It’s rare to find a bad idea with such a long life as paying people to like development. Raised by a host of well-meaning people, across different governments, and within varying developed economies – this idea has risen its head again in the Government’s Planning and Infrastructure Bill.
Angela Rayner’s flagship legislation has faced a mixed, at best, reception upon its introduction to Parliament last week. Though the overarching aims of streamlining decision making in the planning process, re-focusing political engagement towards local plan development, and reducing the demands placed upon often under-trained committee members have been welcomed by some industry voices, there remains substantial concerns about the Bill’s proposed implementation.
Some of these concerns, such as a potential reduction in democratic oversight, incentive structures for local authorities with expanded CPO powers, and risks to biodiversity are well versed. However, it is a relatively minor element of the Bill – found between §22 – 23 – that should be drawing more attention.
This section, entitled ‘Benefits for homes near electricity transmission projects’, covers the Government’s proposals to provide financial benefits, paid by utilities companies, to local residents immediately adjacent to electricity pylons, and other associated infrastructure. These benefits, according to the Government’s own briefing papers, would allow “communities living closest to new transmission infrastructure (to) directly benefit from the delivery of cheaper, secure, and low-carbon energy”. It envisaged, but not specified, that this would come in the form of discounts to annual energy bills.
In practice this section proposes the use of direct payments to local residents to reduce opposition during the design and delivery phase of large-scale development – in this case, for infrastructure schemes.
The history of a bad idea
This is something that successive British governments have discussed at length.
The immediate roots of these proposals lay in the prior Conservative Government, notably the administrations of Tuss and Sunak – where ministers seriously considered policies to provide financial incentives to local residents, in areas with high housebuilding targets. One proposal, entitled a ‘New Homes Bonus, would directly pay nearby households once a project had been completed, and was proposed by the former Environment Secretary Raniel Jayawadena in January 2023. This would either be as proportion of income from each unit sale, or as a defined contribution made to each household (similar to a S106 payment). Other schemes recommended reducing Council Tax levies to offset the purported costs associated with development; including reducing business rates for nearby retailers. At a media level, these proposals received detailed write-ups from the New Statesmen and the Economist – and broad derision from volume housebuilders.
There were good policy justifications for such proposals. With public opinion often opposed to major development – with IPSOS polling in 2024 finding that only 52% of the public want more homes built – alongside the reforms proposed to deliver many residential schemes (in particular, reducing the size or protection of the Southeast’s Green Belt), it is understandable that successive Governments have reached for any lever to make housebuilding more popular.
But a brief history of these proposals, indicates why they have never achieved implementation. Starting with the Open Source Planning Green Paper in 2009, CCHQ announced its support for:
“creating a real and substantial financial incentive to reward communities that accept house building… (meaning) that those directly affected by development are those that benefit.”
For local authorities, this pledge led to the creation of the New Homes Bonus – a direct financial payment made for each new house constructed within their jurisdiction. Nonetheless, the idea of directly compensating communities rather than Councils lived on, with Nick Boles, the then Planning Minister, trialling a ‘Boles Bung’ policy in 2013; allowing communities which successfully drew up neighbourhood plans to receive 25% of CIL monies, with no upper limit on the funds received.
Building from this, Deputy PM Clegg suggested offering council tax discounts to local communities which would accept ‘Garden Cities’ within their boundaries – arguing that his proposals would “allay those concerns of people who feel that their property… might be affected.” Finally, via the 2014 Budget, Chancellor Osbourne announced a review of a ‘Development Benefit’ system, aimed at “passing a share of the benefits of development directly to individual households.”
Outside of the UK, these proposals have a longer, and often more successful, life. In his influential text ‘The Homevoter Hypothesis’, William A Fishcel proposed issuing a new form of home insurance to homeowners in communities with a large amount of proposed development, which would pay out if development negatively impacted house prices. This would be modelled on the home ‘assurance’ programmes pioneered in Oak Park, Illinois, and expanded throughout Chicago’s suburbs. Others have drawn comparisons to New York City’s ‘Transfer of Development Rights’, as a model to replicate within Greater London – whilst the Israeli experience with TAMA 38 (which allows owners of apartments in pre-1980 structures to jointly agree to have their buildings reconstructed with additional stories – financed through the sale of new units) has seen a surge of interest in SW1.
But do these incentives work?
In short, almost certainly not in Britain. In more detail, probably not.
The current Government has been pointing journalists and the industry towards its own polling, which suggests that energy bill discounts may increase acceptance for new transmission infrastructure for the most respondents (78%). But for wider development, there is substantial inconsistency. The prior Government’s own research found that 84% of local people would not be influenced by a direct financial payment and that it would not impact their “likelihood to engage in some form of direct or indirect opposition” to housebuilding. Indeed, this research found, financial payments were “associated with ‘bribes’ by 46% of respondents”.
In other surveys direct payments actually hurt support, with Frey & Oberholzer-Gee finding that offering payment to Swiss communities to accept a nuclear infrastructure project actually reduced support for an application. In one neighbourhood, support for an application, before payment, was 50.8%, which fell to 24.6% when payment was offered – with many highlighting the ethical and principled concerns reported by the UK Government’s previous research.
From our experience, gaining public support for development is less about direct benefits and more the fundamentals – good design, in the right place, communicated well. The Government should listen to the industry who broadly know this, and remove this unnecessary programme.
