Jack Airey is Head of Housing at Policy Exchange

Clement Attlee’s post-1945 Government is rightly held aloft as one with unparalleled achievements. Radical policies like free universal healthcare and the creation of a ‘cradle to grave’ welfare state have not only stood the test of time, but become more relevant as our economy and society have changed.

There is, however, one glaring exception to this rule: the planning system established via the Town and Country Planning Act 1947 that more or less continues in the same form today. The reforms handed the state ultimate power over urban growth and new development. Although it has regularly been tinkered with in the past few decades, the fundamental principles of the planning system are the same as when it was established in the forties as part of a government programme to establish a command-and-control economy.

One of these principles is that property owners are not allowed to develop their land unless they are given a specific license by the local authority. This gives the state quasi-ownership of all property. The right to build is granted on a case-by-case basis at the discretion of local authority members and officers according to their interpretation of state guidance. There are no fixed rules for gaining the right to build, which amplifies uncertainty at every stage of the planning process.

Another principle that continues to be fundamental to the planning system is that the state both can and should know how many and what type of homes and jobs will be needed and direct where they should go. Local authorities are required to micro-manage land markets and set a use for every plot of land in their borough depending on what administrators think will be ‘needed’ over the next two decades. Land uses unpopular with local voters (e.g. land for new homes) are tightly rationed which artificially inflates their value, often to obscene amounts.

As Policy Exchange argues in its new report published today, neither of these principles are remotely suitable to the country’s twenty-first century liberalised economy and society. They assume that local planning departments have a crystal ball to predict how the wants of people and businesses will change over the next few decades. Yet, this is a preposterous idea. Like most of us, planners entirely failed to foresee the impact of internet shopping on the high street, or of digital technology on the need for office space.

The overwhelming effect of our planning system has been to restrict development where it has been needed and wanted – both the construction of new buildings and the conversion of existing buildings to new uses. Given the extent of political control in the planning system (councillors control local planning frameworks as well as individual planning decisions), this should not be a surprise. What local politician is going to stand for office on a platform of promising more development, when voters in local elections are predominantly homeowners who, polling shows, are most likely to oppose new building?

Excessive planning restrictions impose very real costs on those least able to afford them. When renters pass over half their monthly income to their landlord, they should blame a planning system that protects existing property wealth at the expense of people who work hard and get on in life. Similarly, when start-ups and entrepreneurs cannot find anywhere to set up shop that is affordable and close enough to clients and customers, they should blame a planning system that protects incumbent businesses at the expense of those who have better ideas and are more productive.

Even if some see these factors as tolerable implications of a restrictive planning system, one thing that should concern us all is how generally bad we have been at managing urban growth and development. Ever since the state took full control of what land use goes where, the process by which places naturally change has been wholly disrupted. Traditional street patterns have been replaced by entirely new urban patterns like cul-de-sacs. Local authorities have decided where growth should go, and will often choose the most politically convenient location rather than the most suitable. Take, for instance, the housing estates being built next to motorways – is this where we want children to grow up?

The exorbitant cost of acquiring land with planning permission – whose value is made artificially high by state rationing – also means that builders have to skimp on quality design and construction for their development to remain profitable.

Wholly reforming the way land use and development have been regulated for the last seven decades will not be easy. But if we want a more beautiful environment and for younger people to share in the prosperity of this country and believe in the possibilities of capitalism, the planning system needs to be turned on its head.