Draft Community Infrastructure Levy (Coronavirus) (Amendment) (England) Regulations 2020

(Limited Text - Ministerial Extracts only)

Tuesday 14th July 2020 General Committees

[The Minister for Housing (Christopher Pincher)]

I beg to move,

That the Committee has considered the draft Community Infrastructure Levy (Coronavirus) (Amendment) (England) Regulations 2020.

It is a pleasure to serve under your chairmanship, Ms Fovargue. The regulations were laid before the House on 30 June and, if approved and made, will give local authorities the discretion to help small and medium-sized developers experiencing financial difficulties because of the effects of the coronavirus epidemic. They will enable local authorities to defer community infrastructure levy payments without having to impose additional costs on developers. Although we have already put in place a range of measures to help businesses affected by the effects of coronavirus, we recognise that small and medium-sized enterprise developers require additional assistance.

SME builders have been declining in the long term and were hit hard by the last recession. There were 16% more builder and developer insolvencies in 2019 than in 2018. The vast majority of those were SMEs. SME developers are now under further pressure because of the epidemic, so giving local authorities the discretion to grant a deferral of CIL payment liabilities for SMEs is another important step in supporting the sector.

Both developers and local authorities have requested that we introduce a deferral mechanism. However, we recognise that local authorities will be best placed to understand the needs and pressures in their area, so these regulations do not mandate that local authorities defer CIL payments, but instead give them the discretion to do so where they think that appropriate. The regulations make the same provision for the Mayor of London should the Mayor consider it appropriate to defer mayoral CIL payments.

CIL regulations first came into force in April 2010. They enable local planning authorities and the Mayor of London to raise a levy on new development in their local area to fund a wide range of infrastructure to support development. The CIL becomes payable within 60 days of building works commencing unless the charging authority has published an instalment policy. However, the payment schedule set out in an instalment policy can apply only to development that commences after the policy is published. Therefore, although an authority can help developers that have not started building work with their CIL payments by publishing an instalment policy, it does not have the power to defer payments for development that has already commenced.

Where the developer fails to pay on time, the current regulations require the local authority to administer late payment interest on the CIL amount owed, and allow for the imposition of late payment surcharges. The local authority has further powers to enforce, as set out in part 9 of the Community Infrastructure Levy Regulations 2010. The regulations being debated today introduce amendments to that statutory instrument to address the financial effects that coronavirus has brought upon SME developers, including development sites that have stalled because of financial instability. These provisions have been developed following close engagement with the industry and local authorities.

As to the detail of the amendments, we are, first, making changes to allow local authorities the discretion to defer temporarily CIL payments for SMEs in certain circumstances—namely, where the SME is experiencing financial difficulty for reasons connected to the effects of coronavirus and is required to pay a CIL amount during the specified time. SMEs may apply in writing to the local authority no more than 14 days before or as soon as practicable after the date the CIL payment is due, requesting a deferment of the payment. The collecting authority can request whatever information from the developer it reasonably needs to consider the deferral request. It must consider a deferral request as soon as is practicable after it is received and grant or refuse the request in writing. Payments can be deferred for up to six months. Where the deferment payment falls due on or before 31 July 2021, the developer could submit a further deferral request.

Under the current regulations, where a developer has not paid their CIL liability by the date set on the demand notice, late payment interest automatically accrues. That late payment interest accrues at 2.5% above the base rate. Charging authorities may also apply late payment surcharges. We recognise that it would be unfair to continue to apply those charges where a developer has applied to defer a CIL payment. We have therefore paused the application of late payment interest and surcharges while a deferral request is being considered.

The regulations also allow, where a deferral request has been agreed, for the developer to request that any late payment interest that has accrued in the period between lockdown and the deferral request being agreed be credited and taken off the total of the CIL amount owed. That is termed an interest request and ensures that SMEs will not be penalised because of the effects of coronavirus. The regulations make the same provisions for the CIL collected by London boroughs on behalf of the Mayor of London.

Contributions from developers play an important role in delivering the infrastructure that new homes and local economies require. The measures set out in the regulations enable the collecting authority to exercise their discretion to defer payment of CIL on a case-by-case basis. That will give local authorities the discretion to help SME developers who are struggling with cash flow, and ensure that CIL payments are made, albeit over a longer period, rather than being lost because a small builder goes out of business.

I commend the regulations to the Committee.

--- Later in debate ---

[Christopher Pincher]

I am grateful to the hon. Gentleman for his generous approach to the Committee’s deliberations of this statutory instrument. I am happy to answer his questions. He first asked what criteria are applied by a local authority to determine whether an applicant is an SME. The criteria are very clear. The applicant must have a turnover of not more than £45 million a year, which is the normal criterion applied to whether a firm is or is not an SME. That will be the key criterion applied by local authorities in their determination of an application.

The hon. Gentleman also asked whether there will be a gap issue in funding for local authorities. We have talked to local authorities. We have talked to Croydon, Ealing, East Suffolk, Havering, Hillingdon, Richmond, Southwark, and Tower Hamlets—he mentioned that particular authority in passing. Labour and Conservative, and, in the case of Richmond, Liberal Democrat, local authorities all agree that our approach is right and sensible. They all agree that it is better to defer payments than risk SMEs going out of business and having no payments at all—and indeed no construction at all.

The hon. Gentleman also asked whether we would be prepared to review the regulations after three or so months. I think adding further burdens on local authorities in that way is possibly not the most sensible approach, but we are always mindful of our liaison with the LGA. We always look closely at the effects of our policies and will keep it in mind.

In conclusion, I am grateful to the Committee for its consideration and to the hon. Member for Weaver Vale and the Opposition for their support. I gently remind the hon. Gentleman that we have given £3.2 billion to local authorities—a further £450 million last week. We have deferred business rates. We have given them £63 million for the non-shielded food vulnerable. I think that is a relatively good record of support for local authorities. In the spirit of generosity, I hope he will reach out to the shadow Secretary of State for Housing, Communities and Local Government, the hon. Member for Croydon North (Steve Reed) and remind him that it is not sensible to attack homeowners for receiving a “bung” in the reduction of stamp duty. That is designed to help homebuyers and the housing sector. I hope the Committee will support the regulations.

Question put and agreed to.