Town and Country Planning (General Permitted Development) (England) (Amendment) Order 2016
(7 years, 10 months ago)
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The Committee divided: - Ayes: 8 / Noes: 4 - Question accordingly agreed to.
Teresa Pearce (Erith and Thamesmead) (Lab)
I beg to move,
That the Committee has considered the Town and Country Planning (General Permitted Development) (England) (Amendment) Order 2016 (S.I. 2016, No. 332).
It is a pleasure to serve under your chairmanship, Mr Nuttall. I am pleased to be here, standing in for my hon. Friend the Member for City of Durham (Dr Blackman- Woods), who is unfortunately indisposed and unable to be here this week.
The Minister will be well aware of Labour’s long-standing concerns about the extension of permitted development rights and change of use, along with our dismay at the continual use of statutory instruments to make significant changes to planning legislation by both this Government and the previous Government, of whom he was a member. I am glad that our prayer against this statutory instrument was successful and that we have an opportunity this afternoon to discuss it.
The Minister will recall on a number of occasions my hon. Friend the Member for City of Durham telling him and the hon. Member for Grantham and Stamford (Nick Boles), in his former role in the Department for Communities and Local Government, that we are totally against the extension and relaxation of the permitted development rights system, because it takes away the ability of local people and their elected representatives to have their say. Let me make it clear that we are not against change of use per se, and we fully recognise the need for many more additional homes. We want additional housing for all tenures to be developed in a sustainable and appropriate way and in consultation with local people. Unfortunately, we believe that this statutory instrument flies in the face of that objective.
In the specifics of the order, there are several areas on which I would like clarification from the Minister. Article 3 appears to introduce a requirement that the Secretary of State reviews the operation and effect of articles 1 to 7 of the Town and Country Planning (General Permitted Development) (England) (Amendment) Order 2015 every five years. Labour has argued for that in the past and we would welcome such a review, providing it leads to meaningful action if there are problems within the operation of these articles and it is not just a box-ticking exercise that will be ignored.
Article 4 changes the working of the general permitted development order to clarify that the relevant boundary is opposite the rear wall of the residence being enlarged and it is probably a helpful amendment, but the fact that the Government need to clarify matters at this level of detail shows that allowing building through permitted development rights often throws up problems that need to be micromanaged by central Government, which would not occur if planning were done properly through the local authority planning system. The statutory instrument includes in article 5 the provision to include land as well as a building in a change of use from class A1 to A2. This change presents some real concerns that the Minister can perhaps address. Is there any limit on the amount of land and on what can be done with it? Will it be permitted to build on it? Given that the change is from A1 shops to A2 financial or professional services, could a car park be built on it?
Before I go on to look at the details of articles 6, 7 and 8, all of which relate to specific changes of use, I point out once again that we are not against change of use in general, and councils should be able to use it sensibly to plan their high streets. Sadly, with much permitted development in place, this is becoming increasingly difficult. Similarly, planning to increase housing supply should be undertaken through the proper planning system and not on an ad hoc basis through permitted development.
Article 6, which allows for laundrettes to change to residential use, is a case in point, particularly in London. It might be sensible to change a laundrette to residential use, but it might not be, as local community might rely on the laundrette to provide a service that they cannot get elsewhere. Will there be any consultation of local people about what their community needs? The Minister will know that the current prior approval system makes no allowance for this.
In article 7, the temporary permitted development right of change of use from office to residential is made permanent, which frankly dismays us. Surely the Minister can see that the reduction of office space without consultation from the local authority and local people is not only inherently anti-localist but could have serious impacts on the local economy. If a council is looking to regenerate its area by attracting businesses, office space is vital. If a local business wants to expand and cannot find the appropriate space, their ambitions will be stifled and they might take their business out of the area. We would welcome some comment from the Minister on whether he might recognise that or consider putting some kind of cap on the amount of office space that can be converted to residential use.
One element of article 7 that we welcome cautiously, and that Labour has long pressed for, is the condition that the noise impacts of the surrounding premises on the intended occupants of the new developments be taken into account. However, we have reservations, so perhaps the Minister will clarify. Will it work both ways? If there is an office or building that would be disturbed by noise from a new residential development, will that be considered? Similarly, if there are venues that are sources of noise in the area, such as live music venues, and development is still permitted, will those venues be protected from noise complaints from the residents in future? We discussed that during the passage of the Housing and Planning Act 2016.
Like article 7, article 8 gives temporary permitted development rights for change of use from light industrial to residential use. Again, will the Minister say how we can be certain that buildings of light industrial use will not be needed or be part of a local authority’s economic regeneration strategy? Although we welcome the additional element of prior approval that looks at how pre-existing businesses or distribution services would be affected by changes, why is that not extended to include the impact on the wider community or applied to other change of use permitted development rights, such as those in articles 6 and 7?
We are not the only people to have raised those issues. London Councils and others have raised all of them and more, including the resulting increases in office rents, the loss of occupied space and the loss of new affordable housing supply. They also expressed confusion over the article 4 direction, which allows them to suspend permitted development rights. Will that still be allowed to apply in those areas? The Minister will know that it is a very cumbersome process, and that the Secretary of State retains the right to modify article 4 directions, massively limiting the possibilities for their use. Nevertheless, we would like to know whether local authorities will be able to apply for exemptions, and if so on what grounds. Will the Secretary of State simply override all suspensions of office to residential change of use?
Article 10 seems to demonstrate that the Government are prioritising quantity over quality by requiring a developer that is changing a building to residential use to supply the local authority with the number of residences that will come from the development as part of the application to determine whether prior approval is required. We should focus on how appropriate new developments are for an area and on whether they are of the right tenure to meet local needs, as well as simply adding to supply. That can be done through the proper planning system. Article 11 gives temporary permission for commercial film making. We take no issue with that, but I would like clarification from the Minister about what safeguards will be in place to protect the local community and ensure that there is no lasting damage.
Finally, articles 12, 13 and 14, all of which relate to permitted development for mineral exploration, demonstrate how reluctant the Government are to allow planning changes that have potentially enormous and wide-ranging implications to be scrutinised properly. The three articles, subject to conditions, enable the drilling of boreholes for monitoring and investigative purposes in respect of petroleum exploration to be carried out for the purposes of groundwater monitoring, seismic investigation and monitoring, and location and appraisal of mine workings.
I note that there is a requirement for operators to notify the Environment Agency and drinking water suppliers when undertaking the drilling of boreholes, and to notify the Coal Authority of boreholes drilled for the purpose of locating mine workings, but although there is a limit on how near to an occupied building, hospital or school an exploration can be—no closer than 50 metres—there is no similar requirement to inform residents that development is being undertaken. It therefore appears that local communities will have very little say in whether the initial monitoring activity goes ahead. Will the Minister say whether that is simply a mistake by omission, or whether the Government have good reason to think that parents, teachers, doctors and patients need not be notified about these activities, when they could be happening just 51 metres away?
On the commitments to clean up within 28 days after the activity, what assurances will be put in place to ensure that developers comply or are able to comply? For example, what assurances will be sought from companies to ensure that they have the financial security to be able to comply after the event?
Labour has long called for a complete moratorium on fracking underneath areas of environmental sensitivity, such as national parks, areas of outstanding natural beauty, sites of special scientific interest and all levels of water protection zones. In the order, the Government have protected a number of those areas and we welcome that concession. Crucially, however, fracking underneath protected groundwater sources is still allowed, provided it is more than 1,200 metres below. Why is that the case when we do not know the long-term impacts on the water, and by extension, on public health? We ask the Minister to put a hold on exploration under groundwater sources, either indefinitely or at least until we know more about the long-term consequences.
Teresa Pearce
I have almost finished, so to give the Minister time to answer I would rather not give way.
We are concerned that the Government are trying to avoid proper scrutiny from MPs and from the country by enacting potentially enormous, significant changes to our planning system through a negative statutory instrument. I and, I am sure, my hon. Friend the Member for City of Durham look forward to hearing the Minister’s answers to my questions.
The Minister for Housing and Planning (Brandon Lewis)
It is a pleasure to serve under your chairmanship, Mr Nuttall. I look forward to hearing other colleagues’ contributions in the next few moments, and I also wish the hon. Member for City of Durham a speedy and full recovery. For many weeks, not too long ago, we enjoyed a good debate in this Room.
I welcome the opportunity to set out our case for the statutory instrument. As hon. Members have said, it is an important instrument that continues our vital work to simplify and streamline the planning system, to support the delivery of new homes and to support our wider economic growth. I will deal with the questions posed by the hon. Member for Erith and Thamesmead, but I find it intriguing to hear her say that she is not against change of use to provide new homes and then spend the next 10 minutes opposing everything to do with change of use, which will deliver the new homes this country needs. That is something we see regularly from the Opposition. At some stage we need to hear from them what they are in favour of, rather than continually hearing their ways to stop us from delivering the houses that our manifesto was very clear we would deliver for people to increase housing supply and home ownership, following the fall in home ownership after 2006 under Labour and the lowest level of house building since 1923 that it left us with.
I thank hon. Members for their contributions on the statutory instrument; I know some Members are going to make them shortly. Statutory instrument No.332, the Town and Country Planning (General Permitted Development) (England) (Amendment) Order 2016, came into force on 6 April 2016. I want to be clear and entirely transparent about the fact that permitted development rights are an important part of our approach. They reduce bureaucracy and delays and provide greater planning certainty, while recognising where specific planning issues require local consideration.
The hon. Lady talked about local voices. We have made sure they are heard in the process. Local authorities, when they have specific issues, can bring forward an article 4 direction. She outlined how that can be difficult and cumbersome; it is actually quite the opposite. Five hundred articles 4s have been brought forward across the country, with 24 specifically on the change of use to housing. Councils can do that. In terms of how the Government will deal with that and the Secretary of State will look at applications, we have a track record over the past couple of years with the temporary permitted developments, where we have worked with local authorities to see article 4s come through. We have specific exemptions for the City of London and certain other London authorities. We think those exemptions are important and should be there. We have structured it in a way that gives the authorities time to put their article 4s in place to overtake those exemptions; they get that full legal protection. Therefore, I think we have a good record of working with local authorities to deliver those article 4s.
The hon. Lady also touched on noise issues, which we rightly discussed and debated during the passage of the Housing and Planning Act 2016. We have brought forward changes to that, which the industry is happy with and warmly welcomes, to deal with the specific issue that she outlined. We do not want the problem—she makes a fair point; it is why we made those changes—where, if somebody takes on permitted development rights and puts a residential development in, the new residents cannot complain about a music venue or venue business that was there before them. That is absolutely right.
On the light industrial changes, article 4 can still apply there. Local authorities will look at that and applications can be put forward. The light industrial changes come in from October 2017 specifically to give local authorities plenty of time to put article 4 requirements in place, if they feel they need to. We are giving them more than a year to ensure that there is no question of any compensation issues. However, nobody has ever had a successful compensation issue.
Article 3 is a requirement under the Small Business, Enterprise and Employment Act 2015 and is required in all regulatory statutory instruments. That is why it is included. It is intended to ensure that the measures remain appropriate.
Article 5 specifically only covers the change of use of shops to financial and professional services. I have previously been the high streets Minister, so I support and want to do that to allow our high streets the flexibility to continue to develop. The high street should change and develop; the industry is telling us that it needs to. We need to provide the flexibility to do that. I want to be very clear that the order does not allow new buildings such as new car parks or anything like that. It is about the change of use of a property.
The permitted development right for the change of use from office to residential is an important part of our ongoing reforms, which will ensure that the right continues to play a valuable role in helping to tackle our housing challenges while reducing the pressure to build on greenfield and green-belt sites, which is something that we and the people of the country care passionately about. Where there are specific local issues, the local planning authority may bring forward an article 4 direction.
The permitted development right for drilling boreholes will enable the drilling of boreholes to carry out specific monitoring and appraisal activities, and the provision or assembly of structures connected with those investigatory works, as precursor actions to inform any potential oil and gas exploration proposals. The early collection and assessment of monitoring information that may be done through the exercise of the permitted development right will inform the environmental considerations for any future planning application for any proposed oil and gas exploration.
The right is subject to similar exclusions and restrictions that have applied to the operation of similar permitted development rights allowing the drilling of boreholes for mineral exploration. Under class KA of part 17 of the order, that includes the power, in the case of development that continues for longer than 28 days, for the mineral planning authority to issue a direction under article 5 of the Town and Country Planning (General Permitted Development) (England) Order 2015 to require an application for planning permission for the proposed development in some circumstances. The permitted development rights will not allow the drilling of wells for oil and gas exploration. Any proposed development involving shale exploration will need to be the subject of the planning application process.
The statutory instrument brought forward important legislation that is vital to the delivery of the additional housing that the country needs, and to allow environmental monitoring information to be obtained earlier in the planning process, which is logical and can inform any potential proposals for oil and gas exploration. For the reasons I have set out, I commend the order to the Committee.
Ruth Cadbury (Brentford and Isleworth) (Lab)
It is a pleasure to serve under your chairmanship, Mr Nuttall.
I echo the words of my hon. Friend the Member for Erith and Thamesmead. The Labour party is absolutely not opposed to the concept of the change of use of industrial and employment land to housing. We all agree—indeed, we discussed this in Westminster Hall yesterday—that there is an urgent need to deliver more housing, particularly in London, where my constituency is located. That is an admirable aim and one that, prior to coming to this House, I was very much involved with delivering as a lead member and the chair of planning in Hounslow, where we delivered and, indeed, significantly exceeded, the delivery of total and affordable housing targets.
One only has to drive west along the elevated section of the M4 to see the numbers of new-build housing for which planning permission has been granted by the London Borough of Hounslow in recent years. That is why I believe strongly that local authorities that are delivering on new housing targets have to be able to retain the right to make planning decisions without the cumbersome need to apply for an article 4 direction.
The three-year rule was launched under the coalition Government, and that period has just expired. As a result of that relaxation of the change-of-use rules and the new permitted development rights, the borough of Hounslow lost 81,500 square metres of employment floor space. That represented a gain of 1,251 residential units, but that is against an overall delivery through planning decisions of several thousand units. More importantly, because of that relaxation of the rules and Hounslow’s inability to make decisions on certain sites and apply the 40% affordable housing policy, 512 affordable housing units were lost. As developments came forward for which applications for planning permission did not go to Hounslow, the borough could not impose the important affordable housing requirements on those developments, so more than 500 affordable units were lost in that three-year period. Hounslow has delivered 1,400 affordable units in the past five years, but it could have delivered at least another 500 more.
The removal of proper planning consideration and scrutiny for new developments, particularly where they involve change of use from existing—often older—office stock to housing, also concerns me because of the loss of decent housing standards: space standards, access standards, potentially design standards, and so on. All such developments should be subject to public scrutiny. That is why the planning system was set up.
I will give an example of some buildings in Brentford and Chiswick town centres. The market buildings in Brentford and five or six buildings in Chiswick, which are older office stock, have been full to the gills of small and medium-sized enterprises. They have effectively been incubator units and an important source of economic regeneration and jobs because of the role that those businesses have played in the local economy. Those businesses were in the town centre. Jobs were housed in those buildings, which were full until the landlord deliberately let the leases fall in and all the occupants had to find somewhere else, often many miles away, to do business, which, given that many of the business owners and their staff lived locally, added to traffic congestion and their personal stress. Because the people who worked in those buildings were there every day, they helped to sustain the local shops, pubs and restaurants, and the other services in those town centres.
Chiswick town centre is fairly prosperous, but even there, the independent and specialist shops and some of the catering businesses struggle. In Brentford, there is a vulnerable retail and shopping centre, which could not afford to lose the workers from those office buildings, who spent money five days a week—they had lunch hours and might have gone out after work two or three evenings a week. Those people have been lost and replaced by people who often work long hours, leave early and get back late, and might spend an hour once or twice a week in those town centres.
The planning authority—the planning committee, the councillors and the officers—should be able, with due consideration, to assess the positive and negative impacts of such changes of use and the loss of such offices. That is why the planning system was created 70 years ago. That system has stood us in good stead. Particularly in London authorities—in Hounslow as in most of London—it has delivered the new housing that we so desperately need, and done so rationally. In certain circumstances, it has enabled the retention of employment property where that is relevant, such as in the examples that I have given.
Most of the new housing in Hounslow has been built on former employment land; we have got shedloads of it and the vast majority of it has gone to housing, but through proper local planning decisions. There are examples, such as those I have given, that absolutely illustrate why local control should be there. Why remove planning controls and then put them back through the article 4 direction route? Why even go through that route? As I said, it took some time for Hounslow to be able to get the article 4 direction in place—there was the legal challenge and so on.
I want now to move on to laundrettes specifically. This does seem slightly bizarre; laundrettes to housing is not going to deliver very many new housing units. There are not many laundrettes remaining, but in London they provide an essential service. In areas such as mine there are large numbers of people living on low incomes in poor-quality private sector housing or in overcrowded flats with different tenures. Sometimes a washing machine is not provided; sometimes a poor-quality washing machine breaks down. If someone is on a very low income and their washing machine breaks down, that is a serious catastrophe. If someone has young children or is caring for somebody with disabilities who needs laundry and bedding changed every day, they need a laundrette nearby that they can get to. A washing machine breaking down is a serious crisis for many people on low incomes.
It is beholden on us as public servants to have a say in whether it is appropriate that a laundrette should remain or not. Clearly if there is no business or demand locally for a laundrette, the owner or leaseholder can of course apply to the local authority for planning permission, making the case that there is no need for it. In that case, if the evidence is there, the planning authority could well agree that there is no justification for that laundrette anymore and that it should revert to another use, such as housing. However, how many laundrettes are actually suitable for housing, as many of them are in shopping parades? I really regret seeing this very small but for many people very significant—
Graham Stuart
There is a provision. People do not have to apply for planning permission, but they do have to get prior approval. Has the hon. Lady considered that? Does she think it is inadequate, or has she just ignored it?
Ruth Cadbury
I do not find the prior approval rule sufficient to prevent this use, because the Government policy is based on a presumption that we do not need laundrettes anymore and that is what I regret. I would like to hear from the Government what the justification, and where the impact analysis, is for this legislation. In conclusion, I want to know what impact assessment the Government did on these two elements of the statutory instrument before putting them forward, because I have not yet seen the evidence—certainly from my perspective in London—that this is necessary.
Mr Graham Allen (Nottingham North) (Lab)
It is very nice to be here, Mr Nuttall. I think this is the first time I have served under your chairmanship. I know you are very busy campaigning on a number of issues, so we are even more grateful that you are in the Chair today—but not wearing a badge of course, in your impartial role in the Chair.
I should declare an interest immediately and say that I am honoured to be on Lord Heseltine’s panel on estate regeneration, which is looking at a number of the matters touched on in the statutory instrument. I would have been very happy not to attend this Committee, but I was informed by my Whips that my attendance was absolutely essential. Clearly they were keen to hear a serious contribution from me, and they are going to get one for having had the good grace to invite me to sit on the Committee, which of course I have been looking forward to for a long time.
Coming to the Committee and listening to what has been said, I am struck that this would probably not even appear on a council agenda in a place like Sweden, Denmark, Germany or Italy. There are some who would like to leave those countries behind, but in many ways, they can show us the way to operate subsidiarity, which is taking decisions at the right level. I listened to the Minister very carefully. He and the Secretary of State are strong advocates of devolution, yet here we are, fulfilling not a political but an administrative function. This order is the Department, business and industry—an elite, in a way, beyond politics—deciding what should happen in technical terms on general development matters. We are here considering what in virtually every other western democracy is a devolved matter. The Congress of the United States would no more discuss these issues than anything else that should be done at state, local or neighbourhood level. That highlights for me a very serious matter: that the Town and Country Planning Act 1947 settlement is no longer relevant to what our modern democracy needs to deal with issues such as housing.
I fully understand why the Government and Labour Front Benchers should look at housing issues. Of course it is important to get better housing provision, but everything is done at what I dare call the federal level—in the Westminster Parliament of the United Kingdom—and what we tend to get with this degree of minutiae is a whitewash view across the whole of England, in this case, about what should happen on often very small and trivial issues. That flies in the face of the flexibility that we need if we are to develop balanced and healthy communities. I take second place to no one in the Opposition in my respect for the Minister’s work. I have had the chance to work closely with him on a number of issues, so I know his quality and what is in his heart—but this measure does not help get to where we both, and I suspect the whole House, want to get to.
The last thing we need in my constituency is housing, because my constituency is made up of nine enormous former council housing estates. Because we have lost our big-hitting manufacturing industries, on what little land becomes available, in what little space there is, we desperately need variety to help us rebuild and regenerate balanced communities,. We need to keep our laundrettes, as my hon. Friend the Member for Brentford and Isleworth alluded to, and we need to keep our pubs, as many colleagues have been lobbied on even in this last week, as variety in the community. Even more significant than that, we need to keep our skills base. We need to keep our jobs, our office space, our commercial and industrial spaces, from heavy industry—if it is still to be with us—through medium-sized plants right down to starter units and incubators.
Looking across my patch from one end to the other, I see a sea of council housing receding into the distance, and people who need jobs in one of the areas with the highest level of unemployment in the UK. The broad brush approach to what is needed on housing numbers does not apply. It is not relevant. In fact, it aggravates and makes worse the imbalance in some outer estate communities. We could use Dagenham or Skelmersdale as examples—everyone knows an area a little bit like mine somewhere near where they live.
More broadly across the city of Nottingham, I can see why there should be more houses and places where they might be built. However, whenever an offer of land comes up, it is looked first at as a housing possibility rather than as a longer term regeneration possibility. I fully understand the pressures on the Government and on my local council. When an order such as this is introduced, what will happen is that people in Nottingham City Council will think, “If we can sell this bit of land, we can get a capital receipt for it. If the council can get a capital receipt, we might be able to keep a couple of social workers or a director of public health going in a job. Therefore we have to have that money.” They are not encouraged, and the national system does not encourage them, to think in terms of what the regeneration possibilities might be. Once a council has a capital receipt, that is it: the family silver has gone, and it does not get an income stream forever that it would have had had it built something that was rented out and which had a long-term regeneration impact on a community like mine.
In addition, we have Government targets. Any council, whatever its political description, will feel pushed along to try to meet those targets come what may. By my reading of the order, it will aggravate that inflexibility and aggravate the problems in areas like mine.
The Minister asked what the alternatives are. As I always do—sometimes to his regret, I suspect—I will try to come up with some alternatives. When it is said that the market makes the development of certain properties and bits of land not viable, are there not ways that the Government can consider, not least through their devolution proposals, to offer incentives to bring such properties into use? Article 7 relates to changing light industrial units into housing. Are there not ways in which we can maintain them as light industrial units and increase the likelihood of their being brought back into use?
I have in my constituency a most fantastic further education building, which I fought hard to stop being demolished and being made into—believe it or not—another housing estate. Just what we need. We have had it rebuilt, and out of that further education college there are lots of young boys and young girls who are qualifying as plasterers, bricklayers and surveyors—construction sector skills. They do not have a pathway to progress so that they can stay in my constituency, perhaps start work with a unit and a white van and, if they do well for themselves, go on next year or the year after to a bigger unit. That trail is not there.
Much of what I have said the Minister and I have shared before. I ask him whether in those places where there is solid evidence from counting the numbers and looking at the vista that 95% of the land area is already covered by houses, there can be flexibility so that people can invest in other important things to bring variety and the healthy community we need, whether that is work spaces, commercial properties or offices. The order provides a one-club policy for housing. I acknowledge that we need that club, but we also need another 10 in the bag if we are to have a healthy and balanced community.
Article 3 of the order refers to land, which is probably the most important issue. I urge the Minister to do something quite radical and ensure that those who work in their local communities—Members of Parliament, councillors, community organisations, tenants associations or charities—are always given prior notice of land that becomes available, so that they have an opportunity to present a sensible proposal for regenerating their area. They should not find out after a good old-fashioned 1947 consultation process, like two men and a dog, or in this case 23 respondents, for something this important. None of this is secret if you know the way to find out about these things, but the process is not inclusive. Not one person in this room can honestly say that we really involve people in such decisions. Let it be out there so that local people can make a bid and an offer to do something with that piece of land. Perhaps it may be a small unit, perhaps it is about maintaining a laundrette or just turning something into a green space and playing fields in a sea of concrete.
Simon Hoare (North Dorset) (Con)
Before coming here, I was cabinet member with responsibilities for assets on West Oxfordshire District Council for seven years. I would be surprised if the hon. Gentleman did not know that any local authority seeking to dispose of an asset it holds has to secure best value. That is what we always have to try to find. We must sweat our assets to try to fill a black hole, often in central Government funding. Local government is not in a position to give hand-outs willy-nilly to any fanciful community group idea when it is trying to get money in the coffers to spend on vital public services.
Mr Allen
I am well aware of that, but I think we can either say, “It’s there and we have to deal with it,” or we can rail against it, as I do. Best value immediately may be to secure a capital receipt for a piece of land, but in reality a local authority should be allowed to go for not only best value but long-term value, to think strategically and to think about what people in the community need.
The hon. Gentleman talks a little dismissively, if I may chide him gently, about people in the community. Barratt is also people in the community. It seems to get to know pretty damn quick about these opportunities, and a housing estate goes up rapidly, before the average community group—run on a shoestring, probably not even with a full-time person in it—even gets a smell of those opportunities. All that group then gets involved in is the protest when bricks are going on bricks. We can work on best value, but we can also work with the community and indeed allow people in the locality to make decisions. They may well have a view about best value that is about better value, so that their children can get a job, so that they can have a health centre in their community and so that—in line with the Government’s policy on shopping parades and revitalising shopping in areas—we have the balanced and mixed community that many people talk about.
The hon. Gentleman, thankfully, prompts another thought that I will share with the Committee, which is about devolution. No one could seriously suggest that this order is in the mainstream of the Government’s thinking, or possibly even the Opposition’s thinking, on how power is devolved. We look in vain at articles 7 and 8 for things that say how the order ties in with, for example, the devolution deals happening at the moment. Do we want people out there to take more control of their lives or do we want to specify whether they can or cannot have laundrettes, what happens to local pubs or how use should be changed in their areas, through a one- size-fits-all view from Whitehall and the Department?
The Minister has to do his job this afternoon. He is probably very bored with it and wants to get to the Chamber to listen to the debate on Europe and put his point of view to colleagues in the Lobby. However, he is stuck here because this is performing part of the administrative role of Whitehall. If he were allowed out to make a speech on the stump on devolution—I have heard his speeches—he could rouse a crowd to run with their pitchforks flailing down Whitehall, and so could the Secretary of State, but they will not do it by reading articles 3 to 5 of this statutory instrument, because that is not what it is about. The order is not about devolving power and authority or about building diverse and healthy communities. It is just part of the administrative process of the Town and Country Planning Acts.
We all need a bit more imagination. Many of us do not get the nod from the Whips to appear on these very important statutory instrument Committees. As a renowned parliamentarian, Mr Nuttall, you will know that the opportunities are not always there for Back Benchers. That is why I take this opportunity to say that there is a great vision from the Government—I have said this on the Floor of the House—on devolving power to the localities. They are not going as fast as I want—they probably never could—but they have taken a series of significant steps. Opposition Members should not only welcome that but go further, because that is the way things will go in the very near future. I think that means that this sort of statutory instrument needs to sit in that broad context. Unfortunately, the only thing that I can do to get that on the record and to make my little heckle against the steamroller, as Austin Mitchell, the former Member for Hull used to say, is sadly to vote against the order.
Brandon Lewis
I will respond briefly to a couple of points. I tried to limit my contribution by intervening on the hon. Member for Brentford and Isleworth. She may not be aware that 97% of homes now have their own washing machine, so she will appreciate that that is why it is important that we maximise the use of facilities. It is important to note that the order contains an important safeguard that allows local authorities to consider their local area and the impact of the loss of a laundrette on local services and their key shopping areas.
I thank the hon. Member for Nottingham North for his kind remarks, but I fundamentally disagree with his premise. I make no apologies for the fact that we care passionately about housing. I am happy to be here today to make the strong case for why it is important that the Government pull every lever that we possibly can to deliver the homes that people need across our country. I am happy to make the case publicly about the importance of the order in terms of the thousands of homes that it has delivered, many of which would not have been delivered without it.
The hon. Member for Brentford and Isleworth said that her local authority would have given planning permission for every single application. I do not think that I have met a local authority that has ever done that, but it is very good if her local authority does so. In that case, the order does not have an impact on it other than to help it to get things going much quicker. The planning process can take many years, but the order gets homes moving much quicker. Of course, the councils then benefit from the council tax receipts and the new homes bonus.
If there is a healthy supply of homes in Nottinghamshire, market forces will mean that the terms of the order will be less attractive to developers. That is why the order is important, because it is delivering homes in those core areas where we need them most. My hon. Friend the Member North Dorset described how local authorities deal with land. Thanks to the Housing and Planning Act 2016, we will also now have brownfield registers, which means that information about the land will be in the public domain. That initiative is an important addition to planning permission in principle and gets public sector land out there for development.
The order, which is an important part of our policy to deliver housing, has made an important contribution in the past couple of years. Article 4 offers protection to local authorities but it also means that we can deliver housing through every opportunity available to us.
Teresa Pearce
I thank everyone who has contributed. My hon. Friend the Member for Brentford and Isleworth gave us a passionate defence of laundrettes. My hon. Friend for Nottingham North reminded us that when we talk about value, it does not always have to be financial.
Unlike the Government, the Labour party believes that the nearer to people decisions are made, the better those decisions are. That is the fundamental difference between us. England is a diverse place and we need different plans for different places. A one-size-fits-all plan will end up fitting no one. The Minister said that Labour Members challenge everything that he does. I think that is our job. After the many, many weeks that we spent in this room scrutinising legislation, I hope that he would find value in our scrutiny. I thank all Members for their contributions, and thank you, Mr Nuttall, for chairing our proceedings so well.
Question put.
Draft Double Taxation Relief and International Tax Enforcement (United Arab Emirates) Order 2016
Draft Double Taxation Relief (Isle of Man) Order 2016
Draft Double Taxation Relief (Jersey) Order 2016
Draft Double Taxation Relief and International Tax Enforcement (Uruguay) Order 2016
Draft Double Taxation Relief (Guernsey) Order 2016
(7 years, 10 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
First, I inform hon. Members that they can, if they wish, take off their jackets. [Hon. Members: “Hear, hear!”] I am here to help. Secondly, the orders can be debated together if that is the Committee’s wish. It means that we would have an hour and a half as opposed to a longer debate. Is that the wish of the Committee?
Rob Marris (Wolverhampton South West) (Lab)
I agree to that, Mr Hanson. It is a pleasure to be here with you as Chair. If you and the Minister agree to this, could we do it all in one debate but in two chunks? There are five orders. To my mind—the Government may disagree—three of them go together because they relate to Crown dependencies, and two of them, on Uruguay and the United Arab Emirates, go together because they follow a broadly OECD model.
The Chair
If the Committee agrees to debate the orders together, the debate will be an hour and a half long, and if the Minister agrees, they can be debated in two sections within the hour and a half.
The Chair
With this it will be convenient to consider the draft Double Taxation Relief (Isle of Man) Order 2016, the draft Double Taxation Relief (Jersey) Order 2016, the draft Double Taxation Relief and International Tax Enforcement (Uruguay) Order 2016 and the draft Double Taxation Relief (Guernsey) Order 2016.
Mr Gauke
It is a great pleasure to serve under your chairmanship again, Mr Hanson. When you moved on from the shadow Treasury team, I feared that we would never spend time together debating double taxation treaties as we had once done, so I am thrilled that we are reunited on this topic, as I can see you are.
Given the comments of the hon. Member for Wolverhampton South West, let me make some remarks about the identical protocols with Guernsey, the Isle of Man and Jersey, which I believe he wishes to discuss first, and then deal with the remaining orders in a second contribution. We have agreed three identical protocols with Guernsey, the Isle of Man and Jersey, amending the existing double taxation agreements to include modern OECD provisions allocating the primary taxing right over income, profits and gains from land to the jurisdiction in which that land is situated. These changes are connected with the offshore property developers measures announced in Budget 2016, to be legislated for in the Finance Bill—we look forward to that. They remove a potential loophole that may have allowed property development companies located in the Crown dependencies to argue that the DTAs prevent the UK from taxing them on the full amount of their profits from developing UK land. The Crown dependencies have agreed to the changes being effective from Budget day, 16 March 2016, which aids the effectiveness of targeted anti-avoidance rules that protect the new tax charge in the period between its announcement on 16 March 2016 and the introduction of the legislation. That demonstrates the continued co-operation between the UK and the Crown dependencies to tackle tax avoidance and evasion.
I hope that that explanation is helpful to the Committee. I look forward to returning to the double taxation agreements with the United Arab Emirates and Uruguay. I will cease my comments now and allow hon. Members to ask any questions that they have in respect of the protocols that I have described.
The Chair
Order. Although I appreciate why the Minister has spoken to the Jersey order, the motion before the Committee is that it has considered the draft Double Taxation Relief and International Tax Enforcement (United Arab Emirates) Order 2016. I will call Mr Marris to speak, and he can obviously at that stage refer to the Jersey order as part of the discussion.
Rob Marris
I am sorry if I got the Minister off on the wrong foot; I take responsibility for that. Just to clarify, would it be in order to reverse matters? I believe that we are to have a decision at the end of the hour and a half or sooner. I could talk about Jersey, Guernsey and the Isle of Man because the Minister has talked about them, and then, if you agree, Mr Hanson, we could deal separately, as it were, but within the one debate with the orders on the United Arab Emirates and Uruguay.
Rob Marris
Thank you, Mr Hanson; I appreciate your indulgence. I will be brief on Jersey, Guernsey and the Isle of Man. As would be expected, I have some questions for the Minister, although not many. The Jersey agreement goes back to 1952 and has been amended three times since then. The Guernsey agreement goes back to 1952 and has been amended three times since then. The Isle of Man agreement goes back to 1955 and has been amended four times since then. In terms, the three statutory instruments that will be decided on today are the same. They all refer to closing the potential loophole to which the Minister referred. That loophole relates to immovable property, which is defined in each of them—I will not read out the definition, but in essence, it refers to land, agriculture and forestry. In the 1950s in the Isle of Man, Jersey and Guernsey, there was land, agriculture and perhaps some forestry. I am slightly surprised—clearly, this is not just about this Government, given that there were 13 years of Labour Government—that after these have been around for 50 years, somebody seems to have noticed a loophole about land. I am slightly bemused by that, so I wonder whether the Minister could fill us in a little.
Secondly, will the Minister say a little more about the apparent retrospectivity? These measures all go back to 16 March 2016—that is, they would take effect, as per the wording of the statutory instruments, as I understand it, some three months ago. To me, that seems slightly unusual, but perhaps the Minister could talk us through it.
My third question is more on procedure. It bemuses me, and again, I hope the Minister can help the Committee with this, that in the explanatory notes to the statutory instruments—as opposed to the separate notes we get—it says, for example, in the final paragraph of page 5 of the Jersey order:
“A Tax Information and Impact Note has not been produced for the Order as it gives effect to a previously announced policy to enact a double taxation agreement.”
That bemuses me because it seems to say, “The Government have decided to do this, so we are not going to have a tax information and impact note.” I would have thought that if the Government decide on a course of action that needs, as these measures do, the approval of Parliament, it would be helpful to have a tax information and impact note—even a brief one—rather than simply saying, “We have decided to do it so you are not going to get such a note.” Perhaps the Minister could talk us through that.
Mr Gauke
I thank the hon. Member for Wolverhampton South West for his questions. To answer his first question about why these treaties have not been amended before, we have taken action in this Budget to prevent a form of avoidance that HMRC became aware of relatively recently. This ensures that a loophole that would have prevented the implementation of measures to protect the UK tax base can be addressed. The challenge was first, a recognition that profits relating to land in the UK were being booked in these Crown dependencies—the view being that these profits properly belong in the United Kingdom—and therefore, we announced the Budget measure. The concern was that the measures that we took in the Budget could not be implemented without these changes.
Perhaps if I can address the second point—
Mr Gauke
If I can just address the second point, I think it may be helpful to the hon. Gentleman. The new legislation announced in the Budget will include targeted anti-avoidance rules that will stop property developers structuring around the new charging provisions during the period from the announcement on Budget day, which is the date that the new legislation comes into force. Making the protocol changes effective from Budget day aids the effectiveness of these targeted anti-avoidance rules. This is not backdating all retrospection, as such. The double taxation agreements are changed only from the date that the protocols were signed. The targeted anti-avoidance rules will apply prospectively only from Budget day. I hope that provides a bit of clarification to the hon. Gentleman.
Rob Marris
I am grateful to the Minister for that explanation. Is it then the case that the, and I mean this positively, wonderfully innovative accountancy industry in the United Kingdom did not realise that they could advise their clients, quite legitimately, to offshore land profits—this is my shortening of the situation—to the Crown dependencies? They did not realise for 50 years, and then they suddenly realised and it started to happen. The Government then said, “That was never anybody’s intention, so the measures announced in the Budget”—in the statutory instruments today—“will stop that.” Or is it something else?
Mr Gauke
I understand the hon. Gentleman’s point. I want to be perhaps a little a cautious, if not tentative, about the wording. That is not to say that nobody was making use of these provisions—I think that people were making use of them. However, it was relatively recently that Her Majesty’s Revenue and Customs became aware that this loophole—I think it would be fair to describe it as that—was being used. That was not really the intention of Parliament. One could make an argument—if Parliament addressed its mind to this matter—that it would certainly not be the way that we want the system to work. In recent months, in the run-up to the March Budget, it was concluded that action needed to be taken. These changes to the protocols are all part of ensuring that this is effective.
If I can deal with the third question, I will then make my comments about the double taxation agreements. I was asked why there is no TIIN—tax information and impact note. We have not produced impact assessments because double taxation agreements are not of a regulatory nature. They impose no obligations on taxpayers. Rather, they give UK residents relief from foreign tax in prescribed circumstances. They also provide relief from UK tax for non-residents in a comparable situation. Given that the hon. Gentleman has raised that specific point, perhaps we will look again at the wording of the explanatory memorandum to see whether we can provide a clearer explanation next time. He has made a constructive point.
If I may, Mr Hanson, I will turn to the two other orders, on the United Arab Emirates and Uruguay. This first-time double taxation agreement with the UAE completes our DTAs with the Gulf states and follows the same principles that we have adopted with the other countries in the region. Although the UAE does not currently impose tax on individuals or companies, it has the potential to do so. Legislation was in place, but the UAE chooses for the moment not to apply it. Concluding the DTA now ensures that should the UAE start to apply its tax laws, UK companies will have greater certainty over the liabilities, as the taxing rights are constrained by the treaty.
The DTA generally follows the OECD model. Dividends are exempt from withholding tax, other than where the payer is a real estate investment trust, in which case 15% tax may be charged. Interest and royalties are also exempt, but with a provision to ensure that the benefits of the interest article can flow only to UAE residents and companies owned by UAE residents. The exchange of information article is the latest OECD version, which permits information to be used for non-tax purposes with the permission of the other state.
The Government signed a first-time DTA with Uruguay earlier this year. This is an important treaty for the UK as it expands our treaty network in an increasingly important region. The treaty gives valuable benefits to UK businesses and individuals with interests in Uruguay and will strengthen the economic ties between the two countries.
Withholding taxes can hamper cross-border investment, as they represent an extra and often excessive layer of taxation. I am therefore pleased that withholding tax on dividends is restricted to 5% on direct investment and interest is taxable at source at a maximum of 10%, with some important exemptions—for example, for certain bank loans. As we sometimes do with a country whose economy is in transition, we have agreed a provision that allows the taxation of services in the country where they are performed where they last for more than 183 days. The treaty also contains anti-treaty shopping provisions based on the BEPS—base erosion and profit shifting, as you know, Mr Hanson—recommendations on treaty abuse, the latest OECD exchange of information article and an arbitration provision to assist the mutual agreement procedure, which will be welcome to UK companies investing in Uruguay.
I hope those explanations are helpful. I commend the orders to the Committee and I am happy to answer any remaining questions that hon. Members may have.
Rob Marris
I shall try to be brief for the benefit of Minister. It may be that, on certain things, he would kindly offer to write to me. He will know whether he can make that offer when he has heard what I have to say.
I thank Treasury officials, particularly Mr Tom Matthews, for meeting me beforehand to go through these. Any accuracies are theirs, any inaccuracies are mine and any policy pronouncements are mine also. They gave me a talk through of a technical-only nature. As I understood it, the Uruguay agreement was negotiated after the United Arab Emirates agreement. When I go through them there are some differences in wording. There are always going to be some because it takes two to tango and make an agreement, and a country might agree to go with the OECD model but with certain tweaks, just as somebody buying a car gets certain bells and whistles and somebody else does not.
However, I gather that the agreements are, in a sense, generationally different, because when the model for the UAE agreement was used and negotiated successfully, as we see in the statutory instrument, the principal purpose test—which is in the Uruguay agreement—did not exist in the OECD model. The Uruguay agreement uses a later OECD model. That might explain quite a lot of why, when I compare the two, there is much common wording, but also some that appears to me to be different. That may not simply be different because of the different models, but it may be that it is.
I wonder whether, to save the Committee time—others on the Committee may not agree to this—the Minister might write to me, not necessarily in exhaustive detail, to set out some comparisons between the Uruguay agreement and the UAE agreement. No one would thank me if I went through the orders, article by article, and said what is in one and not in another and asked the Minister why. I am not sure that that would be a productive way to proceed. If the Minister felt able to write to me on that, it would be helpful.
I note with some amusement—again, for those who have been on these Committees before; the Minister has—that the UAE agreement refers to “entertainers and sportsmen” under article 16, whereas article 16 of the Uruguay agreement refers to “artistes and sportsmen”. “Entertainers” have become “artistes”. I do not think that has anything to do with the OECD update; the Minister may tell me. These things seem to vary from country to country.
One thing I say with a little more seriousness to the Minister is that, although I appreciate these things have to be negotiated with other countries, and I know a little bit—not a massive amount—about legal drafting because, like the Minister, I have a legal background, if we could find a better word than “sportsmen”, it would be a little bit more “with it”, as it were. I appreciate that the pronoun “he” rather than “she” is used because it can get awfully cumbersome in legislation to do otherwise, but can we not think of something different from “sportsmen”?
Peter Grant (Glenrothes) (SNP)
It is a pleasure to serve under your chairmanship, Mr Hanson. Had I known that you were a member of the jackets-off brigade I might well have nominated you for Speaker last year.
Peter Grant
If you continue to curry favour in that way with Members, who knows where you could be in a few years’ time.
I am happy to support the draft orders but I have a few questions that I hope the Minister will answer. Clearly, the UK has a very different relationship with places like Uruguay and the UAE compared with the Crown dependencies. It is noticeable, however, that the Uruguay and UAE agreements also include new provisions on information sharing on potential tax liabilities. Do we already have adequate information sharing with the Channel Islands and the Isle of Man? If not, is that something we need to return to?
Secondly, with regard to the Uruguay and UAE information sharing, does the confidentiality requirement prevent us from sharing that information further? If, for example, an inquiry is being carried out by the tax authorities elsewhere in Europe or the United States, are the UK authorities prevented from sharing information that we have got under this agreement that might help to uncover large-scale tax avoidance and evasion in Uruguay or the UAE?
There is a second point with regard to the definitions. In some ways it might appear to be very nitpicking to look at the definitions, but if we get them wrong or do not understand their meaning—with no disrespect to hon. Members present—the lawyers will have a field day and the taxpayer is likely to lose out. The definition of immovable property in all the draft orders is, in essence, not surprisingly, whatever the law in the individual country or state says. Is the Minister aware of any significant differences in definition of immovable property in the different places? Are there any instances of where a different definition of immovable property would mean that what we get is something different from what we think? To me, as a lawyer, it is obvious what kinds of property can and cannot be moved, but I know that slight differences in definition might give us problems.
I hope that we will get answers to my questions today, but I am happy for the Minister to write to me at a later date if not. The principle, however, is one that we can all enthusiastically support: it is not fair for someone to be taxed more than once on the one economic activity; and it is extremely unfair for someone not to be taxed at all on any large-scale economic activity.
Related to that, it is becoming more widely accepted that the principle should always be that the tax liability arises in the place where the economic activity takes place. We are all keen for that principle to be extended, particularly in the developing world, so that if international corporations make profits from the hard work and resources of some of the poorest countries in the world, the tax liability will go back to the Governments of those countries, to ensure that not only the workers, but the public services and tax income of the least developed countries get a proper benefit for the efforts of their citizens and, sometimes, the use of their natural resources.
I certainly applaud the direction of travel represented by the draft orders—we are creating a worldwide tax system, which is fairer not only because it prevents people from paying more than they should, but because it ensures that those who have got away with not paying for far too long will gradually find that more and more loopholes get closed. As a result, public services in our country and in many other parts of the world will be properly financed by the people who should be financing them. With those words, I am happy to support the draft orders.
Mr Gauke
I thank the hon. Members for Wolverhampton South West and for Glenrothes for their questions and, indeed, their support. Let me try to address as concisely, but as thoroughly as I can the points made.
First, on the differences between the two double taxation agreements, I am certainly happy to write to the hon. Member for Wolverhampton South West and to set out some details. The two main points that I would bring out, without going into a clause-by-clause analysis—tempting though that is—is that the hon. Gentleman is absolutely right to say that there is a difference of timing in when the draft orders were agreed, so the principal purpose test contained in the Uruguay agreement reflects the fact that that is a new direction for the UK. It comes out of the “Action 15” work of BEPS, and will appear in the next edition of the OECD model. That is the explanation for that, and we expect to see it more often in future. Another distinction worth pointing out is that we have no capital tax, but Uruguay has a wealth tax, so an article in the double taxation agreement properly reflects that.
The hon. Gentleman drew a distinction between artistes and entertainers. That perhaps should be best left to the letter. I will not dwell on that here or draw any general conclusions about the UAE or Uruguay and which is most appropriate, but he raises a fair point on “sportsman”. I am pleased to say that it has been changed to “sportsperson” in the latest OECD model. I fear that we are not going to be able to give him credit for that change in double taxation agreements, but he has certainly spotted something that needs rectifying, and I am pleased to say that it is being rectified.
Turning to the questions raised by the hon. Member for Glenrothes, let me reassure him that we have a tax information exchange agreement with all the Crown dependencies. It is not included here because these are specific protocols dealing with a specific issue, but we have well established treaties with those Crown dependencies. It is worth stressing that they meet the international standards in this area. We were early signatories to what became the common reporting standard.
I am entirely in agreement with the hon. Gentleman on the importance of tax authorities having an ability to share information much more widely than they have in the past and on its not being possible for the information to be held secret, as was once the case. Much progress has been made on the move to automatic exchange of information, which has long been an aspiration of all parties, and that is coming into effect. We have moved a long way in recent years on exchanging information with law enforcement authorities and so on, and on co-operation between tax authorities across the board.
I am not aware of any particular issues or controversy with differing definitions between one jurisdiction and another of the operation of immovable property, but if I may, I will write to the hon. Gentleman to confirm the position and to what extent it has proved difficult, whether in the jurisdictions we are talking about today or more widely. I add my support to his comment that we should have a tax system in which tax is properly aligned to economic activity. That is very much the direction of the OECD’s work on BEPS, and it is very much the direction that the UK has argued for. We believe that the international tax system has to properly reflect that alignment. It is the only sustainable way in which an international tax system can properly work, and we continue to make that argument.
I hope that those points of clarification are helpful to the Committee. With that, I hope that the orders before us will have the support of the whole Committee.
Question put and agreed to.
The Chair
With the leave of the Committee, I will put the remaining motions in a single question.
Draft Double Taxation Relief (Isle of Man) Order 2016
Resolved,
That the Committee has considered the draft Double Taxation Relief (Isle of Man) Order 2016.—(Mr Gauke.)
Draft Double Taxation Relief (Jersey) Order 2016
Resolved,
That the Committee has considered the draft Double Taxation Relief (Jersey) Order 2016.—(Mr Gauke.)
Draft Double Taxation Relief and International Tax Enforcement (Uruguay) Order 2016
Resolved,
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Uruguay) Order 2016.—(Mr Gauke.)
Draft Double Taxation Relief (Guernsey) Order 2016
Resolved,
That the Committee has considered the draft Double Taxation Relief (Guernsey) Order 2016.—(Mr Gauke.)