 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Planning Bill |
Planning Bill |
The Committee consisted of the following Members:Alan Sandall,
Committee Clerk
† attended
the Committee
Public Bill CommitteeThursday 31 January 2008(Morning)[Mr. Eric Illsley in the Chair]Planning BillClause 163The
levy
9
am
Mrs.
Jacqui Lait (Beckenham) (Con): On a
point of order, Mr. Illsley, may I seek your advice before
we start? You will recall that, when we talked about national
infrastructure projects previously, we were worried about
“mission creep”, as we called it; that is, the inclusion
of areas other than those listed in the Bill. How can we return to that
part of the Bill? I have come across a letter dated 7 January to my
hon. Friend the Member for Runnymede and Weybridge (Mr.
Hammond), and signed by the Under-Secretary of State for Communities
and Local Government, the hon. Member for Gloucester, the last
paragraph of which
states:
“The
Planning Reform Bill is concerned primarily with nationally significant
infrastructure projects such as airports, supermarkets and power
stations.”
I think that
that is an example of mission creep. Could we return to the relevant
part of the Bill to discuss that area? If supermarkets are to be
included in nationally important infrastructure projects, we might have
a problem.
The
Chairman:
That is not a point of order for the Chair. That
matter can only be revisited, as the hon. Lady probably realises, on
Report. I am sure, however, that the Ministers will have listened
intently to the contents of the letter, and she might wish to raise the
matter privately with the Minister
concerned.
The
Minister for Local Government (John Healey):
I beg to move
amendment No. 536, in clause 163, page 92, line 36, after
‘owners’, insert ‘or
developers’.
John
Healey:
Supermarkets do not fall within
the definition of or criteria for nationally significant infrastructure
projects. We have debated at some length the criteria that might be
appropriate for such projects under part 3. As you point out,
Mr. Illsley, we will no doubt return to the matter at
subsequent stages of our
deliberations.
We
now come to part 10, which is an important part of the Bill, with an
important provision: the community infrastructure levy. Its purpose,
restated in the discussion paper published on Thursday last week, is
essentially to recognise the need to increase investment in vital
infrastructure such as health centres, schools, roads, transport, parks
and flood defences to support new homes and a growing economy. The
private sector, which benefits from such infrastructure, should play an
important part in funding it. That is the purpose behind the
levy.
I am sure that
we will have a wide debate during discussion and scrutiny of part 10.
The amendments, however, are narrow in their intent and application.
We, and others, think that there might be practical difficulties if it
is only the landowner who might ever be liable for the levy. For
example, when land is unregistered, it might be difficult to find out
who has the freehold or leasehold interest; it might be hard to ensure
enforcement against landowners when they are outside the jurisdiction
of UK courts; and where there are multiple interests in land being
developed, it might be difficult to work out how liability should be
apportioned. Enabling developers to be made liable would ensure that
levy liability could not be evaded or disputed in such
circumstances.
The
purpose of the amendment is to allow developers to assume liability,
and that, of course, is a well-understood and well-established approach
that is supported by a number of interest groups that have been
following our development of the policy and contributing to it. The
amendments make the necessary changes to clauses 163 and 165, and I
commend them to the
Committee.
Mrs.
Lait:
I am grateful to the Minister for bringing the
amendments forward because it had certainly occurred to me, unprompted
by any other group, that confining the levy only to owners could lead
to significant problems. In fact, the evidence from people involved in
that area suggests that limiting it to owners could potentially reduce
the supply of land. Therefore, it is useful to have that clarification
and the further clarification in clause 165 included in the Bill. My
only other comment is that I hope that both owners and developers can
afford good lawyers to sort out the liability between them when
developments come to
pass.
Amendment
agreed
to.
Mrs.
Lait:
I beg to move amendment No. 591, in
clause 163, page 92, line 36, after
‘the’, insert
‘capital’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 594, in clause 165, page 94, line 4, leave out
‘whether or not’ and insert
‘where’.
Mrs.
Lait:
The amendment brings us immediately to one of the
major concerns on which we want clarification and attempts to steer the
Government away from land value and towards increase in capital value
as the basis for the levy. Our major concern is that references to land
value imply that the Government still hope to introduce a land-based
tax through the levy so that the planning gain supplement would in
effect come back into play.
We have
tabled a number of amendments that would remove all reference to land
value as we go through the Bill. Indeed, we will in due course come to
our amendment to repeal the Planning-gain Supplement (Preparations)
Act 2007, because having looked at the detail that we have had on the
community infrastructure levy in the relatively short time since the
consultation paper was published, I remain concerned that the
Government are probably setting up the community infrastructure levy to
fail so that they can bring back the planning gain
supplement.
Amendment
No. 594 is on a slightly different point, because by leaving out the
words “whether or not” and replacing them with
“where”, we are trying to ensure that the levy should not
be based on land value again, because we believe that regeneration
projects potentially would not go ahead. We will return to that issue
when we discuss further
amendments.
Where land
is to be regenerated, there would be no increase in capital value. By
definition, were there an increase in capital value, an area would not
require regeneration, but would be regenerated by the market. We all
want to see as much regeneration as possible and all of us probably
have areas in our constituencies that need to be regenerated. The
London borough of Bromley probably does not have such areas to the same
extent as some other places, but even in the south-east there are areas
that need
regeneration.
If
the infrastructure levy were to apply to land that is to be
regenerated, such projects might not move forward because they would
not stack up financially. The amendment would ensure that there is the
opportunity to maximise regeneration without penalising it through the
levy.
Mr.
Elfyn Llwyd (Meirionnydd Nant Conwy) (PC):
I would like to ask the Minister a question. Under
clause 166 the amount of the CIL will be determined and regulations
will be brought forward. Will the regulations set a uniform calculation
for all charging authorities or will there be discretion for different
charging authorities to charge different rates? That question is
predicated on the fact that there are some authorities that are
determined not to have wind farms in their area and others with
particular views on other developments. What would prevent a charging
authority from coming up with a huge levy amount that would make a
particular development unviable? Will there be a uniform basis of
calculation for the
CIL?
Mr.
Clive Betts (Sheffield, Attercliffe) (Lab): This is a very
important part of the Bill. I understand that the Opposition will raise
several detailed issues of concern, but I hope that there is general
support across the Committee for the principle of what the Government
are trying to do.
I
thank the Minister for the excellent document that was produced last
Thursday, which explains what is quite a complicated measure. Whoever
wrote it should be congratulated for the clarity with which it was
written. It was a very helpful explanatory paper, which also details
the issues about further
consultation.
We all
know the history of this matter. The main issue is that of value, to
which the amendment refers. It is right that we find a mechanism that
does two things, as the explanatory document explains. It will enable
finance to be provided for infrastructure across a wider area than
perhaps the 106 arrangements were initially designed for, although they
have been expanded by
particular authorities. That gets us away from an historical problem
with development in this country. Very often, authorities see
development as bringing costs rather than benefits. Development coming
with the CIL will help to provide the resources for the infrastructure
that is
needed.
The
explanatory document explains this in more detail. The clause
recognises that if planning permission is given by an active public
policy, private individuals have the value of their assets increased.
Planning permission gives the authority to develop, and with that
ability to develop, the value of the land is increased. As a result of
that increase in value, developers or owners—we just discussed
the Government amendment, and it may be owners in certain circumstances
and developers in others—may have the financial resources to
contribute towards development
costs.
9.15
am
Mr.
David Curry (Skipton and Ripon) (Con): Will the hon.
Gentleman not forget that if one lives next door to an area that is
going to get planning permission, it may cause a significant decline in
the value of one’s
assets?
Mr.
Betts:
That is entirely possible but looking at the
generality, as I am trying to do, the aim is to capture some of that
increase in private value for public good, because it is an act of
public policy that increases the private
value.
On the specific
of the amendment, I think that the hon. Lady is wrong. I pursued the
issue of value closely in our witness sessions. People in the coalition
of groups support the CIL, partly because it is not the PGS. However,
they are concerned about value. My hon. Friend the Minister will no
doubt have a better view of this, but my understanding is that the
clause sets the scene for the CIL. It recognises that it is a general
increase in value, brought about by an act of public policy, that we
are trying to capture to fund
infrastructure.
During
the evidence hearings, I pushed my right hon. Friend the Housing
Minister, now Chief Secretary to the Treasury, about whether CIL is
payable only on land that has increased in value once planning
permission has been given. She helpfully explained afterwards that
clause 165(3) says that where planning permission is given, it is not
necessary for the increase in the value of the land to occur for CIL to
be payable. In other words, the clause sets the general scene; it does
not say that a particular site has to have increased in value because
of planning permission for CIL to be payable.
The one issue that greatly
concerned me was whether, on a more practical and detailed level, we
were replicating what was going to happen in the PGS. I support that in
principle, recognising that there are complications in trying to
calculate increases in value to pay PGS, and we get down to the
technicalities in clause 166, with a reference to value. That could
cause problems. The calculation of CIL for a particular site could be
related to value. Government amendment No. 38, which I support, takes
out the reference to value in the calculation of CIL for a particular
site.
The Government have set the
scene by saying that it is the general increase in value that comes
about from planning permission that enables the resource to be
generated that funds the contribution towards the infrastructure, but
they are removing the connection between an increase in value on a
particular site and the CIL that is payable on it. In that respect, the
Government have got it right and the amendment is not
necessary.
Mr.
Richard Benyon (Newbury) (Con): I refer hon. Members to my
entry in the Register of Members’ Interests.
I raise a couple of points in
support of my hon. Friend the Member for Beckenham. Uplift in land
value is taxed under capital gains tax. There are considerable
arguments involved. Trying to assess the uplift and the costs that can
be set against it is a long drawn-out process. It remains the case that
the Government take a large amount of money every year on the uplift in
land values which they are entirely entitled to apportion towards
infrastructure
costs.
Some years ago
we had the development land tax, which stifled many regeneration
projects in a way that I fear this charge may do in future. We have to
be careful. It is so far unclear how we can assess the charge’s
impact on such projects. There is a regeneration project in the centre
of a major town in my constituency. In itself, it is a marginal
project, particularly with retail values dropping as they are, but an
added charge of this nature could be the straw that breaks the
camel’s back. We have to be extremely careful how we implement
it.
I want the
Minister to respond to the submissions that we received from several
local authorities that have their own scheme, including my local
authority, West Berkshire council. In 2004, it introduced a
developer’s contribution scheme that works extremely well. What
impact will the levy have on wise and thinking authorities such as
mine, which have thought ahead and produced a scheme that brings in,
for a small unitary authority that looks after the lives of 145,000
people, an income of £8 million to £9 million a year and
growing? The fee that is charged to developers is entirely clear, right
from the start. Developers know what they will pay because the charge
is calculated on the basis of the impact that the development will have
on local education provision, the primary care trust, fire services,
the highways, libraries and so on, unlike this scheme’s levy,
which is calculated on the value of
land.
The fee charged
by my local authority is completely cost-neutral. The charges are
calculated to take into account the work done by the section 106 and
the legal departments. The scheme is very successful. It is entirely
transparent, and everybody knows where they
stand.
Many
authorities that are considering introducing their own schemes are
beating a path to the door of authorities such as West Berkshire and
others that produced submissions. They want to know how much regional
money will be sliced off the top for regional government, how many
decisions will be made in the
centre, how much money the local authority will be allowed to keep and
how the scheme will actually work. We need many answers from the
Minister.
Mr.
Llwyd:
The hon. Gentleman mentioned capital gains tax. I
think that the Minister is uniquely qualified to discuss it, having
been some time in the Treasury. Can he possibly explain the interaction
between CIL and CGT? In other words, would the payment of CIL be a
deduction for the purposes of CGT if an owner-developer were subject to
CGT?
Mr.
Benyon:
We would all like to hear the Minister’s
reply to that question, but I fear that we know the answer. I look
forward to his
comments.
Alun
Michael (Cardiff, South and Penarth) (Lab/Co-op): I wish
to raise a point that is appropriate at this stage, as the debate has
already gone rather wide. As the Minister is being asked to clarify
several matters, it would be helpful if I raise this one now rather
than doing so on clause stand part. It is about how the levy will
operate in practice.
I
raise these questions from a background of having been not only
construction Minister for a period but also waterways Minister for
several years. British Waterways and the development of canals in this
country provide a considerable success story. Hon. Members may be aware
that our canal network was in a disastrous state due to long-term
neglect, but the backlog of repair and maintenance has been tackled
over the past 10 years and the canal network has been modernised. Much
of that has been due to links to development alongside canals,
sometimes in the centre of cities such as Birmingham, sometimes in
rural communities and small towns. Often, projects that have been about
construction have also been about regeneration, bringing new employment
to an area and generally cleaning up and modernising areas as well as
doing the specific work of repairing, maintaining and even expanding
the canal network.
The
fact is that a great deal of that work has been possible because land
that is near or alongside the canals and historic infrastructure that
is public realm—inland waterways, docks, parks and other open
space—is very much in demand and commands a premium price. New
development, therefore, can derive significant benefit from the
presence of the existing infrastructure, but in the case of waterways
it does not usually contribute to its cost, due to the absence of any
local charging mechanism that could in effect tax new developments to
pay for improvements or additional burdens on that infrastructure.
Occasionally, section 106 agreements have been reached, but that is a
haphazard basis on which to deal with investment in the
infrastructure.
It is
a big issue because new development can impose significant costs on the
providers of such infrastructure, as it may lead to much greater local
usage by people living in the area, by visitors and by heavy
contributions from the entertainment or hospitality industry, all
generated by the development. A new development nearby puts the
surfacing of footpaths and towpaths, fencing, signage, street furniture
and safety issues under considerable pressure and it may require
significant upgrading.
The crux of
the issue is the phrasing of the clause. There is perceived to be a
risk that the word “providing” could be interpreted as
referring to new infrastructure only. Furthermore,
“support” could be interpreted to imply a direct
functional relationship, thus excluding infrastructure from which the
development nevertheless obtains benefit at second
hand.
We need
greater clarification of the proposal, which can be done in one of two
ways. First, will my hon. Friend the Minister for Local Government
consider amending the clause to refer to “improving” as
well as “providing” the infrastructure? Alternatively,
can he assure me that the word “providing” includes
improving? If it does, can he assure me that that interpretation will
not be open to legal challenge? It is important to have clarity. I
would not be surprised if he were sympathetic to my concerns and wanted
the clause to do the job in the way that I have outlined. If there is
any doubt about that, will he look again at the clause to ensure that
it is cast iron and will not subsequently be open to legal doubt or
challenge?
John
Healey:
I will try to deal with the wide-ranging points.
Mr. Illsley, the Committee would welcome your guidance on
whether it will be possible to have a wider debate on clause stand
part. If you agree, I will deal specifically with the points raised in
this
debate.
The
Chairman:
The debate on the amendment ranged rather
widely and strayed into clause 166, which relates to the amount of the
charge. If the Committee wishes it, we can use the amendment as a
clause stand part debate, but the vote on stand part will be taken
formally. I am willing for hon. Members to speak to clause stand part
in this amendment, given that issues have already been
raised.
Mrs.
Lait:
I seek your guidance, Mr. Illsley. I was
going to press for a clause stand part debate because our amendments do
not cover all the points that I wish to
raise.
The
Chairman:
In that case, I ask the Minister to restrict his
comments to the proposal before us. The issues that he wishes to
respond to can be raised again in the clause stand part
debate.
I was
interested in what the hon. Member for Newbury said about the local
authority’s approach in West Berkshire. He may be interested to
know that it has been invited to sit on the practitioners group, which
we will work closely with in the coming months. It has an important
contribution to make to the development of our policy and our plans for
the regulations, and I hope that that contribution will be
made.
9.30
am
With
the CIL, we are trying to build on the innovative approaches of some
local planning authorities in developing tariffs for development, as
the hon. Gentleman described. He is right about the characteristics of
those tariffs: they tend to be standard charges; they reduce the
negotiation that is necessary; they increase the certainty at an
earlier stage; and they allow local planning authorities to secure
contributions from developers of smaller
developments. That ensures that more developments pay a fair share
towards the costs that they impose on a local area. Those contributions
mean that the local community will derive a greater benefit from those
developments. We are attempting to capture all of those principles in
designing the CIL.
To
pick up on the hon. Gentleman’s other point, we are trying to
learn from some of the lessons of the past. The CIL is a very different
mechanism to the land development tax that was repealed by the
Conservative Administration in the mid-1980s. As the Barker review
said, previous development gain taxes which were specifically designed
in that way suffered from two principal problems: first, from their
complexity and, secondly, from the unduly punitive level at which they
were set. That had a huge impact on the supply of land and the pace of
development. We are anxious to avoid both those problems with the
CIL.
The other
weakness of the development land tax, which the hon. Gentleman did not
mention, is that it was designed to supplement central Government
expenditure and revenues. The levy will be collected locally and spent
specifically on local and regional infrastructure that has been
identified as necessary to support the growth of housing, the economy
or developments in the local
area.
Mr.
Benyon:
I feel that some progress is being made. Does the
Minister agree that a system of thresholds could be introduced to the
levy, through consultation? Developments below a certain size, such as
a few houses, will have no regional impact. For developments that fall
under such a threshold, the local authority would keep all of the
receipts from the levy. Obviously, a larger development might have
regional implications, but it seems unduly harsh on local authorities
that have developed their own schemes which are working well that those
will be trammelled by a Government scheme that will top-slice a large
proportion of the levy to be spent regionally or nationally on things
that local communities might not benefit
from.
John
Healey:
No local authority or local
planning authority is obliged to introduce a CIL. Those decisions will
properly be taken locally. The lessons that we can draw from the
innovations by some councils, such as West Berkshire, will be
considered in detail as we develop the policy
further.
Mr.
Curry:
The Minister said that local authorities will not
be obliged to introduce the levy. If a local authority chooses not to
introduce it and is therefore unable to make a contribution from it to
an infrastructure project that is drawing in other sources of funds,
will that jeopardise the availability of those other sources? In other
words, if a local authority does not put in its whack, will that
threaten the availability of funds from national sources? Will the
Government naturally want to direct their money where they have the
leverage of a local
tax?
In paragraph 24
of the consultation document, the potential of the tax is estimated as
being able to raise hundreds of millions of pounds. That seems to be a
very small amount in the light of the cost of infrastructure projects.
I am surprised at the modesty
of that amount. It suggests that we are going to a great deal of trouble
for not very much reward at the end of the
day.
John
Healey:
In a sense, the right hon. Gentleman answers his
own question. All the statements and explanations that we have made on
the levy have been clear and consistent that it will be additional to
other sources of funding. Depending on the extent to which local
planning authorities introduce the levy and whether it is set at a
reasonable rate, we think that it will raise hundreds of millions of
pounds—perhaps some £500 million. It will potentially be
only a contribution. It will be significant, but the comparator set out
in paragraph 16 of the consultation document makes it seem modest. That
makes clear the scale of the public investment that the Government have
allocated over the next few years to support the growth, in particular
of housing development, but also of other infrastructure that is
necessary for economic growth in local areas. The paragraph states that
there will be
“£1.7 billion of targeted
funding for growth areas, growth points and eco-towns, including
£300 million for the Community Infrastructure
Fund.”
The
community infrastructure levy is not the full answer, by any means, to
the need to raise investment, which is often forward-funding, for
infrastructure to support growth. However, it is an important
additional potential source and power that we are seeking to put in the
hands of local planning authorities, so that they can make those
decisions for themselves. The funds and revenues that it might produce
are additional to other sources, including public investment funding to
support
growth.
The
leverage may be relevant in creating a more certain forward revenue
stream in a local or a wider area which could be used to lever in
further investment from the private sector to help develop the
infrastructure that is needed. In some circumstances, it could be used
to support the use of borrowing powers, which the Government also gave
to local authorities in
2004.
Mr.
Curry:
But would the decision to raise or not to raise a
levy by a charging authority—we will come to which body that
will be later—have any impact on the availability of other
public funds for projects? We know that everyone wants more development
than there is money to finance. It is the eternal truth of government.
I am trying to discover whether local authorities will have to take
into consideration, if they choose not to apply the levy, that they are
jeopardising other possible sources of funds from the public sector. I
accept the point about leverages coming out of the private
sector.
John
Healey:
No, there is no reason for local authorities to
fear that. They may worry that if they choose not to take advantage of
the potential for locally raised revenues that a levy could bring,
there might be a gap that they could otherwise have helped to meet in
the financing of infrastructure to benefit their area, support
potential growth and bring benefits to their community. In those
circumstances, I can envisage many local people starting to ask
questions of their local authority or local planning authority as to
why it is not taking advantage of the
power
Mr.
Curry:
The Minister has been talking
about private leverage and we have had some references to flood relief
schemes. Will he consider seriously the current problem whereby the
contributions that local authorities or regional flood relief bodies
make to flood relief schemes might be caught by council tax capping?
That is a major disincentive to local authorities to put money into the
pot to try to move schemes up the priority ladder, as in Ripon, where
we have been flooded
twice.
John
Healey:
Mr. Illsley, I am sure that you would
not want me to get tempted on to the territory of council tax
capping.
John
Healey:
So I will not, but flood defences are precisely
the type of infrastructure for which a community infrastructure levy
can help to support funds, if it is identified in the preparation of
local infrastructure planning as an important element in the investment
required to have further growth in the area.
I am failing not to
be drawn too widely, but will do my best and return to where I
started—the comments made by the hon. Member for Newbury.
Essentially, we want it to be clear from the start that developers pay
what they see on the charging schedule. I think that that is also what
he wants, because it is the case in West Berkshire. That way, we get
away from the potential complexity, uncertainty and bartering that
tends to go on in back rooms, out of sight of the public and out of
reach of strong scrutiny. That is the principal purpose of our
approach.
I am glad
that my hon. Friend the Member for Sheffield, Attercliffe welcomed the
policy document. I would like to claim full credit for it, but cannot.
I will, however, ensure that his remarks are passed on to those who
were involved in the detailed drafting. He is right that clause 163
sets the general scene, and in the coming debates we will get into some
of the specific concerns and details that I know the Committee and
others are interested in. We will get to the question of value in more
detail later. To be clear, he is right that Government amendment No.
538 removes reference to value, but he might be disappointed that
Government amendment No. 546 to clause 166 will reintroduce it. I will
explain why when we get to
it.
My right hon.
Friend the Member for Cardiff, South and Penarth is a great champion of
the value and importance of waterways to our country and to
regeneration, which he knows from his area. The clearest answer to his
concern, and that of British Waterways, that somehow the levy will be
used only for brand new infrastructure is contained in paragraph 34 of
the policy document that we published on Thursday. I think that he will
find everything he needs at that point. If he does not, he can come
back to
me.
Alun
Michael:
I am grateful to my hon. Friend
for pointing the way to the policy document. Part of my concern is that
there could be a danger of misinterpretation or a legal challenge that
would take us in a different direction from his stated intention. Will
he undertake to look at the phrasing of the legislation to ensure, from
his point of view and mine, that his intentions could not be undermined
in that way at a later stage?
With
regard to the question asked by the hon. Member for Meirionnydd Nant
Conwy, the short answer to whether local authorities will have the
discretion to charge different rates is yes. What one local planning
authority decides are the infrastructure needs for its area and what
appropriate contributions to that could be through a community
infrastructure levy will be different to the next.
The process for making charging
decisions and the basis on which those decisions might be made are
likely to be set out in the framework that we intend to introduce
through the regulation-making powers. There will also be safeguards, as
the Bill indicates, to stop a levy frustrating or choking development,
which I think is a concern shared by all members of the Committee.
There will be strong scrutiny in the preparation of the charging
schedule, and there will be some reserve powers, which we will deal in
clause
172.
9.45
am
The hon.
Gentleman asked me about the interaction of the community
infrastructure levy and capital gains tax.
[
Interruption.
]
John
Healey:
Well, I suppose the short answer is that it is
complex, given the nature of tax legislation. That will not surprise
anyone.
In essence,
CGT is payable on disposal of assets, so it is generally payable on the
sale of land or property. Our starting point is Kate Barker’s
report, which, as hon. Members may recall, argued that CGT does not
adequately capture the gains that arise from planning permission.
Essentially, planning permission is a public administration decision,
not an investment, activity or value that is enhanced by, or is the
responsibility of, those who happen to own the land. In other words,
Kate Barker’s major contention was about the gap in our ability
to capture, justifiably, in her view—I would argue that the
design of the community infrastructure levy will do this—the
many gains that come specifically from a public administration
decision, and not by dint of the efforts of anyone who happens to own
the land to which the permission
applies.
In contrast
with the point at which CGT may become payable, the levy as we propose
it is payable on commencement of the development. In the end, these are
different policies, tools or instruments for very different purposes.
The final distinction, separation or difference is that the levy is
specifically for the purposes of supporting the development of
infrastructure. CGT, of course, is simply a revenue stream that goes to
the Exchequer, rather like aspects of the development land tax that I
mentioned
earlier.
Mr.
Llwyd:
I do not mind if the hon. Gentleman prefers to
write to me with the answer in due course. I am not trying to be funny,
but I put to him the case of an owner-developer who is, for example, a
farmer. He decides to develop an estate of 100 houses. He obviously
makes a substantial gain on the land, but, equally, he may have to pay
a large amount of CIL.
That is the kind of scenario I am looking at. I do not wish to raise
complicated matters that may or may not be reasonable, but my question
is perfectly reasonable. Will the payment of CIL at the early stage be
taken into account in calculating a proper deduction from the capital
gain that the farmer has made on the land as an
owner-developer?
John
Healey:
The short answer is no. Anybody in that position
who is considering whether they want to use their land in any way for
development for which they might need planning permission would look at
the charging schedule for the CIL, would see in advance what they would
be liable to pay if they were to go ahead, would build that into their
general financial and business planning case in deciding whether to go
ahead, and would make a business decision as a result of
that.
Any CGT that may
become liable for any disposal that is made later would be an entirely
separate calculation and liability. The only connection that I can see
between the two is that where the levy may have in the mix some impact
on the level of capital gain, it could affect the liability for
CGT.
My right hon.
Friend the Member for Cardiff, South and Penarth has been very
reasonable, and I shall reflect on his concerns. If I do not feel that
I have answered him, as I have tried to do immediately for the
Committee’s benefit, I shall of course write to him—I do
not anticipate that that will be necessary, but if it is I
shall.
Dan
Rogerson (North Cornwall) (LD): This has been a very
useful exchange, prompted by the hon. Member for Meirionnydd Nant
Conwy. Clearly there are concerns about somebody being hit twice for
effectively the same gain. Does the Minister agree that the distinction
might be that the community infrastructure levy is aimed primarily at
the increase in land value through planning permission, and that
capital gains usually takes into account the general increase in value
over time? The CIL is focused on the administrative decision as opposed
to the appreciation of land value, as is the case with capital
gains.
John
Healey:
I suppose that if there has been no appreciation
in the value of an asset being disposed of, a capital gain is less
likely. The hon. Gentleman might have a point and I appreciate his
attempt
to—
John
Healey:
Yes, to help me out, although I had not
appreciated that I was in a hole and required assistance. Nevertheless,
I appreciate the hon. Gentleman’s
intervention.
The hon.
Lady expressed concerns similar to those of the hon. Member for Newbury
about how the levy would choke development, particularly in certain
areas such as on brownfield sites. The answer is that the levy will
need to be set at a level that reflects the local authority’s
priorities and identified infrastructure and growth needs. It must take
into account the likely land value, which is one important way to
assess the development viability of a particular
area.
Robert
Neill (Bromley and Chislehurst) (Con): I appreciate what
the Minister is saying. However, development of the infrastructure of
the Thames Gateway, for example, might involve considerable
decontamination costs prior to completion. Is a mechanism proposed for
deducting those costs or for taking them into account in other ways, so
that development on brownfield land, which might be desirable, does not
become less economically attractive and competitive than on other
land?
John
Healey:
We are discussing that with some of those who have
a direct or representative interest. The proposed consultation on the
design of aspects of the regulations that we will introduce should
ensure that we can deal with all those concerns, and that the levy is
set at a level that will provide an incentive and support for
development, rather than a disincentive and a barrier. That is what we
are aiming at.
On
amendment No. 591, as my hon. Friend the Member for Sheffield,
Attercliffe said, it is not clear that making reference to capital
value is necessary, and nor is it entirely clear what that would add.
On amendment No. 594, I and others have made the point that it is
important that the levy regime does not choke development. However, we
want to move away from case-by-case assessments of the land value
uplift and viability—in other words, to put the emphasis on the
production and publication of a charging schedule. The site-by-site
assessment of land value or viability was one of the main
characteristics of the planning gain supplement. Many of those who
followed that closely had concerns about it. The clause will enable us
to take such action, but it must be done in way that preserves the
incentive to develop. The design of the levy, with the requirement to
set out a schedule of standard charges in advance, will remove the need
for site-by-site
evaluations.
Developers
have put it to us that while a development creates value, which the
levy will tap, there are circumstances in which the permission itself
does not result in an increase in land value, or in which the level of
increase is uncertain. That is an argument that I remember all too well
from many developers against the planning gain supplement. However, we
do not want disputes over whether the permission is the particular
aspect that has generated a value increase. In other words, we do not
want the general purpose of the levy, as set out in subsection (2), to
undermine the requirement to pay the amount of the levy set by the
charging
schedule.
This
provision is designed to put it beyond doubt that the levy is still
payable in such circumstances. Therefore, the potential developer will
be clear from the outset that what they see in the charging schedule is
what they will pay. They will therefore be able to factor that into
their business and financial planning in determining whether they wish
to go ahead with the project. With that and the other safeguards we
propose putting in place to ensure that the charging schedule is set at
a level that does not choke up an unacceptable amount of development, I
hope that hon. Members will accept the Government amendments, rather
than those of the
Opposition.
Mrs.
Lait:
As I hope I indicated earlier, the amendments were
tabled to signal two main areas of the Government’s proposals
that we have concerns
about. In that sense, they are probing amendments. However, there are
real concerns about the impact that downturns in the market will have
on regeneration areas. My hon. Friends the Members for Bromley and
Chislehurst and for Newbury and my right hon. Friend the Member for
Skipton and Ripon, raised practical issues with the levy that we still
have concerns about. I am happy to withdraw the amendment at this
stage, but we will return to these issues in greater detail as we go
through the Bill. We might press these matters to a vote with later
amendments. However, I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Question
proposed, That the clause, as amended, stand part of the
Bill.
Mrs.
Lait:
I am grateful to you for allowing us to have a
clause stand part debate, Mr. Illsley, because although we
have already signalled two of our concerns with the clause,
essentially, it will set up the CIL and there are definite worries
about that whole Government proposal.
The hon.
Member for Sheffield, Attercliffe congratulated the Government on
introducing the consultation document last week. We congratulate them
on doing so, at last, but I am not entirely convinced that it is
anything other than a rush job, and it does not move forward hugely the
available information about the CIL. I wish the Minister good luck in
trying to get this matter sorted out, because there is a long way to
go. On Second Reading, my hon. Friend the Member for Mole Valley (Sir
Paul Beresford) described these proposals as not just skeletal, but
osteoporotic. I am not sure that the consultation document has changed
our
mind.
10
am
The hon. Member
for Meirionnydd Nant Conwy raised one of the principal concerns
expressed by a number of people outside the House: capital gains tax. I
can sympathise with the Minister here. His former role in the Treasury
has in one sense contributed to his skill and in another led him into
deeper waters than he might wish. He has not been at the Treasury while
the reform of capital gains tax has been going through. He is, dare I
say it, somewhat
unsighted.
Were I to
throw any thought into the pot, it would be that the current system of
capital gains gives taper relief. That might be where CIL and CGT could
interact. Subsection (1), however, refers to the fact that the Treasury
must approve the regulations. Although it might be pro forma that that
should happen, if the Treasury has anything to do with it, it will turn
into a tax. That is precisely what the industry does not want, and we
certainly do not want it, because the history of any tax on, let us
call it, subtly, planning gain, has a poor
record.
Mr.
Curry:
Would this not break new ground in that it would be
one of the first examples of a hypothecated tax, to all intents and
purposes, in the United
Kingdom?
Mrs.
Lait:
My right hon. Friend raises a most interesting
point. The Minister, with his Treasury experience, will doubtless be
able to advise us in due
course. A number of Labour Members have, in effect, given the game away.
The right hon. Member for Cardiff, South and Penarth referred to it as
a tax when he was talking about waterways.
Alun
Michael:
I am not sure that it will. I should be grateful
if the hon. Lady could explain what she thinks I
said.
Mrs.
Lait:
I wrote a note to myself because I was taken aback
by what the right hon. Gentleman said. It might have been inadvertent,
but he referred to “taxing developments around
waterways”. I am quite happy to withdraw that once
Hansard is
published.
Alun
Michael:
I suspect that the hon. Lady is not perhaps
talking to herself but writing notes to herself. She certainly appears
to have extrapolated. I have every confidence that Hansard will
record accurately what I said. I think that she has gone in a different
direction.
Mrs.
Lait:
Yes. I do want to move on, but the mere fact that
the word “tax” is used in reference to this levy sends a
cold chill down most people’s
spines.
John
Healey:
Does the hon. Lady not accept two things? First,
this is a levy that builds on the current system of section 106
planning agreements. Secondly, unlike a tax, which by and large is a
general revenue stream, this is specifically and only for the purposes,
if a local authority wants to use the power, of supporting investment
in necessary infrastructure—no more, no
less.
Mrs.
Lait:
I accept what the Minister is trying to achieve. My
point is that the mere fact that the Treasury has to approve the
regulations means, by definition,
that it is approving the standard charges that will be included in the
community infrastructure levy, and that concerns people outside the
House. Those charges might vary; the consultation document stated that
there will be different levies depending on the quality of the land
that is being developed, and we will discuss those details
later.
Everyone fears
the hand of the Treasury in any form of money raising, and the
inadvertent use of the word “taxation” in referring to
the levy is sufficient to send a cold shiver down our
spines.
Mr.
Betts:
It seems almost as if the hon. Lady is trying to
find an excuse to distance herself from the concept of the levy. The
evidence to the Committee was that the development industry and local
authorities were content that it was the best way forward to capture
some of the increase in value from planning permission for the public
purse. Does the hon. Lady support the principle of it or
not?
Mrs.
Lait:
We made it clear that there is an argument for the
levy, but our job as the Opposition is to test to destruction how it
will work. Some serious questions need to be asked on behalf of the
British public about how the levy will work and, with the best will in
the world, this Government have a deplorable record on trying to tax
land development. We must ensure that if the levy is going to work, it
works properly. As I said about previous parts of the Bill, when a
significant group of people approve of something, the downside is not
thought through to the extent that it needs to
be.
John
Healey:
My hon. Friend the Member for Sheffield,
Attercliffe’s question is important. Is the answer that the hon.
Lady’s party supports the principle of a community
infrastructure levy? Yes or
no?
Mrs.
Lait:
I thought that I had said in words of one
syllable—I might have used the occasional two-syllable
word—that the levy is acceptable. But the mechanism, the detail
of the regulations, leads to me say that the devil is in the detail,
although I hate to use that clichÃ(c). We do not have the detail
and the amendments were tabled to try to extract
it.
John
Healey:
I accept that the hon. Lady might have concerns
about the detail and that it is important that the Opposition use
amendments to challenge the Government on it. To follow from her
commitment in principle to a community infrastructure levy, can she
assure us that she will not try to delete the levy from the Bill at a
later stage? For example, amendment No. 238, which has not been
selected, would strike out the whole of part
10.
Mrs.
Lait:
I can reassure the Minister that if we had wanted to
delete the community infrastructure levy we would have found other ways
to do it. I do not have any problem, but we will wait and see how it
works because if it does not work, as in the case of the development
land tax, we will revisit the issue in due course. There is a long way
to go before we find that out.
John
Healey:
The fact that the hon. Lady has confirmed to the
Committee that she supports the community infrastructure levy in
principle and that her party will wait and see how it works is
important. It is important not just to myself, as the Minister
responsible for the Bill; it is of much greater importance to the
interested groups who are following our discussions closely. It means
that the work that we all do together—the work of the hon. Lady,
myself and the interested groups—to get the design and terms of
the levy to be as effective as possible from the outset and implemented
as effectively as possible will not be undermined at the start by a
fear that the hon. Lady’s party will simply remove the levy if
it proves to be effective. Instead, she will wait and see how it works
in
practice.
Mrs.
Lait:
If that means that the Minister will now accept some
of our amendments, then I think that we have made some
progress.
Mr.
Curry:
What it means is that the Minister anticipates that
he will not be in office after the next general
election.
Mrs.
Lait:
I am grateful to my right hon. Friend for that
comment; in our party, I think that we have all taken that as
read.
John
Healey:
I am extremely conscious of the
fact—indeed, it is the reason that I asked the
question—that, as the hon. Member for Newbury suggested when he
urged us to learn lessons from previous land tax regimes, what
inevitably undermined previous regimes that were introduced to try to
achieve purposes similar to the proposed regime was a commitment from
Opposition parties that, if they were to get into power at any stage,
one of their first acts would be to repeal those regimes. Inevitably,
that commitment caused developers to hold back on the potential supply
of land and on development itself.
Therefore the commitment that
the hon. Lady has given to this Committee this morning is not so much
of great significance to me personally as it is potentially of great
significance to other interested groups.
Mrs.
Lait:
As I said before, although we are prepared to see
this levy introduced, we still have serious doubts about how effective
it will be. What we do not want to see—this is one of the
concerns that I have had all the way through our consideration of the
Bill—is a situation in which land will potentially not be
brought forward. That is what has always happened before when there has
been any form of land taxation. The potential for getting the proposals
wrong—it has been difficult even to try and amend them, given
how skeletal they are—is still very high. There is a wish to
make them work. However, the problem when there is such a wish is that
nobody thinks of the downside, how and where they might not work and
what might stop them working once the market is affected by
them.
Robert
Neill:
Does my hon. Friend find it surprising, given that
she might well have to pick up the pieces after the next general
election and make this measure
work, that if the Government are so concerned about getting the measure
right they seem to have been remarkably cavalier in setting out details
about how the various interested groups can be consulted and can
respond? To produce this extremely thin document about something that
is seen as being of such long-term importance—something which,
as the Minister rightly says, we must get right given that the detail
is so important—is rather a contradictory attitude for the
Government to take.
Mrs.
Lait:
I would go further and say that this measure should
be in a completely separate Bill, with considerably more clarity and
detail, so that we all know exactly what the Government are proposing.
At the present moment, we are dealing with—well, I will mix my
metaphors and say that the measure is a skeleton and we are in a fog.
Nobody has the details that they need and that is the problem that we
are all trying to grapple with. We are tabling amendments based on the
Government’s good intentions. That is the content of the
community infrastructure levy in the Bill; it is full of good
intentions. It is not full of the sort of detail raised by my hon.
Friend the Member for Newbury with regard to the levels of the levy, on
which we have tabled amendments.
10.15
am
The document
does not make clear what size of development the levy will be levied
on. We, the industry and local authorities need clarity on that. For
instance, if I had a large house and garden and wished to give my
children—not that I have any—the large house, but wanted
to build in the garden, is that open to a levy? It would mean extra
cars. [Interruption.] Please note that we are not against
families building a house in the garden.
Mrs.
Lait:
Anyone who says that we are against building a
retirement home in the garden has not read what we have said. What size
of development will be affected? Will it be three houses? Will it be a
block of a dozen flats that replaces the big family house, if one
cannot get the house in the garden? Until we know that, local
authorities will not have a clue as to impact. There is a distinct lack
of clarity on some big issues.
I did not want to get into
these discussions during the stand part debate, but we are now going
down that route because we are discussing the principle of the levy
itself. Given that there is such a lack of clarity, I would be grateful
if the Minister could assure us that by the time this gets to the
Lords, the draft regulations will be available. They are the key to
this levy and its success or otherwise. If the Lords do not have the
draft regulations to work on, Parliament will not be able to explore in
any great detail how the levy will
work.
We have had a
much longer debate, Mr. Illsley, and I am grateful for it.
We are concerned that the Government are still operating on a wing and
a prayer, and hope very much that by the time the Bill has gone through
this House we will have considerably more clarity as to what will
comprise the levy.
Mr.
Betts:
Would my hon. Friend the Minister
clarify one point? He said earlier that if a local authority does not
want to introduce the levy, it will not have to do so. One issue that
has been raised—it is a concern that many of us have expressed
over the years—is that while some authorities are very expert
and proficient at using section 106 agreements and getting a lot of
value out of them, if one looks at other, comparable authorities, one
finds that section 106 agreements hardly exist, if they exist at all.
They are not something that those authorities deal with, particularly
in terms of affordable housing.
I accept the
Minister’s point that individual authorities should make their
own choice as to whether to introduce the levy. Am I right in assuming
that, in making this decision, each local authority will have to look
at the infrastructure needs of its area and at likely development as
part of the LDF before coming to a positive decision—as opposed
to a decision by default—that a levy will not be necessary or
appropriate for its area, and that there will have to be a decision
made as part of the LDF process that comes to that
conclusion?
Dan
Rogerson:
The Minister has been checking where everybody
stands on the principle of a levy. We in the Liberal Democrats support
anything that hands more cards to the local community and their local
authorities in enabling them to achieve their vision for the area and
to ensure that adequate facilities and infrastructure are provided. We
note, however, the uncharacteristically menacing tone that the former
Housing Minister adopted during the evidence session with regard to the
fact that the enabling legislation for the planning gain supplement is
still on the statute book. The threat that that poses still hangs over
us all, which is unfortunate, and we remain opposed to such an
approach.
I agree
with the hon. Member for Beckenham that we will have great difficulty
discussing something that could be crucial to future development if we
do not have enough detail to inform our
discussion.
Tom
Brake (Carshalton and Wallington) (LD): Following on from
the hon. Member for Beckenham’s comments, let me add that
clarity is key. One issue that needs further investigation concerns the
partners with which local authorities will work when identifying how
much the levy will cost and what infrastructure it will cover. Those
partners will have to ensure that the infrastructure covered is not
simply what the local authority wants developed and does not, for
example, exclude any health centre facilities that the area might
need.
Dan
Rogerson:
Absolutely. My hon. Friend makes a good point.
As I was about to say, the document now gives us a few more details,
although it is still very much about opening the process. It notes that
health centres may be included, although the examples of processes that
have been adopted up until now include those dealt with by Reigate and
Banstead borough council, and the list of facilities that it has
considered clearly does not include health facilities. I do not know
the local circumstances in that case, but local
authorities might have an incentive to prioritise areas where they have
to provide a service and where they, rather than the primary care
trust, for example, face pressures. It would be interesting to know
what input the primary care trust might have into such
decisions.
There is
huge scope to work at the sub-regional level. My region—what the
Government call the south-west—does not really function as a
region, because it is far too big, and, for the most part, there is no
sense that people belong to it. However, local authorities have a real
opportunity to work together to come up with priorities on issues such
as transport infrastructure.
The other key point is that the
levy must be additional, rather than a get-out clause in respect of
money that is already earmarked for important schemes. It should
deliver those things that are not currently prioritised in the
programme for delivery through Government or other funding. That is the
sort of issue that the right hon. Member for Skipton and Ripon was
getting at.
Mr.
Curry:
The levy is designed to meet the needs that arise
from the development itself, not from a wish list of local authority
infrastructure schemes. It would be interesting to know what measures
there will be to ensure that when local authorities go through the
bottom drawer to see what schemes they would like to carry out, they do
in fact confine this money to schemes that flow from the development
itself, which is what I understood the purpose of the levy to
be.
Dan
Rogerson:
The right hon. Gentleman makes an interesting
point, although I would qualify it by saying that the
Government’s proposals might worsen certain problems in an area.
Potentially, the levy will have an impact not only on new development,
but on current residents. I am thinking of things such as road
junctions.
Mr.
Llwyd:
In our debate, we have had
reference to devils, skeletons, menace and fog. Does the hon. Gentleman
agree that we might have had a more enlightened discussion if we had
had a copy of the draft regulations?
Dan
Rogerson:
I do indeed. Hon. Members are
helping me to jump from one point to another, but that is one to which
I was coming. The hon. Member for Beckenham was right to say that the
issues before us should be the subject of a Bill, and if the detail is
not in this Bill, it should have been included in a separate Bill. As I
have outlined, the Liberal Democrats support the general concept, as
does the hon. Lady, but there might be problems with particular
provisions. We can scrutinise and discuss provisions in secondary
legislation, but we can say only “Aye” or
“No” to them—we cannot amend them. That is part of
the problem; if the people we represent and the organisations that will
be part of the consultation process are not happy with the result, that
is just tough.
It
being twenty-five minutes past Ten o’clock,
The
Chairman
adjourned the Committee without Question put,
pursuant to the Standing Order.
Adjourned till this day at
One
o’clock.
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