Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Report stage
Monday 4th September 2023 Lords Chamber

[Lord Lansley (Con)]

My Lords, I put on record my interest as chairman of the Cambridgeshire Development Forum, which of course involves me in a wide range of planning and development-related issues.

I want to say a couple of things at the outset. First, I say a big thank you to my Front Bench colleagues for the time and energy that they and officials have given to discussing many of these amendments. I know they have worked hard, including through the recess, for us to try to reach agreements about some of these things: even if we do not, I want to say how much I appreciate the effort they are putting into it. The other thing I want to mention is that all my amendments, even if I might end up disagreeing with my noble friends on the Front Bench, are intended to make the Bill work better and in the spirit of how it is constructed.

That brings me to this first group of amendments, all in my name. In Committee, we had a very interesting discussion about what constitutes an “up-to-date” local plan. Why is this important? It is important because when we reach that part of the Bill and we have a plan-led system, we need to know whether the plan has full effect. Almost by definition, an up-to-date local plan has full effect and an out-of-date local plan has no effect, some effect or a differing weight. An emerging plan also has weight attached to it, but we also do not know precisely how much weight is to be attached. The Government’s answer to this, of course, is terribly simple and was a very compelling reply to the amendments in Committee. It said that an up-to-date plan is a plan that has been adopted within five years of the preceding plan. That is a cliff edge, they said, and a cliff edge does not do: we need something that is more subtle than that and acknowledges that there are plans that go out of date, but they are not much out of date and they are relevant, and we have emerging plans to which weight should be given.

So, we have constructed a set of amendments that inserts the words “up-to-date” in front of “plan”, because if you have a plan-led system and you just say “local plans” and do not refine what you mean by that, it is rather deficient—and we are intending to have a plan-led system. The Government’s arguments are based, in substance, around the proposition that local authorities need to have up-to-date local plans; otherwise, the system will not work effectively. In so far as they do not, the Bill has, as we shall come on to in the next group, the question of national development management policies which, to a large extent, step in in the determination of planning applications in circumstances where a plan is no longer up to date. So, there are undoubted pressures on local authorities to have a local plan that is up to date, but this is not easy.

Although we have a significant slowdown in the number of local plans being progressed by local authorities—not least because of the uncertainties associated with the revision of the National Planning Policy Framework and the uncertainties, frankly, associated with the passage of this legislation, which is not helping the situation—none the less when the Bill goes through and the NPPF is published we need to give greater certainty, and I think statutory weight behind the expression “an up-to-date local plan” gives certainty.

However, it does not solve the problem of a plan being out of date or there being an emerging plan in relation to the existing one. That is why the most important amendment I have suggested in this group is Amendment 187, which gives the Secretary of State a power in regulations to say what constitutes an up-to-date local plan—enabling that term to be defined—and to specify what weight should be attached to plans that are no longer up to date and to emerging plans. I anticipate that my noble friend may reply, perfectly sensibly, that we can do all that in guidance; my point is that we are creating statute and therefore want to give statutory weight to local plans as such and to up-to-date local plans, and to give a statutory framework for the processes by which Ministers determine how up-to-date plans, out-of-date plans and emerging plans are to be considered in relation to the process of determining applications.

When we come on to national development management policies, the interaction between the regulations saying how much weight should be attached to emerging and out-of-date plans and the Government’s specific provisions in the national development management policies is an important one, which would be assisted by placing all these things into regulations—to which Parliament can have regard, which is, frankly, not an insignificant consideration. As we have encountered a number of times in the planning considerations in this Bill, where the National Planning Policy Framework and guidance to local planning authorities are concerned, Parliament plays, in effect, no role.

We have a chance now to say that we want a role—that we want to see the regulations and, in exceptional circumstances, to dispute them. The key thing is that Parliament should at least have a chance to see and debate them, and to give statutory weight and legislative backing to the meaning of local plans as they appear at the heart of the plan-making process. I beg to move.

[The Earl of Lytton (CB)]

My Lords, as this is the first time I have spoken at this stage of the Bill, I draw your Lordships’ attention to my professional and property interests.

I strongly support what the noble Lord, Lord Lansley, has put forward, for reasons which tangentially affect me to some extent where I live, down in Sussex, where no one could quite work out whether a duly made neighbourhood plan was still extant in the absence of a current local plan. This seems to be one of those things where unforeseen consequences have come about. As the noble Lord, Lord Lansley, has mentioned, making local plans and keeping them up to date is certainly not an unonerous burden; it is a process of constant churn in which at a certain date it becomes law, if you like, and at another date it suddenly drops off the cliff edge, as he referred to it, but the neighbourhood plans do not necessarily coincide with that same cycle.

It is even more of a problem for communities to make their local plans, because they do not have the same sorts of resources. A lot of it is done by voluntary hard work and endeavour. Yet in areas where a neighbourhood plan is still extant but the local plan has gone out of date, the whole thing is left in limbo. I absolutely buy the point that we need greater certainty and that some parliamentary scrutiny of this process is needed, at least to be able to consider a regulation.

Whether it is right that the Secretary of State should have quite such extensive and untrammelled powers to do this is probably a matter that the two sides of the House will never quite agree on. I think there is a valid point about how far one takes that. However, this degree of uncertainty is highly corrosive and is very damaging to confidence in the local plan and to coherence and trust in the process at neighbourhood and local plan level. I warmly support and thank the noble Lord for raising this very important group of amendments.

Building Safety (Leaseholder Protections etc.) (England) (Amendment) Regulations 2023

Earl of Lytton Excerpts

Thursday 20th July 2023 Lords Chamber

Moved by

[The Earl of Lytton]

At end to insert “but this House regrets that they have been laid without provisions to remedy operational defects in the Building Safety (Leaseholder Protections) (England) Regulations 2022 (SI 2022/711) and the Building Safety (Leaseholder Protections) (Information etc) (England) Regulations 2022 (SI 2022/859); and further regrets that His Majesty’s Government have not adequately consulted relevant practitioners prior to the laying of these Regulations.”

[The Earl of Lytton (CB)]

My Lords, before I proceed, I thank the Minister for reaching out. We did not succeed in getting a meeting together, but I hope that the bullet points I submitted to her office yesterday were of some help.

As the Minister explained, these regulations amend two previous sets of regulations, SI 2022/711 and SI 2022/859. It is true that these new regulations streamline some of the aspects in those regulations. My point is that they fail to deal with the fundamentals of those earlier regulations, which, given where we are now and what is known about their operation, should have been a proper matter for consideration in the application of regulatory power. They represent a theoretical approach at best and, from all that I have heard from practitioners, do not accord with the real world of buying and selling leasehold flats nor the technical or practical issues associated with conveyancing in particular.

It leaves one wondering where to start with all this. There are too many unknown issues: the extent of remediation; the responsibility that would arise under the Building Safety Act for defects; the true legal liability for those defects having arisen; the cost of remediation; and the potential for “known unknowns”, to quote Donald Rumsfeld, or indeed currently unknowable remediation requirements and their likely cost.

Professionals tell me that they do not believe that the comments made by the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments have been properly addressed. Why is that? There are too many variables, exclusions and qualifications in the process of leaseholder certificates of registration, the content and accuracy of requests to the landlord, the landlord certificates themselves, and the extent to which the landlord is, in turn, reliant on information from others not within its control. There is an essentially continuous iterative process of company worth evaluation and liability assessments. The time lag where land registration is an essential part of the information package, which I understand might occur, is governed by the fact that the Land Registry has a backlog it is working through of several months’ duration.

There seems to be a disparity between the information prevailing on 14 February 2022, which is the mandatory date when matters have to be assessed—certainly as regards matters of company ownership and so on—and the relevant facts relating to the financial consequences of remediation, which will arise only as a result of the regulations tabled initially last summer and not at some point in February at the whim of the Secretary of State. I am told that the timescales are too tight in many instances, leading to a high risk of default liabilities and perhaps setting in place a liability for something not caused by the person deemed liable. I feel that that is unlikely to procure a beneficial result. The strict application of four weeks—or seven days, as the case may be—is severely inflexible and, I believe, an impediment.

All of the above will lead to uncertainty, risks and pitfalls, including, as I mentioned, default liability for remediation or for contribution in full, in part or not at all. The latest clarification on whether a leaseholder’s certificate of registration is required in an application for a landlord’s certificate is that a failure to provide it means that they fall into the non-qualified category; as I understand it, once something is non-qualified, it is non-qualified for ever. I fail to see how that is the advantage that the Minister appears to claim for it. I would be grateful if she could provide better detail about how leaseholders are supposed to check the accuracy of the information provided in that landlord’s certificate. Do the Government intend to use their powers under Part 11 of the Bill, which is entitled “Information about Interests and Dealings in Land”, to ensure that those certificates are in fact accurate? If not, I do not see how it is possible to verify this.

As for the certificates themselves, paragraph 15.c. of the department’s own guidance says that a landlord’s certificate must be provided

“within 4 weeks of them becoming aware of a relevant defect which was not covered by a previous landlord’s certificate”.

How much of a rolling event might that be? The things that affect that certificate were not crystallised on 14 February 2022 but are on an ongoing continuum. I see that as a real question of a practical nature. It means that a fresh certificate can be issued as and when new relevant facts emerge, which is intrinsically inimical to the concept of a reliable landlord’s certificate even if it could be deemed accurate at the time of its issue. It simply opens the door to more arguments about who knew what and when and whether the information provided could have objectively been deemed accurate, with all the consequences that flow from that in terms of recovery, accuracy and liability for cost, not to mention potential arguments through litigation.

Going on from that, the reason why 14 February is so important is because paragraph 17.b. says that the landlord’s certificate must

“be based on the circumstances of whoever was the relevant landlord on 14 February 2022”.

The circumstances of that person may be one thing but the practical and factual basis of what may be germane to that is, as I say, something that happens in real time—today, not 18 months ago. I assume from this that the legal situation is therefore taken at one date but the circumstances that may be germane to making that calculation in fact accrue at another date; I will leave that to one side for the moment. The facts may create a completely moveable feast in terms of whether you take one subsequent piece of information and then feed it back in. How is this loop ever going to be broken?

Does the Minister dispute this assessment? It seems that there is a disparity between the valuation date in question and the facts that are germane to that. It is essential that the financial information about landlords, particularly landlord groups, is provided in the landlord certificate and is accurate. Any inaccuracy could make the difference between a leaseholder paying nothing or up to the £15,000 cap. Concerns have been raised with me that landlords are, for understandable reasons, using the accounting definition of “a group” when it comes to assessing their net worth, rather than the definition of “associated” in the Building Safety Act.

--- Later in debate ---

I can tell the noble Baroness, Lady Taylor of Stevenage, who spoke on behalf of the noble Lord, Lord Kennedy, that as I have said many times at this Dispatch Box, we will bring further leaseholder reforms. That was in our manifesto and we will bring them forward in this Parliament.

[The Earl of Lytton (CB)]

My Lords, I am grateful for the Minister’s comments, for the support of the noble Lord, Lord Stunell, who has much greater credibility in this area than I will ever have, and for the support and comments of the noble Baroness, Lady Taylor of Stevenage.

In a sense, I shrug my shoulders slightly here, because the cat is already coming out of the bag. Yesterday, my attention was drawn to the case of URS Corporation Ltd v BDW Trading Ltd, which is a defective premises case which looks set to attach liabilities to all sorts of people, not just the developer. I appreciate the Minister’s comments about my building safety remediation scheme, which tries to effect strict liability for defects rather than this rather curious containment process that is neither fish nor fowl. None the less, if the Minister does not accept it, and the Government cannot take it on board, I think interaction with the courts and litigation will probably procure it but in a slower, more painful and more gruesome fashion. That is where I think things are heading.

I want to take a moment to pay tribute to some of the people who have helped me. Alison Hills, Zahrah Aullybocus and Stephen Desmond are practitioners who have been very happy to share their experiences with me—and their experiences seem to be widely shared by other professionals. What the department is saying and what is happening in reality seem to be two quite different things.

I quoted from the UK finance guidelines, which are the ones that people look to at the moment, and commented on the professional indemnity insurance issues. These are not matters of regulation. This is not a case of raising a magic wand and saying, “We have made a regulation and therefore it is all right, is it not?” This is the court of practical application in real life.

It appears to me that, notwithstanding what the Minister says, the department does not seem to have consulted in depth with practitioners, otherwise I would not be getting all this feedback from people who have attended seminars and courses and discoursed with specialists in this area. All sorts of people, from the likes of Falcon Chambers downwards through a number of specialist firms and practitioners, are saying the same thing. I suspect that, whatever consultation and discussion process is going on—noting that they do not have a duty at all to consult on this—the Government do not appear to be getting their information from the sources they need, and the proof of the pudding is what is happening in the market.

The Government do not appear to have acquainted themselves with the actual experience of leaseholders and professionals. Over recent weeks, some 240 individuals have written to me about one thing or another—not necessarily about this particular set of regulations but about the way in which the Building Safety Act provisions and regulations are not working for them. I believe that is simply the tip of the iceberg.

Although I will continue to press for much more significant reform, and I appreciate the support from all round the House on this, it is not my intention to put this to a vote. I end by saying that I am grateful for the positive points of clarification that the Minister has been able to make on landlord certificates and leaseholder extensions. I certainly look forward to the opportunity of having a dialogue with her and her officials as time goes forward, and perhaps bring together some of the experts that have been helping me. With that, this is not the time to press this amendment, and I beg leave to withdraw.

Amendment to the Motion withdrawn.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Report stage
Tuesday 18th July 2023 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I add a brief footnote to what the noble Lord, Lord Best, said in speaking to Amendment 71, to which I have added my name, and to what my noble friend Lord Lansley has said about Amendment 311. I endorse what the noble Lord, Lord Best, and my noble friend said about the willingness of Ministers to listen to us throughout the process. The government amendments respond to the concern that we all expressed in Committee about the potential loss of affordable homes.

I shall pick up the point made by the noble Lord, Lord Best, about the so-called viability loophole. What has been happening is that well-resourced developers, half way through a scheme, have turned to the local authority and said, “It’s no longer viable—and, by the way, we cannot build the affordable homes which were due to be built right towards the end of the scheme”. That left the local planning authority with the nuclear option of pulling the plug on the whole scheme or allowing it to go ahead and at least getting the open market houses. At the time, Shelter did some research, which showed that the use of viability assessments in 11 local authorities across England contributed to 79% fewer affordable houses being built in urban areas than would have built if the original agreement had been adhered to. Following that controversy, the Government introduced guidance and tightened up the rules in 2018; the new rules limited the use of viability assessments to reduce affordable housing to exceptional circumstances, such as a recession or similar economic changes. That was a step in the right direction.

My concern, which was echoed by the noble Lord, Lord Best, is that government Amendment 76 seems to go back on the 2018 changes and revert to the position that generated all the criticism about viability. I note in passing that the technical consultation criticised the current Section 106 agreements by saying that the

“planning obligations are uncertain and opaque … they are subject to negotiation (and can be subject to subsequent renegotiation), can create uncertainty for communities over the level of infrastructure and affordable housing that will be delivered”.

Is that not exactly what Amendment 76 does in referring to a development being economically unviable? It seems that what the Government are doing is virtually guaranteeing that no development will ever lose money, while the developer benefits from any gains above expectation. The levelling up Select Committee’s report expressed the same doubts last week.

I want to say a final word on Amendment 311, to which my noble friend Lord Lansley spoke. On 17 March, the Government published their technical consultation. It ran to 91 pages and asked 45 questions; it is not an easy read. The consultation ended on 9 June and the document said:

“Following the closure of this consultation, the government will assess responses. In doing so, a response will be issued that summarises the themes that emerged, before issuing a final consultation on the draft regulations after the Levelling Up and Regeneration Bill achieves Royal Assent”.


This means that we are debating Schedule 12 in a vacuum because we do not know what its structure will be. I am afraid that this is a feature of too much in this Bill.

When it published its report, Reforms to National Planning Policy, the Select Committee in another place picked up the same point. It also said that we are going to have real issues if we run the infrastructure levy and Section 106 in tandem, leading to arguments and complications. I was not wholly reassured by what the Minister in the other place said in response to the Select Committee’s query:

“If they say that it is too complicated and ask to change things, we will consider that”.


I am not sure that that is a great step forward.

So, on both issues—viability and the absence of the structure of Section 12—I hope that my noble friend the Minister will be able to provide the House with some reassurances.

[The Earl of Lytton (CB)]

My Lords, I will intervene briefly. I declare an interest as a chartered surveyor with some involvement in the development process.

I want to speak to the factor that links Amendments 71 and 94 and follows on from what the noble Lord, Lord Young of Cookham, has just said. I have been in the past a technical operator of the dark arts of development appraisal. I would be much less charitable than the noble Lord, Lord Stunell, in my comments about exactly what goes on here; for instance, how land values under option agreements are arrived at and how, with a click of a mouse on a proprietary development appraisal computer package, the matter can then adapt to a viability test for the local authority’s community infrastructure levy or Section 106 contribution purposes. Noble Lords would be astounded at the way in which a yield change here and a cost base there, as well as the adaption of a timeframe or the alteration of a contingency allowance—I mention just a few means—can be used to alter significantly the entire outcome and colouration of what is claimed on the back of it. Further, all this is done by using the same primary data inputs and, unsurprisingly, there are two factors that developers will never reveal to you if they can get away with it. One is the land value that they paid, coloured as it is by all sorts of associated costs before it gets as far as a planning consent; the second is their construction costs, which are entirely opaque.

Alongside all this and of much longer standing is what I describe as the commoditisation of residential property, which started in the 1990s. It has since financed ever more of the items society wishes to have, in terms of affordable housing, infrastructure, schools et cetera. But that policy has created a consistent and ever more bankable asset within an enhanced lending sector. This results in the very unfortunate situation of driving up house prices and creating a model that is less than satisfactory. Core to this is the issue raised by the noble Lord, Lord Stunell—transparency. Without it, none of this will be demonstrable to anybody, at any time.

Non-Domestic Rating Bill

Earl of Lytton Excerpts

Committee stage
Monday 3rd July 2023 Grand Committee

[Lord Ravensdale (CB)]

My Lords, I will speak to my Amendments 1, 3 and 4. I apologise to noble Lords for not being present for the opening speeches of Second Reading and therefore being unable to make my points then. However, I was present for the rest of the debate and wrote to the Minister with the points I would have made, so I hope that I may be forgiven. I declare my interests as a project director for Atkins and as a director of Peers for the Planet. I certainly support the aims of the Bill and the measures contained within it, which will support businesses and high streets across our country and the economy.

My amendments in this group are very straightforward. They relate to the application of improvement relief. I listened with great interest at Second Reading to the remarks on this topic from noble Lords and the Minister, who said:

“The Government consider that a 12-month relief will allow time for the benefits of the property investments to flow through into businesses. We will keep this under review”.—[Official Report, 19/6/23; cols. 83-84.]


Although the 12-month relief is very welcome, there is a strong case for the Government to remove such constraints from a specific class of improvement—energy-efficiency improvements. I will explain why.

The Government have already made the great move of exempting renewable energy generation and storage from rateable value through regulations introduced in 2022. However, energy efficiency does not receive a matching exemption, despite the efficacy of energy- efficiency measures in increasing the energy security of the UK and reducing carbon emissions, not to mention in reducing costs for businesses and supporting economic growth. Energy efficiency has been raised many times recently in your Lordships’ House, so I will not bore the Minister and other noble Lords with an extended analysis of why we need to do more in this area.

As to the effect of the Bill as written, we know that all but the simplest energy-efficiency measures have longer payback periods, so it is likely that a 12-month exemption will continue to disincentivise improvements. To be adopted by business, energy-efficiency measures must make clear financial sense and have a low net cost. As a simple illustration, it is unlikely that a household would contemplate insulating their home if there was a risk that the savings would be outweighed by the introduction of a higher council tax band after only a year of relief.

My amendments seek simply to align energy-efficiency measures more closely with the existing reliefs for renewable energy generation and storage so that we have a coherent approach in this area. They represent a great opportunity for the Government to help increase investment in energy-efficiency improvements across business and to contribute to critical national goals in energy security and net zero, as well as lowering bills for businesses at a time when this is needed more than ever. Fatih Birol of the International Energy Agency warned recently that we may see another surge in gas prices this winter. The amendments would extend improvement rate relief for energy efficiency to 1 April 2029; the Government could then decide whether to extend any reliefs beyond then. I beg to move Amendment 1.

[The Earl of Lytton (CB)]

My Lords, I have two amendments in this group, to which the noble and learned Lord, Lord Etherton, who cannot be with us because he is arguing his case across the way in the Chamber, has added his name. I declare that I am a member of the Rating Surveyors’ Association, which, together with Luke Wilcox, barrister of Landmark Chambers, has been helping me formulate my views on these amendments.

The purpose of the two amendments in my name in this group, Amendments 2 and 6, is to extend the application of improvement relief, so, to some extent, they follow the lead of the noble Lord, Lord Ravensdale. Without discussing it with him, I opted for extending the application to works carried out within a five-year period. The amendments follow up on the comments made at Second Reading.

The expected lifespan of the many types of improvement may extend to decades. If, as one supposes, the relief is intended to incentivise improvements—not just mandatory compliance works but those which add materially to utility, convenience and annual value—it needs to be an altogether bigger quantum; otherwise, as matters stand at the moment, we will be in a situation where, maybe 13 months after the work is carried out, the rateable value will increase by some 50% of the additional annual value of the works. This may not be so much for the purposes of adding value as of preserving value in the face of decline, so this dynamic needs to be whittled down.

We have issues with the definition of “relief” and whether it will count for anything at all in practice, and of “improvement”, of which other noble Lords may seek to define certain aspects more clearly—I agree with that. Unfortunately, the Government’s protestations about the sums they claim to have earmarked for this relief do not disguise the fact that the design of these things is often such that none of it is ever called on in practice. I will leave that bit of cynicism to one side, but if this relief is to mean anything beyond a fig leaf, it has to be large enough in quantum and long enough in duration to be commercially noticeable and relevant. Some types of improvement may take a considerable time to translate into a business benefit.

Although I understand, for instance, not including developers in the benefits of this measure, I maintain that the net effect of excluding any otherwise qualifying works carried out by landlords for the tenant, for which there may be a higher rent payable, is based mainly on groupthink rather than objective balance. That is the reason behind Amendments 2 and 6.

[Baroness Hayman of Ullock (Lab)]

My Lords, I have Amendment 5 in this group. Its purpose is to probe the expiration date for heat network relief. For example, why have the Government come up with 2030 in this respect? As I said at Second Reading, we very much welcome the introduction of heat network relief but, as I asked then, as the exemption of renewable energy plant machinery is permanent, why has a similar approach not been taken to heat networks?

Also, the heat network relief applies only to what are described as “occupied” heat networks, so it would be helpful to have some clarification of the definition of “occupied”. For example, if the networks apply as a mix of properties, some of which are traditionally occupied and others are unoccupied, is that still considered to be an occupied property, or does the whole property have to be occupied?

More broadly, the aims of this amendment are also to do with the fact that we believe that the reform of business rates as a whole should have the underlying principle and aim to encourage green improvements to business properties, if, as the noble Lord, Lord Ravensdale, talked about, the targets are around net zero and emissions. We feel that all the proposals should have as their aim—at their centre—ways of meeting those targets.

I thank the noble Lord, Lord Ravensdale, for his introduction of this group of amendments. His amendments are very sensible, and I hope that the Minister will look at them carefully. I also take this opportunity to thank the Minister for her letter to all Peers following Second Reading, in which she gave quite detailed clarification of a number of issues, which I am sure we will discuss further today. I put on record that that was extremely helpful.

As for the other amendments in the group, clearly, improvement relief has been designed so that no business will face higher business rate bills for 12 months following qualifying improvements. We also heard from the Minister in her letter and at Second Reading that the Government consider 12 months sufficient for the benefits to flow through but, clearly, noble Lords who have spoken previously have reservations about this—in particular the noble Earl, Lord Lytton.

--- Later in debate ---

[Baroness Scott of Bybrook (Con)]

My Lords, I will continue. The 12-month relief will provide a breathing space for the investment to start to generate returns before business rates have to be paid. I know that some feel that 12 months is not long enough to incentivise the types of major refurbishment and improvement often made to properties by landlords and developers. However, as I explained to the House at Second Reading, this relief is designed to help occupiers make improvements to their existing premises rather than subsidising general commercial property development.

The noble Baroness, Lady Hayman of Ullock, asked what “occupied” meant. We already have a current discretionary heat network scheme that we have worked up with full guidance in partnership with the heat network sector and local government. That guidance is already published. Once the Bill receives Royal Assent, we intend to translate that guidance into regulations and to make those in good time to ensure a seamless transition between the current discretionary scheme and the new mandatory scheme. I suggest that noble Lords look now at the guidance as it will make it clear what will go forward. In the meantime, we will work with the heat network sector on the regulations in case they need any tweaking.

Nevertheless, as this is a new relief, it is right that the Government evaluate whether it is working and delivers value for money. Therefore, the Bill as currently drafted includes powers to extend the duration of the improvement relief and in 2028 the Government will review the scheme. That will be the appropriate time to consider whether to continue with the scheme and how effectively the relief is operating. As part of that review, we will consider whether 12 months remains the correct duration for the relief. We have, however, allowed for a longer period of relief for low-carbon heat networks, given the particular role that they play in reducing our dependence on natural gas. That relief runs until 2035. Amendment 5, from the noble Baronesses, Lady Hayman and Lady Pinnock, would extend that to 2050. As with improvement relief, we have to balance the need for support with maintaining the services funded from the tax, as I have said. The end date in the Bill aligns with our ambition to phase out new natural gas boilers by 2035. By that date, new low-carbon heat networks will no longer have to compete with natural gas alternatives. Under those circumstances, we hope that the relief will no longer be necessary and, therefore, 2035 will be the right time to end the relief. However, as with the improvement relief, we will keep this under review and the Bill includes powers for us to extend the 2035 date, if it is necessary at the time.

I hope I have given noble Lords the explanations and assurances that they were seeking and that the noble Lord is able to consider withdrawing his amendment.

[The Earl of Lytton (CB)]

The Minister mentioned regulations following Royal Assent and I am happy with that, but could she confirm that this will have a consultation process attached to it? She also referred to something that I interpreted as a post-legislative review. What is the framework for that in this instance?

[Baroness Scott of Bybrook (Con)]

On the regulations, we are consulting at the moment and that will be discussed afterwards. If noble Lords want to put anything in, I suggest they look on GOV.UK. I shall sit down so that the noble Earl can ask his second question because I did not quite pick it up.

[The Earl of Lytton (CB)]

It was about the post-legislative review and its framework, in so far as it would apply to the workings of the Bill once it gets Royal Assent.

[Baroness Scott of Bybrook (Con)]

As far as I know, we do not have a framework yet, but as soon as we have—I assume it will go out to some sort of consultation—I shall make sure that noble Lords are aware of when it is issued.

--- Later in debate ---

[The Earl of Lytton (CB)]

My Lords, I have four amendments in this group, of which Amendments 8, 10 and 13 relate to the matter explained by the noble Baroness, Lady Pinnock. Amendment 14 is a little different and to do with downward-only transition.

Before I go any further, I should have thanked the Minister earlier for her drop-in sessions and her willingness to engage on the Bill. To some extent, it is a joint venture between business, professions and the Government in trying to wrestle with the issues of local government revenues. I understand that.

The purpose of Amendments 8, 10 and 13 is to create an ability for the Secretary of State to adopt a shorter cycle, be it of one year or two years, but they are not prescriptive as to what that might be. That is simply because, having considered the situation and how things have bedded in, the Government should at least have the ability to do so without then seeking a legislative slot later. Although it is counterintuitive to suggest anything that might smack of a Henry VIII clause, this is a sort of Henry VIII clause that I think might be useful in this particular instance.

I pick up something that the Minister said at Second Reading, which the noble Baroness, Lady Pinnock, mentioned, namely the potential instability of more frequent revaluations. However, this does not seem to be a problem in Hong Kong or Scotland; why should it be here? The noble Baroness, Lady Pinnock, alluded to my next point, which is that the stability of the system is within the gift of the Government in terms of their wider policies. I would argue that it is the level of business rates—levied at around 50p in the pound at the assessed rateable value—that is itself the harbinger and cause of a degree of instability. Professionals and businesses just need to feel that there is a better commitment—a more bankable expression of intent—about this. That is why these amendments would serve to allow the shortening of the revaluation gap and, of course, its attendant antecedent date.

I now turn to Amendment 14, which, had I spotted it before, I might have disaggregated from this group because it relates to downward-only transition. Although the Minister made some hopeful noises at Second Reading, I have not yet persuaded her to signpost the permanence of what is otherwise a very welcome item in this Bill; namely, the removal for the next revaluation of downward transition. It always seemed to me invidious that those whose rateable values were reduced should see the benefit only by such minimal and curmudgeonly means as to deprive them of the effect of a significant reduction, not just for many years but, sometimes, for many revaluations. Now that the principle is established that the transition no longer has to equal and offset the transitional phasing of increases by those who should be paying, it is time to confine this rather dishonourable measure to oblivion, if I may so suggest.

Let us not forget that, for every measure of palpable unfairness, perceived or actual, in the business rates, there will be an unknown number of potential entrepreneurs who simply will not lay themselves open to such practices because they see the system as unfair and operating unfairly against them. To that extent, the system is not as elastic an economic function as may be supposed. That is the background to my amendments.

[Lord Thurlow (CB)]

I take a slightly different position. I support these amendments, but I want to introduce a brief note of caution. The case for a reduction in the frequency of updating rateable values has been extremely well made, but I think experts should have a voice in the proposal. I think we should wait until the three-year review process has bedded in and all interested parties should then be free to comment, before reducing that interval further from three to two years, or even one year. Clearly, the VOA has a central role—the most important role—but ordinary ratepayers have a role too. It is possible that an annual or biannual revaluation will become unworkable. That is unlikely with digitisation and the wider use of technology, but any period longer than one year between revaluations is, by definition, quickly out of date. We saw that in high relief with volatile rental markets during and following Covid.

My amendment suggests that the Government listen to the view of the VOA, of course, but also to the RICS, the Rating Surveyors’ Association and the Institute of Revenues Rating and Valuation, together with other accredited advisory groups, before making a decision on these further reductions. I ask the Government to write into the Bill that they will listen to the voices of these experts before further reductions are agreed to.

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The Bill does just that: we are removing the constraint that has required us to impose downward transition, and we are putting in place an Exchequer-funded scheme for the current revaluation. We will use that freedom to permanently deliver all future transitional relief schemes without using downward caps. The detail for the transitional arrangements is set out in regulations rather than in the Act, but those regulations are themselves subject to parliamentary scrutiny and approval. I hope I have given noble Lords some reassurance both that we can return to the question of more frequent revaluations and that we are now abolishing downward transition.

[The Earl of Lytton (CB)]

I am delighted about what the Minister has just said. I thank her for that and apologise for making her say it twice, if I did. It is my understanding that this is now a permanent abolition of downward relief, which is extremely welcome.

[Baroness Pinnock (LD)]

My Lords, I thank the Minister for her response. As she rightly said, this is at the heart of the changes being introduced in the Bill. I thank her for recognising that there could indeed be a further review to reduce the gap between revaluations. However, although I may have misheard her, I thought that the Minister said that the review conducted by the Treasury was—

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[Lord Thurlow (CB)]

I declare my interest as a former chartered surveyor. I should have done so earlier, and I apologise. I, too, join in the chorus of thanks to the Minister and her Bill team for the help and meetings a week ago. I also thank the noble and learned Lord, Lord Etherton, who is absent, for adding his name to my amendments in this group. I am sorry that he is not here to add his voice. This group of amendments is focused on the operation of the VOA and rooted in the desire for transparency for the ratepayer. It is a matter of simple public interest.

The current arrangements require registration for the check, challenge, appeal process before the VOA reveals the evidence it relied upon in assessing rental value. Amendment 15 questions why the VOA should be so secretive. There is no need for it. On appeal, the evidence is revealed, so why not admit it on first inquiry without the need for the CCA registration process? We all hope that the VOA’s figures are correct when assessing new rateable values and that its assumptions in arriving at them are well founded. It is hoped that, by the evidence being shown at the outset of any inquiry, most ratepayers would agree with the VOA’s evidence and accept its valuation. This would avoid the cost, resourcing and administration of the CCA process for the VOA and ratepayers.

With the help of the RICS, I have looked at some of the statistics for recent check, challenge, appeal numbers. In the quarter to March this year, more than 10,000 CCA notices were received. This is the first stage in the appeal process. Fortunately, 90% of them came from interested persons, and I believe that means ordinary people, not agents acting on behalf of ratepayers, so the leaseholder or the freeholder. It is a good thing in the absence of a requirement to use accredited agents, which we will come on to. But 10,000 registrations is an unusually high number. It is to some extent the result of the publication of the latest business rates revaluation. It must put great pressure on VOA resources.

If I am reading the VOA’s published data correctly, in the rating list period 2017-23, 30% of challenges resulted in a reduction. That is far too high. It suggests that the VOA may be taking a bullish view of estimated rental value, rather than an objective one. The VOA translates from estimated rental value to rateable value. This is very likely to lead to a growing trend towards challenges of the fairness of assessments, which is a concern. I do not want to overlook the fact that 70% of CCAs were found in the VOA’s favour, but 30% is still too high for successful appeals. My amendment seeks to reduce the volume of CCAs by thousands of appeals through applicants withdrawing at an early stage in the process.

My other amendment in his group is Amendment 17. It is a simple matter concerning confidentiality of information. Occasionally there is a confidentiality clause in a rent review or a new letting. There may be a means by which the VOA can obtain that detail but the ratepayer cannot. There may be other reasons for confidentiality. Why should the VOA be allowed to factor this evidence into its assessment if the ratepayer may not? It is akin to the VOA informing the ratepayer that it has information it cannot reveal which supports its figures. My amendment does not dispute the reasons for confidentiality being protected—not a bit—but requires simply that any information which cannot be shared with the ratepayer must be disregarded. The ratepayer must be empowered to challenge all the evidence used against them. I beg to move.

[The Earl of Lytton (CB)]

My Lords, I have five amendments in this group. I support the noble Lord, Lord Thurlow, in what he has just said in relation to Amendments 15 and 17. My Amendment 16 follows on from that, and for that reason I will be quite brief about it. The amendments tabled by the noble Lord, Lord Thurlow, and my Amendment 16 seek to provide a duty on the Valuation Office Agency to provide such information, subject only to data protection legislation.

This addresses something that has been a bone of contention for many years, namely that a target and tax revenue focus in HMRC seems to have affected areas of Valuation Office Agency practice to the point where—or where the appearance has been that—evidence has been withheld, right up to tribunal-stage appeals. Over the years, as I have monitored the updates from the Rating Surveyors’ Association and others, I have noted with alarm some examples—I hope these instances are few and far between—of appalling and unprofessional practice, not, as one might suppose, from rating agents of an indifferent moral persuasion and possibly no professional training at all, but from the VOA itself. I worked for the VOA’s predecessor body, the Inland Revenue Valuation Office, for nearly seven years. Then, it was held in universally high esteem for its ethical and professional principles. It would be highly regrettable if, as time has gone on, that were no longer a given—I want to stress that.

This amendment does no more than insist on the same standards for disclosure and candour from the VOA that it requires of private sector agents acting for ratepayers. If this or something similar is not agreed to, there will be not only a rising tide of criticism within the profession but some sort of backlash from the First-tier Tribunal and Upper Tribunal, which will ultimately force the issue. We need to deal with that at this stage.

I move on to Amendments 18 to 20 in my name. Again, I can deal with these quite briefly. All three interlinked amendments try to remove the requirement for an annual return. The principle is that the requirement for notification arises only when there is a change in that status requiring the notification. At Second Reading, there was some consensus that the proposed volume and frequency of making returns to the Valuation Office Agency in relation to changes was misconceived. We heard that it would bring into scope some 700,000 hereditaments on which an additional return-making duty will fall—we are talking about a return per hereditament, not a blanket return per operator. If you are, for instance, an outdoor advertising company—that trade body has been in touch with me, as it has with many other noble Lords—with thousands of billboards, or an operator of cashpoints, this starts to matter. I do not know whether the latter is a good or bad example.

I accept that, if we move to two-yearly or yearly valuation, the real-time provision of data capture becomes that much more important. But why, in all logic and seriousness, if a return is required for a change within 60 days after the event, is it also necessary to make an end-of-year return in addition for the same hereditament, especially as a form of return can be requested at any time by the VOA? To put it another way: the desire for real-time notification and coherence of VOA record-keeping cannot be a justification for unnecessary duplication of duties on the ratepayer. I really do not think that this should be a matter for negotiation; it is a matter of straightforward common sense.

I move on to Amendment 21 in my name. It seeks to ensure that ratepayers do not receive retrospective increases in their rating liabilities where the Valuation Office Agency has not acted promptly on the receipt of ratepayer-provided information. It is to prevent retrospectivity where there is delay in acting on the ratepayer’s provision of information on a notifiable event. Its intention is to cover all situations where the rateable value is likely to be affected, including entering a new hereditament into the rating list. I think it is basically self-explanatory, but it is the counterpart to the duties on the ratepayer to furnish information in a timely manner and, of course, the penalties for failing to do so—about which more in due course.

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[Baroness Scott of Bybrook (Con)]

I am told that there will be a non-digital availability. I will get all the details for the noble Baroness and I will write a letter, which will also go to the Library.

[The Earl of Lytton (CB)]

I would like to tease out a little more information following the Minister’s response on Amendment 17. What happens, in effect, is that the evidence is part of an adjudication process. In my professional line of business, there are various stipulations about surveyors acting as expert witnesses and the way in which these things are to be handled. Amendment 17 is particularly important because, when one gets into a situation where there is an appeal pending, there is this little thing about equality of arms. If one party is able to use information that is held confidentially, to the exclusion of the other party, I do not think that equality—that transparency standard—is met. We are talking about what is ultimately something that leads to an appeal before the valuation tribunal.

Can the Minister say whether I have got it right that the VOA can have a protected category of evidence, as it were, that it is not prepared to share? This is something that has come up on my radar when looking at some of the blogs that have come out of the rating surveying world. It is a matter of fundamental importance in terms of the administration of any sort of justice system and adjudication, which is what this is. I would therefore like to pin down the Minister a little more on that point.

[Baroness Scott of Bybrook (Con)]

I think we made it very clear that the information that can be shared is the information that does not affect the data protection. Therefore, there will be information that cannot be shared because it will affect data protection. Because this is quite a legal issue, I will offer noble Lords a further, in-depth meeting, with lawyers there. If we are to get to the bottom of this, it is better to do that with a lawyer with us talking about the data protection law. Would the noble Earl be happy with that?

[The Earl of Lytton (CB)]

I thank the Minister; that would be very helpful.

[Baroness Scott of Bybrook (Con)]

We will be in touch.

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Moved by

[The Earl of Lytton]

22: Clause 13, page 25, line 26, at end insert—
“(3A) No penalty notice may be imposed pursuant to paragraph 5ZC(1) or (3), and no offence is committed pursuant to paragraph 5ZC(2) (as the case may be), where P’s failure to comply, or P’s provision of false information, was made in reasonable reliance on any relevant guidance published by or on behalf of the valuation officer, or any advice provided to P by or on behalf of the valuation officer.”Member's explanatory statement
This would prevent the imposition of penalties where ratepayers’ errors or omissions are the result of reasonable reliance on VOA guidance or advice.

[The Earl of Lytton (CB)]

My Lords, this is the first of a series of amendments relating to penalties. Amendment 22 tries to create a defence to a penalty. I say straightaway that I do not have any principled objection to penalties as such, but the amendment tries to make sure that, when a penalty demand is made, if the ratepayer had reasonably relied on published Valuation Office Agency guidance or specific advice given about what was not relevant, that should be a relevant defence.

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[The Earl of Lytton (CB)]

My Lords, I was making the point that it should be a defence for a business rate payer to say that they had reasonably relied on published VOA or other guidance in respect of anything to do with being made liable for a penalty. Failure by a ratepayer to notify carries with it a number of penalties, at least one of which is entirely open-ended—more of that in a minute. The implementation of this will depend very much on the extent and quality of the guidance issued, especially as it is supposed that this will be comprehensible to unrepresented ratepayers. I particularly make that point because we are trying to make sure that this does not trigger a requirement across the board for more ratepayers to seek professional advice.

I appreciate that the VOA will not bring in notification and penalty measures until it is satisfied that they work smoothly and seamlessly. That is my understanding—my words, I stress, not necessarily the ones that the Minister would use. My submission is that no government body should be at liberty to state one thing in guidance and then do something quite different or to reinterpret established understandings at its own whim and caprice to the detriment, in this instance, of a ratepayer.

I shall deal with Amendments 23 to 26 as a job lot because their purpose is to fix a number of issues that appear to me to be typos or errors of construction or perception to do with the way in which the penalty regime will work. First, the fixed penalty minimums for incorrect information provided to the VOA appear to be the wrong way round and Amendments 23 and 24 serve to remedy that. I think the figures have just been transposed.

Secondly, unlike the penalties in relation to the provision of information to HMRC as opposed to the VOA, there is no cap whatever for non-compliance on the VOA notification. This seems contrary to legal principle in general and at odds with non-compliance with, for instance, the form of return under Schedule 9 to the 1988 Act, which is subject to a cap, so Amendment 25 seeks to address that.

Finally, there is the question of the Valuation Tribunal for England’s—VTE’s—determination of penalties, which the VOA has imposed in lieu of prosecution for false information. As drafted in the Bill, the burden of criminal proof is inverted, with the ratepayer having to prove “beyond reasonable doubt” that they did not commit the offence. That cannot be right or reasonable. I suspect that it is not intended, either—I hope I am correct. Amendment 26 seeks to deal with that.

That summarises my amendments in this group. I beg to move.

[Baroness Pinnock (LD)]

My Lords, the noble Earl, Lord Lytton, has raised an important group of issues regarding the penalties that could be imposed on ratepayers who do not provide accurate, timely information. I hope that the Minister will be able to respond to that and explain how ratepayers seem to have more and more imposed on them. They must provide the information annually to the VOA—in the last group we debated the VOA’s transparency in relation to that—and the noble Earl has just raised the quite significant penalties imposed if the information is not accurate, even if, as he pointed out, there is a genuine error. It seems that, in the previous group and this one, we do not have the right balance of responsibilities between the VOA requiring information, what business rate payers are required to provide and where the final duty lies.

The VOA is serving two masters: the Treasury on one hand and business rate payers on the other. It seems that the VOA is responding to its Treasury master and is not giving sufficient cognisance to the customers—the business rate payers. The noble Earl raised some important points regarding that. We must get this balance right. The VOA needs to be more transparent and responsive to business rate payers. It also needs to be accountable to them—and the reverse is also true, as the noble Earl said. The VOA demands penalties if the ratepayer gets the information wrong but—hang on—the VOA makes errors all the time. Where is the accountability and compensation to business rate payers for those errors? The noble Earl raised that issue and I hope that the Minister will be able to get the balance right when she responds.

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[Baroness Scott of Bybrook (Con)]

Group 4 consists of Amendments 22 to 26, tabled by the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton. They are concerned with the application of penalties for non-compliance with the VOA duty. As we have said, we will not initiate the VOA duty until we are satisfied that all ratepayers can reasonably and efficiently comply. There will be a soft launch of the duty, during which time no penalties for non-compliance will be issued and the VOA will raise awareness and expand its engagement with sector bodies and businesses of all sizes. As was said, issuing penalties will be the last resort. The VOA and HMRC will ensure that the new online service is simple to use and will take multiple steps to encourage ratepayers to comply, through reminders and warnings, before issuing a penalty.

Amendment 22 seeks to prevent the imposition of penalties where ratepayers’ errors or omissions are the result of reasonable reliance on VOA guidance. However, it is already the case that the VOA is able to apply penalties only where the ratepayer could reasonably be expected to know that the information would assist the VOA. All ratepayers will need to do to ensure that they are complying is follow guided steps on GOV.UK. If the ratepayer follows this guidance, the VOA will not, under the existing provisions of the Bill, be able to apply penalties. Thus, we do not think that this amendment adds anything of substance to the position as it already stands. If a penalty is issued in error where a ratepayer has relied on VOA guidance, the Bill gives the VOA the power to remit it. Ratepayers will also be able to appeal any penalty applied, and this will be independently reviewed by the valuation tribunal.

Amendments 23 to 25 are designed to address the penalty tariffs applicable to instances where a ratepayer has either failed to notify the VOA or provided false information. I will briefly explain the Government’s approach here. The Bill sets out the maximum level of penalty which the VOA may apply depending on the nature of the failure to comply. Our intention, as set out in our response to the technical consultation, is for the VOA sometimes to levy lower penalties than are set out by the framework of the Bill. Penalties will be levied as a percentage of the change in the rateable value rather than the entire rateable value and, where penalties are issued for a failure to provide information, the minimum penalty will be reduced for those on lower rateable values.

The Bill also introduces an offence where a ratepayer has knowingly or recklessly made a false statement. In these cases, a ratepayer could be subject to criminal sanction. Alternatively, making a false statement will lead to a civil penalty, the amount of which is provided by new paragraph 5ZD. Where the civil penalty is applied, in practice the maximum penalty will be 3% of the change in the property’s rateable value plus a fixed penalty of £500. To address the amendment, the Bill rightly provides a more severe penalty for knowingly or recklessly providing false information.

The point has been made that there should be a cap on daily penalties following an initial instance of failure to provide information. This information can have a direct impact on tax liability, so it is crucial that the duty is underpinned by a fair and proportionate but robust compliance regime. However, I can provide the reassurance that, even after the initial 60-day deadline, ratepayers will receive a reminder, warning and final warning before a penalty is applied. Only after an additional 30 days would the first daily penalty of £60 be issued. Ratepayers will be able to request a review and appeal of any penalties imposed. The daily penalties will be stopped when the ratepayer provides the required information, so as soon as the ratepayer complies, the penalties are effectively capped.

Applying daily penalties in this way is not an uncommon feature of taxation penalty regimes. For example, Schedule 36 to the Finance Act 2008 deals with powers for HMRC to request information from taxpayers and imposes penalties for a failure to provide such information. It includes penalties of up to £60 per day for as long as the non-compliance continues, without an overall cap on liability.

Amendment 26 seeks to alter the burden of proof which the valuation tribunal should apply when deciding whether to uphold a penalty decision. Of course, when considering a higher penalty for a ratepayer who has provided false information, the VOA must in the first place be satisfied beyond reasonable doubt that the information was provided knowingly or recklessly. There is considerable protection for ratepayers already.

Nevertheless, I am grateful to the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, for raising questions about the appeals process. We will of course review the relevant text. I hope that, given that I have explained why the system of penalties is designed as it is, noble Lords will agree the amendments are not necessary.

[The Earl of Lytton (CB)]

My Lords, I thank the noble Baronesses, Lady Pinnock and Lady Hayman, for their contributions on this group of amendments. The noble Baroness, Lady Pinnock, referred to the necessary balance here, and I agree. The noble Baroness, Lady Hayman, queried whether the application of criminal charges is properly introduced here, whether the Valuation Office Agency is the right outfit to make that call and whether it will be given the necessary guidance and assistance to make consistent rulings in that respect.

It seems to me that the question is about the discretion of the VOA to do things—its ability to do or not do—as opposed to a legal duty. It seems to me that some sort of duty on the VOA is part and parcel of its overarching statutory duty to, for instance, maintain a correct valuation list. It also seems to me that those duties should mirror the obligations and penalties imposed on the ratepayer, otherwise it is a very asymmetric situation. That is, to some extent, what I was trying to deal with in Amendment 16.

The Minister has given various explanations of the Government’s position here. On Amendment 22 and the question of “reasonably be expected to know”, she said that this covers the guidance given and therefore the amendment does not add anything of substance and that there is a right of appeal. I think I will have to consider carefully what she said. With regard to Amendments 23 and 25, I felt that I had detected a series of typographical errors, but I understand the Minister to have said that they are not errors and that the Bill is deliberately worded that way. I am not sure that on a fair reading that is likely to be the case, so I hope they may be looked into at some stage or other.

On the cap or no cap, I have already pointed out that there is a degree of asymmetry between the approach that has been adopted in the Bill in this respect and what happens with failure to deal with the form of return. I appreciate that there is the “knowingly or recklessly” test, but we have a rather circular argument here because, if the VOA is again the sole arbiter of “knowingly or recklessly” and the thing then proceeds to a tribunal that says something different, I would hope that we could have got to a situation well before then where the ground rules were understood. Is the Minister saying that the wording of the Bill is in all respects what was intended and that there are no typographical errors in it as I had supposed? Will she please clarify that point?

[Baroness Scott of Bybrook (Con)]

No, there are no typographical errors in the Bill. I think the noble Earl asked that question earlier, and there were none.

Just to be clear on criminal offences and why they are necessary, there is already a criminal offence for providing false information in response to a request for information by the VOA. So we are not putting in a criminal offence—there is already one there as it stands now. It is interesting that criminal charges will be only for “knowingly or recklessly” giving false information. If it is just a false statement, for whatever reason, that would still be a civil penalty.

[The Earl of Lytton (CB)]

My Lords, I see a point here, and I shall have to reflect further on what the Minister has said in this respect and may well need to return to the issue at a later stage of the Bill. For the time being, I beg leave to withdraw the amendment.

Amendment 22 withdrawn.

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Moved by

[The Earl of Lytton]

27: Clause 14, page 32, line 21, leave out “2023” and insert “2026”
Member's explanatory statement
This would delay the commencement of the alteration to the reality principle until the 2026 List enters force.

[The Earl of Lytton (CB)]

My Lords, I must admit that this amendment is something of a stalking horse—a bit like asking a Prime Minister on a Wednesday morning what is in the diary for the coming week. What I am really saying is that Clause 14 should be deleted and I thought that, rather than moving that the clause do not stand part, it was better to seek an explanation. That is why it has been done this way.

The amendment relates to material changes in circumstances of hereditament. This is not the same as physical alteration to the hereditament itself. A standard alteration to its extent, and an extension to or improvement of the physical fabric, will continue to be taken into account, as I understand it, as and when it occurs. There is no attempt in the Bill, as I read it, to fetter that—rather, this is to do with matters that do not change the measurable physical attributes of the hereditament itself but none the less patently affect its physical enjoyment.

I am particularly indebted to Luke Wilcox of Landmark Chambers for some very pertinent guidance on this issue. I have a note from him that he has given me permission to share with other noble Lords, and I may well do that, as it goes into more detail about what I am trying to explain.

In non-domestic rating, there is a hypothetical landlord and tenant and a hypothetical lease between the two as well as an assumed obligation for certain states of repair, none of which necessarily mirrors the actual state of affairs relating to the property. However, the hereditament itself is real, measurable and a physically determinable entity, and how it is to be regarded has always been subject to what in legal jargon used to be referred to as the rebus sic stantibus principle. In simple terms, that means that one had to value the hereditament and its environment as it physically is. That is in essence what is now known as the reality principle.

There are two legs to the reality principle. The first is the physical extent—the construction, age, layout and other physical characteristics, fixtures and fittings and general suitability and fitness of purpose of the hereditament for its intended or actual use. The second relates to the local circumstances affecting the area where the physical hereditament is situated. Put another way, it is the local business environment that underpins its physical enjoyment, as distinct from its physical extent. This could be location in relation to other complementary trades, whether there is or is not good customer accessibility, the relevance of parking restrictions, proximity to public transport, levels of shopper footfall and all those sorts of things, which are not related to the physical nature of the hereditament itself but are part of its market environment and, therefore, its rental value.

The current position is that, where there is a change in a matter affecting the physical enjoyment of the property, such as a regulatory change to its planning status or a change in a matter which is physically manifest in the locality—in the past, Government Ministers referred to changed bus routes; I would add a change in road layout to that category—those matters, to the extent that they are evident and quantifiable, are material changes in circumstances, or MCCs, and can trigger a mid-list change in rateable value. Such factors are a part of the reality principle, which is one of the most fundamental concepts in rating law and, to my certain knowledge, has been so for over five decades.

What is proposed here is that Clause 14 would amend the rules that govern when a mid-list alteration to a property’s rating assessment is permitted by changing the definition of what may constitute “material changes of circumstances”. Under the Government’s proposals, those matters, even though manifestly affecting physical enjoyment, would no longer be MCCs, wherever and whenever they are directly or indirectly attributable to legislation or official guidance. Under the relevant portion of the Bill, new paragraph 2ZA(2)(a) of Schedule 6, inserted by Clause 14, an MCC is something that is

“directly or indirectly attributable to a relevant factor”.

New paragraph 2ZA(3) goes on to say what the relevant factors are:

“legislation of any country or territory … provision that … is made under, and given effect by, legislation of any country or territory … advice or guidance given by a public authority of any country or territory … anything done by a person with a view to compliance with anything within paragraph (a), (b) or (c)”.

New paragraph 2ZA(5) states that

“‘legislation’ includes any provision of a legislative character … ‘public authority’ includes any person exercising functions of a public nature”.

This, to my mind, is a substantial change to what has long been understood. What is proposed here is that this category of what has always been understood to be a material change in circumstances should be removed.

It appears that this is a response to matters that arose during Covid. The various Covid lockdown regulations significantly altered the way in which occupiers could occupy their premises. This in turn gave rise to a number of requests for mid-list alterations, since the regulations affected the ability of occupiers physically to enjoy their properties. The Government considered that general legislation should be part of the general market conditions considered at revaluations—this is the case being made—and so should not count as MCCs. However, the Government’s view in this regard differs not only from their own internal guidance, which I checked only yesterday on their website, but from that of the Valuation Office Agency, which regarded, and still regards, legislative changes as MCCs where they are physically manifest. That much is evident from the paperwork.

The Government passed the Coronavirus Act 2020, which prevented matters directly or indirectly attributable to the coronavirus regulations from being MCCs. This was a very specific and nationwide response to an emergency situation and was promoted as such. Clause 14, however, seeks to extend that principle to all events arising from legislation or regulation of all kinds and in all normal times, which is a very different construct.

The Government claim that Clause 14 is intended to restore the law to its originally intended state and condition and that its purpose is to require general legislation and guidance to be treated as part of the general market conditions which are thought to be considered only when a new list is compiled—which, under the Bill, would be every three years. However, under Clause 14 we are considering not necessarily nationwide or even emergency situations but much more mundane changes, often of a local or per-property specific nature. Some are harmless and insignificant but others would have significant effects on individual businesses and the physical enjoyment of the premises. These measures could deny a beneficial use which underpins the operation being run from a hereditament. Clause 14 is not the same thing at all as restoring the situation to what was always understood in rating practice but, in fact, a material departure from it.

The audit trail of legislation that brought in what is now Section 2(7) of the Local Government Finance Act 1988 does not support the Government’s claim either. In fact, it reveals quite a different narrative, and an examination of Addis Ltd v Clement (VO), which has long been and remains the benchmark legal decision that the 1988 Act sought to enshrine, demonstrates this. Not only that but its antecedents go back to the 1920s and have been reaffirmed at senior judicial level as recently as 2020. I repeat: the Government’s guidance on their website and the guidance issued by the VOA make it clear that changes which affect the physical enjoyment of the hereditament, as distinct from changes to the physical hereditament itself, are indeed in scope of material change of circumstances.

This means that Clause 14 will have a far wider effect than the Government’s stated intention. That is because, if something can be so loosely defined as being “indirectly attributable” to a change in legislation, and thereby no longer treated as a material change of circumstances of the relevant type, this opens up a vast array of circumstances in which the causative measure and the non-MCC status may apply. Many things would come into play which affect perhaps only one property or a discrete group, such as a change in planning permission, a premises licence or a road layout change. These are changes which in many cases—in fact, almost invariably—can be made only by dint of legislative authority but none the less would henceforward be “indirectly attributable” to legislation, and thus no longer material changes of circumstances.

There is no sense in which a change in, say, the planning status of an individual property or the exercise of administrative authority resulting in something which patently affects the physical enjoyment of a single property or a locally identifiable property type, can be regarded as part of general market conditions, falling to be dealt with only at revaluation, yet those changes will be excluded under Clause 14 as currently drafted. I do not think that such an approach could ever be justified even on an annual revaluation basis. They are not general market shifts but the result of specific, conscious measures by an authority exercising powers.

Why is this a problem? If the planning or licensing position of a property, or its accessibility or commercial standing in its locality, have changed early in the life of a list, under Clause 14 the ratepayer will continue to pay rates on what would be an incorrect valuation, possibly for almost three years. This gives rise to clear unfairness and inequity. On my reading of the Bill, a billing authority would presumably be in no position to require the rateable value to be reviewed if it implements a scheme under a statutory power which could increase the rateable value of a hereditament in like circumstances.

--- Later in debate ---

[Baroness Scott of Bybrook (Con)]

My Lords, I am grateful to the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, for their amendment. I understand the concerns around this clause; I will take the opportunity to explain why we consider this measure to be necessary and to set out the limits of its application.

As we have heard throughout the passage of the Bill, more frequent revaluations and the measures we are introducing to support them are central to the reform of the business rates system. It is through those revaluations that the rating system is able to track and reflect changing economic circumstances. In property valuation terms, rateable values are updated at revaluations to reflect changes in economic factors, market conditions and changes in the general level of rents.

Of course, that does not mean that rateable values never change between revaluations. It would hardly be fair if, for example, a ratepayer demolished part of their property but this was not reflected until the next revaluation, or if a new property were built but escaped rates until the next revaluation. Therefore, some changes are reflected in rateable values as and when they happen. Examples include changes to the physical state of the property, the mode or category of occupation of the property or matters affecting the physical state of the locality. These matters, reflected as and when they occur, are called material changes of circumstances—MCCs.

The MCC system has been operating in this way for many years, but, during the coronavirus pandemic, we found that it was not working as intended. Large numbers of challenges were made, seeking reductions between revaluations for the effects of the pandemic, which by their nature were part of the general market conditions. Such general market matters should be considered at general revaluations.

Therefore, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 clarified the law to ensure that coronavirus and the Government’s response to it were not an appropriate use of MCC provisions. Specifically, that Act ensured that anything done to comply with legislation, advice or guidance given by a public authority and attributable to coronavirus should not be an MCC, subject to some exclusions. The principle in that Act was approved by both Houses, and it received Royal Assent on 15 December 2021.

Clause 14 of the Bill merely takes that principle, clarified and accepted by this House in the 2021 Act in relation to coronavirus, and applies it more generally to all legislation, guidance and advice from public bodies. Changes in such matters are part of the economic factors and market conditions for a property and should be reflected at a general revaluation. This clause will protect the integrity of the rating system and ensure that more frequent revaluations can proceed smoothly. It will protect the system not just for central government but for local government, which relies on the revenue from business rates. The Local Government Association supports this clause and agrees that these matters should be reflected at general revaluations. But this does not mean that these matters are not reflected in rateable values; it just means that they are reflected only at the set date of each revaluation, along with all other economic and general market factors present at that date.

Furthermore, we have limited the scope of Clause 14 to three aspects of the MCC system to ensure that it operates fairly. This is to ensure that physical changes to the property or the state of the locality are still reflected. Therefore, Clause 14 will bite on only three types of MCCs. First, it will catch matters affecting the physical enjoyment of the property but not the physical state. This might include changes in how the property can be used following new legislation or guidance. Secondly, it will catch matters that are physically manifest in the locality but not matters affecting the physical state of the locality. This might include changes to traffic flows and bus or transport services. Thirdly, it will catch the use or occupation of other premises in the locality, which might include the change in use of a nearby property where, for example, the original use has been prohibited by new legislation.

Clause 14 will ensure that matters such as physical changes to a property or to the state of the locality continue to be immediately reflected in valuations, even if they are a result of new legislation or guidance. Clause 14 will also not bite on whether the property is non-domestic or domestic or whether it is exempt. Overall, Clause 14 will preserve a long-established principle by ensuring that matters that go more to the market conditions and general level of rents of a property belong in the general revaluation process. Of course, with more frequent revaluations, these factors will still be updated more often than ever before.

The clause will provide important stability and certainty to the rating list and, therefore, to the vital revenue for local government that flows from the list. Therefore, it would not be prudent to delay the introduction of the clause, as this amendment seeks. I know that the noble Earl will be disappointed that we are unable to agree to this, but I hope that I have set out the basis for taking this measure and also given him some assurances regarding its scope. I will look at Hansard tomorrow and will write to noble Lords with further explanations if I feel that they are required.

[The Earl of Lytton (CB)]

My Lords, I thank the noble Lord, Lord Shipley, and the noble Baroness, Lady Hayman, for their support in connection with this. Although I understand what the Minister says is the intention of Clause 14, having been taken through it in some detail by more than one expert, I am bound to say that I do not agree with her about the effect of the clause. There is a difference in understanding, and I wonder whether it could be dealt with by a further discussion—the Minister is nodding, which I am grateful for. It is very difficult if somebody reads this in one way and says, “This could cover a multitude of things that could be excluded”, and the Minister says, “Actually, it is not intended to do that and these are the safeguards that we have built in”.

All I can say at this juncture is that I will certainly return to this on Report. I hope that there can be a meaningful dialogue on this in the meantime. It would be wrong for me to go into a detailed unpicking of what the Minister said at this hour and given the other pressures on us. To that end, I beg leave to withdraw the amendment.

Amendment 27 withdrawn.

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[Lord Thurlow (CB)]

That was an impressive introduction. I apologise for bringing this up so late. I was not going to table it, as it was too difficult, but I just could not not do so. I give great thanks to the Table Office for drafting and help.

This group is listed as reliefs and reviews, and I feel strongly that we should dwell more on reviews than reliefs. While injustices should be addressed in the short term with financial relief, the non-domestic rating system is broken, and it seems that the attempts to fix it have become too difficult and it has become easier to throw taxpayers’ money at reliefs than to review it. I believe that the attempts to resolve the injustices in the system have simply been considered too difficult—as I did until last night, or Friday—and have been kicked into the long grass. I would like nothing more at all than to hear from the Minister that action is expected very soon.

One particular injustice, perhaps the most trumpeted, is that of the small high street retailers we have heard about, struggling to survive against the onslaught of internet shopping. In ordinary business terms, the free-market economy dictates the survival rate of businesses, but in this case there is an important further dimension—so much more important—which is the public interest case for healthy high streets. They provide a social necessity to our communities, a valuable asset in the social fabric. We know the subject is complex. A number of high street retailers and major supermarkets have websites; some SMEs may rely on them. These and other good reasons simply complicate the matter; they do not make it impossible.

There is a fiscal irony here. The growing turnover and profitability of internet retail is directly felt in the high street by falling demand. Falling demand translates as falling rental value. It follows that the rateable value will fall. Without this amendment or something similar to it, net tax receipts will also fall. Introducing fairness to the rates paid by internet retailers will go some way—possibly a very long way—to making up for the loss of high street rate contributions.

The solution lies in a new property use class for the purposes of assessing NDR—not to overlap with use classes in the planning Acts; I would run a mile from that. This would be purely for rating. It would correct the current major imbalance between retailers paying warehouse rates and high street retailers paying high street rates. Warehouse rates are a fraction of high street equivalents. Internet retailers know this, and their profits swell by the artificial discount the system supports.

The amendment proposes that the Government conduct a review to make recommendations for a new rating use class. It would harness expertise from the commercial property sector. The amendment gives the Government 12 months to bring a new Bill before Parliament with recommendations to correct this widely recognised injustice.

[The Earl of Lytton (CB)]

My Lords, I support the amendments in this group. At one of my meetings with the Minister and her Bill team I was told that it was not HMRC—or they may have said Treasury—practice to produce an impact assessment as such, and I was directed to a series of notes in lieu. But business rates have an impact on business, employment, entrepreneurial activity and the health of our high streets, and have long seemed a substantial tipping point in decisions about taking on premises, where the tax levied is 50% of the determined market rental value. That puts into shade the collective cost of things such as insurance service charges and other occupational outgoings.

There is a basic imbalance here; I have said so on many occasions in the House and elsewhere. Upfront impact assessments and post-legislative review are exactly what is missing here. I agree with the noble Baroness, Lady Pinnock, that small business relief and small business exemptions are almost an admission of the failure of the system we have.

Turning to Amendment 36, tabled by the noble Lord, Lord Thurlow, I totally agree with its underlying principle that the tax base for local government finance needs to be broadened, with proportionately less of a burden falling on what we might call the traditional business rate payer. This is becoming an impediment. What are termed fundamental reviews have been a great deal less fundamental than they ought to have been. The system has been creaking for some time and one should take notice when things start to creak; it usually means that something is wrong. I very much relate to these amendments, and I look forward to the Minister’s comments.

[Lord Shipley (LD)]

My Lords, my name appears on two of the amendments in this group. Underlying the whole group is a major issue: the Treasury now sees business rates as a source of general income to government, but many small businesses see them as a contribution to local services. That has got out of balance.

I strongly support Amendment 36, in the name of the noble Lord, Lord Thurlow, who has just spoken. He talked about the impact of online shopping on small high street outlets and said that there was a public interest case to be made. Indeed, Amendment 29, moved by the noble Baroness, Lady Hayman of Ullock, probes the possibility of reducing the threshold for small business rate relief on high streets. A number of us raised that issue at Second Reading.

A number of issues are raised in this group. I have an amendment on the hospitality sector. It is not clear to me what reason there would be for not having a hospitality sector review, as I propose. It is about assessing the consistency of approach; we have spoken a lot about high streets, but this applies to the hospitality sector as well. There needs to be an assessment of whether there is a consistent approach for setting non-domestic rateable values between hospitality businesses occupying premises of similar size and trading style. I cite public houses, restaurants, live performance theatres and exhibition spaces as examples. This is the kind of thing that government should be doing anyway, but there is a huge policy issue now around what business rates are for and how we make sure that they are being fairly charged.

Non-Domestic Rating Bill

Earl of Lytton Excerpts

2nd reading
Monday 19th June 2023 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, it is always a pleasure to have another go at business rate legislation. As I always do, I inform the House that I am a fellow of the Royal Institution of Chartered Surveyors, and a member of the Institute of Revenues Rating and Valuation and of the Rating Surveyors’ Association. I am also a co-owner of a non-domestic hereditament that benefits from small business exemption, and I used to work in the Inland Revenue valuation office.

With those declarations, I thank the Minister for reaching out and arranging a meeting with her and her officials, and for the follow-up information provided. I am extremely grateful for that. I agree with many of her overarching statements on what is happening here.

When I asked what impact assessments had been carried out—a matter to which the noble Lord, Lord Shipley, referred—I was told that it is not customary to undertake them for tax-related purposes and I was offered a rather less detailed impact note. I feel that business rate payers must not be used as a beta test bed for emerging ideas and that the repeated suggestions that the Valuation Office Agency will see how things progress are, arguably, destabilising in their own right.

I have said before in this House that, to some extent, this is another attempt to make an old steam loco do what it was never designed to do in terms of the burdens imposed and the reliability of the system. At a levied rate of more than 50% of the assessed annual value of every business property, this remains a tax that is objectively excessive to the point that it imperils its own stability. It is also out of kilter with international comparators. It burdens businesses disproportionately by reference to property value and, most particularly, as to the use and benefit of local services in which they have no formal voice and certainly no vote. Worse, it discourages a certain amount of investment and entrepreneurial activity. Complexity and new burdens continue to be added because HMRC can do so without responsibility for outcomes or risk of push-back. Council tax payers, by contrast, have for many years been protected from any comparable increase in their level of local financial contribution.

Short-termism and modal shift are the outcomes of changes in economics and are, to some extent, propelled further by the business rates environment. Firms that would once have been high street operators now function from cheaper industrial sites, where the shop window is on the internet or social media, the stockroom is the white van on the highway network, and the cash desk is a web-based payment system. Former shopping streets are populated with eateries and charity shops—I should add that many charity shops do not pay business rates. Shorter leases and break clauses are part and parcel of the landscape. Many and varied reliefs have had to be given to address the problems, and the rules relating to them have become ever-more complex. That apart, the Minister is right that a property-based business tax is an effective system provided it is used correctly, and that is a very important proviso.

On the detail, I start with Clause 1, which inserts new Schedule 4ZA into the 1988 Act, and Part 3 of that new schedule relating to the proposed improvement relief. I have already expressed to the Minister in a private meeting my surprise that improvements which may have a lifespan of 20 years or more will benefit from only a single year’s disapplication of any rental value uplift they create. While I understand that it is specifically intended that the relief should not benefit investors or developers, I cannot disentangle this from standard commercial lease terms in which the landlord’s consent and co-operation may be required. The architecture here is, to some extent, misconceived. Although I am informed that substantial funds are earmarked for this, I fail to see any incentive likely to overcome the narrow qualification criteria for this relief. Meanwhile, we still have the situation where heavy industry is obliged, in many cases, to put in at additional expense complex emission controls and other measures, adding nothing to the productive capacity of the property but where the plant and machinery element represented by those improvements is increased thereby and the rateable value with it. This is nonsense and should not continue.

In Clause 5, I welcome the general direction of travel towards shorter revaluation cycles, but they need to be more frequent still. If Scotland can do it, so can we in England. As the rate of mercantile change accelerates, it is clear the non-domestic rating system has not kept up, has been slow to adapt, and has created a large measure of injustice and inequality, damaging confidence in the tax and, to some extent, the credibility of those responsible for its management. This is regrettable.

Clause 6, on transitional relief, is a welcome shift. I simply ask whether it is the Government’s intention to abolish downward phasing altogether—an arrangement in which those who should be paying lower business rates gain only on some never-never principle because this funds transitional relief for those who should be paying more. In terms of natural justice, I would be glad to see it gone and the principles of fiscal neutrality become more elastic. The Minister’s assurances given a few moments ago are welcome.

Clause 10 is welcome because it has long been a complaint that, while the Valuation Office Agency demands information from ratepayers’ representatives to justify valuations, VOA officers can effectively ignore similar requests from ratepayers. On transparency grounds, this has long needed rectification. We will have to see how this turns out or whether the confidentiality arguments that have been put forward in the past will continue to be fielded as a reason for the VOA not honouring the spirit of this provision. However, I welcome it for what it is thus far.

Clause 13 is a new reporting obligation. I thought the rationale behind the frequency of making declarations of changes—an event date plus 60 days, in addition to a financial year end plus 60 days’ reporting—was that if ratepayers had to make a disclosure with that frequency then reviews of the valuation list should match that. That seems logical. That was my reading of the message from the consultation process. Requiring virtual real-time data, which is in effect what this Bill asks for, was the corollary of having annual—or at any rate, much more frequent—valuation list updates. Given this asymmetry, I welcome the Minister’s comments about the potential for further shortening the revaluation frequency and the antecedent date gap between the date of valuation and the date of coming into force of the list.

On the detail of the declarations required, there are in fact two separate circumstances. The first is the information to be provided to HMRC, as set out in Clause 13(2) which inserts new paragraphs into Schedule 9 of the 1988 Act. New paragraph 4F spells out that it is a change in any of three instances of taxpayer reference, VAT registration and national insurance number. However, I remain unclear how the tax bit in particular works for a sole trader operating as an incorporated business. The proposition seems needlessly fussy.

The reporting arrangement for this is set out in the previous paragraph 4E and is to HMRC’s portal. All the information required by paragraph 4F will already be known to central government departments—hey ho. But secondly, at paragraph 4J, there is a separate requirement to report any notifiable information within the ratepayer’s possession or control, including, at paragraph 4J(2)(a) and (b), any changes in the ratepayer identity or, as we have heard, anything,

“that would or might affect the existence, extent or rateable value of the hereditament”.

This is not just physical change. Many ratepayers do not understand what constitutes a “hereditament”, let alone what may be deemed in the view of the VOA to affect it. Although I take the point made by the Minister that this extends at paragraph 4J(3) to what the ratepayer

“knows, or could reasonably be expected to know, that it would assist a valuation officer in carrying out functions”,

I hope we are going to get a clearer definition at some stage and an explanation of the apparent lack of impact analysis, especially as regards small businesses at one end of the spectrum and a retailer with hundreds of hereditaments at the other.

Furthermore, the reporting arrangement under paragraph 4J is not, as one might expect, to HMRC as before but potentially via a different system to be set up by the VOA, using an online facility referred to at paragraph 4L. There will potentially be two different portal routes. I understand that there is to be a pilot, and that the reporting arrangements are to be consolidated via one portal, and that this will not be implemented unless the VOA is satisfied it is fully functional. That is very welcome in what otherwise could be unnecessary duplication.

I remind your Lordships that the barriers to accessing the check, challenge and appeal system under the business rates process were put in place deliberately to deter the so-called rating agent cowboys. I hope there will be some guarantee that, under this new data-harvesting exercise, small unrepresented businesses will not fall into the hands of precisely the same charlatans, or indeed the complex access arrangements intended to defeat them that plagued the appeal system.

None of this negates the ongoing obligation to respond to a more specific demand for information which VOA can make of a ratepayer at any time during the year. Nor is the beneficiary of small business exemption exempt from all the same requirements, even though they pay no rates. Processing tens of thousands of additional annual returns, as I am told is the likely outcome, has not obviously been factored into all this, and the impact note’s suggestion of a £15 a pop cost to businesses seems to me a significant underassessment.

Picking up a point made by the noble Lord, Lord Shipley, there is also no guarantee that the VOA will act promptly either to advise of the likely implications of any change or, indeed, to implement them by changing the rateable value. To my mind, this is still an unnecessarily one-sided and open-ended arrangement, prone to arbitrary redefinition and, potentially, to equally arbitrary determination of claimed infractions. I do not see it as a necessary light touch; rather, as an additional and potentially burdensome obligation, possibly—although I hope not—involving two different gateways for reporting. That is what is actually set out in the Bill.

Clause 14 deals with the redefinition of material change of circumstances. Here, I am bound to say that I do not follow the logic: namely, that changes in statutory or regulatory measures should be taken as part of general market changes and reflected only at revaluations, although I note that the clause does not preclude taking account of changes of a physical nature or the state or locality of the hereditament meantime.

First, just about anything done by dint of administrative powers is by definition a child of statute. If, for instance, a vaping ban—which the Minister referred to and which I raised with her—renders a specific category of business unviable overnight, or, more typically, a low-emission zone, diesel vehicle ban or traffic management scheme is introduced that reduces retail footfall and mercantile activity at a stroke, is it right that this should be excluded from a definition of material change of circumstances?

For such matters to be disregarded, they should, first, apply to all businesses and, secondly, be disregarded only where a significant adjustment period has been allowed for business rate payers to take this into account. In all other cases save national emergency, the consequences for business rate yields should immediately be felt by the public sector that imposes them and not via this free-bet measure that transfers the entire risk on to businesses. I would be grateful if the Minister could elaborate on that point.

The Explanatory Notes’ suggestion at paragraph 37, that this will

“restore the law to its originally intended extent”,

is, I am afraid, simply not something I recognise. Plus, in my professional lifetime we have managed for over 50 years without there ever being an issue requiring such negation of materiality.

I will end my detailed points at this juncture, but I may well return at later stages of this Bill with amendments. I am bound to say that, whatever imagination may have been applied by the architects of this Bill, it has not been viewed from the standpoint of business, particularly as I perceive it from the briefing of the Shopkeepers’ Campaign and from professionals to whom I have talked.

If businesses need to count their fingers every time they figuratively shake hands with the Government on some taxation matter, we are in very negative territory. When the Government continue to claim that the postponement of the 2015 revaluation was “to give business certainty”, as repeated at paragraph 7 of the Explanatory Notes, it makes me cringe. Patently, it was all to do with maintaining tax yield. Businesses did get certainty—that is to say, the guarantee of continuing to pay business rates based on the peak value levels of 2008—but on sharply fallen values, reduced business activity and with substantially increased costs of trading. This was a misrepresentation, and everybody knows it. It is time for an attitude change.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Committee stage
Monday 22nd May 2023 Lords Chamber

[Lord Thurlow (CB)]

My Lords, I am grateful to the noble and learned Lord, Lord Etherton, for identifying what I believe to be an unintended consequence in connection with the proposed forced auctions of high street property. I am pleased to add my name in support of Amendment 418.

Following many years of practice as a chartered surveyor, specifically in the commercial property market, I am well aware that one of the most difficult challenges that landlords of vacant property can face is that of the unauthorised or illegal occupation of their premises. Securing legal and legitimate possession from an occupier who refuses to leave is expensive and time-consuming and can easily—and unfairly—add to the long list of bad landlord stories.

If that unauthorised occupation involves residential property, the problems of cost and delay can increase significantly. I appreciate that the clause we are referring to does not refer to residential occupation, but commercial shops are frequently let to sole traders who use an upper floor storage space informally as residential accommodation. It is outside the terms of the lease, but it may remain a fact, so it is worth pointing out that residential occupation comes into this amendment.

Amendment 418 is designed to protect a landlord from enforcement by the local authority of the auction process when they are already doing their very best to secure vacant possession. They are trying to get rid of an unauthorised occupier. Without this possession, it becomes impossible to let the property. Who would conceive of signing a lease for a shop as a tenant with an illegal trader already in place? Surely it is wrong to penalise the landlord who is keen to let their property but is unable to do so. While legal action is under way, that landlord receives no rent and is probably paying interest on a commercial mortgage. They are likely in breach of their rental income covenants with the bank, so may be verging on defaulting on that loan, and are likely employing costly solicitors to pursue legal action for recovery of their property. Yet, by this Bill, they could be accused of keeping a property vacant.

The clock should not start on the period defined as “lying vacant” until the property is vacant and is in the landlord’s gift to be let to a tenant. I do not believe that it is the Government’s intention to auction off commercial premises that are the subject of legal action to recover possession, so I ask the Minister to ensure that, while legal proceedings are under way to secure possession, the landlord does not inadvertently fall into the trap of effective confiscation by the authorities.

This amendment is not a matter of policy or principle. It does not dispute the intention of Clause 178. It is simply a practical matter that, unamended, will lead to confusion and conflict between vested interests, which, I am sure, is unintended.

[The Earl of Lytton (CB)]

My Lords, I rise to speak to Amendment 426 in my name. I start by declaring an erstwhile interest as a former property manager of retail premises. It had a high street address, but the main shopping area had ceased to be in the high street some 30 years prior so, when we talk about high streets, it requires a little care in what one is actually referring to.

I pay tribute to the British Property Federation, which the noble Baroness, Lady Hayman of Ullock, mentioned in her excellent and substantial introduction to this group of amendments, but I must stress that these views are mine and not those of the BPF.

I observe that 27 clauses and a schedule is a lot of stuff to have in a Bill of this sort for something that I am advised is a really quite narrow application. However, I am looking in the direction of the noble Baroness, Lady Thornhill, because I suspect that she may have other views on this matter that she will doubtless enlighten us on.

The Government seek to attract overseas inward investment at scale, and UK real estate is one of those attractive asset classes across the world which has a great deal of further potential. I am told by the chief executive of Savills that commercial property investment in the UK runs at about £60 billion annually, about £30 billion of which comes from overseas, so this is a matter of considerable moment. However, we risk serial policy interventions, with a potential adding of burdens, increasing uncertainty and raised investor risk, which threaten to undermine this success story. Commercial rent collection moratoriums were one such thing. While I recognise that they were essential in the circumstances, they did not help.

High streets and retail properties are particularly challenged by the burdens from business rates referred to by the noble Baroness, Lady Hayman, and from floor space oversupply, loss of important anchor tenants, major shifts in shopping habits and general changes in work/life balance. Many properties in regions with the highest vacancies suffer from historic business rates levels, with instances of rates liability being in excess of 100% of the rent. That makes tenancies as unattractive as private sector investment and must be addressed.

Any measure that threatens investment should be looked at critically. As far as the retail investment sector is aware, according to the information that I have from the BPF, there is little pressure across the country to introduce these auctions, and the Government admit that they will be relevant in only a minority of cases to deal with empty properties. I appreciate that if a property is creating a particular problem, it must be dealt with, but given what we are being asked to put into this Bill, I wonder whether we are not using a very large sledgehammer to crack a small nut. The BPF tells me that the likely costs of each high street rental auction to a local authority alone would exceed £6,000. At a time when strained local authority finance is prevalent, this is unlikely to make them a priority. That figure, if correct, is just the local authority’s cost—never mind the other costs for the other parties.

The Bill proposes a scheme which I find complex, with exacting compliance criteria and where decisions of local authorities in their own cause appear to be incontestable, such as a refusal of consent under Clause 184(1). Appeals under Clause 187 would be to the county court, which has its own problems of delay and cost, and may not stop there. Therefore, a potential liability to pay compensation assessed by the First-tier Tribunal on top of that makes this look like quite a chancy operation. None the less, if Ministers wish to press ahead with this measure, the Bill should better distinguish between those property owners seeking a tenant but who have been unable to find one, having used all reasonable endeavours, and those who are just being plain unco-operative, where I can see that there is a perfectly good explanation. I pay tribute to the points made by the noble and learned Lord, Lord Etherton, and the noble Lord, Lord Thurlow, in that respect.

Schedule 16, which sets out the grounds on which landlords might have to appeal against a local authority’s final letting notice, should therefore be amended to include a new Clause 8, as set out in my amendment. It provides a facility for the landlord to demonstrate reasonable attempts to market the property at or below what might be described as a reasonable market rent for at least a nine-month period. That is to provide a safeguard against any capricious approach to the matter. We know that there are difficulties on the high street, and in dealing with certain types of shop premises—their shape, their configuration, their position in the high street, and other things that are going on at any given time, possibly to do with planning policy.

--- Later in debate ---

[The Earl of Lytton (CB)]

My Lords, it is a privilege to be a co-sponsor of this proposal, so ably introduced by the noble Baroness, Lady Hayter of Kentish Town, and spoken to by the noble Earl, Lord Caithness. The noble Baroness has far greater knowledge of regulation, which goes back a long time. Especially on the regulations of bodies, that surpasses anything that I could do.

I am a fellow of the Royal Institution of Chartered Surveyors; I have been a member for 48 years and was at one time chair of one of its expert panels. I am also an RICS-registered valuer. Although I am semi-retired, I still pay a subscription to the RICS. I am governed by its rules and its requirements for continuous professional development, and so on. I must make it absolutely clear that the views I express are my own and are not to be taken as any statement by the RICS on its policy, or as its acquiescence in any way with the conclusions that I draw. Although I have spoken at length with the RICS, my views are essentially my own.

I will give your Lordships a few facts. The RICS has a membership of 130,000, 20% of whom are foreign-based. It has international and national status. It sets standards of technical compliance in areas of valuation, measurement, physical assessment and methodology of appraisals in many areas. It does that within a framework of ethical and competence standards, backed by disciplinary powers over its own membership. Other bodies and sectors have frequently and voluntarily adopted the standards that it sets. It has members who survey the ocean floor and others who auction fine art; such is its range and scope.

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My fourth question to the Minister is: what assessment has been made of the alternative option of introducing emergency legislation, should some unlikely conjunction of events require it, rather than taking a provenly risky route of bringing forward a statutory instrument as proposed in the Government’s Amendment 504GK? I could spend time pointing out just how foolish this proposition is, but I have posed four questions and, without clear and positive answers by the Minister today, these matters will certainly have to return on Report. This is too important an issue to leave lying as a set of amendments on the 14th day of Committee consideration, shoved into the Bill without detailed consideration and, in my opinion, detailed reconsideration.

[The Earl of Lytton (CB)]

My Lords, it was with concern that I read the Delegated Powers and Regulatory Reform Committee’s 31st report in relation to the very matter that the noble Lord, Lord Stunell, with his usual precision and excellence, has outlined: namely, the question of the building safety regulator.

It cannot be very often that a committee comes up with statements such as:

“We consider that the Supplementary Memorandum provides wholly inadequate justification for giving the Secretary of State such a broad Henry VIII power to—”


and the third bullet point under that is,

“determine what functions the regulator will have”.

It could have added “and modify them at will”, because that is in fact what the situation is. It goes on to say,

“we consider that Amendment 467D contains an inappropriate delegation of power that should not form part of the Bill”.

It could not be clearer.

The noble Lord, Lord Stunell, set about providing a whole series of logical and technical explanations to this. However, there is another explanation, and this is my take on the back story of what is really going on here. Throughout the process, post the Grenfell tragedy, the Government have sought to manage risk and control what might otherwise be seen as unacceptable political and economic fallout. Ever since their own consolidated advice note of January 2020, admitting in so many words that many of the issues found at Grenfell Tower could affect other buildings of any height, they have sought to delimit the ongoing and subsequent damage that that caused.

This spawned a reference to the department’s technical advisers and a resultant independent expert’s statement of July 2021. That sought to identify and justify that buildings under 11 metres were of an inherently lower risk. This in turn triggered an approach to RICS to amend its EWS1 scheme and its advice to mortgage valuers. We know the outcome of that was greeted with significant ministerial disapproval.

Clause 213, on at least one level—I am not going back over all that—could be seen as an attempt to silence or modify the views of independent professionals to align with the Secretary of State’s thinking or to cancel concepts of commercial risk assessment. Amendment 467D, for its part, could be interpreted as seeking to make sure that risk assessment and remediation via the building safety regulator is toned down. This would at least fit with differing standards under the Government’s pledged remediation contract, of which we have heard a great deal in recent months, and a fair interpretation of the Building Safety Act 2022 standards.

I leave it to your Lordships to consider whether these are, as I suspect, connected in some discrete or perhaps not so discrete policy aimed at managing risk and potentially seeking to outrun market sentiment. All I say is that Governments will never succeed in outrunning market sentiment; to suppose that that might happen is tantamount to saying that you can walk on water. From that point of view, I do not get it.

I remind the Committee, first, that low-rise does not equate to acceptably low-risk. The independent expert’s statement came 11 months after a disastrous fire at four-storey Richmond House in the London Borough of Merton, which was apparently not seen as fit to mention. Secondly, whatever the various machinations, blame-shifting, smoke and mirrors or other activities, it is government policy that has resulted in hundreds of thousands of home owners, many of whom have written to me, being unable to mortgage or sell their properties and facing enormous recurring charges for insurance and other measures. If the Financial Times is to be believed, leasehold flats are now falling seriously out of favour in the marketplace. This is just when increasing densities, and indeed more housebuilding and better use of scarce urban sites, are called for. It is a matter of government policy that we should build more homes.

The genie is out of the bottle and is not going back in. Around 15 months ago, I said in the context of the Building Safety Bill, as it was then, that the Government needed to get ahead of the curve in dealing with this. They have not done so; they are labouring in the wake of events. This is not good enough. It makes the building safety regulator substantially the sole control of the department, as opposed to being an independent body like the Health and Safety Executive. I just add that it was changing the health and safety regime a few years ago that radically changed injuries and fatalities on construction sites. Therefore, it has form and a track record. This approach to the building safety regulator is totally unacceptable, as far as I am concerned.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Wednesday 3rd May 2023 Lords Chamber

[The Lord Bishop of St Edmundsbury and Ipswich]

My Lords, I support Amendment 335 in the name of the noble Baroness, Lady Warwick, and Amendments 336 and 337 in the name of the noble Lord, Lord Best, to which my colleague the right reverend Prelate the Bishop of Chelmsford has added her name as the Church of England’s lead bishop for housing. I am aware, as others have commented, that we are touching on matters that will arise again in the 10th group.

Amendment 335 would address a significant weak spot in the infrastructure levy. As the Bill stands, there is no meaningful protection of developer contributions to the infrastructure levy for affordable and social housing. The amendment would remove the risk of infrastructure levy regulations diverting funds away from such housing provision.

I am glad to support Amendment 337 in the name of the noble Lord, Lord Best. Together with Amendments 338 and 339, it would remove a portion of Schedule 11 containing wide-ranging provision for the examination of charging schedules for the infrastructure levy.

At an earlier point in our proceedings I was pleased to speak in support of the noble Lord’s Amendments 221 and 207, both of which seek to provide for greater inclusion of older people’s needs in development planning in the Secretary of State’s role and at the level of local authorities. Amendment 336 is a further critical piece to address the challenge of growing needs in our increasingly ageing population and the housing crisis. In enabling the charging authority to consider additional evidence, its ability to determine the viability of developments, including older people’s housing, will be better informed. It is particularly key that such developments are given due and quality consideration as we face growing need.

[The Earl of Lytton (CB)]

My Lords, I rise to speak to Amendment 348 in the name of the noble Baroness, Lady Scott of Needham Market. The reason that I have taken on this role is that I am one of her predecessors as president of the National Association of Local Councils. I express my gratitude for the comments of the noble Baroness, Lady Taylor of Stevenage, on the value that she and her party place on that role. I also must declare a professional interest, particularly as a valuer, because from time to time I get to pore over the nitty-gritty of things like development appraisals and viability assessments, which are complex, capable of many interpretations and create all sorts of issues to do with how they may be interpreted.

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[Baroness Jones of Moulsecoomb (GP)]

My Lords, I rise to speak to Amendment 411, in the name of my noble friend Lady Bennett, who cannot be here at the moment. Before I do that, I would like to pay tribute to the Government Front Bench and the Opposition Front Bench for showing real stamina, tenacity and forbearance on this Bill. It is far too big and the only good thing about it—well, it does introduce some good things—is that it stops us discussing even worse Bills.

On 411, I am a former councillor and I had thought that this was possible for councils—but, if there is any doubt at all, we have to make sure that it goes in, because it is incredibly important that we start to increase our supply of affordable housing and social housing. The whole right-to-buy privatisation was very successful for some but, of course, those houses have never been replaced, and with a rising population it is incredibly important that people have a home that is affordable and secure.

The rental sector is failing at the moment. I gather that a lot of people who have bought to rent are leaving the market because it is so complex. So there are houses, but they are mostly going up for auction and being sold mostly to developers; I have absolutely no idea whether that will help.

I am not convinced about hope value, I am afraid. It sounds like an extremely Tory motivator to increase the value of your property immediately before it gets bought. It sounds like greed to me—forgive me—so I will not support any of those amendments.

On Amendment 411, if there is no clarity on whether it is possible to buy land in that way, we will bring this back on Report.

[The Earl of Lytton (CB)]

My Lords, I rise to speak to the question of whether Clauses 174 and 175 should stand part and, to some extent, to government Amendment 412D. I thank the noble Lord, Lord Carrington, for his masterly introduction.

I intend to focus more on what I hope will be the technical side. I have a sort of background here. I dare say that I am the only person in this House—probably in the Palace of Westminster—who had to deal with a development land tax calculation when I worked in public service. I recall those years very well, because the entire land supply dried up during that period. I will try to give a bit of technical background without making it overly complicated.

I, too, am grateful to the Compulsory Purchase Association and Mr Raj Gupta of Town Legal for their comments. Mr Gupta kindly gave me permission to quote from one of his emails, which I may do later.

This is all to do with the question of hope value. If I can loosely paraphrase, this is regarded as an excessive element of value that is so far divorced from current purpose, use and enjoyment that it is regarded as offensive. The first thing you have to know about hope value is that there is a lot of it about. On the outskirts of every village and town in every municipality, there is land that is tied up by legal agreements or whatever that are to do with this inflated hope value. So the first thing we need to bear in mind is: what do you do about the bits where stuff is already in the pipeline? If you put a block on that, it will have consequences.

Hope value does not exist in isolation from the umbrella of market value. Market value combines various things; it may be a current use value, an alternative use value and a hope value. Wrapped together, they form this construct of market value. Things such as hope value are not objectively measurable in their own right, which becomes a bit of problem; I remember that problem from dealing with development land tax calculations, where the question was about the current use value that had to be entered on the form on which one was making the calculation.

However, market value has a clear, established, internationally recognised definition. It is capable of independent corroboration by what is happening in transactions, which are evidenced—that is, the evidence can be produced from within the marketplace. I will leave aside the complexities of specialist things such as going concern value, but this question of hope value rests on the belief that an asset is capable of being made to be worth more, with value being added in some way, such as through works or changes of use, possibly with the prospect of development but possibly by simply bettering what is already there.

Development, by definition, also includes permitted development rights; it is a form of development. The question about that is how to single out those things that society, until now, has regarded as being part of the entitlement of ownership—namely, permitted development rights—from these other excessive sums, if “excessive” is the right term.

The rules for compensation for compulsory purchase have been developed over nearly 180 years and, in modern terms, use market value as their baseline. They sit alongside issues of human rights in relation to, first, the reasonable enjoyment of one’s property and, secondly, the right not to have it taken away other than for demonstrably compelling reasons of public interest—of which more anon—and then only on the basis of fair compensation determined, in the event of a dispute, by an independent adjudicator. So far, so good, as I am not for one minute suggesting that human rights justify a hugely disproportionate level of value. But this is tied into this construct of market value. If one were to start filleting out market value, there would have to be a better definition or one closer to that referred to by my noble friend Lord Carrington.

Pivotal to all this is the concept of equivalence, and it will become apparent why I am talking about this. Equivalence is the ability to buy an equivalent asset from the money gained from the compulsory process. Put another way, the compensation should put the owner in the same position, as near as money can make it, as they would have been but for the compulsory acquisition. That principle was established long ago in a case called Horn v Sunderland.

Particular things need to be borne in mind here. First, the special interest of the acquiring authority is always to be disregarded where it could be realised only as part of the authority’s scheme. That is a given and has been a factor for a long time. Secondly, any reduction in value by virtue of the acquisition being compulsory should also be disregarded, and that is at both ends of the spectrum. Also, the compensation is to be paid in full at the time of taking the land or else interest runs thereon, and any reasonable costs or losses associated with and arising from the act of it being a compulsory acquisition should be paid as part of the compensation.

Clause 174 refers to “no-scheme” minor amendments, but in amending the Land Compensation Act 1961 it seems to go further than the strict purpose of simply eliminating those aspects of value that could be realised only by a scheme involving compulsory powers. It seems to dig deeper than that. The question is how deep and where that process ends. It also amends the definition of compulsory purchase purposes to a point where what it defines could be seen as part of the normal current use rights and not the sole preserve imported by the acquisition scheme itself. I refer to the words “re-development, regeneration and improvement”, which is a very broad definition.

Clause 175 sets out to reinforce this in relation to assumed developments under certificates of alternative development. This is clearly something that the Government want to make harder for claimants and, conversely, easier for acquiring authorities. I will not go any further on that, because my noble friend Lord Carrington covered it pretty well.

Government Amendment 412D introduces a new scheme of Secretary of State direction enabling acquisitions to be made at existing use value in certain circumstances. However, the provision is rather complex and has a sting in the tail in that, after 10 years, if the land has not been used for the specified purpose, which has to be specified up front, there is a potential claw-back. As I see it, it also muddles the justifications of public interest and the rationale for having CPO powers. The two are not the same.

With regard to the ostensible aim to provide more affordable housing, here are some home truths: the amount that the owner of bare, undeveloped land gets after the costs of obtaining the planning assent is typically in the range of 8% to 12% of the finished product value, otherwise known as the gross development value. The complaints about high land values—I know this from having analysed spreadsheets with all this information on them—often come from housebuilders and ignore the effect of the additional rolled-up cost of obtaining planning permission and the very substantial costs on risk of speculatively financing these. The whole planning process makes it more expensive.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Committee stage
Monday 24th April 2023 Lords Chamber

The present arrangements are far from suitable for dealing with changing circumstances. For example, if something else came along quite unexpectedly, like Covid-19 did, we could again see massive changes taking place in a very short space of time, when we have not even coped with the knock-on effects from the last change. I hope the Government are going to be reasonable this time around. This is a reasonable amendment that should not be lightly dismissed or ignored in the way that it has been previously.

[The Earl of Lytton (CB)]

My Lords, the noble Lord, Lord Brooke of Alverthorpe, raises a matter which concerns me. I congratulate the noble Baroness, Lady Pickering, on this amendment. I am not, and never have been, a member of the licensing committee, but I am bound to admit that I have enjoyed many of the venues that are facilitated by the licensing process.

My example is a little different, because this is not just a matter of licensing. It concerns the 24/7 use of an urban industrial area not very far from one of London’s major international airports—hence it is 24/7. It is an older industrial estate that had been subject to periodic, sporadic, upgrades of buildings. However, the local authority, in its infinite wisdom, gave consent for a piece of land on the edge of this industrial area, which I think had previously been residential back gardens, to be used for a residential development. This triggered a change of policy within the local authority, such that every time somebody wanted to do anything on the industrial estate—change a roller shutter door, have a better loading canopy or something like that—an hours of work restriction would be imposed, so preventing it being used 24/7. I challenged a local elected member on this, who was unaware of what his council had done and what the implications were.

I accept that that is a different situation from what one might call the shared space of a town centre, but I think it is relevant that we have—sorry to use the awful phrase—joined-up policies in relation to all these things, unless we want situations happening on our high streets such as those to which the noble Lord, Lord Brooke of Alverthorpe, referred to. Later on, we will get to what happens with vacant properties in high streets when—when—we get to the group that is currently number 28 on the Marshalled List before your Lordships. My Amendment 426 in that group is on this issue.

One other issue is what we might call the administrative framework aspect of all this. I think of circumstances to do with the way in which local government or contractors organise such things as waste collection from premises in urban centres; refuse collectors can turn up in the small hours of the morning and cause disruption. I wonder whether we are not sometimes making a rod for our own backs by not thinking ahead about how we organise these things. Some are displaced by concepts such as core time servicing and other such matters relating to our town centres. There tend to be rather individual, single-issue decisions, without looking forwards, backwards or sideways.

I offer a word of caution to the noble Baroness, Lady McIntosh of Pickering, on the wording “can be integrated” in the amendment. The phrase “can be integrated” does not necessarily mean that a new development will be integrated. I interpret “can” as facilitative, “will” as something more demonstrative. If the administrative rollout is subject to all manner of change going forward, without a statement of principles and constant monitoring of the unfolding process, we may end up with decisions made on a “moment in time” principle rather than having the dynamic under constant review and consideration.

There is obviously a resource implication here but, unless we do this, as the noble Lord, Lord Brooke of Alverthorpe, says—given what has happened in just the last few years and post Covid, with the changes in demand, journeys to work and work-life balance—we will not be anywhere near ahead of the curve in getting this right. Other than that, I strongly support the principle of this amendment; I think it a really worthwhile amendment for consideration by your Lordships.

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Moved by

[The Earl of Lytton]

274: After Clause 106, insert the following new Clause—
“Building Safety Remediation Scheme(1) Planning permission must not be granted to any developer or associate responsible for the construction or sale of units in a building with a building safety risk until the Secretary of State has established a Building Safety Remediation Scheme. (2) Schedule (Building Safety Remediation Scheme) makes further provision for the establishment of a Building Safety Remediation Scheme.(3) This section comes into force six months after Royal Assent.(4) “Associate” has the meaning given in section 121 of the Building Safety Act 2022.”Member's explanatory statement
This clause inserts a new Schedule to implement a building safety remediation scheme to ensure that buildings with building safety risks are put right without costs to leaseholders.

[The Earl of Lytton (CB)]

My Lords, in moving Amendment 274, I will speak also to Amendment 318 in my name and that of the right reverend Prelate the Bishop of Chelmsford. In doing so, I draw your Lordships’ attention to my professional interests.

I have two other amendments in this group: Amendments 320 and 325. They are on a related issue but, given the detail that I need to provide in relation to Amendments 274 and 318, I will do no more than signify my firm support for them and leave the heavy lifting on them to my co-signatory, the noble Lord, Lord Young of Cookham; I thank him very much for agreeing to do that.

While I am talking about the other amendments in this group, let me say that I agree that Amendment 504GJD in the name of the noble Baroness, Lady Hayman of Ullock, is certainly worthy of consideration in terms of providing better passive fire safety measures.

I turn to Amendments 274 and 318. I express my thanks to the Bill team for their engagement; to campaign groups across the country for maintaining awareness of the issues; and to the members of the policy team who have supported me. There are too many of them to name but they know who they are and I am very grateful to them. Most of all, I am grateful to the more than 200 individuals and leaseholder residents’ groups who have written to me over the past four weeks both to support me and to tell me about the tragedies and individual concerns that have beset their lives. It is particularly to give them a voice that I raise this issue today.

Amendments 274 and 318 concern, I believe, matters of great social and economic importance. Despite the Government’s measures in the Building Safety Act 2022, far too many leaseholders remain adversely and significantly affected by serious defects in the original construction of the buildings that they occupy or own. Although the BSA was a significant first step in solving the building safety crisis, it leaves significant numbers of leaseholders without adequate protection from, variously, cladding and non-cladding costs, and much of it is based on extra-statutory commitments of one sort or another. So we have a situation where enfranchised leaseholders and buy-to-let owners with more than three properties are excluded, while residents living in buildings below 11 metres in height receive no protection from non-cladding costs at all.

Correspondents tell me that the Government’s remediation scheme is not working for them and that there is confusion about the process, qualifying interests and building height calculation, with gridlock until all the complex arrangements are in place. The most frequent comment is that owners are still locked into unsaleable properties with waking watch and massive insurance costs, as well as high remediation bills in prospect without any early or firm date for resolution. I now learn that many conveyancers may even be reluctant to take on work involving buildings over 11 metres high because of the complexity and professional risks that face them.

I welcome the announcement that many of the country’s largest developers have committed to remediating buildings that they were responsible for, but I am concerned that their contractual obligations are limited to life-critical fire safety defects, rather than the wider definitions in the Building Safety Act. Furthermore, the developer contract apparently covers only around 10% to 15% of buildings that require remediation and appears to absolve developers of responsibility for those waking watch and other consequential costs.

Statutory liability for remediation itself is placed on landlords but without consideration of whether they have the resources to deal with this issue and are able to cover the costs. The DLUHC impact assessment admits that it has no cost estimates when it states:

“For buildings above 11 metres that have historical non-cladding fire safety defects, there is no reliable data”—


not even estimates—

“on the prevalence, or extent, of these costs”.

However, an Association of Residential Managing Agents survey suggests that the non-cladding remediation costs in buildings above 18 metres are, on average, £25,671 per flat and, in buildings below 18 metres, £38,184 per flat. There appears to be no data on the sub-11-metre block remediation issues. We do not know how many we are dealing with. By my reckoning, more than 200,000 individual flats are significantly affected in England alone. Others have arrived at higher totals. So my first question for the Minister is: will she be kind enough to tell us what figure her department is working to?

Some landlords have the resources to meet these remediation obligations but it is not universal. Several large groups are in fact thinly capitalised or have significant indebtedness. For example, the three groups that comprise what is known as the Long Harbour fund appear to have relatively modest net assets, while the Consensus Business Group has significant borrowings from insurer Rothesay Life. They are unlikely to have the free cash to fund remediation works as well as servicing their bondholders and lenders if the incidence of defects and the average remediation costs, to which I have referred, are totted up.

As noble Lords will know, freeholds are typically valued by capitalising the sum of the net ground rents. In value terms, however, they are small by comparison with the collective of leaseholds. High remediation liabilities may make them worse than valueless. So if landlords’ interests are negative and they become insolvent—bear in mind that some of them are dealt with through special purpose vehicles—these freeholds, with their negative value, are likely to be disclaimed by liquidators and escheat to the Crown, with all the delays and uncertainty that that entails. I foresee a legal limbo with unsaleable flats; although this would be unprecedented at scale, it is far from improbable, yet nobody in DLUHC admits to having done the calculations to assess the impact.

My fear is that the Government’s approach creates new credit risks for lenders, particularly in relation to buy-to-let portfolios. If excluded leaseholders are unable to pay their share of the remediation costs, schemes of remediation risk simply being stalled. In such circumstances, leases could be forfeited, widening out their lender security unless extra capital is given. Such a forfeiture would providentially give landlords a windfall gain. Historically, few leases have been forfeited because rebalancing the mortgage has been the preferred course of action. However, it is one thing to have a debt of a few thousand pounds on a service charge in arrears; it is another thing to have the much more costly and complicated scenario of remediation costs, which may run into tens of thousands of pounds. I do not believe that historical forfeiture data gives an accurate picture of the new scenario going forward. Credit risk and mortgage interest recalibration are likely to have impacts on the wider financial system and, in turn, effects on other derivatives and insurance policies. I believe that this is something that has some way yet to unravel.

This is not only about the free market; it is about the social sector as well. Many shared equity owners have told me that, although they have a minority equity stake, they are being made responsible for a 100% share of the remediation applicable to their unit of occupation. That seems grossly unfair. Amendments 274 and 318 would avoid all this and provide for an alternative, comprehensive solution to the building safety crisis that protects all leaseholders from past and future issues.

Amendment 274 would mandate the Government to establish a building safety remediation scheme—BSRS. Amendment 318 would create a new schedule setting out guidance for its key features, all intended to dovetail with the principles of the existing building safety fund. The intention is to protect all leaseholders—indeed, all owners of buildings of whatever height and tenure—from the costs of remediating buildings that are unsafe in their construction and the interim safety measures in circumstances where they are entirely innocent of the causes of these defects.

Where a building constructed since 1992 did not comply with the regulations in force at the time, strict joint and several liability for remediation of all material building safety defects would be placed on a developer and principal contractor. If neither is able to pay, or if a building met the regulations that were in force at the time of construction but is now seen as unsafe, which can happen, remediation funding would come from a much wider levy on the construction industry and materials providers as a whole, rather than just developers, as is currently proposed by the Government. Once a significant effect is established, there is no need for property owners to apportion blame; the industry can sort that matter out for itself.

Remediation will be carried out to standards under the BSA to avoid concerns about remediators effectively policing themselves and, worse, using their own selected approved inspectors. These may be the same firms that previously signed off things that they should not have.

Noble Lords will excuse me for not explaining Amendment 318 line by line given its length, but I seek brevity. Anyone wanting further detail can go to a resource at tinyurl.com/earloflytton. The approach has been scrutinised by a leading construction counsel, a planning KC, parliamentary counsel and other legal minds, as well as by building control, construction and fire safety practitioners. I am extremely grateful to them all for their input. It has attracted support from Ted Baillieu, former state premier of Victoria, Australia, and co-chair of the Australian cladding task force. This matter is attracting international interest around where we go with these sorts of defects. It has also attracted the interest and support of other organisations, including the Association of Mortgage Intermediaries, ARMA, the British Property Federation, the Intermediary Mortgage Lenders Association, NAEA Propertymark, the National Residential Landlords Association, and many others.

Developers should have been the first stop in the Government’s waterfall principle that we discussed just over a year ago. The BSRS bolts on to the existing government commitment, gives leaseholders and lenders more certainty of remediation, and puts them in a greater degree of control. However, it does not just deal with the present crisis. It covers similar situations in the future, and will, I believe, make short-cutting in building standards unworthwhile going forward. We all know that the race to the bottom on quality must cease. The BSRS provides a necessary layer of protection, especially as the Building Safety Act specifically excludes enfranchised leaseholders and commonhold unit owners from all its protections.

The Government do not have the money to solve the problem and are, at present, as I see it, unprepared to place the responsibility on the construction industry that has created this situation over decades of marking its own homework. I believe that the proposals I am advancing would deal with this. Echoing what one commentator said to me last week, if we do not get this right then the taxpayer could end up meeting the entire cost and we will go on building homes badly. We cannot allow that to happen.

All that apart, this is a fundamental matter of justice and equity. It is about protecting the innocent and vulnerable from the cost of failures by profitable enterprises—businesses that would be held liable for their actions in any other mercantile circumstances that one might conceive of. Indeed, the most basic function of government should be the protection of the citizen and society. Meanwhile, my mailbox continues to be filled with tales of individual tragedy, lives on hold, unsellable property, finances in disarray, fear of imminent bankruptcy, careers and retirements wrecked, mental health threatened, weddings shelved, the starting of families put off, forced evacuations—25 blocks is the tally since 2017—and much more misery besides. This crisis is not over until everyone is protected. I beg to move.

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[The Earl of Lytton (CB)]

My Lords, this has been an extremely interesting debate. I thank all noble Lords for their contributions on this group of amendments.

I thank the noble Lord, Lord Young, for covering all the technical bits that brevity forced me to omit; I am grateful to him for that. The right reverend Prelate the Bishop of Guildford gave an outstanding and thought-provoking commentary on, among other things, corporate motivation and where that should sit in the rules-based order.

The noble Baroness, Lady Fox, asked me some specific questions. I will give it a go in terms of giving her a brief response, but if she wants more information then I ask her to let me know because I may need to write to her. She asked me about the potential damage to the construction industry. My belief is that the construction industry should be able to build its way out of the liability—admittedly, probably at a lower profit margin, but that should be a viable option for it, so I do not see this as being a total loss. One of her later points was about market damage. The best estimate at the moment is that about 10% of the blocks are affected, which effectively means that 90% of them are built to good standards and do not present a problem. The risk is that if we do not deal with those forthrightly, and if the Government’s programme is not continually ahead of expectation, the rotten apples will end up infecting a much wider cohort than would otherwise be the case.

The noble Baroness also picked me up on the demonisation of the term “polluter pays”. I hope that I avoided using that term in referring to the building safety remediation scheme, but I know that outside it has attracted that moniker. That is of course a reflection on the environmental liability; coming further forward in time from that strict liability, we have a more direct example. It is of health and safety, particularly on construction sites. The strict liability that was imposed under that regime substantially improved the rate of death and injury in construction. I believe the same focus that this liability would generate is applicable here, bearing in mind that we are talking about vulnerable people in their own homes and that they are asleep and unconscious for maybe 25% to 30% of the time. They really need to know that that is their safe haven and not to feel threatened in it by issues of safety or finance, such as not being able to transact their property.

I thank the noble Baronesses, Lady Hayman of Ullock and Lady Pinnock, for their support. The noble Baroness, Lady Pinnock, has been an absolutely doughty supporter of the principle throughout. I pay tribute to that, as I do to my noble friend Lord Cromwell for his contribution. I am most grateful.

I thank the Minister for her response but I am disappointed. The fact of the matter is that a very large number of flats are excluded. There is no prospect of any early protection from costs that their owners are not responsible for. Litigation against freeholders is all very well, provided that the freeholders were those who were responsible for the problem in the first place. But if they are not, because they just happen to be from a pension fund that picked it up along the way, no doubt relying on the same sign-off and building warranties as all the occupiers, then I have to say that this looks like the Government plucking at low-hanging fruit for the purposes of PR and marketing. I am sorry, but I do not buy the principle that letting others off the hook should necessitate going after people who may themselves be, beyond peradventure, innocent.

The Minister also referred to the comment made just over a year ago saying that the amendment I moved then, of which I hope this one can be regarded as a new and upgraded version, was not cost effective because it would require a building-by-building assessment. But you do not establish anything unless somebody goes and looks at the building on an individual basis; I know that as a surveyor. I have looked at hundreds of buildings in my professional life and that is where it starts. The Government’s own approval to any sub 11-metre matters is described as being on a case-by-case basis, so what is the difference?

--- Later in debate ---

[Baroness Taylor of Stevenage (Lab)]

My Lords, I shall also speak to Amendments 277, 280 to 281B and 282 in the name of my noble friend Lady Hayman and in mine. I shall also make some comments in relation to Amendments 276, 278 and 279, in the name of the noble Earl, Lord Lytton, and Amendment 281C in the name of the noble and learned Lord, Lord Hope of Craighead.

The increasingly acrimonious circumstances in which planning is often discussed, debated and granted has significantly increased the burden of enforcement. This is combined with a contraction of local authority planning teams due to reductions in local authority funding, which is putting increasing burdens on the planning process, as we have already debated today in Committee. Our amendments are in recognition of that and to ensure that timescales, fines and practices are developed in a way that is proportionate to the current circumstances.

As one brief example, most local councillors will be familiar with their weekly planning list having a number of certificate of lawfulness applications—they are a particular bugbear of mine. These mean that the applicant has not applied for the appropriate permissions in advance and, having now built out their development, is only now seeking the approval of the planning authority. There is little if any appropriate sanction for this behaviour, which seems grossly unfair to all those who take the necessary steps to submit their applications properly in advance of building.

It is fair to say that such developers face the risk of the planning authority turning down their retrospective application, and there have been notable examples of authorities requiring buildings and/or alterations to be taken down. However, with the powers of enforcement diminished, both in this respect and for straightforward breaches of planning, simply by the lack of resources to deal with enforcement, the danger is that we continue to see from the worst offenders a cavalier approach taken to the planning process.

Amendments 275 and 277 in the name of my noble friend Lady Hayman of Ullock are designed to draw attention to the fact that it may be necessary to foreshorten the extended time limits for the enforcement of planning controls where there is a significant impact on the environment. We appreciate that the 10-year window is necessary for raising issues relating to planning enforcement, but it will be important that all involved in development understand that, if enforcement relates to an issue where substantial harm is being caused to the environment, planning officers will expect these to be dealt with more quickly. We hope this amendment will give them the power to do so. The amendment aims to prevent a delayed response from developers, not to limit the amount of time planning controls can be exercised over environmental matters. This should be 10 years, as for all other matters.

We have discussed previously in Committee the need for rapid digitisation of the planning process, where that has not already been done. Amendment 280 is a probing amendment to ensure that this is the case for the enforcement aspects of planning as well.

As in other parts of the Bill, we believe that new burdens may be imposed on local authorities in relation to enforcement. Amendment 281 in my name is to flag up again that there will be a need for an overall assessment of all parts of the Bill to understand the likely financial impact on local authorities. We have received previous assurances from the Minister on new burdens funding. It would be good to know that relevant professional and representative bodies will be consulted on this important issue as quickly as possible after the Bill passes into law, so that no undue financial burdens are placed on already hard-pressed local authorities.

As we have discussed in previous clauses, the financial burden of planning does not fall proportionately on the developer, which is true of enforcement too. Amendment 281A in the name of my noble friend Lady Hayman of Ullock is included to ensure that we do not inadvertently create an enforcement fine regime where it is more cost effective for the developer to breach planning rules and guidelines because the cost of non-compliance is less than the profit they are likely to make from any breach.

My Amendment 281B seeks to introduce a very important provision that would prevent developers applying for an exemption to the provisions in a planning application to deliver affordable housing in a development. We are all very familiar with the long wrangles that planning authorities are having over viability. Our concern is that, if this exemption from enforcement clause were to apply to the delivery of agreed affordable housing, it would simply be another get-out clause in the armoury for developers, with their significant legal firepower, to avoid providing much-needed affordable housing.

Clause 116 is concerned with ensuring that the planning process works as efficiently as possible and makes best use of digital technology. My Amendment 282 seeks to set the purpose of this in the Bill, so there can be no doubt that it is the intention to avoid delays wherever possible.

Amendment 276 is in the names of the noble Earls, Lord Lytton and Lord Devon. Just as our amendments recognise the importance of a shorter enforcement period for environmental issues, it recognises the importance of changes of use to a dwelling house. We agree that, where enforcement relates to somebody’s home, a shorter time period than 10 years would be preferable.

Amendment 278, in the names of the noble Earls, Lord Lytton and Lord Devon, recommends consultation with affected parties on extending the time limits for planning enforcement from four years to 10 years. We would always support such steps, as professional bodies and local government representative bodies can be essential consultees in ensuring that all consequences are understood from the outset and that any unintended consequences can be predicted and mitigated.

On Amendment 279, in the names of the noble Earls, Lord Lytton and Lord Devon, we will be interested to hear the Minister’s response on whether it is the intention for the provisions of the Bill to be retrospectively applied to developments which, under current legislation, have reached the time limit for enforcement. Is the legislation to apply only to enforcement for developments started after the commencement of the Act? Will there be a transition period, or will it automatically apply to all developments that have reached the current four-year limit?

Amendment 281C in the name of the noble and learned Lord, Lord Hope of Craighead, seeks to insert in the Bill the explanation of the purpose of Clause 113, as is contained in the Explanatory Notes. We have had a number of examples during our examination of this Bill where the absence of these explanatory clauses could potentially cause ambiguity in their interpretation. Therefore, we support this sensible move to insert the explanatory clause in the Bill. I beg to move my amendment.

[The Earl of Lytton (CB)]

My Lords, probing Amendment 276, and Amendments 278 in 279, are in my name and that of the noble Earl, Lord Devon, who is regrettably unable to be with us today. Apart from declaring an interest as a property owner, I must also explain that I have in the past been threatened with enforcement proceedings—so guilty as charged, or perhaps not guilty as charged. I am very grateful to a number of planning practitioners who explained some of the finer points of all this to me.

These amendments relate to Clause 107 and refer to what is known as the four-year rule. The current position is that, if works to a property have been undertaken more than four years previously, the owner is immune from enforcement action by the local authority. The equivalent period for changes of use, which of course may be harder to spot, is 10 years. A minimum of 10 years unchallenged enjoyment of both works and change of use is required before a lawful use certificate can be claimed. If you like, the entitlement at that stage becomes absolute.

I should add that, for works or changes of use to a listed building or, I think, for one in a conservation area, time does not run against the enforcing authority, and so protection of heritage is not an issue. Furthermore, works of development that are done secretively or by concealment are, I believe, also not protected by the four-year rule. So the building of a house within the confines of an agricultural barn, as happened in one rather infamous case, would not escape.

The system has operated for many years, quite successfully as far as I know. In the most recent review of the arrangements, the four-year cut off remained unamended. My own sense is that, if works have not been spotted after four years, it is quite unlikely that they will be spotted more readily in years five to 10. Indeed, one might conclude that, if it is that unobtrusive, it should scarcely be a planning concern anyway. It is more likely that it will crop up to ensnare an unwary owner who makes a subsequent application and some historic non-compliance is spotted at that stage.

The four-year rule also recognises that planning is complex, with many pitfalls for the unwary, and that it is not necessary or desirable to micromanage planning uses of land and buildings. For instance, erection of deer fencing, construction of ponds and the placing of certain structures on land may in some cases require consent but in others they do not. A movable item nearly always does not trigger a planning issue but leaving it in the same place for too long does.

Many households think that a permitted development right absolves them of the need for any consent at all. I believe it is government policy to reduce burdens on householders. Furthermore, where a local planning authority has issued what is known as an Article 4 direction, removing permitted development rights for certain types of development, owners may not be aware of this or be made aware, even in a purchase situation. As in one instance which occurred in my professional career, a shopkeeper might find that they are subject to enforcement procedures for displaying an internally illuminated sign fixed to the interior of their shop window glass, but not if it is a foot or two further back. The rules are opaque, convoluted and may be interpreted differentially per authority. As I see it, the four-year rule served to prevent this becoming a more serious issue.

But Clause 107 would remove this protection. I know of no justification for doing this, nor any public consultation that underpins that decision to include it in the Bill. I think that most householders, and possibly quite a few lenders, would view this with concern. But the removal would have, in my opinion, a somewhat more sinister side-effect. I know of instances whereby an annoyed builder has set out to shop a property owner who did not award him a contract of works, or shopped the successful contractor—or a neighbour averring to the authorities that works in non-compliance are taking place, either because of neighbourly detestation or, as in one case known to me, because the neighbour took umbrage about the builders’ vehicle parking and plant-unloading arrangements in the street outside their home. So to leave the door open for an additional six years to this sort of risk of a snooper’s charter is socially, economically and administratively undesirable.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Committee stage
Monday 27th March 2023 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

My Lords, I support all the amendments in the group and will speak briefly in favour of Amendments 188 and 241, on reducing health inequalities and improving well-being. These excellent amendments pick up the theme of Amendment 28, ably spoken to by the noble Baroness, Lady Willis of Summertown, and to which I added my name. All of these amendments emphasise the importance of walkable neighbourhoods and safe walking and cycling routes in nature to improve health and well-being, which is one of the themes of this debate.

I declare an interest as a member of the South Downs National Park Authority, which is collaborating with local health providers and volunteers to encourage not only disadvantaged groups but individuals with specific health challenges to make better use of the downs.

There is an increasing body of evidence to show that access to nature and green spaces has a positive impact on health and well-being outcomes. It can help to address a range of mental health issues, such as depression, anxiety and loneliness. The Government themselves have accepted the health benefits of access to nature in pursuing the idea of social prescribing pilots, which also have the benefit of cutting back on expensive and often ineffective drug prescriptions. The NHS has supported social prescribing being rolled out on a local basis, but this can work only if there are the facilities and infrastructure to expand access to nature and walking therapies. These amendments would enable joined-up government policies, in a way that is all too often lacking. That would require local planning authorities to have special regard to the desirability of 20-minute neighbourhoods and access to nature.

This is not just an issue of health outcomes; it is also fundamental for inequalities. In her earlier contribution, the noble Baroness, Lady Willis, quoted a Public Health England report which says that

“the most affluent 20% of wards in England have five times the amount of parks or general green space compared with the most deprived 10% of wards”.

We know that those living in the poorest and most nature-depleted areas also suffer the impact of premature death and illness from air pollution.

There is an urgent need to rescue abandoned and neglected community areas to recreate green space and plant more trees. There is also a need to create green pathways and networks that can lead out to larger areas of green parks and waterways. We should encourage communities’ rights to reclaim unused and derelict land for microparks and growing spaces to feed their neighbourhoods. This should be built into the planning system in the way that these amendments require, and I very much hope that the Minister will feel able to support them. If the Government do not feel able to provide that support today, I hope that the noble Lords, Lord Crisp and Lord Young, will return to this on Report.

[The Earl of Lytton (CB)]

My Lords, I feel compelled to say, “Hear, hear”, every time a noble Lord gets up to speak on this. As a chartered surveyor, I am, in effect, a witness of evidence to the fact here, having spent a very large part of my career looking at and advising on older buildings, defective modern buildings and everything in between. I support all the amendments in this group, which are at the heart of what we know needs to be delivered by way of appropriate housing standards. I commend the noble Lord, Lord Crisp, for his untiring efforts on the healthy homes standard; he deserves all of our appreciation for that.

Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Committee stage
Wednesday 15th March 2023 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I have added my name to Amendment 158. I declare an interest as a vice-president of the National Association of Local Councils; I am also the co-president of the West Sussex Association of Local Councils.

I remember clearly that we had a difficult meeting of the county association, in that the matters were contentious. It was dealt with online. I and my co-president went through the whole thing; all I can say is that it was entirely satisfactory. It was well organised from the word go and was well marshalled by the clerk of the association. The matter was carried off to everybody’s reasonable satisfaction; given that there were contentious matters, nobody complained.

I would just like to say that the world has changed. The world was changing beforehand; I was doing virtual meetings long before Covid came along. The fact that the technology was there and was sped up says a great deal about those who were responsible for getting things organised, particularly those in this House who organised things so that we could hold our proceedings virtually. It was enormously to the credit of those who seized the opportunity to do it.

However, if we are going to speed up Britain, one of the first things we will want to do is make sure that we make cost-efficient use of people’s time. The first bit of cost-efficiency is reducing road miles; we can start by decarbonising meetings. I am not very far from my local authority offices but I know that, by the time I have travelled five miles, found a parking space, probably paid for parking, crossed the road and gone into the council chamber—I am not a serving councillor; I just use that as an example—it will have taken me a good half an hour, with another half an hour on the way back, thank you very much. If you want busy people to devote their time and energy, you really have to make efficient use of their time; otherwise, they disconnect.

The other important thing here is inclusivity; other noble Lords and noble Baronesses have mentioned this. We are dealing with people who may be infirm or have mobility difficulties. This may involve young people in households with schedules that do not match; they may work away so it is hard for them to get back in time with normal commuting. Of course, you also have parents who are looking after young people and cannot get away. They cannot detach themselves from their household, never mind the infirm or those with other issues.

On the grounds of cost-efficiency and inclusivity, these amendments are very powerful. I thank the noble Baroness, Lady McIntosh, for introducing this group and the noble Lord, Lord Lansley, for taking us through the history of where this issue was. I say again: things have moved on. We need to look at a modern, efficient way of working. This amendment does not say that you would have to have virtual meetings; it gives local choice on the matter. How come a parliamentary Select Committee can operate virtually if it decides that that is convenient, as I think is still the case, but a parish council—or a planning committee, for that matter—somehow cannot? This is inconsistent and makes no sense, so I very much support these amendments. I hope that the Minister, the noble Earl, Lord Howe, will consider them carefully and reflect on them; I know that he is an enormously fair-minded man when it comes to these things.

[Baroness Pinnock (LD)]

This issue is part of a threesome that we have debated this evening: local democracy; fiscal and electoral decisions; and, now, how we hold meetings. How is it that Westminster can dictate how local councils should conduct themselves? That is the question I want to ask. I know that they deal with potholes; actually, I have a plan for potholes. Can we have migration of potholes? Do noble Lords think that would help? It seems to me that these amendments have a lot of merit; I will say why.

The first issue is travel. The noble Earl, Lord Lytton, raised this but only in relation to going a short distance. In their wisdom, the Government have created two new unitary authorities, which start their life in April. North Yorkshire is one. If you live in Selby or are elected to represent Selby, in one part of North Yorkshire, you now have to travel 56 miles to get to a council meeting in Northallerton. That is a 112-mile round trip to get to a meeting. You have to ask yourself: is that an efficient use of anybody’s time, and does it contribute to our net-zero ambitions?

Then there is Somerset, which Members of the Committee may believe is a smaller county, but if you live at one end, in Frome, and the county hall is in Taunton, at the other end of the county, that too is 56 miles and a 112-mile round trip. That is not cost effective or efficient in anybody’s life. If you live in Yorkshire, especially North Yorkshire, and you have to go across the dales or the moors in winter to attend a meeting, you know that sometimes it is simply not possible. That is one reason.

I hope the Government will take up the suggestion by the noble Lord, Lord Lansley, of bringing forward a government amendment, either shortly or at the next stage, to deal with this. As the noble Lord said, it is about efficiency. Virtual meetings lower costs and enable more people to get involved. If we are interested in local democracy, as I am, the more people who can get involved and engaged in decision-making, the better.

My final point, well made by my noble friend Lady Scott of Needham Market, is about the engagement and involvement of people who are otherwise excluded from being councillors because of either caring responsibilities or lack of transport. If you do not have a car in North Yorkshire, I do not know how you get to Northallerton. Maybe the noble Baroness, Lady McIntosh, can tell us, but I think it might take a couple of days.

For all those reasons, it is really important that if we want to reinvigorate our local democracy—which is essential if we are to narrow inequalities, which is at the heart of the levelling-up process—we need more people to be engaged. If we want more people to be engaged and involved, we have to enable it by letting councils decide for themselves whether they want virtual meetings. I fully support the principle behind all these amendments.