My Lords, I shall speak to the proposition in my name and that of my noble friend Lord Lansley that Clause 127 should not stand part of the Bill. My noble friend and I are job-sharing for much of this section of the Bill.

This clause deals with pilots for community land auctions, which aim to give local authorities the ability to benefit far more greatly from new development than they do under the current system, even as proposed in the Bill. Basically, it takes the principle behind Section 106, the new homes bonus, CIL and the infrastructure levy a stage further, but in doing so it risks compromising the integrity of the planning system by moving more towards the sale of planning consents.

The Explanatory Notes to the Bill are normally quite helpful, but the 10 lines on the background to CLAs, on page 126, do not explain what is going to happen. As I understand the proposal, a landowner can name the price at which he is willing to sell his land to the council—it would probably be agricultural land, but it could be industrial land—which then has an option to purchase the land at that price. The price will be somewhere between the current value and the hope value with planning consent. The local authority then develops its plan, and if that land is deemed suitable for housing development, it buys it at the option price and resells it to the developer, pocketing the difference. I assume the Government hope that many landowners will take advantage of the scheme so that the local authority has a choice and the ability to choose best value. I think it clear from that scenario that the local authority has a financial incentive to designate land for development over which it has an option, in preference to land over which it has no option but which may be more appropriate for development. I will return to that in a moment.

As the noble Baroness, Lady Taylor, said, this clause was not in the original Bill; it was shoehorned in at a relatively late stage in November, along with street votes. Noble Lords who were in the Chamber at the time may recall that I was less than enthusiastic about street votes, and indeed they received a sceptical response from the House. So, we now have two policies that seem to have gone straight from a think tank into primary legislation without the normal careful scrutiny that one associates with planning reform, overtaking on the way many oven-ready policies on leasehold and rental reform or repeal of the Vagrancy Act, which was originally in the Bill but now dropped.

It is actually quite difficult to get information about community land auctions. I googled it and discovered that apparently the only place that has them is Hong Kong, but all land there is in public ownership so it is not really a good comparator. They have been championed by Tim Leunig, a respected economist, when he was at the CentreForum think tank in 2011-12; he is now a senior policy adviser to the Secretary of State at DLUHC. Tim Leunig gives an illustration of his proposal that will strike terror into the heart of my noble friend Lord Lansley. He says that

“were Cambridge to allow a million new houses near the city—like America’s Silicon Valley—it could give current adult residents around £700,000 each. Again, that should be a vote winner”.

I see my noble friend wondering what he is going to do with all that money. One of the articles that Tim Leunig wrote making the case said that

“it will kick start the economy. Every extra house we build creates at least three jobs. Building an extra 300,000 would boost employment by around a million jobs … The government says that it will pilot this scheme; we should hold it to its word”.

The date of that article was 4 January 2012, and indeed in his 2011 Budget George Osborne announced that he would pilot a land auction model. However, as far as I can see, no progress has been made, perhaps because the proposition did not withstand critical scrutiny.

The only other reference that I have been able to find in this country is from 2017. The Government announced a task force to investigate a new way of paying for infrastructure projects, such as new public transport. It asked the task force on funding infrastructure to look at the so-called development rights auction model of land value capture. I have not been able to find its conclusions so perhaps my noble friend can shed some light on what happened to that task force.

I am reluctant to condemn out of hand proposals to capture more effectively the windfall gains made from planning consents, but I think this House has a responsibility to scrutinise with particular care policies such as this that simply have not undergone the normal critical scrutiny. We need to look at the risks and ask why it appears that no one else has adopted this policy.

An obvious risk is that it could distort the planning system. Local authorities, which are under enormous financial pressure, could stand to make large windfall gains from land that is less suitable for development. They will be announcing the winner of a race when they have backed a particular horse. The policy risks contaminating the integrity of the planning system and producing suboptimal sites for development, and I suspect that my learned friends will be considering the possibility of judicial review.

I can illustrate the risks from my former constituency, North West Hants. In 1996, Basingstoke and Deane Borough Council and Hampshire County Council bought 2,000 acres of agricultural land just outside Basingstoke. Now, 3,500 new homes are being built on that site, begging the question of whether ownership may have influenced the planning decision.

I wonder how many landowners will be tempted by the scheme. It works only if there is a proper market. Will they go through the hassle of submitting options? What inquiries have the Government made of landowners to see whether they will play? If a landowner thinks the land is suitable for development, why should they not wait and pocket all the money instead of sharing the windfall with the local authority? Most of them are able to take a long-term view of their interests. What happens in an area where there is only one major landowner, or there are not very many and they can easily collude on the option price or decide not to play?

Then there are some technical questions. How does this interact with Section 106 or the infrastructure levy? Does the developer have to pay that as well, or has the planning authority already secured its share through the auction? What has been the response of the LGA or the TCPA to this proposal?

Another issue was raised by my noble friend Lord Lansley and the noble Baroness, Lady Taylor, in responding to the last debate. When I first became a local councillor in 1968, there were few sources of revenue for the council. We had the rents and the charges as revenue that we generated locally; there were the business rates and domestic rates; and there was the central government grant. We are now moving progressively towards a different system of funding local government with Section 106, the infrastructure levy and, potentially, community land auctions. In the old days, we had something called rate equalisation, which recognised that some local authorities had fewer resources than others. Given that factor, which is central to levelling up, I wonder to what extent central government is going to have to inject some sort of equalisation into this new scenario of the infrastructure levy and community land auctions.

To take the Cambridge example that I mentioned a few moments ago, would central government really stand back and allow one local authority to make such a huge gain, or would it say, “We need to share this benefit more generally”? Can my noble friend say, in winding up, in addition to addressing the consequences of moving down the CLA route, what the Government’s proposal is to make sure that this is a levelling-up Bill? My noble friend said in winding up the earlier debate on the infrastructure levy that it will capture more in high-value areas. Yes, of course it will—and so will this. How are we going to make sure that the whole thing does not go against the grain of levelling up?

I hope I have not been too unfair on the proposal. We need fresh thinking, but the job of this House is to scrutinise legislation. That is what we need to do with Clause 127.