HL Deb 15 February 1978 vol 388 cc1424-39

2.59 p.m.

Viscount RIDLEY rose to call attention to the difficulties caused to industrialists who wish to buy land from local authorities or from Government Departments for industrial purposes by the General Disposal Consent of 1st March 1976 (Annex D to Department of Environment Circular 26/76); and to move for Papers. The noble Viscount said: My Lords, in this debate I am going to seek to examine the workings of a part of the Community Land Act 1976, which, when it was a Bill, caused your Lordships to suffer a memorable and perhaps unique all-night session in this Chamber, which none of us will ever forget. I think it is right that this House should be able to examine the way this Act is working. I can only apologise that the subject may prove undeniably boring to most of your Lordships.

Section 42 of the Act—and I shall put this as briefly as I can—says that local authorities and, by inference, Government Departments, may not dispose of the freehold of land without the consent of the Secretary of State for the Environment, or, in Scotland and Wales, the relevant Secretaries of State there. The Circular 26/76, which was issued shortly afterwards, makes it clear that this consent will not be granted for the disposal of freehold by this Government as it is contrary to the spirit of the Act. There were certain defined exceptions which I will not weary your Lordships with by reading today. In essence, only a disposal of the land by a lease of 99 years or, in very exceptional cases, 125 years is allowed.

I would readily admit that since this circular was published there is a further exception for land which is below half a hectare in size—and that, I understand, is 1.2 acres, for the benefit of your non-metric Lordships—or below £25,000 an acre, or both. I agree at once that this concession is very considerable and helpful, particularly for small businesses, but the figures are not nearly large enough, and it is to large concerns and large acreages where I believe this Act is doing great damage; and this I would refer to this afternoon.

Unemployment is acknowledged to be among the great evils from which this nation suffers today. I am not here to argue the causes of it; I am only hopeful that we can do something about it jointly. It must be agreed also that the encouragement of new industry, or the expansion of existing industry, would play a most important part in combating this evil. Indeed, only so recently as July 1977 this Government issued a circular which asked local authorities to do all that they could to help industry in this way.

I should like, with your Lordships' permission, to quote a little from this circular. It says: The Government is determined to do everything possible to create a climate in which industry can flourish". And, again: Local authorities will wish to consider to what extent it will be helpful to industry to make land available for development". This paragraph also referred to further guidance, which is so far conspicuous by its absence. To most local authorities in the special development areas of England and Wales—and, I dare say, in Scotland, too—parts of this circular would have come very nearly as something of an enigma. They have for years been trying to attract new industry and, to use the words of the circular, create a climate in which industry could flourish. They have done all they can to help expanding industry as well. They have a great deal of land available for industrial development. They have for years been trying to see it put to proper use; but the Secretaries of State have not allowed local authorities to dispose of the freeholds. In the vast majority of cases, the inability of the firms concerned to acquire freeholds does not matter; indeed, a lease may be preferable to all concerned. But there are other cases where it matters very much.

I shall quote very briefly from some of the firms to whom this applies. I shall not mention any firms by name. I do not think that this is the opportunity to create yet one more blacklist in industry. I have made a lot of inquiries of local authorities in England and Wales and these are but a few examples of what has been said. I have a large file of evidence which I believe justifies my opinion in this matter. A Durham firm has stated: No one of reasonable intelligence will build large premises on land which does not belong to them". A European company abandoned negotiations because no freehold land was available, but subsequently purchased private land. Otherwise, they would have gone abroad. In North Wales, it was stated that these restrictions have been a most serious inhibiting factor, excluding the majority of sites. An 88-year-old project in Cumbria was abandoned. A United States company with firm instructions to develop only on freehold land will go to Europe.

These are examples. I have many more, but it would be wearisome to repeat them all. They come from all over the Kingdom. The conclusion must be that industry is being adversely affected. I cannot give a figure of the jobs which may have been lost, but I believe it to be considerable. Most of these are subsidiaries of foreign companies. Mr. Peter Shore has said in a letter that it is really often only a matter of explaining to these foreign firms our peculiar British leasehold system. It seems to me to be somewhat like the way that we purchased pieces of Africa for glass beads, explaining that they were very good currency. I think these firms are highly suspicious of leaseholds in many cases and they distrust Government motives.

Furthermore, I should like it to be recorded that there are no such restrictions on the sale of freehold in any other of the countries of the EEC. We do not know how many more businesses may have been deterred even from making preliminary inquiries. They could be numerous. The examples that I have given come from a period when, alas!, as we all know, industrial inquiries were at a very low level. Should they pick up—and they might do so; there are indications—it may well be that we shall be losing a lot more firms in this way.

I refer again to the complication caused by the length of leases. The Act says that 99 years is the maximum. In some cases, this has been subsequently relaxed to 125 years. I am sure that to most of us, either figure would seem to be a very considerable period; but I am informed the difference is important. Finance for development can be obtained very often more easily and perhaps more cheaply for the long periods. Also, there are plenty of cases, of which I have evidence, of unjustified delay in granting permission for the longer lease acting as yet another deterrent.

What is happening at the moment? I believe that many businesses which feel that they must have freeholds will go elsewhere. Quite a lot have purchased freehold sites from private landlords to whom the restrictions do not apply. At least in one case, a firm has purchased land from a nationalised industry. This may be a good thing. In some ways, it is: but it means that many acres of local authority and Government land are lying idle; in some cases developed land on which a great deal of money has been sunk in roads and infrastructure works. In five Northern counties of England alone, there are lying idle in public ownership 1,720 hectares of land which cannot be developed at the moment. Capital is locked away uselessly in this sphere and industry is developing in many places which may not be the ideal location.

When we debated this Act in 1975, one of the reasons for it, we were told, was that it enabled positive planning to take place as opposed to negative planning. Positive planning in the siting of industry is exactly what is not taking place as a result of these restrictions. Secondly, many firms are paying premiums and obtaining options to purchase the freehold land which they confidently expect they will be able to get as soon as this Government change their mind or a new Government take over. The Act is having no effect at all.

Quite a number of the firms I have mentioned will be expanding abroad and we have lost those jobs. Furthermore—and this is the most serious aspect of all—the Government are making exceptions to their own rules. I understand—and I hope that the noble Baroness who is to reply will be able to tell us about this—that a most important motor car company (and, again, I will not name it, but it has a famous four-letter word as its title) has been able to acquire freehold for its £200-million development in South Wales.

If this is true and if the Welsh Office and the Welsh Land Authority abide by different sorts of rules, what are the consequences of that for England or, perhaps, Scotland? I know of a case of a firm with a United States parent company which wished to acquire seven acres adjacent to their factory. They stated categorically that if they could not get the freehold, they would go to France, which is an easy operation because they have another subsidiary there. The Department of the Environment discovered that they had a moral commitment to sell this seven acres, which existed before the Act came into force in April 1976. The firm know of no such commitment for they never asked for the site before that date. The Department has now yielded; the land is sold, yet the Department has failed to create a precedent. I think that we must congratulate them sincerely on the ingenuity of this device. I realise that I have no chance in this short debate today of changing the Government's view. I am anxious that this should be seen in the very long-term context of the advancement and the help we should be giving to British industry.

I do not believe that the Community Land Act is working well. I do not believe that it is achieving the purposes which it set out to achieve. I think that the dogmatic attitude towards these freeholds is short-sighted. I believe it will be reversed by a future Government and, therefore, it is futile. In any case, why is the sale of the freehold necessarily to be regarded as hostile to the principle of the Act? The Act says that the community should reap the benefits of the development of land. Why can they not reap it by the immediate sale of the freehold at the market price instead of having to wait for it?

Even if the Government cannot agree to look at this again, I should like to suggest that they give serious thought to the possibility of relaxing this rigid policy in the special development areas in the North of England and so forth, just as appears to have been done in Wales, and maybe they should do the same thing in Scotland, too. This, I think, would be a very valuable carrot and an additional incentive to new industry to develop in the areas where we are desperately trying to attract new industry. I have personally been involved in this business of attracting new industry in the North-East of England for a number of years. I think I have quite a considerable experience—some successes and some failures—to look back on. I see this restriction on the sale of freeholds as a quite unnecessary hurdle to all our efforts in the development areas. I remember saying so at the time we debated this Act, then a Bill, on Second Reading in August 1975; and the Pilcher Committee on Commercial Property Development, which reported in November of that year, expressed the same feelings in this respect.

To sum up, I believe the Government must face the fact that it is now necessary to sacrifice a very remote prospect of an ultimate financial gain to the community in order to secure an immediate economic gain to the nation. My Lords, I beg to move for Papers.

3.11 p.m.

Lord MIDDLETON

My Lords, I am sure that your Lordships will be grateful to my noble friend Lord Ridley for raising this matter. It was, of course, an important objective of the Community Land Act that land, not just that which would be bought under the Act but any land, once publicly-owned, should never, with certain exceptions, be allowed back into private hands; and during the passage of the Bill in 1975, while most of us on this side of the House objected in principle to this, we also feared that in practice the effect on industrial development would be inhibiting. Indeed, my noble friend Lord Ridley said so on Second Reading. My noble friend has reminded us today of the provisions of Section 42 and of Circular 26 of 1976, which followed. Anyone wishing to develop a site for industry prefers to have the freehold. If he must have a leasehold, then a 99-year lease is not much use to him. He will not find it easy to raise money since, as my noble friend has just reminded us, most financial institutions insist upon either a freehold interest or at least a lease of 125 years, this being the minimum period during which a site is likely to be redeveloped.

As a member of the Yorkshire and Humberside Economic Planning Council for the last ten years, I have some knowledge of the effect of this legislation in my region. The Planning Council has from time to time had representations made to it that development is being held up and jobs are not being made available because of these restrictions on land disposal; and since the Council's primary strategic objective, as indeed it is of the Government, is to encourage investment in industry, this has naturally caused anxiety.

However, it is not particularly easy to obtain concrete evidence. In most cases an industrialist discovers that some piece of local authority-owned land that would suit him is not going to be available on terms which would be acceptable, and either he is frustrated and takes the matter no further or he buys a privately-owned plot. Information on these cases is not likely to be recorded.

The cases which are recorded are those known to the Department by reason of an application by the developer for special treatment. These cases where freehold disposal of industrial land was refused come from all over the Yorkshire and Humberside Region—Leeds, Halifax, Wetherby, Bradford, Keighley, Whitby, Todmorden, Hull, Barnsley, Rotherham and so on—and a wide range of industries was involved, including the traditional Yorkshire ones of clothing, textiles and engineering, as well as the newer industries; and there was also an application from at least one firm from the EEC. I suspect that these cases represent merely the tip of the iceberg, and that the great proportion of cases of discouraged development lies unseen and unrecorded. This is borne out by inquiries made in my own county of North Yorkshire, where there certainly have been indications to their industrial promotion officer that industrialists have lost interest as soon as they have learned that they would not be able to acquire the freehold. It is too early yet to say whether the recent amendment to the general disposal consent will make much difference, though it is fair to say that it is bound to help.

The same county council was able, under the 1965 Act, to advance money to would-be industrialists on land which had been sold or let to them by the authority. The purchase of land and reconveyance on mortgage is now prohibited by the Community Land Act, and I have heard of six cases where North Yorkshire has had to refuse this form of assistance which, before the Act, was effective in promoting industry in the county. Finally, so far as my own county is concerned, it is apparent that unavailability of freehold has contributed to difficulties in the disposal of industrial sites at Leeming Bar and Northallerton, and that the clients who have been discouraged—I think this is significant—are the larger ones, who have been interested in several acres.

My Lords, my noble friend is right to refer to the efforts of district councils to encourage industry. In my own region, a black spot that gives us much concern is Bridlington, where the male unemployment rate is now 14.3 per cent. The total unemployment percentage is 11.3 as against 6.1 per cent. for the region. Their Carnaby industrial site is, greatly to their credit, being developed by the borough in an attempt to mop up this unemployment. Last July there was a firm request to sell a three-acre plot on this site for building a light engineering factory which would employ 40 persons. Despite the unemployment difficulties of Bridlington (sandwiched, as it is, between two development areas) consent was refused and the development was frustrated. As it happened, however, the story ended on a happier note when the developer was able to move into a Government advance factory instead. But there are a number of firms on this particular industrial site which have extension plans, and some of these involve areas of land greater than that allowed under the new rule, which, as my noble friend has reminded us, is 1.2 acres. The firms concerned would, I believe, go ahead only if they could buy their freehold.

Another district council, Calderdale, where there is a desperate shortage of sites for new industry, is doing a very good job in the acquisition of land. It also has plans to reclaim and develop a further 50 acres. Calderdale is one of those areas of West Yorkshire blighted by the ruins of the Industrial Revolution, with hardly any fiat land anywhere, and it really does need every assistance possible. Even if the council succeed in buying and reclaiming this ground, what chance have they of disposing of it by sale to firms who may well not be content with half a hectare or a 99-year lease?

With regard to leases, these are admittedly more common in respect of commercial properties in the larger towns and, of course, in London; but time and again we come up against this 99-year restriction. In my own region, Harrogate could interest prospective developers neither for a shopping site nor for their conference centre until the Department approved 125-year and 150-year leases respectively. Whether they found a moral commitment, I do not know, but, anyway, they got round it. In Leeds, a firm required the freehold of a site, already held on lease, as security for finance, and there were no fewer than 400 jobs at risk. I believe they have now accepted 125 years. The Government have been made aware of the difficulties which have arisen by the number of applications to the Department for special treatment. They have relaxed their rules through the December 1977 amendment to the general disposal consent. Is it too much to ask for even greater flexibility?

If the principle of retention of freehold for the community is sacrosanct, could they not at least look at the length of lease they will permit? In reference to the likelihood that 99 years would be the rule, I recall the noble Baroness, Lady Birk, saying during the Committee stage of the Community Land Bill: Where there is a good case, longer leases would be considered but those would require the specific consent of the Secretary of State on a case by case basis".—[Official Report, 29/10/75; col. 474] This is what has happened, exceptional case by exceptional case, all very laboriously. I have quoted cases within my own knowledge.

I am sure that there is now sufficient evidence of the needs of industrial and commercial enterprises that the 99-year rule could be amended with results which would be beneficial not only to the Northern regions, with whose problems my noble friend and I are familiar, but throughout the whole of the United Kingdom. This is the least that could be done. In my view, local authorities should be allowed full discretion in encouraging industrialists in whatever plans they deem appropriate. That would give a boost to investment and to the creation of jobs which the country needs so desperately; but I fear we shall not see that happen until the Community Land Act disappears from the Statute Book.

3.21 p.m.

Baroness WARD of NORTH TYNESIDE

My Lords, no one has done more than my noble friend who is moving this Motion to help with the very many problems which have arisen, not only in Northumberland but in the part of the world in which he and I both live. It is very complicated for anyone like myself to have to discuss the Motion, with the details of which I am not particularly familiar. I am only too delighted to support my noble friend in elucidating the present extraordinary situation which has arisen not only in our part of the world but apparently all over the country. I shall do my best because all the time—and that was 38 years—I was in another place I was always concerned with trying to get new industries to come to my part of the world, because we always had such a high level of unemployment.

I would think that Her Majesty's Government and local authorities would be only too glad to encourage industrialists to come to the North of England instead of obstructing them. Or do they want to sell land only to nationalised industries? The matter is so difficult and, although all Parties want a reduction in unemployment, we have quite different policies to encourage industrialists to come to build up industries in different parts of the country; I am only too delighted and proud to be able to support the general suggestion which is being made.

One point which I should like to raise first is that sometimes in these complicated matters it is a very good thing to obtain knowledge from people who are not concerned with the political significance of the reasons which are now being discussed under this Motion. Fortunately, last night when I was in my club I was telling one of the members about today's debate, and another member on my left, whom I really did not know at all, said: "My goodness! what an interesting debate". I said, "I am delighted to know that you are interested in it"; and he then told me that he was a consultant to the Thomson Press which operates all over the North of England. He then told me in great detail that the operation of the particular legislation which we are discussing is creating unemployment.

Although on many occasions I do not mind attacking the Government, I should have thought that at this time they are as worried as we are about unemployment. One would think that they would have known what was going on. This friend, or future friend, of mine said that all over the North there was a lack of employment, for the reasons given by my noble friend and the other noble Lord in this debate. As a consultant on Press affairs, this man was not necessarily politically-minded one way or the other, but he stressed that it is creating unemployment. I really cannot believe that this Government would continue to operate legislation which is creating unemployment. As I say, I do not often agree with them, but I know that on all sides of the House we want to find jobs—good jobs—for the unemployed. My friend also told me that younger people, both men and women, who wanted to start small businesses were under great difficulty while this legislation exists.

This is a very important matter and I hope that, when the noble Baroness, whom I sometimes support and sometimes do not support, comes to reply, she will be able to give a general answer which will do away with this matter of the creation of unemployment. Many years ago, in 1931, when I first arrived in the House of Commons, I remember that in one part of my division—a highly industrial division, Wallsend-on-Tyne, with shipbuilding and mining—84 per cent. of the employable population were unemployed, and I have never forgotten the effect on me. I sometimes think that Governments—not only this Government but sometimes also a Government of my own Party—have no idea of the effect which unemployment has on decent men and women. It creates the most terrible problems for them and I would do anything I can do to help my noble friend. We both hope, and expect, to get a realistic and good reply from the noble Baroness when she winds up, one that will help to create good jobs and give people the training that is necessary.

In that way we can show the world what, at any rate, my part of the world can do, indeed what Great Britain can do. As my friend from the club said, it is a terrible thing to realise that this particular legislation is creating unemployment. I can hardly bear it. Therefore I shall not go on making a longer speech but just say to the noble Baroness that if she would like to come up—I am sure my noble friend would welcome her—and talk to some of the people about what is resulting from this extraordinary situation, I am sure we would be able to arrive at a satisfactory conclusion. I hope that the noble Baroness will give an honourable and satisfactory answer which will please a great many people, more people than perhaps she realises. Therefore, I have the greatest possible pleasure in supporting my noble friend and those who support him in asking that we should do away with legislation which will create unemployment.

3.30 p.m.

Lord SANDYS

My Lords, your Lordships will be most grateful to my noble friend Lord Ridley for introducing this short debate this afternoon in so felicitous a manner; and, further, to all my noble friends who have spoken with such knowledge and experience. My noble friend Lady Ward of North Tyneside speaks with long experience and great knowledge of the North-East, as do both noble Lords who have already spoken.

I do not speak with knowledge of the North of England; but I should like to stand back from the canvas for a moment and look at the situation as it was in Northern Germany in 1950, when I was there as one member of the then Army of Occupation. The situation is not parallel except in one respect. In 1950, the occupation Statute was in force and German industry was on its back. I am thinking especially of an area around Hamburg and the northern industrial zones of Germany. It was most significant to be there at that time, for, in 1951, when the occupation Statute ended, within a matter of weeks or months the landscape suddenly began to move. Plans had been prepared two or three years earlier. It was almost like a mushroom growth. Industrial sites were being cleared; factories were being erected; new industries were being created with transport and communication services.

Within a matter of months one no longer saw hoardings, one saw intentions being brought into effect. We have heard from my noble friend Lord Ridley that none of our partners in the EEC have this restrictive view of the freehold of industrial land. In 1950 I knew very little about this subject, and I certainly was unaware at that time of the restrictions which even then were in being in this country. But, if we are to compete with our partners in Europe, surely we ought to be on all fours with them so far as the situation over freehold sites is concerned.

My noble friends have put before your Lordships in great detail the situation in one particular area of the United Kingdom. The one factor which was common to all three speeches was the need for flexibility. We ask the Government to reconsider the disposability of these sites so far as local authorities are concerned. It is within our knowledge that the Land Authority of Wales appears to have a slightly different position from that of Scotland and England. My noble friend Lord Ridley referred in particular to the situation at Bridgend, where one internationally known company is undertaking a £200 million development which will bring about a substantial amount of additional employment in that part of the world. If we are right that this differentiation exists, I wonder whether the noble Baroness, in addressing herself to this particular problem, could inform the House whether the Land Authority of Wales is indeed able to dispose of freeholds and not 99-year or 125-year leases.

My noble friend Lord Ridley charmingly suggested that the subject might be specialised or boring, but we were both stimulated and encouraged by everything that he said in his speech. I should like to refer to one particular aspect: the situation which has obtained since 1945 regarding the betterment levy. One of the things about the whole of the Government legislation in this particular field has been the situation over development and the taxation on it. Let us look back over the years at the situation since 1945. In 1947, a previous Labour Government introduced development charges. In 1967, 20 years later, another piece of Socialist legislation introduced betterment levies. Some eight years later, another Socialist Government introduced development gains tax, and that same Government (the present Government in office) introduced the development land tax in 1976. All these are part of a theme. As my noble friends rightly pointed out, they have not acted in the aim of the original intention—to promote a fairer and more equal distribution—far from it, this has frustrated their very aims. Once again, it is a repetition of Ferrers' Law. And how right my noble friend Lord Ferrers is! The original intention has been totally turned upon its head.

To return to the question of development land tax and disposals, I should like to refer your Lordships to what was said in another place only a few days ago. On 8th February, in another place, at column 1432 of Hansard, the noble Baroness's right honourable friend, Mr. Freeson, was asked: Does he agree that the development land tax, which he so frequently supports in this House, is actually doing a great deal of damage because it means that private developers and owners are not allowing derelict land to come on to the market, and that therefore these vast acreages in cities such as Birmingham are remaining derelict? The noble Baroness's right honourable friend said: As for the development land tax, we have not received evidence from Birmingham or anywhere else that development of this kind of derelict and waste land, particularly the commercial and industrial land about which the honourable Member appears to be thinking, is being held back because of the impact of DLT". That is a very significant statement for the Government to make because the fact that we believe it—that is, the taxation position—is one of the most inhibiting factors does not enter into the equation at all. We believe that development land tax is of the greatest significance. In support of what my noble friend Lord Ridley said, we believe that companies are looking to other countries where the opportunities for commercial development are perhaps infinitely better. Much more important, DLT has a disincentive effect for any type of development in this country.

When we have a look at the situation as regards development land tax, we should look more closely at how this situation operates. It will be interesting to your Lordships to know that, when the Development Land Tax Act came into effect in August 1976, there was a staff of 114 in the office in Middlesbrough. In November 1977, that staff had grown to 153. But I can assure your Lordships that the pace of activity was not excessive, for, of 6,500 land transactions notified to the development land tax office, only 594 gave rise to a tax demand, making a ratio of one civil servant to every four tax assessments. Your Lordships will be aware that development land tax is levied at the swingeing rate of 80 per cent. and, clearly, the office is over-staffed. We understand that the cost of collecting development land tax is currently running at £1½ million. We believe that one cannot consider this whole question of disposal of freeholds, without taking into account the fiscal problems which flow from it.

Finally, I should like to emphasise the question of the amount of legislation, and the flood of paper which flows from it. It will be interesting further to consider what has followed from the enactment in Parliament of the Community Land Act. This was mentioned only a few days ago in a speech of my right honourable Leader, Mrs. Margaret Thatcher, when she said this in Caxton Hall: The flood of paper has been very considerable—nine orders and regulations under the Act, which were signed by the Secretary of State for the Environment, the Secretary of State for Scotland and the Secretary of State for Wales, four other English orders, 13 English directions, 29 English circulars or letters, two Scottish publicity directions, 11 Welsh circulars, five Welsh guidance notes, and two Welsh directions to the Land Authority for Wales, making a total of 111 official advice notes or orders under the Act". This is a prodigious amount of paper which has flowed from one Statute, all of it concerned with the disposal of land.

In summing up, I think that I should say this: without a shadow of doubt, the passage of the Community Land Act has been deeply inhibiting in regard both to employment in this country and to the question of the redevelopment of sites throughout the United Kingdom. We believe that it should be struck from the Statute Book.