Lord Best
Main Page: Lord Best (Crossbench - Life peer)Growth and Infrastructure Bill
Lord Best Excerpts“( ) This period should be consistent with that prescribed to authorities under subsection (9) of section 106BA of the Town and Country Planning Act 1990.”
Lord Best
My Lords, I shall speak also to Amendments 55E, 55EA and 55F. Amendment 55D, standing in my name and that of the noble Lord, Lord Shipley, would require the Secretary of State—that is, the Planning Inspectorate—to adhere to the same timetable as that imposed on local authorities when the inspectors consider appeals under Clause 6. This means responding within 28 days or within a period specified by the Secretary of State. Given that much of the Bill is about speeding up the planning process, I guess that the amendment will find favour with the Government.
Amendment 55E in my name and those of the noble Lords, Lord Shipley and Lord Tope, would ensure that the Planning Inspectorate gives material weight to the original decision made by the local authority and looks at all the evidence on which it was based. There will be local considerations and local issues with which the inspectorate may not be familiar; this amendment will ensure that these are taken on board. Going through the evidence collected by the local authority also prevents duplication of effort by the inspectorate.
Amendment 55EA would guard against the developer obtaining an unjustified windfall gain where estimates of future sale prices, on which the inspectorate has judged the viability of the scheme and decided to sanction a reduction in the affordable housing requirement, prove too pessimistic. The amendment would mean a clawback, or so-called overage payment, to the local authority of a portion of the sales proceeds above the predicted levels. It seems only fair that if developers are to benefit from Clause 6 where prices have fallen, that they share their extra profits if, in fact, prices are better than feared. We have already aired Amendment 55F very fully in combination with Amendment 55ZA, and it goes to the heart of the matter. It would ensure that society gets at least something—a swift start on site—in return for the loss of precious affordable housing. I beg to move.
Lord Cameron of Dillington
My Lords, I will speak to two of these amendments. First, I cannot support Amendment 55EA. It has a mild whiff of retrospective taxation which I do not approve of. More importantly, it fails to understand the motivation of an entrepreneur, and his or her assessment of risk. If a particular project is marginal, then the developer does their own assessment of the upside and downside risk. They will proceed only if they personally believe that the upside returns are sufficient to justify the downside risks. If the upside is threatened, as seems to be the case in this amendment, and only the downside risk remains, I do not believe that they will proceed. In that case, one nullifies the whole purpose of this clause.
Furthermore, it occurs to me that if the local authority wants to share in the upside benefits, it should equally share in the downside risks. I cannot believe that the local authority would be happy to pay the developer if the housing price should drop below the estimated figure. In other words, it seems only fair that if it is going to share in the upside, it might also share in the risk. This applies if it wishes to see the development take place as soon as possible; of course, I would personally prefer that it did neither.
Lord Best
My Lords, I am grateful for the support of the noble Lord, Lord Cameron, for the absolutely crucial Amendment 55F, and indeed for the support of the noble Lord, Lord McKenzie, for all these amendments. It might be worth spending a minute or so on Amendment 55EA which talks about the prediction by the inspector that prices are going to be lower than expected when properties come to be sold being proved wrong, and whether the local authority would benefit from that. Let me run through this briefly. I hope that the noble Lord, Lord Cameron, will be clearer about the position and see that this is not such a foolish suggestion.
The developers say to the inspectorate that when they agreed to the Section 106 agreement, they expected prices to be X thousands of pounds at the time of sale. They now tell the inspector that a lower figure is expected from the sales. The inspector agrees and says, “Okay, we will let you off and allow you to break the contract you have already signed with the local authority. You will be let off the obligation to provide as much affordable housing”. But what happens later is that prices rise and it turns out not to be such a bad deal after all. If, instead of saying, “Good luck to the developers. They paid over the odds for the site. It was foolish at the time, but everything has come right. They have not had to build any affordable housing, they have made their profits, and that is the end of the story”, one says, “If the prediction is wrong and prices rise so that the developers make a handsome profit, over a certain pre-agreed level, there should be a share back to the community in lieu of the affordable housing that has been sacrificed”.
The Minister makes the very fair point that dealing with this in cash may be unwise and it may be that one should return to the agreement for more affordable housing. One should get back some of the affordable housing. I would certainly favour that over the hard cash and that would fit in with other requirements here. That would be a good way of doing it. It would give an opportunity for that deal to be negotiated at the time that the inspector provides their judgment, saying, “Less affordable housing, but, if I am wrong in my predictions and prices rise, then we will have some more affordable housing later”. It must not be any better than the original deal, however. That would be a fair way of handling the unforeseeable circumstances of when properties are actually sold in the future as opposed to guessing.
Lord Jenkin of Roding
My Lords, I strongly urge the amendment on my noble friend the Minister. My noble friend Lord Tope said that a great many organisations were in favour of the change. I have to say that none is more in favour than London Councils—I should perhaps have again declared my interest as a joint president. It has said firmly that, of all the measures, this could be one which really helps the housing situation in London—which, as noble Lords know well, is pretty desperate at the moment.
The cap exists on top of the normal constraints on local government borrowing. It is an additional barrier to development which seems absurd in the present circumstances, given that everybody is quite rightly saying to the Government that growth and getting things moving should be absolutely top of the agenda. It seems absurd that there should be duplication of the protection against irresponsible borrowing by local authorities. It seems not to have any sensible purpose now. The usual controls operate perfectly satisfactorily. I simply do not understand the case for retaining the cap.
I have perhaps not had my ear quite as close to the ground as my noble friend Lord Tope, but I cannot believe that the Chancellor and his colleagues in the Treasury have not been made aware of this and do not recognise that, if they really want to move housing forward in London and the rest of the country, the cap should be removed. I hope that my noble friend will be able to respond positively.
Lord Best
My Lords, I support the noble Lords, Lord Tope and Lord Jenkin, and pledge the Local Government Association’s support. Is its support stronger than that of London Councils? It is equal to that from London Councils.
I talked at Second Reading about the growing national housing deficit. I was trying to get into common parlance the idea that, every year, we are building up a bigger and bigger deficit. We are adding another 100,000 homes a year to the deficit that we already have because we are building at least 100,000 less than we should. We must do something dramatic to try to turn the deficit into a positive.
Local authorities are sitting on assets against which they could borrow. A lot of housing associations have run out of space to borrow any more, and they have used up the opportunity to borrow against the properties that they own. Many local authorities have plenty of headroom to borrow more against that security. This is prudential borrowing that will be repaid out of rents. It is not frightening to overseas investors and bankers to see another £7.4 billion, which is the amount estimated by the report Let’s Get Building, produced by John Perry from the Chartered Institute of Housing. Over a period of five years, £7.4 billion is not enough to frighten the horses but it would produce 12,000 homes a year—60,000 homes in all. That is about 5% of what we need each year, but it is about 10% more than we currently provide. That is one relatively dramatic way in which, without any subsidy, we could get at least a few thousand more homes built every year.
I chaired a commission for the LGA and the Department for Communities and Local Government called Easing Housing Shortages: The Role of Local Authorities, which sent me around to see what local authorities had been doing. Were they up to it? Did they have any sites on which they could develop? They were using what was called local authority new-build funding, and I saw how councils can demolish those garages on the end of the site and put in 14 bungalows, perhaps, for elderly people, who can then move out of underoccupied council housing into those bungalows, thereby releasing 14 family houses on the council estate. It is creative action; the land is already there; the garages do not get used any more; it is a place where people congregate for nefarious purposes—everyone is delighted to see the development. Local authorities could get on with schemes of this kind up and down the land. I support this amendment.
Lord McKenzie of Luton
My Lords, this proposed new clause is the same as that which my colleagues moved in Committee in another place by way of a probing amendment. It has been very powerfully moved by the now traditional triumvirate of the noble Lords, Lord Tope, Lord Jenkin and Lord Best—a powerful group indeed. In the Commons, I am bound to say, it did not elicit much information, and drew a rather aggressive diatribe from the Minister—something to do with Labour and borrowing. Thank goodness we have a Minister at this end with whom we can have a measured and sensible discussion. We have an innate sympathy with this amendment, and would like to use the opportunity to press the Minister on some particular issues.
First, perhaps we can ask something that has been touched upon by the noble Lords, Lord Tope and Lord Jenkin; and if reported hints from senior Treasury officials at the time of the Autumn Statement that the Government were considering at least relaxing the cap are true and under active consideration, it may save us some time. I hope that they are, but perhaps the Minister can tell us whether they are.
I will also make it very clear that we accept that in the interests of macroeconomic management the Government are entitled to have powers to limit the amount of money borrowed by local authorities. In fact, the Labour Government legislated to that effect in 2003, and that power extends to setting limits on individual councils, and different limits for different kinds of borrowing.
When we were debating these provisions in what is now the Localism Act, I tried to get an answer as to why Section 171 was needed as well as Section 4 of the 2003 Act. I do not believe we ever got a satisfactory reply, so perhaps I can use the opportunity to ask again, in the hope that the Minister can now clarify the position. That is my second question.
We have had the benefit of several briefings on this matter from the LGA, the National Federation of ALMOs, CIH and others, and in particular, as has been referred to, we have had the Let’s Get Building report, which was commissioned by the National Federation of ALMOs. The case for more housing is overwhelming, and the need for more affordable housing is desperate. We can debate until the cows come home which Government have delivered what, but it is surely common ground that we need to build more, and that this is becoming increasingly urgent.
Therefore, this is not just about providing decent homes for people. The boost to the economy is surely well understood, as is the strong multiplier effect on GDP of construction and the boost to employment. Given the grim GDP figures delivered last Friday, this could not be more urgent. The need to boost construction and build more social housing is clear. The Let’s Get Building report also lays out why councils, together with ALMOs, are particularly well placed to play a role, especially in using their land assets, and to link it in with their apprenticeship and work experience scheme. Do the Government accept that analysis from the report? It would seem that at least part of the coalition does.
As the report points out, the revenue costs and savings of an expanded council new-build programme are complex and depend on such factors as whether a grant from the HCA would be needed, the extent to which council tenants would require housing benefit—or universal credit in future—and the prior housing status of new tenants. To the extent that additional council housing reduces demand for supporting people in the private rented sector or temporary accommodation, there is a potential saving for the Government. Additional build also provides an opportunity to get a better balance in the local stock offering. As the noble Lord, Lord Best, said, it is a reasonable way of dealing with underoccupation.
Of course, the crunch issue is borrowing. It is accepted that, under current rules, additional borrowing by councils will form part of public sector debt, notwithstanding that it will be effectively financed out of rental income. There may be arguments about recasting the treatment of that debt, but they are probably not for us today. As we have heard, the Let’s Get Building report proposes that additional borrowing of some £7 billion over five years would facilitate the provision of 60,000 additional homes, although the amendment does not call for this. It calls for the housing cap to be removed. Even if the Government were not minded to support the amendment, would they at least be minded to raise the level of the cap? Have they given recent consideration to this? The Minister will doubtless tell us that there is existing headroom of some £2.8 billion, but this is not evenly distributed.
It is worth putting these borrowing numbers into context. According to the December OBR report, the forecast for debt at the end of this March is £1.2 trillion. Moreover, the forecast increased by £27 billion between March and December last year. Given the upside that it could bring to GDP growth, £7 billion over five years would not seem of itself to be critical to our chances of hanging on to our AAA rating—whatever they may be—or to the Government’s chances of meeting their fiscal rules. That £7 billion over five years is within the margin of standard statistical error for public borrowing figures. As for removing the cap entirely, the evidence from CIPFA is that the introduction of prudential borrowing for councils in 2004 has been a complete success and that borrowing levels have remained modest and prudent. Total local government borrowing is in the order of some £81 billion.
The reform of council house finance from April 2012 has boosted councils’ ability to manage their housing finance more positively. They all have 30-year business plans, while average council housing debt is reported as being just over £17,000 per property. I ask the Minister: why not trust local councils on the basis of their track record to date? These are some serious questions for the Government to answer.