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Planning-gain Supplement (Preparations) Bill

My Lords, I beg to move that this Bill be now read a second time. This is a short, straightforward and functional Bill which has nothing to say about the policy, nature or operation of a planning-gain supplement. It has been introduced to ensure the regularity and propriety of government expenditure in line with government accounting rules. It is a simple one-page, three-clause paving Bill, which gives authority for the Commissioners for Her Majesty’s Revenue and Customs, the Northern Ireland department and the Secretary of State for Communities and Local Government to incur expenditure on preparations for the potential introduction of a planning-gain supplement. Should the Government decide to proceed with a planning-gain supplement, we will, of course, legislate for it in the normal way, so this House will have the opportunity to consider and debate any proposals further. As has been recognised by the Treasury Select Committee of the other place, the Government have approached Kate Barker’s recommendation of a planning-gain supplement from her review of housing supply in 2004 with the utmost diligence and seriousness. The Government welcome the active parliamentary interest of both Houses in the planning-gain supplement. Development affects us all and I think noble Lords will agree with me that it is only right and proper that local communities should benefit from that development in some way. The Government announced in the Pre-Budget Report that they would move forward with the planning-gain supplement if it were deemed workable and effective. The Government believe that it would be wrong to rush into a decision on this matter until we are satisfied that any proposals will work as intended and that they are comprehensive and effective. Therefore, this Bill is only a paving measure to ensure that, should the Government go ahead with the planning-gain supplement, the infrastructure to build the systems to support it can be put in place and tested well in advance of any introduction—which, we have said, would not be before 2009. I am sure that the House will recognise that, should we go ahead with a workable and effective policy, a workable and effective IT system to support it would be equally as important. The prospective operation of a planning-gain supplement has been widely debated during consideration of this preparations Bill in the other place. It is worth setting out the aims of the issue before us. Planning-gain supplement aims to help facilitate the creation of new development and economic growth by providing additional resources to finance the critical infrastructure—from roads and transport to schools and health facilities—needed to make growing communities sustainable. It is important to point out that the planning-gain supplement should not be seen in isolation. This Government have implemented important reforms to bring forward more land for housing, and planning-gain supplement is part of a broader agenda. The Government recognise that development needs to be supported by adequate infrastructure. There is no use building a housing development if the people who live there are not supported by the necessary facilities. Such facilities that are needed will, of course, be dependent on local priorities. I feel there is a widely shared view that developers should make contributions to finance that infrastructure; and there is an evolving consensus around the need for additional infrastructure to support growth and for capturing land value as a means of providing that infrastructure. The planning-gain supplement is one solution, seeking to solve a national problem at a local level. The Government believe that a planning-gain supplement can be a fairer, more efficient and more transparent way of capturing land value uplift than the current planning obligations regime or the theoretical and untested land value tax. The House will note the history of development gains taxation. Indeed, some commentators have pointed to the history of past taxes as a means of comparison with the Government’s planning-gain supplement proposals. However, closer examination of these past taxes would show how very different they are from planning-gain supplement. The Government have made it very clear that, unlike past development land taxes, the planning-gain supplement, if introduced, would: be levied at a modest rate in order to preserve incentives to bring land forward for development; be based on clear and simple definitions of value; and minimise avoidance opportunities. Some have argued that a tax based on property valuations is simply unworkable and that valuations are an art, not a science. However, I point out that valuations are an integral feature of other taxes which have broad acceptance, such as business rates. Of the 60,000 property valuations each year for inheritance tax and capital gains tax purposes, only a handful of cases are taken to the Lands Tribunal. In addition to this, business already makes multi-million pound decisions on the basis of property valuations. The Government acknowledge that there may be complex cases. This is why we are specifically consulting the industry on our approach to valuations for the planning-gain supplement, to ensure that we fully understand any issues. The Government have proposed a self-assessed valuation system based on clear definitions and well understood assumptions, which would be evaluated by professional surveyors at the Valuation Office Agency on a risk assessment basis. The Government have made it clear that the planning-gain supplement is an essentially local measure. It is a hypothecated tax, in which 70 per cent of the proceeds will be returned directly to the local authority area from where they derived for local infrastructure priorities. This unprecedented commitment by government is to ensure that all communities better share in the wealth generated by their planning decisions. It should serve as an incentive for communities to support needed growth. The Government announced in the 2006 Pre-Budget Report that all planning-gain supplement revenues generated in the devolved Administrations would be returned to the country in which they were generated, and not be subject to the same conventions as those in England. In considering this preparations Bill, the Government have welcomed debate on the underlying policy and operation of a planning-gain supplement. Indeed, the Commons Communities and Local Government Select Committee has already produced an insightful report, which has been important in shaping the Government’s proposals. Alongside that, the Government are concluding the three detailed consultations that we announced in the Pre-Budget Report and examining the responses received. Although any final decision on the implementation of a planning-gain supplement would be for another place, I extend the Government’s thanks to all those who have participated in the consultation exercises. These consultations indicate the Government’s commitment to developing the planning-gain supplement in a prudent manner on this policy, and to consulting not just on its principle but on its detail. That consultative approach will continue. I know that many in this House have significant expertise and that if the Government decide to introduce the planning-gain supplement, then substantive legislation will be brought before Parliament. Of course, the Government would publish a full regulatory impact assessment, so I can promise this House that should the Government proceed with the planning-gain supplement there would be more opportunities to debate the proposals. I return to the Bill before us. This preparations Bill is merely a paving Bill to authorise the Commissioners for Her Majesty’s Revenue and Customs, the Secretary of State for Communities and Local Government and the relevant Northern Ireland departments to incur preparatory expenditure. The House will note that, as the Bill deals solely with authorising expenditure, the Speaker of the other place has classed this as a Money Bill, under the terms of the Parliament Acts 1911 and 1949. HMRC’s commissioners need this power because administering the planning-gain supplement is not a function they currently possess, and without the power they would not be able to make the preparations necessary to administer that in time for 2009. The Secretary of State and the Northern Ireland departments need these powers because, while they possess common-law powers to incur expenditure, they need regular parliamentary authority in accordance with the Public Accounts Committee concordat and the new service rules in government accounting for any activity on which expenditure could exceed £1.5 million over more than two years. While the Bill authorises those three parties—HMRC, the Secretary of State and the Northern Ireland departments—to incur preparatory expenditure, the burden for building the administrative systems and ultimately for managing the planning-gain supplement will fall primarily to one; namely, Her Majesty’s Revenue and Customs. Its expenditure prior to introduction of any further legislation will include: new information technology for the planning-gain supplement and adaptation of HMRC’s existing system; designing the business systems necessary to administer the tax, and putting appropriately skilled staff in place to manage it; and equipping the Valuation Office Agency and the Valuation and Lands Agency (Northern Ireland) with the necessary facilities to help administer the planning-gain supplement, including staffing, training, accommodation and IT equipment. These administrative functions would, of course, have to be based on further substantive legislation, and be properly tested and in place prior to implementation of the planning-gain supplement, which we have said would not take place prior to 2009. Expenditure incurred by the Secretary of State for Communities and Local Government prior to enactment could include the adaptation of existing government IT planning resources—specifically, information technology used to monitor the planning system known as the planning portal, which is administered by that department. The Bill, and therefore the implementation of the PGS, will not require any preparatory administrative functions to be carried out by the devolved authorities in Scotland or Wales, although the supplement would apply throughout the United Kingdom if introduced. As I have mentioned, the Government have just concluded a round of consultation and are analysing the responses. The passage of this Bill is neededin advance of any decision on a planning-gain supplement, so that if an affirmative decision is taken later this year, then the Government can start to build the IT administrative systems immediately to support it successfully and in a timely manner. It is in no one’s interest to proceed with implementing the planning-gain supplement until such time as we are satisfied that the policy is workable and effective as a means of capturing land value uplift, to finance infrastructure and support growth. The Financial Secretary to the Treasury clearly stated during the passage of this Bill in the other place that if the Government decide not to go ahead with the supplement, then no further expenditure will be incurred under this legislation. If the proposals to introduce a planning-gain supplement are not confirmed, there will be no expenditure on preparations going beyond the Government’s current work on the feasibility and workability of the scheme. With this Bill, we are trying to ensure that, if introduced, the planning-gain supplement would be administratively efficient and customer-friendly. Getting the IT right is absolutely imperative. To do that requires HMRC and its IT partners to have sufficient lead time to build and test those systems properly. In introducing this Bill now, the Government seek to avoid a situation where a decision to progress the planning-gain supplement is taken later, but the authority to commence the design and building of systems needed to run the programme is not there. Your Lordships will know only too well that the parliamentary calendar may not allow the timely enactment of such a Bill if introduced later this year. Such delays would reduce the time available to design, build and test the necessary IT and therefore could create greater risks to ensuring a smooth introduction of the policy. In conclusion, the Bill is simple and straightforward; it is to authorise expenditure to allow the Government, pending further decisions on whether to introduce the planning-gain supplement, to prepare adequately for the administration of this policy prior to implementation. A number of key points of consensus have emerged, as I have pointed out, around the need to support growth with necessary infrastructure, and for the principle that land value capture is a viable means of providing finance for that infrastructure. The Government have welcomed this debate. We have always been open to consultation on our proposals for the planning-gain supplement, and expect further examination of this policy if we choose to advance it toward introduction. Put simply, this short and straightforward Money Bill enables the Government prudently to prepare for the introduction of a planning-gain supplement, enabling sound management and efficient delivery of the underlying policy—on time and on budget—should we decide to go in that direction. I commend the Bill to the House. Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)