Draft Community Infrastructure Levy (Amendment) Regulations 2018

Roberta Blackman-Woods Excerpts

Wednesday 24th January 2018 General Committees

[Dr Roberta Blackman-Woods (City of Durham) (Lab)]

It is a pleasure to serve under your chairmanship, Ms McDonagh. I welcome the Minister to his new role and thank him for outlining the purpose of the draft regulations. Although they are technical, they have clear implications for the money that communities will receive as a result of allowing development to proceed.

As the Minister outlined, the draft regulations are intended to provide clarification of the level of CIL to be paid after a section 73 amendment to a planning permission. They are specifically intended to clarify the rate of indexation that should be used, so that the same rate of the BCIS, or building cost information service, all-in tender price index—more on that later—is applied to the before-CIL and after-CIL calculation. These draft regulations seek to alter the calculation of CIL to be paid in cases where planning permission was granted before CIL was in place in a given area, but where CIL is in place when a subsequent amendment to a scheme is made under a section 73 permission. I add to what the Minister said that this is about the calculation applied. If that is not correct, it would be helpful to have that clarified.

Regulation 128A of the CIL regulations, which deals with this, is apparently not sufficiently clear. Paragraph 7.5 of the explanatory memorandum explains that it has been brought to the Government’s attention that there is a need for a change to that regulation, but it does not give the reasons, or the circumstances in which people had concerns about how the regulation was applied.

The draft regulations seem to state that the CIL to be paid is basically the difference between the original CIL that would have applied, had CIL been in place at the time of the original planning permission, and the new CIL rate to be applied under the section 73 amendment to the original permission. The Government are altering the regulations to ensure that same rate of indexation is used in updating the CIL level as applied to the original planning permission, so that an appropriate comparison is made. Presumably the intention is to reduce the amount of CIL that developers are required to pay. Although I understand the need for clarity, does the Minister accept that the change could have the overall effect of reducing the amount of CIL that can be levied?

Take the hypothetical example of a development given planning permission in 2015, before CIL was in place, and given permission for a section 73 amendment in 2016, after CIL had been introduced locally. The calculation applied is for CIL for the complete new development, which we will call B, minus the hypothetical CIL for the previously permitted development, which we will call A. If the BCIS all-in tender price index is increased from 2015 to 2016, the previously calculated figure for CIL using the index figure from 2015 for A, and the figure from 2016 for B, would be larger than the calculation as proposed by this instrument, which would use the index figure from 2016 for both the A and B calculations. The difference between them would be smaller, reducing the amount of CIL to be charged. I am really pleased that one of the officials is nodding; it is assuring me that I have this right.

Even if the indexation figure was lower from B than A, it still amounts to a reduction in the amount of money that can be levied under the new formula in this instrument. In fact, the BCIS figures show—I have the graph with me—that this has consistently gone up over the last number of years, but even if it did not, it is still using the same rate for both calculations, and that still reduces the amount that can be applied in CIL.

Has the Minister’s office run through any models of possible scenarios to calculate how big an effect this change might have on CIL revenues locally? I am sure that the Minister is aware that CIL is extremely important for local infrastructure, schools and roads, to support development. Endless tweaks to CIL over the last five or six years have often reduced its effectiveness in delivering resources to local authorities and their communities.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

My hon. Friend asks a very pertinent question. In my constituency, Persimmon, which must be one of the worst developers in Britain, is treating my constituents with almost complete contempt. Those constituents are particularly worried about the lack of resources going to the local council from Persimmon to tackle the big problems with local infrastructure that will result from extra people using the roads and needing schools and hospitals.

[Dr Blackman-Woods]

My hon. Friend makes a really pertinent point. We have to bear in mind, when we think about CIL and changes to it, the impact not only on developers but on local communities, and the overall money available to support necessary infrastructure. We need to make sure that where possible, developers pay what they should under CIL. My question to the Minister is whether the impact of the change is being kept under review.

I also want to ask the Minister whether local authorities have to pay for access to the BCIS data. If so, is that a sensible use of public money? It was not clear to me whether that information was readily available to them in the calculation of CIL and the rates that now have to be applied, or whether they had to pay for it like anyone else.

It is not our intention to divide the Committee on this statutory instrument. However, I would like to hear the Minister’s response to my queries, for further reassurance.

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[Dominic Raab]

We have had some very insightful and thoughtful contributions. I thank the shadow Minister for her kind words and look forward to working with her in the future on CIL and on many other housing matters.

My first point in relation to her comments is that CIL should be charged only on changes to development and the indexation. That is the only way these regulations will bite. They will not affect the rate, which I think is the technical point that she raised.

[Dr Blackman-Woods]

I do not think my point was about the overall rate of CIL; it was about the rate of indexation. I thought the purpose of the SI was to ensure that the same rate of indexation is used, rather than to change the overall CIL.

[Dominic Raab]

I thank the hon. Lady for that clarification. I think we are agreed on that point. There has been no change to the rate. The indexation applies to the specific change; it does not apply to pre-CIL matters or applications.

The lack of clarity relates to an application originally brought by Peabody, a registered provider of affordable housing, and a judicial review involving Wandsworth Borough Council. I make that point because we are trying to ensure that the original intention of the 2010 regulations is enforced. Those regulations almost invariably have been properly applied by local authorities, in accordance with the original intention, and accepted by developers. That case is a fairly isolated incident of the wrong interpretation being applied. None the less, for the sake of developers, local authorities and communities, we want to ensure that there is proper legal certainty.

My hon. Friend the Member for Bosworth raised the issue of CIL’s application to the whole country rather than just to London. I hope that I made this point in my opening remarks, but I am happy to reaffirm it: in the wider country, £240 million was raised through CIL last year. CIL is certainly not just a metropolitan or London-centric issue; it applies to the whole country. We are trying to ensure that, where there is much-needed homebuilding, infrastructure is provided, too. CIL is an important contribution to that, certainly not just in London.

My hon. Friend also asked about section 106. That is, in effect, the negotiated contribution that a developer makes, bearing in mind the infrastructure that is required and the viability of the development. The distinction is that that is agreed, whereas CIL is, in effect, levied, but both are critical. We want to ensure that we provide the homes we need in the places we need them, with the necessary infrastructure and funding.

The hon. Member for Bassetlaw, in his usual tub-thumping way, criticised the legislation. He made some perfectly reasonable points. I gently point out to him that the primary legislation for CIL was passed under the last Labour Government, but in the spirit of co-operation, if he has any further ideas or thoughts about the legislation or its application to his constituency, he should feel free to write to me.

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[Dr Blackman-Woods]

I am grateful to the Minister for giving way. He is being very generous. I and all of us on the Opposition Benches accept that this is all about legal certainty, but will the Minister also accept that the outcome is likely to be a reduction in the amount of CIL levied?

[Dominic Raab]

I thank the hon. Lady. I tried to address that earlier. Almost all the cases where the regulations were applied were in accordance and consistent with the original intentions of the regulations. What we are really responding to is that one isolated case. I suspect that if there is any impact on revenue, it will be negligible. That also has to be countervailed against the risk of having uncertain regulations, with all the litigations that would ensue if we did not straighten this out.

As the hon. Member for City of Durham said, the draft regulations are necessary to provide clarity and certainty. They will help to ensure that developers have the certainty required to continue to deliver the homes we need, and that local councils can continue to collect the funding for the vital infrastructure to support them. That is not about going soft on developers; it is about ensuring that we have a constructive relationship that builds the homes that this country needs.

Most development impacts on or benefits from infrastructure. It is right and fair that those who benefit from the uplift in values created by a new development should share some of that gain with the local community. I suspect that that is something we believe on a cross-party basis in this House, and I also believe that it is right for development permitted before CIL came into force to be treated fairly. I commend the draft regulations to the Committee.

Question put and agreed to.