Local Government and Housing Committee

I'm happy to say that, historically, Wales has produced less social housing per head of population than other parts of the United Kingdom, but that in recent years that has begun to turn around. And what I particularly welcome is the shift within the Welsh Government's investment programme towards social housing, as opposed to other forms of affordable housing, which has really increased quite significantly, so that I would hope that, in future, Wales will actually start to outperform other parts of the UK in terms of the absolute numbers of social homes produced per 1,000 population.

Okay, thank you very much for that, Toby. Are there other witnesses who'd like to add anything?

Yes, I'll say something, if that's okay.

Yes, please.

So, yes, I would echo what Toby's just said. It seems to me that what's also important is the notion of trying to set up and deliver a longer term programme over a period of time that is in some way directly related to housing need. So, that's both commendable but it's also a challenge, I think. One of the things that we say in our written evidence is that, when you do this, as we've found in Scotland, you tend to set a level of housing need based on external research or a clear piece of evidence that does that prior to setting up the programme. So, I think the evidence comes from 2019 or so, and there seems to me to be a strong case to revise that sense of what the levels of need actually are, given COVID, market change, the cost-of-living crisis, the challenges that clearly exist in the housing market across the UK.

So, it seems to me that there's a case for, if we're going to assess performance, we need to understand the target it's being based against. So, that's the one kind of thing I would say. And it also seems that, given the challenges that have been created in the last five years in different respects, the programme has been doing pretty well relative to the need targets that it has set itself.

Okay, Ken, thank you very much. Did you want to say anything, Edward?

Yes, just to add to those two points, which I totally agree with—just looking at the data from StatsWales, just to kind of draw attention to the increasing role played by local authorities, which I think is a really strong sign. And I think, later on, there's a question on the agenda about whether we can return to postwar delivery levels. That's a complicated question with a complicated answer, but part of it will be to do with the role played by local authorities and other public sector bodies, and an increasing role for them being a necessity for that.

The other thing I'd say, to pick up on Toby's point, on the emphasis on social housing—more affordable tenures of social housing—the data that's available shows that the majority that's been provided has been for social rent. But that's only for registered social landlords. Now, RSLs do provide the vast majority in Wales, but I think, to pick up on a point in the UK Collaborative Centre for Housing Evidence's written evidence, it would be good to have more and better data regarding overall tenure splits across overall delivery, not just for RSLs, although they do provide the vast majority, so it does give an indication of overall trend.

Okay, Edward. Just on that point about the levels of social house building achieved in the postwar decades—so, obviously, that was an exceptional time, but there was tremendous commitment and drive to achieve those levels—what are your thoughts on how realistic it would be for Wales to achieve something approaching those levels as we move forward over the next few years and beyond?

Okay. Well, I think Ken's got a quick answer to that, so I'll hand over to Ken.

Ken, yes.

Yes, it's not a quick answer, I'm afraid, but it's an answer at least, or it's an opinion. I kind of think it's wrong-headed to think in those terms a little bit. I think what's important is that the Welsh housing system is as effective and as impressive in its outcomes for people as it can be, and that the world is kind of different today. But as I come back to the previous question, for me, it's really important that there's a significant social housing-led affordable supply programme. But its size and scale is about what's wrong with the housing system. It's about what the level of need is, and I don't think, even with the damage that's been done to housing over the last 40 years, with the right to buy and public spending cuts, and the rebalancing of housing, as it were—even in spite of all that, I don't think you simply want to privilege one tenure or one approach over another. It's about how the system as a whole works. But I'm confident in my mind that that requires, for a long time to come, a lot more social housing being built, and it's about the outcomes of a well-functioning housing system, rather than pinning your flag to the mast of a given number or a scale of social housing per se, in my view.

Can I make a point on this? In my view, the challenge is to create balanced communities and to create the sort of housing that will reinforce economic growth without hurting the environment. There will never be enough housing, or good housing, and obviously the legacy of Wales is a challenge, given its industrial past. So, I don't think we're just talking about building social housing, I think we're talking about what's needed to improve or create sustainable urban neighbourhoods and build mixed communities. And in some cases, I would like to use the example of Tycroes and the forest village that we built in Swansea—or outside Swansea—several decades ago. The challenge was to build the kind of housing that would attract people to want to live in Wales or stay in Wales, and so it's not just a question of social housing numbers but something more complex, on which, on the whole, Wales is leading the way with things like the Land Authority for Wales and what it's now doing with Transport for Wales.

Okay. Thank you very much. James, you wanted to come in.

Yes, I did, on postwar levels, because the demographic of the workforce has changed. A lot more people now work in office environments, compared to construction. In the postwar era, a lot more people worked in the construction and building industry. I give Government a little bit of stick on this, but you've also got to leave them a bit alone, because actually the workforce isn't there to build a lot of these houses as well. So, we talk a lot about the numbers and getting back to where we were, but if we don't have the people to actually build the houses, it's never going to happen. So, what do you think we need to do to actually encourage more people to go into the construction industry as a route of employment, because without a well-founded workforce, we are never going to build the level of houses that we actually need to the right standard to actually meet our housing targets across Wales?

Thank you, James. Toby.

I'll answer the first question first and then I'll come on to the question about attracting people into the workforce. The simple answer to your question is that, of course we could build as many as we wanted to in the postwar era, that is just a matter of political choice and will. But, as both Ken and Nick have said, it's not necessarily the right question. It's an arbitrary metric. The situation is different, and we need to be building the right homes and the right number of homes for now, not for 1950. But, of course, if we decided that we did need to massively increase social housing supply or any other housing supply, that is simply a matter of political will. The problem has been that it has just not been a high enough priority. We've had Governments right across the UK who have always said that this is a high priority, but their actions have suggested that it's not that high a priority, right, or we would be somewhere different.

To answer the question about the workforce, that is undeniably true. There are real problems with the workforce in this country, but I would say that the solution to that problem is precisely to actually build more. It's a chicken-and-egg situation: you can't expect the workforce to be there if the projects aren't there to employ them. At the moment, we have allowed our housing supply system to become extremely market led and therefore extremely boom-bust cycle dominated, and that makes it a very difficult place to work in.

As an anecdote, I recently needed a tiny bit of bricklaying work done in my back garden, and I found that there were so many bricklayers desperate for work, which is crazy. There were literally hundreds and hundreds of bricklayers desperate for a tiny bit of work, because they'd all been laid off. So, we have a situation where, if you do have these high-value skills that we desperately need, you will spend a lot of your time unemployed, because the system is so volatile and so insecure, there is such a poor pipeline of future work that we can't even offer the people who do have those skills enough of a future pipeline of work to keep them doing the job. So, if we want to get people into these professions and we want to keep them there, the most important thing we can do is actually to send a clear signal to the market that there will be a steady pipeline of good-quality work ahead. And that, again, comes back to having a proper programme of house building.

Okay. Thank you very much, Toby. Shall we move on, then? Lee.

Yes, so to build on that point, then, of a pipeline, clearly there is market failure here and we are relying on something other than the market to be able to create the conditions to be able to provide that pipeline to cover all the needed mix or economic profile. So, what mechanisms do we think are best placed to do that? When we had housing going out of local authorities to social landlords, one of the arguments was that they'd be able to borrow more and be off balance sheet and that that would give them greater capacity to be able to develop themselves. Is that happening? If not, why is that not happening? Is there sufficient strategic ability within the Welsh public sector, either at a local government level or at a regional level, or, indeed, within the Welsh Government's land unit? I was intrigued by what, I think it was, Dr Falk said, about the collaboration between the land unit and Transport for Wales as showing signs of promise. So, I'd be really interested in thoughts on how we get this pipeline, who are the best actors, what are the current constraints, and what might we, as a committee, think about making it a recommendation to put that all right? There's a lot there.

I'll let Nick come in on some of the solutions in a second, but I'd say, in general, the problem has been that we have allowed our entire housing supply system, including our affordable housing supply system, to become entirely dependent on private supply. And while that feels quite clever in times when the market is booming, and we've used section 106 policies to extract some of the value of private development and channelling it into affordable housing—that feels like a very neat solution, with the problem providing its own antidote—of course, as soon as the market turns, it goes into reverse and we find that we don't have the counter-cyclical investment pipeline that social and affordable housing used to provide.

So, during that postwar boom, we saw a much more stable production of overall housing precisely because, when market sales were poor, there was still a large pipeline of demand from the council sector and that kept people employed, it kept production going, it kept the brick kilns open—it keeps the entire supply system going. Whereas now, as soon as the market turns, your affordable supply drops off a cliff as well, the brick kilns shut, the bricklayers are out of work—the entire pipeline goes into free fall, and we find it very, very hard to then rebuild the supply pipeline in future. And this is why the emphasis on social house building is so important—it's not just about providing the tenure that people need most, although obviously, that's the ultimate purpose of it, it's because non-market supply is a critical part of the demand pipeline that keeps the entire house building industry going.

Well, I would reinforce what Toby has said. The challenge is one of continuity, of continually building whether the market is high or low so that you can sustain a supply chain of materials and also of skilled labour. People often forget that about half the cost of a house is really made up of the infrastructure, including land—land being the greatest variable—and very few house builders, developers, are really willing to take on all the risks involved in not only getting the land together, but also putting in the necessary infrastructure, which is getting ever more demanding with the concerns for low-energy housing.

So, I think that you've got to ask yourself the question: how can one provide the right sites in the right locations? By 'right locations', I'm above all concerned with reducing travel-to-work times, reducing energy emissions. So, I think that linking housing supply with infrastructure is the key challenge, and doing so in places where there is a potential for economic growth. And nobody does this very well in the UK. Really, to look for models, you've got to go to big cities like Vienna or Zurich on the continent, or medium-sized towns in the Netherlands, because we've just got it wrong in the UK in believing that the private market can respond to the demands, let alone the needs of people for better homes. I think the right values exist in the policies that have been set out, particularly the Well-being of Future Generations (Wales) Act 2015, and the issue is the delivery mechanisms to overcome the constraints. If you can provide the sites and cut them up into small enough chunks, then I think the house builders can respond. If the house builders respond on a continual basis, come high or low demand, then the supply of labour and materials will follow.

And could you say more about the TfW example you cited earlier?

Okay. I’ve been really excited, and I hope that the rest of the UK or, indeed, Europe will be aware of what Transport for Wales has been doing through the south Wales metro and other initiatives. I think that is absolutely doing the right things, and the fact that the trains have been bought and are there—I took the rail line up to Pontypridd just to check it out—is really encouraging, and way in advance of, I think, anywhere else in the UK, except for, perhaps, London. So, that’s really good. But the challenge is not just to improve connectivity by rail or public transport or walking, but it’s also to build the housing alongside, and that’s where we go wrong, because we don’t join up development and transport or other infrastructure and finance, and that is the task of government, and it’s probably not either central or local government, but it does require a mechanism like a development corporation or some form of public-private partnership to give you the continuity, because I would say regeneration takes a generation. It’s a 20-year period we’re talking about, when councillors will come and go, and even governments will come and go, but you’ve got to keep pressing on, and that continuity has got to be underpinned, in my view, by public funding because what we’re talking about is a public or common good.

Can I just press you a bit on that? Sorry, I thought you were praising TfW for some innovation of looking at how it could leverage the land along the metro rather than just building the trains.

I don't know—it may be starting to do that.

No, I don’t think it is. So, part of the original vision for the metro that Mark Barry argued for 10, 15 years ago was about leveraging those additional land values that would go up next to metros, and TfW should have a role in exploiting that, and I don’t think that has—I’m not sure if you have views on it—happened to that extent. So, on your question of a development corporation, I think that was my question, really, about capacity: who is best placed to provide this pipeline? Do you think there’s a role for TfW to add value to its existing infrastructure investments, or who else could do that? I’m interested, if anybody wants to answer that.

Well, I notice that, in London, Transport for London has set up a joint company to develop land around transport nodes, bus stations and so on, so I think that’s a start. I don’t think there’s anything like that in Wales. It is a different job; it’s not so different, but it’s not the same as electrifying a railway line or buying railway stock or whatever. So, I do think that it calls for some kind of partnership, and it’s got to be an organisation that, as I say, has got at least a 20-year perspective to deliver results. This is different from just—[Inaudible.]—a site with a few houses.

Sorry, I don’t know if you can hear me trying to interrupt. I just want to press you further on that. I’m intrigued by that notion of the joint spin-off company with TfL. Do you think that the land authority—sorry, that was a slip; it used to be called the 'land authority'—the land division in the Welsh Government is the right body to partner up in a joint venture like that, or do you think that does something else, and does it do that something else well enough?

I don’t know. I suspect the land division will probably be concerned with contaminated land, it will be concerned with former steelworks or whatever. I’m not sure. It’s part of what is required but it’s only part of it, because you need legal skills, you need, certainly, engineering skills, and you need the skills to be able to procure or do the right kind of deals with house builders. I’ve just come back from Freiburg, as it happens, and it’s quite clear—and that’s a model for the whole of Europe—that the local authority set the rules. It set down what it wanted because it was controlling the land and was then able to make it available, not by selling land for the highest price, which is the typical approach that a public sector body takes, but by selling land for the right uses, and using small housing groups, baugruppen—perhaps, in Wales, the equivalent would be co-operatives. So, I think that it’s a different kind of agency required. By the way, it doesn’t have to be huge; it may require a staff of 15 or 20. We’re not talking about anything much larger that, but they do have to be people, not consultants, but people who are employed with that long-term vision and ability to push things forward over all the obstacles.

Thank you. Would any of the others—? Sorry, Chair, I'm taking over your job here.

No, you carry on, Lee, that's fine. I can see, anyway, Toby's coming in.

Just to reinforce what Nick said, I think the critical point is about integration. It's a kind of obvious point, really, but it is astonishing how poor we have become in the UK at integrating the different functions of placemaking, of development, and of government, frankly. So, it's not uncommon to find even within, say, a single local authority, the transport, housing and the property departments all pulling in absolutely opposite directions over the same piece of land. This is a nonsense. The job of government at any level is to be integrating and then balancing these different requirements, and making sure they all pull in the same direction. So, if the council or the Welsh Assembly Government or whoever it is, or a development corporation, is in place, they should be deciding, 'This is what we want to happen with this place and, therefore, we need the transport, the property and the housing departments to all pull in the same direction.' It shouldn't be a revolutionary request, this, and yet, strangely, it is, because, sadly, we have allowed these different functions to become completely siloed with their own targets, their own incentives. Often, those different teams just do not see that it is their responsibility to support the overall agenda of delivering a better place.

Ken.

I'll talk about some of these things, but I wanted to return to the original question that we were set. I come back to what Toby said earlier—I think it's really important to recognise that procyclical nature of the private developer market in terms of its relationship with social housing and affordable housing opportunities. There was a period when it was fair to say that, in recessions or economic turn-downs, there was a counter-cyclical benefit from social housing. I think one of the things that has been apparent in the last five, six years, but particularly in the last two or three years, is the failure of that counter-cyclical level of things, and maybe that reflects the cumulative effects of the things that Toby was talking about, because of the dominance of the private sector model.

In that context, actually, I'd just refer to something that we wrote about in our written evidence. It is extraordinary, as to the Home Builders Federation's point that there's a lot of section 106 money unspent, that there's literally money on the table that isn't being used. I don't quite understand the whys and wherefores of how that's happened, and I guess each case is different at some level, but it's a remarkable thing in the era that we all live in of various forms of fiscal austerity operating from the UK to the devolved nations that that should be the case in England and in Wales. So, I'd point that out.

But the point I really was going to make before we had that very interesting digression is about the kind of choices that people at housing associations have about whether they get involved in development. Clearly, as in Scotland, we're very reliant on housing associations as the prime developer of social housing, but they're independent organisations. It may be their mission to deliver more social housing, but they face real challenges because they have other commitments, some of which come from the UK and the Welsh Governments, such as their commitments to climate change and suchlike, such as their asset management requirements to improve the quality of the existing stock, and we must never forget the importance of improving existing stock, as well as trying to build new homes. So, their rental surpluses, such as they are, or their planned rental surpluses can only go so far, and they have to make difficult choices. They will, on occasion, choose not to build new homes in that context, and that's not in any way an unreasonable position to hold. It depends on the specific circumstances of the association, the local context, the land that's available, how much they have to pay for the land—because another issue as a consequence of the private dominance of the development sector is that RSLs are trying to compete against private developers for land, and that simply doesn't work. I know that's something we're going to come on to later on.

The other thing to say, finally, is that we're all also buffeted by UK Government decisions that impact on how the housing systems function, the local housing allowance being a good example, or the levels of universal credit, et cetera, but also the UK system of mortgage regulation as it has been since 2008, which, of course, greatly reduces the effective demand for home ownership. It means people have to go elsewhere, which puts pressure on the private rented sector, which, in turn, puts pressure on social housing as well. So, these things are always complex and multiple things go on, because that's the nature of the housing system. But I do think RSLs face difficult choices, so it's great that, by ending the right to buy in Wales, you've actually created an environment where councils can start to build again and will, undoubtedly, do a good job.

Okay. Thank you, Ken. Edward, please. Yes.

Just very quickly to pick up on and agree with a couple of the points that have just been made, it's definitely the case that, post global financial crisis, volume house builders were pretty pleased to have section 106 commitments that they could sell to RSLs to get cash through the business, which is evidence of kind of the counter-cyclical benefit of having affordable housing and the need to focus on that as a sort of system of housing that's ideally outside of the market system, although it's currently embedded within it.

On the other point, around the need for a strategic, joined-up approach, if you look at the community infrastructure levy, it hasn't been widely adopted in Wales, maybe for a combination of reasons, including complexity and administrative costs. But, also, the land value has not been there to necessarily cover affordable housing and CIL, and in a case where CIL is in place, it only really contributes a fraction of the overall cost of the infrastructure that's needed, and so developers are frustrated and communities are frustrated. It's not achieving its objective because there's not that joined-up strategic vision with additional public funding coming in to help deliver the infrastructure.

And just on Ken's point around RSLs, because they are competing with private developers for sites—. I was speaking to a Welsh RSL yesterday and they were saying that they're competing with, perhaps, eight other bidders for sites at the moment, and most of those are private developers and they're bidding up the land price, which is obviously not great for their operations, and it'll alter the mix of private and affordable homes that even the RSLs can deliver. So, I'd just emphasise, I think, the necessity of moving away from this kind of market-led system where land-value capture and delivery of affordable housing is embedded within the market logics of private house builders, which is mainly the case now.

Okay. Thank you. Lee.

I'm going to ask about something that came up in the evidence. The Bevan Foundation, in its evidence, is raising some concerns about the reliance on the intermediate rental option—so-called 'affordable rent', which, in practice, in many places, is not what it says on the tin. I just wondered about your thoughts on that within the mix of the options available and whether you think we rely too much on it.

Well, with a lot of these questions, I don't have access to systematic research that's really quantified all these things, so—

That doesn't stop us.

—it's quite difficult. As an academic, that's what I like to base my comments on, but, based on what I have been able to discover, I mean—. To Nicholas's point, it may well be the case that we want to see lots of social rented tenure for people who are unable to access housing otherwise. That's really important. But we also need to think about the place as a whole, and this is why RSLs like to deliver—. Okay, they're delivering mixed tenure schemes because they need to for viability reasons, but it's also important and they also like doing it because it helps to make mixed communities. And so, I think there's room for all tenures on individual schemes, on strategic schemes and so on. However, in the Tirion case, their schemes are predominantly—. The affordable homes in those schemes are let at rents that, you know, may be a modest discount from market rent. So, although they are, strictly speaking, affordable social housing, they may not be targeting those who are in greatest need. We need to come up with imaginative solutions to address the problem across the piece, but I think we shouldn't be putting all our eggs in that basket, in that model. I see some other people have their hands up, but, yes, that would be my view.

Thank you.

Okay. Yes. We've got Toby.

I would just add to that that, without even commenting on the relative affordability of different tenures, because, as has been said, that will vary for lots of different places and people in different circumstances, and we do need a mix—. So, this is not against the concept of having intermediate housing in terms of its affordability, but the problem with the affordable rent model from the supply side is that it doesn't give you that secure pipeline of future demand, because, ultimately, the pricing is related to the market and, therefore, it is unpredictable. Therefore, it's very hard to know exactly what your future rental income is going to be from that product and, therefore, it's very hard to price it into a long-term delivery pipeline, and it's very hard to plan your business on that basis. So, even if it is the ideal tenure for a particular price point, which I suspect it probably isn't in most cases, but, even if it is, it's not giving you that supply-side benefit that's a really predictable, solid, non-market tenure that social housing gives you.

Ken.

Yes. I've got mixed views about affordable rent—we call it 'mid-market rent' in Scotland, 'intermediate rent' in Northern Ireland. There are plenty of examples of really effective provision of affordable rent products in Scotland that often don't use grant at all and do that very effectively through low-cost debt and financial transactions capital and things of that kind. They actually, as a provider, work very well. We've found, both in Scotland and in Northern Ireland, that there clearly is a sub-group of people who will never be a priority for social housing who can't enter home ownership either and who are finding the rents unaffordable in the rental market. So, it can perform a role.

I think the point is, first of all, how much of a priority is that in contrast to the need of people who are homeless or facing really poor quality housing, et cetera? So, there's a political choice over how you allocate public resources between those things in a broader sense. In Scotland, we actually offer grant to mid-market rent, and I've always felt that's been over-prioritised given that there are parts of the country where land values allow you to do it without grant. I think there's a real issue there. There's grant there that could be better devoted to social housing. So, there are some tensions there.

I think there are also some issues about how the people who can apply for mid-market rent or affordable rent is actually allocated—how the eligibility rules work. We have local-authority-by-local-authority income caps on the incomes of people who can apply, but they're set at really high, to my mind, or quite high rates. So, that's all a mixed story. It can do a really good job in setting context, I'm quite sure of that, but it's about the priority that politicians want to give that within the broader portfolio of public expenditure on housing.

I guess the other concern at a broader level is the long-term lesson from England, which seems to me to be the long-term shift out of what we understand as social housing and into these shared ownership and intermediate rent-type products, which have largely taken over. That's very undesirable. I think, when we get to discussions about new delivery vehicles and non-grant options, I think it's got to be clear that that, in most cases, is going to be affordable rent rather than social rent. It shouldn't be called 'social rent', it shouldn't be treated in that way, and it's set. So, we have this issue in Scotland as well. Going ahead, we have a housing investment taskforce, which is attempting to find new ways to pump private funds and institutional funds into the affordable sector more broadly, but I think we'd be very concerned if some of these kinds of models would be called social housing and would have a social tenancy name attached to it, even though the rents are far higher than what social rents are—as Toby says, they may go the way of all things if the market turns in the wrong direction on the financial side.

Sorry, that's a bit of a scatter-gun thing, but I do think, like many things, it's nuanced and quite complex, because it does do a good job, but we do need to be careful about the implications of its over-extent.

Okay, Ken. I'll just bring in Edward, and then Lee would like to come back in. Edward.

Just a very quick point. I totally agree with everything that Professor Gibb has just said, but I think that's why we need aggregate data on the tenure splits of all schemes, not just RSL-led schemes, because then you'll really get a sense of what other tenures are coming through. They might be claiming to be affordable, but how much is actually social rent, how much is intermediate, at what level and so on? I think that's just a very important thing to have a good handle on, to really understand whose needs are being met and how.

Okay. And Lee.

It's just a quick follow up to you, Dr Shepherd, if I could, as we've got you and you do have expertise in land value capture. Just a question I raised earlier about the potential of TfW to leverage its role, because, obviously, as the metro kicks in, you're going to have some—. Pontypridd, for example, will be having a metro train service every five minutes. So, clearly, someone's going to be benefiting from that, and it's, as currently structured, not really being leveraged to then do further public good. So, just your thoughts on the potential and the things we should look out for in making a recommendation around that.

If land values and property values go up around the new piece of infrastructure, then, clearly, there's a moral and pragmatic argument to seek to secure a proportion of that uplift to help cover the cost of the infrastructure that's helped deliver that uplift. So, in principle, yes. I think the question is, obviously, the mechanism by which that is achieved. In London, they've experimented with something called tax increment financing, which might be something that could be experimented with in that environment, but that needs a lot of forethought, and there's some risk associated with that in terms of who bears the overall risk of the value not being achieved. If the state actually borrows against future uplift, and that doesn't materialise—. Examples in the United States where this is very widely used have shown that it's often the community that bears the cost through cuts in services and so on. So, there is considerable risk that could be borne by the public purse, but also, ultimately, by individual people living in those communities. Is that something we really want to take on? It's something to think about.

People talk about land value capture—and this is something I've tried to address in my written evidence—and it can come across as a panacea that can solve everything, but it's very much not a panacea, and some of the limitations of it in terms of how it currently operates I've set out in my written evidence, and I've just alluded to a limitation from the tax increment financing model, which is often promoted as being something that could be experimented with. So, I'm afraid it's a typical academic's if not politician's answer, that, 'It's complicated and there are different ways of looking at it.' But it's certainly something that could be explored.

Sure, but do you have any thoughts on my specific example of TfW and the development of the metro and its potential?

I would like to suggest that there are differences between places, not just in terms of east and west, but the proximity to cities, which will greatly affect the potential for uplift. There will also be great differences according to the condition of the land—whether it's contaminated or not. But, as a generalisation, it makes sense, in my view, for the land within, say, a kilometre or half a mile of a railway station, particularly one that's being upgraded, to be acquired for the purposes of development, for mainly housing, if it's not in the middle of a city. You've got examples, like between Cardiff and Newport, where I think four new stations are going to be developed. Now, the developers will not see the opportunities until the stations are up and the trains are running. The state can see those opportunities, or should be able to see those opportunities, acquire the land and begin to prepare it for development, but it does mean taking a 20-year or so perspective as far as a new community is concerned. I saw that to my cost in the development of Tircoed near Penllergaer, to the north of Swansea. It's now a great place; I can tell you that we had real difficulty selling any houses when there was a collapse in the housing market. But one could see that the opportunity over the long term was there. And this is where, as I say, the public sector has to come in.

The funding that one should be looking for will come from a financial institution, a pension fund, or an insurance company like Legal and General, who is looking for long-term investments, for 20-year, 30-year investments with relatively secure rates of return. So, the funding can be put together if you can find the right sites. Clearly, in the Valleys, there will be limitations where you've got particular problems with steep sites and so on. But, again, it's not, as I say, rocket science to spot these opportunities, though I do think that digital intelligence, mapping, can be used to take some of the risks away. It's not going to be done by a private developer. There will be private developers who will come in to do innovative projects, but once the basic risks have been taken out of it. Now, whether that's done as a subsidiary body of Transport for Wales, or it's done through the land division, I don't know, but it will require several, as Toby was saying, different mentalities, different kinds of organisations working together.

The mechanism seems to work quite well in parts of England, at least—the development corporation for the London docklands being a good case. But you do need to give it the right objectives, and not just, as in the earlier days of the London Docklands Development Corporation, attracting in private finance—so, selling things off for the highest price. But if you give them the right objectives, which you’ve got with the future generations Act, then I think development corporations will make a major difference where there are significant areas of land in places where people will eventually want to work or live.

Land value capture is an issue very close to my heart. I would say that, as Edward has said, there is often a lot of, frankly, wishful thinking around this area, and I guess that stems from the fact that there is just so much value that is created, particularly from new infrastructure provision, and it just seems like madness that we don’t have a mechanism for channelling that into public benefits. That, at a very crude, high level, is true. The problem is that it is quite complicated how you capture that value. There are different mechanisms.

Very roughly, very crudely, I would say there are three different types of mechanism. Firstly, there is the tax system. What the economists have always preferred, right back to Adam Smith, is land value taxation—ways of using tax to capture the unearned increment in land value. Unfortunately, in this country, we just don’t have property taxes, so the reason why tax increment financing doesn’t work in the UK is because we don’t have the tax to increment the finance on. There are no, essentially, property taxes that go up with land value. I note that the Welsh Government had announced a plan to completely reform council tax. That might have gone some way towards actually creating a property tax that would enable some capture of that land value, but that’s now been kicked into the long grass. Without that, we can just set aside the whole question of using the tax system, because we just don’t have the taxes.

The next mechanism is planning gain. As discussed, that has some merits, but it is inherently procyclical and dependent on market actors, so it has extreme limitations.

The really powerful one, as Nick was saying, is simply owning the land in the first place. Acquiring the land at pre uplift cost prices, then generating the uplift, means that you internalise all of that gain for public benefit. The problem there is that the simplest way of doing that, which is simply to buy the land without telling people that you’re about to put in a new phone line, isn’t really an applicable solution, in a way. There are still examples where this most simple form of land value capture happens. It happened recently at Otterpool Park, where the local authority bought a racecourse and then announced that it was going to use it for housing development. The landowner was absolutely outraged, and is trying to take them to every court in the land as some sort of swindle. But it was a perfectly fair, open-market transaction, in my view.

But that’s quite difficult in a modern world, especially where infrastructure provision has long lead-in times, and people want to go ahead and say, ‘Yes, we will build this train line’, and then we turn up with a cheque book and ask people how much they want for the site. Inevitably, we’re going to end up paying over the odds in those circumstances, which is why it always comes back, unfortunately, to compulsory purchase. It’s the only real guarantee of land value capture. You don’t always have to use it all the time, but unless you have a really fair and effective system of compulsory purchase, the land market will always see you coming, and will always extract most of that value before you’ve even turned up with a digger, let alone put a planning application in.

Can I just make a modification to what Toby has said? I think the easiest starting point is with publicly owned land and to pool public land where that exists. I’m going to give you an example, and that’s Denmark, because it’s a relatively small country but a relatively advanced country. In Copenhagen, a development corporation, we might call it, was set up that simply took over all the public land. It started with defence land in a place outside Copenhagen, and was able to begin to get a really significant site. Then it went to take over dockland.

I think this principle of starting with public land is less controversial than starting by taking over private land. But once you’ve got a substantial site under way, which is going to benefit from public investment in the case of the site outside Copenhagen, with the building of a new metro, which was financed out of the uplift from land values, then I think you have, as Toby said, the moral justification for being able to acquire land alongside.

And by all means, then, you may sell it back to the people who owned it originally. If there are developers who’ve invested because they can see the long-term perspective, by all means give them the opportunity to buy the land. And this is where, if you like, the right kind of deal has to be set up while avoiding the sort of corruption that will lead you into the popular press. It's not just an amateur thing, this—it is going to require some skills and public values.

We're going to have to move on very quickly because we have other matters that we haven't covered yet. Edward, very briefly.

Very quickly, just to follow up on some of the things that Toby was saying, the Welsh Government has signalled that it might be interested in introducing a land value tax to replace non-domestic rates and council tax. If that is something that is really still on the table, that's something that might open the door to more effective land value capture. I think on the other point around compulsory purchase, which I think we'll come on to later—there's a question later around the hope value provisions—the postwar history of attempts to collect a proportion of uplift were mainly all designed around this idea of taxation backed up by the threat of compulsory purchase at less than full market value. But we can maybe talk about that in more detail later on.

Ken again. Briefly, if you could, Ken, because we do have other questions we haven't yet reached.

Just very briefly, we've been doing a deep-dive into the affordable housing supply programme in Scotland to try and understand the blockers, and one of the key blockers that people repeatedly tell us about is the inability to access public land without it being at the uppermost commercial value. There's considerable interest from many parties in trying to find a way around that to get NHS land, Ministry of Defence land, local authority transactions to other parts of the local authority—that that can be done in a way that reflects use value in some way, and not market value. There seems to be considerable interest in doing that, but in practice it's incredibly hard to break out of that finance manual guidance that the public sector has to work with. So, it's thinking of the preventative benefits and the other reasons why it's all social good, even if the NHS or MoD don't get top dollar for the land they want to pass on when it's for non-market housing. So, that's definitely a major question for us.

Thanks very much. If we move on, the Welsh Government's target for building new social homes for rent includes those acquired by social landlords on the open market, for example properties that were formerly subject to the right to buy. To what extent do you think those sorts of acquisitions should be and can be part of the solution to these problems? Ken.

This is a big issue in Scotland. Recently, some money has been allocated to social landlords to increase the acquisition of ex-private rented properties in particular, in part as a kind of fig leaf to do something about the temporary accommodation problems in Scotland. I think the challenge is that, sometimes, as I said earlier about the decision to build or not, there's also a decision about whether or not to purchase properties. They're not always the right kind of properties. They're not always in the right place. They may have significant underlying costs attached to the acquisition. So, it kind of depends, doesn't it?

I know in places like Glasgow, a lot of social landlords are interested in this because it gives them an ability to take over more properties, say, within one tenement close, which is better for management of the close, and such like. But in principle, where it makes sense, I think there's absolutely nothing wrong with social landlords getting involved in that. The one thing I would say is that we should recognise that there are costs to taking properties out of the private rented sector. There is still a sense of where do people go if they don't go there and they don't qualify for social housing. You are reallocating the stock in a way that, to some extent, excludes some people from being able to use that. You may well argue that's fine, but we should be aware of that. There could be market consequences of doing that.

I'd agree with that. I've put in my notes, 'It depends on the quality of the homes being acquired and the purchase price'. I know that RSLs in Wales, particularly during and in the aftermath of COVID when the scale of the hidden homeless problem was revealed, were purchasing homes directly from developers that would otherwise have gone to private tenure. Obviously, they're paying, presumably, market price for those homes, and hopefully letting them out maybe at social rents. Those homes won't be built to the same quality standards that are required for new social housing in Wales. So, it doesn't strike me as being the best solution, although it certainly, as Ken suggested, may have a place in the overall mix of solutions to address the overall problem. But I think it would be better value to enable and empower public authorities and not-for-profit developers to scale up their development activities and to make better use of public sector land to do so.

Thanks for that. I'll just bring in Toby briefly, and then James from the committee.

I'll be very quick. I just want to say that of course it's not always the most sensible thing to do, but it is equally a nonsense to have rules that arbitrarily restrict the use of public funding and all the different public levers just to do what makes sense in individual circumstances. We have far too many rules in this country—particularly Treasury-derived ones—that prevent people doing sensible things in the circumstances, and then we end up with the nonsense of unspent public grant or having to return large amounts of grant to the Treasury because we haven't been able to find schemes within the precise timetable that's allowed, that meet the precise metrics, that pass the precise thresholds for value for money under these circumstances. This is craziness. Of course in some circumstances it will make sense to acquire existing homes, and in others it won't. We should be trusting the people that we have already allocated funding to to spend it wisely in the circumstances that make sense.

I'm interested in what you think the role of Government is in the acquisition of these private homes. Because I know that, when I was a local government cabinet member for housing in Powys, it was very difficult actually acquiring some properties, because some of the older properties needed a lot of adaptations made to them, especially trying to meet the Welsh housing quality standard and the Welsh Government's new rules around energy performance certificate ratings. A lot of the older properties need an awful lot of money spent on them to bring them up to where they need to be to actually conform to the current social housing standards set by the Welsh Government. Do you think there should be some role for Government there in setting some parameters of what housing could be bought by local authorities or social landlords to bring in to their own stock, to make sure that, when they're buying something, say, for a couple of hundred thousand pounds, they're not having to spend another couple of hundred thousand pounds bringing it up to the right ratings that need to be delivered to meet Government standards?

I think that sometimes it will be entirely the right thing to do to bring in expensive properties that do require quite a lot of investment. I would be more inclined to trust local authorities and housing associations to make those decisions on a case-by-case local basis, rather than having endless central Government-determined rules that allow people to only do certain things in certain circumstances. Those rules never keep up to date with reality. The market is different everywhere, things are changing all the time. We end up in this stupid situation where we can't spend existing allocated grant because the price of bricks has gone up, and yet the maximum grant rate hasn't kept track, and so you end up not being able to buy a single brick. This is madness. So, no, I don't think we should be restricting local authorities in that way.

But you have to recognise as well, from my time on the coalface of doing this, that the housing revenue account that buys these properties also is a business account. If you're in local government, it has to have payback over a certain amount of time, and if something doesn't stack up financially—. I've seen a lot of houses that local authorities have bought, not just in Powys, having to go back on the market and being sold after because the amount of work they have to do to them to bring them up to standard doesn't actually fit within the realms of what the housing revenue account can pay for in terms of payback. Do you not recognise that that can be an issue?

I absolutely recognise that that can happen. I'm just saying that the solution is not having yet another set of arbitrary central Government-imposed rules that determine exactly what can and can't be done in different circumstances. As you say, that is a business decision for the HRA managers in that place. Actually, the HRA system has proved extremely robust in ensuring that councils behave sensibly. Of course, sometimes they'll make mistakes, and sometimes they'll have to correct them, but I think the system itself allows that correction, and we should be holding people to account at a local level, not relying on Treasury-imposed rules to do it for us.

Thanks for that. Let me move on to planning, which is always a prominent discussion point when it comes to house building. We've had a recent report by the Competition and Markets Authority that found that the planning system is exerting significant downward pressure on the number of consents granted in Wales. What would you say about that? What's your analysis of the extent to which social house building is being held up by planning delays? Would anybody like to offer some thoughts on that? I guess it's quite a difficult question if you're not quite—. Toby.

I'll have a go, with the caveat that I don't claim to be an expert on the individual circumstances of individual planning schemes in Wales, and every one is different.

In general, of course the planning system is an annoyance, and developers, public or private, find it irritating all the time. It's full of irritations and inconsistencies. I would say that there's far too much discretion in it, and that can lead to a lot of these uncertainties. The one thing that everyone can agree on planning is that it should give more certainty, so that people know what they will get permission for and what they won't, and therefore there's just less incentive to play games.

That said, I think it is often blamed excessively for the lack of house building, because planning permission is a necessary but not a sufficient condition to build a home. There are loads of other constraints on house building, most of which actually come from the market and not from the planning system itself. So, you can give as many permissions as you like, but if the market incentives and signals are such that private developers don't see it as being in their best interests to build those out now, then they will not do so, and it's kind of futile to blame the planning system entirely for that.

So, yes, by all means, let's look at reforming the planning system and dealing with some of those irritations, but let's not expect that in itself to make a systemic difference. If you want to make a systemic difference to planning, actually, you need more planning not less, in order to give people more certainty about what will get developed. I think we should have more emphasis on plan making and strategic planning and less emphasis on the kind of discretionary arguments over exactly what shape your windows are and whether it's two or three homes on that site.

Okay. Thanks for that. And Edward.

Yes. I agree with that. Planning is often blamed; it's an easy institution to blame, and if you're a politician, you can pull the lever and change the policy much more easily than you can change the market and the composition of the market.

[Inaudible.]

Well, you've got direct experience of this, Toby, maybe you can comment. But I think the key point is that if you're relying on the private sector to deliver a large proportion [correction: to deliver a proportion] of our social housing, then you're going to be beholden to their incentives and, as Toby alluded to, there's a limit to how much the private sector, particularly volume house builders, are going to want to deliver on individual sites each year because of local market absorption rates, which is discussed in some detail by Oliver Letwin and the Competition and Markets Authority report.

The other thing to bear in mind is that often there are calls to streamline the planning system, which I think, as Toby alluded to, is the wrong way of thinking about it. I agree that we need better strategic planning, which means more resources in local planning authorities and staff who are proud to be planners and are empowered to produce these strategic plans, which provide the certainty that's required. If you start trying to cut things out of the process, then what you might be doing is redistributing risks from development onto the community, by reducing the degree of scrutiny that those risks are subject to, and I think that's something that's really important to bear in mind. I think of planning as being an institution that distributes development risks, assesses those risks and distributes them, and if you're trying to streamline and simplify the planning system, then you're at risk of dropping the ball on some of those, and those risks may land with local communities or the environment. Yes, those are the key points.

Thank you. And Ken.

I just wanted to make the point that we have our Master's degree in town planning at Glasgow, and I know that they have that in Cardiff as well. The big issue, I think—well, one of the really big issues—is the lack of planners, and the lack of planners being educated to do statutory planning functions. I think the Department for Levelling Up, Housing and Communities has acknowledged that and has made some suggestions about it, but it's just a drop in the ocean—giving another planner per local authority isn't really anything like adequate. So, until we have people—just to use the words that Ed just used—who are passionate and really want to be planners, doing that kind of job, that's a real market failure, as it were, in the labour market. We need more passionate town planners working on these statutory issues as well as the bigger strategic questions too.

Thank you very much. And Nicholas, please.

I do agree that one needs ambition or vision or passion when one is trying to change a place that's, say, suffered from the loss of industry. I think one can also, though, reduce a lot of the risks through what I would call spatial science or digital intelligence, and the use of economics as well. So, it's not about architecture, it's not just about being able to draw things; it's about being able to understand the different factors, which will include the supply of infrastructure, the issue of the quality of the environment and so on. And these can all be brought together and mapped. This is an opportunity now because of the progress that's been made in dealing with data. So, it's a different kind of planner, perhaps, than we've been training in the past. And for want of a better word, I call it 'strategic planning', or 'urbanism' is another useful word, but it's wrong to just keep blaming planners when they're asked to try and do too much—much more than one could ever do in a lifetime.

Thanks for that. James.

On planning, one thing that's happened in certain parts of Wales and in my own part of the world is land banking by people—people getting planning on vast swathes of land and just leaving it sit there. They may put an access in or put the footings in somewhere and just leave it, and it's not touched then for decades on end. I was always a big advocate in local government of the use-it-or-lose-it principle: you either use your planning permission and you develop the homes, or you lose it and then that land becomes available again. I'm just interested in what your views are on that, on the planning process, and—everyone’s got their hands up now—actually how the planning process there could be more strict. I do think there are some big firms—. Private developers across the country are holding land back to drive up property values as well, and that doesn't help us in actually delivering more homes for people, so I'd like to get your thoughts on that, please.

You're quite right to bring in the point that many people who are called 'developers' are really just dealers in land, and you can make vast sums of money without taking great risks. The solution to that, as Toby has suggested, is property taxation. And in Denmark, which has a sensible system, there is a distinction between what we would call council tax and a charge on the land. If you put the charge on whoever has got planning permission, if they have sat on the land for two years and nothing has happened, but there is outline planning permission for housing, then it's sensible they should pay tax at the value that would have been achieved if the houses had been built, and that's what effectively happens in Denmark. And it means you don't see derelict land in Denmark because people make sure that it's used for something. So, I think that there is the opportunity to make a reform and to create a precedent in Wales that would then be taken up in the rest of the UK. This is a technical subject that is probably not best dealt with here, but there are perfectly good precedents for how to do this and, in my view, instead of creating something that's never been done before, just look at where it's been done successfully. And as I say, go to Denmark, go to Copenhagen or Aarhus and find a similar situation, and ask yourself, 'How do they charge the owners of property, on what basis, and does it work?'

Okay, thanks for that. And Edward.

Just on the land banking point. I don't know the precise circumstances of the sites that you've got in mind, but I think that it's important to bear in mind that the business incentives for going through the expense, risk and uncertainty of getting planning permission, putting in access, and then not developing—I'm not sure I see that as being necessarily the best business strategy for a house builder. So, I think that there may well be other reasons for those sites not being delivered than simply the developer sitting back and waiting for house prices to go up. It could be because they bought the site at a certain value and it's not viable. It could be because there are post-consent conditions that need to be discharged. I'm not saying there are no circumstances in which land is held speculatively, but I think that, once you've got planning permission as a house builder, you're incentivised to develop and sell those homes.

But the key words there are 'as a house builder'. An awful lot of land with planning permission is held by people who are not house builders and have never built a house and have no intention of doing so. They're holding on to it until such time as they can sell it to a house builder at a level that makes them huge profit. This is not challenging the fundamental economic truth of what Edward's saying, it's just that the reality is lots and lots of land is held with planning permission indefinitely like that. I could take you to thousands of sites that are like that.

I would say that Nick is right about the tax lever, because, unfortunately, 'use it or lose it' as a principle makes great political sense, but it does not work if you only mean losing the planning permission. We already have expiring planning permissions. It makes no difference, because the nature of the planning system and the nature of the market's understanding of the planning system is that, if you've got planning permission to build housing on this site once, you will get it again. So, having your planning permission removed actually doesn't change your incentives at all, unfortunately. We've tried that. We keep reducing the length of time that planning permission lasts before it expires; it makes no difference to this problem. You have to either tax the ownership of the land, or, again, it's back to compulsory purchase and saying, 'You have planning permission, you're not building it, we will take it off you and make sure we can get it into the hands of someone who will build it.'

Okay. We're going to have to move on. James, I know we've covered some of the issues, but do you want to—

Yes, just one point. The amount of public land that is owned by local authorities, Welsh Government, Natural Resources Wales—they all own vast swathes of public land. I'm interested in what your views would be, probably from a Welsh Government perspective. Should they be making more of their own land available for planning for housing, because it's a big land owner, the Welsh Government, but there are also other areas as well? I'm just wondering what your thoughts would be about releasing some of that land out for building.

I'm afraid I have a fairly hard view on this, that the point of planning is to identify the right bits of land for development, which should not be determined by who happens to own it. We've done a lot of this in England, where we've built lots of really crap developments in the middle of nowhere because the Government happened to own an old airfield. This is the wrong way to go about it. We should be building homes in the right places for the local community, and it frankly should not matter if those happen to be in private ownership or public ownership.

Can I make a modest suggestion, which is that I do think the information about land ownership needs to be made more accessible? We're doing some work in the south of India at the moment, in Tamil Nadu, and I'm really impressed by the information system that there is in India—in English, I might say—which allows you to identify who owns land and what it's used for. In England, or Britain generally, it's a bit of a kind of secret. So, I think an easy change to make is to make the information publicly available about ownership, specifically or particularly in areas identified as having potential for growth or being important from a regeneration point of view.

Okay. James, do you want to ask a question on compulsory purchase, because I know we touched on—

Well, I was actually going to go on to 106s, John, if that's all right, and the amount of affordable units delivered via 106s. It's something that I was always very keen on when I was cabinet member for planning, but, unfortunately, with the planning system, with the affordability criteria, I've seen some housing estates that were 50:50 that have actually gone down to 5 per cent, with 95 per cent for the open market and 5 per cent actually affordable, because they'd gone for affordability criteria through developers. What needs to change around that? Because, actually, the system, currently, from a personal perspective, I don't think works, because a lot of developers can drive out the affordable elements from housing developments, because of, 'Oh, it makes the whole site unsustainable and I won't build it.' I'm just interested to get your thoughts on some of this.

This is something that I have done a lot on and I have actually made some progress on. So, we used to have this problem of what you've described, namely the viability threat, where a developer can buy a site for, basically, whatever price they determine they need to pay in order to secure it, and can then go back to the local authority and say, 'Well, look, I've paid so much for it and it's now no longer viable to deliver the affordable housing requirement on it.' Now, of course, they've overpaid; they should be factoring in the affordable housing policy when they bid for that site.

When I was in Government, we changed the planning guidance on this precisely to try and close down this loophole. It does still happen in practice, often because local authorities don't realise that they should be holding firm at that point and saying, 'No, you knew the policy, you shouldn't have overpaid for it, that is on you.' It is on local authorities and central Government to make sure that the planning policy itself is clear enough, so that the pricing can follow through to the market. And when local authorities have really vague policies, where they just say 'affordable housing' without specifying what tenure, for example, that leaves too much wriggle room in there, and developers can end up overpaying for sites. But when you have clear policies, you have to just follow them to the letter, otherwise the market will not price in the effect of that policy. So, yes, I agree with you that it's a problem, but the solution to it is clear policy, rigorously enforced.

But you do get the rub, then, don't you, between local authorities wanting to deliver housing, whether that's open-market housing, social housing or affordable housing, and if you get—. This is from a councillor perspective, and I know a lot of them who sit on planning committees come to the point of, 'Well, we need to build more housing because people need houses to live in, whether that's on the open market or whatever', and if developers say, 'Well, I'm not going to develop it, I'm not going to build any housing', it's very difficult for local councillors sometimes to manage that expectation, isn't it?

It is very hard, and, unfortunately, this is a competitive game, and every time you roll over, that sends a very clear signal that, the next time, you'll roll over again. I would take the example here of the Mayor of London, who’s actually used the existing section 106 system quite effectively, because ahead of his election, his first election, he set out a very clear policy that the target would be 50 per cent affordable housing, but that he would accept 30 per cent, or 35 per cent, no questions asked, but that if you even tried to go below that the Greater London Authority would be down on you like a tonne of bricks, with an army of lawyers and accountants poring over the books. And all the market actors complained and said, 'This will kill development stone dead. Fifty per cent of zero is zero. We won't build anything.' And as soon as he was elected, they rolled over and accepted the new policy, because, actually, they knew that the certainty was worth it. They believed that he wasn't going to roll over and therefore they did. And it's actually worked pretty well.

Okay. Edward, yes.

I don't have too much more to add to Toby. He's done an enormous amount of work on this and has had lots of success, as he's just said. But, partly inspired by work that Toby had done, I looked at the planning context for Wales, and there's very little at a national level in terms of what should guide the negotiation. There's some good policy at local level, there's a commonly adopted viability model across lots of local authorities, but some key elements in there aren't really directly addressed in national policy guidance. There's the 'Development Plans Manual', which talks about benchmark land values for plan making—this is the uplift that landowners, quote unquote, 'need' to achieve in order to be incentivised to release land for development. But it's not as tightly controlled as it is in the national guidance in England, which adjusted as a result of Toby’s campaigning.

So, I think there's real opportunity there to look closely at what benchmark land values are assumed as being in plan making and viability negotiations across Wales, and to introduce some guidance at national level that basically shapes the context for decision making and plan making negotiations at local level. There's an example, which I looked at in the Bridgend local development plan plan-wide viability assessment 2021, where a letter from Savills was published in the appendix to that, which basically said, because of minimum land prices that have been agreed in option agreements with house builders, your benchmark land values, as recommended by Valuation Office Agency, are too low and they should be higher. And that seems to have been adopted without any quibbling.

So, I think that there's something to look at here, and there's a—. I'm not saying it's the same degree of problem as there has been in England, because land value patterns in Wales are different, and certainly different to London, but it's certainly something that I think that the Welsh Government should have a better handle on and try and make it the case that viability assessments are made public, which isn't currently the case, and that was a big change that came in as a result of Toby’s campaigning as well.

Can I just make a general point? Toby mentioned earlier that Welsh Government, local authorities, should be far more willing to compulsorily purchase land. Put aside the fact that they've lost a lot of the skills able to do that, that is not without risk, and, as you said, those returns the private sector had anticipated they would make would form the basis of a legal challenge, and then significant viability, if that speculative land dealer no longer had the cash that he thought he was entitled to. So, that is likely to be challenged, and there is a good chance that would be lost, so it's not quite as risk free as perhaps it should be and as you're both suggesting.

The present compulsory purchase system or the hope value provisions that are—?

Well, they're linked, aren't they?

Yes. That is the present system. It’s in legislation, but it's not currently used in Wales, the hope value issue [correction: hope value provisions]. I think that—. Toby can speak to this more, but people that have criticised the new hope value provisions in the Levelling-up and Regeneration Act 2023 do so making the point that, as you said, it's—. CPO is currently complex and it's risky and it's costly. It's not often done by local authorities, therefore will it really make a difference now we've got these hope value provisions? Those costs and risks will still be there. It's going to be even more subject to debates over what the current use value is. There are always debates over what the actual compensation level should be, but that will be shifted to current use value debates. And there is the perception about unfairness. So, if you're a landowner and you have your land compulsorily purchased at less than market value, you're worse off than you would be if you were able to sell it on the open market. Those are all the criticisms [correction: Those are the criticisms] that are made. But the counter to that is that, as Toby has said, we've got a system that has failed, okay, and we need to have some radical ideas. And this is definitely a step in the right direction. It remains to be seen how it will be used, it remains to be seen how much it'll be snarled up in the lands tribunal [correction: the tribunal], but let's at least see where it goes, and it may well be that, because it's only going to be used in tightly prescribed circumstances, then it might be a step towards a wider solution whereby this actually applies to all land transactions and therefore that's going to level the playing field.

And that sounds desirable. The reality is that is not the current position and so authorities would be liable to challenge under European human rights and probably lose, and so, 'Let's give it a try' is sort of—forgive me for saying this in a pejorative way—an academic view, but the reality is that local authorities, who are up against it, are not going to make those choices.

On the legal challenge point, I know that that was looked at very carefully through the course of the legislation being written. I don't have sight of the advice from counsel, but I know that multiple opinions would have been sought, and I'm fairly confident that the European Court of Human Rights issue is not an impediment. So, I don't think we can say—

Well, it is used to challenge CPOs.

Sorry?

It is used to challenge CPOs.

I don't think that the current legislation, as set out, that enables land to be, in theory, acquired excluding hope value is going to be taken to court and lose as a matter of course because of the European convention on human rights.

I just think this is a red herring. In Germany, Holland, everywhere I've looked at, they appear to be able to assemble land at something like existing use value plus without having any problems with the European Court of Human Rights. I think it's only because we obsess with lawyers trying to maximise fees and so on that we've given an excessive value to land. In Holland, I think the general principle is that the value should be 25 per cent of the completed value of the development. And if we started with a general rule like that, if we started by identifying areas in plans as either growth areas or regeneration areas, forget about—. The mass of sites aren't affected, the mass of land isn't going to be changed in any way, so, we can get away from this ideological issue about the rights of the landowner versus the rights of the state and start thinking about what we need to do to improve our commonwealth for everyone's benefit, and, as I say, start what already is accepted as working in countries or cities or places that are comparable.

I agree with you that that's what we should be aiming towards, but that's not where we are, and the reality of austerity-hit local authorities and a very risk-averse culture within local authorities is that they often don't feel that they have the energy for that fight.

That is undeniable, but it is also true, as Edward just said, that we do have new legislation on this that has yet to be tested, because so far no local authority has tried to use it. And, critically, this will be an issue for Welsh Ministers—they have the power under the new Act to disapply hope value. And it will have to be tested in court—of course it will—and I would expect the first couple of cases probably to be quite contentious. But if, as Edward says, the legislation has been drafted correctly, it should go through, we should win those cases, and then that will have a seismic difference in the capacity of local authorities and their confidence in future. And I would ask the Welsh Assembly Government to think about whether, actually, they are the ones that have the political courage to step forward and actually use this legislation for the first time, because I don't see it happening from Westminster at the moment.

Okay, thanks for that. I'm going to bring Edward in briefly and then we will have to conclude this session.

Just to come back on Mr Waters, ideas will remain academic and seemingly impractical until they are tried, okay. So, we need to try it.

Yes, okay. Well, listen, thank you all very much. It's been a very interesting session, and thank you all very much for your views and evidence to committee this morning. You will be sent a transcript to check for factual accuracy in the usual way, but thank you all very much. Diolch yn fawr.

Okay, committee will break briefly until 11:05.