Consideration of Lords message
Before I call the Minister, I have to tell the House that the original message from the Lords was defective, so Commons Bill paper 162 did not include the amendments in lieu proposed by the Lords. This has now been rectified and a revised Bill paper 162 is in the Vote Office. The first motion therefore relates to the Lords amendments in lieu 7B and 7C, as on the revised Bill paper.
After Clause 4
Development orders: development within the curtilage of a dwelling house
I beg to move,
That this House agrees with the Lords in their amendments 7B and 7C in lieu of Lords amendment 7, to which this House has disagreed.
I thank their noble Lordships and Members of the House of Commons for their thorough and thoughtful consideration of the Bill. There are two main issues before us.
Let me begin by introducing the revised approach to the Government’s proposed relaxation of permitted development rights for home owners. During our consideration of Lords amendments in this House last week, the Secretary of State gave a commitment to reflect on the representations made and to adopt a revised approach. We have reflected carefully on the points raised by Members here and by noble Lords in the other place in their detailed deliberations on the issue, and in particular on the concern that adjoining neighbours would not have an opportunity to make representations on such developments.
In expanding the permitted development rights for domestic extension, the Government propose to adjust the balance between home owners and local authorities, to make it easier and cheaper for families to make room for growing teenagers, or indeed for elderly parents who wish to come and live with them. Those changes reflect the Secretary of State’s recognition that a requirement to make a planning application is out of proportion to the wider impact of development. That is an important principle.
However, we have always said that it is important to balance the benefits against the potential impact that extensions can have on neighbours. Having listened to the concerns expressed, we tabled an amendment which was agreed by their Lordships yesterday without a Division, to ensure that adjoining neighbours will be consulted when the new rights are exercised. We drew inspiration for the amendment from the 2007 “Quality of Life” report by my hon. Friend the Member for Richmond Park (Zac Goldsmith).
Yes, I can confirm that.
What we are proposing is a light-touch neighbour consultation scheme. It will work like this. A home owner wishing to build an extension will write to the local planning authority providing plans and a written description of the proposal. The local authority will then notify the adjoining neighbours—for example, the owners or occupiers of properties that share a boundary, including those at the rear. Those neighbours will have 21 days in which to make an objection, the same period as under existing planning rules. If no neighbours object, the home owner will be able to proceed. If any neighbour raises an objection, the local authority will then consider whether the impact of the proposed extension on the amenity of neighbours is acceptable.
I welcome what my right hon. Friend has been saying. Can he clarify the impact of the curtilage rule? Many terraced houses in London have a 10-metre rear garden and a 3-metre front garden, amounting to a 13-metre curtilage. A 50% extension at the rear would be a 65% extension in relation to the rear garden. Would that be reasonable grounds for objection by a neighbour?
That might well turn out to be a reason for one of the adjoining neighbours not to be happy with the proposal and to object to it.
If a neighbour raises an objection, the local authority will consider the impact. It will then be up to individual councils to decide how to handle the procedure, and to determine whether decisions should be delegated to officers or made by the planning committee.
This is an improvement on the previous position, but who will pay for it all? Will there be a planning fee? Will the local authority be expected to pick up the cost of the consultation in the event of an objection, along with the cost of advertising it to local residents?
No planning fee will be levied on the home owner making the notification. If the extension proceeds with no objections, the local authority will benefit from a considerable saving, because it would otherwise have had to bear the costs of a full planning application. However, we shall be happy to discuss with local authorities, in the normal way, whether in the fullness of time the scheme is likely to impose any additional cost on them.
Normally people object to an extension that is beyond the current permitted level. The position is likely to become more contentious, and there is likely to be a large increase in the number of neighbours who complain. Who will fund the local authority’s inspections and the resulting consultation?
The local authorities would have to do that if a planning application were made in the normal way. Under the new relaxed procedure, the costs will be lower. As I have said, however, if it seems likely that there will be a significantly greater burden on local authorities, we will discuss that with them to ensure that it does not happen.
I am pleased that the Government have taken account of Back Benchers’ concern about neighbour notification. Does my right hon. Friend know how many authorities currently believe, or know, that they are operating with a deficit in terms of planning fees? My local authority believes that it subsidises planning, and that the fees recovered do not cover the planning service that is currently provided.
I think that I must make some more progress first.
If approval is not given, the home owner will be able to appeal against a refusal, or may wish to submit a full planning application. As with normal planning consents, neighbours will not be able to appeal against a grant of permission. The approval process will be straightforward, and—I think that this is the answer to my hon. Friend’s question—we do not expect it to impose significant costs on local authorities. It will ensure that uncontroversial improvements are dealt with quickly, it will protect neighbours’ amenity, with the council as an independent arbiter, and it will ultimately make it cheaper for people to extend their homes and will devolve more power to local residents.
I apologise for being slightly late. I was chairing another meeting.
One of the issues that have been raised continually with me is that of developments that overlook neighbours and, for instance, the positioning of windows. What information will be available to neighbours about that?
The applicant will have to send a letter to the local authority notifying it of the proposal and enclosing plans, which will of course have to receive building control consent. There will be a full notification, but it will not go through the normal planning regime process.
If it affected the amenity of the neighbour, that might well be an issue. It is hard for me to speculate on exactly what kind of amenity would be affected by a breeze block, but if a neighbour felt that it was having an effect, that neighbour would be able to object.
We have listened to the concerns that have been expressed, and have responded directly to them. I hope that I have explained to the House how our amendment addresses, in particular, the concern about the impact of our proposals on neighbours.
Can the Minister confirm that places such as conservation areas and areas of outstanding natural beauty will be exempt from this, and that the usual article 4 route will still be available where there are particular concerns—about flooding or run-off, for instance?
Yes, I can confirm that this does not apply to conservation areas, and that the ability of a local authority to use an article 4 direction is not impaired by the changes we are making.
I hope the House will now allow me to turn to the employee shareholder clause.
I thank the Minister for giving way. I have some remaining concerns about situations in which objections are not made, perhaps because of loyalty to neighbours or because of absent landlords. That could result in a building being erected that has long-lasting implications on future householders in an area. Will the Minister address that point in discussions with the Local Government Association?
I am grateful to the Minister for giving way, and he need not look so heavy-hearted, as I am going to say that I greatly welcome the changes, and that many Members on the Government Benches feel the Government have listened and come up with a sensible proposal. Will he just confirm that existing permitted development rights are not in any way affected by this new procedure, and that they are still there in perpetuity for people to use without any hassle?
Yes, I can confirm that, and I can also assure my right hon. Friend that I was not heavy-hearted; I was simply keen to move on to the employee shareholder clause, and I was wondering how long I was going to be occupied in explaining how my right hon. Friend the Secretary of State for Communities and Local Government had fulfilled his commitment last week to listen to the concerns expressed in this House and to come forward with what I suggest is a very reasonable compromise.
Let me now, finally, turn to the employee shareholder clause. It establishes a new employment status between employee and worker. The Government have always been clear that this measure is entirely voluntary, and that it is open to both individuals and companies to use it if they choose to do so. I emphasised that again in our debate a week ago. In response to concerns expressed by my right hon. Friend the Member for Hazel Grove (Andrew Stunell) and peers in the other place, last week I reassured both Houses about the wholly voluntary nature of this new status. I made a commitment that no one can be forced to apply for, or to accept, an employee shareholder job. I announced that the Government had revised and clarified the position for those claiming jobseeker’s allowance. The position now is that jobseekers cannot be compelled to apply for or accept an employee shareholder job if they do not consider it right for them.
The Minister has 977 people claiming jobseeker’s allowance in his constituency, and long-term unemployment is up by 10%. Can he confirm that employers in his constituency will be able to make job offers conditional on JSA recipients accepting employee shareholder status, thus giving up most of their fundamental employment rights at the same time? That is the point of departure for many people with the Minister on the issue of whether or not this is voluntary.
It is not only voluntary, but I made it clear to the House last week that jobseekers cannot be mandated to accept a job in those particular circumstances, and I cannot make it clearer than that.
In addition, I want to reassure the House that we will not allow individuals to use this employment status for tax avoidance. The Finance Bill includes several measures, such as excluding those who already own 25% of a company and connected persons from benefiting from the capital gains tax exemption.
The will of the elected House has now been expressed twice. However, the other place has again rejected this measure. After considering the concerns expressed by noble Lords, we have laid further amendments to ensure that individuals entering into this employment status fully understand the opportunities and risks involved. I will now set them out.
First, the company must give the individual a written statement of particulars, setting out the employment rights that are not associated with this status and detailing the rights attached to the shares. That will include whether the shares being provided as part of the employee shareholder status have any voting or dividend rights, whether there are rights to have the shares bought back or redeemed, and whether an individual may freely sell the shares to anyone, or if there are restrictions. This written statement is separate from that already required under the Employment Rights Act 1996, which sets out the terms and conditions of the job, and which the employee is entitled to receive within two months of starting work with the employer.
This employee shareholder statement of particulars must be provided in writing before the potential employee shareholder starts the job. It means that an individual can only become an employee shareholder if that has taken place and if the other criteria in the clause are met. The clause ensures that potential employee shareholders understand precisely what the new employment status involves.
I am grateful to the Minister for giving way again, but I respectfully completely disagree with him. What guarantee is there that the prospective employee shareholders will even understand that statement? It will be explaining dividends, pre-emption rights and other technical and complex matters. What guarantee is there that they will understand the information in the statement, or know whether to seek further legal advice and have a proper discussion about these matters?
I do not think we would know in those circumstances whether that was the exact reason why somebody had not been offered the position, but what I did last week—and I hope my hon. Friend accepted this—was make it absolutely clear that nobody who had jobseeker status could be mandated to have to accept a job.
Our second amendment prevents an employee shareholder contract from taking legal effect until seven days have elapsed from when the offer is made to the individual. The amendment affords an individual a period to consider the risks and rewards of the contract. That removes any question that individuals might be pressurised into accepting a contract.
These amendments mean that an individual who has chosen to apply for, and has been offered, an employee shareholder job has both the information and the time they need to consider whether the job is right for them. Noble Lords, including my noble Friends Lord King and Lord Forsyth, also expressed a concern about the employee shareholder receiving independent advice. I want to reassure them and all noble Lords that the Government are taking that concern seriously and are reflecting on the remarks made in the other place yesterday evening.
This new status gives in particular young and new companies a fresh option that they may use to attract high-calibre employees who can share in the growth potential of the company, and I urge the House to support these amendments.
I shall start with the issues that the Minister raised on permitted development. We welcome the Government’s change of heart. This is a victory not just for Opposition Members but for Members who are sitting behind the Secretary of State who have helped us to protect the gardens of England from inappropriate developments. [Interruption.] The Secretary of State laughs, but he was dragged kicking and screaming to table the amendments.
I still find it puzzling that the honeyed words from the Secretary of State last week were so mysterious and vague when the new arrangements unveiled look very much like the planning permission system. First, the house owner will have to provide plans and details to the planning department, including details of the materials to be used, just as happens now. Secondly, the planning department will have to notify neighbours, just as happens now. If there are objections, the planning authority will take the decision whether to grant planning permission, just as happens now. The only change is that in the absence of objections from the directly adjoining properties, the development will automatically go ahead, notwithstanding any objections from other affected neighbours, or from the council, or from the wider community—and, of course, the absence of the £172 planning fee.
I have a couple of questions for the Minister, which I hope he will answer if he has time to sum up, on how neighbours might be affected by the proposals. First, by limiting the possibility of objecting to an extension to those who share the immediate boundary with the property in question, the Government are taking rights away from other neighbours whose amenity or light may be affected. Remember that we are talking about extensions 26 feet long and 13 feet high, Mr Speaker—about the size of the Speaker’s Chair. Why are the Government not even giving those affected in that way the right to express a view that may be considered material by the planning committee? Secondly, what about neighbours who are away when an application is put in, and who come back 21 days later to discover that work has already started on a structure that will seriously affect their amenity and enjoyment of their back garden? Does the Minister not think that unfair?
The Minister decided to talk for some 15 minutes on permitted developments, on which the Opposition will not be objecting this afternoon, and very little time on shares for rights. I wonder why. Let me tell the House why I think he did so, because it is clear that the Government are in a total shambles with their ill-thought-out shares for rights proposals.
Let us remember the origins of the proposal, dreamt up by the Chancellor at Conservative party conference because he had absolutely nothing to say about the economy, growth or unemployment. He proclaimed, let us remember:
“Workers of the world unite.”
The Chancellor got his wish. The workers of the world did unite, along with businesses and organisations, to tell the Chancellor that his proposals were wrong. And it is not just the workers that have united, but his own Back Benchers and, of course, the noble Lords in the other place. The narrow 27 majority for the proposals last week in this place highlighted the extent of the discontent with the proposals in this House.
The Minister’s concessions on jobseeker’s allowance claimants not being forced to take up the shares for rights proposals were welcome, but if the proposals were truly voluntary in the first instance, it cannot be seen as a concession at all. The question that the Minister just avoided, from my hon. Friend the shadow Business Secretary, is whether an employer can make agreement to such a deal a condition of anyone, let alone a jobseeker’s allowance claimant, taking up a job. He refused to answer that question; perhaps, in his summing-up, he may be able to take that on.
What did the concession manage to achieve in the other place last night? Let us see. An increase in the majority against the proposals in the other place last night from 54 to 69—a triumph for the Minister, and it emphasised that Lord Forsyth was correct when he said that the policy
“has all the trappings of something that was thought up by someone in the bath”.—[Official Report, House of Lords, 20 March 2013; Vol. 744, c. 614.]
I disagree with Lord Forsyth on that. I think it was thought up by someone in the bar, and not at the start of the evening but close to closing time. In fact, if we analyse the figures from last night, we see that Cross Benchers voted 59 to 1 against the proposals, as well as the former Liberal Democrat leaders Ashdown and Steel—and this current Lib Dem leader wants them and so does the Business Secretary. Will the public not ask why?
Yesterday, the Lords sent a powerful message to this House that the Government are wrong on shares for rights. Their message, for the second time, is loud and clear: “Dump this awful policy now.” Or will the Treasury not allow the Minister to dump the policy? The results of the vote give the Minister the out he was looking for. We know that the BIS Department is not keen on the proposals, we know that the Minister is not an enthusiastic supporter and we certainly know that the businesses of this country do not want it, following a consultation exercise.
Let us examine what some of the noble Lords said in the other place yesterday. Lord King said,
“I am not the only Member”
of this House
“who feels some embarrassment at finding ourselves in this situation.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1267.]
Baroness Wheatcroft shared Lord King’s embarrassment when she said:
“My Lords, my noble friend Lord King mentioned a degree of embarrassment at finding himself in this situation, which I certainly share.”
She went on to say that the Financial Times,
“that great bastion of employee rights, ran a leader the day after the last debate in this House in which it said that this legislation contained,
‘little to like and a lot to fear’.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1269.]
That was not all in the other place last night. Lord Deben, on shares for rights, said:
“Frankly, it does not matter much what we decide on this because I do not think anyone is going to take it up and I do not think it is going to happen.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1262.]
Baroness Warnock, a Cross Bencher, said in the other place yesterday that she discussed the proposals with Charlie Mayfield, the chairman of the John Lewis Partnership and said:
“He was consulted about this proposal and simply regarded it as laughable.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1261.]
The chairman of the John Lewis Partnership, the bastion of employee ownership in this country with its much-lauded model, is saying that the proposals are laughable. So the noble Lords have spoken.
Let me emphasise what Lord Forsyth said in the other place. He talked about the £1 billion loss to the Treasury in tax. This is the Chancellor’s pet project that loses the Treasury £1 billion and does absolutely nothing for growth. The Bill is supposed to be a growth Bill; it is nothing like it.
I am delighted to receive the intervention, because it is the Treasury that says that £1 billion will be lost and Lord Deben, a Member with whom the right hon. Gentleman probably shared time in government, who said that perhaps no one will take this up. So it is not we who are saying it but Conservative peers in the other place and the Treasury’s own assessment of what will be lost. Whether someone takes it up or not, the Treasury is saying that there will be £1 billion of lost taxation. Perhaps Ministers in this House might want to go and chat to some of their colleagues in the other place and decide what they are going to do with it.
Critically, there was a hint in the Lords that some kind of deal had been done between the Business Secretary, who incidentally has said nothing on these proposals, and the Treasury. Can the Minister tell the House what that deal is? The public deserve to know what deal has been done between the two senior Government Secretaries of State to push the proposals through. I will take an intervention from the Minister now if he wishes to tell the country what that deal is, but I suspect he will not take up that opportunity.
Let me highlight another comment from the other place last night. The shadow Minister, Lord Adonis, who took the report through the other place yesterday, said:
“Where does this report come from? We all know: it is on the rebound from the Beecroft proposal to do away with certain employment rights in respect of unfair dismissal and instead to substitute a single payment that would have resulted from it. The Business Secretary was not prepared to go along with that. Then, as we have heard from various parts of the House”—
including from the Government side of the House last night in the other place—
“some kind of deal was apparently done between the Chancellor and the Business Secretary to resurrect a version of the Beecroft proposal in return for shares.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1271.]
The House needs to know, before the legislation is passed, what that deal was.
Lord Forsyth emphasised it when he said:
“the Government seem determined just to railroad this through and not deal with the arguments.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1258.]
Those arguments are not diminished by the amendments that the Government tabled this morning—amendments that were only confirmed at 11.27 this morning. They are scurrying around, trying to find solutions, when the best solution is to consign the policy to the dustbin.
Under the scheme, which creates a third type of employment status, as the Minister mentioned, employers may award employees at least £2,000 in shares in exchange for the employee’s giving up a bundle of employment rights, including ordinary unfair dismissal, the right to a statutory redundancy payment, the right to request flexible working, and the right to training. The Government are determined to pursue the scheme, but the list of concessions that they have produced today, and which they hope will get it through the Lords, is completely inadequate and does not address the fundamental issues of the giving up of employee rights for a few worthless shares.
There were many interventions in the House last week. The Opposition wholeheartedly support employee ownership, but there does not have to be a link between employee ownership and giving up one’s employment rights. Many Government Back Benchers who are in their place this afternoon made the point about how wonderful employee ownership was, but the fundamental point is that employee ownership does not have to be increased by giving up fundamental rights at work.
Let me go through some of the concessions that have been presented to the House today. First, there is a provision that the employee cannot accept the offer within seven days of it being made. How that would work in practice is completely unclear. An employer remains free to refuse to offer the job to a prospective employee who does not want to take up employee shareholder status. That is a critical point about whether it is voluntary. With the employment market as depressed as it is, why would an employee want to turn this down? People are desperate to get back into work. That is why the proposal cannot be seen as voluntary. Why would an employer not just say that this has to be accepted or the job offer will be withdrawn? Perhaps the job will be offered to a number of candidates, and the candidate who accepts the shares for rights proposal will ultimately get it.
May I challenge the hon. Gentleman to think about his premise? He said earlier that these are worthless shares. I do not think that any business or entrepreneur in the country who takes such a risk would believe that shares are worthless. That is the big difference on the Government Benches. Does he agree that the fact that the Opposition think the value of the shares is zero colours their judgment of how an employee who wants to take a risk and an opportunity would see great value in having a stake in a business?
There is a misconception among Government Members that no Opposition Member has run their own business. Well, I have run several businesses before I came into the House. At the start, of course the value of shares was high, because we were investing in the businesses, but that is not always the case. Ultimately, when businesses shed staff or employees have to leave, shares will be worth less. That is a fundamental principle of business. When I come on to the concessions that the Government have put together, it will be seen that that is absolutely right.
The hon. Gentleman is talking about the end of a business. When one starts a business—as I am sure he has done, given what he just said—it is to achieve success and growth. That is when the shares offer their greatest opportunity. They will be offered for no cash in return for a stake and the potential of profit later, with a tax-free advantage. It really is a win-win.
I have a lot of respect for the hon. Gentleman, who undoubtedly has a lot of business experience, but he clearly has not read the legislation or understood what it is trying to achieve here. He is right that when the shares are being given out, they will have a high value. But at the very time that employees need to cash in those shares because, for example, they have given up the right to redundancy, their value will be lower than when they were first given, or they will be worthless. The residual value of the shares will be far lower when an employee is effectively being sacked than it was when the employee was being taken on. That is why some of the concessions have been made.
Let me come to the written statement that the Minister has suggested to set out the details of the shares being offered, including whether they are voting or non-voting shares, whether they carry a dividend, whether they carry a right to a share in a company’s assets if it is wound up, whether pre-emption rights are excluded, and details of drag-along and tag-along rights. Most employees will not understand the implications of this information, and there is nothing to prevent employers from issuing pages of gobbledygook about the shares that buries the information somewhere within.
I am struck by the provision about winding up, which is specifically mentioned in the concessions. Surely this is the crux of the matter. [Interruption.] Members are chuntering away, but if they wish to intervene, they may do so. How can it be right to give up the right to a redundancy payment at the same time as the shares may not be worth anything at winding up. The term “winding up” is used in the Government’s amendment to the proposals. Shareholders tend to get nothing in the winding up of any business after the creditors are taken into account. Why would any employee want to do this? We end up with a situation where, at a time when an employee would want to cash in the shares, the company is in real financial trouble and the shares are worth far less than the initial value or nothing at all.
That might be the case, but one does not have to give up one’s fundamental worker’s rights to take the risk in shares in businesses. Many employees take shares in businesses, but they do not give up the rights to redundancy, to request flexible working, to training and to unfair dismissal and maternity rights. Last week, the hon. Gentleman made an impassioned speech about his running of businesses and the fact that his employees are always at the forefront of his mind. The vast majority of those in this country who start a business have employees at the forefront of their minds. But relationships do break down and businesses do run into trouble. I agree with him to a certain extent, but missing from the jigsaw is the fact that fundamental rights at work still have to be given up in order to take on those shares. He fails to recognise that that is part of the overall equation.
Let us examine the issue of tax avoidance that my hon. Friend the shadow Business Secretary mentioned in the House last week. The Treasury says—it is a Treasury document—that this will cost £1 billion, but the true cost may be more than that, as my hon. Friend said. As the Treasury’s December 2012 policy costing document says,
“It is hard to predict how quickly the increased scope for tax planning will be exploited.”
Let me examine this:
“increased scope for tax planning will be exploited.”
That sounds to me like tax avoidance and it was picked up by Paul Johnson, the director of the Institute for Fiscal Studies, who said:
“just as government ministers are falling over themselves to condemn such behaviour”—
“that same government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry.”
The Treasury document, by using the terminology
“increased scope for tax planning will be exploited”,
emphasises what Paul Johnson has said.
Is not the value of shares very much up to those who control the shares? The value can be controlled by the majority shareholders, who often are directors of the company and can devalue a company at a moment’s notice by transferring assets out of the business into another company that they can set up.
The hon. Gentleman makes a valuable point. He voted with the Opposition last week, on which he should be commended. The other issue around the concept of dilution of shares is that when new investment comes into a business, shares can be diluted. There is no provision for employees who are shareholders to be informed of that. Assets can be transferred out of businesses and there is nothing to stop employers, when they wish to make large scale redundancies of employee owners in the business, diluting the shares before they do so.
We are back to the same point from the hon. Gentleman. He still refuses to recognise the equation here. That may all be correct, but at the same time fundamental rights still have to be given up. Indeed, those safeguards in the 2006 Act have been wrapped around by many companies in terms of the dilution of share ownership.
I am interested in the hon. Gentleman’s attack on the idea of some tax privilege in the scheme. I imagine that he is a member of the House of Commons pension scheme, and there is tax relief on all contributions that he makes into the scheme, and full tax relief on gains and income in the fund. That seems perfectly reasonable. How does that differ from the tax advantages of this scheme?
Being a member of the House of Commons pension scheme does not mean that I give up my rights at work. The equation is not there. I am not even sure whether the right hon. Gentleman has spoken in favour of these proposals. Does he support them? I am not sure that he does.
It is a little disingenuous to ask a Member of the House who is at the Dispatch Box whether he practises tax avoidance. That is stretching it a bit far. I am merely quoting from the Treasury’s 2012 policy document, which says that:
“It is hard to predict how quickly the increased scope for tax planning will be exploited”.
The Institute for Fiscal Studies says that there will be a whole new avoidance industry in terms of the capital gains tax on these shares, and in terms of PAYE and national insurance. If Government Members do not believe me, they can listen to what Lord Forsyth—as a Scottish Member of Parliament, I never thought that I would agree so much with him—said last night in the other place:
“I remain concerned as to whether the estimate made that this could result in more than £1 billion disappearing in tax-avoidance schemes is correct. It is not clear to me whether the Treasury has found ways of ring-fencing this scheme, which provides for up to £50,000 of capital gains tax to be relieved, and whether this could not be used as a great tax-avoidance scheme.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1257.]
Finally, there is the new Tory tax bombshell. We all remember that phrase because the Liberal Democrats used it at the last general election to describe the proposed increase in VAT, before voting with their Conservative colleagues to increase it to 20%. In the Budget—this is another concession—the Chancellor announced that the first £2,000 of shares will be PAYE and national insurance-free, but what about values above that? We could have a situation in which new employee shareholders give up their employment rights in return for valueless shares that incur PAYE and national insurance at the point of issue. That would mean that an employee on the basic rate of PAYE and national insurance would have to pay several hundred pounds on the issue of the shares in their first pay. It could cost the employee money.
What are the Government trying to achieve in that measure? Is it that employees will give up their right to protection against unfair dismissal so that they can be given some shares that their employer will tell them are worth a certain value, but they have no idea whether that is right? When they get the shares, will they have to pay tax and national insurance on them if their value is more than £2,000? Then, at the end, employers, if they decide to sack them, can take the shares back at a valuation that might be less. It does not seem to be a scheme that will set the nation alight with people wishing to participate in it.
The proposal is worse than Beecroft and goes to the heart of what this ideologically driven Government are all about. They have no economic strategy, no plan other than austerity and unemployment, and the Minister thinks that the holy grail of economic growth is to make it easier to fire rather than hire. It smacks of a Chancellor who is out of ideas and out of touch. I urge the Minister and Government Members to do the right thing: agree with the Lords and dump this policy.
I wish to speak to amendment 7B. I am delighted that the concerns about neighbour notification and the involvement of local people in decision making have been listened to. That was crucial for many Members of this House. However, I would still like to tease out answers on some of my concerns about amendment 7B.
St Albans, according to the Department for Communities and Local Government’s own figures, handles twice the number of planning applications as a normal planning authority. We are surrounded by green belt, thankfully, but are under direct pressure from many developments, including domestic developments. The fees collected do not cover the planning applications already being made, so we run a subsidy to the planning operations of St Albans district council.
I suggest that the fees for applications are quite modest. They form a very small part of a whole development. For example, they do not include architect fees, which can be substantial, or any of the other land searches that might be needed, for instance when tree protection orders are in place on a site. I do not believe that the fees are what deter people from making applications for a housing development, perhaps for a growing family. What I am concerned about is that we will now have what I call “planning-lite.”
The original amendment in the Lords, which was defeated there, suggested not involving planning officers, neighbour notification or any other work for the council whatsoever. The new amendment, which I welcome as an improvement on the old one, would bring the planning system into the permitted development rights decision-making process and, as a result, mean direct costs for many councils, particularly those, such as mine, that have a significant number of planning applications. I cannot see the savings. I would love to see some sort of spreadsheet showing how that cannot be a burden on the council, as it means taking those applications, because they are above the original permitted development rights figures, out of the current planning system, in which a fee is paid for examination and registration for neighbour notifications and perhaps even a site visit, and moving them so that the officer still does the same work but does not get any of the fee. I urge the Minister to monitor that situation, because in a heavily utilised planning department, such as the one in St Albans, I believe that this will have a negative impact on the council.
I am also concerned that we are effectively introducing a third planning system and that there might be pressure on neighbours not to object or to trigger the process. I can envisage developers going around and reassuring neighbours that a development will not be a problem, and the neighbours might feel reassured, but is money to be put into enforcement if the neighbours, when they see the edifice going up, are unhappy because what was described to them is not what is being delivered on their doorstep?
Those are details, but having served as chair of a planning committee and, like other Members, having a postbag filled with planning issues, I know that they are important details to reassure not only hon. Members in the House, but those of us who will face neighbours who say that they were not really aware what they could object to and that a developer had assured them that they had the permitted development rights. We will not be party to those conversations.
I do share that concern. Obviously, the detail is still very light. For example, will the plans be available on websites? Since councillors do not seem to be involved in the system, someone could potentially go around and advise someone who is not as savvy as hon. Members are on the implications of a structure for them in order to form an objection. There is a very active civic society in St Albans that takes a keen interest in planning. I am disappointed that no one other than an immediate neighbour can form an objection. The people who run the Watercress Wildlife Association in St Albans, for example, take a keen interest in the water run-off from further uphill. Will we have a domino effect of several applications on large permitted development rights that eventually start creating soggy gardens further downhill?
I know that that is all detail and that this is a short debate, and I do not wish to tire the House, but my main concern, if we are to move to the new “planning-lite”, is that we seem to have given additional responsibilities to councils but no additional resources. I urge the Minister to listen to the words of councils, which already feel that they subsidise the planning system. We also do not know whether there will be non-determination periods. I have no idea whether the permitted development right period of determination would be similar. What council would prioritise a determination that has no fees associated with it over a determination that has a determination period and a fee associated with it? Will we have two categories of decision making? That all needs to be teased out, and I look forward to the Minister giving guidelines that ensure that councils are consistent in their approach to those decisions and that it is not simply a question of whether someone happens to have a vocal neighbour who is savvy enough to interpret plans and make objections in the interests of the whole community rather than just in self-interest.
Thank you, Mr Deputy Speaker. I assure you that I rise to speak very briefly to Lords amendments 7B and 7C. I acknowledge that we are in a better place than we were last week and thank the Secretary of State for his work on the issues. However, because so many questions remain, I certainly retain a preference for Lords amendment 7, which I think sets out a good solution.
I will quickly run through the objections to the proposals and the uncertainties. I would like to reinforce the point about finance for local authorities. If we are not careful, and if there is no extra money going to local planning authorities when they clearly have duties for which they are not receiving a fee, we might have a situation in which those people who cannot afford extensions end up subsidising those who can, which seems unfair. We are talking not only about planning applications, but enforcement, because there might well need to be enforcement, whether or not there have been objections, if a building does not match what was submitted in the first place.
I remain concerned that not all neighbours will object, possibly because they are absent at the time or because elderly and vulnerable people who depend on their neighbours for help will not feel able to object. It is essential that we build in a requirement for the local authority to at least conduct a desktop exercise to consider all the plans in their context.
I reinforce the points made against seeking objections from adjoining landowners only. In some circumstances it would be appropriate to go further afield. There will be knock-on effects for a row of terraced houses, possibly right along the row, and precedents will be set, even if the initial application was for just one end.
I plead with the Minister to look at the number of outstanding issues, so that we can truly get the best of both worlds by incentivising building while ensuring proper protection for neighbours.
I will first address some of the points that have been made on the change to permitted days. It has been suggested that 21 days might be too short, but that is exactly the same as the equivalent period under the planning regime.
My hon. Friends the Members for St Albans (Mrs Main) and for Mid Dorset and North Poole (Annette Brooke) have suggested that neighbours further afield than those who adjoin might be denied the opportunity to object to something, but it is hard to understand why they would have stronger objections than those who live much closer. I therefore suggest that the focus of objection needs to be the impact on immediate neighbours.
I would hope that neighbours would talk to each other and discuss any proposed developments. They should not feel that they are not able to object. As I have said, it is hard to understand why those who live further away should have, or should be entitled to register, stronger objections than those who live next door to the property concerned.
My hon. Friend raised two other issues, the first of which was what would happen if the extension turned out to be larger than or different from the original proposal. Under the notification, the plans have to be deposited with and approved by the building control regime, which will exercise supervision in exactly the same way as it does for a normal planning application. It would also be able to require modifications to an extension that did not fit the original plans.
Secondly, my hon. Friend raised the issue of fees, which I addressed when I opened the debate. I repeat that if she turns out to be right about the actual cost to local authorities, we will, of course, discuss any concerns or new pressures on them with the Local Government Association in the normal way. Our position, however, is that there will be considerable savings as a result of a number of applications not going through the normal planning route.
Finally, on the employer shareholder clause, the hon. Member for Edinburgh South (Ian Murray) was a little cavalier in some of his arguments. First, he suggested that my noble friend Lord Deben opposed the clause, but he voted for it in a Division last night, so the hon. Gentleman was not accurate about that. Secondly, he suggested that people would be forced to give up their employment rights for what he called “worthless shares”, but they cannot be forced to surrender their employment rights unless those shares are worth at least £2,000. If they turn out to be worth less than £2,000, the employee shareholder would, of course, be fully entitled to be considered to have the rights that he or she previously had.
I did not say that. I said that the value of the shares must be worth at least £2,000. It was the hon. Gentleman who used the word “worthless”. These shares cannot be worthless, or the employee shareholder will not be forced to give up the rights that he or she currently enjoys.
The hon. Gentleman was also wrong about the suggestion that this would somehow cost £1 billion. That estimate comes not from the Treasury, but from the Office for Budget Responsibility, which estimated that between now and beyond the 2020s—that is, the next 30 years—the total cost of the policy might amount to about £1 billion. The actual Treasury estimate is that the cost of the policy is expected to reach about £80 million by 2017-18.
I want to return to my previous question about the provision of legal advice to people before they agree to accept employee shareholder status. The Minister said that the Government are reflecting on what advice can be given to such employees, but what is he actually going to do?
The hon. Gentleman has seen how we reflected on concerns about permitted developments, and concerns about legal advice were expressed extremely cogently last night. We have sought throughout the passage of the Bill to make absolutely sure—I stressed this as long ago as Second Reading—that nobody should be harassed or bullied into accepting this status. I have made it clear that guidance will be available and our amendments improve that by making sure that there will be a statement of written particulars. There will also be a cooling-off period of some seven days, and we are further considering how we might improve the advice available to those who are considering taking up this status.
I am conscious that we have only a minute left, but the one issue that my hon. Friend has not yet addressed—I hope he will—is how we prevent discrimination by a would-be employer who favours people who are willing to do the shares deal over those who are not interested.
If my right hon. Friend is suggesting discrimination at the point when the shares are offered, the amendments that we have already made will protect the employee against that kind of harassment or discrimination. Legitimate concerns have been raised in both Houses that nobody should be forced to accept this status. The essence of the status is choice—the company can choose to offer it and the individual can choose whether or not to accept it, and I commend the motion to the House.
Question put and agreed to.
That this House agrees with the Lords in their amendments 7B and 7C in lieu of Lords amendment 7, to which this House has disagreed.
Motion made, and Question put,
That this House insists on its disagreement to Lords amendment 25 but proposes amendments (a) to (e) to the words restored to the Bill by that disagreement.—(Michael Fallon.)