§ 3.9 p.m.
§ The Earl of Kinnoull rose to call attention to the case for revision of the current rules of compensation in cases of compulsory purchase, in particular for the proposed rail link to the Channel Tunnel; and to move for Papers.
§ The noble Earl said: My Lords, the purpose of this short debate is to discuss the workings of the compensation provisions under the compulsory purchase powers. As it is a complicated subject and there are only six speakers, as my noble friend the Chief Whip has just reminded us, I was about to say that each of us has the luxury of 25 minutes. That would effectively empty the Chamber fairly quickly.
§ The House will recall that the origins of compulsory purchase and compensation date back before 1845 when the first consolidation Acts were brought in to accommodate the acquisition of land for undertakings of a public nature. At that time they were principally to assist the construction of railways and canals which was work being undertaken by private companies. The compensation rules were not spelt out in any detail, and for the next 70 years it was left to arbitrators and case law to define the parameters. By 1919, with land and house values rising rapidly, there were criticisms of excessive compensation being paid equivalent to what were described as compulsory sacrifice figures, whatever that might mean. A Bill was then introduced setting out for the first time in legislation certain fundamental rules of compensation which even today still form the foundation of the present-day code, the principal rule of compensation being that it should be based on the open market value as if sold by a willing seller but taking no account of the particular scheme proposed by the acquiring body.
§ Throughout the subsequent Acts of 1961, 1963, 1973 and 1981, the principle of equivalence—no more or no less than what has been taken away in value—has remained the root of statutory compensation. The fairness of this principle cannot be criticised in its theoretical objectiveness, but in practice it has not always lived up to its high ideals, either through the fault of loose drafting and the often seemingly unsympathetic interpretation of the courts or perhaps through the failure of valuers. The practical problem was compounded by the word "compulsory", with the opposite actually happening in reality on the assumption of a willing seller and the open market value. It was further heightened by personal and emotional distress and financial worry for people whose very homes, the centre of their lives, were possibly being taken away. So despite the general fairness of the rules of compensation set out 659 in the 1919 Act there have been tragic consequences where loopholes in the system have caused grossly unfair compensation to be offered to claimants.
§ I recall as a student the case of Mr. Pilgrim in 1950, who purchased with the help of a large mortgage a vacant plot of land adjoining his home in Romford. Within a year the local council served a compulsory purchase order on the plot and the district valuer announced the value at only one-tenth of the purchase price a year before. Mr. Pilgrim was left with a large mortgage which he could not pay off and a deep feeling of injustice and grievance. It proved a direct cause of his taking his life. The case demonstrated that the principle of equivalence had failed completely, to the shame of the compulsory purchase laws. I am glad to say that that part of the law was subsequently amended, but at a high price.
§ It is true to say that over the years a number of identified unfairnesses in compensation have been mitigated: in areas of disturbance, injurious affection and to some degree blight, although this is still an area of grievance which needs urgent examination. Despite these improvements in the code of compensation, the whole subject is facing increasing criticism, of which my noble friend is well aware and to which his department has recently responded by issuing a consultation paper. Perhaps it is timely that we should be debating this subject today. I am grateful to those noble Lords who have indicated that they will take part in the debate and grapple with this complicated and sensitive subject.
§ The criticism of the present compensation code stems from a number of quarters. First, no recent proposal has caused more individual grievance and protest to Members of another place, as evidenced in their post bags, than the Channel rail link. The main issue of this grievance has been the level of compensation offered to would-be claimants—this despite the positive efforts by British Rail to go beyond the statutory compensation. It is clear that the level of compensation under the present code does not give any confidence that an equivalent property in size, location and setting could be found without the claimant being out of pocket.
§ The second body of criticism comes from the professional bodies, notably the Royal Institution of Chartered Surveyors, in which I must declare an interest, the CLA and the NFU, which not surprisingly are together on this issue. The RICS produced last December a comprehensive "Blue Book" setting out the case for simplifying and strengthening the compensation code and calling for reform to clarify its present obscurity, consolidate its fragmented code and amend its provisions, particularly where the principle of equivalence is at present failing. Both the CLA and the NFU support its views.
§ The third body of criticism comes from those who have experience of being involved in large schemes, either as retired civil servants or former Ministers, and who have witnessed wasted years of frustration and delay caused directly by complicated arguments over compensation. I have in mind the M.25 and M.40 proposals. Lastly, there is the body of criticism, 660 in and out of Parliament and voiced particularly in the debates in the House during the passage of the Channel Tunnel Bill, of the possible misuse of compulsory purchase powers by private or recently privatised companies to include more land in a scheme than is necessary and which is subsequently used for commercial development. I know that the Government are well aware of this last criticism.
§ The recent government circular showed a positive approach and an encouraging awareness over the large number of issues but was strangely silent over the one main issue—the level of compensation offered to claimants, particularly when they lose their homes. The Royal Institution of Chartered Surveyors was not so silent on this important criticism of the present code. It argued cogently the case for compensating the factor of "compulsion" and recognising the claimant as an unwilling seller. It recalled that prior to 1919 it was the accustomed practice to add an additional percentage for this. It recommended a sliding scale in addition to open market value. Others support a flat 10 per cent. addition, as set out in the Petroleum (Production) Act 1934 under the provisions of compensation in that Act. The bolder go for a 20 per cent. addition in line with the French system, which I understand takes the view that being compelled to sell one's house should be a small financial bonus; not a rip-off but an ease of mind payment on rehousing oneself comfortably. Whatever is decided, there is a strong case for a change in the present code to meet this fundamental grievance. The level of compensation is clearly not adequate and leads to unnecessary disputes and delays. One feels that a little more generosity of compensation on the table could avoid this.
§ The Government's circular makes proposals on improving home loss payments, introduced in 1972, as a payment for personal distress and inconvenience. The proposal is to relax the rules of qualification and make it easier for people to qualify. However, while this is excellent and welcome, it is a little disappointing that the spirit becomes niggardly with regard to the new flat payment which the Government suggest. It is proposed that it should remain at the same level. The present level is a minimum payment of £1,200 or a maximum payment of £1,500. In today's terms that seems not overgenerous. I hope that my noble friend will look again and perhaps offer what today would be an equivalent value of what Parliament considered appropriate 17 years ago—£5,000.
§ The chartered surveyors have put forward a strong recommendation on site value compensation in the case of unfit houses. The Government's proposals do not refer to this issue, despite the fact that undertakings have been given in the past to alter the basis of compensation. It is possible that that has already been done; if that is so, then I must apologise to my noble friend. However, I should be most grateful if he could confirm that when he comes to reply.
§ I turn now to the complicated question of private companies, especially those recently privatised, which might be found promoting a scheme with an element of commercial development but which are 661 acquiring the land at non-commercial values at the expense of another private owner. The Government have indicated that they recognise this concern and have reiterated that any element of incidental commercial development will be outside the powers of compulsory purchase. They also stated—quite rightly—that Parliament should scrutinise the scope of any scheme which is set out in the form of a Private Bill.
§ I believe that the Government's new policy on this issue needs a good deal of clarification. For example, how do you distinguish what is an incidental commercial development from what is part and parcel of a scheme? Should a motorway service station be considered as part and parcel of a new motorway, especially as it will undoubtedly be leased or sold off at considerable commercial gain? Further, should water boards be able to create a new sewerage works to release existing works for redevelopment? Moreover, should a scheme for a terminal have any relevance in incidental development when it includes offices, shops, restaurants and an hotel?
§ Does Parliament really have the ability to assess how much land is required in a major scheme and what land is surplus for statutory purposes? The chartered surveyors have stated that in their view there is past evidence which shows that acquiring authorities have purchased land for one form of development and subsequently applied for a different, more valuable, form, presumably outside the scope of their powers.
§ In order to mitigate such unfairness to the landowners, the chartered surveyors have suggested the restoration of additional compensation provisions under Part IV of the Land Compensation Act, which was reprealed in 1967 under the Land Commission Act. I hope that my noble friend will be able to elucidate more clearly how the Government see this area of compensation working fairly in the future so as to meet the well-known fears which have already been expressed.
§ The Government have indicated in their consultative document that they will seek to improve claims for injurious affection in any new legislation. I know that that indication is most welcome. I hope that my noble friend will comment later on two recommendations which have recently been put forward arising out of this matter. The first is that a claimant should be given the right to a subsequent claim where a relevant nuisance—for example noise—has increased more than was anticipated at the time when the claim was settled. One has in mind the M.25 motorway. Secondly, where it can be proved that material detriment or loss of value to a property has been suffered due to public works—even when no land has been taken—the owner should be able to serve a purchase notice on that body.
§ I shall not go into any more specifics but shall conclude by congratulating the Government on responding so quickly and in a positive way—by means to their circular—to the criticisms of shortfalls in the present compensation procedures. A major reform is necessary. I believe that it is urgent and I hope my noble friend will be able to 662 say that he expects to be able to introduce a Bill in the next Session to restore confidence in the fairness of the provisions for compensation in cases of compulsory purchase. I beg to move for Papers.
§ 3.24 p.m.
§ Lord Cornwallis
My Lords, I am most grateful to the noble Earl, Lord Kinnoull, for initiating the debate. During the Committee stage of the Channel Tunnel Bill I moved an amendment to alter the basis of compensation for land acquired for commercial purposes by plcs with compulsory purchase powers. The amendment was lost on a Division, but the noble Lord the present Leader of the House gave an undertaking that he would look at the situation in the light of the Government's privatisation programme.
I see that the Secretary of State, in answer to a Question in another place, has said:Compulsory purchase powers should not be available to acquire land for incidental commercial development".That is most interesting. May I ask the Minister what is "incidental commercial development", and who will decide whether a particular project falls into that category?
As there is no definition and no reference to this matter in either the Water Bill or the Electricity Bill, I can only assume that decisions about this will fall to the Secretary of State. In my view that is a very unsatisfactory method of dealing with the matter. Is this provision to apply retrospectively so far as concerns those privatisation Acts which are already on the statute book? Surely the very fact of privatisation, thereby creating a public limited company, must make all the activities of that company commercial. Therefore any land which the company needs to acquire should be bought at open-market value.
The implication of the present situation appears to be that there is a better reason for development benefit to accrue to a commercial company than for it to accrue to the original owner. I cannot see why that should be. The owner of the land did not purchase it in order to profit from some unknown development. His business and life are probably seriously disrupted, if not destroyed; yet an artificial financial gain will go to the shareholders of a commercial enterprise.
I also question whether the present system of acquisiton is either cost-effective or efficient. Because of the rules, protracted negotiations often have to take place for the owner to obtain what he or she considers to be the existing use value. One man held up a section of the M.25 for over a year at a cost of £9 million to the public purse. The resultant delays can cost far more money than would be needed to pay the full market value.
Two of this country's major civil engineers to whom I have spoken confirm that in their view the financial restrictions relating to compulsory purchase should go. Moreover, taking into account the consequential speed of settlement, that would be cheaper in the long run. Compulsory powers would have to remain to deal with those who would not settle reasonably; but surely the knowledge that, if those powers were invoked, they would stand to 663 receive less rather than more would be a powerful incentive to settle.
The Government have brought forward a consultation paper in which there are many good recommendations. However, before those recommendations can be implemented a number of further privatisation Acts will be on the statute book. There is no reference to those recommendations in either of the Bills currently before your Lordships' House. Can we, as the noble Earl asked, expect a Bill in the next Session of Parliament to bring such recommendations forward? Further, will there be provision for them to be applied retrospectively with regard to those Acts already passed?
When the railways were originally constructed, I believe that the companies concerned paid the full market value plus 10 per cent. That situation continued until 1919. In the United States that system is still used and is claimed to save money because of the cutback in delays and in legal fees. The Société nationale des Chemins de Fer and the French nuclear industry go out and purchase the land they need with an added bonus. I know that they do not have the population density which we have, but many of their projects have enthusiastic supporters rather than disgruntled protesters.
If we do not revise our ideas about the Channel rail link and the necessary infrastructure to service both it and the Channel Tunnel, while we haggle all the much heralded benefits of the tunnel will end up in the Pas De Calais. If we have to have the tunnel and high speed rail link, please let us be realistic and efficient about it and let us get on with it. To date, no one from British Rail or Terraguest has been anywhere near any of the landowners along the proposed route.
Would it not be better if all the negotiations for the link were to be carried out in line with the conditions laid down in the Pipe-Lines Act 1962? Part I of the first schedule to that Act, which was headed,Application for Grant of Pipe-line Construction Authorisations",states in paragraph (1)(c) that, when an application is made to the Minister for an authorisation, the application must state, among other things, whether the grant, or giving thereof, has been or can be obtained. In other words, the company must confirm to the Minister that it has negotiated, or tried to negotiate, with the owners of the land before the Minister will issue an authorisation. There is therefore, within the Act, a compulsion to negotiate first. Any company operating in the private sector should be required to deal at arm's length with any other party.
There will be many additional claims for compensation in the vicinity of the rail link which are not part of the route itself or of the corridor suggested by British Rail. Members of the House from the South East, and no doubt many others, will be aware that a considrable part of the tunnelling and cutting to be carried out for the line will take place where the subsoil is chalk. Those areas are also areas of considerable market garden activity. There 664 will be serious problems with chalk dust. Chalk dust settling on horticultural produce cannot be washed off. It simply becomes a rather nasty slimy grey mud. It will also settle on glasshouses, thereby affecting the admission of light and heat. Some producers may be effectively put out of business for two years or more. Some will be closed down by access works which will no longer be required after the link is completed.
Part I of the Land Compensation Act 1973 states that where no land is taken but "physical factors"—that is the expression used in the Act—cause injurious affection there can be a claim for compensation. Physical factors are noise, vibration, smells, fumes, smoke, artificial lighting or the deposit on the land of a liquid or solid substance. Many people are worried about the solid substance. Will the Minister give an assurance that that part of the Land Compensation Act will be faithfully applied to the Channel rail link?
The revision of compensation terms for land purchase would fall entirely within the Government's free market economy philosophy, so what is the difficulty? I spent 12 years going backwards and forwards to Brussels for British horticulture. I believe that the old adage about the Greeks should now be, "Beware of the French when they come bearing gifts". The French are already building and advertising all sorts of facilities at their end of the tunnel. If we do not revise our methods of getting things done, we will lose out to the French, both over the tunnel and 1992. There cannot be a more urgent reason for doing everything possible to facilitate the provision of these very important developments.
§ 3.34 p.m.
§ Lord Mountevans
My Lords, I too am grateful to the noble Earl, Lord Kinnoull, for raising this issue today. I found especially interesting his remarks about what one might call "good will" or "intangibles"—those that lie outside the fair market value of the property in normal circumstances.
As the noble Earl said, this subject, whichever way one looks at it, is complex. We are all somewhat ambivalent about it. I think that we all use petrol, but we should resent any proposal for a refinery in our immediate vicinity; we use power, but we should resent a Fawley B being put down nearby; we eat fish, but we should hate having a fish dock on the doorstep, or even a proposal for one; we eat meat, but we hate having slaughterhouses. I am trying to say that we all wish to consume and buy goods and services but we do not always take account of the consequences that the provision of those goods and services lay upon someone else.
The issue is even more complicated because we are talking about a project of great magnitude. Whether one takes British Rail's figure of a cost of £1.7 billion, including £500 million for environmental considerations, or even the £2.5 billion that was quoted in the press today as being the cost of the project, it is a massive one. To those directly affected by it—the noble Earl also hinted at this—it is perhaps the end of an era, the end of a 665 lifestyle or even the end of civilisation as such people have known it. It may be a matter of a localised duel between an uncaring British Rail—a monster as perceived by many—and people who individually do not have the resources to cope. But there are others—my noble friend mentioned them in his final remarks—who see the project as one of the utmost national importance and would agree with the chairman of British Rail, Sir Robert Reid, who said yesterday that the construction of the link is of crucial importance to the nation and its prosperity in a single European market.
There are other complications: there is the Government's Green Paper on land compensation and compulsory purchase. We are discussing an infrastructure of national importance against a background where the compensation terms arising out of the construction of that piece of infrastructure are in the course of change. As an additional complication, we have the fact that the Department of Transport is the sponsoring department for the proposed rail link and the motorway which, in some places, run side by side.
My understanding of the present situation is that British Rail is not obliged to do anything until it gets its Act. As noble Lords will be aware, it has not yet tabled a Bill. It is being not inequitable in offering to negotiate immediately in respect of any property situated within 120 metres of either side of the centre line of the corridor along which its route will eventually be built. It is a corridor which must be defined when the Bill is tabled.
British Rail is offering to pay a fair market value, without reference to the consequences of the link; in other words, as I understand it, the fair market value even if the link had never been thought of. It is offering arbitration where fair market value cannot be agreed. It is offering disturbance, nuisance and all manner of other payments—almost a fixture and fittings payments. Within the framework of the present legislation, it is being generous. It is to be praised for putting those terms on the table while, as I say, under no obligation to do so.
Alternatively, British Rail is offering noise compensation—noise compensation is an extremely complicated subject because no one seems to use the same yardstick or unit—on terms which sit fairly equitably between those which govern the conduct of airports, which are divided: there are those relating to day-time noise and those to night-time noise, and those relating to the more ongoing problems created by major road developments. My noble friend Lord Cornwallis touched upon this point: British Rail is offering to negotiate, once it has a defined line of route, with those who are subject to nuisance—closing down one's business for two years is hardly a nuisance—and to make such provisions and recompense as are reasonable to compensate those people for the transient or permanent loss of income that they may suffer.
British Rail, as I have said at least twice before, is under no obligation to do any of that. But it seems to have done very well to make these commitments, to make these offers and, as far as I am aware, has agreed to stick by them until such time as the link 666 is completed or it abandons the project, provided that the law of the land still permits that. Again, we come back to the Green Paper and the proposals for changing the laws on compulsory purchase.
It surprises me, in fact it delights me, that all three speakers in the debate so far have managed to avoid reference to acronyms which refer to backyards. But if one thinks of front gardens and the Garden of England, one has to have sympathy with those who are affected. It is interesting to me that on many occasions when many of these transport infrastructure proposals are tabled, the property market promptly not only goes flat but collapses. Yet once the infrastructure is in place quite often property values go up at a level greater than one might have expected if the infrastructure had not been put in place. Perhaps I may cite two examples. One example I have in mind is Edinburgh airport, where the proposal to extend the runway had the most dreadful consequences for anyone trying to sell a property nearby. But if they had sat tight for two or three years until the runway was developed they would have done far better than if they had tried to sell in the first place. The same applies to a considerable amount of property in the corridor surrounding the M25.
The noble Earl's Motion is in some respects a cart and horse Motion. The horse is British Rail's proposals and I feel it would be wrong for us to use British Rail's proposals for this link as a stalking-horse for the whole wide-ranging issue of compensation. The cart seems to me to be the Government's proposals. We are all hoping for some offer or some undertaking from the Minister as to progress being made on the Green Paper and eventual legislative proposals. I think we need them quickly because by getting them quickly we shall solve the problems to which all three of us who have spoken so far have addressed ourselves.
§ 3.42 p.m.
§ Lord Tordoff
My Lords, the House will be grateful to the noble Earl for introducing this Motion. I am sure that the noble Earl would have been more grateful if he had more support in this debate from all sides of the House. I cannot but observe that he has been somewhat let down as regards support from his own side of the House on this occasion. I believe that is a pity. I do not make that as a party point; but it is sad to see that nobody is prepared to support him in what is an important matter.
I was interested to hear the noble Earl focus on planning blight because that is something that I want to come to in a few moments' time. One of the things that both he and the noble Lord, Lord Cornwallis, referred to is the problem of excess purchase of land. I remember when we were having discussions on the Channel Tunnel Bill—the debate to which the noble Lord, Lord Cornwallis, referred—we were told that nothing could be done about it because this was a law relating to petrol stations on motorways, so we had better like it or lump it. I am glad that it is back on the agenda again.
The other misuse of compulsory purchase orders of which noble Lords will be aware, was that to 667 which the noble and learned Lord, Lord Simon of Glaisdale, constantly referred in relation to Beverley Minster some years ago. In that instance the local authority put a compulsory purchase order on land from which could be seen an aspect of the Minster and then sold it off to private developers, despite it being referred to the ombudsman on two occasions and the finding of the ombudsman going against them. So there are problems in this whole area of the excess purchase of land.
It is interesting that two of the speakers today have dealt with this matter from what I might call a Department of the Environment point of view. The noble Lord, Lord Mountevans, and I are tackling it from the transport point of view, and the Labour Party has put up its Department of the Environment spokesman, but I am glad to see that he is supported by the transport spokesman. I am not being critical of the noble Earl, but we work at an interface on this debate and that may be the reason for some of us being a little confused. I do not pretend to be an expert on planning applications, but I wish to refer to a specific part of the Motion; namely, that relating to the Channel Tunnel.
Before I do that, I should like to mention the note that many of us will have received this morning from the NFU which refers to its view on the reform of land compensation. The note says:[Yet] Government proposes, except for those commercial developments which are "incidental", the traditional basis of compensation should apply"—that is to the private funding of roads, particularly.Under this basis, farmers and landowners will usually receive only current use value, and most of the commercial value of the land will accrue to the developers".One must have sympathy with that point of view. If benefit is to accrue at a subsequent stage, some of it should accrue to the original owners of the land. This goes back to the question of the excess purchase of land, does it not? It is a similar principle.
I shall suggest one or two first principles on this that we view from these Benches. We start from the point of view that if the nation is to benefit from a project and that project involves the necessary compulsory purchase of land or property, it must be the nation which pays the cost. That does not necessarily apply only to the public sector; it can be indirect. In other words, if the Channel Tunnel is for the good of the nation as a whole, then the people who bear the cost of it should not be the residents along the track but the nation as a whole. Therefore, as a matter of principle, compensation should be adequate and should be seen to be adequate, if not erring on the side of generosity. We must not allow the cost of the Channel Tunnel to fall on the people of Kent and the people of Peckham more than it falls on the rest of the community.
The second thing we must recognise is that part of the present problems in relation to the Channel Tunnel stem from a lack of foresight from the Government. Their insistence on having the whole construction funded from the private sector was a mistake from the start. We said so during the passage of the Bill and the results of that decision are now coming out, as we see in relation to the problems of 668 compensation. What has happened is that British Rail held back for a long time. The Government, and I think British Rail too, believed that there was not likely to be too much need for improvement in the rail service south of London in the next few years. It has now become perfectly apparent that if, as the noble Lord, Lord Cornwallis, has said, the Channel Tunnel is to be of benefit on this side of the Channel as well as on the other side we have to improve our connections to that tunnel both between London and the Channel and in my view—and we said this all the way through the Channel Tunnel Bill—to the north of England to where industry can benefit.
I say again that the Channel Tunnel is not about passengers going through on their holidays to France. If it is to mean anything to the country, it must provide the ability to move freight from the industries of this country to the markets of Europe. We must hold that firmly in our minds. To do that we must have a proper rail system.
Because of that confusion I believe that there has been a sudden rush in recent months by British Rail, and by the Government pressurising British Rail, to put some of these things in place. That has led to the fear and frustration, particularly in Kent. There was a terrible fear a few months ago when suddenly lines appeared on maps drawn with as much accuracy as the original map of Trans-Jordan, which was drawn on a murky night in the middle of the First World War by Winston Churchill in a map room somewhere in the bowels of London.
It has now been fined down, but we still have the uncertainty of King's Cross, and whether the terminal will be situated at King's Cross or at Stratford as some people would wish. So there is still considerable uncertainty. But apart from the uncertainty in Kent, there is now also grave uncertainty in the whole area of Peckham and Warwick Gardens. In those areas there is undoubtedly a considerable amount of planning blight.
My policy is not to knock British Rail. I agree in a considerable measure with what the noble Lord, Lord Mountevans, said. I think British Rail has now got its act together and is behaving as generously as it can in relation to the 240 metre corridor through which the link will run. British Rail is offering to purchase houses at a reasonable level, and is offering other compensation too. I do not know whether that would amount to the 110 per cent. that people have talked about as having been the case before 1919, or whether it would amount to the 120 per cent. that people would obtain in a similar situation in France. However, I agree with noble Lords who have spoken that that is the kind of level at which compensation should be pitched. I suspect that British Rail may have approached the matter by a different route and may be in that ball park. I do not criticise British Rail for that.
However, the problem in that area is that the compensation is only applicable within the 240 metre corridor. If one's house is on the other side of the road, planning blight still affects one, although perhaps not to the same degree as someone who suddenly finds he has a house which backs on to 669 the railway. Nevertheless, planning blight affects a greater area than just that corridor. We have to find some way of adopting a graduated system of percentages of compensation as it were, going out from the core of the area of the 240 metres. I know people who live in that area, but who have houses on the opposite side of the street. Those people are very worried about the effect the rail link will have on their general economics.
That really is the criticism that I have, not specifically of British Rail in this case, but of the system. I agree entirely with the comment that has been made that something needs to be done, and quickly, to set people's minds at rest. I think it must be within that kind of area.
That is about all that I need to say on this general subject. The Channel Tunnel is one of the largest projects on the stocks of this country today. It has been welcomed on all sides in this House. But it must not be constructed on the basis of ordinary people having to pay more than their fair share of the cost. We must all bear the cost. I am glad that the noble Earl has highlighted this problem today. I hope that the Minister will be able to give some reassurance to the people who are involved.
§ 3.54 p.m.
§ Lord McIntosh of Haringey
My Lords, some months ago when Questions were raised in this House before the final route of the Channel Tunnel rail link was anounced by British Rail, I suggested that it would be cheaper for British Rail to put the line underground than to face the delays and cost of compensation. A number of people thought I was making a joke. However, I was not, and British Rail did not take my comments as a joke. It became clear that British Rail had realised that we had been approaching that happy state, and that environmental protection by tunnelling was not only an environmentally desirable alternative to damage and compensation, but was also an economically viable alternative in a number of cases. In that sense perhaps the confusion of the compensation legislation is a benefit rather than a disadvantage. Clearly it must be better to prevent damage than to cause damage and pay for it afterwards.
I have no professional expertise of any kind in the matters under discussion today. I have no particular knowledge of compensation procedures. I started to try and read up on that, but when I realised I would have to start in 1845 with the Land Clauses Consolidation Act, I realised it was an impossible task and that I was not going to get anywhere with it. Therefore I listened with great interest, in particular to the speech of the noble Earl, Lord Kinnoull, who is professionally expert in this matter, and to the speeches of other noble Lords who have a well informed interest in the subject.
I come to the matter therefore with a reasonably fresh mind about the technicalities, but with certain fixed ideas about what the public interest should be. I want to talk about the public interest this afternoon. However, before talking about it in more general terms, I wish to say a few words about the Channel Tunnel. I wish to add my support to the words of the noble Lord, Lord Tordoff. The Channel Tunnel 670 is, of course, in itself probably the biggest construction project undertaken in this country. I was going to say it was the biggest project undertaken this century, but it is almost certainly the biggest construction project ever undertaken. As the noble Lord, Lord Tordoff, rightly said, the justification for it in the long run must not be the convenience of people going on their holidays from the South-East of England, but the effect on the viability of our whole rail system. The justification for the Channel Tunnel must particularly be the ability of the tunnel, using our rail system, to bring the northern parts of our country into a more effective economic relationship with Europe, and through Europe with other parts of the world.
The argument behind the Channel Tunnel, which I fully support, is a public economic argument to which it would be very difficult to apply the ordinary commercial criteria of the cost of construction against the benefits to the construction organisation. It is therefore particularly unfortunate that the Government have insisted, first, that the Channel Tunnel itself should be constructed without any public infrastructure investment, and secondly, that British Rail should be forced to build the high-speed channel link without any public investment. That seems to me an extraordinary contrast with the fact that up until now road investment has been entirely financed by the public. However, there is talk now that the revision of the Ryrie rules may make a difference to that situation.
It is noticeable that other major investments similar to the Channel Tunnel in other parts of the world, are not being treated in that way. I hesitate to refer to the Hokkaido-Honshu tunnel in Japan because that not only involved public investment but was also a construction and financial disaster. However, certainly the tunnel link between Denmark and Sweden and the tunnel links between Jutland and the rest of Denmark which are either in contemplation or, in the latter case, already in construction, are being treated as public investment with the opportunity for the private sector to contribute, rather than being treated entirely as a private commercial project. I shall come back in a moment to the effect on that of the cost of investment and the cost of raising capital.
Having stated my own position and the position of my noble friends in principle as regards the desirability of the Channel Tunnel, I shall now consider the public interest in other ways. I must start by saying that it must be in the public interest to secure fairness to all citizens of this country, including the citizens who are affected by projects of this kind.
The fundamental principle must be that we have the same rules for everyone. In other words, there should not be particular rules for those affected by the Channel Tunnel or any other individual project which are not available to those affected by other construction projects. It would be totally absurd if, the first Dartford Tunnel having been a public investment and the second Dartford Tunnel being a private investment, those affected by the one should be treated differently from those affected by the other.
671 Having said that, the nature of the public interest and the nature of our planning procedures lead to extraordinarily lengthy periods of blight. The periods of blight themselves cause great difficulty and pain, even if the construction project never goes ahead. I live within sight of the Parkland Walk proposed by consultants to the Department of the Environment as the route of a high speed link from Highgate to King's Cross. I have not tried to sell my house; therefore, I would not be eligible for compensation under the rules. I am not seeking compensation. I do not think that I am declaring an interest, although I shall gladly do so if anyone feels that I should. The very fact that the Department of the Environment has seen fit to employ private consultants, in this case Ove Arup and Partners, to investigate the possibilities of new motorway construction in London well in advance of any real government consideration of whether such motorway developments are feasible or desirable means that many of my neighbours are suffering from the effects of very serious blight.
The Department of the Environment knows very well, and perhaps the Department of Transport also knows, that my neighbour, Mr. Brian Simpson, has complained to his and my Member of Parliament, Sir Hugh Rossi, about the blight that he suffers on his property, which is even closer to the Parkland Walk in Highgate than mine. Mr. Simpson has had the misfortune to buy one property paying for it with a bridging loan while doing it up and not having sold his previous property. In the meantime, well over a year ago, Ove Arup and Partners announced the route of the proposed Parkland Walk. The result is that Mr. Simpson is not able to sell either of his houses and is losing substantial amounts of money in financing his bridging loan. That is quite apart from the misery for him of having two houses which he does not want and the loss to housing as a result of one house remaining vacant. It is clearly not a satisfactory procedure.
It is not satisfactory for any government department to allow unbridled speculation by consultants retained by the department about a number of different routes. That is one of the particular problems for which British Rail has been rightly criticised. It allowed debate on far too many different routes without carrying out environmental impact assessments on all of them, which it ought to have done, before publication. As a result a great deal of misery and anticipation of misery was caused in Kent and in south-east England. One way of dealing with the problem of compensation is not by changing the rules but by improving government procedures to remove unnecessary blight.
A number of noble Lords, starting with the noble Earl, Lord Kinnoull, have raised the question of privatised companies. In the technical terms of the debate on compensation and in the first of the issues raised by the Government Green Paper published in March this year, there is the question of subsequent use for commercial purposes. The noble Earl suggested, I think rightly, that any development by a privatised company is a commercial development and that the rules which apply to 672 commercial development projects which have always been private should be applied to the privatised companies.
It is not just a question of the privatised companies. The Financial Secretary to the Treasury has suggested in the last few days that the Ryrie rules governing private investment for public infrastructure should be revised in order to make possible the use of private finance for public sector investments. That is a very interesting suggestion. I do not think that it has been fully thought out yet. One consequence will certainly be that the condition that compensation should be based on subsequent use for commercial purposes will be applicable to many more public sector projects to which it did not previously apply. That is in addition to the businesses which are themselves being privatised.
One noble Lord (I did not make a note of who it was) made the valid point that the Bills now going through on privatisation—the Water Bill, with which I have been very much concerned, and also the Electricity Bill, which enters Committee in your Lordships' House tomorrow—do not pay any attention to this problem. They should, because the cost of additional compensation under the compensation rules is an important consideration. It is a consideration which should affect our judgment as to whether privatisation is right or not. It may be that, like me, most noble Lords have already made a political judgment on that matter. It still behoves us, as a revising Chamber, to review all the considerations. The cost of compensation and the possibility of compensation constitute an important issue. It should not be one on which the Government are silent.
In talking about fairness to citizens and the same rules for everyone being a criterion for compensation, I must also say that the direction in which government policy has been moving in recent years means that there is one sense in which not all citizens will be treated the same. It is entirely proper to provide compensation for those who lose as a result of development projects. At the same time, in order to secure justice for all citizens, we ought to have retained the development land tax which a Labour government introduced. It secured that there should be public benefit from the gains which private citizens make as a result of improvements brought forward by the public sector. The two are not the same, but they are the mirror images of the same relationship between the public and the private good.
I do not believe that we can reach full achievement of the public good unless we retain the development land tax. I am sorry that the Government have now said formally, after a number of years, that all efforts—starting with Lewis Silkin in the 1940s until the last development land tax—to secure that aim are futile. I disagree. I believe that it is a consideration in respect of the right and just relationship between the Government and the citizen which ought not to be ignored.
The other consideration I have in mind, which may not be in the minds of chartered surveyors but ought to be in the public mind, is whether and how we are to achieve efficient investment in our infrastructure. The Government hold the view that 673 investment in our infrastructure should as far as possible come from the private sector. That is the purpose of privatisation on the one hand and the revision of the Ryrie rules on the other.
That has two major economic effects. The first is a higher borrowing cost as a result of borrowing in the private sector on an equity basis rather than on a utilities basis or a public loans basis. That is bound to be more expensive. It will be more difficult to undertake the infrastructure investment which the country so badly needs. As we have seen from this afternoon's debate, the second effect is that compensation will be more expensive when it comes to development for commercial purposes.
In both respects, the debate this afternoon leads me to think that the Government ought not to treat the matter purely as a technical issue and one of land compensation law. They should look at the wider political issues and the effects of compensation and all the other considerations to which reference has been made on our ability to renew our infrastructure and make it suitable for our needs in the 21st century.
§ 4.10 p.m.
§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)
My Lords, I am grateful to my noble friend Lord Kinnoull for raising this most important issue. Perhaps I may begin by setting out the Government's attitude to British Rail's proposals for a new rail link between London and the Channel Tunnel. It was in July of last year that BR published its report into the longer term requirements for track and terminal capacity for Channel Tunnel rail traffic. That report concluded that the best way of providing the additional capacity which would eventually be required was to build a completely new line between London and the tunnel. The report also identified three possible route corridors, and three possible sites for a second London terminal, as a basis for public consultation.
BR has now decided that it wants to put its second terminal at King's Cross. It is seeking powers for that in the King's Cross Railways Bill, which is currently being considered in another place. As for the route between the tunnel and London, BR published a further report at the beginning of March. That report identified a preferred route for the new line. The preferred route is significantly different from any of the options identified in the July report, and contains many more environmental protection measures than the original route options. Those changes have added £500 million to the original cost estimate of £1.2 billion for the new line. British Rail estimate that some 30 per cent. of the total cost is for environmental protection measures.
The Government accept British Rail's view that a new line will be needed sooner or later to provide additional capacity between London and the tunnel. What no one knows at this stage is exactly when a new line will be needed. There are still uncertainties about the traffic forecasts, the costs of the project and the revenues. BR cannot begin work on the new line until it has satisfied both itself and the 674 Government that the investment will earn a proper commercial rate of return.
Nevertheless, we think it is right that BR should press ahead with the definition of its preferred route so that people who might be affected by it know exactly where they stand. British Rail is currently consulting on the detailed alignment of its preferred route, and is planning to seek powers to build the new line in a Private Bill which it aims to deposit in Parliament in November of this year. The Government believe that it should remain BR's responsibility to plan the details of the new line. It is BR which is responsible for planning rail services in the UK, and the investment that is needed in connection with those services. The Government have neither the resources nor the expertise to do the job for it.
The noble Lords, Lord Tordoff and Lord McIntosh of Haringey, talked about private sector funding of the Channel Tunnel in general rather than specifically of the new line. As the noble Lord, Lord McIntosh of Haringey, referred to a number of other tunnels being built around the world, I should remind noble Lords that, when the Channel Tunnel was a public sector project in the 1970s, it failed, as everyone will remember. However, it is not true to say that the Government have insisted that the new line be funded by the private sector.
British Rail, with the support of the Government, is in discussion with a number of private sector consortia which have expressed an interest in playing some role in the provision of the new line. It is too early to say what form that private sector involvement might take, but it does not affect the statutory procedures that need to be followed before work can begin. Even if a private sector promoter wanted to build a line without any BR involvement—and there is no sign of that at present—he would still need to seek powers to do so in a Private Bill. It is of course true that the Joint Committee has recommended a number of changes to that procedure. But Parliament has yet to take a view on the Joint Committee's recommendations. Until it has done so, there is no alternative but to plan on the basis of the existing Private Bill procedure.
In connection with the publication of its preferred route proposal, British Rail also announced the arrangements that it would be making for purchasing properties affected by the proposal—a matter to which the noble Lord, Lord Mountevans, referred. Where the new line runs on the surface, it has undertaken to purchase any property within a 240 metre corridor—about 100 metres either side of the proposed alignment. That goes considerably further than BR's statutory obligations and is a good illustration of BR's readiness to do what it can to minimise the impact of its proposals.
For properties outside the 240 metre corridor, to which the noble Lord, Lord Tordoff, referred, and properties inside the corridor, where people prefer to remain in their homes, BR will provide noise insulation for properties where the noise level exceeds 70 dB(A). All householders affected by the new line will be entitled to compensation in 675 accordance with Part I of the Land Compensation Act 1973 for depreciation in the value of their properties caused by the use of the new line.
§ Lord Tordoff
My Lords, I know that one should not normally intervene in these short debates, but we have a little time in hand. I am most grateful to the Minister. However, that proposal does not deal with the question of planning blight in those areas. It deals with compensation for disturbance after the line is built, but it does not deal with the period leading up to that.
§ Lord Brabazon of Tara
My Lords, I take the noble Lord's point, although I am not quite sure what answer I can give him. Planning blight is a difficult issue, as has been recognised not only in this case but in others.
I turn now to the main issue which is concerning my noble friend; namely, the compensation payable for those properties which BR will need to purchase compulsorily before it can proceed with its proposals. The voluntary purchase arrangements which BR has announced may mean that it does not, at the end of the day, need to purchase many properties compulsorily. But that is no reason for us not to consider the terms that apply in cases of compulsory purchase. As I have already made clear, it is unlikely that the new line will be built entirely by a private sector promoter, without reference to BR. Nevertheless, I should like to begin by referring to the arguments as they relate to compulsory purchase by private sector bodies.
The question of the compensation payable when compulsory powers are used by, or for the benefit of, privately owned bodies has been giving rise to much comment recently. It was raised during the debates on the Channel Tunnel Bill when my noble friend the present Leader of the House gave an undertaking to your Lordships that the Government would review the issue. The Country Landowners' Association and the National Farmers Union provided a joint memorandum on the subject and have been assiduous in drawing the attention of Ministers in the various interested departments to their views.
The review was undertaken in the context of a wider consideration of land compensation issues. The Statement of 7th March by my right honourable friend the Secretary of State for the Environment is the Government's considered response on this particularly complex issue. On the same day, the Department of the Environment issued a consultation paper setting our proposals for a variety of detailed improvements to the land compensation provisions.
In the Government's view, there would be no justification for having two compensation codes—one for acquisitions for public bodies and the other for privately owned ones. I believe that the noble Lord, Lord McIntosh of Haringey, made that point in relation to Dartford.
From the point of view of the landowner, it does not matter who is taking the land from him 676 compulsorily; the landowner's entitlement is to be compensated for what is being taken from him. The rule that the effect of the project on the value of the land should be ignored achieves just that effect. It means that compensation is based on what the landowner could have got for the land if he had chosen to sell it on the open market at the time of the compulsory acquisition, but in a situation in which the compulsory purchase itself was not contemplated. That has for many years been the basis of valuation for all compensation for compulsory purchases for all purposes including purchases for private development, for example, in urban development areas or by the existing statutory water companies. We see no reason to depart from that basis of valuation in the particular cases of privatised utilities or the high-speed rail link. It remains a fair way of calculating the landowner's loss.
A number of noble Lords have argued that the present provisions are unfair because they have no regard to the fact that private sector companies normally have to buy land on the open market in circumstances where their interest in acquiring the land may have the effect of pushing its value upwards so that, in effect, they have to pay a price which reflects the value attributable to their development proposals. It has been argued that that amounts to a subsidy by the landowner to the acquiring body. But since the landowner is compensated for his loss—that is to say, the amount that he could have obtained for his land in the absence of the compulsory purchase—I do not accept that he is providing a subsidy in any real sense.
The compensation payable for compulsory purchase reflects the planning status of the land (including any planning permission for development of the type proposed by the acquiring authority), so that if the land had potential for development which could be undertaken without compulsory powers, that potential would be taken into account in the compensation payable. The procedure for obtaining a "certificate of appropriate alternative development" under Section 17 of the Land Compensation Act 1961 is designed to ensure that the potential of the land for development can be established for compensation purposes. Thus, the value which is not to be taken into account under the compensation code is that which is attributable only to the scheme for which the compulsory powers are being used. This is by definition a value which the landowner could not have realised. That is why we do not accept the proposition that the compensation code amounts to a hidden subsidy.
The view that I have expressed has been supported by the Royal Institution of Chartered Surveyors in its recent memorandum on compensation for compulsory acquisition of land in which it says:The Institution believes that where an authority can demonstrate the need to purchase land for public purposes and exercises compulsory purchase powers, the principle of equivalence remains fair as between the parties and the general public".The RICS (and indeed some noble Lords this afternoon) go on to argue that over and above market value compensation the fact that the acquisition is 677 compulsory should be recognised by the payment of an additional allowance. The RICS's memorandum proposes a sliding scale for this purpose. Although we do not necessarily agree with the sliding scale, this is an interesting proposal which we will study carefully. I hope that that will be of encouragement to noble Lords.
We already of course make one payment—the home loss payment—in recognition of the distress of being required to move home, and noble Lords may be aware that an order was made substantially increasing the level of this payment in January of this year. The order increased the payment from three to 10 times the rateable value of the claimant's home and increased the minimum payment from £150 to £1,200. The Department of the Environment's consultation paper on land compensation and compulsory purchase legislation which I have already mentioned make proposals for further improvements to the home loss payments scheme. The paper invites comments on whether further provision should be made for owner-occupiers.
It has been suggested that a reason for changing the basis of compensation payable by private companies when they use compulsory purchase powers is that the companies obtain their land for less than they would otherwise have to pay. It has even been said that the possibility of acquiring land cheaply through the compensation code is being used as a way of attracting investors in privatised undertakings. That is nonsense. Privatised utilities have powers to acquire land compulsorily only for the purposes of their statutory functions, and the need to use those powers will not arise often. The price that such utilities pay for new operational land is not going to make a significant difference to their overall financial position.
More fundamentally, the fact that compulsory powers are involved in a transaction means in many cases that there is no reliable way of determining the value of the land for the purpose for which it is being acquired by reference to any established market. The high speed rail link, for example, could not be contemplated without compulsory powers, if only because of the opportunities which landowners would otherwise have to charge ransom prices to an undertaker who does not have such powers. There is in fact no realistic market in land for high speed rail links. In these circumstances it is fair to require the developer to pay the price specified in the compensation code which, as I have already explained, is based on the actual loss to the landowner.
It has also been argued that while the compensation code is reasonable where compulsory acquisition is for the benefit of a public body since any gain in value as a result of the proposed development accrues to the public, it does not operate fairly where that gain accrues to the shareholders of a private sector company. I hope that I have said enough to show that so far as the landowner is concerned the code does operate fairly: the code ensures that the landowner does not suffer loss. As to the position of the company, I think it would only be in the most unusual circumstances 678 that it would be placed at any advantage vis-à-vis its competitors, and thus in a position to benefit its shareholders.
My noble friend Lord Kinnoull asked about unfit houses. Provision to change the compensation for unfit houses from a site value to a market value basis is being introduced by way of amendment to the current Local Government and Housing Bill.
The noble Lord, Lord Cornwallis, asked whether the Land Compensation Act would be applied to the new rail link and the answer is yes. I think that that is a point which I have covered already.
Noble Lords also asked when we would introduce legislation as a result of this consultation paper. I can go no further than to say that it will be introduced at a suitable opportunity. It is normal for such legislation to apply to cases in which the valuation date falls after the legislation has come into effect.
Compulsory purchase should of course never be undertaken lightly. There must always be good reason before private property rights are interfered with. Powers of compulsory purchase are always specified in primary legislation and are always for a specific purpose. In the case of privatised utilities this purpose will be the discharge of their statutory functions; in other words, the purpose of a compulsory acquisition must be to do the job which Parliament has given to the privatised undertaking. In such cases the undertaking can make a compulsory purchase order which must, however, be confirmed by a Minister whose task is to satisfy himself that the acquisition is necessary for the discharge of the statutory function concerned. Where a landowner objects, a public inquiry must be held. In the case of a project which is approved by private Act (for example the high speed rail link) the compulsory acquisition is authorised by the Act itself; here the affected landowner has the right to petition and Parliament itself can ensure that only land needed for the project is acquired. The main point is that in all cases the scope for compulsory purchase is limited to specific purposes envisaged by statute. There is no question of some privately owned companies being able to acquire land more advantageously than others simply because they happen to have compulsory powers.
The noble Lord, Lord Cornwallis, asked what is commercial and what is not. Whether or not compulsory powers are available for a particular purpose can only be a matter of fact in each case. If the purpose of the acquisition is not one that is envisaged by the relevant statute, there is no power for the land to be compulsorily acquired. British Rail, for example, would not have powers compulsorily to acquire land adjacent to a railway for an office block. However, there may be occasions when the land is needed for a purpose which is envisaged by the statute but it is also possible to undertake other development on the land. An example would be an office block above a railway station. In those cases the justification for the compulsory acquisition lies in the functional legislation. The land is needed for the railway and that remains the justification for the compulsory purchase.
679 The question has been raised of whether a car park next to a railway station is incidental development that would be justified. That would of course depend on the terms of the relevant statute. In all cases compensation will be assessed on the basis that the value of the land takes into account the value which the landowner could have obtained in the absence of the scheme. If that could have included value attributable to an office block or car park, that will be taken into account; and for a development essentially unconnected with the scheme, such as the office block in my example, it is likely that the planning assumptions set out in Section 15 of the Land Compensation Act 1961 will have the effect of ensuring that the development value is taken into account in compensation. But if the landowner could simply not have secured this additional value in the absence of the scheme, he cannot be said to have made a loss. So the existing compensation provision produces a fair result here also.
In his statement of 7th March my right honourable friend the Secretary of State for the Environment said that it is the Government's view that compulsory powers should not be available to acquire land for incidental commercial development. So far, I think it is right to say that this principle has been observed; it is of course for Parliament to ensure that it continues to apply in future legislation. So long as it does, the existing compensation code will continue to be a fair way of assessing the loss to be compensated when land is compulsorily purchased.
§ The Earl of Kinnoull
My Lords, I am grateful to all noble Lords who have spoken and given us the benefit of their experience and wisdom in making this short debate the more valuable. The noble Lord, Lord Tordoff, chided me gently for the apparently small numbers taking part. I must say to him that I much prefer quality to quantity and on this occasion we have achieved it.
The noble Lord, Lord McIntosh, stated earlier on that he was no expert on the subject. However, he spoke for 13 minutes both fluently and cogently and managed to get in the development land tax plug at the same time, although I am not sure that it has anything specifically to do with this subject.
It is a complex subject. My noble friend has given a comprehensive reply at some speed, some of which is encouraging and some disappointing. It is encouraging that the Government are prepared to study the proposal to be more generous on compensation above market value, as I understand it. However, my noble friend's reply on the element of commercial development is disappointing. As I understand it, the Government have gone no further.
I hope that the Government will go further. I hope that the noble Lord will examine closely all the matters that have been raised today, and outside the House, and will find time, as the noble Lord said, for a suitable opportunity to bring in an amendment to this law. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.