Levelling-up and Regeneration Bill

Lord Lansley Excerpts

Report stage
Tuesday 18th July 2023 Lords Chamber

[Lord Best (CB)]

My Lords, I will speak to Amendment 71 in my name and those of the noble Lord, Lord Young of Cookham, and the noble Baronesses, Lady Thornhill and Lady Warwick of Undercliffe. I declare my interests as a vice-president of the Local Government Association and chair of the Devon Housing Commission, as well as my various housing interests as set out in the register.

Following the speeches of the noble Baroness, Lady Pinnock, and the noble Lord, Lord Stunell, your Lordships will note that some doubt hangs over the future of the infrastructure levy. We have heard that representations have been made to the Secretary of State from some 30 significant organisations, which all feel that it would be better to stay with the current Section 106 regime. Those bodies argue that it would be better to stay with the devil we know, even though the system is not perfect—after all, the current system has been achieving half the affordable housing built each year, and no one wants to reduce the numbers. However, our Amendment 71 supposes that the infrastructure levy persists, and it seeks to ensure that the new arrangements do not lead to fewer genuinely affordable homes. Before saying more about Amendment 71, I offer support to Amendment 77 in the name of the noble Lord, Lord Lansley, and Amendments 70 and 94 in the name of the noble Lord, Lord Stunell.

I am grateful to the coalition of housing bodies that constitutes Homes for the North for their expert help in drafting Amendment 71. In Committee, we considered a range of amendments which all had the objective, in effect, of holding the Government to account for their own promise that the new infrastructure levy arrangements will lead to

“as much—if not more”

affordable social housing.

In Committee, the Government responded to our proposed amendments with various counter-arguments, the first of which was that this issue would be better dealt with in the regulations that will follow enactment and appear in the revised version of the National Planning Policy Framework. However, the affordable housing element is a fundamental part of the planning system. Currently, 78.5% of the funding via Section 106 obligations on housebuilders goes to affordable housing. This current priority needs legislative protection in the face of endless competing claims for the new levy proceeds.

Secondly, it can be argued that local authorities should be entirely free to decide for themselves how to spend infrastructure levy proceeds, with no obligation to give priority to affordable housing. However, the infrastructure levy represents a significant new tax-raising power for local authorities, and it would surely be expected that the Government would impose some limitations on its use.

Thirdly, the Minister told us that the relevant clause in the Bill already protects affordable housing provision. We responded that the relevant clause simply required local authorities to

“have regard … to the desirability of ensuring that”

the provision of affordable housing

“is equal to or exceeds”

the output achieved under the Section 106 system. This is a very weak provision, enabling funding for affordable housing to be used instead for any number of other spending opportunities.

Amendment 71 addresses these points and substantially strengthens the wording of the Bill, covering both the way the levy is set and how the money is subsequently spent. It removes the lightweight

“have regard to the desirability of”,

leaving “must ensure”, thereby prioritising affordable housing as identified in the local development plan and the infrastructure delivery strategy.

The Minister has followed through from Committee stage in an exemplary manner. She has reconsidered the position, held meetings with interested Peers and brought forward amendments that address the same issue as our Amendment 71. Her Amendments 72, 73, 74 and 75 alter the offending words in the original version, leaving out

“to the desirability of ensuring”

and inserting the much more direct “seek to ensure”. I am grateful indeed to the Minister for bringing forward these changes in wording, which tighten up the requirements on local authorities to do the right thing in respect of social housing provision.

However—is there not always a “however”?—the new Amendment 76 provides the local authority charging the infrastructure levy with a “get out of jail free” card. It allows the charging authority to drop the obligations on developers where compliance with its requirements for affordable housing would make the development in this area “economically unviable”. It lets developers off the hook where, not for the first time, they plead the case that they cannot achieve the affordable housing identified in the local plan. It is these arguments about viability that have made Section 106 so fraught, usually with local planning authorities losing the argument against the developers and their consultants and solicitors.

This extra clause, which promotes viability on the face of the Bill, undermines the good work being done by the four preceding amendments from the Minister. I may be interpreting this unkindly, but the amendment seems to provide the opportunity for the powerful volume housebuilders to claim—probably because they have paid too much for the land—that providing affordable housing will reduce their profits excessively.

We now have the report of the Levelling Up, Housing and Communities Select Committee of the House of Commons, which looks at planning policy and comments on the Levelling-up and Regeneration Bill. The Select Committee welcomes these government amendments, which would strengthen the duty on local authorities to deliver at least as many affordable homes; but the committee warns that the additional proviso that this duty would be redundant if it could make the development “unviable” puts fulfilment of the Government’s ambition at risk.

The Commons committee concludes that the new infrastructure levy

“may not deliver as many affordable homes as the current regime”.

That outcome would be a disaster. We desperately need more, not fewer, affordable homes. This leaves me welcoming the government amendments, which attempt to do the same job as our Amendment 71, which need not now be pressed. But I will oppose the new government Amendment 76 unless it can be justified by the Minister when she responds.

This country desperately needs more housing for those on lower incomes. We must do everything we can to ensure that the new infrastructure levy regime does not diminish supply from the all-important obligations on housebuilders. There is a clear and present danger here, and I look forward to the Minister’s comments.

[Lord Lansley (Con)]

My Lords, I am glad to follow the noble Lord, Lord Best, who has rightly commended my noble friend the Minister for the careful way she has responded to some of the points made in Committee on the infrastructure levy, and indeed on some of the further discussions we have had and the responses to the technical consultation on the infrastructure levy. That is rather important to take into account.

I confess that, listening to the noble Baroness, Lady Pinnock, I felt that she was making a speech that would have been relevant at the time the technical consultation was published but not at the point at which the Government had clearly responded to that consultation, brought forward amendments and written to us, as the Minister did on 4 July, about those amendments and other factors.

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Amendment 70A, proposed by the noble Baroness, Lady Taylor of Stevenage, seeks to make application of the levy optional. However, this would further fragment the system of developer contributions in England rather than help to streamline it. I should also add that the Government will have the ability to disapply the levy for a particular area or charging authority, as already stated. Moreover, the aim of a test and learn approach is that the system can be adapted to reflect early learning. It would not be appropriate to commit to a course of action, as the noble Baroness proposes in Amendment 81, without first assessing the evidence. Therefore, I hope that she will not move these amendments.

[Lord Lansley (Con)]

I apologise for interrupting my noble friend but, among the powers that have been taken, is she anticipating that the design choices yet to be made will include whether local authorities may set their charging schedule by reference to gross development value or, in certain circumstances, may choose to use floorspace charging, as they do under CIL at present?

[Baroness Scott of Bybrook (Con)]

My noble friend is absolutely right: these will come out as we go through the consultation and further design stages.

Government Amendment 93 is consequential on legislation which is already on the statute book; namely, the Judicial Review and Courts Act 2022. It brings the enforcement provisions relating to the community infrastructure levy in line with the enforcement provisions relating to the new levy, which in turn reflect the provisions in the 2022 Act, creating a consistent, coherent cross-government policy on sentencing law.

We believe that we have a strong case for proceeding with the new infrastructure levy and have built in safeguards to ensure that development can progress with vital mitigations in place. We recognise that introducing the infrastructure levy is a significant change to the existing system. That is why we propose to introduce the levy via a test and learn approach. If the levy is found to have negative impacts in the context of one particular local authority, the Secretary of State will have the flexibility to disapply the levy in that authority for a specified time period.

In any system of developer contributions there are trade-offs between seeking simplicity and at the same time enabling individual site circumstances to be catered for. These are tricky balances to strike, and if our initial policy design leans too far in one direction or another, it may impact on the pace at which development can come forward. It is likely that revisions will be required of the initial levy regulations, as occurred with the community infrastructure levy, as the system beds in. While we do not expect these to be substantial, it will give local authorities confidence that the system will be flexible and able to be adjusted to experience on the ground. We do not expect the power to disapply the levy to be used often—if at all. However, it is a sensible, inbuilt precautionary power to cater for all circumstances.

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As we heard in an earlier debate, this is a levelling-up Bill but the most valuable sites are in the better resourced local authorities. Unless receipts from the options are shared, or there is some clawback, which is not proposed, the policy, if it works, will not level up. So this is not just an auction; this is a gamble. We want to make progress with the Bill, so unless I am provoked by an insensitive reply from my noble friend the Minister—which of itself would be a first—I do not propose to test the opinion of the House on this. However, I did not want to let the debate on the clause pass without putting on the record the very real reservations that have been expressed by those who will have to operate it.

[Lord Lansley (Con)]

My Lords, I want to speak to Amendments 96 and 98, to which my noble friend Lord Young has just spoken so eloquently and compellingly. I share with him a sense of gratitude to our noble friends for the time they have given and for the way in which they have addressed a range of concerns. However, I have to confess that not least my noble friend’s detailed examination of community land auctions in theory caused me to inquire of several people how it might work in practice, although we have not seen that in reality. Those are a few hours of my life I shall never see again, but the conclusion I reached at the end of that was that it will not happen. That is probably the main reason why my noble friend may choose not to press this amendment to a Division to remove this provision from the Bill: it will sit in the Bill, it will become part of the Act and it will never see the light of day beyond that point.

Why? First, because as we have just debated, Part 4 provides for what is, in effect, a mandatory system for all local authorities for deriving developer contributions. Unless that is an utter failure, I cannot see why local authorities would want to go down the path of community land auctions, as opposed to having a much fairer and more equitable system of levy. Secondly, let us look at how it actually works. My noble friend is saying that the regulations will tell us in due course under what circumstances a local authority can enter a scheme. Clause 133(2) says:

“The local plan may only allocate land in the authority’s area for development … if the land is subject to a CLA option or a CLA option has already been exercised in relation to it”.


So, in preparing a local plan—this is before the planning process is completed, so following a call for sites—the local planning authority must seek options from all the sites put forward before they are chosen to be allocated or not to be allocated.

Let us have a look at that. I declare my interest again as chair of Cambridgeshire Development Forum. In 2019, in preparation for a local plan, the Greater Cambridge Shared Planning service issued a call for sites. It received 675 applications. In 2020, it allocated 19 sites. We therefore have, I think, in this joint plan area, 656 sites that have to go through the process of agreeing a community land auction option and disclosing the price—actually, as the lawyers rightly tell me, not only disclosing the price, which many landowners and developers will resist, but agreeing a legally watertight potential option before the point at which the allocation is made. These options will cease to have effect only when the plan is adopted or approved. In this instance, that is expected to be in the middle of 2025, just ahead of the Bill’s cut-off date. That means that, under these circumstances, the community land auction options would subsist for nearly six years, during which 656 sites will be held in abeyance and nothing can effectively be done with them. The price on those 656 sites, at which they are willing to sell, would have been disclosed, while the actual value will continue to change.

I do not see any evidence that local planning authorities have any desire to go down this path and engage in this process. Of course, it is optional, as my noble friend will no doubt remind us—local planning authorities do not have to do it. The conclusion I have reached is that they will not do it. Therefore, in reality, my noble friend did the Government a service by suggesting that it be taken out and the Bill be lightened. As it happens, I suspect Ministers will not do that, but I think they must be realistic and understand that this is proceeding with very little chance of success.

[Baroness Pinnock (LD)]

My Lords, I thank the noble Lords, Lord Young and Lord Lansley, for throwing some much-needed light on the practicalities of community land auctions. During the debate in Committee, a number of us expressed scepticism about the value of having this in the Bill and how it will work. Nevertheless, it is a pilot scheme; there are plenty of reservations in the Bill itself that may make it more difficult for the blue-sky thinking of the think tanks, this having been brought forward at a late stage of the Bill.

There are some voices in the housing sector that support the proposal of community land auctions. Their argument is that this is the best way of extracting a fair portion of the enhanced land value that allocation for development ensures. That is what they say. Others argue, as did the noble Lords, that it will have the perverse effect of buying planning permissions—I think that was the phrase the noble Lord, Lord Young, used in Committee. For me, time will tell. The noble Lords have said they will not push this amendment, so time will tell whether the scheme is attractive to councils and whether it will then deliver what its proponents claim.

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[Earl Howe (Con)]

My Lords, I first thank noble Lords who have spoken on this group of amendments, which understandably have given rise to a number of questions. I shall do my best to address the various doubts and reservations that have been expressed, particularly those of my noble friends Lord Lansley and Lord Young of Cookham. As a general comment, however, I accept and acknowledge that there is uncertainty about the impact of the land auctions approach. That is why we are proposing a cautious power to explore the approach through time-limited pilots, with only a small number of local planning authorities that volunteer to do so participating. Only local planning authorities that volunteer to participate in the pilot will do so; if no local planning authorities volunteer, then the pilot will not happen.

As regards my noble friend’s lament that consultation has not yet taken place, he might have a point if we were proposing something compulsory for local authorities. We are not; we are proposing pilots that will be completely voluntary. That point is relevant also to my noble friend’s doubts about the capacity of local planning authorities to operate and handle a CLA. Local authorities that do not feel they are resourced to run a CLA will not have to do so.

I hope that we are united across the House in believing that it is important that the land value uplift associated with the allocation of land can be captured and put to good use for the benefit of communities. Notwithstanding the expressions of doom and scepticism from my noble friends, I am firmly of the view that community land auctions are a promising approach to doing just that. CLAs are designed as a process of price discovery that will incentivise landowners not to overprice the land that they are willing to sell.

This incentive should, we believe, have the effect of bearing down on land prices, which, in turn, should create greater scope for developer contributions and hence better value for local communities. The additional benefit to a local planning authority is certainty about the amount of land value uplift, rather than their having to make assumptions about values as they typically do at present. Certainty offered by CLA arrangements should make it easier for a local planning authority to set developer contributions, and easier for them to control housing supply. Therefore, removing these clauses from the Bill would mean losing out on an opportunity to test CLA arrangements as a potential new solution to the shortcomings of the current system.

The key questions posed by my noble friend Lord Young can, I think, be summarised as: what is to prevent a local planning authority giving undue preferential treatment to land in which they have a financial interest, either when drafting their local plan or when granting planning consents, and what transparency will there be around the process? I shall try to reassure my noble friend on those two issues.

First, I wholeheartedly agree that we cannot shift into a system in which planning permissions can, in effect, be bought and sold. That is why we are seeking to fully integrate community land auctions into the local plan-making process. There will be transparency, as the local plan will be prepared in consultation with the local community, with the proposed land allocations in the draft plan consulted on and independently examined in public, in accordance with the proposed new plan-making process.

As I have said previously, local planning authorities will need to consider many factors in addition to financial benefits when deciding to allocate land in their local plan. How, and the extent to which, financial considerations may be taken into account will be set out in CLA regulations. Moreover, once the local plan is adopted and sites are allocated, planning permission must still be sought in the usual way.

In the current system, local planning authorities already consider whether a site can viably achieve compliance with emerging policies when allocating land. Therefore, it is not unusual for local planning authorities to have to assess planning applications on land that they have allocated and from which they expect to secure value in the form of developer contributions to mitigate the impacts of new development. It is also not unusual for local planning authorities to consider planning applications on land in which they have an interest or have previously held an interest. Therefore, while it is true to say that community land auctions are a novel and innovative approach, parallels exist within the current system.

We recognise there should be limits on how local planning authorities can use the receipts from community land auctions. We have set out controls on spending that broadly mirror those for the infrastructure levy, and we will set out more detail on what CLA receipts can be spent on in regulations.

We also recognise the importance of both public scrutiny and evaluation to ensure that we fully understand the impacts of the approach. For this reason, the powers are time-limited, expiring 10 years after the regulations are first made.

In summary, I hope that I have provided reassurance—

[Lord Lansley (Con)]

I am sorry to interrupt my noble friend. He quite properly declared his interest as a landowner, but I ask him to think about this from the landowner’s point of view. In my experience around Cambridge, many of the most important sites are in the ownership of colleges and large family holdings. These would not make them available to be allocated in the local plan if, as a consequence, they would be subject to a CLA option and would lose control of the development, which is necessarily the result of the auction process. They would simply hold off. We will get less development as a result.

[Earl Howe (Con)]

I entirely take that point, which is why I spoke of a small number of local authorities that we expect to take up the option of a CLA. I am absolutely seized of the point that my noble friend has made. This will not be suitable in a number of areas around the country; he has given a good example from his own area.

Having said that, I hope I have assured noble Lords that existing legislation, and supporting policy and guidance, will mean that there are numerous safeguards to help ensure that community land auctions do not compromise the integrity of the planning system. It means that, while financial benefits can be taken into account in a CLA arrangement, there remains in place a host of measures to ensure well-planned development occurs.

As I said earlier, if we were to accept the amendments tabled by my noble friends Lord Young and Lord Lansley, we would lose the ability to test the merits of piloting community land auctions, which I believe would be a great pity, although I come back to what the noble Baroness, Lady Pinnock, rightly said: time will tell. For those reasons, I hope my noble friends will not feel the need to move their Amendments 96 and 98 when they are reached.