Planning Bill

moved Amendment No. 436BC: 436BC: Clause 200, page 123, line 32, at beginning insert ““Except as provided in section (Charities relief),”” The noble Lord said: There are three amendments in this group, in the name of myself and others, that provide for a comprehensive exemption in the Bill for registered charities. I speak on behalf of the Charity Tax Group, the Churches’ Legislation Advisory Service and the Charities’ Property Association, of the latter of which I am currently chairman. I also speak in response to numerous letters that I have received from concerned individuals. As I explained at Second Reading, the effect on charities of the proposed CIL is potentially very serious. Charities do not benefit financially when granted planning permission to develop land or property for their charitable purposes. Unlike a commercial developer, charities developing their own property for their own purposes will have no end-point sale from which to pay the tax. If no concession is made and charities are obliged to pay CIL, they will have either to pay for it with their existing funds or to try to raise more money—which, in the future economic climate that we are assured is recessionary, will be quite difficult. At present in this country and in virtually every other country in Europe, charities do not pay tax. In the UK they are entirely exempt from income tax, corporation tax, capital gains tax, and receive compulsory relief of 80 per cent from council tax, with the other 20 per cent being given voluntarily by almost all local authorities. Charities also have more recently received a total exemption from stamp duty land tax. This general exemption from taxes rests on the fact that charities are voluntary bodies, living primarily off voluntary donations which, by law, must be used exclusively for the public benefit. One quid pro quo for these exemptions is that they are very strictly regulated by the Charity Commission, with their contribution to public benefit continually under review. There is a general recognition that charities get or give more value for money than anyone else, including government, because they are so close to their beneficiaries and attract a massive number of volunteers—over half the adult population of the country, in fact. They are unique engines of social cohesion and add huge benefit to our community infrastructure. Of course, the Government recognise this and are currently engaged in a programme of encouraging and making better use of this so-called third sector. Meanwhile, CIL could be particularly damaging to charities. For instance, the liability of charitable housing associations and social housing would be huge, and to what end? There is trouble enough funding social housing. In this context, I refer to the amendment of my noble friend Lord Best, which I strongly support. Anything which gets in the way of the provision of affordable housing should be resisted at all costs, especially, in my view, rural affordable housing. There is still a great lack of clarity regarding the relationship between CIL and the Section 106 agreements, which is yet to be ironed out. However, I will let my noble friend speak to his amendment, saying only that I support it. On the general exemption for registered charities, schools and colleges need to develop their facilities for the furtherance of their charitable purposes, and the same goes for churches and village halls. A recent survey of village halls in Devon alone shows that over the next three years, £23 million will be spent on extensions, improvements and new build to village halls in that county. As for housing associations, what on earth would be the point of them paying CIL when they should probably be recipients of the funds? It is like a money merry-go-round. On a larger scale, the Wellcome Trust is hoping to embark on a joint medical research facility at King’s Cross with Cancer Research UK, MRC and UCL. This project will cost something in the region of £500 million and CIL, if charged, could effectively kill it. These examples will be replicated up and down the country. As certain as night follows day, if charities have to pay CIL, they will have to cut back on their activities—activities which are recognised by all to be the best value for money that society can have. There can be no possible point in charging them this levy. Without a full exemption from CIL, it is certain that many new charity-led community and redevelopment projects will not proceed or will be restricted. To give credit where it is very much due, the noble Baroness and her department have recognised the importance of everything I have said and of exempting charities from CIL. I thank the noble Baroness very much for her kind personal attention to this matter and for the time that she and her department have spent trying to resolve it. But unfortunately, government Amendment No. 437C does not meet the needs of the charity sector. First, it does not state unequivocally on the face of the Bill that charities should be exempt from CIL. It leaves too much to secondary legislation and subsequent regulations which, I believe is very dangerous, as do most people. It also leaves too much discretion to individual local councils. Charities will not have the resources or expertise to argue for specific relief with each relevant charging authority unless the principle of the relief is enshrined in legislation. In our view, discretionary relief is not sufficient. Without going into too much detail here, references to exemptions ““in specified circumstances””—whatever that means—do not sound very convincing. In addition, too much discretion is given to the charging authorities. As I say, charities might find themselves having to negotiate individual projects with individual councils. Will they find themselves being forced to go where they can get the best deal on CIL, which may not be ideal for their purposes? You have to bear in mind that some charities cannot pick and choose so easily; for example, there are limits to where a new lifeboat station can go. Then there is a reference in the government amendment to a charity, "““of a description specified by the regulations””." That is very dangerous. Under English and Scots law, charities operate by definition for the public benefit. We would not want to see charitable purposes cherry-picked by either central or local government. If a body is regarded as charitable by the Charity Commission or the Office of the Scottish Charity Regulator, that should be a sufficient test. We are looking for a definitive exemption in the Bill, as in our amendments. The Government have indicated that seemingly the only reason why they cannot agree to our amendment is that they are concerned that any concession might breach the EU rules on state aid. We entirely understand that the Government are under an obligation to observe EU law, but the group of charities supporting my amendment have consulted a specialist in European business law, Professor Martijn van Empel, who teaches both at the international university in Rome and the University of Essex, and who concluded that an exemption for charities would not affect trade between member states and would not therefore run counter to the ban on state aid as provided by article 87 of the EC treaty. I realise that lawyers disagree—that is how they make their money—and that in this case government lawyers are not so certain, but it seems strange that in virtually every other country in the EU apart from Sweden charities can be exempt from tax, including CIL equivalents in some member states, and exempt without challenge. It is also strange that charities in this country can be exempt from every other tax—which, considering the sums involved, would seem far more serious breaches of the rules than an exemption from CIL without also provoking a challenge. Even if one assumes that no challenge has come because the exemptions from income tax and capital gains tax have been in place too long to be challengeable, why is it that the Government only relatively recently applied the exemption in full for the stamp duty land tax? Our amendment is based on the exemption clauses referring to stamp duty land tax, on the basis that if these clauses were acceptable to the Government then, what is good for the goose must be good for the gander. I get the feeling that this is a very good example of UK gold-plating to EU legislation, which is a defect to our system that I have come across in many other fields in the past. I regret to say, therefore, that in spite of the Government’s worries about state aid, we would still insist on a mandatory exemption for charities in the Bill. I beg to move.