My Lords, I apologise for the length of time that I am going to take, but it has been a very diverse debate about a number of things and some important issues, so please bear with me.
When new development is built, it creates a demand for public services and local infrastructure. The granting of planning permission also increases the value of
land. It is important that local authorities can secure contributions from developers to share in the land value uplift that comes from granting planning permission and use this to deliver local infrastructure and affordable housing for communities.
The current system of developer contributions is uncertain and fragmented. The negotiation of Section 106 agreements frequently results in delays in granting planning permission and these agreements can be renegotiated as the development progresses, as we have heard. Local authorities cannot be expected to negotiate as effectively as big developers. The developers can always build elsewhere, which weakens a local authority’s leverage in negotiations. Developers can devote more financial resources to negotiation, out-gunning local authorities. This can generate uncertainty for local communities over how much affordable housing will be available and what infrastructure will be delivered.
Local authorities can also charge the community infrastructure levy, which is a non-negotiable—but optional —charge. Only half of local planning authorities currently charge the levy. Of those that do not, over one-third believe that introducing it would increase their ability to capture land value. The community infrastructure levy is also unresponsive to change in development value as it is charged at a fixed rate per square metre of new development and does not go up in line with house prices. That is why we are introducing the new infrastructure levy; to largely replace the existing system of developer contributions.
The new levy will aim to capture land value uplift at a higher level than the current developer contributions regime by charging rates based on the final value of developments. This should ensure that a fairer price is initially paid for the land by the developer, and then that the developer pays a fairer contribution to the infrastructure and affordable housing. As it is a non-negotiable charge, it should help to reduce delays associated with Section 106 agreements, while maintaining the viability of developments. It will also end the inequality of arms, where local planning authorities must negotiate for affordable housing with developers. The levy will be charged on the majority of types of development, providing opportunities to secure funding for affordable housing and infrastructure from developments that currently contribute very little. I totally agree with the noble Baroness, Lady Warwick of Undercliffe, that the important issue for developer contributions is housing.
The Government recognise that the new infrastructure levy is a significant change and a major undertaking. For this reason, we are taking a “test and learn” approach to its implementation. This will be vital to monitor and test the design of the levy as it works on the ground. This means that, once levy regulations have been developed following Royal Assent, only a small number of local authorities will adopt the levy initially. This “test and learn” approach will allow the Government to continue to work with local authorities, developers and local stakeholders to achieve a system that is optimally designed. We have published a detailed technical consultation, which closes on 9 June, to inform the design of the new levy regulations. We have approached this consultation in a very open manner with the sector, and we really want to listen to, and take on board, the feedback.
I turn to Amendments 290, 324, 335 and 343, tabled by the noble Lord, Lord Russell, my noble friend Lord Greenhalgh and the noble Baronesses, Lady Warwick and Lady Hayman. The amendments relate to the definition of “infrastructure”. I will highlight first the point that the priority for receipts from the new levy will be the provision of infrastructure: affordable housing, schools, GP surgeries, green spaces and transport. This infrastructure is vital to support the local community and mitigate the impact of any new development.
Although I understand the desire for future levy receipts to be spent on a wider range of other important priorities, I must be clear that this will not be an unlimited pot of money and that any other spending will come at the expense of affordable housing and local infrastructure that is needed to directly mitigate the impact of new development. Although we have the ability to allow for some spending on non-infrastructure priorities through the Bill, we recognise that there are important trade-offs here. Through the consultation, we are testing the extent to which we should require local authorities to prioritise affordable housing and infrastructure before unlocking such flexibilities.
Secondly, I will address childcare, which I think everybody in the Committee agrees is exceptionally important—I know that this is a priority for all of us in the House and the other place. It is also a priority for the Government, and I am happy to say that, since Amendment 290 was tabled, the Chancellor has announced transformative reforms to the funding and delivery of childcare, as part of the Spring Budget. By 2027-28, this Government expect to spend in excess of £8 billion every year on free hours and early education, helping working families with their childcare costs. This represents the single biggest investment in childcare in England ever, and it means that eligible working parents of children from nine months old to their start in primary school will all have 30 hours of free childcare per week. I hope that the noble Lord will agree that the Chancellor’s announcement means that it is no longer necessary to try to bolt together the planning system and funding for childcare through the Bill.
I make it clear to the noble Lord, Lord Russell, that guidance for applications for free schools already includes explicit assumptions that any new free schools will include proposals for nurseries. Therefore, education investment in a possible new development will include a nursery, unless there are very strong reasons why this would be inappropriate. So the Government are dealing with the issue of ongoing support for childcare and, at the same time, there is already in guidance the necessity for more nursery places where houses are built.
I turn to infrastructure spending more broadly. New Section 204N(3) provides a non-exhaustive list of kinds of infrastructure, which assists with broadly understanding what the levy might be spent on. But spending is not restricted to any of the listed items: the levy can be spent on any infrastructure that supports the development of an area. This means funding the provision, improvement, replacement, operation or maintenance of infrastructure, provided that this in accordance with the overall aim of the levy, as set out in new Section 204A. To strengthen infrastructure delivery, new Section 204Q requires local authorities
to prepare “infrastructure delivery strategies”, which will set out a strategy for delivering local infrastructure and spending levy proceeds.