Community Infrastructure Levy (West Berkshire)
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Richard Benyon (Newbury) (Con)
It is a great delight to serve under your chairmanship this afternoon, Mr Hood. I am delighted that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), will be replying to the debate. [Interruption.]
Richard Benyon
To carry on where we left off, I am extremely grateful for the opportunity to bring before the House a matter of concern to my local authority. I welcome my hon. Friend the Member for Great Yarmouth, the Minister with responsibility for local government, to his place, and recognise that the Under-Secretary of State for Communities and Local Government, my hon. Friend the hon. Member for Grantham and Stamford (Nick Boles), who is responsible for planning and who was due to respond to the debate, is otherwise engaged on the Committee Corridor. I know that the local government Minister will convey to him the essence of the debate.
In his response, I hope that the local government Minister will be able to address my concerns. The Planning Minister is familiar with my constituency, because he and I were educated at the same primary school. He knows the pressures of development in West Berkshire and probably thinks of an area like it when he articulates his concerns about not only protecting the countryside and green spaces but addressing the needs of development, to allow the right sort of development to happen in the right place.
I am grateful for this opportunity to raise an issue that is of great concern to my local council. As the Planning Minister will know, and as I am sure my hon. Friend the Minister with responsibility for local government will have been briefed, in September 2004 West Berkshire council adopted its then groundbreaking new policy for securing contributions from developers to improve and enhance council services and infrastructure.
I sat on the Bill Committee that considered what is now the Planning Act 2004 and was closely involved in the previous Government’s attempts to produce a meaningful system for developer contributions. I therefore appreciate the current challenges faced by the Department. That said, it is a shame to constrain local authorities to follow a one-size-fits-all system like the community infrastructure levy, which will not achieve the level of simplicity of West Berkshire’s existing scheme or raise the sums that it does. Today I am asking the Minister to allow a degree of flexibility for well run councils like West Berkshire to continue with their tried and tested scheme.
Since 2004, West Berkshire council has sought contributions from residential developments as small as one house and from commercial developments where the number of staff generated is greater than 10. This formulaic approach has meant that even the smallest residential development contributes towards improvements and to the expansion of council services, be that education, highways, libraries, waste disposal, adult social care, open spaces or health care. Other services require contributions, or mitigation measures for larger developments, and the council’s affordable housing policy was recently updated so that developments of more than five dwellings provide much needed affordable housing on a proportional basis.
West Berkshire council’s current system is clear, simple and effective. The Minister will agree that planning is always going to prove contentious, and he will be aware of that in his constituency as much as elsewhere, but I know he will be impressed that the system delivered in West Berkshire for more than a decade has been achieved with relatively few complaints.
Over the past 10 years, West Berkshire council has banked an average of £4.3 million per annum, all secured to improve council services and to mitigate the impact of development. In addition, a reasonable administration fee is paid for running the system, which means that there is no cost to the taxpayer. Rough calculations provided to me by council officials, however, show that if the community infrastructure levy had been in place over that period, the council would have received only about 75% of the amount that it has raised, with about 15% to 20% of that going to parishes.
Under the West Berkshire council scheme, all the contributions directly benefit the communities affected by development. There is no top-slicing for administration and no shortfall in funding. The planning policy and the formulaic approach are easy to understand and they have been regularly updated and improved to ensure that the policy remains relevant and continues to mitigate the impact of development. The council has had challenges from developers through both the courts and planning appeals, but the policy withstood such challenges well.
Where issues have been raised, or shortcomings identified, West Berkshire council has adapted and updated its policy. Indeed, the policy has been praised by the Audit Commission as an example for other authorities to use as best practice. The council has been visited by the Treasury, as well as other councils, all of which wished to learn from its experiences.
West Berkshire council was involved with the previous Government’s proposals for the planning gain supplement and with the early development of its replacement, the community infrastructure levy. The Minister will note that West Berkshire council has consistently sent robust responses to consultations on the issue. The council has experienced no detrimental effects as a result of its developer contributions policy, and its housing build numbers are close to target, with an average of 515 from an annual target of 525. It maintains a housing supply—based on existing planning permissions—for in excess of five years. It cannot therefore be argued that the policy has held back development.
Council members are really frustrated that a highly successful policy is to be replaced by a scheme that will raise less money and is more complicated. As the Minister will note, CIL takes nearly two years to adopt, given the lengthy and onerous adoption processes prescribed by the regulations. It costs somewhere near £50,000, which, replicated across the country, is a substantial sum. By contrast, West Berkshire council’s policy would cost far less to set up and administer.
Regulations for the CIL were initially launched in 2010. Since then there have been amendment regulations in 2011, 2012, 2013 and now this year. Each new set of regulations has served to add intricacies, correct mistakes or provide further benefits to the development industry—for instance, the recent relaxation to exempt self-build housing from paying CIL has been added to other exemptions for affordable housing, for charities, and for large extensions to homes. In addition, CIL would not be payable in converting offices to dwellings. Such developments could be substantial, with resulting impacts on council services; but with no net increase in square metreage, no CIL is payable, and therefore the existing council taxpayers pick up the burden.
West Berkshire council members feel that they have been forced to replace a perfectly acceptable and efficient system with a substandard set of complicated regulations—regulations not of this Government’s making, but of the previous Government’s. As I have myself been where the Minister is sitting, on these occasions I like the Member leading the debate to bring a solution, so that the Minister can then pop a rabbit out of a hat and reassure the constituents of that Member that a solution can be found.
By way of assisting the Minister, therefore, I suggest that he remove the cut-off date of 6 April 2015 from the regulations. That is all that is forcing West Berkshire council to adopt the CIL: it is the date from which the council is prevented from using a formulaic approach to secure contributions. My proposal would not even require an amendment to legislation, something I know that the Department would welcome. I present that as a suggestion to the problem. It works in West Berkshire, and I hope that in his response the Minister will address the council’s concerns.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
It is a pleasure to serve under your chairmanship, Mr Hood. I congratulate my hon. Friend the Member for Newbury (Richard Benyon) on securing this debate on West Berkshire council’s community infrastructure levy. I know he campaigns hard on issues that affect West Berkshire—not least among that work is his success in securing significant funding for rural broadband, which will be a big opportunity for people in that community.
I shall start by going through some of the issues about the levy in general, before turning specifically not just to West Berkshire but to the helpful suggestion made by my hon. Friend for a solution to the problem. I would argue that the basic principles behind the levy are right. The levy introduces a set tariff on new development, contributing to the provision of essential supporting infrastructure based on viability and evidence. In that sense, the levy is the best framework not only to provide essential local infrastructure but to unlock land for growth. The levy is fair, fast and more certain and transparent than the system that was there before of individually negotiated section 106 planning agreements. The whole process of developing the levy is subject to public consultation, the development of a robust evidence base and independent examination.
With the levy, developers know up front what they will be charged and when payment will be required. Section 106 agreements, on the other hand, do not offer the kind of transparency that the levy provides, as contributions are determined through often lengthy negotiations between developers and local authorities. The levy enables local authorities to prioritise spending on infrastructure across their area to facilitate local growth and development. Authorities are also able to use levy funds to deliver infrastructure outside their area, by working with other local authorities, so long as it supports development in their area.
Section 106 agreements are site-specific and cannot be used to mitigate wider impacts of development. Individual section 106 agreements may be subject to viability testing, which can cause delays. That is not an issue for the levy, as local economic viability will have been tested at examination prior to adoption of the charging schedule. The levy does not replace section 106 planning obligations, but restricts their use in areas that have adopted the levy to ensure there is no double charging of developers. From April 2015, that restriction will apply everywhere else—I will come on to the specific issue of the cut-off date.
The majority of the levy funds are kept by the authority to contribute not only to the provision of infrastructure for their communities, such as schools and roads, but to its improvement, replacement, operation and maintenance, ensuring that the infrastructure is there for years to come.
We feel strongly that local people should be given a real say over infrastructure priorities in their area. One of the amendments to the regulations required local authorities to pass on 15% of levy receipts from development in local areas to parish or community councils, a figure that increases to 25% where there is an adopted neighbourhood plan. That is good news for local people and ensures that they share in the benefits of development.
Good progress is being made. We now have 30 charging schedules in place. A further 48 are with the Planning Inspectorate for examination, and 12 have been approved. We forecast that levy adoption rates will increase steadily, which will in turn increase the overall levy revenues over the next 10 years. The most recent estimate suggests that average annual levy revenues could be in excess of £300 million.
Authorities are starting to work together locally to develop proposals for implementation of the levy. Some are considering the potential of pooling levy funds to unlock growth and development as part of a strategic investment fund. The Government will seek to encourage and support such developments.
It is still early days, however, as the first set of regulations only came into effect in 2010. We have had to make some changes along the way, and that has so far led to five definite amendments. Those changes have been made to make sure that the system is fair, flexible and clear to local authorities and to developers. To be able to do that we have listened to people who deal with the levy on a daily basis.
Draft amendments to the levy regulations are currently before the House and are due to be debated in Committee on 10 February. The amendments are designed to make the levy fairer, more flexible and transparent. I will outline briefly the five key aspects of those amendments. They are: exempting from the levy those building their own homes, or extending existing ones, to help reduce the disproportionate burden placed on that sector of society; allowing levy rates to be set by scale of development; allowing offsetting of levy liabilities when development is altered prior to completion; lessening levy liabilities for buildings brought back into use; and moving the date from which pooling restrictions on section 106 agreements apply to April 2015, giving authorities enough time to reflect changes to the operation of the levy.
My hon. Friend will be aware of many of those issues, so I shall now turn specifically to West Berkshire council. We welcome the efforts the council has put into developing its charging schedule, which we understand will come into effect in April this year. The draft charging schedule was examined by an independent planning inspector on 23 October last year. A report was issued in early November recommending that the charging schedule be approved. Given that the levy is a charge on local development, it is right that charging schedules are subject to local community engagement and public examination.
Local authorities must provide robust evidence, based on local viability considerations, to justify the rates being set in their draft charging schedules. That includes a requirement to have regard to all responses received as part of the public consultation on the draft charging schedule. Inspectors, in their turn, must take into account all the evidence submitted by local authorities, and that includes any representations from interested parties. I understand that the inspector was satisfied that the draft charging schedule was supported by detailed evidence of levy needs, and that the evidence was robust, proportionate, appropriate and in line with expectations set out in levy guidance.
The inspector raised the issue of funding required for infrastructure throughout West Berkshire and cited £257 million. It was estimated that the levy could contribute around £42 million, making a contribution to the area’s funding gap of some £163 million. It was concluded that the figures provided by the authority clearly demonstrated a need to introduce the levy.
My hon. Friend referred to the fact that the levy will bring in only 75% of the amount currently raised by section 106 agreements. Section 106 contributions will, of course, still be collected, albeit in a more limited form. I hope that his authority has considered the total take from both sources. My officials would be happy to meet representatives from the authority to discuss the figures it has calculated, and any other points about the levy, as well as the solution he suggested.
Local authorities are generally making good progress in bringing forward the levy, which we believe is the best way of delivering infrastructure to meet the needs of local areas. We are always willing to listen to and learn from those bringing forward and working with the levy, such as the local authority. We have seen that in the latest set of regulatory amendments that are before the House.
Richard Benyon
Does my hon. Friend accept that the issue is about localism? The Government believe in localism, but are requiring a dirigiste, top-down, one-size-fits-all approach, and it could be argued that we are going against what we say about localism. This is an opportunity to trust a local authority that is doing something and getting it right, as opposed to having a one-size-fits-all approach.
Brandon Lewis
In the sense of getting the charge and the levy right, the levy is there to meet local infrastructure need—the limited section 106 agreements will still be negotiated locally—and gives clear, up-front, transparent information about dealing locally. However, we have made amendments following the experience so far, and I encourage local authorities to meet my officials to go through any specific concerns they have and to feed in any suggested solutions to improve matters. The Department would be interested in looking at those. We are always willing to listen and learn, and we will be happy to continue to do so. I encourage my hon. Friend’s local authority to make that appointment and we will facilitate it at the earliest opportunity.