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Clause 26

Finance Bill – in a Public Bill Committee at 6:00 pm on 2nd June 2009.

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Contaminated and derelict land

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

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I wish to explore some of the background to land remediation relief in the Bill. The Government have tabled a number of amendments to schedule 7. As I understand it, land remediation relief is given at 150 per cent. of the actual cost of remediation. Remediation costs include labour and materials incurred directly or through a contractor. When a business is profitable, the  relief can be used to reduce the corporation tax payable. When a business is not profitable, it can claim a repayment capped at 16 per cent. of the lower cost of the qualifying expenditure or unrelieved losses.

I understand that the objective of the relief is to bring forward brownfield sites for development, particularly ones that have been contaminated. The draft statutory instruments that have been published alongside the clause discuss three aspects of contamination: radon, arsenic and Japanese knotweed. I will return to Japanese knotweed in a moment.

The Government have put great pressure on brownfield developments. A long time ago, the Office of the Deputy Prime Minister set a target that 60 per cent. of new developments should be built on brownfield sites. However, the definition of a brownfield site is quite elastic. Many houses have been built in my constituency on brownfield sites that other people might know as back gardens and former nursing homes. On brownfield sites previously used as industrial sites, chemicals may be left behind that have to be eradicated before the site is developed.

The pressure to build on brownfield sites meant that their value was pushed up until the recent property crash, particularly when there was a relatively low cost of remediation. The cost of remediation is a barrier to sites being used for development. It is therefore understandable that relief is made available to help mitigate the cost of remediation of the land. That is such an obvious point that it is difficult to understand why it has taken so long to get to the point in legislation where we try to improve the availability of the relief.

Lord Rogers’s urban task force, which reported in 1999, suggested that additional relief should be given to developers to decontaminate land. That did not include long-term derelict land. The Barker review of 2004 cited decontamination of brownfield sites as one of the principal barriers to redevelopment of such areas. Two years later, Professor Barker carried out another review. The Chancellor in those days was keen to commission a review in every Budget on all sorts of subjects. Professor Barker got good work out of that. Her review of land use and planning in 2006 said that the Government should consult on the reform of remediation relief to encourage new developments.

In 2007, there was a consultation on tax incentives for the development of brownfield land that looked at better targeting of land remediation relief and increasing certainty and publicity for the relief. The Government concluded:

“In light of the responses to the consultation the Government is minded to take a number of steps to improve the certainty of this relief. In particular, HMRC will be considering how to improve guidance and what mechanisms could be used to ensure that the relief is better publicised. This should help to ensure that financial planning takes full account of the relief from the start.”

We seem to have spent an awfully long time talking about and consulting on this, to get to the process before us today. Even after that long gestation period, the Government are still minded to table two amendments. I should have thought this would be a textbook bit of legislation after so much consultation, and that it would pop, fully formed, into the Bill, without needing to be amended at this stage.

An important issue that I have noted from my constituency is that the relief should be extended to Japanese knotweed. The draft statutory instrument refers specifically to the three botanical types of Japanese knotweed, which apparently holds the title as Britain’s most invasive plant. According to the BBC, its removal from the Olympic site in east London could cost hundreds of thousands of pounds. Apparently, it has bamboo-like stems and clusters of creamy flowers. It sounds exotic, but it is very expensive to remove. It can flourish in any soil, so hon. Members with poor soil in their garden might consider that it would provide an attractive plant, but it overwhelms other plants and damages ecosystems. It has the ability to grow through walls, tarmac and concrete.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

It kills horses as well.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Indeed. Experts say that a new plant can grow from a piece of root the size of a garden pea. It is clearly a problem, and I know that from my experience, because there was a development plan for my constituency to build the final stage of a road through a site that is known locally as Warsash motors.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

I used to live down there.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I know. The road was planned when I was elected in 2001, and has been completed only recently. The reason why it has taken so long to complete is that the county council looked at the cost of removing the knotweed, and thought it easier to poison it and allow it to die naturally rather than try to dig it out. So, I think that people will welcome the fact that Japanese knotweed is covered by the measure, although they might regret the fact that it has taken rather longer than expected to get to this point.

I want to raise with the Minister a few points that emerged from the regulatory impact assessment. The cost of the measure is about £30 million to £40 million a year over a five-to-10 year period, so there is an aggregate cost of somewhere between £150 million and £400 million, but in the RIA, there is no monetised amount for the benefit of that cost. Will the Minister indicate how much land she thinks will be brought forward for development as a consequence of the measure? Alternatively, have the Government been waiting so long that the measure will not bring forward any land at all? I am interested to know what work they have done to understand the benefits and the sort of sites that would come forward for development that have not been coming forward, so we can protect some of our greenfield sites and allow these contaminated brownfield sites to be developed.

According to the RIA, very few people would be disadvantaged by the measure, but one group that will be disadvantaged are those who deal with knotweed currently and send it to landfill sites. Are there many contractors who just take it to landfill sites? What will be the impact on the landfill levy of the introduction of this remediation relief, which will reduce the number of people taking knotweed to landfill sites? I presume that the cost has been netted off, or factored in, to the RIA.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee 6:15 pm, 2nd June 2009

Welcome to the Chair, Mr. Hood. I note that the hon. Member for Hammersmith and Fulham has fled at the thought of Japanese knotweed, probably to check that there is none in his garden. It is not a plant that one would want to find flourishing anywhere near anything that the members of this Committee value.

Land remediation relief was introduced in 2001 to encourage owners and investors to bring contaminated land back into use by providing enhanced tax relief. The Government are committed to increasing housing supply and to maintaining a high proportion of development on brownfield sites. The 2004 Barker review of housing supply and the 2006 review of land use and planning recommended that land remediation relief be extended to derelict land. In the light of those recommendations, the clause and schedule will extend land remediation relief to provide enhanced tax relief for the costs of dealing with specific forms of dereliction, which, up until now, have prevented sites from being brought back into use.

The scope of the legislation is based on a consultation carried out by the Treasury in 2007 and subsequent discussions with a broad range of stakeholders, including representatives from the Government, local government, industry, development agencies and the charitable sector. We recognise that the responses to the consultation show that a lack of certainty about what qualifies under the existing relief may have reduced the effectiveness of land remediation relief. That lack of certainty has meant that industry has not factored the relief into costings, with the result that the existing relief did not exert as much influence on investment decisions as we would have liked. The changes in the Bill are intended to give companies greater certainty, enabling the industry to include the relief fully in their projected costings.

In recent years, companies have exploited the relief by claiming for work on greenfield sites or brownfield sites not contaminated by previous industrial use, which is contrary to the policy intention. Schedule 7 will therefore refocus the existing relief on contaminated brownfield sites and exclude expenditure on greenfield sites. The hon. Gentleman was uncharacteristically uncharitable about Government amendments 8 and 9 to schedule 7. They will make minor drafting improvements for the provisions in the schedule—

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. The Minister knows that we will discuss that when we come to the schedule.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I was responding to the observations that were made by the hon. Member for Fareham, Mr. Hood. I am more than happy to come back to those points, which I do not think are major, when we get to that part of the schedule.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.