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Planning-gain Supplement (Preparations) Bill

Well, I am not sure that the juggernaut has entirely ground to a halt, because I still sit on the Chancellor’s preparatory committee, but I think that the brakes have indeed been applied. I want to pay a compliment to the Minister, who has dealt with the Bill in a good-humoured, tolerant way. I think that he has taken every intervention that has ever been thrown at him, and as a result we have had a much more substantial discussion that we would have done otherwise. I shall briefly summarise the arguments for not proceeding with the Bill, which are of course based on wider arguments about the planning gain supplement principle. The first argument is that the Bill is precipitate, as there is no consensus on it. The hon. Member for Rayleigh (Mr. Francois) summarised the objections of various institutional bodies, and of local government, which is a crucial partner in the proposal. I add that there is need for party-political consensus, too. Certain policies need to span generations; pensions policy is one of them, and policy on the planning gain supplement is another. A lesson has been learned, because different parties have tried to introduce a similar measure, starting with Lloyd George and Winston Churchill in the 1906 Government. Attlee had a go at it; Wilson had a go at it twice; and even Mrs. Thatcher had a try, before abolishing the measure. Everybody has had a go at it, but it has been difficult to implement the measure, partly because of vested interests, party-political opposition and technical problems. It is essential that a much stronger consensus is developed on the idea. It is the second objection that was behind the amendments that I tried to move in Committee, and which the right hon. Member for Greenwich and Woolwich dwelled on. It concerns the way in which the measure takes away from local autonomy, which is already limited in respect of planning matters, and weakens the scope for section 106 agreements. The right hon. Gentleman gave some very good examples from south-east London, showing how creative and experienced planners can extract value for their community, in a way that is appropriate to that community. There are many different ways in which communities seek offsets; it can be through local infrastructure, or through wider infrastructure, such as that relating to health and education. Some councils want cash, and others want affordable housing. The balance is different in each case. My constituency houses the mecca of rugby union, and the Rugby Football Union has just expanded one of its major stands. As a result of negotiation through the planning process, a planning gain agreement has been signed that provides for, among other things, improvements to the local town centre, a system of buses to take fans to local railway stations, and part-access to the conference centre for local performance arts bodies. Those are local concerns that local planners and their representatives understand, and an optimum mix has been obtained. In an area planning application, the Rugby Football Union made the concession of supporting a local residents’ parking scheme, intended to deal with the problems caused by fans on match days. That local input in the negotiating process will be missing once there is a national tax, which will simply become a revenue source. To take another example, I recently visited a rural district where there is intense pressure on affordable housing. It so happens that the local planners are sophisticated and use section 106. In fact, they use it in a very aggressive way, and they have gone beyond the normal de minimis limits. Normally, the Government suggest that affordable housing offset should be asked for once 12 residential units are to be built. The council in question was very aggressive, and said that for every new private residential home, one affordable home should be provided. That is quite a tough policy, but given the context—there was a great deal of development uplift, and a great scarcity of affordable housing—it worked, and the council obtained a lot of affordable houses. It is the council’s judgment and its call; it understands the local balance. That is what section 106 agreements allow, and why use of it should be nourished, rather than stifled. The right hon. Gentleman was right to acknowledge, as I do, that the system is patchy. I was struck by the comments of the Minister, who made the good point that many councils do not use section 106 at all. Clearly, there are many smaller developments for which use of section 106 may not be appropriate, but the Minister quite correctly asked why some councils do not pursue that route even for large projects. It is a good question, and I am not entirely sure what the answer is. I suspect that, in some cases, there is not very much development uplift. There may not be the same pressures, and in many industrial parts of Britain, the land is contaminated and does not have a great deal of value to developers. It may well be that many councils are just not working with the system properly and have not got used to it. That gives us all the more reason to do a lot more to spread good practice, even if we do not proceed with the scheme. We should develop pilot schemes, whether they involve tariffs or take other forms, to make the existing system work much better. I have given two compelling arguments for not taking the Government’s route—the first was the lack of consensus, and the second was the draining away of local authority—but there are others, too. The third point is that the scheme is unnecessary. There is, of course, a strong philosophical argument for obtaining planning gain for the community. Clearly, if there is an uplift through planning approval, and if that uplift is considerably in excess of the opportunity cost for the developer—the risk-adjusted return, which obviously has to be considered—there will be a gain to which the community might reasonably want access. However, discussions on that point have largely ignored the fact that there is already a mechanism to ensure such access: as well as the section 106 agreement, there is capital gains tax. As a result of the planning gain supplement, many developers will pay under section 106, and then pay up to 40 per cent. capital gains tax, and then pay the planning gain supplement, too. We are not told the planning gain supplement rate, but it is an open secret that it is 30 per cent. Section 106 plus 40 per cent. plus 30 per cent. would be quite a high rate of tax. Of course, the Government say that in practice they would not apply full capital gains tax, but would instead give a tax offset, and that in turn would reduce the revenue. The question of whether the measure is necessary, even in revenue terms, has to be posed. Fourthly, there are basic issues of complexity. If the Government proceed with a substantive Bill, we will find out whether they would impose de minimis limits of some kind on small developments. That would greatly reduce the bureaucracy involved, but some things are inherently complex, and that includes big development projects. They often involve pieces of land with different owners, obtained at different times. Calculating the planning uplift for a big development is inherently a difficult and complicated process. Planning itself is complicated. I have never heard a proper answer to the case that I cited on Second Reading. The external cladding of a building, for example, may well require planning permission. Does the valuation have to be calculated for tax purposes? There is enormous administrative complexity associated with the planning process that could well make it prohibitive. The final point, which has been made by the right hon. Member for Greenwich and Woolwich and others, is that PGS might create disincentives to development. There are, however, cases where the impact may be positive. The right hon. Member for Wokingham (Mr. Redwood) came up with a slightly perverse example, which was nevertheless valid. Some developers may be panicked into developing because they feel the planning gain supplement coming. There will be other cases of developers who have planning permission, have paid the tax and may therefore be discouraged from keeping the land in a land bank. They have already paid the levy, so why not develop it? There may be positive incentive effects, but it is much more likely that developers will be discouraged from making planning applications. Experience suggests that that is overwhelmingly the case. Given that there are so many reservations about the fundamental principle, which are widely shared by practitioners in local government and across the House, it seems extremely unwise and unnecessary to proceed with the paving Bill.