My Lords, Amendments 68 and 90, tabled by the noble Baroness, Lady Pinnock, seek to remove the provisions in the Bill which provide the imposition of the new infrastructure levy in England. I regret that these amendments have been proposed, but I recognise the need for serious and open debate on this subject.
We covered the shortcomings of the existing system of developer contributions at length in Committee. There is a clear case for reform. Since 2010, average new-build house prices have risen by more than £250,000, and land prices have also risen substantially. This increase in value must be captured within the levy system, allowing for more local benefit, but we recognise the
need to get these significant reforms right. That is why I can commit to the House today that the Government will undertake a further consultation on fundamental design choices before developing infrastructure levy regulations. Through further consultation and engagement, and the test-and-learn approach, which we discussed in detail in Committee, we will seek to ensure that the levy achieves its aims and that it is implemented carefully. I hope the noble Baroness, Lady Pinnock, will feel able to withdraw Amendment 68 and will not press Amendment 90.
My noble friend Lord Lansley has tabled Amendments 311 and 312, which seek to prevent the introduction of the infrastructure levy until the Government have published proposals for its implementation. I know that my noble friend has formally responded to the recently concluded technical consultation, which we are carefully reviewing. I can confirm that we will not commence the levy provisions in Part 4 until we have responded to that further round of consultation. The regulations themselves will be consulted on in future as well. I hope my noble friend Lord Lansley is therefore content not to press his Amendments 311 and 312. I assure him that he is correct: there is scope in the Bill for us to vary the approach set out in the technical consultation, and I reiterate that, if we do that, we will be consulting further.
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The Government have tabled several amendments to the Bill that seek to address concerns raised in relation to the new infrastructure levy during Committee. A priority for the new levy is that it delivers at least as much onsite affordable housing as the existing system of developer contributions, if not more. For the purposes of the new levy, within the context of this part of the Bill, “affordable housing” is defined as social housing in the Housing and Regeneration Act 2008, but there is flexibility to add other definitions through regulations. This ensures that low-cost rental and low-cost home ownership products are covered by the definition, but also provides flexibility and allows definitions to be updated over time.
As part of our recent consultation on our draft National Planning Policy Framework prospectus, we consulted on changes that would make clear that local planning authorities should give greater weight to planning for social rented homes when addressing their overall housing requirements in their development plans and when making planning decisions. The government response to that consultation will be published in the autumn.
Amendment 70, tabled by the noble Lord, Lord Stunell, would restrict the flexibility to be able to adapt the delivery of affordable housing for rent to match different local circumstances. We therefore consider that the amendment proposed by the noble Lord is not needed.
Government Amendment 79 makes an express commitment in the Bill to introduce a new right to require, whereby local authorities will be able to require developers to pay a portion of their levy liability in kind in the form of onsite affordable housing. It will require provision to be made in infrastructure levy regulations to that effect. I reassure noble Lords that we are retaining a restricted form of Section 106 agreements under the levy that can be used to secure matters such as affordable housing in perpetuity.
Amendment 94, from the noble Lord, Lord Stunell, is concerned with the disclosure of information relating to developer contributions. The right to require is designed to replace site-specific negotiations of affordable housing contributions. While viability assessments may be used in rate setting, any developer that wishes for information to be taken into account must submit it to be examined in public. Levy rates and charging schedules will be matters of public record. I hope noble Lords agree that this removes the need for the amendment.
Government Amendments 72, 73, 74, 75 and 76 strengthen the requirement set out in new Section 204G(2) inserted by the Bill so that, when setting their levy rates, local authorities must seek to ensure that the level of affordable housing that is funded—and the level of such funding provided by developers—can be maintained or exceeded as compared with existing levels. The only exception to that requirement is when the local authority concludes that setting its rates to achieve that end would make the development of its area economically unviable. I stress that it is the local authority that is the decision-maker here: it is its responsibility to consider all relevant evidence and material matters when setting its rates, which will be examined in public. Under the proposals that we have consulted on, once rates are set, developers will not be able to negotiate their contributions downwards.
I want to repeat this, because I know this issue is very much in the minds of the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Best. To reiterate, once the charging schedule has been approved, developers will be required to pay the levy. This means that they will not be able to submit viability assessments further down the line to renegotiate their levy payments downward.
We believe that these amendments avoid potentially adverse consequences; namely, that charging authorities may need to set their rates at such a level that the development becomes unviable. That would be the consequence if we accepted Amendment 71, proposed by the noble Lord, Lord Best. I was pleased to see that the National Housing Federation described our amendments as “hugely welcome”.
I turn to Amendment 71A, tabled by the noble Baroness, Lady Taylor of Stevenage. I want to say at this stage that I am more than happy to meet any noble Lords, but particularly the noble Baroness, to discuss affordable housing delivery before we get to two further groups that will probably come up in September. The amendment would require infrastructure levy rates to be set at such a level as to meet the level of affordable housing need specified in a local development plan. However, there are places in England where the need for affordable housing is very high and land values are relatively low. In these places, a requirement to set levy rates at a level which would meet the level of affordable housing need would make development unviable.
I give the example of Pendle Borough Council, where the 2013 strategic housing market assessment identified that Pendle would need between 74% and 84% of its total annual housing requirement to comprise affordable housing if it was to meet all of its affordable
housing need. The local plan, adopted in 2015, recognised that this would not be viable. The plan aims instead for 40% affordable housing as a long-term aspiration, accepting that it will secure less in the near term.
If we were to require charging authorities to set rates in order to meet need, a borough such as Pendle would have to set incredibly high rates. These rates would not be viable, and the result would be that no housing at all would be built. While I completely understand the intention behind the amendment, if we aim too high we will get no market housing and therefore no affordable housing alongside it. That is why the government amendments ensure that charging authorities must also consider viability when setting rates.
Government Amendment 74 also makes it clear that the references to the funding of affordable housing in that duty include funding by means other than the infrastructure levy. We feel that this means that Amendment 77, proposed by my noble friend Lord Lansley, is not needed.
Government Amendments 78 and 80 place a duty on the Secretary of State to lay a report before each House of Parliament setting out the effect of the infrastructure levy on the provision of infrastructure and affordable housing. This includes whether charging the infrastructure levy has resulted in more or less affordable housing being available than would otherwise have been the case. This will allow for the scrutiny of the levy as part of our test and learn approach.
The noble Baroness, Lady Taylor of Stevenage, is rightly concerned about the relationship between the levy and our commitment to levelling up, as well as how the levy will benefit different tiers of local government. The Bill introduces a legal duty for the Government to publish an annual report on progress towards delivering the levelling-up missions. This will give Parliament and the public an important opportunity to debate and scrutinise progress.
Provision will also be made in the infrastructure levy regulations for consultation in connection with new infrastructure delivery strategies. This will empower local leaders across the country, ensuring that all tiers of local government can engage with and benefit from the new levy when allocating proceeds and determining local priorities. I hope that this reassures the noble Baroness, Lady Taylor of Stevenage, and that she will not move Amendment 69.
Some local authorities that we have spoken to have recognised the potential of a levy based on gross development value but expressed concerns about the risk; for example, around the challenges of setting appropriate rates. Therefore, government Amendments 82 to 89 provide the ability for the Secretary of State to disapply the levy. This will help give such local authorities confidence that unforeseen risks can be managed, after they first implement the new levy.
Amendment 70A, proposed by the noble Baroness, Lady Taylor of Stevenage, seeks to make application of the levy optional. However, this would further fragment the system of developer contributions in England rather than help to streamline it. I should also add that the Government will have the ability to disapply the levy for a particular area or charging
authority, as already stated. Moreover, the aim of a test and learn approach is that the system can be adapted to reflect early learning. It would not be appropriate to commit to a course of action, as the noble Baroness proposes in Amendment 81, without first assessing the evidence. Therefore, I hope that she will not move these amendments.