Examination of Witnesses (Questions 300-319)
YVETTE COOPER
AND JOHN
HEALEY
18 MAY 2006
Q300 Chairman: Minister, we will
probably have to let you go to your committee.
John Healey: If there are any
further questions, particularly to me, then I would be delighted
to answer them and I am happy to do so now. Thank you very much.
Q301 Chairman: I suspect there will
be quite a few. Thank you very much. Minister, I am sorry to have
kept you waiting. Can we go back to one of the points that we
have explored slightly before. How important do you think it is
that there is a visible link between the places where the funds
are generated and where they are spent?
Yvette Cooper: I think that is
why we have said we think the majority needs to go back to those
local authority areas, that there is very considerable advantage
to people feeling that the resources that are raised, the planning
gain that comes from having new developments, new houses in that
area, are also used to benefit that local community. We do also
know that within an individual local authority area there might
be a greenfield site where there is a very high planning gain,
for example, but only a limited infrastructure requirement, and
very close by a brownfield site with some very difficult remediation
costs or some infrastructure requirements. Therefore, we think
local authorities should be able to have the flexibility to look
at using gains from one site to have an impact on another and
to use the infrastructure for another as well. It is because we
think there is very considerable value in the sense of local communities
themselves being able to share in the planning gain within that
area, which is a result of growing the local community and providing
additional houses or additional development, which is why we have
said that we want the link to be very clearly to those local authority
areas.
Q302 Mr Olner: Being one of these
elderly ones who can remember the Community Land Tax many, many
years ago and it failed basically because of the exemptions that
were given then. Have you any views on whether and what land should
be exempt from the Planning-gain Supplement? In your own mind,
do you see a differential between planning gain on land that is
used for residential and land that is used for industrial or commercial?
Yvette Cooper: We propose that
it should apply to all kinds of land rather than simply to residential,
partly because we thought it was important not to distort the
market, not to have a distortion and an incentive to use land
in one particular way rather than another. Therefore, that was
the reason for applying a PGS approach across the board, but obviously
that is something which we are consulting on. As part of the consultation
we also raised the potential to have a different rate for greenfield
and for brownfield sites. Again, that is something where we are
looking at the consultation responses. The reason for thiswhich
was something that Kate Barker had also consideredwas if
we want to continue to prioritise brownfield land, and given that
we also know that there can be additional remediation costs and
additional costs which need to be taken into account for brownfield
land, therefore having differential rates might be a good way
to promote the brownfields development further. Therefore, that
was something we thought we should consult on. There have been
a series of exemptions which have been proposed in some of the
responses to the consultation. We have not proposed specific further
exemptions because we thought the approach should be as simple
and as broad-brush as possible, but obviously we will consider
the responses to the consultation.
Q303 Mr Betts: You mentioned previously,
Minister, the estimates you have done and I was slightly surprisedI
think I have got the figures rightthat 1.2 billion has
been negotiated in section 106 agreements but only £600 million
has been spent as a result of them. Have you got any estimates,
therefore, as to what the figures will be under a changed arrangement?
For example, how much less will be the scale of such section 106
arrangements compared with what they currently are and how much
more will be raised through PGS as a replacement or, indeed, as
an additional revenue stream?
Yvette Cooper: The figures I gave
you, the 1.2 billion and the 600 million, were just for affordable
housing. That was just the section 106s for affordable housing.
Obviously we have said that affordable housing will continue to
be in the revised section 106. This is for 2003-04 and obviously
it will vary from year-to-year depending on development new build
levels in that year. The total value of planning obligations was
1.9 billion in 2003-04, of which 1.1 billion was actually delivered.
The 1.9 billion was what was agreed in planning applications and
1.1 billion was what was delivered through planning obligations.
At this point we have not got a figure for what a revised section
106 would gather because that depends on a whole series of further
estimates about exactly the way in which you draw up a revised
restricted section 106 as well as a whole series of other estimates
and assumptions about PGS as well. It is something that we are
working on.
Q304 Mr Betts: If you are going to
retain section 106 for affordable housing then presumably one
could assume that the affordable housing revenue in the future
will be no less than it is now and, indeed, by encouraging those
authorities which do not pursue it to pursue it in the future
there will be an increase. Is that your intention?
Yvette Cooper: I do not think
that is an unreasonable assumption but, equally, what I cannot
say at this stage is exactly what figures we will be working to
because it is a work in progress.
Q305 Mr Betts: It is rather peculiar,
is it not, that we will be keeping section 106 in place for affordable
housing when it looks as though the delivery of affordable housing
is running at about 50% of what was agreed and the rest of section
106, therefore, comes to about 700,000 a year, of which 500,000
is delivered, so the delivery rate is actually higher on that
element you are proposing to scrap.
Yvette Cooper: I think this raises
some very interesting further questions and this is why I am not
able to give you definitive answers at this stage. We are in the
process of looking a lot further at what the consequences might
be for affordable housing delivery. You could make the argument
that affordable housing should come out of this, affordable housing
should all be done through PGS, you could take that approach,
but the reason we did not was because we felt that affordable
housing was so important we did not want to do anything where
in transitional arrangements there might be any risks to affordable
housing, but also in particular because of this idea that we do
want developers to think of affordable housing as being part of
the costs of their delivery, part of what they should be doing
on those sites because they should be building mixed communities
and in those mixed communities they should be including affordable
housing. Rather than seeing affordable housing as something which
is a bill they have to pay that is separate from them, that is
not an obligation on them, that goes through and ends up with
the authority, they should have some responsibility for delivering
affording housing on their site and that should be inbuilt into
the process. Those were the thoughts behind affordable housing.
The tenor of your question is can we be confident about delivery
levels and what is going to happen in terms of delivery of affordable
housing. We are very conscious of that and our clear aim in this
is to make sure that over time we are able to increase the delivery
of affordable housing, so that is a fairly important question
that is driving the additional work and research that we are doing.
Q306 Lyn Brown: Given that affordable
housing provides for difficult and lengthy section 106 negotiations,
and you are retaining this in the scope of your planning applications,
how do you think PGS will result in a faster and more efficient
planning process?
Yvette Cooper: It will take other
things out. It will take some of the offsite issues out of the
section 106 agreement. It might be possible to better smooth the
process of agreeing affordable housing in section 106s as well
and that might be something you could look at as part of this
whole debate. We do raise the issue in the planning consultation
and in the consultation on the planning gain supplement about
whether we should have a more standardised approach to the provision
of affordable housing as part of revised section 106 agreements.
That is something we are looking at as part of this.
Q307 Lyn Brown: We have had witnesses
who have argued that PGS will make marginal projects more unviable
and thwart your intention of increasing housing supply. Do you
agree with that analysis? If you do not, what is your evidence
base?
Yvette Cooper: Kate Barker's interest
in the Planning-gain Supplement from the beginning was that it
was value sensitive. If you have a site on which there is not
much gain through the planning system because of the marginality
of the project, because of the costs, the remediation requirements,
for example, for a brownfield site, the complexity of the site
and so on, or because of what it was used for before, maybe it
was already used for a whole series of commercial or retail developments
or housing and residential developments, and maybe for all sorts
of reasons there is hardly any gain through the planning system,
under those circumstances as a result there will be hardly any
Planning-gain Supplement paid. The benefit of the PGS approach
is that the amount that is paid is proportionate to the value
uplift as a result of the planning system. Given that the planning
system itself imposes value on sites, it is because we have a
value system that the values of a lot of sites are what they are
and without the planning system the value would be completely
different, and given that it is the planning system that creates
a lot of that value it therefore seems appropriate that a proportionate
share of that increase in value should be shared by the local
communities as well.
Q308 Mr Betts: Have you made any
estimates as to how much revenue you think you could raise from
the new system without causing land-banking and actually reducing
that amount of development?
Yvette Cooper: Work is being done
at the moment to look at different revenue consequences and that
sort of modelling, so that work is underway at the moment. Also,
what you need to look at is what the impact is on development
and so on. That work is underway and will inform the decisions
that are taken.
Q309 Mr Hands: I have two questions.
First of all, all of your talk is about value uplift in the market
but has any consideration been given to what would happen if property
prices, land values, were in a downturn? In such a scenario the
UK would almost certainly be in a recession, or about to enter
a recession. If a lot of the infrastructure development that you
have got proposed is dependent on Planning-gain Supplement to
finance it and it suddenly dried up because there no longer was
any value uplift, at precisely the same time as Britain would
need infrastructure development to avert the costs of the recession
do you not see that being a potential danger that Britain could
effectively grind to a developmental halt at that time?
Yvette Cooper: Obviously the first
thing to say is we should all be grateful for those critical decisions,
that I know you supported, to make the Bank of England independent
and the greater stability that we have had in the property market
as well as the market overall. The second thing to point out is
that the planning gain is not based on long-term market increases
in the value of land, it is based on the increase in value that
takes place as a result of the planning system. So it is the comparison
between the current use value under the current market conditions
and the planning use value under the current market conditions.
It is not like capital gains tax, for example. It is not based
on what happens to a piece of property or a piece of land during
the market. It is based on the difference that takes place as
a result of a planning system. You can envisage ways in which
market conditions might affect that but, nevertheless, it is the
planning system that increases value at every point in the market
whatever the market conditions might be, so therefore it would
be less cyclical than you were initially suggesting.
Q310 Mr Hands: Nevertheless, if you
take a scenario like the early 1990s or the mid 1970s your planning
gain would have been very, very small, minimal if anything, compared
to the infrastructure needs or the desire to reflate the economy.
Yvette Cooper: If you think about
the difference in value between agricultural land and residential
landthose are the most obvious extremeswhere agricultural
land at the moment in current use is something like £9,000
per hectare and residential use is currently around £2.4
million per hectare, that is a pretty massive gap. Whatever position
you are in in the cycle you are still going to have a very significant
gap between agricultural land value and residential land value.
There are cyclical factors that always have to be taken into account
in tax systems, are there not? There are cyclical factors that
always have to be taken into account in the fiscal decisions that
governments make. That is why we have the fiscal rules which are
all about managing expenditure over the cycle. You always have
to take those sorts of things into account. I think this is less
cyclical than you are suggesting for exactly the reasons that
I have suggested, but to the extent that any income is cyclical
then those are the sorts of decisions that treasuries always take
into account.
Q311 Mr Hands: My understanding of
this system would be that it probably could not be introduced
before about the year 2008 and obviously at that time we are working
on the assumption that we will be approaching a General Election.
If another political party were to pledge to abolish the PGS system
is there not a risk that you could bring all development to a
halt for one or two years while land-banking went on because developers
would figure they were better off waiting until the result of
an election?
Yvette Cooper: We said in the
consultation that the earliest that we could introduce this would
be 2008, not least because of the amount of work that we need
to do in advance but also because of the issues around transition
that need to be taken very seriously as well. I think it would
be very unwise for an opposition party to pledge to reverse a
PGS or to get rid of a PGS given that the opposition parties are
now, at least in theory, committed to increasing the level of
housing across the country and recognising that there is huge
need for additional homes across the country. Frankly, the infrastructure
for those homes has to be funded somehow and you will have to
get the resources from somewhere.
Q312 Lyn Brown: Given that PGS has
the potential to create fairly good revenue streams for local
authorities, do you think there is a risk that local authorities
will favour developments that will produce a higher monetary yield
rather than other developments that might be more important for
sustainable communities, for instance things like sports facilities?
How might you ensure this does not happen? Given that things like
leisure and sports facilities are so important to sustainable
communities, do you think they should be included in regional
spatial development plans or local development plans?
Yvette Cooper: To the extent that
PGS becomes an incentive to take one decision rather than another,
you could argue that section 106s would have the same effect.
Ultimately, local authorities have to take responsible decisions
in the interests of the whole community and they are democratically
accountable for those decisions anyway, so they ought to be able
to take account of there are much needed sports facilities and
so on, and not end up rejecting applications for those on the
wrong basis. To the extent that sports and recreation ought to
be part of other planning systems and planning strategies, if
I may I would like to think about that further and write to you.
Q313 Lyn Brown: Can I take you a
little bit further on that. Thank you for that answer. Sport England
created a system whereby they came up with a figure of how many
swimming pools per population were needed. Do you think that within
the sustainable communities development programme, given the complexities
of the section 106 and PGS, we might look at a system that took
that methodology and applied it to other leisure and sporting
facilities for communities so that a local authority has a yardstick
against which to judge whether or not the decisions they were
taking with regard to planning permissions and planning applications
were, in fact, in the best interests of their communities?
Yvette Cooper: I do not know the
detail of the Sport England research, so what I will do is look
at that before I write to you on the issue. We do build into the
planning system obligations for green spaces and open spaces.
I have been advised that the practice guidance that we are drawing
up on section 106 supports the Sport England approach.
Q314 Lyn Brown: Excellent.
Yvette Cooper: A nice simple answer.
I will write to you further about it. We do already have much
more detailed planning guidance, however, about the issue of open
space, sports playing fields and things like that. That is already
strongly embedded in one of the main policy statements. The only
other thing I would add is that with some of the investment for
growth areas we are funding sports and leisure facilities as well.
Lyn Brown: Fabulous. I will just say
that sports and leisure includes culture as well.
Q315 Alison Seabeck: I want to ask
a question about the Community Infrastructure Fund. In Barker
it talks about what is the entitlement at local level that goes
into the Community Infrastructure Fund. Can you give us some reassurance
that this will be additional money and there will not be a government
sleight of hand where PGS goes in but actually the level of funding
does not increase?
Yvette Cooper: We only set up
the Community Infrastructure Fund on a short-term basis. It is
a £200 million short-term fund. We have not set out a long-term
future for the Community Infrastructure Fund. What we have been
clear about from the very beginning of this is this is about funding
the additional homes that we need and increasing the number of
homes from around 150,000 a year to 200,000 a year by 2016. That
requires additional investment on top of what we are investing
at the moment, on top of the funding that the Government is putting
in and on top of the funding that section 106 is putting in. What
we have been clear about is that the overall funding for infrastructure
will need to increase. How much of that comes through PGS and
how much of that comes through Communities Infrastructure is not
something that we would be in a position to say at this stage.
It will depend on how much you are able to raise through PGS and
what alternatives there might be as well.
Q316 Alison Seabeck: That is an interesting
answer but in terms of the infrastructure who is going to arbitrate
on this fund? Roads are required all round the country, are government
departments going to be at war with each other? Will the CIF,
or whoever, be at war with the Department for Transport over who
pays for which bit of road? Is there any clarified thinking on
how the non-local funding will be dealt with?
Yvette Cooper: On the CIF that
we have run so far, which is resources supplied by the Treasury,
the £200 million, the decisions have been made by the former
Office of the Deputy Prime Minister and our department with the
Department for Transport. They have been made on the basis of
really looking at which were the most important strategic pieces
of infrastructure that were needed to support the additional homes.
It was predominantly about the growth areas that have been identified
and homes that were needed. There were broad criteria for making
those decisions. Clearly you need to continue to do that. Potentially,
however, there are other things you need to look at like what
the role of the regional bodies might be taking a view about priorities.
You ought to have far more of a sense of prioritisation at both
the sub-regional and regional levels about where the most important
needs for investment might be. We are having discussions on the
Thames Gateway as part of the Thames Gateway Strategic Forum where
all of the local authorities involved in the Thames Gateway, all
of the UDCs and different agencies involved in the Thames Gateway,
are coming together to try and have a much clearer sense of their
priorities across the Gateway for the infrastructure rather than
it simply being Government taking decisions on the basis of the
bids that come in. To be honest, the more you can get that kind
of local centred prioritisation, either a sub-regional or regional
sense of prioritisation, you will be far more effective in terms
of allocating funding.
Q317 Mr Betts: If we bring the new
system in, replacing the traditional section 106 with an amalgamated
form of some kind, it is quite possible on some sites that the
amount of planning gain captured for the public good will be different
from what it would have been under the old system. In terms of
how that would operate in practice, presumably any site with planning
permission already given when the new system comes in would have
to abide by whatever agreements had been reached on 106 and there
would not be a Planning-gain Supplement. At some point if that
land was not developed after three years the planning permission
would lapse, as I understand it, and now it is not automatically
renewable. Would it be the case that if the site was put up for
planning permission again it would be subject to the new regime
which had come in in the meantime?
Yvette Cooper: A lot of this will
depend on what transitional arrangements were put in place. The
principle of any approach you would take is if the PGS applies
at the point at which planning permission is granted then obviously
previous planning permissions have been granted in advance of
that regime and, therefore, would not be covered. In the situation
you are describing of having to go through the process again,
clearly it would depend on what transitional arrangements were
in place. There is a whole series of things you have to work through
with the transitional arrangements: how do you treat things where
you have got options; how do you treat things where you have got
hope value built into previous decisions to buy land. Kate Barker's
analysis was that in the long-term the impact of the PGS would
be passed on to the landowner because of the way in which the
planning system works. What you need to do is to look in the transitional
period exactly how that would work.
Q318 Mr Betts: Could I come on to
the point you were raising a minute ago. I think most people have
sympathy with the idea of trying to keep things local or at least
sub-regional so there is a relationship between the development
and the resources raised. Clearly you can identify parts of the
country where there is a mismatch between the potential to raise
resources through planning gain, perhaps because of fairly low
land values, and the need to build infrastructure. When they came
to see us English Partnerships said that they saw a major role
for them in helping and assisting in that sort of situation. Do
you see that continuing and, if so, do you see the resources for
English Partnerships to do that coming from the Planning-gain
Supplement or from somewhere else?
Yvette Cooper: I think it depends
what you are talking about. If the argument is that there is some
regional infrastructure needed that is important for regional
economic development, for example, which would not come out of
planning gain from housing then you might be looking at whether
it is through English Partnerships or Regional Development Agencies
or different sources of funding if you were making a different
kind of argument as to why the infrastructure was needed. The
only thing that it is possible to say at this stage is that we
are looking at the Planning-gain Supplement alongside the cross-cutting
spending review. As well as looking at what the different consequences
might be of different kinds of approaches to a PGS and where the
resources might be raised, we are also looking at where the infrastructure
needs are. Broadly, the evidence is that the infrastructure needs,
particularly for new homes, are in the areas where land values
are highest because those are the areas where demand is greatest
so broadly, even at this stage, it is possible to identify quite
a strong correlation between infrastructure requirements and the
needs in terms of the new homes for the future. We are doing a
lot more detailed assessment of that and we are looking at that
alongside the wider spending review decisions as well.
Q319 Mr Betts: The concern then would
be that, therefore, you have a demand led process whereby there
is demand for new homes in the South so infrastructure follows.
I am not saying some of that should not happen but just take the
coalfields area of the Dearne Valley, spending more on infrastructure
in terms of communication and links to the nearby job centres
in Sheffield or Leeds might promote the desirability of those
areas to build new homes in.
Yvette Cooper: Which is why I
think you are talking about other kinds of bodies there as well,
things like the Regional Development Agencies. You are talking
about regional development and a wider issue than simply about
the needs for infrastructure for new homes.
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