The claim
“Currently if a bank branch closes down, a payday loan shop can move in and open up in the same place. Even if there’s already a payday lender just down the street. And there’s nothing the local council can do.”
Ed Miliband, local election campaign speech, 8 April 2013
The background
Ed Miliband plunged into the “heart of the local communities” with his speech today: the great British high street. Or increasing lack thereof.
The Labour leader said that our high streets were changing “and often not for the better”. No doubt we are all well aware of this. But he singled out payday loans shops as one of the prime culprits.
Councils are powerless against this glut of loan companies he said. But are they? FactCheck does the numbers.
The analysis
Mr Miliband is right that payday loan companies are among the fastest growing on the high street. In fact, according to analysis by Price Waterhouse Coopers (PwC) and the Local Data Company, in 2012 they were THE fastest growing – up 20 per cent on the previous year.
Pound shops and pawnbrokers followed closely behind with a 13 per cent increase. Charity shops, betting shops, supermarkets and coffee shops made up the remaining top risers bucking the trend.
On the flip side, the more traditional high street shops continued to disappear. Computer games shops suffered the most, down 45 per cent on the previous year, while card and poster shops, and health food shops were down 23 per cent and 25 per cent respectively. Clothes shops, recruitment agencies and banks were also among the biggest casualties.
PwC said that last year more retail chains went into insolvency than ever before.
Worse still, Matthew Hopkinson, director of The Local Data Company, expects the trend to continue and actually accelerate this year – “as more leases come up for renewal along with the ever increasing demands from consumers for space that delivers an experience good enough to pull them away from their technology devices”.
What can we do? Ed Miliband wants to give local councils more power. He says he would create an additional umbrella planning class that would let local authorities put some premises in a separate category. The move would allow councils to then block applications that meant a change of use for a property.
Mr Miliband is right that if a bank shuts down, a loan company – which is also defined as a financial institution – wouldn’t have to apply for “change of use” (in the same way that, say, a fish and chip shop would).
To change from a retail shop to a food shop automatically requires planning permission – which covers both the “use” and any building works proposed.
But Mr Miliband is wrong about councils having no power to block applications.
A council can still put its foot down, a spokesman for Department for Communities and Local Government (DCLG) told FactCheck.
Under what is known as Article 4, a council could block a payday loan company from setting up shop.
According to the Town and Country Planning Order of 1995, under Article 4 of the order, a Local Authority may remove rights if it feels that the development would be harmful to the character of an area.
However, Labour pointed out to FactCheck that Article 4 is used by councils mainly to protect conservation areas.
Certainly, the Order does state it should only be used in “exceptional circumstances”. It advises councils to use it if they think the proposed business will prove unsightly or damage the historic environment, if it is a business that might divide a community, if it might lead to the loss of agricultural land, impinge on military land, have an adverse effect on a flood risk area or if it could lead to coastal erosion.
Labour also claimed that the process is very burdensome, requires 12 months notice and requires the council to pay compensation to the business that has been unable to set up as a result.
FactCheck is currently waiting for a response from the DCLG on these points, but in the meantime we can say that the last point Labour has perhaps pushed too hard. According to the Order: “There are circumstances in which local planning authorities may be liable to pay compensation having made an Article 4 direction, although the potential liability is limited in many cases by the time limits that apply”.
The verdict
Mr Miliband is wrong to say there is nothing a council can do to stop a payday loan company setting up shop. Councils can put their foot down using an Article 4 direction.
But Labour is right that councils’ tool for blocking people setting up shop is geared more towards exceptional, conservation cases.
An Article 4 direction is not something councils are advised to use to mould their ideal high street.
In any case, the sad truth is that last year the high street suffered a record number of retail insolvencies. FactCheck suspects that for many cash-strapped councils, a rented shop is preferable to an empty one. Can they afford to turn people down?
Perhaps the onus should be on making payday loan groups clean up their act – and as for that, the Office of Fair Trading is on the case.
Last month it gave the payday loan industry 12 weeks to change, or face having their licences taken away. Will the OFT’s bark be worse than its bite? We’ll soon find out.
By Emma Thelwell
