We need to build more houses – especially in the already overcrowded South East. If only there was a large area of derelict land that was within easy reach of London and with excellent links to the economic heart of the largest single market on the planet – and that also wasn’t of any great agricultural or environmental value…

Hang on – there is! It’s called the Thames Estuary. In a great piece for Prospect, Michael Heseltine remembers flying over the area looking for a suitable site for a new airport (he was the aerospace minister at the time):

“As I flew across London, I was struck by the vast tracts of dereliction spread out before me.  The advent of container shipping had rendered the old London docks obsolete almost overnight and the abandoned docklands ran like open wounds east of the capital, acre after acre of crumbling Victorian warehouses and toxic dumps.”

There was a left-right split on what to do about it:

“Those on the left recommended additional subsidy be pumped into the area. But this amounted to little more than expensive life support, with scant prospect of the patient ever recovering. Many on the right argued that intervening would be pointless or even counter-productive. Once prices fell sufficiently, they argued, developers would move in and begin to rebuild.”

What the rightwing argument didn’t take into account was the coordination problems of regenerating large-scale dereliction:

“With this in mind, I established the London Docklands Development Corporation, a dedicated redevelopment agency, free of political control and with wide powers over planning and land-assembly. It was staffed by a mix of experienced private sector developers and local authority representatives. My senior cabinet colleagues saw this as a misguided attempt to get a government department to construct an entirely new local economy.”

Of course, this was never Heseltine’s intention, rather the purpose of the Corporation was to remove those obstacles to market action that were too big for any one business to tackle – a basic principle for state intervention that the free marketeers could have found within their copies of Adam Smith’s Wealth of Nations.

In respect to the Docklands, Heseltine was triumphantly vindicated:

“The story of Canary Wharf is by now well known. There are currently 100,000 people working on this once derelict dockyard. It recently overtook the City of London as the biggest banking centre in Europe.”

He does, however, have one regret – “that we didn’t apply this approach to the rest of the Thames Estuary.”

It does indeed seem ridiculous that we should be scrabbling around for land in the South East – even contemplating the destruction of the green belt – when such a large and strategically-located area is in such obvious need of regeneration.

Obviously, the obstacles to development are huge – but so is the potential.

On one level what is required is a government that realises what government is for.  Instead of intervening in matters that can take care of themselves, the resources of the state could be profitably deployed dealing with coordination problems that businesses cannot tackle on their own.

However, even more important is vision and leadership. Last word to Lord Heseltine:

“If I had stood up in parliament in 1981 and outlined a plan for the Docklands that included Canary Wharf, the new Wood Wharf development, London City Airport and the ExCel Centre and the O2 arena… all serviced by High Speed 1 and Crossrail, then my colleagues in the Commons would rightly have fell about laughing. But if we are going to solve the housing crisis and bring down unemployment… then we must regain the belief that, when we create the right conditions, and the private and public sectors work together, anything is possible.”