Planning Bill

Section 106 certainly is in situ and local authorities can use it, as they do now, for a variety of purposes if they see fit. There can be all sorts of negotiated arrangements that follow from that. No one is going to put a stop to any of that. Our Amendment No. 437 deals with the definition of ““development”” by amending Clause 200. It is important to get that clear because we need to set out exactly what is liable to pay CIL. Clause 200 currently provides that development will be defined in regulations; the Delegated Powers and Regulatory Reform Committee noted that in its 12th report. By providing a definition in the Bill we hope we have met its concern, and it has not commented further on that. The amendment defines development in line with the proposal we set out in August: it will generally be development about buildings that should be liable to pay CIL. The definition sets out that the creation of a new building or anything done to, or in respect of, an existing building is development for CIL purposes. The amendment provides that the CIL regulations may modify this definition for specified works or changes of use or structures. ““Buildings”” is the right definition because it flows from the purpose of the CIL regime in Clause 198(2), which is to ensure the funding of costs associated with the delivery of infrastructure to support the development of an area. The assessment of those infrastructure needs is predominantly about the location of people through their occupation and use of buildings. This approach also builds on the fact that many tariff schemes do not cover this sort of development. We could spend some time discussing the precise boundaries of our definition, but I think I can forestall that by explaining that the fact that a development relates to a building does not automatically mean that it will pay CIL. It will also need to be the sort of development that requires some sort of planning permission. The amendment proposes a regulation-making power to maintain clarity over time in the light of experience. As a consequence of Amendment No. 437A, it is necessary to amend Clause 200(3). Amendment No. 437B removes the requirement in Clause 200(3) for the CIL regulations to define development. I hope that those are the sort of certainties which noble Lords welcome. I turn now to the provision of affordable housing through developer contributions. The noble Lord, Lord Best, is not a man to tangle with on these issues. As usual, he has been exceptionally eloquent and powerful. I could not agree with him more that CIL must not hinder affordable housing; it must not bring disastrous unintended consequences. I am entirely of a mind with the noble Lord. Concerns felt by the affordable housing sector that the introduction of CIL will squeeze contributions for affordable housing has been raised with me, and we have discussed them with the charitable sector. I have said many times in this House that the provision of affordable housing is a priority for the Government. CIL is designed to complement and not reduce existing developer contributions for affordable housing, especially at this time and for all the reasons that the noble Lord made very clear. I shall set out the rationale behind our Amendment No. 437C, which provides exemptions for charities, and also address Amendments Nos. 444A and 437AA. Amendment No. 444A would require that affordable housing contributions are calculated without reference to CIL liability, and that should a developer’s return on investment fall below a defined threshold, CIL should be reduced on a case-by-case basis. The noble Lord is concerned that the provisions for CIL will mean that developer contributions for affordable housing could in certain circumstances be squeezed. The current planning obligations regime has become an increasingly significant method of delivering affordable housing through Section 106. The noble Lord graphically illustrated some of the difficulties that Section 106 and those negotiations cause. I am very well aware of his concerns. He says that CIL will cost affordable housing billions; our calculation is that CIL is expected to raise hundreds of millions of pounds per annum. For example, with regard to the Milton Keynes tariff, £18,000 was awarded per residential unit. That is serious investment that could be used for very good purposes. Particularly at this time, the Government are very sensitive to the need to protect levels of affordable housing contributions and are determined to put in place safeguards which aim to ensure that the introduction of CIL will not result in a reduction in the overall level of contributions secured for affordable housing. We do not intend initially to include affordable housing within the scope of what may be funded by CIL, but it has deliberately been included in the definition of infrastructure in the Bill under Clause 202(2)(g). If there were an unexpected reduction in the level of developer contributions for affordable housing as a result of the introduction of CIL, we can make regulations to ensure that CIL revenue could be used to top up such a shortfall if evidence showed that that was necessary. So there is a major safeguard there. Our clear preference is not to activate that provision because we believe that delivering affordable housing onsite through the existing Section 106 system better meets the Government’s objectives for mixed communities. It allows the real needs of the communities to be articulated and expressed on the types of development and building. It is a complicated process because it has to meet the needs of complicated communities. That is why Section 106 is suitable and effective. We want Section 106 to continue unhindered. We set out in the August document that planning authorities that choose to introduce CIL will be obliged to set a charging schedule in such a way as to ensure it does not impede development. We made it clear that that exercise will need to take into account the costs of meeting affordable housing requirements. In every development plan there will be a specific element set aside for affordable housing. This is what the local area needs and how we, through the development document, propose to provide it; this is how we are going to ensure that we fund it. We intend that regulations will provide for a draft charging schedule to be tested through public consultation and amendments by an independent examination, which would test whether the levels of CIL set out in a proposed schedule would put at risk development, when taken with other costs faced by developers, such as affordable housing obligations. It will be dealt with and analysed as a total package. The recommendations of the independent examiner, who will be looking to see whether there are flaws in those arguments and calculations, would be binding upon the charging authority. Draft charging schedules set too high could be reduced by the examiner if he considered that CIL, taken with other costs and local economic conditions, would prevent development proceeding. CIL is intended to assist in securing affordable housing, not reducing it, by providing additional revenue to support the delivery of planned infrastructure needed to unlock growth. Therefore, the levels of CIL must be set appropriately to ensure that more affordable housing contributions come forward. I am not convinced that the proposed amendment is workable. I fear it would lead to uncertainty, complexity and delay. The amendment proposes that CIL liability should be adjusted for individual developments to take into account affordable housing contributions. That creates uncertainty over the level of CIL liability that developers will have to pay, and will lead to lengthy negotiations. It would leave at the discretion of the charging authority whether to reduce a CIL payment. There would inevitably be disputes over whether a return on investment was over or below the specified threshold. The amendment says that we would have to define that threshold in law, which would involve us prescribing a level of appropriate profit. That is an unattractive and undesirable proposition and takes us back to the site level of negotiations, which we were trying to avoid in CIL, as opposed to PGS. The second suggested exemption would ensure that there was no CIL to pay on social housing development falling within the meaning of the Housing and Regeneration Act. That means low-cost rented accommodation and low-cost home ownership. I have already explained that we believe that Section 106 should continue to be used to seek contributions to affordable housing from commercial developers. Many local authorities have policies of that nature, but the affordable housing that they build will, as the noble Lord will agree, have an impact on local infrastructure. A child living in an RSL home needs a school just as much as one who does not. The question therefore is whether CIL should be payable on affordable housing units as well as on market units. The noble Lord’s amendment asks that question; our answer is that it is clear that the burden on the private developer in providing affordable housing may be significant. For example, if there is a requirement to provide 30 per cent of affordable units transferable to an RSL, in writing their charging schedules charging authorities will need to think about that and ensure that the cost of CIL when added to the cost of providing affordable housing is not so great that the development cannot happen. We will put in place safeguards to ensure that that important consideration is properly taken into account. Therefore, we think that there may be a case for recognising the burden faced by those providing affordable housing by inviting local authorities to consider whether such developers should pay a lower rate of CIL, or no rate at all. We set that out in our August document, which provides for such differential rates. We have to guard against complexity; we are aiming at simplicity. We do not want to introduce new distortions and unfairness. However, we would like to work further with the social housing sector to see whether we can find a way to meet the noble Lord’s objectives in these proposals. We will have some conversations on that between now and Report. I turn finally to our Amendment No. 437C, which has not had as warm a reception as I had hoped, although I hope that what I say will heat up the Chamber a little. I do not need to be persuaded of the virtues of the charity sector. I started a charity; it became hugely successful; it did a brilliant job; it anticipated extended schools and out-of-school learning that is now the norm for this Government and in every school. I am very proud of that. However, in doing that, I came to understand full well what the charity sector faces and the serious obstacles to getting things done. Nevertheless, what we have achieved in our amendment is important. Since we last spoke about charities at Second Reading, we have had extensive conversations with charitable organisations. They are fully aware of what we are wrestling with and what we are trying to do. Our amendment tries to ensure that no charity engaged in development work or likely to fall under CIL suffers unfairly as a result of CIL. We intend to ensure that they are able to carry on their development work and are not damaged by it, and that there are no unintended consequences for them or us. The charity sector is enormous and complex beyond description, in type, range, nature, function and accountability arrangements. Our amendment places a new duty on the Secretary of State to ensure that the CIL regulations either provide for an exemption or reduction in CIL where the liable party is a charity or where the development in question is for charitable purposes, or provides charging authorities with the discretion to make exemptions or reductions covering one of these circumstances. Noble Lords will be aware that ““charities”” and ““charitable purposes”” will by statutory implication carry the same meaning as in Sections 1 and 2 of the Charities Act, which we are proud to have introduced and which goes along with our work with the third sector in recent years to make sure that it is more robust, resilient, effective and democratic, and does the job that only it can do. In recent months, we have worked closely with the sector to develop a provision that works not only for the Government but for the sector and the local government community. CIL is a local tool, so we need to involve local government representatives in the design of exemptions. Under business rates, for example, local authorities have the right to ask for a small—up to 20 per cent—contribution to the costs of providing local infrastructure and services. Charities are sometimes asked to pay for planning obligations to meet local needs, so there are precedents for paying for local impacts. That stands in contrast to the national tax picture where a full exemption is often provided. The task for us in government is to decide where to strike the balance: whether to follow the national or local precedent in this area, or to strike out in an entirely new direction. It is not easy. We have listened to concerns—and, my word, noble Lords have been eloquent today—that charities may be adversely affected and financially impeded from pursuing their charitable activities and aims. We do not want that to happen. We are convinced that it is right in the case of charities for the Bill to go further than granting the powers under Clause 207(1)(c) to allow for exceptions to CIL in regulations, which was our original intention. The amendment places an obligation on the Secretary of State to act on this issue through regulations. It is not permissive in the sense that noble Lords have described. It is permissive only in allowing the Secretary of State to choose from various options. The substantive point is that it requires the Secretary of State to provide some sort of exemption or reduction for charities. The permissive element is to allow for something that is workable and provides the maximum lawful benefits to charities. We know that charities engage in a wide range of economic activity with a wide range of business models. They are specifically regulated. We need to proceed carefully, which is why we are going alongside the charitable organisations to ensure that the relief that we provide is as wide as possible without breaching the criteria that we established at paragraph 4.10 in our August policy document. All exemptions under CIL will need to be measured against the fact that they should not create scope for challenge. That would be hopeless for the charitable sector. They should not be difficult to apply or create a loophole because it is not clear what it applies to; they should be fair and not create undue distortions of competition; they should not give rise to other unacceptable distortions to behaviour or create perverse incentives; and they should not lead to charging authorities suffering a disproportionate loss of revenue which might undermine infrastructure delivery.