The Government's planning reform has come in for criticism as it attempts to strike a balance between economic growth and localism. Will the new National Planning Policy Framework do the job? Hogan Lovells' Michael Gallimore and Harry Spurr report

"Communities should be given the greatest possible opportunity to have their say and the greatest possible degree of local control." So said the Conservative Party in its policy Green Paper, Open Source Planning, published before the last election. "Restoring democratic and local control" has always been at the heart of the party's proposals for planning reform and sits at the centre of the localist agenda.

The Green Paper promised "radical change" in many respects. Particularly eye-catching were proposals to abolish the regional tier of planning and to reform the planning appeals system by restricting a developer's right of appeal and conferring a new, equivalent right on local objectors for the first time.

Designing local plans "from the bottom up" to reflect the "aspirations of neighbourhoods" with "every single resident of the neighbourhood approached to take part" and allowing residents to sell their support for local schemes in return for financial compensation from developers were all firmly on the localist agenda, and apparently integral to the emergence of the Big Society that is itself so fundamental to over-arching government policy.

Once in power, the Conservatives and their coalition partners set about preparing for such reforms with surprising speed and a marked absence of consultation. Regional strategies were the first victim and, although after a long court battle were reincarnated, their reprieve appears to be only temporary. Protests from outside the Government came thick and fast.

The development industry, professionals and local government all warned that the measures would slow the delivery of much-needed development. Neighbourhood planning, it was argued, would almost certainly be anti-development in practice; greater community influence over the local plan preparation process would surely be marked by a single feature – increased resistance to development. The abolition of the regional planning regime would remove the primary incentive for the construction of much-needed new homes. Without this positive influence, NIMBYism would take a firm hold and building rates could plummet.

Removing the fundamental and long-established right of a developer to argue his case on appeal while, at the same time, conferring a new right on third parties would affect a fundamental shift in the treatment of property rights and amount to a substantial constraint on development by introducing damaging uncertainty, cost and delay in the delivery of schemes.

These arguments and others were initially received with little sympathy by a Government committed to the concept of localism, whose election campaign and manifesto had focused so firmly on the Big Society, and which depends for its grass roots support on the rural heartlands where sentiment is traditionally more hostile to development.

Nonetheless, in early 2011 reports began to emerge of growing tension on policy matters between the Treasury and the Department for Communities and Local Government (CLG). At last, it seemed, the view was emerging that while implementation of a fiercely localist agenda might shore up the vote in the shires, it had the potential to act as a serious constraint on growth that is central to the UK's economic recovery.

The result was a flurry of announcements at and around the time of the Budget. On 31 March, the Government's chief planner wrote to councils in a letter entitled 'Planning for Growth': "I am writing to draw your attention to the important announcements made in support of last week's Budget. The Growth Review contains ambitious proposals for further planning reform, to ensure that planning supports the sustainable development that we need as the country emerges from recession."

There was also a written ministerial statement by Greg Clark urging upon councils the importance of "driving and supporting the growth that this country needs" and encouraging them to "support enterprise and facilitate housing". These developments appeared to signal a change of direction best illustrated, perhaps, by Chancellor George Osborne (pictured) when delivering his Budget: "Yes, local communities should have a greater say in planning, but from today we will expect all bodies involved in planning to prioritise growth and jobs. We will introduce a new presumption in favour of sustainable development, so that the default answer to development is 'yes'."

Since those events, while localism has remained on the Government's agenda, the focus has turned markedly towards growth. The initiatives have come thick and fast. Build Now, Pay Later was designed to "give a shot in the arm to housebuilders" by allowing developers to acquire public sector land on attractive payment terms while proposals to allow the change of use from commercial to residential without planning permission were published.

Auctions of public sector land, consultation on a scheme to allow councils to retain business rates, proposals for a "planning guarantee" to ensure the determination of all applications within 12 months and rules to allow councils to take into account the proceeds of the New Homes Bonus when determining planning applications also marked a sharp change of direction. In the space of a few weeks, a significant and obvious shift in emphasis had taken place.

Where, then, does this leave the localist agenda? A recent industry survey by BNP Paribas Real Estate suggests that many people are sceptical about the compatibility of localism with economic growth. Indeed, in its report on Secretary of State Eric Pickles' peremptory abolition of regional strategies, the CLG Committee concluded that the Government would be "faced with a stark choice in deciding whether to compromise either on its intention to build more homes than the previous Government, or on its desire to promote localism." There is undoubtedly a tension between the two concepts and the Government's solution appears at present to be something of an unhappy compromise.

The truth is that localism in planning, as it emerges post-Budget, falls significantly short of the radical reform to the system promised by the Tories in Open Source Planning. Promises to rewrite the appeals system, and to confer on local people the power to hold developers to ransom by selling their support, have been quietly abandoned.

The role of communities in local planning will be subject to significant constraints – neighbourhood plans will need to demonstrate general conformity with existing development plans, substantially eroding their capacity to frustrate allocated housing sites and adopted housing targets – while the Neighbourhood Development Order and Community Right to Build mechanisms might create limited powers to facilitate development but contain none to prevent unpopular schemes.

Proposals for other community rights might sound the part but deliver little benefit. The much vaunted "right to buy assets of community value", for example, will create no such right in practice, while the "right to challenge" in relation to public services looks likely to be a little-used measure of limited value to communities.

Meanwhile, delivery of the growth referred to in the flurry of announcements in the spring appears to remain as elusive as ever. Following the controversial abolition of regional strategies last year – "freeing councils from top-down targets", as the Government puts it – the BNP Paribas survey recently forecast (based on current trends) a 13% cut in council housing targets, amounting to a 30% drop in completed dwellings.

This is no surprise; the CLG Select Committee Report had earlier described the situation following this decision as "a hiatus in planning, which can only have a detrimental effect on the economic recovery." Yet the Government's planning proposals to kickstart that recovery appear ill-suited for the job. It seems inconceivable that either the New Homes Bonus, or Land Auctions, or the Build Now, Pay Later, scheme, for example, or indeed any of the other recent initiatives, will be capable either on their own or in combination to bring about the huge increase in investment required.

The picture, then, is one of compromise, and a somewhat unhappy one at that. As the CLG Committee noted in another of its reports, "the concept of 'localism' is far from new, nor is it particularly controversial." It is the manner of its application in the current economic climate that has caused so much anxiety in the industry. This, according to the Committee, "has thus far been marked by inconsistency and incoherence". One of the reasons for this is surely the fundamental tension between the need to secure development for the sake of economic growth and the desire to put planning powers in the hands of the communities expected to accommodate that development.

Perhaps the answer lies in the emerging National Planning Policy Framework. The signs in the consultation draft issued by CLG on 25 July are positive. There is to be a new, powerfully-worded presumption in favour of sustainable development and strong encouragement to councils to adopt a proactive approach to supporting economic growth.

The draft states that decision-takers should assume that the default answer to development proposals is 'yes' except where this would compromise the key sustainable development principles in the framework. The framework should help to inspire much-needed confidence within the development industry. At the same time, however, it is clear that the protection of the environment will be a strong theme running through the framework.

Striking this delicate balance is surely as desirable as putting power in the hands of local communities. It is also likely to be more effective as a driver of the right sort of growth. Despite much criticism over recent months, the Government will go some way towards resolving the tension at the heart of its objectives, and thus deserve considerable applause, if the National Policy when finally published achieves this important balance.

Michael Gallimore is a partner and head of planning and Harry Spurr a barrister at Hogan Lovells.