My Lords, in addition to the levy we have been debating, the Government are interested in testing other mechanisms that could improve land value capture.

Community land auctions are an innovative process of identifying land for allocation for development in a local planning authority’s area in a way that seeks to optimise land value capture. Their aim is to introduce transparency and certainty by allowing local planning authorities to know the exact price at which a landowner is willing to sell their land. The crux of our approach is to encourage landowners to compete against each other to secure allocation of their land for development in the local plan by granting a legally binding option over their land to the local planning authority.

The competitive nature of community land auction arrangements incentivises landowners to reveal the true price at which they would willingly part with their land. If the land is allocated in the local plan upon its adoption, the local planning authority can sell the CLA option, keeping the amount that the successful bidder has paid and capturing the value that has accrued to the land as a result of the allocation. The successful bidder must then pay the price set out by the original landowner in the option agreement to purchase the land. The detailed design of community land auction arrangements will be set out in regulations that will be subject to the affirmative procedure. In a moment, I will address my noble friend Lord Young’s clause stand part notice but, for now, I hope that that is useful background, by way of introduction.

On Amendment 364B, I reassure the noble Baroness, Lady Hayman, that sustainable development remains at the heart of our approach. Piloting authorities will decide which land to allocate in their emerging local plans by considering a range of factors, which the Government will set out in guidance. Unlike conventional local plans, when allocating sites, local planning authorities will be able to consider the financial benefits that they are likely to accrue from each site. How, and the extent to which, financial benefits may be taken into account will be determined in regulations. Importantly, the existing requirement to prepare local plans, with the objective of contributing to the achievement of sustainable development under Section 39 of the Planning and Compulsory Purchase Act 2004, will remain.

We are not altering the existing local plan consultation and examination process. Piloting authorities will still be required to consult on the proposed land allocations in their draft local plans, before they are submitted and independently examined in public in accordance with the local plan preparation procedures, as modified by Schedule 7 to the Bill.

On Amendment 365, the Secretary of State is required to lay a report before each House of Parliament on the effectiveness of the pilot within the timeframe set out in Clause 134(2). There is a requirement to publish this report, which means that it will be publicly accessible and available to any combined authority that was involved in the pilot.

The noble Baroness, Lady Taylor, asked about whether there had been prior consultations. We will consult on community land auctions shortly, and taking part in the pilot will be voluntary for local authorities. We need the powers in the Bill to enable the pilot to happen.

I appreciate the thought behind my noble friend’s Amendment 366. However, as community land auctions are a new and innovative process for identifying land for allocation for development, our view is that it is right that the Bill makes provision for them to be piloted on a strictly time-limited basis.

If community land auction arrangements are deemed successful, and if there is ambition to extend the approach, further primary legislation would be required to implement them on a permanent basis. As we do not have the evidence about their effectiveness yet, we think it right that the Bill does not include provisions that could make CLAs a permanent fixture. Instead, the Government will take a decision at the relevant point in the future, based on the evidence. I hope that, with those reassurances, my noble friend Lord Lucas and the noble Baroness, Lady Taylor, will feel able not to press those two amendments when they are reached.

On Clause 127 as a whole, my noble friend Lord Young questioned the relationship between community land auctions and the plan-making process. I stress to him that it is essential that community land auctions are compatible with plan-making and that they dovetail within new and existing frameworks in the planning system. Sites that are allocated through the community land auction process will still need to secure planning permission in the normal way.

My noble friend asked whether community land auctions amounted to a process of selling planning permissions. The answer is no. CLA arrangements will be the means of identifying land for allocation for development in a local plan. Local authorities will be required to consult on the proposed land allocations in their draft local plan before the plan is submitted and, as I mentioned, independently examined. My noble friend described the process as, in essence, handing out money to people. Local authorities will need to spend the levy in line with the requirements in the Bill, which sets out that it should be spent in the same way as the infrastructure levy.

My noble friend also asked what happens when there is only one landowner. Community land auctions will be a voluntary pilot scheme, as I mentioned. We are not proposing that they should be mandatory everywhere. We confirmed in our May 2022 Bill policy statement that there will be a requirement for two rounds of community engagement before plans are submitted for independent examination.

Clause 127 requires that any directions given or regulations made under Part 5 aim to ensure the overall purpose of community land auctions arrangements, which is that the costs of supporting the development of an area and the costs incurred in achieving other specified purposes should be funded wholly or partly by owners or developers of land. As I have explained, introducing this clause will allow the Government to test the effectiveness of community land auctions in practice through a pilot scheme. The provisions allowing for the community land auctions pilot in the Bill will expire 10 years after CLA regulations are first made, and we will seek local planning authorities which wish to participate in this pilot to volunteer to do so.

I hope that I have given my noble friend sufficient assurance. However, I will carefully examine the remarks that he made and the questions that he asked. If I have not covered those points sufficiently, I undertake to write him, but I hope that, for now, he will be content for this clause to remain part of the Bill.