No-scheme principle

Neighbourhood Planning Bill – in a Public Bill Committee am 11:45 am ar 27 Hydref 2016.

Danfonwch hysbysiad imi am ddadleuon fel hyn

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

With this it will be convenient to consider the following:

Clauses 23 to 30 stand part.

New clause 13—Review of compulsory purchase—

(1) Before exercising his powers under section 35(1) the Secretary of State must carry out a review of the entire compulsory purchase order process.

This new clause would require the Secretary of State to review the entire compulsory purchase order process.

Photo of Gavin Barwell Gavin Barwell Minister of State (Department for Communities and Local Government) (Housing, Planning and London)

I will now run through the remaining compulsory purchase measures in the Bill. Clause 22 is the key measure of all the CPO measures in the Bill. It wipes the slate clean of more than 100 years of sometimes conflicting statute and case law about how compensation should be assessed, and it establishes a clear, new statutory framework for doing so.

The core principle of compulsory purchase compensation, which is not altered by the Bill, is that the land should be acquired at market value in the absence of the scheme underlying the compulsory purchase. Any increase or decrease in land values arising from the scheme is therefore disregarded for the purposes of assessing compensation.

The problem is that since the “no-scheme world” principle was first established, it has been interpreted in a number of complex and sometimes contradictory ways. That lack of clarity can make negotiations over the level of compensation difficult, resulting in unnecessary delays. The clause will therefore clarify the position by creating a statutory no-scheme principle and setting out a series of clear rules to establish the methodology of valuation in the no-scheme world.

The clause will also extend the definition of the scheme to include relevant transport projects where they have made the regeneration or redevelopment scheme that is the subject of the compulsory purchase possible. I will say more about that later. The Committee will be delighted to hear that I will not go through the clause line by line, but focus on a few key points.

Subsection (3) will replace sections 6 to 9 of the Land Compensation Act 1961, which set out how the scheme is to be disregarded when assessing compensation. Proposed section 6A in the Land Compensation Act will maintain the fundamental principle that any increases or decreases in value caused by the scheme, or the prospect of the scheme, should be disregarded, and lists the assumptions to be made. If there is a dispute about compensation and the parties have to go to the Upper Tribunal to resolve it, proposed section 6D clarifies how to identify the scheme that must be disregarded.

The default position is set out in proposed section 6D(1): that the scheme to be disregarded means the scheme of development underlying the compulsory acquisition—usually the current compulsory purchase order. If an acquiring authority wants to assert to the Tribunal that a scheme to be disregarded covers a larger area than the underlying scheme of development, it can do so only if that was identified at the outset in the authorising instrument or associated documents, when the acquiring authority started the compulsory purchase process. I hope that is clear.

In proposed section 6D(2) we have replicated the current special provisions for new towns and urban development areas. This special status means that all development within these designated areas forms part of the scheme to be disregarded, so the value of later acquisitions within a new town area will not be influenced by earlier developments within that area. We have extended this special provision to mayoral development areas as well.

We have also made special provision where regeneration or redevelopment schemes have been made possible only by relevant transport projects. I said I would say a few more words about this. New transport projects will often raise land values around nodes or hubs—HS2 is a good example. Where that makes regeneration or redevelopment attractive, but the private sector is unable to bring a scheme forward, public authorities might have to step in by using their compulsory purchase powers to help bring forward the regeneration.

In those circumstances, when assessing the compensation that people might receive if their property is acquired through compulsion by a public authority, the regeneration or redevelopment scheme will be able to include the relevant transport projects as part of the scheme to be disregarded in the no-scheme world. This is a complicated area of law, so let me try to make it as clear as possible. What that means is that the land will be valued without the uplift caused by the public investment in the transport project. This is one of only two bits in the Bill that change the compensation people might get if some of their property is subject to compulsory purchase.

The provision is subject to some very important safeguards to ensure that it is proportionate and fair to all. They are as follows. The prospect of regeneration or redevelopment must have been included in the initial published justification for the relevant transport project. In other words, an acquiring authority could not come along to a piece of land that had been improved by a transport project 20 or 30 years ago, when no mention of this redevelopment happened, and use this legislation to try to drive down the price of compensation. The instrument authorising the compulsory acquisition must have been made or prepared in draft on, or after, the day on which this provision comes into force. The regeneration or redevelopment scheme must be in the vicinity of the relevant transport project. The relevant transport project must be open for use no earlier than five years after this provision comes into force—they must not be existing schemes. Any compulsory purchase for regeneration or redevelopment must be authorised within five years of the relevant transport project first coming into use.

Importantly, if the owner acquired the land after plans for the relevant transport project were announced, but before 8 September 2016—the date on which we announced we were going to do this—the underlying scheme will not be treated as though it included the relevant transport project. In other words, the provision should not be retrospective for people who acquired the land before they might have known the Government were going to change the law in this way.

I recognise that extending the definition of the scheme in this way will mean that some claimants receive less compensation than might otherwise have been the case. However, I hope that the Committee shares my view that it is right that the public, rather than private interests, benefit from public investment into major transport projects. Having increased neighbouring land values by providing new or improved transport links, the public sector should not then have to pay more when acquiring land for subsequent development that was envisaged when that transport project was announced, and would not otherwise have been possible. The provision will ensure that the public purse does not have to pay the landowner land values inflated by previous investment that the public sector has already made.

I turn now to clause 23. Part 4 of the Land Compensation Act 1961 provides that in certain circumstances a person whose land has been acquired by compulsion may be entitled to claim additional compensation. That additional compensation entitlement arises if, within 10 years, planning permission is granted for development on the land that causes an increase in its value which was not taken into account in the original assessment of compensation.

Part 4 therefore introduces an element of uncertainty and unknown risk about compensation liability for the acquiring authority, leading inevitably to increased costs, which are often dealt with by paying insurance premiums. In the Government’s view it also provides an opportunity for an unearned windfall for claimants. Compensation under the ordinary rules already reflects the full market of the land at the valuation date, with all its present and future potential, including any hope value for future development. Under part 4 a claimant is treated as though they have retained their investment and interest in the acquired land and so can benefit from any increase in value generated by subsequent planning permission. No such expectation would arise on any ordinary sale in the private market. Therefore, although it is little used, I believe that for the reasons I have set out the provision is unfair. Its repeal will reduce the risk and uncertainty for acquiring authorities, while maintaining the principle of fair compensation for claimants.

Clause 24 introduces a statutory timeframe—there is none at present—for the acquiring authority to serve a confirmation notice on all interested parties, attach a confirmation notice on or near the land, and publish a copy of it in the local press. Although most acquiring authorities are keen to push ahead with their scheme and publish the confirmation notice quickly, for a variety of reasons some delay. Those delays prolong the uncertainty facing those with an interest in the land. Depending on their length, delays can also result in delays to much needed new housing, which is what the Bill is ultimately about.

Clause 25 ensures that the entitlement to compensation for disturbance of a business operating from a property that is acquired by compulsion is fair to all tenants and licensees. This is an area where we are changing the law to make compensation more generous. At present there is an anomaly that means that licensees who have no interest in the land that is being taken are entitled to more generous compensation for the disturbance of their business than those with a minor or unprotected tenancy with an interest in the property. That is because where property occupied by a licensee is acquired, the law on disturbance compensation allows account to be taken of the period for which the land they occupied might reasonably have been expected to be available for the purpose of their trade or business, and of the availability of other land suitable to the purpose.

However, for those with a minor or unprotected tenancy with a break clause or a short unexpired term, case law has held that for the relevant purposes it must be assumed that the landlord would terminate their interest at the earliest opportunity, whether or not that would actually have happened in reality. Clause 25 removes that anomaly and brings the compensation entitlement for businesses with minor or unprotected tenancies into line with the more generous compensation payable to licensees.

Clause 26 enables either the Greater London Authority or Transport for London, or both, to acquire all the land needed for a joint transport and regeneration or housing scheme on behalf of the other. My hon. Friend the Member for North West Hampshire may be aware of the problem that exists. At the present time, to bring forward a comprehensive redevelopment scheme in London, two compulsory purchase orders are needed—one promoted by the Greater London Authority for the regeneration or housing elements; and the other promoted by Transport for London for the transport scheme. That clearly makes no sense at all. It adds complexity and delay to the process and causes confusion among those affected. Clause 26 will remove the artificial division and allow the Greater London Authority and Transport for London to use their existing powers more effectively by enabling them to promote joint compulsory purchase orders, or allowing one to acquire land on behalf of the other. In so doing, it will speed up the process and make it clearer for everyone.

Finally, clauses 27 to 30 contain amendments to a small number of provisions on compulsory purchase in the Housing and Planning Act 2016, to ensure that the technical detail operates as intended. I hope that I have given a useful description of what the remaining clauses do.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Housing) 12:00, 27 Hydref 2016

I thank the Minister for his helpful run-through of the CPO clauses in the Bill. I have a couple of specific questions about clause 22, but I want to say at the outset that those are probing questions because we agree with the overall thrust of the clause. I think that the Minister has taken some tentative steps down the road of socialism in protecting the public interest in the way that might happen under the clause. We absolutely agree with the broad intention of the clause. It is right that it applies to new towns and mayoral developments, and to an extent to transport, to try to facilitate, in particular, the larger scale development that is very much needed. Nevertheless, there are a few questions about how compensation will be decided under proposed section 6D(2) to (4), which is what my questions specifically relate to. At the moment it does not look as though any claims under the proposed section can be referred to the Upper Tribunal. If that is not the correct interpretation, perhaps the Minister will clarify that.

We know that the no-scheme principle is central to a fair assessment of compensation and that the scope of the disregarded scheme must be appropriate so that proper compensation is paid. The Government have included proposed section 6D(5) under clause 22 to safeguard the public purse in circumstances where it is appropriate to disregard a wider scheme. Where the appropriateness of doing so is challenged, the Upper Tribunal is empowered to determine the matter. Can the Minister explain what safeguards exist where a scheme is extended instead under proposed section 6D(2) to (4), where the recourse to the Upper Tribunal does not exist and all qualifying schemes, regardless of merit or circumstances, will be extended as a matter of law? I am sure that he has sensible reasons for including them but, to ensure that there is confidence out there in the development sector, we might need to hear a little more about why that is the case—if indeed it is the case.

Does the Minister agree that, as desirable as it is to recover the benefits of public investment, such recovery should be made from all those who benefit and should not discriminate against those who are already bearing the impact of losing their homes or businesses to make way for the scheme? The extension of the scope of the scheme in proposed section 6D(2) to (4) without any appeal or consideration of the facts of a case means that there could be injustice to homeowners and small businesses as well as investors and developers that own land affected by such schemes. It goes beyond ensuring fair compensation, which is assured by proposed section 6D(5).

My point is that the Government must avoid poorly targeted policies to recover the benefit of public investment and must introduce separately a properly considered mechanism that might build on existing schemes such as the tax incremental funding and community infrastructure levy schemes, which properly focus the recovery of value from past and future public investment.

Those are my questions for the Minister. As I have said, we agree very much with the basic provisions of clause 22, but there is perhaps a need to put something else into the public record about why they are being introduced in the way they are. Perhaps he should look at the limitations for appeal under proposed section 6D(2) to (4). Does he think anything more needs to be done, or will the scheme as outlined put in place appropriate safeguards for those who might be concerned about the extension of the wider scheme, in particular, and the extension to transport? Overall, we can see the rationale for the Government wanting to do that.

I move on to new clause 13. We have had a helpful discussion about CPO. We had a rather lengthier discussion about CPO during the passage of what is now the Housing and Planning Act 2016. I also looked at CPO powers under the previous Government’s Infrastructure Act 2015. Having recognised that CPO powers and the legislation underpinning them are very complex, we are in danger of the Government going on with the process of simply amending CPO powers and tinkering with the system, making it more complex, I suspect, rather than less. However, there seems to be a view across all parties that we need to review this in its entirety and bring forward a much more consolidated and rationalised piece of legislation that will be much easier for local authorities and developers to get their heads around.

Unfortunately, I do not have with me the Town and Country Planning (General Permitted Development) (England) Order 2015. The last time I asked the Government to introduce a piece of consolidated legislation on permitted development, I did not think I was going to get 167 pages in return, plus an additional 12 pages a couple of months ago, separate from that order, so I have some anxieties in proposing this new clause.

CPO legislation goes back a very long way—I think to 1845, with parts of that legislation still used—and it might be about time to think of consolidating it. We are not the only ones to think so. Colin Cottage from the CPA—which is the Compulsory Purchase Association, not the Commonwealth Parliamentary Association, although that might have an interest in CPO—told the Committee:

“The existing system is not helpful for reaching quick solutions. In fact, in many ways it encourages people to be fighting with each other from the outset. Ultimately, that increases the uncertainty, conflict and cost. That is really the issue that we have to look to address in order to give ourselves a more streamlined system.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 64, Q114.]

Richard Asher from the Royal Institute of Chartered Surveyors said:

“I believe, and the Royal Institution of Chartered Surveyors has always believed, that codification of the whole of the CPO rules, which go back to 1845 and are highly complex, would be a sensible way forward. I think the simplification of the rules for CPO would be a major step forward…I think the complexity often deters people—particularly local authorities, in my experience—from using CPO powers. It also results in a number of CPOs being refused or rejected by the courts because of the complexity of the rules that surround them.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 63, Q114.]

If ever there were an argument for simplifying, rationalising, streamlining and consolidating a bit of legislation, surely it is that the courts, simply because they are finding the legislation too difficult and complex, are throwing out what might be bona fide requests for a CPO.

I appreciate that the Government have been consulting on CPO reform. The consultation document appears to have been issued before the Committee sat, so I thought we should acknowledge that. We got not only the consultation but the Government’s response. That is a bit of good practice that I suggest the Government use elsewhere but, alas, the Government did not consult on whether the whole scheme should be reviewed. They asked about various aspects of the reform, which is a step forward. If the consultation has led to the measures in clause 22, it is a good thing. However, it is time for a fundamental review of not only the primary legislation but the secondary legislation on compulsory purchase. A full-scale rationalisation and consolidation would be an extremely helpful way forward.

We all know—and I think this view is shared across the whole House—that we have to deliver more homes. I hope that the Minister shares our view that those homes have to be delivered in communities. We should be about placemaking and not just building homes. The areas that those homes are in will need to be underpinned by appropriate infrastructure. In this country, we are poor at bringing forward the infrastructure that we need on time. Having a rationalised, much more straightforward CPO system would definitely help us to bring forward the necessary infrastructure in a timelier manner.

Very helpfully, Colin Cottage of the Compulsory Purchase Association pointed to some examples from other places that the CPA feels do compulsory purchase better than we do in the UK. I do not know whether that is the case, but it might be helpful for the Minister to look into that. Colin Cottage mentioned America, which he said had a more streamlined system where,

“81% of land value compensation assessments are agreed immediately, and another 4% settle after a short period of time. Only the remaining 15% are then contested for any lengthy period of time. That is a much higher strike rate than we have in this country.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 65, Q116.]

It would be very interesting to hear whether the Minister or his Department have any intention of looking for international examples that might help to bring forward land more clearly through a revised CPO system. Examples of countries that manage to get to an agreement on compensation much more quickly would be helpful.

The British Chambers of Commerce pointed us to the French system. In these Brexit days, we are perhaps not meant to look to France or other European countries for example of good practice. Nevertheless, the BCC said that the French system had an enhanced CPO compensation scheme that enabled particularly large-scale transport projects to be brought forward more quickly. The Minister might like to look at that suggestion. I will leave that argument there. I know that the Minister reads the Lyons report regularly, so he will know that we made a very comprehensive argument in it for reviewing compulsory purchase legislation in this country. I will not repeat that argument here; I have summarised it as succinctly as I can. I look forward to hearing what the Minister has to say.

Photo of Gavin Barwell Gavin Barwell Minister of State (Department for Communities and Local Government) (Housing, Planning and London) 12:15, 27 Hydref 2016

I will begin by answering some of the hon. Lady’s detailed questions and then come on to the principles behind the amendment. I think she had three questions; I was not quite clear on the first, so I will deal with the other two and then see if I understood the first question correctly.

The hon. Lady’s third question was about ensuring that everybody benefits from an uplift in land values as a result of Government public investment in the scheme and that there is a way of capturing back some of that uplift. To a degree, she answered her own question: under current policy, CIL is the main mechanism by which we seek to capture some of the uplift when development is given, so that a contribution can be made to necessary improvements within a community area, a new infrastructure or whatever is required. She will be aware that I have on my desk a review by Liz Peace and her team of CIL and issues relating to section 106 contributions. We are considering that review and will respond to it in our White Paper later this year. The hon. Lady’s point that it is legitimate for the state to capture some of that uplift is absolutely valid; we need to think about the best mechanism for doing that.

I believe that the hon. Lady’s second question was on arguments about the definition of the scheme, what it constituted and whether the upper tribunal had a role. Have I understood her correctly?

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Housing)

It was whether the widening of the scheme under proposed section 6D(2) to (4) of the Land Compensation Act 1961 could be referred to the upper tribunal under proposed section 6D(5).

Photo of Gavin Barwell Gavin Barwell Minister of State (Department for Communities and Local Government) (Housing, Planning and London)

The answer is a simple yes. Proposed new section 6D(5) states:

“If there is a dispute as to what is to be taken to be the scheme…then, for the purposes of this section, the underlying scheme is to be identified by the Upper Tribunal”,

so the answer is a simple yes.

I think the hon. Lady’s first question was about the wider role of the upper tribunal in dealing with compensation disputes. She was concerned that there were some other areas that could not go to the upper tribunal. We believe the answer is that they can, but I may not have captured her question correctly. Would she reiterate in which particular cases she was worried that people could not go to the upper tribunal?

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Housing)

It was the schemes referred to in proposed new section 6D(2) to (4), and whether compensation arrangements could be determined under proposed new section 6D(5).

Photo of Gavin Barwell Gavin Barwell Minister of State (Department for Communities and Local Government) (Housing, Planning and London)

The answer is a definite yes.

If Mr Bone is feeling particularly generous, he might let me answer hon. Members’ earlier questions, but he may prefer me to write to them rather than going back to a previous debate.

No: if you have suddenly remembered, Minister, go ahead.

Photo of Gavin Barwell Gavin Barwell Minister of State (Department for Communities and Local Government) (Housing, Planning and London)

Inspiration has arrived. Clause 19 gives the power to make regulations limiting or making particular provision about temporary possession; the hon. Member for City of Durham asked for some guidance about how those powers might be used. The Government’s thinking is that it could be about particular types of land, such as open spaces, commons or National Trust land. We might want to give particular thought to classes of land in which the provisions might not apply.

In the agricultural example given by the hon. Member for Oldham West and Royton, the losses would be assessed as a claim for loss or injury under clause 14(2), so the answer is that it is covered. Thank you for allowing me to clarify those two matters, Mr Bone.

I have some sympathy with the points made by the hon. Member for City of Durham. As we touched on in an earlier debate, the evidence we heard showed that there was definitely a strong desire out there for simplification of the CPO rules. We believe that the Bill contributes to that, particularly by clarifying in statute how the no-scheme world principle works, but also by removing the uncertainty that I referred to about people’s ability to come back and make subsequent claims for compensation based on subsequent planning applications. There are definitely measures in the Bill that deliver some of the simplification that people want, but the hon. Lady is right that some people who gave us evidence said that maybe we need a fundamental rethink of the whole thing. I certainly do not have a closed mind on that.

The Law Commission has looked at this area of law. To a degree, what the Government did in the Housing and Planning Act 2016 and what they are doing in this Bill reflects the advice of the Law Commission. Compulsory purchase is probably an area on which it is easier to say, “We need a fundamental reform,” than to develop consensus on what that fundamental reform should be. I am certainly not opposed to that in principle.

What I would like to do, if the Committee is agreeable, is to implement these reforms, around which there is a good degree of consensus. Let us see what impact they have on speeding up CPOs; hopefully they will make it easier for people to use and undertake them. At that point, we can consider the hon. Lady’s suggestion. There is something that I do not like doing, although I accept that I may be in a slightly different position from other members of the Committee. I have become very conscious, in just the three months I have been doing this job, of how easy it is for Parliament to write into legislation, “The Government must review this” and “The Government must review that.” A huge amount of civil service time is then taken up with undertaking those reviews.

We keep all our policies under review and based on the evidence all the time. However, something that has been said to me consistently by people across the housing world—large developers, smaller developers, people working in local authority planning departments and housing associations—is that people are looking for consistency of policy. Therefore, my ambition, if possible, is to set out in the White Paper a strategy for how we can get the country building the number of homes that we need, to listen to what people have to say in response to the White Paper and to implement it. I would then like to try—this is an ambitious thing for a politician to say—to have a period of policy stability during which we get on and implement the strategy that we have set out, rather than introducing changes every single year.

I do not want to be unsympathetic to the hon. Lady because her new clause just reflects the fact that some people have said, “Could we look at a more radical thing on CPO?” If, over time, there were a growing consensus about how that might be done, I would not close my ears to it. However, I do not want to write into this legislation a statutory requirement on the Government to conduct such a review when I am clear that my officials will have a huge piece of work on their hands dealing with the White Paper and the responses to it, and then implementing the strategy. I hope that I have explained my position without being in any way unsympathetic to the principle of the hon. Lady’s point.

It might be helpful to right hon. and hon. Members to understand a couple of technical things that happened there. First, we are appreciative of the Minister going back to earlier matters. It is my belief that it is better to have answers given on the record, rather than by letter.

The second point is that new clause 13 has been spoken to in this group because it is about CPO, but it is not being moved at this stage, so it cannot be withdrawn. It will be up to the shadow Minister whether she wants to move that clause when we reach it later. As nobody else wishes to speak, we can move on.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Clauses 23 to 30 ordered to stand part of the Bill.

Clause 31