| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
3.30 pm
Lord Dearing: Some noble Lords will remember a show called “Oliver!” in which Fagin says,
“You’ve got to pick-a-pocket or two”.
As currently drafted, this smacks of a situation where the pick-pocket-in-chief can choose his own jury. I am grateful to the Minister for the assurance that that is not quite what the Government have in mind.
Baroness Andrews: I am grateful for the musical interlude, which is welcome. To ensure that the draft schedules are ready to be examined, subsection (4) requires charging authorities to accompany the draft schedule with a declaration that they have complied with the legal requirements and that they have had regard to the key matters. Subsection (7) requires the independent examiner to consider how the charging authorities dealt with the key issues, and recommend that either the draft schedules should be approved, improved through modifications or rejected with reasons given and published, and in keeping with our commitment that charging schedules are tested to the same high standard, subsection (9) provides that CIL regulations must require the charging authority to allow someone, if they so request, to appear in person at the examination to make oral representations. We do not think it would be appropriate to force a charging authority to approve a schedule if it was strongly opposed to the recommendations, so subsection (10) allows it to be withdrawn.
I turn to government Amendment No. 438N, which deals with how schedules are approved. In keeping with the arrangements for development plan documents, this amendment ensures that if a charging authority wishes to approve a charging schedule, they can do so only in accordance with the recommendations of the independent person who conducted the examination. This effectively makes those recommendations binding on the charging authority unless it chooses to withdraw it. For charging authorities which are local authorities, approval can only be by a majority of voting members at a meeting of the authority or, in the case of the mayor, personally.
Amendment No. 438P is important because it deals with how charging schedules may come into effect and how charging authorities may cease charging CIL. This is because developers and other applicants seeking to apply for planning permission to which CIL will apply have to be able to plan ahead in terms of the likely costs of developing land. In order to do this, they need to be aware of the level of CIL that they will be charged. That is why new subsection (1) prevents charging schedules coming into effect until the charging authority has published it. We will consult through draft regulations on the most effective methods of doing that. It may be that a charging authority’s plans for an area change—for example, if a planned phase of significant growth comes to an end. It will have no further infrastructure needs that are best met by charging CIL. We have to make provision to stop charging CIL if the situation warrants it, and subsection (3) provides for this.
However, allowing charging authorities an unconstrained ability to stop charging CIL could cause uncertainty and would be unfair, so subsection (4)
23 Oct 2008 : Column 1292
Amendments Nos. 438K and 438Q are integrally linked and deal with the application of the charging schedules once they are adopted. Amendment No. 438Q responds to concerns from stakeholders about the need for further clarity about what should happen in the event of a disagreement between a charging authority and a person liable for CIL on matters of fact. It requires the Secretary of State to make regulations providing for a right of appeal on matters of fact relating to the calculation of the amount of CIL. We hope there will be very few cases but, if there is dispute about whether the development is the kind of development on which CIL should be charged or the quantum has correctly identified the amount of floor space and so on, we need an appeal mechanism.
Most disputes on matters of fact should be capable of being resolved quickly and simply. Under Amendment No. 438L, we are considering a proposal to require charging authorities to recalculate their estimate of the amount of CIL due from a particular development if requested to do so within a set time of being notified of the amount of CIL due. Only if disagreement remains after this stage would the matter become a formal appeal.
It is obviously important that the appeal is decided by a suitably qualified person. Subsection (2) specifies that it must be considered by a person appointed by the Commissioners for HM Revenue and Customs. It is expressed in this way because we want appeals to be considered by a valuation officer or a district valuer. We believe that the Valuation Office Agency, which celebrates its 100th birthday in 2010—I am sure we can all find ways of celebrating that—is best placed to consider these appeals because it has a proven and respected track record in property and land rating assessments. I stress that we do not intend HMRC to have any role in CIL.
Given the relatively straightforward subject matter of any appeal, we propose that it should be conducted by written representations rather than through hearings in person. They would be binding but, of course, a further challenge in the courts would be necessary. We shall consult on the detail in the draft regulations.
Amendment No. 438K is partly consequential. It deletes the previous provision for regulations to provide for a right of appeal. Amendment No. 438L provides the opportunity for further clarity about how much CIL would be payable under a charging schedule and about the revision of charging schedules. New subsection (8) provides that the regulations may set out when charging authorities must provide an estimate of the amount of CIL chargeable on individual developments—for example, at the time planning permission is granted for the development. This estimate
23 Oct 2008 : Column 1293
On the questions raised by my noble friend Lord Woolmer, new subsection (9) would expressly allow for charging authorities to revise their charging schedules, and new subsection (10) makes clear that the requirement for examination, approval and the bringing into effect of charging schedules which are the subject of other government amendments applies to those revisions in the same way as to the first charging schedule. To be clear, charging schedules should seek to reflect the degree of potential change envisaged in the development plan—for example, the anticipated changes in the economic climate—and so formal revisions of charging schedules should not be necessary simply in response to normal variations in market conditions.
But charging authorities should keep under review the effect of the level of CIL on development in their area, perhaps through their annual monitoring report which looks at the delivery of the local development documents. If their monitoring shows that economic circumstances have changed significantly or there is a need to revise the development strategy, the charging authority should also assess the need to revise the charging schedule.
I am conscious that a great deal of heavy, technical detail has been placed on the record. I am not sure that I could answer any further questions but I am happy to write to noble Lords if they require further details.
The Earl of Caithness: Will the Minister help me? I got a bit lost at the end there, trying to absorb everything she was saying. If a local authority wants to change the level of CIL or stop it, does it have to go through the full rigmarole it went through when it set CIL? Can it just say at a meeting of the authority, “The rates are coming down from £40 a square metre to £10 a square metre”, or does it have to go back out to consultation and go through the whole process again?
Baroness Andrews: It has to go through the whole process. It would be a serious undertaking to change the level of CIL; it cannot just be snuck through.
Lord Greaves: Does the Minister have an estimate of how long it would take an authority from starting the process of setting its schedule of rights to going through the whole process and getting it examined and having them in place?
Baroness Andrews: To the best of my knowledge we have not set down any timetables, nor have we anticipated any. We have some examples of the tariffs that have been worked out. The development plan document will be in good shape. We will take advice from the Local Government Association about what we might expect.
Baroness Ford: Will the Minister write to noble Lords with some idea of how long the consultation process that the noble Earl referred to will take? It is
23 Oct 2008 : Column 1294
Baroness Andrews: I am happy to do that. I can then reflect on some of the other elements that go into making that a certain and swift process.
Lord Dearing: In London there are two charging authorities, the mayor and the borough concerned. If the two operate independently in setting their charges, there needs to be some mechanism to ensure that they are mutually consistent and reasonable.
Baroness Hamwee: I moved this amendment some time ago. I can speak only for myself; I thought that I understood some of this when we started at 11.30 this morning, but my confidence has drained away over the past few hours. On my own amendment, the Government, in their concern to protect partners, are not just putting an extra burden on local authorities but giving them a difficult, perhaps impossible, task. That, however, is just one of a whole range of matters. It was suggested earlier that there might be some analogy with musicals—picking a pocket or two. I have been wondering if we are somewhere over the rainbow; we may certainly be on a yellow brick road. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 436BB not moved.]
Lord Cameron of Dillington moved Amendment No. 436BC:
436BC: Clause 200, page 123, line 32, at beginning insert “Except as provided in section (Charities relief),”
The noble Lord said: There are three amendments in this group, in my name and others, that provide a comprehensive exemption in the Bill for registered charities. I speak on behalf of the Charity Tax Group, the Churches’ Legislation Advisory Service and the Charities’ Property Association, of the latter of which I am currently chairman. I also speak in response to numerous letters that I have received from concerned individuals.
As I explained at Second Reading, the effect on charities of the proposed CIL is potentially very serious. Charities do not benefit financially when granted planning permission to develop land or property for their charitable purposes. Unlike a commercial developer, charities developing their own property for their own purposes will have no end-point sale from which to pay the tax. If no concession is made and charities are obliged to pay CIL, they will have either to pay for it with their existing funds or to try to raise more money—which, in the future economic climate that we are assured is recessionary, will be quite difficult.
23 Oct 2008 : Column 1295
3.45 pm
At present in this country and in virtually every other country in Europe, charities do not pay tax. In the UK they are entirely exempt from income tax, corporation tax, capital gains tax, and receive compulsory relief of 80 per cent from council tax, with the other 20 per cent being given voluntarily by almost all local authorities. Charities also have more recently received a total exemption from stamp duty land tax. This general exemption from taxes rests on the fact that charities are voluntary bodies, living primarily off voluntary donations which, by law, must be used exclusively for the public benefit. One quid pro quo for these exemptions is that they are very strictly regulated by the Charity Commission, with their contribution to public benefit continually under review.
There is a general recognition that charities get or give more value for money than anyone else, including government, because they are so close to their beneficiaries and attract a massive number of volunteers—over half the adult population of the country, in fact. They are unique engines of social cohesion and add huge benefit to our community infrastructure. Of course, the Government recognise this and are currently engaged in a programme of encouraging and making better use of this so-called third sector.
Meanwhile, CIL could be particularly damaging to charities. For instance, the liability of charitable housing associations and social housing would be huge, and to what end? There is trouble enough funding social housing. In this context, I refer to the amendment of my noble friend Lord Best, which I strongly support. Anything which gets in the way of the provision of affordable housing should be resisted at all costs, especially, in my view, rural affordable housing. There is still a great lack of clarity regarding the relationship between CIL and the Section 106 agreements, which is yet to be ironed out. However, I will let my noble friend speak to his amendment, saying only that I support it.
On the general exemption for registered charities, schools and colleges need to develop their facilities for the furtherance of their charitable purposes, and the same goes for churches and village halls. A recent survey of village halls in Devon alone shows that over the next three years, £23 million will be spent on extensions, improvements and new build to village halls in that county. As for housing associations, what on earth would be the point of them paying CIL when they should probably be recipients of the funds? It is like a money merry-go-round.
On a larger scale, the Wellcome Trust is hoping to embark on a joint medical research facility at King’s Cross with Cancer Research UK, MRC and UCL. This project will cost something in the region of £500 million and CIL, if charged, could effectively kill it.
These examples will be replicated up and down the country. As certain as night follows day, if charities have to pay CIL, they will have to cut back on their activities—activities which are recognised by all to be the best value for money that society can have. There can be no possible point in charging them this levy. Without a full exemption from CIL, it is certain that many new charity-led community and redevelopment projects will not proceed or will be restricted.
23 Oct 2008 : Column 1296
To give credit where it is very much due, the noble Baroness and her department have recognised the importance of everything I have said and of exempting charities from CIL. I thank the noble Baroness very much for her kind personal attention to this matter and for the time that she and her department have spent trying to resolve it. But unfortunately, government Amendment No. 437C does not meet the needs of the charity sector. First, it does not state unequivocally on the face of the Bill that charities should be exempt from CIL. It leaves too much to secondary legislation and subsequent regulations which, I believe is very dangerous, as do most people. It also leaves too much discretion to individual local councils. Charities will not have the resources or expertise to argue for specific relief with each relevant charging authority unless the principle of the relief is enshrined in legislation. In our view, discretionary relief is not sufficient.
Without going into too much detail here, references to exemptions “in specified circumstances”—whatever that means—do not sound very convincing. In addition, too much discretion is given to the charging authorities. As I say, charities might find themselves having to negotiate individual projects with individual councils. Will they find themselves being forced to go where they can get the best deal on CIL, which may not be ideal for their purposes? You have to bear in mind that some charities cannot pick and choose so easily; for example, there are limits to where a new lifeboat station can go.
Then there is a reference in the government amendment to a charity,
That is very dangerous. Under English and Scots law, charities operate by definition for the public benefit. We would not want to see charitable purposes cherry-picked by either central or local government. If a body is regarded as charitable by the Charity Commission or the Office of the Scottish Charity Regulator, that should be a sufficient test. We are looking for a definitive exemption in the Bill, as in our amendments.
The Government have indicated that seemingly the only reason why they cannot agree to our amendment is that they are concerned that any concession might breach the EU rules on state aid. We entirely understand that the Government are under an obligation to observe EU law, but the group of charities supporting my amendment have consulted a specialist in European business law, Professor Martijn van Empel, who teaches both at the international university in Rome and the University of Essex, and who concluded that an exemption for charities would not affect trade between member states and would not therefore run counter to the ban on state aid as provided by article 87 of the EC treaty.
I realise that lawyers disagree—that is how they make their money—and that in this case government lawyers are not so certain, but it seems strange that in virtually every other country in the EU apart from Sweden charities can be exempt from tax, including CIL equivalents in some member states, and exempt without challenge. It is also strange that charities in this country can be exempt from every other tax—which, considering the sums involved, would seem far more serious breaches of the rules than an exemption from
23 Oct 2008 : Column 1297
I get the feeling that this is a very good example of UK gold-plating to EU legislation, which is a defect to our system that I have come across in many other fields in the past. I regret to say, therefore, that in spite of the Government’s worries about state aid, we would still insist on a mandatory exemption for charities in the Bill. I beg to move.
Lord Hodgson of Astley Abbotts: My name is attached to this amendment and to subsequent amendments. I apologise to the Committee for not having taken part in proceedings before, and not having taken part in Second Reading on 15 July. I was abroad at the time, but when I read Hansard and saw that there were 37 speakers and that the debate finished at half past midnight, I suspected that another speaker would not have been particularly welcome at that time.
I have a particular interest in the charitable and voluntary sector and therefore in the implications of CIL for the sector. I declare an interest, which is in the register, as president of the National Council for Voluntary Organisations.
Like the noble Lord, Lord Cameron, I have noted and read carefully the amendment tabled by the Government in the name of the noble Baroness, Amendment No. 437C. While I accept that it goes a little way towards meeting the concerns of the sector, in essence I find it dangerously imprecise and extraordinarily permissive. The detail of the wording says that the regulations must,
may be allowed. A reduction could be something or nothing; it could be 1 per cent. Therefore, that might provide a useful means to charity but it might also be a means to charge charities at effectively the full rateof CIL.
The second paragraph of the new subsection proposed by the Minister’s amendment states that the regulations will permit charging authorities to make arrangements to reduce. Permission is all very well, but which charging authority faced with a golden goose will step aside?
Like the noble Lord, Lord Cameron, I argue that the Government should recognise the special position of charities, which, as he said, are exempt from tax apart from VAT. This is not a party political matter; it is a situation which has persisted for many years and which the Government should now take on board.
As the police would say, I have form on this matter, because I had the pleasure of taking the Charities Bill through your Lordships' House from the Front Bench. I have put my name to amendments in this group because I have three major areas of concern about what the Government are doing. First, the Government’s proposal is quite at odds with their stated policy objectives as regards the voluntary sector. Secondly,
23 Oct 2008 : Column 1298
| Next Section | Back to Table of Contents | Lords Hansard Home Page |