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Planning-gain Supplement (Preparations) Bill

The hon. Gentleman makes an interesting point. However, if rural areas suffer development and generate revenue for the wider good, funding resulting from that should largely be spent in the area where the development has taken place, not remotely, many miles away or in a different area, which I think is the intent behind the 30 per cent. funding going centrally for distribution on a basis that we know not, at this point. I was about to address a source of revenue for local authorities that they would lose under the proposals. At present, section 106 agreements can give rise not only to some community gain in development terms, but to substantial funds that local authorities can use to spend according to their own priorities, which might or might not be directly related to a planning issue—or alternative planning issues, such as building a car park or more affordable housing. That is one of the few sources of discretionary revenue available to many smaller councils. It would be difficult for those councils if they were to lose that revenue source as a result of the introduction of planning gain supplement. Let me turn to the scope of the proposed planning gain charge. There has been much comment in the various Government consultations on how it should take effect. We heard from the hon. Member for Stoke-on-Trent, North (Joan Walley)—whom I am pleased to follow—that many aspects remain opaque at best. She called on her Front-Bench colleagues to pursue discussions with interested parties to try to define the scope of the tax clearly so as to prevent a number of anomalies from arising. I was pleased that the Financial Secretary said that home improvements would be excluded from the tax. I was also interested when he said that the tax would apply to small-scale residential developments. I am concerned that it also appears that it would apply to affordable housing. If that is the case, land brought forward for affordable housing would become more expensive, which might restrict the supply of affordable housing, particularly in rural areas where schemes might be small or for single plots, and therefore be developed on their own, not in conjunction with larger market housing schemes. I urge the Government to consider in detail the rural-proofing aspects of the tax when drawing up any eventual Bill. We currently face challenges in our rural economy in trying to encourage farm diversification and appropriate environmental improvements in rural areas. It would be a great shame if they were put at risk or jeopardised by an ill-thought-through planning tax that could, for example, affect the construction of waste slurries on an agricultural holding, which would suddenly require planning consent, or affect such things as flood defences or waste energy plants. We have heard plenty of historical examples, nicely encapsulated by the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), of the fact that a lot of effort goes into finding ways around land tax surcharges. That has been the history of all five of the previous schemes introduced, as has been rehearsed this evening. My principal concern about any such tax that the Minister seeks to introduce is that it is highly likely to reduce the amount of land brought forward for development, rather than to increase it. That has been the history of previous attempts, and I fear that it would be the history of this one. The reduction of the supply of land will have the inevitable consequence of increasing the cost of available land, in contrast to the Government’s arguments in response to the consultations. Therefore, it will have the consequence of increasing house prices. I shall now briefly turn to the section 106 scheme now in operation across the country. It has a number of acknowledged difficulties, but it has worked relatively well. In my area it works well in delivering affordable housing and other planning gain to the community. My concern is that if it is to remain, how are we to avoid the ramifications of a double taxation system? If local authorities can still impose section 106 agreements for community benefit and we also have a planning gain supplement of whatever percentage the Government choose, we run the risk of driving development out of an area because of excessive demands on the developer and the elimination of profit, which drives development in most cases. If planning authorities continue to levy a section 106 agreement and retain 100 per cent. of the cash contribution—if that is the manner in which the charge is made—there will be little incentive for them to do anything other than secure as high a section 106 agreement charge as they possibly can, rather than charging a planning gain supplement, at least 30 per cent. of which they could lose. The interaction between those two charges could lead to some very perverse consequences. The Government need to establish a clear explanation of, and division between, how those two charges will work. Another question is how the levy will be paid and at what point. I am thinking in particular of greenfield land, which is subject to a long development lead time, but the same is true of some brownfield land. There is a significant brownfield site in my constituency that the local regional development agency is hoping to contract to purchase. It has been under-exploited since manufacturing ceased a couple of decades ago, and it has been a blight on the edge of Bridgnorth. Such land deals take a long time to negotiate and are normally done by means of an option rather than a direct contract, and an option is not a contract. If the charge is to be levied at the point at which the gain takes place, that might well be many years after the contract has been signed—when the land is developed and the property eventually built on it is sold to an investor. At what point will the charge come in, and which party will bear the charge? All these things need thinking through very carefully to ensure equity in the process, and to ensure that whoever secures the gain also endures the pain. Finally, I want to give an example of a development tax in operation in my constituency. It applies to residential developments as small as single dwellings, and was introduced by South Shropshire district council only three months ago, at the beginning of October. The Liberal Democrat-controlled council introduced a tax of 50 per cent. of build cost, and in line with its calculations, it has charged £60,000 per dwelling. The tax was introduced following a moratorium on open market house building on single plots for anything other than affordable housing. Demand has increased in my constituency, given the severe shortage of housing in the area. The House will not be surprised to hear that despite that pent-up demand, there has not exactly been a flood of applicants to pay this considerable tax. In fact, there has been only one application for a single plot since this magnificent policy was introduced. Of course there has not been a flood of applicants, because this is an excessive tax, not a reasonable one. That example illustrates well to the Minister the importance of proportionality. As a number of Labour Members have said, the tax must be introduced at such a level that it will not restrict yet further the amount of available land for development. It must be seen to be a reasonable tax that is bearable to pay, in view of the gains that have been received. In my view that is the best way to ensure that if the tax is eventually introduced, it will not reduce supply and drive up costs.