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Session 2009 - 10
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Delegated Legislation Committee Debates

Draft Community Infrastructure Levy Regulations 2010



The Committee consisted of the following Members:

Chairman: Janet Anderson
Ainsworth, Mr. Peter (East Surrey) (Con)
Brown, Lyn (West Ham) (Lab)
Dobbin, Jim (Heywood and Middleton) (Lab/Co-op)
Dunne, Mr. Philip (Ludlow) (Con)
Follett, Barbara (Parliamentary Under-Secretary of State for Communities and Local Government)
Goldsworthy, Julia (Falmouth and Camborne) (LD)
Hamilton, Mr. Fabian (Leeds, North-East) (Lab)
Horam, Mr. John (Orpington) (Con)
Jackson, Mr. Stewart (Peterborough) (Con)
Jones, Lynne (Birmingham, Selly Oak) (Lab)
McDonagh, Siobhain (Mitcham and Morden) (Lab)
Marsden, Mr. Gordon (Blackpool, South) (Lab)
Prentice, Mr. Gordon (Pendle) (Lab)
Rogerson, Dan (North Cornwall) (LD)
Scott, Mr. Lee (Ilford, North) (Con)
Sharma, Mr. Virendra (Ealing, Southall) (Lab)
Sarah Davies, Committee Clerk
† attended the Committee

Fifth Delegated Legislation Committee

Tuesday 16 March 2010

[Janet Anderson in the Chair]

Draft Community Infrastructure Levy Regulations 2010

10.30 am
The Parliamentary Under-Secretary of State for Communities and Local Government (Barbara Follett): I beg to move,
That the Committee has considered the draft Community Infrastructure Levy Regulations 2010.
It is a pleasure to serve under your chairmanship again, Mrs. Anderson. The regulations are good news for the United Kingdom’s economy. They will facilitate the faster growth that we need at this crucial point, create jobs and reduce the wasted costs of unemployment. The regulations introduce a comprehensive and coherent package of reforms, which will better enable the infrastructure needed to unlock development and assist economic recovery.
A flexible new local charge, called the community infrastructure levy—for the sake of brevity, I will refer to it as “CIL”—will give local authorities in England and Wales the means to fund infrastructure in their areas. CIL will provide valuable top-up funding—I stress that—for local communities that see the need for additional facilities in their area, to ensure that they have in place the infrastructure so essential to allow residential and commercial developments. CIL will not replace the need for mainstream public funding, which will continue. Alongside this, a leaner and more focused planning obligations regime will allow for the mitigation of individual development impact issues not covered by the local CIL. That includes the provision of affordable housing as part of mixed communities.
The case for change is convincing. Planning obligations, also known as section 106 agreements—which have haunted so many hon. Members, including me—allow charging authorities to seek a contribution from developments to mitigate their impact. However, they have been much criticised. They have to be negotiated, which can lead to substantial delays and costs to developers and local planning authorities. The system lacks transparency, because it is usually based on ad hoc negotiations conducted in private. Above all, planning obligations are inherently unfair, with major developers bearing the burden of funding. Planning obligations are not well suited to addressing the cumulative impact of development, whether big or small, on the need for infrastructure. Currently, only 6 per cent. of planning permissions in England make any contribution under the planning obligations regime.
CIL will help to solve such problems. Unlike planning obligations, CIL is a predictable and transparent instrument specifically designed to help fund the local infrastructure needed for development across an area in a fair and predictable way. Yet it will also preserve incentives to develop in a variety of circumstances. As the Minister for the East of England, I know that it will be greatly welcomed in that region, because we need to find money to fund infrastructure developments.
CIL is good news for developers. It is fairer, as it is levied on most types of new development in a local authority area, although there are common-sense exemptions. It is simple and predictable, applying in pounds per square metre on the net additional increase in floor space. Rates will be published in a charging schedule, enabling developers to predict the size of their potential liability months or even years in advance, enabling better allocation of financial resources and a faster planning process. Charges will be consulted on and tested in a public inquiry. Developers have the reassurance of knowing that there are rigorous safeguards against charges being set too high, thus putting at serious risk the economic viability of an area’s development.
CIL is also good news for local communities. It will help fund the key infrastructure that neighbourhoods need, and which they have identified through infrastructure planning in support of their development plans. CIL’s application is wide and could include roads, public transport, open space and health centres. It is also flexible. Several authorities could pool their CIL revenues to support the delivery of a sub-regional infrastructure, which would make it more able to be applied in several areas, for example, in respect of a larger transport project when individual pooling authorities are satisfied that a unified CIL would support development in their areas. In London, the Mayor and the boroughs will be able to levy CIL, enabling support for vital strategic infrastructure in the capital, such as Crossrail, as well as local infrastructure needs. CIL revenues will all be retained locally and charging authorities must monitor and report annually on the use of CIL, ensuring local accountability for developers and local communities.
As I have said, the community infrastructure levy is part of a wider package of reforms. We remain convinced that planning obligations are the right tool for mitigating the site-specific impacts of a development, but their use does need to be better controlled. CIL will therefore function alongside a scaled-back planning obligations regime as part of a pro-development package. In other words, it is an integrated system designed to remove barriers to development. We want planning obligations to make individual developments permissible, and CIL to help unlock vital development throughout an area that would otherwise be completely stalled due to the lack of necessary infrastructure.
I wish to reassure members of the Committee that a healthy development industry is essential to our economic recovery. In the short term, many jobs will come from that industry. We could not countenance a system that enabled local authorities to bleed developers dry. Our changes to planning obligations are a case in point. For the first time, section 106 will legally only be able to deliver what is essential to make a development acceptable in terms of planning and affordable housing. Developers will be protected from paying tariffs under section 106 for a piece of infrastructure that is intended for CIL funding. Section 106 tariffs will cease on the adoption of a local CIL or nationally after 2014, whichever is sooner, because CIL is the right vehicle to achieve the objectives of pooled contributions.
Developers should not fear that CIL charges will be set too high. It is designed to support and enable development, and there are rigorous safeguards to ensure that that is exactly what it does. A local authority will have to strike an appropriate balance between funding infrastructure from CIL and the potential effects on the economic viability of development across its area. It will be able to set differential CIL rates if it thinks that that is the best option for the area. All charging schedules must be publicly consulted, and then subjected to a public inquiry before an independent examiner. The recommendations of the examiner will be binding on the charging authority if it wants to proceed with CIL, including when an examiner sets a lower rate.
CIL has long been supported as the right concept, and that has been borne out by our many discussions with stakeholders over the past two and a half years. We have tried at every stage of the process to seek the views of all those affected by the changes in the regulations, from local authorities to developers. In 2007, when the Department for Communities and Local Government was in the capable hands of my right hon. Friend the Member for Bolton, West (Ruth Kelly), we listened to the concerns of the development industry and opted for CIL, instead of the planning gain supplement. We listened as the Bill passed through the House and we have listened again. The consultation on the draft CIL regulations last July generated 392 responses from across the development industry, local and regional government and voluntary and community bodies. The consultation showed that the package of reforms continues to enjoy broad support from developers and local authorities.
Let me now turn to the changes that we have made after the consultation. The revised regulations before the Committee reflect several key changes as a result of that process. In response to the concerns of developers, CIL will now be levied on a net, not a gross, basis, which is fairer because CIL is intended only to fund the infrastructure needs created by growth. It will also create incentives for development on previously developed land, which we are extremely keen to encourage.
We have listened to calls for CIL relief to be extended, and we have acted. Developers have asked us for a procedure to give a reduction where a specific scheme cannot afford to pay CIL, so the regulations now contain exceptional circumstances relief. We have provided the facility for local authorities. The social housing sector and some developers asked for a social housing exemption. Accordingly, the regulations will give 100 per cent. CIL relief to social housing, protecting the delivery of, we hope, up to 1,300 additional social homes. Taken alongside the relief for charities, that will ensure a level playing field for all providers of social housing.
We listened to local authorities and developers when they asked for ways of unlocking infrastructure earlier in development. Accordingly, the regulations will allow authorities to use CIL to support the timely provision of infrastructure—for example, by using CIL to backfill early funding provided by a financier, such as the Homes and Communities Agency. The Secretary of State may direct authorities to borrow prudentially against future CIL income should the Government conclude that, subject to the overall fiscal position, there is scope for local authorities to do so.
I believe that the regulations strike the right balance between local authority flexibility and providing certainty and consistency for developers. They are pro development, creating a flexible local levy system alongside more focused planning obligations. They are essential to support development and protect economic recovery. This is the right time to introduce CIL, so that developers and charging authorities alike can plan ahead with confidence and build the infrastructure that we need to enter a new economic cycle with confidence.
10.44 am
Mr. Stewart Jackson (Peterborough) (Con): It is a pleasure to serve under your chairmanship once again, Mrs. Anderson. I am sure that this will probably be the last opportunity to make a valedictory speech to praise the Minister. It feels like a long goodbye, as we have served on Committees debating statutory instruments over a number of weeks. I would like to put it on record that we wish her well in the future, and acknowledge the excellent work that she has done in a difficult time for the country and for her party as Minister for the East of England.
We do not see a huge ideological difference between the parties on the regulations. We have not prayed against them and will not seek to divide the Committee, but it is appropriate to consider the context of the regulations and what we hope to achieve, which is that infrastructure be recognised as an important corollary of development. The regulations are the best way of achieving appropriate community infrastructure such as roads, bridges, community centres, police stations and schools. When one considers that the sustainable communities plan was first enunciated eight years ago by the right hon. Member for Kingston upon Hull, East (Mr. Prescott), when he was Deputy Prime Minister at the Office of the Deputy Prime Minister, it is probably appropriate to say that the Government have taken a significant time to come to their conclusion on the community infrastructure levy. That plan involves a lot of infrastructure and planning, and a lot of stress is placed on probably the best-known section of an Act: section 106 of the Town and Country Planning Act 1990. That section is clearly now not fit for purpose, and we therefore need to assist developers in these difficult times to be aware of their responsibilities to work collaboratively with local authorities, registered social landlords and others in providing the appropriate facilities.
We do not oppose the statutory instrument, not least because it clearly arises from the Planning Act 2008, on which we had a useful and comprehensive debate. Although there is not a great ideological difference of opinion, it would be remiss of me not to mention that, given that the public consultation closed in October, the regulations were published late in the day—barely six weeks before CIL was due to be enacted. There is some concern about the efficacy of CIL, as seen in a survey that was produced by Drivers Jonas in January. It found that almost 80 per cent. of local authorities were still undecided, or were unlikely to implement the levy. We can publish any number of regulations, but if they are not implemented because planning specialists or elected members are unclear about how they work and do not engage proactively with developers and others, that is a key problem. The Government need to think carefully about the guidance that they issue for local authorities, and its timeliness, so that there is maximum transparency and clarity on the issue.
For the avoidance of doubt, and hopefully to inform the debate, I will enunciate my party’s policy, which is not a million miles from the Government’s. We believe that the principle of expecting developers to contribute to the additional infrastructure needed to make their development viable is sound. However, the Government’s proposed twin-track approach is unnecessarily complicated and does nothing to address the uncertainty and delays that exist in agreeing planning obligations. We will simplify the system by returning planning obligations to their original function by limiting their use to stipulations relating directly to site-specific remediation and adaption. At the same time, we will scrap CIL and non-site-specific planning obligations, and introduce a single unified local tariff, applicable to all residential and non-residential developments—even a single dwelling—but at graded rates depending on the size of the development. The background to that is that the prototype for the levy was developed in Milton Keynes as a roof tax. We believe that the system can be nuanced in a more flexible and effective way to facilitate an appropriate link between development and the infrastructure needed to support it, which is something that we have not seen over the past few years in places such as the Thames Gateway, Milton Keynes, south midlands and—as the hon. Lady will know—in the Stansted-Cambridge-Peterborough growth corridor.
However, it would be churlish not to concede that the Government have gone some distance in moving the regulations forward to ameliorate the significant concerns that were outlined by key stakeholders in the industry last year. I will not rehearse those changes again. We welcome them, particularly the standard period of payment, payment by instalment and CIL being levied on net additional increase in floor space, as well as some of the other issues that the Minister mentioned.
I will finish with specific issues and the generic question that many people ask: what steps are being taken to prevent developers from being charged under both section 106 and CIL? Will the Minister focus on that? I know that she has mentioned it, but it is important to clarify that point.
The agriculture community has serious concerns about CIL and its application to agricultural buildings. The Minister may wish to touch on that in her concluding remarks. I have other specific questions, which I hope she will be kind enough to address. What assumption have the Government made of the profit margin per dwelling in terms of the implementation of CIL? Will this charge put up the cost by, say, £5,000 per dwelling? How does it apply to affordable housing other than through a social housing landlord? I beg the Minister’s indulgence—I did not give her notice of those specific questions, but they are pertinent to consideration of the regulations.
I would not say we wholeheartedly welcome the regulations. We have proposals of our own, which we think will achieve the same outcome by a more circuitous route, in the event of a Conservative Government. Equally, it would not be appropriate to vote against the regulations. On that basis, we hope that our concerns will be taken on board when the Minister answers the points that I have raised.
10.52 am
Dan Rogerson (North Cornwall) (LD): It is a pleasure to serve under your chairmanship this morning, Mrs. Anderson. I echo the remarks of the hon. Member for Peterborough about the Minister’s contributions in her time in the Department and in Parliament generally. I wish her well for the future.
My party supported the CIL and the Planning Act 2008. I had the pleasure of serving on the Committee that considered the measure. There were aspects of which we did not approve, such as the Infrastructure Planning Commission, but the general approach of attempting to help the wider community catch up with the benefits of development that accrue to the developer personally or corporately is something that we have supported for a long time. I have been involved with Liberal Democrat councils and dealing with the tax system, and it has long been a tradition in our party to look at land value taxation, and ways in which we can capture the increase in the value of the land to ensure that the wider community benefits.
Having supported CIL, I was keen to raise concerns at the time about how sketchy it was in the Bill. We then moved into a period of consultation on detailed regulations. As the hon. Member for Peterborough said, we now have them—somewhat at the eleventh hour, but we have them. Therefore, there are a number of questions that I would like to raise with the Minister. Again, I fully accept there are matters to which she may wish to return later or in writing, but anything she is able to address this morning will be helpful.
The first matter is consultation and an authority moving to consultation. We very much welcome the list of statutory consultees and, in particular, the inclusion of parish councils. Again, during debate on different provisions of the Planning Act 2008, I tabled amendments, which were not accepted at the time, to include parish councils as consultees. I am delighted that parish councils will be consulted on CIL.
I could not see in the recommendations mention of NHS trusts as consultees. I might have missed that. I want them on the list, like the local authorities and voluntary and representative bodies. If I have missed that, I apologise, but I shall welcome any steer from the Minister as to how she feels about those who are responsible for taking local NHS money decisions being consulted and having the opportunity to contribute to the plan.
On London, what is the balance of responsibilities between the Mayor and the boroughs? That is important for people in London. When a charging authority decides to withdraw a draft charging schedule, as is its right under section 212(11) of the Planning Act, why is the Minister determined that that should be deleted from history?
Moving to approval, before submitting a draft charging schedule, an authority has to agree a declaration that the schedule complies with the law. For local councils, that quite rightly must be agreed at a meeting of the whole authority—I welcome any attempt to widen participation of all local authority members in such important decisions—but for London the power given under section 212(6) of the Act goes to the Mayor of London personally. Is there not a case, echoing the situation for local authorities, for the power to be shared with the London assembly to give wider consideration to representations from across the whole of London?
Moving on to costs, the 2008 Act provides that the charging authority can appoint whomsoever it wishes as the examiner, provided that they are independent of the authority and have appropriate qualifications and experience. Regulation 30 sets out how the Secretary of State can recover costs connected with an examination from a charging authority. Will the Minister clarify the Secretary of State’s role in the approval process? Is it expected that local authorities will approach the Secretary of State or the Planning Inspectorate as the appropriate examiners? What costs does the Minister anticipate would need to be recovered under regulation 30?
I would also be grateful for some clarification of the chargeable amount. We recently debated issues around planning conditions in which, because of the economic climate, it was felt appropriate to make it easier to extend planning permissions and for development not to have to commence immediately in order to preserve those planning applications. There is now provision for a planning application to lie dormant for much longer. I was a little concerned that a developer might seek to land bank. In other words, once planning permission is granted—when the chargeable amount is determined—it could sit there until development commenced at a later date, at which point the local authority or planning authority might well have increased the charges for other developers. By land banking, the developer could effectively pay a lower contribution rate than others when development commenced.
I noticed the exemptions for charities—something we discussed, as the Minister said, when debating the Planning Act. The clawback period is sensible—if a charity gets an exemption and then transfers the land to someone else within seven years, the new owner could be liable to pay CIL. However, it is important to recognise the distinction between a charity constructing something of benefit to the local community for example, to do with how the charity carries out its activities, as opposed to something that is designed to raise revenue for the charity, which might have an indirect positive impact on the local community, but could have negative implications for those living in the immediate area. It is important to recognise the difference between such developments by a charity.
On the relief for social housing, it is important that local authorities have the ability to negotiate and take a view. I am interested, however, in how that might set a precedent. Although I very much support local authority discretion, I am a bit concerned that we need a strong framework to protect local authorities when allowing exemptions for some social housing, where, in some cases, they may take a different view later. Local authorities need the ability to use their discretion effectively without facing too much challenge.
As the hon. Member for Peterborough said, we still have section 106 on the statute book. That will still be used to fund affordable housing and other things. The regulations are not a replacement, but an add-on. When we look at the business rates supplement, which is now a possibility, local authorities have all sorts of tools for raising revenue to contribute to infrastructure in the area. While I generally support the provision of those tools, we still have to see what the interaction between them will be in the future, and whether there can be a better of way of clarifying that interaction, ensuring that its benefits are there, but that it does not act as a brake on development.
In essence, I would like to echo the hon. Member for Peterborough. My party supports the concept. We have some concerns about specific issues, which I have raised. It would have been better to have the regulations earlier, but we are where we are, and I hope that the Minister will pick up some of the issues.
11.1 am
 
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