My Lords, I declare my rural interests as set out in the register. My Amendment 292 would establish a statutory duty of care that makes the acquirer consider and possibly reduce the impact of a compulsory purchase proposal on the claimant,
their property and their business. The intention is to safeguard property owners against the excesses of acquiring authorities, many of which are large, commercial and profitable companies or government bodies. HS2 comes to mind in this respect: stories of its excessive use of compulsory purchase powers are numerous in the part of Buckinghamshire in which I live.
Property owners are affected by compulsory purchase in many ways. Some lose their whole property. Many lose only a proportion of their property but have to suffer the impacts of construction for many years or decades, having to maintain a viable business throughout that time.
The acquirer’s responsibility is to compensate the landowner or business owner for their loss. This is nearly always paid after the land has been taken, and in some cases many years after. This delay only adds to the loss. Many property owners affected by compulsory purchase feel that their interests are ignored by acquirers keen to deliver the scheme, together with any environmental mitigation, but with little consideration for the person or business that may have occupied that area for generations. For an individual, this really is David and Goliath.
A statutory duty of care to consider and mitigate the impact on landowners and businesses affected by the scheme would rebalance the interests of delivering the scheme and reduce the impact. A duty of care would not delay or prevent schemes but it would ensure that the impacts on property owners and businesses are considered as a key part of the scheme, rather than being an afterthought considered only when compensation is due some time later.
The Secretary of State will have to justify how this duty of care is delivered, but an appeal to an independent person or ombudsman would give the proposal legal force. I look forward to the Minister’s response on this constructive amendment designed to take much of the aggravation out of compulsory purchase while enabling sensible schemes to progress with considerations of the interests and livelihoods of the owner.
Moving on in this group, I now call for the deletion, or at least complete redrafting, of Clauses 174 and 175, as well as government Amendment 412D, which proposes a new clause after Clause 175. The compulsory purchase provisions contained in these three clauses are immensely complicated to the layman, including myself, so I will contain my remarks to an overview and the principles at stake. In opening this debate, I would be interested to hear from the noble Baroness how these clauses relate to the Law Commission’s review into compulsory purchase reform, as it seems odd to be legislating before receiving the outcome.
By way of background to these clauses, the Government in June 2022 initiated a consultation process largely covering the contents of the clauses. We finally received the Government’s response to those consultations last week, some nine months after the close of the consultation. Under consultation principles the response should be within four months. Please also consider the fact that this Bill was introduced to the other place in May last year. What was the point of the consultation if the Government had already decided what to do?
Broadly speaking, the comments are highly diverse and no consensus was reached on any of the questions, and the negative and “not sure” views were the majority in most cases. The main comments highlight issues such as unfairness created by a two-tier property market, the vague definition of public interest, absence of clarity leading to additional costs and delays, human rights, mental health and stress, the European Convention, and potential wider effects on housing developments.
The clauses bring into question the long-held principle that anyone forced to sell land should expect to be put in the same position as would be the case if the land had not been taken from him. In other words, he should be paid market value. The purpose of Clause 174 is to cap the cost of acquiring land for affordable housing in a compulsory purchase situation by eliminating “hope value” in certain defined circumstances through the use of directions by the Secretary of State. I quote:
“In assessing the value of land … it is to be assumed that no planning permission would be granted for development on the relevant land”.
In other words, the value would be existing use rather than market value, which might incorporate hope value, which is the value attributed to the expectation of development in the future. This market value currently applies to any purchaser, whether compulsory purchase or a commercial sale. In the case of compulsory purchase, any hope value included in the purchase price paid would have to be justified and have sound basis, as it can be challenged at a tribunal.
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In Amendment 412D, the Government are now proposing to restrict the payment of market value in certain defined circumstances in compulsory purchase situations where there are benefits to acquiring the land at reduced value, if it is in the public interest, such as enabling the provision of affordable housing and health or education facilities. Hence, there will be a two-tier system, with private sales at market value and compulsory purchase sales at less than market value. This is hardly fair and is open to all sorts of challenges, from human rights to calculations on public benefit. Surely a better way of dealing with this perceived problem is through either the conditions of planning, such as Section 108 or CIL, or alternatively the tax system, so that all land sales are treated equally.
There are several huge issues that have not been addressed. First, if the purpose of this amendment is land-value capture, why are we looking just at this sector of the market? How can it be right that someone who owns land next door to land that is subject to a direction and compulsory purchase can sell at market value whereas his neighbour is capped?
Secondly, it is very important not to make the common mistake that compulsory purchase affects only rich land- owners. Many of those affected will be small householders or businesses. Capping to existing use value denies them the benefit of planning for a change of use or an extension. They will receive only existing use value. Is this fair and justified when those not affected by compulsory purchase will get market value? Suppressing or ignoring market value is a fundamental change, and means that private owners will subsidise public schemes. I see visions of a repeat of the Crichel Down affair.
Thirdly, most of the independent estimates of the cost of land acquisition that I have read put this figure at less than 10%, although a figure of 38% has been quoted by Civitas. Clearly, there is a requirement for proper research on this issue, as it should be quantified before any action is suggested. Also, land is only one component of development cost. What about the other 90% of costs and, indeed, revenues that affect the public benefit calculation? The cost profile of a scheme changes over time. The ring-fencing of public benefit is impossible. It is also important to remember that affordable housing in commercial developments is paid for out of normal house sales. How could this work in a CPO situation? Where is the money coming from?
Fourthly, what is the effect on private housing development? Surely a private developer will be highly reluctant to initiate and work up a scheme if there was any possibility of a local authority obtaining a direction and CPO, as that developer would then lose all his sunk costs, which could be very considerable. It could lead to local authorities having to do more of their own developments with all the many costs and resources involved, and we all know that local authorities are underresourced in this area.
Fifthly, although the Government are limiting the application for a direction to local authorities and other public sector organisations, they will need to enter contracts with private sector companies to build the houses or hospitals. Is it the intention of the Government to insist that the building is done at cost price only, as why should the builder add a profit margin on to his contract when the landowner has been made to forego his own margin of profit through the compulsory purchase at existing use value?
Sixthly, capping would apply if justified in the public interest, but how will this be judged? What are the guidelines? What objective criteria would be used to justify that below-market value should be used to benefit the public? Surely, reliable, detailed evidence from actual schemes is the only way to quantify the public benefit? The Government have promised guidelines, and we should examine them closely before approving this legislation.
Seventhly—and, noble Lords will be glad to hear, finally—the Government have promised guidelines as to how the landowner can challenge the directions. Surely we need to see these guidelines before going any further? The Minister writes of safeguards, but these appear to work only after 10 years in the circumstances where the development has not been in accordance with the direction—a long wait for any compensation.
In summary, I will quote the Compulsory Purchase Association:
“The CPA does not consider that there are many, if any, instances where the capping proposals would operate to render schemes that were otherwise unviable viable, or where they would deliver materially improved public benefits as a result. Nor does it consider that it would be practically possible to ringfence compensation sums ‘saved’ for the delivery of particular benefits, given the changing cost profile of schemes over their lifetime”.
I turn to Clause 175, which deals with prospects for planning for alternative development in compulsory purchase situations. Where identification of a future use can be difficult—for example, where there is no up-to-date local plan—a claimant can apply for a certificate of alternative development from a local
authority which will say what alternative development could be accommodated on that land, should the scheme not go ahead. This application can either be specific—in other words, for housing—or for any development, and the local planning authority has to respond saying what land use might be acceptable. This process is supposed to be easy for the applicant and to give an indication of appropriate future uses. If an application for a certificate for alternative development is refused, it can be appealed through the Upper Tribunal.
However, under Clause 175 a claimant will have to apply for a certificate for certain development and put considerable effort and resource into justifying the proposal that may be similar in quantum to making a full planning application, rather than seeking a broad indication, as is the case at the moment. This could involve the applicant paying several thousand pounds on professional fees to build up the best case possible, which may then be refused because of the vagaries of the planning system and local authorities.
There may be instances where a local authority will turn down a certain application and a claimant may then have to submit a further application for a different type of development—a further risk and cost that the claimant has to suffer, although the applicant still has the ability to appeal the original decision to the Upper Tribunal. This moves the onus away from the local authority to the applicant or claimant at a time when they are already suffering the considerable impacts of the scheme—consultations, surveys, inquiries, loss of land, construction impacts, severance, et cetera—this is scarcely equitable.
In conclusion, I fear that there are many questions in what I have just said, and I look forward to the considered response of the Minister. In particular, we need to know the Government’s promised guidelines on how a scheme will deliver public benefits, how removal of hope value is justified in the public interest, and what is meant by “public interest” and “public benefits”. I ask the Minister to provide objective definitions.
We also need to have a convincing matrix analysing the real costs of delivering these schemes; in other words, who gets what? Without this information, it seems somewhat irresponsible to focus only on the landowner, who may account for only 10% of the expenditure. What about the other 90%? There is currently too much information missing to approve these clauses.
My final remark is whether this rather poorly considered proposal—in my opinion—to cap certain land sales is equitable and whether the right solution, if the underlying problem is land value capture, is not best addressed through planning conditions or general taxation. I beg to move.