HL Deb 15 February 1978 vol 388 cc1442-55

3.50 p.m.

Debate resumed.

The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk)

My Lords, before I reply to the Motion of the noble Viscount, Lord Ridley, there are two things I should like to say. First, we seem to be discussing this in a calmer and a more reasonably-timed atmosphere than we all did two years ago during the passage of the Bill. I should like to tell the noble Baroness, Lady Ward, that I have very recently been up to the North-East and was very well looked after by her noble friend—and we did not once mention the Community Land Act. I was absolutely delighted to find that as well as working, as I shall try to convince noble Lords opposite, to the benefit of the community, it has resulted in the noble Baroness's finding a future friend. I think perhaps very few Acts could claim that as well, so for that reason alone I would say it has fulfilled a very important human purpose.

I have listened to the speech of the noble Viscount, Lord Ridley, with great interest and attention. He raised a number of points and put them most courteously and ably, as he always does. But I do not think it is possible to discuss properly these issues and those raised by the noble Lord, Lord Middleton—who was also one of the people with whom during those particular days I seemed to talk more than I did with my own husband—and also the points raised by the noble Baroness and the noble Lord, Lord Sandys, without first recalling their wider context: that is, the Government's policies generally for development land. It was, and remains, a major objective to ensure a sensible, positive and fair use of the nation's scarcest resource, land. Our approach has been to give the community a fuller share of the benefits, both social and economic, that accompany development.

The catastrophic effects for housing, industry and commerce of the land price explosion of the early '70s are still, or should be, very fresh in our minds. If I may say so, I think we have heard, not unnaturally, a great deal about the "evils" of what is going on at the moment, but we have heard very little about what happened in this particular area before, which resulted in a great many catastrophes and disasters which constantly recurred and which the Act was intended to alleviate in the long run. The machinery of development control, which is absolutely essential, is not sufficient, as we have all learned, to stop wild speculation. Controls alone cannot ensure that development takes place when and where it is needed and at a price that prevents profiteering in land.

The Community Land Scheme, with its associated development land tax, to which I shall return in a moment, sets out to ensure an orderly supply of land to meet the nation's essential needs. We are now in a position where local authorities can acquire development land and, as owners, promote its development more closely. The community can at last play its proper rôle in development and can rightly take its share of consequent increases in land value. Eventually local authorities will supply all the land needed for major development and that land will be acquired at its existing use value.

The noble Lord, Lord Middleton, pointed out something concerning himself and others. I think his words were: Some of us objected in principle and others also objected in practice". I am sure that he is a fair man and will agree with me that, if you start off by objecting to something in principle, as one has every right to do, then that is going to make it very much more difficult to try, even with the best will in the world, to make it work in practice. If you are basically "agin" something, you approach it, as I am sure he would agree, with quite a different attitude. I am not pretending that we have yet achieved all the objectives of the scheme: of course not. We are still suffering from the chaos in the land market that followed the collapse of the 1972–73 boom.

Then, this new land "baby" had the misfortune to be born on the eve of one of the most severe economic crises ever to strike this country. Also, it takes time for any new concept to take root and change traditional attitudes, especially when so many people and interested parties are involved in the complex processes of development. In addition, there are always bound to be teething troubles, and this applies to measures whether one supports them or not. But the Government's specific policy on the disposal of publicly-owned land, which is covered by the Motion of the noble Viscount, must be seen within this wider framework.

The policy has two particular objectives. First, it secures for the community future increases in land values by retaining the freehold and either letting the land on short tenancies or having rent review clauses in the lease. Secondly, it enables the community to make periodic reassessments of the use of the site in relation to the wider land use strategy of the area. It does this by limiting the term of the lease to a normal maximum of 99 years. The noble Viscount, Lord Ridley, has expressed serious misgivings, as have other speakers, about the practical consequences of applying that policy and I know there are many outside this Chamber who share his views. I can see why he and those who think like him should dislike it, but I do not believe that implementation of the policy need hold up industrial or commercial development. There are really two issues here that form part of this Motion, and I think it would be best if I considered them separately.

On the question of freeholds, it is a fundamental principle of the Land Scheme that once land has been brought into public ownership the freehold should remain there. There are sound economic reasons why local authorities should hold the freehold, and they should have this advantage. There is no secret about that; and this is quite right. What the noble Viscount is suggesting would undermine the whole basis of the scheme. He is saying, in fact, that I and people who think as I do like the idea of freeholds reverting in most cases to the community, to the public sector or to local authorities, but that the scheme should be widened or relaxed in such a way that freeholds are much more readily available. I am sure he is aware that this would undermine completely the whole basis of the scheme.

The noble Viscount then went on to say that either this should be changed by this Government or, as I understood it, the Act would be repealed in the event of the return of a Conservative Government. That is a point of view to which he is entitled, but it is not one which is consonant with the working of the Community Land Act. In any case, I do not believe—and experience has confirmed this time and time again—that the ability to secure the freehold of land is usually a decisive factor in determining industrial or commercial investment. The quotation that he used— no one of reasonable intelligence is going to build factories on land that does not belong to him"— is really just sheer nonsense, if he will forgive me; because this has been going on for years and years, since long before the Community Land Act was passed. He is surely not trying to say that in the past nobody has built factories on land which has not belonged to him, because the facts are against him. It is not as though the idea of leasehold is wholly new. Many local authorities, as well as all the new towns, have been leasing industrial and commercial land for many years. I believe there is already a widespread and growing understanding of our policy—which applies, of course, only to land required for industry and commerce Land for owner-occupied housing can be and is sold freehold.

I agree it is true that there are many people for whom the idea of a leasehold interest on which to build a factory, offices or shops is new; and habits die hard. We still sometimes meet the, "What was good enough for my father…" attitude, and the same applies to many innovations. As with any major change, there is naturally opposition at first. In many ways, we are a very traditional people and, in breaking with tradition, particularly when tied up with it are myths and all the mystique concerning land, it is not surprising that, in what has been a very short time—it is only two years ago that this measure was passed—people should feel this way.

Industrialists who own the freehold of their existing sites think "freehold" when they want to expand or develop a new venture because it is what they are used to. It is also true that foreign firms investing in this country are sometimes unfamiliar with our leasehold system, but our experience is that it is often a case of carefully explaining it to them. This aspect of the scheme is becoming better understood. Local authorities, industrialists and the financial institutions are all now becoming more accustomed to think in terms of leaseholds. Developments have gone ahead and exceptional treatment has been justified or found necessary for very few cases. The reasons why people decide to develop, or decide not to, are varied and complex. I think it is doubtful, except where tradition overtakes enterprise, whether lack of freehold has been a real impediment to development.

Lord SANDYS

My Lords, I do not think the problem is tradition which is causing frustration; as my noble friend Lord Middleton said, one of the chief problems is financing; it is the frustration resulting from the purchase of land under mortgage being prohibitive which is causing one of many financial problems to industrialists.

Baroness BIRK

My Lords, I heard the noble Lord say that. One problem is that the institutions are very hard-vested in their attitudes and find it difficult to break away from them. I was about to deal with the point of exceptions. I find it rather strange that, at one and the same time, noble Lords opposite are pleading for greater flexibility yet are knocking the Government hard in respect of those cases where they believe there are good reasons for making exceptions. If we did not do that I believe that people like the noble Viscount, Lord Ridley, and his fellow peers would say, "But you do not even make an exception and you do not listen to exceptional circumstances". That is in fact what we are doing. The noble Lord, Lord Middleton, quoted correctly what I said in Committee on this question of leases, and that is exactly the position today.

The noble Viscount referred to what he called a motor company with a four letter name beginning with F, and I think it is about time somebody mentioned the word in full to avoid difficultiy. The word is, of course, "Ford". It is perfectly true that Ford have a freehold site of 185 acres in Wales; it was organised not through the Welsh Land Authority but through the Welsh Development Agency. That was one case which was considered to be an exception and I understand that work has been given to about 2,500 people in that case. It was not possible to arrange it in any other way, although the same procedure was gone through by the Welsh Development Agency to try to arrange it on a lease. It is one of the few exceptional cases and I make no apology for that; I am being open about it and I am giving the name of the company, whereas the noble Viscount felt he should not give the names of any of the companies he was quoting.

I turn to the other key feature of our disposals policy—the requirement that leases should be for terms of not more than 99 years, which means that full control and the ability to reassess the use of the site are restored within a reasonable period. It is true that some people who put up money for industrial development—this is where the institutions come into it—would prefer leases for longer than 99 years, and the arguments they advance to explain their preferences are familiar. They are all about turning round on the same spot and they have all been articulated by the noble Viscount and other noble Lords this afternoon.

As the noble Viscount pointed out, in 1975, the Advisory Group on Commercial Property Development, under the chairmanship of Sir Dennis Pilcher, recommended 125 years as a desirable length of lease, and the arguments they adduced were substantially the same as those now being advanced. Frankly, then as now, these arguments are not terribly convincing because it is quite an arbitrary matter. Ninety-nine years is a long time in our fast-changing society; business practices, technology and so on are changing all the time. Actuarial conventions about redevelopment periods may sound very plausible in theory but are not necessarily so in practice. In any event, if we had gone for 125 years we should no doubt be having a similar debate now with noble Lords asking for it to be increased to 150 years, so it is almost a case of taking one's pick; 99 years is one short of 100 and is a long time, particularly hearing in mind the rate of change in industrial and business practices.

Can we really forecast the future life of an industrial building more than half a century from now? I doubt it in these days. Does 125 years neatly encompass two life spans while 99 years does not? Many experts would say that 99 years encompasses two and sometimes three lifespans. Obsolescence, I believe, is a movable feast. No, I cannot accept the argument that sound investment considerations demand a lease of 125 years and nothing less. This is a very conservative view with a large as well as a small "c".

Surely the facts speak for themselves; there is nothing new in 99 year leases for industry. It has been the traditional industrial tenure in parts of this country for many years and in some areas 60 years has been the norm. I recall very well that that period was the one first being discussed during the early stages of the discussion of the Act. In the new towns a 99 year lease policy has been pursued very successfully. Banks, insurance companies and other financial institutions are well used to it. Indeed, recently some property companies and agents have questioned in a periodical the logic of this preference for longer leases. I believe it is a question of feeling that we want to stick to what we are used to or the feeling that there is something sacrosanct about a longer lease or about owning a freehold.

Perhaps we will gradually move towards a situation where the investing institutions will be realistic and look for their security in the factories and offices they are funding, rather than in the land on which those factories and offices are built. This in fact is what has been happening in the past. I do not accept that this policy is creating unemployment. I listened carefully and with great sympathy to the passionate plea made particularly by the noble Baroness, Lady Ward of North Tyneside. Like her, I abhor and find tragic the level of unemployment that we have in this country. But to say that lack of a freehold or a very long lease is a decisive factor in investment is, in my view, to be rather unrealistic. Industry decides on the basis of profitability of manufacture—I wonder whether, before intervening, the noble Baroness would allow me to finish dealing with this particular point. I accept that the length of the lease is more difficult because of the attitude of financial institutions, but we adopt a flexible approach and approve 125-year leases where this is absolutely essential. We are approving such leases at the rate of one a week. I would say, therefore, that our position and approach are flexible.

Baroness WARD of NORTH TYNESIDE

My Lords, I am very grateful to the noble Baroness for sitting down. The noble Baroness takes that view, but may I ask her how she can prove it when other people who have just as much experience, excepting perhaps Civil Service experience, say that it is causing unemployment in the part of the country which my noble friend and I represent? The noble Baroness has not dealt with that point; she just says that she does not accept it. May I ask her why?

Baroness BIRK

My Lords, this is a question of, how long is a piece of string? I would only point out to the noble Baroness that, unfortunately, unemployment has been very high for many years and decades in the area about which she is speaking and which she represented in another place for so many years. Unemployment was very high long before the Community Land Act even poked out its legislative head. Unemployment, unfortunately, has existed in that area for many years. I am saying that the factors are complex. To blame freeholds or the length of leasehold for unemployment is a very simplistic attitude. I should like to turn round the argument. If people are so anxious to provide employment and if they also believe that they can operate profitably, then I come back to the point I made previously—which is being proved all the time because industrialisation is taking place—that this is not the factor. I gave the example of Ford's in Wales. It is absolutely essential that an exception should be made in order that that business may operate in Wales. I should have thought that this answered the question put by the noble Baroness. It is obvious that we shall not agree about this, but I believe that I have answered her question as fully as I can.

Baroness HORNSBY-SMITH

My Lords, the noble Baroness has very frankly admitted the different premise that has been applied to Ford's. However, is the noble Baroness not saying that, if it is a large company with an immense amount of muscle which can say that it will employ 2,500 people, the Government will concede the freehold rather than the leasehold? Does the noble Baroness not appreciate that members on both sides of industry have stressed that, if we are to mop up unemployment, it is the small companies and the new industries which will do it? It seems completely unfair that, if a dozen or so small companies could in the aggregate employ 2,500 people, they should have no chance of getting the freehold, simply because individually they are small and do not possess an immense amount of muscle.

Baroness BIRK

My Lords, this also is not so. I was asked by the noble Viscount specifically about Ford's in Wales. I gave him as frank an answer as I could, together with all the information that I had. The noble Lord, Lord Middleton, quoted my reply at the Committee stage when the Bill was going through this House. I said then that each case was dealt with individually. That is absolutely true. The negotiations carried on between the local authority or the land agency and the company are put before the Secretary of State or before Ministers, together with the history of the matter and the reasons why they are finding the case particularly difficult. Different reasons are given in each case. It is in order to try, so far as it is humanly possible, not to deter industry that there is this careful scheme of exceptions. It is not a question of size. Exceptions have been made in the case of very much smaller industries. Also, certain large industrial undertakings have decided to operate on 99-year leases, so there is not that kind of divisiveness.

Nevertheless, I accept that there are cases where local authorities and industrialists have had difficulty in finding financial backers who are prepared to invest. Similarly, while local authorities are still supplying only a small part of the land market, they can sometimes be at a disadvantage against competition from private landowners. I recognise that at the moment it is rather like a patchwork quilt, with the different land tenures forming a variegated pattern. That is the situation we are in at the moment. Obviously, it presents problems when we are moving from one situation to another. We recognise these difficulties, and this particular stratagem of looking at each case individually allows for this.

Therefore, while, in the vast majority of cases, development has gone ahead on the basis of a 99-year lease, where genuine problems have arisen my right honourable friend has always been prepared to consider whether there are special circumstances justifying exceptional treatment. Although special consents to disposal on leases of 125 years have been relatively few, they have readily been granted in cases where real problems have been clearly demonstrated. As I have already said, they are running at about one a week. I am sorry to delay noble Lords by repeating that fact, but it seems to me to be extremely important that it should be understood.

An important factor that must not be forgotten is that the policy regarding disposal of development land applies only to significant development of an industrial or commercial character. It does not apply to land for owner-occupied housing, which can be sold freehold, and it also does not apply to the many small parcels of land which are surplus to local authority requirements.

The Community Land Scheme is concerned only with developments that are of real significance in planning terms, but the original de minimis limit for the control of land disposals, which was set at £500 before there had been any experience of the scheme, was found to be far too low. As the noble Viscount, Lord Ridley, pointed out, last December we revised the general consent to exclude sites of not less than half a hectare in area and of not more than £25,000 in value. This is where the point made by the noble Baroness, Lady Hornsby-Smith, is relevant. The small business now has the opportunity to go ahead without having to be involved in this way.

Therefore, local authorities are now free to dispose of such land on whatever terms they may negotiate, subject to their obtaining the best market price. This has been very helpful to local authorities, since it has greatly reduced the number of cases where they have to obtain the special consent of the Secretary of State. Also, it has been of tremendous help to industry and commerce because a great deal of it, as the noble Baroness knows very well, falls into the small or medium sized firm rather than the large sized firm. This happened only in December, but I think that the noble Baroness will agree that this has now been taken care of.

The noble Lord, Lord Sandys, referred to the suggestion that the development land tax is having the effect of creating a shortage of development land. I do not believe that this is the time or the debate to have a long discussion on development land tax. The Government do not accept that there is a general shortage, especially for industry, although there may well be problems in certain areas. Again, however, it would be far too simplistic to attribute these shortages to development land tax. The tax has been in operation for only 18 months, during a period when the land market has been exceptionally quiet. It may have had a temporary effect on sales of land, but there is no evidence that it has been a major factor. Landowners have to face up to the fact that development gains will be taxed, whichever Party is in power. The last Conservative Administration taxed them at up to 83 per cent. by way of development gains tax. It is most unlikely that much tax will be payable on derelict land, which was the point made by the noble Lord, Lord Sandys. The land would have a high base value against which this will be calculated; so this does not really have a great deal of effect here.

Noble Lords have referred to unnecessary delays in the handling of planning applications and appeals for industrial development. This is, of course, a constant theme, and, with or without the Community Land Act, this is a problem that Governments have had to wrestle with as part of the price of having a planning system at all in this country. We are continually trying—and we are quite well aware of the need to do so—to improve the planning machinery. In recent months we have taken several steps to meet the needs of industrial developers, which, after all, is what this debate is about. As part of the Government's industrial strategy we have urged local authorities to give first priority to the handling of industrial applications. The Department of the Environment and the Welsh Office now give similar priority on appeal or call-in, and we have increased the proportion of appeals to be handled by inspectors to almost 90 per cent., thus ensuring very much speedier handling.

I conclude by returning to the wider objectives of the Government's policies for land, with which I began. It is quite clear that we are not going to be foolish enough to think that I am going to persuade noble Lords opposite by what I am saying today, and the noble Viscount, Lord Ridley, was completely realistic about this. Nor did he expect me to get up and say that the Government have changed their mind entirely on the whole policy, are prepared to listen and to change their mind because of the very eloquent speech which the noble Viscount made. He did make an eloquent speech, but the Government are not changing their mind about the policy. Local authorities have now been given the task of becoming "land authorities". This gives them a rôle, and it is a new rôle, a growing rôle, which, allied to their traditional planning functions, should lead to their viewing land as a strategic issue in itself, requiring positive management—as noble Lords will remember, the debate was very much about this and there was a great deal of agreement on all sides of the House about the importance of positive management—development planning and an entrepreneurial approach.

Our disposals policy must be seen as an integral part of these major changes and one that is important in influencing authorities in that direction. We are seeking a radical break with the swings of policy that have bedevilled land issues in this country for the last 30 years. The problems involved are extremely complex and difficult. It will take time to make the many adjustments needed, and it will be an uphill battle. I am not pretending that it will not be. But the need to have greater stability in the land market is, I think, widely recognised among builders and developers of all kinds, and it is a goal from which we shall not be deterred.

4.24 p.m.

Viscount RIDLEY

My Lords, this is a short debate, and I shall not detain your Lordships for longer than a few seconds. It is right that I should thank for their support all noble Lords who took part in the debate. We have had a Northern flavour this afternoon, and we are none the worse for that. I should like to thank the noble Lord, Lord Middleton. I must remind your Lordships that he said the cases known to the Department are the tip of the iceberg; I think that is very true. I lack the eloquence of my noble friend Lady Ward of North Tyneside, and I lack some of her friends. I do thank her for her support, and I hope that I may be invited to this club one day to meet some of her friends. I am sure they all talk politics. I should also like to thank Lord Sandys for exposing the nonsense of the Community Land Act in such an effective way.

I appreciate that the last time the noble Baroness, Lady Birk, and I had the pleasure of meeting we were able to meet on Hadrian's Wall. I wonder, in passing, whether she considers that Hadrian would have built that wall if he could have got only a 99-year lease. I very much doubt it. Even a 125-year lease would not have satisfied him in the circumstances. The noble Baroness referred to the situation existing in the new towns. I have a case here of a firm who wished to employ 80 people but they were deterred from going to a new town, to the loss of a very bad unemployment black spot. In any case, the new towns are a fairly small part of the picture. This Act extends to the whole country.

The noble Baroness accused me of trying to undermine the whole basis of the Community Land Scheme. I do not think I tried to do that. It may surprise some of my friends to hear me say this, but I believe there is certain good, as well as bad, in the Community Land Act, and it certainly was not in my brief to suggest that the Act should be repealed. I did not say that, although it has been said by others. All I did ask was that the English situation should have the flexibility which appears to prevail in Wales. I am sure the noble Baroness will take that point very much to heart.

The word "Ford" has now been mentioned, and I can use that word. I did not reveal my sources because, as she herself as a good journalist knows, a journalist never reveals his sources. But it was fairly obvious that it was Ford we were talking about. This I believe to be one of the very valuable precedents created in South Wales, and I am certain that now that we know the truth quite a number of other cases can be found where, equally, it will become necessary to ask that the case of Ford be used as a precedent. So if anything has undermined the whole basis of the Government's Community Land Scheme I should have thought it was Ford. I again thank your Lordships for bearing with us in this debate. I trust that we have not exceeded our two and a half hours. I am grateful to all noble Lords who have taken part. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.