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5.40 pm
John Healey: I beg to move, That the Bill be now read the Third time.
This Bill is a short, straightforward measure. It is a one-page, three-clause paving Bill designed simply to ensure the regularity and propriety of Government expenditure in accordance with Government accounting rules—no more, no less. As a narrow preparations measure, it obviously has nothing to say about the underlying policy, nature or operation of a planning gain supplement, although many Members have had much to say about such matters during our deliberations. In fact, I welcome that level of interest, along with the expertise demonstrated in all parts of the House, which has contributed and will continue to contribute to our thinking on the policy of a planning gain supplement.
We have approached the question of whether to introduce a planning gain supplement—and if so, how best to design it—with a degree of caution and a significant degree of consultation. We published a wide-ranging consultation document in December 2005 on the principle of a planning gain supplement, and on 6 December 2006 we published three further consultation documents. The consultation will close on 28 February. The Treasury Select Committee commended the Government on our measured approach to these proposals. It said:
“We welcome the measured way in which the Government is consulting on and taking forward proposals for a Planning-gain Supplement.”
That process and approach will continue, but the Bill authorises three parties—Her Majesty’s Revenue and Customs, the Secretary of State for Communities and Local Government, and the Northern Ireland Departments—to incur preparatory expenditure. Nevertheless, the burden of, and the most significant responsibility for, building the administrative systems—and, ultimately, for managing any planning gain supplement—will rest with HMRC. Its expenditure before the introduction of any further legislation will include new information technology for the planning gain supplement and the adaptation of its existing system; designing the business systems necessary to administer the tax, and putting in place appropriately skilled staff to manage it; and equipping the evaluation office agency and the Valuation and Lands Agency in Northern Ireland with the necessary facilities to help administer a planning gain supplement, including staff, training, accommodation and IT equipment.
Stewart Hosie:
Will the IT equipment and systems be populated with data during this phase, and if so, will they include land-holding details? If so, will that not
place a financial burden on local authorities and others—not least the Register of Sasines—in providing that information?
John Healey: The hon. Gentleman races ahead of the point that we have reached in speculative work on how a system might be designed, commissioned and developed. Authorisation for that next stage is required by this very paving Bill, but these administrative functions would have to be based on further substantive legislation, and properly tested and in place before the introduction of the planning gain supplement, which we have said will not take place before 2009.
Mr. Gummer: If the system is not to be populated by information, is it to be unpopulated? If so, how do we know that it will work? I find it very difficult to understand what we are spending IT system money on if there is no information to populate it. Can the Minister explain what the system will do?
John Healey: I did not say that it would not be populated by information. Clearly at some point any IT system would need to be populated by information. All I said was that the hon. Member for Dundee, East (Stewart Hosie) was asking specific questions that were taking us several stages ahead of where we are in the process at the moment. A final decision on whether to introduce a planning gain supplement awaits the conclusion of the current round of consultations. The passage of this Bill is needed in advance of that decision and that is the purpose of bringing it forward. If we decide that we should introduce a planning gain supplement, we can start to design, commission and build the IT administrative systems immediately to support that, and increase the chances of doing so successfully and in a timely and cost-effective way.
The Bill is not exceptional, in that the House has approved paving measures for policies that have been far less developed than our proposals for a planning gain supplement are at this time. Paving Bills are not unusual and are introduced where there is a need to incur expenditure in advance of the main legislation. Examples include the British Coal and British Rail (Transfer Proposals) Act 1993 and the Tax Credits (Initial Expenditure) Act 1998. More recent examples include section 137 of the Finance Act 2002, which authorised preparatory expenditure on a lorry road user charge, and section 324 of the Finance Act 2004, which gave authorisation to the Treasury to incur expenditure if we were to adopt the single currency. Clearly it is in no one’s interest—certainly not the Government’s—to proceed with the implementation of a planning gain supplement unless or until such time as we are satisfied that the policy will be workable and effective.
Mr. Francois: The Financial Secretary has cited several paving Bills. Can he tell us, as an example, how much has been spent by the Treasury in preparing for the implementation of the single currency in the United Kingdom?
Mr. Deputy Speaker: Order. I really do not think that the Minister should be tempted too far down that route. I shall allow a brief response, but that is all.
John Healey: I am happy to take your guidance on that point, Mr. Deputy Speaker .
The central question when considering whether to introduce a planning gain supplement is whether it would be workable and effective as a means of capturing the land value uplift that comes with planning permission to finance infrastructure and support growth. I reiterate to this House, as I have clearly stated before, that if the Government decide not to go ahead with a planning gain supplement, no further expenditure will be incurred under this legislation.
The explanatory notes we published with the Bill set out the latest estimates of the possible cost of introduction. They are cautious, top-end estimates that are subject to change as the project is refined and the policy finalised. They also represent costs right the way through to full introduction and initial operation of a planning gain supplement, by which time of course there would have been full subsequent debate and legislation to authorise its administration.
The Bill is simple and straightforward. It is a preparations Bill to allow the Government, pending further decisions on whether to introduce a planning gain supplement, to prepare adequately for the policy prior to its implementation. I commend it to the House.
5.48 pm
Mr. Francois: We now come to the Third Reading of this paving Bill, which is designed to help implement a planning gain supplement. This is not the first time the House of Commons has been asked to debate a tax on the increase in the value of land. The earliest specific example that I was able to find of such a measure was an Act in the reign of Henry VI, dated 1427, which facilitated a tax on the improvement in land values based on the construction of sewers. For the record, a similar measure was apparently also attempted under Henry VIII in 1531. To leap forward some four centuries, something like this was tried five times in the 20th century, and on each occasion it foundered, principally over the issue of how to agree on the valuation to be taxed. In debating this matter again tonight we are following in the footsteps of our legislative predecessors—with, I suspect, the same ultimate outcome at the end of the whole process.
Coming right up to the present, we opposed this paving Bill on Second Reading and in Committee, and we remain opposed to it tonight. We remain opposed to the related planning gain supplement in principle for a number of reasons, which I laid out in some detail on Second Reading on 15 January, but which might be briefly summarised as follows. First, although it is supposed to assist local communities, it is designed to be centrally collected and then redistributed according to Government fiat. Secondly, in England a significant element of the tax is intended to be regionally administered by undemocratic and unrepresentative regional bodies. Thirdly, it is likely to hinder, rather than help, the creation of affordable housing, as the National Housing Federation has pointed out. Fourthly, it would be a highly complex tax to administer in practice, not least because of the likelihood—based on all historical precedent—of lengthy arguments over valuations.
Despite the earlier debate in Committee and on Report this evening, the Government have not made a convincing case for their introduction of what even they admit is now only a lead option. If they cannot even convince themselves, how do they expect to convince the House? This is a Bill, and indeed a tax, with few friends. For instance, the CBI said of the proposed planning gain supplement:
“the Government’s proposals to implement PGS are likely to lead to a number of unintended and negative consequences that would outweigh the potential benefits of PGS and we would strongly urge the Government to reconsider its proposals.”
Similarly, the British Property Federation, which has been staunchly opposed to the planning gain supplement throughout, said that it
“Is not suited to brownfield or previously developed sites; removes the linkage between the developer, the development and direct community benefit; can provide uncertainly in the planning process; is unworkable on most commercial developments; will slow the rate of developments coming forward; will discourage regeneration schemes; will create a blockage in the planning system; could lead to lengthy disputes in the courts and does not give any certainty that the necessary infrastructure will be provided.”
Other than that, the British Property Federation thought that the planning gain supplement was a good idea.
Meanwhile, the Royal Institution of Chartered Surveyors said of the planning gain supplement:
“The proposals are based on a misunderstanding of how land is valued, how planning gains arise and how the property market operates”.
The Chartered Institute of Taxation was equally unimpressed and commented as follows:
“Not even a well thought out consultation document can save a bad idea and we think that the law of unintended consequences will apply, with the result that the proposals will not deliver the Government’s policy objectives without a major element of compulsion being applied to local planning authorities, to allow developments that they do not wish to allow.”
The National Housing Federation, the umbrella body for housing associations, argued in 2006 in its evidence to the then Select Committee on the Office of the Deputy Prime Minister that the planning gain supplement would not assist the development of affordable housing. It is an expert in the area, and as it explained:
“By charging PGS on affordable housing the Treasury will simply be pushing money around the public funding system....If PGS is levied on housing associations a proportion of housing association grant for social housing will effectively be paid back to the Treasury via PGS and fewer homes will be provided. Moving funds from one part of the public purse to another is not efficient.”
Similarly, there have been concerns about the effect on the charitable sector. The Charitable Properties Association—the CPA—argued on that point in evidence to the Communities and Local Government Committee. It stated:
“The CPA believes the PGS will have a seriously detrimental impact on the financial position of property owning charities. This includes both charities which have significant land holdings as part of their endowment...and charities which develop their own land in order to fulfil their charitable purposes, for example by providing affordable housing.”
The Government’s proposals still fail to address the fundamental weakness of this type of tax, which has foundered historically on the problems of agreeing the
increase in land value on which it is to be levied. As the Royal Institution of Chartered Surveyors, which is a specialist in this area, has argued:
“The valuation of development sites comprises of making assumptions about different variables, six of which can have a big impact on the opinion of value. A change of around 5 per cent. in each of these variables can result in an overall change in the value of the site of over 25 per cent.”
It is not just representatives of business and the third sector who have voiced their public opposition to the planning gain supplement. A number of prominent Labour party members and organisations have done so too. A previous Labour Minister with responsibility for planning and housing, the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), who is in his place this evening, is on the record as opposing the concept of the planning gain supplement. He reiterated his opposition during the Second Reading of the Bill on 15 January. If he will allow me, I will quote what he said:
“Although this is only a paving Bill, it begins a process that is inherently complex and risky and that could end badly. I urge my right hon. and hon. Friends to take stock and give careful thought to all the issues involved, as well as the considered views of the people and organisations who best know the minefield that they are approaching. If they do so, they may well conclude that the alternatives available can generate better outcomes and save them from repeating the mistakes of the past. When history has such good lessons to teach us, it is unwise—to say the least—to ignore them.”—[ Official Report, 15 January 2007; Vol. 455, c. 582-3.]
Quite. When even well respected Labour former Ministers are sounding warning bells it is little wonder that the Government have paused for thought, yet they want the approval of the House to spend the money nevertheless.
That is not the only objection to the tax from a socialist quarter. As we have already heard this evening, the Labour-led Scottish Executive have expressed strong reservations about the implementation of the planning gain supplement. Despite our giving the Minister a good opportunity under new clause 1 to lay out in more detail how some of the aspects would operate in Scotland, he declined to do so. Moreover, a joint memorandum was submitted to the then Select Committee on the Office of the Deputy Prime Minister in March 2006 by the Labour Housing Group and the Labour Land Campaign, the former of which describes itself as
“A socialist society affiliated to the Labour Party, who aim to promote affordable housing”.
It is reassuring to know that socialists are still allowed to be affiliated to the Labour party. The memorandum states:
“The PGS proposals combined with the package of reforms proposed for the planning system following the Barker Report will not address the problem of the shortage of affordable housing, a severe problem in the South West and many rural areas, including parts of Yorkshire, Derbyshire and Cumbria”.
On top of all that, the Library briefing note that accompanies the Bill points out that the “closest precedent” in terms of a similar paving Bill was the 1998 Tax Credits (Initial Expenditure) Bill, which led to the much troubled tax credits system, in which just under half of all the payments in the system each year are incorrect. In his Third Reading speech, the Minister cited that as a recent example of a paving Bill. The financial memorandum that accompanied that Bill
nine years ago explained that expenditure of between £15 million and £20 million was required to facilitate the introduction of tax credits. Even allowing for inflation since that time, are the Government seriously arguing to the House that the preparatory work for the introduction of the planning gain supplement is likely to cost twice what was required to help bring in the whole tax credits system, which now equates to some £16 billion a year of public resources? If they are, that really tells us something about how complicated and bureaucratic the planning gain supplement is likely to be.
As we have argued throughout the course of the Bill, most MPs across the House would accept that developers should make an adequate contribution to infrastructure costs in return for receiving permission to build, but the planning gain supplement is not the way to achieve that. As the Estates Gazette argued forcefully about the planning gain supplement in December 2006:
“Of course it won’t work. It didn’t work the five times it was tried in the past century and it won’t work now.”
In advocating the Bill tonight, the Government are asking the House to commit an unlimited sum in preparation for an unpopular tax that does not itself guarantee that the full proceeds of any development will return to the area in question, and which in Scotland and Wales does not guarantee that anything at all will be returned to the affected locality.
Perhaps that is part of the reason why so many organisations oppose the planning gain supplement. To remind the Minister, the Confederation of British Industry does not want it. The Institute of Directors does not want it. The British Property Federation does not want it. The Scottish Property Federation does not want it. The Royal Institution of Chartered Surveyors does not want it. The Royal Town Planning Institute does not want it. The Chartered Institute of Taxation does not want it. The House Builders Federation does not want it. The National Housing Federation wants it, but only if it does not apply to the federation. The Scottish Executive might want it, but only if it does not apply in Scotland. The Labour Housing Group does not want it if it applies to Cornwall, Cumbria, Derbyshire or Yorkshire. The right hon. Member for Greenwich and Woolwich does not want it to apply anywhere at all, and nor does my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer)—he would not want it even if it applied only to Protestants. No one wants it except the Treasury, and even the Treasury is not sure whether it wants it at all.
Despite that wall of opposition, the Government’s hesitation and the fact that they have downgraded their proposal from a definite way forward to only a lead option, the Minister still had the neck to ask the Commons to vote Supply of more than £50 million to prepare for the introduction of a tax with which the Treasury might never proceed. All that money might eventually be wasted, not least because the Minister assured us earlier that any IT procured would not be used for anything else.
The Conservatives oppose the Bill, and the planning gain supplement to which it relates. We have stated clearly that if the Government are foolish enough to try to introduce a planning gain supplement, an incoming
Conservative Government will repeal it. I hope that the House will spare us the trouble and put the Treasury out of its misery by voting against this benighted measure.
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