Earl Attlee
My Lords, the purpose of the CIL is for owners or developers of land to contribute to the cost of providing infrastructure that supports the development of the area. Almost all development has some impact on the need for infrastructure, or benefits from it. It is fair that such development pays a share of the cost of providing that infrastructure. In setting a charge, local authorities must have regard to the actual and expected costs of infrastructure and its other sources of funding. They must also have regard to the economic viability of development, which includes the need to deliver affordable housing.
The noble Lord, Lord McKenzie of Luton, proposes amendments to provide that affordable housing provision will not be prejudiced by any levy charges that an authority may set. As we explained in the other place and to the National Housing Federation, the existing legislation already provides appropriate safeguards to avoid negative implications for the delivery of affordable housing. The statutory guidance issued under Section 221 of the Local Planning Act 2008, to which local authorities are required to have regard, explicitly sets out that a charging authority must take development costs, particularly those for affordable housing, into account when setting a charge. The point of the levy is to support and not frustrate the delivery of a local development plan. The statutory guidance is specifically clear that an examiner should consider whether a local authority’s proposed charges would put their affordable housing target at risk. Where the independent examiner considers that it does, they should not approve the proposed charge.
The noble Lord, Lord McKenzie, asked me about the Section 106 funding source for affordable housing. It does not follow that the imposition of a CIL charge will result in lower Section 106 contributions. In setting a charge, a council has to consider the impact on the economic viability, including affordable housing, and ensure that the levy does not put it at risk, which will include affordable housing funds. These amendments are clearly well intentioned. We agree that affordable housing is important and must not be harmed by the implementation of a levy. I can reassure noble Lords that the amendments are unnecessary, as appropriate safeguards already exist.
The noble Lord, Lord Greaves, in his Amendments 148ZZZBE et cetera, seeks amendments that would in effect allow local authorities to implement a charge without first having to remedy any deficiency identified by the independent examination of their proposals. Local authorities are in the best position to know what level of charges will work in their area to support development and encourage growth, but we do not accept that they should have complete freedom to set any charges they like. Instead, we are maintaining proportionate safeguards to prevent unreasonable levy charges, which could put development at serious risk. Our proposals rebalance the relationship between the examiner and the local authority, to provide that it is the authority that has the final decision on how any deficiencies in their proposed charging schedule are addressed. However, we are clear that any changes made by the authority must be sufficient and necessary to remedy any non-compliance identified by the independent examination of the proposals.
Noble Lords also seek to remove powers that allow for regulations to make provision about the evidence that a local authority must or must not consider in setting a charge. Our experience of similar examination of local plan-making shows that the decisions of independent examiners vary. Councils have tended to give a great deal of weight to previous decisions, and that has sometimes led to restricted local flexibility and freedom. We want to ensure that that does not occur with the levy. The proposed power will enable the Government to respond in a robust and flexible way to practices which threaten to undermine the ability of councils successfully to introduce their local levy charges. Our proposals strike the right balance between ensuring that local authorities have real discretion to set charges in their area while retaining appropriate safeguards to ensure that proposals do not put development of the area at risk.
Amendment 148ZZBBA, tabled by my noble friend Lord Greaves, would widen the permitted use of levy receipts beyond infrastructure to matters that support the development of an area. My noble friend has raised an interesting point. We are clear that the point of the levy is to support growth and new development. Infrastructure is of course central to supporting new development and unlocking growth, but it is not the only matter necessary to enable and incentivise development. We want to reflect on whether continuing to limit spending solely to providing infrastructure restricts local authorities’ ability to support and enable development of the area. We want to consider whether widening permitted uses of the levy would make the instrument more effective and better placed effectively to promote, support and enable new development.
My noble friend Lord Greaves also proposes Amendment 148ZZBBB, which would do two things. First, it would alter the purpose of the levy so that it is focused on supporting communities rather than development. We have set out proposals to pass a proportion of the funds raised in an area to the parish council for that area and for those funds to be spent on infrastructure to support the development of that area. Control over the remainder of the funds is to be retained by the charging authority—normally the unitary, district or borough council—to provide the infrastructure needed to support the development of the larger area. The point is that the impact of the development and the infrastructure needed to support it are not confined to the geography of the community. Some will be, and our changes to direct a meaningful proportion of funds to the communities where development takes place will deal with that. Other matters, such as transport, span communities—and, indeed, charging authorities.
Secondly, the amendment proposes to allow funds to be used for the building, improvement and renovation of housing. That is unnecessary, as existing primary legislation in the Planning Act 2008 already contains the power to allow for levy receipts to be spent on affordable housing. However, regulations currently prevent that. Allowing such spending is therefore not a matter for the Bill, but the treatment of affordable housing is relevant to the amendments sought. I can confirm that we will consult during the summer on making that change through regulations.
In Amendment 148ZZCB, my noble friend Lord Greaves seeks to remove the provision for regulation to set out the ongoing costs to be funded by the levy. The powers we propose mirror existing ones in the Planning Act 2008, which allow for regulations to set out the works, installations or other facilities to be funded by the levy. The existing powers are currently used to specify that the Mayor of London must use receipts to fund strategic transport infrastructure. London is unique in that the London boroughs may also levy charges in their area, but are free to spend the receipts on any infrastructure to support their areas. We have no plans to use the power to specify the ongoing costs to be funded, but we envisage that it is necessary to deal with similar exceptional circumstances.
Lord Berkeley
Can the noble Earl clarify what is covered by “future ongoing costs”? Is it maintenance of housing or maintenance of a road? It is a bit of an open-ended commitment. You can understand a capital cost but if it is maintenance for roads or housing forevermore, it seems a bit odd.
Earl Attlee
My Lords, perhaps it would be helpful if I first answered the question from my noble friend Lady Hamwee on whether ongoing means maintaining the infrastructure or excludes it. Clause 100 sets out that this includes maintenance and operation of infrastructure.
Amendment 148ZZBBC seeks to allow the levy to fund the provision of infrastructure on a continuous rather than ongoing basis. We do not believe that this amendment would have a material effect. Our changes clarify that levy receipts can be used to maintain the ongoing costs of providing infrastructure but such spending will still have to satisfy the requirement that it also supports development of the area. The reason for our change is that the current provisions are being construed as limiting spending only to the initial costs of providing infrastructure. This could prevent infrastructure that is wanted and needed from being provided where the funds necessary to maintain and run it are not available. This is a perverse outcome and we are making sure that councils have the flexibility to deliver what is needed to support development of their area.
My noble friend Lord Lucas seeks an amendment that would prevent regulations allowing levy receipts to be reserved for future ongoing costs. I have explained that our proposals are concerned with ensuring that local authorities have real flexibility to spend the funds on the matters that are needed to support development in their area. We believe that this amendment would constrain this flexibility and could result in inefficient and ineffective spending by requiring funds to be used now rather than retained for future strategic projects that are planned.
Amendment 148ZZCD, tabled by the noble Lord, Lord Greaves, and others, proposes to remove provisions that provide for regulations to place a duty on charging authorities to pass all or some of any community infrastructure levy received to other persons. Alongside the physical barriers to new development, growth can be slowed or restricted by local concerns about its impacts. We intend to use the powers conferred by Clause 100 to require charging authorities to pass a meaningful proportion of receipts raised from new development in an area to a parish, town or community council for that area where there is such a local council. The local council will be required to spend the funds to provide infrastructure to support the development of its area.
When communities understand that new development is directly contributing towards the cost of the demands that it places on the infrastructure of their area, and see that they will be given real control over how these resources are used to address those demands, they are more likely to accept and indeed support it. Our reforms to the levy will make it genuinely pro-growth. Addressing the demands that new developments place on infrastructure will enable development to happen and it will incentivise communities to accept it. Using receipts to invest in the local area will ensure that growth is supported and sustainable, which will in turn unlock new development and growth.
We want to reflect on the amendments proposed by my noble friends Lord Greaves and Lord Tope to allow the spending of the levy on matters other than infrastructure. It is essential that the levy operates in a way that helps drive growth as effectively as possible. We will carefully consider whether permitting spending on other matters can improve the instrument’s ability to support and enable development. As ever, I am very happy to discuss these matters privately between this stage and Report. I hope that noble Lords will feel able to withdraw their amendments at the appropriate point.
Earl Attlee
My Lords, that is quite a detailed point. It would probably be safer if I wrote to the noble Lord on that.
Lord Lucas
My Lords, I would certainly like to take up my noble friend’s offer of conversations between now and Report. I think I heard three different answers to the question posed by my amendment, and I hope that I will end up with one answer by the time we get there.
Lord McKenzie of Luton
My Lords, I, too, thank the Minister for a full and indeed very positive, or broadly positive, reply. Certainly at this hour, I should like to read the record and perhaps revert to those who pressed this particular amendment on us to talk it through with them in detail. I am grateful to the noble Lord, Lord Greaves, for the thrust of his support. These issues around who else the levy should be paid to are certainly important ones, and I would be happy to be included in that correspondence if I may. It is also important that it is done by diktat of the Secretary of State rather than being the local authorities’ decision.
Can I just check: did I hear the Minister correctly when he said that he thinks it is right that the legislation provides for affordable housing to be included within infrastructure—the regulations currently preclude that? Did the Minister say that he was looking to consult on that later this year to change that rule, so affordable housing could be included? Was that what he said?
Earl Attlee
My Lords, I think the noble Lord will have to read the Hansard, but what I said was quite clear and the words in my speech will make that clear. The short answer is yes.
Lord McKenzie of Luton
In which case, I am most grateful to the noble Earl.