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It is a novel experience for me to stand in the Chamber debating a spending Bill in connection with a Government proposal which, as we heard from my hon. Friend the Member for Rayleigh (Mr. Francois), is merely the leading option of many, and has yet to be enshrined in substantive legislation. The Financial Secretary gave us a number of pointers and teasing suggestions about what might be included in a subsequent substantive Bill, but he referred several times to the conditionality of the Bill, using the “if”
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word. I have heard of floating ideas through the media, but now they are being floated through Parliament. We are here this evening to throw money at the issue—not inconsiderable amounts of money. In answer to a question, the Financial Secretary said that we were talking about £40 million. I note from the explanatory notes that we are actually being asked to approve expenditure of £52 million on we know not what, at this stage.

I have had the pleasure of being involved in some pre-legislative scrutiny, which I think is an extraordinarily good idea, but asking the House for pre-legislative expenditure strikes me as a dangerous precedent. I fear for the future during my involvement in this House under the present Chancellor if, in his anticipated new role as Prime Minister, he seeks support for many other measures of this kind.

I should like the Minister to give some idea of the running costs that we can expect for the additional branch of Her Majesty’s Revenue and Customs, and how they would interrelate with any savings that might be found in planning departments of local authorities if a large part of the function of negotiating agreements with developers and planners were subsumed in HMRC. I share with my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) the privilege of serving on the Public Accounts Committee, and there has been remarkably little resemblance between actual and budgeted expenditure on any information technology project that we have examined since I have been a member of the PAC. I sincerely hope that if the Bill is passed, HMRC and the Treasury will be called to account and required to show the Committee what it ends up spending rather than what it planned to spend.

Let me deal with some of the wider issues raised by the Bill. In his 2005 pre-Budget report, the Chancellor described the planning gain supplement as “a local tax for local people”. We have heard very little about “localisation” in today’s debate. What we have heard is that it will be the Treasury that takes control of not only the calculation of the tax—which will be taken away from local people—but the collection of it, and the distribution of a large proportion of the receipts. The tax may be paid by local people, to the extent that local developers and landowners will be paying, but it will be determined by the Treasury—the clunking centralised fist of the present Chancellor and his successors.

The Financial Secretary gave us a glimpse of how much might be left to local people when he referred to 70 per cent. of receipts reverting to the local authority area. That raised considerable concerns on the Opposition Benches, and among the Labour Members who were brave enough to express them. I would like to know—perhaps the Minister can shed more light on this in her winding up—who will determine where that 30 per cent. that will be taken from the local community will go. Will it be the Treasury, or the regional government office? It was denied earlier that it will be the regional assembly, which is good news in a way, but who will it be, if not either of those parties?

I remind Members that we were given one other clue: we were told that receipts would be ring-fenced within national boundaries. So the region—or, rather, the nation—of Scotland will retain its 30 per cent. I took
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that to mean that England will, perhaps, be lucky enough to retain its 30 per cent. but if it is intended that there will be a lower level of regional allocation, that would be useful to know. We have heard that adjacent regions might have a call on that 30 per cent. That is not the right way to proceed; the areas that will suffer from the blight of the development should receive the financial benefit.

Anne Main: My hon. Friend used the phrase “have a call on”. I asked whether there was any bid process to ask for some of that funding back, and there is no method for that, so it is strictly an allocation process from the centre. It will be given out if certain people think fit, and a local community cannot ask for it back.

Mr. Dunne: I am grateful to my hon. Friend for pointing out the difficulty that local communities will face in bidding for that funding. What she mentions does not appear to be part of the Government’s current plans.

The other area that caused me concern was the use of the word “area”. It was clear that we were talking not about the local authority but about the local authority area. In my county of Shropshire—I am pleased to see that the hon. Member for Telford (David Wright) has returned to his place—we are in the midst of a debate on whether we should move from a two-tier structure to a unitary structure. The word “area” currently has connotations of a unitary area. Therefore, in Shropshire, which is a large county, funds raised from my constituency could be spent 50 miles away in the hon. Gentleman’s constituency, or further north, in north Shropshire. As far as my constituents are concerned, that is not the local area.

Another aspect that causes me concern is that many local councils will lose control of a substantial proportion of their revenues.

David Wright: The hon. Gentleman is making a constructive speech, and I think that Members of all parties can agree that he is posing the right questions. Protection of the rural environment—greenfield sites—is an issue in Shropshire. Does he agree that if infrastructure spending can be transferred to a place such as Telford—or, indeed, the fringe of the west midlands—we can protect green space in rural areas better? If we facilitate development in towns and the west midlands conurbation, that is better than taking sites in south Shropshire out of green use.

Mr. Dunne: The hon. Gentleman makes an interesting point. However, if rural areas suffer development and generate revenue for the wider good, funding resulting from that should largely be spent in the area where the development has taken place, not remotely, many miles away or in a different area, which I think is the intent behind the 30 per cent. funding going centrally for distribution on a basis that we know not, at this point.

I was about to address a source of revenue for local authorities that they would lose under the proposals. At present, section 106 agreements can give rise not only to some community gain in development terms,
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but to substantial funds that local authorities can use to spend according to their own priorities, which might or might not be directly related to a planning issue—or alternative planning issues, such as building a car park or more affordable housing. That is one of the few sources of discretionary revenue available to many smaller councils. It would be difficult for those councils if they were to lose that revenue source as a result of the introduction of planning gain supplement.

Let me turn to the scope of the proposed planning gain charge. There has been much comment in the various Government consultations on how it should take effect. We heard from the hon. Member for Stoke-on-Trent, North (Joan Walley)—whom I am pleased to follow—that many aspects remain opaque at best. She called on her Front-Bench colleagues to pursue discussions with interested parties to try to define the scope of the tax clearly so as to prevent a number of anomalies from arising.

I was pleased that the Financial Secretary said that home improvements would be excluded from the tax. I was also interested when he said that the tax would apply to small-scale residential developments. I am concerned that it also appears that it would apply to affordable housing. If that is the case, land brought forward for affordable housing would become more expensive, which might restrict the supply of affordable housing, particularly in rural areas where schemes might be small or for single plots, and therefore be developed on their own, not in conjunction with larger market housing schemes. I urge the Government to consider in detail the rural-proofing aspects of the tax when drawing up any eventual Bill.

We currently face challenges in our rural economy in trying to encourage farm diversification and appropriate environmental improvements in rural areas. It would be a great shame if they were put at risk or jeopardised by an ill-thought-through planning tax that could, for example, affect the construction of waste slurries on an agricultural holding, which would suddenly require planning consent, or affect such things as flood defences or waste energy plants.

We have heard plenty of historical examples, nicely encapsulated by the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), of the fact that a lot of effort goes into finding ways around land tax surcharges. That has been the history of all five of the previous schemes introduced, as has been rehearsed this evening. My principal concern about any such tax that the Minister seeks to introduce is that it is highly likely to reduce the amount of land brought forward for development, rather than to increase it. That has been the history of previous attempts, and I fear that it would be the history of this one. The reduction of the supply of land will have the inevitable consequence of increasing the cost of available land, in contrast to the Government’s arguments in response to the consultations. Therefore, it will have the consequence of increasing house prices.

I shall now briefly turn to the section 106 scheme now in operation across the country. It has a number of acknowledged difficulties, but it has worked relatively well. In my area it works well in delivering affordable housing and other planning gain to the community. My concern is that if it is to remain, how are we to avoid the ramifications of a double taxation system? If local
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authorities can still impose section 106 agreements for community benefit and we also have a planning gain supplement of whatever percentage the Government choose, we run the risk of driving development out of an area because of excessive demands on the developer and the elimination of profit, which drives development in most cases.

If planning authorities continue to levy a section 106 agreement and retain 100 per cent. of the cash contribution—if that is the manner in which the charge is made—there will be little incentive for them to do anything other than secure as high a section 106 agreement charge as they possibly can, rather than charging a planning gain supplement, at least 30 per cent. of which they could lose. The interaction between those two charges could lead to some very perverse consequences. The Government need to establish a clear explanation of, and division between, how those two charges will work.

Another question is how the levy will be paid and at what point. I am thinking in particular of greenfield land, which is subject to a long development lead time, but the same is true of some brownfield land. There is a significant brownfield site in my constituency that the local regional development agency is hoping to contract to purchase. It has been under-exploited since manufacturing ceased a couple of decades ago, and it has been a blight on the edge of Bridgnorth. Such land deals take a long time to negotiate and are normally done by means of an option rather than a direct contract, and an option is not a contract. If the charge is to be levied at the point at which the gain takes place, that might well be many years after the contract has been signed—when the land is developed and the property eventually built on it is sold to an investor. At what point will the charge come in, and which party will bear the charge? All these things need thinking through very carefully to ensure equity in the process, and to ensure that whoever secures the gain also endures the pain.

Finally, I want to give an example of a development tax in operation in my constituency. It applies to residential developments as small as single dwellings, and was introduced by South Shropshire district council only three months ago, at the beginning of October. The Liberal Democrat-controlled council introduced a tax of 50 per cent. of build cost, and in line with its calculations, it has charged £60,000 per dwelling. The tax was introduced following a moratorium on open market house building on single plots for anything other than affordable housing. Demand has increased in my constituency, given the severe shortage of housing in the area. The House will not be surprised to hear that despite that pent-up demand, there has not exactly been a flood of applicants to pay this considerable tax. In fact, there has been only one application for a single plot since this magnificent policy was introduced. Of course there has not been a flood of applicants, because this is an excessive tax, not a reasonable one.

That example illustrates well to the Minister the importance of proportionality. As a number of Labour Members have said, the tax must be introduced at such a level that it will not restrict yet further the amount of available land for development. It must be seen to be a reasonable tax that is bearable to pay, in view of the
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gains that have been received. In my view that is the best way to ensure that if the tax is eventually introduced, it will not reduce supply and drive up costs.

6.33 pm

Mr. Brian Binley (Northampton, South) (Con): I apologise to the Minister for not being present for her opening words. May I say that I saw a wedding photograph of her in a long, midnight blue dress and was most taken aback? I hope that that in some way mitigates her concern at my missing her opening speech. [Interruption.] I apologise—apparently, her colleague made the opening speech. I did say that I was not here then, Mr. Deputy Speaker, and that proves the point conclusively. By the way, the dress was beautiful.

I should declare an interest as a county councillor for Northamptonshire, a county that is heavily involved in the sustainable communities project. Let me give the House an idea of what that project will mean to my county. By 2023, an additional 100,000 houses will have been built there and, by 2031, a further 67,000 will have been built. That could increase the population of Northamptonshire, which stands at some 630,000, by 50 per cent. In other words, it could increase by between 300,000 and 360,000.

The House will appreciate that such a population uplift will place a tremendous demand on the infrastructure and mean that the county will require a further 1,100 hospital beds. By 2031, we will also require an additional 20 upper schools and 60 primary schools. That is to say little of roads or of improving what is a not very good rail transport situation, particularly so far as the connections to London and Birmingham are concerned. It is fair and proper to say that they have improved of late under this Government, but the fact remains that we are talking about a loop away from the main line that will not be able to service the proposed population increases. We already know that there will be a service provision shortfall of some £715 million over the next 16 years. I hope that the House is getting the impression that we face some serious problems and that we need some serious help.

I turn to the Green Paper that has been pointed out to me in no uncertain terms by Labour Members. Incorrectly, we are relying massively on this little Green Paper and the increase in planning gain that it will bring to the people of Northamptonshire. The belief is that there will be a planning gain of between £40,000 and £60,000 per house. It does not take a rocket scientist to work out that, at say £40,000 per house, building 40 houses per hectare will bring in a tax of £1.6 million. Crudely speaking, that is the approximate current price of a hectare of land for development in Northamptonshire. The urban development corporation believes that it might bring in £1.6 million per hectare, and that there will not be an increase in land prices. However, I cannot imagine anybody with any sense simply giving the land to the corporation, so we are left with a conundrum. There is no way in God’s heaven that the money raised by the planning gain supplement will come anywhere near meeting the cost of the infrastructure that the county will require to support the 50 per cent. increase in population.


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David Wright: The hon. Gentleman is making the very case for the Bill, is he not? The policy is to ensure that the resources generated by the tax can be moved from one part of the country, or of a given region, to another—in this case, to support development in his county. Surely that is the very reason for introducing the Bill.

Mr. Binley: It is clear that the hon. Gentleman knows more about what will go on behind the Bill than the rest of the House does. We are told that 30 per cent. of the planning gain supplement will be handled by the Government in one form or another. However, we are not told what it will really be used for, how much it will cost to collect or how many civil servants will be needed to administer it. Most of all, we are not given any guarantee that the infrastructure needed to support the increase in population will be forthcoming from the Government.

A good argument has been made to the effect that people will not sell land at that level of planning gain taxation, so there will be a dearth of land on which to put those 167,000 homes. That point was made by my hon. Friend the Member for Ludlow (Mr. Dunne). The increased population will be forced on us by a Government who refuse to guarantee us the infrastructure required to support it. Therein lies the concern. We have asked again and again for guarantees from the Government of money to ensure that the infrastructure will be in place by the time that those people settle in our county. The Government have consistently refused to give us that guarantee. They want the people of Northamptonshire to accept the extra housing on the basis of a vague undertaking that the taxation will be in place, much of it through this Bill, to supply the necessary infrastructure. We have seen many Government promises over the past 10 years. They do not fill us with confidence.

I do not wish to understate the confidence that I place in the Minister who will wind up the debate. We are fortunate that she is in her position and have had considerable help from her in the past. However, the Government’s record on keeping promises has been abysmal and the people of Northamptonshire recognise that. Our fear is that we will be let down again. We will have the houses dumped on us, but we will not have the infrastructure to support the new arrivals.

I have several questions to which I hope the Minister can reply when she winds up. First, how much does she think should be raised by a planning gain supplement? Unless we know that and can relate it to the number of houses to be built, we have no idea how far the supplement will go towards paying for infrastructure or how much the Government will need to add. Secondly, we want to know whether the Government will guarantee the money for the required infrastructure to the people of Northamptonshire, so that they can proceed with some confidence. At present, they sorely lack that confidence.

Thirdly, will the retained element be used to supply the infrastructure for sustainable communities projects? If so, we need to see the figures, because I suspect that the money to be raised will come nowhere
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near the money that is needed. If the money does not come from the planning gain, where will it come from in general taxation?

Finally, what greenfield sites will be built on to raise the money necessary to provide the planning gain that will answer all the problems with infrastructure? I realise that that is not part of the purpose of the Bill, but it is a vital question. At the moment, in Northampton, we are talking about building 22 houses on brownfield sites, but they will not provide the planning gain taxation necessary, not least because of the cost involved in reclaiming the sites to make them fit for building on.

The Bill fails to answer all those questions and does not give the people of Northamptonshire any confidence. I see smiles on the faces of Labour Members, clearly much cleverer than I am, who do not share my fears. I invite them to come to Northamptonshire and answer the questions I have asked. I would be delighted if they did so—it would help me and the people of Northamptonshire enormously. There is a challenge for you. Let us see you turning up in my town and see who would be smiling then. Many people would not be smiling at you—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I hope that the hon. Gentleman was not including me in those remarks.

Mr. Binley: You are always most welcome in Northampton, South, Mr. Deputy Speaker. If you could give me some dates, it would be a pleasure to put the arrangements into effect.

I beg the Minister to give us some answers to my questions. We are taking on a big project on behalf—it could be argued—of the nation. It will certainly do much to alleviate the most serious problem facing the south-east. Given that that is what we are being asked to do, the very least we deserve is to learn where the infrastructure cost will come from. If the Minister can give us some answers, I and many thousands of people in Northamptonshire would be very grateful.


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