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In response to these amendments, I think that the Government have listened very hard. The planning gain supplement was regarded as unworkable and unfair on all sides; on the other hand, there is a very great measure of support in the private sector for the community infrastructure levy. We know that the British Property Federation, from which we have all received interesting and thoughtful correspondence, has concerns about some of the detail here. But it is evident to all of us that if we are to have proper sustainable development across England, we must simply do more to make a contribution to that very necessary infrastructure.
If landowners have a windfall gain because of a change of planning status of the land, it is reasonable that they should pay some of that towards necessary infrastructure on account of that land being developed. I do not believe that the levy is unreasonable; there is widespread support for it; and it is a necessary procedure. For those reasons I urge noble Lords to resist the amendments.
Baroness Valentine: I support the community infrastructure levy in principle. I have grave concerns about the tax on increase in land value, a point the noble Earl, Lord Caithness, touched on. My amendments in this and subsequent groups relate exclusively to the community infrastructure levy. Before speaking to my amendments, I must mention that I am chief executive of London First, a business membership organisation.
Amendments Nos. 435CA and 437CA in this group relate to the purpose of CIL. These are the first of seven of my amendments, which fall into three separate groups. They all fundamentally focus on one goal: the funding and delivery of infrastructure. The community infrastructure levy must be fairly and reasonably levied to broadly reflect the impact of development, through the development plan process, and the moneys collected must be spent on ensuring timely delivery of infrastructure.
My two amendments in this group on the purpose of CIL would ensure that CIL is not a tax on land value and that references to it as such are removed. Critically, referring to increases in land value is inappropriate. First, it sends the wrong message about the purpose of CIL. CIL is not to tax the increase in land value arising from the grant of planning permission; it is to secure a contribution from development to additional infrastructure needs created by new development in the area.
Secondly, the issues around using land value increases as a basis for assessing viability are highly complex. Any simple reference to uplifts in land value flowing from planning permission would inevitably lead to differing interpretations, not least because land can increase in value irrespective of development or planning permission.
The principle is that CIL is not a tax on land value, and I would prefer to see any unintended implication that it is removed from the Bill. That is why Amendment No. 437CA suggests the removal of a subsection which
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Lord Jenkin of Roding: I support very strongly what the noble Baroness, Lady Valentine, has said. Since the last war, we have suffered repeated attempts by successive Labour Governments to try to assess and tax the increase in land value as a result of planning permission. My memory goes back to the Land Commission. At that time, the Minister concerned was firmly advised that the provision was impossible and would simply choke off development; and the Land Commission had subsequently to be abolished.
Then we had the development land tax. That did not work either. We have had the planning gain supplement, which happily seems to have been withdrawn but remains on the statute book. A later amendment deals with that. The community infrastructure levy is the latest attempt. The great mistake is to regard it as a form of capital gains tax on some extremely difficult-to-assess increase in land value. The evidence I have had from a number of organisations on this issue argues that it is extremely difficult to assess what is the increase in the value attributable to planning permission—a point wisely made by the noble Baroness. In practice, this will become a value—not an increase in value—and then the tax will be based on that.
The problem there is that the value may bear absolutely no relation to the increase in infrastructure costs to which this community infrastructure levy is intended to be a contribution. It is no more than a contribution, to give local authorities some extra funds to pay part of the cost of the infrastructure to which a development can give rise. It has been pointed out to me that some of the biggest increases in value may come from retail developments—shopping centres—which may not require infrastructure costs beyond some possible increase in road capacity. Some of the developments that will carry considerable increases in infrastructure requirements may, in fact, pay considerably less. This must be tied to what the local authorities see as their infrastructure needs.
An example pointed out to me was that of an expanding town; with a substantial increase in population, it will eventually need an expansion in the crematoria. How will that be tied in to the development costs? It is clearly an infrastructure need occasioned by the development leading to the increase in population. Simply to try to link this to the extremely difficult concept of the increase in value, however, seems fraught with difficulties.
I take issue with one point made by my noble friend Lord Caithness. On Amendment No. 444, I shall be agreeing with the Delegated Powers Committee, which made a powerful point on this, and arguing that this is a charge, not a tax. It is a charge, in line with a great many others that have preceded it and on which this House has always had its part to play. My amendment is that both Houses should therefore be involved in the approval of the regulations. I am mildly surprised that
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There lies at the heart of the difficulties here, which will be addressed by a number of amendments, the concept that you can somehow tax the increase in value attributable to planning permission. All the advice that I have had suggests that that is in fact a near impossible task. I hope that we will be able in Committee—and, later, on Report—to make some changes to link the charging schedules which local authorities will draw up to their development plans, so that the levy on developments will thereafter bear a close relationship to the infrastructure needs of each local authority.
It may be that that is the Government’s intention, but the advice that I have had is that it is not expressed properly in the Bill. We need to change the Bill, and will come to some of these amendments later on. I emphasise that the noble Baroness, Lady Valentine, has put her finger on an extremely important point.
Noon
Lord Dixon-Smith: I have tabled Amendment No. 436 in this group, which deals with a simple and narrow point that I shall address before returning to the generality of the discussion. The amendment is not perfectly worded, but simply makes the point that there should be only one charging authority. By that, I mean that people undertaking development who will pay this charge, or whatever we choose to call it—I shall come to that in a moment—should have only one bill to deal with. It will be immensely complicated if there is any possibility of their receiving two, three, five or any number of bills.
This is a probing amendment designed to ensure that the Government clarify precisely how they will deal with the dilemma which is immediately apparent to anybody who has read the Bill and noted that the London boroughs may charge authorities as planning authorities and that the Mayor of London may also be a charging authority. We have heard of an instance where this problem has to be overcome. Occasionally, in other parts of the country there are cross-boundary developments. Such a development will be difficult if one part pays one rate while another pays an entirely different rate because it happens to be in an authority that takes a different view of what the charge should be. Is this a charge or a tax? My noble friend Lord Jenkin of Roding properly addressed that and rightly said that it should be a charge, with local authorities having the discretion to set it within an approved system.
The other place clearly takes a different view and sees this as a Revenue matter. The Treasury clearly sees it as a Revenue matter. When you sit down and consider the sum that the Government expect to raise from this charge, as suggested in at least one of their consultation papers—£500 million is mentioned—it is big enough to be a tax. We are into the argument that, “A rose by any other name would smell as sweet”, but my noble friend raised the fundamental point that one classification gives us some control over the measure in the future whereas the other does not. I consider that in this instance we ought to have a role to play.
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Moreover, this is nothing new. We should not be left with the impression which might have been given by the noble Baroness, Lady Ford, that developers are not already subject, or may be subject, to paying a very considerable contribution towards all infrastructure costs. Section 106 has been in place for a long time. I know from personal experience that it can include playing fields, road improvements, sewerage extension and things that can be way off site. They may be related to a development, but they also provide real benefit to the whole of the wider community. We should not think this is an entirely novel provision that has not been around for a very long time. Indeed, my noble friend gave the background history to it.
However, as I see it, the measure is designed to catch a lot of development that at present does not contribute towards infrastructure. Whether you call this a tax or a charge, it is an additional way of raising money for public finance. We have been given no assurance—I wish that we had—that the existing sources of funding used for these purposes will not be diminished because this new charge is being brought in. If there is any hint that this might be a substitute for existing sources of funding, we are doomed to failure. I suspect that for a time we are doomed to failure anyway, or the Government are because they have an unfortunate but immaculate sense of timing. They are picking the worst possible moment to introduce a charge on the construction and development industry. I put it in its widest sense.
We should realise that this charge usually has to be paid from the landowner’s receipts; but so did Section 106. One must also remember that this will catch a lot of development where there is no change of ownership and in very many instances there will be no enhanced value, perhaps apart from the cost of construction. I am sorry if this seems like a Second Reading speech; it is a Second Reading speech, but it is absolutely vital that we should get the context of what is happening correct.
I am immensely sorry that this provision is here at this time. That is not to say that there might not have been a time when this would have been more favourably received. We continually load fiscal charges on to desirable developments. There is only one long-term effect as a result, which is that the price of everything rises. It will be paid by people improving their houses, if the improvement requires planning permission. It will be paid as part of the cost of site value and the construction cost of a house and, ultimately, it will be paid by house purchasers. It is another twist of the inflationary screw.
It may be said that this is justifiable, but I remind the Minister of the time when the development land tax was proposed. That was a deliberate attempt to tax enhanced value. What happened was quite simple; all development land disappeared from the market for as long as that proposal was around. It remained off the market until the price had risen to the extent that the receipt to the landowner, plus the tax, was sufficient that he was not losing money as a result of the introduction of the charge.
We have picked another one of those glorious moments when that reaction will be significant. The only thing I want to add is that I doubt whether any local authority
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Baroness Hamwee: We welcome the fact that there is a little flesh on the skeleton, although it is still fairly emaciated. There have been comments about the timing of this. If the Government had not run into trouble in the Commons over the principle of the Infrastructure Planning Commission, we might well have been debating this part of the Bill about six months ago, and the comments might have been a little different.
Section 106 and the planning gain supplement have been mentioned. The advantage of Section 106 compared with the planning gain supplement was that the community could see the benefit that would come to it, if not as a result of the development at any rate linked to the development. The community could see benefits which might counter the disadvantages of a development, although Section 106 seems to have pushed at the limits, possibly to an improper extent. If the new levy brings a degree of propriety—perhaps that would be a bit strong—rather, if it puts things into the proper pigeon holes, that is to be welcomed. I agree with the comments made about the difficulty of defining and assessing value and I, too, see this as a charge, although I wonder whether the window tax of centuries ago was a tax or a charge.
I want to ask a question and make a point on government Amendments Nos. 436A and 436B. I disagree with the noble Earl and support making the Mayor of London a charging authority, because, as I understand it, if the mayor is the planning authority for an application, it is necessary for the mayor to be the charging authority as well. What is important is how the money is spent, the relationship between the mayor and the boroughs and the relationship between the boroughs where the mayor is not a party, but the development may affect more than one borough. Outside London there could be a similar situation.
Amendment No. 436B deals with joint committees. I may be wrong, but I do not believe that it covers an arrangement between the mayor and the boroughs. Will the Minister’s amendment deal with that, because there needs to be a structure in which everyone can have confidence?
Lord Cameron of Dillington: I have only one series of major amendments today that deal with CIL, but I indicated at Second Reading that I have a series of questions which I will attach to other noble Lords’ amendments throughout the day.
My question has already been asked by other noble Lords, but perhaps I may put it in a rather different way and attach it to Amendment No. 435G in the name of the noble Earl, Lord Caithness. If CIL is a tax, as it were, on the rise in the value of land as a
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I pick up the theme that other noble Lords have mentioned as to whether CIL is a tax on the rise in land value or genuinely a levy, which it purports to be, which attempts to raise money for extra infrastructure caused by the development. The same question applies. A development may reduce the strain on the infrastructure, such as the creation of a key worker’s house, or be neutral vis-Ã -vis the strain on the infrastructure, such as an agricultural development that merely involves enlarging a cattle building, putting up a slurry store or replacing a building on a like-for-like basis—such as the renewal of an office building. Although it is called a levy, is this a tax on renewals? Can the Minister clarify at this early stage whether CIL is a tax or a levy?
12.15 pm
Lord Reay: Amendment No. 435GA, which is in this group, extends the purpose of CIL to allow compensation to be paid to those who have been adversely affected by permitted developments. I realise that there would need to be consequential amendments if this amendment were accepted, for example, to extend the application of Clause 202(1). I am also uncertain about how this amendment would interact with the new government amendment on compensation, which we debated and adopted last week, replacing the former Clause 151. That amendment, as I understand it, would restore the right of landowners, but not licensees, tenants or anyone else, to bring a claim for compensation by means of a claim for nuisance. Perhaps the Minister will say something about that when she replies.
My amendment relates to my Amendment No. 433, to which I will speak later, which bans the unregulated practice of developers making financial offers at their own discretion to local interests in an attempt to influence planning decisions in their favour. I should like to see all developers, including those of wind power generators, liable to CIL and the proceeds made available to compensate those whose livelihood or health, as well as property, has been adversely affected by the development that has been permitted. That would do much to deal with the problem of the divisiveness that that practice has introduced into communities.
It is not clear to me whether wind power generators are caught by CIL. I should be grateful if the Minister could say something about that with and without, if that is possible, the amendment tabled by the noble Baroness, Lady Valentine. This is a probing amendment.
Lord Cobbold: I have given notice of my intention to oppose the Question that Clause 198 stand part of the Bill because I wish to probe the basic concept of
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Lord Brooke of Sutton Mandeville: I shall make a brief speech as a footnote from a flank to the observations made by my noble friend Lord Dixon-Smith from the Front Bench concerning the timing of this legislation and the state of the economy. I realise that when the Government formulated this policy they might not have foreseen the situation in which the economy finds itself and that events have overtaken them. The flank nature of my observation is that I shall allude to planning in the island of Ireland. It is well known that planning laws are more relaxed in the Republic of Ireland, some would say to the disadvantage of the beauty of the Irish countryside. In Northern Ireland 30 or 40 years ago, planning laws were considerably stronger, to the benefit of the landscape. During the Troubles, which inevitably led to a massive economic slowdown, the British Government relaxed the planning laws in Northern Ireland in order to stimulate economic activity. When the Troubles came to an end, it was possible to return to the status quo. Is the Minister contemplating on behalf of the Government that there will be a fine tuning, in the sense of timing, with regard to the introduction of this legislation if it goes through?
Lord Woolmer of Leeds: I rise to express sympathy for the amendments tabled by the noble Baroness, Lady Valentine. There is a real danger, not only in the Bill but in the consultation documents, of not merely implying but saying that CIL is, effectively, a charge or a tax—or whatever it will be called—on development gain. The amendment proposed by the noble Baroness is an ingenious solution. If the Minister were able to respond positively to the idea behind the amendment, reassurance would be provided that, in discussions, that part of the consultation document would disappear. In expressing sympathy for that, I add that the debate on clause stand part is the only time when we can talk about the principle as opposed to how what is proposed is brought about.
I continue to express to the Minister what she knows are my deepest reservations about the line that the Government are taking. I forecast that enormous tangles will result from this. The idea that it will provide certainty will turn out to be a myth. There will be enormous variations across local government areas and they will tend to emerge, not de minimis, but at modest levels because of the fear, on which I shall comment in a moment, of stopping some developments. In my view, it will be set at modest levels. It is very wise to keep Section 106 because, in my view, local authorities
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This is the point in the Bill when it is worth putting on the record our very grave reservations. In due course, if it came to a vote, I would not vote against the Government, but I simply give a warning that they are opening up a pitfall. As the current recession and depression in development and in property prices—housing, commercial and industrial—show, working out what kind of rates to charge, what you are going to bring in, and when, is a very tricky business indeed. Values have fallen by between 20 and 50 per cent. As the recession takes hold, you will probably find that property values and development values fall even more sharply which will make a mockery of this system if it is in operation. However, this concept would regularise much better the framework in which local authorities set out their infrastructure needs and would provide a basis on which comprehensive discussions could take place with anyone who wants to undertake development. That is warmly welcomed. However, I am not at all convinced that that framework, which is a big step forward, needs to be supported by this kind of funding, in part or in whole.
Baroness Andrews: This has been a very important first debate on this part of the Bill.
Lord Woolmer of Leeds: I apologise, but I did not declare an interest. I am a partner in a business which works in the property development area.
Baroness Andrews: I thank my noble friend for making that clear. This has been an important debate on the fundamental issues of the community infrastructure levy. I am very grateful to all noble Lords who have spoken. I am particularly grateful to the noble Baroness, Lady Ford, who has brought forward her great experience in positive support of CIL itself. A number of very important questions have been raised in the Committee which I shall try to address, but I begin by setting the scene, as it has moved on since the summer. This is probably more in the nature of a Second Reading speech, but the Committee needs to know how we addressed the issues that arose from the questions raised at Second Reading.
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