The most significant change in retail planning guidance for more than a decade is about to take place. In less than eight weeks the government will unveil details of its draft revision of 2005's Planning Policy Statement 6 (PPS6). A key plank of the reform will be the abolition of the much maligned needs test, which was introduced by the Tories 11 years ago to reverse the slow death of the town centre by restricting rampant greenfield development . But will it really help increase competition in the grocery market as the government hopes - or could it do the opposite? For the past decade or so, any retailer wanting to develop a new store has had to jump through the three hoops of the needs, sequential and impact tests. The needs test, in particular, has attracted flak. Sainsbury's, which has lobbied vociferously for its abolition, argues that edge-of-town sites are often the only areas left that can be developed. As soon as one large scheme has been given the green light, any others are effectively prohibited because the need will be deemed to have been satisfied. "Edge-of-town locations are often the nearest you can get to centres. If there is already a large format store out-of-town, that will have soaked up all the available need," says Sainsbury's regional town planning manager Matthew Nicholson. It is not just edge-of-town schemes that are jeopardised, says Asda, which has also been vocal in its opposition. It argues that the regime essentially prevents the entry of newcomers to local markets. "In practice, the planning regime means there is only a limited number of 'permits' to trade groceries from a supermarket in a particular town," says John Longworth, executive director at Asda. "As a result, the incumbent 'permit holders' are not subject to the normal threat of entry." The government appears to have taken these criticisms on board. In May, during the launch of its planning White Paper, Ruth Kelly, then secretary of state for communities and local government, described the needs test as a "blunt instrument". Kelly was prompted by former CBI economist Kate Barker, whose review of the entire planning system has framed ministerial thinking and formed the basis for the white paper. The paper stated that the government would "replace the needs and impact tests with a new test that has a strong focus on our town centre first policy". This test would promote competition and improve consumer choice, while "avoiding the unintended effects of the current needs test", it promised. A clearer picture of what this new test will entail will only begin to emerge when the draft policy statement is issued in September and that's likely to undergo further revision as the Competition Commission inquiry findings, published early next year, are taken into account. However, Asda would like to see a new 'competition test' introduced that would restrict supermarkets already present in a local market from setting up an additional store, stopping any one player from having a monopoly in 'permits to trade'. In her review, Barker agreed that the needs test should be replaced by a competition test, but said the other tests could remain, though there would need to be a rethink of the sequential test, which prevents supermarkets from developing out-of-town if town centre sites are available. The impact and sequential tests were being interpreted too stringently by councils, she argued. Guidance should focus on "broad strategy" rather than "potentially inaccurate forecasting", be less prescriptive and take into account the benefits of a new store. "More accessible sites may be less economic to develop and the requirement that applicants be flexible in their business model may raise barriers to entry and limit costs," she reasoned. Edge-of-town-centre sites will be the main beneficiaries, believes Savills partner Jeremy Hinds. "Planners will have to take into account whether a proposal in a certain location will affect the town centre. But the retailer could also point out the economic benefits of a store and why it has to be built and run in a certain way. The importance of retail employment will be a factor." However, not everyone is convinced that the changes will have the desired effect. In Tesco's submission to the Barker Review, it argued that competition was not purely dictated by location. "The degree to which planning constraints are likely to impact on competition will depend on the degree to which new development is a key competitive weapon," it said. "While this may be an important factor in other UK industries, in retail this is limited. Most retail competition is fought around price, product range, product quality, retail service, brand and availability. Getting these things wrong, irrespective of the stores held, is a recipe for failure." There was still plenty of space left to develop, it added. Other players are opposed to change. Waitrose, whose heartland is town centre sites, says it wants proof that a viable replacement to the tests will work. "Without a robust and effective replacement to the needs test, future private sector investment in town centres will be at risk," says Nigel Keen, director of development. "We await detailed government proposals, which we hope will continue to prioritise town centre development and support increased consumer choice." Smaller shops are equally sceptical. "Sometimes planning authorities should be able to say no to large retail development," says Shane Brennan, ACS head of public affairs and communications. "There has to be a clear, objective way of assessing the economic impact of a new development out-of-town, which we believe the needs test delivers. We are not convinced by the Barker line that the existing tests are robust without the needs test, as you cannot conduct them without the data from the needs test." Once the draft version of the new- look PPS6 is published, the long consultation will begin. The Competition Commission inquiry findings will play an important role. But with the writing already on the wall for the needs test and opinion divided over what it should be replaced by, it may be some time before either retailers or shoppers see the benefit. That's if they benefit at all. n