Levelling-up and Regeneration Bill

Earl Howe Excerpts

Committee stage
Thursday 18th May 2023 Lords Chamber

[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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[The Earl of Caithness (Con)]

My Lords, maybe it is because it is Thursday afternoon, but I am slightly more confused now than before my noble friend gave his reply. He said that the land would be within the development plan, but he also said that it is an innovative way of identifying land for development. Those two statements do not seem to agree; there is a contradiction. I do not think that my noble friend answered my noble friend Lord Young’s point about the distortions that this can cause to a potential development plan.

It is perhaps true more in the south of England than in the north, where land values are cheaper, but if a landowner gets in cahoots with the local authority and says, “I will sell you my land at X”, knowing very well that his chances of getting planning permission are zero, would that not encourage the local authority to alter the development plan to benefit itself and the community rather than doing planning in the old-fashioned way, which was to develop with a holistic view of the area?

One thing I am not certain about is where local authorities will get the funds from to buy that land, particularly in the expensive south-east. I wonder whether my noble friend can help me on that.

[Earl Howe (Con)]

My Lords, the process will not be as my noble friend has described. The simplest way I can describe this is that community land auctions will be a process of price discovery. In the current system, local planning authorities have to make assumptions about the premium required by a reasonable landowner to release their land for development. For Section 106 agreements, this manifests itself through viability negotiations between the local planning authority and a developer. As these can be negotiated, there is a higher risk that, in effect, higher land prices lead to reduced developer contributions, rather than contributions being fully priced by developers into the amount that they pay for land.

For the community infrastructure levy and the proposed infrastructure levy, a levy rate is set for all development within certain parameters. When setting rates, the local planning authority has to calculate how much value uplift will occur on average, and has to make assumptions about landowner premiums and set a levy rate on that basis. The actual premium required by individual landowners will not be available to local planning authorities and will vary depending on individual circumstances. If the local planning authority makes an inaccurate assumption about landowner premiums, they may either make a lot of sites unviable by setting too high a levy rate, or else they will collect much less than they might have done otherwise by setting too low a levy rate.

Under the CLA process, landowners bid to have their land selected for allocation in an emerging local plan, as I have described, by stating the price at which they would willingly sell their land to the LPA for development. The offer from the landowner, once an option agreement is in place with the LPA, becomes legally binding. The LPA can either exercise it themselves, thereby purchasing the land, or auction it to developers. The competitive nature of CLAs incentivises landowners to reveal the true price at which they would willingly part with their land. If they choose to offer a higher price, they risk another piece of land being allocated for development, in which case they will not secure any value uplift at all.

I do not want to prolong the debate unnecessarily, so I will respond to my noble friend in writing on the other questions I have not covered.

[Lord Young of Cookham (Con)]

I am very grateful to my noble friend the Minister for the very patient way he dealt with the argument I put forward. I will take him up on two points. First, he said that the Government will consult local authorities about this. Surely, before introducing primary legislation on a major planning system, they should consult the local authorities first, rather than after the Bill has gone through. Secondly, and perhaps more importantly, I think he said that when the local authorities were drawing up the plan they could take into account the financial benefits. I think that is moving towards what he subsequently deplored: namely, the sale of planning permission.

[Earl Howe (Con)]

The extent to which those financial benefits can be taken into account will be set out, as I mentioned, in regulations. My noble friend makes a fair point, but parameters will be set around this. On the issue of prior consultation, which the noble Baroness, Lady Taylor, also raised, one can take two views: one is to go through the process that my noble friend advocated, and the other is to say that the integrity and workability of the scheme is such that we can afford to come to this House and the other place first before launching a pilot. Our view is that it will be perfectly satisfactory to take that course.

[Baroness Taylor of Stevenage (Lab)]

My Lords, this has been a very interesting discussion. This is probably one of the cases where there is less clarity at the end of the debate than there was at the beginning. I am very grateful to the noble Lord, Lord Young, for once again giving a very forensic and detailed analysis of the subject and for raising all the key issues that sit within it. As the noble Baroness, Lady Pinnock, said, it was a very clear description of community land auctions.

On the issue of consultation, I remind the Committee that the noble Lord, Lord Benyon, in answer to an Oral Question earlier today, said that we are in danger of doing too much consultation. In this case, it would have been helpful if councils had been consulted before this proposal was put forward in primary legislation, because some of the issues raised in the debate would have come up immediately—they are quite obvious to those of us engaged in local government.

I have great sympathy with what the noble Lord, Lord Young, said. There is a queue of things that many of us feel should be in this Bill, including renters reform, leasehold reform, repealing the Vagrancy Act and so on. They did not get across the line and put into this primary legislation; yet here we have a fairly unformed idea, which has not been tested, which is in the legislation. That process is a bit mysterious to some of us.

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[Lord Stunell (LD)]

My Lords, I support what the noble Baroness, Lady Taylor of Stevenage, said, as well as what my noble friend Lady Pinnock had to say about this.

I need to start by saying that I worked in the architects’ department of a new town for 13 years and lived in that new town during its raw development stage. Noble Lords will not be surprised to hear me say that I believe that the development corporation model has a proven track record, usually of building communities with all the essential infrastructure in a joined-up way. The Government are right to see the development corporation model as one means of accelerating necessary development, and I welcome the presence of these clauses in the Bill.

However, I will just briefly reflect on my experience. During the 1960s and 1970s, the new towns were very top-down in conception. The New Town Act made the development corporation I worked with simultaneously the client, the designer, the planning authority and the funding channel for the delivery of the projects I worked on, which was a very cosy situation for those of us working on the projects but not so good if you lived next door or sometimes literally underneath where we were developing. The later generation of urban development corporations mostly paid better lip service to local democratic institutions than that.

However, there are deficiencies, and my noble friend Lady Pinnock has put her finger on one of them. It is good that the relevant clauses inform a model whereby development corporations spring from local government initiatives and are not to be imposed by somebody with a map sitting in Whitehall. That brings me to my first question to the Minister. Clause 156(2) still reserves the power to declare urban development corporations independent of any local proposals—the Secretary of State can in fact sit behind a desk in Whitehall. Do the Government have in mind making any such designations, and if not, why do we have Clause 156(2) in the Bill?

My second question relates to the consultees listed in Clause 156(4), which inserts new provisions. Indeed, the noble Baroness, Lady Taylor of Stevenage, refers to that in her Amendment 407. A very good part of that clause says that local government is to be involved even if it is not the commissioning authority. There is then a less good list of what local government consists of. Very surprisingly, it does not include parish and town councils. They are not listed as statutory consultees, although district and county councils are. There is a parallel provision in the legislation for the urban development corporations to what we might call the green belt ones. In each case, parish councils are left out. In any normal use of language, they qualify as local government, do they not? They also qualify as legislative and statutory as well, so it is a great puzzle to me why they are not there. An important point is that they will probably be the best informed about their areas, and at a detailed level which certainly will be missed by county councils, for instance. I therefore want to hear from the Minister why parish councils are not statutory consultees.

The Minister may say that there is a catch-all here;

“any other person whom the proposing authority considers it appropriate to consult”

is among the consultees. However, that is an option for the consulting authority, not a statutory consultation partner. If you want to rely on that catch-all, why not rely on it for county councils? If it is blindingly obvious that you would always consult a parish council, and therefore you do not need to say it, it must surely be blindingly obvious that you need to consult the county council, so you do not need to say that. If you are mentioning one, why not the other?

Secondly, what led to the omission of town and parish councils? If it was an oversight, will the Minister please correct it on Report or at least tell us that the inevitable statutory instrument will make it unambiguously clear that any town or parish council in or in the vicinity of a proposal should be consulted as a matter of course? I would be very happy to receive an answer by letter, if that makes it easier.

[Earl Howe (Con)]

My Lords, as the noble Baroness, Lady Taylor, has explained, this group of amendments concerns development corporations. I am grateful for the broadly supportive comments from noble Lords for these provisions.

Amendment 403 probes the issue of local accountability, which was a theme picked up strongly by the noble Baroness, Lady Pinnock, whose amendment I will come to in a moment. One of the key priorities of the Government’s levelling-up agenda is to empower local leaders and communities. Introducing a new, locally led urban development corporation model will support local aspirations for regeneration without the need to establish a body accountable to central government, but which is instead accountable to local authorities. For it is local authorities—local councillors, elected by their local community—who will be the originators of the proposal and oversee the locally led development corporation, ensuring clear democratic accountability.

We completely recognise the importance of community involvement and participation in the creation of locally led development corporations. That is why we have included statutory public consultation arrangements for locally led urban and new town development corporations in the Bill, which proposing authorities must implement before submitting their proposal to the Secretary of State.

We intend also to use regulations to set out further details on the composition of board membership and aims of the oversight authority for locally led urban development corporations, as we did in relation to locally led new town development corporations in 2018. In appointing independent members, we expect the oversight authority to ensure that the board has the relevant skills and experience needed and includes those with an understanding of the local area.

I turn to Amendments 404 and 405. We recognise the importance of ensuring that appropriate scrutiny has taken place, including from the local community, where a proposal is being developed to designate the development area of a new settlement or urban development area and establishing a locally led development corporation. As I have mentioned before, we have included provisions for statutory public consultation where people can have their say on the proposals at the formative stage before it is submitted to the Secretary of State. When the proposal is received by the Secretary of State, they will look very carefully at the robustness of the plans, including at community involvement and views expressed, before making a decision on whether the proposal is expedient in the local interest and making an order to designate the development corporation’s development area.

The noble Baroness, Lady Taylor, asked whether all planning would become the responsibility of the locally led UDC and whether all powers would transfer from the local authority to the locally led urban development corporation. The answer is no—or rather, not necessarily. It is for local authorities to propose and for the Secretary of State to decide, under his discretion, whether and to what extent functions should transfer.

The noble Baroness and the noble Baroness, Lady Pinnock, also asked about the conformity of locally led UDC development with local plans. A development corporation that takes on plan-making or development management functions will be subject to the same rules as a local planning authority. I would be happy to fill out that answer in writing, if I may.

Amendments 404 and 405 are therefore an unnecessary addition to these consultation requirements. They would slow down the designation of development corporation areas. The purpose of designating the area is to determine the area in which the locally led development corporation will operate and deliver a programme of urban regeneration or a new town. There will be further opportunities for the local community to have its say on the planning proposals for the area as proposals for development come forward through the planning system.