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Mr. Hayes: I shall build on my hon. Friend's point. The position might be disadvantageous to the developer as well. Developers often get, properly, some kudos by having contributed to a local scheme that is popular and that people understand and regard as transparent. If money is given, it will not have the same impact in terms of the local community's understanding. It may not therefore benefit the local developer in quite the same way.

Mr. Turner: My hon. Friend is right. I am sure that a new play area or an extension to a local school, or even some road humps, would be more popular with the local community than a sports centre that is inaccessible by public transport. In some areas, I know that some developers' contributions have been paid in the form of park-and-ride car parks, by payments to public transport and even by works of so-called public art, which in many cases are unrecognisable as either public or art. People resent their money being spent on such ill-chosen things.

That brings me on to a response to the question of whether payments should be made up front. If a tariff is introduced, I understand that the payments are required to be made up front. An up-front payment for a developer may make the difference between the viability and unviability of a development. A payment down stream, if that is the opposite of up front, may be affordable because the profit has been realised on the development.

Mr. Hayes: There are two other aspects. The first is that payment up front may be particularly disadvantageous to small developers as opposed to large ones with large budgets and turnovers. Secondly, high-risk developers may be discouraged. Developers will be

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less likely to take chances if they have already paid in advance. I do not say that I am against payments up front, but these questions must be answered.

Mr. Turner: Those points indeed have to be answered. I shall illustrate what may have been in my hon. Friend's mind, if I may presume to read his mind. A brownfield development may be close to a densely populated area of housing. The people living in that housing have just as much right to the benefits that might accrue from the provision of, for example, a play area as other people who live in areas that are less costly to develop. Yet the developer may not have the capital necessary to put up front into reclamation or remediation, as the Minister calls it, of the brownfield site, and for the provision of a tariff that can be translated into a community benefit. Will the Minister consider whether an up-front payment is the best and only way in which the tariff may be paid?

Mr. Hayes: I do not want to interrupt my hon. Friend's flow any more than is necessary for the development of his own argument, but many in the industry support his point. The Chartered Institute of Housing and the House Builders Federation both draw attention to the problem of developers being unwilling to take risks specifically in respect of affordable housing on brownfield sites or on any site. They may be discouraged.

Mr. Turner: I was about to pay tribute to my hon. Friend's fertile and inventive imagination, but now I understand that I must give credit to the august bodies that he cited. He is right that there is a problem that could mean that no community benefit is received because no development takes place.

My hon. Friend gives me a cue to move on to the housing obligation—the socialist housing obligation, as some call it. My hon. Friend the Member for Cotswold (Mr. Clifton-Brown) referred to the obligation to provide affordable housing and the necessity test. I have no objection to the provision of affordable housing, but I am curious about how the necessity test applies. How can the construction of 24 luxury flats give rise to the need to provide so many units of affordable housing? The provision of additional units of luxury housing does not push up the price of local housing, and it may even have the effect of marginally pushing down the price of other housing. When the Minister replies, will he go into some more detail on the application of the necessity test, and whether it will be broadened as a result of the implementation of new clause 1?

Mr. Clifton-Brown: My hon. Friend will be aware that, because of the Tesco case and others, case law has already broadened the necessity test to the de facto position where we have a de minimis test. I was gently chiding the Minister to suggest that the regulations should clarify the position—exactly the point that my hon. Friend is making.

On a slightly different but related point, the local authority should be able to set different tariffs in different areas according to the existing infrastructure. Clearly, some infrastructure will be poor and some better, so it makes sense to be able to set different charges in different areas.

Mr. Turner: Whether we use the necessity test or a broader test goes to the heart of whether the

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contribution—or a section 106 agreement—is merely a form of taxation rather than a reasonable contribution to the cost of a particular development.

What kind of applications should be free from any obligation to pay the contribution? The Minister has not stated what kind of applications he has in mind. It may be possible to speculate. It may be that he has given some opinion in the draft regulations on which he is consulting, but I hope that he will be able to clarify what kind of applications should be free—and, presumably, free at an England-wide level, rather than free at a local authority level—from a particular contribution.

Mr. Hayes: My hon. Friend is being a little ungenerous to the Minister, because, in response to an earlier intervention, he said that the development of particularly difficult sites, or those that were unlikely to be developed without the enthusiastic involvement of keen developers who may be deterred by obstacles in their way, might not incur such a tariff. But will my hon. Friend test the Minister on issues such as parts of a local authority or regions and parts of the country that desperately need an injection of new development and that might as a whole be excluded from the tariff?

Mr. Turner: I apologise to the Minister for not making myself sufficiently clear. He pointed out that certain sites may be difficult, but I was envisaging in the kind of applications that may be excluded from any obligation to make the contribution, developments such as hospitals, schools or railway undertakings—in other words, what would be erected on the site rather than the nature of the site. Perhaps the Minister could respond to that, and in so doing distinguish between schools and hospitals provided by public and private sector funds, if it is his intention that a distinction should be made in the regulations that he lays before the House.

6.45 pm

My hon. Friend prompts me to come on to whether there should be variable tariffs and variable exclusions within local authorities. Like many large authorities—and, I am sure, some small ones—my local authority has areas of relative wealth and relative poverty. The areas of relative poverty may need certain kinds of development more than others and developers of such developments might be dissuaded were the tariff set at a standard level throughout the authority. Does the Minister intend that there should be variable tariffs within local planning authority areas, and, as my hon. Friend prompts me to ask, that developments in certain councils should be exempt from any requirement to make a developer contribution?

Many people see a section 106 agreement as merely a means of extracting money from a developer in return for a development that almost certainly would take place anyway, even though that it usually contributes to some local benefit, and sometimes to a benefit that is provided city-wide. A park-and-ride scheme is a good example of such a section 106 agreement. The developer's contribution set out in new clause 1—and to some extent the section 106 agreement—begins to look like a tax, rather than merely a payment made to the authority to compensate for the consequences of a particular development. Indeed, it begins to look so much like a tax that I am sorry that The Daily Telegraph

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did not include it as No. 61 on page 3 this morning. This is a tax on development because it is not hypothecated to a particular purpose and it is not a charge because it does not compensate for a particular cost. I hope that the Minister will look carefully at whether the contributions should properly be defined as a charge or a tax. It appears to me to be a tax.

I have only two other points, one of which is on the social housing obligation. In some places—many parts of London are good examples—the profit made from developing housing is so great that the social housing obligation can be met out of profit, and the marginal rate of return on the development is so great that the developer may suffer a bit but not hugely from its imposition. In other parts of the country—parts of my constituency are an example—the marginal benefit from building housing is still regrettably so low that developers wonder whether to go ahead, because they may not make sufficient profit. I am sure that that is even more the case in more deprived parts of the country.

If the developer is not going to make sufficient profit, he will not go ahead, even with private housing, and there will be a dearth of such housing available in an area. Under those circumstances, the only way the developer can meet the social housing obligation is to raise the price of the housing that he builds.

That means that the developer no longer meets the cost of the social housing obligation out of his pocket; in many cases, it is met by first-time buyers who purchase houses that he intended to build in the first place. The price of those houses can be driven up by the social housing obligation. Will the Minister address that issue and refer to the balance that local authorities might strike in drawing up a tariff, variable or otherwise?

Finally, on Wales, the Minister has given us plenteous and generous assurances about the regulations that he intends to lay before the House setting out the details of the path that he wishes to take. For our part, Opposition Members will make a judgment on those assurances. I am sure that we will have faith in him and believe what he says. We may conclude that those assurances are not good enough, but at least a clear set of assurances will have been given. We have no such assurances from the National Assembly for Wales. Nobody has spoken in this House for the Assembly; indeed, nobody can do so. Have there been any discussions behind the scenes between his office and the Assembly that allow him to say that the Assembly concurs with the assurances that he has given?

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