2nd reading, Order of Commitment discharged in the Lords
- Speaker
Lord Davies of OldhamLabour- Quote
- My Lords, I beg to move that this Bill be now read a second time. This is a short, straightforward and functional Bill which has nothing to say about the policy, nature or operation of a planning-gain supplement. It has been introduced to ensure the regularity and propriety of government expenditure in line with government accounting rules. It is a simple one-page, three-clause paving Bill, which gives authority for the Commissioners for Her Majesty’s Revenue and Customs, the Northern Ireland department and the Secretary of State for Communities and Local Government to incur expenditure on preparations for the potential introduction of a planning-gain supplement. Should the Government decide to proceed with a planning-gain supplement, we will, of course, legislate for it in the normal way, so this House will have the opportunity to consider and debate any proposals further. As has been recognised by the Treasury Select Committee of the other place, the Government have approached Kate Barker’s recommendation of a planning-gain supplement from her review of housing supply in 2004 with the utmost diligence and seriousness. The Government welcome the active parliamentary interest of both Houses in the planning-gain supplement. Development affects us all and I think noble Lords will agree with me that it is only right and proper that local communities should benefit from that development in some way. The Government announced in the Pre-Budget Report that they would move forward with the planning-gain supplement if it were deemed workable and effective. The Government believe that it would be wrong to rush into a decision on this matter until we are satisfied that any proposals will work as intended and that they are comprehensive and effective. Therefore, this Bill is only a paving measure to ensure that, should the Government go ahead with the planning-gain supplement, the infrastructure to build the systems to support it can be put in place and tested well in advance of any introduction—which, we have said, would not be before 2009. I am sure that the House will recognise that, should we go ahead with a workable and effective policy, a workable and effective IT system to support it would be equally important. The prospective operation of a planning-gain supplement has been widely debated during consideration of this preparations Bill in the other place. It is worth setting out the aims of the issue before us. Planning-gain supplement aims to help facilitate the creation of new development and economic growth by providing additional resources to finance the critical infrastructure—from roads and transport to schools and health facilities—needed to make growing communities sustainable. It is important to point out that the planning-gain supplement should not be seen in isolation. This Government have implemented important reforms to bring forward more land for housing, and planning-gain supplement is part of a broader agenda. The Government recognise that development needs to be supported by adequate infrastructure. There is no use building a housing development if the people who live there are not supported by the necessary facilities. Such facilities that are needed will, of course, be dependent on local priorities. I feel there is a widely shared view that developers should make contributions to finance that infrastructure; and there is an evolving consensus around the need for additional infrastructure to support growth and for capturing land value as a means of providing that infrastructure. The planning-gain supplement is one solution, seeking to solve a national problem at a local level. The Government believe that a planning-gain supplement can be a fairer, more efficient and more transparent way of capturing land value uplift than the current planning obligations regime or the theoretical and untested land value tax. The House will note the history of development gains taxation. Indeed, some commentators have pointed to the history of past taxes as a means of comparison with the Government’s planning-gain supplement proposals. However, closer examination of these past taxes would show how very different they are from planning-gain supplement. The Government have made it very clear that, unlike past development land taxes, the planning-gain supplement, if introduced, would: be levied at a modest rate in order to preserve incentives to bring land forward for development; be based on clear and simple definitions of value; and minimise avoidance opportunities. Some have argued that a tax based on property valuations is simply unworkable and that valuations are an art, not a science. However, I point out that valuations are an integral feature of other taxes which have broad acceptance, such as business rates. Of the 60,000 property valuations each year for inheritance tax and capital gains tax purposes, only a handful of cases are taken to the Lands Tribunal. In addition to this, business already makes multi-million pound decisions on the basis of property valuations. The Government acknowledge that there may be complex cases. This is why we are specifically consulting the industry on our approach to valuations for the planning-gain supplement, to ensure that we fully understand any issues. The Government have proposed a self-assessed valuation system based on clear definitions and well understood assumptions, which would be evaluated by professional surveyors at the Valuation Office Agency on a risk assessment basis. The Government have made it clear that the planning-gain supplement is an essentially local measure. It is a hypothecated tax, in which 70 per cent of the proceeds will be returned directly to the local authority area from where they derived for local infrastructure priorities. This unprecedented commitment by government is to ensure that all communities better share in the wealth generated by their planning decisions. It should serve as an incentive for communities to support needed growth. The Government announced in the 2006 Pre-Budget Report that all planning-gain supplement revenues generated in the devolved Administrations would be returned to the country in which they were generated, and not be subject to the same conventions as those in England. In considering this preparations Bill, the Government have welcomed debate on the underlying policy and operation of a planning-gain supplement. Indeed, the Commons Communities and Local Government Select Committee has already produced an insightful report, which has been important in shaping the Government’s proposals. Alongside that, the Government are concluding the three detailed consultations that we announced in the Pre-Budget Report and examining the responses received. Although any final decision on the implementation of a planning-gain supplement would be for another place, I extend the Government’s thanks to all those who have participated in the consultation exercises. These consultations indicate the Government’s commitment to developing the planning-gain supplement in a prudent manner on this policy, and to consulting not just on its principle but on its detail. That consultative approach will continue. I know that many in this House have significant expertise and that if the Government decide to introduce the planning-gain supplement, then substantive legislation will be brought before Parliament. Of course, the Government would publish a full regulatory impact assessment, so I can promise this House that should the Government proceed with the planning-gain supplement there would be more opportunities to debate the proposals. I return to the Bill before us. This preparations Bill is merely a paving Bill to authorise the Commissioners for Her Majesty’s Revenue and Customs, the Secretary of State for Communities and Local Government and the relevant Northern Ireland departments to incur preparatory expenditure. The House will note that, as the Bill deals solely with authorising expenditure, the Speaker of the other place has classed this as a Money Bill, under the terms of the Parliament Acts 1911 and 1949. HMRC’s commissioners need this power because administering the planning-gain supplement is not a function they currently possess, and without the power they would not be able to make the preparations necessary to administer that in time for 2009. The Secretary of State and the Northern Ireland departments need these powers because, while they possess common-law powers to incur expenditure, they need regular parliamentary authority in accordance with the Public Accounts Committee concordat and the new service rules in government accounting for any activity on which expenditure could exceed £1.5 million over more than two years. While the Bill authorises those three parties—HMRC, the Secretary of State and the Northern Ireland departments—to incur preparatory expenditure, the burden for building the administrative systems and ultimately for managing the planning-gain supplement will fall primarily to one; namely, Her Majesty’s Revenue and Customs. Its expenditure prior to introduction of any further legislation will include: new information technology for the planning-gain supplement and adaptation of HMRC’s existing system; designing the business systems necessary to administer the tax, and putting appropriately skilled staff in place to manage it; and equipping the Valuation Office Agency and the Valuation and Lands Agency (Northern Ireland) with the necessary facilities to help administer the planning-gain supplement, including staffing, training, accommodation and IT equipment. These administrative functions would, of course, have to be based on further substantive legislation, and be properly tested and in place prior to implementation of the planning-gain supplement, which we have said would not take place prior to 2009. Expenditure incurred by the Secretary of State for Communities and Local Government prior to enactment could include the adaptation of existing government IT planning resources—specifically, information technology used to monitor the planning system known as the planning portal, which is administered by that department. The Bill, and therefore the implementation of the PGS, will not require any preparatory administrative functions to be carried out by the devolved authorities in Scotland or Wales, although the supplement would apply throughout the United Kingdom if introduced. As I have mentioned, the Government have just concluded a round of consultation and are analysing the responses. The passage of this Bill is needed in advance of any decision on a planning-gain supplement, so that if an affirmative decision is taken later this year, then the Government can start to build the IT administrative systems immediately to support it successfully and in a timely manner. It is in no one’s interest to proceed with implementing the planning-gain supplement until we are satisfied that the policy is workable and effective as a means of capturing land value uplift, to finance infrastructure and support growth. The Financial Secretary to the Treasury clearly stated during the passage of this Bill in the other place that if the Government decide not to go ahead with the supplement, then no further expenditure will be incurred under this legislation. If the proposals to introduce a planning-gain supplement are not confirmed, there will be no expenditure on preparations going beyond the Government’s current work on the feasibility and workability of the scheme. With this Bill, we are trying to ensure that, if introduced, the planning-gain supplement would be administratively efficient and customer-friendly. Getting the IT right is absolutely imperative. To do that requires HMRC and its IT partners to have sufficient lead time to build and test those systems properly. In introducing this Bill now, the Government seek to avoid a situation where a decision to progress the planning-gain supplement is taken later, but the authority to commence the design and building of systems needed to run the programme is not there. Your Lordships will know only too well that the parliamentary calendar may not allow the timely enactment of such a Bill if introduced later this year. Such delays would reduce the time available to design, build and test the necessary IT and therefore could create greater risks to ensuring a smooth introduction of the policy. In conclusion, the Bill is simple and straightforward; it is to authorise expenditure to allow the Government, pending further decisions on whether to introduce the planning-gain supplement, to prepare adequately for the administration of this policy prior to implementation. A number of key points of consensus have emerged, as I have pointed out, around the need to support growth with necessary infrastructure, and for the principle that land value capture is a viable means of providing finance for that infrastructure. The Government have welcomed this debate. We have always been open to consultation on our proposals for the planning-gain supplement, and expect further examination of this policy if we choose to advance it toward introduction. Put simply, this short and straightforward Money Bill enables the Government prudently to prepare for the introduction of a planning-gain supplement, enabling sound management and efficient delivery of the underlying policy—on time and on budget—should we decide to go in that direction. I commend the Bill to the House. Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)
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- 18:03
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- Speaker
Lord StewartbyConservative- Quote
- My Lords, competition to take part in this debate has been so fierce that the list of speakers has had to be substantially reorganised to accommodate us all. I should point out that I am not aiming to tread on the toes of my noble friend Lady Hanham, who will be a wind-up speaker. Thirty years ago, for my sins, I was appointed opposition spokesman on the then Development Land Tax Bill. My sins must have been great, because it turned out to be a long and gruelling committee, but I learned quite a bit about a subject with which I had not been previously very familiar. I do not want to get into the details of any particular previous tax, or of the potential tax gain that may follow this paving Bill. However, I want to make one or two brief remarks to highlight some concerns that arose—and of which I became particularly conscious—in considering the development land tax. It is not difficult to make an intellectual case for some form of tax on the windfall element of gains, and I do not think that anyone would try to argue otherwise. The problem is how it is done; it is sensible that the Government are taking this at a steady pace and not a gallop, as there are many potentially conflicting elements to the case for or against such a charge. The points made by the Minister on benefits to local development are perfectly valid. The difficulty is that there are negative economic impacts with charges of this kind, because if there is a disincentive for owners to sell their land, they are likely not to sell it at all. The one thing that one would want to avoid, particularly in current market circumstances, would be anything that made it more difficult to bring forward land for development. One has to accept that any impost of that kind would be likely, if it had such an impact, to reduce the supply of land and aggravate shortages that already existed. Furthermore, the land sold would be likely to be more expensive, because if the seller wished to preserve the yield from the disposal of his land and less of it came to him, that would undoubtedly be a factor. One cannot get away from the fact that both those factors would put upward pressure on land prices and, therefore, on housing prices. I hope that the Government will think hard before taking any steps that would be likely to impede the supply of development land. I would have thought that it would be of benefit to take some steps—I do not know what they might be—to encourage the supply of development land, rather than to go in the opposite direction. We do not want to make dwellings more expensive than they are in the current market; so I ask the Minister, who has put forward the case for the paving Bill with his usual lucidity and good sense, to ensure that the Government look at the conflicting aspects of a charge of this kind and make sure that the measure does not run into the law of unintended consequences and find that the practical effect is not beneficial or counteracts the other beneficial elements of the proposed charge. I did not expect to be the second speaker in this debate, so I have confined my remarks to those brief reminiscences about the development land tax—but many lessons should be learned from that tax and need to be borne in mind if we are considering going down a similar path.
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- 18:18
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Baroness Miller of Chilthorne DomerLiberal Democrat- Quote
- My Lords, I will bear in mind the Minister’s remarks that this is a paving Bill. However, I feel moved to speak. If the Bill progresses further, I hope that the assumptions, policy and IT systems designed for it will be able to accommodate exemptions. I want to talk specifically about exemptions for exception sites in rural areas. The current situation is dire. The noble Lord, Lord Stewartby, has just dealt with whether the planning-gain supplement is likely to make it more difficult to develop land. The top issue in rural communities is the lack of housing. As the Minister himself may be aware, for at least the past five years the Commission for Rural Communities has highlighted that as its number one issue. The Government reacted in 2005 by creating the Affordable Rural Housing Commission. The commission duly reported. I should declare an interest here as I served on the Joseph Rowntree commission, the work of which fed into the Elinor Goodman commission inquiry. The Government have yet to act positively on any of the recommendations of the Affordable Rural Housing Commission. The Government themselves estimate that 11,000 new homes will be needed annually, at a price which enables those with an income of less than £17,000 per annum to make use of them. The Commission for Rural Communities goes even further. It believes that about 31,000 affordable homes will be needed annually for at least the next five years, whereas only 1,700 are being built annually. Whichever figure one accepts, there is an enormous shortfall. The price is being paid by rural communities, members of their younger generation leaving for the towns in droves because there are simply no houses for them. The situation is ridiculous. The Government talk about sustainable communities but, because of this housing shortage, they have condemned rural communities to a situation which is anything but sustainable. The Minister may say that the Government do not need to go to the trouble in rural areas of exempting exception sites for affordable housing, but these sites are developed only because they are an exception to the usual rule of no further development. The Government may say that the availability of such sites for affordable housing will deflate land values. However, evidence shows that land values rise significantly after planning permission has been given even when new developments include an affordable housing element, and even when the planning permission may be solely for affordable housing. Regardless, there is an overwhelming argument that, as this new tax is considered, nothing must be done to reduce the supply of land for houses in rural communities. The Government themselves recognise the value of these sites. They were about to get rid of them last year when the Minister, the noble Baroness, Lady Andrews, made the wise and significant decision in the government U-turn on preserving exception sites. It was a particularly helpful move. I conclude by providing some figures showing why the sites are so important and must not be discouraged. According to the best figures of the Rural Housing Trust, a key housing trust in this area, about 2,450 exception sites have provided 19,600 homes since 1989. The Minister may not think that a great number, but he should bear in mind that those homes were provided in the smallest communities in Britain, those which are hardest to sustain. If these villages are not to be condemned to being ghettos for the very elderly and the very wealthy, the Minister will have to take serious account of the situation in those areas.
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- 18:23
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Lord NewbyLiberal Democrat- Quote
- My Lords, the Bill raises two issues: whether the principle of the planning-gain supplement is desirable, and whether the Bill is a sensible first step in moving towards the introduction of such a supplement. On the first issue, we strongly support the principle that communities should capture some of the uplift in land value that arises from the granting of planning permission in order to finance local infrastructure and community development. The question is whether a planning-gain supplement is a sensible way of achieving that. We have serious doubts about whether it is, and so, it appears, does nearly every other body with expertise in this area. There have been powerful and persuasive criticisms of the Government’s plans by, among others, the CBI, the Institute of Directors, the British Property Federation, the Scottish Property Federation, the Royal Institution of Chartered Surveyors, the Royal Town Planning Institute, the Chartered Institute of Taxation, the Home Builders Federation and the City of London Corporation. None of them believes that the tax as envisaged will work effectively. In debates in another place, the honourable Member for Greenwich, who has great experience in this area, in my view holed the proposals below the waterline with a measured but devastating critique of them. I should like to know who with expertise in this area, outside your Lordships’ House and another place, believes that these are sensible and workable proposals. Who supports them? If there is such criticism of the proposals as they stand, what does that criticism amount to? The test set by the Government is that the proposals must be “workable and effective”, but all the evidence from previous similar measures and from those who work in the property industry is that they fail that test. Perhaps I may mention some of the principal criticisms. First, there will be real problems in the valuation process, particularly for complex, multi-phase, multi-use developments. There will be considerable scope for dispute about what an appropriate valuation is, particularly on sites that require land remediation. In cases where new infrastructure is needed, there will also be legitimate and large scope for arguing about whether any uplift in value accrues from the granting of the planning consent or from the subsequent investment by the developer and about which element has created the additional value. In terms of the ability of the planning-gain supplement to produce the revenue, which everyone agrees is needed to support development, it is extremely telling that the City of London Corporation has said: “It is doubtful that the revenue generated by [planning-gain supplement] would be sufficient to provide the same level of infrastructure achieved through funds obtained by the operation of the existing system”. So there are real problems relating to valuation. If these problems mean that there is a delay and the tax is successfully evaded, the revenue generated will be much less than expected and I believe that that will prove to be a fatal flaw in the plan; it simply will not be seen to deliver over a period. Secondly, problems arise from the start date and the very early point in the development process at which the payment has to be made, which will affect the market and the speed at which development comes forward. Again, I quote the City of London Corporation: “Requiring PGS to be paid up front will increase costs and favour schemes which are pre-let, pre-sold or divisible into small units or phases. The City Corporation is concerned that this is likely to disadvantage large, speculative schemes which cannot be broken down into phases. These are essential to the City office market”, as are similar schemes to office markets in other major cities. A third issue relates to the fact that, to put it mildly, at this point there is clearly a lack of consensus on the proposals, and in those circumstances developers will not believe that they are going to be durable. That, in turn, will mean that developers hold back on development, whether it is housing or other forms of development, and the pace of development will be slow. We heard from the noble Lord, Lord Stewartby, other arguments as to why this measure might slow down development. It is ironic that one of the arguments for it given by the Government is that it will help economic regeneration and growth; in fact, it is likely to have the opposite effect. Our final major concern is the way in which the planning-gain supplement breaks the link between the local communities affected by the PGS and the developer, and it does so in two ways. First, it is planned that only 70 per cent of the supplement will go back to the local area. How the remainder is to be distributed is pretty unclear but, from the descriptions that we have heard so far, there seems to be no reason why, in England at least, it could not be allocated by the Treasury or by government regional offices for projects in the region in which the development is taking place which simply do not reflect local priorities. Secondly, in my view, the fact that there is an automatic payment to a national Exchequer rather than the local authority will mean that the scope and requirement for dialogue between the developer and the local authority about how much is contributed or necessary or how the money is spent will be greatly reduced. Both the developer and the local authority stand to lose by that. Negotiations over Section 106 agreements, when done properly, enhance both the quality of the development and the benefits to the local community. I understand that Section 106 agreements will remain in place but, with planning-gain supplement top-slicing much, if not all, of the revenue available, it is difficult to see what real value such agreements will have in the future. With all those criticisms, is the measure still worth putting in place? If there were no other way of getting a proportion of the uplift in value that accrues from development, it might at least be worth trying in a few pilot areas, but we think that there is a better way of achieving the same goal as that intended by the Government which is much more likely to be successful. It would have two principal components. First, one would make Section 106 work more effectively in more places. We know that the operation of Section 106 is very patchy and that a surprisingly large proportion of councils do not negotiate Section 106 agreements at all. That seems to me quite extraordinary. However, many do and, where they do, there is a great benefit to the local areas. It seems to me that we should build on the flexibility of Section 106. In an area with major house building on greenfield sites, such as Milton Keynes, it has been possible to operate a tariff system under Section 106 which the house builders, the local authority and the local community feel has been very effective. In the case of complex, multi-use developments, such as those currently under way or planned for the Greenwich peninsula, a whole raft of infrastructure and community facilities will be funded because of a well negotiated Section 106 process. We should be seeing how good practice in negotiating Section 106 agreements can be spread to authorities that are not very good at it. Frankly, I do not see why this should be so difficult. Perhaps, for example, the LGA should offer a new service to individual local authorities on how to do it, or perhaps commercial planning specialists should be appointed as a matter of course for all large developments. I am not sure what the best way of achieving success with Section 106 will be in every case but I am fairly certain that, with a bit of thought and effort, it could be done. Secondly, in order to provide a continuing income-stream to local communities from development, we support the concept of basing business property taxation on land values. In this way, the burden of providing local infrastructure, for example, can be borne in part by the ongoing benefit that property owners have from development. Another advantage would be that, because it is an income-stream, as the value of the land changed with the development and other developments in the area, you could capture ongoing uplift and not just that which had been valued at the point when the development commenced. In addition to those two points, we would end taper relief on capital gains and introduce VAT on new building. Those are other ways of capturing some of the uplift, and incidentally they would benefit the national rather than the local Exchequer. Taken together, in our view, these measures would achieve the goals of the planning-gain supplement but they would do so in a practical, effective and sustainable manner. As for the Bill itself, it leaves open all the key issues about how the supplement would operate and, indeed, the vital question of the rate at which it would be levied. The Government envisage that they will spend £52 million on IT and staff before any substantive Bill can be enacted. They claim that there are a number of precedents for that approach. While that is technically correct, will the Minister say whether in any of the previous cases the Government incurred substantial expenditure before the substantive measure was introduced, when they were not formally committed to going ahead with the substantive measure? As the Minister made clear, the Government are keeping their options open on whether the measure will happen. But they are happy to spend up to £50 million or more in the mean time. I think that that is profligate, not least because, if I were a betting man, I would wager that the Government ultimately will not introduce planning-gain supplement, and will have wasted tens of millions of pounds in the process. As this is a Money Bill, we will have no chance to pursue these points further—nor, despite what the Minister says, will the expertise in your Lordships’ House enable us to have a detailed debate on any substantive Bill which is introduced, because presumably it, too, will be a Money Bill. If that point is disputed, I am pleased to hear it and am sure that the Minister will reply to it in his winding up. Today is our day in court on the Bill. For the next phase at least, we will be spectators on the development of these proposals. I suspect that it will not be happy viewing.
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- 18:28
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Baroness HanhamConservative- Quote
- My Lords, I declare an interest as a member of a local authority and of a planning committee. I am moving myself slightly out of my normal role on the Department for Communities and Local Government, on which I hope we will have the matter to discuss further, if it comes about. I thank the Minster for his introduction to the Bill. As he and others have said, the Bill has been certified as a Money Bill within the meaning of the Parliament Acts 1911 and 1949. As the noble Lord, Lord Newby said, this therefore will be the only stage, apart from a formal Third Reading, when we will have an opportunity to consider it. As that is the case, I wish to put forward the significant concerns we have, some of which caused my honourable friends in the other place to oppose the Bill throughout all stages of its progress. Before looking at the issues in detail, I would like to set out that we on these Benches accept that developers should make an adequate contribution to infrastructure costs in return for receiving permission to develop land, but we do not believe that the planning-gain supplement is the way to achieve this, especially as it is in addition to the existing Section 106 arrangements. As my noble friend Lord Stewartby, pointed out, the windfall element is understood in planning and development, but it is imperative that whatever is introduced does not impede the supply of development land. As the Minister has explained, this short, three-clause Bill will enable Her Majesty’s Revenue and Customs and the Secretary of State for Communities and Local Government to incur preliminary expenditure to set up the business processes needed for the planning-gain supplement's introduction—now delayed to, I think, 2009. As the noble Lord, Lord Newby, pointed out, this Bill is somewhat previous since the Government cannot give any information, nor even one of those best guesstimates with which we are becoming all too familiar, on what sort of costs are likely to be incurred. Perhaps the Minister could enlighten us. Indeed, the Government have not actually yet committed themselves to implementing the planning-gain supplement; they have only indicated that it is currently a “lead option”, a phrase which the other place argued is actually the culmination of a watering-down of the Government’s commitment, in the face of wide hostility to the proposals. If this lead option is dropped, then what? At what stage is it expected that expenditure on the systems will start to be incurred? Is it the intention that that should be dependent on a full rather than a partial— that has already taken place—regulatory impact assessment, which has not yet been carried out? Or will expenditure be incurred before this is completed? This Bill could allow taxpayers’ cash to turn to waste, I am afraid one might say, again. The Bill has no limit on how much can be spent. Indeed, the Opposition suggested amendments to deal with this in the other place in Committee. The Explanatory Notes are very vague on costs, hinting that they could exceed £50 million—but by how much? Another £50 million? £2 million? £4 million? If we compare this figure with the closest precedent—the 1998 Tax Credits (Initial Expenditure) Act—which led to the much-troubled tax credit system, Her Majesty’s Government are effectively suggesting that the planning-gain supplement is likely to cost twice that required to set up a system that supports some £16 billion a year of public resources. Not only is the Minister asking for a blank cheque for something that might never happen, but there is huge concern that if this system is implemented it will be complicated and bureaucratic. Also, the Government have an appalling record with IT systems, most of which have either a history of long and troubled implementation or large cost over-runs, so we can have no confidence that support for this measure today will be anything more than a figleaf to justify unassessed expenditure. I am sure that I do not have to remind your Lordships’ House that the Chartered Institute of Taxation is very unimpressed with these proposals, stating that, “not even a well thought out consultation document can save a bad idea and we think that the law of unintended consequences will apply, with the result that the proposals will not deliver the Government's policy objectives”. During Second Reading in the other place, the Minster suggested that this was only a paving Bill, and that it did not say anything about, “the policy, nature or indeed operation of a planning gain supplement”.—[Official Report, Commons, 15/1/07; col. 561.] The Minister said again that the opportunity would arise to discuss those areas if the Government decided to introduce legislation, and that they should not form a significant part of the debate on the Bill. I disagree. If Parliament is being asked to provide a blank cheque we must consider the proposals that that blank cheque will potentially be funding. The planning-gain supplement is yet another example of a Labour stealth tax, this time on development and affordable housing rather than a genuine attempt to finance infrastructure in development areas. The Confederation of British Industry goes as far as to suggest that it is a, “threat to the competitiveness of UK business and the long-term health of the UK economy”. The current proposals are that the planning-gain supplement is to be centrally collected and then redistributed according to government fiat or, as currently described and as the Minister said, on a basis of 70 per cent being returned to the relevant local authority area, unlike the current working of Section 106, under which everything goes back to the local council, as the noble Lord, Lord Newby, said. Thirty per cent of the tax in England is intended to be regionally administered by the undemocratic and unrepresentative regional bodies—we go back to these—presumably the regional planning bodies. On what it does not say, but one might ask the Minister on whose plans that portion will be spent. Will it be the Government's, the regions’, or the local authorities’ within the region? Who will decide the priorities of that 30 per cent? It is well known that people tend to be pro-building projects as long as they are not in their own backyard. If we are to change this attitude we must persuade people that they will see genuine visible benefits coming back to them from development in their area. A regionally administered system does little to provide reassurance; there is nothing to stop money being redirected towards another corner of the region, remote from the original community. The Government have also failed to address fundamental questions about cross-border implementation and working of the tax, a hotly debated issue in the other place. On top of this, the National Housing Federation has pointed out that the planning-gain supplement is likely to hinder, rather than help, the creation of affordable housing: “By charging PGS on affordable housing, the Treasury will simply be pushing money around the public funding system … If PGS is levied on housing associations, a proportion of Housing Corporation grant for social housing will effectively be paid back to the Treasury via PGS, and fewer homes will be provided. Moving funds from one part of the public purse to another is not efficient”. The noble Lord, Lord Newby, found a number of people opposed to this whole process. He quoted the CBI, and I add the British Chambers Of Commerce and the Local Government Association. All have reservations about the proposals, and a consortium of companies involved in property development commissioned research which concluded that PGS was unlikely to deliver the increased funding for investment in infrastructure, was likely to reduce the supply of smaller development sites, and would be likely to change the way some sites are developed as developers seek to minimise their PGS liabilities. The noble Lord, Lord Newby, mentioned the Corporation of London, so he and I have obviously both been well briefed by it. It has raised concerns about the PGS’s effect on brownfield sites. The City corporation fears significant adverse consequences from the imposition of the tax on complex urban environments such as the City, particularly that the “before and after” approach to site valuation could result in a move back to outline consents and the freezing of property development, with consequences for the stock of world-class business premises. As with other commentators, the City is also concerned about the point at which development will be deemed to have started for the purpose of the tax to be clarified, as well as whether small-scale refurbishments will be excluded. I do not know whether this is in the Minister’s brief; I raise it and, if he knows the answer, perhaps he will give it to me. In common with the many other bodies sceptical about the value of PGS over the current Section 106, the corporation points out that it relies on these funds to finance many facets of the City environment, and that it is doubtful that the revenue generated by PGS would be sufficient to provide the level of infrastructure achieved through funds obtained by the operation of the current Section 106 system. Did the Minster see the article in the Daily Telegraph on Saturday, reporting that development contracts are now containing a “walk away” clause to be implemented if the tax becomes law, because of the large developers’ concerns that it will add millions of pounds to the cost of public infrastructure projects, including the Olympics? These are all questions about the tax itself, and I am sure that the Minister will try to suggest that they are not relevant to today’s debate—but they are. There is no point in our addressing the value of setting up the infrastructure to support the tax if the tax itself is suspect in its ability to do better than the one it is superseding—or, more correctly, adding to. If we step back from the detail of the PSG, the overarching question is whether it will work or not. Five previous incarnations of development tax have been tried. They have foundered on each occasion, principally over how to agree on the valuation to be taxed, an issue that the Government have failed to address and is now raised again. I remind your Lordships that, in practical terms, we must not forget the Government’s record on new information technology systems, which have been notoriously difficult to deliver on time and on budget. We recognise that the Section 106 system is not perfect, that it is not implemented uniformly across the country—as the noble Lord, Lord Newby, has said—and that there are questions about transparency and appropriate use of the money raised, but it is widely accepted by local authorities and developers as a useful way of ensuring that benefits are achieved by the local community from developments within their borders. It may require limited reform, but it does not need to be superseded or top-sliced, or to be substituted or subordinated to a new stealth tax. I hope that I have given noble Lords a clear flavour of the range and depth of opposition to the Government’s proposals on this issue. I guide them towards the debates in the Commons, should they wish to delve more into the topics. I hope that the Minister will note the concerns raised by all speakers so far, and undertake not to implement the terms of the Bill before and unless a decision is taken, after full parliamentary consideration, on the principle of the tax itself.
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- 18:41
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- Lord Davies of OldhamLabour
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- My Lords, I am grateful to all noble Lords who have spoken in the debate. I was a little surprised that the noble Lord, Lord Stewartby, was reluctant to take his position as number two in the batting order, after he and I opened the batting for the parliamentary side in Australasia on several occasions. I welcomed the chance of a fresh partnership today. He spoke, as we would expect, with his usual force. The noble Lord conceded the important point that an intellectual case could be made for PGS. We seek to make more than an intellectual case; he asked us to. He said that the issue is its practicalities. That is why this is a paving Bill, and why we need the resources and opportunity to set up systems and investigations which give us real insight into the complex, challenging issues involved. We do not intend to introduce any legislation before 2009 because we recognise how much work is to be done. In the mean time, this paving Bill provides for what ought to be done: a structure enabling us to be effective if there is a parliamentary decision that the planning supplement should go forward. That is the basis of this planning Bill. I was asked about the nature of the Bill in the more distant future. I cannot go into much detail about that for obvious reasons: we are at a preparatory stage. I give the House my, and the department’s, working assumption that the Bill that will eventually emerge, if we decide to go ahead, will not be a money Bill, with the restrictions that that would impose, but will be open to both Houses for full scrutiny. I give reassurance on that. I cannot go into greater detail; I am sure that the House will recognise how limited I am in talking about such a distant prospect. The noble Lord, Lord Stewartby, opened the debate with a criticism of the Government. He spoke of the great danger if we get things wrong, that there would be a disincentive to sell land rather than encouraging it to become available. We all know the current demands upon land availability. The noble Baroness, Lady Miller, expressed particular concerns about small rural communities; I shall come on to that in a moment. She was merely identifying one dimension of the development issue. We bear the law of unintended consequences in mind. Given the history of development tax and issues of this kind, surely what is being enjoined upon the Government today—to take care, to make preparations, to consult widely and to look at all the dimensions of the issue to ensure delivery of successful policy—is exactly our reason for having this paving Bill. If we were not mindful of those considerations, were not responsive to those needs, were unimpressed by history and did not recognise the challenge before us, we would not have a paving Bill at this stage. That is its raison d’être. There was a broad base of criticism, first articulated by the noble Lord, Lord Stewartby, but it ran through several other contributions, although other noble Lords accepted the principle that development should produce some advantage to the public good. The noble Lord, Lord Newby, to be fair to him, said that he started out accepting that principle and that he disagreed with us about the strategy for realising it. I recognise those points. At least we have a consensus in the House that it is desirable that progress be made broadly in these terms but that it is a difficult target to hit. That is why we have this Bill. I reassure the noble Lord, Lord Stewartby, that the planning-gain supplement is only part of a package of reforms designed to increase the supply of land. We do not regard it as the engine of development. Our recent planning policy statement identified a range of ways in which we expect to see land availability increase. The noble Baroness, Lady Miller, concentrated particularly on affordable housing in rural areas. I emphasise that the document to which I have just referred keeps rural exceptions for affordable housing. I recognise what the noble Baroness says: it is one of the critical features of village and rural life and we would not be making effective progress on planning if we did not recognise that feature, to which many noble Lords will attest. The noble Lord, Lord Newby, suggests that history is against us because there have been difficulties. He quoted a list of critics. It would be very odd if the Government did not come along with a list of supporters, too. As the noble Lord listed four or five critics, I will list four or five supporters. I list others, but I do not wish to detain the House further. Paul Bevan, the chief executive of the South East England Regional Assembly, indicated the Assembly’s support in principle for these proposals. The Town and Country Planning Association and English Partnerships also support them. I could go on to list others. That is not saying that several of the institutions mentioned by the noble Lord, Lord Newby, and the noble Baroness, Lady Hanham, as being critical of the measure are not to be taken seriously. That is why we are involved in this long-drawn-out consultation and why we intend to proceed with care. The noble Lord, Lord Newby, reiterated the usual issues. Valuation is a difficult exercise; it is an art not a science, and the issue is much disputed. This Bill will not introduce valuations; they go on all the time. This difficult art form is practised very widely by many wholly professional organisations and individuals—and some less professional ones, we can also attest, on occasions. Of course valuation is an important part of the Bill but it is not credible to say that we ought not to make progress because of the extreme difficulty of effective valuation. The noble Lord placed great emphasis on the present Section 106 and that strategy for realising value and assets from development. The noble Baroness, Lady Hanham, also emphasised the point. We should all recognise the limitations of Section 106. If it were a panacea, there would not be widespread concern—even dismay—at the very limited realisation to the public advantage of a great deal of development. I respect what both of them say about the virtues of Section 106 but I do not agree with them that all is going swimmingly at present. That is not the point of view of this Government or a wide section of this country that thinks that, with rising land values, there is a proper public concern, because many such values reflect public investment. We have many illustrations, but the one that is oft quoted and which stands up to public scrutiny is the fact that there is no doubt that the growth in land values along the whole extension of the Jubilee Line is not incidental or accidental because it follows that substantial investment in public transport. We all know the vast costs of that extension and the attendant land values that resulted. It is not the sole factor; other beneficial developments—I almost introduced the Dome at that point, but I do not wish to be too controversial—have enhanced these areas, providing facilities that have no doubt increased land values, but a critical factor is transport and the Jubilee Line. Both noble Lords speaking from the opposition Front Benches placed much emphasis on the present Section 106 structures. We do not accept that as the basis on which we should go forward. The noble Baroness, Lady Hanham, was concerned at the costs incurred by this paving Bill. We acknowledge that it incurred costs. The basis of our argument is quite straightforward: if as a Government we are convinced, and are able to convince Parliament, of the value of the process that will potentially be introduced in 2009, we would be criticised if we did not engage in substantial preparation for that time, because past failures have been the result of inadequate preparation and support systems. Success in this difficult area will be achieved only if there is an infrastructure to the legislation that guarantees its works. That is why we will need IT systems and to spend money to guarantee that any such Bill has an infrastructure to make it work. It is the whole rationale behind this paving Bill.
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- 18:56
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- Baroness HanhamConservative
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- My Lords is it usual for a Government to come forward for unexplained and unitemised expenditure? I said that we were passing a blank cheque. We do not know how much this will cost or how much the Government are asking the country to spend. There is no business plan as far as we can see because it has not been presented to us. Is it not an unusual thing to ask the House to do without the Minister indicating how much we are likely to be asking the country to spend?
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- 18:56
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- Lord Davies of OldhamLabour
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- My Lords, as this is a paving Bill, limited costs, related to the objectives that I identified, will be involved. Of course it is unusual, because we do not have many paving Bills, certainly not paving Bills that look forward to legislation several years away; we do not intend to introduce this legislation until 2009. Noble Lords indicated that this is a difficult policy to develop. There have been costly failures in the past. The present system does not work effectively and there is no return from public investment in development. All shades of opinion share that position. The problem is whether the Bill will work. Most critics have not been critical of the principle that underlies the Bill but do not think that the Bill will work. That is why we are acting with such caution. This Bill does not implement these issues. It is a cautious approach requiring a degree of preparation. That is why we have this paving Bill.
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- Baroness HanhamConservative
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- How much, my Lords?
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- 18:56
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- Lord Davies of OldhamLabour
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- My Lords, I cannot be tied down to detail on expenditure but I have identified the purposes of that expenditure. That was the basis on which the Bill was put before the other place. The noble Baroness believes that such expenditure should be challenged, but this is not about implementing the Bill but about creating the framework within which it could operate if we embarked on that road. The Government are mindful that they are open to challenge, and that if we do not proceed because the work shows that this proposal lacks feasibility, the money authorised by the Bill will have been wasted. However, we have the right to travel in greater optimism than critics, for two reasons: first, we are going about this with due caution, and, secondly, the problem with criticism is that it is negative about an issue that wider society wants resolved because the present structures do not work. I commend the Bill to the House. On Question, Bill read a second time; Committee negatived.
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