Summary

• Britain faces an acute housing crisis. Housing is now the least affordable it has been for 148 years, since Victorian Britain. In contrast to what happened during the industrial revolution, employers today are blocked from hiring more due to a shortage of nearby new homes for workers. Investors are less likely to invest if firms cannot get the workers they need.
• New homes must respond to the economic needs of the country. They must ultimately serve the Government’s central mission of growth. 
• Living standards have been squeezed as the growth in rental costs has outstripped  incomes.
• Economic evidence shows that for new towns to be worthwhile, they need to be in or near existing high-wage opportunities. 
• Achieving the growth mission will involve allowing settlements that can generate more good jobs to build up and out – using underutilised bits of ‘grey belt’, doing more with brownfield, improving and making better use of land in underinvested council estates, and more.
• One of the ways cities have built ‘out’ in the past is through masterplanned extensions. Edinburgh New Town, most of Bath, Newcastle's Grainger Town, and Pimlico were all built in this way.
• Successful agglomerations such as Aberdeen, Edinburgh and Manchester need more transport infrastructure to allow them to realize the full benefits of their existing housing. Leeds’s successful tech and finance industries will benefit if the long-overdue tram system is finally built. York could benefit from a ‘New Town’ in the form of an urban extension.
• Labour has the strongest pro-housing mandate of any government since Attlee. It should pursue this mandate in part through designating and building new towns around cities with severe housing shortages, where affordability is worst and where job markets are the strongest.

The Challenge

The UK has invested less per head in the physical fabric of our homes than any other high-income Western country. Most of the high price of UK homes is attributable not to high quality construction, but to the high price of the underlying land and planning permission. We have failed to plan for enough homes where needed for many years. Fixing this will raise Britain’s growth closer to its potential. Economic evidence shows that we can deliver more growth by building homes where workers currently have to pay the most to live within reach of good jobs. This will remove barriers for workers, deepen agglomeration effects and accelerate the formation of high-growth clusters.

Britain today benefits strongly from its agglomeration economy. It is core cities and clusters that are home to some of the UK’s most promising firms such as Cambridge’s Silicon Fen or Salford’s MediaCity.  Firms in city centre locations account for 14% of British jobs and 25% of higher-skilled services jobs in 'exporting' activities. The strength of agglomeration is particularly pronounced in the southeast and east of England. 

Achieving the growth mission will involve allowing settlements that can generate more good jobs to build up and out – using underutilised bits of ‘grey belt’, doing more with brownfield, improving and making better use of land in underinvested council estates, and more.

One of the ways cities have built ‘out’ in the past is through masterplanned extensions. Edinburgh New Town, most of Bath, Newcastle's Grainger Town, and Pimlico were all built in this way.

Some new towns, like Skelmersdale, have been less successful. What unites the successful attempts is that they have been sited next to or within easy reach of areas with good jobs available. 

Labour has the strongest pro-housing mandate of any government since Attlee. It should pursue this mandate in part through designating and building new towns around cities with severe housing shortages, where affordability is worst and where job markets are the strongest. The shortage of housing is strangling innovation and growth in research clusters.

New towns should complement, rather than detract from existing towns. This means that new towns generally should not be built near towns and cities with disused former industrial areas, low house prices and wages. Regeneration in those towns and cities is key. Nearby new towns may divert precious resources and political focus away from improving existing urban areas. 

Voters want the Government to improve their current lives, not upheave them. For people to enthusiastically move to a new town, it needs to be well-connected to or right next to existing  places with plentiful good jobs. The proposed new town of Tempsford, on the intersection of the East Coast Main Line and the new rail link between Oxford and Cambridge, is a good example of a well-connected new town.

People want jobs, affordability and a sense of community. Businesses want workers nearby. Isolated new towns won’t satisfy either group. Well-connected new towns will best meet the needs of both groups, generating the most  growth and biggest improvement to quality of life. 

The Government should consider locations that meet the housing needs of ordinary people and that can drive economic growth. One example is Taplow in Buckinghamshire. It sits on the M4 corridor, in a cluster of towns including Bath, Oxford and Reading with high-wage job opportunities, productive businesses, and good rail connections to London. 

Labour’s Plan to Power up Britain says:

The key to Britain’s success lies in ‘clusters’ - bringing together skills and infrastructure to attract and build strong, regionally based industries and take advantage of local specialisms.

Agglomeration economies are hugely significant for our success as a modern economy, with thriving high-value services and a strong industrial base. Agglomeration effects are a result of knowledge spillovers, strong customer-supplier links, and businesses and workers competing and cooperating, sharing ideas and learning from one another.

To gain the benefits of agglomeration requires business to have access to deep labour markets, which occur where areas host a pool of skilled workers who can take advantage of good homes, reliable transport links, strong public services, and have exciting cultural offers to share ideas and knowledge.

Given the importance of these ‘clusters’ to the UK’s economic model, it is important that new towns are in the right places - well connected to existing centres of economic opportunity. 

The Housing Shortage is a Barrier to Opportunity 

The housing crisis is pricing working people out of economic opportunity. The towns and cities at the frontier of British productivity growth have seen huge housing cost increases driven by the tight supply of homes. These workers are forced with a choice: pay up, move out or don’t bother. In the towns and cities with the highest productivity, high housing costs have robbed workers of the wage benefits from growth, disincentivising British workers from taking better-paid jobs. Their only way to do so is often to join the hundreds of thousands with ever-lengthening commutes to work. Working people are being priced out of living within many towns with the best opportunities. 

In the towns and cities with the highest productivity, high housing costs have robbed workers of the wage benefits from growth.

Commuting problems matter for workers, the environment, and wider economic growth. British workers have some of the longest commuting times in Western Europe,  especially where they are trying to get to jobs in high-wage cities with acute shortages of housing such as London. Long commutes have profoundly detrimental impacts on health, happiness and productivity.

Given the large environmental challenges caused by an increasing reliance on cars, carbon emissions and congestion should be a key factor in new town placement. The environmental goals of this government must not be undermined by placing new towns far from workplaces and with poor public transport. Congestion is already at unsustainable levels for many road users. New towns that extend existing settlements and their public transport networks are one way to mitigate this.  

If new towns are to increase economic growth they must help solve current barriers to labour mobility. Workers have become less free to move as housing costs have become more of a barrier. Labour mobility is important for living standards as it increases labour bargaining power by forcing firms to compete for workers on pay and conditions. Workers who move from an area of median productivity to the most productive will see a 9% increase in wages; this rises to a 17% increase in wages for a worker moving from the least to most productive area. Labour mobility also benefits the workers who do not move as firms are forced to compete for the remaining workers, particularly boosting the pay of low earners. New towns adjacent to or extending productive areas will enable working people to benefit from growth through greater labour mobility.  

A good home is important for everyone. The shortage of homes in towns and cities means that people have few good options. Limited choices mean that we put up with British homes that are some of the smallest in Europe and rank poorly for energy efficiency. As an economy, we are currently forcing people to make an unnecessary choice between economic opportunity and owning their own home. As indicated by the net inflows of young people, particularly skilled young workers, into core cities such as London or Manchester, many choose economic opportunity but this comes at the cost of homeownership and more living space. Towns and cities with high wage levels lose thousands of workers in their 30s every year due to high housing costs and a desire for larger, better homes. A significant number of workers leave cities earlier than they planned. New towns should offer a good option for these younger but experienced workers to remain within the economic cluster. To lose these workers because of poor housing options is not only a policy failure, but a personal tragedy of underutilised potential.

The workers who manage to access jobs in high-wage towns and cities are mainly those with the most inherited wealth or in the highest paid professions. The lack of adequate housing supply in towns and cities exacerbate inequalities. Housing costs are high relative to median earnings in areas where the best jobs are located. This is worse in the UK than elsewhere. For example, Oxford has a median house price to earnings ratio of 12.1 while Boston fares much better at 8.3. 

The Opportunity

The Economic Evidence for New Towns for a New Generation

The extraordinary power of agglomeration could hardly have a more surprising history than that of the town of Middlesbrough. Although it is now a regionally prominent and politically important town with a population of nearly 150,000, Middlesborough’s growth is remarkably recent. As late as 1801, it was home to just 25 people, and would likely have remained small were it not for the relentless transformative power of the Industrial Revolution.

With the extension of the Stockton & Darlington Railway to the village in 1830 to bring coal to the coast, followed by  the discovery in 1850 of iron ore in the nearby Cleveland Hills, Middlesbrough experienced explosive growth. By 1891, its population had surged to over 75,000, earning it the moniker "Ironopolis". This remarkable transformation exemplifies the economic forces driving urban agglomeration across Britain as the industrial revolution gathered steam.

Middlesborough attracted not only miners and smelters but also a host of ancillary activities both upstream and downstream of the iron industry. This influx, in turn, spurred the expansion of services necessary for a large population – from housing and schools to shops and entertainment. Over time, the internal gravitational pull of the burgeoning urban centre transformed Middlesbrough into a self-sustaining community.

We might call these phenomena industry-specific spillovers, where economic opportunity from one industry creates opportunities in related industries and activities. This spillover effect attracts people and leads to the emergence of a core urban centre with a diverse range of activities, albeit one still substantially reliant on the initial industry that started the process.

Middlesborough’s story became common across the North of England during this period. It shows how urban expansion occurred: specific industries required large numbers of people to concentrate in particular physical locations. This concentration might be driven by a natural resource like iron ore or coal, or by changing patterns of trade that made certain locations more important as trading hubs. The central element in this observed pattern of development is that workers needed to be physically close to opportunities.

The importance of physical proximity only increased with mechanisation.  Before the nineteenth century, many industries had been structured according to a “putting-out” system, whereby the components of goods were manufactured in the countryside in workers’ own homes, only then being collected and sent to the cities for some final processing or assembly before being sold.  Yet the increase of mechanisation meant that a single energy source could power several devices at once, making it far more cost-effective to concentrate workers in one location. The efficiency to be gained from physical proximity increased. And along with savings on transporting fuel to those locations – like the coal that came to Middlesborough thanks to the railways – it became inevitable that industries would expand to capture these benefits. To encourage workers to operate in the same, more concentrated physical space, firms offered higher wages and other benefits, enticing workers to make the move.

While the abundance of natural resources had driven urban growth in the past, what distinguished the Industrial Revolution was the unprecedented scale of this growth, overshadowing more traditional drivers of agglomeration such as trade or logistical hubs, or administrative, religious, or military centres.

Other places  mirrored Middlesbrough's explosive growth. Manchester, propelled by the cotton textile industry, saw its population surge from about 75,000 in 1801 to over 300,000 by 1851. This four-fold increase in just 50 years transformed Manchester, earning it the nickname "Cottonopolis."

Bradford, fuelled by wool cloth manufacturing, exploded from a population of 13,264 in 1801 to 279,767 by 1901 - a twenty-fold increase in a century. Glasgow, powered by shipbuilding and engineering, experienced comparable growth, expanding from 77,385 in 1801 to 761,709 in 1901, nearly a ten-fold increase.

Even smaller-scale developments were impressive. Barrow-in-Furness, driven initially by iron mining and later by shipbuilding, grew from a tiny village of 325 people in 1847 to a substantial town of 51,712 by 1891 – a remarkable 160-fold increase in just 44 years.

These examples underscore the unprecedented scale and speed of urban growth during the industrial revolution, far outpacing the development of towns based on religious and administrative functions. The power of industrial agglomeration to reshape Britain's economic geography was unparalleled in its history, creating new urban hierarchies and fundamentally altering patterns of settlement and economic activity across the country.

As Britain’s economy developed, however, it began to diversify. Economic complexity is strongly associated with higher income per capita: as productivity improves, a dynamic, growing economy naturally expands into different sectors. This increase in complexity was particularly evident in the country’s evolution from its traditional industrial base through several waves of sectoral development. The early 20th century saw the relative decline of traditional industries like textiles alongside the continued increase in prominence of more technologically sophisticated sectors such as chemicals and engineering, complemented by the emergence of financial services. The interwar period saw yet another shift toward advanced manufacturing, which included electrical engineering and automotive production. This diversification accelerated even further in the post-war decades, with the UK developing significant capabilities in electronics, precision engineering, and pharmaceuticals, while simultaneously expanding its knowledge-intensive services in areas like business consulting and scientific research.

Each wave of sectoral expansion represented not just the emergence of entirely new sectors of industrial activity, but also of an increasingly complex combination of knowledge, skills, and networks of production that underpinned the growth of the British economy. This diversification gradually transformed the nature of agglomeration benefits. The firm- and sector-specific industrial spillovers gave way to broader location spillovers. In this new paradigm, the economic returns to being in a specific area were not driven simply by physical proximity to a particular industry. Instead, they stemmed from the general economic activity and dynamism of the location itself.

Large cities offer firms access to deep labour markets where diverse skills converge. This concentration facilitates not just the cross-pollination of ideas across industries, but also the emergence of specialised services catering to both firms and consumers, regardless of their specific sector. While industrial clusters remained important, the advent of general-purpose technologies like electricity and automobiles transformed the economic potential of cities. No longer dependent on a single industry, urban centres saw a flourishing of white-collar, service sector jobs across the country.

Leunig and Overman's classic paper on the topic reveals a profound transformation in Britain's economic geography over the past century. The industrial revolution had sparked explosive growth in northern cities like Middlesbrough, Manchester, and Glasgow through industry-specific spillovers and the concentration of manufacturing. However, these forces have waned in importance. Instead, new economic dynamics have dramatically shifted the balance of economic power southward, particularly towards London and its surroundings.

This shift reinforces London's historical importance as a centre of trade and governance. Recent economic forces have amplified advantages London already possessed, which were  originally the result of its geography and location nearer the European mainland. Meanwhile, the very factors that had powered the North's growth – the benefits of having similar industries clustered together close to sources of abundant coal – became less economically crucial. The result was that London retained its importance through the Industrial Revolution, even as Northern industrial power reached its apex, and diverged again once this growth subsided.

The scale of this divergence is striking. In 2022, Inner London, and the areas of Berkshire, Buckhamshire and Oxfordshire had GVA per person over £45,000, 37% above the UK average. In contrast, Cornwall, West Wales and the Valleys, and the area around Durham each had a GVA per person of less than £24,000, 27% below the UK average. This disparity reflects not just the decline of traditional industry, but the ascendance of new economic drivers that disproportionately benefit some areas.

These changes stem from fundamental shifts in how the economy functions, determining what is produced where, and by whom. Westlake and Haskel argue that this transformation is rooted in the growth of the service sector and the increasing importance of high-skill industries. These developments have reshaped the economic landscape in ways that favour different types of agglomeration than those that drove the Industrial Revolution.

The change has been substantial. In 1950, the service sector employed 48% of the workforce. By the early 21st century, this had grown to 70%. This rebalancing of the economy has important implications for where economic activity takes place. Unlike the industries of the industrial revolution, which often had to locate near raw materials or power sources, service industries benefit from being co-located in large, diverse urban areas.

The City of London's financial services sector is a clear illustration of this shift. Unlike Middlesbrough, whose growth was tethered to iron ore deposits and coal, the City's success does not depend on proximity to any particular natural resource. Instead, it has thrived because of the dense network of related services that have congregated in London. Law firms, accountants, IT consultancies, and marketing agencies all benefit from being close to each other and to the financial firms they serve.

This clustering creates what economists call agglomeration economies. As more firms and workers in related industries locate in the same area, they benefit from various advantages. Workers can more easily find jobs that match their skills, and firms can more readily source employees with the specific expertise they need, and ideas spread more quickly, in a self-reinforcing cycle.

The outcomes of successful urban agglomeration translate into tangible benefits for workers, firms, and the broader economy, including higher wages, greater specialisation, and faster technological progress. This dynamism, in turn, attracts more businesses and talent, further reinforcing the city's competitive advantage.

These benefits extend beyond just the financial sector and related activities. The high wages in finance create demand for other services, from high-end restaurants to cultural attractions, which in turn create job opportunities across a wide range of skill levels. The taxes generated from these high-productivity jobs help fund national public services and infrastructure, creating a virtuous cycle of development that benefits broader society.

This process helps explain why the GVA per person in London and the South East has pulled so far ahead of other regions. The agglomeration effects in these areas create opportunities that are not available elsewhere in the country. Access to these good jobs is crucial not just for individual opportunity, but for overall economic growth. High productivity jobs drive innovation and economic growth, generating value that ripples out through the entire economy.

While agglomeration economies offer substantial benefits, these advantages are not unlimited. As cities grow, so too do the costs associated with that growth, particularly in terms of congestion and living costs. Efficient transport infrastructure becomes crucial, effectively expanding the reach of agglomeration by reducing travel times, as demonstrated by London’s vast transport network. Projects like the Leeds tram and Crossrail 2 are expected to support hundreds of thousands of new homes and jobs by connecting suburban areas more efficiently to the central city, effectively expanding the zone that experiences agglomeration benefits.

Understanding and harnessing the importance of agglomeration is crucial when designing interventions to increase housing availability and economic opportunities in high-potential areas. This underpins the argument for extending existing settlements rather than creating entirely new ones. The benefits of such an approach are rooted in the very nature of agglomeration economies. Growing existing urban areas allows us to capitalise on the infrastructure, institutions, and networks already in place, making it a more viable approach to urban development.

Unlike the process of expansion that drove urban agglomeration during the industrial revolution, we do not start from an extremely low base when we expand an existing city today. We are building upon a foundation of physical infrastructure - roads, railways, utilities - as well as social infrastructure like schools, hospitals, and cultural institutions. These existing frameworks can often accommodate additional population and economic activity at a lower marginal cost than building entirely new settlements. These pull factors play a similar economic role to that of natural resources: they enable the emergence of economic returns that attract people and businesses. Any successful attempt at expanding a location must be based on the existence of economic potential, whether in the form of natural resources and advantages, or in the form of existing agglomeration economies.

Expanding existing urban areas therefore allows us to tap into and reinforce the agglomeration economies that are already at work. A city that grows from 500,000 to 750,000 inhabitants is not just getting bigger - it is also becoming more productive. The larger population can support a wider range of specialised businesses and services, creating a more diverse and resilient local economy.

Extending existing settlements allows us to build on an existing economic infrastructure in our cities, amplifying their strengths and taking advantage of their higher productivity. Instead of a pattern of development that attempts to unleash a virtuous cycle of agglomeration where none exist, this approach aligns with both historical patterns of urban growth and our current understanding of spatial economics.

The process of organic growth and expansion  drove the development of many of Britain's great industrial cities, and we see similar agglomeration effects today. What changed considerably throughout the 20th century was the nature of the agglomeration. While Manchester or Birmingham’s growth was primarily driven by industry-specific factors, modern urban expansion is often based on more diverse and knowledge-intensive sectors. Today, cities like Manchester and Leeds could harness the benefits of agglomeration with better public transport and charging fair prices for road use to reduce congestion. Smaller cities with potential like Cambridge, York or Oxford could leverage their existing strengths in education, research, and technology to become increasingly productive and innovative as they grow. Yet, unlike their industrial-era counterparts, these cities face significant planning constraints that have curtailed their potential expansion, highlighting how policy decisions can profoundly impact urban development and economic geography.

Do New Towns Have to be Isolated Settlements?

Not all urban development theories have recognized the importance of agglomeration.. A contrasting view emerged in the early 20th century with Ebenezer Howard's concept of Garden Cities, which later evolved into the 20th century new towns movement. Howard envisioned self-contained isolated communities of about 32,000 people, surrounded by greenbelts, combining the best aspects of town and country life. These new settlements would be entirely planned, with ample space for housing, industry, and agriculture.

While these ideas were influential and led to the development of many new towns in the mid-20th century, they stand in stark contrast to the modern understanding of spatial economics. This vision of urban development assumed that a carefully planned remote settlement of a specific size could provide an optimal living environment even in the absence of the existing economic pull factors that have historically driven expansion. We now understand that cities are dynamic entities, their optimal size and structure constantly evolving in response to changing economic forces. Thriving cities rely on dense networks of relationships between people and businesses that enable a degree of specialisation and division of labour only possible in larger markets. They benefit from knowledge spillovers that occur when skilled individuals from diverse fields work in close proximity. These factors are difficult, if not impossible, to replicate in a planned, self-contained settlement.

Thriving cities rely on dense networks of relationships between people and businesses that enable a degree of specialisation and division of labour only possible in larger markets. They benefit from knowledge spillovers that occur when skilled individuals from diverse fields work in close proximity. These factors are difficult, if not impossible, to replicate in a planned, self-contained settlement.

The concept of distant and poorly connected new towns pushes against the natural gravitational pull of economic activity to concentrate and reinforce itself. Just as businesses in related industries tend to cluster together to benefit from shared resources and knowledge, urban economies as a whole grow stronger and more productive as they expand. Attempting to create new, self-contained settlements too far away from existing economic centres is akin to trying to start a new industry in isolation - it is not just difficult, but it may fail entirely, regardless of the effort invested. These new settlements often struggle to achieve the critical mass of economic activity needed to become self-sustaining, let alone thrive.

Moreover, the original conception of new towns as isolated settlements underestimated people's desire to be connected to larger economic centres. In practice, the most successful isolated new towns, such as Milton Keynes, derived their success for many years from their strong commuter connections to London. This outcome illustrates the enduring appeal and economic gravity of established urban hubs going back centuries. These forces are so strong that London was an economic outlier even in Roman times.

While Howard's Garden Cities were a well-meaning attempt to address the problems of industrial urbanisation, they were unfortunately based on a fundamental misunderstanding of the dynamics of urban agglomeration. Our current understanding suggests that working with, rather than against, the underlying economic forces driving agglomeration is likely to be a more effective approach to urban development. Attempts to create new, self-contained settlements in isolation from existing economic centres run counter to that understanding.

Furthermore, the creation of entire new towns presents significant environmental challenges. Building new infrastructure from scratch - roads, utilities, public buildings - is enormously costly, both financially and in terms of environmental impact. These costs are particularly high for remote locations that lack existing connections to major infrastructure networks.

The carbon footprint of building an entire new town is substantially larger than expanding an existing one. A new town requires not just new buildings, but new roads, power lines, water and sewage systems, and more, with the additional construction generating significant carbon emissions. In contrast, expanding an existing town often allows for more efficient use of existing infrastructure, reducing the need for entirely new systems. New towns also tend to lead to increased car dependency, as it is extremely difficult to establish the kind of dense and efficient public transport systems that enable already connected agglomerations to flourish. This ultimately results in higher per capita carbon emissions compared to larger, denser cities with well-developed public transport networks.

Given these economic and environmental challenges, expanding existing urban areas often presents a more sustainable path for accommodating population growth. For a new generation of new towns to succeed, they must work with these economic and environmental realities. 

The Successes and Challenges of New Towns

Successful new towns have integrated well into the economic geography of Britain. The most successful post-war new towns were well located in locations that could take advantage of the growing service sector, with transport connections to core cities and short commuting times for workers.

New towns do best when created next to high-growth towns and cities. Historically, the best ways cities have built ‘out’ in the past is through masterplanned extensions: Edinburgh New Town, parts of Bath, Newcastle's Grainger Town, and Pimlico were all built in this way. The proof of their success is that they are now considered simply a part of the existing city. 

Some new towns have become self-sustaining as free standing communities. Milton Keynes is often cited as one of the most successful new towns. As a city, it has developed its own economy and identity. But its original success derived from its excellent commuter connection to London, which allowed workers to move to Milton Keynes without too much disruption to their lives. Some other new towns, like Skelmersdale, have been less successful. The distance between the town and good job opportunities made it more difficult for residents to get decent jobs. 

New towns should improve rather than worsen regional economies. The creation of Skelmersdale in the 1960s impeded Liverpool’s efforts to regenerate by relocating Liverpudlian workers away from the city, and created unnecessary extra burdens on government funding through increased welfare costs.

It is vital to get the economics right for each new town. And, in selecting a good location for a new town, politics also matters. Political obstacles can hamper construction of new infrastructure.  This makes it even more important for each new town to leverage existing infrastructure and transport links, to minimise the costs and political opposition associated with additional construction.

 It often takes decades for a new town to achieve its intended size, particularly if they are not immediately adjacent to an existing successful settlement. Even in the case of Milton Keynes, the often cited success story of new towns, it took 10 years after the ministerial order to build 10,000 homes. And new towns like Milton Keynes that were located  in the Greater Southeast built 5,200 homes more on average than new towns elsewhere in England.

Plan of Action

For new towns to be a success and achieve Government ambitions of strong growth, they must be built in locations that reflect the demands of the economy. High land values are a good indicator of where current housing shortfalls exist and where the economy would benefit most from new homes. Of course, some areas have high land values as a result of non-expandable amenities (such as the impact of natural beauty on the Lake District) and damage to those amenities should be avoided. Building a new home in the middle of Exmoor will not drive the economy in the same way as building a new home in the centre of Bristol. 

New towns should be located with good connections to where people already live and work, as a range of organisations including the Centre for Cities, Create Streets and Britain Remade, and the Tony Blair Institute have recently explained. New towns will initially be for commuting workers, and creating new public transport is expensive and slow, a gamble that no future resident would want to rely on. 

Once  location is chosen, establishing the legal framework for new towns can be simple. A hybrid bill is the simplest and quickest way for the Government to lay the legal groundwork for a new town. It enables democratic scrutiny in Parliament. It also allows much faster delivery than alternative methods: once the Act is in force, the Secretary of State will have all necessary powers to implement the plans passed by Parliament. Special development orders (SDO) are also a quick method of permitting development without needing parliamentary approval. Development corporations are another option, although these currently lack sufficient powers to provide for public transport.  Where local government is eager to take the lead on a new town, it should be empowered to do so.

A key step in building new towns will be providing necessary utilities. The Government should set strong incentives for utility firms to do so. This is particularly true in water-constrained Cambridge, where a lack of investment in public water infrastructure has blocked new homes. The water regulator, Ofwat, has historically been reluctant to permit new investment in water infrastructure because the regulatory model means that all investment will ultimately raise customer bills. The Government should meet with Ofwat to determine what it will take to ensure that Ofwat will allow water firms to invest to anticipate and meet housing demand in high-demand areas, and meet with the relevant firms to extract commitments that they will do so at pace. Development in Oxford has been all but halted by the delays in expanding the sewage treatment plant serving the city. Another important reservoir, near Abingdon in Oxfordshire, is being progressed as an NSIP, with the Development Consent Order expected to be submitted in 2026. The Government should request a commitment from Thames Water for delivery of the reservoir by 2029 with an offer of a financial incentive to get it completed quickly. Failing that the Government should promise to undertake a review into delivery through other means such as compulsory purchase using a short hybrid bill. 

To pay for new infrastructure and public services without imposing costs on taxpayers the Government will need to use value capture mechanisms. These mechanisms involve diverting some fraction of the large increases in values of land that are generated in some areas when permission is granted for new homes. 

Powers to capture value and assemble land are important for any new town. The failures of the previous Government’s flagship garden city, Ebbsfleet, demonstrate the peril of a new town policy without any powers. Ebbsfleet, a development corporation, has built only 3,000 homes in 9 years – less than one third of the 10,000 homes that Milton Keynes built in its first decade.

One option for value capture is to use compulsory purchase orders (CPO) to buy the land used for new towns. Under recent legal powers, this can be done at pre-existing use value so the Government can reap all the rewards of the public investment rather than private landowners. For example if industrial scrubland is purchased and the government then grants planning permission for it to be used for medium density building, the value of the land would rise enormously. The government can realise this gain by then selling to a housebuilder and use the profits to create the new infrastructure needed – for example, GP surgeries, road links or rail upgrades. Ideally the allocation of land for use in new towns is great as the government can only CPO land at the pre-existing use value in the initial allocation.  

Another method of value capture would see the Government auctioning development rights to the landowner who offers the highest bid to pay for planning permission. This again enables the government to build the necessary new town infrastructure. Value capture works best when used in land closest to existing high-wage cities as that is where the value uplift is greatest.

The simplest method of land value capture is through taxation imposed by Parliament in a finance bill. Additional taxes could be imposed on development in new towns. That could take the form of an increased developer levy such as the one that was imposed for London’s Elizabeth Line, a high rate of property tax, or an increased rate of capital gains tax and corporation tax on land covered by the new permissions granted for the new town. 

Figure 1: Taplow on the Elizabeth Line is a promising location for a potential New Town

An extension to the town of Maidenhead, at Taplow, has a strong economic growth case. Maidenhead has great rail connections and a strong local economy. It is an attractive area for people seeking more affordable housing outside of London.

At peak times, Taplow currently has four trains per hour which get to central London in 40 minutes. Maidenhead has six, two of which reach Paddington in 23 minutes. Recent public investment in the Elizabeth line has added additional passenger capacity that could be better leveraged. Currently the Taplow station has fewer than 4,000 residents within one kilometre.  Abbeywood has 24,000 residents within  one kilometre.

Figure 2: Land near the station in Taplow that is currently underused

The local jobs market is strong with neighbouring Slough boasting the highest concentration of company HQs outside of London. In Windsor and Maidenhead, 82% of residents are employed, higher than both the national average of 75% and the wider Southeast region's rate of 79%.

The Government could pass an Act for a Taplow New Town, an extension onto the successful towns of Maidenhead and Slough. The Act would define the area covered and give the Secretary of State powers to build new infrastructure. The proposed area covers 5.8 square km  (580 hectares). At a gentle medium density of 50 homes per hectare and assuming 20% public, green and commercial use, Taplow new town could accommodate over 20,000 homes or 40,000 people. 

Figure 3: A vision for Taplow New Town

The suggested site is entirely contained within the Beaconsfield constituency, which has among the most unaffordable housing in the country. The new town would be compact enough to encourage active travel; a resident at the top of Taplow New Town could cycle to the station in 12 minutes. 

The Secretary of State, using powers granted through a Taplow New Town Act, can issue a Compulsory Purchase Order to buy the land at existing use values, grant permissions for development and then sell the land to developers at the new increased land value to fund the Government’s investment in the area. The raised funds should be used for the creation of vital public services such as schools and GP clinics in addition to Government priorities such as new social homes.