The growth and infrastructure bill is a missed opportunity

It’s only a month until chancellor George Osborne sets out his 2013 budget. Once again it is expected that it will focus on growth and no doubt contain some new wheezes to lift the economy out of its prolonged stagnation.

But the government is in danger of initiative overload with previous proposals having little chance to bed down before new ones come trundling down the tracks. The government’s plans for reforms to planning, infrastructure and employment rights, set out in the growth and infrastructure bill, are a case in point.

They say a week is a long time in politics and it certainly is when it comes to planning. Local authorities and communities were just starting to get to grips with the planning provisions of the localism act. This promised community empowerment and heralded a new era of localism. But then the growth and infrastructure bill came along. Far from reinforcing provisions in the localism act it is seen as a lurch back in the other direction. Labour’s Lord Adonis commented that the bill’s unifying theme is not growth but weakening local government, contradicting not only the coalition’s previous policy of localism but Lord Heseltine’s report on growth that condemned the drift to centralism as a barrier to local economic development.

It is certainly a missed opportunity to empower local communities to deliver the growth we need. In particular, to deliver real impact, the bill needs to focus on providing local areas with the tools to hold financial services providers to account in order to improve access to credit on fair terms for both households and businesses.

The absence of measures to improve access to finance in this bill is a major issue. For example, one of the bill’s stated aims is to speed up the provision of new housing by reforming planning laws. But permission already exists for 400,000 new homes to be built. These homes are not being built because developers do not have confidence that they can sell new homes due to constraints on mortgage availability, particularly for new first time buyers.

Mortgage lenders say that the number of homes bought by first time buyers has been increasing in recent months. But according to Shelter, these buyers are now older, have wealthy parents, are foreign investors or are buy-to-let landlords, meaning that home ownership remains out of reach for many.

Affordable finance for small and micro businesses also remains a problem. A recent report from the Community Development Finance Association (CDFA), funded by the Royal Bank of Scotland, found that unmet demand for finance amongst individuals and organisations that do not qualify for traditional bank funding has reached more than £6bn. The CDFA estimates that if community development finance institutions (CDFIs), operating at the heart of the community finance sector, had the capital and scale to fill just half of this gap, 68,293 jobs and 38,935 businesses would be created.

The Community Investment Coalition argued convincingly during the passage of the financial services act for the need for disclosure of bank lending data at postcode level. This is so that local community economic development agencies can accurately identify where access to finance is a problem and where it is not and develop their service responses accordingly. It would also allow those who wish to fill the gap, such as credit unions, CDFIs and local authorities do so in a targeted, more effective way.

It is widely acknowledged that small and micro businesses will be the engine of economic growth. Changes to planning and infrastructure will do little to keep this engine running if they can not access the affordable credit they need to fuel start-up and expansion.