House again in Committee.
436BA: After Clause 199, insert the following new Clause—
“Duty to co-operate with charging authority
Partner authorities (within the meaning of Part 5 of the Local Government and Public Involvement in Health Act 2007 (c. 28)) must co-operate with charging authorities in the preparation of the community infrastructure levy.”
The noble Baroness said: This is another long group. At this stage, I shall speak only to my amendment and ask the Minister a question on one of her amendments. Perhaps she will be able to cover it when she speaks to her amendments.
Amendment No. 436BA was discussed with me by the Local Government Association. It would introduce a new clause on a duty to co-operate with the charging authority. It refers to “partner authorities”. “Partner” has an even higher status than a buzzword in local government these days. Almost everything is done through partnership. In the Local Government and Public Involvement in Health Act, of which many of us have memories, if not necessarily fond ones, there are many provisions about partnerships.
The purpose of the new clause would be to ensure that local public bodies co-operate with the charging authorities in order that the charging authorities have full information from which to determine the level and types of infrastructure required in their area. Charging authorities will need access to service-related information held by a variety of agencies if they are fully to understand the infrastructure requirements of local communities. The provision of information relating to long and medium-term service goals, requirements, targets, capacity and so on, will be fundamental to underpinning the charging authorities’ setting of the CIL.
I shall refer quickly to government Amendment No. 438M. I am afraid that I am going back to London on this. There is a provision here about the Mayor of London having personally to approve the charge. The Government have tabled Amendment No. 444C, which restricts delegation on the part of the mayor under the Greater London Authority Act 1999, but it does not take out every provision for delegation. Are the two government amendments consistent with one another?
More broadly on Amendment No. 438M, I look forward to hearing from the Minister whether the examination of the charging schedule will be a tick-box exercise or something more substantive. I hope that when the Minister introduces Amendment No. 438M, she will explain how the process is anticipated to work. I am unclear from the proposed new clause whether the examiner is simply required to ensure that the process has been complied with, or what the powers will be. I beg to move.
I have four amendments in this group. Amendment No. 436BB is designed so that everyone will know exactly what is happening and so that there is a bit of transparency. Anyone purchasing land for potential development or considering planning permission should be able to know how authorities might charge a levy on that land, so that they can ascertain potential liabilities and costs beforehand. That is particularly important given that the legislation will involve a number of authorities, although it now appears that there will be only one charging authority. The aim of the amendment is to have transparency for all those involved in the process.
Amendment No. 438CC addresses the situation whereby some authorities will have greater capacity to implement the CIL regime than others. There is a need to encourage and reward local authorities that have the best practice in infrastructure delivery. Support and guidance are required for those that may need to improve their performance.
My third amendment is Amendment No. 438H. A simple fixed-rate tariff based on different classes of development seems to be a sensible way forward if we are going to have this ghastly levy. It is important that other factors should be considered when calculating the CIL, including such things as any increase in density, any impact on infrastructure demand from the development and existing infrastructure needs of a given local area. What discussion is taking place around the issue of levy collection in local authority areas that are rich in infrastructure? How will infrastructure be provided in those areas that are poor in infrastructure but which have low levels of development generally to support the existing deficits? I want to ensure that levies are not set so high as to prevent development occurring. Where they are set at such a level, the charging authority should compensate the owner or developer if the cost of the charge prevents the development going ahead. I cover that situation in Amendment No. 444B.
There are some quite serious issues in this group of amendments. I refer to government Amendment No. 438C, which refers to what the charging authority must have regard to, and to government Amendment No. 438J, which allows it to charge a nil rate. I refer also to Amendment No. 438H, tabled by the noble Earl, Lord Caithness, considering the economic impacts of the levy.
Earlier, the noble Lord, Lord Dixon-Smith, said that the timing of the levy was not very good. In a private conversation that he and I had yesterday—I apologise for divulging a private conversation, but it seems to be the trend these days—we agreed that developers, entrepreneurs, businesses and the construction industry needed this levy right now like a hole in the head. I would go further than that. My area of interest is rural areas. Some rural areas are desperately in need of regeneration and development, and they will need this levy like a bullet through the head.
Some remote or deprived areas do all that they can to relieve costs for new businesses and to channel government or European funding to aid development, facilitate infrastructure developments and even facilitate planning to attract new businesses and development. Even without CIL, those areas often fail to attract the businesses that they desperately need. There is perhaps a lack of trained staff; in some areas, there might be a lack of fast broadband or easy transport communication; there is probably insufficient housing for workers; or there are perhaps better places to go for businesses. All this happens even without the advent of CIL.
The government paper on the levy, published in August, provided an analysis of how CIL might work in Swindon. I am sure that it would work very well there and provide much needed public funding for infrastructure; but what about some of the more deprived and remote areas, such as the south-west, including west Cornwall, west Somerset, north Devon or Torbay, or even other areas of the country, such as Wales, west Cumbria, east Lincolnshire or north Cambridgeshire? The list goes on. I expect that many of those areas will try to remain competitive by setting a nil rate. My anxiety is: what happens then? What do the partner bodies do with their demands for funds from CIL for their infrastructure? Do they say, “In that case, we will spend our capital on infrastructure projects elsewhere?”, thus, presumably, condemning the deprived area to further, continuous and eternal deprivation?
Another question mentioned earlier is: what will the Treasury do when the CIL receipts flow into the coffers of the high-charging authorities? Will it say, “We will no longer fund infrastructure costs of this nature through the rate support grant or other agency funding”? The Treasury cannot do that for one authority and not another; presumably the remote and deprived authorities then take a further step backwards. It would seem that deprived areas will have to choose between having no development or no infrastructure—or maybe neither.
I do not wish to put the Minister on the spot, but I would be very grateful if she could help me with my largely, but probably not exclusively, rural worries.
I wish to touch on some of the points raised by my noble friend Lord Cameron. I turn to my four amendments in this group, which are in two pairs—Amendments Nos. 438EA and 438HA and Amendments Nos. 438CA and 438CB—because they tackle two specific points on how CIL should be set.
My previous amendments related to the purpose of CIL. These amendments concern how local authorities go about establishing CIL. I will briefly touch on some of my previous comments, because they also apply here. I am extremely grateful for the Minister’s indication that we can continue to discuss some of these issues.
My overall point is that CIL should be set at the right level to fund infrastructure and at a level appropriate to the prevailing economic conditions. CIL should take account of overall development viability in an area and not be linked to any increase in land value arising from the grant of planning permission. Amendment No. 438EA seeks that local authorities should take account of development viability when setting the CIL by ensuring it is not set at a level that would stop land being brought forward for development. If CIL is set too high, landowners will not make their land available. Therefore, the test for the appropriate level of CIL should be that it will still allow the land needed for development plan priorities to come forward.
Amendment No. 438HA removes the reference to land value increase in relation to local authority CIL charging schedules. I have already argued that taxing increases in land value should not form part of the purpose of CIL, nor be a consideration for local authorities when setting CIL. If land value is used as a reference point, it will inevitably become the basis upon which CIL is allocated between different land uses, rather than the demands each use places on infrastructure—a point which the noble Lord, Lord Jenkin, has made. This will mean that uses, such as retail, which generate the highest land value increases, will bear a disproportionate burden, irrespective of their impact on the infrastructure. As I understand it, that is not the purpose of CIL. Amendments Nos. 438EA and 438HA set out to change the mechanism for assessing CIL—the viability of development and its impact on infrastructure. The amendments also seek to change the language to that used in the planning system, rather than the tax system.
My second pair of amendments, Amendments Nos. 438CA and 438CB, propose that the setting and charging of CIL should be done through the development plan process. It is simply common sense that if CIL is to work efficiently and effectively, the development plan, the cornerstone of the planning system, must be used as the structure through which it is formulated, tested, and charged. Without these amendments the unintended consequence of the current drafting is that development which is acceptable in planning terms could be refused planning permission if it is unable viably to meet the full cost of CIL. It is only through incorporating CIL in the development plan process that there is any hope of the levy being independently and robustly tested, and applied in a reasonable way to planning decisions.
At present, the clauses make no reference to the planning process by which the CIL should be determined. The Government’s August 2008 publication on CIL suggests that the charging schedule will be part of the local development framework. Crucially, the report suggests that the charging schedule will not obtain the status of a development plan document. If this is the case, there will be a number of negative consequences for the robustness of the CIL system. If, on the other hand, the CIL charging schedule were to be a development plan document, the resulting CIL policies would have the full weight of the statutory planning system behind them. This would allow the local authority to take full account of the viability of a development when deciding whether to grant planning permission and, in exceptional cases, to vary the CIL to ensure viability.
In particular, for instance, there are brownfield, mixed-use regeneration schemes, like King’s Cross, where the development, while desirable and meeting many planning objectives, may be unable to bear the full cost of CIL without becoming unviable. In these exceptional cases, it is vital that the local authority has discretion to reduce the CIL charge and that this is done within the existing structures of the development plan. In such a case, were the local authority not to grant planning permission on the grounds that the development was unable to pay the full CIL, the applicant could appeal to the planning inspectorate against refusal, and there would be a proper process for resolving the issue and evaluating the proposed development.
We must not allow for the formulation of unnecessary bureaucracy to deal with these exceptional cases when a perfectly adequate and well respected system exists already—the development plan.
The one thing on which a large number of people are agreed regarding this part of the Bill is that it is a good deal better than the planning gain supplement; but that is about the only thing on which people agree. The noble Baroness, Lady Andrews, on this occasion and on Second Reading, made much of all the bodies that have said that CIL is the right way forward. I find that difficult to understand, because some important bodies have severe reservations about CIL and those reservations are being exposed. The speech by the noble Baroness, Lady Valentine, indicated several of the issues which need to be resolved. Some of the opposition goes to the heart of the matter.
The original complaints about this skeleton Bill were wholly justified, which is why I originally proposed to leave out all the important clauses in this part of the Bill. The noble Baroness, Lady Andrews, then tabled, rather belatedly, a string of 25 amendments that attempted to put some flesh on the bones. That led me to withdraw the notices that I had given about the clauses. At one point during Second Reading there was some suggestion that this part of the Bill might be withdrawn and returned after more thought had been given to its structure. Clearly that was not going to happen and, therefore, there seemed to be no point in trying to take out all the clauses one by one.
I withdrew my notices, but a lot of major issues remained, one of which was viability, which was touched on in an earlier debate. It is hugely important that when local authorities set their rates and draw up their schedules on the sort of flat-rate basis that the noble Baroness, Lady Andrews, described on the previous amendment, they must have very close regard to whether the developments that will be liable to those flat rates of CIL will actually go ahead. We have the horrid examples of previous attempts to tax increases in land value due to planning permission, all of which succeeded in doing nothing more than choking off development, as my noble friend Lord Dixon-Smith made clear in his speech on the previous amendment. I find the absence of this requirement very worrying.
Another aspect arises on government Amendment No. 438Q, which is in this group. It is about appeals. They will be allowed based on fact in relation to the application of methods for calculating CIL. Charging authorities can appoint a valuation officer or a district valuer to oversee such appeals, but the amendment does not allow appeals on grounds of viability. Why not? Surely, there should be some point at which a developer can say, before it happens, that if the authority is going to charge a certain amount, it will go somewhere else or not do the development and the authority will not get any investment. There seems to be no formal procedure for that and no right of appeal on viability. The amendment does not address the concerns of some of the bodies that represent major developers. The clause is indicative of the attitude of the Government on this. We will return to this, not least in the present economic climate. There must be some way in which a developer can bring concerns and say that if the authority charges a certain amount, it will go away. Then the developer and the authority can discuss what else the authority can do to help. Otherwise, this will follow the pattern of the Land Commission, development land tax and everything that has gone before. I am sure that the Minister and her colleagues in her department would be dismayed if that were to be the result of this. This is an important issue that the Bill does not address, but it must or Part 11 will be one more piece in the string of failures that we have had over the past 20 or 30 years.
Can the Minister enlighten me on two or three matters? It is natural to assume that local authorities will have different rates of CIL. It will be for them to decide. The circumstances and the procedures are set out in the consultation papers. I assume that each local authority will be able to decide what proportion of its infrastructure it will seek to fund from CIL. Some may decide that the market is so difficult that they will not be able to fund a great deal in this way and others, in prosperous, booming parts of the country—if there is prosperity and boom in the next few years—may have the confidence to aim for a much higher proportion. What average proportion of infrastructure investment do the Government expect local authorities to fund through CIL? What range have they worked on? They must have some idea. The intention is obviously that it will be an important contributor. Will there be any pressure on local authorities from the Government to aim at at least that proportion? What is the relationship between central government and local government on this? Some local authorities might decide that the way to attract development is to go for low rates of CIL. It would be helpful to know how the Government see the dynamics of that.
My second group of questions to the Minister concern changing the rates of CIL. After a while, a local authority might decide that it had got it wrong. It might be doing better or worse than it thought. Can local authorities change their mind? Is there an interval between setting CIL, reviewing it and changing it? In the early days, I was involved in Leeds. If we got developers to come to the city, we were delighted. We were almost begging them to come and were being very generous. Ten, 15 or 20 years later, the city was in a position to be demanding in the way in which it dealt with developers. There is no certainty about these things because of the nature of development. Can local authorities change their rates of CIL and, if so, what time will have to pass before they can do that? What flexibility or inflexibility faces them? If they can change the rates of CIL, where does that leave developers who have already paid into the fund at a different rate? I accept that there will be a levy and am trying to understand how the nuances will work.
I shall try to add to this thoughtful debate about some interesting amendments. I shall touch on the issue of process and viability to be helpful on some of the concerns that have been raised. One of the things that I like about the proposition in front of us is that it combines some certainty for developers with flexibility for local authorities to take account of their circumstances. My noble friend Lord Woolmer referred to the maturity of the development process and local circumstances. The process that has been put in place over the past four or five years, by which various local authorities have developed a tariff, has been worth while, but it is not a quick process. It cannot be done in a matter of weeks. The work done by Milton Keynes Council to develop its tariff took 18 months and took account of all the infrastructure needs. The noble Lord, Lord Dixon-Smith, mentioned crematoria, and the business plan for the expansion of Milton Keynes took account of everything from crèches to crematoria. Everything was put in place. The first thing that was factored in to that process—this speaks to the point made by the noble Lord, Lord Cameron, about the displacement of funds—was the certain commitments of central government departments; the Department for Transport, the Department of Health and the Department for Education and Skills and so on. It was only after the local government contribution was clear and the bill of fare, as it were, for CIL was looked at that the tariff was struck at £18,500, to the satisfaction of the 18 landowners.
In response to the point made by my noble friend Lord Woolmer, once that is legally set in stone, it cannot be changed, so the authority cannot come back three, four or five years later, change its mind and say that the tariff will not be £18,500 but £30,000.
I am grateful to my noble friend. Her experience is extremely helpful. My concern is that many of the examples that people give, including my noble friend’s examples, are in the prosperous, booming areas of the south and south-east. That is not the whole of England, and there are parts of the country where that is not the case. Everyone would like to be in such an area—I apologise. People do not like being in areas where there is a lot of housing pressure, yet politicians do because it is easy to negotiate. I should be grateful if my noble friend would reflect more widely than the areas where there is a lot of pressure for development.
I thank my noble friend for that intervention. I was about to touch on that point when I talked about viability. The noble Lord, Lord Jenkin, made an enormously important point about viability. It is not invariably the case, but it is frequently the case, that the areas that require the most investment in infrastructure are the more prosperous areas where development is on greenfield land and infrastructure has to be built or an existing settlement needs a major extension. In those situations, the way in which CIL is framed will work as it is intended to work. Indeed, the work done on the tariff, not just in Milton Keynes, but also in Bedfordshire, South Hampshire and Ashford in Kent, all follows that logic.
However, it is exceptionally important that authorities which have a large amount of brownfield sites are able to take the time to consider whether they feel it is appropriate to have a zero charge for CIL in such situations. Frequently but not invariably, brownfield sites tend to be rich in infrastructure because they tend to be in city centres or in areas around city centres which have good infrastructure but they may have been neglected in other ways. The reason I like the proposition in front of us is that it gives authorities flexibility so that they do not need an additional take from a development because the infrastructure is in reasonably good shape or it is where it should be.
Finally, I ask the Minister to respond to my noble friend Lord Woolmer’s point about whether charging authorities will have the ability to vary the level of CIL across an authority. That goes to the heart of the point about the viability. You may have a charge which is perfectly viable in one part of an authority but completely unviable in another. I should like some reassurance that that will be possible, but not in a way that one ends up with developers negotiating every single application because that has been the bugbear of Section 106. I should be grateful if my noble friend could respond to some of these points.
I hesitate to intervene as I do not have an amendment in this group, but I am prompted to inquire about one or two things. The noble Lord, Lord Woolmer, and the noble Baroness, Lady Ford, have raised some fundamental issues about the charging scheme. The ability of authorities to change the level of the charge is fundamental. If they have the right to charge it and the right not to charge it, they must also have the right to vary it, and presumably to vary it at will.
That gives rise to other questions. One could have a situation in a region—we still have them—where the RDA was doing its best to encourage development and providing all sorts of incentives and a planning authority decided to levy CIL which would be seen as a disincentive or as a recycling of the RDA’s money—using it in a different way. The relationship there needs to be explored.
The second issue, which we do not appear to have thought about at all, is if there is some sort of expectation that CIL will be charged anyway, can CIL be charged where there is no demonstrable demand for additional infrastructure? We are assuming that it will go through the planning process and, of course, the planning process will throw up demand. From long observation, I am bound to say that if you ask people what they would like, they will always think of something on which to spend money. Is there some sort of standard by which we will judge areas which have a sufficiency of social infrastructure—let us call it that as that is really what we are talking about—against areas where there is a crying need for social infrastructure? That is a separate issue but if there is a clear expectation from the Government that there should be a charge and it should be paid and collected, are we raising false expectations? I really do not know.
I have one final, slightly facetious, but none the less important, point. If an authority can charge CIL, can it have a negative CIL? That is a perfectly legitimate proposition. There is nothing in the papers which would prevent an authority from declaring a negative CIL and providing an incentive for development in its area. This is the kind of sector we are dealing with here. In dealing with her amendments, I ask the noble Baroness whether she could clear that hurdle for us as well.
Noble Lords have put a number of hurdles in my way. A number of complex issues arise on this group of amendments. Many of the issues have evolved around the definition of viability, the way in which it will be interpreted and made to work. I am very grateful for the contribution of my noble friend Lady Ford. She made it clear that we are not inventing a process of huge complexity and universality. Over the past five years at least, we have watched and observed with some pride the way in which local areas have developed local tariffs. But it has been very hard work. They have been extremely local and they have given us a very good clue about how we should approach CIL and what it is capable of delivering for us.
Before I address the amendments, it might be sensible to say something, in the context of the questions which have been raised, about viability in different areas and how CIL mediates and helps to express that. We dealt with this in detail in the August document and CIL will be framed, as I keep saying, by the local development framework. If local authorities are to proceed with CIL, they will need to set charges which reflect the economic circumstances of the area and they will need to subject those to consultation with developers and the local community. On the questions raised by the noble Lord, Lord Jenkin, for example, developers will be able to make representations to the charging authority about the draft charging schedule on the grounds that it would affect the viability of their development.
Of course, the negotiation on the right level of CIL will have to be conditioned by what will be deliverable. We have made that very clear. At that point developers will also be able to put their case in person to the independent examiner if they do not think it is the right level of CIL to facilitate what they are there to do. Subsection (9) of Amendment No. 438M contains a right to be heard. So a process is built in whereby the developer, from the beginning, is alongside the local authority saying, “These are the development plans for the area, this is the infrastructure that we will have to provide and this is how we think your charge, as you are assessing it, will relate to our capacity to pay”, and so on. This is very much a local issue.
In relation to the rural issues raised by the noble Lord, Lord Cameron, and to pick up the point made by the noble Lord, Lord Dixon-Smith, assuming it is a voluntary tool, local authorities in rural areas do not have to take it up. If there is little change or development, a local authority might judge that there is a low infrastructure need or insufficient development, but it can make that choice. The point is that it is for local authorities to decide. Currently, we are considering Matthew Taylor’s report on rural planning issues and he focuses on that. We will be bearing in mind his conclusions on developing CIL in relation to rural areas. Whether it is a rural area or the social areas mentioned by my noble friend Lady Ford, the point is that local economic circumstances will determine the shape and the nature of CIL.
My noble friend asked about revision. We certainly expect that the charges will need to be kept under review and revised; for example, if changes in land values lead to the charges becoming unviable. I shall come back to that later in the context of an amendment. We are considering what the procedures for revision might look like and how they can provide for flexibility as well as certainty. In terms of differential rates, regulations will be able to allow charging authorities to set differential rates, taking into account viability in terms of development situations and so on. I hope I am getting across to noble Lords the local nature, the pragmatic nature and the flexible nature of what we are attempting to do through CIL. That will be relevant when I talk about some of the amendments.
To return to the point made by the noble Lord, Lord Jenkin, about appeal, even where charging authorities take sensible precautions to ensure that schedules set out viable charges, there may still be a very small number of cases where the level of charge set may not be affordable on a particular development. Obviously, that will be less true if the local authority sets differential rates.
Essentially, we want charging schedules accurately to reflect the circumstances of different parts in a local authority’s area and we will seek views as we continue our discussion on how that may be achieved. My noble friend Lord Woolmer asked me what proportion of infrastructure funding we expect to be funded by CIL. That question goes to the heart of it. Frankly, we do not have a view on that. It will depend very much on how much infrastructure need a local area has and what is the viability of development locally. It will be for charging authorities to synthesise those issues in their charging schedules. We cannot second-guess that; it would be wrong for us to do so.
I am sorry to interrupt, but I feel that it is necessary. If we are considering charging schedules and the viability of a project, I can remember many long-term development projects in Essex that went from financial viability to huge periods of deficit, back to viability and into deficit again during the period when they were constructed. There is a really big problem here. I see the planning system that the Government are establishing for this, but, as with all plans, fulfilment may be on a very different timescale from that which the planners—the people initiating the plan—conceive. Development plans now last for a considerable period, a timescale that is much longer than financial certainty.
I have no quarrel with that; that is a challenge to the process of planning for the long term in relation to CIL. As I said, there is provision for review, but that is the sort of discussion that we are having with the development industry.
I now quickly turn to the amendments. Government Amendment No. 438C is intended to provide further certainty and transparency for developers and the local community about how charging authorities will calculate and set out the level of CIL they propose to charge. It is also a serious response to a number of the concerns expressed by the Delegated Powers and Regulatory Reform Committee. To this end, a new subsection (1) would require charging authorities that want to charge CIL to issue a charging schedule, which will set out the rates or criteria that will determine how much CIL will be due from each individual development.
I hope that, along with what I will come to say about the requirement for charging authorities to provide estimates of CIL, liabilities under government Amendment No. 438L will satisfy Amendment No. 436BBA, tabled by the noble Earl, Lord Caithness.
I am sorry if I misled the noble Lord. I meant to say that the charging schedule will probably be based on a notion of metrics, units. The unit would carry a particular charge, and that will be multiplied by the number of units. That does not mean households or anything like that.
As I was saying, I hope that what I have to say will satisfy the noble Earl, Lord Caithness, on his amendment, Amendment No. 436BBA, which would impose a requirement for regulations to specify procedures for informing current and future land owners or developers how CIL will be calculated in individual cases. We have done precisely that; so I hope that that will meet his amendment.
We all agree that the level at which CIL is set is crucial. Amendment No. 438CC would place the Secretary of State right at the heart of the CIL process, with powers to set the upper and lower limits of CIL that charging authorities must operate within and also, it appears, with discretion to allow authorities to operate outside those rules. The noble Earl has talked a great deal this afternoon about viability. In my introduction I addressed the points that he made in his amendment, and I share his concern.
We have made it very clear that CIL is a flexible local level charge to be set as local circumstances dictate. Of course, it is important that effective safeguards are in place against excessively high CIL charges. The framework that the Government are establishing through the amendments will ensure that CIL does not choke off development. Government Amendments Nos. 438C and 438M, in particular, set out the key matters that charging authorities must take into account in setting their CIL and provide for the independent examination in public of the charging schedule. Those are strong safeguards, but the involvement of central government is not warranted.
Subsection (2) of our Amendment No. 438C then sets out three key matters to which charging authorities will have regard; the regulations will follow that up in more detail. First, they will have to consider the actual and expected costs of infrastructure in their area. That will be the infrastructure needed to support implementation of the development strategy set out in their adopted development plan. It will be derived from the infrastructure planning they are required to undertake, in England, by planning policy statement 12 and, in Wales, by planning policy Wales.
Secondly, charging authorities will have to have regard to the actual and expected increase in value that arises from the granting of planning permission. As we debated this morning, expressing the source of CIL funds in that way is difficult for some parts of the industry. We are in discussion and I will come back on that issue.
CIL is not planning gain supplement, for the reasons that we know. If it were, individual development would be assessed and charged a nationally fixed percentage of the difference between the value of land before and after permission is granted. As I said, under CIL, charging authorities should estimate the broad likely uplifts in land value for their area and consider it on a strategic level. We all agree that assessment of viability is not a precise science, but it is essential that the charging authority should have to undertake it, to ensure that they do not risk impacting on the viability of development by setting too high a rate of CIL.
Thirdly, charging authorities will have to have regard to the actual and expected sources of funding for the infrastructure identified. That includes from central, regional and local government grants.
Although government Amendment No. 438C amends Clause 201 to provide certainty about the most important considerations that charging authorities must consider when setting CIL, Clause 201 previously allowed for other detailed factors to be specified in regulations. Our Amendment No. 438D amends that clause to ensure that this continues to be provided for. Government Amendments Nos. 438E to 438G are consequential on new subsections (1) and (2) in government Amendment No. 438C. They delete the paragraphs in subsection (3), the contents of which have been transferred to these new subsections.
The noble Baroness, Lady Valentine, asked important questions. Her Amendment No. 438CA would require CIL to be calculated by reference to rates or criteria in a development plan document prepared by a local planning authority. She has argued that it should be part of the statutory planning framework. One unintended consequence of her amendment would be that CIL could not be applied by LPAs in Wales or at a strategic level in London. I recognise that stakeholders want reassurance that CIL will be managed as part of the planning system, but I cannot agree with her amendment. We intend the CIL charging schedule to be a legal document and part of the folder of documents that make up a local authority’s local development framework.
We have discussed with the industry whether it is necessary for the CIL charging schedule to have the legal status of a development plan document. As the noble Baroness knows, we are after certainty, transparency and viability: hence the standardised charge. Under her proposition, however, the level of CIL would be subject to case-by-case negotiation. It would sit alongside Section 106 arrangements and would have to be part of that way of doing things. That is not what the industry wants. It would not be a sensible approach. We are very willing to continue working with the industry to see whether we can design a procedure that deals with exceptional circumstances in which a developer cannot afford to pay—I referred to that when I responded to the noble Lord, Lord Jenkin—but we are trying to get away from the sort of system where there is the right to negotiate levels of CIL in every case. Such a right would defeat the object of the entire exercise.
As our August policy document made clear, we have, crucially, accepted that charging schedules should be prepared and tested to a standard equivalent to development plan documents. They must be robust and trusted, and there must be the opportunity to test them. The Government’s amendments go further than the industry has asked by setting out in primary legislation, not regulation, tough procedures that deal with the examination and approval of charging schedules and that will be binding on local authorities in the way in which the DPD is binding. This is a much better way of doing things than the noble Baroness’s amendment, and I ask her with respect not to press it.
The noble Baroness’s Amendment No. 438HA would delete the reference to,
“values or expected values or in any other way”,
in Clause 201(5). This clause provides that the CIL regulations can permit or require charging schedules to operate by reference to any measure of the amount or nature of the development. This relates to the question asked by the noble Lord, Lord Jenkin. This might be the floor space of the development, pounds per square metre of floor space, or intended use, and retail development might attract a higher charge than office development. Other options are specified. The amendment aims to narrow these options to prevent the CIL regulations that permit or require the charging schedule from operating by reference to,
“values or expected values or in any other way”.
There is a residual fear that the clause might lead to a PGS by the back door. However, it simply allows us to explore with stakeholders how the charging schedule should best operate. Is a per-metre-of-floor-space charge the best approach? Would a charge that is somehow linked to other relevant values be better? These could include allowances to the developer to reflect other costs arising from the development, and the costs of a planning obligation requiring the construction of a road. The amendment would not allow us to explore that in any other way, and it could prevent us from adopting other people’s good ideas. I therefore ask her not to press it.
I listened very carefully to the debate and did not want to intervene, but I really must ask the Minister a question and quote a case study. I do not understand this. It is fiendishly complex.
A new port at Felixstowe has just received planning permission under what is in effect a Section 106 agreement, which required the best part of £100 million to be spent on upgrading the railway line between Felixstowe and Leeds. I cannot see how a local authority—in this case Suffolk County Council—can create a charging schedule that covers that kind of work and does so regularly. I am sure that it is a very good planning authority, and it may be all right for office blocks, but I do not see how this can work when something like a Section 106 agreement, which I believe this will replace, may be required. How will it work? There must be some negotiation, must there not?
I am sorry that my noble friend was not here for our debate this morning when we said that CIL would fund everything that is needed by way of infrastructure. All the money that presently goes into infrastructure from central government and various government departments will be there still. CIL will be a local charge to meet local infrastructure needs. I take his point and I am happy to have the debate with him outside the Chamber, but it is a contextual issue he is addressing. We now are talking about specific ways in which the charging schedule will reflect the local needs of the community, but within the context of everything available to fund the infrastructure as well.
Amendment No. 438CB would remove the power for the Secretary of State to make regulations about the procedures to be followed by charging authorities in setting CIL rates. To ensure that the charging schedules are prepared and tested to similar standards, we need to be able to set down the processes such as consultation in regulations. Our proposals to place the charging schedule within the LDF and ensure that it is prepared to a similar standard will give the status and connection to the local authority’s development plan that is needed. I therefore would ask the noble Baroness not to press Amendments Nos. 438CA and 438CB.
On Amendment No. 438EA, again in the name of the noble Baroness, Lady Valentine, there is widespread agreement, not least this afternoon, that CIL should not choke off development. It is self-evident that the higher the level that CIL is set, the higher the costs of development. The lower the amount that a developer can spend on purchasing land for development, the more likely it is to remain commercially viable, and so on. Ultimately, if the difference between the existing value of the land and the price proposed by a buyer who wishes to develop is too low and the landowner does not sell, we will not get the delivery that we want. As I said earlier, the amendment is prompted by concerns that development viability is articulated in a way that does not capture the essential nature—or sometimes the essential difference—between parts of the industry, which we will discuss later. We remain open to amending the Bill if the right formulation can be found.
Amendment No. 438H would add to the list of factors in Clause 201(3) which the CIL regulations may permit or require charging authorities, in setting or revising rates, to consider. The purpose is likely to be that the level of CIL set in a charging schedule means development proceeding. Ensuring that CIL does not stop development proceeding is also behind Amendment No. 444B, although the noble Earl, Lord Caithness, comes at this from a novel direction, which does not surprise me given his ingenuity. His amendment appears to require a charging authority to effectively pay compensation to a developer if CIL prevents development going ahead. His amendment would go too far to achieve what I think that he is after; that is, an incentive to the authority not to set too high a CIL charge. It would involve a detailed case-by-case assessment for each development claiming the compensation, probably by someone independent of the charging authority and developer, of the likely increase in value arising from the planning permission and the financial circumstances of the development to show that it was CIL which was preventing a development proceeding rather than other factors. This would be highly contentious and time-consuming, and would encourage perverse behaviour. It might even reward inefficient developers.
I hope that the government amendments, particularly Amendment No. 438C, which provides that charging authorities must have regard to the actual or expected increase in value arising from planning permission, clearly demonstrate that we share the concerns of noble Lords to ensure viability. It may help to allay concerns about the effect of CIL if I now turn to government Amendment No. 438J. This alters the extent of the power in Clause 201(5) and provides that the CIL regulations provide, permit or require provision to make differential rates of CIL. It picks up on the point made by my noble friend. These differential rates may now include provision for nil rates of CIL and not simply reductions.
We think that it is conceivable that a charging authority, in developing its charging schedule, may conclude that a type or class of development or a particular part of their area—for example, warehousing—might be at the limits of economic viability and unable to sustain a meaningful level of CIL charge. This amendment would allow charging authorities to set a zero rate for that area or class or type of development if they can justify it according to local circumstances. It is not enough that we ensure that charging authorities take account of the right things to have legitimacy. We have to ensure that they are prepared to robust standards.
As always, the amendment in the name of the noble Baroness, Lady Hamwee, is well intentioned.
I am sorry if that sounds patronising: I really do not mean it in that sense. She knows how passionately I put forward notions of partnership and the local duties of partnership in the Bill passed last year in this House. At a time when we are trying to reduce the burdens on local authorities and business, we are trying to avoid imposing such a wide-ranging obligation on partner authorities.
The noble Baroness also asked whether the independent examiner is interested only in the process of how the charging schedule is prepared. The answer to that is no because the independent person—this picks up a point of concern to the noble Lord, Lord Dearing—who is likely to be a planning inspector, will look at how and whether the charging authority has properly had regard to the matters set out in Clause 201 and the criteria that we have set out. He will look at how the criteria have been met as well as issues of process. In response to the wider meaning of her amendment, all this is about trusting local councils as regards who they need to engage with. We fully accept that charging schedules have to be tested to the same high standard as development plan documents. As I have said, we go further than that, as reflected in Amendment No. 438M by putting it in the Bill.
I turn now to the questions put by the noble Baroness on government Amendments Nos. 438M and 444C, which reflect a forensic dig into the Bill. These amendments are entirely consistent because the first amendment requires that certain functions are to be exercised by the mayor only, such as the approval of the declaration under subsection (4), while the other amendment prevents the mayor from delegating functions specifically to, say, local authorities or Transport for London. The two clauses are internally consistent in the Bill.
Who is going to do the work of independent assessment? In practice we consider that inspectors who work or have worked for the Planning Inspectorate will be best qualified to carry out these examinations, and we want to encourage charging authorities to choose from this pool. In guidance there will be assistance to supplement the inspector if they need specialist evaluation skills. I can assure the noble Lord, Lord Dearing, that we are still considering ways to ensure that the provision is robust enough.
Some noble Lords will remember a show called “Oliver!” in which Fagin says,
“You’ve got to pick-a-pocket or two”.
As currently drafted, this smacks of a situation where the pick-pocket-in-chief can choose his own jury. I am grateful to the Minister for the assurance that that is not quite what the Government have in mind.
I am grateful for the musical interlude, which is welcome. To ensure that the draft schedules are ready to be examined, subsection (4) requires charging authorities to accompany the draft schedule with a declaration that they have complied with the legal requirements and that they have had regard to the key matters. Subsection (7) requires the independent examiner to consider how the charging authorities dealt with the key issues, and recommend that either the draft schedules should be approved, improved through modifications or rejected with reasons given and published, and in keeping with our commitment that charging schedules are tested to the same high standard, subsection (9) provides that CIL regulations must require the charging authority to allow someone, if they so request, to appear in person at the examination to make oral representations. We do not think it would be appropriate to force a charging authority to approve a schedule if it was strongly opposed to the recommendations, so subsection (10) allows it to be withdrawn.
I turn to government Amendment No. 438N, which deals with how schedules are approved. In keeping with the arrangements for development plan documents, this amendment ensures that if a charging authority wishes to approve a charging schedule, they can do so only in accordance with the recommendations of the independent person who conducted the examination. This effectively makes those recommendations binding on the charging authority unless it chooses to withdraw it. For charging authorities which are local authorities, approval can only be by a majority of voting members at a meeting of the authority or, in the case of the mayor, personally.
Amendment No. 438P is important because it deals with how charging schedules may come into effect and how charging authorities may cease charging CIL. This is because developers and other applicants seeking to apply for planning permission to which CIL will apply have to be able to plan ahead in terms of the likely costs of developing land. In order to do this, they need to be aware of the level of CIL that they will be charged. That is why new subsection (1) prevents charging schedules coming into effect until the charging authority has published it. We will consult through draft regulations on the most effective methods of doing that. It may be that a charging authority’s plans for an area change—for example, if a planned phase of significant growth comes to an end. It will have no further infrastructure needs that are best met by charging CIL. We have to make provision to stop charging CIL if the situation warrants it, and subsection (3) provides for this.
However, allowing charging authorities an unconstrained ability to stop charging CIL could cause uncertainty and would be unfair, so subsection (4) provides that regulations may specify circumstances in which a charging authority may cease to charge, for example—this will be of interest to noble Lords—when there has been a significant and unforeseen downturn in the market. We also require under a power in Clause 205(2) that there be consultation with infrastructure providers. Subsections (5) and (6) of the new clause set out how this will be achieved by a majority of members at a meeting of the charging authority, or in the case of the mayor, by personal decision.
Amendments Nos. 438K and 438Q are integrally linked and deal with the application of the charging schedules once they are adopted. Amendment No. 438Q responds to concerns from stakeholders about the need for further clarity about what should happen in the event of a disagreement between a charging authority and a person liable for CIL on matters of fact. It requires the Secretary of State to make regulations providing for a right of appeal on matters of fact relating to the calculation of the amount of CIL. We hope there will be very few cases but, if there is dispute about whether the development is the kind of development on which CIL should be charged or the quantum has correctly identified the amount of floor space and so on, we need an appeal mechanism.
Most disputes on matters of fact should be capable of being resolved quickly and simply. Under Amendment No. 438L, we are considering a proposal to require charging authorities to recalculate their estimate of the amount of CIL due from a particular development if requested to do so within a set time of being notified of the amount of CIL due. Only if disagreement remains after this stage would the matter become a formal appeal.
It is obviously important that the appeal is decided by a suitably qualified person. Subsection (2) specifies that it must be considered by a person appointed by the Commissioners for HM Revenue and Customs. It is expressed in this way because we want appeals to be considered by a valuation officer or a district valuer. We believe that the Valuation Office Agency, which celebrates its 100th birthday in 2010—I am sure we can all find ways of celebrating that—is best placed to consider these appeals because it has a proven and respected track record in property and land rating assessments. I stress that we do not intend HMRC to have any role in CIL.
Given the relatively straightforward subject matter of any appeal, we propose that it should be conducted by written representations rather than through hearings in person. They would be binding but, of course, a further challenge in the courts would be necessary. We shall consult on the detail in the draft regulations.
Amendment No. 438K is partly consequential. It deletes the previous provision for regulations to provide for a right of appeal. Amendment No. 438L provides the opportunity for further clarity about how much CIL would be payable under a charging schedule and about the revision of charging schedules. New subsection (8) provides that the regulations may set out when charging authorities must provide an estimate of the amount of CIL chargeable on individual developments—for example, at the time planning permission is granted for the development. This estimate could be used as the basis for an appeal on a matter of fact, as I have just described in relation to Amendment No. 438Q.
On the questions raised by my noble friend Lord Woolmer, new subsection (9) would expressly allow for charging authorities to revise their charging schedules, and new subsection (10) makes clear that the requirement for examination, approval and the bringing into effect of charging schedules which are the subject of other government amendments applies to those revisions in the same way as to the first charging schedule. To be clear, charging schedules should seek to reflect the degree of potential change envisaged in the development plan—for example, the anticipated changes in the economic climate—and so formal revisions of charging schedules should not be necessary simply in response to normal variations in market conditions.
But charging authorities should keep under review the effect of the level of CIL on development in their area, perhaps through their annual monitoring report which looks at the delivery of the local development documents. If their monitoring shows that economic circumstances have changed significantly or there is a need to revise the development strategy, the charging authority should also assess the need to revise the charging schedule.
I am conscious that a great deal of heavy, technical detail has been placed on the record. I am not sure that I could answer any further questions but I am happy to write to noble Lords if they require further details.
Will the Minister help me? I got a bit lost at the end there, trying to absorb everything she was saying. If a local authority wants to change the level of CIL or stop it, does it have to go through the full rigmarole it went through when it set CIL? Can it just say at a meeting of the authority, “The rates are coming down from £40 a square metre to £10 a square metre”, or does it have to go back out to consultation and go through the whole process again?
To the best of my knowledge we have not set down any timetables, nor have we anticipated any. We have some examples of the tariffs that have been worked out. The development plan document will be in good shape. We will take advice from the Local Government Association about what we might expect.
Will the Minister write to noble Lords with some idea of how long the consultation process that the noble Earl referred to will take? It is important that we understand this. I draw attention to the recent development at Elephant and Castle, where the Section 106 agreement has been revised over the past two months to enable that development still to go ahead. I suspect that if that had had to go through a whole process, which might have taken six to nine months, we would have missed the market and stalled the development. Will she give that more consideration?
I moved this amendment some time ago. I can speak only for myself; I thought that I understood some of this when we started at 11.30 this morning, but my confidence has drained away over the past few hours. On my own amendment, the Government, in their concern to protect partners, are not just putting an extra burden on local authorities but giving them a difficult, perhaps impossible, task. That, however, is just one of a whole range of matters. It was suggested earlier that there might be some analogy with musicals—picking a pocket or two. I have been wondering if we are somewhere over the rainbow; we may certainly be on a yellow brick road. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 200 [Liability]:
[Amendment No. 436BB not moved.]
436BC: Clause 200, page 123, line 32, at beginning insert “Except as provided in section (Charities relief),”
The noble Lord said: There are three amendments in this group, in my name and others, that provide a comprehensive exemption in the Bill for registered charities. I speak on behalf of the Charity Tax Group, the Churches’ Legislation Advisory Service and the Charities’ Property Association, of the latter of which I am currently chairman. I also speak in response to numerous letters that I have received from concerned individuals.
As I explained at Second Reading, the effect on charities of the proposed CIL is potentially very serious. Charities do not benefit financially when granted planning permission to develop land or property for their charitable purposes. Unlike a commercial developer, charities developing their own property for their own purposes will have no end-point sale from which to pay the tax. If no concession is made and charities are obliged to pay CIL, they will have either to pay for it with their existing funds or to try to raise more money—which, in the future economic climate that we are assured is recessionary, will be quite difficult.
At present in this country and in virtually every other country in Europe, charities do not pay tax. In the UK they are entirely exempt from income tax, corporation tax, capital gains tax, and receive compulsory relief of 80 per cent from council tax, with the other 20 per cent being given voluntarily by almost all local authorities. Charities also have more recently received a total exemption from stamp duty land tax. This general exemption from taxes rests on the fact that charities are voluntary bodies, living primarily off voluntary donations which, by law, must be used exclusively for the public benefit. One quid pro quo for these exemptions is that they are very strictly regulated by the Charity Commission, with their contribution to public benefit continually under review.
There is a general recognition that charities get or give more value for money than anyone else, including government, because they are so close to their beneficiaries and attract a massive number of volunteers—over half the adult population of the country, in fact. They are unique engines of social cohesion and add huge benefit to our community infrastructure. Of course, the Government recognise this and are currently engaged in a programme of encouraging and making better use of this so-called third sector.
Meanwhile, CIL could be particularly damaging to charities. For instance, the liability of charitable housing associations and social housing would be huge, and to what end? There is trouble enough funding social housing. In this context, I refer to the amendment of my noble friend Lord Best, which I strongly support. Anything which gets in the way of the provision of affordable housing should be resisted at all costs, especially, in my view, rural affordable housing. There is still a great lack of clarity regarding the relationship between CIL and the Section 106 agreements, which is yet to be ironed out. However, I will let my noble friend speak to his amendment, saying only that I support it.
On the general exemption for registered charities, schools and colleges need to develop their facilities for the furtherance of their charitable purposes, and the same goes for churches and village halls. A recent survey of village halls in Devon alone shows that over the next three years, £23 million will be spent on extensions, improvements and new build to village halls in that county. As for housing associations, what on earth would be the point of them paying CIL when they should probably be recipients of the funds? It is like a money merry-go-round.
On a larger scale, the Wellcome Trust is hoping to embark on a joint medical research facility at King’s Cross with Cancer Research UK, MRC and UCL. This project will cost something in the region of £500 million and CIL, if charged, could effectively kill it.
These examples will be replicated up and down the country. As certain as night follows day, if charities have to pay CIL, they will have to cut back on their activities—activities which are recognised by all to be the best value for money that society can have. There can be no possible point in charging them this levy. Without a full exemption from CIL, it is certain that many new charity-led community and redevelopment projects will not proceed or will be restricted.
To give credit where it is very much due, the noble Baroness and her department have recognised the importance of everything I have said and of exempting charities from CIL. I thank the noble Baroness very much for her kind personal attention to this matter and for the time that she and her department have spent trying to resolve it. But unfortunately, government Amendment No. 437C does not meet the needs of the charity sector. First, it does not state unequivocally on the face of the Bill that charities should be exempt from CIL. It leaves too much to secondary legislation and subsequent regulations which, I believe is very dangerous, as do most people. It also leaves too much discretion to individual local councils. Charities will not have the resources or expertise to argue for specific relief with each relevant charging authority unless the principle of the relief is enshrined in legislation. In our view, discretionary relief is not sufficient.
Without going into too much detail here, references to exemptions “in specified circumstances”—whatever that means—do not sound very convincing. In addition, too much discretion is given to the charging authorities. As I say, charities might find themselves having to negotiate individual projects with individual councils. Will they find themselves being forced to go where they can get the best deal on CIL, which may not be ideal for their purposes? You have to bear in mind that some charities cannot pick and choose so easily; for example, there are limits to where a new lifeboat station can go.
Then there is a reference in the government amendment to a charity,
“of a description specified by the regulations”.
That is very dangerous. Under English and Scots law, charities operate by definition for the public benefit. We would not want to see charitable purposes cherry-picked by either central or local government. If a body is regarded as charitable by the Charity Commission or the Office of the Scottish Charity Regulator, that should be a sufficient test. We are looking for a definitive exemption in the Bill, as in our amendments.
The Government have indicated that seemingly the only reason why they cannot agree to our amendment is that they are concerned that any concession might breach the EU rules on state aid. We entirely understand that the Government are under an obligation to observe EU law, but the group of charities supporting my amendment have consulted a specialist in European business law, Professor Martijn van Empel, who teaches both at the international university in Rome and the University of Essex, and who concluded that an exemption for charities would not affect trade between member states and would not therefore run counter to the ban on state aid as provided by article 87 of the EC treaty.
I realise that lawyers disagree—that is how they make their money—and that in this case government lawyers are not so certain, but it seems strange that in virtually every other country in the EU apart from Sweden charities can be exempt from tax, including CIL equivalents in some member states, and exempt without challenge. It is also strange that charities in this country can be exempt from every other tax—which, considering the sums involved, would seem far more serious breaches of the rules than an exemption from CIL—without also provoking a challenge. Even if one assumes that no challenge has come because the exemptions from income tax and capital gains tax have been in place too long to be challengeable, why is it that the Government only relatively recently applied the exemption in full for the stamp duty land tax? Our amendment is based on the exemption clauses referring to stamp duty land tax, on the basis that if these clauses were acceptable to the Government, then what is good for the goose must be good for the gander.
I get the feeling that this is a very good example of UK gold-plating to EU legislation, which is a defect to our system that I have come across in many other fields in the past. I regret to say, therefore, that in spite of the Government’s worries about state aid, we would still insist on a mandatory exemption for charities in the Bill. I beg to move.
My name is attached to this amendment and to subsequent amendments. I apologise to the Committee for not having taken part in proceedings before, and not having taken part in Second Reading on 15 July. I was abroad at the time, but when I read Hansard and saw that there were 37 speakers and that the debate finished at half past midnight, I suspected that another speaker would not have been particularly welcome at that time.
I have a particular interest in the charitable and voluntary sector and therefore in the implications of CIL for the sector. I declare an interest, which is in the register, as president of the National Council for Voluntary Organisations.
Like the noble Lord, Lord Cameron, I have noted and read carefully the amendment tabled by the Government in the name of the noble Baroness, Amendment No. 437C. While I accept that it goes a little way towards meeting the concerns of the sector, in essence I find it dangerously imprecise and extraordinarily permissive. The detail of the wording says that the regulations must,
“provide that an exemption or reduction”,
may be allowed. A reduction could be something or nothing; it could be 1 per cent. Therefore, that might provide a useful means to charity but it might also be a means to charge charities at effectively the full rateof CIL.
The second paragraph of the new subsection proposed by the Minister’s amendment states that the regulations will permit charging authorities to make arrangements to reduce. Permission is all very well, but which charging authority faced with a golden goose will step aside?
Like the noble Lord, Lord Cameron, I argue that the Government should recognise the special position of charities, which, as he said, are exempt from tax apart from VAT. This is not a party political matter; it is a situation which has persisted for many years and which the Government should now take on board.
As the police would say, I have form on this matter, because I had the pleasure of taking the Charities Bill through your Lordships' House from the Front Bench. I have put my name to amendments in this group because I have three major areas of concern about what the Government are doing. First, the Government’s proposal is quite at odds with their stated policy objectives as regards the voluntary sector. Secondly, unless a full exemption is given, the practical implications for charities are potentially very serious. Thirdly, the Government fail to recognise the particular role and duties imposed by law on charities and their trustees.
I shall deal briefly with those concerns in order. The first is on the Government’s policy towards charities. At Second Reading of the Charities Bill on 20 January 2005, the Minister’s colleague, the noble and learned Baroness, Lady Scotland of Asthal, said:
“The Government's three aims for the Bill are: first, to provide a legal and regulatory environment that will enable all charities, however they work, to realise their potential as a force for good in society; secondly, to encourage a vibrant and diverse sector independent of government; and thirdly, to sustain high levels of public confidence in charities through effective regulation”.—[Official Report, 20/1/05; col. 883.]
I call that a ringing endorsement of a charity and voluntary sector. I shall not bore the Chamber by quoting more extensively from the noble and learned Baroness’s speech, nor from the Minister who did most of the detailed work during the passage of the Bill, the Captain of the Gentleman-at-Arms, the noble Lord, Lord Bassam of Brighton. In the light of what the noble and learned Baroness, Lady Scotland, said, government Amendment No. 437C is an apology for an amendment, with many weasel words and carefully phrased let-out clauses. If the Government really believe that the voluntary and charity sector is important, as they said it was, they should allow a full exemption now.
Secondly, I turn to the practical implications, some of which were dealt with by the noble Lord, Lord Cameron. In essence, many charities are fixed-asset rich and liquid-asset poor; that is, their assets are tied up in a building—it may be a school or housing. They have relatively little cash apart from working capital. Indeed, we want them to have relatively little cash because we do not want them to be sitting on piles of money, but to use their resources for the society in which they operate.
From time to time, they will need to upgrade their assets. They might wish to put a language laboratory into a school or upgrade sheltered housing with ramps, new alarm systems or some new provision of health and safety. To do this, they will probably have to sell part of their assets—it may be a bit of their land—and they may wish to maximise their return by doing so with planning permission. If CIL is to be imposed on them, either they will have, as the noble Lord said, to raise money to pay the tax—it is not attractive to go rattling the bucket and saying, “Will you give me some money to pay some tax to the Government?”; I am not sure that the Government would wish to be portrayed in that light either—or they will have to skimp on the project, or they will have to sell at a lower price to reflect the impact of CIL.
What about gifts that are not directly linked to the charity? An example might be a well run charitable school in London, meeting all the targets and doing a really good job in its community. It has many supporters, one of whom has, let us say, a weekend cottage in Norfolk with a garden of two acres. He decides because he has supported the charity for many years to leave the cottage and its grounds to the charity in his will. When he dies, the charity will be faced with three options. The first is to sell as is. Secondly, it might be advised that it is in a village where the infrastructure plan suggests that development could take place and that if it applied for planning permission for four houses in the garden, it could then sell at a better price. Thirdly, it will have just to pass it on without getting the full benefit of the enhancement in value. In each case the funds will have to be—not may be—deployed for the educational charity back in London which received the gift. I say to my noble friend Lord Dixon-Smith that I am not sure that his Amendments Nos. 438A and 438B cover charities receiving gifts that are not linked to the original site. Therefore, if CIL is proceeded with, people may be deterred from giving because why give money if the Government are going to garner part of the gain in the form of tax, or the charity has to sell without maximising the full potential return.
Finally, I tackle the special role and position of charities. The 1601 Act presumed charitable purposes for three activities—the relief of poverty, the advancement of religion and the advancement of education. The Government’s 2006 Bill removed that presumption. No longer could you presume that you were charitable because you carried out one of those functions. Now you have to be within one of the 12 purposes laid out in that Act. So every charity has to go through two threshold tests. First, are they charitable? Do they fit into one of those categories? Secondly, and most importantly, do they provide a public benefit? The Charity Commission now has increased powers to ensure that those two tests are being met. So a charity must always deploy its funds in pursuance of its charitable objects, and these must have a benefit for the public. If it fails to do so, its trustees—and, indeed, it—are liable under the law. Therefore, the idea that somehow huge windfalls for private companies or individuals involved with charities might take place if CIL is not imposed is fanciful. If the Government really want to do what they say they wish to do—to enable charities to realise their full potential as a force for good in society—then they will not seek to impose CIL on the sector. I understand, although I am no expert in these matters, that there are in any case the backstop powers in the Town and Country Planning Act to deal with extreme cases.
I have not seen the noble Baroness’s speaking notes but I can probably guess what they are going to say. First, there will be honeyed words about how important the charitable sector is, how the Government believe they are doing a wonderful job, the many things that the Government have done to encourage the charitable sector, and how indeed they have produced a whole Charities Act to show that they mean that the charity sector is very important to them. So we will have, I am sure, a deluge of honey.
After the deluge of honey we will then have a further enticement about regulations. We had the demolition of the regulation argument from the noble Lord, Lord Goodhart, in the Second Reading debate. Indeed, the words of the Minister’s colleague, John Healey, in the Committee stage in the House of Commons caused one to have further doubts about what might lie down the road because, as people have pointed out in several debates earlier today, we do not know what the regulations are going to be. The second thing to be said about regulations, of course, is that when we get them they are unamendable, so we are stuck with what we get at that particular time.
As the noble Lord is representing the NCVO, which is a hugely reputable national organisation, I presume that he has already been involved in discussions at some length with us about these regulations and will continue to want to have those discussions with us as we work through the very complex difficulties that this poses and the need not to create unintended consequences in legislation.
I am grateful to the noble Baroness. I am sorry if she is taking my remarks amiss. Of course I am well aware that discussions have been going on, but the Bill is now passing through the House, and if we do not make these changes now we will be left only with statutory instruments to deal with. We are not yet clear how the charitable sector is going to be dealt with. Indeed, as I pointed out, the Government’s amendment has several lacunae in it.
The noble Baroness and I have debated many times in the past and her responses have always been very sympathetic. I suspect that she feels that she is put in a very unenviable position in trying to force the CIL on to the charitable sector. I suspect that the hidden hand—the elephant in the corner of the room—is the Treasury with its persistence and everlasting concern about tax leakage. I hope that she will understand that there is very strong feeling about this in the charitable and voluntary sector. The amendment has support from all corners of the Committee. I hope therefore that she will be able to commit the Government later today to bringing back a full exemption by means of amendment on Report—no ifs, no buts and no maybes.
I find myself in a similar position to that of the noble Lord, Lord Hodgson, in that I was unable to be present at the Second Reading debate, and have been unable to take part in the Bill so far. However, I have listened a lot today and am attracted to the Bill in many respects, but dearie me, we seem to be dealing with the convoluted infrastructure levy. I am trustee of several charities. I am unconvinced that any of them is likely to be involved in what may happen, but they are listed in the register of interests. Perhaps the Historic Chapels Trust and Pennine Heritage are two, as they own buildings.
“Charity” is a precious word; it is a good word and held in high esteem. It is certainly not mentioned in the same breath as tax in the Bill. It might be mentioned in the same breath as “tax rebate” or “tax payment”, but not tax. I have been looking. Is this a tax or is it a specific sharing of a necessary cost? The introduction to the executive summary, which I just happened to pick up from the Printed Paper Office, says:
“The proceeds of the levy will be spent on local and sub-regional infrastructure to support the development of the area”.
Those seem to be the same sorts of things that income tax, capital gains tax and corporation tax are spent on.
I have been wondering how real this will be. What do charities do? How could it come to pass that this gets serious? I say to myself that a charity will not build a supermarket. What are they going to do? I look no further than where I live, in Calderdale, where our present mayor’s mayoral appeal is for a children’s hospice. That was also the mayoral appeal last year for the adjacent authority of Kirklees. Those promoting the hospice believe it right to have this place built to cover children of both geographical areas. I wonder whether somebody else could do it; perhaps some public sector body could build something of that nature. However, it is being done by a charity. I wonder whether those involved in endeavouring to raise that money will at some point ask whether there is more to raise because of a levy to pay.
They might then be told that, because of highway problems, more money must be raised. They would be rattling the tin or running bring-and-buy sales, or whatever, to pay for highway improvements that it is suggested their project makes necessary. Yet everybody knows that those highway improvements are needed anyway, and it is an excuse.
I mention the hospice being built for two local authority areas because they have chosen a site not in Calderdale, but in Kirklees. If we look carefully at the clause, however, we find that, under the Bill, and even under the Minister’s amendment, there can be different policies in each local authority area. These people have the site but, in future circumstances, would they have to have been scratting about to see what sort of levy proposals there are in this or that authority, to determine where to put this much needed service? So we want none of that, looking at the whole business of charity, its precious nature and people endeavouring to do good in this way.
The government amendment adds yet more doubt. The whole provision introduces doubt. Clause 198 states that the Secretary of State may introduce CIL. An amendment that was agreed states that a charging authority may introduce CIL. Therefore, the Secretary of State and a charging authority may introduce it. Further, government Amendment No. 437C states that,
“regulations must either … provide”,
exemptions or reductions for charitable purposes or “permit” them. That introduces further doubt. We want to get rid of doubt. I hope that, at least as regards the charitable sector, there can be certainty in the legislation. However, if the government amendment were accepted, there would be more doubt.
Clearly, much work has been done on this matter and people have expressed their concerns about it. However, much more could be done, and I encourage the Minister to make certain that it is.
I declare the interests that are recorded in the House of Lords Register of Interests. I give tempered support to the noble Lord, Lord Cameron of Dillington. I echo what he said about our gratitude to the noble Baroness for her tireless, accommodating manner and that of her officials in trying to work through tricky, sensitive issues. I am sure that the Government do not wish to impose additional burdens on charities, especially at a time in our nation’s and world’s history when there are likely to be increased demands placed on their services. Therefore, I am grateful for the concessions in government Amendment No. 437C.
I do not want to duplicate what has been said, but rather to underline it and give it a little added emphasis. What still worries us is not the Government’s intention but its possible execution, particularly given the fact that the wording of Amendment No. 437C is largely permissive. We are worried about the power to specify a description of a charity in the regulations, which might mean that some charities will qualify for an exemption while others will not. That would be invidious for the charitable sector. Equally, permitting,
“charging authorities to make arrangements for exemptions”
rather than requiring them to do so opens up the possibility of some charging authorities being generous to charities while others might make no concession at all. Again, that would be very invidious. I believe that point was made earlier by the noble Lord, Lord Dixon-Smith.
We certainly do not want a situation in which individual charities have to negotiate with individual charging authorities. There is also the danger that adjacent charging authorities might adopt different policies or exemptions or reductions. Charities might vote with their feet and decide not to develop the areas they were going to because of a bad deal on CIL, yet those might be precisely the areas that the voluntary sector ought to develop for the good of the community.
It ought to be remembered that many charitable developments constitute infrastructure. The most obvious example that comes to mind is that of voluntary aided schools. Indeed, earlier the Minister referred to schools as part of the infrastructure. Communities need decent schools if they are to function properly, and it makes no sense to operate a planning system in a way that discourages new school building and school refurbishment. To cut to the quick, we hope very much that the Government intend that charities should be given a general exemption, but we would prefer to see that in the Bill.
I have two amendments in this group, Amendments Nos. 437AA and 444A, which were most helpfully prepared by the National Housing Federation, Shelter and the Chartered Institute of Housing. Both these amendments concern the relationship between CIL and affordable, so-called social, housing. It would be a disastrous unintended consequence of the provisions for CIL if this levy led to a sharp reduction in the number of homes built for those unable to buy or rent on the open market.
We are now discussing the levy against a backdrop of very little new house-building of any kind. Ambitious targets for affordable housing now look painfully vulnerable. The Government have set their target as 70,000 extra affordable homes annually and, if CIL was levied at the kind of level that we think it might be, say, £20,000 per home, CIL would require payment of something like £1.4 billion per annum from the affordable housing sector. At a time when numbers of repossessions are rising, and waiting lists for housing association and council homes are growing rapidly, surely CIL must help, not hinder, the flow of more affordable housing.
Housing associations struggle to make the sums add up and the books balance at present. Adding extra expense is bound to push many projects over the line of viability and affordability. Perhaps the Government will be willing to reimburse any extra cost attributable to producing a housing development to which CIL is added. Unless the Government are prepared to increase the scale of funding overall for social housing, higher grants per home would simply mean fewer homes from the total available. Can it be argued that the imposition of CIL will not lead to a much higher cost of production for each home, because planning conditions already require payments for comparable purposes which, in the future, will simply be absorbed in the CIL?
The hope must be that CIL will raise more for infrastructure and related costs than do the current arrangements. Some of the extra will come from the levy being charged on commercial developments and on smaller scale developments that currently escape planning, but the housing associations would still be affected by CIL being imposed on some of the smaller developments that they currently pay nothing on, because they are below the level at which obligations kick in. Indeed, on their larger developments, it seems certain that schemes will have to pay a major contribution towards increasing the resources available overall towards infrastructure costs.
I hugely welcome the idea of exemptions from CIL for charities and for developments for charitable purposes. I look forward to hearing more about those plans from the Minister. There may be improvements to the Minister’s proposals, as my colleagues are suggesting today, but it is clear that once again the noble Baroness is prepared to bring forward amendments to the Committee that will greatly improve the legislation that we are scrutinising.
Nevertheless, even if those exemptions prove to cover charitable activities adequately, they may not reach much of the affordable social housing created by the housing associations, the local authority arm’s-length management organisations—ALMOs—and the new local housing companies envisaged in the Housing and Regeneration Act. Many housing associations are charities, from the older trusts such as Peabody and Joseph Rowntree, to the newer organisations of the 1960s, such as the Notting Hill Housing Trust, and the one in which I declare an interest as its chair, the Hanover Housing Association. In order to obtain funding from the GLC in the 1970s, when I was secretary to the London Housing Association’s council, it was necessary for a housing association to be registered as a charity, to provide greater reassurance to the GLC as supplier of funds. That rule did not apply in other parts of the UK. Many of the housing associations, for example, most of the bigger ones in the north of England, have never been charitable bodies, even though they are non-profit social enterprises.
Could the work of all these organisations be regarded as—I quote the amendment tabled by the noble Baroness, Lady Andrews—“development for charitable purposes”? Will this be the basis of the description to be specified by regulations? Is it the Government's intention that all affordable housing will be exempt from CIL? As these are murky waters surrounded by uncertainty, my Amendment No. 437AA seeks to put that exemption beyond doubt by ensuring that CIL is not levied on any development of social housing, as clearly defined by Section 68 of the Housing and Regeneration Act 2008. My amendment is clearer and more straightforward than the new charity exemption clause.
My second amendment, Amendment No. 444A, comes at the problem from a different angle. Nowadays, as your Lordships will know, affordable housing is often secured through the planning system. In order to obtain planning consent for what is hoped to be profitable housing for sale, housebuilders and developers are required through a Section 106 agreement to produce a percentage of the homes as affordable social housing. This arrangement counts for some three-quarters of all new affordable housing. Usually, these homes are sold immediately, at a pre-agreed price, to a housing association which will own and manage those homes. To pay the developer’s price, the housing association may need to draw down some social housing grant from the Housing Corporation or, in future, from the Homes and Communities Agency. The developer must also contribute towards the cost at the very least by forgoing some of the profit that it could have made if the homes had been sold on the open market, rather than as affordable housing.
Negotiations on just how much affordable housing can be extracted from a development are often tortuous. The local authority will usually have set a target—say, 35 per cent of all new homes, or 50 per cent in some high-demand areas. Site-by-site reductions will be subject of negotiation. A brownfield site with heavy remediation costs may be unable to absorb the same level of affordable housing as is feasible for a straightforward greenfield site. The local authorities need to have considerable sophistication when dealing with the negotiations. Housing associations are sometimes innocent bystanders when these arguments are raging between councils and housebuilders. Sometimes associations are responsible for the whole development, including sales and affordable housing, and they are the ones who negotiate directly. I have been in this position at the Joseph Rowntree Housing Trust, and I know how delicately the balancing act must be handled between the viability of the whole project and the percentage of social housing that can be including within the scheme.
Amendment No. 444A seeks to ensure that those negotiations are not thrown out of kilter by the arrival of CIL. If the levy increases the cost of the scheme and reduces its profitability for a developer, or its viability for a housing association, it is very likely that affordable housing will take the first hit. My amendment avoids this hazard by ensuring that CIL is not the first call upon the developer’s resources, but affordable housing is. CIL might, therefore, have to take the strain, but not the quantum of affordable housing, if there is not enough in the kitty for both.
I hope that the Minister will once again help us to improve the Bill and protect the affordable homes that will be desperately needed in years to come.
I shall speak to Amendment No. 438 in my name and that of the noble Lord, Lord Bradshaw, who has apologised for not being here. I am afraid that the amendment adds to the list of pleas for exemption from CIL—in my case, the railways.
Some people might think that Network Rail is a charity; it is, in fact, a not-for-profit distribution company—in the private sector, according to the Treasury, although most of its money comes from government in one shape or form. I tabled the amendment before I read my noble friend’s Amendment No. 437A, and it rather looks as if developments of railway infrastructure will be exempt. I would be grateful if my noble friend confirmed that.
However, that leaves stations. They are part of a regulated railway. Network Rail calculates that if it has to pay CIL on station developments, it will cost about £250 million a year. It may have to pay CIL, but it may be that the train operators, which have been given franchises by the Government, will have to pay Network Rail. One is likely to have a virtual circle of train operators bidding for franchises, not knowing how much CIL they will have to pay if they wish to propose upgrades to stations. There will be added risk and uncertainty. I suspect that it will end up with stations not being developed. What normally happens with many station developments is that local authorities contribute to them. We see that in many places around the country. We will go from a situation in which local authorities are contributing to rebuilding station buildings, better platforms or better car parks, to one in which they will tax Network Rail so that it will pay. One does not need a PhD to understand that the consequence will be that station developments will not happen. I hope that the Minister can give me some assurance on this because it is a classic case of the law of unintended consequences.
I have one other question, which follows from Amendment No. 444A, tabled by the noble Lord, Lord Best. Can the Minister explain when, under Clause 208, Section 106 agreements apply and when CIL applies? The circumstances look vague. Is it possible for local authorities to apply both at the same time?
I would like to associate the Liberal Democrats with much of the debate on this group, particularly the representations that have been made about charities and social housing. My noble friend Lord Shutt of Greetland threatened to make a guest appearance in this debate, and I do not think he disappointed us when he followed the noble Lord, Lord Hodgson of Astley Abbotts.
I shall make a few comments about local sporting facilities and sports clubs. I refer to government Amendment No. 437C. It has been suggested that it does not meet the Bill in a number of ways. It refers to charities, but not to community amateur sports clubs, which are not necessarily charities but perform a similar function. In various Acts, they are set alongside charities as benefiting from, for example, gift aid on donations and often relief from non-domestic rates. If the Government are pursuing this amendment in its present form, will the Minister have a look at whether community amateur sports clubs can be added to it? Local sporting facilities are a vital part of community facilities. I do not have to go into detail about their benefit to local communities, not least to those who take part in the sporting events. They benefit health, welfare and so on. It would be unfortunate if they were caught by the community infrastructure levy in the way that charities may not be—I use the word “may”.
There is also a general concern about the effect of the changes on the very real benefits which local sporting facilities and many other local community facilities get, at the moment, from planning obligations through Section 106 agreements. The noble Lord, Lord Berkeley, has raised the relationship between the two. It is estimated by Sport England that, in 2006-07, sport benefited to the tune of £21.3 million from planning gain. Clearly, there is a potential in the new system for bodies, which at the moment are benefiting from money from planning permissions, having to pay over money in future. Where is the balance likely to lie? Those real concerns exist not just in local sporting facilities, but also in a number of different sectors. It needs bottoming.
On a more general point, the more I listened to the debate on CIL this morning and this afternoon, the more I came to the view that it may well be a piece of legislation which we spend a great deal of time worrying about, and which is never brought into effect. The more one looks into it, the more one sees the unintended consequences and complexities. In the end, people will say that it is not the answer and we will have to go back and think again.
The noble Lord, Lord Berkeley, asked about the regulations provided for in government Amendment No. 437A, where it says:
“works, or changes in use, of a specified kind not to be treated as development”.
I have received a representation from the United Kingdom Business Council for Sustainable Energy—a very worthy body—which cuts right across the normal divisions between business and the environmentalists. It represents both and seeks to find as much common ground as possible. It is saying that the inclusion of energy infrastructure projects would be perverse in that CIL is intended to provide funds for infrastructure. The short answer is that CIL is there for things like roads, hospitals and schools, whereas the kind of infrastructure we have been discussing in the earlier part of this Bill is very different. The industry has always been happy to work with local authorities on Section 106 agreements, such as the benefit to society from the introduction of what the noble Lord, Lord Cameron of Dillington, at an earlier sitting of this Committee, referred to as unfriendly neighbour projects, or words to that effect.
In terms of a local community, a major energy installation could well be regarded as a bad neighbour project. At the same time, we all agree that that is essential; it is what the first part of this Bill is all about and it is a matter of how one reconciles local communities to that. The answer is that you can provide them with a variety of advantages and benefits which are specifically related to the building and use of a project, and which can therefore be seen by the developer as part of his good community relations. The question that has been put to me is whether CIL will come on top of that. How will CIL be worked for those very large structures that we talked about earlier in the Bill? More specifically, are these the kind of works which the Government are minded not to treat as development, as regards the regulations referred to in Amendment No. 437A? There is a lot of uncertainty here. The noble Lord, Lord Berkeley, referred to railways and gave a very good example of his Felixstowe railway that required £100 million to be spent on a line from Leeds. There is a variety of projects. If we could have an answer to that when the noble Baroness winds up, I should be extremely grateful.
We are at the core of the problems that CIL throws up. We will have to finish with absolute clarity about this difficulty in the Bill; at the moment, we do not have it.
First, I shall deal with my amendments in the group. Amendment No. 437 is simple. It would ensure that any development not requiring planning permission will not pay CIL. I am moderately happy that the noble Baroness has that situation well and truly covered. I am very grateful to her for that because, as the Bill was drafted, that was not clear.
My other amendment, which I freely admit, as my noble friend Lord Hodgson of Astley Abbotts, said, is not “legally satisfactory”, was tabled deliberately to ensure that we covered absolutely the subject of this debate, which is about charities and charitable works—which, in my view, must have clear exemption expressed in the Bill. The other half of the amendment picks up the point made by the noble Lord, Lord Berkeley, but in a much wider context. It states that the provision of infrastructure should not be eligible to pay CIL. It seems to be the ultimate churning of money to take money from people to provide infrastructure but make the people who provide infrastructure also pay that charge. That is illogical in the extreme.
That applies just as much to road improvements, electricity transmission—power stations have been raised by my noble friend Lord Jenkin—and all the other infrastructure that we require in a modern society. The only effect of adding CIL to those developments will be to increase the charges that the developers have to make for that infrastructure—so far, we use roads without charge, but it will come back in the form of increased excise duty on fuel, or something like that. Putting the charge on electricity generation or transmission will increase the cost to the customer. There is no escaping that. As I said earlier, my view is that the whole scheme will ultimately have an inflationary effect and increase charges generally across the board—not exactly something that I look forward to.
I shall not try to repeat the arguments that everyone made on the question of charity. The case was admirably and clearly set out by the noble Lord, Lord Cameron of Dillington, and finished by the noble Lord, Lord Shutt of Greetland, who was absolutely right about “charity” being a good word. The right reverend Prelate the Bishop of Southwell and Nottingham said that the nature of the Bill means that the exemptions are optional. That is not satisfactory. They must be absolute, and this must be clearly stated so that people understand. Without that, the Bill is in danger of having a well deserved reputation for having an ill effect on how society develops.
This applies across the board and not only to the charitable sector. The noble Lord, Lord Best, was not quite sure whether aspects of social housing were charitable. I am sure that he is right to make that point, because aspects of social housing and affordable housing are in the field of desirable infrastructure from which the whole community benefits. In my view, CIL is designed to provide a certain amount of local icing, not to affect greatly the main infrastructure provision. That is not clear in the Bill, and it must be made clear as a result of our debate. That may not happen today, but I hope that the Minister will take this matter away and think about the wording both of the Bill and of some of her amendments, which do not go sufficiently far. We need this absolute clarity for the sake and the benefit of everyone across the country.
This is good, heavy pounding, is it not? I have six amendments in the group. The first amendment is on a slightly different subject from anything that we have discussed so far. I tried to get it degrouped, but the Government would not let me, which further complicates the debate.
Amendment No. 436C would change the timing of the payment of the liability. It should be paid when the necessary infrastructure for the development has been completed. The argument for this is really very simple. I want that infrastructure to be built. If I have an assessment to pay for the cost towards it, what certainty is there that it will be built? It is a very simple amendment, and I am sure that the Minister will be able to help me.
I put my name to Amendment No. 437, which is also in the name of my noble friend Lord Dixon-Smith. He did not mention it specifically, but it is important that CIL is not payable on any development that does not require planning permission. If development is exempted, there should be no CIL, which should be clear in the Bill.
I support the amendment of the noble Lord, Lord Best, on affordable housing.
Yes. Planning is not needed at the moment and one can get on with the development. That is particularly important in rural areas, and it must continue. We discussed that two or three days ago.
When the noble Lord, Lord Best, was speaking, I was thinking that it was about 20 years ago when, as a Minister with responsibility for housing, I grappled with affordable housing and proposed schemes. Then, as now, if there was any CIL to be paid, it would have completely destroyed any of the projects that we were pursuing.
My noble friend Lord Hodgson commented on “or reduction” in proposed new subsection (4A)(a) in the Minister’s Amendment No. 437C. As he will see, I tabled an amendment to this to leave out those words for the simple reason that there should be no reduction for charities, which should be exempt. I concur with what my noble friend Lord Dixon-Smith said. We tabled our amendment before the noble Lord, Lord Cameron, tabled his. We wanted to make certain that this issue was well aired.
Amendment No. 437D covers particularly the small organisation, which may not have a great deal of money, but has developed something. CIL should be paid,
“only when that value has been or is to be realised by a sale or transfer of part or whole”.
When the noble Lord, Lord Greaves, was talking about amateur sports clubs, it occurred to me that this was just the sort of situation that might cover them. The Minister perhaps has listened too much to the big developers and the rich local authorities where development has been under intense pressure over the past few years. The Government have not listened enough to the small amateur organisations, small businesses, charities and individuals covered by this. In cutting the cloth for the big boys, individuals and small organisations will get hurt.
I have a query for the Minister on proposed new subsection (4B)(a) and (b) under government Amendment No. 437C. In principle, she is right to include something like this. It is a reasonable safeguard against a developer trying to evade CIL for a development, but there should be a cut-off date. One can foresee a time when local authorities are pushed for money. For example, the noble Lord, Lord Cameron, may have put up an agricultural building, which has improved his enterprise, and seek to enlarge it. He has not paid CIL on it because what he did to begin with was exempt or was at a nil rating, but the extension would fall into a CIL requirement. Because the local authority is short of money, it puts a CIL on the original development and classifies the whole thing as one.
I can foresee lots of situations when local authorities will go on fishing trips like that in order to raise money. They always will be short of money. Therefore, should there not be a cut-off date, such as when the development is substantially complete? The local authority should issue a certificate which means that it cannot go back and revisit CIL on that part of the development.
My last two amendments in this group support my noble friend Lord Dixon-Smith. I should like to clarify one thing. My noble friend used the word “charity”. Does “charity” cover a limited company with charitable status? It is not quite the same thing, but as long as every sort of charity is covered and exempt, I am happy.
I have ceased to count the number of questions that I was asked in this debate. I suspect that I will not be able to answer them all and will have to write, but I will do my best. First, I should like to give a general statement. It is understandable that now we are talking about how CIL operates we have moved away from the high objectives and politics and have got into the serious and difficult technical issues of a complex set of possibilities. I understand it when the noble Baroness, Lady Hamwee, says that she is less certain than when we had our big debate. It is precisely for those reasons—when we come to talk about the charitable clauses that we have put forward, the exemptions and so on—that we are wrestling with genuine complexities. We are genuinely trying to do our best, in conversation with those who understand the impact on the ground, to determine how we can best manage this so that it is a benefit and not a disbenefit for the people we are trying to help. It is no matter whether they are developers, people who need affordable housing or the charitable sector.
At this level of detail, one begins to realise that it is difficult. Basically, we are trying to do something that will raise money to invest in the things our communities need, whether they are hospitals, playgrounds or railway stations. Those needs are not going to go away, they will become more intense. Yes, noble Lords may feel that what we have concocted will cause local authorities to take a deep breath and think again, and some may well be right to do so because of their local circumstances, but this is designed to help meet the needs of the community. That is what it is all about, and I do not apologise for the fact that it is complicated. It is also why we said at Second Reading that so much had to be left to regulation because it will be dealt with through discourse and understanding between us and the people who have deliver this on the ground. Those are my general comments about why we are at this point in the debate.
I shall go fairly quickly. I understand the point about the groupings, but all these amendments are about different forms of exemption, so it is right to group them together. They cover the question of which developments should be liable to pay CIL, and we have heard much in the debate about exemptions for specific types of development. I shall turn, first, to Amendments Nos. 436C and 437D tabled by the noble Earl, Lord Caithness. These seek to ensure that CIL would be payable only when the necessary infrastructure had been completed as opposed to on commencement of the development in question, as currently provided for in Clause 200(2)(a). It does not make sense for CIL to be payable only once an item of infrastructure has been completed, because it may well be something required to support the development plan as a whole. Essentially it is a work in progress and not fixed in time. CIL is a source of revenue for local authorities to use in a flexible way based on local infrastructure needs and planning. As I have said before, the link between development and infrastructure is strategic rather than specific, so it is difficult to say which developments would have to pay on completion of a particular item of infrastructure, or which pieces of infrastructure a specific development had to contribute to. It also raises difficulties about the concept of completion. “Commencement of development” has a legal definition set out in the Town and Country Planning Act 1990, but the concept of completion has less legal precedent and raises issues around monitoring, checking, verification and so forth.
Amendment No. 437D appears to require that CIL may be paid only where the value arising from planning permission is wholly realised at the point of sale or be under a contract of sale for a development or some wider area within the charging authority’s area. I am afraid that the amendment is not clear on that point. It is different from the provision currently set out in Clause 200(2)(a) which requires regulations to make CIL payable on commencement under subsection (5) which allows regulations to be made to,
“require CIL to be paid in respect of land developed in reliance on planning permission”.
The Government do not believe that payment on point of sale is appropriate for a number of reasons. First, as we have debated, it is often the case that land prices after the introduction of CIL will reflect potential CIL liabilities faced by parties interested in the land. In this way, such parties should have the means to pay for CIL on commencement of development by paying less for the land beforehand. Secondly, while Clause 200(2)(a) requires that CIL be payable on commencement, the Government envisage that the liable parties will have 28 days from commencement to pay CIL liabilities, as set out in paragraph 4.33 of the August document. Clause 203(2)(b) provides for regulations to allow payment in instalments. In this way, we are offering some release from pressure on developer cash-flows, and I think we are right to do so.
In the case of some development, sale may occur decades later if the developers are, for example, demolishing and rebuilding on investment land they already own, and may be looking to rental from it rather than selling outright. As this is a very regular occurrence, crystallising liability at the point of sale will undermine CIL very seriously and could also distort developer decisions as to whether to sell or hold completed developments. Delaying payment of CIL until the land in question has been sold risks delaying the charging authority’s receipt of CIL. Many noble Lords around the Chamber have asked for certainty in the context of our debate. What we have here is the possibility of a lot more uncertainty, imposing additional borrowing costs on the charging authority in order to fund the infrastructure or perhaps delaying its construction. A further consequence of providing that regulations may require that CIL be paid only where the value of the land in question has increased as a result of planning permission is the risk of costly disputes between liable parties claiming that the value has or has not increased. That may dissuade some charging authorities from attempting to collect CIL at all.
I understand that. Does the Minister not understand that small and local builders, in particular, finance developments as they go along? It is quite normal for Section 106 agreements to be payable or part payable on the occupation of the first house to have been built rather than on the commencement of the development. Payment on the commencement of the development would cause real problems for many small and local builders—not only in the present circumstances but generally.
I take the points raised by both noble Lords.
I turn now to the question of which types of developer and development should pay CIL—or, rather, which should not pay CIL. There have been many different opinions, some based on technical measures such as the need for planning permission, others on the type of development or the type of developer. We have always recognised that there may be a case for exemptions to paying CIL, and our policy documents set that out. Amendment No. 437 requires that CIL will not be payable on any development which does not require planning permission. I think the noble Lord thought that I had dealt with this because I have made it clear that that is indeed the case. It is evident that development that does not require planning permission in CIL terms cannot be CIL liable. That must be defined in the CIL regulations and we will do that.
I wondered whether the purpose of the amendment was to ensure that development which benefits from permitted development rights is not liable to pay CIL, a point raised by the noble Earl, Lord Cathcart. Paragraph 4.8 of the August policy document sets out the Government’s view that most PDR development is likely to be excluded from CIL. We take that view because PDRs are a good proxy for relatively low levels of impact on infrastructure. That would mean that the day-to-day operations such as maintenance work by statutory undertakers and bodies such as Network Rail would not be liable to pay CIL. I hope that brings some reassurance to noble Lords.
We will define the precise boundaries in regulations but we need to be mindful of the fact that some permitted development might have sufficiently significant impacts on infrastructure that a contribution ought to be sought. Planning permission for CIL purposes should not simply mean that which is granted on an application made to a local planning authority under Section 60 of the Town and Country Planning Act 1990 because that might leave a loophole with regard to certificates of lawful development. This is important because these certificates can be issued by planning authorities to confirm that the development is lawful for planning purposes; that it is immune from enforcement action. We want to explore further whether CIL should be payable in respect of development for which a certificate of lawful development is granted in order to avoid creating an incentive for developers to undertake development without the appropriate planning permission and then later to seek a certificate to render it lawful and therefore out of reach of CIL. Furthermore, it may be that development that should be liable to pay CIL is centred through regimes outside the regime under the Town and Country Planning Act. We need to discuss with stakeholders what should constitute planning permission for CIL purposes, bearing in mind that there might be loopholes. We have not, therefore, set that out in the Bill; it will be in regulations.
The noble Lord, Lord Berkeley, will not be surprised by my response to his Amendment No. 438, although I appreciate his reasons for tabling it. He is seeking to ensure that organisations whose sole activity is the provision of rail infrastructure and whose profits are used solely for the provision of rail infrastructure are exempt. I am sure he has in mind Network Rail. Amendments to achieve the same effect were twice tabled in the other place and each time they were not carried. However, the amendment is more focused on Network Rail than before. Officials have discussed Network Rail’s concerns with it, and I believe that our proposals, along with government amendments tabled for other clauses, go a significant way towards addressing those concerns.
Amendment No. 438 would exempt the relevant organisation in its entirety, regardless of what type of development it undertook. That gives rise to considerable questions of fairness, but does not mean that every development that Network Rail undertakes will be subject to CIL.
In due course I shall come on to Amendment No. 437A, which defines what types of development will be CIL-liable. Subject to us being able to cover other structures, the core concept is that CIL-liable development will be development relating to buildings; we do not intend to cover day-to-day operational requirements. We will also be looking at development undertaken through permitted development rights; we do not propose that all such development should be subject to CIL.
All that should be welcomed by Network Rail, but for other development we need to consider carefully whether Network Rail should be treated differently. Imagine, if you will, a situation where two office blocks are being developed side by side, one by Network Rail as a new headquarters, the other by a different developer. Is it right that one makes no contribution through CIL to the infrastructure needs it creates in that area while the other, simply because it is being undertaken by a developer that is not Network Rail, is expected to make a contribution? That is obviously unfair. Both office blocks have an impact on the local infrastructure.
Perhaps I may help my noble friend. Network Rail is actually two separate companies. One is a regulated company that is purely to do with operating, maintaining and enhancing the network and the stations, and is not allowed to carry out property development as she suggests. That is the regulated company, which is the subject of my amendment. The other company, which can go off and develop headquarters, would of course pay CIL. I am referring to the first company, which is regulated and cannot do anything outside the regulated railway and the stations.
I take that point, but we have to be clear that any exemptions from CIL need to be decided on the basis of objective criteria. My noble friend’s amendment fails the second of those, which relates to fairness. I hear what he says, though, and I will consider the implications of it.
I turn to government Amendment No. 437A. The noble Lord, Lord Jenkin, asked about the large infrastructure projects and the implications they have for bad-neighbour questions. That is something we shall come on to in a later amendment that I seem to remember about how other countries deal with bad neighbours and give some form of compensation. These are national projects, as we know, but my instinct, although I cannot give him a categoric answer, is that there may be situations where they might be local infrastructure as well, so they might be liable. If he will leave that with me, I shall try to give him a clearer answer on that important point.
Section 106 certainly is in situ and local authorities can use it, as they do now, for a variety of purposes if they see fit. There can be all sorts of negotiated arrangements that follow from that. No one is going to put a stop to any of that.
Our Amendment No. 437 deals with the definition of “development” by amending Clause 200. It is important to get that clear because we need to set out exactly what is liable to pay CIL. Clause 200 currently provides that development will be defined in regulations; the Delegated Powers and Regulatory Reform Committee noted that in its 12th report. By providing a definition in the Bill we hope we have met its concern, and it has not commented further on that.
The amendment defines development in line with the proposal we set out in August: it will generally be development about buildings that should be liable to pay CIL. The definition sets out that the creation of a new building or anything done to, or in respect of, an existing building is development for CIL purposes. The amendment provides that the CIL regulations may modify this definition for specified works or changes of use or structures. “Buildings” is the right definition because it flows from the purpose of the CIL regime in Clause 198(2), which is to ensure the funding of costs associated with the delivery of infrastructure to support the development of an area. The assessment of those infrastructure needs is predominantly about the location of people through their occupation and use of buildings. This approach also builds on the fact that many tariff schemes do not cover this sort of development.
We could spend some time discussing the precise boundaries of our definition, but I think I can forestall that by explaining that the fact that a development relates to a building does not automatically mean that it will pay CIL. It will also need to be the sort of development that requires some sort of planning permission. The amendment proposes a regulation-making power to maintain clarity over time in the light of experience.
As a consequence of Amendment No. 437A, it is necessary to amend Clause 200(3). Amendment No. 437B removes the requirement in Clause 200(3) for the CIL regulations to define development. I hope that those are the sort of certainties which noble Lords welcome.
I turn now to the provision of affordable housing through developer contributions. The noble Lord, Lord Best, is not a man to tangle with on these issues. As usual, he has been exceptionally eloquent and powerful. I could not agree with him more that CIL must not hinder affordable housing; it must not bring disastrous unintended consequences. I am entirely of a mind with the noble Lord.
Concerns felt by the affordable housing sector that the introduction of CIL will squeeze contributions for affordable housing have been raised with me, and we have discussed them with the charitable sector. I have said many times in this House that the provision of affordable housing is a priority for the Government. CIL is designed to complement and not reduce existing developer contributions for affordable housing, especially at this time and for all the reasons that the noble Lord made very clear. I shall set out the rationale behind our Amendment No. 437C, which provides exemptions for charities, and also address Amendments Nos. 444A and 437AA.
Amendment No. 444A would require that affordable housing contributions are calculated without reference to CIL liability, and that should a developer’s return on investment fall below a defined threshold, CIL should be reduced on a case-by-case basis. The noble Lord is concerned that the provisions for CIL will mean that developer contributions for affordable housing could in certain circumstances be squeezed. The current planning obligations regime has become an increasingly significant method of delivering affordable housing through Section 106. The noble Lord graphically illustrated some of the difficulties that Section 106 and those negotiations cause. I am very well aware of his concerns. He says that CIL will cost affordable housing billions; our calculation is that CIL is expected to raise hundreds of millions of pounds per annum. For example, with regard to the Milton Keynes tariff, £18,000 was awarded per residential unit. That is serious investment that could be used for very good purposes.
Particularly at this time, the Government are very sensitive to the need to protect levels of affordable housing contributions and are determined to put in place safeguards which aim to ensure that the introduction of CIL will not result in a reduction in the overall level of contributions secured for affordable housing. We do not intend initially to include affordable housing within the scope of what may be funded by CIL, but it has deliberately been included in the definition of infrastructure in the Bill under Clause 202(2)(g). If there were an unexpected reduction in the level of developer contributions for affordable housing as a result of the introduction of CIL, we can make regulations to ensure that CIL revenue could be used to top up such a shortfall if evidence showed that that was necessary. So there is a major safeguard there.
Our clear preference is not to activate that provision because we believe that delivering affordable housing onsite through the existing Section 106 system better meets the Government’s objectives for mixed communities. It allows the real needs of the communities to be articulated and expressed on the types of development and building. It is a complicated process because it has to meet the needs of complicated communities. That is why Section 106 is suitable and effective.
We want Section 106 to continue unhindered. We set out in the August document that planning authorities that choose to introduce CIL will be obliged to set a charging schedule in such a way as to ensure it does not impede development. We made it clear that that exercise will need to take into account the costs of meeting affordable housing requirements. In every development plan there will be a specific element set aside for affordable housing. This is what the local area needs and how we, through the development document, propose to provide it; this is how we are going to ensure that we fund it. We intend that regulations will provide for a draft charging schedule to be tested through public consultation and amendments by an independent examination, which would test whether the levels of CIL set out in a proposed schedule would put at risk development, when taken with other costs faced by developers, such as affordable housing obligations. It will be dealt with and analysed as a total package.
The recommendations of the independent examiner, who will be looking to see whether there are flaws in those arguments and calculations, would be binding upon the charging authority. Draft charging schedules set too high could be reduced by the examiner if he considered that CIL, taken with other costs and local economic conditions, would prevent development proceeding. CIL is intended to assist in securing affordable housing, not reducing it, by providing additional revenue to support the delivery of planned infrastructure needed to unlock growth. Therefore, the levels of CIL must be set appropriately to ensure that more affordable housing contributions come forward.
I am not convinced that the proposed amendment is workable. I fear it would lead to uncertainty, complexity and delay. The amendment proposes that CIL liability should be adjusted for individual developments to take into account affordable housing contributions. That creates uncertainty over the level of CIL liability that developers will have to pay, and will lead to lengthy negotiations. It would leave at the discretion of the charging authority whether to reduce a CIL payment. There would inevitably be disputes over whether a return on investment was over or below the specified threshold. The amendment says that we would have to define that threshold in law, which would involve us prescribing a level of appropriate profit. That is an unattractive and undesirable proposition and takes us back to the site level of negotiations, which we were trying to avoid in CIL, as opposed to PGS.
The second suggested exemption would ensure that there was no CIL to pay on social housing development falling within the meaning of the Housing and Regeneration Act. That means low-cost rented accommodation and low-cost home ownership. I have already explained that we believe that Section 106 should continue to be used to seek contributions to affordable housing from commercial developers. Many local authorities have policies of that nature, but the affordable housing that they build will, as the noble Lord will agree, have an impact on local infrastructure. A child living in an RSL home needs a school just as much as one who does not.
The question therefore is whether CIL should be payable on affordable housing units as well as on market units. The noble Lord’s amendment asks that question; our answer is that it is clear that the burden on the private developer in providing affordable housing may be significant. For example, if there is a requirement to provide 30 per cent of affordable units transferable to an RSL, in writing their charging schedules charging authorities will need to think about that and ensure that the cost of CIL when added to the cost of providing affordable housing is not so great that the development cannot happen. We will put in place safeguards to ensure that that important consideration is properly taken into account. Therefore, we think that there may be a case for recognising the burden faced by those providing affordable housing by inviting local authorities to consider whether such developers should pay a lower rate of CIL, or no rate at all. We set that out in our August document, which provides for such differential rates.
We have to guard against complexity; we are aiming at simplicity. We do not want to introduce new distortions and unfairness. However, we would like to work further with the social housing sector to see whether we can find a way to meet the noble Lord’s objectives in these proposals. We will have some conversations on that between now and Report.
I turn finally to our Amendment No. 437C, which has not had as warm a reception as I had hoped, although I hope that what I say will heat up the Chamber a little. I do not need to be persuaded of the virtues of the charity sector. I started a charity; it became hugely successful; it did a brilliant job; it anticipated extended schools and out-of-school learning that is now the norm for this Government and in every school. I am very proud of that. However, in doing that, I came to understand full well what the charity sector faces and the serious obstacles to getting things done. Nevertheless, what we have achieved in our amendment is important.
Since we last spoke about charities at Second Reading, we have had extensive conversations with charitable organisations. They are fully aware of what we are wrestling with and what we are trying to do. Our amendment tries to ensure that no charity engaged in development work or likely to fall under CIL suffers unfairly as a result of CIL. We intend to ensure that they are able to carry on their development work and are not damaged by it, and that there are no unintended consequences for them or us.
The charity sector is enormous and complex beyond description, in type, range, nature, function and accountability arrangements. Our amendment places a new duty on the Secretary of State to ensure that the CIL regulations either provide for an exemption or reduction in CIL where the liable party is a charity or where the development in question is for charitable purposes, or provides charging authorities with the discretion to make exemptions or reductions covering one of these circumstances.
Noble Lords will be aware that “charities” and “charitable purposes” will by statutory implication carry the same meaning as in Sections 1 and 2 of the Charities Act, which we are proud to have introduced and which goes along with our work with the third sector in recent years to make sure that it is more robust, resilient, effective and democratic, and does the job that only it can do.
In recent months, we have worked closely with the sector to develop a provision that works not only for the Government but for the sector and the local government community. CIL is a local tool, so we need to involve local government representatives in the design of exemptions. Under business rates, for example, local authorities have the right to ask for a small—up to 20 per cent—contribution to the costs of providing local infrastructure and services. Charities are sometimes asked to pay for planning obligations to meet local needs, so there are precedents for paying for local impacts. That stands in contrast to the national tax picture where a full exemption is often provided.
The task for us in government is to decide where to strike the balance: whether to follow the national or local precedent in this area, or to strike out in an entirely new direction. It is not easy. We have listened to concerns—and, my word, noble Lords have been eloquent today—that charities may be adversely affected and financially impeded from pursuing their charitable activities and aims. We do not want that to happen.
We are convinced that it is right in the case of charities for the Bill to go further than granting the powers under Clause 207(1)(c) to allow for exceptions to CIL in regulations, which was our original intention. The amendment places an obligation on the Secretary of State to act on this issue through regulations. It is not permissive in the sense that noble Lords have described. It is permissive only in allowing the Secretary of State to choose from various options. The substantive point is that it requires the Secretary of State to provide some sort of exemption or reduction for charities. The permissive element is to allow for something that is workable and provides the maximum lawful benefits to charities. We know that charities engage in a wide range of economic activity with a wide range of business models. They are specifically regulated. We need to proceed carefully, which is why we are going alongside the charitable organisations to ensure that the relief that we provide is as wide as possible without breaching the criteria that we established at paragraph 4.10 in our August policy document. All exemptions under CIL will need to be measured against the fact that they should not create scope for challenge. That would be hopeless for the charitable sector. They should not be difficult to apply or create a loophole because it is not clear what it applies to; they should be fair and not create undue distortions of competition; they should not give rise to other unacceptable distortions to behaviour or create perverse incentives; and they should not lead to charging authorities suffering a disproportionate loss of revenue which might undermine infrastructure delivery.
I do not wish to trespass, having irritated the noble Baroness earlier this afternoon. In her amendment, proposed new paragraph (a) provides for an exemption, but proposed new paragraph (b) permits one. “Provides” is not used in both cases. Surely, we are right in saying that the second part is permissive; it is not obligatory.
That is true, but I have said that the substantive point is that the Secretary of State is required to find an exemption and then there are some choices that are also in the text of the amendment.
The noble Earl, Lord Caithness, made an interesting point about timing. I will read Hansard carefully on that point.
To ensure that the mechanism we provide to achieve this relief is compliant with the criteria, we have to go on talking to the charitable sector. The matter is complex and will take time. We have to consult through the draft regulations. It is therefore right that the detail of how this relief will work is laid out in secondary legislation. We have to be careful about avoidance. Proposed new subsection (4B) provides a mechanism against that. It provides a mechanism to claw back CIL money if the use of a development which was already deemed to be exempt or subject to reductions changes for a purpose which is not exempt. This addition to the Bill provides reassurance that an exemption or reduction from CIL liability relating to charities will be in CIL regulations. It is a guarantee that the Secretary of State will act. It is the right starting point for a discussion with the sector about how an exemption should be framed. The regulation-making power gives us the latitude to frame with care the workings of this power.
Other amendments reflect, for example, on the notion of a blanket exemption. Amendment No. 437CZA seeks to amend our amendment so that the Secretary of State cannot provide for a reduction in CIL in relation to charities or to development for charitable purposes. If she uses those powers she must provide a complete exemption. I understand the argument, and I understand the search for simplicity and certainty, but noble Lords should follow the logic of this argument too. On arguing for a complete exemption, I would be deeply sympathetic if noble Lords could tell me where a blanket exemption would start and finish, given the complexity of the sector. What would it mean in watertight legal terms? Where would the boundaries lie across this very complex sector? How would we anticipate and deal with distortions that would occur at the far edge, where charitable activity is often a minor element of major private and commercial concerns? Those are the sort of difficulties we have to face.
I am sympathetic, and I have set out the principles and safeguards that would guide us. We have the responsibility of ensuring that we have the right tools in the right place. We do not have an annual Finance Act in which we can put things right on a regular basis. That is why regulations are so useful to us, but that is why blanket exemptions cause us problems, for all the reasons I have said. Regulations will be subject to very thorough consultation. We do not want to unduly limit the relief.
Amendment No. 438A seeks to secure two exemptions in the Bill for CIL. These would be for two classes of development—developments that are solely concerned with the provision of infrastructure and developments undertaken by a charity exclusively for the charitable purposes for which the charity was established. Almost all development has some impact on the need for infrastructure. It is not a homogenous category. That is why we envisage what types of development relating to buildings will be liable to pay CIL. It is worth noting that the existing system of planning obligations can operate in relation to development consisting of infrastructure. Again, the conclusion I draw, because that can cover such a wide variety of developments, is that it is not appropriate to provide a blanket exemption for infrastructure from CIL.
As we made clear at paragraphs 4.1 to 4.14 of the document in August, we indicated that we are giving serious thought to what type of development ought to be liable to pay CIL. Government Amendment No. 437A principally defines development in relation to buildings. I have addressed the point about development rights.
Amendment No. 438A would also exempt all charities from paying CIL where the development they undertake is exclusively for the purposes for which they were established. Our Amendment No. 437C is intended to provide assurance to noble Lords that there will be some provision providing relief in relation to charities, as I have said. Amendment No. 438B of the noble Earl, Lord Caithness, specifies that limited companies with charitable status should be included. I reassure the noble Earl that in our Amendment No. 437C, our use of the term “charity” includes “bodies corporate” and, therefore, limited companies. I hope that that will satisfy him. I am not so sure about the status of sporting clubs, although we have a fairly wide definition; I will have to come back to the noble Lord, Lord Greaves, on that.
Finally, Amendments Nos. 436BC, 438BA and 438BB seek to require that a charitable exemption is laid out in CIL regulations operating in a way similar to charitable relief under the stamp duty land tax. Amendment No. 438BA in effect provides that a development would be exempt from paying CIL where, on the commencement of development, the land is owned by a charity, or being developed by a charity, and it is intended to be used for charitable purposes.
Amendments Nos. 438BA to 438BC are all self-explanatory, so I shall cut to the chase. I have listened to what noble Lords across the Committee have said, and their strength of feeling about this. I recognise the strong desire of many in this Committee and the charity sector to have confirmation of how any exemption provided for will work. I am committed to working with the sector intensively over the next two weeks, before we come back, to deliver a meaningful relief. It would be unwise to commit myself to a particular mechanism at this early stage. I must be absolutely certain and careful to ensure that the relief we provide is as wide as possible without breaching the criteria for exemptions which we have formulated, and without creating unintended consequences. That would not serve the purposes of the sector. CIL is a new tool built on the existing system for which there is no clear precedent. National taxes are cited as precedent here but, looking at the Bill after today, I do not think that anyone could claim that CIL is a national tax. It has to be an iterative process. These are local taxes
I assure noble Lords that we will be considering a range of existing mechanisms as part of the process. We have already taken on board the principle of clawback. I have listened to what has been said this afternoon but, on the basis of what I have said in a long and wearying speech, I hope that the noble Lord with withdraw his amendment.
I thank the noble Baroness, and noble Lords who have supported my three amendments. I am encouraged by support on all sides to push on with our aims. I still fail to understand the Government’s reticence, and why they seem to need their permissive regime. As the noble Lord, Lord Hodgson, said, such are charity law and the powers of the Charity Commission that there is no more fear that a full exemption from CIL will be abused than any other tax exemption already available to charities.
I strongly endorse what the noble Lord, Lord Shutt, says: we must get rid of doubt. I could not agree more. The Minister expresses her support for our general aims, but I am afraid that I still cannot see why, for the avoidance of doubt, we cannot have a straightforward exemption for registered charities in the Bill. I have no doubt that we will return to this on Report. In the mean time, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 436C and 437 not moved.]
437A: Clause 200, page 124, line 3, at end insert—
“( ) In this section “development” means—
(a) the creation of a new building, or(b) anything done to or in respect of an existing building.( ) CIL regulations may provide for—
(a) works, or changes in use, of a specified kind not to be treated as development;(b) the creation of or anything done to or in respect of a structure of a specified kind to be treated as development.”
On Question, amendment agreed to.
[Amendment No. 437AA not moved.]
437B: Clause 200, page 124, line 5, leave out “development (and”
On Question, amendment agreed to.
437C: Clause 200, page 124, line 24, at end insert—
“(4A) CIL regulations must either—
(a) provide that an exemption or reduction in CIL applies in specified circumstances where—(i) the person who would (apart from this subsection) be liable to pay CIL in respect of the development is a charity of a description specified by the regulations, or(ii) the development is for charitable purposes of a description specified by the regulations, or(b) permit charging authorities to make arrangements for exemptions or reductions in respect of charities or development for charitable purposes.(4B) CIL regulations may provide for CIL liability to arise in respect of a development where—
(a) the development was exempt from CIL, or subject to a reduced CIL charge, on its commencement, and(b) the description or purpose of a development changes after its commencement.”
[Amendment No. 437CZA, as an amendment to Amendment No. 437C, not moved.]
On Question, Amendment No. 437C agreed to.
[Amendments Nos. 437CA to 438 not moved.]
Clause 200, as amended, agreed to.
[Amendments Nos. 438A to 438BB not moved.]
Clause 201 [Amount]:
438C: Clause 201, page 124, line 32, leave out subsections (1) and (2) and insert—
“(1) A charging authority which proposes to charge CIL must issue a document (a “charging schedule”) setting rates, or other criteria, by reference to which the amount of CIL chargeable in respect of development in its area is to be determined.
(2) A charging authority, in setting rates or other criteria, must have regard, to the extent and in the manner specified by CIL regulations, to—
(a) actual and expected costs of infrastructure (whether by reference to lists prepared by virtue of section 202(5)(a) or otherwise);(b) actual and expected increase in value arising from planning permission (calculated in accordance with the regulations);(c) other actual and expected sources of funding for infrastructure.”
On Question, amendment agreed to.
[Amendments Nos. 438CA to 438CC not moved.]
438D: Clause 201, page 124, leave out lines 41 and 42 and insert—
“(3) CIL regulations may make other provision about setting rates or other criteria.
(3A) The regulations may, in particular, permit or require charging authorities in setting rates or other criteria—”
438E: Clause 201, page 124, line 43, leave out paragraphs (a) and (b)
On Question, amendments agreed to.
[Amendment No. 438EA not moved.]
438F: Clause 201, page 125, line 10, leave out paragraph (e)
438G: Clause 201, page 125, line 15, leave out paragraph (g)
On Question, amendments agreed to.
[Amendments Nos. 438H and 438HA not moved.]
438J: Clause 201, page 125, line 37, after “charges,” insert “a nil rate,”
438K: Clause 201, page 125, line 39, leave out subsections (6) and (7)
438L: Clause 201, page 125, line 42, at end insert—
“(8) The regulations may require a charging authority to provide in specified circumstances an estimate of the amount of CIL chargeable in respect of development of land.
(9) A charging authority may revise a charging schedule.
(10) This section and sections (Charging schedule: examination), (Charging schedule: approval) and (Charging schedule: effect)(1) and (2) apply to the revision of a charging schedule as they apply to the preparation of a charging schedule.”
On Question, amendments agreed to.
Clause 201, as amended, agreed to.
438M: After Clause 201, insert the following new Clause—
“Charging schedule: examination
(1) Before approving a charging schedule a charging authority must appoint a person (“the examiner”) to examine a draft.
(2) The charging authority must appoint someone who, in the opinion of the authority—
(a) is independent of the charging authority, and(b) has appropriate qualifications and experience.(3) The charging authority may, with the agreement of the examiner, appoint persons to assist the examiner.
(4) The draft submitted to the examiner must be accompanied by a declaration (approved under subsection (5) or (6))—
(a) that the charging authority has complied with the requirements of this Part and CIL regulations (including the requirements to have regard to the matters listed in section 201(2) to (4)),(b) that the charging authority has used appropriate available evidence to inform the draft charging schedule, and(c) dealing with any other matter prescribed by CIL regulations.(5) A charging authority (other than the Mayor of London) must approve the declaration—
(a) at a meeting of the authority, and(b) by a majority of votes of members present.(6) The Mayor of London must approve the declaration personally.
(7) The examiner must consider the matters listed in subsection (4) and—
(a) recommend that the draft charging schedule be approved, rejected or approved with specified modifications, and(b) give reasons for the recommendations.(8) The charging authority must publish the recommendations and reasons.
(9) CIL regulations must require a charging authority to allow anyone who makes representations about a draft charging schedule to be heard by the examiner; and the regulations may make provision about timing and procedure.
(10) The charging authority may withdraw a draft.”
438N: After Clause 201, insert the following new Clause—
“Charging schedule: approval
(1) A charging authority may approve a charging schedule only—
(a) if the examiner under section (Charging schedule: examination) has recommended approval, and(b) subject to any modifications recommended by the examiner.(2) A charging authority (other than the Mayor of London) must approve a charging schedule—
(a) at a meeting of the authority, and(b) by a majority of votes of members present.(3) The Mayor of London must approve a charging schedule personally.”
438P: After Clause 201, insert the following new Clause—
“Charging schedule: effect
(1) A charging schedule approved under section (Charging schedule: approval) may not take effect before it is published by the charging authority.
(2) CIL regulations may make provision about publication of a charging schedule after approval.
(3) A charging authority may determine that a charging schedule is to cease to have effect.
(4) CIL regulations may provide that a charging authority may only make a determination under subsection (3) in circumstances specified by the regulations.
(5) A charging authority (other than the Mayor of London) must make a determination under subsection (3)—
(a) at a meeting of the authority, and(b) by a majority of votes of members present.(6) The Mayor of London must make a determination under subsection (3) personally.”
438Q: After Clause 201, insert the following new Clause—
(1) CIL regulations must provide for a right of appeal on a question of fact in relation to the application of methods for calculating CIL to a person appointed by the Commissioners for Her Majesty’s Revenue and Customs.
(2) The regulations must require that the person appointed under subsection (1) is—
(a) a valuation officer appointed under section 61 of the Local Government Finance Act 1988 (c.41), or(b) a district valuer within the meaning of section 622 of the Housing Act 1985 (c.68).(3) The regulations may, in particular, make provision about—
(a) the period within which the right of appeal may be exercised,(b) the procedure on an appeal, and(c) the payment of fees, and award of costs, in relation to an appeal.”
On Question, amendments agreed to.
Clause 202 [Application]:
438R: Clause 202, page 125, line 44, at beginning insert “Subject to section (Compensation)(5),”
The noble Lord said: I shall speak to Amendments Nos. 438R, 442B and 442C, which deal with enforcement and compensation.
Government Amendment No. 442B provides clarification as to the measures that the Secretary of State may set out in regulations for the purpose of enforcing CIL. First, it clarifies that regulations may provide that any interest, penalty or surcharge payable may be treated as CIL for the purposes of Clauses 202 to 205. Secondly, it limits the penalties or surcharges that can be imposed through regulations to the higher of 30 per cent of the CIL amount or £20,000. Finally, it prevents regulations authorising entry to a private dwelling without a warrant issued by a justice of the peace.
Clause 204(3) provides powers to make regulations about the consequences of late payment of CIL or a failure to pay CIL. Such measures may under Clause 204(3)(a) and (b) include interest, surcharges or penalties. However, the Bill does not expressly say how the money received from those might be spent. Clause 202(1) says that CIL regulations must require that CIL is applied, or caused to be applied, by charging authorities to infrastructure, but the argument might go that interest, surcharges and penalties are not CIL but are sums in addition or different from it. The amendment will provide for clarity here. It ensures that we can use our regulation-making powers to ensure that any income must be spent on infrastructure or on administering CIL. It is right that we can ensure that income from interest, penalties and surcharges is spent in these ways, where it can be put to best effect. It is a constituent part of the whole CIL regime.
By making a distinction between CIL and interest, penalties and surcharges, we consequently need to be clear that the regulation-making powers on collection and enforcement apply to them. The amendment therefore allows those items to be treated as CIL for the purposes of Clauses 203 and 204. Without clarity, authorities will be unsure whether enforcement-related income ought to fund infrastructure or whether it might be used for some other purpose; for instance, to finance their enforcement procedures.
We consider that it is important to have the option to ensure that the money received through enforcement could be channelled to infrastructure delivery, not least because penalties may be proportional to CIL liabilities and therefore potentially quite substantial, exceeding the costs of enforcement activity. Amendment No. 442B also sets two limits to the penalties and surcharges that may be provided for through regulations. The level of the penalty or surcharge may not exceed the higher of the two—30 per cent of any CIL or £20,000.
For most cases of persistent non-payment, we intend that charging authorities will be able to impose penalties that are a fixed proportion of the CIL amount due to ensure that the penalty imposed reflects the amount of CIL due. The limit of 30 per cent is informed by the HMRC proposal in a recent consultation as part of the ongoing review of the penalties that taxes unpaid for more than 12 months face penalties of up to 30 per cent of the amount due. For cases of unpaid CIL of less than 12 months, however, we envisage the penalties being less than 30 per cent of the amount due.
The monetary limit of £20,000 is to allow regulations to provide for fixed penalties. For example, it is envisaged that charging authorities may be able to serve stop notices requiring development to cease where CIL has not been paid; much as local planning authorities may do where unlawful development takes place. Failure to comply with such a notice would be an offence, but rather than require such breaches to be dealt with by way of criminal proceedings, we have the option to provide for a civil penalty to be payable in substitute to a fine on conviction.
Finally, Amendment No. 442B restricts the powers of entry that regulations may set out for the enforcement of CIL. It prevents regulations enabling, for example, charging authorities to enter private dwellings without a warrant from a justice of the peace as a means of enforcing CIL, which helps to ensure that such powers are used proportionately and appropriately. The unrestricted nature of the power currently found in Clause 204(3)(f) was a concern for the Delegated Powers and Regulatory Reform Committee in its 12th report. The amendment seeks to meet that concern and, indeed, the 13th report did not raise this as a concern. The amendment contains a number of sensible provisions providing for certainty and restricting the regulation-making powers on enforcement.
Amendments Nos. 442C and 438R relate to the payment of compensation in relation to enforcement action. Amendment No. 442C introduces a new clause to make provision that the CIL regulation may require charging authorities to pay compensation in respect of loss or damage suffered as a result of enforcement action being taken by them. The amendment allows regulations to set out when compensation may be sought, how it may be sought, how much compensation may be paid, and the methodology through which it may be determined. Disputes about compensation may be referred to the lands tribunal.
Amendment No. 438R makes a necessary consequential amendment. Under subsection (5) of the new clause, CIL revenues, if regulations allow, may be used to pay this compensation. However, Clause 202(1) stipulates that CIL regulations must require the charging authority to ensure that CIL is spent on funding infrastructure. Amendment No. 438R adds the necessary qualification to take account of the possibility that CIL may be used to pay compensation under the new clause. The appropriate use of CIL enforcement measures could give rise to loss or damage to developers. Inappropriate enforcement could include where CIL liabilities have been paid or are not due, but the charging authority in any event requires a development to cease. This amendment would allow the CIL regulations to cater for such circumstances and offer the possibility of a significant safeguard against the misuse of CIL enforcement actions for the property and development industry. There is a parallel between these provisions and Section 186(2) of the Town and Country Planning Act 1990, which provides for compensation for inappropriately served planning stop notices.
These amendments provide safeguards against the misuse of CIL enforcement action. I beg to move.
I have a number of amendments in this group. Amendments Nos. 438S and 442ZE tackle a problem, but in two ways. The Bill provides no certainty that new infrastructure will be delivered, nor does it outline possible consequences for local authorities that do the wrong thing in relation to the delivery of infrastructure. If a levy is collected in good faith for infrastructure, there needs to be a requirement that it is appropriately spent for the intended purpose. We all want to ensure that timely delivery is included to ensure that no local authority can stockpile funds for an unreasonable period. That is why Amendment No. 438S states that the local authority must spend the money within three years of its receipt. Amendment No. 442ZE is a slightly more subtle way of going about that, and requires the local authority to be transparent about how it handles the funds.
I shall not speak to Amendment No. 442ZA, because we have covered that point. On my Amendments Nos. 442ZB, 442ZC and 442ZD, I ask the Minister why there should be regulations to allow CIL to be used to reimburse expenditure already incurred. Surely, if we look ahead to what a local authority wants, why should it be reimbursed for what it has already done? Similarly, why should a regulation permit CIL to be used for administrative expenses? If we are trying to deal with infrastructure, why should the administrative expenses of the local authority be covered by CIL? That would be an abuse. That is why I have specifically proposed that those two provisions not be included in regulations.
I have also tabled Amendments Nos. 442ZF and 442ZG. They are about repayment of money. The Bill states that money can be repaid if there is an overpayment with or without interest. That is quite wrong; if there is an overpayment, I have proposed that it should be paid with interest at the rate of 3 per cent above the Bank of England base rate. My position is not fixed regarding the final half of that amendment, as long as we receive an assurance that the repayment will be made with interest, otherwise the local authority could be hanging on to money which does not belong to it.
My final amendment is Amendment No. 442ZH. It removes subsection (6). I think it pleases my noble friend Lord Jenkin of Roding because it relates to tax. I thought that because the clause relates to tax, it is better out of the Bill.
London councils anticipate that they are going to have to collect CIL for their own purposes and for the Greater London Authority. They will incur expenses in doing that. My noble friend’s Amendments Nos. 442ZB, 442ZC and 442ZD remove the ability of local councils and borough councils to cover the costs out of the proceeds. I suggest that it is not appropriate for them to be accepted.
My Amendment No. 442A is in this group. It was tabled before we saw the new clause on compensation introduced by government Amendment No. 442C. The Law Society’s anxiety was that it appeared that part of the penalty for failure to pay CIL would be the removal of the planning permission, apparently without compensation. Amendment No. 442A therefore removed Clause 204(3)(d). Since then, the Government have tabled their amendment on compensation, which provides that,
“‘enforcement action’ means action taken by a charging authority under regulations … including … the suspension or cancellation of a decision relating to planning permission”.
I am not clear how these two measures add up. On the one hand, one of the penalties for failure to pay CIL could be the cancellation of planning permission, but under the compensation clause, the local authority that does that will then have to compensate the developer who failed to pay CIL. I cannot believe that that is right.
It may well be that I have totally misunderstood how these two clauses are going to work together. I understand this might be a complicated question. It might be wise if the noble Lord, Lord Patel, were to write me a letter about this. It may well be that I should have given him notice. We have not seen the compensation clause for very long. If the Minister could write to me about the combined effect of the ability to remove planning permission as a penalty and having to pay compensation for it, I would be extremely grateful.
My Amendment No. 438T is in this group. It removes the definition of infrastructure. That might seem a little perverse after some of the debates we have had. This is another amendment that I was asked to table by the Local Government Association, which makes the proper point that every local area is different and the needs for infrastructure will vary in different places, so the Bill runs the risk of thwarting local growth and regeneration. The list is not complete. Crematoria have been mentioned at least twice this afternoon. The noble Lord, Lord Patel, is not a veteran, as other noble Lords are, of the Housing and Regeneration Bill, in which we spent some time considering the place of crematoria in terms of infrastructure and what is needed to support a community.
I am puzzled by the fact that we have a list which is not exhaustive and a provision, in Clause 202(3), for regulations to amend that list. That seems to me to be a little odd. If it is illustrative only and can be revised to reflect changing needs, as the Minister in the Commons said, is it an appropriate way of addressing changing needs? The Minister has already been asked today to give us some idea of how long the process will take in each local planning authority area. We know that the proposals for CIL will have to go through an examination and that the planning inspectorate or examiner will test the authority’s infrastructure requirements, but to have to go through the parliamentary process of amending regulations, when the starting point is that items contained in the Bill are “illustrative only”, seems as odd as many other things we have heard today.
I wish to speak to Amendment No. 439 on behalf of my noble friend Lord Berkeley who has had to go to the Institution of Electrical Engineers to deliver a lecture at 6 o’clock. I hope that the Committee will understand that he could not be here.
The effect of the amendment is to make it clear that railways as well as roads and other transport facilities fall within infrastructure. I have come across a number of cases in Yorkshire where local authorities contribute to certain elements of rail, whether signalling, new halts, bridges, lines or rolling stock. It can be quite important in improving regional, sub-regional and local services. It would be helpful if it were clear to local authorities that railways are firmly included in infrastructure.
I wish to speak to Amendment No. 442ZAA in this group. As we have heard, the purpose of CIL is to contribute to the funding and delivery of infrastructure. For the industry coalition, including London First, which last year put forward the proposal for a planning charge as the alternative to planning-gain supplement, the rationale of this new levy has always been about co-ordinated and timely infrastructure delivery.
My amendment concerns the vital issue that local authorities and other infrastructure providers should be required to give a commitment to use their best endeavours to deliver infrastructure financed through CIL in a timely fashion. The amendment would require local authorities and others benefiting from CIL to give a best-endeavours commitment. “Best endeavours” is a familiar term in legislation. It was used in the New Roads and Street Works Act 1991. Given the state of some roads in London, some may feel that even best endeavours are not enough, but it is much better than no promise of endeavour at all.
The commitment to delivery is a vital component of the current tariff system operating in areas such as Milton Keynes. Noble Lords may be aware of a BBC investigation in which a resident of Macclesfield used the Freedom of Information Act to discover that £2.5 million of Section 106 money had gone unspent by his local authority. That might be an exceptional case, but it highlights the importance of my amendment, which would commit local authorities and other infrastructure providers to use their best endeavours to deliver CIL-funded infrastructure. We must focus on charging and collection on the one hand, but delivery on the other. The one is pointless without the other.
I will try to answer all the points that have been raised, although a few amendments have not been followed through. This group of amendments deals with three core themes: how CIL moneys can be spent; enforcement procedures; and compensation. I will deal with them in turn.
My noble friend Lord Berkeley cannot be here and I am grateful that my noble friend Lord Woolmer has spoken to his amendment. He seeks reassurances about the types of infrastructure that might benefit from CIL and asks that railways be included within the scope of the infrastructure to which CIL may be applied by explicitly listing it in Clause 202(2).
We fully recognise the importance of new rail infrastructure in supporting development and are clear that CIL should support railways where required. Equally, we recognise the irreplaceable role of other services in the lives of communities, such as police and emergency services. However, the amendment is unnecessary.
Let me explain. The purpose of the infrastructure list in Clause 202 is to illustrate the types of infrastructure CIL might finance by providing a wide definition of infrastructure. The list includes examples of infrastructure that CIL could fund without stipulating in detail every item that could benefit from CIL. It is not intended to be an exhaustive list, so the fact that a particular public service or facility does not appear does not mean that it cannot be funded from CIL. The list already covers railways through its inclusion of,
“roads and other transport facilities”.
The nature of that definition goes further than the conventional concept of infrastructure, such as transport, schools, and flood defences. Because of its illustrative nature, the list also covers a range of other items that support the development of an area. That may include community facilities, schools and police and emergency services. Thus, the items addressed by the amendment already fall within Clause 202(2). We have no doubt about that. I hope that that reassures the noble Lord.
In reference to the infrastructure list in Clause 202, Amendment No. 438T, tabled by the noble Baroness, Lady Hamwee, would remove Clause 202(2) and (3) from the Bill, which set out the illustrative list of the infrastructure items that CIL might finance and our power to amend that list. Clause 202(2) defines infrastructure by reference to an illustrative list of the types of infrastructure that CIL might finance and does not seek to be exhaustive by stating each and every infrastructure type included. However, it serves the purpose of establishing the scope for appropriate infrastructure and offering some clarity and certainty about how CIL may be used. For instance, without Clause 202(2), it would not be readily obvious that affordable housing or the provision of open space could be classed as infrastructure for CIL purposes.
Furthermore, by providing a list—albeit indicative—Clause 202(2) gives some indication to developers of the type of infrastructure that their moneys may fund. Removing the list risks a narrow interpretation, so limiting the choice of infrastructure that local authorities may use CIL to fund and potentially undermining their ability to use CIL to support their development plans. I therefore resist the amendment and want to retain Clause 202(2).
Amendments Nos. 442ZB, C and D, tabled by the noble Earl, Lord Caithness, would remove the possibility that authorities could use CIL revenues to pay for expenditure already incurred and to finance administration costs directly connected with the CIL system or the infrastructure funds. Although I recognise the concerns giving rise to the amendments, I will endeavour to explain why we believe that that is probably not the best way forward.
Taking first the suggestion that we preclude CIL from expenditure already incurred, the noble Earl may feel that that is carte blanche for authorities to misuse CIL by channelling it to finance infrastructure that has already been provided, rather than using it to finance new infrastructure or to improve existing infrastructure to unlock growth. I assure the Committee that that is not the intention behind Clause 202(6)(a). The Government have been clear that CIL is designed to support infrastructure for the development of an area, which is what Clause 198(2) provides as one of the purposes of CIL.
Clause 202(6)(a) provides the flexibility necessary to allow authorities to choose how to pay for the infrastructure that makes their communities conducive to growth. This might involve building a new train station or repairing an out-of-use station platform to enable new lines to serve the community. Let us suppose that two developments benefit from this infrastructure, one of which is commenced before the station is built or the platform refurbished and one after. The local authority has counted on CIL from both developments when deciding to fund the station. In such circumstances, it is perverse to insist that only the development that happens in advance of the delivery of the infrastructure should fund the station, while the CIL money from the other development cannot be used to reimburse any of the costs here. We need to enable authorities to collect CIL to pay for the costs of infrastructure that has already been built, but always within the context of providing infrastructure to support the development of an area. They could not get way behind in the development plan. I hope that this reassures the Committee of the intentions and the benefits of this component of the Bill.
The noble Earl proposes that we remove the power to enable authorities to spend CIL receipts on the administration system that directly supports the operation of CIL or the administrative expenses incurred in providing CIL-funded infrastructure. I thank the noble Lord, Lord Jenkin, for his input. I emphasise that our desire to resist this amendment is based purely on the flexibility brought by the retention of this power in the Bill. This approach provides options for the long term, should we ultimately decide that authorities can use CIL receipts to cover administration costs.
The amendment seeks to protect CIL funds exclusively for direct infrastructure delivery and to prevent authorities diluting the benefit to infrastructure by spending CIL receipts on administration costs. I understand that concern, but the removal of the power in Clause 202(6)(c) may be counterproductive. Local authorities may well argue that if they are to introduce CIL, we must equip them to do so. Providing the power to finance the costs directly associated with operating CIL will therefore be an important facility.
The clause has been constructed in such a way that regulations can control how money is spent here, and, crucially, in such a way that limits can be set on the amount of CIL contributing to administration costs. In this way, it allows revenues to be protected for their principal purpose while helping authorities to finance the cost of the system. This approach is entirely consistent with practice on existing charges. The revenue from the levy in business improvement districts, for example, may be spent on administration costs. I recognise that the amendment intends to maximise money for delivery. However, the most effective way of achieving this might be to maximise the number of authorities introducing CIL. Permitting them to finance the cost of the system from receipts could serve as a strong incentive, and greater take-up will benefit developers and communities alike. For all those reasons, I ask the noble Earl not to press his amendments.
Amendment No. 442ZAA in the name of the noble Baroness, Lady Valentine, seeks assurances that authorities and their delivery partners do their best to ensure that CIL revenues result in infrastructure on the ground. I am sympathetic to that aspiration, but the amendment is unnecessary and may be unworkable. CIL will facilitate the delivery of the infrastructure needed to support growth because it will provide necessary funding. However, “best endeavours” creates a significant legal duty of the kind that is placed on managers of airports to assist constables or others in searching buildings, aircraft and people under the Aviation Security Act 1982, and on governing bodies for schools to provide for the special educational needs of children under the Education Act 1996. Why should an authority be required to implement new measures in the delivery of a project simply because CIL is applied to that project? What about other local authority services? Other initiatives ensure that LPAs put infrastructure planning at the heart of the development planning process; for example, the new PPS 12 on local development frameworks.
Clause 202(1) contains a requirement to impose an obligation that CIL is applied, or caused to be applied, to funding infrastructure. Charging authorities would not be acting lawfully if they held CIL revenue indefinitely or spent CIL on things other than infrastructure. Another aspect of the amendment is that it calls for an assessment of what might be called a proof of effort, not only on the part of authorities, but also on the part of third party delivery agents. This requires proof of something that would be very difficult for authorities or third parties to demonstrate or for central government to assess.
I do, however, appreciate that at its heart the amendment seeks to secure infrastructure delivery and hold authorities to account for their management and use of CIL revenues. The Government share this desire and for that reason the Bill already provides powers under Clause 202(7) to require authorities to monitor and report on their CIL activity. Local communities and developers will be able to spot any wrongful or inefficient use of CIL receipts and could exert pressure on a charging authority to make better use of moneys or to speed up delivery.
Therefore, I believe that we already have sufficient and measurable safeguards within the Bill and through pre-existing practices to achieve the intentions of this amendment. While I have sympathy with its intention, I believe, for the reasons I have set out, that the amendment is unworkable. I therefore ask the noble Baroness, Lady Valentine, not to press her amendment.
On Amendment No. 442A, the noble Lord, Lord Jenkin, said that one of the biggest issues was about stopping planning permission and then having no recourse or compensation, which the government amendment addresses particularly. But he raised a number of other issues on which I will write, if that is acceptable. I therefore ask him not to press his amendment.
Perhaps I may take the Minister back to a serious point concerning Clause 202(2) and (3). I am increasingly lacking in confidence that the Bill will work under the Government’s terms. Accepting that the Government want to set out the scope—I think that that was the term used by the Minister—of the types of infrastructure that a developer might be expected to fund under Clause 202(2), in order to have that certainty why are regulations needed under Clause 202(3) to,
“add, remove or vary an entry in the list of matters”?
It does not refer to the scope, but, I repeat, to the matters. I simply cannot understand how those two statements can lie together. I am not asking for a reply now. I am asking for this to be considered as perhaps the one constructive thing that I might have said this afternoon.
In case the fifth cavalry can come to the aid of the Minister, perhaps I may intervene. I listened with care to what he said, but he did not comment on my Amendments Nos. 442ZF, 442ZG and 442ZH, or on Amendments Nos. 442ZE and 438S. He covered the other amendment to which I spoke, but in his hurry to get through, he missed out speaking on these.
To address the issue raised by the noble Baroness, we will consider it and will write in some detail. Amendments Nos. 442ZF and 442ZG seek to remove the ability of regulations to decide the level of interest that may or may not accompany repayments of overpaid CIL from a charging authority to a developer. Instead, these amendments specify that where such repayments are made, they should do so with added interest of 3 percentage points above the Bank of England base rate. Let me reassure the noble Earl that the Government are keen to ensure that regulations provide adequate safeguards to CIL-liable parties.
On the matter of repayment, the Bill contains provision for regulations to be able to require repayment in cases of CIL overpayment, including where appropriate a suitable amount of interest. However, given the careful balance that needs to be struck by any such interest rate in incentivising the right amount of payment in the first place, this is an issue that the Government would prefer to set out in regulations rather than in the Bill. Overpayment by 3 per cent, as envisaged in the amendment, might actually encourage developers to overpay to secure a better rate of return from the charging authority than from a bank, and it would penalise a charging authority to pay out of public moneys interest, even if overpayment were made through no fault of its own.
I ask the noble Earl not to move his amendment and allow the Government to set out further detail on how charging authorities may be required to repay CIL-liable parties in cases of overpayment in regulations.
On Question, amendment agreed to.
[Amendments Nos. 438S to 442ZD not moved.]
Clause 202, as amended, agreed to.
[Amendment No. 442ZE not moved.]
Clause 203 [Collection]:
[Amendments Nos. 442ZF to 442ZH not moved.]
Clause 203 agreed to.
Clause 204 [Enforcement]:
[Amendment No. 442A not moved.]
442B: Clause 204, page 128, line 9, at end insert—
“( ) Regulations under this section may provide that any interest, penalty or surcharge payable by virtue of the regulations is to be treated for the purposes of sections 202 to 205 as if it were CIL.
( ) The regulations providing for a surcharge or penalty must ensure that no surcharge or penalty in respect of an amount of CIL exceeds the higher of—
(a) 30% of that amount, and(b) £20,000.( ) But the regulations may provide for more than one surcharge or penalty to be imposed in relation to a CIL charge.
( ) The regulations may not authorise entry to a private dwelling without a warrant issued by a justice of the peace.”
On Question, amendment agreed to.
Clause 204, as amended, agreed to.
442C: After Clause 204, insert the following new Clause—
(1) CIL regulations may require a charging authority to pay compensation in respect of loss or damage suffered as a result of enforcement action taken by the authority.
(2) In this section, “enforcement action” means action taken by a charging authority under regulations under section 204, including—
(a) the suspension or cancellation of a decision relating to planning permission, and(b) the prohibition of development pending assumption of liability for CIL or pending payment of CIL.(3) The regulations shall not require payment of compensation—
(a) to a person who has failed to satisfy a liability to pay CIL, or(b) in other circumstances specified by the regulations.(4) Regulations under this section may make provision about—
(a) the time and manner in which a claim for compensation is to be made, and(b) the sums, or the method of determining the sums, payable by way of compensation.(5) CIL regulations may permit a charging authority to apply CIL (either generally or subject to limits set by or determined in accordance with the regulations) for expenditure incurred under this section.
(6) A dispute about compensation may be referred to and determined by the Lands Tribunal.
(7) In relation to the determination of any such question, the provisions of sections 2 and 4 of the Land Compensation Act 1961 (c. 33) apply subject to any necessary modifications and to the provisions of CIL regulations.”
On Question, amendment agreed to.
Clause 205 [Community Infrastructure Levy: procedure]:
442D: Clause 205, page 128, line 26, at end insert—
“( ) procedures to be followed by a charging authority in relation to charging CIL;”
On Question, amendment agreed to.
443: Clause 205, page 129, line 3, at end insert—
“( ) CIL regulations should make provision for it to be an offence for any applicant for development consent to seek to influence the decision by making improper donations.”
The noble Lord said: This amendment seeks to outlaw what I refer to as improper donations, but which in practice are known as goodwill payments, and now I believe in some cases are called community funds, as one euphemism seeks to replace another in the age-old fashion. These are the payments which developers seeking planning permission for onshore wind farms are in the habit of distributing to entities in the locality where they are making the application. The developers have discretion as to what sum they offer, to whom they offer it and at what moment they offer it. The practice is now commonplace. The CPRE published a table only last week that detailed 35 such cases and says that such payments are now routinely offered by at least three of the principal wind power generating companies with each development they bring forward. The sums offered can run into hundreds of thousands of pounds over the life of the project.
At one point, it looked as though the Government might be considering the regulation of these payments. They stated in the 2007 planning White Paper that:
“Developers are not prevented from making goodwill payments to individuals; however, any such payments would be outside the planning system and cannot directly influence or be taken into account by a local planning authority in its determination of any planning application”.
No local authority in England has apparently got an official policy towards such payments, perhaps because the Government have said that they should be outside the planning system. But of course these payments are designed to influence the planning process and can, in fact, directly interfere with it.
For example, near to where I live, developers are applying for permission to build a large wind power station at Armistead in Cumbria. They offered £19,000 to redo the tennis court belonging to the youth club in a local village. This offer was accepted by the trustees of the club, two of whom were parish councillors and one of whom was married to a parish councillor. These councillors then had to absent themselves from the discussion on the proposal at the parish council meeting. As a result, the meeting lacked a quorum and the parish council was unable to deliver an opinion on the proposal to the district council. That is an example of interference in the planning system.
The time has come to regulate this area. The current situation provides too many opportunities for abuse. It also creates a highly divisive situation among local communities as developers, having already enriched selected farmers and landowners with the largesse supplied to them by the poor, unwitting electricity consumer, proceed after that to enrich selected elements among the local community.
As the Government will no doubt have noticed, this issue is gaining traction. Last week there was a 20-minute discussion on the subject at midday on Radio 4 following the publication of the CPRE paper. So I hope the Government will do something. The Minister explained today that wind turbines would not be liable to CIL. My point is that the present substantial contributions to the local community made by the developers should be regulated and that the current lawless and disturbing situation should not be allowed to continue and develop unchecked. I challenge the Minister to justify the Government’s present policy on this. To do so could be said to be the point of this probing amendment. I beg to move.
I shall speak, first, to the government amendments in this group. Amendment No. 443ZA has been brought forward in response to concerns about the reserve powers that the Secretary of State would have to intervene in the way charging authorities set, collect and apply CIL. Representations have been made about the wide nature of the Secretary of State’s delegated powers and we have listened to those. The amendment therefore seeks to remove the regulation powers for the Secretary of State to provide herself with intervention powers over CIL-charging authorities.
The noble Earl, Lord Caithness, has indicated that he intends to oppose the Question that Clause 206 should stand part of the Bill. Following this amendment, Clause 206 would contain only a power for the Secretary of State to give guidance on any matter connected with CIL. I hope that that does not warrant a stand part debate and, on that basis, that the noble Earl will not oppose Clause 206 standing part of the Bill.
Government Amendment No. 444C provides for amendments to be made to four Acts of Parliament so that CIL can function effectively and efficiently. Under proposed new subsection (1) of the amendment, Section 101(6) of the Local Government Act 1972 would be amended to provide that CIL is not a rate for the purposes of the subsection. Section 101 allows for, among other things, the delegation of functions within a local authority to its committees, sub-committees and officers. Section 101(6) disapplies Section 101 for the purposes of functions with respect to levying a rate. To avoid any question about whether CIL is a rate for the purposes of the Local Government Act, the amendment provides that CIL is not to be considered a rate for Section 101(6).
Section 38 of the Greater London Authority Act 1999 allows the Mayor of London to delegate functions. In particular, Section 38(2) allows the mayor to delegate his functions not only to the deputy mayor and any member of the staff of the Greater London Authority but also to the London Development Agency, the Common Council of the City of London and local authorities. The effect of proposed new subsection (2A) in the new clause is that the mayor may not delegate his CIL function to the latter three bodies.
There is a restriction in Section 9(8) of the Norfolk and Suffolk Broads Act 1998 which means that the Broads Authority may delegate functions in relation to its navigation area only to its navigation committee. Proposed new subsection (3) would mean that the Broads Authority would be able to delegate CIL functions, within its powers to delegate, to someone else should it so wish to do.
Finally, Section 71(1)(c) of the Deregulation and Contracting Out Act 1994 prevents a Minister making an order for the contracting out of,
“a power or right of entry, search or seizure into or of any property”.
Exceptions are made to that in Section 71(3) relating to the enforcement of things such as non-domestic rates and water charges. The amendment provides a similar exception for CIL purposes.
Government Amendment No. 460 is concerned with the commencement of two sets of provisions in Part 11. The effect of Amendment No. 460 would be that Clause 199 and the consequential amendments provided for in a new clause by Amendment No. 444C are to come into force by a commencement order by the Secretary of State.
Amendment No. 443, tabled by the noble Lord, Lord Reay, seeks to provide that the CIL regulations create a new offence when an applicant for development consent seeks to influence the decision by the consenting authority by offering what are called “improper donations”. I reassure him that government policy is extremely clear on this issue; it is a fundamental principle of the planning system that planning permission cannot be bought or sold. I know there is some concern—he has quoted the CPRE evidence—about the influence of benefits offered by some wind farms.
The question turns in part upon what is a material consideration relevant to a decision to grant planning permission for a particular development. That is a matter of both law and fact. It must be something that is about the development in question and the use of land, but in an individual case it will depend on the facts. The problem with the amendment is that it means that if a developer gets that difficult judgment wrong, they will have committed an offence, and that is obviously not right.
A planning authority is already acting unlawfully if it gives an unreasonable amount of weight to something in reaching a decision, or gives weight to something that is not a material consideration. If it does so, its decisions are potentially subject to judicial review or to investigation by the Local Government Ombudsman. I strongly believe that that is right and we should not alter the situation. I know that is a disappointing reply for the noble Lord, but I hope he can remove his amendment on that basis.
I am disappointed by the Minister’s response to my noble friend Lord Reay. I thought he had an extremely good point. I could regale the Committee with a number of examples where communities have been split by this developer behaviour. It is not just wind power; it is rich developers who are in a position to use money to try to secure local agreement by various means. In the case that has been mentioned, the parish council could not even take a vote on the issue. I hope she will look at this again. My noble friend has a good point and I felt she was a little dismissive of it, which is not her normal way.
The question of whether the clause should stand part follows from my Amendment No. 435J. However, I am grateful to the Minister for her Amendment No. 443ZA because it gets the Secretary of State out of where the Secretary of State should not be. I claim that as a little victory. The Minister has given precious little away throughout the Bill. It has been a long hard slog, and if she were opening bat for England we would not lose a test match.
I shall just say a word about two of the government amendments. On Amendment No. 444C—I relate this back to the question that I asked on Amendment No. 438M, which is now subsection (6) of the new clause in the amendment—I assume that the personal approval of the declaration under that new clause is not a function exercisable under Part 11. I am still puzzled, but maybe when I read it all it will become clear.
I have put it as an observation. On Amendment No. 460 to Clause 226, which is the commencement clause, can the Minister explain why only these two provisions are to be subject to the Secretary of State bringing the commencement by order? Is it to enable the development of regulations? Perhaps I could say a word about the timing; noble Lords have touched on this already. I understand that the Government had indicated that they expect commencement to be in the spring of next year. The noble Baroness is nodding. Given the need for consultation on the regulations and the economic climate, this is ambitious, but I suppose the regulations will come in after the Bill has been enacted and the Act has commenced.
The noble Baroness has said that she will write to noble Lords with some idea of when the new regime can be in place. That would have to be after the development of a charging schedule and its examination.
This has been a very difficult day. I take no pleasure in being as critical as I have been, but my noble friend and I feel extremely strongly that had the Government drafted regulations rather than focusing on how to get to the next stage of the Bill, then we would not have heard the difficulties, questions and criticism that have been voiced around the Committee today. The Government are often in this difficult situation of regulations following enactment. I do not expect the Minister to comment on this; I am being slightly self-indulgent in sounding off. But had regulations been thought through instead of an attitude of “How the hell can we get through this bloody Bill?”—unparliamentary language, maybe, but I think it expresses what quite a lot of people are feeling—we would have got to the end of this stage with much more consensus because our analysis of the problems might have come together rather more.
I hear what the noble Baroness says. Having worked hard over the summer to put things on the face of the Bill, I think we have had a much better debate than we were able to have on Second Reading. I will write to her about the commencement orders and set out the schedules.
I was disappointed with the noble Baroness’s reply to my amendment, as she realised I would be. However, I will read carefully what she said. I do not think that this issue will go away. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 205, as amended, agreed to.
Clause 206 [Secretary of State]:
443ZA: Clause 206, page 129, line 10, leave out subsections (1) to (4)
On Question, amendment agreed to.
Clause 206, as amended, agreed to.
[Amendment No. 443A not moved.]
Clause 207 [CIL regulations: general]:
444: Clause 207, page 130, line 2, leave out “the House of Commons” and insert “both Houses of Parliament”
The noble Lord said: The amendment’s wording refers to the parliamentary approval of the regulations made under this part of the Bill. This was referred to very briefly by the noble Lord, Lord Goodhart, on Second Reading. I have been asked to say that he totally supports the amendment and offers his apologies to the Chamber for being unable to be here today. He chaired the Delegated Powers and Regulatory Reform Committee of this House and it is right that I draw attention to what it said on this issue.
Paragraph 26 of the report says:
“Regulations under clause 198 are subject to affirmative procedure in the House of Commons only. The memorandum”—
that is, the government memorandum—
“seeks to justify this on the basis that the regulations may result in the imposition of a charge, a matter for the financial privilege of the House of Commons”.
It is a matter for the other House to decide that; but one has to point out, as this report does, that,
“receipts are not paid into the Consolidated Fund or any other particular fund but are to be spent by the receiving body (clause 202(1)); and that the regulations, so far as dealing with the matters referred to in clauses 202, 205 and 208, are not obviously financial”.
Perhaps most significant, as the committee pointed out, is the statement that,
“the following charges are subject to a procedure in both Houses: national insurance, council tax, business rates, the Business Improvement Districts levy, the climate change levy and indeed the two charges”,
which were mentioned in the Government’s memorandum. It goes on to recommend,
“Except in so far as the House considers that provision in Part 11 … is related to matters over which the Commons will claim financial privilege, we recommend that the power at clause 198 … should be subject to control in both Houses”.
This is a matter of considerable constitutional significance. I have consulted the House authorities about the exact position. The first sentence in paragraph 7.173 of the Companion to the Standing Orders, which the authorities referred me to, says:
“Each House of Parliament is guardian of its own privileges. It alone may invoke them. Until it does so, the other House is free to act as it thinks fit”.
So it is entirely appropriate for us to table the amendment that I have tabled. It will be open to another place to claim the financial privilege, but only after the Bill is returned with the Lords amendment.
There is an exception to that rule—a category of matter which,
“prima facie are material and intolerable infringements of privilege”—
such as imposing a charge on public revenues, and so on. The Companion goes on to say:
“With these exceptions, the Commons may either invoke their financial privileges in respect of Lords amendments or waive them; and the Commons regularly accept Lords amendments which have financial implications. The Speaker of the Commons directs that a ‘special entry’ be made in their Journals implicitly asserting their general rights but stating that the Commons accept the Lords amendment, ‘the Commons being willing to waive their privileges’”.
Given the very clear and comprehensively argued case made by the Delegated Powers and Regulatory Reform Committee, it is not only entirely proper for us to table the amendment that I have, but incumbent on us to do so as we think fit as an expression of our entitlement to do so.
I add only one other point in favour of the amendment. When I was Secretary of State for the Environment, I had a very senior civil servant working for me with whom I kept closely in touch. He rose through the ranks and became a Permanent Secretary in another department. I speak of Sir Geoffrey Chipperfield, who has given me permission to use his name. At the end of a letter, in which he voiced a number of other criticisms, he said:
“But what worries me most is that all the secondary legislation needed to implement all this will merely be subject to affirmative resolution in the Commons. We all know that it is virtually impossible to find the time or the will for MPs to debate affirmative resolutions thoroughly. It is a great pity if the CIL is regarded as a financial measure which the Lords can’t look at, because it does seem to me that any regulations made to implement it need the sort of detailed scrutiny that only the Lords can give”.
That is a very powerful opinion from somebody who is thoroughly familiar with the system of parliamentary government in both Houses and we should treat it seriously. It is absurd that the Bill should allow the regulations to be debated only in the House of Commons, requiring only the approval of another place. It is not a tax—I criticised my noble friend earlier about that—but a charge. It is a charge which goes to local authorities; it does not go into the Consolidated Fund; and it is exactly like all the other charges that were listed in the report of the Delegated Powers Committee. I beg to move.
I associate these Benches with the comments of the noble Lord; we entirely agree with him. Perhaps I may add one technical observation. What we have been discussing, even if it were a tax, is much broader than a financial provision. For that reason, I would support this House’s role.
I have put my name to the amendment. I was critical of the Minister at Second Reading and suggested that she was quite wrong to allow to come to this House a Bill containing a clause concerning a levy for which only the House of Commons would be allowed to discuss the regulations. Having ploughed through today’s proceedings, I am even more convinced that I was right in saying that the way in which this Bill has been presented is a disgrace. It quite contradicts Mr Healey, who said in the Commons that the Lords would be fully informed and,
“have the maximum information possible”.—[Official Report, Commons, Planning Bill Committee, 31/1/08; col. 632.]
The Bill as it stands is a quite deliberate attempt to stop this House debating the regulations and prevent us having the maximum information available. If that is how the Government wish to treat this House, let them firmly state that on the record.
Lest it be thought that no one on this side shares the views of the noble Lord, Lord Jenkin, I associate myself with them. I said at Second Reading that I thought that the levy was a tax. It was made clear by the Minister that it was not. When the question of Treasury involvement was raised today, it was made clear that that was not because it was a tax. The heart and guts of this are precisely in the regulations. It is deeply offensive for a framework Bill depending on regulations to be put before us when those regulations need a lot more work before they are brought forward. I say in a non-partisan way—I do not associate myself with some of the more emotive remarks of the noble Earl, Lord Caithness—that my noble friend the Minister would do a service to the Chamber to accept that a substantial case is being made. It is not the way for the Government to proceed and I hope that they will think again.
Those who have expressed views on the amendment moved by my noble friend Lord Jenkin are in complete agreement that it would be improper if the regulations could be approved only by the other place. I am grateful to my noble friend for setting out in detail the background and going through all the official guides to parliamentary procedure. If the Government’s aspiration for the levy to be seen as a charge is to have any credibility, they must accept that this House has every right to play a full part in consideration of the regulations. I hope that the Minister will save us all the trouble of coming back to the amendment again and accept it.
The amendment was moved in great seriousness and has found support all around the Committee. I will not reiterate the quotations of the noble Lord, Lord Jenkin, from the DPRRC. I am sorry to say that I cannot agree with his judgment about how this is best done.
The amendment goes further than the DPRRC’s report, which recognises that the Commons may claim privilege over some parts of the CIL clauses. This very important issue goes to the heart of the relationship between our House and the other place. I have considered this sensitive issue carefully, but we must also be mindful of the views of the other place, as indeed the DPRRC’s report indicates. I believe that the Speaker of the House of Commons will reach a view on whether financial privilege extends to amendments made by this House when the Bill is returned to the other place. The decision is for the Commons authorities. I cannot advise on what that decision will be. Our considered view is that this matter is covered by privilege.
I do not think that I can add anything else to the matter at the moment. The DPRRC report notes that the matter would be better left for the other place to resolve. The views of noble Lords are certainly on the record.
I am deeply disappointed at the noble Baroness’s view. I had hoped that she might at least take the matter back and discuss it with her colleagues. She has missed the point. It is for the other House to claim privilege; it is not for this House to take a view on what that privilege is.
We have had a very long day. I have been on the Energy Bill too so we are quits on that. I am not sure that the Minister took the matter on board, so I will quote again from the Companion. It states:
“Each House of Parliament is guardian of its own privileges. It alone may invoke them. Until it does so the other House is free to act as it thinks fit”.
The Chamber is not full, but given that there is support on every side of it for this amendment, and that it was strongly spoken to at Second Reading, I hope that the noble Baroness would say that there were strong feelings in this House. I did not go so far as the noble Lord, Lord Woolmer, did when he said that the provision was offensive, but I have to say that I actually feel that myself.
When you think, as the Delegated Powers Committee said, that national insurance, council tax, business rates, business improvements and the climate change levy regulations are all approved by both Houses, it is, if I may say so, offensive that the Government have decided that the community infrastructure levy is to be the privilege of the House of Commons on its own. If another place chooses to do that, of course that is its right, but I hope that the noble Baroness, perhaps in conjunction with the Leader of the House, will take back to her colleagues the strong feelings that have been expressed on the matter so that we may return to it and perhaps get a better answer. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 207 agreed to.
Clause 208 [Relationship with other powers]:
[Amendments Nos. 444A and 444B not moved.]
Clause 208 agreed to.
444C: After Clause 208, insert the following new Clause—
“Community Infrastructure Levy: amendments
(1) In section 101 of the Local Government Act 1972 (c. 70) (arrangements for discharge of functions by local authorities) after subsection (6) insert—
“(6A) Community Infrastructure Levy under Part 11 of the Planning Act 2008 is not a rate for the purposes of subsection (6).”
(2) In section 9 of the Norfolk and Suffolk Broads Act 1988 (c. 4) (the Navigation Committee)—
(a) in subsection (8), after “Subject” insert “to subsection (8A) and”;(b) after subsection (8) insert—“(8A) Subsection (8) does not apply in relation to functions under Part 11 of the Planning Act 2008 (Community Infrastructure Levy).”(3) In section 71(3) of the Deregulation and Contracting Out Act 1994 (c. 40) (contracting out: functions of local authorities) omit the word “and” at the end of paragraph (g) and after paragraph (h) insert “; and
(i) sections 203 and 204 of the Planning Act 2008 (Community Infrastructure Levy: collection and enforcement).”(4) In section 38 of the Greater London Authority Act 1999 (c. 29) (delegation), after subsection (2) insert—
“(2A) In relation to functions exercisable by the Mayor under Part 11 of the Planning Act 2008 (Community Infrastructure Levy) subsection (2) has effect with the omission of paragraphs (c) to (f).””
On Question, amendment agreed to.
Clause 209 agreed to.
444D: After Clause 209, insert the following new Clause—
“Planning-gain Supplement (Preparations) Act 2007 (c. 2)
The Planning-gain Supplement (Preparations) Act 2007 (c. 2) is repealed.”
The noble Earl said: I can move the amendment briefly because the noble Baroness wrote my speech for me in speaking to Amendment No. 435A. She said that the Government were not going to reintroduce PGS, so why do we need the Planning-gain Supplement (Preparations) Act 2007 on the statute book any more? I beg to move.
That is one of the better speeches I have heard.
The amendment would provide for the repeal of PGS. The Prime Minister stated in July 2007 that the main planning-gain supplement Bill was provisional. If a better alternative were found, the Government would be willing to defer its introduction in the current legislative Session. Following discussions with the development industry, the Government deferred the introduction of a planning-gain supplement Bill in this parliamentary Session to take forward CIL in preference. The Government are clear that more revenues are needed to help fund the infrastructure necessary to support growth, and the development industry is willing and has backed CIL. We are legislating for CIL, not PGS.
The PGS preparations Act 2007 is three sections long and cannot be used to introduce PGS. It does not set out the detailed policy, nature or operation of PGS. Its sole purpose is to allow certain authorities to spend money in order to prepare for the introduction of PGS—for example, to develop IT systems. In the event, no expenditure has been incurred in relation to PGS which would not have been permitted in the absence of the preparations Act. There is therefore no need to repeal the preparations Act, as it was a narrow preparations measure designed to ensure the regularity and probity of government expenditure in accordance with the usual government accounting rules. I hope that the noble Earl can withdraw his amendment.
That is a dreadful response, with due respect to the Minister. Can she tell me how much money has been spent under the preparations Act? Why, if the Government are not going to proceed with it, do they need it on the statute book?
This is the Government at their most duplicitous. They would prefer a planning-gain supplement. I can see that in a few years’ time they will turn around and say that CIL is not working, so we need a planning-gain supplement. As we would still have the preparations Act on the statute book, they could use that to get on and start planning, introducing another bit of legislation. That is unacceptable. I hope that the Minister has a better answer for me now. Given her assurance that they are not going to introduce PGS, why does one still need the preparations Act on the statute book?
I am so tempted to call a Division now. I am very frustrated at the close of today’s business. Clearly, however, a Division would count the House out. That would not be conducive to the rest of business. For the time being, I shall withdraw the amendment, but I would hope that the noble Baroness could, first, answer my question on how much has been spent and, secondly, write to me in slightly fuller detail about this. Otherwise we might have to come back to it.
445: Clause 212, page 131, line 14, leave out “expressions relating to the Crown” and insert ““Crown land” and “the appropriate Crown authority””
446: Clause 212, page 131, line 17, at beginning insert “For the purposes of this section,”
447: Clause 212, page 131, line 36, at beginning insert “For the purposes of this section,”
On Question, amendments agreed to.
Clause 212, as amended, agreed to.
Clause 213 agreed to.
Clause 214 [Service of notices: general]:
448: Clause 214, page 133, line 23, leave out “(subject to subsection (4))”
On Question, amendment agreed to.
Clause 214, as amended, agreed to.
Clauses 215 and 216 agreed to.
Clause 217 [Orders and regulations]:
449: Clause 217, page 135, line 16, leave out “This section applies” and insert “Subsections (2) and (3) apply”
450: Clause 217, page 135, line 18, at end insert—
“( ) a power conferred by paragraph 1(4) of Schedule 4;”
451: Clause 217, page 135, line 31, leave out from “containing” to end of line 32 and insert “—
(a) an order granting development consent;(b) an order made by virtue of paragraph 1(7A) of Schedule 4;(c) an order changing or revoking an order granting development consent;(d) an order under section 14(3), (Intervention: other circumstances), 153(3), 154(5), 165(1), 196(5) or 212(3)(g);(e) regulations under section 101(2)(c) or 102(2)(b).”
452: Clause 217, page 135, line 33, after “14(3),” insert “(Intervention: other circumstances),”
453: Clause 217, page 135, line 35, at end insert—
“(7) No regulations may be made under section 101(2)(c) or 102(2)(b) unless a draft of the instrument containing the regulations has been laid before, and approved by resolution of, each House of Parliament.”
On Question, amendments agreed to.
Clause 217, as amended, agreed to.
Clauses 218 and 219 agreed to.
Clause 220 [Interpretation]:
[Amendment No. 454 not moved.]
455: Clause 220, page 136, line 41, at end insert—
““gas transporter” has the same meaning as in Part 1 of the Gas Act 1986 (see section 7(1) of that Act);”
On Question, amendment agreed to.
Clause 220, as amended, agreed to.
Clause 221 agreed to.
Schedule 12 [Application of Act to Scotland: modifications]:
455A: Schedule 12, page 188, line 9, at end insert—
“ Section (Liability under existing regimes) applies as if—
(a) for paragraph (c), there were substituted—“(c) section 10 of the Water (Scotland) Act 1980 (compensation for damage resulting from exercise of statutory powers)”, and(b) paragraph (d) were omitted.Section (Compensation in case where no right to claim in nuisance) applies as if—
(a) in subsection (4), the reference to the Lands Tribunal were a reference to the Lands Tribunal for Scotland,(b) for subsections (5) and (6) there were substituted—“(5) Section 6 of the Railway Clauses Consolidation (Scotland) Act 1845 (which makes the construction of the railway subject to that Act and the Lands Clauses Consolidation (Scotland) Act 1845) applies in relation to authorised works as it applies in relation to the construction of a railway.(6) Any rule or principle applied to the construction of section 6 of the Railway Clauses Consolidation (Scotland) Act 1845 must be applied to the construction of subsection (3) of this section (with any necessary modifications).”, and(c) in subsection (7)—(i) the reference to Part 1 of the Land Compensation Act 1973 were a reference to Part 1 of the Land Compensation (Scotland) Act 1973, and(ii) in paragraph (c), for “17” there were substituted “15”.”
456: Schedule 12, page 188, line 19, at end insert—
“ Section 163 applies as if—
(a) in subsection (3)—(i) for the words from “the”, where it first occurs, to “(c. 49)” there were substituted “subsections (5) to (9) of section 135 of the Town and Country Planning (Scotland) Act 1997 (c. 8) (which relate to the execution and cost of certain works)”, and(ii) the words from “section 276” to the end were omitted,(b) in subsection (4), for “section 289” there were substituted “subsection (5) of section 135”, and(c) subsection (5) were omitted.”
On Question, amendments agreed to.
Schedule 12, as amended, agreed to.
Clauses 222 and 223 agreed to.
Schedule 13 [Repeals]:
457: Schedule 13, page 189, leave out line 36
On Question, amendment agreed to.
Schedule 13, as amended, agreed to.
Clause 224 agreed to.
Clause 225 [Extent]:
458: Clause 225, page 139, line 29, at end insert—
“( ) Section (Grants for advice and assistance: Scotland) extends to Scotland only.”
459: Clause 225, page 139, line 36, after “construction” insert “(other than by a gas transporter)”
On Question, amendments agreed to.
Clause 225, as amended, agreed to.
Clause 226 [Commencement]:
460: Clause 226, page 140, line 10, leave out “(subject to subsection (7) below);” and insert “, except sections 199, (Community Infrastructure Levy: amendments) and 209;”
On Question, amendment agreed to.
Clause 226, as amended, agreed to.
Clause 227 agreed to.
House resumed: Bill reported with amendments.