Steve Coffey is Chair of Homes for the North.
The Levelling Up and Regeneration Bill is at the heart of the legislative programme announced in the recent Queen’s speech. It has now started its long passage through Parliament with its second reading already complete.
The Bill is designed to weave together the threads of two White Papers – this January’s Levelling Up White Paper and the Planning White Paper published in summer 2020. But in attempting to do so, it may be that some inherent contradictions have been exposed which will be difficult to reconcile.
The Bill starts by enshrining in law the Levelling Up ‘Missions’ set out in the White Paper. The Government is being brave in committing itself (and its successors) to delivering the ambitious objectives it set out back in January, establishing reporting and monitoring arrangements that, whilst not exactly guaranteeing their delivery, should at least ensure a high degree of transparency and accountability. In theory this will require future Government policies and spending plans to be seen through the lens of levelling up. So far so good.
But reading on to part 4 of the Bill which introduces the Infrastructure Levy, we quickly come across a showpiece policy – one of the few to survive intact from the Planning White Paper – which seems highly unlikely to support the delivery of those very Missions. Here’s the problem.
Whilst the clauses relating to the Infrastructure Levy are largely enabling – putting the Secretary of State in a position to lay detailed regulations – there is enough detail on the face of the Bill to draw some early conclusions. The proposed levy will secure developer contributions for the provision of key infrastructure and affordable housing by applying a locally determined tax on developments, based on development value.
Indeed, an added safeguard is put in place which will require Local Authorities (in setting the level of the levy) to generate enough income to provide at least as many affordable homes as the developer contribution regime it replaces – which is just as well as the current system delivers around half of the nation’s affordable homes! So there are two immediate ‘levelling up issues’ here.
Firstly, without doing the sums, it stands to reason that there will be a geographical imbalance in the level of the levy generated in different parts of the country, with higher value areas (largely in London and the South East) generating the highest levels of funding to provide vital infrastructure, in exactly the same way as is currently the case. Under the current system, over 50% of pre-pandemic developer contributions were generated in London and the South East, contrasting with 15% across the whole of the North.
There is little reason to believe this won’t be replicated, at least until the country has been levelled up – a vicious circle. A lot has been written about the ‘Matthew effect’, the concept that “for to everyone who has, will more be given”. Or putting it another way, those parts of the country least in need of levelling up, get the lion’s share of the dosh!
Secondly, whilst there is at least the assurance that the new levy will have to be set at a level which will deliver the same amount (or more) of affordable housing as provided under the regime it replaces (good nationally), in applying this test locally, all it will do is guarantee that past patterns of geographical provision are replicated.
Forgive me, but I thought levelling up was about turning these on their head, so that the gap between economic growth (and the housing offer needed to support it) begins to narrow rather than widen. And the Levelling Up White Paper itself seems to agree, saying “we will also scrap the 80/20 funding rule that focused investment in Greater London, and instead invest in more homes in the North and Midlands to relieve pressure on the South East”. But this isn’t going to help.
So what is the solution? At Homes for the North we have commenced a piece of work which will explore this issue and look for some practical changes that can be made as the legislation and associated regulations pass through Parliament. Should local authorities be compelled to identify the level of housing (and affordable housing) needed to support their levelling up ambitions and enshrine them in their local plans? Does there need to be a mechanism to redistribute at least some of the income generated through the levy? Or should Homes England be required to distribute their own funding to help local authorities meet their levelling up ambitions, taking account of the uneven impact of the levy?
We don’t yet have the answers, but surely these are the legitimate questions we should all be asking.