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I will refer to the community infrastructure levy as CIL; that will shorten our debate by at least an hour. CIL is a significant change to the way in which development contributions towards community infrastructure are secured. The fundamental point—to address immediately the point raised by my noble friend Lord Woolmer—is that we seek to do that in a way that ensures that development is deliverable and sustainable; that it is framed by the local development plan; that it is related to the specific costs of infrastructure that the community needs; and that, for the first time, we will have certain, transparent and predictable levels of funding to fund the impact on infrastructure that new development generates.

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I am sure that noble Lords will have read the report we issued in August, which went into a great deal of detail about our thinking behind the proposal and our testing of assumptions. A great deal of work was done on those relationships in that document. The noble Baroness, Lady Ford, said that the proposal for the levy commands wide support; I can endorse that. As far as we are aware, no local government planning or developer representative body objects in principle to our proposal. I am very grateful to the noble Baroness, Lady Valentine, for saying just that when she opened her speech. For example, there is support in principle from the CBI, the Local Government Association, the British Property Federation, the TCPA, the Royal Town Planning Institute, the Royal Institute of Chartered Surveyors, the Campaign for the Protection of Rural England, and many others. I know that the noble Earl, Lord Caithness, and my noble friend Lord Woolmer do not accept some of those views. I hope that I can persuade them in our debates that there is a lot of merit in what we propose—that it is not only a better system but the right system to provide what we so badly need in future.

It is worth reflecting on that consensus, because everyone is agreed that we need a fairer, more certain and more transparent way to secure developer contributions. That is crucial in the light of what many noble Lords have said about the current state of the economy and the need for long-term secure planning. We need to understand what we have to do and be as transparent and clear about managing risks ahead as possible.

Developers have consistently said to us that they find the existing negotiated system of planning obligations or Section 106 agreements slow and unpredictable. They are certainly not transparent. We know from our recent research that it is the most major developments that bear the burden of contributing to local infrastructure. Only 14 per cent of residential planning permissions make some form of contribution through planning obligations. I take the point made by the noble Lord, Lord Dixon-Smith—this is about capturing more of the development so that it can contribute to the key infrastructures that we use.

We are not talking simply about roads but about hospitals, play spaces, schools and green spaces. We are talking about the green infrastructure and the physical infrastructure but also the social infrastructure. It is all contained in the definition of what the community needs to thrive—what the development plan must work out to ensure that the community has all the resources it needs to thrive. Most minor development makes no contribution.

I think that the noble Lord, Lord Dixon-Smith, referred to household development. I make absolutely clear that we intend to use our regulation-making powers to exempt household development for homeowners, so there is no question that that will be caught by CIL. We have been very clear about that.

I know that we will discuss the impact of the current economic difficulties. As I said, the demographic, social and environmental trends will not change in the long term. We must ensure that, whatever are our

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short-term difficulties, we are planning for suitable infrastructure for long-term sustainability. That is exactly what CIL is intended to do, and why it is so important to get right in that equation the explicit relationship between the costs of infrastructure, to which the noble Lord, Lord Jenkin, referred, and long-term sustainability.

Lord Jenkin of Roding: I am sorry to intervene at this point, but unless the Minister is coming to it, she has missed the point. Different developments impose entirely different pressures on infrastructure costs. That is not represented in the Bill at all. The Bill does not refer to what infrastructure demands will be made by particular developers. There seems to be a flat rate across the board. She may be going to tell us that the schedules will somehow draw a distinction, but I have seen nothing to suggest that.

12.30 pm

Baroness Andrews: There are several issues. CIL is a standard charge—an average charge that will be worked out on the basis of assessments, which we will talk about. Specific forms of funding will not be raised for specific bits of infrastructure. The local authority’s job will be to work out the overall costs of the infrastructure that it needs and the overall amounts that can reasonably and viably be raised by CIL. We can have that debate when we talk about value. It is a rational process, which we do not have at the moment.

As I say, the key attraction of CIL is that it will be a straightforward standard charge on development. It might, for example, be pounds per square metre of floor space. It will be framed by the local development plan, and, crucially, it will be independently tested to ensure that the result will be viable and will facilitate, not choke, development. It must be published in advance by the local authority so that a developer can know, perhaps months or years in advance of developing, what they will be asked to pay based on the characteristics of development.

I invite noble Lords to contrast that idea with the existing system of ad hoc negotiations conducted in private, sometimes on the basis of either an unclear or an untested policy. Indeed, the emergence of tariff schemes based on the existing legislation indicates that local authorities and developers alike now realise that we must urgently standardise and simplify what has been a very complex area of planning. That is why there is such support for this measure. I reassure the noble Lord, Lord Dixon-Smith, again that it continues to sit alongside Section 106. It is a voluntary charge, and it will be up to local authorities to decide what will work best in their areas, given the choices that they have. Most infrastructure will continue to be provided through government funds, as it always is.

The rate to be paid will be decided at the local level, not by government, and it must be based on sound infrastructure planning to underpin the local development plan. However, it must evidently also have regard to the realities of development economics. As my noble friend pointed out, the whole purpose of CIL is to facilitate development. The amendments provide safeguards to ensure that local authorities, and the

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community, take proper account of infrastructure needs and the viability of development when setting their charges.

The noble Earl, Lord Caithness, raised the spectre of a development land tax and a planning-gain supplement. The noble Lord, Lord Jenkin, and the noble Baroness, Lady Valentine, expressed concern that even if it is technically correct to refer to land value uplift in these clauses—I believe that it is—the overall tone of the clauses, particularly the focus on land value uplift in the purpose clause, still leaves some with the misplaced impression that we intend to reintroduce PGS. I hope that our debate today will alleviate that concern, but let me be clear; CIL is not PGS, for the very reasons given by my noble friend Lady Ford. PGS was intended to be levied as a percentage of land value uplift on a case-by-case basis. CIL is an area-wide standard charge. PGS would have been set at a single national rate. CIL is set locally. PGS would have been UK-wide. CIL is an optional local tool. PGS would have been collected and redistributed by HMRC. CIL is collected and retained by local planning authorities. The contrast is significant. If we were to introduce our previous proposals for a planning-gain supplement, we would require substantial new primary legislation.

The most useful comparison is therefore the emergence of tariff schemes, which have grown up organically out of local authority practice. In fact, CIL extends an existing idea that is familiar to many in local government and development communities. It also provides additional benefits. It will be easier to fund larger pieces of infrastructure that are needed as a result of the cumulative impact of development, it will increase the transparency and accountability of charges, and the accompanying reduction in the scope of planning obligations over time will reduce negotiating time and increase certainty for developers.

This policy has not sprung up out of the blue. The reports by Sir Michael Lyons, Kate Barker and Sir Rod Eddington have all considered local government finance, housing and planning, transport infrastructure issues, and the things that are bedevilling, weakening and frustrating them. We are taking action to address that, not least through our widely welcomed new Planning Policy Statement 12, which promotes more robust infrastructure planning at the local level. I emphasise that CIL is part of the solution. It will be ring-fenced for infrastructure, and it will be appropriately monitored, audited and reported on, but we will not seek to solve all infrastructure delivery issues through it because of the Government’s commitment to fund infrastructure.

The document that we produced on 5 August was the result of a very fruitful dialogue with all the bodies that I have mentioned. That dialogue continues, as I will say in many of our debates this afternoon. There is a great deal of detail to work out, which is why we have constructed these powers in an enabling way, as I explained at Second Reading. The existing system has evolved over time, as we expect CIL will do as local authority practice develops and matures.

In July, the Delegated Powers and Regulatory Reform Committee expressed concerns about the extent of these enabling powers, but I am delighted to say that

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its latest report indicates that the amendments that I am presenting today go a very long way to addressing its concerns. They clarify which authorities will be able to charge CIL, they set out in the Bill the core elements of the process of establishing a charging schedule, and they cap certain enforcement powers.

I thank the noble Lord, Lord Goodhart, who cannot be in his place today, and the committee officials for their great assistance over the summer in helping us to clarify the legislation. We will certainly attempt to make progress on the committee’s remaining concern that the complex issue of crystallising the identity of the liable party will give rise to some very difficult issues in law and determinations. We will work very hard on that, and I pay tribute to the work that my officials did over the summer to produce the amendments, which will make a significant difference to the surety with which we can discuss these issues. It has been extremely hard work, but we now have a lot more detail that we can discuss.

I should note that there is support for our enabling approach from bodies outside, because they want that continuing dialogue and to be able to influence what will happen, and we are happy to facilitate that. I am happy that we have the Opposition’s support in principle for CIL. It really is a very important issue, and I hope that I have set out the context for our discussion on the amendments. I shall try to speed through the amendments as we go.

The first group of amendments relates to the purpose of CIL and the authorities that should be able to charge it, which we have discussed. The noble Earl, Lord Caithness, tabled a number of amendments on the purpose of CIL. His Amendment No. 435A would remove the need for the Treasury’s agreement to the regulations implementing CIL. Treasury involvement does not imply a tax. There is nothing unusual or sinister about Treasury consent being needed for regulations. In this case, CIL relates to the raising and spending of significant amounts of money, and it is right that the Treasury should have a formal role in ensuring that it operates effectively. There are plenty of precedents for this approach. The Treasury is involved in a wide range of measures. Section 365 of the Communications Act 2003, for example, requires Treasury consent for the Secretary of State to make regulations that set the TV licence fee and for entitlement to concessions. I could quote many others. The noble Lord, Lord Jenkin, clearly made the point that this levy is a local charge concerned with revenues for local authorities.

The noble Lord’s Amendments Nos. 435C, 435E and 435F are linked. They seek to ensure that CIL may only partly fund part of the costs of infrastructure, which seems unnecessarily restrictive. While I accept that in most cases CIL will simply form part of the funding package for infrastructure, these amendments would preclude the possibility that CIL could provide the entire funding for a piece of local infrastructure, which could be relatively small; for example, a new playground. The amendment would appear to force local authorities to find some other funding source for the smallest requirement, even if CIL could fund it. We do not want to lose that flexibility.

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Amendment No. 435D would place an additional restriction on the use of CIL. It would mean that only direct costs incurred in providing infrastructure may be covered. It is unclear what “direct” means, so it could make this clause a source of potential legal dispute if the courts are invited to decide how direct a cost the charging authority is entitled to meet through CIL. We consider that the approach we have taken already establishes a sufficiently direct connection between the money raised under CIL and the delivery of infrastructure. I hope that the noble Lord feels his proposal has been met.

I turn now to the amendments which seek to alter the overall purpose of CIL. Amendment No. 435G appears to be at odds with the noble Earl’s Amendment No. 437D, which appears to seek to apply CIL only to those developments that realise an increase in value when they are sold. Amendment No. 435CA, in the name of the noble Baroness, Lady Valentine, is partially in line with the current purpose of CIL. I agree with the noble Baroness entirely when she says that CIL must be fairly and reasonably levied, and linked to the cost of infrastructure. The amendment suggests that development should contribute to providing the infrastructure needed,

We have said that CIL funding, ultimately, is drawn from the increase in value that results from the granting of planning permission. We have done so in order to help explain a matter of fact and to make the law clear and precise. From our discussions with the industry and from what the noble Baroness and the Committee have said, I know that the notion of value is less relevant to some parts of the development sector than others. It is different in the commercial sector and in the housebuilding sector. We take that point.

I know that the industry feels that this is rather too precise a way of expressing it and that perhaps it is expressed in terms more familiar to economists than anyone else. I can tell the Committee that we will continue to discuss with the industry whether these concerns about the tone of legislation can be addressed. I should add that the noble Baroness’s amendment would also delete the specification of who is liable to pay CIL.

The questions posed by the noble Lord, Lord Cameron, come into this range of questions about land values. In most cases, as we know, development happens because the developers see that the value of their properties will increase as a result, which was inherent in the design of PGS. If land values had not increased, there would be no PGS to pay. But the industry was clear that it did not want an instrument that required a site-by-site assessment of liability. We can understand that; it is precisely what we are trying to meet. It wants a standard charge, which we have tried to provide with CIL. These charges are averaging in their effect.

Clause 205 allows a charge to be imposed where there is no land value uplift or where there is a decrease, because it is an average charge. That said, our regulation-making powers also allow for charging authorities not to impose a charge in the first place on classes of development where value did not generally increase.

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We rather expect that the guidance we give to charging authorities will remind them that it would be unwise to impose CIL if it prevents development from occurring. All this must be cast in the framework of what will work and what will promote and facilitate development. We are talking about common sense as much as calculation here. The two surely must go together.

It is set out in the August document that the Government are exploring how we might also need an arrangement to deal with truly exceptional cases. In those three ways, I hope that we can arrive at an understanding of how this will work to cover these different situations that develop on the ground in relation to what the local authorities will try to do.

The noble Baroness’s amendment would delete the specification of who is liable to pay CIL. I do not think that the DPRRC would be content with that. It has told us that more rather than less detail is needed on where liability for CIL lies. So we are working hard to see whether we can provide more detail. Accepting this amendment would worsen the situation by removing any indication at all.

Amendment No. 437CA, again in the name of the noble Baroness, Lady Valentine, is related to the amendments to Clause 198. The amendment would delete Clause 200(5), which would remove the ability for CIL to be levied on a development, whether or not the value of land has increased as a result of the granting of planning permission in that case. This amendment raises the prospect that each and every development proposal to which CIL might apply would need to be the subject of a specific assessment of value uplift, which I am sure is not what the industry has said. It is too expensive and has many other defects. CIL allows us to move away from case-by-case to average standard charges.

I understand that parts of the property and development industry have some concerns about the concept of value created by development not only in Clauses 198 and 200(5), which set out the general purpose of CIL, but also in Clause 201, which makes provision for the detail about how a specific charging schedule should be created. We are continuing to discuss with industry whether there is a better way to achieve our shared goal of ensuring that the economic viability of development is properly reflected and taken into account in the design of CIL. Those discussions are not yet complete, but I am still willing to consider bringing forward an amendment on this issue on Report if we can reach agreement. Therefore, I would ask the noble Baroness not to move her amendment.

Amendment No. 435GA, in the name of the noble Lord, Lord Reay, would add to Clause 198(2) and therefore provide an additional purpose of CIL to compensate those who are adversely affected by permitted developments. We have been very clear about the purpose of CIL. It is a new mechanism to raise additional revenue to help delivery of the infrastructure needed. It is not about offering compensation to those who are affected by permitted development. CIL has never been conceived in this way and the rest of Part 11 is not consistent with such an approach. The obligation under Clause 202(1) is for CIL regulations to ensure that CIL is spent on infrastructure.

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The noble Lord asked me specifically about wind turbines. We have an amendment later on which I think I will be able to assure him that wind turbines, because they are not buildings, will not be covered by CIL. As he knows, there are already mechanisms and systems in place for addressing those adversely affected by permitted development. It is inappropriate to extend the purpose of CIL in this way.

Government Amendment No. 436A would replace Clause 199. The amendment has been tabled to provide clarity about which authorities will be CIL charging authorities. It partly responds to the concerns that the DPRRC raised in its 12th report about the current Clause 199 since it leaves to regulations the specification of which authorities would be empowered to charge. I think we have satisfied the committee so that it will not come back to this in its 13th report.

Amendment No. 436A is a substantial amendment, which I think will be welcome. First, it removes from the Bill any possibility for the Secretary of State and Welsh Ministers to be empowered as CIL charging authorities. That is a major change. Our August policy document explains that infrastructure sometimes crosses local authority boundaries or sometimes needs contributions from one or more authorities. We have listened to the local government community, which tells us that local authorities can work together on a voluntary basis to identify items of infrastructure of common interest and put in place CIL charging schedules to raise the necessary contributions without the need for the Secretary of State or Welsh Ministers to levy a charge. Our decision to remove the Secretary of State and Welsh Ministers as potential CIL charging authorities is a vote of confidence in local authorities.

The second change will be to reconfigure Clause 199 to make it clear that a starting point of the Bill is that local planning authorities will be the CIL charging authorities. “Local planning authority” has the same meaning here as it has in Section 37 of the PCPA 2004 as regards England and Section 78 of the Act as regards Wales. The CIL charging authority will be the local authority with responsibility for preparing local development plans. CIL is closely linked to the development plan process and is the logical choice. The noble Lord, Lord Dixon-Smith, asked what happens when boundaries are straddled. I refer him to paragraph 446 of the August CIL document. It states:

“Where a development proposal straddles local planning authority boundaries, the Government proposes that, as with current planning obligation policies, the relevant CIL charging schedule (if any) would be applied to the parts of the development within the relevant authority”.

We have addressed the point in that paragraph, which goes into some detail.

Amendment No. 436A also specifies that the Mayor of London is a charging authority for Greater London in addition to the London boroughs. We think that it is right that this should be so in order that the mayor, as a strategic authority, can raise additional revenue for strategic infrastructure projects. The boroughs might establish CILs for the infrastructure needed to support the development envisaged in their local development plans, while the mayor might do so across London for strategic infrastructure.

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Crossrail is a clear example of this. Indeed, the heads of terms between the Government and Transport for London on Crossrail which was laid in the Library of the House last year list Transport for London as underwriting £300 million in revenue to be raised from a CIL. This amendment covers that point. We expect that the boroughs will collect CIL on behalf of the mayor so that developers have only one payment to make to a single authority. I hope that that meets the point raised by the noble Lord, Lord Dixon-Smith. I know that he was concerned about the confusion which might arise from there being two Bills. We expect the boroughs to act as a single collection authority.

Baroness Hamwee: I am sorry to interrupt the Minister when she is getting through her response so well, but I want to raise a further query on this narrow point. Her description seems to suggest that the mayor will be the charging authority even on occasions when the mayor is not the planning authority. Can she confirm whether that is so?

Baroness Andrews: My understanding is that the mayor can be the charging authority only when he acts as the planning authority. The noble Baroness also raised issues about joint committees. We do not expect these arrangements to reflect joint committee arrangements. The joint committees between local authorities are separate and we shall come to them later, because there is a distinction to be made.

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