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Clause 2

Planning-gain Supplement (Preparations) Bill – in a Public Bill Committee at 12:30 pm on 30th January 2007.

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Extent

Question proposed, That the clause stand part of the Bill.

Photo of Simon Burns Simon Burns Opposition Whip (Commons)

I assure Members that I do not intend to detain the Committee. I am a simple seeker of information. The Minister kindly answered a question during the clause 1 stand part debate. However, I thought he was a little churlish in his comments. I have been attending very diligently to my duties as a Whip and I did listen to him early on in the debate, but I wanted to be absolutely certain about the definition of the Secretary of State so that I did not get this part of my contribution wrong.

There is something that puzzles me, which I hope the Minister will be able to explain. The clause extends the Bill to the whole of the United Kingdom. I would be grateful if the Minister could confirm that the Bill will apply to Scotland as well as Northern Ireland, England and Wales. I assume that the answer is yes, given the explanatory note. That puzzles me and leads me to my main question.

On the assumption that the Bill extends to Scotland, why is it that the Bill, if one looks at the front page, has been presented to Parliament by the Chancellor of the Exchequer, all the other Ministers in the Treasury team, the Secretary of State for Wales, the Secretary of State for Communities and Local Government but not the Secretary of State for Scotland. It seems an odd omission that the Scottish Secretary has not been included on a piece of legislation dealing with Scotland.

Photo of Mark Francois Mark Francois Shadow Paymaster General

The clause is simply titled “Extent”. It states:

“This Act extends to the United Kingdom.”

By definition it will include Scotland. I want to press the Minister a little on the matter. One of the complaints about the PGS is that it is light on detail thus far. With regard to how it will operate in the devolved Administrations, both Scotland and Wales, the Government have provided very little indeed. It has  said in effect that it will be left up to the two respective Administrations to decide within their own nations.

The Minister tweaked my nose a little earlier by suggesting that there were some Conservative councils that he thought were in favour of the planning gain supplement. I have to tell him that the Scottish Executive, who I understand are effectively a coalition of Labour and the Liberal Democrats, were also consulted on how the PGS would apply in Scotland. Their response to the 2005 consultation was excoriating. Among other things, they said in their reply—I have a copy of it here if the Minister wishes to glance at it—that the new tax was “misconceived”, that it would render otherwise sustainable economic developments economically unviable, that it was “highly difficult and complex”, that it would act as a “disincentive” and would hinder a generation, that it would place extra burdens on the delivery of affordable housing, a theme we have heard again and again this morning and which now resonates from north of the border, and that it would

“act as a break on development in most areas of the United Kingdom”.

I take it from that that they include Scotland as part of that.

The Chancellor himself hails from that part of the world. Perhaps we could ask the Minister to explain what further discussions he has had with the Scottish Executive, given that in Scotland it would appear that the devolved Government have severe reservations about the introduction of this tax, despite the fact that the First Minister in Scotland is, as I understand it, a member of the Labour party, although whether he is a member of the socialist housing group, or whatever it was, I am not entirely sure.

Perhaps the Minister could at least give us some view of how the tax might operate in Scotland and, if he is unable to say in detail—

Photo of Simon Burns Simon Burns Opposition Whip (Commons)

My hon. Friend makes a very important point, which raises an equally important question. If the Scottish Executive and the Labour First Minister in Scotland strongly disapprove of the proposal, does my hon. Friend have any idea what the Labour Members sitting on this Committee think? Do they share the Chancellor of the Exchequer’s views, or the First Minister in Scotland’s views on the proposed legislation? How will they be campaigning in the Scottish elections on the issue?

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I am sure that that is of great interest to us all but it is not for discussion in this Committee.

Photo of Mark Francois Mark Francois Shadow Paymaster General

I respect the ruling of the Chair but it is a shame because that was of real interest to me. However, there are Scottish Members present in the Committee and, if they choose to make a contribution that is in order while I am speaking, I will do my best to answer any questions that they may have. I see that the Government Whips are giving them advice.

I say in all seriousness that the Government have been very light on detail as to how the measure will operate in Scotland. They have said in essence that they will leave all that to the Scottish Executive, although, as I understand it, this being taxation, it would be a UK  measure, so the Government could in theory impose that on Scotland, even if the Scottish Executive were of the opinion that it would not work well or be in the interests of the people of Scotland.

Photo of Anne Main Anne Main Conservative, St Albans

That raises a bigger question. The ODPM Committee recognised that many other Departments had to deliver the vision of the ODPM—or, as it is now, the Department for Communities and Local Government. One of our concerns was that we rested heavily on the Treasury to deliver that. If the two Departments yet again cannot agree on a way forward, I envisage the clash that my hon. Friend refers to.

Photo of Mark Francois Mark Francois Shadow Paymaster General

While the Deputy Prime Minister headed the ODPM, a range of Departments struggled consistently to deliver his vision, with mixed results. I shall not be drawn further down that path.

I return directly to Scotland. What would be the constitutional position if this House voted to introduce the planning gain supplement in the United Kingdom but the Scottish Executive were firmly against it? From their consultation document, which is in the public domain, it seems that they are not particularly pro it, to put it mildly. So the question about extent is serious: what would the constitutional position be in those circumstances?

What further consultations have the Government undertaken with the Scottish Executive? Can the Minister at least give the Committee some idea of how the Executive envisage the measure working in practice before we vote him the money? Unfortunately, we were not able to call public witnesses and we have no member of the Scottish Executive here to give us an idea. Perhaps he, as best he is able, could act as their interlocutor and explain his understanding of how they want to make his tax work north of the border.

Photo of Michael Connarty Michael Connarty Chair, European Scrutiny Committee

Despite the worries of the hon. Member for Rayleigh, although my hon. Friend the Member for Cardiff, West is a grand Whip and a good friend of mine, Whips have tried for many years to urge this Member from a Scottish constituency to behave, and I am always likely to behave in line with the responsibilities of a constituency MP and one who puts Scotland as high in his order of concerns as the rest of the UK.

I missed the pantomime season this year, but I am glad that the performances from the Opposition Benches provided me with some humour and pantomime gestures. Concern for Scotland has never been high on the agenda of the Conservative party, which is why they have one Member of Parliament from Scotland. He is hanging on by the skin of his teeth.

I am concerned not just because of the technicality raised by the Opposition Whip, the hon. Member for West Chelmsford, that there is no mention of a Scottish Minister among those proposing the Bill, or the fact that there is no reference to expenditure in Scotland. There are unique circumstances in Scotland. Considering the figures given by the Minister, it is possible that 40 per cent. of planning approvals do not  contain a section 106 agreement, which causes me deep concern. I presume that most of those cases are in England and Wales because I assure him that for a long time section 75 agreements, the equivalent of the section 106 agreements, have been developed in Scotland.

As I said earlier, representations have been made to the Minister and meetings held with him, organised by myself on behalf of one of my local authorities, which has a sophisticated approach to the use of section 75. The authority questioned whether it was necessary to introduce any legislation at a central or national level and asked whether, if a system of intervention were to be introduced by the Government—call it a planning gain supplement or otherwise—there would be a good case for having a different system in Scotland. There are differences in the way in which Scotland has developed its section 75 planning gain agreements, particularly in an area such as West Lothian.

The Minister paid a compliment to Councillor Willie Dunn, West Lothian council’s cabinet member for economic development, and Mr. Dickson, its planning and development director. Those people explained the system that they have to deal with in West Lothian—this is probably true of all the Lothians—because of the pressure on developments exerted by Edinburgh, where it is very expensive to find a home. That means that the council has had to become very sophisticated in dealing with developers and land use agreements in its area. It must provide additional facilities for schools, for education in its revenue sense and for infrastructure in some of the areas that are being developed. Many of those areas are on brownfield sites in an old industrial area, and you, Mr. Hood, will be familiar with such issues from your experience in the coal industry.

Whether a central planning gain supplement system would help depends whether, as I discussed earlier, it results in a net financial gain that allows the Government to meet the bureaucratic costs of their system, although we do not really know what those costs will be in the long term. It would also depend on the Government’s ambition to deal with not only local authorities’ needs, but the area’s infrastructure needs. That is why there is the question whether clause 2 is right. Will the process of analysis show that there will be a net gain for Scotland, which would justify introducing a Bill that includes Scotland? There are serious concerns about the issue, which have been expressed by West Lothian council. Those concerns have been expressed very onomatopoeically, and the word used by the Conservative spokesman showed not only the sense, but the heat and light of the Scottish Executive’s response.

I think that we would get the same response from the Convention of Scottish Local Authorities. At one time, I was the leader of a council and the deputy leader of the convention’s Labour group, and my understanding is that the section 75 planning agreements were not only agreed by the Scottish Executive, but worked out using a guideline sent out by the Executive after discussions with COSLA. I understand that such agreements are approved by, and in use among, all local authorities.

We are not only discussing Labour local authorities in industrial areas. I bumped into Bill Walker, an old colleague of some Members of the House, who represented 1,200 square miles of Perthshire. For purposes unknown, he happened to be in the Lobby, and he had with him some people who are very interested in this very topic. He said that, even in his day, his local council in the county had been very sophisticated at getting planning gain supplement to provide infrastructure. Indeed, he had a formula, which I cannot recall, but it provided for a certain number of classrooms for so many houses and, therefore, for education infrastructure to be put in place alongside developments in Perthshire. The provisions are, therefore, used by not only industrial Labour authorities, but every local authority in Scotland.

Although Falkirk council did not come down to see the Minister, it and West Lothian council, which is the other council in my area, would probably echo the sentiments that have been expressed, because they have a highly developed procedure. They think that that procedure works to their advantage and absorbs the tremendous pressures coming from the growing financial centre of Edinburgh, which are spreading into Lothian, central Scotland and Falkirk. The question is why that procedure should be absorbed into a UK-wide procedure.

The problem concerns the filtration of funds, which is a soft way of describing money going into the Treasury, but not coming back out. There is already an example of that in operation. Everyone knows about “Gordon Brown money for schools”, as educationalists call it. Before returning to Glasgow, my wife rescued a few schools in Essex, and Gordon Brown money came directly to those schools. In Scotland, however, that Treasury money does not go directly to schools, but to the Scottish Executive through a process in the block grant.

I have been investigating the issue in some detail. I have been told that a grant goes to the local authority, but that it is not specified for schools, so it may or may not go through the local authority and on to schools. If the planning gain supplement levy or tax were to go into the Government’s coffers at x before coming out of those coffers at x minus y, then y might be 30 per cent. of x. As I have said to the hon. Member for Twickenham, if the planning gain supplement were set at a high enough level, so that one local authority did not get 50 per cent. less than another for each house built, the system might benefit the Scottish Executive, because the money would go to them and not directly to local government. The equation is x minus y. However, if it were x minus y minus z, which would be the case if the Scottish Executive were to absorb some of the funds for their projects, the sum that goes to local authorities would be less than that under a simple section 75 agreement. I am concerned about that filtration system.

Photo of Anne Main Anne Main Conservative, St Albans 12:45 pm, 30th January 2007

The hon. Gentleman is making a perfect case. The Select Committee came to exactly the same conclusion. That filtration process—or whatever one would like to call it—was our concern, and we came out with a statement that it may deliver the same amount or more, but that it may also deliver less. That is a major concern for those of us who oppose the measure.

Photo of Michael Connarty Michael Connarty Chair, European Scrutiny Committee

I am not sure about the Select Committee’s conclusion, but I am grateful for the intervention. I may come to a different conclusion from Opposition Members, but we must apply the same logic. Our decisions must be evidence-based, because this paving Bill gives authority to do something that will, given the assurances by the Minister, involve a regulatory impact assessment.

The decision may be that this is not the way to go with regard to Scotland. I do not know whether an equivalent level would apply in England, which does not have an equivalent to the Scottish Executive—an executive or regional authority—that would have the right and the power to take a proportion of the money from the planning gain supplement. If x minus y resulted in more money going directly to local authorities in England, it would probably be beneficial. If central Government were to take y—let us say, 30 per cent.—and spend it on infrastructure to support the local authority from which the money obtained through a planning gain agreement came, it would be beneficial.

The problem in Scotland is that there is another level. In fact, the money could be absorbed into the Scottish Executive budget and not come out at the level required to give the local authority—for example, West Lothian—the necessary money for infrastructure that would allow it to absorb the housing. It is plain—I believe that this was said to the Minister in my presence—that there is no reason for West Lothian to absorb people from Edinburgh who need to live near Edinburgh because of their employment, if that would result in a budget deficit. In that case, the council would simply not allow the development to go ahead, and many bids for housing plans would not be approved. That would be a tragedy, and I would not support such a retrograde step.

Photo of Mark Francois Mark Francois Shadow Paymaster General

The hon. Gentleman’s predecessor was actually the originator of the West Lothian question, which seems to be more and more important in view of this debate, and the hon. Gentleman clearly knows a great deal about the subject. How does he think that the Scottish Executive would operate in practice? The Government have given an indication that the component of the planning gain supplement that would come back to local authorities in England would be at least 70 per cent., and the remaining 30 per cent. would be the regional component. For Scotland, there is no such guarantee at all. Money could be raised in one part of Scotland and given to another.

Photo of Michael Connarty Michael Connarty Chair, European Scrutiny Committee

I will not venture into an analysis—not even a hypothetical one—of how the Scottish Executive might or might not absorb the money, but I will put my concern into a different context. The problem is what percentage comes back to the local authority, and whether a UK-wide system without a separate Scottish component can be justified for Scotland. Obviously, guarantees would be obtained by COSLA and the local authorities as to how it would operate, but if it is operated at a UK level, there is no guarantee that local authorities will have the ability to influence what happens. I can tell hon. Members now that they do not influence what happens with the Gordon Brown schools money. I get complaints from  people who say that they are not getting the money that they used to get when they could understand and influence the system. That is no longer the case, because the money is absorbed.

I want to touch on designation of expenditure, because my concern extends beyond filtration. If the money goes to the Scottish Executive, they may decide to improve the road infrastructure. For example, there is a project on the stocks on which I have been campaigning for some time. If they were to take £10 million out of the planning gain that is available because of developments in West Lothian and Falkirk and spend it on a bridge to join those two, it would be very good for economic development, but that would be £10 million out of the hoped-for planning gain for both Falkirk and West Lothian. In particular, those councils would need to provide social services and education for the people who will live in the houses that those areas are going to absorb because of the pressure on Edinburgh. If there is any question of the designation or use of the money being wrong in terms of the priorities for the local authority, there will be a major problem with the measure being accepted in Scotland.

The legislation extends to the United Kingdom. I would not like anyone to think that if the Executive did not fight against this and the measure were against the wishes of the people in Scotland, the Executive would just hide behind the argument that the measure was passed at Westminster. Devolution is about things that are not required to be done at Westminster not being done at Westminster. In this case, I think that there has to be serious debate during the process of the Bill being implemented—I am not opposed to the Bill—to decide whether it would be better to have a separate system for Scotland, run by the Scottish Executive and controlled by the Scottish Executive. There are many arguments for that, and I hope that the Minister has not ruled them out by putting this clause in the Bill at this moment.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I welcome the hon. Member for West Chelmsford and his reinforcement of the efforts made by the hon. Member for Rayleigh from the Front Bench, although I think that the hon. Member for Rayleigh has been doing a pretty good job. I shall try to give him an explanation. The proposal for a planning gain supplement would be UK-wide. However, this Bill does not specify Scotland, because preparatory expenditure needing new powers under this Bill would not be incurred by the Scottish Executive. The agencies  requiring those preparatory expenditure powers are Her Majesty’s Revenue and Customs, the Valuation Office Agency and, because the VOA does not operate in Northern Ireland, the Northern Ireland Departments.

My hon. Friend the Member for Linlithgow and East Falkirk is right that section 75 is a devolved matter. It remains a devolved matter and would remain a devolved matter if we introduce a planning gain supplement. The devolved Administrations would keep all revenues raised in their country under a planning gain supplement. Clearly, they would then have the discretion to deploy those revenues to support infrastructure and growth in whatever way they choose. That is properly a devolved discussion that they need to have and are having with their local authorities, which is the principle of devolution. There have been, as members of the Committee would expect, detailed discussions involving Government in both the Treasury and HMRC, and the Scottish Executive and the Scottish Parliament. The Scottish Executive clearly have a very active interest, given their devolved responsibility for planning. I say clearly, however, to the hon. Member for Rayleigh and to the rest of the Committee that we do not have any proposal to test the PGS a year early in Scotland, as happened in the case of the poll tax.

Photo of Mark Francois Mark Francois Shadow Paymaster General

I have listened carefully to the Minister’s reply but, unless I missed it, he did not give me a clear answer to what I thought was a fairly straightforward question: what would be the constitutional position if Westminster voted for the introduction of the planning gain supplement across the United Kingdom, but the Scottish Executive then voted against its introduction? Despite what the hon. Member for Linlithgow and East Falkirk said from the Back Benches about a pantomime, it is a pretty serious question and I did not hear the Minister answer it, so before we allow clause 2 to stand part of the Bill, perhaps he would be kind enough to rise to his feet again, with your indulgence, Mr. Hood, and answer that important question.

Photo of John Healey John Healey The Financial Secretary to the Treasury

This Bill is a matter for this Parliament, and a substantive PGS Bill would be a matter for this Parliament.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

Further consideration adjourned.—[Kevin Brennan.]

Adjourned accordingly at one minute to One o’clock till this day at half-past Four o’clock.