Clause 1
Planning-gain Supplement (Preparations) Bill
10:45 am
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I beg to move amendment No. 1, in clause 1, page 1, line 2, after ‘expenditure’, insert
‘not exceeding £25 million in total’.
I do so in my name and that of my hon. Friend the Member for West Chelmsford (Mr. Burns), who is my parliamentary neighbour, as well as my neighbour this morning, as he sits in his place on the Front Bench.
The amendment is designed to place a limit on the amount of expenditure that may be incurred by the Government under this paving Bill, in preparation for the implementation of the planning gain supplement. There are several reasons for this approach. First, the Government are not committed to introducing the planning gain supplement at all. In the debate on amendment No. 2, I hope to lay out in more detail how, over a period of time, the Treasury has gradually watered down its commitment to the introduction of the PGS, to the point that the PGS was recently described by the Financial Secretary on the Floor of the House as only “a lead option”. However, we are now being asked to commit significant amounts of public money in preparing to implement an option that may yet be discarded. On Second Reading, my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack) said in an intervention on the Minister:
“The Financial Secretary is speaking with great charm, and he is beguiling and almost converting me, but although I am an advocate of pre-legislative scrutiny, he has not yet made me an advocate of pre-legislative legislation”.—[Official Report, 15 January 2007; Vol. 455, c. 571.]
Secondly, the Government’s hesitation in pressing ahead may have been compounded by the number of organisations that are on the record as opposing the introduction of the PGS. What follows is not an exhaustive list, but those organisations include the Confederation of British Industry, the Institute of Directors, the British Property Federation, the Home Builders Federation, the Royal Institution of Chartered Surveyors, the Royal Town Planning Institute and the Chartered Institute of Taxation. In addition, a set of legal and accounting firms, including companies such as Reed Smith, Deloittes and PricewaterhouseCoopers, have all expressed reservations of one kind or another about how the new system that the Bill is designed to facilitate might operate in practice.
For instance, before we commit the taxpayer to the financial requirements of the Bill, we should bear in mind that the CBI said of the planning gain supplement that
“the Government’s proposals to implement PGS are likely to lead to a number of unintended and negative consequences that would outweigh any 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 PGS, said—among other things—that
“PGS is not suited for brownfield or previously developed sites; removes the linkage between the developer, the development and direct community benefit; can provide for uncertainty in the development 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.”
The Royal Institution of Chartered Surveyors said of the PGS that
“the proposals are based on a misunderstanding of how land is valued, how planning gains arise and how the property market operates”.
For good measure, Labour’s previous planning Minister, the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), who is unfortunately not with us in the Committee, is on record as opposing the planning gain concept. He reiterated that a fortnight ago on Second Reading, when he gave the Minister the apposite warning:
“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.”—[Official Report, 15 January 2007; Vol. 455, c. 582-83.]
Considering that even well respected previous Labour Ministers are sounding warning bells, it is little wonder that the Government have paused for thought before going ahead with the supplement, yet they still want parliamentary approval to spend the money.
Thirdly, there is no expenditure limit in the Bill, so the expenditure that we are being asked to approve could theoretically be open-ended, particularly if the Treasury continues to dither on whether to proceed with the PGS. The Treasury’s explanatory notes provide an estimated cost for project staff and an associated information technology system of up to £52 million, which it justifies in the following terms:
“Project planning is at an early stage. The enactment of this Bill will allow further development of the project by HMRC and their IT partners and for the technology to be properly costed. The current upper end estimate is that IT build, infrastructure and service costs will be approximately £40 million, however these are subject to change as the project is refined and policy finalised.”
In arguing for the need to authorise such expenditure, the notes add for good measure:
“Between enactment of the Bill and the implementation of PGS a core team of project staff will also be needed to develop the new operating model and recruit and train staff. These costs are currently estimated at £12 million for HMRC and the Valuation Office Agency up to and including 2008/09.”
Even allowing for the notorious difficulty of forecasting accurately the future cost of IT systems, a matter to which I hope to return on new clause 1, we are entitled to ask why those estimates are so high. At a time when most primary care trusts are under serious financial pressure—I am sure that Members of all parties share that experience—why are the Government requesting up to £50 million to prepare for a tax that they may never actually introduce?
Moreover, the Library briefing note that accompanies the Bill points out that the “closest precedent” to such a paving Bill was not, I am afraid, the Water Act 1989— almost 20 years ago—but the Tax Credits (Initial Expenditure) Act 1998. In time, that led to the much troubled tax credit system in which just under half of all payments are incorrect each year. The financial memorandum that accompanied that Bill explained that expenditure of between £15 million and £20 million would be required to facilitate the introduction of tax credits. Even allowing for inflation since then, are the Government seriously arguing that the preparatory work for the introduction of the planning gains supplement is likely to cost twice as much as that required to help bring in the tax credit system? If so, that tells us something about how complicated and bureaucratic the planning gains supplement system is likely to be.