No need, no go.July 12th, 2018
Has Welsh Government’s love of the anachronistic retail “need” test finally killed the retail development market in Wales?
The struggling retail development and investment market in Wales has been dealt another blow this week in the judgment of the Court of Appeal in Waterstone Estates Limited v Welsh Ministers and Neath Port Talbot County Borough Council  EWCA Civ 1571.
This judgment has brought into focus just how divergent, and comparatively difficult, national retail policy in Wales has become from that in England and brings into serious question whether there now is any future for retail investment and development in Wales.
The case centred on the provision of roadside services adjacent a trunk road, just beyond the defined settlement limit of the village of Glyn-Neath. The proposal was refused by the local planning authority on various grounds and then refused at appeal by an Inspector on the basis, inter alia, that the identified need for new retail had already been met upon a backland site adjoining the village centre, well away from the highway.
The decision and the case that followed brings into focus the concept of retail need in a development management context.
In England, the need test was abandoned in 2009 following the2006 Barker Report into the Planning System commissioned by DCLG that concluded that a retail need test is not fit for purpose in a development management context. At Paragraph 1.31 of her final report, Ms Barker advised:
“ Policy revisions are also desirable to ensure that developments are not turned down on
inappropriate grounds. It is not the role of local planning authorities to turn down
development where they consider there to be a lack of market demand or need for the
proposal. Investors who are risking their capital and whose business it is to assess likely
customer demand are better placed than local authorities to determine the nature and scale of demand. Imposing requirements to demonstrate need in this development control context, as presently occurs in PPS6 is unnecessary, as well as adding to costs (needs tests can cost upwards of £50,000 each on top of planning fees and other documentation).”
She added at 1.13:
“This is particularly important as the current system of needs tests in town centre first policy
also can have perverse effects: it protects incumbents and gives preference to operators that have lower sales densities. These incumbents may be operating in out-of-town shopping centres, leading to the effect that if need is demonstrated and there is no impact on the town centre, an existing out-of-town shopping centre could expand while there is no application for a sequentially preferable site in the town centre. Furthermore, incumbents may find it easier to expand incrementally while prospective local entrants fail at any one time to demonstrate sufficient need for a one-off increase of space. The needs test should therefore be removed.”
Despite this damning indictment of the need test, Welsh Government has persisted with including and indeed strengthening the weight to be afforded to this test through its revisions to Planning Policy Wales (“PPW”).
The Court of Appeal’s judgment centered on two matters, but in terms of retail the key question before it was whether the need test was a “gateway” test that had to be satisfied before considering the sequential test and impact; or merely one of a number of tests. Lord Justice Hickinbottom concluded at paragraph 74 of the judgment (which was agreed by Lord Justices Davis and Singh): “In my view, those paragraphs clearly indicate that, in the context of planning applications, there is a discrete requirement for need to be established which, if not satisfied, is a breach of PPW policy.”
He added at paragraph 77, in respect of PPW paragraph 10.2.12 which states “If there is no need for further development for retail and commercial centre uses, there will be no need to identify additional sites” applies equally to development management.”
At paragraph 78 he added: “Looked at broadly and in its proper context, in my view paragraph 10.2.12 firmly indicates that, outside centres, need is a discrete requirement for planning applications; and, if it is not satisfied, then there is no requirement (or “need”) to proceed to consider whether there is any sequentially preferable site.”
The judgment also considered the issue of what “need” the test referred to, since plainly the proposal was for a roadside services area that all parties accepted could not reasonably be sited at the allocated village centre site. He opined at paragraph 84 :
“However, first, as Mr Buley powerfully submitted, “suitable” in paragraph 10.2.14 must mean suitable for general retail use because, in that paragraph, it is applied to plan-making as well as decision-taking on an application, and Mr Lewis accepts that, for in the context of plan-making, that is the accepted (and only sensible) meaning. It must have the same meaning in respect of each of those functions….”
In this respect he then went further to distinguish this approach from that adopted in England and Scotland:
“That meaning is clearly not the same as that used in the three English and Scottish authorities relied upon by Mr Lewis. I do not consider that those cases assist on the issue of construction of PPW: they concern the construction of different national policies that apply in England and Scotland.”
In his postscript to the judgment he added in paragraphs 89 & 90:
“As a result of the construction of the PPW which I consider to be true, it may well be that policy relevant to need on an application for planning permission for retail use in Wales is significantly different from that in England. That is not surprising, given the devolved nature of town and country planning. It is to be expected that, over time, planning policy and substantive law will increasingly diverge. The Planning (Wales) Act 2015, section 3 of which inserts a new section 60 into the 2004 Act requiring the Welsh Ministers to prepare and publish a National Development Framework for Wales, is only likely to increase the pace of change in Wales.
I emphasise that Mr Lewis, who is highly experienced in planning matters in Wales, did not for a moment suggest that there should be an assumption that planning policy in Wales is the same as in England. This case is a further reminder as to how dangerous such an assumption might be.”
The overarching effect of this judgment cannot be underestimated for the retail development sector. Many Welsh local planning authorities have, recognising the “perverse effects” that Barker identified could arise when applying a theoretical need approach to development management, adopted a pragmatic approach of considering the need test “in the round” when determining retail applications. Such pragmatism is essential in a dynamic retail market and where many development plans are now either long in the tooth or entirely absent and local planning authorities have been reluctant to update their retail evidence base due to swingeing budget cuts.
It seems that once again therefore, local planning authorities in Wales may be hamstrung in applying common sense by poorly drafted Welsh Government policy. This policy was, even when drafted by the boffins in Cathays Park, a clumsy attempt to jump on the populist bandwagon to stop the growth of large supermarkets in the early 2000s. As demonstrated in this judgment, this policy has simply failed to keep up with the retail sector’s changes, to the detriment of investment and new job creation.
The retail development sector in Wales was on life support before this judgment. Outside of Cardiff, Wales has not been on the radar for substantive retail investment for some years. By having a planning framework now demonstrably more onerous than England, we are becoming even more of an investment backwater.
It is beyond ironic that this policy does not apply, and therefore did not stop Amazon securing permission, in the same planning authority of Neath Port Talbot and apparently in under a month, for new warehouse to support its growing internet retail operations – Operations that now represent the biggest threat to the high streets of Wales.
Unless Welsh Government steps up to the plate to change its approach immediately, I fear that retail developers and investors will abandon Wales altogether. Of course, when you take this approach together with draft changes to TAN1 for housing, it does seem that stopping development is perhaps Welsh Government’s underlying objective.
The judgment’s postscript also underscores the need for those developers brave enough to still pursue retail development in Wales, and their advisers, to understand just how different the planning system here now is.