater importance in the planning system as the systems exclusion of price signals has led to problems of a

constrained supply of development land and high prices (Cheshire and Sheppard, 2005). They go on to propose a system of price signalling that if combined with Impact fees could depoliticise the supply of housing and make the system more transparent (Cheshire and Sheppard, 2005). In a similar respect Lord (2009) has argued that Information Economics could be an appropriate way to make the calculation of the CIL more transparent, treating the CIL as a transaction cost and reducing the asymmetry of information between parties in the process of calculation of the CIL charge (Lord, 2009). A further development of this approach is the use of Game Theory, it is argued this could be a useful basis with which to analyse the negotiation process of setting a CIL or indeed other planning decisions (Lord, 2009).

These theories all reflect a neoliberal view that the market should operate with as little intervention by the state is possible, and that this is the most appropriate governance arrangement. The nature and tools of state intervention in the land property markets however still remain relevant and influential and these are now considered.

3.5 Planning Tools to influence the market