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6.2 pm
Mr. Raynsford: I have to tell my hon. Friend the Financial Secretary that the reservations that I voiced on Second Reading remain real. I am speaking to express the hope that during the consideration that the Treasury will give to representations submitted during the course of the consultation, it will consider very carefully indeed reservations expressed by a wide range of authoritative commentators who believe that the Bill—it is, admittedly, a short paving Bill, as my hon. Friend emphasised—is taking us down a high-risk route and that it could well lead to an outcome that he, I and many hon. Members would deeply regret.
I speak not from the point of view of someone who has any doubt about the merits of raising a significant contribution from the profits that accrue from development to fund necessary and desirable infrastructure and social provision that would enhance those developments. I wholeheartedly endorse the principle of ensuring that developers contribute towards a more sustainable and rounded development than would otherwise be possible and the principle that the community, as well as the developer, should receive a true gain from the process. The issue is not the principle of raising revenue from the profits of development to fund necessary infrastructure and social provision, but the mechanism by which those funds are raised.
I know that the Government’s argument is that the implementation of the existing system, which is largely based on the section 106 mechanism in England and the section 75 mechanism in Scotland, is patchy. I accept that entirely. However, I speak as someone who represents an area in which the mechanism has been used to good effect by a local authority that has been absolutely clear in its objectives and open in its relations with developers. It has wanted not only to ensure that there is a fair contribution—often quite a significant one—but to give the certainty that that contribution will go into the area concerned to deliver demonstrable and tangible benefits for the benefit of not only the wider community, but the developer.
I have seen that happen in a range of areas. The millennium village in the Greenwich peninsula is widely spoken of as an exemplar of sustainable new development and high-quality housing. It has achieved high environmental standards and has a mix of tenures, with owner-occupiers, tenants and people on intermediate tenures living together in a harmonious framework. The attractive ecology park makes the area a desirable place in which to live. A primary school was taken in one form of its existence on to the site so that there would be a school there as and when residents moved into the development. The school has the capacity to expand to two forms of entry so that it can absorb the additional pupil numbers that come as a result of the development. A health centre provides high-quality health care for people in the new development. All that, together with the transport
infrastructure, such as the Jubilee line and other transport facilities, makes the development highly sustainable.
The development has benefited hugely from developer contributions, and everyone has seen the benefit of that. The developer has received a benefit because the contributions have made the development more attractive. People want to come to live in the area—they are moving not to a frontier town, but to somewhere with an attractive existing park, a school and a health centre that were in place from the early stages.
The community has benefited from the contributions because it has such facilities, which was not the case for earlier developments that had far less good social infrastructure throughout their early stages. The development in the 1960s and 1970s in Thamesmead, in my neighbouring constituency, was often heavily criticised because it was predominantly residential and there was a shortage of the necessary facilities and infrastructure to allow a vibrant community to be in place right from the outset. A lot of work has been done subsequently to transform Thamesmead, but its start was not auspicious because of a lack of the extensive employment and social infrastructure that should have been in place at the beginning. We have learned lessons from history, and new developments in our area are being carried through in such a way as to ensure that developers make a significant contribution towards necessary infrastructure.
As I have implied, developers are generally happy to pay the contribution, but there are few developers who are keen to pay. They see the benefits of the contribution and appreciate the certainty that if they pay the contribution, they will get their planning permission and have a development of which their new residents, tenants and occupiers can all be proud. There is a win-win situation.
I can cite not only the single example of the Greenwich millennium village, although that is a fine example, because there are many others. Although the Meridian Delta Ltd. development on the same Greenwich peninsula has not yet begun, contributions have already started to be made towards improving road access to the site, which will be necessary to cope with the larger number of people living there. Although I am in favour of more sustainable forms of transport, some improvements to the road network were necessary. Those improvements are being funded in advance of the beginning of the development, but I am afraid that that would not be feasible under the formula proposed for the planning gain supplement, under which sums would be payable only at the start of the development. In addition, those funds would be payable to central Government, so it would probably take more time for them to come back to the locality. There is thus a question of timing. Developers are happy to make a contribution at the beginning of the process because they know that that is necessary to facilitate the development from an early stage.
The question of valuation is the nub of the issue. The sites on the Greenwich peninsula that I have described were profoundly polluted before any development began. They were the relics of our industrial past—I think that the Greenwich peninsula housed the biggest gasworks in Europe in the early to
mid-19th century. There was an enormous residue of heavy metals and other pollution in the land, so there were vast remediation costs involved in making development possible on the land.
Of course, any developer who was faced with the prospect of paying the planning gain supplement would have at its disposal a bank of well-qualified advisers and lawyers who could identify all such offsetting costs and would be able to demonstrate, with extraordinary skill and facility, that when account had been taken of the remediation costs and the other offsets necessary to secure a successful development, such as discounted commercial lettings in the early years to ensure that tenants are found for properties, the uplift in value associated with the grant of planning permission would be either very small indeed, or perhaps nothing at all. However small the percentage take of planning gain supplement, a very small percentage of a very small or even non-existent figure is of no great value or even nothing. Yet there may well be very considerable downstream development gains. These are big developments that will only really come into their own over 10, 15 or 20 years, at the end of which profits will be considerable.
The section 106 agreements being negotiated by my local council—with MDL in relation to the peninsula, with Berkeley homes in relation to the Woolwich Arsenal, and on other very big sites—take account of long-term profit and benefit, rather than simply the immediate uplift in value associated with the grant of planning permission.
I therefore put it to my hon. Friend the Minister that in these examples there is a likelihood that a planning gain supplement introduced on the principles that the Government propose could well result in a reduced take overall, once the developers have demonstrated all the offsetting costs and the limitations on the increase in value attributable to the grant of planning permission. They will be able to minimise their potential contribution. There is a serious risk that on some of these sites the public sector take will be less than is being secured under the section 106 system.
That would be a tragedy and a disaster. First, it would involve the parties—the local authority, the developers and the community—no longer working together harmoniously to secure benefits to the community. There would be a separate process in which there would no longer be an incentive for the developer to work positively and constructively to get the best outcome. The incentive would be for it to minimise its liability for planning gain supplement—that would be a natural reaction.
Secondly, the local authority would be worried that it would not get sufficient money from its 70 per cent. share of the planning gain supplement to provide the infrastructure that it wanted to provide—and was able to provide using the existing section 106 framework. Those are genuine fears coming not from the developers but from local authorities and other practitioners who have been involved in facilitating development and using section 106 to secure benefits to the community. They fear that the planning gain supplement could deliver less than the current arrangements.
That brings me to the obvious question: why are the Government introducing this measure? There are a number of reasons. One is the recommendation from
the Barker report which suggested this option. If we look back at the context of that report, we may well feel that this is not one of the happiest of its recommendations. It was in many respects a trade-off because of other pressures on the planning system to deliver more houses. I am not sure that the mechanism will deliver, for reasons that I have already explained, or that it is entirely appropriate.
I certainly think that the Government have got themselves into a position where the planning gain supplement is becoming a totem, and there is a risk that it will proceed despite all the reservations that have been widely voiced about its potential downsides. That will be because it has got into the currency, because the Barker report recommended it, because in responding to the report the Government said that they would proceed with it, because they consulted and following that they said that it was a lead option, and because they then introduced a paving Bill allowing them to take further steps.
In my most pessimistic moments, I see a remorseless process, with the juggernaut going down the road through various stages and reaching a point where it becomes unstoppable. I fear that if that happens, we will find ourselves, in two or three years, seeing the introduction of a tax which has serious disadvantages, including its possible impact on certain communities, such as mine, which has benefited from the existing section 106 framework, and which will end up proving to be a problem that the Government could well have avoided.
I hope that, even at this late stage, my hon. Friend and his colleagues in the Treasury will reconsider. I do not believe that section 106 is incapable of delivering the benefits that should be delivered to facilitate development. I have accepted entirely that the performance is patchy. We should be looking much more closely at options for sharing expertise, for sharing the good practice of those who are doing things well and for assisting those local authorities that are not currently making the most of the section 106 system, to ensure greater benefits for their communities from the profits of development. That is not unfeasible. I am sure that there is scope for doing that, and I am sure that within the sums that have been allocated under the paving Bill it should be possible to provide expert advisory units to support local authorities to do the job better and to gain more from the section 106 process.
I also think that there is considerable scope for developing innovative thinking such as that in Milton Keynes, I note that my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) is here and I know that she will be more expert in the matter than I. English Partnerships, the local authority and other development interests in Milton Keynes worked for some time to produce the concept that was called, perhaps inappropriately, a roof tax, although it is more a tariff system. The benefit is that it gives certainty to all parties that there will be proceeds from development and that those can be used to fund the necessary infrastructure and social provision.
Dr. Starkey:
Obviously I am a great admirer of the tariff in Milton Keynes, but my right hon. Friend will be aware that Milton Keynes is very particular in
having, essentially, a single landowner in English Partnerships and in having, as a growth area, large development that is planned, so that we know where housing will be and can say precisely what infrastructure is needed over time as well as within an area, meaning that it can be costed in advance and a sum agreed per dwelling. That is applicable to other growth areas, but it is difficult to see how it could be generally applicable.
Mr. Raynsford: I agree wholeheartedly. I was not recommending that the roof tax be applied generally. As my hon. Friend rightly highlighted, it is an appropriate mechanism for areas with a greater than average concentration of land ownership, with greater than average uniformity of land values and where there is certainty in the development pipeline. It is precisely in such circumstances that that mechanism is one of the most effective tools to achieve the objectives that we all have. It would be wholly inappropriate in Greenwich, but as I have pointed out, I do not think that the planning gain supplement will be appropriate in Greenwich, and I would rather have a framework that allowed section 106 agreements, which have worked well there, to continue, allowing the developments to flow in the area.
The argument that I have been advancing is that there should be more of a focus on existing mechanisms or new thinking about appropriate mechanisms that may be tailored to the needs of individual areas. We should allow those to succeed rather than focusing on the single, across-the-board mechanism of the planning gain supplement, which in my view will not deliver the promised benefits in certain areas. I have explained why I do not think that it will deliver in many development sites on my own patch. I agree with my hon. Friend, but the conclusion that I draw is that an across-the-board taxation system such as PGS is probably not the right way forward. Instead, we should be looking at how to develop the different mechanisms that exist at the moment or are being developed.
The last one that I want to refer to briefly is the concept of a strategic section 106 agreement. One of the greatest worries about section 106 is the uncertainty for developers as to what they are likely to be required to pay. I fully understand the worries that they have expressed about that element of uncertainty in the existing system. The idea of a strategic approach is to set out in advance a much clearer indication of the contribution that developers will be expected to make, so that when they go to explore a particular site, they can do so with greater certainty. That would be a good way to tackle one of the difficulties with section 106, and it would do it in a way that ensures that developers and local authorities have a common interest. That common interest would mean that development would happen, that the developer would know what they were expected to contribute, that there would be greater certainty, and that the contribution would be used for local benefit.
There are a range of options; the planning gain supplement is not the only possibility open to the Government. I hope that my hon. Friend the Minister
will recognise that the alternatives merit further consideration. I hope that when the consultation is finally assessed, he will come to the conclusion that we should not take a highly risky route that may not provide all that was promised, and that there is considerable merit in exploring the scope for making existing mechanisms work better, and ensuring that the objective that we all share is achieved. That objective is greater success in capturing the profits of development to ensure more successful, sustainable developments that work well, and for the interests of the whole community.
6.20 pm
Dr. Cable: It is a privilege, as it was on Second Reading, to follow the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), who speaks with a great deal of experience and wisdom on the subject, and who has addressed it in a completely non-partisan way. He exposed the arguments very properly, and gave the strongest argument for not proceeding with the paving Bill. Of course, that is partly a matter of public finance, as sums of £50 million are by no means trivial, but the real argument was the one that he advanced. There is a juggernaut principle in Whitehall, and once contracts are signed, once the computer company is involved and once a Whitehall section is set up to promote a measure, it is very difficult to stop the juggernaut. That is why it is important to discuss issues of substance.
Dr. Starkey: I seem to recall it being mentioned earlier that there was a paving Bill to enable us to join the European currency, yet that juggernaut has not yet driven us inexorably into the European currency. Does his argument not therefore fall away?
Dr. Cable: Well, I am not sure that the juggernaut has entirely ground to a halt, because I still sit on the Chancellor’s preparatory committee, but I think that the brakes have indeed been applied. I want to pay a compliment to the Minister, who has dealt with the Bill in a good-humoured, tolerant way. I think that he has taken every intervention that has ever been thrown at him, and as a result we have had a much more substantial discussion that we would have done otherwise.
I shall briefly summarise the arguments for not proceeding with the Bill, which are of course based on wider arguments about the planning gain supplement principle. The first argument is that the Bill is precipitate, as there is no consensus on it. The hon. Member for Rayleigh (Mr. Francois) summarised the objections of various institutional bodies, and of local government, which is a crucial partner in the proposal. I add that there is need for party-political consensus, too. Certain policies need to span generations; pensions policy is one of them, and policy on the planning gain supplement is another. A lesson has been learned, because different parties have tried to introduce a similar measure, starting with Lloyd George and Winston Churchill in the 1906 Government. Attlee had a go at it; Wilson had a go at it twice; and even Mrs. Thatcher had a try, before abolishing the measure. Everybody has had a go at it, but it has been difficult to implement the measure, partly because of vested
interests, party-political opposition and technical problems. It is essential that a much stronger consensus be developed on the idea.
It is the second objection that was behind the amendments that I tried to move in Committee, and which the right hon. Member for Greenwich and Woolwich dwelled on. It concerns the way in which the measure takes away from local autonomy, which is already limited in respect of planning matters, and weakens the scope for section 106 agreements. The right hon. Gentleman gave some very good examples from south-east London, showing how creative and experienced planners can extract value for their community, in a way that is appropriate to that community. There are many different ways in which communities seek offsets; it can be through local infrastructure, or through wider infrastructure, such as that relating to health and education. Some councils want cash, and others want affordable housing. The balance is different in each case.
My constituency houses the Mecca of rugby union, and the Rugby Football Union has just expanded one of its major stands. As a result of negotiation through the planning process, a planning gain agreement has been signed that provides for, among other things, improvements to the local town centre, a system of buses to take fans to local railway stations, and part-access to the conference centre for local performance arts bodies. Those are local concerns that local planners and their representatives understand, and an optimum mix has been obtained. In an area planning application, the Rugby Football Union made the concession of supporting a local residents’ parking scheme, intended to deal with the problems caused by fans on match days. That local input in the negotiating process will be missing once there is a national tax, which will simply become a revenue source.
To take another example, I recently visited a rural district where there is intense pressure on affordable housing. It so happens that the local planners are sophisticated and use section 106. In fact, they use it in a very aggressive way, and they have gone beyond the normal de minimis limits. Normally, the Government suggest that affordable housing offset should be asked for once 12 residential units are to be built. The council in question was very aggressive, and said that for every new private residential home, one affordable home should be provided. That is quite a tough policy, but given the context—there was a great deal of development uplift, and a great scarcity of affordable housing—it worked, and the council obtained a lot of affordable houses. It is the council’s judgment and its call; it understands the local balance. That is what section 106 agreements allow, and why use of it should be nourished, rather than stifled.
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