Housing and Planning Bill

Viscount Younger of Leckie Excerpts

Wednesday 23rd March 2016 Lords Chamber

[Lord Beecham (Lab)]

My Lords, Amendment 103BB deals with a minor but to some people significant point, which is the compensation to be payable when land is acquired by a development corporation. The amendment simply provides that the Secretary of State may by order set out a formula for determining fair compensation to the landowner in those circumstances. That seems a reasonable proposition.

[Viscount Younger of Leckie (Con)]

My Lords, I turn to the detail of the compensation amendments, Amendments 102CK and 103BB, tabled by the noble Lord, Lord Cameron, and the noble Earl, Lord Lytton, but spoken to today by the noble Duke, the Duke of Somerset.

I will outline briefly the principles of compensation for land taken by compulsion. These points have arisen in an earlier amendment in Committee. The compensation code is underpinned by the principle of equivalence. This means that the owner should be paid neither less nor more than his loss. The code provides that land shall be purchased at its open-market value, disregarding the effect of the scheme underlying the compulsory purchase.

The land is valued in a construct called the no-scheme world, whereby any increase or decrease in value that is due to the scheme is disregarded. Land will always have its existing-use value but market value also takes into account the effect of any planning permissions that have already been granted and of the prospect of future planning permissions. This is generally known as hope value, as the noble Duke eloquently pointed out. In the context of compensation for compulsory purchase, this is assessed according to the planning assumptions in the Land Compensation Act 1961, which require the valuer to assume that the scheme underlying the acquisition is cancelled. I remind the House that these were extensively revised and debated in the Localism Act 2011.

In some situations, there will be no hope value, because the individual claimant could not have obtained planning permission for some more valuable use. For instance, the land might be in an isolated rural location where permission for development would have been unlikely to be granted in the absence of a comprehensive scheme requiring compulsory purchase powers. In other situations, perhaps where land is acquired near an existing settlement, there will be pre-existing prospects for development on the land. In lay man’s language, that is development potential that existed prior to the scheme. The strength of those prospects will be reflected in the market value of the land.

On Amendment 102CK, it has been said that land acquired for housing by means of a development consent order should always attract development value. If the land had development potential in the absence of the scheme underlying the development consent order, that hope value would be reflected in the market value and the compensation to be paid. But an increase in the value of the land that is solely attributable to the scheme would be disregarded under the compensation code.

I turn to Amendment 103BB. The noble Lord, Lord Beecham, and the noble Baroness, Lady Andrews, have suggested that there is something unique about the land taken for new towns that requires the Secretary of State to provide a formula for compensation. New towns may well fall into the class of case 1 mentioned earlier, where there is no pre-existing hope value, as there is no reasonable prospect of development in the absence of a comprehensive scheme requiring compulsory purchase powers. In this situation, compensation in the no-scheme world is likely to be at or close to agricultural values. Schedule 1 to the Land Compensation Act 1961 makes it very clear that for new towns any increase in value that is attributable to the development of other land in the new town must be disregarded, where that development would not have been likely to be carried out had the area not been designated as a new town.

I thank the noble Earl, Lord Lytton, for the amendments spoken to by the noble Duke, the Duke of Somerset. I suspect that your Lordships will not be very keen to be further enlightened this afternoon by a technical debate on these particular matters. However, we shall look carefully at what the noble Duke said, and I shall write further to him and the noble Earl before Report about these matters.

[Lord Campbell-Savours]

The Minister said that he will write to the noble Duke. Can we all see a copy of that letter, and can we have an assurance that there will be no movement, no concession made to the CLA, in this area?

[Viscount Younger of Leckie]

I am not in a position to make any guarantees this afternoon, but I will certainly include all noble Lords who have taken part in this debate, and copies will be placed in the Library of the House.

I turn to the compulsory purchase policy elements and Amendments 103BC to 103BF. I am very grateful to the noble Lord, Lord Cameron, and the noble Earl for raising these important matters, again spoken to by the noble Duke, the Duke of Somerset. They concern the matter of ensuring that advance payments of compensation are not only paid, but paid on time. This links to the equally important question of the way that acquiring authorities should treat claimants when land is being purchased by compulsion.

Starting with Amendment 103BC, having considered the responses to the spring 2015 consultation, the Government think that penal rates of interest on outstanding advance payments are the most appropriate sanction, and we are providing for this in Clause 174. Taken together with the new arrangements for making claims and obtaining further information in Clauses 172 and 173, we think that the prospect of a penal rate of interest will sufficiently concentrate the minds of acquiring authorities, so that advance payments will be made on time.

I now turn to Amendments 103BD and 103BE. The Government think that setting interest rates in a Bill is too restrictive. Provision to set both rates is available in secondary legislation. Coming to the detail of the amendments, the Government think that it is premature to decide on the punitive rate of interest for late payments of advance payments of compensation—as proposed in new subsection (1A) of new Section 52B in Amendment 103BD. The noble Lord, Lord Cameron, and the noble Earl, Lord Lytton, will know that the Government published our consultation paper on phase 2 of our compulsory purchase reform programme on 21 March. The good news is that the paper proposes that 8% above the base rate should be the punitive rate for late payments of advance payments.

The second part of Amendment 103BD—proposed new subsection (1B)—would overtake the existing provisions in Section 32 of the Land Compensation Act 1961 to set the rate of interest for compensation unpaid at the date of entry. This rate is not punitive, as there are often legitimate reasons for some compensation to be unpaid at that date. The final claim for many businesses, for example, cannot be finalised until their relocation has been completed.

Noble Lords will recall from the spring 2015 consultation that the Government consulted on increasing this rate of interest from 0.5% below the base rate. The Government confirmed in their response to consultation that the rate would be increased to 2% above the base rate. The Committee will be interested to hear that new regulations are in preparation by the Treasury and will be published in due course.

The new rate of 2% above base is intended to achieve an equitable and fair settlement between the claimant and the acquiring authority. The interest on unpaid compensation from the date of entry is not the same as the interest on commercial lending. It may be helpful if I say that it is more likely that it will be based on a formula which will compensate the claimant for interest which he or she would otherwise reasonably be receiving, had the money been otherwise invested. We can have a separate debate on that, I am sure.

I now turn to Amendment 103BF, which focuses on introducing a statutory duty of care to be owed by acquiring authorities to claimants. There is no doubt that claimants should be treated with fairness and courtesy and kept up to date with developments. This is best practice, and all competent professionals should be advising their clients to act in this way. The Government believe that a new statutory duty of care for compulsory purchase is not necessary and would not help relations between acquiring authorities and claimants. The kind of assistance which should be provided by an acquiring authority may differ depending on the circumstances. A broad duty of care may be imprecise in nature and difficult to enforce. The professionals working in compulsory purchase suggest that clear guidance on good practice would be a better way forward.

The recently updated compulsory purchase guidance, published on 29 October 2015, makes it clear that acquiring authorities should make reasonable offers of compensation in the context of overall project costs. Acquiring authorities should also be prepared to engage constructively with claimants about relocation issues and mitigation and accommodation works where relevant. The guidance also urges acquiring authorities to offer those with concerns about a compulsory purchase order full access to alternative dispute resolution techniques, from the planning and preparation stage to agreeing the compensation payable for the acquired properties. With these explanations, I ask the noble Duke to withdraw the amendment.

[Lord Williams of Elvel (Lab)]

My Lords, I cannot see what attitude the Minister is taking towards the CLA amendments, as was raised by my noble friend Lord Campbell-Savours. Will he please set it out very simply ?

[Viscount Younger of Leckie]

Of course, I believe it will be best for me to include the technical details in the letter that I am already writing and will place in the Library of the House.

[The Duke of Somerset]

My Lords, I thank the Minister for his very full reply and the two noble Lords who have contributed to this short debate. Some of what we heard was good news; some of the rest not so good. I am sure that the noble Lords who tabled the amendments will, like myself, take great care in reading the reply.

The noble Lord, Lord Campbell-Savours, knows that the Committee has debated on a number of occasions his feelings about acquisition values. May I repeat what has been said on other occasions? Expropriation simply means that less land will come forward. It has been tried twice before and each time the development land tax has been a failure and has been withdrawn. Basically, any gains made through the sale of development land are taxed through the normal tax system. Finally, a lot of community benefit is funded out of the market value of these developments. I therefore do not go along with his hypothesis.

I look forward to hearing more about the consultation and thank the Minister for his reply. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Harris of Haringey]

My Lords, given that the Government Chief Whip has not yet arrived in the Chamber to explain what the intention is—although we may be about to get a message from him—to expedite matters, in order to see exactly what the Government’s intentions are, I beg to move that the House do now resume.

[Viscount Younger of Leckie]

My Lords, I argue that the House should not resume. Discussions are ongoing with the Chief Whip as we speak. I suggest to the House that we continue. The Chief Whip will come into the Chamber as soon as he is able to update us on progress on the Bill.

[Lord Harris of Haringey]

On the basis of that assurance that the Government Chief Whip will be joining us in about 10 minutes, I will not press my Motion to a vote at this stage.

--- Later in debate ---

[Lord Harris of Haringey]

My Lords, the Government Chief Whip briefly appeared in the Chamber. I now see that the Leader and Deputy Leader of the House are here. I am minded to move that the House do now resume, unless we are about to get a Statement.

[Viscount Younger of Leckie]

My Lords, before the noble Lord, Lord Harris, continues, for the benefit of the House I should like to inform your Lordships that the Chief Whip will be making a brief Statement at 7 pm on the subject of the progress of the Bill.

[Lord Harris of Haringey]

I am sure that this will be helpful. It is clearly progress and we all want to get on with this. But it would be useful for the House to know what the intention of the Government is as far as the progress of this Bill is concerned. So, unless we are going to be given more information, I will again put a Motion that the House do now resume.

[Viscount Younger of Leckie]

It may be helpful for the noble Lord to know that is has been agreed with the usual channels to have the Statement at 7 pm.

[Lord Harris of Haringey]

My Lords, I am sure that that is the case, but I am not a member of the usual channels. There are Members sitting in this Committee who are interested in this Bill or in particular clauses or aspects of it. We have a right to know the intention in terms of the remaining groups on this Bill. That is why I therefore move that the House do now resume.