Levelling-up and Regeneration Bill (Nineteenth sitting)

Rachael Maskell Excerpts

Tuesday 6th September 2022 Public Bill Committees

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

Could the Minister give some examples of what those extensive directions could include, because that is not made clear in the Bill?

[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.

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[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.

[Tim Farron]

The No. 1 housing-related concern that I hear from my constituents is the absence of affordable places that they can find to live in, whether they be private rented, private bought or, in particular, social rented.

Perhaps some way down the list, but still high up it, is people’s real concern and anger when they see developments come to pass without infrastructure. We can talk about all sorts of different things. The hon. Member for York Central talked about doctors’ surgeries and school places, and there are sewers, drains, roads and all the other important infrastructure that underpins a successful development and means it does not put extra strain on existing infrastructure and therefore cause problems for and resentment on the part of neighbours and other developments, which in turns fuels opposition to future development.

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[Mr Jones]

The hon. Member for Greenwich and Woolwich is correct to raise the importance of affordable housing delivery for local communities. Amendments 150 to 152 would prevent the infrastructure levy from being used to fund affordable housing, and I understand why he has tabled them. The provision of affordable housing is critical, and section 106 planning obligations currently deliver around half of all affordable housing in England. The Government do not want the new infrastructure levy to reduce the number of affordable homes that are secured when new development comes forward. In fact, the opposite is true: we are committed to the delivery of at least as much, if not more, on-site affordable housing through the infrastructure levy as is delivered through the current system of developer contributions.

Section 106 is an imperfect mechanism for securing affordable housing and can result in prolonged and costly negotiations that often generate outcomes that favour developers. Developers can often use their greater resources to negotiate policy-compliant levels of affordable housing downward on viability grounds. Local planning authorities tell us that the ability to secure developer contributions through negotiations is dependent on the individuals involved in the process. The amount that local authorities secure from developers will vary depending on which officers lead the negotiations, and their experience, strategy and confidence. This unpredictable element in the negotiation of section 106 obligations means that some authorities can secure more affordable housing than others, and that value that could be secured by local government instead goes to developers and landowners.

[Rachael Maskell]

The Minister is making the case that section 106 should be amended so that more power is given to local authorities. Why is he not taking that step to ensure that developers do not have the upper hand in negotiations?

[Mr Jones]

We are advocating delivering the same amount or more affordable homes through the infrastructure levy than are currently provided through section 106. That is based on the ability to capture more value from new development than is already the case, and the fact that there will be a more consistent approach that will not allow the current situation, wherein certain authorities that have the experience and ability at officer level to negotiate better section 106 agreements than others benefit significantly from being able to do so, compared with some authorities that do not appear to be in that position.

[Rachael Maskell]

I do not understand why the Minister does not just change the framework around the negotiations so that all authorities have the powers they need to get the outcomes they require, rather than introducing a system that will weaken the ability to determine what is actually good for a site and the infrastructure that communities need—let alone the affordable housing they desperately need.

[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.

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[Tim Farron]

When it comes to these issues, one of the things that makes people look heavenward and tut is the phrase “affordable housing”. Many people see it as a reference to homes that are anything but affordable. In my community, the average household income is less than £30,000 a year, and the average house price is more than a quarter of a million pounds. Given that a wise bank manager is not meant to give a mortgage for anything more than three and a half times someone’s income, the average house is two and a half times the upper limit of what ought to be offered to the average earner of average household earnings in my constituency. We see the problem.

Often, we see developments where homes are built for £180,000, £200,000 or £220,000, and are defined as affordable. They are not. We need a new term—a new name that demonstrates that something is genuinely affordable within the region for people on average and below average earnings, so that we can have a community that meets the needs of everybody, and not, as my area is increasingly becoming, somewhere that is only available for a new entrant if they have an awful lot of money and where, increasingly, those who are in private rented accommodation are not secure. They have been expelled in their thousands in the last year and a half alone, through section 21 evictions; the Government were meant to deal with that, and have failed to do so.

This series of amendments pushes the Government on an area of concern that we need to discuss far more: the lack of a proper, meaningful housing strategy. In reality, everything the Government propose to try to create genuinely affordable housing is via the infrastructure levy, and there is very little out there apart from that. We are far from convinced that the infrastructure levy will create any more genuinely affordable homes than those that exist already, and it may even create fewer, for the reasons we have set out.

We can juxtapose that with the complete failure to do anything proactive. Why are local authority council housing departments not allowed to borrow against the value of their stock? Why are we unable to do the things that would allow the Government to be, in many ways, the developer of last resort? Why are we not doing what we need to do to directly develop and build the homes that we patently need to be genuinely affordable? Here we are, talking about things that might make a difference at the edges, and even then allowing talk of affordable housing that is not affordable.

While nomenclature matters, the fact that we are debating this issue during consideration of these amendments is a reminder of how paltry the Government’s ambition is when it comes to genuinely meeting housing needs in this country. There is an opportunity to do something big—something Macmillanesque—and make a serious attempt to create homes for a new generation, instead of tinkering around the edge of the market with devices that may or may not work, and, if they do, will make little difference.

It is depressing having this debate on the margins, when the Government should be genuinely levelling up by investing and by allowing local authorities and housing associations to have the income and the powers to build the homes we genuinely need. Do not give developers the excuse to build homes that they say are affordable, but that are not really affordable.

[Rachael Maskell]

I, too, want to speak in favour of the four amendments before us. I will not go to Macmillan, but back to Nye Bevan. When he saw how broken the housing system was and how urgent the need was, he brought about a transformation in housing development for a generation, when the homes fit for heroes were built. It was good-quality social housing and housing that people could afford to live in.

In my community in York, we are looking at an affordability ratio of around 8.3, and it is getting harder by the day. Since we started debating the Bill in Committee, I have seen the development of another 133 short-term holiday lets—Airbnbs—in my community, and I am sure the rate of growth over the summer means that number has grown. We know that the nature of housing is complex and has changed, but we need to look at how we develop truly, genuinely affordable homes, which my constituents have to move out of the area to find.

A low-wage economy, such as in the hospitality sector, means that people cannot, and do not, come to work in the area. As a result, we have seen hospitality venues limit their opening times and become unable to benefit from the incoming community, which wants to see a wider offer, and from the tourism industry. That is having a cyclical, negative impact on the economy as well as the community. Those issues should be at the forefront when looking at housing reforms, and this Bill simply does not cut it.

From the moment in the main Chamber when we heard the Minister enhance the value of affordable homes, including those outside London, we all took a sharp breath, particularly those of us from areas that have a low-wage economy. The system is broken and the Bill simply does not tackle the challenges before us. These amendments are vital because they define what we mean by “affordability”, strengthen the Bill and ensure that we bring in the protections that are necessary.

A Minister in a new Government could completely change the definition of “affordability”, meaning we could be lumbered with a definition that does not apply to our situation. For example, my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier) has said that the affordability ratio in her constituency is 16. How can housing be affordable with that sort of affordability ratio? It is baffling.

We need to have some sort of relationship to the reality of particular economies, and that is not reflected at all in the legislation. There will be very few places where we have the ratio of three and a half times a person’s salary, which I remember from when I bought my first home. Those kinds of ratios were much more affordable and genuine. That means that many people cannot get on the housing ladder, and are dependent on the private rented sector, which at the moment is flipping over to short-term holiday lets. There is a squeeze in the market on both sides. It simply is not working, and I cannot see that coming into play without this level of protection.

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[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.

[Rachael Maskell]

How are local authorities making calculations about the loss of affordable housing? Clearly, if we just look at new developments, we could say, “There is this growth in affordable housing”, but if authorities are losing stock, the proportion of affordable housing in a community is decreasing. How will that be addressed? If the local plan is just about future developments, should there not be some adjustment for the loss in existing stock? I am talking about not just social stock, but ownership stock.

[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.

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[Mr Jones]

Proposed new section 204F of the Planning Act 2008 makes provision requiring an exemption from paying the levy where the party liable to pay is a charity and where the building or structure will be used for a charitable purpose. “Charitable purpose” here has the meaning in section 2 of the Charities Act 2011. It is something that is “for the public benefit” and is for a specific purpose, such as the prevention or relief of poverty, the advancement of education, health, the arts or sport, or the provision of relief to those in need. That kind of development is entitled to exemption from the levy in its entirety.

Under the current system of section 106 planning obligations, an obligation can constitute a reason to grant planning permission only if it is directly related to the development. For that reason, affordable housing contributions tend to be sought on residential developments. Amendment 158 would substantially extend the range of development required to deliver contributions towards affordable housing, including non-residential charitable development. In general, we oppose the amendment because it is not appropriate for charities providing services for the public benefit to also be required to provide affordable housing. It would be unfortunate if all kinds of charitable development, from drug treatment facilities to village halls, became economically unviable because we required them to fund an element of affordable housing as well.

[Rachael Maskell]

It is becoming clear in the debate that there are charities and charities. Some charities are run by major businesses and make a profit. Say a private school was disposing of a playing field that would then be used for the development of unaffordable housing to provide significant funding. Should that private school be exempt because it has charitable status under the Charities Act? Would that be right, because surely it is acting like any other business?

[Mr Jones]

The hon. Member makes a very good point. A charity that builds something that is not for a charitable purpose would not be subject to an exemption from the levy under proposed new section 204F. For example, feeding into what she said, if a charity were delivering market housing, that would be unlikely to meet the definition of a charitable purpose. If there are specific scenarios where contributions should be sought, the Bill enables us to consider them as part of the development of the levy’s regulations. More broadly, we will consult on the types of exemptions that should apply to the levy prior to laying the regulations before the Commons for approval. For those reasons, amendment 158 is not necessary.

[Rachael Maskell]

I want to test another scenario. Say the same educational establishment develops a nursery on that site, but the nursery has a commercial interest. Under the debate that we had about the provision of services, that could be seen as one of the services that could come under the infrastructure levy. A nursery could be a profit-making opportunity for said institution, while also providing support for children under the Government’s funding for nurseries. Would that be included or excluded from the scheme that the Minister is outlining?

[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?

[Mr Jones]

As I said under amendment 158, proposed new section 204F of the Planning Act 2008 allows for certain charities carrying out development for charitable purposes to be exempt from the levy. Proposed new section 204D(5)(h) also provides powers to exempt or reduce levy liabilities through regulations. This would allow us to set national exemptions or reductions where it is appropriate for other types of development by other types of organisations. When considering the approach to exemptions and reductions, we will need to consider a wide range of development types, including those put forward by the amendment. There is an important balance to strike. Although we will explore national exemptions and reductions to the levy, we want local authorities to be able to make their own decisions about how they might want levy exemptions to apply.

[Rachael Maskell]

I am grateful to the Minister for making that point. Obviously, if local authorities are going to make such determinations, they will have to look for the maximum opportunity. As the legislation is unamended, they will also seek to subsidise the affordability of housing as well. It is very unlikely that a local authority will then look for wider exemptions from the infrastructure levy, so I cannot see how that would work in practice to deliver the objective to which the Minister refers.

[Mr Jones]

I was just bringing it to the hon. Member’s attention that there is a balance to strike in these matters. Clearly national exemptions are an important part of this, but we want to give a certain amount of local flexibility. Our forthcoming consultation on the infrastructure levy will explore this question further. It will allow us to look at the case for exemptions in the round, and decide what types of developments should not be subject to the charge, or should be subject to a reduced charge. Following consultation we will set out in regulations where a charge to the levy will not apply. Those regulations will be subject to debate in Committee and approval in the House. On that basis, I do not consider the amendment necessary and kindly ask her to withdraw it.

[Rachael Maskell]

I have been reassured by the Minister that this will form part of the wider consultation process in the next stage. We will look at that with interest. Clearly, we will want to follow this through in later stages, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Greg Smith (Buckingham) (Con)]

I beg to move amendment 58, in schedule 11, page 287, line 33, at end insert—

“(1A) A charging schedule may—

(a) require a developer to pay their full IL liability for a development before being permitted to commence work on that development,

(b) require infrastructure funded by IL associated with a development to be built before work on that development may commence.”

This amendment would enable Infrastructure Levy charging authorities to require a developer to pay their full IL liability, or for infrastructure funded by IL associated with a development to be built, before development may commence.

--- Later in debate ---

[Tim Farron]

Amendment 58 is really interesting, and probes the Government on an issue that I am also concerned about. The hon. Member for Buckingham set out the case well and I also very much hear the challenges and counterpoints from the hon. Member for Greenwich and Woolwich.

We can all point to developments in our communities where we have seen new housing created without adequate infrastructure being provided. Often, we are talking about utilities such as sewage and draining, and the additional pressure put on those services that they cannot meet. There is clearly huge merit in what is being suggested, because it locks the developer in. I referred earlier to the Church Bank Gardens development in Burton-in-Kendal, where the homes are built and the infrastructure is still not there. The footpaths are not put right. Much of the infrastructure has not been done at all. The road has not been put right. There is often a lack of trust—a sense that the developer will seek to get the benefit of a development without providing the services that were surely part and parcel of the conditions of developing it. The hon. Member for Buckingham is right to press the point, and I hope the Government will take it seriously.

It is important to bear in mind what we are talking about when we think about infrastructure. Several people, me included, have cited GP surgeries, for example, as part of the infrastructure that we would want to have underpinned. I want to be very careful that we do not allow integrated care boards, as they are now, and the Government as a whole to skimp on the provision of GP surgeries, particularly in existing communities, and assume that somehow developers will pick up the tab for them. As we struggle to keep our surgeries in Ambleside and Hawkshead, the issue is not developers not paying the infrastructure levy. The issue is shocking Government cuts in the funding of GP surgeries and complete inflexibility from the new integrated care boards, so let us be careful, when we talk about supporting infrastructure, which we must, and about getting it in place before new developments, that we do not lift or shift responsibility away from our NHS managers and from the Department of Health and Social Care and other Departments.

[Rachael Maskell]

I rise to make a brief point. It is more about the scope of what we have discussed—the infrastructure levy being able to contribute to affordable housing and social housing within a development. One of my fears is that everything is left to the end; it is left to the end to calculate everything, and we end up with what has happened at St Peters Quarter, in York, with the high-value housing—beautiful, spacious housing—in one area and then the section 106 housing in the corner, where there is no proper infrastructure to support it because there is no money left. We therefore get real segregated communities.

I go back to the report that John Hills wrote in 2007. I was at a meeting with him, discussing the report, and he was talking about the importance of place making and mixed communities. We could be in danger of ending up with more divided communities if everything is paid at the end. Therefore scheduling payment is really important. Developers know that that money will have to be paid, and we should ensure that it can be paid in a timely way so that we do not end up with the scenario that we have articulated so much with either the section 106 provision coming never or the infrastructure levy money not delivering on the expectation at the start of the planning process. That could of course occur, but, even worse, we could end up with really divided and segregated communities when we know that the strength and resilience of communities comes where we see that housing jumbled up.

A good example would be Derwenthorpe, in York, where it is not possible to tell what is a social house, what is a privately owned home or where there is equity sharing or anything else, because the houses are all the same and people live in a very mixed and diverse community. That has built strong resilience in the community.

We need to think about more than just housing; we need to think of place making, which I know is Homes England’s real objective. Of course, by holding everything back to the very last minute, we are in danger of not having that. Properly scheduling payment of the infrastructure levy will ensure that we get the proper places that people want to live in and that we build resilience across all communities, as opposed to dividing communities and then developing areas that will create social challenges in the future.

[Mr Jones]

I thank my hon. Friend the Member for Buckingham for his contribution to the debate on the levy today. Even though it is an inviting proposition, I do not think it would be wise for me to start to try to pre-empt the policy of the new Government, but what I will do is focus on amendments 58 and 161, which are before us.

Charging the levy on the basis of gross development value, which will be the sales value of the development that is sold, will enable the levy to capture more of the increases in development value that occur over time. That will result in better opportunity to capture more value from development to put towards infrastructure and services. Later payments will also reduce demands initially on developer cash flow, and the returns necessary to make a development worth while, because payments will not be required up front.

Payments may be made later, but we recognise the importance of the infrastructure levy supporting the timely provision of local infrastructure alongside new development, so that homes are supported by the right services. That is why it will be possible for local authorities to borrow against future levy liabilities, so they can forward-fund infrastructure.

We are also introducing infrastructure delivery strategies that will drive local authorities to plan more effectively for the best use of levy revenues. On the majority of sites, levy contributions towards infrastructure will be secured in cash, creating a simpler, streamlined system. Developers will, however, still need to deliver the infrastructure on site that is integral to the use of the site, including access roads and flood risk mitigations.

In addition, as we have debated, on larger, more complex sites, we intend to retain the use of section 106 planning obligations to secure in-kind delivery of infrastructure. Such contributions will be offset against the levy liability and the timing of their delivery can be negotiated.

Nevertheless, we recognise that there are circumstances in which early payment and payment by instalments may well be appropriate. That is why the Bill provides powers to allow for that under proposed new section 204R(2) of the Planning Act 2008, which is in schedule 11.