My Lords, Amendment 292, tabled by the noble Lord, Lord Carrington, would place a new statutory duty on all acquiring authorities to act fairly towards anyone involved in the compulsory purchase process and would require the Secretary of State to issue a compulsory purchase code of practice setting out how the statutory duty to act fairly must be discharged by acquiring authorities.
I assure noble Lords that the Government understand the concerns raised on ensuring there is a fair balance between the interests of a body exercising compulsory
purchase powers and the person whose interests are being compulsorily acquired. Used properly, compulsory purchase powers can contribute to effective and efficient regeneration, essential infrastructure, the revitalisation of local areas and the promotion of business leading to improvements in quality of life and the levelling up of communities. However, acquiring authorities should only use compulsory purchase powers where there is a compelling case in the public interest and the use of the powers is clearly justified. The justification for a CPO must provide sufficient evidence to demonstrate that the benefits of the compulsory acquisition of land outweigh the harm to any individuals. It is for the acquiring authority in each CPO to determine how best to do this.
The Government’s guidance on compulsory purchase is clear that negotiations should be undertaken by acquiring authorities in parallel with preparing a CPO to build relationships and demonstrate that the concerns of landowners and further claimants are treated with respect. The guidance sets out that a benefit of an acquiring authority undertaking early negotiations is to identify what measures it can take to mitigate the effects of the scheme on landowners. It also requires that, when making and confirming an order, both acquiring and authorising authorities should be sure that the purposes for which the CPO is made justify interfering with the human rights of those with an interest in the land affected. For these reasons, the Government consider the proposed duty is unnecessary. The existing compulsory purchase legislative and policy framework has safeguards in place to protect individual interests and ensure a fair balance is maintained between an acquiring authority and the person whose land is being acquired.
Amendment 410, tabled by the noble Baroness, Lady Taylor of Stevenage, would insert a new subsection into Clause 165 to provide that the Secretary of State may define by regulations the meaning of “regeneration” in new Section 226(1B) of the Town and Country Planning Act—inserted by Clause 165—providing that local authorities have been consulted. I thank the noble Baroness for raising this constructive amendment as it allows me to clarify to the House the reason for the introduction of Clause 165 of the Bill.
Local authorities have a wide range of existing powers to compulsorily acquire land in support of their functions. Clause 165 adds “regeneration” to the planning compulsory purchase power under the Town and Country Planning Act to put it beyond doubt that local authorities can use these powers for development with a clear regeneration benefit. The Government are making it clear through Clause 165 that local authorities’ existing planning compulsory purchase powers for facilitating development, redevelopment and improvement also include regeneration activities. The term regeneration is not specifically defined in legislation to not overly restrict use of the broad planning compulsory purchase power.
However, the Government’s guidance on compulsory purchase indicates how regeneration can be achieved through CPOs: for example, bringing land and buildings back into effective use; encouraging the development of existing and new industry; creating attractive environments; and ensuring that housing and social facilities are available to encourage people to live and work in the area.
The Government believe that setting out in regulations a definition of the meaning of regeneration risks unnecessarily constraining and narrowing use of the planning compulsory purchase power, which could limit its effectiveness for local authorities. This would run contrary to the Government’s objective of encouraging use of CPO powers by local authorities where there is a compelling case in the public interest to bring forward development, including for housing, regeneration and infrastructure. I trust I have given the Committee reassurance that the purpose of Clause 165 is to provide local authorities with suitably broad compulsory purchase powers enabling the delivery of regeneration benefits.
Amendment 411, tabled by the noble Baroness, Lady Bennett of Manor Castle, would insert a new clause which would amend Section 226(1) of the Town and Country Planning Act to extend use of the CPO power under that section to where a local authority wishes to compulsorily acquire land to facilitate the provision of affordable housing or social housing. I thank the noble Baroness for bringing this amendment. As alluded to in my response to the previous amendment, local authorities have a wide range of existing powers to compulsorily acquire land to support their functions, and Clause 165 of the Bill is making it clear that the CPO power under Section 226 of the Town and Country Planning Act may be used for regeneration purposes too.
Use of this extended power by local authorities could, among other things, involve the construction of affordable or social housing forming part of a large-scale regeneration scheme or the reconstruction of buildings to deliver affordable or social housing. Local authorities also have compulsory purchase powers available to them under the Housing Act 1985. These powers may be used to compulsorily acquire land, houses or other properties for the provision of housing accommodation which must achieve a quantitative or qualitative housing gain. This could include, for example, the provision of affordable or social housing.
I hope I have given the Committee reassurance that Clause 165 of the Bill gives local authorities a broader compulsory purchase power which may be used to facilitate affordable or social housing forming part of a regeneration scheme. Also, local authorities already have powers available to them to compulsorily acquire land or properties to support their housing functions.
Amendment 412, tabled by the noble Baroness, Lady Taylor of Stevenage, would insert a new clause which would add a new subsection to Section 226 of the Town and Country Planning Act. I thank the noble Baroness for raising this amendment as again it allows me the opportunity to outline to the House the existing compulsory purchase powers available to local authorities to increase the number of residential properties in their areas. As I have said, under the Housing Act 1985 local authorities have specific compulsory purchase powers which, when used, must achieve a quantitative or qualitative housing gain in their areas. These powers may be used by local authorities to compulsorily acquire land, houses or other properties for the purpose of increasing housing accommodation in their areas.
Under the Town and Country Planning Act, local authorities have further compulsory purchase powers to deliver a range of types of development and
infrastructure. Requiring local authorities to deliver replacement and extra housing in addition to the main purpose for the compulsory purchase is likely to increase the costs of providing essential infrastructure and beneficial development. This will discourage the use of compulsory purchase and run contrary to the Government’s objective of encouraging use of CPO powers by local authorities where there is a compelling case in the public interest to bring forward development, including, as I say, for housing, regeneration and infrastructure. I hope I have given the Committee reassurance that local authorities already possess specific compulsory purchase powers for the purpose of increasing the quantity and quality of residential development in their areas.
I move now to the question of whether Clause 174 should stand part. Perhaps I could begin by directing the Committee’s attention to the provisions of Clause 174 in the round, which are in the technical area of compulsory purchase compensation, and to respond to concerns raised by the noble Lord, Lord Carrington. The Land Compensation Act 1961 contains the principal rules for assessing compulsory purchase compensation. Under the current rules, when assessing the open market value of land to be acquired, there are statutory assumptions which must be taken into account. This includes discounting the effect of the compulsory purchase scheme, known as the no-scheme principle. The landlord receives a value for the land which they would have received if the CPO and associated investment had not existed. The Government want to ensure that the improvement of land enabled by a transport project is equally able to benefit from the definition of the scheme under Section 60 of the 1961 Act and the scope of the no- scheme principle, as the regeneration and redevelopment of land currently can. There is no reason why the improvement of land should be excluded from the scope of this definition, and the Government are seeking to achieve this through Clause 174.
Clause 174 amends Section 6D of the 1961 Act by inserting a definition of development which includes redevelopment, regeneration and now the improvement of land. The change further aligns the wording of Section 6D with the amendment the Government are making to local authority CPO planning power under Section 226 of the Town and Country Planning Act 1990, at Clause 165, for English local authorities to use consistent terminology. I understand government officials have met the noble Lord, Lord Carrington, to discuss his concerns with Clause 174, and I hope my explanation of the clause’s purpose has given the Committee reassurance that its focus is on the consistent application of the statutory no-scheme principle to the improvement of land, alongside the redevelopment and regeneration of land.
I move now to the question of whether Clause 175 should stand part. Clause 175 is another clause in the technical area of compulsory purchase compensation. As I outlined in my response to the noble Lord, Lord Carrington, on the previous amendment, the Land Compensation Act 1961 contains the principal rules for assessing compulsory purchase compensation. Under the current rules, when assessing the open market value of land to be acquired, there are statutory
assumptions which must be taken into account. Not only does this include discounting the effects of the compulsory purchase scheme, known as the no-scheme principle, but it requires that the planning prospects of the land being acquired must be considered. One method of assessing the planning prospects of land is to establish appropriate alternative development; namely, development which would have got planning permission if the acquisition of the land through compulsory purchase was not happening. Where appropriate alternative development is established, it may be assumed for valuation purposes that planning permission is in force. This is known as the planning certainty, and, assuming the value of the appropriate alternative development is greater than the existing use value, it creates an uplift in the value of the land.
The 1961 Act allows parties concerned with the compulsory purchase to apply to a local planning authority for a certificate to determine whether there is development which, in its opinion, would constitute appropriate alternative development. These certificates, known as CAADs, are used as a tool to establish whether there is an appropriate alternative development on the site, and thus planning certainty for valuation purposes—namely maximum uplift in value attributed to the certainty that development would be acceptable and granted permission in the no-scheme world. Under current rules, there is no requirement to apply for a CAAD to establish planning certainty and secure any resulting uplift in the value of land. The purpose of Clause 175 is to ensure that the compulsory purchase compensation regime does not deliver elevated levels of compensation for prospective planning permissions, which would result in more than a fair value being paid for the land.
5.15 pm
Clause 175 makes changes to the Land Compensation Act 1961 to address this. Specifically, planning certainty is claimable only via the issuing of a CAAD. Where planning certainty cannot be demonstrated through a CAAD, the likelihood of a future permission is assessed, and a proportionate value can be reflected in the compensation for land. Compensation associated with the prospects of planning permission will still be claimable under the 1961 Act. However, the effect of Clause 175 will be to bring the assessment of value connected with the appropriate alternative development more in line with the position in a normal market transaction, where the prospect of planning permission would be treated as a certainty for valuation purposes only if that permission had been applied for and obtained.
Clause 175 will introduce changes to the compulsory purchase compensation regime to ensure elevated levels of compensation for prospective planning permissions are not delivered. This will help ensure more public sector-led schemes are viable and can deliver levelling-up benefits which are necessary in the public interest. I understand government officials have discussed this issue with the noble Lord, Lord Carrington, and I hope I have given reassurance that the purpose of Clause 175, to ensure compulsory purchase compensation connected with appropriate alternative development, is fair and better reflects the conditions of the sale of land on the open market.
At this point I will respond to a few questions brought up by the noble Lord, Lord Carrington, and my noble friend Lord Caithness. I know that when I read through Hansard there will be a number of other questions from what has been quite a complex and long debate. We will write a letter in response and put a copy in the Library. There were a couple of specific questions I would like to answer now.
The noble Lord, Lord Carrington, asked if the Government intend to do the building at cost price only. When applying for a direction, we expect acquiring authorities will have to provide evidence of their viability appraisals for their schemes, and this includes the gross development value of any scheme.
The noble Lord, Lord Carrington, asked what is meant by public interest and public benefit. The Government’s guidance on compulsory purchase will be updated to provide advice on public interest and public benefit. This work will be undertaken in collaboration with stakeholders and published as measures are brought into force.
The noble Lord also asked what the Secretary of State will take into account when deciding whether to make a direction. The Secretary of State will expect public sector authorities, when seeking a direction, to supply clear evidence in support of their public interest justifications, including—these are examples but there will be others—viability appraisals for their schemes, details of grants or other funding, details of why they are not able to deliver the scheme without a direction, the estimated land value that would be captured, how individual landholders would be affected, and how the estimated land value captured would deliver public benefits which strike a fair balance between the private rights of the landholders and the wider interests of the community.
The noble Lord, Lord Carrington, and my noble friend Lord Caithness asked about the Law Commission’s review and why we are looking at this before the results of the review come out. The reason is that the review on compulsory purchase is about procedure and compensation, and it will focus on consolidation of legislation and technical modernisation. The work of the Law Commission will not consider policy reform as we are doing in the Bill. As such, our reforms will be taken forward via the LURB.
The noble Lord, Lord Carrington, asked why we are not considering transport as one of the issues that we will be looking at. This is because a consistent theme raised in response to our consultation was the identification of affordable and social housing, education and health as the types of public sector-led development where restricting the payment of hope value is most likely to be justifiable in the public interest, as direct benefits to local communities can be clearly identified and delivered. A direction measure focused on broader transport or infrastructure schemes would be more difficult to justify in the public interest as a direct benefit to those local communities that we are talking about.
The noble Earl, Lord Caithness, asked how developers make profits when a landowner does not get market value. The Government’s response made it clear that they do not consider it proportionate for a direction to remove hope value compensation to assist the profits
of private developers. He also asked whether the local authorities would need to publish development costs. We expect that when applying for a direction acquiring authorities will provide evidence of their viability appraisals for their schemes as part of their justification evidence. This will include the gross development value of any scheme.
Amendment 413, tabled by the noble Baroness, Lady Taylor of Stevenage, would require the Secretary of State to publish a report on an annual basis to highlight the extent that compulsory purchase compensation awards incorrectly reflect the value of property. The amount of compulsory purchase compensation paid to an individual landowner is private information and not a matter of public record, unless it has been determined by the Upper Tribunal, which, even then, involves only a small number of cases each year.
Where compensation has been determined by the Upper Tribunal, this usually relates to only one head of claim and does not cover all aspects of compensation for the compulsory purchase; for example, compensation for disturbance or home loss payments, which is particularly relevant for larger schemes. As such, there is no publicly available source of collated, comprehensive information on the payment of compulsory purchase compensation.
The assessment of compulsory purchase compensation should be undertaken by a qualified valuer and is a matter of judgment. It involves the determination of the market value of a property at the relevant point in time, which requires knowledge of the particular local property market. As such, there is no one “correct” value that can be ascribed to a piece of land. Assessing whether compensation paid was consistent with reasonable valuation judgments would be a time-consuming task requiring valuer experience and expertise. I hope I have convinced the Committee that the purpose which the noble Baroness is seeking to secure through her amendment is not achievable in practice.
Amendment 414, tabled by the noble Baroness, Lady Taylor of Stevenage, would insert a new clause which permits public authorities to seek a direction from the Secretary of State disallowing the prospects of appropriate alternative development, although not the prospects of planning permission, from being considered in the assessment of compulsory purchase compensation relating to a specified scheme for the construction of, or redevelopment for, social rented housing.
The Government agree with the need to address issues around the payment of hope value in compulsory purchase situations but are unable to support the amendment. This is because the Government have tabled their own amendment which has similar effects. The Government’s amendment enables directions to be sought to remove hope value where it can be shown to be in the public interest, not just in affordable or social housing schemes but in education and health schemes.
Government Amendment 412D relates to compulsory purchase land compensation. It seeks to build on the compulsory purchase compensation reforms already included in Clause 175. I understand that government officials met Peers to discuss their concerns on the principle underpinning this amendment, which I hope to reassure the Committee on today.
Criticism has been made, including by the Levelling Up, Housing and Communities Committee in the other place, of the current land compensation rules in that they unnecessarily embed and raise expectations of hope value in the assessment of compulsory purchase compensation. It has been asserted that this can lead to claims for higher than necessary land settlements, which can make it more expensive for public authorities to deliver schemes in the public interest through the compulsory purchase of land; and, furthermore, that this can prevent public authorities using their compulsory purchase powers to deliver important development.
The Government are committed to addressing this issue, and to improving public authorities’ confidence in the use of compulsory purchase orders to bring forward much-needed housing, regeneration and other vital development.
The Government consulted on a proposal to cap compulsory purchase payments of hope value via directions, which generated significant debate, and published their response on 27 April. In response, the Government are seeking to introduce Amendment 412D to allow directions to be sought from the Secretary of State on a scheme-by-scheme basis to restrict the payment of hope value in certain types of schemes; that is, schemes that enable affordable and social housing, or education- and health-related development. In all cases, the acquiring authority must be able to demonstrate a compelling justification in the public interest to secure the direction.
The Government have designed the targeted direction approach to concentrate on those types of CPOs as they respond to current societal priorities. They also consider that it is for schemes of this type that public sector acquiring authorities are most likely to be able to provide the necessary evidence to demonstrate that payment of compensation below market value would be justified in the public interest.
The Government do not consider it proportionate to remove hope value compensation in all compulsory purchase instances. However, they believe that there will be cases where the non-payment of hope value compensation will enable vital affordable housing or other development, such as education or healthcare facilities, to be brought forward that otherwise may not be. They also believe that the non-payment of hope value will enable land values to be captured and directed back into schemes to ensure their delivery, giving public authorities upfront certainty. This will enable them to have more confidence in the viability of their schemes and their ability to deliver benefits in the public interest.
While the making of directions will provide more certainty to public sector authorities, landowners will continue to be able to claim other types of compensation. These include full development value for actual, extant planning permissions on their land, disturbance, and home loss payments, as well as severance and injurious affection payments.
Landowners will also be able to seek additional compensation if the acquiring authority does not build out its scheme as proposed at the time of securing the direction. Where this occurs, the Secretary of State will be able to make a direction allowing landowners to claim additional compensation based on the difference
between the compensation they initially received and what they would have received had the original direction not applied.
The Government believe that Amendment 412D will deliver reform to the compulsory purchase compensation regime, which will enable more land value to be captured by public authorities and invested for the public benefit. Amendment 412D, together with the compensation reforms in Clause 175, will ensure that local authorities and other acquiring authorities have the right land assembly powers to deliver much-needed housing, regeneration and infrastructure.
Government Amendments 412A, 412B and 412C relate to consequential amendments in the area of compulsory purchase and amend Clauses 168, 170, 171 and 219. The amendments are in consequence of the introduction of the power to conditionally confirm CPOs in Clause 168 and of confirmed compulsory purchase powers being exercisable for a period longer than three years in Clause 171 and government Amendment 412D.
5.30 pm
The consequential amendment to Clause 168 introduces a new schedule before Schedule 15 and omits one of the provisions in Clause 168 which is superseded by the new schedule. The new schedule brings together various amendments to existing primary legislation, and the Historic Environment (Wales) Bill, which are in consequence of the introduction of the power under Clause 168 for confirming authorities to conditionally confirm CPOs. As a consequence of the new schedule, Clause 170 has been superseded and should no longer stand part of the Bill.
The amendment to Clause 171 relates to amending Section 582 of the Housing Act 1985 to ensure its consistency with the new power under Clause 171 for confirmed compulsory purchase powers to be exercisable for a period longer than three years where the confirming authority considers it necessary. For the reasons I have outlined, I hope the Committee will support government Amendments 412A, 412B and 412C.