Levelling-up and Regeneration Bill

Baroness Pinnock Excerpts

Committee stage
Thursday 18th May 2023 Lords Chamber

I just feel that we could have done this in a much simpler way. This stand-part debate may serve no purpose at all other than to ask whether it is too late to think about doing things in a simpler way, rather than trying to sweep the CIL and Section 106 away, then reintroducing much of it but putting it into a more complicated and riskier scenario, as the infrastructure levy appears to me to do.

[Baroness Pinnock (LD)]

My Lords, this may be the third occasion on which we have discussed the infrastructure levy, which simply illustrates how important a part it will play in future development if it is passed. I agree with much of what the noble Lord, Lord Lansley, said about the proposal for an infrastructure levy. It seems to me that there are too many variables in the infrastructure levy to give certainty to local communities, planning authorities and developers.

Growth development value on large-ish or medium-sized sites which are going to be developed across a number of years—300 houses over eight years, maybe—can significantly change in that period, as can the viability of the developer, because of lots of external factors. I had a lot of sympathy with the noble Lord, Lord Lansley, when he asked why we have this complicated system where viability assessments take place at various stages during the development. How can the change that will inevitably happen during a development period provide with some certainty the affordable housing a local area needs, for instance? One of the huge risks of the infrastructure levy is that, rather than increasing the number of affordable homes that are built, it will reduce it, because of the risks to local communities and councils, and to developers, across the planned period.

From what I have heard from the Minister, the purpose of the infrastructure levy is to provide more certainty for developers and to take away the requirement to sign legal and Section 106 agreements. However, it does not—we heard in the earlier group that we are retaining Section 106 for some aspects and deliveries. At the heart of this issue is the challenge of how local infrastructure, as part of a new development, is funded, who funds it, and what qualifies as infrastructure. Planning authorities will have the unenviable task of determining the proportion of infrastructure levy to subsidise housing against mitigating the impact on the community for school places, GP surgeries, open spaces, biodiversity, green spaces, play areas, and so on, all of which will have to be funded through the infrastructure levy.

I have said already that one of the risks of the infrastructure levy is the uncertainty that will be created. As I understand it, and maybe the Minister can help explain it, when a local plan is being developed, the infrastructure delivery strategy will have to be determined at the same time. That leads me to some questions. Where does the infrastructure delivery strategy fit in relation to local plans that have been agreed and are being implemented? Does a new one have to be developed on the back of the long and painful process of developing a local plan? Do we have to have another infrastructure delivery strategy on top of that, bearing in mind that local plans are in existence for 10 years? How does that fit in, because when local plans are developed, they will have had in mind a previous regime for funding infrastructure?

I have another pertinent question. As rates are going to be set by local planning authorities and councils, they will inevitably reflect local economic circumstances. The example of the rates agreed for community infrastructure levy—albeit that excludes Section 106—is informative in this regard. In a Yorkshire metropolitan authority that I will not name, of the charges for CIL that were calculated, the charge per square metre for the highest of the three tiers was £80. I then looked at a district council in Hampshire, where financial circumstances are better, and the highest tier there was £235 per square metre. It concerns me greatly that there should be a huge differential between a relatively poor Yorkshire metropolitan council area and a relatively well-off area towards the south of the country.

The differential rate is so large that I do not see how councils in the north, or areas where it is more difficult to extract funding from developers because of land values, will be able to fund the levels of infrastructure that are required. The risk is that those areas have less funding from the levy to implement affordable housing and all the other public services that normally come out of development, whereas better off areas could provide better facilities. That is one huge risk, and a worry for me.

I have some questions on that for the Minister—I hope she will be able to answer them. I read through the technical paper on the infrastructure levy but I could not see anywhere where the department had done some calculations as to what the rates are anticipated to be in different parts of the country. I am sure the department will have done that, otherwise you would not make this transformational move. It would be good to hear from the Minister what those acceptable estimated rates are. Currently, as we know, about 66% of funding from CIL and Section 106 goes on affordable housing. Perhaps the Minister will be able to tell us what proportion of different rates across the country it is anticipated will be spent on so-called affordable housing.

I come to my third question. Developers are interested in maximising their profits—quite rightly, as they have commercial interests. They will find ways, as they do with Section 106 and CIL, to challenge the requirements through viability assessments. The best thing that could happen is that those assessments disappear. Perhaps the Minister can talk a bit about that. If all this is to be dependent on viability assessments, the prospect of raising more funds for subsidising housing and community benefits out of development schemes is more pie in the sky than reality.

The trouble with all this is that, as with many other parts of the Bill, there is insufficient information to make judgments about whether the efficacy of the new powers as against existing schemes—which are known, tried and tested—will work.

The big question for me is that the Government are hoping that the infrastructure levy will fund more so-called affordable housing, which, certainly in my authority, is now required to be in perpetuity: the 20% reduction in market value has to be passed on by a covenant on the house in perpetuity. You get a better bang for your buck from that, so I ask the Minister whether this, too, could be a requirement of any infrastructure levy subsidy of affordable housing. There are more questions than answers, and I look forward to what the Minister has to say.

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[Baroness Scott of Bybrook (Con)]

I take that point. We have talked about the different rates from different development typologies, and we expect local authorities to set different rates. As the noble Baroness said, they do that with COUNCIL for different development types. We have published research that shows the range of possible rates for different case study areas, and I have put the results of that research in a letter.

For all these reasons, the Government are introducing the new infrastructure levy through the Bill and it is the correct thing to do for the country. There are too many local communities that, with the CIL system and the Section 106 system, are not getting what they deserve from the developments in those areas. So a new system, however difficult it is or however long it takes to deliver, has to be the right way to go.

[Baroness Pinnock (LD)]

The Minister makes a very important point about the infrastructure levy, as opposed to Section 106 and CIL. Could she provide us with some evidence that the infrastructure levy will raise more money than the existing system?

[Baroness Scott of Bybrook (Con)]

I will look to the evidence but, as I have clearly stated many times, we are expecting the same if not more housing, particularly affordable housing, from this infrastructure levy. I just say to my noble friend Lord Lansley, as I have said before, that we are not getting rid of Section 106 agreements, but will use them only in very restricted circumstances. The main issue from this is that affordable housing comes out of the Section 106 system and into the infrastructure levy system. When the whole country moves to the infrastructure levy, it will make affordable housing a much more important issue when it comes to how we use developer contributions in the future.

I move on now to government Amendment 361A. This makes three consequential changes to other Acts of Parliament to ensure that the new infrastructure levy will be treated in the same way as CIL in relevant legal contexts. First, Section 101(6) of the Local Government Act 1972 requires that a local authority’s functions in relation to levying rates may be exercised only by that authority—in other words, those functions may not be delegated—but CIL is not a “rate” for this purpose. This means that a local authority may delegate its CIL functions.

Amendment 361A replicates this approach in respect of infrastructure levy functions. I emphasise, however, that the Bill contains important safeguards for democratic accountability. For example, new Section 204K(6) makes it clear that a local authority may approve its infrastructure levy charging schedule only at a meeting of the authority and by a majority of the members present.

Secondly, Section 70 of the Town and Country Planning Act 1990 provides that “local finance considerations” can be a material consideration when determining planning applications. Local finance considerations include CIL, which can therefore be a material consideration when a planning application is determined.

Government Amendment 361A treats the infrastructure levy in the same way, allowing infrastructure levy receipts—anticipated and received—to be taken into account when determining planning applications. This does not override the primary aims of the infrastructure levy to support the development of an area by providing infrastructure, including affordable housing, or its meeting of other purposes, as set out in regulations, in a way that does not make development of the area economically unviable.

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[Lord Lucas (Con)]

My Lords, I cede everything to my noble friend Lord Young when it comes to experience and wisdom in this matter, but I am very attracted by the idea of running the pilot proposed by the Bill. It has long seemed to me deeply inequitable that when it comes to property development, the landowner gets so much for the uplift and the community gets so little. We very much need to explore and try out ways of setting that right, and this seems an excellent thing to try. I share my noble friend’s reservations that aspects of it may turn out not to be right, but that should not prevent us having a go. My amendment just says that if it proves to be a success, and I shall keep my fingers firmly crossed that it is, it would seem foolish to let it die after 10 years without giving Parliament the opportunity to let it continue.

[Baroness Pinnock (LD)]

My Lords, I thank the noble Lord, Lord Young of Cookham, very much for the best explanation of community land auctions that I have heard. I have searched the internet to find a good explanation but have heard the best one this afternoon from him.

The issue is how we capture for local communities the uplift—a very large uplift in many cases—in land values once planning consent has been given to a site. This is one way in which it could work and it has some attraction to it. However, living as I do in West Yorkshire, where land values are not like those in Surrey, Hampshire or Berkshire, the inevitable consequence of community land auctions is exactly as the noble Lord, Lord Young, said: to the well off, more shall be given while to the least well off, little shall be given.

As far as I can tell, this will exacerbate regional inequalities. As the noble Lord, Lord Young, said, this is a levelling-up Bill. Living where I do, I was really looking forward to lots of proposals in it to reduce regional inequalities, but this is one example of where it will do the opposite. Somehow we have to find ways of extracting the very considerable uplift in land values once planning consent is given for housing.

Where I live, we still have many former industrial sites in need of costly remediation, and those land values will not be there for a community land auction. The provision will work only on greenfield sites, which is contrary to what we are trying to achieve. It will increase regional inequalities, which is contrary to the purpose of the Bill. If we can find a better way of extracting land value once planning consent or planning allocations have been given, that is where we should go. I am not convinced that this is the way, interesting though the proposal is. “Let us see the evidence” is what I would like to say. I know we are going to do a pilot, but somebody somewhere in the department has done some thinking and provided some evidence. Let us see it before we make a decision on this, because otherwise it is a dive into the unknown.

My last point is that there have not been good examples recently of local authorities getting involved in commercial practice—in fact, the contrary is the case. That is where this would take us: local authorities bidding for and buying land at a certain value and then hoping that, once they sell it on with planning consent, the extra can be extracted. That is putting a lot of faith in the commercial expertise within local authorities, which I am not sure they have. If I was putting a bet on developers and landowners against local authorities, I know which one would win.

[Earl Howe (Con)]

My Lords, in addition to the levy we have been debating, the Government are interested in testing other mechanisms that could improve land value capture.

Community land auctions are an innovative process of identifying land for allocation for development in a local planning authority’s area in a way that seeks to optimise land value capture. Their aim is to introduce transparency and certainty by allowing local planning authorities to know the exact price at which a landowner is willing to sell their land. The crux of our approach is to encourage landowners to compete against each other to secure allocation of their land for development in the local plan by granting a legally binding option over their land to the local planning authority.

The competitive nature of community land auction arrangements incentivises landowners to reveal the true price at which they would willingly part with their land. If the land is allocated in the local plan upon its adoption, the local planning authority can sell the CLA option, keeping the amount that the successful bidder has paid and capturing the value that has accrued to the land as a result of the allocation. The successful bidder must then pay the price set out by the original landowner in the option agreement to purchase the land. The detailed design of community land auction arrangements will be set out in regulations that will be subject to the affirmative procedure. In a moment, I will address my noble friend Lord Young’s clause stand part notice but, for now, I hope that that is useful background, by way of introduction.

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[Baroness Taylor of Stevenage (Lab)]

My Lords, although it is not a matter for the register of interests, I declare a particular interest in this group of amendments in that I grew up in an area developed and managed for many years by a development corporation. At their best, they provide focus, finance and pace for new development. If we are serious about tackling the severe housing crisis, which we have discussed so many times in your Lordships’ House, and ensuring that we create the conditions and environment for the new forms of employment we need—I am reminded of recent discussions in Question Time about the need to develop new battery capacity at speed—we should welcome the move to enable this way of tackling new developments at scale.

However, we must ensure that, as we do so, we learn the lessons of the past, including the not-so-distant past: with all the safeguards we need to ensure development at pace does not ride roughshod over proper and appropriate process and accountability. We also need to ensure that there is appropriate membership of, and links with, those who are democratically elected at local level, so that the public can be reassured they have a recourse via the democratic route.

May I ask the noble Earl the Minister a few questions before I begin consideration of our amendments about the way that development corporations are framed in the Bill? First, the Bill refers to one or more local authorities having what is called “oversight” of the development corporation. Of course, as advocates of localism we welcome this, but can the Minister be more specific about whether that means that the local authority will be the accountable body, which is a different term? This important distinction would help us to understand whether it is the Government’s intention that development corporations are autonomous in terms of finance or whether financial decision-making and probity will still require a council process. If it is the former, I am not convinced that there is sufficient detail in the Bill about how probity will be achieved. Bearing in mind the very considerable sums of public money that will potentially flow through development corporations, it is absolutely crucial that we are all clear on this issue.

Also in relation to finance, the Bill creates substantial new powers of borrowing for development corporations. Will they be subject to the same prudential borrowing regime as local authorities? If it were not so late, I could talk more about public accounts committees and local public accounts committees and how that might be a solution, but I will save that for another day.

Secondly, regarding how development corporations are to operate in terms of planning powers, will they be responsible only for the planning of new development within the designated area? To explain further: should the designated area contain existing development, does the council remain responsible for day-to-day matters of planning, such as infill development, extensions, tree preservation orders and so on, or is the whole gamut of planning within the application area the responsibility of the development corporation once the designation has been made? Can the Minister also clarify whether, in two-tier areas, the district council takes on the planning powers of both tiers—for example, the minerals, waste and flooding powers of the county as well as district planning powers? Would the county council keep the minerals and flooding powers without housing powers, or would all those powers transfer to the development corporation?

Lastly, in terms of membership and chairmanship of a development corporation, it is not clear to me whether this is left entirely to local discretion or whether it will require government departmental sign-off. Will it be a requirement that each local authority that comes within the designated area of the development corporation will be entitled to representation on that development corporation? Can the Minister give any further clarity on that? I am happy to have a response in writing at a later date.

Amendment 403 attempts to establish a principle that the development corporation should be accountable to local residents. When councils undertake development, whatever the scale, the public have all the protections that have been built into the planning system through the route of democratic accountability. Our amendment probes how that will be replicated in relation to development corporations. I note that the new Amendment 403A, in the names of the noble Baroness, Lady Pinnock, and the noble Lord, Lord Shipley, makes a similar point in relation to ensuring that the public get value for money.

In view of discussions in your Lordships’ House just yesterday relating to the very significant development taking place under the mayoral development corporation in Teesside, I think it is particularly important that the accountability route for the public in relation to both the development itself and the public funds invested is much clearer than it is at present. We strongly believe that development undertaken by a development corporation should have to be in accordance with local plans, subject to master planning, where it is implementing development at scale, and subject to the same reassurance of independent examination as is required of councils.

Our Amendment 404 would give the public the opportunity to make representation at an independent inquiry.

Our continuing concern about this Government’s failure to deliver any scale of housebuilding that would help to tackle our housing emergency has prompted our Amendment 406, which probes the Government’s intentions in relation to a programme for new towns. We have had many discussions in Committee about the role of members of local councils in the development of their areas. Too often in the past, these vital community bodies—parish, town and other community councils—are left out of the loop. Their role at the heart of their communities is key to ensuring that there is a voice for local people as developments move forward.

Our Amendments 407 and 408 will introduce a requirement for local councils to be represented on locally led urban development corporations. In my questions to the Minister, I outlined our concerns over how the finances of a development corporation are to be publicly accountable. Our Amendment 409 reflects that concern and asks that the Secretary of State is much clearer than the Bill currently is about how the finances of development corporations are to be transparent, how they will be monitored and how they are to be accountable to the public. I beg to move.

[Baroness Pinnock (LD)]

My Lords, this short group is actually very important. Clause 156 in Part 8 is an introduction by the Government of a new type of development corporation: locally led. Development corporations have been around in various guises for a long time—new towns, Canary Wharf and the Olympic Park are examples—with very variable degrees of success in achieving their stated aims. Development corporations are the vehicle for public-private partnerships, often to develop former industrial sites. In that sense, the principle is supported by these Benches. However, the noble Baroness, Lady Taylor of Stevenage, is quite right to challenge some aspects of the planned changes. We support her Amendments 404 and 405, which would ensure that the public have a right for their voice to be heard. This is, after all, the levelling-up Bill, where public engagement, involvement and participation are emphasised.

It is absolutely right—fundamental, in my view—that locally elected representatives are at the heart of development corporations, for the very reason that they are the route by which members of the public can take their concerns, raise complaints, get answers, challenge decisions that are being made and hold the board to account for the public money that is being spent. Unfortunately, that is not the case with some existing development corporations. Wherever public funding is involved, as it is in development corporations, there has to be public and transparent decision-making and then public accountability for those decisions. Hence Amendment 403A in my name and that of my noble friend Lord Shipley.

Unfortunately, one development corporation, the Teesside Development Corporation mentioned by the noble Baroness, Lady Taylor of Stevenage, is making headlines of the wrong sort, in both the Yorkshire Post and the Financial Times, for the apparent failure of transparency and accountability. Teesside is a mayoral development corporation—I asked this question yesterday in the Chamber, to which the noble Baroness, Lady Scott, responded—where it seems that the mayor has the sole right to appoint the board membership of the development corporation. I think that was the response I got, but maybe that is not the case, in which case I hope that is put right. This practice is totally contrary to good governance, where openness and inclusivity have to be the hallmark. The extension of development corporations to include locally led ones is an opportunity for the Government to review best practice in governance, transparency and accountability and make the appropriate changes so that all development corporations meet the highest standards of open and transparent governance.