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

Roberta Blackman-Woods Excerpts

Thursday 27th June 2019 General Committees

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

It is a pleasure to serve under your chairmanship again, Mr Gapes. I thank the Minister for so succinctly outlining a pretty hefty statutory instrument.

I will not go through every single aspect of the draft SI—the Committee will be relieved about that—but I will check our understanding of a couple of issues. However, it is worth highlighting at the beginning that this SI, as we understand it, is the implementation stage of the change in the CIL system that the Government signalled they wished to make in the autumn statement in 2017—to reform and develop contributions—and that it follows a period of consultation, on which I wish to applaud the Minister, because we not only had the consultation but received the Government response before the SI came before us. That was extremely helpful.

The technical consultation asked questions about a policy statement that sought to make developer contributions more transparent and accountable. To achieve that, the system should reduce complexity, achieve swifter development, improve market responsiveness, increase transparency about where contributions are spent, and introduce a new tariff to support the development of strategic infrastructure. I will come back to that last point in a moment, because I cannot actually find it in the SI. Perhaps it is hidden somewhere and the Minister can enlighten me.

In putting forward that set of policy proposals, the Government asked questions about whether the consultation was proportionate; about removing the restriction preventing local authorities from using more than five section 106 obligations to fund a single infrastructure project—the pooling restriction, which we have already heard about—about improving the operation of the CIL levy, and about introducing a more proportionate approach to administering exemptions. They also asked about extending abatement provisions to phased planning permissions secured before CIL was introduced—the Minister explained clearly what the Government were doing in that regard—about applying indexation where planning permission is amended, and about indexing CIL to track the value of development more closely. We think those are all very sensible. Finally, questions were asked about removing regulation 123 restrictions, about seeking a proportion of section 106 agreements to monitor planning obligations, and about delivering starter homes.

It is worth recognising that, interestingly, the vast majority of respondents to the consultation were local authorities. We might expect that, because they administer the CIL system, but not as many developers responded as one might have expected. In general, there was support from local authorities for the provisions that enable more flexibility to be introduced into the system. Obviously, they liked the proposal to make consultation more appropriate in scale, and they agreed with the removal of the pooling restriction. There was less agreement about replacing penalties with surcharges. It is not clear exactly where we have ended up with that. A cap of £2,500 has been introduced, but it is not clear whether we are calling it a surcharge or a penalty.

There are a number of smaller changes to do with abatement on which the Government seem to have reduced their initial intentions. It might be useful to know why. I think there is general understanding of why the Government are changing indexation and what will happen with regard to CIL being applied to amendments. However, the changes make it more difficult for local authorities to plan for infrastructure spending: if they expect a certain amount of CIL from a development and that development changes, there might still be high infrastructure requirements, but they might not get as much money. The Government do not seem to have recognised that in what they have said so far.

On the replacement of regulation 123 lists with infrastructure funding statements, it is really good to give communities more information about the CIL—how it is applied and what it funds—but we need to be sure that that does not place a burden on local authorities that they will not be able to fund. Will the Minister reassure the Committee that the monitoring fee will cover the additional burden on local authorities of putting that list together?

I understand entirely why the Government wanted to provide an exemption from the levy to support the delivery of starter homes—years on, I think the number that have been delivered is zero—and local authorities have said, I think in exasperation, “If the Government think exempting starter homes from the levy might help to deliver them, fair enough”. However, that reduces the amount of money available for infrastructure, which is not a good thing. I hope that the Government will monitor that and see what impact it has on local infrastructure delivery.

The sector generally welcomes proposals to streamline consultation and to get rid of pooling restrictions. There is concern that some of the changes to CIL will reduce the funding for investment in critical infrastructure. In principle, there is support for infrastructure funding statements, but there needs to be an absolute guarantee that councils have time and resources to produce them. There is still concern that the Government did not quite deal with the issue of CIL regulations working properly between two-tier authorities. Local government asked the Government to give better direction on how CIL should be directed between county and districts where there are two tiers. I understand that the Government say, “Where it is two-tier, we’ll give the money to the county and there will have to be a negotiation between the county and the districts.” That is the current system, but it leads to some problems. Will the Government look again at that issue?

I have stood here on a number of occasions with amendments to CIL regulations in front of me. It is now almost impossible to track exactly where we are with CIL regulations because they have changed so much in the last few years. The whole local Government sector and the development sector are saying to the Government that now is the time not just to consolidate the CIL regulations into a single schedule but to rewrite where we are, so that it is clear what regulations are still in force, and what has been changed.

--- Later in debate ---

[Kit Malthouse]

As I am sure my hon. Friend knows, there are controls within the local authority environment, such as the section 151 officer and, of course, the district audit function, which make sure that local authorities comply with the rules, particularly where cost recovery is the restriction. We are saying that their use of funds should be proportionate to the output that they produce. However, it is important that we invest money in transparency. If we are going to have credibility in the system, it is important that we take those steps.

The hon. Member for City of Durham asked how things would work in two-tier authorities, and we think we can address that point in guidance rather than through regulations. It will obviously vary from area to area. We have some two-tier authorities and some that are unitary, and we will address that through guidance.

The hon. Lady asked about the strategic infrastructure tariff. I think I am right in saying that, as the strategic infrastructure tariff is not enabled under the same planning Act, it has to come in by separate regulation. When a combined authority requests such, it is our intention to bring forward regulations.

The hon. Member for Bassetlaw and the hon. Lady both raised the cap on self-build on what I said in my speech were ordinary people—I hate using that phrase, because I do not think anybody is ordinary. We have seen perverse situations in the media where a delay in the submission of paperwork for a commencement order means that somebody building a home for their own occupation suddenly gets a huge charge, sometimes up to £100,000. The regulations cap that surcharge at £2,500, which is the figure that seemed to be acceptable from the consultation. We are also saying that it is a surcharge rather than a penalty, and we are giving local authorities the discretion to collect it or not. We recognise that for some local authorities the cost of collection may exceed £2,500, and, therefore, whether they collect that will be at their discretion.

The hon. Member for Poplar and Limehouse raised section 106 money for London. There is a separate figure. I do not have it with me at the moment, but I will write to him with it.

The hon. Member for Bassetlaw asked whether Traveller sites and park homes were exempt. It is essentially up to the local authority to determine its CIL charging policy. It will vary from area to area. Fundamentally, it is for his local councils to decide whether they want to charge it on park homes or Traveller sites or showman sites.

The hon. Member for Poplar and Limehouse raised a good point about the likelihood of local authorities combining section 106 and CIL. Obviously, the removal of the restriction will allow them to do that. However, as I said earlier, there are still greater restrictions on section 106—it has to have more of a connection to where it comes from— but we think there is merit in allowing authorities to combine the two for larger infra- structure projects when it is required.

I think that I have broadly covered all the issues that have been raised.

[Dr Blackman-Woods]

The Minister has not covered consolidation. Paragraph 49 of the Government’s response to the technical consultation on reforming developer contributions says that the Government will look at further consolidation. Is that likely to happen?

[Kit Malthouse]

Yes, it is likely to happen. We will look at further consolidation. As the hon. Lady will know, much of the thrust of policy coming out of the Department has been to create certainty and transparency both for local people and for the development community. Although the regulations appear complex in their formulation, they are actually designed to simplify and to make the levy more predictable and less perverse.

There were a number of questions about whether the regulations will result in more money for the local authority or less. On balance, my guess is that it will result in more, not least because there will be more certainty and the perverse disincentive for development will be removed. Greater certainty reduces risk, which should in the end result in more development, but I am more than happy to look at what more we can do for clarity’s sake.

The hon. Member for Bassetlaw raised a very good question about bringing derelict property into use. I think he is right that in the regulations such properties will not be exempt. However, there is a wider policy issue for the Government to address about the general disincentives in the system for investment in a property to bring it back into use. For example, in my constituency there is a very good pub called the Wellington Arms in Baughurst, which was a derelict pub for many years. It was bought by a couple of guys who brought it into use. It is now one of the best restaurant-pubs in the area. I try to eat there on a regular basis—I have to save up to go, but it is brilliant.

Of course, the immediate impact of the new owners’ investment was that they saw the rateable value of their pub rose from £12,500 to £55,000, with a commensurate effective taxation penalty for the investment that they had made and the employment that they had created. There is a wider question for us, as we move into a new phase, if you like, of government, about where we want the balance between incentive and disincentive for investment to sit.

I am grateful to the Committee for considering the regulations.

Question put and agreed to.

Resolved,

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