Clause 1 — Preparatory expenditure
Orders of the Day
5:48 pm
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
We now come to the Third Reading of this paving Bill, which is designed to help implement a planning gain supplement. This is not the first time the House of Commons has been asked to debate a tax on the increase in the value of land. The earliest specific example that I was able to find of such a measure was an Act in the reign of Henry VI, dated 1427, which facilitated a tax on the improvement in land values based on the construction of sewers. For the record, a similar measure was apparently also attempted under Henry VIII in 1531. To leap forward some four centuries, something like this was tried five times in the 20th century, and on each occasion it foundered, principally over the issue of how to agree on the valuation to be taxed. In debating this matter again tonight we are following in the footsteps of our legislative predecessors—with, I suspect, the same ultimate outcome at the end of the whole process.
Coming right up to the present, we opposed this paving Bill on Second Reading and in Committee, and we remain opposed to it tonight. We remain opposed to the related planning gain supplement in principle for a number of reasons, which I laid out in some detail on Second Reading on
Despite the earlier debate in Committee and on Report this evening, the Government have not made a convincing case for their introduction of what even they admit is now only a lead option. If they cannot even convince themselves, how do they expect to convince the House? This is a Bill, and indeed a tax, with few friends. For instance, the CBI said of the proposed planning gain supplement:
"the Government's proposals to implement PGS are likely to lead to a number of unintended and negative consequences that would outweigh the potential benefits of PGS and we would strongly urge the Government to reconsider its proposals."
Similarly, the British Property Federation, which has been staunchly opposed to the planning gain supplement throughout, said that it
"Is not suited to brownfield or previously developed sites; removes the linkage between the developer, the development and direct community benefit; can provide uncertainly in the planning process; is unworkable on most commercial developments; will slow the rate of developments coming forward; will discourage regeneration schemes; will create a blockage in the planning system; could lead to lengthy disputes in the courts and does not give any certainty that the necessary infrastructure will be provided."
Other than that, the British Property Federation thought that the planning gain supplement was a good idea.
Meanwhile, the Royal Institution of Chartered Surveyors said of the planning gain supplement:
"The proposals are based on a misunderstanding of how land is valued, how planning gains arise and how the property market operates".
The Chartered Institute of Taxation was equally unimpressed and commented as follows:
"Not even a well thought out consultation document can save a bad idea and we think that the law of unintended consequences will apply, with the result that the proposals will not deliver the Government's policy objectives without a major element of compulsion being applied to local planning authorities, to allow developments that they do not wish to allow."
The National Housing Federation, the umbrella body for housing associations, argued in 2006 in its evidence to the then Select Committee on the Office of the Deputy Prime Minister that the planning gain supplement would not assist the development of affordable housing. It is an expert in the area, and as it explained:
"By charging PGS on affordable housing the Treasury will simply be pushing money around the public funding system....If PGS is levied on housing associations a proportion of housing association grant for social housing will effectively be paid back to the Treasury via PGS and fewer homes will be provided. Moving funds from one part of the public purse to another is not efficient."
Similarly, there have been concerns about the effect on the charitable sector. The Charitable Properties Association—the CPA—argued on that point in evidence to the Communities and Local Government Committee. It stated:
"The CPA believes the PGS will have a seriously detrimental impact on the financial position of property owning charities. This includes both charities which have significant land holdings as part of their endowment...and charities which develop their own land in order to fulfil their charitable purposes, for example by providing affordable housing."
The Government's proposals still fail to address the fundamental weakness of this type of tax, which has foundered historically on the problems of agreeing the increase in land value on which it is to be levied. As the Royal Institution of Chartered Surveyors, which is a specialist in this area, has argued:
"The valuation of development sites comprises of making assumptions about different variables, six of which can have a big impact on the opinion of value. A change of around 5 per cent. in each of these variables can result in an overall change in the value of the site of over 25 per cent."
It is not just representatives of business and the third sector who have voiced their public opposition to the planning gain supplement. A number of prominent Labour party members and organisations have done so too. A previous Labour Minister with responsibility for planning and housing, Mr. Raynsford, who is in his place this evening, is on the record as opposing the concept of the planning gain supplement. He reiterated his opposition during the Second Reading of the Bill on
"Although this is only a paving Bill, it begins a process that is inherently complex and risky and that could end badly. I urge my right hon. and hon. Friends to take stock and give careful thought to all the issues involved, as well as the considered views of the people and organisations who best know the minefield that they are approaching. If they do so, they may well conclude that the alternatives available can generate better outcomes and save them from repeating the mistakes of the past. When history has such good lessons to teach us, it is unwise—to say the least—to ignore them."—[ Hansard, 15 January 2007; Vol. 455, c. 582-3.]
Quite. When even well respected Labour former Ministers are sounding warning bells it is little wonder that the Government have paused for thought, yet they want the approval of the House to spend the money nevertheless.
That is not the only objection to the tax from a socialist quarter. As we have already heard this evening, the Labour-led Scottish Executive have expressed strong reservations about the implementation of the planning gain supplement. Despite our giving the Minister a good opportunity under new clause 1 to lay out in more detail how some of the aspects would operate in Scotland, he declined to do so. Moreover, a joint memorandum was submitted to the then Select Committee on the Office of the Deputy Prime Minister in March 2006 by the Labour Housing Group and the Labour Land Campaign, the former of which describes itself as
"A socialist society affiliated to the Labour Party, who aim to promote affordable housing".
It is reassuring to know that socialists are still allowed to be affiliated to the Labour party. The memorandum states:
"The PGS proposals combined with the package of reforms proposed for the planning system following the Barker Report will not address the problem of the shortage of affordable housing, a severe problem in the South West and many rural areas, including parts of Yorkshire, Derbyshire and Cumbria".
On top of all that, the Library briefing note that accompanies the Bill points out that the "closest precedent" in terms of a similar paving Bill was the 1998 Tax Credits (Initial Expenditure) Bill, which led to the much troubled tax credits system, in which just under half of all the payments in the system each year are incorrect. In his Third Reading speech, the Minister cited that as a recent example of a paving Bill. The financial memorandum that accompanied that Bill nine years ago explained that expenditure of between £15 million and £20 million was required to facilitate the introduction of tax credits. Even allowing for inflation since that time, are the Government seriously arguing to the House that the preparatory work for the introduction of the planning gain supplement is likely to cost twice what was required to help bring in the whole tax credits system, which now equates to some £16 billion a year of public resources? If they are, that really tells us something about how complicated and bureaucratic the planning gain supplement is likely to be.
As we have argued throughout the course of the Bill, most MPs across the House would accept that developers should make an adequate contribution to infrastructure costs in return for receiving permission to build, but the planning gain supplement is not the way to achieve that. As the Estates Gazette argued forcefully about the planning gain supplement in December 2006:
"Of course it won't work. It didn't work the five times it was tried in the past century and it won't work now."
In advocating the Bill tonight, the Government are asking the House to commit an unlimited sum in preparation for an unpopular tax that does not itself guarantee that the full proceeds of any development will return to the area in question, and which in Scotland and Wales does not guarantee that anything at all will be returned to the affected locality.
Perhaps that is part of the reason why so many organisations oppose the planning gain supplement. To remind the Minister, the Confederation of British Industry does not want it. The Institute of Directors does not want it. The British Property Federation does not want it. The Scottish Property Federation does not want it. The Royal Institution of Chartered Surveyors does not want it. The Royal Town Planning Institute does not want it. The Chartered Institute of Taxation does not want it. The House Builders Federation does not want it. The National Housing Federation wants it, but only if it does not apply to the federation. The Scottish Executive might want it, but only if it does not apply in Scotland. The Labour Housing Group does not want it if it applies to Cornwall, Cumbria, Derbyshire or Yorkshire. The right hon. Member for Greenwich and Woolwich does not want it to apply anywhere at all, and nor does my right hon. Friend Mr. Gummer—he would not want it even if it applied only to Protestants. No one wants it except the Treasury, and even the Treasury is not sure whether it wants it at all.
Despite that wall of opposition, the Government's hesitation and the fact that they have downgraded their proposal from a definite way forward to only a lead option, the Minister still had the neck to ask the Commons to vote Supply of more than £50 million to prepare for the introduction of a tax with which the Treasury might never proceed. All that money might eventually be wasted, not least because the Minister assured us earlier that any IT procured would not be used for anything else.
The Conservatives oppose the Bill, and the planning gain supplement to which it relates. We have stated clearly that if the Government are foolish enough to try to introduce a planning gain supplement, an incoming Conservative Government will repeal it. I hope that the House will spare us the trouble and put the Treasury out of its misery by voting against this benighted measure.