My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.

House in Committee accordingly.

[The LORD SPEAKER in the Chair.]

Clause 198 [The levy]:

moved Amendment No. 435A:

I oppose the amendments in the name of the noble Earl, and, in so doing, I draw attention to my interests on the register. Like the noble Earl, I am a member of the Royal Institution of Chartered Surveyors, but I take a different view to the introduction of the community infrastructure levy. I take that view based on almost 10 years’ experience of major infrastructure projects across the length and breadth of England and the difficulties that all parties—central and local government, private developers and housebuilders—have encountered over that time in unlocking land for development because of lack of investment in infrastructure.

The noble Earl drew attention to the previous idea of a planning gain supplement. He was not alone in having grave concerns about the PGS, but, to the Government’s credit, there was widespread consultation on that, and the department went to great lengths to listen, understand that concern and modify its proposals in light of that concern. I pay tribute to my noble friend Lady Andrews for the lead she took in that work.

There is no doubt in my mind that all across England lots of perfectly viable, sensible and sustainable developments are held up for want of a mechanism to fund the necessary infrastructure to release those developments. An example that I could give would be in west Bedford, where five major landowners could not unlock that development for the want of a relief road. Often the issue is not over a massive infrastructure; sometimes it is actually quite small. Because of that, it is below the radar of departments such as the Department for Transport, but it is simply too rich for the appetite for resources of a single authority. In the case of west Bedford, central government brought all those landowners together and with the local council they were able to secure a voluntary contribution to unlock that infrastructure over a period. Again, in Milton Keynes there is now a tariff in place; the 18 landowners there voluntarily came together because they knew that it was in their own interests to unlock that development in a sustainable way and agreed to pay a tariff of just over £18,000 per house for that.

In response to these amendments, I think that the Government have listened very hard. The planning gain supplement was regarded as unworkable and unfair on all sides; on the other hand, there is a very great measure of support in the private sector for the community infrastructure levy. We know that the British Property Federation, from which we have all received interesting and thoughtful correspondence, has concerns about some of the detail here. But it is evident to all of us that if we are to have proper sustainable development across England, we must simply do more to make a contribution to that very necessary infrastructure.

If landowners have a windfall gain because of a change of planning status of the land, it is reasonable that they should pay some of that towards necessary infrastructure on account of that land being developed. I do not believe that the levy is unreasonable; there is widespread support for it; and it is a necessary procedure. For those reasons I urge noble Lords to resist the amendments.

I support the community infrastructure levy in principle. I have grave concerns about the tax on increase in land value, a point the noble Earl, Lord Caithness, touched on. My amendments in this and subsequent groups relate exclusively to the community infrastructure levy. Before speaking to my amendments, I must mention that I am chief executive of London First, a business membership organisation.

Amendments Nos. 435CA and 437CA in this group relate to the purpose of CIL. These are the first of seven of my amendments, which fall into three separate groups. They all fundamentally focus on one goal: the funding and delivery of infrastructure. The community infrastructure levy must be fairly and reasonably levied to broadly reflect the impact of development, through the development plan process, and the moneys collected must be spent on ensuring timely delivery of infrastructure.

My two amendments in this group on the purpose of CIL would ensure that CIL is not a tax on land value and that references to it as such are removed. Critically, referring to increases in land value is inappropriate. First, it sends the wrong message about the purpose of CIL. CIL is not to tax the increase in land value arising from the grant of planning permission; it is to secure a contribution from development to additional infrastructure needs created by new development in the area.

Secondly, the issues around using land value increases as a basis for assessing viability are highly complex. Any simple reference to uplifts in land value flowing from planning permission would inevitably lead to differing interpretations, not least because land can increase in value irrespective of development or planning permission.

The principle is that CIL is not a tax on land value, and I would prefer to see any unintended implication that it is removed from the Bill. That is why Amendment No. 437CA suggests the removal of a subsection which is not required and, indeed, may contradict the later provision in Clause 201(3)(b). Amendment No. 435CA also removes the reference to land value as the basis for establishing CIL. Instead, CIL must be fairly and reasonably levied in a way that broadly reflects the impact of development through the development plan process. I will return to this point in later amendments.

I support very strongly what the noble Baroness, Lady Valentine, has said. Since the last war, we have suffered repeated attempts by successive Labour Governments to try to assess and tax the increase in land value as a result of planning permission. My memory goes back to the Land Commission. At that time, the Minister concerned was firmly advised that the provision was impossible and would simply choke off development; and the Land Commission had subsequently to be abolished.

Then we had the development land tax. That did not work either. We have had the planning gain supplement, which happily seems to have been withdrawn but remains on the statute book. A later amendment deals with that. The community infrastructure levy is the latest attempt. The great mistake is to regard it as a form of capital gains tax on some extremely difficult-to-assess increase in land value. The evidence I have had from a number of organisations on this issue argues that it is extremely difficult to assess what is the increase in the value attributable to planning permission—a point wisely made by the noble Baroness. In practice, this will become a value—not an increase in value—and then the tax will be based on that.

The problem there is that the value may bear absolutely no relation to the increase in infrastructure costs to which this community infrastructure levy is intended to be a contribution. It is no more than a contribution, to give local authorities some extra funds to pay part of the cost of the infrastructure to which a development can give rise. It has been pointed out to me that some of the biggest increases in value may come from retail developments—shopping centres—which may not require infrastructure costs beyond some possible increase in road capacity. Some of the developments that will carry considerable increases in infrastructure requirements may, in fact, pay considerably less. This must be tied to what the local authorities see as their infrastructure needs.

An example pointed out to me was that of an expanding town; with a substantial increase in population, it will eventually need an expansion in the crematoria. How will that be tied in to the development costs? It is clearly an infrastructure need occasioned by the development leading to the increase in population. Simply to try to link this to the extremely difficult concept of the increase in value, however, seems fraught with difficulties.

I take issue with one point made by my noble friend Lord Caithness. On Amendment No. 444, I shall be agreeing with the Delegated Powers Committee, which made a powerful point on this, and arguing that this is a charge, not a tax. It is a charge, in line with a great many others that have preceded it and on which this House has always had its part to play. My amendment is that both Houses should therefore be involved in the approval of the regulations. I am mildly surprised that my noble friend has added his name to it; no doubt he will explain at some stage. However, that is by the way, and we will come to the argument later.

There lies at the heart of the difficulties here, which will be addressed by a number of amendments, the concept that you can somehow tax the increase in value attributable to planning permission. All the advice that I have had suggests that that is in fact a near impossible task. I hope that we will be able in Committee—and, later, on Report—to make some changes to link the charging schedules which local authorities will draw up to their development plans, so that the levy on developments will thereafter bear a close relationship to the infrastructure needs of each local authority.

It may be that that is the Government’s intention, but the advice that I have had is that it is not expressed properly in the Bill. We need to change the Bill, and will come to some of these amendments later on. I emphasise that the noble Baroness, Lady Valentine, has put her finger on an extremely important point.

I have tabled Amendment No. 436 in this group, which deals with a simple and narrow point that I shall address before returning to the generality of the discussion. The amendment is not perfectly worded, but simply makes the point that there should be only one charging authority. By that, I mean that people undertaking development who will pay this charge, or whatever we choose to call it—I shall come to that in a moment—should have only one bill to deal with. It will be immensely complicated if there is any possibility of their receiving two, three, five or any number of bills.

This is a probing amendment designed to ensure that the Government clarify precisely how they will deal with the dilemma which is immediately apparent to anybody who has read the Bill and noted that the London boroughs may charge authorities as planning authorities and that the Mayor of London may also be a charging authority. We have heard of an instance where this problem has to be overcome. Occasionally, in other parts of the country there are cross-boundary developments. Such a development will be difficult if one part pays one rate while another pays an entirely different rate because it happens to be in an authority that takes a different view of what the charge should be. Is this a charge or a tax? My noble friend Lord Jenkin of Roding properly addressed that and rightly said that it should be a charge, with local authorities having the discretion to set it within an approved system.

The other place clearly takes a different view and sees this as a Revenue matter. The Treasury clearly sees it as a Revenue matter. When you sit down and consider the sum that the Government expect to raise from this charge, as suggested in at least one of their consultation papers—£500 million is mentioned—it is big enough to be a tax. We are into the argument that, “A rose by any other name would smell as sweet”, but my noble friend raised the fundamental point that one classification gives us some control over the measure in the future whereas the other does not. I consider that in this instance we ought to have a role to play.

Moreover, this is nothing new. We should not be left with the impression which might have been given by the noble Baroness, Lady Ford, that developers are not already subject, or may be subject, to paying a very considerable contribution towards all infrastructure costs. Section 106 has been in place for a long time. I know from personal experience that it can include playing fields, road improvements, sewerage extension and things that can be way off site. They may be related to a development, but they also provide real benefit to the whole of the wider community. We should not think this is an entirely novel provision that has not been around for a very long time. Indeed, my noble friend gave the background history to it.

However, as I see it, the measure is designed to catch a lot of development that at present does not contribute towards infrastructure. Whether you call this a tax or a charge, it is an additional way of raising money for public finance. We have been given no assurance—I wish that we had—that the existing sources of funding used for these purposes will not be diminished because this new charge is being brought in. If there is any hint that this might be a substitute for existing sources of funding, we are doomed to failure. I suspect that for a time we are doomed to failure anyway, or the Government are because they have an unfortunate but immaculate sense of timing. They are picking the worst possible moment to introduce a charge on the construction and development industry. I put it in its widest sense.

We should realise that this charge usually has to be paid from the landowner’s receipts; but so did Section 106. One must also remember that this will catch a lot of development where there is no change of ownership and in very many instances there will be no enhanced value, perhaps apart from the cost of construction. I am sorry if this seems like a Second Reading speech; it is a Second Reading speech, but it is absolutely vital that we should get the context of what is happening correct.

I am immensely sorry that this provision is here at this time. That is not to say that there might not have been a time when this would have been more favourably received. We continually load fiscal charges on to desirable developments. There is only one long-term effect as a result, which is that the price of everything rises. It will be paid by people improving their houses, if the improvement requires planning permission. It will be paid as part of the cost of site value and the construction cost of a house and, ultimately, it will be paid by house purchasers. It is another twist of the inflationary screw.

It may be said that this is justifiable, but I remind the Minister of the time when the development land tax was proposed. That was a deliberate attempt to tax enhanced value. What happened was quite simple; all development land disappeared from the market for as long as that proposal was around. It remained off the market until the price had risen to the extent that the receipt to the landowner, plus the tax, was sufficient that he was not losing money as a result of the introduction of the charge.

We have picked another one of those glorious moments when that reaction will be significant. The only thing I want to add is that I doubt whether any local authority will want to consider a charge of this nature at present. I only have very limited intelligence—by which I mean information coming to me—but we ought to appreciate that on planning committee agendas, applications for new build have virtually disappeared. There are still applications around for housing extensions and that sort of thing, but very few applications are coming forward for anyone to do anything. I strongly suspect that it is much more important to get the development process moving forward again than it is to introduce this charge.

We welcome the fact that there is a little flesh on the skeleton, although it is still fairly emaciated. There have been comments about the timing of this. If the Government had not run into trouble in the Commons over the principle of the Infrastructure Planning Commission, we might well have been debating this part of the Bill about six months ago, and the comments might have been a little different.

Section 106 and the planning gain supplement have been mentioned. The advantage of Section 106 compared with the planning gain supplement was that the community could see the benefit that would come to it, if not as a result of the development at any rate linked to the development. The community could see benefits which might counter the disadvantages of a development, although Section 106 seems to have pushed at the limits, possibly to an improper extent. If the new levy brings a degree of propriety—perhaps that would be a bit strong—rather, if it puts things into the proper pigeon holes, that is to be welcomed. I agree with the comments made about the difficulty of defining and assessing value and I, too, see this as a charge, although I wonder whether the window tax of centuries ago was a tax or a charge.

I want to ask a question and make a point on government Amendments Nos. 436A and 436B. I disagree with the noble Earl and support making the Mayor of London a charging authority, because, as I understand it, if the mayor is the planning authority for an application, it is necessary for the mayor to be the charging authority as well. What is important is how the money is spent, the relationship between the mayor and the boroughs and the relationship between the boroughs where the mayor is not a party, but the development may affect more than one borough. Outside London there could be a similar situation.

Amendment No. 436B deals with joint committees. I may be wrong, but I do not believe that it covers an arrangement between the mayor and the boroughs. Will the Minister’s amendment deal with that, because there needs to be a structure in which everyone can have confidence?

I have only one series of major amendments today that deal with CIL, but I indicated at Second Reading that I have a series of questions which I will attach to other noble Lords’ amendments throughout the day.

My question has already been asked by other noble Lords, but perhaps I may put it in a rather different way and attach it to Amendment No. 435G in the name of the noble Earl, Lord Caithness. If CIL is a tax, as it were, on the rise in the value of land as a result of development, presumably, if a development does not involve a rise in land value, no CIL would be charged, although I notice that Clause 205 indicates that CIL would still be payable if there were no increase. However, what will happen if there is a decrease in the value of the land? Believe you me, for business purposes many landowners undertake developments that actually decrease the value of their land. I have done that myself.

I pick up the theme that other noble Lords have mentioned as to whether CIL is a tax on the rise in land value or genuinely a levy, which it purports to be, which attempts to raise money for extra infrastructure caused by the development. The same question applies. A development may reduce the strain on the infrastructure, such as the creation of a key worker’s house, or be neutral vis-à-vis the strain on the infrastructure, such as an agricultural development that merely involves enlarging a cattle building, putting up a slurry store or replacing a building on a like-for-like basis—such as the renewal of an office building. Although it is called a levy, is this a tax on renewals? Can the Minister clarify at this early stage whether CIL is a tax or a levy?

Amendment No. 435GA, which is in this group, extends the purpose of CIL to allow compensation to be paid to those who have been adversely affected by permitted developments. I realise that there would need to be consequential amendments if this amendment were accepted, for example, to extend the application of Clause 202(1). I am also uncertain about how this amendment would interact with the new government amendment on compensation, which we debated and adopted last week, replacing the former Clause 151. That amendment, as I understand it, would restore the right of landowners, but not licensees, tenants or anyone else, to bring a claim for compensation by means of a claim for nuisance. Perhaps the Minister will say something about that when she replies.

My amendment relates to my Amendment No. 433, to which I will speak later, which bans the unregulated practice of developers making financial offers at their own discretion to local interests in an attempt to influence planning decisions in their favour. I should like to see all developers, including those of wind power generators, liable to CIL and the proceeds made available to compensate those whose livelihood or health, as well as property, has been adversely affected by the development that has been permitted. That would do much to deal with the problem of the divisiveness that that practice has introduced into communities.

It is not clear to me whether wind power generators are caught by CIL. I should be grateful if the Minister could say something about that with and without, if that is possible, the amendment tabled by the noble Baroness, Lady Valentine. This is a probing amendment.

I have given notice of my intention to oppose the Question that Clause 198 stand part of the Bill because I wish to probe the basic concept of CIL. I have two related concerns, which have already been raised by several speakers. First, I understand it is proposed to introduce CIL while retaining Section 106 planning obligations. That puts potentially excessive burdens on the developer. I declare an interest as a landowner in Hertfordshire. Secondly, a combination of CIL and Section 106 impositions may result in widespread withholding of potential development land, as happened in the case of development land tax in the 1970s. I do not wish to interrupt today’s important debate on the detailed provisions of the Bill, but I should like the Minister’s assurance that if Section 106 agreements are to be retained, the combined burden must be kept within reason.

I shall make a brief speech as a footnote from a flank to the observations made by my noble friend Lord Dixon-Smith from the Front Bench concerning the timing of this legislation and the state of the economy. I realise that when the Government formulated this policy they might not have foreseen the situation in which the economy finds itself and that events have overtaken them. The flank nature of my observation is that I shall allude to planning in the island of Ireland. It is well known that planning laws are more relaxed in the Republic of Ireland, some would say to the disadvantage of the beauty of the Irish countryside. In Northern Ireland 30 or 40 years ago, planning laws were considerably stronger, to the benefit of the landscape. During the Troubles, which inevitably led to a massive economic slowdown, the British Government relaxed the planning laws in Northern Ireland in order to stimulate economic activity. When the Troubles came to an end, it was possible to return to the status quo. Is the Minister contemplating on behalf of the Government that there will be a fine tuning, in the sense of timing, with regard to the introduction of this legislation if it goes through?

I rise to express sympathy for the amendments tabled by the noble Baroness, Lady Valentine. There is a real danger, not only in the Bill but in the consultation documents, of not merely implying but saying that CIL is, effectively, a charge or a tax—or whatever it will be called—on development gain. The amendment proposed by the noble Baroness is an ingenious solution. If the Minister were able to respond positively to the idea behind the amendment, reassurance would be provided that, in discussions, that part of the consultation document would disappear. In expressing sympathy for that, I add that the debate on clause stand part is the only time when we can talk about the principle as opposed to how what is proposed is brought about.

I continue to express to the Minister what she knows are my deepest reservations about the line that the Government are taking. I forecast that enormous tangles will result from this. The idea that it will provide certainty will turn out to be a myth. There will be enormous variations across local government areas and they will tend to emerge, not de minimis, but at modest levels because of the fear, on which I shall comment in a moment, of stopping some developments. In my view, it will be set at modest levels. It is very wise to keep Section 106 because, in my view, local authorities will still want to get additional revenue from developments which are large and which will produce substantial gains. I can see that that is what will happen. If that were not to be done, as a matter of logic and straightforward economics, once you apply a charge, a tax—call it what you want—to all developments, at the margin some developments will become unviable.

This is the point in the Bill when it is worth putting on the record our very grave reservations. In due course, if it came to a vote, I would not vote against the Government, but I simply give a warning that they are opening up a pitfall. As the current recession and depression in development and in property prices—housing, commercial and industrial—show, working out what kind of rates to charge, what you are going to bring in, and when, is a very tricky business indeed. Values have fallen by between 20 and 50 per cent. As the recession takes hold, you will probably find that property values and development values fall even more sharply which will make a mockery of this system if it is in operation. However, this concept would regularise much better the framework in which local authorities set out their infrastructure needs and would provide a basis on which comprehensive discussions could take place with anyone who wants to undertake development. That is warmly welcomed. However, I am not at all convinced that that framework, which is a big step forward, needs to be supported by this kind of funding, in part or in whole.

This has been a very important first debate on this part of the Bill.

I apologise, but I did not declare an interest. I am a partner in a business which works in the property development area.

I thank my noble friend for making that clear. This has been an important debate on the fundamental issues of the community infrastructure levy. I am very grateful to all noble Lords who have spoken. I am particularly grateful to the noble Baroness, Lady Ford, who has brought forward her great experience in positive support of CIL itself. A number of very important questions have been raised in the Committee which I shall try to address, but I begin by setting the scene, as it has moved on since the summer. This is probably more in the nature of a Second Reading speech, but the Committee needs to know how we addressed the issues that arose from the questions raised at Second Reading.

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

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

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

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

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

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

I know that we will discuss the impact of the current economic difficulties. As I said, the demographic, social and environmental trends will not change in the long term. We must ensure that, whatever are our short-term difficulties, we are planning for suitable infrastructure for long-term sustainability. That is exactly what CIL is intended to do, and why it is so important to get right in that equation the explicit relationship between the costs of infrastructure, to which the noble Lord, Lord Jenkin, referred, and long-term sustainability.

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

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

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

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

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

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

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

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

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

In July, the Delegated Powers and Regulatory Reform Committee expressed concerns about the extent of these enabling powers, but I am delighted to say that its latest report indicates that the amendments that I am presenting today go a very long way to addressing its concerns. They clarify which authorities will be able to charge CIL, they set out in the Bill the core elements of the process of establishing a charging schedule, and they cap certain enforcement powers.

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

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

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

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

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

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

“to support the development of an area”.

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

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

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

Clause 205 allows a charge to be imposed where there is no land value uplift or where there is a decrease, because it is an average charge. That said, our regulation-making powers also allow for charging authorities not to impose a charge in the first place on classes of development where value did not generally increase. We rather expect that the guidance we give to charging authorities will remind them that it would be unwise to impose CIL if it prevents development from occurring. All this must be cast in the framework of what will work and what will promote and facilitate development. We are talking about common sense as much as calculation here. The two surely must go together.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The third significant change made by Amendment No. 436A is that the CIL regulations may provide for substitute authorities to be CIL charging authorities in place of the local planning authority, an example of which might be the Isles of Scilly if the Council of the Isles of Scilly has its planning functions withdrawn, for instance. The council would be granted planning functions by order under Section 116 of the 2004 Act. We think that it is important to provide that power.

A second need for this power relates to the national parks, which have already been a feature of our debates. A national park is a “local planning authority” and prepares a development plan for its area. The national park authority must then consider the infrastructure needs of its area in line with the Government’s policy in PPS12. Clause 199 therefore provides that it will be the CIL charging authority for its area, and not the local authorities within the park boundaries. However, it is important that this is discussed further with stakeholders, including the park authorities, to ensure that it makes sense. Some, with their unusual layout, consist of small areas within other charging authorities. We do not want to create a nonsense here, so for reasons of scale and efficiency it might not be thought appropriate for a small separate area to be the CIL charging authority. The amendment provides the flexibility to continue those discussions.

Amendment No. 435K, tabled by the noble Earl, Lord Caithness, covers similar ground. It would prevent the CIL regulations being able to empower the Secretary of State, Welsh Ministers and the Mayor of London as charging authorities. I am delighted to say that we are in agreement on at least two of those three authorities, but, for the reasons I have set out, we have proposed that the mayor should be a charging authority.

The second government amendment in this grouping, Amendment No. 436B, arises as a consequence of the restructuring of Clause 199 by Amendment No. 436A. The unamended clause would allow for joint committees of local planning authorities established under Section 29 of the 2004 Act to act as CIL charging authorities. Therefore, to allow this to continue, government Amendment No. 436B allows CIL regulations to provide that joint committees established under Section 29, where they include a CIL charging authority, are to exercise CIL functions in their area on behalf of the CIL charging authority. The new subsection (3), which mirrors the order-making power in Section 29(4)(a) of the 2004 Act, will permit CIL regulations to set out how joint committees can exercise those charging authority functions. Provision can be made corresponding to provision relating to joint committees in Part VI of the Local Government Act 1972. It is right that where, as we foresee, local authorities cooperate and enter into joint committee arrangements, they should be able to charge CIL as part of those new arrangements, not least to deliver sub-regional infrastructure across local authority boundaries. However, that is entirely a matter for each local authority.

A few other amendments remain in this grouping. The noble Lord, Lord Dixon-Smith, and the noble Earl, Lord Cathcart, tabled Amendment No. 436. I am a little unclear about this issue. The first possible intention of this amendment would be to provide that a developer should only be charged CIL by a single charging authority. Government Amendment No. 436A sets out that it is the plan-making authority that will be the CIL charging authority—which I hope clarifies the position. However, in London, given the special position of the mayor, we propose that the mayor should be involved. The amendment could also intend to require that the CIL regulations must prevent the mayor from being empowered to charge CIL in London. The alternative, that the London boroughs would be prevented from establishing a CIL if the mayor chose to do so, is equally unpalatable. However, this amendment could alternatively be designed to ensure that CIL revenue from only a single charging authority can be applied to any one item of infrastructure identified through the development plan process. In many cases that might be what happens; but in some instances the infrastructure that might be needed to support growth could be quite substantial, such as a significant flood defence scheme or new motorway junction. CIL is much better placed than existing schemes to fund such infrastructure, and these larger sub-regional pieces of infrastructure benefit from more than one boundary.

I have a note that states that I need to correct something that I said in response to the noble Baroness, Lady Hamwee. She asked if the mayor will be a charging authority only when he is the planning authority. The answer to that is no, although I said yes. We propose that the mayor will be able to charge CIL on all planning permissions in London because he will determine only a handful of applications a year. Setting a charge for all applications will enable lower charges. I will write to the noble Baroness on this point because it needs a proper letter, and of course I shall copy it to all noble Lords who are taking part in these debates. My letters go to all noble Lords, rather like TV licences.

The noble Lord, Lord Dearing, who cannot be in his place today, was also concerned about how CIL would work in London, and he has asked me to ensure that his concerns are registered. I hope that I have done that, but I should say also that we are continuing to work with stakeholders in London to see whether we can do anything additionally to ensure that both the mayor and the boroughs are able to set charges that address their infrastructure needs without overburdening individual developments. He, along with others, is concerned about the eventual impact on viability. I hope that that meets his point.

The problem with going back to the conditions suggested in Amendment No. 436 could be that the voluntary approach to the funding of sub-regional infrastructure would have to be prevented in the CIL regulations, which we do not think is right. It would mean that a CIL could not be used to support sub-regional infrastructure in a meaningful way. For that reason, we have a problem with the amendment. However, I will write to noble Lords in more detail on the point. My flow was interrupted by the need to address and correct what I said previously.

I apologise to the Minister—I am never sure whether I should interrupt her when she is in full spate, and sometimes it is easier to deal with this kind of query at the end. She said that household development would not be eligible to pay the charge, but what are the limits of household development? There must be a limit somewhere, otherwise you could have a two-bedroom cottage being extended into a mansion and not being eligible for the charge. There is also a marginal question of whether building one house is household development. We need to be clear about the definition of what is, or is not, eligible development. In view of what the Minister said about writing, perhaps she would prefer to write on this specific issue. It is important to individuals and builders across the whole country.

I am grateful to the Minister for her full reply; she has lifted the lid on some of the questions and problems which this part of the Bill raises. However, she did not answer one important question, and it would be of great help if she could. When will these regulations be available? The regulations will answer many of the questions. The question which my noble friend Lord Dixon-Smith has just asked the Minister is very important—but where are the regulations? Until we get them we will go on flapping around trying to get answers.

The noble Baroness, Lady Hamwee, bowled the Minister a beautiful googly. It now appears that there will be two charging authorities in London, the mayor and the local borough, whereas if you are outside London, the local authority will be the only body able to charge. Would it not have been so much easier if this had been set out before us? We could have discussed it and had a much more sensible debate. Does the Minister now have an answer for me on regulations?

I am afraid that it is the kind of answer that Ministers sometimes give. The department spent the summer working to ensure that we met the DPRRC’s requirements to put as much as we could in the Bill so that the Committee could debate the CIL architecture as fully as possible. The regulations are being worked on. We are in major discussions with a large number of stakeholders—we will be happy to involve the noble Earl—and will bring them forward as soon as we can. We will do so with the best expedition.

So Mr. Healey’s assurance to the House of Commons that they would be ready for this autumn is in fact worthless, because they are not ready?

No. I did not contradict my honourable friend in the other place at all. I said that we would bring them forward as soon as possible, which we certainly will.

Mr Healey said that it would be done by the autumn, but clearly it has not been done.

Although it has been a wide-ranging debate, I particularly wish to draw attention to what the noble Baroness, Lady Valentine, said. She and I raised the same point but we attacked it from different points of view. I think that her amendments are better than mine. It is obviously the case that the levy should deliver infrastructure that is to the benefit of the development, its occupiers and users, but if you link CIL to the land value then that will make it a tax on the planning permission rather than what the charge is supposed to be about. The noble Lord, Lord Cameron, is right—and I said it, too—that, in key development areas where planning permission is likely, uplift will already have been taken into account in the price. It is confusing to have a reference in the Bill to value as a result of planning permission. It undermines the reason for CIL and what the noble Baroness is trying to do with it. However, I understand that she is still thinking about this and I hope that she will bring forward more sensible wording on Report.

The Minister did not deal with the point raised by my noble friend Lord Dixon-Smith that there would be no reduction in central government funding. Will the charge be used as an opportunity for central government to reduce funding of local authorities? It is clear that developers, individuals and, indeed, bigger companies will be charged CIL, but individuals and small businesses will not get any benefit at all. There will be no increase in infrastructure in their development and they will not get any uplift in value. They are being subjected to a new charge. For that reason, the charge must be closely linked to the development plan. We need to explore that further as we go through the next amendments.

The entire thrust of CIL is that it is explicitly linked to the development plan. It is an additional charge which is made locally for all the reasons that I have given. As I also said, government funding will continue to provide the majority of funding for infrastructure, which is very expensive.

Indeed it is. The Minister has given a full reply. Later today we will cover a great deal of what we have just said as there will inevitably be a run-through following this glorified Second Reading debate. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 435B:

I think we could do with some light relief after the previous amendment. I can be very brief. The amendment would change the name of CIL. It may be inspired by a desire to limit CIL spending to only local infrastructure needs. It may also be intended to make mischief, which the noble Earl is perfectly capable of.

We have made it perfectly clear that CIL is a local measure, but it cannot be limited solely to providing local infrastructure for all the reasons I have given previously, where local authorities consider that they have more strategic infrastructure than is needed to support their growth. We made it clear at paragraphs 2.28 and 2.30 in our August policy statement, which I will not read, that sub-regional infrastructure supports the needs of more than one local authority. There are important examples: hospitals, larger transport projects and waste facilities. Sub-regional infrastructure is critical to the way our communities function. It is often the most critical type of infrastructure in terms of unlocking significant housing or economic development; I have lost track of the number of instances that I know of—I am sure my noble friend Lady Ford knows them too—where development is held up because local authorities cannot agree, an incredible amount of time is wasted while people argue over who is responsible for what and things just do not happen for years on end. We cannot afford that, and we should not rule it out in either name or substance. I am sorry to disappoint the noble Earl, but I cannot accept his amendment.

How disappointing. I thought I was going to be so helpful to the Minister and that she would accept my amendment with alacrity. However, I understand that there can be areas where it will be cross-boundary and that the idea of CIL is not just a local infrastructure in the way that some people would define “local”, but local to a whole planning area.

With regard to the Minister’s letters to us, could they please be a little more personal? To receive a letter for “noble Lords with an interest in the Planning Bill” is rather like getting a letter from the Kremlin. If it could be addressed to a Peer with copies circulated to other Peers, it would be just a little more friendly.

Certainly. I wrestled with the title of that letter; it was even worse before. I will ensure that the next letter is a personal one, copied to all.

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 435C to 435GA not moved.]

moved Amendment No. 435H:

moved Amendment No. 436A:

moved Amendment No. 436B:

My Lords, I beg to move that the House do now adjourn during pleasure until 1.30 pm.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 1.16 to 1.30 pm.]