Levelling-up and Regeneration Bill (Twenty Fifth sitting)

Matthew Pennycook Excerpts

Committee stage
Tuesday 18th October 2022 Public Bill Committees

[Greg Smith]

New clause 16 is relatively straightforward. It addresses an issue that arose from talking to Conservative and other councillors up and down the country in areas where rogue development—build now and seek to apologise or get retrospective planning permission later—has caused significant issues. The new clause would give the planning authorities the ability to take into account an applicant’s character, such as whether they have previous form on rogue or illegal development, when considering any fresh applications. It is relatively straightforward and aims to give our planning authorities more ability to protect their communities from rogue development.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve with you in the Chair, Sir Mark. New clause 37 in my name and that of my hon. Friends, is, like new clause 16, a simple amendment. I will not devote too much time to making the case for it.

We all agree that it is essential that the integrity of the planning system is upheld, not only to ensure that unauthorised development cannot blight local communities, but to maintain public trust and confidence in the planning decision-making process. When considering chapter 5 of the Bill, we had a number of debates about how planning enforcement might be improved as well as better resourced. A number of members of the Committee, including my hon. Friend the Member for South Shields, have spoken at length about the impact that rogue developers can have on communities across the country.

New clause 37 seeks to probe the Government on a specific issue of concern. As the hon. Member for Buckingham has just made clear, at present it appears that it is entirely permissible for an individual developer to consistently breach planning control, with the only risk being that they face enforcement action in respect of that specific breach. We believe that it is right that enforcement of planning law and regulation is based on the principle of proportionality and that when it comes to cases of alleged unauthorised development, local authorities have discretion to determine how the breach can be remedied. However, we also believe there is a strong case for changing the law so that certain categories of proscribed persons, in particular those who breach planning control and make no efforts to rectify those breaches, can be prohibited from carrying out development of any kind.

New clause 37 would allow that sanction to be applied to those who persistently offend when it comes to contraventions of planning law and regulation. Its objective is the same as new clause 16, on a character test and the prior record of an applicant. Adopting new clause 37, or a version of it, would reduce the burden on local authorities that are attempting to deal with the minority of rogue developers of this kind, and would also strengthen the integrity of the system overall. I hope the Government will give it serious consideration.

[Lee Rowley]

I thank my hon. Friend the Member for Buckingham and the hon. Member for Greenwich and Woolwich for their new clauses. I am extremely sympathetic to some of the concerns. I agree with the hon. Member that ensuring the integrity of the planning system is paramount. We will all have examples from across the country of where development does not occur in the way that is sanctioned, or before it is sanctioned, and then an attempt is made to gain planning permission retrospectively by those who are not necessarily following either the letter or the spirit of the rules as set down. It is extremely frustrating.

By the same token, we have to tread extraordinarily carefully here. There are a set of principles, which my hon. Friend and the hon. Member acknowledged in their speeches—that the planning system is based on a specific application, which should be judged accordingly on its merits. It is challenging to bring forward a form of character test within those principles, although I recognise that there is an issue here that many communities up and down the land are seeing.

As those who have debated it for longer than I have will know, the Bill already includes a significant package of measures that will help tackle persistent abuses of the system. Those will speed up the enforcement process, restrict the circumstances in which an appeal can be lodged, increase fines for non-compliance and discourage intentional unauthorised developments that rely on a slow enforcement timescale. The Government acknowledge some of the concerns and are trying to find appropriate levers with which to approach them.

While offering a commitment to continue to talk about this issue, although wanting to be being clear that it is extremely difficult in terms of legislation, as my hon. Friend and the hon. Member acknowledged, the Government are not minded to accept the new clauses. I therefore ask both Members not to press them.

[Greg Smith]

I welcome the commitment my hon. Friend has just made to carrying on the conversation. I accept the complexity, in a system that looks at individual cases, of bringing in a more universal test. However, there are other areas of life where people—for example, those with particular criminal records—are barred from doing certain activities—particularly where children are involved. If we could extend the principle and precedent whereby somebody who has form with rogue development—that is, turn up, build now and apologise later—which blights communities up and down the land, is barred through legislation that is practical and that does not undermine the planning system, I am up for carrying on that conversation. If not through the exact wording of this new clause, then perhaps by another means, we could find a happy solution that protects our communities from those who, I am sorry to say, continue to blight them by building out schemes that they do not have planning permission for.

[Matthew Pennycook]

I thank the Minister for that response. I agree that we have to tread very carefully in this area; the principles that we have all spoken about, in terms of planning system proportionality and judgment on individual applications, are important. The Minister was not on the Committee at the time, but the Opposition broadly supported the measures outlined in chapter 5 of part 3, which strengthened enforcement. I welcome his commitment to continue the discussion outside the Committee, but I hope he gives the issue some serious thought.

I accept what the Minister said about the difficulties, particularly in terms of a character test, but at the same time it does not seem beyond the talents in this Committee Room—I will put it that way—to come up with a system that proscribes certain categories of person. Even if it was a threshold of a certain number of planning breaches in the past, beyond which someone cannot bring forward applications, there must be some way of doing it. A minority of rogue developers are causing havoc for communities and lots of work for planning departments in local authorities. We think the Government should give further thought to making progress on the issue.

[Greg Smith]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 17

Community right of appeal

“(1) The Town and Country Planning Act 1990 is amended as follows.

(2) After section 78 (right to appeal against planning decisions and failure to take such decisions) insert—

‘78ZA Community right of appeal

(1) The Secretary of State must by regulations make provision—

(a) enabling communities to appeal against a decision to grant planning permission or permission in principle for a development, and

(b) about such appeals.

(2) The regulations may require a certain number or proportion of residents of a local area to record objection against a decision for such an appeal to proceed.

(3) The regulations may, in particular, make provision the upholding of such appeals and the revocation of permission if—

(a) the development is inconsistent with a relevant neighbourhood plan, or

(b) due process has not been followed in relation to the planning application.

(4) The first regulations under this section must be laid before Parliament before the end of the period of six months beginning on the day on which this section comes into force.’” —(Greg Smith.)

This new clause would introduce a community right of appeal against the granting of planning permission.

Brought up, and read the First time.

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As we go for localism, community control and a system that genuinely puts communities in charge of planning, we need a mechanism to ensure that we do not shut people out of the planning process by demanding that they travel great distances to attend meetings. That applies as much to the councillors who sit on the planning committee as to the residents or interested parties who have a right to be heard in the process. As much as I hate the virtual environment, I think that it is necessary to allow councils to meet in that way to ensure that everyone can have their voice heard.

[Matthew Pennycook]

It is a pleasure to follow the hon. Member for Buckingham. I think that hate might be too strong a word, but I certainly share his preference for in-person over virtual meetings, where possible. However, there are circumstances where virtual meetings have become necessary or useful, and that is what these new clauses both seek to address for the planning system.

While there are significant points of disagreement between the Opposition and Government Benches on the question of whether the Bill, in the round, will enhance or discourage community engagement in the planning process, there none the less exists a broad consensus that that objective is a worthy one. Whatever one believes the causes to be, there is general agreement that it is a problem that, as things stand, less than 1% of people engage with the local plan-making process, only around 3% engage with individual planning applications, and—of particular concern to the Opposition—particular segments of society typically have no voice whatsoever on planning decisions that will have a huge impact on their communities and their lives.

We therefore think that reducing barriers to engagement with the planning process would be beneficial for a variety of reasons. Chief among them—this is a point that I return to again and again—is that, in some ways, we think it would address the extremely low levels of trust and confidence that the public has in the planning system as a whole.

New clause 69, which, in many ways, is similar to new clause 28 in the name of the right hon. Member for Chipping Barnet, seeks to increase public engagement in the planning process by allowing local authorities to hold planning committee meetings virtually or in a hybrid form. That proposal is obviously not novel. We know from the experience of local authorities during the pandemic that allowing for remote participation both worked effectively and had a number of benefits, including—as the hon. Member for Buckingham said—reduced travel times for councillors and the public, and greater transparency and openness.

What attracts us to this proposal is the fact that virtual meetings facilitated an increase—in many cases a dramatic one—of resident engagement in decisions, in part because remote participation made it far easier for a broader range of people, including those with disabilities, caring responsibilities and work commitments, to take part in meetings for the first time. New clause 69 simply seeks to ensure that those benefits, particularly increased public participation in planning decisions, can be enjoyed on a permanent basis.

However, it is important to say that it does not seek to do so prescriptively. While the language used is drawn from section 78 of the Coronavirus Act 2020, we would expect any regulations to follow to provide for local authorities to determine for themselves whether any given meeting is virtual or hybrid. That is on the basis that councils and councillors are best placed to decide how and when to use different meeting formats in particular circumstances. We feel strongly that it is important that they are given the freedom to do so.

There is widespread support for putting remote meeting arrangements on a permanent footing, including from the Local Government Association, Lawyers in Local Government, and the Association of Democratic Services Officers. As the Minister may know, the planning inspectorate already enjoys the freedom to offer virtual or hybrid meetings, at the discretion of a lead inspector, relating to hearings and inquiries.

To conclude, as every hon. Member knows, online meetings are now commonplace not just for work but for many other forms of social interaction. The public rightly expect that kind of accessibility for council meetings as well, and we are convinced that the freedom for local authorities to hold virtual or hybrid meetings will be welcomed by all our constituents.

We hope that allowing planning committees the option of meeting virtually, or permitting virtual participation in physical meetings, is an uncontroversial and common-sense measure. I hope that the Government are minded either to accept the new clause or, if they feel that it is defective in some way, to table one of their own that achieves the same aim.

[Ben Bradley]

I support the principles of the new clauses, although I will suggest a way in which they might need to be amended so as to apply not just to planning meetings, but to all council meetings. Throughout the pandemic, councils were allowed—and therefore invested in the technology—to permit members of the public to engage in council meetings through those mechanisms, and the public did. As the hon. Member for Greenwich and Woolwich said, engagement in many of those conversations was much higher during the pandemic. People were able to engage with them more easily from their own homes, and they probably had “Coronation Street” on in the background. The more something allows people to take part in a much easier way, the better.

As officers and councillors increasingly work in a more hybrid way, we are encouraging our staff in Nottinghamshire to work from home more, not least because of the practicalities—staff expect that these days. Financially, we do not want, and cannot afford, to run as many buildings as we currently have. Fewer people are in the office. Every time we have a face-to-face meeting that does not need to be face to face, that requires people to trek across the county. It requires councillors to do a three-hour round trip, sometimes for a 20-minute meeting. It is a waste of resources.

Through the pandemic, we also found that we saved thousands of tonnes of carbon—never mind the travel expenses—by not trekking around the county for meetings. I struggle to get opposition councillors, never mind members of the public, to attend some of our governance and ethics meetings. Accessibility is not an issue in that sense.

If there is to be a change to the new clauses, I ask Ministers to make them broader, to include all council meetings. Our full council meeting will always be an in-person public meeting; it is the exciting, set-piece event at the heart of our council calendar. However, many other meetings need not be. Giving local government that flexibility would be very welcome.

There has been a process to review this issue. There was a consultation a year or so ago, I think, and local government was asked to submit views. I can confidently imagine that the broad consensus was, “Give us flexibility, please, to make those decisions locally.” We have done it before, and we can very easily do it again. When Ministers consider the new clauses behind the scenes, I ask that they make them broader still and give us the scope to make those decisions locally.

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[Rachael Maskell]

I rise to move new clause 43 and to support new clause 68. They mirror one another and therefore emphasise the need for a review of permitted development rights, which are a major issue in planning.

New clause 43 calls for a change in the Town and Country Planning (General Permitted Development) (England) Order 2015. It would require a review to be published, within a year of the Bill becoming law, on the effectiveness of permitted development rights in achieving housing targets. Much planning permission is granted on the basis of balancing the economic viability of a site in favour of developers. Planning authorities may stipulate the framework around that, but it is not uncommon for developers to come back to authorities pleading that the site does not hold viability and seeking to change the tenure of units planned for it.

Furthermore, we have a housing crisis. The Government are right to want to fix it by setting targets for the number of units to be built, but if those units are unaffordable to a local population, or if they are sold as investment properties—as assets—and remain empty or are converted into short-term holiday lets, the housing demand is not addressed. Worse, property prices can heat up the market, resulting in a greater pool of people who are unable to access housing, which is making things far worse.

By allowing such a liberalisation of planning, not least for developers, the Government are creating a worsening situation. Rather than resolving the housing situation, they are pushing people out of their localities, as people cannot afford to either buy or rent. Now, with the economic crisis, they cannot get a mortgage either, but cash buyers can scoop up properties and then drive revenue through holiday lets. In York, we are seeing that in spades. York Central promises to be such a site of investment properties rather than homes, with the wrong housing in the wrong place heating up the market and exposing our city to even greater numbers of short-term holiday lets. This has to stop.

My new clause would enable a review, which would include an examination of the quality of housing delivered. I cannot tell hon. Members the scale of shoddy workmanship that we are witnessing. Developers hand their properties over to property management companies and then deny responsibility. Water ingress is common. Sinks are fitted just with silicone, and not properly plumbed in. Wiring is half done. Bin stores are turned into inaccessible bike shelters. The list of unresolved complaints is endless.

York is naturally concerned about its heritage and conservation sites, and we want to ensure that its archaeology is preserved, too. On the environment, we know that new developments help to solve the carbon crisis rather than add to it. If measures are not reviewed and taken seriously, we know that transport planning can be poor, as we are seeing on the York Central site. That will have an impact on the rest of the city. I have already mentioned the thorny issue of the cost to local authorities of the mess that is being created.

Reviewing permitted development rights, as the new clause seeks to do, is about addressing all the consequences, foreseen and unforeseen, of rushing planning through, not least at a time when planning departments across our communities are significantly under-resourced and under-powered. The new clause seeks a review, which is needed, and we want to see action following on from that. If the Government committed the resources and time needed to carry out a review of a such a significant issue, they could make such a difference to communities up and down the country. The review would ultimately be of real value to the Government, by ensuring that the planning system is working effectively for the purpose for which it is designed.

[Matthew Pennycook]

I rise to speak to new clause 68, in my name and those of my colleagues, and to speak in support of new clause 43. I congratulate my hon. Friend the Member for York Central on tabling new clause 43 and on her powerful remarks, not least about the contribution of the extension of permitted development rights to the affordability pressures in urban parts of the country such as hers.

It is a matter of public record that the Opposition have long-standing concerns about the detrimental impact of the liberalisation of permitted development rights on local communities. The Government have always justified the progressive liberalisation of those rights on the grounds that it removes unnecessary administrative impediments to development in the planning system. There is no doubt that the extension of PD rights since 2013 has boosted housing supply; estimates suggest that it has led to a net increase of around 100,000 dwellings. However, the increased supply secured as a result of deregulatory measures over recent years, and the significantly reduced control of rural and urban land that they entail, has come at the cost of a loss of affordable housing and infrastructure contributions, and an increase in poor-quality housing, with obvious implications for public health and wellbeing.

Evidence of the negative impact of the extension of permitted development for the conversion of office, commercial and industrial units to housing is now ubiquitous. A report published by the Ministry of Housing, Communities and Local Government in July 2020—at the same time, incidentally, that Ministers were setting out plans for a further extension of PD rights—found that, in comparison with schemes created through planning permission, permitted development schemes were far less likely to meet national space standards and far more likely to have reduced access to natural daylight and sunlight.

Members may well have come across some of the more well-publicised examples of poor-quality PD schemes. Those include the Wellstones site in Watford, which involved the conversion of a light industrial building into 15 flats, seven of which had no windows at all; 106 Shirley Road in Southampton, a former electric and gas fire shop, which was converted into six studio flats, each roughly the size of a single car parking space; and Terminus House in Harlow, a former office block converted into hundreds of homes, many with just one openable window, which has rightly been described as a “human warehouse”.

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[Rachael Maskell]

I listened carefully to the debate, and I am grateful for all the contributions to it. The Minister will know that we are not putting forward a plan to tear up the whole PDR framework; we are simply calling for a review, as we believe is appropriate. After a scoping review, we would determine which points to drill down on, to ensure that we are looking at the parts of the system that are simply not working. That is the intention behind the new clause. Although it has a broader scope, it homes in on some of the challenges in the system. I therefore do not think that the proposal to put a scoping exercise in the legislation is unreasonable. I welcome the Minister’s offer of dialogue on these matters, which clearly are significantly impacting our communities. Dialogue will be really important. I will not press my new clause to a vote, but I will certainly take up that offer.

[Matthew Pennycook]

As I think the Minister will expect, I am naturally disappointed by his response. There are times when hiding behind the fact that there are trade-offs in balancing problems is appropriate; there are times when it is just a fig leaf, and not doing anything about a glaring problem. His own Department has produced evidence that it is not just a problem at the margins. I encourage him to go and see some of the sites being allowed on appeal because of national planning policy. It is not a problem at the margins; it is endemic, and intrinsic to the liberalisation of PD rights that has been allowed over the past nine years.

It is a straw man for the Minister to say, “We can’t do this, because it’s reviewing all PD rights.” Uncontroversial elements of PD can be dealt with very quickly; we are talking about the problematic aspects and the expansion of PD rights over the past nine years. It is causing a huge amount of human suffering, if nothing else. For that reason, not least to signal the Opposition’s intent to deal with this matter if and when we form the next Government, I will press new clause 68 to a Division when the time comes.

[Rachael Maskell]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Nigel Huddleston.)

Oral Answers to Questions

Matthew Pennycook Excerpts

Monday 17th October 2022 Commons Chamber

[Mr Speaker]

I call the Opposition spokesperson, Matthew Pennycook.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

Last week Government sources told The Times that Ministers were planning to renege on their commitment to abolish section 21 no-fault evictions, only for the Prime Minister to stand up days later and deny that that was the case. Private renters need long-term security and better rights and conditions now, not chaotic mixed messaging from a Government in disarray. Can the Secretary of State give the House a cast-iron guarantee from the Dispatch Box today that if the Government are still standing come the time, a renters’ reform Bill will be introduced in the next parliamentary Session?

[Mr Clarke]

I can confirm that we will introduce the rental reform Bill in the course of this Parliament. That is a commitment that we have made and are determined to honour. I could not be clearer in saying that I echo the Prime Minister’s words last Wednesday that this is going to happen.

Levelling-up and Regeneration Bill (Twenty Second sitting)

Matthew Pennycook Excerpts

Committee stage
Thursday 13th October 2022 Public Bill Committees

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Dehenna Davison)]

Thank you, Mrs Murray. It is a pleasure to serve under your chairmanship, particularly for my first outing as a Minister. I would appreciate your going slightly easy on me on procedural matters—I will do my best.

As we know, the Government are committed to empowering local areas to drive forward growth and renewal without the need to establish a body accountable to central Government. Development corporations are powerful tools that can deliver large-scale development, and they have been successfully used to deliver more than 20 post-war new towns across England, such as Telford and Milton Keynes. They have also been instrumental in regenerating brownfield sites, such as Canary Wharf and the London Olympic site. However, the enabling legislation was designed for a different time and in response to very different circumstances, so there are now multiple types of development corporation, which have varying powers and remits that inhibit their use. Given the scale of the challenge to level up the country, provide the necessary infrastructure and deliver the growth and housing that current and future generations need, we want to ensure that development corporations are accessible right across England.

In October 2019, we consulted on the legislative framework for development corporations to ensure that they have the powers they need to deliver. The results of that consultation showed that there is a gap in the existing models. Outside of mayoral areas, there is no model available for local authorities to regenerate their areas, which is what the clause is intended to address. The clause introduces a new locally led urban development corporation model, which will be overseen by a local authority covering the area, rather than by central Government. It will also allow local authorities, rather than central Government, to put forward proposals to the Secretary of State to designate and create a locally led urban development corporation.

Subsection (4) sets out what authorities will need to do before submitting a proposal to the Secretary of State for designation. That includes what a proposal must contain, who is able to put forward a proposal and who can become an oversight authority. Local authorities will not be able to unilaterally decide to ask the Secretary of State to designate a locally led urban development corporation. Instead, the clause includes a statutory requirement for the proposing authorities to consult local residents, businesses, MPs and other local authorities before making a proposal to the Secretary of State. When the proposal is received by the Secretary of State, they will look carefully at the robustness of the plans, including community involvement and the views expressed, before making a decision. That is why new clause 53 is an unnecessary addition to the consultation requirements and would slow down the designation of development corporation areas.

The purpose of designating an area is to determine the area in which the locally led development corporation will operate and deliver a programme of urban regeneration, and there will be other opportunities for the local community to have their say on the planning proposals for the area through the planning system. Respondents to the consultation noted the considerable amount of up-front resource required to make the case for a locally led development corporation, expressing apprehension about the level of evidence that may be required.

The clause introduces a different test for locally led urban development corporations. Before they are established, the Secretary of State must assess whether it is expedient in the local interest, rather than in the national interest, to designate the development area, which means that local authorities will no longer need to prove that their proposal is in the national interest. A similar provision is introduced for locally led new town development corporations under clause 132. We will provide further guidance to ensure that the evidence required to meet the test is proportionate and provides the certainty that local authorities desire.

We also want to ensure that the proposals are implemented as planned. Subsection (7) requires the Secretary of State to give effect to the proposal, subject to its meeting the statutory test that it is expedient in the local interest. That will include the order providing for the name of the development corporation, the number of board members, who the oversight authority will be, and arrangements for the performance of functions by oversight authorities consisting of more than one local authority. The order must also provide for any other functions that the proposal sets out as planning powers.

Orders designating locally led development corporations will, as for mayoral development corporations, be subject to the negative procedure. That reflects the fact that local democratic scrutiny will have occurred prior to the proposal being permitted to be made. The clause will equalise mayoral and non-mayoral areas with locally led development corporations by standardising the parliamentary process, with democratic oversight at the local level.

We intend to use the powers in the clause as we did the locally led New Towns Act 1981 (Local Authority Oversight) Regulations 2018, which will be subject to the affirmative procedure. That includes setting out which functions will be transferred to the oversight authority. We will consult on regulations in due course to ensure that they are informed by both communities and stakeholders. In the light of that explanation, I ask the hon. Member for Greenwich and Woolwich not to press new clause 53.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to reconvene under your chairmanship, Mrs Murray. I welcome the two new Ministers to their places. I want to speak to new clause 53, not least because I am not entirely convinced by the reassurances just given by the Minister. As she said, and as the policy paper accompanying the Bill sets out, this part of the Bill makes provision for a new type of locally led urban development corporation accountable to local authorities rather than the Secretary of State. It amends the process for establishing locally led new town development corporations and updates the planning powers available to both centrally and locally led development corporations, bringing them into line with the mayoral development corporation model in terms of enabling them to become local planning authorities for the purposes of local plan making, neighbourhood planning and development management.

In the view of the Opposition, part 6 of the Bill is largely uncontroversial, and we are broadly supportive of the measures contained within it. The development corporation model established by the New Towns Act 1946 was a key part of the post-war planning settlement and, as the Minister referenced, it proved remarkably effective in addressing the housing emergency faced in those years. The 32 new towns built under the post-war UK new towns programme today house over 2.5 million people. Funded by 40-year Government loans, they ultimately not only paid the Treasury back, but returned a surplus. The legacy of urban development corporations is more mixed, but their potential for large-scale regeneration is undeniable and their capacity to successfully deliver major projects, such as the London Olympics, is testament to their utility.

In a real sense, development corporations remain an answer to one of the core weaknesses of the planning system, which is that local planning authorities have the power to develop and set a strategy in a local area, but few powers and little capacity to ensure the necessary development to realise it is delivered. On the other hand, development corporations combine strategic planning capability with powerful delivery mechanisms that help ensure that the development objectives they set are realised. They can, for example, commission private sector companies, or establish their own, to deliver homes and infrastructure, and they can compulsory purchase the land they need to deliver a plan and then control consent to bring forward development. For all those reasons and more, we therefore welcome the fact that the Bill includes provision to amend and enhance the development corporation model. However, we need to ensure that the new types of development corporation provided for by part 6 of the Bill realise their potential and have legitimacy in the eyes of the public—the latter being directly related to the former.

When it comes to their likely efficacy as a means of regenerating areas, the decision to provide for locally led development corporations risks proving a double-edged sword. The advantage is, of course, that a local authority, or authorities, seeking to designate an urban development area and create an urban development corporation, as provided for by clause 131, or to oversee the creation of a new town in an area within their administrative boundaries, as provided for by clause 132, can determine their own priorities rather than having them determined for them by the Department. In that sense, the measures provided for in this part are in keeping with the spirit of the original New Towns Act 1946. The disadvantage is that, in practice, there is likely to be little incentive for a local authority, or authorities, to take the financial and political risk of designating a given area and establishing the necessary development corporation to regenerate it. The recent experience of four north Essex authorities, which attempted unsuccessfully to designate and oversee the development of three garden communities, is a stark illustration of the need for central Government to be far more active in supporting locally led initiatives if they are to succeed.

The success of the post-war UK new towns programme lay, in part, in the fact that each development corporation operated within the context of strong national policy and enjoyed the active and direct support of the Government of the day and their Ministers. It is telling that this part of the Bill places no duty on the Secretary of State to support—financially or otherwise—the locally led development corporations it enables to be established. As things stand, we have no sense of what the Government ultimately wish to achieve by means of the provisions in this part, not least how they believe such locally led development corporations will assist in levelling up, given the likelihood that most will come forward in the south and, I would wager, the south-east of the country. Our new clause 53 is not designed to address the potential challenges involved in ensuring that locally led corporations realise their full potential in that sense, as vehicles for regeneration and levelling up, but I hope the Government will carefully consider the points I have made in that respect.

When it comes to community consultation, I am afraid that I am not satisfied that the proposed measures are sufficient. In terms of the perceived legitimacy of these development corporations, it is essential that they provide for an element of public participation in any proposal to designate and establish such a corporation. At present, the process provided for by clause 131 entails no public inquiry before designation and no right for members of the public to be heard prior to a decision being made.

The same is the case for locally led new town development corporations, as provided for by clause 132. That means the Bill will allow land to be designated as an urban development area, and powerful new bodies to be established to oversee development on such land, without any rights for the local communities affected to have their say and at least test the evidence as part of that process. We believe that is an error, and new clause 53 simply seeks to ensure that proposals to designate land as an urban development area and to establish a locally led urban development corporation would be subject to independent examination, at which the public would have a right to be heard. As you will know, Mrs Murray, that is part of our ongoing efforts throughout the passage of the Bill to overhaul it to ensure that there is an ongoing role for the public in the planning process at these stages, with the obvious benefits that that entails for trust and confidence in the planning system. I look forward to any further thoughts the Minister might have having heard my argument.

[Dehenna Davison]

I thank the shadow Minister for not only expressing his concerns but indicating his broad support for part 6 of the Bill and the enhancements it will make overall to the development corporation model.

The point about trust and confidence in planning and the development corporation system is vital. On the point about consultation, I refer the hon. Member back to the comments I just made: there would be no unilateral ability for local authorities to go straight to the Secretary of State to request that a locally led urban development corporation be set up. There is a statutory requirement for authorities to consult local residents, businesses, MPs and other local authorities before making those representations to the Secretary of State.

On the resources for establishing a development corporation, we recognise that this can be a significant undertaking, but the Government have a range of programmes available to help support local authorities in their growth aspirations. We would encourage local authorities that are interested to approach the Department and see how we can work with them to provide that resource and confidence. On that basis, I once again ask the hon. Member not to press new clause 53, and I commend the clause to the Committee.

Question put and agreed to.

Clause 131 accordingly ordered to stand part of the Bill.

Clause 132

Development corporations for locally-led new towns

Question proposed, That the clause stand part of the Bill.

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As with a locally led urban development corporation, the clause also updates the procedure that the Secretary of State must follow in designating a locally led new town development corporation. This will ensure that all locally led development corporations align with the negative procedure already used for mayoral development corporations, reflecting the local democratic scrutiny that is a precondition for any such order. I therefore commend the clause to the Committee and, with the clarifications I have provided on the clause’s overall intent and operation, I kindly urge the hon. Member not to press his new clause.

[Matthew Pennycook]

I will speak to new clause 54, but I shall be extremely brief. As the Minister will know, the new clause seeks to achieve precisely the same outcome as new clause 53, in relation to locally led urban development corporations, but in relation to the locally led new town development corporations, as provided for by clause 132.

For the record, I reiterate that we are not reassured by the Minister’s comments about public consultation being intrinsic to the proposed measures. If I have understood her correctly in terms of that public consultation, we are talking about the ability for communities to comment after the areas of land in question have been designated and established. I suggest that the process of designating land to be developed in this manner and of establishing a corporation is a matter that local communities will want to have a say on, as is rightly the case, before they get a say on other elements of the process to follow.

We believe it is a mistake to establish a process for creating these corporations in which the public have no input into the designation and no right to be heard at the point that the land in question is delineated and the corporation established. I appreciate that the Minister will give me exactly the same answer she did in response to new clause 53, but I hope that the Government will at least reflect on what it will mean for trust and confidence in the planning system, which we know is extremely low, if local communities are cut out of this stage of the process entirely.

[Dehenna Davison]

Once again, I completely share the hon. Gentleman’s sentiments around trust in the planning system. It is absolutely paramount to the planning system operating and getting that local buy-in—it is really crucial. That is why it is a statutory requirement for a public consultation to be undertaken before the proposal is submitted to the Secretary of State, on the grounds that I outlined in the previous clause. I hope that that provides at least some reassurance that local residents will absolutely be consulted before these processes move forward.

Question put and agreed to.

Clause 132 accordingly ordered to stand part of the Bill.

Clause 133 ordered to stand part of the Bill.

Schedule 12 agreed to.

Clauses 134 to 137 ordered to stand part of the Bill.

Schedule 13 agreed to.

Clause 138

Removal of restrictions on membership of urban development corporations and new town development corporations

[Matthew Pennycook]

I beg to move amendment 183, in clause 138, page 157, line 26, at end insert—

“(4) In the case of a locally-led urban development corporation, the board must include no less than three community members who represent a local qualifying body.

(5) In this section, ‘local qualifying body’ means a parish or town council, or an organisation or body designated as a neighbourhood forum, authorised for the purposes of a neighbourhood development plan or such other bodies that reflect the cultural, social or environmental priorities of the locality to be designated as a locally-led urban development area.”

This amendment would ensure that local communities within the locality to be designated as a locally-led urban development area are represented on the board of a locally-led urban development corporation.

[The Chair]

With this it will be convenient to discuss amendment 184, in clause 138, page 157, line 39, at end insert—

“(2ZC) In the case of a locally-led development corporation, the board must include no less than three community members who represent a local qualifying body.

(2ZD) In this section, ‘local qualifying body’ means a parish or town council, or an organisation or body designated as a neighbourhood forum, authorised for the purposes of a neighbourhood development plan or such other bodies that reflect the cultural, social or environmental priorities of the locality to be designed as the site of a proposed new town.”

This amendment would ensure that local communities within the locality to be designated as the site of a proposed new town are represented on the board of a locally-led development corporation.

[Matthew Pennycook]

In our exchanges on clauses 131 and 132, we debated the public legitimacy of the new locally led development corporations. We believe the same issue arises in relation to clause 138, which concerns the membership of urban development corporations and new town development corporations. The clause amends schedule 26 of the Local Government, Planning and Land Act 1980 and section 3 of the New Towns Act 1981 to remove the previous board member cap and the need to set out board membership numbers in an order in relation to both types of corporations, bringing them in line with mayoral development corporations and locally led new town development corporations, to which no cap applies. We believe that is a sensible measure, and do not object to it.

However, we believe there is a more fundamental issue with development corporation board membership. As part of a locally led proposal, a local authority or authorities must be identified for designation as the oversight authority for the development corporation in question, but when it comes to a corporation’s appointed board and its deliberations, there are no safeguards in the Bill to ensure that the voices of residents are heard. If new locally led development corporations are to be a success, we believe it is important that they have robust governance arrangements, and that those arrangements enjoy public trust and confidence. In our view, the obvious means of ensuring that is to enable an element of public participation in them.

Amendments 183 and 184 seek to probe the Government on this important issue by providing for the inclusion of at least three community members representing a local qualifying body, as defined in proposed new paragraph 1A(5) to schedule 26 to the Local Government, Planning and Land Act and proposed new subsection (2ZD) of section 3 of the New Towns Act, which appear in the amendments. We believe the inclusion of representative members of a local community on the board of a locally led development corporation would strengthen those corporations’ legitimacy in the eyes of the public and help ensure that the significant planning powers those corporations will exercise enjoy a degree—albeit a limited degree—of local community oversight. I look forward to the Minister’s response.

[Tim Farron (Westmorland and Lonsdale) (LD)]

Mrs Murray, it is a genuine pleasure to serve under your guidance today. I offer a huge welcome to the two new Ministers. I am very pleased to see them in their places, and they have made a good start so far.

Just a quick word from me on this: there is a real danger when the Government seek to do good things. With development corporations, the ability to regenerate communities and create economic benefit and equality is certainly an aim and a likely outcome of doing it properly. The danger is that we establish a bunch of quangos that people feel detached from, with the sense that this is something being done to their community rather than them being part of it. That is why I think that the amendments are wise and worth taking on board, from the Government’s perspective.

I can give a little example. Our new Ministers will get used to me talking about national parks a lot, but they are quite a good example of outfits that do a very good job that are run by very good people who are not directly elected. I have the Yorkshire dales and the Lake district in my patch. When we talk about legitimacy and public consent for decisions that are made—sometimes they will not be the most popular decisions; they will be difficult decisions—then, rightly or wrongly, if we do not have people who are directly accountable to, elected from and, indeed, from the communities that are served by those bodies, there will be pushbacks, and it will cause a lack of consent and of unity in the community. However, the lakes and dales are run by brilliant people. None of them is directly elected by the people they serve, yet they make the kind of decisions that, outside national parks, are made by directly elected councillors.

That is a side plea for the Government to consider those issues, but when it comes to development corporations, I think the Government need to go out of their way to ensure that local communities’ voices are not just heard but seen to be heard. Therefore, people in the community should be directly part of those boards.

--- Later in debate ---

[Dehenna Davison]

I thank the shadow Minister and the hon. Member for Westmorland and Lonsdale for their contributions, and hope that I can provide a little bit of reassurance.

We feel that, while incredibly well intentioned, the amendments are unnecessary. The appointment of board membership for locally led new town development corporations is already addressed in the New Towns Act 1981 (Local Authority Oversight) Regulations 2018. Those regulations provide that

“the oversight authority must have regard to the desirability of appointing one or more persons resident in or having special knowledge of the locality in which the new town will be situated.”

That could include members from parish councils or local community groups, or organisations that reflect the cultural, social or environmental priorities of the locality.

We intend to replicate that approach for locally led urban development corporations. We intend to set out further details on the composition of board membership in regulations, which will be subject to parliamentary debate. As we did with the New Towns Act 1981 (Local Authority Oversight) Regulations 2018, the Department will consult on draft regulations to ensure that they are appropriate and permit local communities and businesses to have a say.

In appointing independent members, we expect oversight authorities to ensure that the board has the relevant skills and experience needed. That includes those with an understanding of the local area. In accordance with the principles of local authority appointments, the appointments of the chair, deputy chair and independent board members should be through an open, transparent and publicly advertised procedure, which I hope will provide some reassurance to the hon. Member for Westmorland and Lonsdale. I appreciated the examples from his own constituency.

Regarding the suggested minimum of three appointments, it is the Government’s view that it should be up to the oversight authority to determine the appropriate board composition and numbers, based on local circumstances. I hope, therefore, that the hon. Member for Greenwich and Woolwich will agree not to press his amendments.

[Matthew Pennycook]

I thank the Minister for that response and am partly reassured by it. As I hope I made clear, we are trying to drive at what I think is a very limited form of public participation on the boards. I accept what the Minister says, both on what is expected by the Government from oversight authorities in putting the boards together, and the further details, although what “a say” means is yet to be defined. We look forward to seeing in the regulations what those further details entail.

I hope the Minister has taken away our very firm view that there must be an appropriate level of community participation on the membership of the boards so that local communities have trust and confidence in what they are doing. However, I do not intend to press the amendment to a Division at this time. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 138 ordered to stand part of the Bill.

Clause 139 ordered to stand part of the Bill.

Clause 140

Acquisition by local authorities for purposes of regeneration

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Dehenna Davison]

I will now explain clauses 140 to 144 and schedule 14. The Government want to see local authorities empowered to use compulsory purchase to regenerate their areas, so that places and regions can drive improvements in economic growth and pride in place. The levelling-up White Paper made it clear that we want local communities to be empowered to take the lead, and we want to ensure they have the tools they need to succeed. Key to that is ensuring that local authorities have the right compulsory purchase enabling powers and processes, and the confidence to use them. This is the intent behind the clauses, which focus on modernising and streamlining the compulsory purchase process to make it faster and more effective.

With clause 140, we are making it crystal clear in the Bill that local authorities in England have the power to use compulsory purchase for regeneration purposes and to bridge the gap the urban centre recovery taskforce identified last year, which we are keen to address. Currently, local authorities in England are able to use their compulsory purchase powers for development, redevelopment and improvement purposes.

Clause 140 will ensure that local authorities have the certainty to acquire land compulsorily for regeneration schemes too. That will align them with other public authorities such as Homes England and the Greater London Authority. That could, among other things, improve the social wellbeing of a local authority’s area, while not actually involving the construction or reconstruction of a building. For instance, this regeneration compulsory purchase order power could be used to transform a vacant commercial building into a community hub. Alongside this change, we will bring forward updated guidance to provide more clarity on the use of compulsory purchase for long-term strategic land assembly by local authorities.

On clause 141, we need to ensure that the CPO process is efficient yet accessible and fair for all involved in it. The clause retains the current requirements for the physical deposit of documents and service of notice. It remains the case that sufficient proof of delivery through electronic communications is difficult. Given the nature of compulsory purchase, it is crucial that affected parties receive—and can prove that they have received—the necessary communications. The clause also requires acquiring authorities to make CPO documents and notices available online, and it creates the flexibility for Ministers to direct, in extreme circumstances where the physical deposit of documents is impractical, that online provision is sufficient. Further provisions in clause 148 provide for the application of common standards to compulsory purchase data. As I have described, these amendments begin the modernisation of the CPO process, and I commend clause 141 to the Committee.

Clause 142 will create a faster, more effective confirmation process. At present, a single affected landowner can demand an expensive and lengthy public inquiry for any CPO. This can be used as a delaying tactic, slowing down the decision-making process and increasing the costs for the acquiring authority and others involved. As we know, cost for the authority means cost for the taxpayer. In turn, this can make acquiring authorities, such as local authorities, less inclined to use CPO powers. We believe that the confirmation procedure should reflect the complexity of the order. Many CPOs involve one or a very small number of properties, with little impact outside the boundaries of those properties. Confirmation proceedings for orders like these do not generally need a public inquiry.

We also believe that it is right to give the discretion to the confirming authority to determine the appropriate procedure based on the circumstances, while protecting the right for affected parties to have an oral hearing if they wish. In keeping with those ambitions, clause 142 enables confirming authorities to decide to hold a public local inquiry, or to follow the new representations procedure, which will include an oral hearing if objectors request one. We will engage with stakeholders in shaping the representations procedure to ensure it works practically and produces a faster and more efficient process.

On clause 143, we want to ensure that authorities have the confidence to achieve positive outcomes in making CPOs. Too often when there is a decision to confirm a CPO, the CPO is rejected because of a specific impediment at the point of decision, and that often results in significant delay or even the complete collapse of the scheme. We want authorities to know that where a specific impediment, such as funding uncertainty, remains outstanding at the point of decision, a condition can be imposed for that to be dealt with and discharged at a later point.

Clause 143 achieves that end by introducing the concept of conditional confirmation, which will allow decision makers to confirm CPOs subject to the conditions being met before the compulsory purchase powers may be used. That may assist progress-stalled developments, as conditions could be imposed to force a landowner to follow through on commitments to undertake developments, and if they fail to do that, that will allow a CPO to become operative.

We also want authorities to make their CPOs earlier in the delivery process of a scheme. That will encourage authorities to make their CPOs concurrently with seeking other consents, rather than sequentially after obtaining other consents. Introducing conditional confirmation will support that aim.

To reassure hon. Members, that does not mean that insufficiently prepared CPOs or CPOs without sufficient justification will be conditionally confirmed. The test of there being a compelling case in the public interest to confirm the CPO will absolutely remain. We expect only very specific conditions to be imposed in most cases—one or possibly two to a CPO that otherwise shows a compelling case in the public interest. Guidance will be updated to provide clarity on the imposition of conditions. Initial confirmations will be a significant lever to provide authorities with more confidence in using CPOs and to deliver schemes more quickly.

Clause 144 gives effect to schedule 14, which makes provision in relation to compulsory purchases by Ministers, corresponding to clauses 141 to 143. Given that Ministers may use compulsory purchase in a number of circumstances —for example, to deliver major highway or rail schemes—it is only right that those provisions benefit from improvements to the process. I hope I can get the support of all hon. Members for the clauses.

[Matthew Pennycook]

The Minister referred to at least two further sets of guidance that are to follow. Can she give the Committee any sense of the timeline for that?

[Dehenna Davison]

I cannot today, but I will endeavour to write to the hon. Gentleman within the next 48 hours to provide that clarity.

Question put and agreed to.

Clause 140 accordingly ordered to stand part of the Bill.

Clauses 141 to 144 ordered to stand part of the Bill.

Schedule 14 agreed to.

Clause 145

Consequential amendments relating to date of operation

Question proposed, That the clause stand part of the Bill.

[Dehenna Davison]

I sincerely hope that we can get agreement for these clauses. New clause 62 goes further to deliver the Government’s priority to ensure that the compulsory purchase system is fit for purpose. It will build on other measures to ensure a fair balance between landowners and acquiring authorities in the public interest when it comes to the payment of compensation.

The Land Compensation Act 1961 contains the principal rules for assessing compensation relating to compulsory purchase. Under the current rules, when assessing the open market value of the land to be acquired, there are statutory assumptions that must be taken into account. They include the discounting effects of the compulsory purchase scheme, known as the no scheme principle, and considering the planning prospects of the land being acquired. The latter gives rise to landowners being able to claim hope value as part of their compensation—an issue that has attracted significant attention in recent years, including from the Levelling Up, Housing and Communities Committee.

One method of assessing the prospect of planning consent is to establish appropriate alternative development, namely development that would have received planning permission if the scheme underpinning the compulsory purchase were cancelled. Where appropriate alternative development is established, it may be assumed for valuation purposes that planning permission is in force on the relevant valuation date. That is known as planning certainty. Assuming the value of the appropriate alternative development is greater than the existing use value creates an uplift in the value of the land.

The 1961 Act allows parties concerned with a compulsory purchase to apply to a local planning authority for a certificate to determine whether there is development that, in its opinion, would constitute appropriate alternative development. Certificates of appropriate alternative development, CAADs, are used as a tool to establish whether there is appropriate alternative development on a site, and thus planning certainty for valuation purposes.

Under the current rules, there is no requirement for a CAAD to be applied to establish planning certainty and secure any resulting uplift in the value of land. In addition, when issuing a certificate, local planning authorities are required to identify all developments that they think are appropriate developments, not just developments that match the description of the development being applied for. That can increase the administrative burden on a local planning authority’s resources and the risk of a legal challenge, which results in further costs to the authority and the taxpayer. Expenses incurred by applicants submitting their CAAD applications must be paid for by acquiring authorities.

My Department has been working closely with stakeholders to develop a package of measures to reform the CAAD process and ensure that the assessment of the prospect of planning permission is aligned with normal market conditions. It is important that a balance is struck between landowners and acquiring authorities. We are therefore seeking to introduce Government new clause 62 to ensure that the compulsory purchase compensation regime does not deliver elevated levels of compensation for prospective planning permissions, which would result in more than fair value being paid. That will be achieved by ensuring that compensation attributed to alternative development is claimable only via the issuing of a CAAD and, further, that value attributable to potential alternative development in the future cannot be claimed. Although the prospect of planning permission will still be claimable, our new clause will bring the assessment of value attributable to prospective planning permission in line with the position in a normal market transaction. It will also ensure that valuations of hope value are not disproportionate.

We are very clear that those affected by compulsory purchase are entitled to a fair value for their land, but we want to ensure that the compulsory purchase compensation regime does not lead to elevated compensation, including costs being paid for prospective planning permission, which would result in more than fair value being paid by local authorities, and thus by the taxpayer. I hope that the whole Committee will support Government new clause 62.

[Matthew Pennycook]

I thank the Minister for that very detailed exposition of the purpose of the new clause. She will be pleased to learn that, in general terms, we are supportive of the provisions in part 7 of the Bill, which concerns compulsory purchase. They are sensible and proportionate measures that will give local authorities clearer, more efficient and more effective powers; greater confidence that they can acquire land by compulsion to support regeneration schemes; and greater certainty that land can be assembled and schemes delivered quickly through compulsory purchase.

We also support the Government new clause, which concerns compensation in relation to hope value. The cost of land is a major barrier—only one of many—to development across the country, and to increasing investment in infrastructure and affordable housing. As the Minister made clear, land values are frequently inflated well above agricultural or industrial values because of hope value—that is, the value attributed to the expectation that land could be awarded planning permission for new housing.

Hope value often makes social housebuilding and the provision of infrastructure unviable for local authorities and developers, and the fact that it is based on the assumption that each plot of land will maximise short-term profitability disincentivises long-term value generation. A landowner with a plot of land that might be ideal for specialist or affordable housing, or other essential uses that the market has no incentive whatsoever to deliver, can under the current regime always choose to refrain from developing it, in the expectation that they will receive a far better price in the future for a standard scheme dominated by market-sale homes at current prices.

The 2020 White Paper, “Planning for the Future”, rightly recognised that less than half of the uplift in land values created by the granting of planning permission is being captured by communities to help to pay for infrastructure and affordable housing. Given the demands on captured value when it comes to infrastructure and affordable housing, we agree with the Government that it is right to seek to reform the system, in order to ensure that assessment of value attributable to the likelihood of alternative development is more akin to what it would be in normal market conditions, and to rebalance the position with regard to costs and compensation between landowner and acquiring authority to make it fairer. To that end, we believe that the Government new clause, which proposes implementing a range of changes to section 14 and other sections of the Land Compensation Act 1961, as set out in the first part of the Government’s compulsory purchase compensation reforms consultation, published in June, is good. We are pleased that the Government felt able to bring it forward.

Levelling-up and Regeneration Bill (Twenty Third sitting)

Matthew Pennycook Excerpts

Committee stage
Thursday 13th October 2022 Public Bill Committees

[Dehenna Davison]

Part 9 of the Bill will greatly enhance our understanding of who owns or controls land and property. To assist the economy to grow, the Government need to break down any barriers and find key tools that ensure our property market is fair, open, competitive and resilient. One big barrier at the moment is information asymmetries. The land market in England and Wales currently lacks full transparency, particularly when land control arrangements are used—opaque arrangements short of ownerships such as options and conditional contracts.

The Government are determined, for the benefit of us all, to shine a light on complex arrangements used to control land and property. Clause 178 allows the Secretary of State to expand the collection of information about legal and beneficial ownership of land and property in England and Wales. We intend to use the power to dig deep into opaque ownership, and to control structures into narrow use cases.

First, the power will ensure that landlords responsible for the cost of remediating unsafe buildings under the Building Safety Act 2022 do not avoid their liabilities. Some are seeking to avoid their remediation responsibilities and frustrate the Act through the use of obscure structures. A targeted power will help to cut through that, and will allow us to ensure that works are carried out swiftly, so that we avoid continued costs for leaseholders and calls on the Government’s legal budget. Secondly, the power will allow the intelligence and security agencies to identify opportunities for hostile actors to misuse properties in the vicinity of sensitive sites and put national security at risk.

Clause 179 further expands the Secretary of State’s power to collect information on certain specified types of arrangements used to control land. The powers will allow us, for the first time, to collect information on arrangements used by developers and others to control land. I would like to share some facts and statistics about the extent of land control arrangements, and the impacts that the practice has on the housing market, but I cannot, because Ministers and the public are blindfolded on that point. We have no accurate data on the area of land that is subject to such controls, although we suspect that it is substantial. That means that it is hard for local authorities, communities and businesses to identify who controls developable sites. In many areas, that hampers good place-making and slows down development of new areas for people to live in and thrive in.

Collecting and publishing information about land control arrangements will give communities and local authorities a better understanding of who controls land in their area, and addresses those barriers. It will also provide Government with additional information that will allow them to understand who exercises control over land and property, even where that person is not the legal owner. It will provide the basis for assessing that hidden market and producing evidence-based policy.

To implement these powers effectively, we must retain the flexibility to respond swiftly to attempts to avoid or evade this legislation, and ensure that we have all the information we need to unpick the complex and opaque structures used by some to hide their ownership or control. Clause 180 specifies the key information that must be set out in statutory instruments before the powers under the previous two clauses can be used. Parliament will have the opportunity to debate and approve all regulations made under this part of the Bill before they come into force, and all draft instruments will be laid before the House under the affirmative procedure.

Clause 181 allows for the retention, sharing within Government and publication of information collected under clauses 178 and 179. In her Second Reading speech, the shadow Secretary of State, the hon. Member for Wigan (Lisa Nandy), expressed concerns that we were seeking to withhold information on arrangements used by developers to control land. I am pleased to reassure her, and members of the Committee, that we will publish such data as machine-readable open data, in line with our commitments, set out in the 2017 housing White Paper, to improve the transparency of those arrangements and—our key motivations behind the measure—to make the land market more transparent and competitive.

Bearing in mind privacy and security considerations, it is the Government’s intention that other types of information collected—but not published—will be shared with and used by Government bodies to carry out their functions; for example, they could be used for the enhancement of national security and the implementation of the Building Safety Act 2022.

Clause 181 allows for the payment of fees to cover the costs of collecting that information. As our proposals are designed to work with the grain of existing processes, we expect that any fees, if charged at all, would be modest. To be clear, regulations creating any such fee must be made under the affirmative procedure, so Parliament would have to approve them first.

Clause 182 allows the creation of criminal offences by regulation, so that penalties could be imposed on those who failed to comply with requirements to provide information, or who provided false or misleading information. In the overwhelming majority of cases, we expect that people will comply, but the steps that we are taking through this legislation to increase transparency about the ownership and control of property will be disruptive to dishonest actors, or those seeking to conceal their ownership or control of land and property. The stringent transparency measures are, in part, designed to deter nefarious activity or the avoidance of other initiatives aimed at increasing transparency. It would be naive to assume that there are not those who will try very hard to avoid their obligations. That is why that power is so important. The final clause in this part, clause 183, is a technical clause that sets out key definitions. I hope that is non-contentious.

In summary, together, these clauses will provide crucial tools to ensure that our property market is fair, transparent, competitive and resilient. I commend them to the Committee.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

Part 9 is one of the less remarked-on parts of the Bill, but it contains important measures. As the Minister outlined, it provides for enabling powers that require the disclosure of information relating to the ownership and control of land in England and Wales, including transactional information.

Labour fully supports the goal of increasing transparency and accountability in respect of the ownership and control of land that could be used for development, as well as transactional information relating to instruments, contracts and other arrangements. We agree with the Government that reform in this area has the potential to help expose anti-competitive behaviour by developers, tackle strategic land banking, aid smaller-sized enterprises to acquire land for development, facilitate more effective land assembly by local authorities and others, and help communities to better understand the likely path of development in their area. As the Minister rightly said, reform will also help to ensure that where buildings are defective in terms of building safety and require remediation, those works are undertaken as swiftly as possible.

New Developments on Green-belt Land

Matthew Pennycook Excerpts

Wednesday 12th October 2022 Westminster Hall

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve with you in the Chair, Sir Gary. I congratulate my hon. Friend the Member for Coventry North West (Taiwo Owatemi) not only on securing a debate that is clearly of great importance to the communities that she represents, but on her willingness to tackle at length a subject that is controversial and has arguably failed to receive the attention it deserves in this place. I also thank all right hon. and hon. Members who have taken part this morning in what has been a lively, interesting and thoughtful session.

In opening the debate, my hon. Friend outlined with her customary forcefulness her concern about the large-scale green belt release that has been authorised on the fringes of her Coventry constituency. The individual cases she mentioned are complex and I do not intend to comment on them in detail, other than to say that, more than anything, they illustrate the difficult position in which individual local authorities are placed in the absence of effective sub-regional frameworks for managing housing growth.

My hon. Friend was also at pains to situate the general issues arising from green-belt development in her city within the context of Britain’s housing crisis, and she was right to do so. After all, the point at issue here is not whether green belts have value and can provide for public recreation, contact with nature and habitat maintenance, which they do. Rather, it is whether green-belt land should be released to meet the significant housing need that now exists across England and, if so, how much and under what circumstances.

When it comes to the green belt, what should be in many ways a relatively dispassionate debate consistently provokes intense emotion and polarisation. That is partly because housing development, by its very nature, will always be a contentious issue, but that fact alone cannot account for the strength of feeling generated by this issue.

I would suggest that at least two other factors underlie the passions provoked by the green belt. The first is that any consideration of the green belt as policy labours under a series of misconceptions. Chief among them is the falsehood, which was mentioned by the right hon. Member for East Hampshire (Damian Hinds), that green belt is always and everywhere green fields, as opposed to the reality, which is that, at least on the edges of most major cities, green belts include abandoned industrial buildings, petrol stations, scrubland, motorways, farmland, golf courses and nature-rich green fields. 

The second misconception is that, more often than not, any debate about the future of the green belt is framed as an irreconcilable choice between two flawed options— namely, the complete abolition of green belts or rendering their present boundaries entirely sacrosanct. A more honest and nuanced approach is long overdue—one that recognises that the green belt has served England’s towns and cities very well over many decades, in terms of its original aim of preventing unlimited urban sprawl, and that it must be retained for that purpose. We also need to accept that the green belt’s existence has come at a cost, in terms of constrained housing supply, growing problems with affordability and problematic development displacement, and that there is a strong case for looking again at how the policy should operate in the years ahead.

The Labour party fully supports the prioritisation of brownfield development. We remain committed to preserving the green belt and would resist any attempts to abolish it, as per the long-held wishes of those for whom nothing short of total planning deregulation will suffice. Not only are green belts not to blame for all the country’s housing shortage ills, but their removal would without question trigger a tsunami of land speculation and an increase in low-quality, high-cost and infra- structure-deficient development of the kind that, as we have heard, is already far too commonplace.

However, we are equally opposed to any attempt, along the lines mooted by the right hon. Member for Richmond (Yorks) (Rishi Sunak) in the recent Conservative leadership contest, to prevent green-belt land from being released for development under any circumstances. The truth is that there are certain types of land within green-belt boundaries—for example, brownfield land within green belt or poor monocultural farmland next to key transport hubs—that are ideally suited for development. Politicians who argue that every inch of green-belt land should be forever off limits are doing the public a disservice.

[Sir Gavin Williamson]

I wish to respectfully correct the hon. Gentleman. He is referring to already developed land—he talked about petrol stations and industrial areas—but actually that sits outside the green-belt designation. Green-belt designation does not include previously developed industrial land.

[Matthew Pennycook]

I disagree with the right hon. Gentleman; I think he is wrong on that point. It includes brownfield land and land that has previously been developed. That is part of the problem: there is a misconception that green belt always equals greenfield, but it does not. I will talk about the distinction in a minute, because it is important for how we might go forward.

The debate we should be having is not a rehash of the stale exchanges between those who wish to abolish the green belt entirely and those who wish to render it inviolable. It should instead focus on what the Government need to do to ensure that more of the right bits of the green belt are released for development, that land-value capture is maximised on those sites so that the communities in question can benefit from first-class infrastructure and more affordable housing, and that green-belt land with the highest environmental and amenity value is properly protected, enhanced and made more accessible. The selective release of green belt should increase, rather than decrease, the opportunities for urban communities to benefit from green space and nature.

In our view, any approach to green-belt development must be premised on the involvement of local communities. More needs to be done to ensure that local authorities routinely review green-belt land as part of the local plan-making process, and that they have the freedom to take a balanced view of how green-belt land within their boundaries is managed. We also want to see a more meaningful role for the public in determining which areas of green-belt land are permanently protected, which are improved and made more accessible, and which, if any, might be appropriate for new homes.

Perhaps most importantly, any green-belt development must deliver tangible benefits for local communities. As my hon. Friend the Member for Coventry North West ably outlined, the problem is that in far too many cases today, green-belt land is being transformed into ill-planned neighbourhoods full of overpriced executive homes with the inevitable community backlash that that results in. That point was also made by my hon. Friends the Members for City of Chester (Christian Matheson) and for Reading East (Matt Rodda), and by the hon. Member for Lewes (Maria Caulfield).

Ensuring that green-belt development leads to beautiful and well-serviced neighbourhoods with good access to improved green open spaces and homes that are genuinely affordable for local people would require reform, not least to enable local authorities to acquire the land at a reasonable price, but that is entirely feasible if the political will exists. We can debate the precise delivery mechanisms, but Labour believes that the case for more effectively facilitated, very limited development on poor-quality land within green belts in areas where it is most needed, in a way that meets local housing need, while at the same time protecting and enhancing high-quality green-belt land for the benefit of the public, is unarguable.

The alternative—here I take issue with the right hon. Member for South Staffordshire (Sir Gavin Williamson)—is to accept what is already taking place: namely, the progressive loss of all kinds of green-belt land, including greenfield and high-quality green-belt land, via haphazard and speculative fringe development, often of poor quality and via appeal. Doing so also sets aside a potentially valuable means of boosting housing supply, simply because it is too politically sensitive.

In the face of a housing crisis that is our country’s most pernicious iniquity, blighting the lives of millions, the notion that every part of the green belt is sacrosanct cannot be justified. It is high time for a serious debate about the role that a reimagined green belt can play in tackling the crisis. I look forward to hearing from the new Minister, and I once again welcome him to his place. I hope he can clarify not just what the Government intend to do to prevent the ongoing release of high-quality, nature-rich green-belt land of the kind we have heard about, but what the Government’s thinking on the green belt now is more generally, given that in the space of just three years the present Prime Minister has called both for a million homes to be built on green-belt land and for no green-belt development whatsoever to take place.

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[Matthew Pennycook]

Will the Minister give way?

[Lee Rowley]

I really must make progress.

The hon. Member for Coventry North West talked about a failure to address issues in planning. I accept that there are always challenges in planning, but I wish to put on the record the importance of the 2 million new houses that have been built over the last 12 years—2 million families have had the opportunity to realise their dream of home ownership. Some 600,000 of those are affordable homes, and 242,000 were built in 2019 alone. Billions of pounds, whatever our views on whether that is sufficient, will have come forward in infrastructure to support communities.

The hon. Member for Coventry North West also highlighted the challenges in how the system works. I absolutely accept that there are challenges in how the system works, but ultimately this is a process where local authorities—I will not mention specific councils—have the power to bring forward a plan at the time that they wish. They should understand the context in which local plans are brought forward. They have the ability to both include and exclude locations, and they can set the overall framework in which development happens in a local area.

There is then clarity that allows developers, communities, individuals and those who are affected to understand what will and will not happen. Some authorities do that well. Some of those that perhaps do it less well could learn. I am unable to comment on Coventry specifically, but I hope the hon. Lady and her colleagues from the city will reflect on that.

[Matthew Pennycook]

Will the Minister give way?

[Lee Rowley]

I need to make progress—I have only a few minutes. My right hon. Friend the Member for South Staffordshire (Sir Gavin Williamson) talked about the duty to co-operate, and I hope we will be able to make further announcements on that in due course. I am happy to discuss it with him separately if that helps, given his interest in it.

Colleagues from various constituencies, including the hon. Member for Reading East (Matt Rodda) and my hon. Friend the Member for Eastbourne (Caroline Ansell), talked about brownfield land. I absolutely accept the huge importance of developing on brownfield land. As I highlighted, the national planning policy framework indicates the importance of that. A substantial amount of taxpayer subsidy has already been brought forward for brownfield land. There was only one announcement, back in July. I hope that, if hon. Members’ local authorities had the opportunity to bid into that brownfield land fund between July and August this year, they did so. Should it be appropriate, it is important that local authorities take opportunities to bid to build on brownfield land, and that they think through what they can do locally to bring forward additional brownfield land.

The hon. Member for York Central (Rachael Maskell) talked about investment zones. I place on the record that the expression of interest guidance for investment zones is clear on the environment: mitigation would be required of any environmental impacts of proposed investment zones. If local authorities that apply do not concur with that, their application would be failed. That is publicly available in the guidance on expressions of interest.

My right hon. Friend the Member for East Hampshire (Damian Hinds) made strong points about the importance of a diversity of approaches to ensure that we support housing need in local areas. I am happy to talk to him more about the land constraint point that he highlighted.

The hon. Member for City of Chester talked about the importance of green belt, which I have already talked about. I wholeheartedly concur with him on that point. He also highlighted water and storage facilities. Paragraph 160 of the NPPF covers that, but if there is a specific point he thinks I should be made aware of, I would be happy to talk to him separately.

My hon. Friends the Members for Eastbourne and for Lewes (Maria Caulfield) talked about specific applications. I am afraid that I am unable to talk about those, but my hon. Friends have noted them. I completely agree with my hon. Friend the Member for Lewes about the importance of neighbourhood plans and the involvement of local areas in them. I am grateful to my hon. Friend the Member for Rugby (Mark Pawsey) for raising the issue about his locality. Within the bounds of appropriateness, I am happy to receive further representations on that and to talk about it. I am also grateful to the hon. Member for Reading East for highlighting the brownfield element.

In the 30 seconds that remain, I again thank all colleagues for their comments. It has been a useful and helpful debate, and I look forward to further discussions. If there were simple answers on this issue, I am not sure that we would be here today. If there were easy ways to resolve the very difficult trade-offs, I am sure that my many predecessors would have done so years ago, as I have been told on a number of occasions. However, it is good to talk and to understand the concerns in local areas. I am grateful both to the hon. Member for Coventry North West for securing the debate and to everybody for their contributions to it.

Levelling-up and Regeneration Bill (Twentieth sitting)

Matthew Pennycook Excerpts

Committee stage
Thursday 8th September 2022 Public Bill Committees

[The Chair]

Hon. Gentlemen are welcome to take off their jackets if they wish to do so. I have a few preliminary reminders for the Committee. Please switch electronic devices to silent. No food or drink, except for the water provided, is permitted during sittings of this Committee. Hansard colleagues would be grateful if Members emailed their speaking notes to [e-mail]. I welcome the Minister to his place.

Schedule 11

Infrastructure Levy

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I beg to move amendment 162, in schedule 11, page 288, line 11, after “development” insert “of the area”.

This amendment seeks to ensure consistency with inserted section 204A(2) on page 282 and ensure that consideration of viability relates to the area as a whole.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 163, in schedule 11, page 289, line 33, leave out “or require”.

This amendment and Amendment 164 would prevent the Secretary of State imposing a nil rate, differential rates, reductions, or a minimum threshold below which IL is not charged and ensure that rates are set by the charging authority.

Amendment 164, in schedule 11, page 289, line 36, leave out “or require”.

See explanatory statement for Amendment 163.

[Matthew Pennycook]

It is a pleasure to reconvene with you in the Chair, Mrs Murray. I warmly welcome the hon. Member for Sutton and Cheam to the caretaker role that he has bravely taken on today. He is the third Minister I have engaged with in proceedings on the Bill. The shadow Department for Levelling Up, Housing and Communities team are setting new records when it comes to the ministerial attrition rate. It may be overly ambitious to hope that we can get through five Ministers by the completion of proceedings on the Bill, but we live in hope.

On a serious note, I place on record our thanks to the hon. Member for Nuneaton (Mr Jones) for his efforts in taking the Bill through Committee in recent weeks, including before the summer recess, and for the constructive way in which he did so. I hope that we can continue in that vein today.

We had, in our last sitting, an extensive debate on the infrastructure levy, and touched on the issue of viability as part of the design of any new proposal. This group of amendments relates to the infrastructure levy rate-setting process, and how viability testing will be used to inform it. Once again, allowing for the fact that we do not have the detail we need, and for the fact that the required forthcoming regulations will be subject to further consultation, I am assuming for the purposes of these amendments—largely because of the remarkable similarity between schedule 11 and the provisions in the Planning Act 2008 that gave effect to the community infrastructure levy—that the Government are minded to base the IL rate-setting process on that which applies to the process for adopting a CIL charging schedule.

If that is the case, the process will require charging authorities to undertake—if not directly, then by commissioning consultants for the purpose—an area-wide viability assessment. Such assessments would be similar to—and indeed could, where appropriate, be combined with—the area-wide viability testing that forms part of the evidence base for the examination of new local plans. As “full viability assessments”, these will involve a large number of residual land valuations for different development typologies, and potentially strategic sites, to test what IL rates could be supported in different circumstances. It is likely that they would have to consider all aspects of development appraisal, including average values, costs, profit and land value, rather than using gross development value as the value-based metric used to determine specific IL liabilities.

The new levy has broader scope than the CIL, incorporating as it does both infrastructure and affordable housing. Higher rates will be necessary as a result. Given that, and given that GDV—the metric to be used—does not take into account site-specific development costs, IL has the potential to result in significant non-negotiable liabilities, so the stakes involved in the IL rate-setting will be far higher than those that pertain in the CIL charging schedule adoption process. Thus it is almost certain that the IL rate-setting process in any given area will be heavily contested; landowners and developers will task their representatives with challenging the scope of the assessment, its methodology, inputs, assumptions and conclusions, with a view to reducing IL rates and their future liability. There is therefore a strong case for putting in place additional measures to ensure that the IL rate-setting examination process is fair, and I hope that the Government are exploring what might be done to ensure that the Planning Inspectorate is able to draw on the necessary expertise so that that is the case.

The aim of amendment 162 is to ensure that the bar for viability testing in the IL rate-setting and examination process is not set unreasonably high, and that there is therefore a more level playing field between charging authorities and those who might potentially object to a proposed IL rate or rates. The amendment seeks to avoid authorities being compelled to either undertake onerously detailed analysis, bring forward overly complex charging structures or set artificially low rates to compensate for the risk that the Bill creates of developers arguing that specific projects in an area are unviable. It does that by specifying, using the language used in proposed new section 204A(2) of the 2008 Act, that when setting IL rates, charging authorities must consider the economic viability of development in the area as a whole. That would make it clear that in the rate-setting process, the test of viability should not be so specific as to relate to individual sites, unless perhaps they are of strategic significance to the charging authority area, but should instead take into account viability across a range of sites, and the overall delivery of the amount of development envisaged in the local plan. That is in line with current practice, and would mean that IL rates would not be unduly influenced by the characteristics of development sites that may not be typical of the area, and that could result in nil or particularly low rates being set across the whole of it.

[Rachael Maskell (York Central) (Lab/Co-op)]

I am grateful to my hon. Friend for tabling the amendments. It is clear that the system is not working, because when going through the planning process many developers argue that the site is no longer viable, and therefore make changes to the plans. What should be put in place to ensure that we have more accurate viability testing before planning permission is granted?

[Matthew Pennycook]

I thank my hon. Friend for that well-made point. We had, as she will know, an extensive discussion on viability in the last sitting. The system is flawed in many respects, but there are ways in which it has been improved in recent years, and it could be improved further. The Mayor’s threshold approach in London is a good example of how that can be done; it draws in relevant expertise to ensure that contentious sites undergo a full viability assessment.

Our issue with the proposed system is that it is premised on removing the viability issue from the process entirely, but the point here is that the system certainly does not do that; at the rate-setting stage, viability is very much an issue. That needs to be addressed through the amendments. Amendment 162 would ensure that IL rate-setting testing and examination cannot be unfairly manipulated by developers seeking to drive down levy rates, because the amendment would clarify that charging authorities will not be expected to test every development site in their area. It would mitigate the risk that the infrastructure necessary to support development will not come forward, and that amounts of affordable housing will be reduced.

Amendments 163 and 164 are necessary to give full effect to the Government’s commitment that the new system will be, to quote the policy paper, a “locally determined Infrastructure Levy”, with Il rates set locally by charging authorities. The amendments do that by altering the provisions that give the Secretary of State the power to impose specific IL rates, nil rates or minimum thresholds that have not emerged as a result of an examination, or been justified with reference to local evidence. By preventing the Secretary of State from overriding a charging authority in those respects, the two amendments seek to avoid a scenario in which a charging authority is either prevented from developing its own IL rates or, after the lengthy and resource-intensive process of determining the IL rates and thresholds appropriate for its area, and after having them verified by an independent examiner, has them overridden by the Secretary of State.

There is nothing in the Bill to ensure that IL rates imposed by the Secretary of State in the way that the Bill allows would be based on local evidence or subject to independent assessment. There is therefore an obvious risk that the Secretary of State may, on occasion, be persuaded to bypass the IL rate-setting process on spurious grounds. We feel strongly that the process should be genuinely local, and that charging authorities should be confident, if they develop a rate or rates that are approved in examination, that they will be able to apply those without interference from the Department. I look forward to hearing the Minister’s thoughts on each of these important amendments.

[The Minister of State, Department for Levelling Up, Housing and Communities (Paul Scully)]

It is a pleasure to serve under your chairmanship, Mrs Murray, and to address the Committee and answer the questions raised. The hon. Gentleman talked about attrition rates, which are important for all of us as constituency MPs, and we all want to make sure that we get this right. I, too, thank the former Minister for Housing, my hon. Friend the hon. Member for Nuneaton (Mr Jones), for the work that he has done over the summer.

I begin by acknowledging the work of the Committee so far. The planning reforms will clearly be important in supporting our growth agenda, so I look forward to the next few days. I understand why the hon. Gentleman seeks to introduce the amendments. I will try to clarify some of the points, and to explain why we do not believe that the amendments are necessary. I will start with amendment 162.

Local planning authorities will be responsible for setting infrastructure levy rates, and for charging and collecting the levy, and they can spend the levy revenues on local priorities. When setting rates, they must have regard to the economic viability of the development of the area. I reassure the hon. Gentleman and the Committee that proposed new section 204A(2) of the Planning Act 2008 already ensures that that is the case. It states that the overall purpose of the levy,

“is to ensure that costs incurred in supporting the development of an area and in achieving any purpose specified under section 204N(5) can be funded (wholly or partly) by owners or developers of land in a way that does not make development of the area economically unviable.”

The overall purpose of the levy applies to all levy regulations, including those made under proposed new section 204G(4)(a), to which the hon. Gentleman has proposed additional text. This means that when charging authorities set rates or other criteria, they must have regard to matters specified in levy regulations relating to the economic viability of development. Although I understand his point, I hope that with that explanation, he will agree that amendment 162 is unnecessary.

Amendments 163 and 164 would prevent the Secretary of State from requiring, through regulations, that differential rates of the levy be set. They would also prevent the Secretary of State from specifying in regulations the basis on which a threshold for such rates may be determined. Again, I recognise that the aim of the amendments is to ensure that the rates are set solely by the charging authority, but I reassure the Committee that local rate-setting is indeed essential to the levy design. However, the levy must be charged in a coherent and consistent way, so that it meets its objectives of capturing more value and raising more revenue for local planning authorities, while maintaining the viability of developments across an area.

How the levy is charged should reflect the different amounts of additional value that might be generated across different kinds of development. In some circumstances, it might be necessary to require in the levy regulations that rates be set at higher or lower levels. For example, the additional value created by new floor space might be a lot greater than that created when existing floor space undergoes change of use. Similarly, the additional value generated by a residential development might be a lot higher than the amount generated by some types of commercial development, and it is right that the difference in value is reflected in levy rates.

There might be types of development on which it is simply not appropriate to charge the levy, or on which it would be appropriate to charge a reduced rate. Providing for that in the levy regulations will ensure the coherence of the regime that I talked about.

How much additional value is generated by a development depends in part on how much it cost to build, and on the value of the land before development takes place. The minimum threshold will broadly account for the costs of development in an area by charging the levy on the final gross development value. Above the minimum threshold, the levy is charged only on the additional value of a development. Without a minimum threshold, the levy would not be able to reliably capture more of the value uplift in different development types and land uses, while maintaining viability. The ability for levy regulations to require that thresholds for nil or reduced rates be determined in a specified way, including the ability to adjust them with reference to the cost of development in a charging authority’s area, is key to ensuring that this aspect of the levy function works in a coherent and consistent way.

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For those reasons, and given that the upcoming consultation will allow plenty of time to discuss, debate and shape these measures, I am unable to accept the amendments and ask the hon. Member to withdraw them.

[Matthew Pennycook]

I appreciate that comprehensive answer from the Minister, but I am afraid to tell him that I am not reassured. I am not sure—I will happily go back and check the record—that he addressed my specific points. As I said, our concern is that the language in proposed new section 204G(4)(a), when it comes to specifying how viability is handled within the rate-setting process, refers simply to “development”. It is not consistent with the language in proposed new section 204A(2), which specifically refers to “development of an area”.

The Minister spoke in general terms about the local rate-setting process. I take no issue with that. It is absolutely right that the local charging authority looks at viability as part of that process, but the specific concern that we have, as I said, is that it may be forced to assess the viability of every site in the area that it oversees, rather than being able to undertake a general assessment of viability in that area and not have specific sites skew the results. This could potentially have very serious implications for the levy rates that are set and the ability of developers to try to drive down those rates as part of the process. We are not satisfied on that score.

On amendments 163 and 164, we do not take issue with the fact that there needs to be a minimum threshold or the need for specified ways of setting or adjusting the levy rates. Our issue is with the powers that the Bill provides for the Secretary of State to intervene and overturn a locally determined rate that has gone through an examination process. The Minister has not convinced me that there is a good reason for those powers. On that basis, I am keen to make the point that we think this is one of the many weaknesses in the Government’s proposed infrastructure levy, so I am minded to press amendment 162 to a vote.

[Paul Scully]

Let me just answer a couple of points as the hon. Member considers whether to press the amendment to a vote. I assure him that charging the levies is very much for the local authorities. The intention is to not have a system that is different for every single development, because that becomes incredibly unwieldy—that is the point of introducing this system rather than the existing, technically complex system, where developers, who have deeper pockets than many local authorities, and more expertise, get round section 106 and CIL and so on. If they so choose, local authorities should be able to have different levies in different areas within their remit, but that should not be just from development to development. That is the intention of the measures here.

The powers of the Secretary of State reflect the current system. As I mentioned, the Secretary of State has powers under the existing system and we are reserving that same right, which is to be used only very sparingly.

[Matthew Pennycook]

I thank the Minister for that useful further clarification of the Government’s intention, but in many ways he made my point for me. No one is taking issue with the fact that the Bill specifies that local charging authorities set the rate. That is absolutely right. It is an advantage of the proposed system vis-à-vis that outlined in the 2020 “Planning for the Future” White Paper, which envisaged a nationally set rate or rates. The issue we have—the Minister spoke directly to this point—is the inequality of arms between developers and local planning authorities. Our concern is that the language in the Bill will allow developers, not in the way they do with the current section 106 system but under the new system, to use their extra resources, skills and expertise to drive down levy rates at the point at which they are set, due to the way that viability is dealt with in proposed new section 204G(4)(a). I am not satisfied by the Minister’s comments, and I will press amendment 162 to a Division.

Question put, That the amendment be made.

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[Greg Smith (Buckingham) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Murray. I join you in welcoming the Minister of State, Department for Levelling Up, Housing and Communities, my hon. Friend the Member for Sutton and Cheam, to his place on the Front Bench. It is also a pleasure to follow the hon. Member for York Central; I recognise the point she made about green lungs in urban environments, and about parkland and green spaces being in towns and cities up and down the land.

Listening to her comments, I remembered my own time in local government some moons ago, in the London Borough of Hammersmith and Fulham. We gave planning permission to one of Europe’s largest regeneration projects on brownfield land, crossing the London Borough of Hammersmith and Fulham and the Royal Borough of Kensington and Chelsea, around Earl’s Court and West Kensington. That development had multiple parks and lots of green space locked into its design, and into the planning permissions that were granted. It was, in fact, the incoming Labour council in 2014 that undid all of that and turned it over. While I have not been there in some time, I think I am right in saying that Earl’s Court still sits in rubble, as opposed to housing and beautiful green parks.

I will speak principally to amendment 59, which is tabled in the name of my right hon. Friend the Member for Chipping Barnet (Theresa Villiers), to which I too have put my name. It goes to the nub of the concerns that many Members across the House have about planning reform and the way we should go forward. There is a debate about where we should build; should we build on brownfield, or should we build on green space—green belt, greenfield, agricultural land and so on? When I look at my constituency, covering 335 square miles of north Buckinghamshire, 90% of that land is agricultural land. We have seen substantial development over the last 20 or 30 years. Some villages that started off small are now almost unrecognisable because of the vast housing estates that have been built, and which continue to be built on greenfield land around them. I think of villages such as Haddenham—close to my home village, for total transparency—where, yet again, another huge acreage of agricultural land is being built on for homes right now. Buckinghamshire Council, a good Conservative-run council, has a clear vision to build the housing the county needs through the light densification of some of the towns in Buckinghamshire.

However, what amendment 59 principally talks to is the need to incentivise developers to consider brownfield sites when they look at where to build the homes needed in Buckinghamshire and the rest of the country, and that they are not disincentivised because it is so much easier for them to build on greenfield, where they do not have the decontamination costs and all the other expensive costs of developing out brownfield sites. We can use the infrastructure levy to do that. If there is a sliding scale that says to developers that we can create that incentive through the taxation system and the infrastructure levy and potentially make these things cost-neutral, we can take the challenges of decontamination and other costs associated with brownfield land out of the equation for them. In that way, they will pay less infrastructure levy for building out on brownfield sites than they would for destroying the great British countryside.

It is not a perfect solution by any stretch of the imagination, because we still need the money for the roads, the GP surgeries, the schools and everything else the infrastructure levy is there to provide. However, unless we can create a system that really does come good on the Government’s welcome and solid commitment to building on brownfield first, I fear—and I had another developer in my inbox yesterday wanting to build out on a partially greenfield site in Waddesdon in my constituency—that all we will see is planning applications come in for greenfield development, and the brownfield first policy will not be realised.

I therefore urge the Minster to consider how we can use the infrastructure levy, in the spirit of amendment 59, to ensure that there are not financial penalties on developers for developing on brownfield land, so that we make that brownfield first policy come true. In that way, we can give local authorities that have lost a considerable chunk of greenfield and agricultural land in recent years—food security is important to all of us, and it is a pretty simple proposition that the more agriculture land we lose, the less food we can grow—the tools and powers as planning authorities to say that certain proposals are not what they need right now. In some areas, the proposals might be fine and might be what they want but, to use Buckinghamshire as an example, we could put in the differential rate enabled by this amendment to protect our greenfield and agricultural land and to drive development of the homes, commercial units and businesses we need on to the brownfield sites that exist predominantly in towns, and in some villages, in Buckinghamshire.

I urge the Government to look at the spirit of the amendment and to incorporate it into what will undoubtedly, after the leadership election, be quite a different Bill by the time it emerges on Report, to see whether we can make these proposals a reality.

[Matthew Pennycook]

First, I congratulate my hon. Friend the Member for York Central on amendment 168. She rightly speaks about the importance of green space in urban areas and about how we can increase the rate of it, if anything, when it comes to individual planning applications.

I will speak primarily to amendment 59, because I think it is worth putting the following on the record. I understand the point that the hon. Member for Buckingham is making, but my reading of the Bill is that the framework established in part 4 already allows charging authorities to set different IL rates according to existing and proposed uses, and those could include different rates for greenfield and brownfield sites. So the means to resolve the issue he is driving are already in the Bill, and Buckinghamshire Council will be able to set different rates on brownfield and greenfield sites if the Bill is given Royal Assent.

Our concern is that, by seeking to make mandatory a sliding scale of charges relating to land type or existing typologies by site, amendment 59 could result in reduced infrastructure contributions and lower levels of affordable housing in areas where development mainly or exclusively takes place on brownfield land, because it would prevent charging authorities from setting rates that are effective and suitable for their area and that consider local circumstances. For example, a mandatory sliding scale of charges, as proposed in the amendment, could result in the expectation that a charging authority whose development sites are entirely or mainly on brownfield land would set low IL rates to incentivise development in that area and disincentivise development in other areas with fewer brownfield sites.

Furthermore, brownfield development in higher-value areas will almost certainly generate sufficient values to support higher levels of contributions than would be possible on greenfield sites. As such, a mandatory sliding scale of charges would mean the loss of developer contributions that could viably have been delivered on brownfield sites, with no assurance that this would be offset by a higher level of contributions on greenfield land. Labour firmly believes in the principle of brownfield first, as do the Government, and that is absolutely right. However, we feel strongly that the setting of different IL rates for different land types should ultimately be determined by individual charging authorities taking account of local circumstances, rather than by the method proposed in amendment 59.

[Paul Scully]

The Government are already providing strong encouragement for the take-up of brownfield sites—we are all agreed on that—and are prioritising suitable brownfield land for development wherever possible. There is significant investment through the £550 million brownfield housing fund and the £75 million brownfield land release fund to unlock brownfield land across different communities across the country. Our national planning policy framework makes it clear that local authorities should give substantial weight to the value of using suitable brownfield land in settlements for homes and other identified planning need.

We recognise the importance of delivery on brownfield sites, as has been raised by the hon. Member for York Central and my hon. Friend the Member for Buckingham. However, we believe that that is better achieved through planning policy rather than through a fixed algorithm that automatically increases levy charges on the basis of the proportion of greenfield to brownfield. This further amendment would add a new element to the levy formula, which would still allow for greater greenfield development in certain circumstances, but would remain a formulaic approach rather than a policy-driven one.

The proportion of greenfield development within the local authority should continue to be policy driven at that local level, as we have heard. I agree with the hon. Member for Greenwich and Woolwich that it should be the local authority—the charging authority—driving that, based on their local circumstances. In any case, proposed new section 204G(5) and (8) in schedule 11 already contains powers for the levy regulations to permit or require local planning authorities to set different levy rates for different kinds of development, and proposed new section 204G(4) makes it clear that the local authority must have regard to the increases in land value that result from planning permission. That provides a framework where, if increases in land values are higher, as we have heard is often the case with greenfield development, higher rates can be set. On that, we agree in terms of policy.

In answer to the hon. Member for York Central, I totally understand her drive when she talks about buildings going up to five storeys, and it is important that it is the local area that determines exactly these things. Whether it is the view of the Minister or the affordability of properties, that should not be determined centrally with an artificial algorithm. It very much needs to be locally driven, so that local families and communities benefit from housing themselves and from the economic value of bringing in new people and new investment. It is about getting that balance right, and that will change for different areas. It was interesting to hear the hon. Member’s tour de force—that tour of York, and I suspect I will get a bit more about green spaces later this morning.

[Matthew Pennycook]

A lot more.

[Paul Scully]

A lot more, the hon. Gentleman says from a sedentary position.

Clearly, we do need those green lungs, as my hon. Friend the Member for Buckingham said. Those of us who have an urban, suburban or semi-urban area need to get that balance right, and I would much rather that that was done through a policy framework than by an algorithm, which can be game-played by developers. It is important to get this right at a local level, so it is important to get for local authorities to get the local plan in, so that they can shape their place. They have the determination to do so. For those reasons, amendments 168 and 59 are not necessary.

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[Rachael Maskell]

I have heard what the Minister has said. I will take his words as authoritative—they will be in the Hansard record of today’s debate—and, as a result, I will withdraw my amendment. The point about energy is significant, not least if I look at the Derwenthorpe development by the Joseph Rowntree Housing Trust in York, which has put energy and a community centre at the heart of that social/private development. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Matthew Pennycook]

I beg to move amendment 165, in schedule 11, page 306, leave out from line 38 to line 2 on page 307.

This amendment would limit the circumstances under which the Secretary of State could direct a charging authority to review its charging schedule.

This amendment, much like amendments 162, 163 and 164, which we debated earlier in relation to the IL rate-setting process, is concerned with ensuring that the new levy system is genuinely local and that charging authorities are fully in control of developing its discretionary elements at a local level. It would remove proposed new section 204Y(1)(b), which provides the Secretary of State with the power to direct a charging authority to alter its charging schedule in a range of circumstances, including

“in any other circumstances that IL regulations may specify”.

That is of particular concern.

Given that the Bill gives the Secretary of State the power to revise individual charging schedules at their sole discretion, with no need to justify that intervention by means of any objective evidence-based criteria, we are concerned that, as drafted, it could have significant implications. For example, it could allow a future Secretary of State to require a charging authority to amend its locally developed charging schedule as a result of lobbying by a developer, without having to provide any evidence that the levy as implemented in the area in question is impairing viability and frustrating development.

We believe that this amendment is necessary to ensure that the Secretary of State cannot direct a charging authority to alter its charging schedule merely due to the passage of time or any other circumstances they see fit, given that the only justified rationale for an intervention from Ministers in relation to a charging schedule—namely, its impact on viability—is already covered by subsection (1). I look forward to the Minister’s response.

[Paul Scully]

Proposed new section 204Y(1)(b) enables the Government to require an authority to review—not necessarily alter—its levy charging schedule if a significant amount of time has passed since its last issuing, review, revision or replacement. Proposed new section 204Y(1)(c) enables the Government to require a review in any other circumstances as may be specified through regulations. It is important to have a power to direct a review to be undertaken after a significant period has elapsed since the schedule was put in place or revised. That is because there may be occasions when a schedule has been in place for many years without a proper review, and so is not up to date.

The levy will be a mandatory charge, and for many local authorities operating a levy on new developments it will be a novel means to capture land value. Monitoring and reviewing charging schedules will therefore be important, especially for authorities that are unaccustomed to charging a levy. That is why we want levy charging rates to be reviewed on a timely basis. We will issue guidance on what that might reasonably mean in terms of time and circumstances. I hope that provides reassurance, including for communities and developers, that the rates remain appropriate. We want to make sure the approach is balanced.

Historically, local planning authorities have not always reviewed and updated key documents, such as local plans, in a timely fashion, which is why it is appropriate to take this power to direct a charging authority to issue, review, revise or replace. Furthermore, it is entirely consistent for the Bill to secure timely reviews of charging schedules and to require that local authorities introduce a charging schedule in the first place. Levy charging schedules are underpinned by evidence on local economic circumstances and viability. Reviews either provide confidence that the charging schedule remains appropriate or starts a process of revision if they are considered not to be.

We also consider it important to have the power to regulate for any other circumstances in which the Government may want to direct that a review be undertaken, such as if a new local plan is issued soon after the publication of a charging schedule. Any further circumstances identified will be introduced through affirmative regulations, and so will be laid before this House and debated and approved here. With that clarification, I hope the hon. Gentleman will agree to withdraw the amendment.

[Matthew Pennycook]

I appreciate that response from the Minister. I am partly reassured, and I note the point that he made about the use of “review” as opposed to directly “revise” in terms of the power available to the Secretary of State. I also note what the Minister said about the forthcoming guidance. I remain slightly concerned about how broadly defined line 2 of page 307 is, in that it does allow the Secretary of State to call for that review on the basis of anything that might come forward in future regulation, subject only to the affirmative procedure. We all know the limitations of that.

I am not going to press the amendment to a Division, but I hope the Government will reflect on the Opposition’s concerns about the ability in the Bill, as presently drafted, for the Secretary of State to intervene in a number of ways that should be the preserve of local charging authorities. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Matthew Pennycook]

I beg to move amendment 166, in schedule 11, page 308, leave out line 25.

This amendment would prevent IL regulations making unspecified provision about how powers under section 106 of TCPA 1990 (planning obligations) are used.

The Committee will be relieved to hear that this is the last of our amendments on the infrastructure levy. It relates to the interaction of the infrastructure levy with other existing powers. As drafted, proposed new section 204Z1(1) in schedule 11 provides for future IL regulations to make unspecified provisions about how a range of existing powers, including CIL and section 106 planning obligations, are to be used or not used.

Our specific concern relates to the application of those broad powers to the use of section 106 agreements. While we appreciate fully that there are circumstances where the use of section 106 will have to be limited—for example, to avoid double charging a development for the same infrastructure item—we feel strongly, for reasons that I went into in exhaustive detail on Tuesday in relation to that part of the Bill in the round, that section 106 agreements have a crucial role to play in ensuring we secure sufficient levels of affordable housing. We are concerned that proposed new subsection (1) could be used to unduly restrict their use.

By deleting line 25 from page 208, amendment 166 simply seeks to ensure that future IL regulations cannot make unspecified provisions about how section 106 agreements are used once the levy system is operational. I hope the Minster will seriously consider accepting the amendment. If not, I feel that we need, at a minimum, far greater clarity about the precise circumstances in which the Government expect to have to restrict section 106 of the Town and Country Planning Act 1990.

[Paul Scully]

Proposed new section 204Z1 in schedule 11 enables the Secretary of State to prescribe how certain powers are to be used or not. As we have heard, proposed new subsection (1)(c) enables the Secretary of State to prescribe how section 106 applications may or may not be used alongside the levy. That power has been used previously to make provision under the community infrastructure levy regulations to ensure that section 106 obligations are necessary in planning terms, directly related to the development, and fair and reasonably related to the scale and kind of development.

We need to be able to continue to ensure, under the new system, that section 106 obligations are used in ways that are appropriate, necessary and fair. We need to be able to delineate between matters that should be funded by the levy, and contributions to infrastructure or mitigation that should be secured by the more narrowly focused section 106 agreement. That means that developers will know that they will receive consistent treatment across different local authorities.

Removing section 106 from the list of powers will mean that the Secretary of State is unable to provide clear, coherent and consistent boundaries between what the levy should be used for, and what section 106 agreements can and cannot be used for. That would remove a key provision that will provide for coherence across the levy and the planning obligations regime. It is important to remember that the levy will take most of that. It will be more complicated, niche or bespoke schemes for which section 106 will remain. That coherence is why we want to keep that power and consistency. For that reason, I hope the hon. Member for Greenwich and Woolwich will withdraw the amendment.

[Matthew Pennycook]

That is a welcome additional clarification from the Minister, and I do not want to rehearse the previous debates that we have had. As I set out at length, we believe that the infrastructure levy should be discretionary and that, if it is not discretionary, affordable housing should not be within scope, so we remain concerned about the ability of this power to restrict how section 106 agreements are used. However, I will not press the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 11, as amended, agreed to.

Clause 114

Power to designate Homes and Communities Agency as a charging authority

Question proposed, That the clause stand part of the Bill.

[Matthew Pennycook]

I have a question relating to clause stand part. The Homes and Communities Agency, which operates under the trading name of Homes England, can already be designated as a local planning authority under the Housing and Regeneration Act 2008. The clause amends section 14 of the Act to provide that, if a designation order is made under section 13 to designate the HCA as a local planning authority for all or part of a designated area, the designation order may also make provision for the HCA to be the IL charging authority for all or part of the designated area.

The current situation with CIL is that the Homes and Communities Agency, urban development corporations and enterprise zone authorities can also be collecting authorities for development where they grant permission, but only if the relevant charging authority agrees. It would appear that the new provision in the clause allows Homes England to be a charging authority for the area where it acts as the planning authority, without the need for agreement from the local planning authority, as is currently the case with CIL.

Given the circumstances, I am more than happy for the Minister or his successor to respond to me in writing at a later date, but I would be grateful if he could explain the rationale behind the change of approach, what engagement and consultation Homes England will be required to carry out with other relevant local bodies in the absence of an explicit agreement to exercise the relevant powers, and what processes Homes England will use to decide how IL should be spent in that area.

[Paul Scully]

I will write to the hon. Gentleman with further details. As he rightly says, the clause is designed purely to act as a framework for having Homes England become a charging authority as well as a local planning authority. That power has not be exercised to date, but if it were, Homes England could become a charging authority. It is important to have the power in order to allow the Homes and Communities Agency to become the charging authority as well as the local planning authority, and to specify the purpose and kinds of development. Without the clause, the levy may not be able to function effectively in areas where the Homes and Communities Agency may be designated as the local planning authority. I commend the clause to the Committee, and I am happy to write to the hon. Gentleman with further details, should he require them.

Question put and agreed to.

Clause 114 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Gareth Johnson.)

Levelling-up and Regeneration Bill (Twenty First sitting)

Matthew Pennycook Excerpts

Committee stage
Thursday 8th September 2022 Public Bill Committees

[The Chair]

I have a few preliminary reminders for the Committee that Mr Speaker has asked me to read out. Please switch electronic devices to silent. No food or drink is permitted during sittings, except for the water provided. Hansard colleagues would be grateful if Members could email their speaking notes to hansardnotes @parliament.uk.

Clause 115 ordered to stand part of the Bill.

Clause 116

Power to specify environmental outcomes

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I beg to move amendment 173, in clause 116, page 133, leave out lines 13 to 20 and insert—

“(a) protection of the natural environment, cultural heritage and the landscape from the effects of human activity;

(b) maintenance, restoration or enhancement of the natural environment, cultural heritage or the landscape;

(c) protection of people and their long-term health, safety and wellbeing from the effects of human activity on the natural environment, cultural heritage and the landscape;

(d) protection of the climate from the effects of human activity;

(e) monitoring, assessing, considering, advising or reporting on anything in paragraphs (a) to (d).”

This amendment would broaden the definition of environmental protection to allow the Secretary of State to specify outcomes relating to climate change obligations and public health objectives.

It is a pleasure to serve under your chairmanship, Mr Hollobone. Part 5 of the Bill concerns the Government’s proposed new approach to assessing the potential environmental effects of relevant plans and major projects —namely, environmental outcomes reports. The reports are intended to replace the partly European Union-derived systems of strategic environmental assessment, including sustainability appraisals, and environmental impact assessments.

The Government’s rationale for the change in approach—this is gleaned not only from reading the Bill and its accompanying documents, but from the 2020 White Paper—is that the SEA and EIA systems can lead to duplication of effort and overly long reports, which inhibit transparency and add unnecessary delays to the planning process, and that the EOR framework will provide for clearer, simpler and presumably shorter assessments, with designated environmental outcomes that are easier to understand and monitor, and therefore to mitigate, remedy and compensate for, and will ensure that strategic and project scale assessments are properly joined up.

The Government’s critique significantly overstates the weaknesses of the SEA and EIA systems. That is not to suggest that they are perfect; for example, they can rightly be criticised for too often producing assessments that are too complex and cumbersome to be used effectively. However, the Government already have the necessary powers to improve many aspects of the SEA and EIA systems, if they chose to exercise them. Overall, the existing systems have made an enormous difference to how the environmental impact of development is considered. They are well established and understood, and when used correctly, they provide for rigorous, evidence-based, comprehensive assessments of the direct and indirect effects of projects and their mitigation in a way that involves the public.

As things stand, we really have no idea whether the proposed system of environmental outcomes reports provided for by part 5 will ultimately improve the process of assessing the potential environmental effects of relevant plans and major consents, because, as with so much of the Bill, the detail required to understand how EORs will operate in practice is simply not available. For example, we have no idea what range of factors the EORs can consider, or when EORs will be mandated. These and a wide range of other questions will be answered only when the regulations that set outcomes emerge in due course. Given the wide-ranging powers provided for in this part of the Bill, that is a cause of real concern.

When it comes to the basic EOR framework provided for by clauses 116 to 130, we take the view that an outcomes-based system could be an improvement on the present systems, given that they assess on the basis of the significance of effects on all relevant environmental receptors—although, again, it is impossible to arrive at a considered judgment on how much practical difference the EOR system will make when we have no idea how detailed or ambitious those outcomes will ultimately be, or what timeframe they will involve.

However, while we recognise the potential for an outcomes-based approach to establish an improved system of environmental protection, we are extremely concerned that part 5 is likely to lead to an approach that is too limited in scope, is insufficiently aligned with important obligations and requirements in environmental and climate legislation, and—for all the assurances to the contrary—provides an opportunity for environmental regression in the future.

It is essential that we have confidence that the new environmental outcomes report system will maintain the robustness and scope of the strategic environmental assessment and environmental impact assessment frameworks, and will lead to tangible improvements in our natural environment, as well as helping to fight climate change. If we are to build that confidence and provide reassurance that the new system will deliver improved outcomes, the EOR framework provided for in clauses 116 to 130 needs strengthening in a number of important respects. Amendment 173, and others that will be debated later, are designed to achieve that aim.

Clause 116 gives the Secretary of State the power to make regulations that set out specific environmental protection outcomes against which relevant plans and consents will be assessed, and sets out what the Secretary of State must have regard to when making those regulations. Subsection (2) sets out the definition of environmental protection for the purposes of the Bill. The Committee will note that it includes

“protection of the natural environment, cultural heritage and the landscape from the effects of human activity”,

as well as protection of people from the effects of human activity on each of those, and their maintenance, restoration or enhancement.

We take no issue whatsoever with any of the definitions in subsection (2). Indeed, the Government’s decision to explicitly include references to cultural heritage and the landscape in what is meant by “environmental protection” is welcome; but we still believe that the definition is too limited. Specifically, protection of the climate, and protection of people’s long-term health, safety and wellbeing from the effects of human activity, should be explicitly included in the Bill’s definition of environmental protection. Amendment 173 provides for that broader definition, and would enable the Secretary of State, when making regulations under part 5 of the Bill, to specify environmental outcomes relating to both climate change obligations and public health objectives.

In short, the amendment would expand the range of possible environmental outcomes that Ministers could, if they chose, specify by regulation in the future, and therefore expand the range of things that assessments under the EOR regime could encompass. It would allow the Secretary of State to, for example, specify as a desired outcome the long-term flood-proofing of key infrastructure, so that it is climate resilient; or measures to promote walkability and urban cooling, so that development promotes key public health objectives. This is a sensible and proportionate amendment, and I hope that the Minister will consider accepting it.

[The Minister of State, Department for Levelling Up, Housing and Communities (Paul Scully)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. As we have heard, the amendment seeks to expand the definition of “environmental protection” in clause 116 to include explicit reference to public health and climate change. Before I turn to the detail of the clause and the introduction of the new environmental outcomes reports, I should say that the Government have been clear that the new system is intended to improve the assessment of projects’ environmental impacts, and to place environmental matters—including climate change and public health—at the centre of decision making.

In line with that ambition and the commitment to non-regression, the definitions in clause 116 reflect and build on the definitions in the Environment Act 2021. Many of the terms used in the EU system of strategic environmental assessment and environmental impact assessment duplicate existing processes, or are poorly understood. Our broader approach to defining what outcomes may be covered will allow the Secretary of State greater flexibility to consider all relevant matters, including those that form part of the current assessment regime, such as human health and climate change.

As set out in subsection (2)(b) of the clause, the definition of environmental protection includes the protection of people, which would allow the Secretary of State to consider matters relating to health when setting outcomes. Subsections (2)(a) and (b) refer to protection from the effects of human activity, which would include protection from the impacts of climate change. Further, the definition of environmental protection is covered by the definition of the natural environment in subsection (3). This definition includes natural systems, cycles and processes, to ensure that matters such as climate change are properly built into consideration of outcomes under the new system.

While climate change and human health will undoubtedly be important considerations in setting outcomes, it is not necessary to make more explicit reference to them in primary legislation; doing so would risk limiting the range of outcomes that can be set, and risk our suggesting that climate change and health will be considered above other environmental topics that may, in individual cases, be equally important.

It is right that environmental outcomes reports focus on the full range of environmental issues. Developing the detail of what outcomes will be covered in secondary legislation will allow us to consult stakeholders, so that we can ensure that climate change and public health commitments, as well as other environmental matters, are captured. Outcomes will also draw on the extensive commitments made across Government, including the requirement in subsection (5) for the Secretary of State to have regard to the latest environmental improvement plan when setting outcomes. Setting out details around climate change and public health in secondary legislation will also enable us to minimise the risk of duplication and ensure alignment, as these are important considerations across other policy areas in the planning and consenting systems. In the light of these assurances, I hope that the hon. Member for Greenwich and Woolwich is able to withdraw his amendment.

[Matthew Pennycook]

I appreciate that response, but I do not think it addresses the concern raised by the amendment. I very much welcome what the Minister said about the Government’s intention to put public health and climate at the centre of decision making. The concern, though, is that although the clause gives a comprehensive list of what “environmental protection” means, it does not explicitly reference public health—human health—or climate, and I cannot for the life of me understand how inserting those things in the Bill explicitly would in any way limit the outcomes that could be set. We would merely be specifying and clarifying that outcomes relating to those two objectives were caught under the powers in the Bill.

I note what the Minister says about forthcoming secondary legislation capturing those objectives, but this issue speaks to our concern that there is a real gap in how the Bill addresses climate and public health. We feel that while opportunities to reinforce the Government’s commitments are woven through the fabric of the Bill, those issues are often neglected or left out.

I will not press the amendment, but we shall come back to the issue of public health and climate, because they need to have a much more central role in this legislation, and to be written into the Bill in many important respects, including in clause 116. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Matthew Pennycook]

I beg to move amendment 174, in clause 116, page 133, line 29, leave out subsection (5) and insert—

“(5) Before making any EOR regulations which contain provision about what the specified environmental outcomes are to be, the Secretary of State must ensure they are in accordance with—

(a) the current environmental improvement plan (within the meaning of Part 1 of the Environment Act 2021),

(b) biodiversity targets including those required under sections 1 and 3 of the Environment Act 2021,

(c) the duty to conserve biodiversity as required under section 40 of the Natural Environment and Rural Communities Act 2006,

(d) local nature recovery strategies as required under section 104 of the Environment Act 2021, and

(e) lowering the net UK carbon account as required under section 1 of the Climate Change Act 2008.”

This amendment would ensure that when using EOR regulations to specify environmental outcomes the Secretary of State would have to ensure they are in accordance with the current environmental improvement plan and additional criteria.

[The Chair]

With this it will be convenient to discuss new clause 52—Super-affirmative procedure for major regulations made under Part 5—

“(1) If the Secretary of State proposes to make EOR regulations which fall under section 192(5), the Secretary of State must lay before Parliament a document that—

(a) explains the proposal, and

(b) sets it out in the form of draft EOR regulations.

(2) During the period of 60 days beginning with the day on which the document was laid under subsection (1) (‘the 60-day period’), the Secretary of State may not lay before Parliament draft regulations to give effect to the proposal (with or without modifications).

(3) In preparing draft regulations under this Part to give effect to the proposal, the Secretary of State must have regard to any of the following that are made with regard to the draft regulations during the 60-day period—

(a) any representations, and

(b) any recommendations of a committee of either House of Parliament charged with reporting on the draft regulations.

(4) When laying before Parliament draft regulations to give effect to the proposal (with or without modifications), the Secretary of State must also lay a document that explains any changes made to the proposal contained in the document laid before Parliament under subsection (1).

(5) In calculating the 60-day period, no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than 4 days.”

This new clause would require major EOR regulations made under Part 5 to be subject to the super-affirmative procedure.

[Matthew Pennycook]

Clause 116(5) simply states that before making any EOR regulations that contain provision about what the specified environmental outcomes are to be, the Secretary of State must have regard to the current environmental improvement plan within the meaning of part 1 of the Environment Act 2021. At present, that environmental improvement plan is the 25-year environment plan, which was published in 2018 and is due to be reviewed next year. We welcome the fact that the Bill makes it clear that when making EOR regulations, the Secretary of State will have to have regard to that 25-year environment plan, although I encourage the Minister and his departmental colleagues and officials to do what they can to ensure that its review is completed before this Bill receives Royal Assent, so that the measures in the plan are fully aligned with the now operable Environment Act 2021, and so that the nature of the safeguard provided for in subsection (5) of this clause is clear and unambiguous.

However, while the explanatory notes to the Bill make it clear that the Secretary of State can draw on other relevant material when developing outcomes, there is nothing in the Bill to ensure that the Secretary of State must have regard to other important obligations and requirements set out in environmental and climate legislation beyond the environmental improvement plan.

[Rachael Maskell (York Central) (Lab/Co-op)]

I am grateful for the work that my hon. Friend is doing on the environment, and to try to ensure that the climate is front and centre in the Bill. Commitments were made at COP26 and COP15. We need the application of those commitments to come through in planning; there is nowhere else that they can come through. Is it not important that the determinations reached at those summits be brought into the planning process?

[Matthew Pennycook]

It absolutely is. The amendment seeks to ensure that the obligations we have made, and the way that they are written into domestic legislation, is accounted for in the framework that part 5 provides for. After all, we are talking about how to assess the environmental impact of development. It stands to reason that requirements and obligations that flow from things such as the Climate Act 2008 should be written into the Bill explicitly. Leaving them out is problematic because it would lead to important EOR regulations being made without there being sufficient regard to significant relevant targets, duties, strategies and obligations, which, we should remember, the Government themselves legislated for.

Amendment 174 seeks to replace subsection (5) of clause 116 with a subsection containing a more comprehensive list of requirements that the Secretary of State should have regard to—it is only “should have regard to”—before making any EOR regulations that make provision about specified environmental outcomes. In addition to the environmental improvement plan, the Secretary of State would have to have regard to: biodiversity targets, including those under sections 1 and 3 of the Environment Act 2021; the duty to conserve biodiversity, as is required under section 40 of the Natural Environment and Rural Communities Act 2006; local nature recovery strategies, as is required under section 104 of the Environment Act 2021; and lowering the net UK carbon account, as is required under section 1 of the Climate Change Act 2008.

Putting that expanded list of requirements in the Bill would strengthen the EOR framework by making it perfectly clear that the Secretary of State has to take into account those important legislative commitments when making EOR regulations.

In addition to expanding the list of requirements that the Secretary of State must have regard to before making any EOR regulations relating to specified environmental outcomes, we also believe there is a compelling case for greater parliamentary oversight of any such regulations that are proposed. The explanatory notes to the Bill make it clear that set outcomes will be subject only to public consultation and the affirmative parliamentary procedure. I will not detain the Committee with a digression on the limitations of the affirmative procedure as a means of effective parliamentary scrutiny—we are all familiar with them, and have discussed them in the context of the Bill previously.

Clause 116 and the other clauses in part 5 provide the Secretary of State with expansive powers allowing them to pass, by regulation, as yet unspecified, and potentially far-reaching, measures affecting the environment and environmental law, so we strongly believe that any such regulations should be subject to the super-affirmative procedure. New clause 52 would provide for use of that procedure for regulations made under part 5. I hope the Minister will give the new clause consideration, along with amendment 174.

[Paul Scully]

I understand the hon. Member’s concerns, but I hope to explain why the approach that we have taken in the Bill is sufficient. Amendment 174 would require environmental outcomes to be set in accordance with the environmental improvement plan, biodiversity targets, local nature recovery strategies and the Climate Change Act 2008. The environmental improvement plan, the current iteration of which is the 25-year environment plan, is where the Government set out how we aim to leave the environment in a better state than we found it. The Government have made it clear that an outcomes-based approach will be developed to support our environmental ambitions. For the purposes of this legislation, the environmental improvement plan is the most relevant document in informing the setting of outcomes. It is where the breadth of the ambitions are captured, and it is itself informed by a wide range of commitments and matters from other sources.

The Environment Act 2021 created a duty on the Government to prepare annual reports on the implementation of the environmental improvement plan, and to review and, if necessary, reissue the plan every five years. As such, it is a dynamic document that will evolve over time and reflect the most up-to-date position on the Government’s efforts to support the environment.

The environmental improvement plan also sets interim targets in respect of each of the key matters for which the Government have applied legally binding environmental targets, which will be reviewed regularly. That includes the biodiversity target mentioned in the amendment. Other more general duties and local strategies will also be informed by this overarching plan.

The amendment would also introduce a duty to act in accordance with a range of existing legislative provisions, and therefore risks creating potential conflict and unnecessary confusion. It is unclear how, for example, a national outcome could be set in accordance with a local nature recovery strategy, which is by definition spatial and site-specific.

Outcomes will cover a broad range of topics. The intention is not to create an exhaustive list of everything that will be considered when they are being set; rather, it is to recognise that the environmental improvement plan is at the heart of the Government’s agenda. Other duties will of course be reflected in outcomes at the moment they are set, but the duty to have regard to the current environmental improvement plan is the clearest way of ensuring that outcomes reflect the Government’s environmental ambitions.

With that in mind, it is important to note that the environmental improvement plan and commitments such as those under the Climate Change Act 2008 were not conceived as a way of informing outcomes for the EOR. As such, it would not be appropriate to set a hard requirement that EOR outcomes be set in accordance with those commitments.

The purpose of environmental outcome reporting, as is true of the existing system, will be to ensure that the right information is gathered to inform the right decisions, not to prioritise any one particular policy over another. Not everything in the environmental improvement plan will be relevant to development and environmental assessment, and there will be ambiguity as to how the plan should best be translated into outcomes for individual plans and developments. Equally, we will want to set outcomes in respect of landscape and cultural heritage, which are not in the scope of the plan.

When making EOR regulations that specify outcomes, we will have regard to the environmental improvement plan and other relevant considerations. Just as importantly, we will use the process of public consultation to ensure that we are capturing the outcomes that will best support the delivery of our environmental priorities. The amendment therefore risks both confusing and limiting the process by which outcomes are set. Given that explanation, I hope that the hon. Member for Greenwich and Woolwich will be able to withdraw the amendment.

New clause 52 seeks to make the EOR regulations subject to the super-affirmative procedure—something comparatively new to me. We have sought to take a proportionate approach to parliamentary scrutiny and consultation, placing the strongest requirements on the core elements of the new system. Clearly, we want to ensure that we have the best debates, consultations and discussion on such incredibly important issues. The use of powers in this particular part of the Bill, however, is tightly constrained with broad use of the affirmative procedure to ensure that Parliament gets the opportunity to scrutinise regulations properly in detail.

In addition to requiring the affirmative procedure, clause 125 ensures that EOR regulations that cover the most significant aspects of the new regime—for example, those that specify outcomes—will also require public consultation or consultation with stakeholders. That will provide stakeholders and parliamentarians with the opportunity to consider the details of the proposed regulations in advance of their being laid. Regulations requiring public consultation will be followed up by an official Government response on how those views have been taken into account in setting the detailed policy.

Before engaging formally on the detailed regulations, after the Bill achieves Royal Assent we plan to launch a high-level consultation on the core elements of the new system—for example, on the outcomes-based approach to assessment and the use of the mitigation hierarchy in assessing reasonable alternatives. That will be combined with conceptual roundtables and expert policy forums to inform the design of the new regulations and wider implementation.

As such, the super-affirmative procedure would duplicate the consultation and the approval requirements, so we do not deem it necessary. It would only serve to slow down the process of bringing forward necessary reforms that we believe will help to improve the environment in the long run. Given that explanation, I hope that the hon. Member will agree not to press new clause 52.

--- Later in debate ---

[Matthew Pennycook]

I am somewhat reassured by that response from the Minister. However, I take issue with it in a number of respects. I appreciate fully that the 25-year environment plan is the current environmental improvement plan. It may be the most relevant document, but it is limited. I note the point about biodiversity targets, but the document does not contain all the other requirements in the legislation listed in the amendment. The environment plan may be informed by those other requirements, but it does not contain them and does not operate in the same way.

If I am honest, I struggle to understand the issue with the insertion of language relating to legislation the Government have passed, which one would hope has been aligned and made compliant with other bits of legislation that could create potential conflicts during the process of passing it. We remain concerned that the reference in subsection (5) is too limited and we would like to see a wider set of requirements written into the Bill, but I do not intend to press amendment 174 to a vote.

On new clause 52, I welcome the Minister’s comments on the processes that the Government intend to follow when it comes to designing EOR regulations. That measure of public involvement is welcome and will be an important part of the process, but we are still concerned that, overall, the safeguards are insufficient—I will come on to talk about the other safeguards provided in part 5. We do not believe that they tightly constrain the use of the powers; in fact, we think they do the opposite, and there are a number of loopholes that need to be closed.

I cannot for the life of me understand how a public consultation would duplicate the parliamentary oversight that would be afforded to this place by the super-affirmative procedure. I go back to the point I made on a previous amendment. These are broad, expansive powers, which are as yet unspecified. There is a need for greater parliamentary oversight, as well as other stronger safeguards. I am not going to press the new clause to a vote at this point, but we will come back to this and other matters on this part. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

I have said already that we are committed to delivering a modern system of environmental assessment that properly reflects the nation’s environmental priorities. The Bill allows us to introduce a new framework to replace the EU’s systems, while recognising the important role that environmental assessment plays. The previous regime could be overly bureaucratic and disproportionate. Expanding case law has led to a situation where unnecessary elements are being assessed for fear of legal challenges. The costs for big projects run into hundreds of thousands of pounds on occasions; yet, despite the lengthy reports, they often prove ineffective at securing better environmental outcomes or encouraging development to support the country’s most important environmental priorities.

The 25-year environment plan acknowledges that the UK is one of the most nature-depleted countries of Europe. The 2019 “State of Nature” report led by conservation research organisations found that 41% of UK species are declining and one in 10 is threatened with extinction. Given the urgency with which we need to restore the environment to leave it in a better place for future generations, we desperately need a new approach.

The powers in the Bill will extend to all regimes currently covered by the EU system, to ensure the best approach for the interoperability between regimes, particularly for projects that are often in the scope of more than one regime, such as planning and marine. The new approach will be centred around the creation of environmental outcomes reports, which will directly set out how consents and plans should support the delivery of environmental priorities by assessing the extent to which they support the delivery of better environmental outcomes. That moves us away from the uncertainty of assessing likely significant effects to a more tangible framework that provides more clarity on what should be assessed and when.

Assessing consents and plans directly against those outcomes will ensure that reporting is focused on those matters that will make a real difference to environmental protection. In turn, that will support more effective decision making and make reports more accessible to the public.

The outcomes will be fairly high level and user-friendly, simply setting out environmental priorities. It will be the job of indicators underpinning those outcomes to measure the delivery towards the outcomes. Indicators will be created and outlined in guidance for the different types of plans and projects and for different spatial scales. For example, indicators could set out which air pollutants should be measured and against which limits to measure the contribution towards an air-quality outcome seeking to reduce emissions.

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Environmental outcomes reports for relevant consents and relevant plans

[Matthew Pennycook]

I beg to move amendment 175, clause 117, page 134, line 26, at end insert

“relative to the current status of the environment as assessed in a prepared baseline study”.

This amendment would ensure that the preparation of a baseline study which sets the context for assessing the environmental effects of a proposed project remains a core requirement of producing an EOR.

This amendment relates to a technical matter, but still an important one. Clause 117 gives the Secretary of State the power to make regulations requiring the preparation of an environmental outcomes report for relevant plans and relevant consents, the criteria for which will be set out in due course in regulation. It is this provision that establishes the outcomes-based approach to assessment, which the Minister has just described, wherein anticipated environmental effects are to be measured against the specified environmental outcomes, which clause 116 provides the power for the Secretary of State to specify.

Clause 117 ensures that where an EOR is required, it must be taken into account when considering whether to grant planning consent and the terms on which it is given, or to bring a plan into effect. The core requirements of what an EOR should contain are set out in subsection (4). It specifies that an EOR

“means a written report which assesses—

(a) the extent to which the proposed relevant consent or proposed relevant plan would, or is likely to, impact on the delivery of specified environmental outcomes”.

Paragraph (b) specifies any steps that may be proposed in terms of mitigation, remediation or compensation, and paragraph (c) discusses any proposals about how paragraphs (a) or (b) should be monitored or secured.

It would therefore appear that, when it comes to EORs, the Government have in mind, essentially, a simplified environmental assessment report—one, as the explanatory notes make clear, based on the mandatory information required in the reporting stages of the environmental impact assessment directive and the strategic environmental assessment directive. However, in setting out the core requirements of what an EOR should contain, subsection (4) contains no reference to the need for an environmental baseline assessment to have been prepared. We believe that oversight needs to be addressed.

A baseline study is an essential part of preparing an EIA because it is necessary to assess the current status of any given environment prior to development taking place. It covers, for example, what habitats exist within the environment and how they are changing, or the type and number of species present, in order to accurately judge the expected impact of development on the outcomes previously specified. Indeed, because baseline studies are an integral part of the existing SEA and EIA systems, we believe their removal could well contravene the non-regression safeguard provided for by clause 120, which we will debate in due course.

When it comes to EORs, it is difficult to conceive of how they will operate in practice without some kind of baseline study taking place, because quantifying the impact of development on any given outcome requires that the precise characteristics of the locality in question are known.

By amending subsection (4)(a) of clause 117, amendment 175 simply seeks to ensure that the preparation of a baseline study, which would set the context for assessing the environmental effects of a proposed plan or consent, remains a core requirement of producing an EOR. I look forward to hearing from the Minister that the Government are content to accept the amendment or, if not, an explanation as to why the Government believe that baseline studies are no longer required when it comes to assessing the environmental impact of any given development.

[Paul Scully]

As we have discussed, amendment 175 would give an explicit requirement for the impact of a consent or plan to be set up relative to a baseline study on the current environmental state. Subsection (4)(a) of clause 117 explains that an environmental outcomes report must demonstrate how the plan or consent would affect the delivery of specified environmental outcomes. The environmental baseline is a reference point against which the assessment is carried out. It will remain part of the process of demonstrating how a plan or project supports the delivery of environmental outcomes.

While outcomes will reflect national priorities, it is important that they can be translated to the regional or local level, given that that is the level at which the plans and projects, which will require EORs, will normally take place. As such, outcomes will be underpinned by a set of specific indicators, which will measure the contribution of a plan or project towards outcomes. Those indicators will be relevant to the geography of an area and will change over time to reflect the latest scientific understanding. Indicators will outline how a plan or project shows whether they are contributing to outcomes, and will be tailored to the needs and characteristics of different outcomes.

The details of outcomes and indicators will be developed, as I have said, through consultation with relevant stakeholders, and we will work with experts to gain insights on how best to utilise baseline data to inform them and ensure that overall environmental protections are maintained. Following that, clear guidance will be provided setting out how a plan or project should use indicators to demonstrate that they are supporting outcomes.

I do not think that we are that far apart in this, and I hope that the hon. Member for Greenwich and Woolwich will accept my explanation that although the baseline data is clearly important in measuring those outcomes and using those indicators, we do not need the duplicative nature of having it in the Bill. I therefore hope the hon. Member will withdraw his amendment.

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[Matthew Pennycook]

I appreciate that response from the Minister. I think we would still like something to be written into the Bill regarding baseline studies. However, I very much welcome the clarification that he has just provided—that they will “remain part of the process” , and that they will be translated and tailored to the regional and the local level. I think that is very important and, on that basis, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The outcomes-based approach to assessment will ensure that the Government’s environmental commitments and priorities are placed right at the centre of the consenting process, in a system that is streamlined, transparent, accessible and clear. As outlined in the previous clause, we would want to make reports user-friendly and concise, enabling communities to understand what forms part of the assessment and how impacts are measured via indicators. We also want to improve the accessibility of reports and the data that underpins them by improving their format and avoiding multiple PDFs of tens of thousands of pages, for example.

In order to introduce the new outcomes-based approach to environmental assessment, the Government need the power to require the production of an environmental outcomes report for relevant proposed contents and plans. In taking that power, the Government are able to ensure that, where a report is required for a relevant consent or plan, the report must be completed before consent is granted or a plan is adopted.

Furthermore, the clause ensures that where an environmental outcomes report is produced, it must be considered by the relevant decision maker, which means that decisions are informed by quality information that fully considers the environmental effect of the plan or consent. It also sets out what the content of the reports should be. They will primarily assess how the proposed consent or plan would impact on specified environmental outcomes, supporting our ambition to move towards an outcomes-based system.

In structuring the clause, we recognised the need to provide powers to support the reform of a wide range of environmental assessment regimes across Government, but we have sought to ensure that core requirements are brought to the fore. For example, reports must consider reasonable alternatives to the proposed consent or plan and assess any steps taken in line with the mitigation hierarchy. This is the first time that explicit consideration of the mitigation hierarchy has been included in environmental legislation. Importantly, that hierarchy recognises that prevention is better than cure. In every consideration, plans and projects should first seek to avoid the impact happening in the first place, before considering mitigation and finally compensation, which should be absolutely the last resort. That sequential approach will finally be enshrined in law.

Having the powers to set out specifics in regulations rather than on the face of the Bill will ensure that the new system is more dynamic, allowing for updates to our approach to be considered and consulted on as our understanding of the environment deepens. It will also allow the differences between regimes to be accommodated. The clause sets out crucial provisions required to implement environmental outcomes reports and ensures that reports have sufficient weight and status in the decision-making process. I commend the clause to the Committee.

Question put and agreed to.

Clause 117 accordingly ordered to stand part of the Bill.

Clause 118

Power to define “relevant consent” and “relevant plan” etc

Question proposed, That the clause stand part of the Bill.

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[Matthew Pennycook]

I welcome the detail provided by the Minister, but I will push him a little further on both clauses. Again, in the circumstances, I am more than happy for him to write to me to elaborate on his answers if he feels he needs to.

As the Minister said, clause 118(2) enables the Secretary of State to make regulations setting out those consents that should be considered category 2. Although category 1 consents will always require an EOR, category 2 consents will be required to produce one only where they meet criteria set through regulations made under the provision. I would be grateful if the Minister gave the Committee an idea of the criteria likely to be set through regulations under this provision that will require a category 2 consent, and of the rationale behind those criteria.

Clause 118(4) allows the Secretary of State to make regulations imposing a requirement for a consent in relation to a project. The requirement will be used, as in the current environmental impact assessment agriculture regime, where no other consenting mechanism exists. The Bill simply states that

“EOR regulations may impose a requirement for a consent in relation to project, which is to be a category 1 consent or a category 2 consent”.

Can the Minister explain the rationale for not specifying that the Secretary of State may impose a requirement for a consent in relation to a project only where no other consenting mechanism exists?

Clause 119(1) enables the Secretary of State to make regulations setting out how the delivery of specified environmental outcomes should be assessed or monitored. Can the Minister tell us whether the Government have a general sense of how outcomes will be assessed and monitored under this new framework and, if so, will he share it with the Committee?

Finally, clause 119(3) states that EOR regulations may make provision requiring action to be taken, if an assessment or monitoring under subsection (1) or (2) determines that is appropriate for the purposes of compensating for a specified environmental outcome not being delivered to any extent. Will the Minister explain the thinking behind the penalties and remedies available in the new EOR system when it comes to environmental outcomes not being delivered, and will he tell us whether the Department has undertaken any work to research the impact of introducing an outcomes-based approach on rates of delivery and non-delivery of environmental targets in development projects?

[Paul Scully]

Let me try to answer some of those points, and I will happily write with extra detail should I fail in my objective. We will clearly be consulting on which developments require an EOR when certain criteria are met, and we will publish those following Royal Assent. In line with our commitment to non-regression, we will ensure that any plan or project requiring assessment under the current regime because of its potential impact on the environment will continue to do so under the new framework. We want to avoid unnecessary screening work, so it is likely that more plans and projects will automatically be subject to a proportionate report, but only in borderline cases. As I said, we will work towards that through a consultation process on the criteria approach.

The regulations will determine the process for considering whether the plans or projects meet the criteria for a full environmental outcomes report, and clearly we will work with stakeholders to inform our approach to the criteria, and the processes for determining whether those criteria have been met. We want to ensure that the development management system continues to determine projects. We want the EOR to reform the process, but we do not want to replace it. The majority of consenting regimes base the consenting decision on a range of different factors. They will need to make a subsequent decision following assessment, but we want to ensure that the Secretary of State effectively has a light touch on this because, having done the consultation with stakeholders, this should be done at a local level as best we can.

The hon. Member for Greenwich and Woolwich talked about monitoring. The detail of monitoring regimes, including how long monitoring should be carried out for, will be set out in regulations to reflect the different approaches required for each assessment regime. It is not a one-size-fits-all system, because that is unlikely to be optimal, but the intention is that, with a more streamlined pre-consent process, more time and resource can be put into post-consent monitoring, which will likely be of far more value both in terms of securing positive outcomes and gathering useful environmental data to feed back into the system.

One thing that I am not sure I brought out enough in my speech is that the data that the exercise provides, being more data driven rather than the prose that I was talking about, will not only be useful for permissions and monitoring but have a far wider effect on our understanding of the environment in general, because some really interesting data will be brought out that cannot be captured in the analogue system that we have at the moment. I cannot answer the hon. Gentleman’s question about the research to date, so I will write to him on that, and other points that I have not covered.

Question put and agreed to.

Clause 118 accordingly ordered to stand part of the Bill.

Clause 119 ordered to stand part of the Bill.

Clause 120

Safeguards: non-regression, international obligations and public engagement

[Matthew Pennycook]

I beg to move amendment 176, in clause 120, page 137, line 21, leave out subsection (1) and insert—

“(1) The Secretary of State may only make EOR regulations if doing so will result in no diminution of environmental protection as provided for by environmental law at the time this Act is passed.”

This amendment would ensure that the new system of environmental assessment would not reduce existing environmental protections in any way rather than merely maintaining overall existing levels of environmental protection.

[The Chair]

With this it will be convenient to discuss amendment 177, in clause 120, page 137, line 26, leave out from “Kingdom” to end of line 28.

This amendment would ensure that for the purposes of making EOR regulations international obligations are not limited to those that regulate the process for environmental impact assessment.

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[Matthew Pennycook]

The clause provides for a series of safeguards premised on a commitment to non-regression of environmental protection, suitable opportunity for public engagement and international obligations. While we welcome the inclusion of these safeguards in the EOR framework set out in part 5, we feel strongly that they are insufficiently robust. When it comes to public engagement, we note that subsection (3) of the clause specifies that

“the public will be informed of any proposed relevant consent or proposed relevant plan”,

and should have an opportunity to engage in the process, as per the requirements of the Aarhus convention. We are concerned the force of the provision is undermined by the fact that “adequate public engagement” is defined in subsection (4) as whatever the Secretary of State “considers appropriate”.

When it comes to international obligations, it is welcome that subsection (2) specifies EOR regulations

“may not contain provision that is inconsistent with the implementation of the international obligations of the United Kingdom”,

but we are concerned that in qualifying this constraint by specifying it only applies to those international obligations

“relating to the assessment of the environmental impact of relevant plans and relevant consents”,

the Bill could restrict applicable international obligations to those that simply regulate the process for environmental impact assessment. The Minister may say it is entirely appropriate that they do so, but we feel qualifying the constraint in this way could have the effect of ensuring that international obligations relating to air or water quality standards, for example, need not be considered because they would not form part of the actual “assessment” of environmental impacts. We believe the constraint provided for by subsection (2) should be less ambiguous, so as to close a potential loophole. Amendment 177 would achieve that objective by deleting the relevant qualification to make clear that EOR regulations may not contain provision that is inconsistent with the implementation of any international obligations that apply to the UK.

Finally, we welcome the inclusion of a non-regression clause in the Bill, on the grounds that any additional safeguard that constrains the use of the regulation-making powers in this part of the Bill is beneficial. However, we have three serious concerns about the effect of the non-regression provision set out in clause 120(1). Firstly, its application is entirely at the discretion of the Secretary of State; it is they who have to be satisfied that making the regulations will not result in environmental regression. As such, it is an entirely subjective constraint, and one that is unlikely to ever be challenged in the courts. Secondly, we are extremely concerned about the practical implications of specifying the Government’s non-regression commitment applies only to the

“overall level of environmental protection”.

In failing to make clear that the principle of non-regression, as it relates to the EOR framework, applies to specific aspects of environmental protection, we fear the new system will engender, as the CEO of Wildlife and Countryside Link, Richard Benwell, put it to the Committee in the oral evidence he provided many weeks ago,

“a runaway offsetting mentality where the assurance that things will be better overall can be taken to obscure a lot of harm to the natural environment at the local level.”––[Official Report, Levelling-up and Regeneration Public Bill Committee, 23 June 2022; c. 117, Q146.]

Thirdly, we are also concerned about the definition of “environmental law”, cited in subsection (1) and set out in subsection (4) of the clause. In limiting the non-regression constraint in the Bill to environmental law as defined in the Environment Act 2021, a number of relevant considerations would not be covered—including some of those set out on the face of the Bill in clause 116, such as cultural heritage and landscape—as they fall outside of the definition used in the 2021 Act. Section 46 of the Environment Act 2021 defines environmental law as “any legislative provision” that is “concerned with environmental protection”. A literal interpretation of environmental law, so defined, would cover only UK law. The Minister may argue that is unproblematic, given the commitments relating to “international obligations” set out in subsection (2), but for the reasons I have addressed we are concerned they are defined on the face of the Bill in an overly restrictive manner that will limit how much protection they provide against potential future regression.

We therefore believe that subsection (1) should be replaced with a new subsection specifying that the Secretary of State may make EOR regulations only if doing so will result in no diminution of environmental protection as provided for by environmental law at the time that the Act is passed, as provided for by amendment 176. The amendment would significantly strengthen the non-regression constraint provided for in the clause, so that Ministers cannot determine to make EOR regulations that increase environmental harm in some areas if they judge they are somehow offset in others, but must ensure there is no diminution of environmental protection whatsoever. I look forward to hearing the Minister’s response to these two important amendments.

[Paul Scully]

The new system that we have been discussing is all about improving environmental assessment, not weakening environmental protection. Moving to the outcomes-based approach that I have outlined will allow the Government to set ambitious outcomes, building on the Environment Act 2021 and other environmental commitments.

I understand the spirit and reasoning behind amendment 176, which proposes to amend the wording of the non-regression provision in clause 120 so that regulations must “result in no diminution of environmental protection”.

However, in drafting the Bill, we recognised the need to provide assurance that the new system will continue to support the protection of the environment, and the clause was drafted specifically to mirror the provisions of the EU-UK trade and co-operation agreement. That ensures that these reforms live up to our commitment to non-regression with our partners in that area. If we are to meet the complex environmental challenges that we face, we need to take a holistic approach and focus on how well the system delivers for the environment overall. We will concentrate on the aspects of the system that deliver real, positive outcomes for the environment, rather than on bureaucracy.

Where needed, we will seek to streamline the system, for example in areas where there is duplication of other existing processes, thereby allowing resources to be better focused elsewhere. However, along with the commitment to non-regression, we have also included significant duties to consult with the public and relevant stakeholders. We are also giving Parliament the opportunity to scrutinise subsequent regulations through the affirmative procedure, which is entirely appropriate. In the light of those reassurances on our commitment to maintaining environmental protections, I hope that the hon. Member for Greenwich and Woolwich will withdraw amendment 176.

Amendment 177 provides that EOR regulations must not be inconsistent with any international obligations, rather than specifying consistency with international obligations relating to environmental assessment. The inclusion of clause 120(2) demonstrates the Government’s commitment to legislating in a manner that is consistent with our international obligations. The clause seeks to provide explicit assurance of the importance of international obligations in respect of environmental assessments, and those commitments will be at the foundation of the new process of environmental outcomes reports, which builds on the core principles at the heart of the current practice.

Ultimately, the focus of EORs is the assessment of the environmental impact of relevant plans and relevant consents, which is why clause 120 refers to our international obligations relating to the assessment of the environmental impact of relevant plans and relevant consents. That ensures that relevant international obligations, such as those under the Espoo and Aarhus conventions, are properly reflected. To make the provision broader would sacrifice clarity and risk introducing confusion as to which areas of international law are particularly relevant and pertinent in such cases. With that explanation, I hope that the hon. Member for Greenwich and Woolwich will also consider withdrawing amendment 177.

[Matthew Pennycook]

I welcome the Minister’s clarification. Particularly on amendment 176, it is extremely useful to hear that the wording was chosen specifically to mirror that in the EU-UK trade and co-operation agreement. I do not want to digress into that agreement in any way—no one on the Committee would thank me for doing so—but it is a useful clarification.

I take what the Minister said about amendment 177; I do not intend to press it to a vote. However, we strongly feel that, international obligations aside, when it comes to safeguards the Bill still contains too many loopholes, many of which I mentioned when I was speaking to the amendment. In particular, what concerns us about the non-regression provision in clause 120 is the reference to only

“providing an overall level of environmental protection”.

We are extremely concerned that that might mean that environmental harm could take place at a local level because the Government could say, “Overall, we are satisfied that the level of protection has been maintained.” For that reason, and to make very clear how strongly we feel about the point, I am minded to push amendment 176 to a Division.

Question put, That the amendment be made.

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[Paul Scully]

As I have said, we are committed to ensuring that the new system of environmental assessment will provide at least the same level of overall environmental protection as the existing system. The clause enshrines that commitment, building on the landmark Environment Act 2021, and is in line with our commitments in the EU-UK trade and co-operation agreement.

It is a vital commitment, and it will ensure that EORs support the Government’s objective to be the first generation to leave the environment in a better state than we found it. We want to make it clear that, in introducing these reports, we are not trying to lower standards or bypass important environmental protections, and so it is important that we enshrine in legislation this commitment to non-regression.

We have also ensured that the Secretary of State’s powers are tightly constrained when considering whether overall levels of protection have been maintained. We have provided significant commitments to consultation and secondary regulations, which will be laid under the affirmative procedure and will thereby enable parliamentary scrutiny on this issue.

This clause also sets out that regulations made may not be inconsistent with the implementation of the relevant international obligations of the UK. As in other parts of the planning system, public engagement is a crucial feature of environmental assessment, and the clause sets out our commitment to maintaining opportunities for public engagement to take place. This will ensure that the public can be involved in the process of preparing an environmental outcomes report, in line with the requirements of the Aarhus convention, which includes provision on public participation in decision making on environmental matters. The clause provides a strong commitment to non-regression and to maintaining opportunities for public engagement, as we move to that new system, and so I commend the clause to the Committee.

Question put and agreed to.

Clause 120 accordingly ordered to stand part of the Bill.

Clause 121

Requirements to consult devolved administrations

[Matthew Pennycook]

I beg to move amendment 178, in clause 121, page 138, line 3, leave out “after consulting” and insert “with the consent of”.

This amendment, along with Amendments 179 and 180, would ensure that EOR regulations which contain provision within devolved competence can only be made with the consent of the relevant devolved administration.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 179, in clause 121, page 138, line 16, leave out “after consulting” and insert “with the consent of”.

See explanatory statement to Amendment 178.

Amendment 180, in clause 121, page 138, line 34, leave out “after consulting” and insert “with the consent of”.

See explanatory statement to Amendment 178.

[Matthew Pennycook]

Clause 121 specifies that, where EOR regulations contain provisions within devolved competence, the Secretary of State must consult the relevant devolved Ministers. Our concern is that this is an unduly weak requirement that could see EORs imposed in Scotland, Wales and Northern Ireland without the consent of their respective devolved Administrations. Because the requirement is only to consult with the relevant devolved Ministers about EOR regulations containing provision within devolved competence, we could see EORs imposed without consent. We fear this could lead, advertently or inadvertently, to environmental regression if an EOR specified weaker outcomes than that sought by the relevant devolved Administration.

These three amendments simply seek to ensure that the consent of the relevant devolved Minister is obtained when EOR regulations contain provision within devolved competence to safeguard against that particular scenario. I look forward to hearing the Minister’s response to them and the concerns they are designed to address.

[The Chair]

It really is “The Matthew Pennycook Show” this afternoon, is it not?

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[Matthew Pennycook]

I accept those assurances, and on that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

I will be brief, because I think my previous remarks addressed the point about transposition of the EU directive leading to the creation of a range of environmental assessment regimes that have different territorial extents and applications. As I have already explained, discussions are ongoing with the devolved Governments regarding how best to work together to ensure a consistent and coherent approach to environmental assessment across the UK. We are hopeful that we can work closely with devolved Governments to extend the powers in the Bill to place all the nations on an even footing. For those reasons, I commend the clause to the Committee.

Question put and agreed to.

Clause 121 accordingly ordered to stand part of the Bill.

Clause 122

Exemptions for national defence and civil emergency etc

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Paul Scully]

Exactly. This is why you get paid the big bucks, Mr Hollobone. Thank you very much.

[Matthew Pennycook]

The Minister touched on a number of the issues that I wanted to raise. This is a series of important clauses and therefore I have a couple of questions for him. I hope that I can draw out a little more detail, but as ever, he is more than welcome to write to me if he requires to do so.

Clause 122(1) states:

“The Secretary of State may direct that no environmental outcomes report is required to be prepared in relation to a proposed relevant consent which is solely for the purposes of national defence or preventing or responding to civil emergency.”

Subsection (2) of that clause further states:

“EOR regulations may provide for further circumstances in which the Secretary of State is to be able to direct that no environmental outcomes report is required to be prepared.”

Can the Minister give the Committee some examples of the “further circumstances” in which no environmental outcomes report may be required as per subsection (2), given that civil emergencies and national defence, as he said, are already covered by subsection (1)?

Clause 123 is a new provision that sets out the enforcement provisions that can be made in respect of EORs. The Minister touched on a few, I believe, but I would be grateful if he could provide any further detail as to how enforcement of EORs will operate and how they will operate compared with the current SEA and EIA systems.

Clause 125(2) specifies that the Secretary of State, as the Minister has also said, may consult only

“such persons as the Secretary of State considers appropriate”

before making certain EOR regulations, or issuing, modifying or withdrawing certain guidance. Can the Minister give us some idea of which persons or bodies the Secretary of State would be likely to approach before making or modifying regulations and guidance? Specifically when it comes to statutory consultees, which he spoke about, is there any rationale for not specifying statutory consultees in the Bill?

[Paul Scully]

I thank the hon. Gentleman for that contribution. On the formal consultation, I cannot yet give him details as to whom specifically we will speak to, barring the fact that, as I said earlier, we will clearly seek to speak to all the key stakeholders that we work with really closely. Indeed, we have worked with a number of those in the lead-up to the Bill. We want to ensure that we get the expert advice of people not only who can contribute to our knowledge, but who will be using the system, so that we can get the benefit of that on-the-ground experience, because what we do not want to have is unintended consequences.

On enforcement, the Bill amends and strengthens the powers and sanctions available to decision makers. We want to ensure that the new system is effective at delivering on the outcomes, so it will be necessary for the regime to have enforcement mechanisms. The exact details of the new system are in the process of being developed. We will be working with the same stakeholders on the design of the new system, in terms of enforcement as well as exemptions, and we want to ensure that we have a full consultation.

In addition to consultation, there will be parliamentary debate. I hope that reassures the hon. Member for Greenwich and Woolwich that we are prepared to work collaboratively to ensure that this regime—the framework that we are talking about now—works well in practice, and that that coherent approach makes it easier to understand and enforce. Enforcement is no good if we just have a bit of prose that means nothing; we need to make sure we enforce that as well.

Question put and agreed to.

Clause 122 accordingly ordered to stand part of the Bill.

Clauses 123 to 126 ordered to stand part of the Bill.

Clause 127

Interaction with existing environmental assessment legislation and the

Habitats Regulations

[Matthew Pennycook]

I beg to move amendment 181, in clause 127, page 141, line 32, leave out “in particular” and insert “not”.

This amendment would ensure that any specified environmental outcomes arising from EOR regulations made would augment not substitute those arising from existing environmental assessment legislation and the Habitats Regulations.

[The Chair]

With this it will be convenient to discuss amendment 182, in clause 127, page 142, leave out lines 12 and 13.

This amendment would ensure that EOR regulations cannot be used to amend, repeal or revoke existing environmental assessment legislation.

[Matthew Pennycook]

Clause 127 enables the Secretary of State to make regulations on how the EOR framework provided for by part 5 interacts with existing environmental assessment legislation and the habitats regulations. The explanatory notes accompanying the Bill state:

“This is necessary to ensure that where an Environmental Outcomes Report is prepared, where appropriate, this is capable of meeting the requirements of existing environmental assessment so as to avoid duplication.”

It would be recognised as meeting both.

Our serious concern is that by providing for requirements undertaken in relation to an EOR to satisfy the requirements under the habitats regulations, this clause could allow the Secretary of State to substitute the protections afforded by those regulations with weaker requirements that had undergone only limited parliamentary scrutiny under the affirmative procedure. In our view, this is deeply problematic because the habitats regulations provide for an extremely high level of environmental protection for our most precious and vulnerable habitats and species, indeed for greater protection than the SEA and EIA systems, requiring as they do applications proposing a development that will affect a site to first prove that mitigation is in place to avoid significant harm, or that there is an overriding public interest reason to proceed and compensatory measures are necessary. In revising subsection (2) of the clause, amendment 181 would address that concern by ensuring that any specified environmental outcomes arising from EOR regulations made would augment, not substitute, those arising from existing environmental assessment legislation and the habitats regulations.

An additional concern with this clause comes in the form of subsection (3), on page 142 of the Bill, which provides for EOR regulations under the clause to

“amend, repeal or revoke existing environmental assessment legislation”.

Even with the list of what constitutes “existing environmental assessment legislation” set out on the face of the Bill in clause 130(1), we believe this provision is unnecessarily broad. Amendment 182 therefore seeks to remove clause 127(3) to ensure that EOR regulations cannot be used to amend, repeal or revoke existing environmental assessment legislation.

It is essential, as the Minister himself accepted during debate about an earlier clause, that we recover nature and that we do so quickly, or we risk irreparable damage to the natural world upon which life depends. To that end, proven, effective laws should be maintained and strengthened rather than undermined in any way. For that reason, I hope the Minister will appreciate the concerns we raise and give both of these amendments serious consideration.

[Paul Scully]

Given the scale of the underpinning legislation, as we transition from the current complex system of environmental assessment to the new framework of EORs, the Government require powers to manage the interaction between the old and new systems.

The interaction provisions in clause 127 are designed to ensure that when an EOR is prepared, it is capable of meeting the requirements of existing environmental assessment legislation where appropriate. That allows the Government to guard against duplication while the various assessment regime owners bring forward regulations to introduce environmental outcomes for their regimes. It also allows existing environmental assessment legislation to meet the requirements of an EOR, which is to avoid duplication and manage co-ordination across the different assessment regimes. We all know that it takes time to consolidate the complex legislation covering a number of Departments and agencies, and we want to make sure there are no gaps in the process.

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Amendment 182 would limit our ability to remove the old legislation as the new system comes online. The current system would be frozen in time, and there would be no capacity to update its provisions to better reflect current pressures on the environment and the UK’s changing needs. In effect, it could lead to there being multiple overlapping systems of environmental impact assessments and strategic environmental assessments operating at the same time, leading to confusion, additional bureaucracy and wasteful duplication. With that in mind, I hope the hon. Gentleman will agree to withdraw amendment 182.

[Matthew Pennycook]

I thank the Minister for that response. I note and accept what he said about amendment 182, although I will go back and satisfy myself that the concerns raised in that regard are fully addressed.

We continue to have concerns about the issues raised by amendment 181. I heard what the Minister said about the Government’s intention for these provisions to avoid duplications and enable co-ordination, but I remain concerned that, as drafted, they could lead to the powers substituting rather than augmenting the protections provided for by the habitats regulations, in particular. The Minister’s defence was that we are protected in that regard by the safeguards in clause 120, but he has heard our concerns about their robustness. Along with our concerns about clause 120, that is one of the fundamental weaknesses of part 5 that we would like to see addressed. For that reason, I will press amendment 181 to a Division. This will be the final one today.

Levelling-up and Regeneration Bill (Eighteenth sitting)

Matthew Pennycook Excerpts

Committee stage
Tuesday 6th September 2022 Public Bill Committees

[Mr Jones]

As ever, it is a pleasure to serve under your chairmanship, Mr Paisley. I hope that colleagues had a good summer and, in many ways, are suitably refreshed and raring to go with our consideration of the Levelling-up and Regeneration Bill in Committee.

These three amendments are aimed at ensuring that proposed new section 93G of the Town and Country Planning Act 1990, which is created by clause 99, works as intended. The amendments propose two changes. First, new section 93G does not refer to the correct section of the 1990 Act as the basis for the grant of planning permission. Therefore, the two technical corrections set out in Government amendments 74 and 75 are considered necessary to make clause 99 legally accurate. Secondly, to ensure that references in new section 93G concerning when new development has begun have the same meaning as those elements set out in existing section 56(2) of the 1990 Act, a consequential amendment is required. This is set out in Government amendment 76.

Overall, the amendments will ensure that clause 99 works as intended, without ambiguity. For those reasons, I hope that members of the Committee support them.

Amendment 74 agreed to.

Amendments made: 75, in clause 99, page 117, line 25, leave out “58(1)(b)” and insert “70”.

This amendment corrects a cross-reference.

Amendment 76, in clause 99, page 117, line 29, at end insert—

“( ) In section 56 (time when development begins), in subsection (3), after ‘92,’ insert ‘93G,’.”—(Mr Marcus Jones.)

This amendment adds a consequential amendment to section 56 of the Town and Country Planning Act 1990 (which determines the time when development begins).

Question proposed, That the clause, as amended, stand part of the Bill.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to reconvene after the summer recess under you in the Chair, Mr Paisley.

Clause 99 will insert proposed new section 93G into the Town and Country Planning Act 1990, as the Minister said. The new section will require those carrying out certain development types to serve a commencement notice to the relevant local planning authority before any development takes place. Such development notices will be required to outline the expected start date of construction, the details of the planning permission, the proposed delivery rate for the scheme, and other relevant information. The example in the explanatory notes accompanying the Bill suggests that this provision will most likely apply to large-scale residential schemes as a means, albeit a limited one, of preventing land banking and slow build-out by larger developers.

We welcome this sensible new duty. However, I would be grateful if the Minister provided further clarification as to what kinds of developments are likely to fall within the “prescribed description” bracket in subsection (1)(b) of the proposed new section and therefore be required to submit one of the new commencement notices.

[Mr Jones]

As I am sure the hon. Gentleman will appreciate, the description of the particular type of development he refers to will be dealt with in regulations and we will bring forward further details in due course. We will do so in consultation with both local authorities and industry.

Question put and agreed to.

Clause 99, as amended, accordingly ordered to stand part of the Bill.

Clause 100

Completion notices

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[Tim Farron]

I gather it is a struggle to get back into the Toon afterwards—I will cadge a lift to the Bigg Market with you.

My concern is—this is why the amendment is important—that when we talk about planning and the powers that communities have, so often Governments, particularly this one, listen to a range of voices, but especially to the interests of developers. Here is an opportunity for the Government to listen to and give power to communities. In my constituency and around the country, there will be many instances like the one referred to by the hon. Member for South Shields, where planning permission has been given, work begins and then it is not completed. The powers available to the local council or local planning authority—let us be honest, we are talking about the powers available to the local community to have any control over all that—are very limited.

If the Government accepted the amendment, it would indicate that they are serious about empowering communities over the things that happen in them. That way, we are not allowing things to happen to communities, but allowing communities to have real sovereignty over what happens within their boundaries.

[Matthew Pennycook]

Very briefly, I congratulate my hon. Friend the Member for South Shields on this excellent amendment, which we support. She made clear that the problem she has highlighted of private plots lying derelict for extended periods of time with no real prospect of development being completed has a real impact on local communities. Allowing the 12-month completion notice deadline to be circumvented in the circumstances set out in the amendment, with the proportionate requirement set out in proposed new subsection 3B, is sensible and we urge the Government to consider it seriously.

[Mr Jones]

I listened closely and carefully to what the hon. Member for South Shields said. I am sure she knows that because of the role of Ministers in the planning system, I cannot discuss that particular situation in detail, but I can say that I am aware of such situations, even in my own constituency. I am sure there are similar situations across the country.

Amendment 170 relates to the proposed updated legislative framework for completion notices in clause 100. Those notices are an existing tool available to local planning authorities that can be served on developments that, in the opinion of the local planning authority, will not be completed in a reasonable period. We want to equip local planning authorities with the tools necessary to deal with sites that have experienced long periods of inactivity or slow delivery. That is why, through clause 100, we propose to modernise the procedure for serving completion notices to make them simpler and faster to use, giving more control and certainty to local planning authorities in the process. To achieve that, clause 100 will remove the need for a completion notice to be confirmed by the Secretary of State before it can take effect and allow for a completion notice to be served on unfinished developments sooner, providing the planning permission has been implemented.

Amendment 170 proposes two fundamental changes to clause 100. First, there would be a shorter completion notice deadline below the current 12-month minimum in certain circumstances. Those are where a local planning authority is of the opinion that development has not taken place on a site for a prolonged period; that there is no reasonable prospect that the development would be completed in a reasonable period; and that it is in the public interest to serve a notice.

While I support the intention, I remind the Committee that completion notices, when served by a local planning authority or the Secretary of State, must provide the recipient with an opportunity to complete the development. To put it another way, a completion notice requires a person to use or lose their planning permission. Therefore, that person must be afforded the chance to use the planning permission and complete the development before the granting of that permission is removed. Providing the opportunity to complete is a critical aspect of the procedure governing the use of completion notices and reflects the longstanding position that planning permission is a development right and that revoking that right should be subject to compensation.

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These changes will help make completion notices a more attractive option for local planning authorities in England to galvanise delivery or to remove unused or unwanted planning permissions. These reforms make clear to the development industry and communities our commitment to ensuring that planning permission is built out as quickly as possible, and that where there are unreasonable delays to delivery, local planning authorities have more control and confidence in exercising their powers to bring about a timely completion of development. I commend clause 100 and schedule 10 to the Committee.

[Matthew Pennycook]

Clause 100 would amend the provisions in the Town and Country Planning Act 1990 relating to completion notices. It does so by removing two requirements: that the Secretary of State must approve a completion notice and that the notice must be served only after the deadline for commencement of the planning permission has passed. We welcome these sensible revisions to the 1990 Act. I do, however, have two questions for the Minister, but I am more than happy for him to get back to me in writing if needed.

First, given that the changes sought by clause 100 are intended to work in conjunction with the new duty provided for by clause 99 on commencement notices, will the Minister explain why such notices are restricted to certain types of as yet undefined development, while the changes made to completion notice provision will continue to apply to all types of development? Secondly, subsection (2) of proposed new section 93H makes it clear that a local planning authority can serve a completion notice if it is of the opinion that the development will not be completed “within a reasonable period”—a power that in theory would allow the cases my hon. Friend the Member for South Shields just raised to be addressed in a timelier manner. Will the Minister clarify what is meant by “within a reasonable period”? If he cannot, can he tell us who will determine what it will mean in due course and whether there will be any limits whatsoever, given how ambiguous the phrasing is?

[Mr Jones]

On the first question, I will take up the hon. Member’s offer to write to him. To his second point, that reasonable period of time will be set out in guidance. The local planning authority will be the one to deal with the matter directly, rather than getting the Secretary of State involved. The authority will be able to determine how to deal with a particular situation by taking into account the factors relating to each development involved.

Question put and agreed to.

Clause 100 accordingly ordered to stand part of the Bill.

Schedule 10 agreed to.

Clause 101

Time limits for enforcement

Question proposed, That the clause stand part of the Bill.

[Mr Jones]

The Government are clear that effective enforcement action is important to maintain public confidence in the planning system. This chapter introduces a number of measures long called for by colleagues in this place to strengthen the enforcement powers of local authorities and to close loopholes. Local planning authorities presently have a wide range of enforcement powers, with strong penalties for non-compliance, to tackle such situations. While we believe that the current enforcement framework generally works well, we acknowledge that we could make improvements in a number of areas. We want to strengthen planning enforcement powers and sanctions, reinforcing the principle that unauthorised development should never be viewed as preferential to proper, up-front planning engagement.

Within the planning enforcement framework, there are statutory time limits for the commencement of enforcement action. It is necessary to have a statutory time limit to provide certainty when the passage of time means that enforcement action is no longer feasible. However, there are currently two time limits for commencing enforcement action, depending on the nature of the breach. For a breach of planning control consisting of building operations or the change of use to a single dwelling, the time limit for commencing enforcement action is four years. For any other breach of planning control, the time limit for commencing enforcement action is 10 years from the date of the breach.

Stakeholders have raised concerns that the four-year timeframe can be too short, and in some cases can result in opportunities to commence planning enforcement action being inadvertently missed. For example, a person may not initially raise concerns with their local planning authority, assuming that a neighbouring development has the correct permissions or will not cause disturbance. Should the development prove disruptive, they may then try to come to an agreement with the person responsible for the development. By the time they raise their concerns with the local planning authority, some time may well have passed. The local planning authority may not initially be aware of that, prioritising other investigations. When an investigation begins, it may then become clear that the time limits for commencing enforcement action have inadvertently passed.

The four-year time limit can cause frustration for communities, whose initial pragmatism may result in unauthorised, harmful development becoming inadvertently immune from enforcement action. The clause will bring the time limit to commence enforcement action in England to 10 years in all cases, either from the date of substantial completion or the date of the breach, depending on the specific nature of the breach. That will provide greater confidence to local planning authorities that they will have the time to take enforcement action, and indicate to the public that planning breaches are taken seriously and should never be viewed as a preferential approach to proper engagement with the planning system. I commend the clauses to the Committee.

Question put and agreed to.

Clause 101 accordingly ordered to stand part of the Bill.

Clause 102 ordered to stand part of the Bill.

Clause 103

Enforcement warning notices

[Matthew Pennycook]

I beg to move amendment 116, in clause 103, page 122, line 36, at end insert—

“(4) The Secretary of State must provide sufficient additional financial resources to local planning authorities to enable them to implement the provisions in this section.”

This amendment, along with New Clause 36, would require the Secretary of State to provide sufficient additional resources to local planning authorities to enable them to implement the changes required by Chapter 5 of Part 3.

[The Chair]

With this it will be convenient to discuss new clause 36—Duty to provide sufficient resources to local planning authorities for new burdens: enforcement of planning controls—

“The Secretary of State must provide commensurate additional financial resources to local planning authorities to enable them to implement the provisions in Chapter 5 of Part 3.”

See explanatory statement for Amendment 116.

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[Matthew Pennycook]

Planning enforcement is vital if the integrity of the planning system is to be upheld. For that reason, we broadly welcome the measures set out in chapter 5 of this part of the Bill. Taken together, the amendment and new clause 36 would simply require the Secretary of State to provide sufficient additional resources to local planning authorities to enable them to implement the changes required by the provisions in this chapter.

As we discussed in relation to many previous amendments, we know that as a result primarily of local authority belt tightening in response to funding cuts by central Government, the resources dedicated to planning within local planning authorities have fallen dramatically over recent years. Planning enforcement has not escaped the impact of that general resource reduction. When it comes to the impact on enforcement activity, the figures speak for themselves: the Department’s own data on enforcement action show a marked decline in the issuing of planning contravention and enforcement notices over the past decade. Given that planning enforcement action, as opposed to the investigation of planning breaches, has long been classified as a discretionary service—rather than a statutory duty—our concern is that without sufficient additional resources many local authorities will simply determine to cut back on planning enforcement teams, rather than make full use of the new and enhanced powers provided for by the clauses in this chapter.

The National Association of Planning Enforcement, based on feedback from its members, has detailed how funding pressures are even leading some local authorities to consider removing their planning enforcement services budgets altogether, or reducing the provision to essential services only, with the suggestion that that means electing only to enforce certain breach types or taking enforcement action only on a select number of cases. In evidence recently submitted to the Select Committee on Levelling Up, Housing and Communities, the Royal Town Planning Institute highlighted that budgetary pressures were now so acute for some local authorities that they are prepared to risk the challenge of potential judicial reviews and formal complaints to the ombudsman, rather than spend resources they simply do not have on staffing planning enforcement teams.

We believe that it is right for clear expectations to be set when it comes to local authorities fulfilling their planning enforcement obligations. However, they deserve to be properly resourced to carry out those obligations and given adequate funds to undertake enforcement action, including in relation to biodiversity net gain. To the extent that the provisions in this chapter, including extending the period for taking enforcement action to 10 years in all cases and introducing new enforcement warning notices, clearly constitute additional work pressures on planning enforcement teams, it is only appropriate that local planning authorities receive sufficient additional resources to carry them out.

I hope that rather than merely once again paying lip service—as happened on so many occasions before the summer recess—to the need to ensure that planning authorities are resourced to deliver the reforms in this Bill, the Minister will feel able to demonstrate a commitment on the record to resourcing local planning authorities properly by either accepting our proposals or detailing precisely what additional funding authorities can expect in order to carry out the new functions.

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[Mr Jones]

I thank the hon. Member for York Central for that important point. I have acknowledged that there are capacity and capability challenges. I have also acknowledged that the Government want to go further by allowing local authorities to bring in more income. We have discussed and put the principle out there of doubling fees for retrospective planning applications, which often put often unnecessary additional pressure on local authorities, if people would have put forward their planning applications in the first instance in the proper and usual way.

On new clause 36, effective enforcement action is important to maintain public confidence and trust in the planning system. The package of enforcement measures in the Bill will strengthen the enforcement powers available to local planning authorities. Generally, the provisions make the existing framework easy to use by enforcement officers and, as such, they will not create significant additional burdens or resource pressures for local planning authorities. The use of new tools, such as enforcement warning notices, is discretionary. We are also working with partners to deliver a capacity and capability strategy to support the implementation of our planning reforms so that local planning authorities have the right skills and capabilities to make creative decisions and drive forward ambitious proposals, and we are committed to new burdens principles.

For those reasons, we cannot accept amendment 116 and new clause 36. I hope the hon. Member for Greenwich and Woolwich is sufficiently reassured to withdraw the amendment.

[Matthew Pennycook]

I regret to inform the Minister that I am not sufficiently reassured. I note what he said about fees and about the strategy the Department intends to bring forward. Yet, what I hear time and again in responses to amendments that seek to press the Government on local authority resourcing is a seeming unawareness of how acute the problem is. The Minister referred to it in very diplomatic terms as capacity and capability challenges, but it goes way beyond that. Local planning authorities are under acute pressure, which has a direct impact on planning services in those local authorities and, because it is a discretionary service, on the enforcement part of those planning services.

I am concerned to hear the Minister say that he does not think the provisions in this chapter constitute additional work pressures. It seems to me that they do. When looked at in the round, the measures introduced in the Bill certainly constitute additional work pressures on departments. I am not going to press these proposals to a Division, but we will come back time and again to the issue of local authority resourcing, because planning is under acute pressure in terms of capability and skills, and the Government have to provide stronger commitments as to what they will do to address that. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Mr Jones]

On the basis that we have debated clause 103 at some length, I commend it to the Committee.

Question put and agreed to.

Clause 103 accordingly ordered to stand part of the Bill.

Clause 104

Restriction on appeals against enforcement notices

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[Mr Jones]

The retrospective planning application process is a necessary part of the planning system. It allows those who have made a genuine mistake to remedy the situation. However, we are aware that it is also used by people who have intentionally undertaken development without permission, who then attempt to delay enforcement action.

Prior to the Localism Act 2011, an appeal could be made both against the refusal of a retrospective application and against enforcement action, on the ground that permission ought to be granted. Through the 2011 reforms, we reduced the circumstances in which an appeal could be made, preventing an appeal on the grounds that permission ought to be granted if an enforcement notice was issued before the end of the statutory determination period. However, the reforms inadvertently created a loophole, which has allowed appellants to continue to appeal twice in certain circumstances, against the refusal or non-determination of a retrospective planning application and against an enforcement notice, on the ground that permission ought to be granted. Both appeals, in effect, assess the planning merits of the case.

The loophole exists because, in some circumstances, a local planning authority might not issue an enforcement notice before the end of the determination period for a related retrospective application. That could be because the local planning authority might have invited the retrospective application in the first place, and does not want to be seen to prejudge the outcome, for example. In such cases, if the development were subsequently found to be unacceptable and retrospective planning permission was refused, an enforcement notice would be issued after the end of the determination period.

There would remain two opportunities to obtain permission retrospectively: first, by appealing the refusal of the retrospective application, and secondly, by appealing the enforcement notice on the ground that permission ought to be granted. A similar situation would occur if the determination of the retrospective application were delayed and the appellant appealed the retrospective application on the ground of non-determination.

Therefore, the clause will extend the period during which an enforcement notice can be issued and during which an appeal on the ground that permission ought to be granted can still be prevented to two years. The applicant will not then be able to appeal an enforcement notice on the ground that permission ought to be granted during that extended period. Instead, they will have only one route to obtain planning permission retrospectively—through a successful appeal of the refusal or the non-determination of the retrospective planning application. Appealing an enforcement notice on other grounds will still be permitted.

The clause will reinforce the message that people should seek planning permission before they start a development. Where they do not do so, they should have only one opportunity to obtain planning permission after the unauthorised development has taken place so that the matter can be rectified as soon as possible. That will speed up enforcement action and prevent resources from being wasted assessing the planning merits of the same case twice. I therefore commend the clause to the Committee.

[Matthew Pennycook]

I would like to make some further remarks on clauses 105 and 106. Clause 105 will give the Secretary of State a new power that allows them to dismiss an appeal in relation to an enforcement notice or an application for a lawful development certificate in England should it appear to them that the appellant is causing undue delays to the appeals process. This is another point of clarification, but I simply wish to get a sense from the Minister of what causing undue delays as per proposed new section 176(6) of the Town and Country Planning Act 1990 will be taken to mean in practice.

Clause 106 will amend sections 187A and 216 of the 1990 Act in relation to England to increase the maximum fine for failing to comply with either a breach of condition notice or a section 215 notice. We do not oppose those changes, but I would like reassurance from the Minister that the Government have properly considered the possibility that increasing the maximum fine in such a way might have the unintended consequence of discouraging from seeking retrospective permission those who have, for whatever reason, made genuine mistakes on their planning applications.

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[Mr Jones]

The Government are committed to increasing opportunities for meaningful and early community involvement in planning decisions. Throughout the Bill, we are introducing measures that do just that. Communities should be given a say on developments that affect them, and should have those views taken into account when decisions are made. We are also keen to ensure that issues are dealt with early on, so that decisions are not unduly delayed. That is why we are introducing this minor but important change.

Clause 108 will make permanent the powers in sections 61W to 61Y of the Town and Country Planning Act 1990 that enable the Secretary of State to mandate the types of applications for which applicants will be required to carry out consultations with those in the vicinity of the development, and with any other specified people—for example, statutory bodies—before submitting a planning application to the local planning authority. The powers also require applicants to have regard to any responses received in the pre-application consultation, including views expressed by local communities.

The powers have been used only to require pre-application consultation on onshore wind turbines where two or more turbines are being installed, or where the hub height is over 15 metres. We want to explore additional opportunities to use the powers where pre-application engagement will be most beneficial, and we will engage on that before bringing forward the necessary changes through secondary legislation. Making the powers permanent will allow the Government to further strengthen community engagement with the system. I commend the clause to the Committee.

Question put and agreed to.

Clause 108 accordingly ordered to stand part of the Bill.

Clauses 109 to 112 ordered to stand part of the Bill.

Clause 113

Infrastructure Levy: England

[Matthew Pennycook]

I beg to move amendment 142, in clause 113, page 131, line 38, leave out “a charge” and insert “an optional charge”.

This amendment would ensure that application of the Infrastructure Levy would be optional rather than mandatory.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Amendment 143, in schedule 11, page 283, leave out lines 27 and 28 and insert—

“(1) A charging authority in England may, if it determines that IL would be more effective than the community infrastructure levy for delivering infrastructure in its area and would not prevent it meeting the level of affordable housing need identified in its local development plan, in accordance with IL regulations, charge IL in respect of development in its area.”

This amendment to inserted section 204B, which is connected to Amendment 142, would ensure that application of the Infrastructure Levy would be optional rather than mandatory

Amendment 145, in schedule 11, page 289, line 18, leave out “or require”.

This amendment and Amendment 146, would give charging authorities discretion over the basis on which infrastructure levy rates are calculated.

Amendment 146, in schedule 11, page 289, line 30, leave out “or require”.

See explanatory statement for Amendment 145.

Amendment 147, in schedule 11, page 308, leave out from line 40 to line 13 on page 309 and insert—

“may be given under subsection (4) for authorities that have adopted an IL charging schedule, only if it is necessary for–

(a) delivering the overall purpose of IL mentioned in section 204A(2), or

(b) avoiding charging a specific development more than once for the same infrastructure project through both IL and the following powers—

(i) Part 11 (Community Infrastructure Levy) (including any power conferred by CIL regulations under that Part),

(ii) Section 106 of TCPA 1990 (planning obligations), and

(iii) Section 278 of the Highways Act 1980 (execution of works)

unless this is essential to rendering the development acceptable in planning terms.”

This amendment would avoid restrictions being placed on the use of the community infrastructure levy, section 106 obligations, and section 278 agreements at the Secretary of State’s discretion unless necessary to avoid double charging for the same infrastructure provision.

Clause 115 stand part.

[Matthew Pennycook]

Part 4 of the Bill concerns the infrastructure levy, which is the Government’s proposed replacement for the present arrangement by which local planning authorities secure developer contributions, comprised of the community infrastructure levy—or CIL—and section 106 planning obligations, albeit with a significant role, as required, for section 278 agreements providing for permanent alterations or improvements to a public highway.

In our view, this new levy is one of the most consequential aspects of the Bill, with potentially far-reaching implications for not only the provision of core infrastructure but the supply of affordable housing. For that reason, I intend to spend a fair amount of time considering it.

Clause 113 introduces schedule 11, which would amend the Planning Act 2008 to provide for the imposition, in England, of the new levy. It is worth noting at the outset that the levy proposed in the Bill is a quite different proposition from the one suggested by the Government in their 2020 “Planning for the Future” White Paper. The latter was premised on a nationally set rate or area-specific rates, and its introduction was to be accompanied by the replacement of the current system of section 106 planning obligations. The amended approach proposed in the Bill, which allows charging authorities to set their own infrastructure levy rate or rates and retains an important role for section 106 on—albeit presently undefined—large sites, is without doubt an improvement on the excessively rigid system put forward in the White Paper.

However, the Opposition still have serious concerns about the possible implications of the revised infrastructure levy outlined by the Government. I deliberately use the word “possible”, because schedule 11 merely provides the basic framework for the levy; as with so much of this legislation, almost all the detailed design is to follow in regulations after some form of consultation.

In general terms, we have two main concerns about the new levy. First, when we consider how it might work as proposed, it is impossible to escape the conclusion that it will result in a system of developer contributions that is at least as complex as the present one; it is likely to be even more complex. In short, we worry that it may prove onerously complicated to operate in practice.

Secondly, there is good reason to suspect that the levy as proposed will fail to secure as much, let alone more, public gain from developers. In short, we worry that it will lead to less infrastructure and less affordable housing in the future, while putting the development of less viable sites at risk entirely.

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[Matthew Pennycook]

That is a very apt point, and I will address it when I talk about how the levy might work in practice. One of the criticisms of the system that Ministers often cite are the problems relating to viability inherent in it. We know that local planning authorities struggle with that element of the system. This new levy introduces a need to value and incorporate viability into every planning decision covered by the new levy, rather than just those where viability is a consideration, so I think the resourcing pressures will be exacerbated by its introduction.

However, we accept that the Government have no intention of removing part 4 from the Bill, so our focus is firmly on trying to amend it and schedule 11 to mitigate any harmful effects of the levy. This first group of amendments on part 4 seeks to achieve that mitigation simply by reversing the presumption in the Bill that the use of the infrastructure levy will be mandatory for all charging authorities, and by fixing core elements of its design. In short, they all aim to provide for a greater degree of discretion.

Amendment 142 would amend clause 113 to make it clear that IL would be an optional charge. Amendment 143 would have the same effect in relation to schedule 11, while making it clear that the decision to adopt the levy would be premised on a judgment that it would be more effective than CIL for delivering infrastructure and would not prevent affordable housing need from being met. Making IL optional would necessitate allowing charging authorities that choose not to adopt it to continue to make use of the current system, so amendment 147 seeks to ensure that the Bill places no restrictions on the use of the community infrastructure levy, section 106 obligations and section 278 agreements, unless doing so is necessary to avoid double charging for the same infrastructure provision. To give charging authorities that freedom, it is necessary to leave out clause 115 entirely, given that it restricts the use of CIL to Greater London and Wales.

Finally, amendments 145 and 146 are designed to provide an additional safeguard by enabling charging authorities to determine the best way to calculate the amount of IL payable, rather than forcing them to base such a calculation on gross development value—a metric that, as I will come on to explain, we believe is likely to generate a host of serious problems if made the default means of calculating levy charges. We feel strongly that these amendments, by giving charging authorities discretion in these important respects, would help to avoid the obvious risks of imposing the levy universally, given the significant variation in development and land values not only across the country but in individual local authority areas, and would better allow charging authorities to tailor developer contribution arrangements to their local circumstances, so that they can get the best for their area.

I have already alluded to our belief that there are a series of inherent flaws in the levy as proposed. Chief among those are the fact that its proceeds will be expected to cover not only core infrastructure, but all affordable housing, and the fact that charges will be based on a percentage of final gross development value, or GDV. To convey to the Committee precisely why we believe that these features are so problematic, and why we feel so strongly that charging authorities should have discretion on whether to adopt the new levy, as well as on the metric on which it is calculated, let me give a worked example that shows the differences between the existing and proposed systems, based on my understanding of how the new levy is likely to operate.

Let us imagine, for the purposes of this worked example, that under the present developer contributions system, a local planning authority receives an application for a 100-home development, with 1,000 square metres of commercial floor space and an on-site community facility—a simple planning application. We will assume that the LPA has a local plan in place, and that it specifies a requirement of 50% affordable homes by unit; that would be 50 of the 100 homes on this hypothetical site. Let us imagine further that, as so often happens, the applicant uses viability assessments to reduce the affordable housing contribution levels to 40%. If that is approved, under the existing system, the local planning authority will know that in this scenario, despite the reduction on viability grounds, it will secure 40 affordable homes to buy or rent on this site, and with a local CIL rate of, say, £100 per square metre, it has certainty at the point of planning determination that the applicant is required to make a contribution of approximately £520,000 for infrastructure, taking into account social housing relief.

Now let us assume, in contrast, that this Bill receives Royal Assent unamended, and that the same local planning authority receives, some years from now, an identical application, having been forced to adopt the new infrastructure levy. It is an extremely challenging exercise to specify even hypothetical infrastructure levy rates, given the overall lack of detail at present and the numerous assumptions that are required to estimate what sort of rates will be needed to achieve the same level of value capture as at present—a subject I will touch on in more detail when we deal with the amendments relating specifically to rate setting. For the purposes of this scenario, let us specify that the authority’s levy charging schedule has set a minimum cost threshold of say, £3,000 per square metre; an IL rate of 50%—because, whatever the specific range, we know that IL rates will have to be far higher than CIL rates to cover the costs of all required infrastructure and affordable housing; and that the authority in question seeks to apply a ‘right to require’ amount—that is, the proportion of the levy proceeds to be allocated to on-site affordable housing— of 90%.

Under the new system, how many affordable homes would the levy implemented by this charging authority provide on our hypothetical site, and what contribution would the applicant make toward the provision of other local infrastructure? To answer those two relatively simple questions, one would need an assessment of the gross development value of the proposed development, GDV being the metric that the Government wants the new levy to be based on. To assess the development’s GDV, valuations would have to be secured. To accurately assess the value of the mix of flats and houses of different sizes, features and locations across the development, one would need to reference the value of comparable new build properties in the area, assuming those exist. To accurately value the commercial floor space in the proposed development, one would need to undertake an assessment of likely rents, using comparable local properties, again assuming that those exist. Those likely rents would then have to be capitalised using a yield based on an analysis of the sale of comparable commercial buildings in the area, again assuming those exist. The resulting figures would then have to be divided by net saleable and lettable floor space to generate a per square metre value for that commercial floor space. Generic or standardised information could of course be used, but that would run the risk of significantly increasing the margin of error, with consequential impacts for the amount of affordable housing and infrastructure provided on our hypothetical site.

Armed with those assessed values, and given that end value is the metric on which this levy is calculated, in order to estimate the amount of IL generated for affordable housing on the site, the local planning authority would deduct the minimum threshold of £3,000 per square metre, multiply the remaining number by the IL rate of 50%, multiply it again by the 90% “right to require” proportion, multiply that figure by the proposed amount of floor space, and divide the remaining figure by the different values of market homes and affordable homes, which in themselves would require additional valuations.

All of that is to say that the exact proportion of affordable homes that the levy will generate will vary from site to site in any given local planning authority area, even if the authority chooses to set a single rate, rather than multiple rates, as is its right. It will depend on myriad different, and far from simplistic, time-consuming assessments of end value. However, calculating the levels of affordable housing generated by the levy is not the end of the process. The local planning authority will then need to calculate the infrastructure contribution for our site, namely the difference between the total levy amount and the proportion allocated to affordable housing, and the value of the community facility as another piece of on-site infrastructure.

Moreover, every one of these valuations—each critical to arriving at an assessment of the GDV of the development as a whole—will presumably not be set in stone, because the value of the market and affordable homes, the commercial floor space and the community facility on our hypothetical development will change over time, as would any other. That means that the local planning authority will almost certainly have to carry out further valuations at different stages in the development process, with the final liability not being known until years after the application was submitted—and that is setting aside the very real possibility that the new system will, along with problems relating to avoidance, generate frequent disputes over valuations, which could delay and complicate the process further.

Imagine for one moment a senior planning officer or an elected councillor in our imagined local planning authority who is confronting that new system and trying to accurately assess at the planning application stage how much affordable housing will be provided on our hypothetical site, and the amount of infrastructure funding that will be extracted from the developer. I put it to the Committee that doing that would be extremely challenging, if not impossible, for them—let alone for a local resident who has taken a passing interest in the proposed scheme.

As my hon. Friend the Member for York Central said, most local planning authorities simply do not have the expertise and the resource to oversee such a complicated process, and that leaves aside other pertinent questions. What if the final infrastructure levy liability, based as it will be under the Government’s proposals on end-value GDV, turns out to be lower than the value of the on-site affordable housing and infrastructure that has been constructed in the interim? In such circumstances, would the local planning authority have to refund the developer on the basis that an overpayment has been made?

What is more, the difficulty that charging authorities will face in estimating the affordable housing and infrastructure payments generated by the new levy, and by implication they difficulty that they will have in setting rates in the first place, are not the new system’s only weaknesses. The significant uncertainty that will result from the decision to base the levy on a proportion of GDV is likely to cause issues in relation to the price of land and development land sales. It will almost certainly hamper the ability of local planning authorities to properly assess the benefits of proposed development, and whether it will contribute sufficiently to meeting local housing need and infrastructure requirements. Also, the new system will not remove the need for some type of site-specific legal agreement to ensure that the contributions extracted from developers are used to deliver the affordable homes on site, and that all the relevant requirements in terms of tenure type, discount rates and eligibility are ultimately met.

Perhaps most contentiously, the decision to make GDV the metric for the new levy is likely to result in applicants making their IL payments at the end, rather than at the beginning, of the development of a site, because the potential for interim payments or payments on account will be complicated by the fact that the final IL liability will not become clear, due to all the problems inherent in valuing GDV, until near the point of completion. That raises the very real prospect of the new levy creating a system in which the infrastructure required to support development will not be in place when it is needed.

One assumes from several passing comments made by previous Ministers that the Government believe that the answer to this obvious problem is to allow local authorities to borrow against future levy receipts to fund the delivery of infrastructure up front. However, the Minister must surely recognise that all that proposition entails is a transfer of risk and cost from the private to the public sector; it does nothing to address the uncertainty at the heart of the new process. Even with the opportunity to borrow against future levy receipts, it would remain the case that net receipts from post-completion valuation would be hard to predict, and rates on borrowing would reflect that uncertainty, resulting in infrastructure being more expensive to deliver. The idea that local authorities will collectively take up this borrowing option at the scale needed to offset the delay in securing levy contributions is, frankly, for the birds.

It may be that the Government believe that infrastructure on any given site will be paid for by levy contributions extracted from already completed developments, but if that is the case, it will give rise to a situation where there is no guarantee that the infrastructure funding delivered by a new development will be spent in the vicinity of the development. Whatever way one looks at it, the outcome is likely to be fewer overall approvals, more unsustainable development where development does occur, and greater local opposition; either development will not be accompanied by the up-front provision of core infrastructure, or there will be no obvious link between an individual development site and infrastructure provision in the area.

In sum, and with the obvious proviso that the detailed design of IL will be delivered through regulations and so we can only judge the new system based on our current understanding of the Government’s thinking, there is very good reason to suspect that the levy will not be a simpler, more transparent, more certain and more effective system of developer contributions than the one that presently exists. As a result, we feel strongly that the Government should think again about legislating to make its adoption mandatory.

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For the reasons I have set out, I commend clauses 113 and 115 to the Committee.

[Matthew Pennycook]

How to respond to that? That was a valiant attempt to make the best case possible for what is ultimately a flawed proposition.

The Minister has outlined that the existing system has flaws. I agree with him, as I said earlier, although I do not think they are the flaws that he set out. Some of the issues around viability—I spoke to the reasons earlier—have been addressed, and the Government can take other steps, not least under clause 110, to strengthen the existing system. However, we are considering the framework for a system that, as far as I can tell from looking back at CIL and previous attempts, has never been tried. We are talking about a single, fixed-rate levy mechanism for securing all affordable housing and infrastructure. That has never been tried, and certainly not on the basis of a metric as problematic as GDV.

The Minister says that we know the sale value at the endpoint of a development, but we do not necessarily—it depends on what the development is, and with phased development it becomes even more complicated—and knowing that does not address the inherent uncertainty that GDV creates at the point of the planning application being determined. With the current system, there is no sense of how much affordable housing or infrastructure we are going to get, and we certainly have no guarantees that we are going to get that infrastructure up front, which is a live point of concern across the Committee and across the House.

It is okay to say that perhaps local authorities will have greater certainty, by means of the borrowing power that the Bill will provide for, but what will they do—store up infrastructure levy reserves for a couple of years before they start to bring forward infrastructure developments on sites? Even if they can do that, this system will break the link between individual sites and IL contributions, so in all our constituencies we will get greater local opposition to plans because, even more so than with the current system, our residents will not be able to understand the link between a planning application being brought forward and what public gain they and their community will get out of it.

I do not think that the Minister, as much as he attempted to, has responded to the serious concerns that I have set out about GDV and the new system to the extent that we can be reassured that, in passing this framework this morning, we will be introducing a system that will have better outcomes and that addresses the real complexities in the current system.

Levelling-up and Regeneration Bill (Nineteeth sitting)

Matthew Pennycook Excerpts

Committee stage
Tuesday 6th September 2022 Public Bill Committees

[The Chair]

We met this morning, and we come now to the afternoon session. Obviously, some of you have extrasensory perception and have anticipated the fact that I was going to let you take your jackets off—good on you.

Clause 113 ordered to stand part of the Bill.

Schedule 11

Infrastructure Levy

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I beg to move amendment 148, in schedule 11, page 282, line 29, leave out

“and in achieving any purpose specified under section 204N(5)”.

This amendment and Amendment 149 would prevent the Secretary of State directing the proceeds of the infrastructure levy towards purposes other than supporting the development of an area by funding the provision, improvement, replacement, operation or maintenance of infrastructure.

[The Chair]

With this it will be convenient to discuss amendment 149, in schedule 11, page 294, line 35, after “purposes” insert

“which support the development of the area and”.

See explanatory statement for Amendment 148.

[Matthew Pennycook]

As ever, it is a pleasure to serve with you in the Chair, Sir Mark. Having debated this morning in broad terms the deficiencies of the proposed infrastructure levy as we see them, and the corresponding case for discretion in terms of its adoption and core elements of its design, I turn now to a far more specific concern.

Part 1 of schedule 11 makes changes to the Planning Act 2008 by inserting new part 10A, providing for the introduction of the new levy. The new power replicates section 205 in part 11 of the 2008 Act, albeit with an important change that makes clear that the purpose of the levy now includes anything specified by the Secretary of State under subsection (5) of proposed new section 204N, in schedule 11 on page 294. The proposed new subsection makes clear that regulations may allow for circumstances in which a specified amount of the infrastructure levy is applied to purposes other than funding the provision, improvement, replacement, operation or maintenance of infrastructure, defined so as to include transport, schools, medical facilities, open spaces, flood defences, affordable housing and a number of other items.

That gives rise to two obvious questions. First, what purposes other than the provision, improvement, replacement, operation or maintenance of infrastructure, defined as broadly as it is in proposed new section 204N(3), on page 294, would IL ever need to be spent on? Perhaps the Minister can give us an example of what kind of non-infrastructure the Government believe those powers should fund. Secondly, why should developer contributions secured in relation to a particular area be used to support the provision of non-infrastructure items that may be unconnected to it? Our concern is that allowing the purpose of IL to include anything specified by the Secretary of State may give rise to a situation—as, I might add, the 2020 White Paper explicitly suggested—in which proceeds from the infrastructure levy are used to fund things such as service provision or the reduction of council tax.

There may be a far less problematic reason for the inclusion of the relevant language in proposed new section 204A(2) specifying that IL can be used to achieve any purpose under proposed new section 204N(5). For example, it may simply be the means of facilitating the continuation of the neighbourhood share under the new system. However, if that is the case, why not make that clear in the Bill? Given how widely drawn the language in proposed new section 204N(5) is, we remain concerned that it could lead to much-needed IL funds being directed to purposes other than supporting the development of an area by funding its infrastructure. That is the concern that amendments 148 and 149 are designed to address, by deleting the relevant language from proposed new section 204A(2) on page 282.

In our previous debate, I outlined in detail our concern that the levy as proposed will fail to secure as much—let alone more—public gain from developers than the present system. Allowing specified amounts of IL to be used to fund non-infrastructure items that might be unconnected to a given area would exacerbate that problem by further depleting the funding available for infrastructure, including affordable housing, in that area. The amendments would simply ensure that any funds generated by the levy would have to be spent on infrastructure that supports the development of the area in question. I look forward to hearing the Minister’s response.

[The Minister for Housing (Mr Marcus Jones)]

It is a pleasure to serve again under your chairmanship, Sir Mark. The Bill seeks to give local communities control over what is built, where it is built and what it looks like. It creates an incentive for communities to benefit from development. The delivery of infrastructure is a key pillar in our approach, and the levy is our key tool to support that.

We think that the local authority is best placed to decide which infrastructure projects it should spend the proceeds of the levy on. The Bill will require local authorities to prepare infrastructure delivery strategies. These will set out a strategy for delivering local infrastructure through spending levy proceeds. There is scope to allow even more flexibility on spending, to further incentivise communities to benefit from development. The Bill enables the funding purposes of the infrastructure levy to be extended to such purposes as may be specified by the Secretary of State under proposed new section 204N(5) if certain circumstances apply.

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[Mr Jones]

If the hon. Member bears with me for a moment, I will give her an example.

The measure will enable regulations to set out the circumstances where charging authorities could spend a specified amount of the levy on items that are not infrastructure. This means that in some areas, once local authorities are able to meet their affordable housing and infrastructure needs, they could have scope to increase their flexibility on what they spend levy receipts on, such as improving local services. This would remain a matter for the local authority to decide on, subject to any limitations set out in regulation or guidance, ensuring that infrastructure and affordable housing remain priorities. Furthermore, it is right that even if such extended funding of the levy is permitted and taken up by the local authority, it should be subject to the overall test in proposed new section 204A that such costs must not make the development an area economically unviable. Therefore, we do not believe the amendment is necessary, so I ask the hon. Member for Greenwich and Woolwich to withdraw it.

[Matthew Pennycook]

I think that was a useful answer from the Minister, for the following reasons. He clearly stated that the reason for the flexibility is to allow local planning authorities to spend levy receipts on non-infrastructure items not covered in proposed new section 204N(3). That is very useful, because he has responded to our concern by saying on the record that the infrastructure levy could be spent on things such as the funding of services.

The Minister made an important qualification, which I will address. He made clear that local authorities would be allowed to spend only once they had met their affordable housing targets and infrastructure needs. I applaud his optimism that the levy will cover not only all affordable housing provision and core infrastructure, but other things such as services. I welcome that clarification.

The Minister will do two things, I think. When we come to them in due course, I think he will accept our amendments to strengthen the Bill’s requirements on meeting affordable housing supply. However, I still think the Bill needs to be tightened to specify what kind of non-infrastructure the levy could be spent on in the circumstances he outlines. At the moment, it is incredibly broad—it relates to any purposes specified by the Secretary of State—and that remains a point of concern. Although I will not push this amendment to a vote, we may return to this issue. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Mr Jones]

I beg to move amendment 196.

Proposed new section 204A in schedule 11 sets out the overall purpose of the levy, which is to ensure that the costs incurred in supporting the development of an area can be funded wholly or partly by the owners or developers of land in a way that does not make development of an area economically unviable. The overall purpose also applies to the costs incurred in achieving the other specified purposes that are allowed under the levy regime.

Proposed new section 204A currently cross-references to purposes that may be specified under proposed new section 204N(5). That means that the levy regulations may allow levy receipts to be spent on matters other than infrastructure, such as improvements to local services and delivery of local programmes that are valued by local communities. Although the infrastructure levy will primarily be spent on infrastructure and affordable housing, that will give us the scope to allow local authorities more flexibility over how they spend the levy if those priorities have been met.

The amendment will correct an omission and ensure that proposed new section 204A also correctly cross-refers to the powers in proposed new sections 204O and 204P, which will also allow levy receipts to be spent on other specified purposes, such as non-infrastructure matters. Where that is allowed, it must be subject to the overall purpose set out in proposed new section 204A. To ensure that proposed new section 204A correctly interacts with proposed new sections 204O and 204P, we are introducing a minor technical amendment to ensure the cross-reference is properly made. I therefore respectfully ask the Committee to support the amendment.

[Matthew Pennycook]

I rise to speak briefly to this Government amendment, notwithstanding our debate on the previous group of amendments. There is nothing in the Bill to ensure that local authorities meet a sufficient level of housing need—we will come to that—or of infrastructure need. Even taking into account the Minister’s reassurances on how the levy can be spent, I remain concerned. If anything, Government amendment 196 augments the concerns I have just spoken about. By specifying that the aim of the levy can include any purpose specified under proposed sections 204N(5), 204O(3) and 204P(3) of the Planning Act, the amendment allows proceeds of the levy to be spent not only on non-infrastructure items that might be unconnected to a given area in a way already made clear in the Bill, but on a wider set of, one presumes, non-infrastructure items. In a sense, the amendment’s intention is to widen the scope of the non-infrastructure items to which specified amounts of IL can be directed.

As I have made clear, we strongly believe that funds generated by the levy should be spent on infrastructure that supports the development of the area in question, and we oppose this Government amendment for the same reasons I set out in relation to amendments 148 and 149. I will not press the matter to a vote, but I want to put that on the record. We feel very strongly, as I think local communities will, that the proceeds of an infrastructure levy should be spent on infrastructure in their area. If anything, rather than having surplus amounts to spend on other items specified by the amendment or the Bill, I believe that the levy will not cover all those infrastructure costs.

[Tim Farron (Westmorland and Lonsdale) (LD)]

I am also very concerned. This rings serious alarm bells with me and, I think, many other people, particularly those who work in housing associations and local government. It is hard to build affordable housing—we would have built a lot more of it if that were not the case. Given the price and availability of land, the process of finding a delivery partner, the involvement of contractors and housing associations, and the need to make the money stack up, it is not easy. The problem is that if we create a safety valve that allows infrastructure levy funding to be spent on something other than the infrastructure that underpins new affordable housing developments or the development of affordable housing itself, some people will take the easy option and some of the money garnered for planning gain will not do the community much good at all.

I hope and believe that the Government and this Minister have good intentions, but if we allow the funds gathered by the infrastructure levy to seep out from the pot for developing affordable housing and the infrastructure that underpins it, that is what will happen. We must not allow it to happen.

[Mr Jones]

Let me respond to the point raised by the hon. Member for Westmorland and Lonsdale. Clearly, the firm intention of the policy set out in schedule 11 is that the requirement for relevant infrastructure and affordable housing in a particular area is satisfied. However, there may be circumstances where a local authority, while satisfying those criteria, uses this mechanism. As I have said before, we expect to capture more value from developments because we will be capturing the value of the uplift of the finished product, not just the value at the point at which planning permission is achieved. Therefore, the expectation is that there could be greater value and it could enable local areas to do additional things, alongside the relevant and necessary affordable housing and infrastructure. I hope that reassures the hon. Gentleman about the Government’s intention.

Amendment 196 agreed to.

[Matthew Pennycook]

I beg to move amendment 150, in schedule 11, page 282, line 32, at end insert—

“(2A) The intention of IL is to enable local authorities to raise money from developments to fund infrastructure to support the development of their areas while allowing planning obligations under section 106 of the Town and Country Planning Act 1990 to continue to be used to provide affordable housing and ensure that development is acceptable in planning terms.”

[The Chair]

With this it will be convenient to discuss the following:

Amendment 151, in schedule 11, page 294, leave out line 21.

This amendment would remove affordable housing from the application of the infrastructure levy to with the intention that it would continue to be funded under current system of s106 TCPA 1990 obligations.

Amendment 152, in schedule 11, page 294, line 31, at end insert

“, other than to add affordable housing”.

This amendment would prevent affordable housing being added to the list of matters included within the meaning of “infrastructure” at a future date by regulations.

[Matthew Pennycook]

As the Minister made clear this morning, the Government are not willing to give charging authorities discretion when it comes to adopting the infrastructure levy, or any freedom to determine the best metric upon which to calculate IL rates. However, I want to try to persuade him to reconsider using the levy to deliver affordable housing.

Amendment 150 would insert into proposed new section 204A a proposed new subsection making clear that the intention of IL is to enable charging authorities to raise money to fund infrastructure to support the development of their areas, while allowing planning obligations under section 106 of the Town and Country Planning Act 1990 to continue to be used to provide affordable housing and to ensure that development is acceptable in planning terms.

Amendments 151 and 152 would make consequential changes to the schedule, respectively removing affordable housing from the list of what is designated as infrastructure and preventing regulations from reinserting it into that list at a later date.

When I spoke to amendments 142 and 143 and amendments 145 to 147, I set out our two main concerns about the new levy—namely, that it is likely to prove onerously complicated to operate in practice and that it will almost certainly lead to less infrastructure and less affordable housing overall than those secured under the present system. It is the second of these concerns that lies behind amendments 150, 151 and 152.

Under the present system, funds raised through the community infrastructure levy are used only to fund infrastructure, facilities and services that support development in a given area. It is individual section 106 agreements that, along with any grant funding secured, pay for affordable housing. Under the new system, which is premised on affordable housing as well as all other required infrastructure being funded through a single mechanism, local planning authorities will be forced to set IL at significantly higher rates than the community infrastructure levy, which is typically equivalent to a relatively small proportion of development value.

The obvious resulting risk of having to set such high rates is that development on less viable sites, the majority of which are concentrated in those parts of the country most in need of levelling up and which the Government say is their mission to help, will simply not happen. As such, local planning authorities in areas with higher risk to viability of brownfield sites will be left with a choice: either allow such sites to remain undeveloped, or lower IL rates sufficiently to incentivise development on them but forgo essential infrastructure and affordable housing from more viable sites as a result. In practice, both outcomes are likely to materialise. If that is the case, it will have significant implications for the supply of infrastructure and high-quality affordable housing across the country.

There are very good reasons for the Government to reconsider funding affordable housing through the new levy, and I want to briefly speak to a number of them. First, there has never been a previous attempt to implement a single fixed-rate levy mechanism for securing both infrastructure and affordable housing. That is not for want of some extremely clever people attempting to design such mechanisms, but the desire to incorporate affordable housing into previous systems, including CIL, was ultimately abandoned, because each time they were deemed to be inoperable in practice. That is an obvious warning that the Government would do well to heed.

Secondly, as we have already discussed in the debate on the first group of amendments to part 4, by systematically financialising the provision of affordable housing, and for that matter on-site infrastructure, with the inherent variability and uncertainty that that entails, the levy is likely to unnecessarily complicate the planning process, resulting in additional delays, disputes and resourcing pressures.

Thirdly, the rigidity inherent in applying one or more IL rates in any given charging area to sites within it that will inevitably vary in terms of development and land values will result in a wide range of levels of affordable housing and infrastructure contributions across sites. That is inherent to the design of the levy. As a result, it will be incredibly difficult for local planning authorities to know what levy rates to set in order to fund all necessary infrastructure and meet the affordable housing need identified in their local development plans.

Fourthly, there are inherent problems when it comes to attempting to provide affordable housing through a rigid fixed-charge approach, because of how such a charge interacts with viability. If the Government are adamant about pursuing a fixed-charge approach, they could always consider a fixed-percentage affordable housing requirement delivered through section 106 agreements, which would be preferable to a general levy calculated on the basis of gross development value.

By amending the national planning policy framework as they have done, to place greater emphasis on viability testing as a part of plan-making rather than as a feature of individual site applications, the Government have already firmed up affordable housing requirements while still allowing for flexibility in exceptional cases where there are genuine viability challenges. In our view, the current arrangement strikes the right balance and, as I said this morning, the Government’s time would be better spent focusing on what more could be done—for example, by equipping local authorities with the specialist skills and resources that they need to make the existing system work more effectively.

Lastly, and related to the previous point, setting a fixed IL rate or rates will inevitably result in the loss of affordable housing supply on every site in a given charging area that could viably deliver more than the rate in question would require, while at the same time putting at risk entirely the development of sites grappling with genuine viability challenges that would be unable to provide the requisite level of contributions. That problem is inherent to the nature of a levy premised on a general fixed rate or rates within charging areas where there is variation in values and costs between sites.

Whichever side of the line individual charging authorities ultimately come down on, the overall result will be lower rates of affordable housing delivery in England. If local planning authorities try to overcome that inherent flaw in the proposed levy system by setting myriad different IL rates, in an attempt to respond to the natural variation in development and land values in any given area, the result will be a smorgasbord of rates, which would make for a fantastically complicated arrangement that would make it hard, if not impossible, for developers and communities to understand the extent and nature of the contributions due on different sites in a given locality.

It is telling that despite the Government’s commitment to the levy securing at least as much affordable housing as developer contributions do now, there is nothing in the Bill that guarantees that that will be the case. We need to be confident that we are approving a framework that has a reasonable chance of at least maintaining the supply of affordable housing that we currently secure through developer contributions, and ideally one that allows for improvements to allow that supply to increase, because it needs to increase markedly.

Short of giving charging authorities discretion in relation to adopting the infrastructure levy and the freedom to determine the best metric on which to calculate IL rates, limiting the scope of the levy to the delivery of actual infrastructure and retaining the use of section 106 to fund affordable housing, as amendments 150 to 152 propose, is the best means of achieving that aim, because it would overcome the problems with the setting of IL rates that I have described and the impact that fixed rates will have on overall levels of affordable housing secured through developer contributions. It would also directly address an issue we have not discussed—namely that a fixed levy would not be capable of determining affordable housing requirements for estate regeneration schemes, which necessarily vary from site to site, depending on the existing level of affordable housing that should be re-provided and how much additional affordable housing can be delivered.

I trust that the Minister has carefully considered the arguments I have made and will consider accepting the amendments, which would make the Government’s levy proposals far more workable than they currently are. Either way, he really does owe the Committee an explanation of how the levy will operate in such a way as to ensure that developments are viable and deliver both the required infrastructure and at least as much affordable housing as is currently secured through section 106 agreements, because despite the optimistic claims that successive Ministers have made and the claims that he made in debates this morning, nearly two years after the levy proposal was first put forward in the White Paper no evidence whatever has been published to demonstrate that the infrastructure levy is actually capable of achieving that. I look forward to hearing the Minister’s response.

[Rachael Maskell]

I am grateful to be called to speak to this set of amendments and thank my hon. Friend the Member for Greenwich and Woolwich for tabling them.

It is really important that we think about the consequences and what could happen. I reject the setting of infrastructure against affordable housing. If people are building any form of development, they will have to put infrastructure on that site, whether the infrastructure is a GP surgery, a school or some of the more micro infrastructure that is necessary for a community to function. As a result, the infrastructure will trump affordability in order to reach viability, so we will not see the affordable housing being built; in fact, if anything we will see a regression if the two are set against each other. For people to get the true value of developments with high-value accommodation, there will be a demand for infrastructure on the site. The developer will naturally focus on that and that will be how the situation turns.

It is also important to look at what will happen with this patchwork approach throughout the country, because if different areas set different levels of infrastructure levy, that will create a new market for where developers go and develop. Of course, they will be looking to their profit advantage over what the local communities need. The new system will be another pull: it will direct them to where they can get the deal that best suits them for developing the infrastructure that they want. It is going to skew an already bad situation into an even worse situation in respect of the need for affordable housing, let alone social housing. I cannot see how it is going to bring any advantage to a social developer, let alone a commercial developer, in trying to ensure that we get the mix of housing that we require in our communities. With affordable housing and social housing in particular being developed at such low levels compared with high-value housing—which, let us face it, is going over to being essentially an asset rather than lived-in accommodation—the differential is clearly going to cause a lot of challenge, and even greater challenge, for communities.

As we have debated, supporting infrastructure might not even be infrastructure: it could be services or something else. The provisions create risk in the legislation, so my hon. Friend’s amendments are about ameliorating that risk and ensuring that there is some level of protection to ensure that affordable housing is built.

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[Mr Jones]

We are all concerned with making sure that we get as much affordable housing as we can from housing developments. Clearly, what I am arguing for is a wider package of measures that we believe will deliver at least as much affordable housing as under the current system, if not more, together with the infrastructure that communities need.

It is not fair that communities lose out just because their local authorities have effectively been strong-armed during the negotiation, and it is not fair that developers may face arbitrary variation in the demands for contributions in different places. If developers do not know how much they are going to have to pay, it is much harder for them to price contributions into land. There is currently an incentive to overpay for land and then try to negotiate contributions downwards.

To address the inequality of arms that the Committee has discussed, the new levy will introduce the right to require affordable housing through regulations. The right to require will enable local authorities to determine what proportion of the levy they want delivered in kind as affordable housing and what proportion they want delivered as cash. That will mean that local authorities, not developers, will get the final say on the proportion of affordable homes delivered as an in-kind levy contribution on a site. It is therefore important that affordable housing is considered as a kind of infrastructure that can fall within the levy regime.

It will be equally important that the levy delivers at least as much affordable housing as under the current system. That is why, when the levy rates are set, charging authorities must design them with regard to the desirability of ensuring that the rates can maintain or exceed the amount currently secured through developer contributions.

Let me address a couple of other points. The hon. Member for Greenwich and Woolwich was concerned about less-viable sites and lower-value sites. I reassure him that local authorities will set a minimum threshold that reflects build costs and existing use values, as well as setting levy rates. The minimum threshold will help to ensure that lower-value sites continue to come forward.

The hon. Member for York Central mentioned concerns about risk and about delivering affordable homes and infrastructure while the changes take place. I reassure her that, as we discussed in the earlier debate on the infrastructure levy, we will be driven by a test-and-learn approach. The lessons from that work will be learned to make sure that we achieve our objectives, and the places that are not using that approach in working with the new infrastructure levy will continue to work on the same basis as they do now until the new system is rolled out. I reassure the hon. Lady again that the process could take some years to achieve to make sure we get it right.

On that basis, I hope that the hon. Member for Greenwich and Woolwich will not press amendments 150 to 152 to a Division.

[Matthew Pennycook]

I thank the Minister for his response, but I am afraid I am not reassured, for the following reasons. The Minister rightly said, and I accept, that section 106 is an imperfect mechanism for extracting public gain from developers, but, as we have already debated, it is one that can be improved on, and has been in recent years, and can be reformed further.

The question before us, which goes back to the wider debate we had earlier, is: will the levy system replace the current system with one that will extract sufficient public gain to at least allow the same levels of affordable housing? I have listened carefully to the Minister, and he has made repeated commitments that it will extract at least as much as that gain. However, as we will come on to with the next set of amendments, there is nothing in the Bill that guarantees that the levy framework, even if it does extract the same amount of gain, will lead to a situation in which at least as much affordable housing is required. The language—I will come to this in the next debate—in proposed new section 204G is incredibly weak in that regard.

Nothing I have heard this morning reassures me that we are not implementing a system that will fail to extract the same amount of public gain when it comes to infrastructure and affordable housing as the present system. There is nothing in the Bill to ensure that local authorities spend their levy proceeds on the levels of affordable housing required to meet the housing need in their area. Given all the risk and uncertainty of replacing the existing system with the proposed one, I feel strongly that the Government are making a fundamental mistake by including affordable housing within the scope of the levy. I will therefore press amendment 150 to a Division.

Question put, That the amendment be made.

Division 12

Ayes: 5

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Labour: 4
Liberal Democrat: 1

Noes: 8

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Conservative: 8

[Matthew Pennycook]

I beg to move amendment 153, in schedule 11, page 283, leave out lines 22 and 23.

This amendment would amend the definition of “affordable housing” to ensure that the infrastructure levy could only be spent on social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 154, in schedule 11, page 285, line 35, at end insert—

“(9) IL regulations must provide for exemption from liability to pay IL in respect of a development which exclusively contains affordable housing.”

This amendment would provide for an exemption from liability to pay IL in respect of a development which contains 100 per cent affordable housing.

Amendment 155, in schedule 11, page 287, leave out lines 34 to 42 and insert—

“(2) A charging authority, in setting rates or other criteria, must ensure that—

(a) the level of affordable housing which is funded by developers and provided in the authority’s area, and

(b) the level of the funding provided by the developers,

is maintained at a level which, over a specified period, enables it to meet the level of affordable housing need identified in the local development plan.”

This amendment would require Infrastructure Levy rates to be set at such a level as to meet the level of affordable housing need specified in a local development plan.

Amendment 156, in schedule 11, page 298, line 13, at end insert—

“(aa) set out how the charging authority intends to use IL to meet the level of affordable housing need identified in the local development plan, and”.

This amendment would require a charging authority to detail the way in which it intends to use the infrastructure levy to meet its identified housing need in preparing and publishing an infrastructure delivery strategy for its area.

[Matthew Pennycook]

Having just sought unsuccessfully to persuade the Minister to reconsider using the infrastructure levy as a means of delivering developer-funded affordable housing, I will set out how we believe the Bill needs revising to ensure that the new levy will supply, in practice, sufficient levels of such housing. I have spoken at length about why we are concerned that the new levy will fall short as a mechanism to deliver affordable housing, and our fear that its introduction will lead to an overall reduction in affordable housing supply—a fear not assuaged by a piece written on 22 August for the ConservativeHome website by the recently departed Under-Secretary of State, the hon. Member for Harborough (Neil O’Brien), in which he explicitly argued that the levy would allow for a rebalancing of

“what developer levies are spent on, towards things local residents want, like GP surgeries, schools, roads, and landscaping, rather than social housing for non-locals”.

Dismissing concerns about the impact of the levy on affordable housing, the Government have promised on multiple occasions, and the Minister has again today, that it will deliver at least as much affordable housing as developer contributions do now. Indeed, the policy paper accompanying the Bill explicitly sets out that commitment. The Minister went further this morning, and said that the infrastructure levy will be so successful that not only will it cover all infrastructure and affordable housing but we will have a surplus that we can spend on lovely things in our local areas. As I mentioned, no evidence has yet been published by the Government to substantiate why they believe that the new levy will be able to fulfil that objective.

We are promised a technical consultation soon, and the Department is by all accounts sitting on a study by academics at the University of Liverpool involving the design and implementation of a prospective levy charging schedule. I put it to the Committee, however, that it is telling that in the two years since the levy was first mooted in the White Paper no analysis or impact assessment has been produced to demonstrate that the new levy has a chance of matching the existing system of developer contributions when it comes to the delivery of affordable housing.

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[Mr Jones]

The hon. Member for Greenwich and Woolwich is right to refer to the importance of the new levy in supporting the delivery of affordable housing for local communities and in contributing to meeting local need. As we have discussed, the Government are committed to getting at least as much, if not more, on-site affordable housing through the new levy as we do under the current system of developer contributions.

The definition of affordability, as challenged by amendment 153, is a complex and evolving picture that is better understood and monitored at local level. It is therefore appropriate to allow for infrastructure levy regulations to provide for any other description of affordable housing, beyond that defined as social housing in part 2 of the Housing and Regeneration Act 2008. This will ensure that any new types of affordable housing tenure introduced in the future can be brought into the scope of the levy.

[Matthew Pennycook]

I am sorry to put the Minister on the spot, but it would be useful if we had an example of the type of housing tenures that the Government believe that that specific line in the Bill is required for, given the already very broad definition of social—affordable—housing in part 2 of the 2008 Act.

[Mr Jones]

As the hon. Member knows, when the 2008 Act was brought into effect by the last Labour Government, there was a reasonably wide definition of the different types of affordable housing. One of the evolutions in affordable housing recently has been the introduction of First Homes. I hear what the hon. Member for Greenwich and Woolwich says about that, but we are working to make sure that we have 1,500 first homes by the end of March 2023; that will be significant progress. The vast majority of affordable housing currently provided does fall within the definition that we have discussed, which was put into legislation in 2008, and we envisage that that will continue to be the case under the levy. However, accepting amendment 153 would mean placing a lot of reliance on the definition of social housing in the 2008 Act. Clearly, social housing is an extremely important part of the mix of affordable housing, but amendment 153 would reduce the levy’s ability to respond to any changes in tenure types that arise in the future. That is not helpful or necessary. It is right that the levy regulations should provide future-proofing and regulatory flexibility.

Amendment 154 deals with exemptions for sites that are 100% affordable housing. Subsection (5)(h) of proposed new section 204D of the Planning Act 2008, in schedule 11 of this Bill, already contains a power for levy regulations to make provision about exemptions from or reductions in levy liability. The levy will be used to secure contributions towards affordable housing. We do not expect to charge the levy on exclusively affordable housing developments; we will explore that matter further in consultation. However, all development will be required to deliver the infrastructure that is integral to the functioning of the site, and we will retain the use of planning conditions and restricted use of section 106 agreements to secure that.

Amendment 155 would require infrastructure levy rates to be set at a level that enables an authority to meet the affordable housing need specified in a local development plan. The total value that can be captured by the levy, or indeed any system of developer contributions, will not necessarily match the costs of meeting the entire affordable housing need of an area as specified in the local development plan. Revenues will depend on the amount and types of development that come forward, and when they come forward, as much as on the levy rates and thresholds set. That said, the Bill recognises the importance of using the levy to deliver affordable housing. Proposed new section 204G of the Planning Act 2008, in schedule 11, provides that charging authorities must, when setting their rates, have regard to the desirability of ensuring that affordable housing funding from developer contributions equals or exceeds present levels. That will ensure that affordable housing need is accounted for when levy rates are set; to ensure that, those rates will be subject to public examination.

Importantly, the Bill makes provision for rates to be set with regard to increases in land value—for instance, as a result of planning permission. Targeted increases in rates will allow charging authorities to maximise the revenue that they can capture, and the amount of affordable housing that they can deliver.

We have designed the levy so that it can deliver at least as much affordable housing as the current system, if not more. As I have explained, the new right to require will require affordable housing to be provided. That will be introduced through regulations. That means that local authorities will get the final say on the proportion of levy contributions that go towards affordable homes. Should the levy generate more revenue than at present, local authorities could choose to direct those additional revenues towards meeting their additional affordable housing needs.

[Mr Jones]

I thank the hon. Member for that point. Like many other areas, York’s housing market is affected by the tourist industry that the city attracts. It is for local areas—I am glad that the hon. Member’s area is forming a local plan—to assess the housing need in their local plan; they should take matters such as the amount of affordable housing, and the need in an area, into account when making that plan.

Local authorities will need to balance the objective of providing affordable housing with the levy’s other aspirations. Local authorities will need to use the levy revenues to deliver other critical infrastructure, such as new roads and medical facilities. Local authorities, which know their local areas, are best placed to balance funding for affordable housing with funding for other infrastructure needs.

On amendment 156, proposed new section 204Q, introduced by schedule 11, introduces the requirement for levy charging authorities to prepare an infrastructure delivery strategy, which will outline how a local authority will use the money the levy generates through a strategic spending plan. That will include an outline of how it will use levy revenues to secure affordable housing. It is important that that happens in each area. The charging authority will have regard to that when setting levy rates. The exact detail of the infrastructure delivery strategy and how it should be produced will be determined through regulations. We will consult on matters relating to the infrastructure delivery strategy, and forthcoming secondary legislation and guidance will clarify how to treat affordable housing. All of that will be informed by our commitment to deliver at least as much affordable housing as we do under the current system.

I hope that my explanation gives the hon. Member for Greenwich and Woolwich clear assurances on how the new levy will support the delivery of affordable housing, and therefore I ask him to withdraw the amendment.

[Matthew Pennycook]

I thank the Minister for that comprehensive response. I will take each part of it in turn. I note what he says about the powers provided for in proposed new section 204D(5)(h) to the Planning Act 2008, regarding 100% affordable sites, and I welcome his commitment that the Government do not expect those sites to have the levy applied to them. That should be written in the Bill, but I take that commitment at face value, and I hope to see it fleshed out via the regulations.

--- Later in debate ---

Amendment, by leave, withdrawn.

[Matthew Pennycook]

I beg to move amendment 157, in schedule 11, page 283, line 28, at end insert—

“(1A) But a charging authority may not charge IL on development in its area comprising—

(a) over 150 residential units, or

(b) over 10,000 sq m of floorspace

and instead Part 11 of the Planning Act 2008 (Community Infrastructure Levy) applies to such developments.”

This amendment would specify a threshold for large sites in relation to which the role of section 106 TCPA 1990 agreements would be retained, meaning that the community infrastructure levy would continue to be used to support such development.

I made clear at the outset of our consideration of part 4 that the levy differs from that set out in the 2020 White Paper in several important respects. One of those is that the Government now propose to retain a distinct role for the current system of section 106 planning obligations, rather than replacing it entirely, as per the White Paper. We are told that narrowly targeted section 106 agreements will still be used for securing infrastructure integral to the operation and physical design of a site. The examples in the policy paper that accompanies the Bill—internal play areas and flood risk mitigations—suggest that the use of such agreements in this way will be a frequent occurrence. More importantly, we are also told that the Government want a role for section 106 agreements in supporting the delivery of larger strategic sites. On such sites, infrastructure can be negotiated and provided in kind; the value of what is agreed must not be less than what would have been paid through the levy. This raises a host of questions, as does every aspect of the Government’s proposal.

Will developers have to pay the difference where the cost of delivering infrastructure on large sites is less than the required IL charge would be? Correspondingly, would charging authorities have to refund developers if it transpired that the cost of delivering infrastructure was higher than the given IL charge? Who defines what is on-site infrastructure, and what can act as credit against the nominal levy charge? Will it be set out in regulations—there is then a risk that it will be too inflexible—or will it be defined by each charging authority? There is then an associated risk of additional complexity. How do we avoid developers providing a range of unnecessary on-site facilities in order to reduce their liability vis-à-vis that levy charge?

Those and other important questions aside, in general terms we very much welcome the proposed retention of section 106 agreements, both for the infrastructure that is integral to the operation and physical design of sites and for larger strategic sites. Indeed, when it comes to the latter, the continued use of section 106 is essential to ensuring that they are developed, given the obvious pitfalls of attempting to do so solely via the levy, with all the inherent flaws that we discussed earlier today.

However, schedule 11 does not define what actually constitutes a larger site for the purposes of the ongoing role of section 106 agreements. Amendment 157 simply seeks to place that definition in the Bill, in proposed new section 204B of the Planning Act 2008, so that there is clarity at the outset of the process of introducing and implementing the levy as to the site size threshold above which IL would not be charged.

The amendment proposes that, for the purposes of permitting an ongoing role for section 106 agreements, a large site should be defined as an area comprising over 150 residential units, or over 10,000 square metres of floorspace. We have chosen those threshold values for a number of reasons, but primarily because schemes of over 150 units or 10,000 square metres of floorspace are typically more complex, take longer to deliver and are often phased, and are more likely to require site-specific mitigation, thus benefiting from the ability of section 106 agreements—this is one of their key strengths—to tailor obligations to the specific circumstances of a site.

On large sites thus defined, which would account by our estimates for around 5% of current approved residential projects nationally, affordable housing provision would be delivered via section 106, as under the present arrangement. To avoid the delay and complexity of securing contributions for core infrastructure on the sites by means of such agreements, amendment 157 makes it clear that the existing provisions of part 11 of the Planning Act 2008 would still apply, thereby enabling contributions relating to the sites to continue to be secured by means of the community infrastructure levy.

We believe that straightforward and uncontroversial amendment would provide certainty as to what does and does not constitute a large site where there will be an ongoing role for section 106 agreements at the outset of what will be, by the Minister’s own admission, a lengthy process of testing, implementing and rolling out the new levy. I look forward to hearing the Minister’s response.

[Mr Jones]

The Government intend that the levy will replace CIL, except for the Mayor of London and in Wales, and largely replace the discretionary negotiated section 106 regime. However, following feedback through consultation and engagement with the industry, we recognise that, in some limited circumstances, a case exists for retaining a role for section 106 planning obligations in the delivery of infrastructure. Such circumstances include large and complex sites where infrastructure requirements are site-specific and require a more negotiated approach to ensure that infrastructure is provided at the right time. It is important to set the right definition for large and complex sites. We need to strike a balance between creating a more consistent levy system, while retaining flexibility for some negotiations on sites with complex infrastructure needs. On sites where section 106 agreements will continue to be used, we still expect developers to deliver at least as much overall value. It is just that some of it will be as in-kind infrastructure contributions rather than as a cash payment.

Setting the threshold in the Bill for when section 106 agreements should be used runs the risk of impacting on the effectiveness of the levy. If it is set too low, lots of development will continue to use section 106 agreements, and developers will continue to strong-arm local authorities over the value of their contributions. If we set it too high, it can impact infrastructure delivery on sites with complex and competing infrastructure needs. That is why we intend to consult on what the threshold should be, to allow us to consider stakeholder feedback and different options. The levy regulation, which will be laid before the Commons for approval, will specify the circumstances in which section 106 agreements will continue to be used. For the reasons I have explained, I request that amendment 157 be withdrawn, to allow us to consult further on when the use of section 106 agreements would continue to be more appropriate.

[Matthew Pennycook]

I appreciate the Minister’s response and, taking on board what he has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Matthew Pennycook]

I beg to move amendment 158, in schedule 11, page 286, line 38, leave out “IL” and insert—

“that part of the IL not applied to the provision of affordable housing”.

This amendment would mean that charities in England and Wales were not exempt from contributing to the provision of affordable housing on any given development.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 159, in schedule 11, page 287, leave out lines 5 to 14.

This amendment and Amendment 160 would ensure that charitable exemptions were limited to development undertaken by charities in England and Wales.

Amendment 160, in schedule 11, page 287, line 26, leave out from “2011” to end of line 28.

See explanatory statement for Amendment 159.

[Matthew Pennycook]

Proposed new section 240F of the Planning Act 2008 makes provision about exceptions from, or reductions in, IL for charities. The explanatory notes to the Bill make it clear that the provisions in this proposed new section replicate those that currently exist for the community infrastructure levy in section 210 of the Planning Act 2008. That is indeed the case but, as the Minister will know, charities are not exempt from contributing to infrastructure and, most importantly, affordable housing secured through section 106 agreements.

Because the new levy entails a single fixed-rate mechanism for securing both infrastructure and affordable housing, and because there is nothing on the face of the Bill to specify that charities must contribute to the provision of the latter, the limit of charitable exemptions to infrastructure and affordable housing has been drawn far more widely than that which applies in the case of CIL at present. We believe that is problematic, and could hamper development on sites taken forward by charities or reduce the amount of affordable housing delivered on them. By making it clear that charitable exemptions do not apply to that part of IL related to the provision of affordable housing, amendment 158 seeks to enable development led by institutions established for charitable purposes to proceed, and to enable appropriate levels of affordable housing to be secured on the sites in question.

A separate but related issue is the question of what constitutes a charity for the purposes of proposed new section 204F. Subsection (2)(a) of the proposed new section provides for regulations to exempt from paying IL institutions established for charitable purposes, defined in subsection (4) as not only a registered charity under section 29 of the Charities Act 2011, but any charities within the meaning of section 1 of that Act not required to be registered. We believe that defining charities so widely could result in development not taking place, or being unsustainable when it does, because unregistered charities would also be exempt. Amendments 159 and 160 simply seek to limit charitable exemptions from IL to those charities that are formally registered with the Charity Commission, as per the 2011 Act.

We believe that this sensible and proportionate set of amendments will ensure that charities are appropriately exempted, but that the limit of that exemption is not drawn so widely that it could impede development or reduce the levels of infrastructure and affordable housing coming forward. I hope the Minister will agree and signal that he is content to accept all three.

[Tim Farron]

Briefly, I think that the points made by the hon. Member for Greenwich and Woolwich are really good. It is important that we do not provide loopholes to allow developers to get out of providing genuinely affordable homes for local communities.

It is also important to remember the role of the National Trust, which does many good things. In my community and across Cumbria, it is effectively an affordable housing provider at times. Sometimes it is an unaffordable housing provider, and sometimes it is an outfit that moves from having affordable homes to having holiday lets, and it behaves in ways that I, and hopefully many people here, would not approve of. It is also potentially a developer, for better or for worse. There is the prospect of a new gateway development near Windermere railway station, which has the potential to provide genuinely affordable homes for local people. There is also the potential for that to not be the case, so it is important that we do not get overly benign and dewy-eyed about the word “charity”. What we really ought to be concerned about is the delivery of genuinely affordable housing for local communities, which is why it is important that this definition is tight and clear, and that we expect those charities that have the good will and support of the nation to earn that in the communities where they are not doing so at present.

--- Later in debate ---

[Mr Jones]

I thank the hon. Member for that question. I will not get drawn into lots of different examples, but we are very clear that we are talking about charitable purposes under the definition in the 2011 Act.

Turning to amendments 159 and 160, there may be other instances where an institution is established for charitable purposes but does not meet the definition of a charity—for example, a charity established in Scotland, Northern Ireland or overseas. Amendments 159 and 160 would remove the express ability for regulations to set exemptions or reductions in the levy for these types of institutions. This would mean that only English and Welsh charities could be exempt from the levy when delivering development for charitable purposes. While we recognise that this will be less common, it would still be unfortunate if other types of charitable institutions could not deliver important facilities because of increased costs from the levy.

We are aware that different charitable institutions may operate differently from English and Welsh charities. That is why it is important to maintain a separate power to prescribe in regulations in detail the levy liabilities of such institutions. That enables provision to be made in the regulations, which will keep up with future changes that might be made to charities law. There will also be instances where a charitable institution carries out development that itself is not for charitable purposes but that it should none the less be able to claim an exemption or reduction for.

In the current CIL system, the CIL regulations make use of this power to provide for relief from CIL liability at the discretion of the local authority for developments carried out by charities for investment purposes. This approach works, which is why we do not agree with amendments 159 and 160, which would remove the express ability to set this kind of exemption or reduction through regulations in the future.

I hope that I have provided helpful clarification to the hon. Member for Greenwich and Woolwich and other members of the Committee. I therefore kindly ask the hon. Member to withdraw his amendment.

[Matthew Pennycook]

I am partly reassured by what the Minister said, not least because he clearly indicated that the Government are going to go away and give further consideration to designing regulations. However, I urge him—or his successor when he is promoted—to really look into this issue, because I think there is a chance here, as Members have commented on, for a loophole to be exploited in ways that would cut across the purposes of the Bill as per the Government’s thinking. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Rachael Maskell]

I beg to move amendment 167, in schedule 11, page 287, line 28, at end insert—

“204FA Social enterprises and community interest companies

(1) IL regulations must provide for an exemption from liability to pay IL in respect of a development where—

(a) the person who would otherwise be liable to pay IL in respect of the development is a social enterprise or a community interest company, and

(b) the building or structure in respect of which IL liability would otherwise arise is to be used wholly or mainly for the purposes of social enterprise or the community interest.

(2) IL regulations may—

(a) provide for an exemption from liability to pay IL where the person who would otherwise be liable to pay IL in respect of the development is a social enterprise or a community interest company;

(b) require charging authorities to make arrangements for an exemption from, or reduction in, liability to pay IL where the person who would otherwise be liable to pay IL in respect of the development is a social enterprise or a community interest company.

(3) Regulations under subsection (1) or (2) may provide that an exemption or reduction does not apply if specified conditions are satisfied.”

This amendment makes equivalent provisions about the Infrastructure Levy for social enterprise or community interest companies as it does for charities under inserted section 204F.

The reason for the amendment is that there are different forms of businesses across communities. At this point, I should declare an interest as a Member of the Co-operative party. Social business is really important across our communities. Social businesses, enterprises and community interest companies have a different focus from the run-of-the-mill business. They are not there for profit. They are there to reinvest in their service users and facilities and to give back to their communities.

I think there is a real anomaly in the legislation. Today, the voluntary, community and social enterprise sector is referred to as one, recognising the charitable aims and social aims that these organisations bring. In moving the amendment, I am looking for parity, to recognise the fact that not-for-profit organisations—community interest companies and social enterprises—make an investment in their communities. They can make an investment by employing people from a place of disadvantage and by giving people opportunities in life. However, they are businesses as well, running cafés, for instance. Obviously they reinvest the proceeds they make into people in the community or they perhaps run a nursery or another form of business. We have seen the real benefit that that brings—it certainly addresses the levelling-up agenda. It enables people to move forward in their social mobility journey.

These organisations often start out with no assets whatever. They are very small. They build, reinvest and grow, which is good for the local economy. We need only to look at Preston as an example. It has invested—I look at the Chair, who is the MP for Preston—in the community. It has invested in the model of social business as well, and we know the importance of that. We want to see that rolled out across our communities. If these organisations grow and want to invest more and further benefit the community, but they then have to pay the infrastructure levy, that will curtail the opportunities that they can bring to our communities, and we do not want to see that. We want to see community interest companies, co-operatives and social businesses grow in a way that allows them to reinvest in our communities.

One thing that I have found most inspiring over the last few weeks is meeting organisations that are putting incubators for social enterprises in their communities—again, with no asset, but they provide an opportunity to bring forward a generation of new community interest companies and social enterprises. I have seen a little bit of that on the SPARK site in York, which really has put a spark into York. It is built out of old containers on a site and has brought a new energy into the city centre. It has been a fantastic opportunity, running and helping businesses to develop the ethos of community interest companies as they move forward.

I do not understand why in the legislation credible social businesses, social enterprises and community interest companies do not have exemptions when they give so much back to our communities and bring real transformation to our society. I want the amendment to be made. It is an omission; perhaps the Minister will explain why such an omission was made. Will he also reflect on the charities when it comes to the consultation and looking at further regulations? Will he include social enterprises and community interest companies in the substantive next phase of the legislation?

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[Greg Smith]

I will not detain the Committee for long. The amendment very much speaks for itself. It enables a charging schedule to require that, where an infrastructure levy is required, it be paid up front, or, where the infrastructure levy requires the developer to build something out themselves, that the infrastructure they are building—the GP surgery, school, road, or whatever it might be—be built first. It is a straightforward amendment. Having heard so many colleagues speak in the House or around the place, the great frustration that I have seen in my constituency, and that I have heard from others, is that, when in particular big housing developments or huge industrial parks are built, the infrastructure comes far too late.

I congratulate the Government, and welcome their presumption that infrastructure should come first. Through the amendment, which for clarity I will not press to a Division today, I urge them, as the Bill progresses to Report stage, to really think about locking their own desire and stated policy for infrastructure to be built first into the Bill. I warned that I will not press the amendment to a Division because, having lived through the glorious summer recess leadership election, we have heard a lot of talk and commitments about planning policy and the things that are in the Bill and which the Committee is talking about. I suspect that on Report it will be a wholly different Bill from the one that we have been debating over the past few months in Committee. The point that I wish to push is that the amendment marries up with what the Government have stated that they want to do, and I appeal to Ministers to find a way of incorporating the spirit of the amendment into the Bill on Report.

[Matthew Pennycook]

When speaking to the first group of amendments to this part of the Bill, I outlined in great detail why the decision to make GDV the metric for the new levy is likely to result in applicants making their IL payments at the end, rather than the beginning of the development process. As I argued when making the case for charging authorities to have a choice when it comes to adopting the new levy or retaining the present system, if a levy with GDV as its metric is made mandatory, the final IL liability will almost certainly not be known and become due until near the point where a development is completed. Given the problems inherent in attempting to design a levy system that enables interim payments or payments on account, that convinces sufficient local authorities to borrow against future levy receipts with all the risk that entails, or that overcomes the problems that will arise from paying for infrastructure on one site with levy contributions extracted from others, the most likely outcome is a situation where the infrastructure required to support development will not be in place when it is needed, as the hon. Member for Buckingham has just outlined. That is deeply problematic because, as I said earlier, we think it will mean fewer overall approvals, more unsustainable development when it does occur and greater local opposition.

Amendment 161 seeks to address that issue by specifying in proposed new section 204R on levy collection that the payment of IL must take place within a reasonable period of a development or phase of development commencing or in accordance with any instalment policy adopted by the charging authority. In doing so, it simply aims to avoid additional delays to the provision of infrastructure that will be necessary to support development and the resulting pressure that that would place on existing local infrastructure.

Amendment 58 in the name of the right hon. Member for Chipping Barnet (Theresa Villiers) and others similarly seeks to revise the Bill so that IL payments are made earlier than is currently proposed by the Government. We support the principle, for the reasons I have outlined. However, in enabling charging authorities to require developers to pay either their full IL liability or sufficient amounts of it to enable a development to be built before development commences, that amendment goes much further than currently provided for by either CIL or section 106 agreements, which are typically paid prior to implementation of a development or phases. Because it is not mandatory for planning permissions to be implemented, we are slightly concerned that amendment 58 could lead to a situation where IL contributions are paid and infrastructure provided on development that is not subsequently completed. Mandating the payment of IL before development commences would also impact on developer cash flow and viability, particularly in cases of phased developments, which could have the consequence of reducing IL rates and thus the overall level of affordable housing and infrastructure contributions provided.

Lastly, the problems inherent in a levy based on the metric of GDV—in terms of multiple valuations having to be undertaken at different stages in the development process, with the final liability not being known until years after the application was submitted—would be magnified were a provision to be introduced mandating the payment of IL before any development commences. For those reasons, and with all due respect to the hon. Member for Buckingham—I agree with him on the principle—we believe that amendment 161, which merely requires IL payments to be made within a reasonable period of a development or phase of development commencing, is the more proportionate response to a problem that is clearly recognised across the Committee. I hope the Minister will give serious consideration to accepting our amendment so we can ensure that, if the levy is introduced, it allows for the infrastructure required to support development to be in place when it is needed.

--- Later in debate ---

[Matthew Pennycook]

As we have discussed extensively, given that we would not know the end value until later on in the development and that it would be subject to multiple valuations that might be disputed, how do the Government envisage the operation of a system of payments up front? Will the payments be simply scored off against the projected, expected end value, which will be calculated at a later date? Will the Minister give us a sense of how that sort of arrangement might work in practice?

[Mr Jones]

As we have discussed a number of times during the debate, the matter to which the hon. Gentleman refers will be set out in regulations. Clearly, that needs to be considered, because we need to ensure that there is a mechanism whereby payments are required to be made earlier in the development. That mechanism will be there and we can make that happen.

In due course, as I have said, we will consult on how the levy might be collected and paid. For example, we intend to explore whether a substantial proportion of the levy should be paid prior to the completion of the development or a phase of it. That plays into what the hon. Member for Greenwich and Woolwich mentioned. It would give charging authorities confidence that they will secure funds before the development is sold on. I hope that my reassurances that the Bill already provides powers to achieve the objectives laid out in the amendments in this group will mean that at this point my hon. Friend the Member for Buckingham is able to withdraw his amendment and that the hon. Gentleman feels able not to move amendment 161.

Levelling-up and Regeneration Bill (Nineteenth sitting)

Matthew Pennycook Excerpts

Tuesday 6th September 2022 Public Bill Committees

[The Chair]

We met this morning, and we come now to the afternoon session. Obviously, some of you have extrasensory perception and have anticipated the fact that I was going to let you take your jackets off—good on you.

Clause 113 ordered to stand part of the Bill.

Schedule 11

Infrastructure Levy

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I beg to move amendment 148, in schedule 11, page 282, line 29, leave out

“and in achieving any purpose specified under section 204N(5)”.

This amendment and Amendment 149 would prevent the Secretary of State directing the proceeds of the infrastructure levy towards purposes other than supporting the development of an area by funding the provision, improvement, replacement, operation or maintenance of infrastructure.

[The Chair]

With this it will be convenient to discuss amendment 149, in schedule 11, page 294, line 35, after “purposes” insert

“which support the development of the area and”.

See explanatory statement for Amendment 148.

[Matthew Pennycook]

As ever, it is a pleasure to serve with you in the Chair, Sir Mark. Having debated this morning in broad terms the deficiencies of the proposed infrastructure levy as we see them, and the corresponding case for discretion in terms of its adoption and core elements of its design, I turn now to a far more specific concern.

Part 1 of schedule 11 makes changes to the Planning Act 2008 by inserting new part 10A, providing for the introduction of the new levy. The new power replicates section 205 in part 11 of the 2008 Act, albeit with an important change that makes clear that the purpose of the levy now includes anything specified by the Secretary of State under subsection (5) of proposed new section 204N, in schedule 11 on page 294. The proposed new subsection makes clear that regulations may allow for circumstances in which a specified amount of the infrastructure levy is applied to purposes other than funding the provision, improvement, replacement, operation or maintenance of infrastructure, defined so as to include transport, schools, medical facilities, open spaces, flood defences, affordable housing and a number of other items.

That gives rise to two obvious questions. First, what purposes other than the provision, improvement, replacement, operation or maintenance of infrastructure, defined as broadly as it is in proposed new section 204N(3), on page 294, would IL ever need to be spent on? Perhaps the Minister can give us an example of what kind of non-infrastructure the Government believe those powers should fund. Secondly, why should developer contributions secured in relation to a particular area be used to support the provision of non-infrastructure items that may be unconnected to it? Our concern is that allowing the purpose of IL to include anything specified by the Secretary of State may give rise to a situation—as, I might add, the 2020 White Paper explicitly suggested—in which proceeds from the infrastructure levy are used to fund things such as service provision or the reduction of council tax.

There may be a far less problematic reason for the inclusion of the relevant language in proposed new section 204A(2) specifying that IL can be used to achieve any purpose under proposed new section 204N(5). For example, it may simply be the means of facilitating the continuation of the neighbourhood share under the new system. However, if that is the case, why not make that clear in the Bill? Given how widely drawn the language in proposed new section 204N(5) is, we remain concerned that it could lead to much-needed IL funds being directed to purposes other than supporting the development of an area by funding its infrastructure. That is the concern that amendments 148 and 149 are designed to address, by deleting the relevant language from proposed new section 204A(2) on page 282.

In our previous debate, I outlined in detail our concern that the levy as proposed will fail to secure as much—let alone more—public gain from developers than the present system. Allowing specified amounts of IL to be used to fund non-infrastructure items that might be unconnected to a given area would exacerbate that problem by further depleting the funding available for infrastructure, including affordable housing, in that area. The amendments would simply ensure that any funds generated by the levy would have to be spent on infrastructure that supports the development of the area in question. I look forward to hearing the Minister’s response.

[The Minister for Housing (Mr Marcus Jones)]

It is a pleasure to serve again under your chairmanship, Sir Mark. The Bill seeks to give local communities control over what is built, where it is built and what it looks like. It creates an incentive for communities to benefit from development. The delivery of infrastructure is a key pillar in our approach, and the levy is our key tool to support that.

We think that the local authority is best placed to decide which infrastructure projects it should spend the proceeds of the levy on. The Bill will require local authorities to prepare infrastructure delivery strategies. These will set out a strategy for delivering local infrastructure through spending levy proceeds. There is scope to allow even more flexibility on spending, to further incentivise communities to benefit from development. The Bill enables the funding purposes of the infrastructure levy to be extended to such purposes as may be specified by the Secretary of State under proposed new section 204N(5) if certain circumstances apply.

--- Later in debate ---

[Mr Jones]

If the hon. Member bears with me for a moment, I will give her an example.

The measure will enable regulations to set out the circumstances where charging authorities could spend a specified amount of the levy on items that are not infrastructure. This means that in some areas, once local authorities are able to meet their affordable housing and infrastructure needs, they could have scope to increase their flexibility on what they spend levy receipts on, such as improving local services. This would remain a matter for the local authority to decide on, subject to any limitations set out in regulation or guidance, ensuring that infrastructure and affordable housing remain priorities. Furthermore, it is right that even if such extended funding of the levy is permitted and taken up by the local authority, it should be subject to the overall test in proposed new section 204A that such costs must not make the development an area economically unviable. Therefore, we do not believe the amendment is necessary, so I ask the hon. Member for Greenwich and Woolwich to withdraw it.

[Matthew Pennycook]

I think that was a useful answer from the Minister, for the following reasons. He clearly stated that the reason for the flexibility is to allow local planning authorities to spend levy receipts on non-infrastructure items not covered in proposed new section 204N(3). That is very useful, because he has responded to our concern by saying on the record that the infrastructure levy could be spent on things such as the funding of services.

The Minister made an important qualification, which I will address. He made clear that local authorities would be allowed to spend only once they had met their affordable housing targets and infrastructure needs. I applaud his optimism that the levy will cover not only all affordable housing provision and core infrastructure, but other things such as services. I welcome that clarification.

The Minister will do two things, I think. When we come to them in due course, I think he will accept our amendments to strengthen the Bill’s requirements on meeting affordable housing supply. However, I still think the Bill needs to be tightened to specify what kind of non-infrastructure the levy could be spent on in the circumstances he outlines. At the moment, it is incredibly broad—it relates to any purposes specified by the Secretary of State—and that remains a point of concern. Although I will not push this amendment to a vote, we may return to this issue. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Mr Jones]

I beg to move amendment 196.

Proposed new section 204A in schedule 11 sets out the overall purpose of the levy, which is to ensure that the costs incurred in supporting the development of an area can be funded wholly or partly by the owners or developers of land in a way that does not make development of an area economically unviable. The overall purpose also applies to the costs incurred in achieving the other specified purposes that are allowed under the levy regime.

Proposed new section 204A currently cross-references to purposes that may be specified under proposed new section 204N(5). That means that the levy regulations may allow levy receipts to be spent on matters other than infrastructure, such as improvements to local services and delivery of local programmes that are valued by local communities. Although the infrastructure levy will primarily be spent on infrastructure and affordable housing, that will give us the scope to allow local authorities more flexibility over how they spend the levy if those priorities have been met.

The amendment will correct an omission and ensure that proposed new section 204A also correctly cross-refers to the powers in proposed new sections 204O and 204P, which will also allow levy receipts to be spent on other specified purposes, such as non-infrastructure matters. Where that is allowed, it must be subject to the overall purpose set out in proposed new section 204A. To ensure that proposed new section 204A correctly interacts with proposed new sections 204O and 204P, we are introducing a minor technical amendment to ensure the cross-reference is properly made. I therefore respectfully ask the Committee to support the amendment.

[Matthew Pennycook]

I rise to speak briefly to this Government amendment, notwithstanding our debate on the previous group of amendments. There is nothing in the Bill to ensure that local authorities meet a sufficient level of housing need—we will come to that—or of infrastructure need. Even taking into account the Minister’s reassurances on how the levy can be spent, I remain concerned. If anything, Government amendment 196 augments the concerns I have just spoken about. By specifying that the aim of the levy can include any purpose specified under proposed sections 204N(5), 204O(3) and 204P(3) of the Planning Act, the amendment allows proceeds of the levy to be spent not only on non-infrastructure items that might be unconnected to a given area in a way already made clear in the Bill, but on a wider set of, one presumes, non-infrastructure items. In a sense, the amendment’s intention is to widen the scope of the non-infrastructure items to which specified amounts of IL can be directed.

As I have made clear, we strongly believe that funds generated by the levy should be spent on infrastructure that supports the development of the area in question, and we oppose this Government amendment for the same reasons I set out in relation to amendments 148 and 149. I will not press the matter to a vote, but I want to put that on the record. We feel very strongly, as I think local communities will, that the proceeds of an infrastructure levy should be spent on infrastructure in their area. If anything, rather than having surplus amounts to spend on other items specified by the amendment or the Bill, I believe that the levy will not cover all those infrastructure costs.

[Tim Farron (Westmorland and Lonsdale) (LD)]

I am also very concerned. This rings serious alarm bells with me and, I think, many other people, particularly those who work in housing associations and local government. It is hard to build affordable housing—we would have built a lot more of it if that were not the case. Given the price and availability of land, the process of finding a delivery partner, the involvement of contractors and housing associations, and the need to make the money stack up, it is not easy. The problem is that if we create a safety valve that allows infrastructure levy funding to be spent on something other than the infrastructure that underpins new affordable housing developments or the development of affordable housing itself, some people will take the easy option and some of the money garnered for planning gain will not do the community much good at all.

I hope and believe that the Government and this Minister have good intentions, but if we allow the funds gathered by the infrastructure levy to seep out from the pot for developing affordable housing and the infrastructure that underpins it, that is what will happen. We must not allow it to happen.

[Mr Jones]

Let me respond to the point raised by the hon. Member for Westmorland and Lonsdale. Clearly, the firm intention of the policy set out in schedule 11 is that the requirement for relevant infrastructure and affordable housing in a particular area is satisfied. However, there may be circumstances where a local authority, while satisfying those criteria, uses this mechanism. As I have said before, we expect to capture more value from developments because we will be capturing the value of the uplift of the finished product, not just the value at the point at which planning permission is achieved. Therefore, the expectation is that there could be greater value and it could enable local areas to do additional things, alongside the relevant and necessary affordable housing and infrastructure. I hope that reassures the hon. Gentleman about the Government’s intention.

Amendment 196 agreed to.

[Matthew Pennycook]

I beg to move amendment 150, in schedule 11, page 282, line 32, at end insert—

“(2A) The intention of IL is to enable local authorities to raise money from developments to fund infrastructure to support the development of their areas while allowing planning obligations under section 106 of the Town and Country Planning Act 1990 to continue to be used to provide affordable housing and ensure that development is acceptable in planning terms.”

[The Chair]

With this it will be convenient to discuss the following:

Amendment 151, in schedule 11, page 294, leave out line 21.

This amendment would remove affordable housing from the application of the infrastructure levy to with the intention that it would continue to be funded under current system of s106 TCPA 1990 obligations.

Amendment 152, in schedule 11, page 294, line 31, at end insert

“, other than to add affordable housing”.

This amendment would prevent affordable housing being added to the list of matters included within the meaning of “infrastructure” at a future date by regulations.

[Matthew Pennycook]

As the Minister made clear this morning, the Government are not willing to give charging authorities discretion when it comes to adopting the infrastructure levy, or any freedom to determine the best metric upon which to calculate IL rates. However, I want to try to persuade him to reconsider using the levy to deliver affordable housing.

Amendment 150 would insert into proposed new section 204A a proposed new subsection making clear that the intention of IL is to enable charging authorities to raise money to fund infrastructure to support the development of their areas, while allowing planning obligations under section 106 of the Town and Country Planning Act 1990 to continue to be used to provide affordable housing and to ensure that development is acceptable in planning terms.

Amendments 151 and 152 would make consequential changes to the schedule, respectively removing affordable housing from the list of what is designated as infrastructure and preventing regulations from reinserting it into that list at a later date.

When I spoke to amendments 142 and 143 and amendments 145 to 147, I set out our two main concerns about the new levy—namely, that it is likely to prove onerously complicated to operate in practice and that it will almost certainly lead to less infrastructure and less affordable housing overall than those secured under the present system. It is the second of these concerns that lies behind amendments 150, 151 and 152.

Under the present system, funds raised through the community infrastructure levy are used only to fund infrastructure, facilities and services that support development in a given area. It is individual section 106 agreements that, along with any grant funding secured, pay for affordable housing. Under the new system, which is premised on affordable housing as well as all other required infrastructure being funded through a single mechanism, local planning authorities will be forced to set IL at significantly higher rates than the community infrastructure levy, which is typically equivalent to a relatively small proportion of development value.

The obvious resulting risk of having to set such high rates is that development on less viable sites, the majority of which are concentrated in those parts of the country most in need of levelling up and which the Government say is their mission to help, will simply not happen. As such, local planning authorities in areas with higher risk to viability of brownfield sites will be left with a choice: either allow such sites to remain undeveloped, or lower IL rates sufficiently to incentivise development on them but forgo essential infrastructure and affordable housing from more viable sites as a result. In practice, both outcomes are likely to materialise. If that is the case, it will have significant implications for the supply of infrastructure and high-quality affordable housing across the country.

There are very good reasons for the Government to reconsider funding affordable housing through the new levy, and I want to briefly speak to a number of them. First, there has never been a previous attempt to implement a single fixed-rate levy mechanism for securing both infrastructure and affordable housing. That is not for want of some extremely clever people attempting to design such mechanisms, but the desire to incorporate affordable housing into previous systems, including CIL, was ultimately abandoned, because each time they were deemed to be inoperable in practice. That is an obvious warning that the Government would do well to heed.

Secondly, as we have already discussed in the debate on the first group of amendments to part 4, by systematically financialising the provision of affordable housing, and for that matter on-site infrastructure, with the inherent variability and uncertainty that that entails, the levy is likely to unnecessarily complicate the planning process, resulting in additional delays, disputes and resourcing pressures.

Thirdly, the rigidity inherent in applying one or more IL rates in any given charging area to sites within it that will inevitably vary in terms of development and land values will result in a wide range of levels of affordable housing and infrastructure contributions across sites. That is inherent to the design of the levy. As a result, it will be incredibly difficult for local planning authorities to know what levy rates to set in order to fund all necessary infrastructure and meet the affordable housing need identified in their local development plans.

Fourthly, there are inherent problems when it comes to attempting to provide affordable housing through a rigid fixed-charge approach, because of how such a charge interacts with viability. If the Government are adamant about pursuing a fixed-charge approach, they could always consider a fixed-percentage affordable housing requirement delivered through section 106 agreements, which would be preferable to a general levy calculated on the basis of gross development value.

By amending the national planning policy framework as they have done, to place greater emphasis on viability testing as a part of plan-making rather than as a feature of individual site applications, the Government have already firmed up affordable housing requirements while still allowing for flexibility in exceptional cases where there are genuine viability challenges. In our view, the current arrangement strikes the right balance and, as I said this morning, the Government’s time would be better spent focusing on what more could be done—for example, by equipping local authorities with the specialist skills and resources that they need to make the existing system work more effectively.

Lastly, and related to the previous point, setting a fixed IL rate or rates will inevitably result in the loss of affordable housing supply on every site in a given charging area that could viably deliver more than the rate in question would require, while at the same time putting at risk entirely the development of sites grappling with genuine viability challenges that would be unable to provide the requisite level of contributions. That problem is inherent to the nature of a levy premised on a general fixed rate or rates within charging areas where there is variation in values and costs between sites.

Whichever side of the line individual charging authorities ultimately come down on, the overall result will be lower rates of affordable housing delivery in England. If local planning authorities try to overcome that inherent flaw in the proposed levy system by setting myriad different IL rates, in an attempt to respond to the natural variation in development and land values in any given area, the result will be a smorgasbord of rates, which would make for a fantastically complicated arrangement that would make it hard, if not impossible, for developers and communities to understand the extent and nature of the contributions due on different sites in a given locality.

It is telling that despite the Government’s commitment to the levy securing at least as much affordable housing as developer contributions do now, there is nothing in the Bill that guarantees that that will be the case. We need to be confident that we are approving a framework that has a reasonable chance of at least maintaining the supply of affordable housing that we currently secure through developer contributions, and ideally one that allows for improvements to allow that supply to increase, because it needs to increase markedly.

Short of giving charging authorities discretion in relation to adopting the infrastructure levy and the freedom to determine the best metric on which to calculate IL rates, limiting the scope of the levy to the delivery of actual infrastructure and retaining the use of section 106 to fund affordable housing, as amendments 150 to 152 propose, is the best means of achieving that aim, because it would overcome the problems with the setting of IL rates that I have described and the impact that fixed rates will have on overall levels of affordable housing secured through developer contributions. It would also directly address an issue we have not discussed—namely that a fixed levy would not be capable of determining affordable housing requirements for estate regeneration schemes, which necessarily vary from site to site, depending on the existing level of affordable housing that should be re-provided and how much additional affordable housing can be delivered.

I trust that the Minister has carefully considered the arguments I have made and will consider accepting the amendments, which would make the Government’s levy proposals far more workable than they currently are. Either way, he really does owe the Committee an explanation of how the levy will operate in such a way as to ensure that developments are viable and deliver both the required infrastructure and at least as much affordable housing as is currently secured through section 106 agreements, because despite the optimistic claims that successive Ministers have made and the claims that he made in debates this morning, nearly two years after the levy proposal was first put forward in the White Paper no evidence whatever has been published to demonstrate that the infrastructure levy is actually capable of achieving that. I look forward to hearing the Minister’s response.

[Rachael Maskell]

I am grateful to be called to speak to this set of amendments and thank my hon. Friend the Member for Greenwich and Woolwich for tabling them.

It is really important that we think about the consequences and what could happen. I reject the setting of infrastructure against affordable housing. If people are building any form of development, they will have to put infrastructure on that site, whether the infrastructure is a GP surgery, a school or some of the more micro infrastructure that is necessary for a community to function. As a result, the infrastructure will trump affordability in order to reach viability, so we will not see the affordable housing being built; in fact, if anything we will see a regression if the two are set against each other. For people to get the true value of developments with high-value accommodation, there will be a demand for infrastructure on the site. The developer will naturally focus on that and that will be how the situation turns.

It is also important to look at what will happen with this patchwork approach throughout the country, because if different areas set different levels of infrastructure levy, that will create a new market for where developers go and develop. Of course, they will be looking to their profit advantage over what the local communities need. The new system will be another pull: it will direct them to where they can get the deal that best suits them for developing the infrastructure that they want. It is going to skew an already bad situation into an even worse situation in respect of the need for affordable housing, let alone social housing. I cannot see how it is going to bring any advantage to a social developer, let alone a commercial developer, in trying to ensure that we get the mix of housing that we require in our communities. With affordable housing and social housing in particular being developed at such low levels compared with high-value housing—which, let us face it, is going over to being essentially an asset rather than lived-in accommodation—the differential is clearly going to cause a lot of challenge, and even greater challenge, for communities.

As we have debated, supporting infrastructure might not even be infrastructure: it could be services or something else. The provisions create risk in the legislation, so my hon. Friend’s amendments are about ameliorating that risk and ensuring that there is some level of protection to ensure that affordable housing is built.

--- Later in debate ---

[Mr Jones]

We are all concerned with making sure that we get as much affordable housing as we can from housing developments. Clearly, what I am arguing for is a wider package of measures that we believe will deliver at least as much affordable housing as under the current system, if not more, together with the infrastructure that communities need.

It is not fair that communities lose out just because their local authorities have effectively been strong-armed during the negotiation, and it is not fair that developers may face arbitrary variation in the demands for contributions in different places. If developers do not know how much they are going to have to pay, it is much harder for them to price contributions into land. There is currently an incentive to overpay for land and then try to negotiate contributions downwards.

To address the inequality of arms that the Committee has discussed, the new levy will introduce the right to require affordable housing through regulations. The right to require will enable local authorities to determine what proportion of the levy they want delivered in kind as affordable housing and what proportion they want delivered as cash. That will mean that local authorities, not developers, will get the final say on the proportion of affordable homes delivered as an in-kind levy contribution on a site. It is therefore important that affordable housing is considered as a kind of infrastructure that can fall within the levy regime.

It will be equally important that the levy delivers at least as much affordable housing as under the current system. That is why, when the levy rates are set, charging authorities must design them with regard to the desirability of ensuring that the rates can maintain or exceed the amount currently secured through developer contributions.

Let me address a couple of other points. The hon. Member for Greenwich and Woolwich was concerned about less-viable sites and lower-value sites. I reassure him that local authorities will set a minimum threshold that reflects build costs and existing use values, as well as setting levy rates. The minimum threshold will help to ensure that lower-value sites continue to come forward.

The hon. Member for York Central mentioned concerns about risk and about delivering affordable homes and infrastructure while the changes take place. I reassure her that, as we discussed in the earlier debate on the infrastructure levy, we will be driven by a test-and-learn approach. The lessons from that work will be learned to make sure that we achieve our objectives, and the places that are not using that approach in working with the new infrastructure levy will continue to work on the same basis as they do now until the new system is rolled out. I reassure the hon. Lady again that the process could take some years to achieve to make sure we get it right.

On that basis, I hope that the hon. Member for Greenwich and Woolwich will not press amendments 150 to 152 to a Division.

[Matthew Pennycook]

I thank the Minister for his response, but I am afraid I am not reassured, for the following reasons. The Minister rightly said, and I accept, that section 106 is an imperfect mechanism for extracting public gain from developers, but, as we have already debated, it is one that can be improved on, and has been in recent years, and can be reformed further.

The question before us, which goes back to the wider debate we had earlier, is: will the levy system replace the current system with one that will extract sufficient public gain to at least allow the same levels of affordable housing? I have listened carefully to the Minister, and he has made repeated commitments that it will extract at least as much as that gain. However, as we will come on to with the next set of amendments, there is nothing in the Bill that guarantees that the levy framework, even if it does extract the same amount of gain, will lead to a situation in which at least as much affordable housing is required. The language—I will come to this in the next debate—in proposed new section 204G is incredibly weak in that regard.

Nothing I have heard this morning reassures me that we are not implementing a system that will fail to extract the same amount of public gain when it comes to infrastructure and affordable housing as the present system. There is nothing in the Bill to ensure that local authorities spend their levy proceeds on the levels of affordable housing required to meet the housing need in their area. Given all the risk and uncertainty of replacing the existing system with the proposed one, I feel strongly that the Government are making a fundamental mistake by including affordable housing within the scope of the levy. I will therefore press amendment 150 to a Division.

Question put, That the amendment be made.

Division 12

Ayes: 5

---

Labour: 4
Liberal Democrat: 1

Noes: 8

---

Conservative: 8

[Matthew Pennycook]

I beg to move amendment 153, in schedule 11, page 283, leave out lines 22 and 23.

This amendment would amend the definition of “affordable housing” to ensure that the infrastructure levy could only be spent on social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 154, in schedule 11, page 285, line 35, at end insert—

“(9) IL regulations must provide for exemption from liability to pay IL in respect of a development which exclusively contains affordable housing.”

This amendment would provide for an exemption from liability to pay IL in respect of a development which contains 100 per cent affordable housing.

Amendment 155, in schedule 11, page 287, leave out lines 34 to 42 and insert—

“(2) A charging authority, in setting rates or other criteria, must ensure that—

(a) the level of affordable housing which is funded by developers and provided in the authority’s area, and

(b) the level of the funding provided by the developers,

is maintained at a level which, over a specified period, enables it to meet the level of affordable housing need identified in the local development plan.”

This amendment would require Infrastructure Levy rates to be set at such a level as to meet the level of affordable housing need specified in a local development plan.

Amendment 156, in schedule 11, page 298, line 13, at end insert—

“(aa) set out how the charging authority intends to use IL to meet the level of affordable housing need identified in the local development plan, and”.

This amendment would require a charging authority to detail the way in which it intends to use the infrastructure levy to meet its identified housing need in preparing and publishing an infrastructure delivery strategy for its area.

[Matthew Pennycook]

Having just sought unsuccessfully to persuade the Minister to reconsider using the infrastructure levy as a means of delivering developer-funded affordable housing, I will set out how we believe the Bill needs revising to ensure that the new levy will supply, in practice, sufficient levels of such housing. I have spoken at length about why we are concerned that the new levy will fall short as a mechanism to deliver affordable housing, and our fear that its introduction will lead to an overall reduction in affordable housing supply—a fear not assuaged by a piece written on 22 August for the ConservativeHome website by the recently departed Under-Secretary of State, the hon. Member for Harborough (Neil O’Brien), in which he explicitly argued that the levy would allow for a rebalancing of

“what developer levies are spent on, towards things local residents want, like GP surgeries, schools, roads, and landscaping, rather than social housing for non-locals”.

Dismissing concerns about the impact of the levy on affordable housing, the Government have promised on multiple occasions, and the Minister has again today, that it will deliver at least as much affordable housing as developer contributions do now. Indeed, the policy paper accompanying the Bill explicitly sets out that commitment. The Minister went further this morning, and said that the infrastructure levy will be so successful that not only will it cover all infrastructure and affordable housing but we will have a surplus that we can spend on lovely things in our local areas. As I mentioned, no evidence has yet been published by the Government to substantiate why they believe that the new levy will be able to fulfil that objective.

We are promised a technical consultation soon, and the Department is by all accounts sitting on a study by academics at the University of Liverpool involving the design and implementation of a prospective levy charging schedule. I put it to the Committee, however, that it is telling that in the two years since the levy was first mooted in the White Paper no analysis or impact assessment has been produced to demonstrate that the new levy has a chance of matching the existing system of developer contributions when it comes to the delivery of affordable housing.

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[Mr Jones]

The hon. Member for Greenwich and Woolwich is right to refer to the importance of the new levy in supporting the delivery of affordable housing for local communities and in contributing to meeting local need. As we have discussed, the Government are committed to getting at least as much, if not more, on-site affordable housing through the new levy as we do under the current system of developer contributions.

The definition of affordability, as challenged by amendment 153, is a complex and evolving picture that is better understood and monitored at local level. It is therefore appropriate to allow for infrastructure levy regulations to provide for any other description of affordable housing, beyond that defined as social housing in part 2 of the Housing and Regeneration Act 2008. This will ensure that any new types of affordable housing tenure introduced in the future can be brought into the scope of the levy.

[Matthew Pennycook]

I am sorry to put the Minister on the spot, but it would be useful if we had an example of the type of housing tenures that the Government believe that that specific line in the Bill is required for, given the already very broad definition of social—affordable—housing in part 2 of the 2008 Act.

[Mr Jones]

As the hon. Member knows, when the 2008 Act was brought into effect by the last Labour Government, there was a reasonably wide definition of the different types of affordable housing. One of the evolutions in affordable housing recently has been the introduction of First Homes. I hear what the hon. Member for Greenwich and Woolwich says about that, but we are working to make sure that we have 1,500 first homes by the end of March 2023; that will be significant progress. The vast majority of affordable housing currently provided does fall within the definition that we have discussed, which was put into legislation in 2008, and we envisage that that will continue to be the case under the levy. However, accepting amendment 153 would mean placing a lot of reliance on the definition of social housing in the 2008 Act. Clearly, social housing is an extremely important part of the mix of affordable housing, but amendment 153 would reduce the levy’s ability to respond to any changes in tenure types that arise in the future. That is not helpful or necessary. It is right that the levy regulations should provide future-proofing and regulatory flexibility.

Amendment 154 deals with exemptions for sites that are 100% affordable housing. Subsection (5)(h) of proposed new section 204D of the Planning Act 2008, in schedule 11 of this Bill, already contains a power for levy regulations to make provision about exemptions from or reductions in levy liability. The levy will be used to secure contributions towards affordable housing. We do not expect to charge the levy on exclusively affordable housing developments; we will explore that matter further in consultation. However, all development will be required to deliver the infrastructure that is integral to the functioning of the site, and we will retain the use of planning conditions and restricted use of section 106 agreements to secure that.

Amendment 155 would require infrastructure levy rates to be set at a level that enables an authority to meet the affordable housing need specified in a local development plan. The total value that can be captured by the levy, or indeed any system of developer contributions, will not necessarily match the costs of meeting the entire affordable housing need of an area as specified in the local development plan. Revenues will depend on the amount and types of development that come forward, and when they come forward, as much as on the levy rates and thresholds set. That said, the Bill recognises the importance of using the levy to deliver affordable housing. Proposed new section 204G of the Planning Act 2008, in schedule 11, provides that charging authorities must, when setting their rates, have regard to the desirability of ensuring that affordable housing funding from developer contributions equals or exceeds present levels. That will ensure that affordable housing need is accounted for when levy rates are set; to ensure that, those rates will be subject to public examination.

Importantly, the Bill makes provision for rates to be set with regard to increases in land value—for instance, as a result of planning permission. Targeted increases in rates will allow charging authorities to maximise the revenue that they can capture, and the amount of affordable housing that they can deliver.

We have designed the levy so that it can deliver at least as much affordable housing as the current system, if not more. As I have explained, the new right to require will require affordable housing to be provided. That will be introduced through regulations. That means that local authorities will get the final say on the proportion of levy contributions that go towards affordable homes. Should the levy generate more revenue than at present, local authorities could choose to direct those additional revenues towards meeting their additional affordable housing needs.

[Mr Jones]

I thank the hon. Member for that point. Like many other areas, York’s housing market is affected by the tourist industry that the city attracts. It is for local areas—I am glad that the hon. Member’s area is forming a local plan—to assess the housing need in their local plan; they should take matters such as the amount of affordable housing, and the need in an area, into account when making that plan.

Local authorities will need to balance the objective of providing affordable housing with the levy’s other aspirations. Local authorities will need to use the levy revenues to deliver other critical infrastructure, such as new roads and medical facilities. Local authorities, which know their local areas, are best placed to balance funding for affordable housing with funding for other infrastructure needs.

On amendment 156, proposed new section 204Q, introduced by schedule 11, introduces the requirement for levy charging authorities to prepare an infrastructure delivery strategy, which will outline how a local authority will use the money the levy generates through a strategic spending plan. That will include an outline of how it will use levy revenues to secure affordable housing. It is important that that happens in each area. The charging authority will have regard to that when setting levy rates. The exact detail of the infrastructure delivery strategy and how it should be produced will be determined through regulations. We will consult on matters relating to the infrastructure delivery strategy, and forthcoming secondary legislation and guidance will clarify how to treat affordable housing. All of that will be informed by our commitment to deliver at least as much affordable housing as we do under the current system.

I hope that my explanation gives the hon. Member for Greenwich and Woolwich clear assurances on how the new levy will support the delivery of affordable housing, and therefore I ask him to withdraw the amendment.

[Matthew Pennycook]

I thank the Minister for that comprehensive response. I will take each part of it in turn. I note what he says about the powers provided for in proposed new section 204D(5)(h) to the Planning Act 2008, regarding 100% affordable sites, and I welcome his commitment that the Government do not expect those sites to have the levy applied to them. That should be written in the Bill, but I take that commitment at face value, and I hope to see it fleshed out via the regulations.

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Amendment, by leave, withdrawn.

[Matthew Pennycook]

I beg to move amendment 157, in schedule 11, page 283, line 28, at end insert—

“(1A) But a charging authority may not charge IL on development in its area comprising—

(a) over 150 residential units, or

(b) over 10,000 sq m of floorspace

and instead Part 11 of the Planning Act 2008 (Community Infrastructure Levy) applies to such developments.”

This amendment would specify a threshold for large sites in relation to which the role of section 106 TCPA 1990 agreements would be retained, meaning that the community infrastructure levy would continue to be used to support such development.

I made clear at the outset of our consideration of part 4 that the levy differs from that set out in the 2020 White Paper in several important respects. One of those is that the Government now propose to retain a distinct role for the current system of section 106 planning obligations, rather than replacing it entirely, as per the White Paper. We are told that narrowly targeted section 106 agreements will still be used for securing infrastructure integral to the operation and physical design of a site. The examples in the policy paper that accompanies the Bill—internal play areas and flood risk mitigations—suggest that the use of such agreements in this way will be a frequent occurrence. More importantly, we are also told that the Government want a role for section 106 agreements in supporting the delivery of larger strategic sites. On such sites, infrastructure can be negotiated and provided in kind; the value of what is agreed must not be less than what would have been paid through the levy. This raises a host of questions, as does every aspect of the Government’s proposal.

Will developers have to pay the difference where the cost of delivering infrastructure on large sites is less than the required IL charge would be? Correspondingly, would charging authorities have to refund developers if it transpired that the cost of delivering infrastructure was higher than the given IL charge? Who defines what is on-site infrastructure, and what can act as credit against the nominal levy charge? Will it be set out in regulations—there is then a risk that it will be too inflexible—or will it be defined by each charging authority? There is then an associated risk of additional complexity. How do we avoid developers providing a range of unnecessary on-site facilities in order to reduce their liability vis-à-vis that levy charge?

Those and other important questions aside, in general terms we very much welcome the proposed retention of section 106 agreements, both for the infrastructure that is integral to the operation and physical design of sites and for larger strategic sites. Indeed, when it comes to the latter, the continued use of section 106 is essential to ensuring that they are developed, given the obvious pitfalls of attempting to do so solely via the levy, with all the inherent flaws that we discussed earlier today.

However, schedule 11 does not define what actually constitutes a larger site for the purposes of the ongoing role of section 106 agreements. Amendment 157 simply seeks to place that definition in the Bill, in proposed new section 204B of the Planning Act 2008, so that there is clarity at the outset of the process of introducing and implementing the levy as to the site size threshold above which IL would not be charged.

The amendment proposes that, for the purposes of permitting an ongoing role for section 106 agreements, a large site should be defined as an area comprising over 150 residential units, or over 10,000 square metres of floorspace. We have chosen those threshold values for a number of reasons, but primarily because schemes of over 150 units or 10,000 square metres of floorspace are typically more complex, take longer to deliver and are often phased, and are more likely to require site-specific mitigation, thus benefiting from the ability of section 106 agreements—this is one of their key strengths—to tailor obligations to the specific circumstances of a site.

On large sites thus defined, which would account by our estimates for around 5% of current approved residential projects nationally, affordable housing provision would be delivered via section 106, as under the present arrangement. To avoid the delay and complexity of securing contributions for core infrastructure on the sites by means of such agreements, amendment 157 makes it clear that the existing provisions of part 11 of the Planning Act 2008 would still apply, thereby enabling contributions relating to the sites to continue to be secured by means of the community infrastructure levy.

We believe that straightforward and uncontroversial amendment would provide certainty as to what does and does not constitute a large site where there will be an ongoing role for section 106 agreements at the outset of what will be, by the Minister’s own admission, a lengthy process of testing, implementing and rolling out the new levy. I look forward to hearing the Minister’s response.

[Mr Jones]

The Government intend that the levy will replace CIL, except for the Mayor of London and in Wales, and largely replace the discretionary negotiated section 106 regime. However, following feedback through consultation and engagement with the industry, we recognise that, in some limited circumstances, a case exists for retaining a role for section 106 planning obligations in the delivery of infrastructure. Such circumstances include large and complex sites where infrastructure requirements are site-specific and require a more negotiated approach to ensure that infrastructure is provided at the right time. It is important to set the right definition for large and complex sites. We need to strike a balance between creating a more consistent levy system, while retaining flexibility for some negotiations on sites with complex infrastructure needs. On sites where section 106 agreements will continue to be used, we still expect developers to deliver at least as much overall value. It is just that some of it will be as in-kind infrastructure contributions rather than as a cash payment.

Setting the threshold in the Bill for when section 106 agreements should be used runs the risk of impacting on the effectiveness of the levy. If it is set too low, lots of development will continue to use section 106 agreements, and developers will continue to strong-arm local authorities over the value of their contributions. If we set it too high, it can impact infrastructure delivery on sites with complex and competing infrastructure needs. That is why we intend to consult on what the threshold should be, to allow us to consider stakeholder feedback and different options. The levy regulation, which will be laid before the Commons for approval, will specify the circumstances in which section 106 agreements will continue to be used. For the reasons I have explained, I request that amendment 157 be withdrawn, to allow us to consult further on when the use of section 106 agreements would continue to be more appropriate.

[Matthew Pennycook]

I appreciate the Minister’s response and, taking on board what he has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Matthew Pennycook]

I beg to move amendment 158, in schedule 11, page 286, line 38, leave out “IL” and insert—

“that part of the IL not applied to the provision of affordable housing”.

This amendment would mean that charities in England and Wales were not exempt from contributing to the provision of affordable housing on any given development.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 159, in schedule 11, page 287, leave out lines 5 to 14.

This amendment and Amendment 160 would ensure that charitable exemptions were limited to development undertaken by charities in England and Wales.

Amendment 160, in schedule 11, page 287, line 26, leave out from “2011” to end of line 28.

See explanatory statement for Amendment 159.

[Matthew Pennycook]

Proposed new section 240F of the Planning Act 2008 makes provision about exceptions from, or reductions in, IL for charities. The explanatory notes to the Bill make it clear that the provisions in this proposed new section replicate those that currently exist for the community infrastructure levy in section 210 of the Planning Act 2008. That is indeed the case but, as the Minister will know, charities are not exempt from contributing to infrastructure and, most importantly, affordable housing secured through section 106 agreements.

Because the new levy entails a single fixed-rate mechanism for securing both infrastructure and affordable housing, and because there is nothing on the face of the Bill to specify that charities must contribute to the provision of the latter, the limit of charitable exemptions to infrastructure and affordable housing has been drawn far more widely than that which applies in the case of CIL at present. We believe that is problematic, and could hamper development on sites taken forward by charities or reduce the amount of affordable housing delivered on them. By making it clear that charitable exemptions do not apply to that part of IL related to the provision of affordable housing, amendment 158 seeks to enable development led by institutions established for charitable purposes to proceed, and to enable appropriate levels of affordable housing to be secured on the sites in question.

A separate but related issue is the question of what constitutes a charity for the purposes of proposed new section 204F. Subsection (2)(a) of the proposed new section provides for regulations to exempt from paying IL institutions established for charitable purposes, defined in subsection (4) as not only a registered charity under section 29 of the Charities Act 2011, but any charities within the meaning of section 1 of that Act not required to be registered. We believe that defining charities so widely could result in development not taking place, or being unsustainable when it does, because unregistered charities would also be exempt. Amendments 159 and 160 simply seek to limit charitable exemptions from IL to those charities that are formally registered with the Charity Commission, as per the 2011 Act.

We believe that this sensible and proportionate set of amendments will ensure that charities are appropriately exempted, but that the limit of that exemption is not drawn so widely that it could impede development or reduce the levels of infrastructure and affordable housing coming forward. I hope the Minister will agree and signal that he is content to accept all three.

[Tim Farron]

Briefly, I think that the points made by the hon. Member for Greenwich and Woolwich are really good. It is important that we do not provide loopholes to allow developers to get out of providing genuinely affordable homes for local communities.

It is also important to remember the role of the National Trust, which does many good things. In my community and across Cumbria, it is effectively an affordable housing provider at times. Sometimes it is an unaffordable housing provider, and sometimes it is an outfit that moves from having affordable homes to having holiday lets, and it behaves in ways that I, and hopefully many people here, would not approve of. It is also potentially a developer, for better or for worse. There is the prospect of a new gateway development near Windermere railway station, which has the potential to provide genuinely affordable homes for local people. There is also the potential for that to not be the case, so it is important that we do not get overly benign and dewy-eyed about the word “charity”. What we really ought to be concerned about is the delivery of genuinely affordable housing for local communities, which is why it is important that this definition is tight and clear, and that we expect those charities that have the good will and support of the nation to earn that in the communities where they are not doing so at present.

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[Mr Jones]

I thank the hon. Member for that question. I will not get drawn into lots of different examples, but we are very clear that we are talking about charitable purposes under the definition in the 2011 Act.

Turning to amendments 159 and 160, there may be other instances where an institution is established for charitable purposes but does not meet the definition of a charity—for example, a charity established in Scotland, Northern Ireland or overseas. Amendments 159 and 160 would remove the express ability for regulations to set exemptions or reductions in the levy for these types of institutions. This would mean that only English and Welsh charities could be exempt from the levy when delivering development for charitable purposes. While we recognise that this will be less common, it would still be unfortunate if other types of charitable institutions could not deliver important facilities because of increased costs from the levy.

We are aware that different charitable institutions may operate differently from English and Welsh charities. That is why it is important to maintain a separate power to prescribe in regulations in detail the levy liabilities of such institutions. That enables provision to be made in the regulations, which will keep up with future changes that might be made to charities law. There will also be instances where a charitable institution carries out development that itself is not for charitable purposes but that it should none the less be able to claim an exemption or reduction for.

In the current CIL system, the CIL regulations make use of this power to provide for relief from CIL liability at the discretion of the local authority for developments carried out by charities for investment purposes. This approach works, which is why we do not agree with amendments 159 and 160, which would remove the express ability to set this kind of exemption or reduction through regulations in the future.

I hope that I have provided helpful clarification to the hon. Member for Greenwich and Woolwich and other members of the Committee. I therefore kindly ask the hon. Member to withdraw his amendment.

[Matthew Pennycook]

I am partly reassured by what the Minister said, not least because he clearly indicated that the Government are going to go away and give further consideration to designing regulations. However, I urge him—or his successor when he is promoted—to really look into this issue, because I think there is a chance here, as Members have commented on, for a loophole to be exploited in ways that would cut across the purposes of the Bill as per the Government’s thinking. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Rachael Maskell]

I beg to move amendment 167, in schedule 11, page 287, line 28, at end insert—

“204FA Social enterprises and community interest companies

(1) IL regulations must provide for an exemption from liability to pay IL in respect of a development where—

(a) the person who would otherwise be liable to pay IL in respect of the development is a social enterprise or a community interest company, and

(b) the building or structure in respect of which IL liability would otherwise arise is to be used wholly or mainly for the purposes of social enterprise or the community interest.

(2) IL regulations may—

(a) provide for an exemption from liability to pay IL where the person who would otherwise be liable to pay IL in respect of the development is a social enterprise or a community interest company;

(b) require charging authorities to make arrangements for an exemption from, or reduction in, liability to pay IL where the person who would otherwise be liable to pay IL in respect of the development is a social enterprise or a community interest company.

(3) Regulations under subsection (1) or (2) may provide that an exemption or reduction does not apply if specified conditions are satisfied.”

This amendment makes equivalent provisions about the Infrastructure Levy for social enterprise or community interest companies as it does for charities under inserted section 204F.

The reason for the amendment is that there are different forms of businesses across communities. At this point, I should declare an interest as a Member of the Co-operative party. Social business is really important across our communities. Social businesses, enterprises and community interest companies have a different focus from the run-of-the-mill business. They are not there for profit. They are there to reinvest in their service users and facilities and to give back to their communities.

I think there is a real anomaly in the legislation. Today, the voluntary, community and social enterprise sector is referred to as one, recognising the charitable aims and social aims that these organisations bring. In moving the amendment, I am looking for parity, to recognise the fact that not-for-profit organisations—community interest companies and social enterprises—make an investment in their communities. They can make an investment by employing people from a place of disadvantage and by giving people opportunities in life. However, they are businesses as well, running cafés, for instance. Obviously they reinvest the proceeds they make into people in the community or they perhaps run a nursery or another form of business. We have seen the real benefit that that brings—it certainly addresses the levelling-up agenda. It enables people to move forward in their social mobility journey.

These organisations often start out with no assets whatever. They are very small. They build, reinvest and grow, which is good for the local economy. We need only to look at Preston as an example. It has invested—I look at the Chair, who is the MP for Preston—in the community. It has invested in the model of social business as well, and we know the importance of that. We want to see that rolled out across our communities. If these organisations grow and want to invest more and further benefit the community, but they then have to pay the infrastructure levy, that will curtail the opportunities that they can bring to our communities, and we do not want to see that. We want to see community interest companies, co-operatives and social businesses grow in a way that allows them to reinvest in our communities.

One thing that I have found most inspiring over the last few weeks is meeting organisations that are putting incubators for social enterprises in their communities—again, with no asset, but they provide an opportunity to bring forward a generation of new community interest companies and social enterprises. I have seen a little bit of that on the SPARK site in York, which really has put a spark into York. It is built out of old containers on a site and has brought a new energy into the city centre. It has been a fantastic opportunity, running and helping businesses to develop the ethos of community interest companies as they move forward.

I do not understand why in the legislation credible social businesses, social enterprises and community interest companies do not have exemptions when they give so much back to our communities and bring real transformation to our society. I want the amendment to be made. It is an omission; perhaps the Minister will explain why such an omission was made. Will he also reflect on the charities when it comes to the consultation and looking at further regulations? Will he include social enterprises and community interest companies in the substantive next phase of the legislation?

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[Greg Smith]

I will not detain the Committee for long. The amendment very much speaks for itself. It enables a charging schedule to require that, where an infrastructure levy is required, it be paid up front, or, where the infrastructure levy requires the developer to build something out themselves, that the infrastructure they are building—the GP surgery, school, road, or whatever it might be—be built first. It is a straightforward amendment. Having heard so many colleagues speak in the House or around the place, the great frustration that I have seen in my constituency, and that I have heard from others, is that, when in particular big housing developments or huge industrial parks are built, the infrastructure comes far too late.

I congratulate the Government, and welcome their presumption that infrastructure should come first. Through the amendment, which for clarity I will not press to a Division today, I urge them, as the Bill progresses to Report stage, to really think about locking their own desire and stated policy for infrastructure to be built first into the Bill. I warned that I will not press the amendment to a Division because, having lived through the glorious summer recess leadership election, we have heard a lot of talk and commitments about planning policy and the things that are in the Bill and which the Committee is talking about. I suspect that on Report it will be a wholly different Bill from the one that we have been debating over the past few months in Committee. The point that I wish to push is that the amendment marries up with what the Government have stated that they want to do, and I appeal to Ministers to find a way of incorporating the spirit of the amendment into the Bill on Report.

[Matthew Pennycook]

When speaking to the first group of amendments to this part of the Bill, I outlined in great detail why the decision to make GDV the metric for the new levy is likely to result in applicants making their IL payments at the end, rather than the beginning of the development process. As I argued when making the case for charging authorities to have a choice when it comes to adopting the new levy or retaining the present system, if a levy with GDV as its metric is made mandatory, the final IL liability will almost certainly not be known and become due until near the point where a development is completed. Given the problems inherent in attempting to design a levy system that enables interim payments or payments on account, that convinces sufficient local authorities to borrow against future levy receipts with all the risk that entails, or that overcomes the problems that will arise from paying for infrastructure on one site with levy contributions extracted from others, the most likely outcome is a situation where the infrastructure required to support development will not be in place when it is needed, as the hon. Member for Buckingham has just outlined. That is deeply problematic because, as I said earlier, we think it will mean fewer overall approvals, more unsustainable development when it does occur and greater local opposition.

Amendment 161 seeks to address that issue by specifying in proposed new section 204R on levy collection that the payment of IL must take place within a reasonable period of a development or phase of development commencing or in accordance with any instalment policy adopted by the charging authority. In doing so, it simply aims to avoid additional delays to the provision of infrastructure that will be necessary to support development and the resulting pressure that that would place on existing local infrastructure.

Amendment 58 in the name of the right hon. Member for Chipping Barnet (Theresa Villiers) and others similarly seeks to revise the Bill so that IL payments are made earlier than is currently proposed by the Government. We support the principle, for the reasons I have outlined. However, in enabling charging authorities to require developers to pay either their full IL liability or sufficient amounts of it to enable a development to be built before development commences, that amendment goes much further than currently provided for by either CIL or section 106 agreements, which are typically paid prior to implementation of a development or phases. Because it is not mandatory for planning permissions to be implemented, we are slightly concerned that amendment 58 could lead to a situation where IL contributions are paid and infrastructure provided on development that is not subsequently completed. Mandating the payment of IL before development commences would also impact on developer cash flow and viability, particularly in cases of phased developments, which could have the consequence of reducing IL rates and thus the overall level of affordable housing and infrastructure contributions provided.

Lastly, the problems inherent in a levy based on the metric of GDV—in terms of multiple valuations having to be undertaken at different stages in the development process, with the final liability not being known until years after the application was submitted—would be magnified were a provision to be introduced mandating the payment of IL before any development commences. For those reasons, and with all due respect to the hon. Member for Buckingham—I agree with him on the principle—we believe that amendment 161, which merely requires IL payments to be made within a reasonable period of a development or phase of development commencing, is the more proportionate response to a problem that is clearly recognised across the Committee. I hope the Minister will give serious consideration to accepting our amendment so we can ensure that, if the levy is introduced, it allows for the infrastructure required to support development to be in place when it is needed.

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[Matthew Pennycook]

As we have discussed extensively, given that we would not know the end value until later on in the development and that it would be subject to multiple valuations that might be disputed, how do the Government envisage the operation of a system of payments up front? Will the payments be simply scored off against the projected, expected end value, which will be calculated at a later date? Will the Minister give us a sense of how that sort of arrangement might work in practice?

[Mr Jones]

As we have discussed a number of times during the debate, the matter to which the hon. Gentleman refers will be set out in regulations. Clearly, that needs to be considered, because we need to ensure that there is a mechanism whereby payments are required to be made earlier in the development. That mechanism will be there and we can make that happen.

In due course, as I have said, we will consult on how the levy might be collected and paid. For example, we intend to explore whether a substantial proportion of the levy should be paid prior to the completion of the development or a phase of it. That plays into what the hon. Member for Greenwich and Woolwich mentioned. It would give charging authorities confidence that they will secure funds before the development is sold on. I hope that my reassurances that the Bill already provides powers to achieve the objectives laid out in the amendments in this group will mean that at this point my hon. Friend the Member for Buckingham is able to withdraw his amendment and that the hon. Gentleman feels able not to move amendment 161.