Growth and Infrastructure Bill

Lord Burnett Excerpts

Monday 28th January 2013 Lords Chamber

[Lord Deben]

My Lords, I hope the Minister listens to the specific concern to make this “in between” clause actually work. However, I hope she will not discuss this issue without facing up to one entirely unspoken problem, which both sides of the House have always had a very clear plot to avoid ever discussing. I find it unacceptable that we should run our supported housing on the basis that we tax people who need a house to pay for other people who need a house. This is entirely a fiscal arrangement that the Treasury has entered into because it does not want us, as a community, to pay the costs of people who need housing and cannot afford it.

So what we do is say that those who are least able to pay more than they have to for their accommodation shall be taxed to pay for others. This is a total scandal. I find this bit and the clause that will follow extremely difficult to support—not because I object to the clause, but because, once again, it hides the plot between Labour, Conservatives and Liberal Democrats never to admit the reality of Section 106. I very often agree with the noble Lord, Lord Best, and I respect him enormously, but to talk about Section 106 agreements being freely entered into is, frankly, nonsense. They are not freely entered into; they are a necessary requirement of getting any kind of development at all.

[Lord Burnett]

My noble friend Lord Deben makes a powerful case. Does he agree that it is sometimes forgotten by people looking at it from the local authority side that if developers or builders make a profit they pay corporation tax, income tax, capital gains tax or whatever the tax is? In addition, they have Section 106 burdens, and likely to be coming down the track—some have adopted it—is the community infrastructure levy. It will paralyse the industry again if we carry on loading it with these burdens.

[Lord Deben]

I repeat what I said in the earlier part of this debate. I declare an interest in the sense that I try to help people do sustainable development. That is what has led me to this deep concern. We talk as though the money that developers pay has no effect on the cost of the housing of the people who pay for it. Successive Governments of both parties have consistently spoken about this total myth. The truth is that prices of homes in this country are greater for first-time buyers than they would be if we did not tax them. It is undoubtedly for a good reason, but they are taxed and other people are not.

We have an intergenerational problem. Because of the way that all this works, people who do have houses have a value which is significant. Of course, many of us in that position mitigate it, because the bank of mum and dad has to make it possible for the next generation to have a home. Many people are not in that position. I want this Government to face up to the fiction, which we have all accepted—I admit to it as a former Minister—that somehow the mechanism we have is reasonable and fair. It is unreasonable and unfair. At this moment, when the pressures on young people are so considerable, we must come away from the idea that it is reasonable to accept the basic concept of the noble Lord, Lord Best, that somehow new houses sold on the market should carry that tax and then increase it because—as my noble friend has pointed out—of the other infrastructure taxes that will take place. Nobody else seems prepared to do it, so it is time for this House to say to the Government and Opposition, “This will not go on”. It is not reasonable that we should not, as a society, bear the cost of affordable housing, but shovel it off—because then it is not on the national accounts—to those who are least able to afford it, thus widening the gap between the haves and the have-nots.

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[Lord Burnett]

My Lords, I remind the Committee that we have been through, and probably are still in, the most incredibly severe recession. It is an appalling recession and many building companies have gone broke. They have gone into liquidation. Unfortunately they and other companies have signed up to planning agreements which, because such almost impossible burdens are attached to them, sterilise the sites, development, and the ability to build on them. This clause, the thrust of which I very much support, recognises that fact, and some local authorities, to their credit, recognise it because they are already renegotiating these planning burdens. Local authorities recognise that they want some affordable housing rather than none. The quid pro quo argument made by the noble Lord, Lord Best, is well worthy of consideration as long as there are reasonable time limits.

Another thing that has not been mentioned sufficiently is that, even if you renegotiate a planning permission, that takes a great deal of money, time and effort. Let us get some planning done and let us get some houses built. We are building only about 100,000 homes a year. We need at least 200,000 a year. The noble Lord, Lord Deben, is absolutely right. Let us try to remove some of these burdens and get builders building again. There has been a fundamental change of economic circumstances. That is what the clause is trying to deal with and that is why I support it.

[Lord Beecham]

My Lords, the noble Lord, Lord Deben, made what Ministers are apt to call some interesting points, which usually presages a disinclination to approve them. However, he did make some interesting points, not least the thought that perhaps the Treasury should revisit the issue of how significant housing projects and more generally the construction industry, to take up the remarks of the noble Lord, Lord Burnett, might be supported. However, the argument of the noble Lord, Lord Deben, was too limited in some ways.

The assumption throughout the noble Lord’s speech was that we are talking exclusively about housing, but Section 106 agreements are not, of course, confined only to housing matters. Secondly, he assumed that affordable housing schemes are for owner occupation. Of course that is true of a greater proportion, but they are not necessarily confined to owner occupation. There is also a need—which is one of the reasons for these agreements in any event, as the noble Lord, Lord Alton, implied—for a mix of tenure which would potentially ensure that there is a social mix within the development. In addition, the noble Lord, Lord Deben, implied that we are talking only about first-time buyers. I do not know what the evidence is for that assertion. When new estates are built, wherever that is, there are certainly a number of first-time buyers, but equally there are people who are, as it were, trading up and who are not necessarily first-time buyers. The position is not quite as stark as he suggested.

It follows that we need to be very clear about what the policy objectives are. First, as everyone in this Committee and in the House generally would confirm, we need to build more houses. Secondly, they should be accessible, through one form of tenure or another, to a wide range of people, not least in order to meet the desirable aim of having the kind of social mix that would help avoid a divided society. There are different ways of doing this. Clearly, Section 106 agreements can facilitate matters, and we will debate that issue in greater detail later. However, I recall in the 1970s, when there was a collapse in the property market, that my local authority stepped in to buy up unsold new private housing developments. That may have happened in other places as well but I cannot say whether it did. They were taken into the municipal stock. Subsequently, of course, under right-to-buy, they virtually all left local authority ownership. However, this might be a way of freeing up the industry; if not properties that are currently built and standing empty, then at least local authorities or social housing organisations taking a share of a development, thereby providing initial purchases and helping to ensure that kind of social mix.

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[Lord McKenzie of Luton]

It seems to me that the value comes from the granting of planning permission in respect of the land. If you are going to argue that that has to be shared by the community as a whole, not just the local community, surely you need mechanisms to get that value raised and to redistribute it. You could not do it on the basis of the current tax system.

This takes me back to a point that I was going to make on the amendment. I recall that when I first went on Luton Council, in the mid-1970s, we had something called the Community Land Act, as I recall it, and the development land tax. It was then very much the name of the game for developers to go and dig a trench to demonstrate that they had started their development before those provisions kicked in. Normally, there was a photograph taken with somebody holding up a copy of the Times, or whatever, to validate that this was when they had actually dug the trench.

[Lord Burnett]

I wonder whether the noble Lord recalls that I referred to the development land tax at Second Reading. It was a good example of the fact that where you have prohibitively high rates of taxation—I think the rate of development land tax was about 80%—it actually sterilised development so that building just did not take place. That was the downturn to which I think the noble Lord, Lord Beecham, was referring.

[Lord McKenzie of Luton]

We did very well out of it in Luton, I am bound to say, but I should stress that it is not Labour Party policy to reintroduce this tax. We should get that clearly on the record.

So far as the amendment is concerned, I agree with the provision to make sure that there are mechanisms to clearly identify when there is a commencement of development. What I was not sure about, having looked at Section 56 of the Town and Country Planning Act 1990, is whether that overrides all the other things listed there as the commencement of development. For example, that section says that,

“‘material operation’ means … the digging of a trench which is to contain the foundations, or part of the foundations”.

I think that the noble Lord, Lord Best, referred to that but I am not sure whether his amendment overrides it. It would technically seem to need to do that to get the solution that the noble Lord is seeking—a solution with which I agree.

There are a range of broader points but I will forgo the opportunity now for my clause stand part debate and come back there as we go through the amendments in due course.

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[Lord Best]

My Lords, I am deeply grateful to all noble Lords who have joined in this debate. By covering a lot of the ground on this now, we have saved time later. I will respond briefly to some of the key points made. With regard to the powerful speech by the noble Lord, Lord Deben, I have been discussing these things with Housing Ministers and Planning Ministers for longer than I care to remember; it was the noble Lord, Lord Waldegrave—then William Waldegrave, the Planning Minister—who first introduced the idea of planning gain paying for new housing development. I remember those conversations. It started in Docklands, where there was a need for local people to see something for themselves when lots of new housing was being built that was much more expensive than they could afford; from that came this way of paying for affordable housing for a range of people.

Perhaps it would be better if one simply taxed more deeply the landowners, the house builders and the occupiers, and put the money in a pot to pay for affordable housing, but it would not then be produced in the way that the noble Lord, Lord Alton, was commending—on sites that are now a mix of owner-occupiers and people who are renting or in shared ownership, which are socially very valuable. In a way, the way in which planning gain operates is a tax, and there are really only three people who can pay it. As the noble Lord, Lord Deben, suggests, the purchaser—who may be a first-time buyer—will actually be charged what the market can bear and the market is determined by the 85% of properties that change hands in the second-hand market rather than those that are built new. The developer can charge only what the market will bear, and the purchaser will look at other properties as well. The purchaser is unlikely to see their price increase for that reason.

The house builder themselves cannot operate at a loss—they would just not be in business at all—so they cannot absorb all the cost of this tax themselves. It is, I think, the third party, the landowner, where the tax finally lands, because there is a very wide variation in the value of land for agricultural or other purposes and land for development, and that is where the tax really has been drawn over the years. That system has worked pretty well.

The noble Lord, Lord Davies, makes the point that this could be a double bad deal for local communities unless we get some changes. The noble Lord, Lord Burnett, noted that local authorities already renegotiated a lot of deals, and he approves of the idea of a quid pro quo now if we are to tamper with the Section 106 agreements.

[Lord Burnett]

I think that I said it was worthy of consideration.

[Lord Best]

I accept that with some gratitude. The noble Lord, Lord Alton, talked about the social mix on decent sites, which is an important part of Section 106. The noble Lords, Lord Beecham and Lord McKenzie, were supportive, for which I am grateful. The noble Lord, Lord McKenzie, wondered whether this way of approaching the issue would actually not work and one might require a different change to the Town and Country Planning Act. The point of this amendment is that it would enable a Section 106 voluntary agreement —yes, I agree, with some pressure—to be made between two parties, and that could specify the definition of what starting on site and getting going would mean. That would not require legislation; you can put anything into a Section 106 agreement. However, the inspectorate, in reducing the amount of affordable housing, would make that conditional upon agreement being reached about what it means to start on site. I think that it could work.

Clearly the Minister is not minded at this time to go for an amendment of this sort. She very properly applauds the way that Section 106 works and accounts for a lot of affordable housing today. Like her, I approve greatly of the work of Nick Boles, the Planning Minister, in energetically trying to ensure that we build more homes, not just to ease housing shortages but to help the wider economy. She brings some reassurance that the community infrastructure levy provisions might produce ways in which developers were obligated to get on with the job. I am not sure whether that is going to be enough and I reserve my position, but at this point I beg leave to withdraw the amendment.