Draft Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019

Sarah Newton Excerpts

Thursday 27th June 2019 General Committees

[The Minister for Housing (Kit Malthouse)]

I beg to move,

That the Committee has considered the draft Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019.

The regulations were laid before the House on 4 June 2019. If approved and made, the regulations will help local authorities to collect contributions from developers more effectively, and to use them to fund infrastructure. The regulations will remove unnecessary restrictions that prevent authorities from using funds effectively. They will ensure fair charges so that self-builders do not face a £30,000 charge if they hand in their paperwork late, and will increase transparency and accountability, so that local people know exactly what contributions their local authority has secured.

The community infrastructure levy regulations first came into force in April 2010. They enabled local planning authorities and the Mayor of London to raise a levy on new developments in their local area. The levy can be used to fund a wide range of infrastructure to support development. Some 150 local planning authorities now charge the levy, and £855 million was raised by March 2018, which has been used to fund infrastructure, including road schemes, green spaces and flood defences. In London, the levy has raised an additional £490 million towards Crossrail.

Local planning authorities are also able to negotiate individual planning agreements with developers, which secure contributions towards infrastructure and affordable housing. Unlike the community infrastructure levy, those section 106 planning obligations must be directly related to the development in question. In 2016-17, local authorities levied around £5 billion through section 106 planning obligations, £4 billion of which was for affordable housing and £1 billion of which was for infrastructure.

The regulations before the Committee introduce reforms to both the community infrastructure levy and section 106 planning obligations. They have been developed through extensive consultation with industry and local authorities.

[Sarah Newton (Truro and Falmouth) (Con)]

The section 106 agreements have been really useful in communities like mine. Will the Minister confirm that we will lift the cap and enable as much pooling as communities think appropriate to deliver vital local infrastructure, such as walking and cycling pathways?

[Kit Malthouse]

I can confirm that we will be doing so, and I will come to the details shortly.

We are making changes to make it easier for local authorities to introduce the levy. Currently, before a local planning authority can introduce or update the levy, it must consult twice on its proposed schedule of charges. That schedule is then subject to examination in public to ensure that the proposed rates will not make development across the area unviable.

Although safeguards are important, the current system is too slow and bureaucratic. Local authorities can take a year or more to introduce the levy and may take as long again to update their charging schedule. We have therefore reduced the consultation requirements to a single round of consultation followed by an examination in public. That will make it easier for local authorities to introduce the levy and to update their levy rates when economic circumstances change.

We are also making the levy fairer. Local authorities’ charging schedules are indexed to a measure of building costs, meaning that levy charges do not rapidly become out of date. Complications can arise when a developer changes their development in a way that changes their levy liability, for instance by increasing or decreasing the floor space. Our reforms ensure that when an amendment to a planning permission increases the developer’s liability, the increase is charged at the latest indexed rate.

If a permission to increase floor space is increased, it is right that the latest levy rate is paid on that new space. On the other hand, decreases in levy liability are charged at the original indexed rate. If the original levy liability was £100 per square metre, for example, any reduction should also be at a rate of £100 per square metre, rather than £120 or whatever the latest indexed rate is. That way, we ensure that charges remain fair.

A further complication occurs when a development is granted planning permission before the levy is introduced to an area, but is changed after the levy has been implemented. Under the existing regulations, that can generate perverse outcomes for developments that are built in phases, over time. For example, when an amendment increases floor space in one phase of development, that rightly creates a new levy liability for the new floor space. However, when an amendment to another phase of the development reduces floor space, there is no corresponding reduction in liability. That is because the development was first granted permission before the levy was in place, so there is no levy liability to reduce. That creates a ratchet effect; amendments that create new floor space create new liabilities, while amendments that reduce it do not. Developers may end up paying the levy on more floor space than they actually build. The draft regulations will allow reductions in floor space in one phase of the development to be offset against increases in floor space in another phase of the development. That is much fairer, and ensures that developers are charged only for what they build.

The 2010 regulations allow for some developments to be exempt from the levy. That includes residential extensions and self-build housing, but for exemption to be valid, a commencement notice must generally be submitted before work is started on the site. If the paperwork is not completed in time, the developer must pay the full levy liability. I am aware of circumstances in which people building their own home have found themselves subject to a £30,000 charge or more simply for late paperwork. That is disproportionate and it is distressing for those involved. Under the reforms, the penalty for a late commencement notice will now be reduced to 20% of the full levy amount, capped at £2,500. Again, the aim is to improve fairness.

My hon. Friend the Member for Truro and Falmouth will be pleased to hear that we are also introducing new freedoms for local authorities to spend funds raised through the levy and through section 106 planning obligations. The existing regulations prevent local authorities securing more than five section 106 planning obligations on a single piece of infrastructure. That is known as the section 106 pooling restriction. For example, if six developments in an area collectively require a new school to be built, only the first five can be required to contribute. That can prevent otherwise acceptable development from being built. It also means that developers and local authorities waste time and resources developing workarounds so that all developments contribute fairly to the required infrastructure. We are removing that restriction to give local authorities the freedom that they need to fund infrastructure.

The existing regulations also state that section 106 planning obligations cannot be used to fund infrastructure that a local authority intends to fund partly through the levy. If the local authority wants to fund half the cost of a school through the levy, therefore, it cannot use planning obligations—for example, from those developments in the immediate vicinity—to pay for the other half. That restriction makes it harder for local authorities to fund infrastructure so we are removing it.

It is not enough to give local authorities more freedom on how they use the levy and planning obligations; it is also important for local people to know what is being secured on their behalf. For that reason, we are introducing new reporting requirements for local authorities. Each year, they must publish an infrastructure funding statement detailing revenues from the levy and from section 106 planning obligations, and setting out how those funds have been allocated. To ensure that local authorities are able to resource that, the new regulations will make it clear that they may seek proportionate monitoring fees through section 106 planning obligations. Authorities are already able to use up to 5% of the levy to fund that administrative work.

We have also created a new requirement for authorities to consult if they want to stop charging the levy. That will ensure that they consider the funding impacts of their decisions and that they can be held accountable for them by local people.

Lastly, the draft statutory instrument makes a small number of minor clarifications to the regulations to deal with issues identified during and after the March 2018 public consultation. The parts of the regulations dealing with calculating the levy have also been consolidated into a single schedule to make them easier to use.

Contributions from developers play an important role in delivering the infrastructure that new homes and local economies require. If the draft regulations are approved and made, they will ensure that the levy and section 106 planning obligations can better fund vital infrastructure in local communities. They will give more freedom to local authorities over how they use this funding, and will also make that more transparent to local people. Finally, they will ensure that levy charges are transparent and fair for developers. I commend the draft regulations to the Committee.

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[Sarah Newton (Truro and Falmouth) (Con)]

Will the hon. Gentleman give way?

[John Mann]

I will let the Minister respond.

[Sarah Newton]

Will the hon. Gentleman give way?

[John Mann]

Okay, I will give way.

[Sarah Newton]

Thank you. I am sorry. I was a little confused as to whether the hon. Gentleman had come to the end of his speech.

As somebody who advocated this openness and transparency, to call it a bureaucracy tax is a misnomer, because the parish councils in my constituency really want to know how Cornwall Council is allocating the section 106 and the CIL funding. People in the villages and communities are sometimes very suspicious about decisions made at the centre about infrastructure, and suspicious that the funds are not flowing from the individual developments in their communities into the infrastructure that they would like to see, such as new schools, road junctions or cycle pathways.

Enabling greater transparency is a good thing, but councils have to bear some cost in doing this—

[The Chair]

Order. If the hon. Lady wishes to make her own speech, she can, but she must keep her interventions relatively brief.

[Sarah Newton]

Sorry, Mr Gapes. My natural enthusiasm got the better of me.

[John Mann]

I advise the hon. Lady that the best bit of legislation from this Government originated from a Labour Government. Neighbourhood planning was wisely taken up by both the coalition Government and the current Government with my strong support every time. If there is a neighbourhood development plan—Bassetlaw is a leader and has more plans than any other council in the country—25% goes into the local community. Parish and town councils are boldly going forward with their plans and are able to draw down more money. It is the best single piece of legislation by this Government and their coalition predecessor, albeit stolen from a very good Labour Government idea, but that is good politics. Why a bureaucracy tax as well? We do not need it. Neighbourhood planning is one of the good things that the Government have managed to do.