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I have one other question, which follows from Amendment No. 444A, tabled by the noble Lord, Lord Best. Can the Minister explain when, under Clause 208, Section 106 agreements apply and when CIL applies? The circumstances look vague. Is it possible for local authorities to apply both at the same time?
Lord Greaves: I would like to associate the Liberal Democrats with much of the debate on this group, particularly the representations that have been made about charities and social housing. My noble friend Lord Shutt of Greetland threatened to make a guest appearance in this debate, and I do not think he disappointed us when he followed the noble Lord, Lord Hodgson of Astley Abbotts.
I shall make a few comments about local sporting facilities and sports clubs. I refer to government Amendment No. 437C. It has been suggested that it does not meet the Bill in a number of ways. It refers to charities, but not to community amateur sports clubs, which are not necessarily charities but perform a similar function. In various Acts, they are set alongside charities as benefiting from, for example, gift aid on donations and often relief from non-domestic rates. If the Government are pursuing this amendment in its present form, will the Minister have a look at whether community amateur sports clubs can be added to it? Local sporting facilities are a vital part of community facilities. I do not have to go into detail about their benefit to local communities, not least to those who take part in the
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There is also a general concern about the effect of the changes on the very real benefits which local sporting facilities and many other local community facilities get, at the moment, from planning obligations through Section 106 agreements. The noble Lord, Lord Berkeley, has raised the relationship between the two. It is estimated by Sport England that, in 2006-07, sport benefited to the tune of £21.3 million from planning gain. Clearly, there is a potential in the new system for bodies, which at the moment are benefiting from money from planning permissions, having to pay over money in future. Where is the balance likely to lie? Those real concerns exist not just in local sporting facilities, but also in a number of different sectors. It needs bottoming.
On a more general point, the more I listened to the debate on CIL this morning and this afternoon, the more I came to the view that it may well be a piece of legislation which we spend a great deal of time worrying about, and which is never brought into effect. The more one looks into it, the more one sees the unintended consequences and complexities. In the end, people will say that it is not the answer and we will have to go back and think again.
Lord Jenkin of Roding: The noble Lord, Lord Berkeley, asked about the regulations provided for in government Amendment No. 437A, where it says:
I have received a representation from the United Kingdom Business Council for Sustainable Energy—a very worthy body—which cuts right across the normal divisions between business and the environmentalists. It represents both and seeks to find as much common ground as possible. It is saying that the inclusion of energy infrastructure projects would be perverse in that CIL is intended to provide funds for infrastructure. The short answer is that CIL is there for things like roads, hospitals and schools, whereas the kind of infrastructure we have been discussing in the earlier part of this Bill is very different. The industry has always been happy to work with local authorities on Section 106 agreements, such as the benefit to society from the introduction of what the noble Lord, Lord Cameron of Dillington, at an earlier sitting of this Committee, referred to as unfriendly neighbour projects, or words to that effect.
Lord Cameron of Dillington: Bad neighbour projects.
Lord Jenkin of Roding: In terms of a local community, a major energy installation could well be regarded as a bad neighbour project. At the same time, we all agree that that is essential; it is what the first part of this Bill is all about and it is a matter of how one reconciles local communities to that. The answer is that you can provide them with a variety of advantages and benefits which are specifically related to the building and use of a project, and which can therefore be seen by the
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Lord Dixon-Smith: We are at the core of the problems that CIL throws up. We will have to finish with absolute clarity about this difficulty in the Bill; at the moment, we do not have it.
First, I shall deal with my amendments in the group. Amendment No. 437 is simple. It would ensure that any development not requiring planning permission will not pay CIL. I am moderately happy that the noble Baroness has that situation well and truly covered. I am very grateful to her for that because, as the Bill was drafted, that was not clear.
My other amendment, which I freely admit, as my noble friend Lord Hodgson of Astley Abbotts, said, is not “legally satisfactory”, was tabled deliberately to ensure that we covered absolutely the subject of this debate, which is about charities and charitable works—which, in my view, must have clear exemption expressed in the Bill. The other half of the amendment picks up the point made by the noble Lord, Lord Berkeley, but in a much wider context. It states that the provision of infrastructure should not be eligible to pay CIL. It seems to be the ultimate churning of money to take money from people to provide infrastructure but make the people who provide infrastructure also pay that charge. That is illogical in the extreme.
That applies just as much to road improvements, electricity transmission—power stations have been raised by my noble friend Lord Jenkin—and all the other infrastructure that we require in a modern society. The only effect of adding CIL to those developments will be to increase the charges that the developers have to make for that infrastructure—so far, we use roads without charge, but it will come back in the form of increased excise duty on fuel, or something like that. Putting the charge on electricity generation or transmission will increase the cost to the customer. There is no escaping that. As I said earlier, my view is that the whole scheme will ultimately have an inflationary effect and increase charges generally across the board—not exactly something that I look forward to.
I shall not try to repeat the arguments that everyone made on the question of charity. The case was admirably and clearly set out by the noble Lord, Lord Cameron of Dillington, and finished by the noble Lord, Lord Shutt of Greetland, who was absolutely right about “charity” being a good word. The right reverend Prelate the Bishop of Southwell and Nottingham said that the nature of the Bill means that the exemptions are optional. That is not satisfactory. They must be absolute,
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This applies across the board and not only to the charitable sector. The noble Lord, Lord Best, was not quite sure whether aspects of social housing were charitable. I am sure that he is right to make that point, because aspects of social housing and affordable housing are in the field of desirable infrastructure from which the whole community benefits. In my view, CIL is designed to provide a certain amount of local icing, not to affect greatly the main infrastructure provision. That is not clear in the Bill, and it must be made clear as a result of our debate. That may not happen today, but I hope that the Minister will take this matter away and think about the wording both of the Bill and of some of her amendments, which do not go sufficiently far. We need this absolute clarity for the sake and the benefit of everyone across the country.
The Earl of Caithness: This is good, heavy pounding, is it not? I have six amendments in the group. The first amendment is on a slightly different subject from anything that we have discussed so far. I tried to get it degrouped, but the Government would not let me, which further complicates the debate.
Amendment No. 436C would change the timing of the payment of the liability. It should be paid when the necessary infrastructure for the development has been completed. The argument for this is really very simple. I want that infrastructure to be built. If I have an assessment to pay for the cost towards it, what certainty is there that it will be built? It is a very simple amendment, and I am sure that the Minister will be able to help me.
I put my name to Amendment No. 437, which is also in the name of my noble friend Lord Dixon-Smith. He did not mention it specifically, but it is important that CIL is not payable on any development that does not require planning permission. If development is exempted, there should be no CIL, which should be clear in the Bill.
I support the amendment of the noble Lord, Lord Best, on affordable housing.
Lord Berkeley: When the noble Lord talks about a development not requiring planning permission, does he mean that it is within permitted developments?
The Earl of Caithness: Yes. Planning is not needed at the moment and one can get on with the development. That is particularly important in rural areas, and it must continue. We discussed that two or three days ago.
When the noble Lord, Lord Best, was speaking, I was thinking that it was about 20 years ago when, as a Minister with responsibility for housing, I grappled with affordable housing and proposed schemes. Then, as now, if there was any CIL to be paid, it would have completely destroyed any of the projects that we were pursuing.
My noble friend Lord Hodgson commented on “or reduction” in proposed new subsection (4A)(a) in the Minister’s Amendment No. 437C. As he will see, I tabled an amendment to this to leave out those words
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Amendment No. 437D covers particularly the small organisation, which may not have a great deal of money, but has developed something. CIL should be paid,
When the noble Lord, Lord Greaves, was talking about amateur sports clubs, it occurred to me that this was just the sort of situation that might cover them. The Minister perhaps has listened too much to the big developers and the rich local authorities where development has been under intense pressure over the past few years. The Government have not listened enough to the small amateur organisations, small businesses, charities and individuals covered by this. In cutting the cloth for the big boys, individuals and small organisations will get hurt.
I have a query for the Minister on proposed new subsection (4B)(a) and (b) under government Amendment No. 437C. In principle, she is right to include something like this. It is a reasonable safeguard against a developer trying to evade CIL for a development, but there should be a cut-off date. One can foresee a time when local authorities are pushed for money. For example, the noble Lord, Lord Cameron, may have put up an agricultural building, which has improved his enterprise, and seek to enlarge it. He has not paid CIL on it because what he did to begin with was exempt or was at a nil rating, but the extension would fall into a CIL requirement. Because the local authority is short of money, it puts a CIL on the original development and classifies the whole thing as one.
I can foresee lots of situations when local authorities will go on fishing trips like that in order to raise money. They always will be short of money. Therefore, should there not be a cut-off date, such as when the development is substantially complete? The local authority should issue a certificate which means that it cannot go back and revisit CIL on that part of the development.
My last two amendments in this group support my noble friend Lord Dixon-Smith. I should like to clarify one thing. My noble friend used the word “charity”. Does “charity” cover a limited company with charitable status? It is not quite the same thing, but as long as every sort of charity is covered and exempt, I am happy.
Baroness Andrews: I have ceased to count the number of questions that I was asked in this debate. I suspect that I will not be able to answer them all and will have to write, but I will do my best. First, I should like to give a general statement. It is understandable that now we are talking about how CIL operates we have moved away from the high objectives and politics and have got into the serious and difficult technical issues of a complex set of possibilities. I understand it when the
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At this level of detail, one begins to realise that it is difficult. Basically, we are trying to do something that will raise money to invest in the things our communities need, whether they are hospitals, playgrounds or railway stations. Those needs are not going to go away, they will become more intense. Yes, noble Lords may feel that what we have concocted will cause local authorities to take a deep breath and think again, and some may well be right to do so because of their local circumstances, but this is designed to help meet the needs of the community. That is what it is all about, and I do not apologise for the fact that it is complicated. It is also why we said at Second Reading that so much had to be left to regulation because it will be dealt with through discourse and understanding between us and the people who have deliver this on the ground. Those are my general comments about why we are at this point in the debate.
I shall go fairly quickly. I understand the point about the groupings, but all these amendments are about different forms of exemption, so it is right to group them together. They cover the question of which developments should be liable to pay CIL, and we have heard much in the debate about exemptions for specific types of development. I shall turn, first, to Amendments Nos. 436C and 437D tabled by the noble Earl, Lord Caithness. These seek to ensure that CIL would be payable only when the necessary infrastructure had been completed as opposed to on commencement of the development in question, as currently provided for in Clause 200(2)(a). It does not make sense for CIL to be payable only once an item of infrastructure has been completed, because it may well be something required to support the development plan as a whole. Essentially it is a work in progress and not fixed in time. CIL is a source of revenue for local authorities to use in a flexible way based on local infrastructure needs and planning. As I have said before, the link between development and infrastructure is strategic rather than specific, so it is difficult to say which developments would have to pay on completion of a particular item of infrastructure, or which pieces of infrastructure a specific development had to contribute to. It also raises difficulties about the concept of completion. “Commencement of development” has a legal definition set out in the Town and Country Planning Act 1990, but the concept of completion has less legal precedent and raises issues around monitoring, checking, verification and so forth.
Amendment No. 437D appears to require that CIL may be paid only where the value arising from planning permission is wholly realised at the point of sale or be under a contract of sale for a development or some
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The Government do not believe that payment on point of sale is appropriate for a number of reasons. First, as we have debated, it is often the case that land prices after the introduction of CIL will reflect potential CIL liabilities faced by parties interested in the land. In this way, such parties should have the means to pay for CIL on commencement of development by paying less for the land beforehand. Secondly, while Clause 200(2)(a) requires that CIL be payable on commencement, the Government envisage that the liable parties will have 28 days from commencement to pay CIL liabilities, as set out in paragraph 4.33 of the August document. Clause 203(2)(b) provides for regulations to allow payment in instalments. In this way, we are offering some release from pressure on developer cash-flows, and I think we are right to do so.
In the case of some development, sale may occur decades later if the developers are, for example, demolishing and rebuilding on investment land they already own, and may be looking to rental from it rather than selling outright. As this is a very regular occurrence, crystallising liability at the point of sale will undermine CIL very seriously and could also distort developer decisions as to whether to sell or hold completed developments. Delaying payment of CIL until the land in question has been sold risks delaying the charging authority’s receipt of CIL. Many noble Lords around the Chamber have asked for certainty in the context of our debate. What we have here is the possibility of a lot more uncertainty, imposing additional borrowing costs on the charging authority in order to fund the infrastructure or perhaps delaying its construction. A further consequence of providing that regulations may require that CIL be paid only where the value of the land in question has increased as a result of planning permission is the risk of costly disputes between liable parties claiming that the value has or has not increased. That may dissuade some charging authorities from attempting to collect CIL at all.
Lord Greaves: I understand that. Does the Minister not understand that small and local builders, in particular, finance developments as they go along? It is quite normal for Section 106 agreements to be payable or part payable on the occupation of the first house to have been built rather than on the commencement of the development. Payment on the commencement of the development would cause real problems for many small and local builders—not only in the present circumstances but generally.
Baroness Andrews: I am grateful for that.
Lord Dixon-Smith: Section 106 arrangements depend on the agreement between the developer and the authority. The first payment may occur at all kinds of different stages, dates and times.
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Baroness Andrews: I take the points raised by both noble Lords.
I turn now to the question of which types of developer and development should pay CIL—or, rather, which should not pay CIL. There have been many different opinions, some based on technical measures such as the need for planning permission, others on the type of development or the type of developer. We have always recognised that there may be a case for exemptions to paying CIL, and our policy documents set that out. Amendment No. 437 requires that CIL will not be payable on any development which does not require planning permission. I think the noble Lord thought that I had dealt with this because I have made it clear that that is indeed the case. It is evident that development that does not require planning permission in CIL terms cannot be CIL liable. That must be defined in the CIL regulations and we will do that.
I wondered whether the purpose of the amendment was to ensure that development which benefits from permitted development rights is not liable to pay CIL, a point raised by the noble Earl, Lord Cathcart. Paragraph 4.8 of the August policy document sets out the Government’s view that most PDR development is likely to be excluded from CIL. We take that view because PDRs are a good proxy for relatively low levels of impact on infrastructure. That would mean that the day-to-day operations such as maintenance work by statutory undertakers and bodies such as Network Rail would not be liable to pay CIL. I hope that brings some reassurance to noble Lords.
We will define the precise boundaries in regulations but we need to be mindful of the fact that some permitted development might have sufficiently significant impacts on infrastructure that a contribution ought to be sought. Planning permission for CIL purposes should not simply mean that which is granted on an application made to a local planning authority under Section 60 of the Town and Country Planning Act 1990 because that might leave a loophole with regard to certificates of lawful development. This is important because these certificates can be issued by planning authorities to confirm that the development is lawful for planning purposes; that it is immune from enforcement action. We want to explore further whether CIL should be payable in respect of development for which a certificate of lawful development is granted in order to avoid creating an incentive for developers to undertake development without the appropriate planning permission and then later to seek a certificate to render it lawful and therefore out of reach of CIL. Furthermore, it may be that development that should be liable to pay CIL is centred through regimes outside the regime under the Town and Country Planning Act. We need to discuss with stakeholders what should constitute planning permission for CIL purposes, bearing in mind that there might be loopholes. We have not, therefore, set that out in the Bill; it will be in regulations.
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