TOWN AND COUNTRY PLANNING BILL (Hansard, 19 October 1954)

§ THE LORD CHANCELLOR

My Lords, in rising to move the Second Reading of this Bill, I must not only ask for the traditional indulgence which your Lordships give to one who addresses your House for the first time, but must also apologise for making a large draft on the patience extended, perhaps more reluctantly, to those who speak at some length. But your Lordships are aware that brevity and town and country planning are seldom allied. May I first point out where this Bill fits in the order of legislation on this subject? Noble Lords will remember that the decision to amend the financial provisions of the Town and Country Planning Act, 1947, was announced nearly two years ago. On November 18, 1952, a Bill was introduced to do two things: first, to abolish the development charge—that ceased to be payable from that date; and, secondly, to cancel the distribution of the £300 million to owners of land the value of which had depreciated as the result of the 1947 Act. That Bill became the Town and Country Planning Act of 1953. Noble Lords may also remember a White Paper, published with the Bill, which outlined proposals for further legislation and promised separate Bills for England and Wales and for Scotland during the present Session. This Bill which I now commend to your Lordships deals with England and Wales.

435 I know that your Lordships are familiar with the background and the reasons which make a further Bill necessary, because the subject was fully debated on the Second Reading of the Bill introduced in 1952, but I hope your Lordships will agree that it is useful to glance at the background, in order to get the present Bill in perspective. It is necessary, in order to understand the financial structure of the present Bill, to consider that of the Act of 1947, and the nature of the problem which that Act was designed to meet. It is the problem inherent in public control over land use. The early Parts of the Act of 1947 established that control firmly. These Parts the Government have not changed and are not changing. With minor exceptions, no one can develop land—that is alter the existing state of land or buildings—without permission of the local planning authority or of the Minister on appeal.

As your Lordships are also aware, the local planning authorities have made their development plans and settled the broad pattern of land use. A number of those plans have been confirmed by the Minister, and my right honourable friend is considering the remainder; so that to-day—and we leave the position so—land use is completely subject to public control. The Green Belts are being preserved; good agricultural land is being kept in agricultural use; new buildings are better sited, designed and laid out, and towns are being slowly but steadily improved. All this must have a great effect on land values. Where development is allowed, broadly, the values rise; where it is not they fall, and compensation must be paid to owners who suffer, in the public interest, serious loss which has not been foreseen. But I hope your Lordships will agree that compensation must be kept within bounds. If it is paid on every adverse decision at the peak of development value an unreasonable and unfair burden will be placed on the community, and planning control becomes impossible.

I am sure the story of what has been done over the past fifty years to meet this problem is very familiar to your Lordships. Before the last war compensation was a matter for local authorities. In theory, they could recover part of the increased value as betterment accruing elsewhere. In practice, however, 436 they did not, and could not, recover betterment. Therefore, they were unable to face the steady and unending cost entailed in the full exercise of the power of restricting development. I am sure that to some of your Lordships, at least, the examples of that ineffective control in the outer suburbs of London and on the sea coast are known. The Coalition Government of which the noble and learned Earl, Lord Jowitt, spoke earlier, and of which he and I were members—and I think, if the noble and learned Earl will not resent my saying so, he was the first person some twelve years ago to introduce me into this engrossing subject by making me chairman of a committee for his Ministry at that time—considered this point with an analysis that had been made by the Uthwatt Committee. At the time, we always used to say that the Uthwatt Committee had three reactions. There were those who were for the Uthwatt Report; there were those who were against the Uthwatt Report; and there were those who had read the Uthwatt Report. But on that basis we in the Coalition Government put forward certain proposals, as the noble and learned Earl will remember, for a "once-for-all" payment by the State for development rights and some development charge—though my recollection is that we did not come to complete agreement on the last item. These proposals were the foundation, I think one can say as a matter of historical fact, of the legislation of 1947 which established the £300 million fund and the development charge.

I think it is important that your Lordships should consider the position which then obtained. In theory, owners were left with only the value of the land for its existing use, and land bought and sold ought to have been bought and sold at existing use value. The value for development had to be bought back from the State by the development charge. The Act provided that when public authorities acquired land under compulsory powers, compensation should be based on the existing use value, and the authorities themselves had thereafter to pay the development charge. As my right honourable friend the Prime Minister said in November, 1952, the logic was impeccable, but the results, in practice, were unhappy, because people acted not in accordance with the logic but in accordance with their own best interests as they 437 saw them, and they sold their land at the best price they could get. If there was a likelihood that development would be allowed, they usually got something for the prospect, notwithstanding that the charge would have to be paid. On the other hand—and this, my Lords, is a point which had to be faced—the man who bought the hand and had to pay the charge regarded it as a tax on his enterprise. Meanwhile, as your Lordships remember, money from the £300 million fund would have had to be paid to every owner whose land had development value in 1948, and who had put in a claim whether he had suffered injury or not. Some of these owners had no intention of developing, but were to be paid out of this fund.

That, my Lords, is the picture. I hope that I have not taken too long to paint it before your Lordships. That is the picture in the light of which, by the Act of 1953, the Government abandoned the development charge and decided to pay compensation only when damage to development value was sustained. That is the historical background for the present Bill, and its primary object is to establish, still by reference to the claim originally made on the £300 million fund, a system of compensation on what I hope your Lordships will excuse me for calling a "pay as you go" principle, in substitution for the system established by the Act of 1947. I am quite aware that, viewed in its historical context, the most notable feature of the Bill is that it makes no direct provision—I repeat, no direct provision—for the collection of betterment. There is nothing resembling the once ubiquitous development charge. I am aware that the Bill has been criticised on that account, but I think it is fair to say that it has not been criticised with vehemence, because, so far as I know, few critics have agreed on the method or means of collection. It is an old problem of town and country planning that there is no satisfactory way of distinguishing betterment which is due to public effort from betterment which is solely, or largely, the result of private enterprise and of the actions and ideas of individuals. That is a problem which has always had to be faced, and which has always been found too difficult for solution. This Bill ensures that any enhancement in development value that accrues after 1940 will not have 438 to be paid for from public funds when planning restrictions are imposed or when the land itself is acquired compulsorily for public purposes.

In that respect, the Government have sought to preserve as much as possible of the financial system of the 1947 Act, while dropping those features which have been shown to be impracticable. In retaining as the basis of compensation the claims made on the £300 million fund, the Government have been criticised for want of logic and for the inequities which it is suggested the compensation scheme might cause. There may be something in this criticism. In constructing a scheme of compensation for damage, obviously one must pay those who hold an interest in the land when the damage is done. Compensation must run with the land. But claims on the fund, as I have tried to indicate to your Lordships, were based on interests in the land as they existed on July 1, 1948. I am aware that, starting with a clean sheet, it would have been more logical and satisfactory to assess the development value in 1948 on the assumption that all land was freehold. That would have put everyone on an equal footing, for, as it is, there is no compensation for loss of development value where no claim was admitted in 1948. Another aspect is that compensation in respect of land in which more than one interest subsisted may be different from what it would have been had there been only one interest in being. The Government, however, have felt that they should not attempt to reopen the whole system of claims on the fund either on a new basis altogether or by giving those who failed to claim a further opportunity.

I want to stress the following point to your Lordships because it is important in considering not only the Bill itself, but also what happens to the Bill. Today many people are owed money for various reasons: they are owed money because their land has been compulsorily acquired during the last six years, they are owed money because they have been refused permission to develop land, or they are owed money because they have paid the development charge. We have tried our best, but we cannot give an accurate estimate of what is owing. I do not believe that an accurate estimate 439 in the true sense can be made, simply because enough is not known of the incidence of planning restrictions over the past six years. But the sum is in the region of £50 million to £60 million.

For many people who hold established claims and expected to be paid early in 1953—though, of course, in most cases they did not expect to get the full value, as they will under the present Bill, since the £300 million fund provided for payment at only some 80 per cent.—it is a matter of great anxiety that the Bill should pass and that they should get their money. We feel that the Government's first obligation—I say, first obligation—is towards these people, and that any attempt to reopen the 1947 settlement would produce further, and perhaps fatal, delay. Nevertheless, the Government recognise (I know that this is a point which has troubled some of your Lordships) that the position of some people who failed to make claims may be very hard and that there are a good number of people in that position. In most cases it will not matter, because the land will not be bought by public authorities and if the owners want to develop the land themselves, they now have no charge to pay; but if their land is needed badly for some essential public purpose, then their position may be very hard. In considering this point, the Government have taken the line that they could not and, as I have said, should not improve the compensation provisions of the 1947 Act.

Their main object in amending the financial provisions has been to promote development and enterprise by getting rid of the charge. As your Lordships are aware, the Exchequer abandoned a steady source of revenue which helped to finance compensation. The Government felt they must pay on the established claims where serious damage is sustained, and pay in full, but they felt that that was so far as they could go. Nevertheless, the Government are greatly concerned about the position of people whose land had development value in 1947, but for which no claim was made, if that land subsequently comes to be compulsorily acquired. The recent very tragic case in which an owner bought land in 1950, paying the full development value, and then that land was subsequently acquired compulsorily for housing, will be in your Lordships' minds. Under the 1947 Act 440 the local authority could pay the owner only the existing use value, for, as no claim had been made, nothing was due to the owner for development value. I am sure it has been in all our minds that that owner committed suicide. I feel bound to point out, as a matter of fairness, without wishing to go any further or to become controversial on the matter, that that owner suffered under the 1947 Act and that nothing the present Government had done or are doing is responsible for the position in which he found himself.

Nevertheless, the Government have felt it incumbent on them to see whether they cannot do something to alleviate the position of these small owners, and they have come to the conclusion that a provision can be included in the Bill which would enable the Minister to authorise the payment of an ex gratia supplement in cases of that kind. An Amendment dealing with that matter will in due course be moved. I ought to say to your Lordships that such a provision cannot apply to past cases, where the land has already been compulsorily acquired; it would not be possible, or indeed right, to make the supplementary payment retrospective. But it can, and I hope will, prevent any such cases from being possible in the future, and that is the object which we have in mind. Equally, the provision cannot extend to cover cases where permission for development is refused. But I think your Lordships will agree, from your own experience, that this decision falls less hardly on the owner than compulsory acquisition.

I pass to another aspect of the matter on which there has been some criticism of the Bill—namely, the system of two prices for land. Owners are now free to sell their land in the open market, and will be left so free; but public authorities will, after this Bill has become law, buy land at its value for existing use, plus the unexpended balance of the claim, or, under a provision which will be moved, plus a supplement in lieu thereof. That price may be different from the open market price. This system the critics say will never work. But what I put to your Lordships is that it is the only possible arrangement, in the present circumstances, and it is rooted in the 1947 Act. It is true, as I believe I said to your Lordships, that in theory there was only one price under that Act: everybody was expected 441 to sell at existing use value. The trouble is, however, that, in practice, they did not. We have lived with the two prices for six years, the only difference being that until our White Paper was issued one price was "under the counter". That is the practical situation, and that is the situation with which we had to deal.

I am not arguing that that makes it right to have two prices—the Government would prefer not to do so, if it could be avoided—but I ask your Lordships to look at the choices. The only alternative to a controlled price for acquisition by public authorities is the current market price, and that would present great difficulty and, in some cases, inequity, and the difficulties and inequity are not all one way, as your Lordships know. Of the two alternatives, the system proposed in the Bill is the only one which is possible at the present time. As I have indicated, we must never forget that we have six years of arrears with which to deal. Past cases must be settled on the basis of the claims that have been made. We could not possibly switch to a different basis for current cases, even if we were convinced that we knew what would be a better basis far so doing.

We do not really know with any certainty what effect planning of the type I have described will have on land values. These values will tend to reflect the prospects of profitable development as revealed by the development plans, and if public authorities had to pay the current market value, in some cases they would pay for values the community had created, while in other cases—and this I would ask your Lordships to remember—they would pay less than was fair, and the owner would be deprived of the value he had once enjoyed. We recognise this problem. We recognise that owners will in same cases get less from public authorities than they would get in the open market, and that may create a sense of grievance. We will, of course, watch the position. I have given my reasons for thinking that it is the best solution, but obviously, as the development plans show their full effect, we shall always be ready to consider the position, and to consider whether some further provision should be made. As I said before, in this thorny subject the Government have felt that it would not 442 be right to alter the basic provisions of the 1947 Act at this stage.

There is one other point that I hope will appeal to those of your Lordships who have been looking to the hardships that may be caused. In Clause 34 of the Bill the Government have tried to meet one point and give some protection to the prospective purchaser. The effect of that clause is that if a person has it in mind to buy land for development, and then gets planning permission, he can ask the local authority whether there is any known project for purchasing the land compulsorily. If he is told that there is none, and is given, so to speak, the green light in that way, and having bought the land he finds that it is acquired within five years, he has to be paid by the acquiring authority compensation which takes into account the value of the planning permission that he has obtained. I feel that the period of five years should be sufficient, because, as your Lordships will appreciate, once the land is fully developed the existing use value payable on acquisition becomes the same thing as market value, because the land has, on my hypothesis, been fully developed and the owner is no longer at risk. I hope your Lordships will think that that is a fair measure of protection for people who buy land after the Bill becomes law.

The Bill is a long and complex document, and it would be straining even the kindness and patience of your Lordships too far if I were to deal with it in anything like detail. But I want to say this: that already I feel that great improvements have been made in the drafting of the Bill that was introduced in February in another place; and I very much hope that we may make considerable further improvements. Again, I shall have to ask the indulgence of your Lordships, in that I shall have to lay a large number of Amendments before the House. I would say at this stage, however (I cannot go further, because it would not be right to do so on Second Reading, but I hope the noble Lord, Lord Silkin, will take cheer from this), that the majority of those Amendments, whose bulk may give him a slight shock when he sees them the first time, are clearly and definitely drafting Amendments, which do not alter the sense of the Bill but merely clarify its exposition, so that he who is concerned may not only read but understand. The difficulty 443 and complexity of the Bill is due to the fact that it has to deal with the past as well as with the future, and to do so on a consistent basis, notwithstanding the fact—and I am sure that this again is well in your Lordships' mind—that for the past the claims on the fund remain a species of personal property, whereas for the future they must be firmly attached to the land to which they relate. The claims, as I say, are a personal property, and could be and have been passed as such; but for the future we want to see that they are firmly attached to the land.

Parts I and V of the Bill deal with the past. Part I contains what I may call the "unscrambling" provisions, and is designed to cater for the acts and events of the past few years except for planning decisions, which are dealt with in Part V. Part I is the most complex Part of the Bill. It is closely keyed up to the complexities of the 1947 Act. It provides for a variety of types of payment to be made by the Central Land Board to holders of claims if they have in certain defined respects suffered loss through the working of the 1947 Act. The main types of payment (your Lordships will find these clearly dealt with in the Explanatory Memorandum) are case A, where the claim holder has paid development charge; case B, where the claim holder has sold land at prices which did not fully reflect its development value as measured by the claim; case C, where the claim holder disposed of his land by gift while retaining the claim, and case D, where the claim holder acquired the claim by purchase. Provision is also made for payments in cases analogous to those in case B—for example, where a lease was granted on terms which excluded development value, and also in cases where the development charge has been paid by, or land has been bought compulsorily from, a person who bought or leased the land at a price which included development value from an owner who retained the claim. Apart from one minor exception, which your Lordships will find in Clause 6 (3), the payment may not exceed the amount of the claim established on the £300 million, but it may equal the amount of the claim, together with interest, to cover the fact that the claim was assessed in 1948 and is not being paid until 1955. Part V comes late in the structure of the Bill because its 444 provisions (for compensation to be paid by the Minister in respect of past planning decisions) are necessarily founded on the principles which would apply in the case of restrictions imposed in the future.

Perhaps I may just say a word or two on Part II, which provides for compensation in respect of future planning decisions. The payments under it are to be governed by what remains of the claims on the £300 million fund after the payments and adjustments provided for in Parts I and V have been made. The residue of the claims loses its character, as I have said, as personal property and becomes an incident of the land. It is referred to as the "unexpended balance of established development value." I apologise for that long and cumbrous term of art, but it is difficult, as those of your Lordships who have studied the subject will know, to find a shorter term which covers the position which we have in mind on this Part of the Bill. That balance, of course, is progressively reduced to take account of payments made and of the realisation of development value by building or other development. Anyone owning an interest in the land affected by a planning decision who can show that his interest has depreciated can claim compensation, provided that the land has an unexpended balance. That is shown by Clause 19. Immediately after the Bill comes into effect, owners entitled to some payment will be invited to make application to the Central Land Board, or to the Minister by way of the local planning authority, and the Government will do everything they can to secure prompt payment. An effort will be made to explain in simple and clear language to those concerned what their rights are to help them to make their claims.

There has been a good deal of discussion, and some controversy, on Part II, over the system of exclusions from compensation contained in Clauses 21 and 22. I only want to say that they are similar in nature to those contained in the Town and Country Planning Act, 1932. The basic principle is sometimes described as "good neighbourliness." I do not think that that quite covers it. My right honourable friend, the former Minister, put it in these words: Provided some reasonably remunerative development is allowed the owner is not 445 entitled to compensation because he is prevented from exploiting his land to the most remunerative development possible. We have not tried to deal with this matter by way of stating principles, either in one word or in a resonant sentence: we have approached the problem inductively and have tried to point out the various actual circumstances in which the provisions will apply. I see the noble Lord, Lord Layton, very near me. He and I, in the past, in various parts of the Continent, have discussed fully the relative advantages of the a priori and the inductive approach to numerous problems. I suggest to your Lordships that even the strongest supporter of the a priori method would really think that an inductive and practical approach is the best way to deal with these exclusions, and that is what we have sought to do. I do not want to take your Lordships through them in detail now. Clause 22 works rather differently. Compensation may be excluded if permission is refused for one kind of development where the Minister permits another kind of development. For example, there may have been a refusal of industrial development but the Minister allows either residential or commercial development. That is the point dealt with there. Again, I think it would be more convenient if we pursued the matter further and into any detail on the Committee stage.

May I now just say a word—and again I will be short—on Part III. Part III deals with the price to be paid by a public authority on the compulsory acquisition of land which has an unexpended balance at the time of purchase. The compensation will continue to be assessed on the basis of Part V of the 1947 Act—that is, on the assumption that it is restricted to existing use. But this is the difference. Where there is a balance of the kind I have described, additional compensation, based on the amount of the balance, will be payable by the acquiring authority. If works have been carried out since July 1, 1948, which do not correspondingly enhance the existing use values of the land, extra compensation will also he payable on that account.

These provisions closely affect local authorities. It is true that under the 1947 Act they bought their land at existing use value; but, of course, it is equally true that they were liable to pay development charge. In the future, there will be no 446 development charge payable by them, but the acquiring authority will have to pay the unexpended balance, as I have described. Instead of buying so much of the development value as they need, but at current prices, they will buy the whole development value as at 1947. We believe that, taken by and large, this change will not be to the disadvantage of local authorities. Inevitably, acquisitions for low value uses, such as public open spaces, will tend to be more expensive, where the land had development value in 1947. Some compensating changes are to be made in the system of planning grants. In so far as the disappearance of development charge acts as a spur to private development, on which rate revenue mainly depends, the changes which the Government are making are to the advantage of local authorities. The rising tide of private house building is good evidence of this.

I know there has been some concern in professional circles about Part III, because it represents a continuance of the fixed price system for compulsory purchase which has been in operation since 1948, although payment is now to be made for the 1947 development value, as well as for the current existing use value; but the new feature is that the fixed price system is to be combined with a free market in land for private purchasers. It is said that these two prices will go further and further apart, and that that will create a serious problem. That remains to be seen. What has become clear is the disadvantages of the old system which pivoted on the development charge. That has been proved by experience. Market value for compulsory purchase, which is the only alternative, has serious shortcomings, as I have tried to point out, both ways, not only for the local authority but also for the private owner. Further experience—in particular of the trend of market value in a planned world—is something which we must consider, something which I should not deny might point to a different solution. If it does, no Act is immutable and we can deal with the problem when it comes.

Your Lordships will be glad to note that Part IV of the Bill is short, and makes compensation payable in full by local planning authorities where a revocation or modification of planning permis- 447 sion depreciates the value of an interest in land, whether or not the land has an unexpended balance. That is obviously right and fair, and I shall not go into the point any further. I have already dealt, in part, with Part V of the Bill, which applies to planning decisions already taken, on the principles underlying the provisions in Part I. Part VI of the Bill deals with various miscellaneous and supplementary matters. It would be a painful thing to catalogue them and quite out of place here. I would simply ask your Lordships to note two of these matters. Clauses 50 and 51 provide for a simpler and improved system of Exchequer grants in aid of planning expenditure incurred by local authorities. There will be a uniform rate of 50 per cent. for all planning purposes and for all authorities. Your Lordships will remember that the 1947 Act contained a complex system under which different and diminishing grants were given for different purposes. Some of the grants varied according to the resources of the authorities. I am happy to inform your Lordships that the new system has been welcomed by representatives of the authorities and, as such, we put it forward. Clause 54 deals with the application of the Bill in the mineral field. I think it has always been agreed that that is a matter which is so complex that it requires to be dealt with by means of regulations. Your Lordships, like all good legislators, are opposed to abandoning your own scrutiny through the making of regulations; but I think everyone would agree that this subject is so complex as to justify that course.

I am conscious of, and apologetic for, having taken so much of your Lordships' time. I can only claim that this is a long and complex Bill, and it may be that an explanation which gives a survey of the points at the beginning will be of assistance to your Lordships in deciding what are the important points on which to mobilise your arguments and thoughts. All planning legislation, I submit to your Lordships, should be judged by this test: whether it will contribute to securing better development on the ground, not better plans on paper. The Government are aware of the fears expressed that the intrusion of compensation into the consideration of planning 448 applications will mean a decline in the quality of planning work, and that development will be permitted for financial considerations which ought not to be permitted. All I can say is that the Government believe this criticism to be ill-founded. It is quite true—anyone who has had any connection with government can see it at once—that, since the Bill places compensation on a "pay as you go" basis, a Government could, in theory, seriously reduce the effectiveness of planning control by cutting the money to be provided to meet claims for compensation. I want to assure your Lordships that this Government do not intend to subordinate planning to short-term finance. They recognise that planning is not something which can be put off to a better time.

There is no retreat from mistakes made in this field. Good farmland and areas of natural beauty, once developed, are gone for ever. We have tried to see that Parliament will be able to judge whether we are carrying out, by the provisions in Clause 63 (10), the approach which I have described to your Lordships. Those provisions are designed to make it clear that the necessary money will be forthcoming. The Minister is to report to Parliament on the progress of compensation payments for current planning decisions, either at the end of five years or at the end of the financial year in which the aggregate of payments under Parts II and IV reaches £30 million, whichever is the earlier. It is impossible at this stage to estimate the rate at which compensation will be claimed, but the expectation was that the £30 million would cover, and probably more than cover, payments in the next five years. If, however, it proves inadequate, the Government will not be dismayed.

We are aware of, and we rely on, the fact that there is always the weight of public opinion to keep a Government straight on this point, and public opinion and enlightenment on matters of planning have progressed a long way since 1947. Any Government which sought to take the short view that is feared would, in my opinion, be generally condemned. That is the chief safeguard. The Government claim that the financial provisions of the 1947 Act, which were designed to facilitate planning without fear of the purse, have proved in practice a hindrance to the development which it 449 should be the object of planning to secure. We believe that the changes made by the Act of 1953 and those proposed in the present Bill will help to secure more development and better development; and that they will do so without weakening the planning control upon which the great part of the measure of 1947 was founded. For these reasons, I beg to move that the Bill be now read a second time.