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Planning-gain Supplement (Preparations) Bill

I have to tell my hon. Friend the Financial Secretary that the reservations that I voiced on Second Reading remain real. I am speaking to express the hope that during the consideration that the Treasury will give to representations submitted during the course of the consultation, it will consider very carefully indeed reservations expressed by a wide range of authoritative commentators who believe that the Bill—it is, admittedly, a short paving Bill, as my hon. Friend emphasised—is taking us down a high-risk route and that it could well lead to an outcome that he, I and many hon. Members would deeply regret. I speak not from the point of view of someone who has any doubt about the merits of raising a significant contribution from the profits that accrue from development to fund necessary and desirable infrastructure and social provision that would enhance those developments. I wholeheartedly endorse the principle of ensuring that developers contribute towards a more sustainable and rounded development than would otherwise be possible and the principle that the community, as well as the developer, should receive a true gain from the process. The issue is not the principle of raising revenue from the profits of development to fund necessary infrastructure and social provision, but the mechanism by which those funds are raised. I know that the Government’s argument is that the implementation of the existing system, which is largely based on the section 106 mechanism in England and the section 75 mechanism in Scotland, is patchy. I accept that entirely. However, I speak as someone who represents an area in which the mechanism has been used to good effect by a local authority that has been absolutely clear in its objectives and open in its relations with developers. It has wanted not only to ensure that there is a fair contribution—often quite a significant one—but to give the certainty that that contribution will go into the area concerned to deliver demonstrable and tangible benefits for the benefit of not only the wider community, but the developer. I have seen that happen in a range of areas. The millennium village in the Greenwich peninsula is widely spoken of as an exemplar of sustainable new development and high-quality housing. It has achieved high environmental standards and has a mix of tenures, with owner-occupiers, tenants and people on intermediate tenures living together in a harmonious framework. The attractive ecology park makes the area a desirable place in which to live. A primary school was taken in one form of its existence on to the site so that there would be a school there as and when residents moved into the development. The school has the capacity to expand to two forms of entry so that it can absorb the additional pupil numbers that come as a result of the development. A health centre provides high-quality health care for people in the new development. All that, together with the transport infrastructure, such as the Jubilee line and other transport facilities, makes the development highly sustainable. The development has benefited hugely from developer contributions, and everyone has seen the benefit of that. The developer has received a benefit because the contributions have made the development more attractive. People want to come to live in the area—they are moving not to a frontier town, but to somewhere with an attractive existing park, a school and a health centre that were in place from the early stages. The community has benefited from the contributions because it has such facilities, which was not the case for earlier developments that had far less good social infrastructure throughout their early stages. The development in the 1960s and 1970s in Thamesmead, in my neighbouring constituency, was often heavily criticised because it was predominantly residential and there was a shortage of the necessary facilities and infrastructure to allow a vibrant community to be in place right from the outset. A lot of work has been done subsequently to transform Thamesmead, but its start was not auspicious because of a lack of the extensive employment and social infrastructure that should have been in place at the beginning. We have learned lessons from history, and new developments in our area are being carried through in such a way as to ensure that developers make a significant contribution towards necessary infrastructure. As I have implied, developers are generally happy to pay the contribution, but there are few developers who are keen to pay. They see the benefits of the contribution and appreciate the certainty that if they pay the contribution, they will get their planning permission and have a development of which their new residents, tenants and occupiers can all be proud. There is a win-win situation. I can cite not only the single example of the Greenwich millennium village, although that is a fine example, because there are many others. Although the Meridian Delta Ltd. development on the same Greenwich peninsula has not yet begun, contributions have already started to be made towards improving road access to the site, which will be necessary to cope with the larger number of people living there. Although I am in favour of more sustainable forms of transport, some improvements to the road network were necessary. Those improvements are being funded in advance of the beginning of the development, but I am afraid that that would not be feasible under the formula proposed for the planning gain supplement, under which sums would be payable only at the start of the development. In addition, those funds would be payable to central Government, so it would probably take more time for them to come back to the locality. There is thus a question of timing. Developers are happy to make a contribution at the beginning of the process because they know that that is necessary to facilitate the development from an early stage. The question of valuation is the nub of the issue. The sites on the Greenwich peninsula that I have described were profoundly polluted before any development began. They were the relics of our industrial past—I think that the Greenwich peninsula housed the biggest gasworks in Europe in the early to mid-19th century. There was an enormous residue of heavy metals and other pollution in the land, so there were vast remediation costs involved in making development possible on the land. Of course, any developer who was faced with the prospect of paying the planning gain supplement would have at its disposal a bank of well-qualified advisers and lawyers who could identify all such offsetting costs and would be able to demonstrate, with extraordinary skill and facility, that when account had been taken of the remediation costs and the other offsets necessary to secure a successful development, such as discounted commercial lettings in the early years to ensure that tenants are found for properties, the uplift in value associated with the grant of planning permission would be either very small indeed, or perhaps nothing at all. However small the percentage take of planning gain supplement, a very small percentage of a very small or even non-existent figure is of no great value or even nothing. Yet there may well be very considerable downstream development gains. These are big developments that will only really come into their own over 10, 15 or 20 years, at the end of which profits will be considerable. The section 106 agreements being negotiated by my local council—with MDL in relation to the peninsula, with Berkeley homes in relation to the Woolwich Arsenal, and on other very big sites—take account of long-term profit and benefit, rather than simply the immediate uplift in value associated with the grant of planning permission. I therefore put it to my hon. Friend the Minister that in these examples there is a likelihood that a planning gain supplement introduced on the principles that the Government propose could well result in a reduced take overall, once the developers have demonstrated all the offsetting costs and the limitations on the increase in value attributable to the grant of planning permission. They will be able to minimise their potential contribution. There is a serious risk that on some of these sites the public sector take will be less than is being secured under the section 106 system. That would be a tragedy and a disaster. First, it would involve the parties—the local authority, the developers and the community—no longer working together harmoniously to secure benefits to the community. There would be a separate process in which there would no longer be an incentive for the developer to work positively and constructively to get the best outcome. The incentive would be for it to minimise its liability for planning gain supplement—that would be a natural reaction. Secondly, the local authority would be worried that it would not get sufficient money from its 70 per cent. share of the planning gain supplement to provide the infrastructure that it wanted to provide—and was able to provide using the existing section 106 framework. Those are genuine fears coming not from the developers but from local authorities and other practitioners who have been involved in facilitating development and using section 106 to secure benefits to the community. They fear that the planning gain supplement could deliver less than the current arrangements. That brings me to the obvious question: why are the Government introducing this measure? There are a number of reasons. One is the recommendation from the Barker report which suggested this option. If we look back at the context of that report, we may well feel that this is not one of the happiest of its recommendations. It was in many respects a trade-off because of other pressures on the planning system to deliver more houses. I am not sure that the mechanism will deliver, for reasons that I have already explained, or that it is entirely appropriate. I certainly think that the Government have got themselves into a position where the planning gain supplement is becoming a totem, and there is a risk that it will proceed despite all the reservations that have been widely voiced about its potential downsides. That will be because it has got into the currency, because the Barker report recommended it, because in responding to the report the Government said that they would proceed with it, because they consulted and following that they said that it was a lead option, and because they then introduced a paving Bill allowing them to take further steps. In my most pessimistic moments, I see a remorseless process, with the juggernaut going down the road through various stages and reaching a point where it becomes unstoppable. I fear that if that happens, we will find ourselves, in two or three years, seeing the introduction of a tax which has serious disadvantages, including its possible impact on certain communities, such as mine, which has benefited from the existing section 106 framework, and which will end up proving to be a problem that the Government could well have avoided. I hope that, even at this late stage, my hon. Friend and his colleagues in the Treasury will reconsider. I do not believe that section 106 is incapable of delivering the benefits that should be delivered to facilitate development. I have accepted entirely that the performance is patchy. We should be looking much more closely at options for sharing expertise, for sharing the good practice of those who are doing things well and for assisting those local authorities that are not currently making the most of the section 106 system, to ensure greater benefits for their communities from the profits of development. That is not unfeasible. I am sure that there is scope for doing that, and I am sure that within the sums that have been allocated under the paving Bill it should be possible to provide expert advisory units to support local authorities to do the job better and to gain more from the section 106 process. I also think that there is considerable scope for developing innovative thinking such as that in Milton Keynes, I note that my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) is here and I know that she will be more expert in the matter than I. English Partnerships, the local authority and other development interests in Milton Keynes worked for some time to produce the concept that was called, perhaps inappropriately, a roof tax, although it is more a tariff system. The benefit is that it gives certainty to all parties that there will be proceeds from development and that those can be used to fund the necessary infrastructure and social provision.