| Previous Section | Index | Home Page |
Michael Gove: Thank you, Sir Alan, for your helpful advice.
The reason why Treasury Ministers spoke was not any lack of confidence in ministerial colleagues, but the fact that this measure is palpably a straightforward tax demand. It is not about the more efficient use of land. It is about the more efficient—or, rather, the more rapid—acquisition of revenue for the Exchequer.
These amendments put the Government to the test. If they are genuinely willing for land to be used more efficiently, and if they genuinely believe that the measure is about encouraging regeneration, they will have no hesitation in accepting the amendments, because they would exempt from the scope of the legislation properties that are empty specifically because they are going through the planning process. They would exempt properties that are in the middle of a regeneration programme, such as those for which planning applications have been made or which are awaiting the result of a planning appeal. Such properties should be specifically exempted.
Let me explain why this specific exemption is worthy of this set of amendments. The amendments relate to the ideal of regeneration and, as we explored in previous debates, regeneration is a difficult process for those engaged in commercial property. When addressing regeneration in areas of past urban blight that require new commercial enterprises for new life to be breathed into them, we must recognise that people who are prepared to invest in those areas are taking a risk. Almost by definition, any area that is not currently a thriving business area—any area where additional commercial investment is clearly required or where we wish to encourage regeneration—is an area where the market fundamentals are not yet in place to attract the investment that we would all wish.
Therefore, when someone brings forward a specific regeneration project, they do so with a close eye on the balance of advantage and the balance sheet. As they look at any particular regeneration project, they might look at a balance of sites in any particular city or town. They will try to get together a critical mass of land in the right areas to allow them to proceed with a regeneration project that will give them a satisfactory return on capital. As we all know, in the commercial property world sites can come up rather more slowly than one would wish in order to maximise the efficiency of a project. Nevertheless, in order to try to ensure that a project is both successful and genuinely transformative, an enlightened investor will wait and exercise patience until the exact portfolio of sites comes into alignment. As they wait for that to happen, it will of necessity be the case that some of those sites are left empty. They are elements in what will be a transformed landscape that cannot be transformed piecemeal. The developer has to wait until all those areas are available before he is ready to move.
If the legislation is not amended, an additional tax will have to be paid on many of the parcels of land waiting to be packaged together, because the current relief on rating will no longer exist. That could mean that potentially viable regeneration projects would be rendered unviable as a result of the tax change. It stands to reason for every business that if it faces an increased tax bill, its economic activity will be penalised. As mentioned earlier, that is a not a hypothetical consideration, but a real-life concern.
In an earlier debate, I mentioned the specific case of Palmer Capital Partners, which has, as reported in Property Week, already had to abandon regeneration projects because of the anticipated tax hit of this legislation. I am afraid that my accent meant that I did not pronounce the “r” at the end of Palmer sufficiently; the name is Palmer as in Huntley and Palmer, or Harry Palmer. The reason why that is relevant is that the Minister interpreted me to mean Palma, the capital of Majorca, the principal Balearic island, so he thought that the company was some sort of Mediterranean fly-by-night enterprise. That was an opportunity for him to suggest, with his characteristic sprezzatura, that the only people who were complaining were the villains whom he had previously identified in the property market—commercial property organisations that deliberately leave properties empty. I hope that he will take this opportunity to reassure Palmer Capital Partners that he appreciates that it is an entirely reputable organisation. He has the lifebelt of being able to say that it was my curious Aberdonian accent that lured him into making that mistake.
Mr. Woolas: It could have been my Lancastrian hearing. I did mishear the hon. Gentleman and thought that he had said “Palma”, but I certainly intended no slur against the company involved, or the good people of Majorca. In fact, a study of the regeneration of Palma, especially in the mediaeval city centre, would give us an example of a fantastic property development and regeneration project, from which we could certainly learn a lot.
Michael Gove: I am grateful to the Minister for taking that opportunity to clarify the position. I knew that he meant no ill by his comment. If anything, his comments in the previous debate were evidence of his ludic wit, not a reflection of any desire to condemn the operation of Palmer Capital Partners, or any other company. I am sure that the Minister’s experience of Palma is greater than many other hon. Members’ experience, and I am glad to know that when he went to Majorca his principal aim was to investigate how successfully it had regenerated itself economically. I suspect that that regeneration has been most successful in the catering, leisure and hotel sectors, and some UK cities should learn from that.
It is appropriate to acknowledge that Palmer has had to abandon certain projects, because that is a real-life example of a company prevented by the Bill from going ahead with regeneration. Other companies in a similar position would benefit from the amendment. When properties are deliberately left empty to secure regeneration benefits, an extension of relief while planning permissions are dealt with would mean that the companies involved could bring forward projects that would not occur otherwise. If the Government are willing to stay their hand in a few cases, the resulting economic benefits would be enjoyed by everyone, but especially by people in the areas most in need of economic and commercial development.
On Second Reading, we discussed the north-east as a case study of the effects of the Bill. The Minister referred to Eldon square in Newcastle, where rents are significantly higher than in other parts of the city, and implied that there was a dysfunctionality in the planning or local government finance systems that only the Bill
could put right. However, it is impossible to gauge how effective the economic regeneration of the north-east has been without taking account of the fact that industry there has made its unhappiness with the proposals very clear.
The Minister may not be familiar with Evans Easyspace, which operates out of North Shields in north Tyneside. A new commercial operation that it opened in July 2005 contains 17 small offices, and the same number of workshops. They are let to new and start-up businesses—exactly the sort of enterprises that a Government committed to regeneration would want to support.
The centre is a success, having reached an optimum occupancy of 91 per cent., although the Minister will note that Evans Easyspace is already taking a hit because some properties on the site are not occupied. The company argues that if the changes proposed in the Bill had been in place when it was conceiving its enterprise, it would have had to pay an additional £53,000 in empty property rates. It says that that is a conservative estimate, and that the sum of money involved might have made the difference between deciding to going ahead with the project and staying its hand.
There is high demand for jobs in north Tyneside, so how can the Government put forward a Bill that companies in the area consider to be entirely counter-productive? What would the Minister say to Evans Easyspace and other enterprising companies that choose to locate in areas where their services are most needed, and which are explicitly concerned about the potential effect that the Bill as it stands will have on future investment?
I accept that when developers gather parcels of property for regeneration, the seriousness of their intent to use all the sites that they have amassed in that geographical area can be open to doubt. It may well be that some of those sites are meant to form part of a regeneration project, but other sites, offices or premises may be left vacant for longer than would otherwise be wise or prudent. That is an extremely unlikely eventuality. As I explained on Second Reading, I do not believe that there is widespread economic masochism in the commercial property sector. I believe that most people who have chosen to take a risk and invest in commercial property recognise that it is appropriate to ensure that there are tenants in the property generating income which can make their investment worth while.
3.45 pm
However, I will allow that it is theoretically possible that land on which a return could be made is not used to maximum efficiency at a given point. That principle is accepted in the broader debate on land use when we come to talk about land banking. I can see the hon. Member for West Ham (Lyn Brown) nodding thoughtfully. As a member of the Select Committee that scrutinises the Department for Communities and Local Government, I know that she has been doing some work on the subject. Individuals, for whatever reason, choose to stockpile land that is developable and hold it back off the market in the hope perhaps of making a capital gain rather than to see it used in the most efficient way.
It is appropriate that we get land banking in context. I am sure that the Minister will be aware that the principle of deliberately holding land back and not seeking the maximum return on it is at the heart of the Bill and it is something that we question. There is some useful evidence that calls into question whether such hoarding of space that could be more effectively used economically takes place. A letter was published in the Financial Times today from the executive chairman of the Home Builders Federation, who points out that in 97 per cent. of developments that have implementable planning permission builders have been on site within three months. That reinforces the truth that most operators are only too eager and willing to see the land on which they have secured planning permission used for commercial ends.
We accept that in certain circumstances people might conceivably hoard land. The amendment ensures that in any case in which that suspicion might arise it can be effectively erased. It covers those organisations or individuals who are in the planning process. They might have had planning permission turned down and are waiting for the planning inspectorate in Bristol to give its ruling so that development can go ahead. Given that seeking planning permission is of itself prima facie evidence of an intent to develop, and it is not a cheap process or one that anyone would undertake lightly, if a planning application has been made for a site, it is pretty clear to us that the individual or organisation who owns that site wants to see it used in a healthy, vibrant, commercial fashion. They should therefore not be penalised in the way that the Bill proposes.
The Government have introduced the Bill in the hope that land will be used more efficiently. What better test could there be of the willingness of individuals and organisations to see land used efficiently than the fact that they have sought planning permission for that site? If the Minister’s original thesis is correct that some individuals deliberately hold back property on which they could earn a useful commercial return, whoever these wicked individuals are, they are clearly not people who are seeking planning permission or waiting for the result of an appeal from the planning inspector. So whatever wicked individuals the Minister wishes to catch with this legislation, the amendment will ensure that the virtuous are not affected.
The Minister may argue that the inevitable cost of accepting the amendment will be taxation revenue forgone. However, I invite him to think about the cases in which such taxation revenue might be forgone: when properties remain empty and under-utilised because an individual is waiting for planning permission or for the planning inspectorate to rule. The answer to any lack of revenue that may be consequent on the passing of the amendment thus lies directly in the Government’s hands. If they ensure through their reforms, which we are discussing in the context of the planning White Paper, that the planning system as a whole is effectively simplified and streamlined, it will ensure that, working hand in hand with local government, there will be no undue delays in the planning system. It will quickly be found that the change of use properties required to achieve maximum commercial return is granted. Industry will benefit. Users of those services will benefit and of course the Government will benefit because we will not have properties caught in limbo
awaiting the result of a planning application and, consequent on the amendment, not paying tax.
The challenge for the Minister is to explain why a Government who have introduced the planning White Paper, and hope to legislate this autumn to simplify the planning system, have insufficient confidence in their legislation to accept our amendment. If they are telling us the truth about the planning White Paper and the planning system there is no problem; there will be no delays—certainly none greater than three months—in granting planning permission and beginning development.
As the Minister knows, specific targets have been brought in for planning applications; they vary depending on the size of the development and are measured in terms of weeks, but they are indicative guidelines only; some local authorities are better at meeting them than others—it is notable that Conservative local authorities are often more successful in that regard than Labour. Party politics aside, however, we recognise that the Government have through the planning delivery agreement system sought to incentivise the speedy processing of planning applications. There is, however, a problem with the PDA system; as it sometimes incentivises speed over the quality treatment of planning applications, it can lead to the premature rejection of planning applications because a local authority is anxious to meet its PDA targets. Good planning applications, which should be accepted, are peremptorily rejected. As a result, planning applications have to go to appeal and the whole process is elongated and made more complex.
If the Government simply rely on PDA and existing instruments to guarantee that properties are not left empty and undeveloped for too long, we fear it will be insufficient. It is only through prompt implementation of changes to the planning system that the benefits that the Minister has described, and we recognise are required, can be brought about. I hope that when the Minister replies, he will explain the changes in the planning system that will ensure effective and prompt transfer of land from redundant and uncommercial use to successful commercial use. If he is as persuasive as he normally is, his arguments in favour of the planning White Paper and planning reform will in effect be arguments in favour of amendments Nos. 2, 3 and 4.
I have not yet talked about amendment No. 5, which is grouped with amendments Nos. 2, 3 and 4 for the convenience of the House because they deal with planning overall. However, amendment No. 5 is what might be termed a guards van to the rest of the train of my argument—it is connected, but it serves a different purpose. Amendment No. 5 deals with a specific part of the Bill that the Government have introduced following gentle pressure from the Opposition.
In the Ways and Means debate, we contended that the Government were running a risk. When changes were made to empty property rating relief and when reliefs were withdrawn in the 1970s—I regret to say by Sir Edward Heath, but that is a separate matter—unfortunate and perverse, although almost certainly unintended, consequences followed. We had the unfortunate example of individuals who suddenly found that their empty properties were liable for full rates who felt that they had to vandalise their own property. Rather than pay—rather than pony up—for an empty site on which no commercial activity occurred and from which no commercial return could
be secured, they defaced their own property. They pulled down the roof, stripped out the floor and damaged what would otherwise have been a commercially useful investment.
When we put the reality of history—and therefore the real dangers of choosing to legislate again in the same manner—to the Government in the Ways and Means debate, they were to an extent dismissive. They said that they felt that the risk was being exaggerated. However, a few weeks later when we had the Second Reading, the Government, who had been a little dismissive at first, accepted that we had a good point and attempted to deal in the Bill with just such a perverse consequence. They said—I hope that I will not paraphrase them inaccurately—“If we have a commercial vandal who does violence to his own property, we will judge the rates payable on that property on the state it was in before the individual engaged in that act of economic self-harm and harm to the broader community and economy.”
On Second Reading, we raised some concerns about that. We could understand why the Government, having accepted our arguments, sought to legislate to deal with the issue, but we were concerned about proving intent. How can one be certain whether any changes that have occurred to a property are tax avoidance or whether they are legitimate? How can one make a window to a commercial property developer’s soul?
Amendment No. 5 is intended to provide the Government with a lifeline. We still think that the Bill is unnecessarily loose, so we have attempted to tighten it by a few notches to make sure that those whom it captures are smaller in number and more likely to be genuine commercial property vandals. The amendment would ensure that anyone who makes changes to their property in accordance with planning permission is not whacked in the same way by the Bill. It would allow an organisation or individual who had stripped out floors or taken off roofs as part of a commercially sensible or far-sighted change to continue to enjoy exemptions. It would include in the Bill clear protection for individuals who want to change their property in a way that is consistent with maximising long-term benefits from it.
4 pm
Amendment No. 5 deals with a separate part of the legislation, and a specific change that the Government have introduced, so it does not relate to the same clause as amendments Nos. 2 to 4 do. If we take several steps back and look at the train that is amendments Nos. 2 to 4, and the guard’s van that is amendment No. 5, from an appropriate distance, so that we can see them all together and can attempt to judge them, or at least present them, to the House together, we see that one of the things that unites them is an attempt to ensure that the legislation covers only those people whom the Government have said that they intended it to cover. What all the amendments seek to do is to give effect to the Minister’s stated intentions. If the Government are sincere in their belief that the legislation is all about the more effective use of land, and the more prudent development of commercial property; if it is all about ensuring that regeneration can proceed, and that small retailers and other small business have the opportunities that they should have; if that is the
Government’s stated intention, how can they willingly penalise owners who are seeking to improve their commercial property?
If the Government choose to reject the amendments, they are rejecting their own logic, and are deliberately setting out to punish people who are taking a risk in the interests of the wider economy because the Government’s primary aim is simply the acquisition of revenue at all costs. In that respect, the group of amendments goes beyond the scope of the Bill and strikes at the heart of the Government’s intentions over the next two years. Will they legislate in the national interest? Will they take a sufficiently enlightened view of representations from citizens and other interests within our nation? Will they listen and learn, in the words of the Chancellor of the Exchequer, and will they take a genuinely holistic view of the well-being of the nation, or are they narrowly focused on what is currently in the Treasury’s interests? That broad question—I submit that there can be no broader question—lies at the heart of these tightly framed amendments. It is because the amendments have been framed in the way that they have been that they give rise to that profound question.
If the Minister is intent on promoting not just the health of the commercial property sector and regeneration in areas that need it, but on good policy formulation, he will have no problem accepting the amendments. However, if, as I fear, he is simply doing his new master’s bidding, and is picking the pockets of the commercial property sector and its tenants in order to deal with the black hole that has been left after 10 years of improvident stewardship of the nation’s finances, he will reject the amendments. We will shortly hear the Minister explain the reasoning behind his reaction to the amendments, but by tabling them, we have set a clear test. It is a test of intent, sincerity and policy, and it is a test on which we will judge—
The Chairman: Order. The hon. Gentleman’s peroration is becoming exceedingly repetitive. He has perhaps made his point.
Michael Gove: Sir Alan, if I have made my point in a way that is satisfactory to, and understood by, the Chair, I am sure that it will be understood by all other Members. I commend the amendments to the House.
Mr. Woolas: I am grateful for that direction from the Chair, Sir Alan, although I was waiting to hear how amendments Nos. 2 to 5 could get us from planning permission to the future of the British economy; I thought that we might soon move on to foreign affairs, too.
The hon. Member for Surrey Heath (Michael Gove), whose speeches I always enjoy, clearly never had a train set as a young boy. His education is incomplete, because the purpose of the guard’s van, as any young boy or, I would imagine, young girl would know, is to put the brakes on and slow the train down, not to round it off.
| Next Section | Index | Home Page |