Wednesday 3rd May 2023

(1 year, 1 month ago)

Lords Chamber
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Committee (12th Day)
Relevant documents: 24th and 31st Reports from the Delegated Powers Committee, 12th Report from the Constitution Committee
Amendment 290
Moved by
290: After Clause 123, insert the following new Clause—
“Developer contributions: childcare(1) This section applies where a local authority is making a consideration under—(a) section 106(1)(d) of TCPA 1990 in relation to a “major development”, or (b) Part 4 of this Act. (2) When this section applies, the local authority in question may have regard to—(a) the current availability and affordability of childcare services in the local area,(b) the impact that any new development will have on the availability and affordability of childcare services in the local area, and(c) the need to promote high-quality affordable childcare in line with sections 6 and 7 of the Childcare Act 2006.(3) When setting obligations to which this section applies, the local authority must publish a statement setting out the reasons underpinning their decision to allocate the level of funding or support they have to early years or childcare services and settings.(4) Nothing in this section prevents a local authority from having regard to any factor not mentioned in this section when making a relevant consideration.(5) “Major development” here has the same meaning as in the Town and Country Planning (Development Management Procedure) (England) Order 2015 (S.I. 2015/595).”Member's explanatory statement
This amendment would make clear that local authorities are empowered, but not required, to use developer contributions to fund childcare services and settings. It would also require them to publish a statement explaining why – in relation to large developer contributions – they did or did not direct any funding towards childcare services and settings. This would only apply to major developments, as is currently the case for affordable housing considerations.
Lord Russell of Liverpool Portrait Lord Russell of Liverpool (CB)
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My Lords, I rise to move Amendment 290 in my name and those of the noble Baronesses, Lady Royall and Lady Tyler, and the noble Lord, Lord Young. I thank all those who have supported this amendment, in particular the large number of Conservative noble Baronesses I have managed to nobble—it was 16 at the last count, I think —all of whom have indicated their strong support, in principle, for it. I will not bore your Lordships or broadcast my ignorance by opining on the 24 other amendments in this rather large group; I am confident that others will make their own cases at an appropriate, or even inappropriate, point.

We are all aware of the challenges facing parents of young children in the country today. Childcare is too expensive and often extremely hard to access. Even if one is able to afford it, often it is not there. I think we would all agree that, when a parent will lose money if they go back to work because the childcare that they can access is more expensive that what they can earn back in the workplace, the system is not working as it should.

Over the past seven years, the children’s charity Coram—I declare my interest as a governor—has done some research and indicated that prices have risen by 40%, far outstripping inflation and wage growth. However, these price rises have been driven in part by the growing scarcity of childcare services. The Government’s own data shows the systematic underfunding over several years of the so-called free hours, giving nurseries a rather invidious choice between closing down and pushing prices up for the hours that they charge for. The end result is that 5,000 providers closed their doors for good last year. In more than half of local authorities, there is not enough childcare provision for very young children. This is letting families across the country down and is holding back our economy as new parents are forced to give up careers.

Against this backdrop, the Chancellor has announced an extremely welcome massive expansion of government-funded childcare over the next three years. This will see hundreds of thousands of children receive some childcare for free but, potentially, increasing demand for already scarce nursery places. The Government have recognised that this cannot happen overnight but they have not—so far, at least—put in place funding specifically to increase the number and capacity of nurseries. This amendment is by no means the complete solution to the problem but we suggest that it should be part of the picture as we work out just how we are going to deliver on the promises that the Chancellor has made.

It is a long-established principle that, when developers build new homes at scale in what is termed a “major project”, they must contribute towards the extra public service capacity that these developments take up. Whether they are schools, GP surgeries or public transport links, these contributions help to ensure that a major development is acceptable and additive to local communities. Unfortunately, one area where this simply is not happening is the provision of childcare services and facilities. Over the past five years, around £35 billion has been raised from developers to fund affordable housing and community infrastructure. About a third of that has been spent on infrastructure such as repairing roads and extending or building new schools. However, of that £35 billion, the total amount that has been spent on childcare provision is £22 million, which is not very impressive. That is equivalent to £1 for every £1,667 raised from developers—a slight imbalance, perhaps.

There are some areas that have done well. In East Sussex, over £900,000 has been spent on expanding two nurseries. On the Isle of Wight, £200,000 has been spent on extending a family centre. In Knowsley, in Liverpool, almost £2 million has been spent on two new nurseries. However, these represent a disappointingly small set of areas. In responding to a freedom of information request to identify what they had or had not done, more than 90% of local authorities indicated that they had not spent a single penny of developer contributions on childcare or early years support. Since the guidance on both the community infrastructure levy and Section 106 contributions does not mention early years settings at all, this should not come as a great surprise.

Amendment 290 would not force local authorities to spend their money differently. All it would do is make it crystal clear and explicit to them that they can do so and that, in doing so, they will potentially help the Government to deliver on their commitments and policies. Local authorities have focused primarily on schools, not early years provision. While early years provision is meant to be understood as being implicitly included in the schools category, it is mostly not being included or considered at all. On Report in the other place, the Minister, Lucy Frazer, said that

“it is crucial that children get the support, care and education they deserve. It must be the case that nurseries and pre-schools fall within the definition of ‘schools and other educational facilities’”.—[Official Report, Commons, 13/12/22; col. 962.]

However, the clear evidence from the freedom of information data is that, 90% of the time, that simply is not happening. I am sure that this is not wilful or intentional neglect; I just think that local authorities do not regard early years provision as a priority to be fully considered. All our amendment asks the Government to do is to make it explicit, rather than implicit, that the need for childcare services should be taken into account. It asks the local authority

“to publish a statement explaining why … they did or did not”

allocate funding or support to childcare services.

At Second Reading, I mentioned that I had undertaken some research on behalf of the Minister to find, given her distinguished 10-year tenure as the leader of Wiltshire Council, a term in Wiltshire dialect that would clarify the intent of this amendment. The noun that I found was “jiffling”, which, in everyday English, means “confusion”. I hope the Minister will agree that, of the myriad amendments that she has dealt with so far and will deal with in future, this is one of the more straightforward, more diplomatic and least contentious ones. It is also fully aligned with the direction and intent of government policy and its purpose, which is simply to eliminate the possibility of any jiffling when local authorities evaluate the potential need for childcare services when reviewing any major project. I beg to move.

Lord Young of Cookham Portrait Lord Young of Cookham (Con)
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My Lords, it is a pleasure to follow the noble Lord, Lord Russell, and add a brief footnote to the speech he made on Amendment 290, to which I have added my name. As he said, the amendment makes it explicit that the infrastructure levy can be used to make childcare accessible and affordable.

I will make four brief points. First, in standing back and looking at total expenditure on all ages of children under 18, I believe we spend too low a percentage on under-fives and too great a percentage on older age groups, in terms of outcome both for society as a whole and for the individual child. I believe that a pound’s worth of investment spent earlier yields a greater return than if spent later. This is not the time to defend that assertion, but it is relevant to the debate.

Secondly, I therefore welcome the priority the Government have recently given to childcare, with £204 million of additional funding this year increasing to £288 million by 2024-25, on top of the £4.1 billion previously announced, together with earlier announcements about family hubs.

Thirdly, in expanding free entitlement, if that additional funding is inadequate, there is a risk that, as the noble Lord just said, providers continue to remove themselves from the market or reduce the quality of care provided. If the latter happens, it would place the priority of providing employment opportunities for parents above the purpose of child development. Increasing the demand for childcare places by making it cheaper without increasing funding for staff salaries may make it harder to find a nursery space in the first place. At the moment, it is not at all clear where the extra places will come from. Sam Freedman, an author and political columnist, posted the following on Twitter:

“we haven’t been given a figure for the new hourly rate but based on the overall cost for 3+4 year olds (£288m for 2024/5) it looks way too low. We proposed adding in £2bn to make it sustainable”.

Fourthly, the current business model for much of childcare relies on cross-subsidy from the better-off parents who can afford the extra hours to make good the gap in statutory funding. I was rereading the report of the Lords Select Committee on Affordable Childcare, published in February 2015, which said this about cross-subsidy:

“There is evidence that the funding shortfall in the rates offered to”

private, voluntary or independent

“providers for delivery of the free early education entitlement is met in some settings by cross-subsidisation from some fee-paying parents. This means that parents are subsidising themselves, or other parents, in order to benefit from the Government’s flagship early education policy”.

At the moment, of course, nurseries subsidise the too-low, free, hourly rate by charging more for one and two year-olds, hence the high prices. But, if one and two year-olds get free hours, as proposed, you cannot get the cross-subsidy. As free entitlement is expanded to more of the market and more of the week, it undermines the current business model for those who are providing childcare. If we want to achieve the Government’s policy on childcare and levelling up, we need to ensure that extra resources are available. That is what this amendment does.

Baroness Tyler of Enfield Portrait Baroness Tyler of Enfield (LD)
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My Lords, I will speak to Amendment 290, in the name of the noble Lord, Lord Russell, and to which my name is attached. I pay tribute to the noble Lord’s leadership on this issue and apologise to the Committee, as I was unable to speak at Second Reading. I will just make a few additional points to those already made by the noble Lords, Lord Russell and Lord Young. As a member of the Lords Select Committee on Affordable Childcare, to which the noble Lord, Lord Young, just referred, I very much want to underline the points he made about cross- subsidisation.

This amendment, which makes it explicit that childcare services are considered a proper use of developer contributions by local authorities, is incredibly important. We need to see it written down. At the moment, there is nothing in legislation or guidance, and this would be only an option for local authorities—not something they are required to do. As the noble Lord, Lord Russell, said, it is hardly a surprise that so few local authorities are spending any of their developer contributions on childcare services. To reiterate his point, in the last five years, only 22 local authorities have spent anything on them.

As all noble Lords know, the childcare sector is under huge pressure. Last year, more than 5,000 providers closed down. Depending on which estimate you prefer, the difficulties in accessing affordable childcare cost our economy between £11 billion and £30 billion a year. Women in particular often have no choice but to give up work after having children. Even if they return later, they will see their earnings stunted for the rest of their careers as a result. We can see this clearly in the gender pay gap: women’s weekly earnings and labour force participation fall substantially when they have their first child and do not reverse a decade later. This is not just about childcare—there are other major barriers that women face—but it is a really important issue. We know we have serious productivity problems as a nation, and this is something that we cannot ignore.
I was also glad to see in the recent Budget that the Government recognise this challenge. I welcome the Budget announcement, but this does not change the fundamental fact that our childcare system is in a precarious state. Liberal Democrats have been calling for properly funded, genuinely free childcare for years because, unless the Government fund free hours at the actual cost of providing them, it will make the problems parents face—a chronic lack of providers and eye-watering fees for full-time childcare—even worse.
Childcare is an essential part of our economic infra- structure. For many parents, it is as crucial to getting to work as roads or trains. I know that this amendment would not solve all these problems, but it would help to ensure that families with children do not see childcare prices forced up or waiting lists becoming even longer as a result of much-needed new and affordable housing. That is why I support this important amendment.
Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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My Lords, I will speak to the amendments in this group in my noble friend Lady Hayman’s name and in my name, and comment on other amendments submitted. As this is the first group on the infrastructure levy before the Committee, I will make some general comments, which I will try not to repeat in future groups so as not to test Members’ patience.

The introduction of the infrastructure levy has broadly been welcomed by local government and the Local Government Association, as it is non-negotiable and set at a local level. I hope that, eventually, it will rationalise the current system of the CIL and Section 106. However, as my grandmother is from Wiltshire, I feel justified in saying that it is a jiffling picture at the moment.

The proof of its success will be whether the levy delivers more in infrastructure, affordable housing and, key to this group of amendments, some of the social infra- structure that greatly concerns local residents when they hear of new development. Key to this is whether, as the current community infrastructure levy and Section 106 system transitions to this new arrangement, the levy actually delivers at least as much as, if not more than, the current system. What protections does local government have against the temptation for Secretaries of State—I will not name anyone—to top-slice the infrastructure levy?

Forgive my cynicism, but I have the clear memory of the new homes bonus in mind. The new homes bonus was, first, top-sliced from local authority budgets then cut in successive years, so it was really just another mechanism to cut local government budgets. I know that the infrastructure levy is substantially different, in that funding is delivered from the development sector, but will this be too tempting a pot for the Treasury to resist?

The LGA has expressed concerns that significant elements of the levy are not yet clear in the Bill, such as definitions of larger sites, rate-setting and the relationship between different tiers of authorities that will be in receipt of the levy. There also needs to be a clear definition of what infrastructure is in scope and what is not, which is the subject of many amendments in this group. For example, if the system is to move on from Section 106, how will contributions towards issues currently funded by that method be treated, such as skills, apprenticeships and the local workforce—in other words, issues that sit outside the built environment?

Local government has also urged the Government to reconsider the timing of the levy. The new system as proposed may help developers’ cash flow, but local authorities want to ensure that infrastructure is provided early in the development process so that existing local residents can be reassured that there will not be an uncomfortable transition phase while the provision of infrastructure lags behind development and results in a period of pressure on existing resources. I moved around our new town four or five times when I was growing up, as new developments were built, each time to areas with no shops or services and little in the way of public transport. The sequencing of infrastructure is really important.

Like many other voices in local government, I have long been an advocate for removing the permitted development process, which undermines local plan-making and the quality standards of new homes. But if the Government insist on retaining permitted development—it looks as though they will—there must be a way of applying the levy to such change-of-use developments.

Many of the amendments in this group are seeking some clarity from the Government about how the infra- structure levy can be used and how they will demonstrate what is being achieved in this respect. Our Amendment 314, in the name of my noble friend Lady Hayman, raises the key issue of demonstrating how the levy will impact public transport in travel-to-work areas and requests that the Minister must publish within two years of Royal Assent a summary setting out progress. If we are serious about reducing car dependency to aid our net-zero ambitions, clear commitments from this legislation are essential.

Similarly, Amendment 315 probes whether the levy may be used in relation to the contribution required for restoring railways. We have heard a great deal in earlier discussions on the Bill about, for example, the use of restored former rail routes to improve interconnectivity. The levy could provide a very important contribution to this. We hope that when we see the detail of the regulations associated with the levy, it will be empowered to do so.

Amendment 316 again probes the intended scope of the infrastructure levy. When we talk to local people, their concerns about new developments, as well as the impact on the environment, are often about the pressure that these put on services and facilities that meet local and strategic needs and contribute towards a good quality of life, such as health provision, education, community, play, youth services, recreation, sports, faith and emergency services facilities. Too often, they have felt that developers focus just on the profit side of the equation, with little regard for the needs of existing communities or those for whom they are building. Although CIL and Section 106 have made some provision for parts of social infrastructure in the past, they have been too limited in the amount provided and in restrictions on what is provided. As an extreme example, in my borough, a Section 106 agreement could be used only to deliver a bus shelter in an area that had long since lost its only bus service. We would like to see a broad scope for the infrastructure levy, driven locally by local need and with flexibility for it to be used in appropriate ways as communities develop.

It would be wrong not to mention the knotty issue of viability. I draw attention to the Explanatory Notes to the Bill, which say at paragraph 725:

“The purpose of IL is: to ensure that the costs incurred in supporting the development of an area (including by the provision of affordable housing), and achieving any additional purpose specified in IL regulations, are funded at least in part by owners or developers of land, but in a way that does not make development in the area economically unviable”.

One has to ask: unviable to whom? If the infrastructure needed is not to be provided through this route, how is it to be provided? Will it be by the local authorities which are already so strapped for cash they are cutting services, not developing them, or by the Government? My noble friend Lady Hayman’s Amendment 343 seeks to specify a wider scope for the infrastructure levy in the Bill, so that it is clear that developers may be asked to make wider contributions to the infrastructure demands that their development is driving.

Amendment 355, in my name, seeks to limit the circumstances in which the Secretary of State can direct a charging authority to review its charging schedule. We understand why it may be necessary to ensure that charging schedules are kept up to date, but surely these timescales are for local determination, and it should be only in the most extreme circumstances that intervention would be necessary. The community infrastructure levy itself is a relatively new form of charging infrastructure against developments, so it will be important to have a benchmark on what it has achieved in this respect so that it is possible to assess the infrastructure levy against the current arrangements.

I will comment briefly on other amendments in this group. The amendment from the noble Lord, Lord Russell, is to ensure that large-scale developments can be required to provide funding for childcare services and settings. My noble friend Lady Hayman’s Amendment 343 also seeks to broaden the scope of social provision under the infrastructure levy. In her amendment to Schedule 11, paragraph (c) refers specifically to nurseries, so we support this amendment. The plea of the noble Lord, Lord Russell, was powerfully made. Having been a single parent myself, I know that the issue of nurseries and childcare is really vital, but we need to identify what the infrastructure levy can do with capital and revenue funding streams. It is no good building nurseries if there is no funding to run them. The noble Lord, Lord Young, was right to raise the complex issues around funding for childcare. If we are going to resolve some of this through the infrastructure levy, we need to understand how.

There are a number of amendments in the names of the noble Lords, Lord Greenhalgh and Lord Wasserman, and the right reverend Prelate the Bishop of Exeter regarding the implications of the infrastructure levy for our emergency services. We understand the motivation behind these amendments: although emergency services may be asked to comment and make submissions on planning applications, they are, more often than not, unable to be there at the point of decision-making. It is important that the Bill gives clarification on how emergency services are to be treated for the purposes of the infrastructure levy.

Amendment 335, in the name of my noble friend Lady Warwick, the noble Baronesses, Lady Watkins and Lady Thornhill, and the right reverend Prelate the Bishop of Chelmsford, seeks to ensure that infrastructure levy funds cannot be used by local authorities to cover the costs of unspecified items. The wording in Schedule 11, which this amendment would remove, is simply not clear enough. The amendment highlights again how important it is that the Bill is absolutely clear about what can be covered by IL and what cannot.

We are grateful to the noble Lord, Lord Best, for his tireless pursuit of opportunities that the Bill could give to increase the delivery of supported housing, particularly for older people. We believe that this should be a strong consideration in the structure of the infrastructure levy, so we support his amendment. The noble Lord’s Amendments 337 to 339 and 354 all refer to the independent examination of the IL charging schedules by an independent examiner. We look forward to the Minister’s comments on the rationale for this provision in Schedule 11. Is this service to come under the remit of the Planning Inspectorate? If not, who will carry out this role, how, and how will they be appointed?

In respect of Amendment 348 from the noble Baroness, Lady Scott of Needham Market, we are interested to hear the views of the Minister on the treatment of town and parish councils under the new infrastructure levy regime. There are over 10,000 parish, town and community councils in England, ably represented by the National Association of Local Councils. Is it the intention of the Bill that these councils be a specified recipient of the neighbourhood share of the infrastructure levy; for that share to be 25%, or 35% for a parish council with a neighbourhood development plan; and for a parish council to have full flexibility over how those receipts are spent?

NALC believes that the higher CIL amount provides an additional incentive to undertake a neighbourhood development plan and to identify extra investment in infrastructure or anything else concerned with addressing demands of development. Do the Government intend to build on CIL for the new infrastructure levy, with a parish council being the body which will receive the neighbourhood share? They are not named explicitly in the Bill. Will the uplift in neighbourhood share still be available to parish councils which have prepared a neighbourhood plan?

I hope your Lordships will forgive me for a long intervention, but this is a huge group with a lot of different amendments in it. In summary, a great deal of clarification is needed around the introduction of the infrastructure levy. We urge that as much of this clarification as possible is included in the Bill and that there is a thorough period of pilots introduced to test the implementation of the infrastructure levy in practice and whether it can deliver against the opportunities that it should be able to realise.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I rise to speak to Amendments 324, 329, 342, 346, 347, 351, 352 and 360 in my name. I have tabled them on behalf of the emergency services of England, including the following organisations: the Association of Ambulance Chief Executives, the Association of Police and Crime Commissioners, the National Fire Chiefs Council, the National Police Chiefs’ Council, the National Police Estates Group and the National Fire Estates Group. I should declare my interest as a vice-president of the Local Government Association.

As extraordinary as it sounds, the English planning system has never recognised the emergency services as critical infrastructure providers anywhere in primary legislation, national planning policy or statutory guidance. The result of this is that, while new development such as housing estates, bars, restaurants, nightclubs, theatres, warehouses, factories or even power stations place additional demands on the emergency services that stretch existing resources, it is rare for mitigation in the form of developer contributions from Section 106 and the community infrastructure levy to be put in place to alleviate this.

The failure to recognise the emergency services in legislation is a colossal blind spot in the planning system, which has had dire practical results when the emergency services seek to obtain funding for the essential ambulance, fire and rescue, and police infrastructure needed to support new development of all kinds. This is demonstrated by the following figures. The Section 106 system started in 1990. In the 33 years since it has been operating the emergency services of England have been awarded a combined total of £25.4 million, which is a paltry amount when DLUHC’s own figures show that other infrastructure types such as education receive hundreds of millions of pounds per year from the Section 106 system.

There are 10 ambulance trusts in England, but none has ever received a Section 106 contribution at all. In England, there are 39 territorial police forces, but of this total only 12 have ever been awarded a Section 106 contribution since the system started. Of this total, only four of the 12 forces still receive such contributions on a regular basis. Of the 48 fire and rescue services in England, only five have ever been awarded a Section 106 contribution and none has been a regular recipient.

The situation with respect to the community infra- structure levy, or CIL, is even worse than with respect to the Section 106 system. Since it started nearly 13 years ago, the emergency services in England have been awarded a combined total of only £1.5 million—a terrible contrast with the fact that the CIL system in England raises hundreds of millions of pounds for other infrastructure types every year.

The Government have accepted that these problems exist and that action needs to be taken to solve them, so that the emergency services have an equal seat with other infrastructure providers at the negotiating table. I am grateful for a letter to me on 16 March from Housing Minister Rachel Maclean, which points to the reference to the emergency services in proposed new Clause 204N(3) in Schedule 11 to the Bill, meaning that they are referenced for the new proposed infra- structure levy. The Minister has committed to include emergency service providers as a required consultee for the infrastructure delivery strategy through regulations. The Minister has also committed to reviewing the NPPF as part of a wholesale review and consultation once the Bill has received Royal Assent, to consider whether there can be explicit references made to the emergency services, putting them on an equal footing with other forms of infrastructure such as education. Finally, the Minister has committed to reviewing planning practice guidance to add reference to the emergency services with regard to the use of developer contributions.

The commitments from the Government are very welcome, and it has been helpful to have meetings with my noble friend the Minister, but these measures are not enough, for a number of reasons. The Government have confirmed that the new infrastructure levy will not be introduced fully for 10 years—that is, not until 2033. That means that Section 106 agreements and CIL will continue as the main sources of developer contributions for another decade, and possibly much longer in England. The definition in proposed new Clause 204N(3) refers only to the infrastructure levy. It will not apply to Section 106 and CIL. The new infrastructure levy will be a complex mechanism in its establishment, operation and application, and yet the Bill contains only a single reference that the emergency services may benefit from it, with no other provisions. The experience with CIL of the emergency services demonstrates beyond reasonable doubt that they would receive little or nothing from the new infrastructure levy in practice.

Even more seriously, without further amendments to the Bill, there could well be the inadvertent consequence that the current provision will be interpreted by the vast majority of local planning authorities and developers alike as confirming that the Government do not intend for the emergency services to access money raised through Section 106 and CIL. This would close what little access the emergency services have to these two systems, leading to the already paltry amounts being awarded being reduced to zero. That is why the chairs of the emergency services wrote to the Housing Minister on 31 March 2023, offering a way forward—to withdraw six of our eight amendments, provided that two key amendments to the Bill be agreed alongside the measures proposed by the Minister to address their concerns.

The first of those is Amendment 324, to provide a fuller definition of emergency and rescue services. This definition is needed in the absence of one for the emergency and rescue services within the primary legislation governing the planning system. The second is a modified version of Amendment 360, which clarifies that emergency services can receive money from Section 106 agreements and CIL while ensuring that local authorities have primacy of decision-making. This offer was made in a constructive spirit but, so far, we have had no response from the Minister. It would be helpful if my noble friend could provide an update.

We need to find a solution to deal with this issue. If we do not, the existing situation will continue and the thin blue, red and yellow lines will be reduced ever further, as the ambulance, fire and rescue, and police services spread themselves ever more thinly over a greater area to try to cover new developments of all kinds.

Lord Bishop of Exeter Portrait The Lord Bishop of Exeter
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My Lords, I rise in support Amendments 324, 329, 342, 346, 347, 351, 352 and 360 in the name of the noble Lord, Lord Greenhalgh, and to which I have added my name. They concern planning reform and the emergency services.

A robust and effective planning process is essential for the flourishing of our communities. A key aspect of this is to ensure the adequate provision of emergency services. I welcome the fact that the Bill has included emergency services in the definition of infrastructure under Schedule 11, but, historically, this has not always been the case. It remains the fact that local authorities are not obliged to take into account the views and concerns of the emergency services.

Those living in new developments such as in Plymouth and Exeter, my own diocese, rightly expect to be provided with the same level of service and protection afforded to all citizens. The increased demands on the emergency services posed by new developments require additional funding. In this way, the emergency services are no different from any other infrastructure provider. However, the lack of recognition in legislation and national planning policy has made it extremely hard for emergency services to access funding from the infrastructure levy, Section 106 money and community infrastructure levy systems. The obvious result is that the services provided are diluted.

The Bill in its current form does not mitigate these problems and the thrust of these amendments seeks to address the historic disfranchisement of the emergency services in our planning processes. I am sure that all noble Lords will join me in recognising the vital contribution that those who work in the emergency services make to our common life. It should therefore be incumbent upon us to ensure that in the planning and formation of new developments, the emergency services have an equal seat at the planning table. I gladly support this.

Lord Shipley Portrait Lord Shipley (LD)
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My Lords, I should like to speak to Amendment 331 on behalf of my noble friend Lady Pinnock. It an extremely important amendment and I will be very interested to hear what the Minister says in reply. In that sense, this is, at this stage, a probing amendment. It would enable infrastructure levy-charging authorities to require a developer to pay their full IL liability, or infrastructure funded by IL associated with the development to be built before development may commence, and would enable developers to be required at the request of the authority to provide money for remedial work. Under current systems, of which across this Chamber there is huge amount of experience, there are constant delays in the delivery of infrastructure and remediation and failures to deliver the affordable housing needed in an area, and it takes ages to negotiate and renegotiate the terms of the community infrastructure levy or Section 106.

An amendment of this kind, which would require payment of the infrastructure levy up front, would speed up development because it would concentrate the minds of the developers and bring clarity to the contractual status of the infrastructure levy, and it would, in our view, have a positive impact on the development process. Of course, it would not be compulsory to charge it up front, but it would be possible to do so if a local planning authority felt that it was the right approach. That is the proposal in Amendment 331.

I have long felt that we spend far too much time trying to cope with negotiations where developers seek to make changes to the promises that they have made. I look forward to the Minister’s reply to see whether the Government think that there is some mileage in a proposal of this kind that would get payment made up front rather than later, however staged that process may be through a development being put on to the ground.

Baroness Warwick of Undercliffe Portrait Baroness Warwick of Undercliffe (Lab)
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My Lords, I will speak to Amendment 335 in this group. Each amendment in this group deals with the impact of the proposed infrastructure levy on different aspects of social infrastructure. The levy is one of the most consequential aspect of the Bill, which proposes a new infrastructure levy largely to replace the current system for developer contributions. Developer contributions currently play a vital role in delivering affordable and social housing. Section 106 agreements alone accounted for 47.3% of all affordable homes in 2021-22, a figure that represents 12% of all new homes delivered annually. Section 106 is not a perfect process, but while there is clear scope to reform and improve the existing system for developer contributions, it is none the less responsible for a huge proportion of new affordable and social homes. As its proposed replacement, the infrastructure levy represents a radical shift in how this housing will be funded and delivered.

There are 4.2 million people currently in need of social housing in England. This means one in five children is living in an overcrowded, unaffordable or unsuitable home. Research published last week by the National Housing Federation found that more than 310,000 children in England are forced to share beds with other family members—I have already put down a Question on that issue. That means that one in every six children is being forced to live in cramped conditions because their family cannot access a suitable and affordable home. This equates to 2 million children from 746,000 families.

Against this backdrop of acute housing need, changes to the planning system must, at minimum, protect current levels of new affordable housing. It is with this principle in mind that I tabled four amendments to Schedule 11. Each of those amendments seeks to strengthen protections for affordable housing in this legislation and ensure that the infrastructure levy does not lead to a net loss of affordable housing. I am pleased to have received support for these amendments from the Labour and Liberal Democrat Front Benches and the right reverend Prelate the Bishop of Chelmsford.

I now turn to my amendment in this group. A key threat to the supply of affordable housing via the infra- structure levy is its potential to result in the diversion of developer contributions away from affordable housing and towards other unspecified forms of infrastructure unconnected to development. As long as there are clear affordable housing needs, it is essential that local authorities’ use of developer contributions for purposes other than affordable housing is strictly limited. My amendment seeks to prevent levy receipts being spent on unspecified items “other than infrastructure”. In its current form, the new infrastructure levy could lead to the diversion of developer contributions away from affordable housing. By contrast, a high proportion of developer contributions currently obtained via Section 106 agreements is spent on affordable housing. According to research commissioned by the Ministry of Housing, Communities and Local Government in 2020, 78% of Section 106 funds were spent on affordable housing in 2018-19.

I support Amendment 350 tabled by the noble Lord, Lord Best, which is in a later group, which seeks to ring- fence 75% of levy receipts for affordable housing based on the current proportional figure for Section 106 funds.

My amendment attempts to remove the risk of future regulations which would permit the diversion of funds away from affordable housing or infrastructure and towards unspecified items provided by a local authority. I hope the Minister will acknowledge the real and present danger inherent in this part of the Bill and explain how the Government propose to mitigate it.

Lord Wasserman Portrait Lord Wasserman (Con)
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My Lords, very briefly, I support the eight short but important amendments introduced with admirable clarity and persuasiveness by my noble friend Lord Greenhalgh and supported by the right reverend Prelate the Bishop of Exeter. Before I say anything more about these amendment I want to apologise to the Committee for having been unable to attend the Second Reading of this important Bill.

As I am sure all noble Lords agree, it is the first responsibility of government to keep us all safe. It gives me great pleasure to be able to say that this is a responsibility that this Government, and their predecessors stretching back to May 2010, have carried out with notable determination and success. However, this is precisely why I am so disappointed that the present Administration have not welcomed with open arms this set of relatively minor and uncontentious amendments, which, if enacted, would make an enormous difference to the safety of our communities.

As many noble Lords may know, these amendments are the product of a group of high-powered experts convened by those who are responsible for keeping us safe. As has already been mentioned by my noble friend, these were the Association of Police and Crime Commissioners, the National Police Chiefs’ Council, the National Fire Chiefs Council, the Association of Ambulance Chief Executives, the National Police Estates Group and the National Fire Estates Group. The amendments were developed for the express purpose of filling a yawning gap in our national legislative and regulatory arrangements which they believe limits significantly the effectiveness and efficiency of the emergency services for which they are directly responsible.

What is this gap? It is the fact that nowhere on our statute books—not in primary legislation, secondary legislation, the National Planning Policy Framework or the statutory guidance governing the planning system—is there anywhere which recognises the emergency services as providers of critical infrastructure for community safety. This might not matter very much for those of us who live in major cities, as these cities have had the basic support services for the emergency services in place for decades, if not centuries. However, it matters very much for those who live, work, study or play in new developments, such as housing estates, sports stadia, music venues or commercial properties, such as offices, retail parks, warehouses and factories. In these places the need to provide appropriate infra- structure for our emergency services is nowhere specified in our planning system. It is simply assumed that this infrastructure will be there when it is required.

Simply to assume that someone will magically provide the necessary infrastructure for our emergency services, so that these services will be on hand whenever we need them, is not a way to run a country—certainly not a country which believes, as we do, that community safety is the first responsibility of government, be it local, regional or national. To assume that everything will be all right on the night may be an effective way of saving money but it is not an effective way of saving lives. It is the saving of lives which is the primary aim of these amendments.

I therefore urge my noble friend the Minister to accept these amendments, fill this major gap in our legislative and regulatory arrangements, and thereby make a major contribution to the safety of our communities.

Lord Best Portrait Lord Best (CB)
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My Lords, I am speaking to Amendments 336 to 339 and 354 in my name, all concerned with the mechanisms of the new infrastructure levy.

Amendment 336, supported by the right reverend Prelate the Bishop of Chelmsford, would require planning authorities, when devising their charging schedule for the new infrastructure levy, to recognise that different kinds of development have different levels of viability and profitability. Not least, building specialist accommodation for older people needs more help than building standardised, uniform homes for sale or rent with the minimum of extra amenities. The amendment seeks to ensure that the charging schedule for the infrastructure levy recognises that more help from the levy will be needed for more specialist developments.

We have had excellent debates in this Committee on housing for older people, and indeed on how the socially worthwhile elements of new residential developments affect viability, so I will not detain your Lordships by making the case that the new levy arrangements should enhance the production of much-needed supported housing, such as retirement accommodation. I simply commend this tweak to the IL arrangements.

I am also speaking to the cluster of amendments in my name—Amendments 337 to 339 and 354—that all relate to one key point. They come from the well-respected Royal Town Planning Institute and are intended to simplify the processes for creating the infrastructure levy. They would do so by getting rid of the requirement for an independent examination of IL charging schedules, relying instead on a simpler, direct relationship between the local planning authority and the Secretary of State.

The RTPI argues that, since the Bill already gives the Secretary of State the power to intervene if the examination outcomes are regarded as unsuitable, an additional independent examination is an unnecessary extra step and should be replaced, in setting the IL rates, by direct dealings between central and local government. That would have the beneficial effect of deterring the lengthy and costly legal challenges to charging schedules that can otherwise be expected.

As noble Lords know, the Bill introduces a new mandatory framework for local planning authorities to extract the infrastructure levy from developers carrying out new development. Local planning authorities will be required to prepare a charging schedule and a price list outlining local costs and thresholds of development for the levy, and to consult the public accordingly. In addition, the Bill then requires an independent examination, probably by the Planning Inspectorate, before the charging schedule is published. The Secretary of State will be empowered to require charging schedules to be amended.

All this can become a long-winded and expensive process, so the amendments seek to cut out one of the sources of delay and cost. The Bill’s impact assessment says the new system is estimated to cost between £12 million and £18 million, absorbing a portion of the levy to cover those costs. Ministers have indicated that they expect the implementation of the infrastructure levy to take place over this decade, and the impact assessment explains that the expected start-up and administrative costs for the recruitment and training of personnel in local authorities are expected to be no less than £147 million, and perhaps as much as £440 million, over the 10-year appraisal period.

At present only about half of local planning authorities, 48%, have introduced the current community infra- structure levy, the precursor of the new infrastructure levy. The other councils have considered it unfeasible to introduce the CIL, not least because of the cost. That emphasises the need to keep things simple for the new infrastructure levy.

The amendments would remove the requirement for charging schedules to be examined independently, representing a significant simplification. That would reduce the otherwise heavy administrative burden for the Planning Inspectorate in examining every local authority’s charging schedules within a defined period, which would require considerable extra capacity. The Bill ensures accountability through public consultation, which should mean that infrastructure provision recognises the community’s wishes, and through the guarantee of the Secretary of State’s reserve powers to intervene when necessary.

Amendment 335 was introduced ably by the noble Baroness, Lady Warwick of Undercliffe; if more than four names had been allowed in support of this one, mine would have been one of them. The amendment would prevent infrastructure levy receipts being spent on any unspecified items rather than being used for affordable housing or infrastructure. When the Bill was in Committee in the Commons, the Minister said that

“the levy regulations may allow levy receipts to be spent on matters other than infrastructure”—

or affordable housing—

“such as improvements to local services and delivery of local programmes that are valued by local communities. Although the infrastructure levy will primarily be spent on infrastructure and affordable housing, that will give us the scope to allow local authorities more flexibility over how they spend the levy if those priorities have been met”.—[Official Report, Commons, Levelling-up and Regeneration Bill Committee, 6/9/22; col. 622.]

That somewhat open-ended statement is a bit confusing. It is not of great concern if the final words are the key—namely, that there is flexibility over how councils spend the levy if the infrastructure and affordable housing priorities have been met—but if that opens up the IL resources to be spent on any number of good causes, the whole concept of an infrastructure levy is derailed. Can the Minister please reassure the Committee that this is not an opening of the door to all kinds of worthy but quite different spending? Amendment 335 would clarify the position, and I strongly support it.

Lord Bishop of St Edmundsbury and Ipswich Portrait The Lord Bishop of St Edmundsbury and Ipswich
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My Lords, I support Amendment 335 in the name of the noble Baroness, Lady Warwick, and Amendments 336 and 337 in the name of the noble Lord, Lord Best, to which my colleague the right reverend Prelate the Bishop of Chelmsford has added her name as the Church of England’s lead bishop for housing. I am aware, as others have commented, that we are touching on matters that will arise again in the 10th group.

Amendment 335 would address a significant weak spot in the infrastructure levy. As the Bill stands, there is no meaningful protection of developer contributions to the infrastructure levy for affordable and social housing. The amendment would remove the risk of infrastructure levy regulations diverting funds away from such housing provision.

I am glad to support Amendment 337 in the name of the noble Lord, Lord Best. Together with Amendments 338 and 339, it would remove a portion of Schedule 11 containing wide-ranging provision for the examination of charging schedules for the infrastructure levy.

At an earlier point in our proceedings I was pleased to speak in support of the noble Lord’s Amendments 221 and 207, both of which seek to provide for greater inclusion of older people’s needs in development planning in the Secretary of State’s role and at the level of local authorities. Amendment 336 is a further critical piece to address the challenge of growing needs in our increasingly ageing population and the housing crisis. In enabling the charging authority to consider additional evidence, its ability to determine the viability of developments, including older people’s housing, will be better informed. It is particularly key that such developments are given due and quality consideration as we face growing need.

Earl of Lytton Portrait The Earl of Lytton (CB)
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My Lords, I rise to speak to Amendment 348 in the name of the noble Baroness, Lady Scott of Needham Market. The reason that I have taken on this role is that I am one of her predecessors as president of the National Association of Local Councils. I express my gratitude for the comments of the noble Baroness, Lady Taylor of Stevenage, on the value that she and her party place on that role. I also must declare a professional interest, particularly as a valuer, because from time to time I get to pore over the nitty-gritty of things like development appraisals and viability assessments, which are complex, capable of many interpretations and create all sorts of issues to do with how they may be interpreted.

The introduction of the new infrastructure levy is something to which I give a cautious welcome, but I have some mixed feelings. First, I fear for its flexibility in terms of scheme viability. Secondly, I question the objectivity with which some of that viability is assessed. We have heard about the need for prioritisation and the timing of payment, raised by the noble Lord, Lord Shipley. But in global terms, more and more demands are placed on levies that come out of the development process. We have to be careful about what the net figure ends up being when all is said and done. Things such as the timing of payments can have significant effects on the cost and forward funding of things, so it is very important that we get that right and do not end up with, in effect, sclerosis of the system because it can no longer meet the demands for all those mouths that are clamouring to be fed.
I can relate to every single one of the amendments proposed by other noble Lords as necessary social or services infrastructure. It is vital to say that these have to be paid for somehow or other, or else people are committed to unsatisfactory environments and having to travel endlessly for goods and services that are not immediately available. The noble Baroness, Lady Taylor, made a telling point; she referred to the financing of a bus shelter on a route that no longer existed. Well, I certainly know of parish councils which have complained to me that so much provision had been made under Section 106 contributions for transportation, usually by bus from the local town to whichever area was being developed as a settlement, that there was no way they were ever going to be able to spend that money. There was also no way that it could be allocated to other things. Indeed, for particular large development, that Section 106 contribution might have been lost because it was unable to be usefully deployed for that purpose. I do not know whether that still is the case.
I turn to my main point, which is to do with the role of parish councils and neighbourhood forums. I am absolutely clear that the current definition of a body qualifying as a parish council or a neighbourhood forum, entitling it to receive the neighbourhood share of the community infrastructure levy, which the infrastructure levy will replace, is the right one. It is consistent with the Government’s approach to devolution: to establish democratically accountable bodies that lead their communities. By this means, the neighbourhood council share of the CIL receipts is passed on to parish councils or, in the case of neighbourhood forums, retained by the planning authority, which then involves the neighbourhood forum in determining its use. However, that is at the discretion of the principal authority, and it is not always exercised in a way that supports parish and town council and community-level activities. That may be a matter of simple priorities; I do not indicate it as a criticism of principal authorities. Stuff happens. This is quite an overworked system when we look at how it has to operate in practice. Indeed, the fact that there may be an obligation to pass things on to a parish and town council, properly formed in a location, may itself be a barrier to a willingness by principal authorities to see the formation of new parish and town councils. That is a terrible negative in terms of giving voice to communities and neighbourhoods.
Parish councils are not specifically named in the Bill; the noble Baroness, Lady Taylor, referred to that. They are not referred to as an entity to which receipts might be passed. In questioning that, I would also counsel against dilution to narrowly focused bodies that are perhaps not democratically accountable to their wider area. I remind your Lordships that there is no other coherent definition or status in law relating to neighbourhood representation other than parish councils.
There is currently an uplift from 15% to 25% of CIL receipts for a parish council with a made neighbourhood development plan. That provides the additional incentive to go through the process of making that plan in the first place. Of course, it provides for additional investment in community infrastructure that is not dealt with elsewhere. It is right that this should not be any old slush fund, if I can use that term, for general development. It has to be identified; there has to be a properly formulated shopping list, and I think we all recognise that. The problem is that the neighbourhood share of the infrastructure levy, as I understand it and as has been mentioned, could just be 25% as a flat rate. Of course, that does not give any uplift or incentive for communities to go through the neighbourhood plan process. Can the Minister clarify what is intended?
Another issue is that with non-CIL areas, as they are at the moment, parishes do not get the benefit from the basic 15% or the uplifted 25%. All their benefits are brokered through Section 106 and are under the sole discretion of the principal authority. My concern is that if we do not get this right, there will be a marked reduction in willingness to produce neighbourhood plans. That needs to be resolved. It is right that the Government intend to build on the approach that has been established under CIL; uneven and lumpy in its operation though it may be, I think it is the right way forward. That should ensure that communities benefit from the development and that local councils can invest in local infrastructure that is derived from their priorities.
As democratically accountable local leaders, parish councillors should have full flexibility in how the neighbourhood share is used, given, of course, that they need to identify the need. I think that is right. They are often on the front line of dealing with the impact of developments on residents, businesses, services and facilities. The amendment seeks to preserve the principles of CIL and its distribution under the new infrastructure levy. I invite the Minister to consider also the transparency and accountability that must underpin trust in the operations, and which parish councils, in particular, seek to achieve. I know that the Government are at pains to highlight the vital role of the first tier of local government at community level.
I want to mention one other amendment of the many that I would like to support, and that is Amendment 290 tabled by my noble friend Lord Russell of Liverpool. This is one of those bits of infrastructure that are vital to people’s lives and their work-life balance. If we do not get that right—if we just look at the hard infrastructure and do not deal with the social infrastructure—we will in effect blight whole sectors of new communities, that need to bed in, with an existence that does not give them the comfort and the sense of place and fulfilment that they should rightly have in their home. This and of course a number of the other points that have been made are vital. I have to say that I have been sitting on my hands trying not to jump up and down and say “hear, hear” to many of the contributions by other noble Lords.
Baroness Thornhill Portrait Baroness Thornhill (LD)
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My Lords, this has been an incredibly wide-ranging, detailed and at times passionate debate, particularly in the contributions from the noble Lords, Lord Greenhalgh and Lord Russell of Liverpool. We are all under no illusions that this is a radical change in policy, and therefore it deserves the detailed scrutiny that noble Lords are giving it over three groups today.

We are told that

“The aim of the Infrastructure Levy is to create a fairer and simpler system of developer contributions, which will ultimately capture more value for local authorities and local communities”.

Who does not agree with that? Unfortunately, the more I have read and tried to get to grips with it, the more complex it becomes and, particularly following this debate, I believe there are legitimate questions as to whether this proposal will succeed in its aims.

Listening to noble Lords, it seems that the impetus for many of the amendments, such as Amendments 290, 335—to which I have added my name—336 and 348 and the many in the name of the noble Lord, Lord Greenhalgh, reflect the extent to which noble Lords are concerned that the current financial situations of many councils will lead them to spend the infrastructure levy on a wider range of social infrastructure, leaving less for other infrastructure. Conversely, other noble Lords are seeking to see if they can spend it on said items. Amendment 343, in the name of the noble Baroness, Lady Hayman of Ullock, seeks to broaden the scope of what infrastructure means. In Amendments 315 and 316, she probed—via the noble Baroness, Lady Taylor, of course—what should be spent on transport. Transport is surely a no-brainer if we are seeking sustainable development.

However, I am concerned that we are trying to get so much out of the infrastructure levy to make up for the real issue, which is over a decade of underfunding for councils. I say very firmly that we support the need for government to ring-fence money for social housing because we believe that this is a national housing crisis, but we feel very strongly that there should be real autonomy for councils to meet their own identified needs with the rest of the levy. I hope the Minister will be able to clarify not only the apportionment of money, but crucially, the power and autonomy of charging authorities in spending the cash raised. My noble friend Lord Shipley and the noble Baroness, Lady Taylor of Stevenage, made a very clear case about the need for up-front moneys, which I hope the Government will take seriously.

So much of this seems to hinge on the infrastructure development strategy. I say to the Minister that I am sure it would help us all if we had more detail about what is expected to be in it. I would value clarification about who signs it off, where it will sit—presumably in the local plan—and its particular relationship to other local plan policies and the NDMPs.

In two-tier areas, CIL has been really controversial, with county councils being concerned or even angry with the levels of CIL set by their districts. The noble Baroness, Lady Taylor of Stevenage, being both a county councillor and a district leader, will be aware of this tension in Hertfordshire. I am still not sure where the power lies in the final decisions about the priorities within that strategy. I expect it will be in forthcoming guidance, but it will be an area of challenge, from the top combined authorities down to parishes.

Amendment 348, supported by the noble Earl, Lord Lytton, argues for a proportion of the neighbourhood allocation of the levy for parishes. Do we yet know what constitutes a neighbourhood or, perhaps, a parish? It seems to me that districts will be very much piggy in the middle in two-tier areas, with much work to do in collaboration and consultation on an area-wide strategy. They will need capacity and support to do this effectively, which is why the Government’s approach of test and learn seems to be the right one. However, can I make a plea? In asking for councils to volunteer, there is a danger that only positively motivated councils will come forward. Perhaps the department could cast around for a two-tier area that has struggled with CIL to get a more accurate picture.

Several tensions were expressed in the amendments in the name of the noble Lord, Lord Best, regarding the role of the appointed examiner relating to charging levels. His message was a detailed critique, but his overarching message was very clear: keep it simple. The setting of levels is clearly at the heart of whether this is a success. It is very technical and an issue which ultimately determines whether the levy will fulfil its promise to raise more money than the current system.
Yet the work carried out by Liverpool University exploring the different types of authorities and how much each would yield in relation to current levels of CIL and Section 106 provided very interesting evidence—probably what we all know. There is more scope to capture more value on greenfield sites in areas with higher development value—in other words, in rural villages and leafy suburbs with high house prices. I am intrigued as to how this finding sits with the Secretary of State’s declarations regarding green-belt development. Yet again, to those who already have a lot shall more be given. Of course, the work also found the reverse to be true; brownfield sites in areas with low-value housing may even find themselves in the infrastructure equivalent of negative equity. There are no prizes for guessing where most of these sorts of areas are. My question to the Minister is: how will this inequality of councils’ actual ability to raise the levy be dealt with? Have there been any adjustments as a result of this research, which they quite rightly commissioned?
All of this and more has led me into thinking about whether this levy is actually going to do what it aspires to, whether it is worth the risks involved and the 10-year timeframe it will take to deliver. But there will be more of that in later groups. We will also probe in a later group how this relates to the crucial area of affordable and social housing. Much more will be said about that, but it has been kicked off well today by the amendments in the name of the noble Lord, Lord Best, which we broadly support.
Baroness Scott of Bybrook Portrait The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
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My Lords, I apologise for the length of time that I am going to take, but it has been a very diverse debate about a number of things and some important issues, so please bear with me.

When new development is built, it creates a demand for public services and local infrastructure. The granting of planning permission also increases the value of land. It is important that local authorities can secure contributions from developers to share in the land value uplift that comes from granting planning permission and use this to deliver local infrastructure and affordable housing for communities.

The current system of developer contributions is uncertain and fragmented. The negotiation of Section 106 agreements frequently results in delays in granting planning permission and these agreements can be renegotiated as the development progresses, as we have heard. Local authorities cannot be expected to negotiate as effectively as big developers. The developers can always build elsewhere, which weakens a local authority’s leverage in negotiations. Developers can devote more financial resources to negotiation, out-gunning local authorities. This can generate uncertainty for local communities over how much affordable housing will be available and what infrastructure will be delivered.

Local authorities can also charge the community infrastructure levy, which is a non-negotiable—but optional —charge. Only half of local planning authorities currently charge the levy. Of those that do not, over one-third believe that introducing it would increase their ability to capture land value. The community infrastructure levy is also unresponsive to change in development value as it is charged at a fixed rate per square metre of new development and does not go up in line with house prices. That is why we are introducing the new infrastructure levy; to largely replace the existing system of developer contributions.

The new levy will aim to capture land value uplift at a higher level than the current developer contributions regime by charging rates based on the final value of developments. This should ensure that a fairer price is initially paid for the land by the developer, and then that the developer pays a fairer contribution to the infrastructure and affordable housing. As it is a non-negotiable charge, it should help to reduce delays associated with Section 106 agreements, while maintaining the viability of developments. It will also end the inequality of arms, where local planning authorities must negotiate for affordable housing with developers. The levy will be charged on the majority of types of development, providing opportunities to secure funding for affordable housing and infrastructure from developments that currently contribute very little. I totally agree with the noble Baroness, Lady Warwick of Undercliffe, that the important issue for developer contributions is housing.

The Government recognise that the new infrastructure levy is a significant change and a major undertaking. For this reason, we are taking a “test and learn” approach to its implementation. This will be vital to monitor and test the design of the levy as it works on the ground. This means that, once levy regulations have been developed following Royal Assent, only a small number of local authorities will adopt the levy initially. This “test and learn” approach will allow the Government to continue to work with local authorities, developers and local stakeholders to achieve a system that is optimally designed. We have published a detailed technical consultation, which closes on 9 June, to inform the design of the new levy regulations. We have approached this consultation in a very open manner with the sector, and we really want to listen to, and take on board, the feedback.

I turn to Amendments 290, 324, 335 and 343, tabled by the noble Lord, Lord Russell, my noble friend Lord Greenhalgh and the noble Baronesses, Lady Warwick and Lady Hayman. The amendments relate to the definition of “infrastructure”. I will highlight first the point that the priority for receipts from the new levy will be the provision of infrastructure: affordable housing, schools, GP surgeries, green spaces and transport. This infrastructure is vital to support the local community and mitigate the impact of any new development.

Although I understand the desire for future levy receipts to be spent on a wider range of other important priorities, I must be clear that this will not be an unlimited pot of money and that any other spending will come at the expense of affordable housing and local infrastructure that is needed to directly mitigate the impact of new development. Although we have the ability to allow for some spending on non-infrastructure priorities through the Bill, we recognise that there are important trade-offs here. Through the consultation, we are testing the extent to which we should require local authorities to prioritise affordable housing and infrastructure before unlocking such flexibilities.

Secondly, I will address childcare, which I think everybody in the Committee agrees is exceptionally important—I know that this is a priority for all of us in the House and the other place. It is also a priority for the Government, and I am happy to say that, since Amendment 290 was tabled, the Chancellor has announced transformative reforms to the funding and delivery of childcare, as part of the Spring Budget. By 2027-28, this Government expect to spend in excess of £8 billion every year on free hours and early education, helping working families with their childcare costs. This represents the single biggest investment in childcare in England ever, and it means that eligible working parents of children from nine months old to their start in primary school will all have 30 hours of free childcare per week. I hope that the noble Lord will agree that the Chancellor’s announcement means that it is no longer necessary to try to bolt together the planning system and funding for childcare through the Bill.

I make it clear to the noble Lord, Lord Russell, that guidance for applications for free schools already includes explicit assumptions that any new free schools will include proposals for nurseries. Therefore, education investment in a possible new development will include a nursery, unless there are very strong reasons why this would be inappropriate. So the Government are dealing with the issue of ongoing support for childcare and, at the same time, there is already in guidance the necessity for more nursery places where houses are built.

I turn to infrastructure spending more broadly. New Section 204N(3) provides a non-exhaustive list of kinds of infrastructure, which assists with broadly understanding what the levy might be spent on. But spending is not restricted to any of the listed items: the levy can be spent on any infrastructure that supports the development of an area. This means funding the provision, improvement, replacement, operation or maintenance of infrastructure, provided that this in accordance with the overall aim of the levy, as set out in new Section 204A. To strengthen infrastructure delivery, new Section 204Q requires local authorities to prepare “infrastructure delivery strategies”, which will set out a strategy for delivering local infrastructure and spending levy proceeds.

Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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Where do the infrastructure delivery strategies sit in terms of the local plan process? The noble Baroness, Lady Thornhill, referred to this. What role will they play in relation to NDMPs? It is not clear from the legislation exactly how they fit in with the rest of the planning process, and it is important that either the Bill sets that out or we have guidance elsewhere—for example, in the National Planning Policy Framework—that makes it crystal clear where those strategies sit.

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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I understand that, and I will write to the noble Baroness to explain this completely. I know that this is confusing because the NPPF has not been agreed, so I understand where she is coming from and I will make sure that we send her a letter.

Turning to Amendment 324, I agree with my noble friend Lord Greenhalgh that the emergency and rescue services should be among the infrastructure providers that are able to receive levy funds from local planning authorities. For this reason, they are already included in the illustrative list of infrastructure in new Section 204N(3), which makes it explicit that levy funds can be applied towards

“facilities and equipment for emergency and rescue services”.

We do not provide detailed definitions across all kinds of infrastructure, as this is not necessary. The words used must be given their natural and common-sense meaning—so “infrastructure” too must be given its ordinary meaning. I have stated that it can encompass matters not listed in new Section 204N(3).

I understand that those representing the emergency services are concerned that, without a clear definition of “emergency and rescue services” in primary legislation, the emergency and rescue services will miss out on the levy proceeds, and that they will be overlooked by the local charging authorities. I will provide some more reassurance in this regard. As I previously set out, under new Section 204Q, local authorities will be required to prepare an infrastructure delivery strategy. The Bill allows us to make regulations stipulating that infrastructure providers should be consulted when preparing the infrastructure delivery strategy. I can commit today to including emergency and rescue service providers as a required consultee for the infrastructure delivery strategy through regulations. That will put the emergency services on an equal footing with other infrastructure providers when the local authority is considering its spending plans for the levy.
I do not believe that there is anything in the drafting of the Bill, or in the design of the new infrastructure levy, that will place the emergency services at a disadvantage. However, I reassure the Committee that, if unintended impacts come to light through our early implementation of the levy through the test and learn approach, we can seek to remedy that through the levy regulations and statutory guidance.
There is also the question of allowing spending on priorities other than infrastructure. We recognise that there are circumstances where local authorities may wish to have some flexibility to provide revenue funding towards local priorities, and what their communities want to see, which do not meet the natural definition of infrastructure; for instance, a programme supporting local employment in the construction industry or additional support for childcare. For that reason, the Bill contains powers for the Government to bring forward regulations that would enable local authorities to use levy proceeds in this way for funding wider local priorities.
We have published a technical consultation on the infrastructure levy, which considers how the levy regulations could be taken forward in a way that ensures that we are able to prioritise delivering at least as much affordable housing as under the current system, and to deliver priority infrastructure, which is needed to mitigate the impact of development. We are keen to hear from local authorities, developers and communities, through the consultation, to strike the right balance on this issue. I hope noble Lords agree that these stake- holders have an important voice here, and that the Government should give them an opportunity to speak before making a final decision on how to address the matter in regulations.
I thank the noble Baronesses, Lady Hayman and Lady Taylor, for proposing Amendments 314 to 316 and 363, which concern the publication of assessments on the infrastructure levy, relating particularly to the impact on public transport, railway restoration and social infrastructure, and on how the new levy compares to the existing community infrastructure levy. As I emphasised previously, the new levy will aim to capture land value uplift at a higher level than the current system of developer contributions. That means that there will be a greater contribution from the developers to strategic infrastructure, such as enhanced public transport routes and new or improved walking and cycling routes, to support the development of an area. National planning policy is clear that new developments should give priority to pedestrian and cycle movements and facilitate access to high-quality public transport where possible. We want to ensure that the new levy works to support those policy aspirations. Under the provisions in new Section 204N, it is clear that infra- structure can also include improvements to local transport infrastructure, such as roads or railways. A local authority could also choose to spend the levy on improving community facilities and similar social infrastructure. It will be up to the local authority to decide what local infrastructure needs it has and to direct its levy funds to those areas.
Infrastructure delivery strategies will provide scrutiny and transparency as to how levy proceeds are spent and will ensure that the relevant infrastructure bodies have the opportunity to input into how levy revenues are spent, alongside their communities. Our technical consultation on the infrastructure levy explores the design and operation of infrastructure delivery strategies further.
On the publication of a comparison with the community infrastructure levy within 120 days of the Act being passed, I note that much of the detailed design of the community infrastructure levy is set out in the Community Infrastructure Levy Regulations 2010, and the infrastructure levy will be similar in that regard. We are currently consulting on policy questions to inform the design of the regulations and will further consult on the draft regulations once they are prepared. That means that it will take time for a full comparison to be made and for that comparison to be meaningful.
All local authorities are currently required to publish an infrastructure funding statement, setting out the developer contributions they have secured. We intend to maintain similar reporting requirements under the new levy; it will support the development of direct comparisons between the two regimes. Under the test and learn approach, only a small number of local authorities will adopt the levy initially, so that the policy really benefits from the process of iteration. The local authorities will be supported to introduce their levy charging schedules and their infrastructure delivery strategies, and we will assess what further support they may need during the implementation.
I reassure the Committee that the test and learn approach will be conducted with openness and transparency. The Government will be keen to work with a wide range of stakeholders to make sure that the new levy works as intended. I can commit to publishing an evaluation which will allow us to judge the effectiveness of the levy at an appropriate time. The department has already commissioned a scoping study to develop an approach to the evaluation of the planning elements set out in the Bill, which we expect to report on following Royal Assent. The full evaluation, informed by the findings of the scoping study, will then be commissioned. I hope this provides reassurance that the approach to the implementation of the new levy reduces the need for the formal reporting envisaged in this group of amendments, and that I have persuaded the noble Baronesses opposite that the test and learn approach addresses the underlying concerns raised by the amendments.
Amendments 329 and 360, tabled by my noble friend Lord Greenhalgh, raise the important issue of how the Government intend to apply the levy to publicly funded infrastructure, such as the provision of emergency services. I very much agree with my noble friend that it would not make sense for infrastructure that is provided for the benefit of the general public to be charged a levy for providing additional public benefits. New Section 204D(5)(h) in Schedule 11 provides powers to set out levy exemptions or reduced rates in regulations. It is our intention that publicly funded infrastructure will not be subject to the levy, and we are currently exploring this as part of our levy consultation. That would include infrastructure delivered by the emergency services. Even with such an exemption, all development, including publicly funded infrastructure, will be required to deliver the infrastructure that is integral to the functioning of the site. That may include, for instance, sustainable drainage or safe internal road layouts on emergency services sites. We propose to retain the use of planning conditions and a restricted use of Section 106 agreements to secure such matters.
Amendment 360 also seeks to create an exemption for infrastructure provided by the emergency services in the existing developer contributions system. Local authorities may negotiate a Section 106 agreement only where it is necessary in planning terms. For the reasons I have already mentioned, it remains important that the direct impacts of public infrastructure can be addressed, under both the new and existing systems. Local authorities are also able to zero-rate public infrastructure in their community infrastructure levy charging schedules.
Amendment 360 also seeks to make further changes to how the existing system takes account of requests for Section 106 and community infrastructure levy funding from emergency services providers, and to when payments towards infrastructure are made. Issues concerning how the existing developer contributions system works are dealt with in policy and statutory guidance for all other infrastructure providers. We do not say anywhere in primary legislation that, when making decisions about developer contributions, local planning authorities should give particular weight to the representations of a specific infrastructure provider. That would unnecessarily constrain local authorities’ discretion.
However, I am content to put on record that the department will happily engage with my noble friend Lord Greenhalgh and representatives of the emergency services to explore how revisions to existing national policy and statutory guidance could address the concerns he raised. I understand that the Housing Minister has already written to him to this effect. While it is not the aim of the Bill to introduce changes to the existing system, I appreciate that it is important that payments under Section 106 and the CIL be made at the appropriate time and that local authorities have the tools to negotiate the timing of infrastructure delivery at the right point. We keep the operation of the existing system under continuous review and my officials will continue to engage with the sector to see if anything else may be needed.
Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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I really appreciate that response, but the emergency services replied to the letter from the Housing Minister with a way forward. They are very concerned that the existing community infrastructure levy and Section 106 system is not working. Although, as the Minister pointed out, emergency services are mentioned in the schedule, the principal concern is how the historic system works, as it will take up to a decade for the new system to come into play. Will the Minister respond to the latest representations, so that we can agree a way forward?

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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I completely understand my noble friend’s issue and, as I have said, we are very happy to have a meeting to look at what can be done in the existing system. We know what is going on with the proposed system, but I understand the issues and we will meet further on this with the emergency services.

Turning to Amendments 331 and 346, I thank the noble Lord, Lord Shipley, for speaking on behalf of the noble Baroness, Lady Pinnock, and my noble friend Lord Greenhalgh for tabling these amendments. I agree that ensuring that development is accompanied by the timely provision of the right infrastructure is important to local communities where development is taking place. However, requiring a full payment of the levy up front would impact the viability of development and result in fewer homes, and therefore fewer affordable homes, being delivered. Large developments can be built out over periods of a decade or more, and it is not necessary for all mitigating infrastructure to be delivered in the early stages of that development.

Lord Thurlow Portrait Lord Thurlow (CB)
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The viability of development, particularly larger schemes, does not put the developer’s position at risk. The increased costs of—in this case—the infrastructure levy come out of the value of the land: in other words, the landowner, who, at the stroke of a pen in a local authority, has seen their agricultural field, for want of an example, rise from £4,000 or £5,000 an acre to £750,000 an acre. That is where the loss of value will occur—in the simple viability of a large development.

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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I thank the noble Lord for that. As I said, large developments can take a decade or more to build out and we do not want to build infrastructure, only for it to stand idle for a long time. This would increase costs for developers, reducing the amount of money that can therefore be put towards other infrastructure and affordable housing, without generating additional benefits for the communities. I agree that infrastructure must be delivered in a timely way, but that means neither too early nor too late. I will turn in a moment to the powers in the Bill that will allow this.

Turning to my noble friend Lord Greenhalgh’s Amendment 346, I clarify for the Committee that new Section 204O in Schedule 11 allows for regulations to be made that require local planning authorities to pass levy receipts to specified bodies. These are the powers that enable a proportion of levy receipts to be passed to bodies such as parish councils, thus retaining the ability for a neighbourhood share to be set up under the levy, rather than the spending of funds more generally. I believe that my noble friend raises a wider point here, making sure that levy payments are made in a way that allows infrastructure to be in place before a development is occupied and begins to impact on the capacity of services such as emergency services.
In relation to both amendments, I can reassure the Committee that we already have powers in the Bill that can be used to deliver important infrastructure at the right time. This includes powers in new Section 204R(2), in Schedule 11, to allow levy regulations to require early levy payments, or payments by instalment, if this is considered appropriate by the local authority. We are currently consulting on how these powers should be used.
Furthermore, it will be possible for local authorities to build up a reserve of funds from multiple sites to deliver infrastructure when it is needed, or to borrow against future levy receipts. For the largest, most strategic sites, Section 106 agreements will continue to be used to secure the delivery of infrastructure at an appropriate time, in line with the agreement. On all other sites, infrastructure integral to the design and function of the site will continue to be delivered by the developers.
Moreover, if a local authority requires an additional sum to be held in bond for remedial works, there are powers for it to do so in existing legislation through Section 278 of the Highways Act 1980 or, if necessary, through Section 106 of the Town and Country Planning Act. Local authorities will continue to be able to use these powers under the levy, in circumstances allowed by regulations, so no new legislation is required to achieve this. I hope I have provided noble Lords with the reassurance that the issues raised can be addressed through the current drafting of the Bill and through the levy regulations.
I move now to Amendments 336, 337, 338, 339, 354 and 355. This group of amendments, tabled by the noble Lord, Lord Best, and the noble Baroness, Lady Taylor, relate to the preparation, examination and monitoring of infrastructure levy charging schedules. I will begin with Amendment 336, which would require the consideration of the viability of different types of development, including older people’s housing, when setting rates. Delivering housing for older people is important. Both the Department for Levelling Up, Housing and Communities and the Department of Health and Social Care provide capital funding to incentivise the supply of housing options available to older people. Our planning rules already mean local authorities must consider the needs of older people when planning for new homes.
However, we recognise that there may be many different types of development undertaken in an area, and that the economics of these developments are different. The Bill already makes provision which enables charging authorities to set different levy rates for different types of development in their infrastructure levy charging schedules, and requires that they have regard to the viability of development when setting rates. When the levy is introduced, local authorities will need to ensure that all types of development remain capable of being delivered. We also have the ability to prescribe what evidence must be taken into account when setting rates. Therefore, viability is already central to the local authority’s considerations on rate setting. It is up to local authorities to find the right balance when setting rates to capture as much value as they can while ensuring that development still comes forward because it is viable.
Furthermore, infrastructure levy charging schedules will be subject to an examination in public to ensure that appropriate care has been taken in setting rates. Amendments 337, 338, 339 and 354 seek to remove this protection. Having an examination in public is an important procedural mechanism. This ensures that people impacted by the rates have the right to be heard when rates are set, that local authorities pay due regard to their stakeholders and that they take all relevant considerations into account when setting rates. The existing community infrastructure levy has the same process for independent scrutiny of proposed rates, and this works well.
The noble Lord, Lord Best, asked what the point of costly charging schedules was. The independent examination should reduce the risk of JR, rather than increase it. We want the procedural system to be fair, transparent, consistent and robust. The examination process will deliver this and will also reduce the likelihood of legal challenges being brought on procedural grounds, as I said.
Lastly, new Section 204Y(1) to be inserted into the Planning Act sets out the instances where the Secretary of State may require a charging authority to review its levy charging schedule. Amendment 355 would limit the circumstances in which the Secretary of State could direct such a review. Reviews are important to provide confidence that the charging schedule remains appropriate or alternatively identifies the need to start a process of revision if the rates are not considered to be effective for securing value. This will be important for both local communities and developers, so that the rates and minimum thresholds that have been set remain appropriate and up to date. Historically, we know that local planning authorities have not always reviewed and updated key documents, such as local plans, in a timely fashion. We also consider it important to retain flexibility to be able to regulate for other future circumstances when it may be necessary to direct a review of a charging schedule to be undertaken.
The levy is a long-term transformation programme, which needs to be able to deal with not just the markets of today but the markets of tomorrow. New development models may come forward, new methods of construction may impact on costs, and new sectors of the economy may appear, which have their own unique challenges. I hope I have persuaded the noble Baroness of why the power to direct reviews is valuable, and how important it is to have this flexibility.
I turn now to Amendments 342, 347, 348, 351 and 352, tabled by my noble friend Lord Greenhalgh and the noble Baroness, Lady Scott of Needham Market, which relate to how levy funds can be spent. I am sure all noble Lords will agree that the emergency and rescue services are fundamental to the safety and security of our country, as we have heard today. To support appropriate provision alongside new development, the infrastructure levy will be able to be spent on facilities and equipment for emergency and rescue services.
New Section 204Q(11) requires levy regulations to determine the consultation process and procedures that must be followed when a local authority is preparing its infrastructure delivery strategy. This can include which bodies must be consulted in order for charging authorities to determine their infrastructure priorities for the spending of the levy. These matters of detail will be determined through regulations. I agree with noble Lords that it is entirely appropriate that emergency and rescue services should be among the bodies consulted on the infrastructure delivery strategies and should be listed in regulations for that purpose.
An important question is the weight that must be given to representations made by particular bodies, such as the emergency and rescue services, when spending or passing infrastructure levy receipts to another body. Specifying a particular infrastructure body whose representations must be given significant weight in the Bill would suggest that this body should be given preferential treatment over other bodies, such as healthcare, education and highways, which are also fundamental to creating sustainable developments. It is important that the planning authority must ultimately make its own decisions about the allocation of limited resources, taking into account all local needs and preferences, in the round. I hope I can persuade noble Lords that it is better for local authorities to make these decisions themselves than for central government to single out certain interests.
New Section 204Q(6) requires that regulations must make provision for the independent examination of infrastructure delivery strategies, and new Section 204Q(8) allows regulations to determine what the examiner must, may or may not consider, and the procedure that must be followed. This examination will ensure that the charging authority has fulfilled its obligation to consult, and properly taken account of the consultation responses and any national policy or guidance.
Requiring the final strategy to be approved by the infrastructure bodies would add an unnecessary burden to the process and, most critically, would take the decision-making powers away from the local authority. If such a power were granted to the emergency services, it would also be sought by all other infrastructure providers, all of which would be seeking funding. If participants had, in effect, a veto, it would be unlikely that any infrastructure delivery strategy could be agreed and produced in a timely fashion, if at all.
I recognise the importance of a fair process. The development of an infrastructure delivery strategy, combined with its examination to ensure that it has been properly undertaken, is our means of delivering it. I hope I have persuaded noble Lords that this strikes the right balance between empowering a local authority to make appropriate decisions, while ensuring that they are transparent and subject to oversight.
The list of kinds of infrastructure at new Section 204N(3) is intended to be a non-exhaustive list of what is considered to be infrastructure. It is indicative of some of the things that local authorities may like to consider but it is not intended as a checklist or mandatory list. It is far more important that local planning authorities engage with relevant infrastructure-providing bodies about what is needed in their local area.
With regards to passing funds to parish councils, the Government are committed to empowering communities through the planning system. Under the community infrastructure levy, where all or part of a chargeable development is within an area of a parish council, the charging authority must pass 15% of the receipts to the parish council, and this increases to 25% where there is a neighbourhood development plan in place. The levelling up White Paper commits the Government to continuing the neighbourhood portion of CIL as it introduces the new infrastructure levy. This commitment will be achieved under new Section 204O, inserted by Schedule 11, which provides powers for regulations to be made that may require charging authorities to pass levy receipts on to other specified persons. This replicates the existing framework for CIL, set out in Section 216A of the Planning Act 2008, as amended.
It is important that parish councils do not lose out through the introduction of the new infrastructure levy. However, the amendment tabled by the noble Baroness, Lady Scott, would represent a significant increase of levy funds compared with the existing system. It is important to emphasise that, in the existing system, Section 106 agreements, for which there is currently no neighbourhood share, secure about 85% of all developer contributions, while CIL secures about 15%. The new infrastructure levy will capture much of what is currently secured through the Section 106 agreements. This means that the total revenue collected through the new infra- structure levy will be much greater than CIL. If we were to set the neighbourhood share of the infrastructure levy at a percentage equal to or higher than that of CIL, funding currently secured through Section 106 would be diverted to parish councils. Such an approach would inevitably result in a decrease in affordable housing and revenue for local authorities’ infrastructure needs.
We are consulting on what proportion of levy proceeds parish councils should expect to receive under the new system when chargeable development takes place in their area, and that will be provided for in regulations. Our position, however, is that the value collected as neighbourhood share should not result in less money being allocated for neighbourhoods than in the existing system.
The noble Baroness is also concerned with the level of flexibility that is afforded to parish councils in how they spend levy receipts. In the Bill, we already have powers which would give more flexibility to parish councils in the levy context, in terms of their spending choices—this is set down in the existing provisions in new Section 204O(3). We can provide in regulations for councils to spend specified amounts of money on other things that are not related to infrastructure and not related to supporting development.
Through regulations, we will ensure that parish councils have flexibility in how the neighbourhood share of the infrastructure levy can be spent. This will enable parish councils to focus on priorities that matter most to communities at the hyper-local scale.
For the reasons I have set out I hope I have provided noble Lords with reassurances on how the levy will be spent.
Before I go on to the government amendments, I will make a couple of points. The noble Earl, Lord Lytton, brought up the issue of bus shelter problems in 106 being lost—Section 106 obligations usually have to be used in line with the original intentions as set out in the obligation itself. This can mean that local authorities must return funds if the original purpose is no longer relevant. The levy will answer this—local authorities will have flexibility over how they spend funds when circumstances change and will not have to return the charge.
The noble Baroness, Lady Taylor of Stevenage, asked how we are going to stop the Secretary of State top-slicing the infrastructure levy. There is a new requirement for local authorities to publish an infra- structure levy strategy—as we have already been saying—setting out their approach to spending the levy. I can assure the noble Baroness that spending will be led by local authorities, with decisions only shaped by national policy—so no top-slicing.
Moving on to the government amendments, the Government recognise that the new infrastructure levy represents a significant change. Amendments 335A and 357A are minor clarifying amendments to the Bill to support this transition. These amendments will allow local authorities currently charging the community infrastructure levy to use those receipts to fund preparation and admin costs for the new levy. Similarly, they will make provision to enable sums obtained from developers via the 106 agreements to be used in connection with the new levy. These amendments therefore make it clear that local planning authorities can use cash collected under the existing developer contributions system to support the administration and set-up costs related to the new levy.
Amendment 335A makes a clarifying amendment to new Section 204Z(1) in Schedule 11 to enable the levy regulations to make provision treating CIL as if it were the infrastructure levy. This can be relied on, for example, to make provision for CIL to be applied to fund the administration costs and set-up costs of the new levy, such as work to develop new charging schedules.
In a similar vein, Amendment 357A amends new Section 204Z1(1)(c) in Schedule 11 of the Bill to make it clear that local authorities will be able to use sums obtained through Section 106 agreements to support the set-up and administrative costs of the new infra- structure levy.
Both these amendments are minor clarifying amendments, as they may express what is arguably implied within existing powers. Together, these amendments are an important part of the Government’s plans to introduce the new infrastructure levy in an effective, transparent and coherent way.
Lord Shipley Portrait Lord Shipley (LD)
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First, I am very grateful for the very lengthy reply the Minister has given us. I listened very carefully to all she said, but could she confirm that the new system, which she referred to as a “long-curve transformation programme”, will actually end up building more affordable homes? That seems to me to be a central requirement of the infrastructure levy. I seek her confirmation that the outcome of all she has just said will be that more affordable homes will be built in this country.

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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What we have said is that this will deliver no fewer affordable homes. Of course, the number and type of affordable homes that are built will be a local decision. If local authorities want more homes—I suggest that we need more homes in this country—we should be able to deliver more homes.

Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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I thank the Minister from our side for the very detailed response she gave to all the contributions that have been made. In response to the question from the noble Lord, Lord Shipley, we have a further group on this, so I am sure we will debate it further in the course of that group. The combination of the lack of clarity around what the new infrastructure levy is going to deliver in affordable housing and the removal of housing targets looks like a terrible contribution. I know the Minister said that this would not mean fewer affordable homes, but the number that have been built in the last few years is woeful. We want that to improve; we want to get more affordable housing out of this. I know we will discuss this again in a subsequent group, but it is really important. I hope we can get some clarification in that group about how this new infrastructure levy system is going to help us deliver the affordable homes that we all know we need.

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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This is about not just the new infrastructure levy but the whole Bill. We know that where local authorities have local plans, they build more houses. The Bill is there to enable and encourage local authorities to have local plans. It is the combination of all these things within the Bill that should deliver more houses.

Lord Russell of Liverpool Portrait Lord Russell of Liverpool (CB)
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Well, my Lords, time certainly flies when you are talking about local government. I pay tribute to the stamina of the many people here who have a background in local government. I also congratulate them because I think this is the first time I have heard a debate on local government where about five people have not popped up, one after the other, and stated that they are a vice-chair of the Local Government Association. Eureka—we seem to have got away from that. I do not know whether the Minister is grateful to the Government Whips’ Office for putting such a compact group of amendments together; maybe it is an efficient way of dealing with this. I pay tribute to her for her stamina, for being on her feet for nearly 50 minutes and for being as detailed as she has been. I think all of us genuinely appreciate that. She deserves lunch really quite soon.

I thank the noble Lords who spoke specifically about my Amendment 290. Your Lordships will be relieved to hear that I am not going to go into detail on any of the other amendments. What I would like to come back to is the fact that I think all of us who are concerned about the level of provision of childcare services would really appreciate a detailed letter which very explicitly says what is covered, what is completely clear and what may be slightly less clear. We are in a situation where it simply is not working at the moment.

If we are going to get value from the Chancellor’s huge expansion in free childcare services, we have to be sure that we have enough places to put the children in, in the right places. We also need to be completely clear that we need both capital funding, where it is required to ensure that we have new childcare facilities, and funding to actually make it possible for them to be run. Part of that is about ensuring that the fees charged cover the costs and, in most cases, leave a degree of profitability for those services—most of which are private —otherwise they will continue to go out of business. We would be most grateful if we could have a really detailed response on that.

I am sure other noble Lords will follow up on their amendments as well. Again, I thank the Minister for the length and thoroughness of her response. I beg leave to withdraw my amendment.

Amendment 290 withdrawn.
Amendment 291
Moved by
291: After Clause 123, insert the following new Clause—
“Sustainable drainageThe Secretary of State must make provision under section 49 of the Flood and Water Management Act 2010 so as to bring Schedule 3 to that Act (sustainable drainage) into force in relation to England before the end of 31 December 2023, insofar as it is not already in force.”
Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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My Lords, I am delighted to speak to Amendment 291 and others, including Amendment 312K in my name. I declare my interests as on the register. I am also co-chair of the All-Party Parliamentary Group on Water, and I have been involved recently in a project yet to be published on bioresources, which was undertaken by CIWEM, Water UK and others. I have co-authored two reports, with a third on bricks and water, together with the Westminster Sustainable Business Forum.

Turning to Amendment 291, I am particularly grateful to the noble Baroness, Lady Bakewell of Hardington Mandeville, not just for co-signing the amendment but for agreeing to step in had I not been able to get back from my physio appointment at the hospital. I thank the NHS for my treatment since I injured my ankle earlier this year. Amendment 291 seeks to add a new clause to the Bill relating to sustainable drainage. It asks that provision be made, under Section 49 of the Flood and Water Management Act 2010,

“so as to bring Schedule 3 to that Act (sustainable drainage) into force in relation to England before the end of 31 December 2023 insofar as it is not already in force”.

It is important to note at the outset that the same provision already applies in Wales, so to me it is a fairly simple matter to introduce this. I am asking for a degree of urgency on the part of the Government to do so.

I wrote to my noble friend Lord Benyon on 9 December 2022 and received a reply from my honourable friend the Minister for Environmental Quality and Resilience in the other place, Rebecca Pow, on 20 April, some four months later. That, again, reflects the lack of urgency in this matter. I was delighted that the Government announced, and published on 10 January, results of their review, deciding to make sustainable drainage systems—SUDS, as I will call them—mandatory in all new developments. However, the less than ambitious timeline set out is to deliver this sometime during 2024, but that is by no means certain.

Two things are important about Schedule 3 to the Flood and Water Management Act 2010. One is to end the automatic right to connect, to stop the possibility that water companies are virtually obliged to connect to major new developments. As we know, these are substantial developments. The Government are committed to building some 300,000 new homes a year, and for the most part these homes are four or five-bedroomed houses. When I am not here, I spend my time mostly in rural North Yorkshire, and we have a particular need there for one or two-bedroomed homes in villages wherever possible. I do not know quite why there is an obsession to build four and five-bedroomed homes other than that is what developers seek to do.

One can imagine that four or five-bedroomed homes produce a lot of wastewater: let us call it sewage, for the avoidance of doubt. We are asking water companies to connect major new developments to antiquated piping: some of it is Edwardian and most of it is Victorian, but it needs to be replaced. It is not going to be replaced any time soon. It is grossly unfair that we are asking—obliging—water companies to fit sewage from five-bedroomed houses to pipes that, in many circumstances, simply cannot take them. I raised this at the time of the passage of the Environment Bill, now the Environment Act, because it is potentially leading to a public health disaster.

Much of this sewage and wastewater is spilling over on to highways. For some reason, highways authorities are not responsible for flooding and sustainable drainage, so if there is a source of flooding, highways authorities— I accept that, for the most part, they may be local authorities too—do not contribute to the cost of easing the potential risk of flooding. That is the first purpose of this amendment: to end the automatic right to connect. It was first required by Sir Michael Pitt following the floods of 2007. That led to surface water flooding, a relatively recent concept, being recognised for the first time and being added as a new source of flooding to the well-established sources of flooding, such as river flooding—fluvial flooding—pluvial flooding and coastal water flooding.
Ending the automatic right to connect is the first problem; it is part of Schedule 3 but has not yet been implemented. This means that sewage can back up not just on to highways but into existing developments. That forces the residents of such developments to leave their homes for three to six months because, obviously, sewage is a public health hazard and their houses have to be cleaned, redecorated and so on. They have to be rehoused during that time.
The second part of the problem is that these new developments are being built without sustainable drains. Such drains could be ponds or something more significant, but they tend to be—indeed, we encourage them to be—natural ways of retaining water. It could be a little culvert or a little pond but it has to take excess water so that, when flood-water comes, it does not mix with sewage and lead to what I described earlier.
For this very reason, it is important to bring Schedule 3 forward at the earliest possible date to end the automatic right to connect and to make sure that SUDS are planned and implemented on an arbitrary but mandatory basis for all new developments. I urge my noble friend the Minister to use her good offices to bring the government consultation forward to the summer. A consultation normally takes 12 weeks. There is then a response and every opportunity to bring forward what I imagine will be a statutory instrument.
We do not need weeks, months or a year to bring this forward. My modest amendment could form part of this Bill; it is a very good opportunity to raise this issue. Schedule 3 could be implemented by December—that is, the end of this year. I take this opportunity to urge my noble friend the Minister on the urgency of this situation and to ask her to bring forward the consultation and the legislative process. If Wales has been able to do it, I cannot understand why it is beyond the wit of my own Government to bring it forward in England.
This is a modest amendment. It will enable sustainable drains to be built on a mandatory basis as a natural part of all new developments. There are more ambitious schemes, such as those with which I was associated as part of the Slowing the Flow project upstream of Pickering, which has prevented Pickering flooding. I hope that less ambitious schemes than that can be implemented in other areas. We also need to have all partners involved.
I accept the point made by my noble friend Lord Benyon in answering a recent Oral Question—on the last day we debated this Bill, in fact—to the effect that this is a complicated subject and a decision has to be taken on who maintains SUDS once they have been put in place. The question we have to ask is this: who maintains them and implements the maintenance of them in Wales? Perhaps we can learn from the Welsh experience.
I turn briefly to Amendment 312K in my name. It has been drafted to ensure that houses built before 2009 are covered by the Flood Re insurance scheme, or the Government must mandate local authorities to stop building in inappropriate places. The fact is that, if a person does not require a mortgage and buys a property without one, they may be unaware that that property is not covered by insurance, if it was built after —sorry; is it before or after?
Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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I am very grateful to the noble Baroness. If the house is built after 2009, it will not be covered. I believe this is a gap in the legislation. When we were both in the other place, I visited the noble Baroness’s constituency, which was very heavily flooded in 2009. I was aghast by the number of people who could not even insure their properties for contents if they were tenants, because of the cost of that insurance. So this provision is very important indeed. I hope that my noble friend looks very kindly on Amendment 312K, to which I intend to return at a later stage.

Finally, I lend my very strong support to the other amendments in this group in the name of the noble Baroness, Lady Hayman of Ullock. She has prepared them very well and I think I know where they came from. Many of them are the unfinished business of the Pitt review of 2007 and many reflect the conclusions we reached in not just the reports of the Environment, Food and Rural Affairs Committee of the other place, which I had the honour to chair, but the recent reports of Bricks and Water and Bricks and Water 2, and the recommendations we are going to make in Bricks and Water 3. They are that building regulations can achieve a lot towards greater resilience to future floods in properties, but we need the data that the noble Baroness is asking for in these amendments.

I believe that flood mitigation should reduce insurance premiums, where actions have been taken to make the property more resilient. There is obviously a gap in the data available but, where that data exists, we must urge all organisations to share it. I entirely support the Flood Re scheme and Build Back Better. I would like to end with a tribute to the ABI and all the work that it has done since the Flood Re scheme was introduced. With those words, I beg to move.

Baroness Hayman of Ullock Portrait Baroness Hayman of Ullock (Lab)
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My Lords, I thank the noble Baroness, Lady McIntosh of Pickering, for her introduction to this group. As she and other noble Lords are aware, I have a particular interest in flooding issues because where I live, near Cockermouth in Cumbria, we have had some particularly appalling flooding in recent years. The whole issue of flooding and adaptation resilience is becoming more and more important for the Government to consider, as we start to see the impact of climate change on our weather systems. It strikes me that the planning section of the Bill is an opportunity to try to build that kind of resilience and adaptation considerations into legislation.

I will first make some comments on the noble Baroness’s amendment on SUDS. She mentioned that surface water flooding is a relatively new risk, mainly because of the way our planning system works and how we build and what we build. This has now resulted in 3.8 million properties in England at surface water flood risk. That is a huge number. In the Government’s plans to boost the supply of new homes, sustainable drainage systems can play a pivotal role in ensuring that new properties are built in a manner that helps to manage surface water flood risk at the local level. The noble Baroness explained this extremely well in her introduction. We absolutely support her amendment on this.

We also believe that there is an urgent need to implement the Government’s policy on floods under the Flood and Water Management Act 2010, as the noble Baroness mentioned. We need to ensure that we have mandatory installation in all new-build developments. It does not matter what size they are: this has to be part of the development. We welcome the Government’s recent announcement to make sustainable drainage mandatory in new developments, but they need to urgently progress with the necessary implementation phase. As the noble Baroness said, if they can do it in Wales, why can we not just get on with it here? I see the Minister nodding. With her Welsh connection, she knows what Wales can do.

The noble Baroness, Lady McIntosh, reminded us just how important this is and what a difference it could make if we just got on with it. It is frustrating that the Government so often come up with really important suggestions and things that we need to do and then we seem to just sit on those. Perhaps the Minister could explain why this has not been introduced. When will we see progression on it?

I have one last point on this. It is essential that the Environment Agency guidance on surface water flood risk is fully considered as part of the planning process. I will be interested to hear from the Minister whether the Government have plans to include this within the progression.

I turn to my amendments in the group, of which I have a number. Amendment 303 would require the Government to set minimum standards for flood resilience, flood mitigation and flood waste management in all building regulations. Amendment 304 would place a duty on the Government and local authorities to make data about flood prevention and risk available for the purpose of assisting insurers and property owners. Data is absolutely crucial if we are going to get to grips with this issue. People need to understand exactly what is what, whether they are looking for insurance or to purchase a property. Amendment 305 would require the Government to establish a certification scheme for improvements to domestic and commercial properties in England made for flood prevention or mitigation purposes and an accreditation scheme for installers of such improvements.

On that point, one of the very frustrating things after the last floods we had in West Cumbria was that when property owners, particularly in the Cockermouth area, were looking to insurers to replace the damage—whether doors, kitchen equipment, flooring or electricity installations—a certain number of insurers would not look at adaptation and mitigation for the future and would only replace like for like. That is not a sensible way forward. One reason I was keen on this amendment was to ensure that, when a building has flooded and the insurers comes in, the money is spent wisely, to either prevent flooding in the future or to make sure that costs are cheaper. For example, you do not replace a wooden kitchen or floor with the same but look at how you can improve the condition of that building for future risk.

I noticed that Amendment 312K, from the noble Baroness, Lady McIntosh of Pickering, is quite similar to some of our amendments. We strongly support what she is saying here.

I want to cover the reasoning behind my amendments. The main thing is that we believe we need much more robust planning policy around development in flood risk areas, and we need to increase our resilience to climate-related flood risk. The measures in the Bill to put greater emphasis on environmental outcomes in the planning process, and recognition of the need to protect areas at high flood risk, are very welcome, but we believe that adapting to climate change and managing flood risk is a challenge for the whole of our society.

We see this Bill as an opportunity to improve the planning system to ensure net-zero alignment. That includes reducing inappropriate development in high flood risk areas and ensuring that new homes are resilient to climate risk. Developers have to get real about this as well. When we had huge floods in Tewkesbury in 2007, there was a huge development called “Water Meadow View” or “Water Meadow Flats” by the river —or something similar, I cannot remember. After the flooding, the name was changed and “Water” had gone. It was cynical and we should not allow that kind of practice. Developers need to be part of these discussions, not just communities and insurance companies.
We also need to make sure that that is underpinned by a long-term funding commitment to investing and maintaining the UK’s flood defence infrastructure. While we welcome the recognition of flood risk in the national development management plan proposals, the legislation could go further to establish environmental protections in statute, rather than just relying on further consultation of the NPPF after the passage of the Bill. A review of the NPPF presents an opportunity for the Government to close the loophole in the current guidance that accompanies the framework. That loophole means that developers can build and sell properties in flood risk areas simply if they leave space for flood defence measures to be installed in the future. This loophole needs to be closed to ensure that the developer is held responsible for any measures necessary to ensure that properties are protected from flood risk to the highest possible standard.
I also have Amendment 306 in this group. It requires the Financial Conduct Authority to make rules requiring insurance companies to take into account flood prevention or mitigation improvements that are either certified or have planning permission requirements taken into account when setting insurance premiums. This is incredibly important. I live in an old mill house. The only reason that we can get insurance is because it takes into account the fact that we have a proper flood wall defence system. If the insurance company just asked whether the property had flooded before or just looked at the flood maps, it would cause us huge problems. If one has invested to make one’s property resilient, that should be taken advantage of.
Before I move on to further issues, I shall just mention the students from Hull—from Ron Dearing UTC—and Skegness who met me recently. They wanted to tell us a story about what it is like living in Hull under constant flood risk and the impact on young people living with the fear that their town could suffer serious damage from flooding at any time. We need to listen to young people because this is their town and their future. They have a campaign called #WeAreHere if anyone interested wants to have a look. It was very moving listening to them.
My next amendment, Amendment 307, requires the Financial Conduct Authority to make rules requiring insurance companies to take into account certified flood prevention or mitigation improvements or planning permission requirements in setting insurance premiums. The insurance sector is very productive and brings a huge amount of money into the UK economy. However, those companies are on the front line, responding to the physical risks of the climate crisis, particularly the increased risk of flooding. I thank the ABI, the Association of British Insurers, for its briefing on this part of the Bill. The figure that the ABI gave me is that, in response to the damage caused by storms Dudley, Eunice and Franklin that hit much of the UK in February 2022, insurers were expected to pay out nearly £500 million in dealing with 177,000 claims. That gives some feel for the level of damage, insurance and response. This is not going to get better. It is important we look at how we deal with this. The ABI says that that followed on the back of payments of more than £540 million in response to flooding from storms Ciara, Dennis and Jorge in 2020.
The ABI has been calling for the Government to ensure that there are no inappropriate developments in flood risk areas and to encourage a more transparent planning application process with clear monitoring and reporting by local authorities on planning decisions. It believes that to increase resilience the Government should consider clearly linking future residential and commercial developments to building regulations approved documents and has long been calling for greater alignment between Defra and DLUHC on planning and development policy. It would be interesting to know from the Minister what work Defra and DLUHC have been doing, what work they are planning to do and whether she believes they could work together more closely.
My final amendment, Amendment 308, would require the Government to expand the Flood Re scheme to premises built since 2009 that have property flood resilience measures. The noble Baroness opposite mentioned the problems this has caused. When Flood Re came forward, it was incredibly important. For the first time, people who had been struggling to get insurance for their property were able to get insurance, so I want to say how much we supported Flood Re coming in and the work it has done. It had been very difficult for home owners to get affordable insurance. It is not that insurance was not offered; it was just offered with a £10,000 excess, which made it completely unaffordable if you had a two-bedroom terrace house. If we look at the figures, 94% of the UK home insurance market provides access to policies backed by Flood Re, and we know that many thousands of flood risk properties have benefited from it since it was introduced.
However, as the noble Baroness, Lady McIntosh, said, Flood Re does not provide cover for properties built after 1 January 2009. I met the head of Flood Re to discuss this with him after our flooding, and he explained that the 2009 exemption is an extension of previous agreements between the insurance industry and the UK Government and that such properties were purposefully excluded from the scheme to ensure that inappropriate building in flood risk areas were not incentivised. In other words, we do not need to include properties built after 2009 because they will not flood. We have seen that that is simply not the case, and—I was going to say it has left a number of properties high and dry but, unfortunately, it is exactly the opposite —it has left people with no cover. We have to revisit this because it simply is not fair.
The insurance industry says that to amend Flood Re retrospectively would send the wrong message on building in flood risk areas. I can see that from the point of view of the insurance company, but if you think about it from the home owner’s side, they need to be properly protected and able to insure their houses. Will the Minister take this back to the department to see whether it will review insurance policies around houses built since 2009?
Finally on that point, we also need to look at how we move forward with insuring businesses because Flood Re does not cover commercial properties, properties in multiple occupation over a certain size or tenants, necessarily. It is working successfully for those for whom it was set up, but there are a number of gaps. It is important that we revisit them because the next time we have huge floods, not only will there be huge costs for insurance companies, but there will be huge costs for people who have been unable to get insurance so far.
Earl of Caithness Portrait The Earl of Caithness (Con)
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I very much support what has been said about adaptation and drainage because of the flooding situation. I shall mention one incident to my noble friend on the Front Bench because it goes to the point made by the noble Baroness, Lady Hayman of Ullock. At a development in Sherborne in Dorset—the development is now nine years old, so it was built after 2009—there have been considerable flooding problems from surface water, which raises the question: why did the local authority not insist on a better scheme to begin with? All the home owners have now had to pay more into the annual service charge to remedy the defect. The developer obviously put in the minimum amount of drainage that it thought it could get away with, which indeed it did, but now it is up to the home owners to meet the bill. It is so much easier to mitigate something right at the start than after a development has been completed.

My noble friend Lady McIntosh is right that we fought this hard on the Environment Bill when it was going through the House. I hope my noble friend the Minister will be enthusiastic in her support for my noble friend’s amendment so that we get better control over drainage. Will she please confirm that she is checking that local authorities are scrutinising developers’ plans properly now and making allowances for the increase in sudden heavy downpours, which was not necessarily the case 15 years ago when these developments were being promoted?

Baroness Bakewell of Hardington Mandeville Portrait Baroness Bakewell of Hardington Mandeville (LD)
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My Lords, Amendment 291 in the name of the noble Baroness, Lady McIntosh of Pickering, to which I have added my name, seeks to bring forward the date of the implementation of the requirement that the Government have announced to make sustainable drainage systems—SUDS—mandatory on all new developments from the end of 2023. Flooding is a terrible scourge and needs to be sorted out now, not next year or some time beyond. The Government appear to have committed to a leisurely timetable, with a consultation this year but no legislation before implementation, expected in 2024. That means that many developments that are currently being planned and built will not have SUDS in place, thus bringing a greater risk of flooding for them, and indeed for existing developments that may experience flooding in future as a result.

The noble Baroness, Lady McIntosh, is a passionate supporter of SUDS and other forms of natural defences, and has spoken extremely well on the subject on many occasions. Sustainable drainage is vital for preventing flooding or the risk of flooding. When a new planning application comes forward, the role of SUDS in dealing with surface water on a new development is crucial. Sadly, it is not always the case that a proper sustainable drainage system is integrated into the planning permission, despite it being in place since 2010 under Section 49 of the Flood and Water Management Act.

The essential role of SUDS in assisting the management of surface water and preventing localised flooding is vital. It is astonishing that even today not every developer is prepared to install proper sustainable drainage systems in its schemes. Having this amendment in the Bill is vital for ensuring that in future every single local authority takes note of the need for an effective and robust SUDS to be in place for even a small development, right up to large multipurpose housing and business developments. I fully support the amendment.

The group of amendments in the name of the noble Baroness, Lady Hayman of Ullock, Amendments 303 to 308, also relate to flooding, and seek measures to alleviate and prevent the misery that it causes to home owners. I am particularly keen to support Amendment 308, which would extend the time and remit of flood reinsurance scheme eligibility to businesses, something that we have debated in this Chamber on previous occasions. The noble Baroness is right to raise the issue of the flood resilience of properties known to be likely to flood. Home owners as well as developers have a responsibility to be aware of this and to take steps to mitigate the effects of flooding.

I turn to Amendment 312K, in the name of the noble Baroness, Lady McIntosh of Pickering, which I have not signed but wish to support, regarding preventing residential properties being built on functional flood plains or other areas at high risk of flooding. Those domestic properties built after 2009 are not covered by Flood Re. It has in the past been the case that developments proposed on the flood plains in Somerset have been refused planning permission by the local authority, only to have this overturned by the then Secretary of State granting permission on appeal. As the saying goes, when the rains fell, then the floods came up, to paraphrase a parable in the Bible.

It is not that long ago that, in 2014, Somerset was underwater for a very considerable spell of the winter, and attracted visitors, from royalty, Government and Opposition leaders to hundreds of waterfowl. Many home owners have suffered terribly because their houses were built on areas with a history of flooding, which developers decided to ignore. It really is time that developers stopped building homes in inappropriate places, especially on flood plains. As the noble Baroness, Lady McIntosh, has already said, either Flood Re should be extended to include houses built after 2009 or houses should no longer be built on functional flood plains or in any area where the Environment Agency recommended against such development. I completely support this view.
Baroness Bloomfield of Hinton Waldrist Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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My Lords, Amendment 291, in the name of my noble friend Lady McIntosh of Pickering, seeks to require the Secretary of State to bring into force Schedule 3 to the Flood and Water Management Act 2010 before the end of 31 December 2023.

I understand the intention behind this amendment. However, in January, the review for implementation of Schedule 3 to the Flood and Water Management Act 2010 was published and recommended making sustainable drainage systems mandatory for new developments in England. The Government are now looking at how best to implement Schedule 3, which we aim to do in the course of 2024. An ambitious timeline has been set, which considers parliamentary processes, to deliver this as quickly as we can. It is essential that we allow time to engage with stakeholders to help shape the details of the implementation. A public consultation will then take place on mandatory standards, statutory instruments and impact assessments before new statutory requirements are brought in.

It is clear that bringing in a standardised approach to SUDS is needed to increase their uptake and maximise the benefits they bring. We also need to set technical statutory standards for what an acceptable SUDS is in different circumstances. We need to establish SUDS-approving bodies in unitary or county councils, and provide guidance, as well as legal criteria and processes for fees, appeals and enforcement. I have some information on the Welsh introduction of SUDS—obviously, my favourite subject. Wales has recently completed its post- review implementation and has identified a number of issues that have not worked as well as had been hoped. In England, we are analysing these results, and are able to take these findings into consideration, such as ensuring the best way to fund the maintenance of SUDS.

I hope I have provided adequate reassurance that action is being taken to bring into force Schedule 3 to the Flood and Water Management Act 2010, and therefore the Government are unable to support this amendment at this stage.

The noble Baroness, Lady Hayman of Ullock, tabled six amendments, and I shall take each in turn. Amendment 303 would impose a new duty on the DLUHC Secretary of State to make new building regulations within six months of the day the Act is passed for property flood resilience, flood mitigation and waste management in connection with flooding. Statutory guidance to the building regulations in Approved Document C already promotes the use of flood-resilient and -resistant construction in flood-prone areas. While the building regulations set requirements for the drainage systems of individuals, the main sewerage system is governed by the sewerage undertaker for the area; for example, Thames Water.

The sewerage undertaker, as the statutory consultee, and local planning authority have ultimate responsibility for ensuring that drainage systems for new developments are built to a standard that minimises flooding. These duties sit outside the building regulation system. I thank the noble Baroness for suggesting these amendments and I hope that I have reassured the Committee to some extent that the Government already have well-established means of managing flood risk in the building regulations and associated guidance. Also, new developments are not approved where there is an unacceptable flood risk. The local planning authorities and relevant statutory consultees, including the Environment Agency, are the right bodies to oversee the maintenance of existing flood mitigation measures. For these reasons, the Government do not believe that introducing new requirements in the building regulations is necessary. As I have said, statutory guidance to the building regulations in Approved Document C: Site Preparation and Resistance to Contaminants and Moisture already promotes the use of flood resilient and resistant construction in flood-prone areas.

Amendment 310 would place a duty on the Government and local authorities to make data about flood prevention and risk available for assisting insurers and property owners. The Government agree that communities should have access to the information they need to manage and prepare for their level of flood risk. For example, the Environment Agency publishes flood risk data and maps for England. Lead local flood authorities are required to have a strategy for managing local flood risks in their areas. This must include an assessment of local flood risk. This information is publicly available; therefore, we do not feel that creating new legislative duties on government and local authorities to publish data is necessary. We hope that this explanation will provide enough reassurance to allow the noble Baroness not to move this amendment.

Amendment 305 would require the Government to establish a certification scheme for improvements to domestic and commercial properties in England made for flood prevention or mitigation purposes and an accreditation scheme for installers of such improvements. There are a range of enablers, including improving standards and skills, that need to work effectively to support the property flood resilience market. These will help ensure that the foundations are in place to support communities to be better prepared through the effective use of property flood resilience. We need to work together to overcome these challenges, with all sectors and industries playing their part.

In February 2020, a code of practice on property flood resilience delivery was published by the Construction Industry Research and Information Association, with support from the Defra industry round table. It complements British standards on flood resilient construction and retrofit and resistance products. The property flood resilience round table is actively considering how best we can embed the code of practice. The Government have supported training in collaboration with the Chartered Institution of Water and Environmental Management. Alongside this, the Government have also committed to set policy direction for property flood resilience measures that support consumer and industry confidence and therefore take-up. I hope that this explanation will provide some comfort, and enough to allow the noble Baroness not to move this amendment.

Amendment 306 would require the Financial Conduct Authority to make rules requiring insurance companies to take into account flood prevention or mitigation improvements that are either certified or planning permission requirements in setting insurance premiums. The Government’s long-term policy statement committed the Government to ensuring that all homes currently at high risk of flooding are better protected or better prepared. Property flood resilience—PFR—is a nascent market. There are a number of barriers that need to be overcome in order to increase the uptake of PFR, including giving customers confidence in the products and their installation.

There is currently no mechanism to capture data about PFR installed. A process needs to be developed to identify and verify households with PFR. The Government have committed to set policy direction for property flood resilience measures that supports consumer and industry confidence, and therefore take-up. We are working closely with Flood Re, the PFR round table and the insurance industry to determine how best we can achieve this. Again, I hope I have been able to provide some reassurance such that the noble Baroness, Lady Hayman, will not move this amendment.

Amendment 307 would require the Financial Conduct Authority to make rules requiring insurance companies to participate in the currently voluntary Build Back Better scheme launched by Flood Re in April 2022. Build Back Better has been introduced on a voluntary basis. Insurance companies that cede to the Flood Re scheme can choose whether to offer BBB to their customers. At this early stage, we want insurers to adopt BBB and to embed it in their processes. Providing Flood Re with the power to pay claims funding resilient repair over and above normal reinstatement, as the noble Baroness, Lady Hayman, mentioned, will help to drive a cultural shift across the insurance market, driving positive changes in the supply chains and raising awareness of and demand for PFR, helping the market to grow and develop.

Customers of a significant number of insurers, including two-thirds of the household insurance market, are already able to benefit from Build Back Better, and government has encouraged other household insurers to participate in the scheme. In April last year, the Government made legislative changes to the Flood Re scheme to drive the uptake of PFR. Flood Re can now pay claims from insurers ceding to the scheme, which includes an amount of resilient repair, up to a value of £10,000, over and above the cost of like-for-like reinstatement after actual flood damage. While this has been introduced on a voluntary basis, Flood Re requires insurers choosing to participate in Build Back Better to offer it across their home insurance offerings, rather than just on insurance policies ceded to Flood Re.

As I said, property flood resilience is a nascent market, but we want to encourage innovation and learning by doing, and the Government will continue to consider the impact and effectiveness of the current approach. However, Build Back Better is in its early days and has not yet been fully embedded or tested, as a result of relatively benign weather recently. I therefore ask the noble Baroness not to press this new clause.

Amendment 308, also tabled by the noble Baroness, Lady Hayman of Ullock, would require the Government to extend the Flood Re scheme to premises built since 2009 that have property flood resilience measures that meet minimum standards, and buildings insurance for small and medium-sized enterprise premises. Expanding the scope of Flood Re to cover properties built after 2009 would be inconsistent with planning policy. Inappropriate development in flood plains should be avoided. Where necessary, it should be built resiliently so that households can access insurance.

Changes to planning policy in 2006 set out that inappropriate development in flood plains should be avoided. Where development is necessary in a flood risk area, it should be made safe for its lifetime, without increasing flood risk elsewhere, and it should be appropriately flood resilient. There is currently no mechanism to capture data about property flood resilience installed, but we recognise that a process needs to be developed to identify and verify households with property flood resilience.

Baroness Hayman of Ullock Portrait Baroness Hayman of Ullock (Lab)
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I apologise, but that is not good enough. I know people living in properties built after 2009 who are completely stuck and cannot get insurance. The Minister talked about the need to come back to planning legislation, but surely this is the place to do it: we are talking about planning legislation, and this is the big opportunity to do something.

Some of these properties have been impacted by developments built in the field next to them, with the water then pushed across. When they were built, they maybe were not considered a flood risk, but unfortunately they now suffer flooding. The current set-up simply does not cover all the properties that it needs to. I urge the Minister to go back to her department and push these points.

Baroness Bloomfield of Hinton Waldrist Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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I understand the noble Baroness’s concerns, and I will take that back to my colleagues in the department.

Flood Re was designed to provide available and affordable insurance for households. It does not cover businesses. Business insurance operates differently from household insurance: it is often bespoke, based on the individual nature of the business. Flood Re is funded via a levy on UK household insurers. Expanding its scope to cover businesses would create a new levy on businesses and could result in businesses across the country—and, indirectly, customers—subsidising profit-making organisations in locations at flood risk. Often, businesses placed near rivers or the coast benefit from their position.

There is no evidence of a systematic problem for businesses at high flood risk accessing insurance, but I appreciate that this is an issue for some. Businesses in high flood risk areas can shop around for the best insurance quote and can use alternative brokers. A number of innovative products are offered to businesses by the industry, including insurers that offer increased flood excess with reduced premiums, and parametric insurance, which allows property owners to set the level of premiums in line with an agreed level of risk.

The Government are working with the insurance industry and the wider commercial sector, through the joint government and industry property flood resilience round table, to help businesses become more resilient to flooding. The Government have also committed to set policy direction for property flood resilience measures that supports consumer and industry confidence, and therefore increases take-up. I hope that this explanation provides enough reassurance to allow the noble Baroness not to move her amendment.
I turn now to Amendment 312K, tabled by my noble friend Lady McIntosh of Pickering, which would prevent planning permission for residential development in high-risk flood areas and functional floodplains, which are described as flood zone 3a and flood zone 3b, as assessed by the Environment Agency. The Government recognise that flooding presents a risk to people, homes, villages, towns and cities; it goes right to the heart of our communities, so the Government take this risk very seriously. The National Planning Policy Framework sets out a clear, overarching policy on flood risk. It states that inappropriate development in areas at risk of flooding, whether an existing or a potential risk, should be avoided, and that, where possible, alternative locations at a lower flood risk should be identified—this is known as the sequential test. Where development is necessary, and where no suitable sites are available in areas with a lower risk of flooding, the proposed development should provide wider sustainability benefits to the community which outweigh the flood risk and be made safe without increasing flood risk elsewhere, and, where possible, reduce flood risk overall—this is the exception test. Where those strict tests are not met, new development should not be allowed.
Three national flood zones are identified by the Environment Agency’s flood map for planning. Flood zone 3, which is commonly referred to as high risk, is split into two separate zones by the local council: flood zone 3a and flood zone 3b. The latter is classified as a functional floodplain and has the highest likelihood of flooding. Large parts of many major towns and cities comprise land classified as flood zone 3. However, I must stress that building on land assessed as high risk is not the same as building on land assessed as a functional floodplain. It is clear that new housing and most other forms of development are not appropriate in a functional floodplain—flood zone 3b—where water has to flow or be stored in times of flood. The framework is clear that a site-specific flood risk assessment should accompany all proposals in flood zone 3.
This policy approach recognises that it is unrealistic to ban completely all development in flood risk areas, as it would mean that land that could be built on safely could no longer provide the economic opportunities that our coastal and riverside settlements depend on. Instead, trusting our local authorities to make sensible decisions about what development is appropriate in their area ensures that some development can go ahead when it is in the interests of the surrounding area. In addition, where a major development within flood zone 3 is proposed and the Environment Agency raises objections on flood risk grounds, the local council is required to consult the Secretary of State if it is minded to grant planning permission. That provides the Secretary of State an opportunity to call in the decision.
The National Planning Policy Framework was amended in 2021 to make sure that all sources of flood risk need to be considered, including future flood risk, to ensure that any new development is safe for its lifetime, and without increasing the risk of flooding elsewhere. This is supported by the planning practice guidance on flood risk and coastal change, which was significantly revised in August 2022 and advises on how to take account of, and address the risks associated with, flooding in the planning process. Through the reforms to the national planning policy consultation, which closed on 2 March this year, we will keep the important flood risk and coastal change aspects of national policy under review to ensure that it is sufficiently robust to keep future development safe from floods and not to increase risk elsewhere.
My noble friend Lord Caithness asked specifically about the flood resilience measures relating to climate change and storm overflows. A significant amount of funding has already been made available to local government, providing it with the opportunity to take a place-based response to climate change reflecting local circumstances.
We will continue to support local government by investing a further £200 million over six years from April 2021 to pilot innovative actions that can improve the long-term flood and coastal resilience of 25 local areas. The building regulations specify that systems which carry rainwater from the roof of a building to a soakaway or some other suitable rainwater outfall area must be adequate for these purposes. Furthermore, they specify the use of flood resilient and resistant construction in flood-prone areas. Therefore, while I appreciate the spirit of these amendments, the Government do not feel they can support them, given the strong use of planning policies and because the amendments may prevent much-needed development from taking place in areas which can be made safe without increasing flood risk elsewhere.
I hope that I have given my noble friend Lady McIntosh enough reassurance not to press her Amendments 291 and 312K, and for the noble Baroness, Lady Hayman, not to press her Amendments 303 to 308.
Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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My Lords, I am grateful for what has been a very wide-ranging debate. It was pleasing to see the support for all the amendments in this group; I am grateful for that and thank those who have spoken. I am grateful to my noble friend the Minister for her attempt to reassure those of us who have tabled amendments in this group, but I for one found it a bit depressing.

We recognise that surface water flooding is a relatively new concept; it was really recognised only from 2007. Flood Re was set up in 2009 and I take my noble friend Lord Caithness’s point that perhaps it did not take on board the potential for the level of floods that would follow. My noble friend has accepted that the Secretary of State is calling in these developments and we have heard that there have been a number of developments where the Environment Agency has ruled against them, the planning authority has ruled against them and the Secretary of State has approved them. This simply cannot go on, and I urge my noble friend to take away at least one of the thoughts that emerged from the debate, from the noble Baroness, Lady Hayman of Ullock, that there should be more co-ordination and discussion between her department and Defra, which put through the Flood and Water Management Act 2010 and the Environment Act, now implemented.

We cannot have a situation where, 14 years on from Flood Re, developments are still being built when we know that the water will be displaced and will go into existing developments, and there will then be public health aspects that cause people to leave their homes. It is only when, like the noble Baroness, Lady Hayman of Ullock, and me, you have visited homes and seen people in a state of severe distress that you can begin to understand the human despair. We are in a position to do something with this Bill, so I urge my noble friend to take what we have discussed back to her department and Defra and come back with government amendments before Report. Otherwise, I shall bring amendments back at that time. For the moment, I beg leave to withdraw the amendment.

Amendment 291 withdrawn.
Amendment 292
Moved by
292: After Clause 123 insert the following new Clause—
“Duty of care(1) It is the duty of any body using compulsory purchase to act fairly towards the owner of any property being acquired and any claimant of compensation.(2) The Secretary of State must issue a code of practice specifying how the duty in subsection (1) is to be discharged.”Member’s explanatory statement
This amendment will ensure that legislative provision for compulsory purchase, and the actions of the acquirer, always achieve a correct balance between the interest of the state and that of the property-owning individual.
Lord Carrington Portrait Lord Carrington (CB)
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My Lords, I declare my rural interests as set out in the register. My Amendment 292 would establish a statutory duty of care that makes the acquirer consider and possibly reduce the impact of a compulsory purchase proposal on the claimant, their property and their business. The intention is to safeguard property owners against the excesses of acquiring authorities, many of which are large, commercial and profitable companies or government bodies. HS2 comes to mind in this respect: stories of its excessive use of compulsory purchase powers are numerous in the part of Buckinghamshire in which I live.

Property owners are affected by compulsory purchase in many ways. Some lose their whole property. Many lose only a proportion of their property but have to suffer the impacts of construction for many years or decades, having to maintain a viable business throughout that time.

The acquirer’s responsibility is to compensate the landowner or business owner for their loss. This is nearly always paid after the land has been taken, and in some cases many years after. This delay only adds to the loss. Many property owners affected by compulsory purchase feel that their interests are ignored by acquirers keen to deliver the scheme, together with any environmental mitigation, but with little consideration for the person or business that may have occupied that area for generations. For an individual, this really is David and Goliath.

A statutory duty of care to consider and mitigate the impact on landowners and businesses affected by the scheme would rebalance the interests of delivering the scheme and reduce the impact. A duty of care would not delay or prevent schemes but it would ensure that the impacts on property owners and businesses are considered as a key part of the scheme, rather than being an afterthought considered only when compensation is due some time later.

The Secretary of State will have to justify how this duty of care is delivered, but an appeal to an independent person or ombudsman would give the proposal legal force. I look forward to the Minister’s response on this constructive amendment designed to take much of the aggravation out of compulsory purchase while enabling sensible schemes to progress with considerations of the interests and livelihoods of the owner.

Moving on in this group, I now call for the deletion, or at least complete redrafting, of Clauses 174 and 175, as well as government Amendment 412D, which proposes a new clause after Clause 175. The compulsory purchase provisions contained in these three clauses are immensely complicated to the layman, including myself, so I will contain my remarks to an overview and the principles at stake. In opening this debate, I would be interested to hear from the noble Baroness how these clauses relate to the Law Commission’s review into compulsory purchase reform, as it seems odd to be legislating before receiving the outcome.

By way of background to these clauses, the Government in June 2022 initiated a consultation process largely covering the contents of the clauses. We finally received the Government’s response to those consultations last week, some nine months after the close of the consultation. Under consultation principles the response should be within four months. Please also consider the fact that this Bill was introduced to the other place in May last year. What was the point of the consultation if the Government had already decided what to do?

Broadly speaking, the comments are highly diverse and no consensus was reached on any of the questions, and the negative and “not sure” views were the majority in most cases. The main comments highlight issues such as unfairness created by a two-tier property market, the vague definition of public interest, absence of clarity leading to additional costs and delays, human rights, mental health and stress, the European Convention, and potential wider effects on housing developments.

The clauses bring into question the long-held principle that anyone forced to sell land should expect to be put in the same position as would be the case if the land had not been taken from him. In other words, he should be paid market value. The purpose of Clause 174 is to cap the cost of acquiring land for affordable housing in a compulsory purchase situation by eliminating “hope value” in certain defined circumstances through the use of directions by the Secretary of State. I quote:

“In assessing the value of land … it is to be assumed that no planning permission would be granted for development on the relevant land”.

In other words, the value would be existing use rather than market value, which might incorporate hope value, which is the value attributed to the expectation of development in the future. This market value currently applies to any purchaser, whether compulsory purchase or a commercial sale. In the case of compulsory purchase, any hope value included in the purchase price paid would have to be justified and have sound basis, as it can be challenged at a tribunal.

In Amendment 412D, the Government are now proposing to restrict the payment of market value in certain defined circumstances in compulsory purchase situations where there are benefits to acquiring the land at reduced value, if it is in the public interest, such as enabling the provision of affordable housing and health or education facilities. Hence, there will be a two-tier system, with private sales at market value and compulsory purchase sales at less than market value. This is hardly fair and is open to all sorts of challenges, from human rights to calculations on public benefit. Surely a better way of dealing with this perceived problem is through either the conditions of planning, such as Section 108 or CIL, or alternatively the tax system, so that all land sales are treated equally.
There are several huge issues that have not been addressed. First, if the purpose of this amendment is land-value capture, why are we looking just at this sector of the market? How can it be right that someone who owns land next door to land that is subject to a direction and compulsory purchase can sell at market value whereas his neighbour is capped?
Secondly, it is very important not to make the common mistake that compulsory purchase affects only rich land- owners. Many of those affected will be small householders or businesses. Capping to existing use value denies them the benefit of planning for a change of use or an extension. They will receive only existing use value. Is this fair and justified when those not affected by compulsory purchase will get market value? Suppressing or ignoring market value is a fundamental change, and means that private owners will subsidise public schemes. I see visions of a repeat of the Crichel Down affair.
Thirdly, most of the independent estimates of the cost of land acquisition that I have read put this figure at less than 10%, although a figure of 38% has been quoted by Civitas. Clearly, there is a requirement for proper research on this issue, as it should be quantified before any action is suggested. Also, land is only one component of development cost. What about the other 90% of costs and, indeed, revenues that affect the public benefit calculation? The cost profile of a scheme changes over time. The ring-fencing of public benefit is impossible. It is also important to remember that affordable housing in commercial developments is paid for out of normal house sales. How could this work in a CPO situation? Where is the money coming from?
Fourthly, what is the effect on private housing development? Surely a private developer will be highly reluctant to initiate and work up a scheme if there was any possibility of a local authority obtaining a direction and CPO, as that developer would then lose all his sunk costs, which could be very considerable. It could lead to local authorities having to do more of their own developments with all the many costs and resources involved, and we all know that local authorities are underresourced in this area.
Fifthly, although the Government are limiting the application for a direction to local authorities and other public sector organisations, they will need to enter contracts with private sector companies to build the houses or hospitals. Is it the intention of the Government to insist that the building is done at cost price only, as why should the builder add a profit margin on to his contract when the landowner has been made to forego his own margin of profit through the compulsory purchase at existing use value?
Sixthly, capping would apply if justified in the public interest, but how will this be judged? What are the guidelines? What objective criteria would be used to justify that below-market value should be used to benefit the public? Surely, reliable, detailed evidence from actual schemes is the only way to quantify the public benefit? The Government have promised guidelines, and we should examine them closely before approving this legislation.
Seventhly—and, noble Lords will be glad to hear, finally—the Government have promised guidelines as to how the landowner can challenge the directions. Surely we need to see these guidelines before going any further? The Minister writes of safeguards, but these appear to work only after 10 years in the circumstances where the development has not been in accordance with the direction—a long wait for any compensation.
In summary, I will quote the Compulsory Purchase Association:
“The CPA does not consider that there are many, if any, instances where the capping proposals would operate to render schemes that were otherwise unviable viable, or where they would deliver materially improved public benefits as a result. Nor does it consider that it would be practically possible to ringfence compensation sums ‘saved’ for the delivery of particular benefits, given the changing cost profile of schemes over their lifetime”.
I turn to Clause 175, which deals with prospects for planning for alternative development in compulsory purchase situations. Where identification of a future use can be difficult—for example, where there is no up-to-date local plan—a claimant can apply for a certificate of alternative development from a local authority which will say what alternative development could be accommodated on that land, should the scheme not go ahead. This application can either be specific—in other words, for housing—or for any development, and the local planning authority has to respond saying what land use might be acceptable. This process is supposed to be easy for the applicant and to give an indication of appropriate future uses. If an application for a certificate for alternative development is refused, it can be appealed through the Upper Tribunal.
However, under Clause 175 a claimant will have to apply for a certificate for certain development and put considerable effort and resource into justifying the proposal that may be similar in quantum to making a full planning application, rather than seeking a broad indication, as is the case at the moment. This could involve the applicant paying several thousand pounds on professional fees to build up the best case possible, which may then be refused because of the vagaries of the planning system and local authorities.
There may be instances where a local authority will turn down a certain application and a claimant may then have to submit a further application for a different type of development—a further risk and cost that the claimant has to suffer, although the applicant still has the ability to appeal the original decision to the Upper Tribunal. This moves the onus away from the local authority to the applicant or claimant at a time when they are already suffering the considerable impacts of the scheme—consultations, surveys, inquiries, loss of land, construction impacts, severance, et cetera—this is scarcely equitable.
In conclusion, I fear that there are many questions in what I have just said, and I look forward to the considered response of the Minister. In particular, we need to know the Government’s promised guidelines on how a scheme will deliver public benefits, how removal of hope value is justified in the public interest, and what is meant by “public interest” and “public benefits”. I ask the Minister to provide objective definitions.
We also need to have a convincing matrix analysing the real costs of delivering these schemes; in other words, who gets what? Without this information, it seems somewhat irresponsible to focus only on the landowner, who may account for only 10% of the expenditure. What about the other 90%? There is currently too much information missing to approve these clauses.
My final remark is whether this rather poorly considered proposal—in my opinion—to cap certain land sales is equitable and whether the right solution, if the underlying problem is land value capture, is not best addressed through planning conditions or general taxation. I beg to move.
Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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My Lords, the noble Lord, Lord Carrington, warned me that we may go head to head on this, and I fear that that might be the case this afternoon. This group of amendments addresses a very important set of conditions about compulsory purchase and the skewing effect of hope value, which we consider is vital to address to help the delivery of genuine regeneration schemes and social and/or truly affordable housing.

Definitions are important here, which is why the first amendment in my name in this group probes how the Secretary of State will work with local authorities to determine an appropriate definition for regeneration. Too often, this has been left in the hands of developers so that existing communities feel, at best, that their views about how they would like the area to be regenerated are ignored and, at worst, that they are being displaced by regeneration schemes, as developers are relentless in their pursuit of uplifting the values of properties for their own benefit.

I understand the amendment in the name of the noble Lord, Lord Carrington, and I am sure that there are cases which result in the kinds of circumstances he has described, but the boot is quite often on the other foot. However, I support his comments about how many important sections of the Bill are subject to consultations running in parallel with the progress of the Bill through Parliament. It does not give us much confidence that listening is going on, and it means that we are trying to incorporate all the pre-legislative processes as we are going through the process of the Bill. So the consultations are running, and we should then have pre-legislative scrutiny—which we have ended up having to do as we go through the Bill—and then legislation. I think that is why we have had such a long set of proceedings on the Bill. There are issues here.

The amendment in the name of the noble Baroness, Lady Bennett, includes a power of acquisition for local authorities, specifically for the purpose of social or affordable housing. I believe that there are powers already under previous Acts of Parliament that allow this, but it is important that those powers are sped up or enhanced in some way. Part of the “Today” programme on Radio 4 this morning was about social housing in Wales. Before the Minister is tempted to come back and say that that is to do with Labour running Wales—which I do understand—this situation, of a gentleman who had been waiting some 20 years for social housing, occurs across the country. One of the responses from Shelter, which also appeared on that programme, was that local authorities need a fast-track route to purchase empty homes for social housing. The power is already there, but it can take for ever. I have been dealing with a case in my own borough where, 22 years later, we have still not managed to purchase a very dilapidated house because of the various circumstances attached to that case. It makes it very difficult. Where it is possible, local authorities should be helped and assisted to do that.

My Amendment 412 aims to ensure that compulsory acquisitions by a local authority do not materially change the housing provision in an area. It is important to clarify that we do not intend this amendment to suggest that the housing has to be re-provided on the same site, although that may be a choice that the local authority wishes to make. If it is not, the housing should be re-provided elsewhere in the local authority area and be specified at the time of planning for the site in question.

On the question of Clauses 174 and 175 standing part, we are grateful to the noble Lord, Lord Carrington, and the noble Earl, Lord Lytton, for highlighting these two clauses. We look forward to the Minister’s intentions on this, but we may have some further discussions on how these are going to work later in the Bill. I hope we have understood the purpose of government Amendment 412D correctly, in that it seems to indicate that the Minister agrees with us that hope value should not accrue to land where it is to be used for the purpose of affordable housing, health or education. If the Minister could, for the sake of clarity, confirm that it is also intended to mean social housing, that would be very helpful.
My Amendment 413 is intended to ensure that data is collected, so that the extent of the compulsory purchase of land that has hope value attached to it can be collated and understood. I am very grateful to the noble Lord, Lord Shipley, for adding his name to our Amendment 414, which is a detailed clause that has the effect of ensuring that local authorities do not have to pay hope value for land for properties for social rent where they are able to demonstrate the need for that development. I am very grateful to Shelter, which continues to make the case for taking away the anachronistic hope value that results in making delivery of affordable and social homes unviable. The problem with hope value is that land is already so expensive that it is very hard for anyone to build genuinely affordable or desperately needed social homes.
Hope value is one of the key factors that make land too expensive. Councils can compulsorily purchase land in order to build much-needed homes for their community, but they are then forced by law to pay that hope value. This is calculated by the amount the land could be worth if it was sold, for example, to build luxury private homes. Because hope value is so lucrative, many landowners will refuse the council’s initial offer because they know that the council has no power to buy the land at a lower price. This is not intended to depress land values, because the land is always subject to a proper valuation process. Rather, it is intended to address the up to 80% that can be added for hope value. We understand that it was always intended that the LURB would address this, and we look forward to hearing the Minister’s response on it.
I hope that, before Report, we can work with the Government and other noble Lords to ensure that we identify a detailed amendment in relation to the circumstances in which hope value should not apply. I note that noble Lords during debates on this section of the Bill have concerns about social uses, affordable and social housing, health and education needs and emergency services provision. This is not intended to deprive landowners of the real market value of the land; it is intended to make it viable to build social and affordable housing on that land and not increase the value of the land by 80% or some other high percentage that takes all the viability out of developments.
Baroness Jones of Moulsecoomb Portrait Baroness Jones of Moulsecoomb (GP)
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My Lords, I rise to speak to Amendment 411, in the name of my noble friend Lady Bennett, who cannot be here at the moment. Before I do that, I would like to pay tribute to the Government Front Bench and the Opposition Front Bench for showing real stamina, tenacity and forbearance on this Bill. It is far too big and the only good thing about it—well, it does introduce some good things—is that it stops us discussing even worse Bills.

On 411, I am a former councillor and I had thought that this was possible for councils—but, if there is any doubt at all, we have to make sure that it goes in, because it is incredibly important that we start to increase our supply of affordable housing and social housing. The whole right-to-buy privatisation was very successful for some but, of course, those houses have never been replaced, and with a rising population it is incredibly important that people have a home that is affordable and secure.

The rental sector is failing at the moment. I gather that a lot of people who have bought to rent are leaving the market because it is so complex. So there are houses, but they are mostly going up for auction and being sold mostly to developers; I have absolutely no idea whether that will help.

I am not convinced about hope value, I am afraid. It sounds like an extremely Tory motivator to increase the value of your property immediately before it gets bought. It sounds like greed to me—forgive me—so I will not support any of those amendments.

On Amendment 411, if there is no clarity on whether it is possible to buy land in that way, we will bring this back on Report.

Earl of Lytton Portrait The Earl of Lytton (CB)
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My Lords, I rise to speak to the question of whether Clauses 174 and 175 should stand part and, to some extent, to government Amendment 412D. I thank the noble Lord, Lord Carrington, for his masterly introduction.

I intend to focus more on what I hope will be the technical side. I have a sort of background here. I dare say that I am the only person in this House—probably in the Palace of Westminster—who had to deal with a development land tax calculation when I worked in public service. I recall those years very well, because the entire land supply dried up during that period. I will try to give a bit of technical background without making it overly complicated.

I, too, am grateful to the Compulsory Purchase Association and Mr Raj Gupta of Town Legal for their comments. Mr Gupta kindly gave me permission to quote from one of his emails, which I may do later.

This is all to do with the question of hope value. If I can loosely paraphrase, this is regarded as an excessive element of value that is so far divorced from current purpose, use and enjoyment that it is regarded as offensive. The first thing you have to know about hope value is that there is a lot of it about. On the outskirts of every village and town in every municipality, there is land that is tied up by legal agreements or whatever that are to do with this inflated hope value. So the first thing we need to bear in mind is: what do you do about the bits where stuff is already in the pipeline? If you put a block on that, it will have consequences.

Hope value does not exist in isolation from the umbrella of market value. Market value combines various things; it may be a current use value, an alternative use value and a hope value. Wrapped together, they form this construct of market value. Things such as hope value are not objectively measurable in their own right, which becomes a bit of problem; I remember that problem from dealing with development land tax calculations, where the question was about the current use value that had to be entered on the form on which one was making the calculation.

However, market value has a clear, established, internationally recognised definition. It is capable of independent corroboration by what is happening in transactions, which are evidenced—that is, the evidence can be produced from within the marketplace. I will leave aside the complexities of specialist things such as going concern value, but this question of hope value rests on the belief that an asset is capable of being made to be worth more, with value being added in some way, such as through works or changes of use, possibly with the prospect of development but possibly by simply bettering what is already there.

Development, by definition, also includes permitted development rights; it is a form of development. The question about that is how to single out those things that society, until now, has regarded as being part of the entitlement of ownership—namely, permitted development rights—from these other excessive sums, if “excessive” is the right term.

The rules for compensation for compulsory purchase have been developed over nearly 180 years and, in modern terms, use market value as their baseline. They sit alongside issues of human rights in relation to, first, the reasonable enjoyment of one’s property and, secondly, the right not to have it taken away other than for demonstrably compelling reasons of public interest—of which more anon—and then only on the basis of fair compensation determined, in the event of a dispute, by an independent adjudicator. So far, so good, as I am not for one minute suggesting that human rights justify a hugely disproportionate level of value. But this is tied into this construct of market value. If one were to start filleting out market value, there would have to be a better definition or one closer to that referred to by my noble friend Lord Carrington.

Pivotal to all this is the concept of equivalence, and it will become apparent why I am talking about this. Equivalence is the ability to buy an equivalent asset from the money gained from the compulsory process. Put another way, the compensation should put the owner in the same position, as near as money can make it, as they would have been but for the compulsory acquisition. That principle was established long ago in a case called Horn v Sunderland.

Particular things need to be borne in mind here. First, the special interest of the acquiring authority is always to be disregarded where it could be realised only as part of the authority’s scheme. That is a given and has been a factor for a long time. Secondly, any reduction in value by virtue of the acquisition being compulsory should also be disregarded, and that is at both ends of the spectrum. Also, the compensation is to be paid in full at the time of taking the land or else interest runs thereon, and any reasonable costs or losses associated with and arising from the act of it being a compulsory acquisition should be paid as part of the compensation.

Clause 174 refers to “no-scheme” minor amendments, but in amending the Land Compensation Act 1961 it seems to go further than the strict purpose of simply eliminating those aspects of value that could be realised only by a scheme involving compulsory powers. It seems to dig deeper than that. The question is how deep and where that process ends. It also amends the definition of compulsory purchase purposes to a point where what it defines could be seen as part of the normal current use rights and not the sole preserve imported by the acquisition scheme itself. I refer to the words “re-development, regeneration and improvement”, which is a very broad definition.

Clause 175 sets out to reinforce this in relation to assumed developments under certificates of alternative development. This is clearly something that the Government want to make harder for claimants and, conversely, easier for acquiring authorities. I will not go any further on that, because my noble friend Lord Carrington covered it pretty well.

Government Amendment 412D introduces a new scheme of Secretary of State direction enabling acquisitions to be made at existing use value in certain circumstances. However, the provision is rather complex and has a sting in the tail in that, after 10 years, if the land has not been used for the specified purpose, which has to be specified up front, there is a potential claw-back. As I see it, it also muddles the justifications of public interest and the rationale for having CPO powers. The two are not the same.

With regard to the ostensible aim to provide more affordable housing, here are some home truths: the amount that the owner of bare, undeveloped land gets after the costs of obtaining the planning assent is typically in the range of 8% to 12% of the finished product value, otherwise known as the gross development value. The complaints about high land values—I know this from having analysed spreadsheets with all this information on them—often come from housebuilders and ignore the effect of the additional rolled-up cost of obtaining planning permission and the very substantial costs on risk of speculatively financing these. The whole planning process makes it more expensive.

If land were sequestered without compensation at all from the landowner, you would typically be talking about a modest, single-figure percentage of the ultimate gross development value. The noble Lord, Lord Carrington, is right about that. The process of the development—the complexity of the finance, materials and labour—over extended timeframes makes this a really complicated piece of discounting to arrive at net present values for. The whole thing is speculative, in the sense that you are trying to predict what might happen over a period of time—not in terms of the end values, because those are present day, but, particularly on larger sites, the risks associated with developing them out and the rate at which they can be developed out without swamping the local market in the process.
The noble Lord, Lord Carrington, referred to affordable housing requiring market housing to fund its construction. That is true. Mostly, this is reflected in the landowner receiving a lower value for the property.
By and large, local authorities do not build the houses themselves; they enter into commercial agreements with developers to construct them, and these commercial entities make profits, typically not less than 20% of the finished product value. I would be glad if that would lodge in noble Lords’ minds: we are talking about single figures of GDV for the landowner and 20% for the developer. That is a common figure and is embedded in many viability assessments that go to local authorities. Whether it is visible is another question, but it seems worth comparing.
These are readily discernible by anybody familiar with development appraisal and construction economics and practice. But there is an increasingly grey area, which the noble Lord, Lord Carrington, referred to, between what is properly regarded as public interest and what may be termed government commercial objectives, which may be driven by political priorities and the mercantile advantages thus facilitated. To give one example, the Government used the 2017 Electronic Communications Code to reduce rents, to benefit a category of investor who were investors in the leaseholds on these various sites. They made a killing commercially, it would appear, but have so far produced no measurable operational benefits to the network, let alone to the consumers who sign up for their mobile service.
The Government claim to have consulted on the measures. As the noble Lord, Lord Carrington, said, the consultation results have been published. I am grateful to Mr Raj Gupta for his summary. He says, first, that the outcome of the consultation demonstrates that
“there is very limited support for any form of abolition”.
Secondly, he said:
“There were some ludicrous responses given”,
in one or two areas;
“For example, one respondent said that a Crossrail 2 study had shown that the abolition of hope value would fund 50% of the cost of the new railway when a PWC study commissioned by TfL said that total land acquisition was less than 10% of the cost”.
They cannot both be right, but I would put my money with PWC. He thought that
“The response to question 5 is really telling. The Govt noted that hope value was more likely to be paid for transport schemes and regeneration of brownfield land—but it is not proposing capping for those kind of schemes”.
And so it goes on.
I will bring my comments to a close. An existing use value needs to be defined. What among the prospects of free markets is it that the Government propose should now be disregarded? The net result of this could be highly irregular in terms of the pattern of values. Existing use value means different things to different people. A piece of bare land in a village or urban fringe might have a low scheme land value—I suppose it might have utility for the protection of the view for owner A, horse grazing for owner B, a wildflower meadow for someone else, or be part of an agricultural holding or amenity land, all of which have different valuation criteria. The list goes on. It means different things to different people. I said that I make no judgment about property owners and whether they should get inflated or other levels of value, but the Government need to explain and consider market sentiment or the result risks being the precise opposite of what they are setting out to achieve by these measures.
Earl of Caithness Portrait The Earl of Caithness (Con)
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My Lords, the whole compulsory purchase issue is a complex and niche part of the law, as has been well explained in the debate today. I am hugely grateful to the noble Lord, Lord Carrington, for setting out his amendment in detail.

I have some interests to declare. It is 50 years—yes—since I was last involved in compulsory purchase procedures as a land agent, and the law has moved slightly since then. But I do remember how fiendishly complicated it was; just when I thought I had got my head around it, I moved jobs and went off to do something else.

The nub of the Government’s proposals is to change a long-settled aspect of compulsory purchase in this country. It was put into words by Lord Justice Scott in Horn v Sunderland. He said that the landowner

“has the right to be put, so far as money can do it, in the same position as if his land had not been taken from him”.

That tenet—that vital basic principle for compulsory purchase—is now being demolished by the Government, with the support of the Labour Front Bench.

It is now clear that there is considerable blue water on this issue between us and those who want to deprive a landowner or somebody of the rightful value of their property. It can start with land but it is a slippery slope. Once it is established that somebody is not getting the full market value for their land, and that the state can take that from them, it will go on into other issues that affect people. I deeply regret that my Government have headed down this road. I hope that my noble friend the Minister will be able to explain why she wishes to destroy that principal tenet of compulsory purchase.

The noble Lord, Lord Carrington, talked about the process of consultation. He was far too kind to the Government about that. On the previous amendment, interestingly, my noble friend Lady Bloomfield said that the Government could not accept it because a consultation would have to be had to go through it in detail before they could possibly come to Parliament. We come to this amendment and now we find that there was a consultation process, but the Government introduced it after the Bill had been read for a first time in another place; not only that, but they put down amendments contrary to the consultation process. So those who answered the consultation process were not actually answering the question that the Government are now posing.

If this was not so serious, it would actually be quite a funny skit about how badly the Government are behaving. This is an appalling way to govern. It reduces confidence among all the professionals in this area—and if it reduces the confidence of these professionals, it will not be long before the Government start reducing the confidence of other professionals.

The government amendments to the Land Compensation Act and the Acquisition of Land Act change significantly the basis of that consultation procedure. We have now got the results of the consultation—merely a week before we came to discuss it, and I think that was partly due to the very useful meeting that we had with the Minister’s officials, for which I am extremely grateful. At that meeting I posed them the question, “When are you going to publish the results of the consultation?” There was a scratching of heads and the answer, “Let’s see; we’ll go back to the department and think about it”. I am very grateful to the officials for having thought about it, but it proves that the consultation was a total waste of everybody’s time and a lot of paper.

Furthermore, the Government have asked the Law Commission to look at the whole of the compulsory purchase procedure laws. I spoke to the Law Commission this morning on this. It has started work on it; it aims to produce its report and the proposed Bill in 2025. Would it not be better, before the Government tread into this minefield of compulsory purchase, to wait for the Law Commission to come forward with its report before disturbing this issue?

I would like to ask my noble friend the Minister three questions. Nearly all schemes that are affected by compulsory purchase will include a developer; the local authority does not have the resources or the ability to do it on its own. So if a developer is involved, how can the Government justify allowing the developer to make a profit? As the noble Earl, Lord Lytton, has just said, it is something in the region of 20%.

I was a developer in the late 1970s and early 1980s, and all our schemes had a minimum of 20% when we started them. How can you justify giving a developer 20% profit when the landowner is not getting the market value for the land? That is a severe infringement of human rights. I appreciate that, as the noble Earl, Lord Lytton, said, the planning procedure is very expensive. If I remember rightly, I read in the papers yesterday that the Government have spent £800 million so far on costs regarding the proposed new Dartford crossing—and not a spade has been put in the ground yet. That is expensive, and it is equally expensive, but on a lesser scale, for landowners; proportionately, it is about the same.

If there is going to be a direction under the proposed legislation, will the local authority have to prove that the development could not proceed unless the land was bought at existing use value, not at market value? If the answer to that is no, then this is state robbery. If the answer to it is yes, my third question to my noble friend the Minister is whether the local authority will be required to publish detailed costs of the proposed development. It is only by getting the detailed costs that one will be able to challenge the efficacy of the proposal. One will need a considerable amount of detail from the developer and the local authority to show that compulsory purchase is the only method by which that proposed development could proceed.

If the answer to my questions is no, as I said, that becomes state robbery. If it is yes, no one will enter into any scheme with developers. Developers are not going to take up options on land and the supply of land for social and affordable housing will dry up, as it has done in the past. This is cyclic. I have now seen it twice in my lifetime: Governments wish to encourage something and think they are doing it, either through the rent Acts or land supply, but the result is completely the opposite; the land supply dries up and there is less of what they and we all want at the end of the day —more social and affordable housing; and then a future Government have to unwind it and start the process all over again.
If the result is going to be as dire as the noble Earl, Lord Lytton, the noble Lord, Lord Carrington, and I fear and the supply of land is going to dry up, why are the Government undertaking this measure? This is far too complex and detailed an issue to be tackled in the way that it is, and the consequences are going to be huge and very political.
Baroness Bloomfield of Hinton Waldrist Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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My Lords, I beg to move that the debate on this amendment be adjourned.

Earl of Caithness Portrait The Earl of Caithness (Con)
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Why do we have to adjourn when we are in the middle of an important debate? For the continuity of that debate, surely if the Minister replies now, that will be fine.

Baroness Bloomfield of Hinton Waldrist Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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There are a number of other speakers to speak in the debate. The list of speakers is quite long and we would probably be allowing another hour before the next business could be taken, which has been timetabled for around 4 pm.

House resumed. Committee to begin again not before 4.52 pm.