5. Statement by the Cabinet Secretary for Finance: Vacant Land Tax

– in the Senedd at 4:59 pm on 15 May 2018.

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Photo of Ann Jones Ann Jones Labour 4:59, 15 May 2018

(Translated)

The next item is the statement by the Cabinet Secretary for Finance on vacant land tax. I call on the Cabinet Secretary for Finance, Mark Drakeford.

Photo of Mark Drakeford Mark Drakeford Labour 5:00, 15 May 2018

(Translated)

Thank you very much, Deputy Presiding Officer. In February this year, I was able to inform Members of the Welsh Government’s intention to test the new Wales Act 2014 mechanism to establish Welsh-specific taxes by seeking the devolution of powers for a Welsh tax on vacant land. This is an entirely new process, which neither the Assembly nor the UK Government has undertaken before. The first step was to agree the necessary process steps to securing the transfer of the relevant powers.

Photo of Mark Drakeford Mark Drakeford Labour

As a result, Dirprwy Lywydd, a protocol has now been agreed, as set out in my letter to the Chair of the Finance Committee on 29 March last. That protocol sets out a two-stage process. First, the Assembly, along with both Houses of Parliament, will be asked to agree a draft Order in Council, which will specify the power for the Assembly to introduce a tax on vacant land in Wales. If that first stage succeeds, it will then be for the Welsh Government to bring detailed proposals before the National Assembly to enable Members to decide whether to pass any proposed tax into law.

While the UK Parliament has a part to play in the decision to devolve these powers to Wales, it is for this Assembly to determine how such powers are to be used. I'm confident that the process we have managed to agree properly reflects those different responsibilities.

Of course, Dirprwy Lywydd, the process for transferring powers not only requires the powers to be transferred from the UK Parliament; they also have to be accepted by this Assembly, should the Assembly choose to do that. I remain committed to joint working with Members in this regard, ensuring that the Assembly is supplied with all the relevant information, and that should happen throughout this process.

If that is the process that we've agreed, I thought it would be helpful to set out expectations for the next steps. It's my intention that we will be in a position by the autumn of this year to submit a formal request to the Financial Secretary to the Treasury, and by the spring of next year, I would hope that legislation will be laid before the Assembly and the UK Parliament to seek agreement to the transfer of these powers.

Dirprwy Lywydd, if these are the means by which the new Wales Act 2014 possibilities are to be tested, I turn now to the purpose of a vacant land tax itself. As discussed previously in this Assembly, taxation can serve a variety of purposes. A vacant land tax is intended to incentivise positive behaviours, rather than primarily to raise revenues. By increasing the cost of holding onto land that has already been identified as suitable for development, a vacant land tax could help to change the balance of incentives so that we encourage the development that will help to provide much-needed housing and economic opportunities in Wales. And at the same time, it is the tax that can be put to work to support our regeneration objectives.

The goal is not to make life more difficult for the majority of responsible businesses and landowners who do the important work of developing land for commercial or residential use. The aim is, rather, to bring about changes in the behaviour of the minority who look to speculate unfairly on rising land values, and to tie up land that could be used to the benefit of people and communities.

Dirprwy Lywydd, for taxation to be an effective way to encourage positive behaviours, it has to be considered not in isolation, but as part of a suite of solutions designed to encourage the effective use and development of land in Wales. It is but one tool available to us in pursuit of that purpose, but the purpose is an important one. Research commissioned by the Welsh Government into stalled development sites found that just over 400 sites were stalled across Wales at the time of publication, in 2015. These stalled sites primarily related to residential development, with at least 7,600 homes being tied up within these sites across Wales.

Last month, my colleague the Minister for Housing and Regeneration announced an independent review of affordable housing supply in Wales. Amongst other things, this review offers us the opportunity to explore ways we can increase the number of homes built through the Welsh Government’s contribution to social housing, and to look at the quality of standards of that affordable housing. We have to continue to be concerned, not just with the quantity but the quality of the homes being built in Wales. 

Dirprwy Lywydd, while a vacant land tax may be a new idea for us, it is certainly not novel in other parts of the world. The issues we face are not unique to Wales; they exist across the United Kingdom and beyond. In England, as a result of remarks made by the Chancellor of the Exchequer in an earlier budget, there is an acknowledgement of these issues, with a review now taking place of the gap between planning permissions granted and housing starts. Chaired by Oliver Letwin, that inquiry issued a preliminary statement in March, identifying factors holding back development once planning permissions have been granted. The review intends to provide a full report in time for the Chancellor’s autumn statement later this year.

Now, other countries are already using tax to help address this problem. In the Republic of Ireland, as Members here know, they have recently introduced a vacant sites levy in order to encourage the development of vacant and derelict land. Similarly, municipalities in the United States have also successfully used taxation to encourage development of derelict land.  

The international picture suggests that taxation can certainly be a powerful tool to drive development. That is not to say, of course, that these experiences in these other jurisdictions can simply be picked up and dropped into the Welsh context, but there is certainly enough evidence to suggest that this is a route worth exploring further. 

Dirprwy Lywydd, it is a fundamental principle of the Welsh Government that policy development, whether tax or otherwise, should be informed by evidence. The first stage of our work will therefore be to work further on building that evidence to ensure that we reach the best possible understanding of the issues and how our interventions could address them. By pressing ahead with this work now, we will be in a strong position to make necessary decisions if and when the necessary powers are agreed. There are important questions as to how we can incentivise positive behaviour in the public as well as the private sector, and how the policy can serve to encourage the regeneration of derelict or underused urban land, as well as to deliver housing.

I recognise that it is only through close co-operation with our stakeholders that we can ensure that we achieve our objectives without placing an unintended burden on responsible developers and builders. To that end, I'm grateful to all of those who have already begun to contribute to the development of these proposals.  

Photo of Mark Drakeford Mark Drakeford Labour 5:07, 15 May 2018

(Translated)

Deputy Presiding Officer, the advisory group on taxation is already helping to inform our thinking, and we have begun to engage with Wales’s planning authorities, house builders and a number of business associations. I intend to establish a particular group, made up of those with a close interest in this area, to advise on policy development. In this way, as we begin the process of securing the powers, we will continue to work closely with stakeholders to help to inform future decisions on whether to proceed with a vacant land tax.

Deputy Presiding Officer, it remains the early stages of this untested process of devolution in Wales, one that we haven’t tried before. I hope that I have been able to set out the progress made to date and the plans for further development over the coming months. I will, of course, continue to keep Members informed as we move through this new process. Thank you.

Photo of Nick Ramsay Nick Ramsay Conservative 5:09, 15 May 2018

Can I welcome the Cabinet Secretary's statement today? You certainly have to be a jack of all trades in this new tax world, don't you, Cabinet Secretary? Many of the taxes involve land in some way, so I'm sure you're becoming an expert in your own right.

As you said today, this is new territory for the Welsh Government and for this Assembly, and I appreciate that your statement today falls into two parts, primarily, as you've explained. So, you've got the testing of the new tax machine through the mechanisms on the one hand, which can then be employed with other taxes, of course, and then the actual tax, the vacant land tax, on the other—the tax that you've decided to progress. This part of the process—the third part of the process—is as important as the development of the tax itself.

I suppose my first question is: what sort of timescale are you looking at here? As I say, I appreciate that these are early days and you can't be exact on that, but, clearly ,we're at the start of the process and we've not been through this before. What sort of rough timescale would you anticipate each of these different segments of the process being played out to, so that we move to a point where the tax is either decided upon or not decided upon? As I say, I appreciate there's a number of hurdles to jump through when it comes to giving that answer. You've mentioned the different permissions required from the Assembly and from the Houses of Parliament, but if all that goes to plan, at what point do you see a new tax coming into operation?

Turning to the tax itself, clearly, in many ways, the jury is still out because there are a number of different scrutiny levels that that would have to go through before it was decided on, and there'd be amendments to it and what have you. I do think that there are, from what I've seen, some sound reasons for implementing a vacant land tax, and you've touched on some of those arguments today. I've looked at the statistics, and it's estimated that the UK housing developers are holding around 600,000 plots of land that have planning permission but remain undeveloped. I think you had the Welsh statistics at your fingertips. I didn't have those—I had the UK level, and it clearly is a staggering amount of land currently in the bank.

According to the Land Registry, this also includes the practice of buying undeveloped land with the intention to split it up into smaller plots to then sell at inflated prices—a practice that I'm sure has gone on for some time. Of course, if that is happening, it does mean that people who are waiting for houses, and waiting for houses to be built, are having to wait longer than they otherwise would because of that. The potential—. I should say that the focus is on the potential future value of the land against the current selling price. Sorry—that was the final bit of that sentence that I didn't finish.

The UK Government have said that they'll be looking at this whole area themselves. Are you liaising with them on that, or with the officers in Westminster? I suppose key to this question, and key to the development of all taxes, is: are you confident that the tax that you are proposing is actually required—that it will resolve the issues that we're addressing? I fully understand what you're saying about tax being a valuable tool to change behaviours, but, of course, tax isn't the only option. Just because you have a tool that you can use, it doesn't mean that you always use it if there might be other options that can be used to ease the situation.

As I understand it, according to Oliver Letwin's interim report to the UK Government, the biggest driver of building rates once permission is granted for large sites appears to be the absorption rate—the rate at which newly constructed homes can be sold without distorting the local market price. The type of home, as well, is a factor in that, so, clearly, this is a complex landscape that we need to work within.

You mentioned other countries—I looked at the Irish example. What lessons do you think can be learned from countries with a vacant land tax? I note that the Irish levy has already been criticised by some leading estate agents across the Irish sea. The increase in the rate there to 7 per cent has led to fears that boom and bust could be amplified beyond what it otherwise would be without that. As land is viewed as a raw material, it's natural for developers to carry a stock of development land, but they will not carry a land bank in a slow market, meaning that when a recovery follows, developers will spend the early years on site assembly rather than the house building that they could and should be doing. I know that that's probably a question for a future phase of this, but I think it's key to the development of this tax, so I'd be interested to know what evidence you're gleaning from the example of other countries.

So, I welcome your statement today. I think it's fine as far as it goes, Cabinet Secretary, and I think the Assembly realises that testing the machinery is all-important at this phase. Whilst many of these questions remain for the future, I think it would be good if you could put some meat on the bones at the moment as to what discussions you've had with other Governments and with the sector.

Photo of Mark Drakeford Mark Drakeford Labour 5:14, 15 May 2018

I thank Nick Ramsay for those questions. He's quite right that the statement today is an updating statement, designed to make sure that Assembly Members know where we have got to in the development of this new possibility for devolution. We are not at all in a definitive place in relation to a vacant land tax, but I thought it was important—that Members would want to know both where the process had got to and where the thinking on developing policy ideas had arrived at as well.

In relation to the timescales that Nick Ramsay asked me about, as I said in the statement, I hope that we will be in a position to make a formal submission to the Treasury in the autumn of this year. There's a lot of work going on with the Treasury to make sure that we've got organised the material that they will need in order to be able to make a decision at that point, so we're doing that work now and we'll formally submit it in the autumn. The Treasury will then have a job of work to do in considering the material that we have provided. I think their rules will require them to carry out a brief consultation on our proposals themselves, and if that is successful then in the spring I hope we would be in a position where the Treasury would take the necessary Orders through the UK Parliament, and it will be for the Assembly to decide whether or not it wanted to take on the new power. 

After that, my intention would be to consult on the idea of a vacant land tax here in Wales, and to have a greater depth of detail beneath what we are proposing. I remain open-minded about where all that will take us, and if the evidence that we got in through consultation persuaded us that this was not an idea that had value here in Wales, then we would have to learn the lesson of that consultation. I embark on it with some confidence that this is a useful new tool that we would want to develop, but if we're serious about being evidence informed in the way we make decisions, we have to be open-minded enough in this very new area to be open to the fact that consultation might provide evidence that would point in a different direction. So, I don't expect the process to be rapid. I think it's more important that we do it properly than we just rush to make use of a power that we've obtained. I want to do it thoroughly and I want to make sure that those who have an interest in it know that their views and their voices will be properly heard in it all. 

I start from the point of view that this is, as Nick Ramsay said, just one tool that is available to help us in this area, but I believe it's very likely to be a useful and effective one, but it's not the only factor—absorption rates and other factors are important as well. In the meantime, we continue to learn the lessons where we can from others. The Republic of Ireland, the Government there's been very generous with giving us the time of its senior officials to make sure we've learnt from their experience so far. Nick Ramsay asked me what I thought that the lessons were; I'll just identify two at this point. I think the first thing that they said to us was that it's very important that this is a planning-driven idea, not a tax-raising idea. You're doing it in order to make effective the planning system and the permissions that it provides. And, secondly, I think they said to me, 'Don't forget that regeneration is just as important a purpose of this tax as housing.' Housing tends to be the obvious thing that you refer to, but regeneration is an equally important policy objective for a vacant land tax.     

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru

(Translated)

Thank you very much, Deputy Llywydd. I welcome today’s statement from the Cabinet Secretary. Of course, Plaid Cymru welcomes the fact that we are using these new powers, and that there is a process in place to reach agreement with the Westminster Government as to how these powers should be transferred to Wales. It is important, as the Cabinet Secretary has said, that we look at the evidence, and we certainly wouldn’t oppose such a tax in principle, but we would want to see that this is going to work in a Welsh context and would tackle that fundamental question as to whether this is what is holding development for housing or regeneration back in Wales, or whether there are other factors at play here.

In that context, you say in your statement that you want to establish a specific group as part of the advisory group that you have to look at this area. May I just ask you to tell us a little more about how you hope that group will work? Will it be a group that will be outward facing? Will it be gathering evidence? Will it be available to attend Finance Committee, for example, to share its findings? Or, is it an entirely—I won’t say 'secretive', but is it going to be behind the scenes within Government? What sort of group is this? I ask so that people can feel confident that the work is being done in the broadest means possible.

You also say in your statement, and I agree entirely—and it’s what I’ve just mentioned, if truth be told—that there are a number of factors that impact on the fact that land is left undeveloped in Wales, despite having planning consent. You have another proposal in terms of sites that are stalled, as you describe them, and in the budget of this year you mentioned using financial transactions capital for that purpose. I’m not sure whether you can give us an update as to whether that is working, but specifically, how do you believe that that would go hand in hand with any proposed vacant land tax? Because clearly if the availability of funding isn’t shifting some of these sites, is the tax going to mean that this land is going to be shifted? There seems to be something else that is holding these developments back, and in that context, of course, planning and consent for wayleaves and so on, there are a number of factors that can impact upon land and the development of land. So, if you could just give us some idea of how you are going to consider this bigger picture. I accept that you say in your statement that you will do that, but what specific steps will you take in order to ensure that the tax will meet any specific needs and demands?

May I also ask, on the final point—a point that has been raised relatively recently relating to land in Wales? The Labour Party at a UK level has talked about the right to purchase land for affordable housing—it’s a sovereign land trust, as it’s been described, I believe. Your Cabinet Secretary for rural affairs, who is responsible for planning, has mentioned that this is a possibility in Wales or is at least something that could be considered. Again, this is another development that will have to fit in to any tax development of this kind, because we are talking about a number of different ways of skinning a cat here, as it were. So, how does this concept fit into these proposals? And will you, when you transfer—? Let’s say that you do decide, to proceed with this tax, will we as an Assembly be able to consider the tax, not as a stand-alone issue, but in the context of these packages of policies that I’ve mentioned, and there may be others, so that we have a more comprehensive idea of the broader policy of Government towards land, the development of land and planning?

Photo of Mark Drakeford Mark Drakeford Labour 5:22, 15 May 2018

(Translated)

I thank Simon Thomas for the questions. I agree with what he said at the outset. I’m eager to use the new possibilities that we have and that’s why we have started on the process of testing the new mechanism and we’re creating the mechanism, because there wasn’t a mechanism there before. So, one of the purposes of doing this in the first place is just to learn the lessons that will emerge from trying this for the first time and to see, as Simon Thomas said, how this is going to work in the Welsh context.

That’s why I’m going to pull together a new group. We’re going to use a couple of people, I think, who are already in the group that we have that advises the Government on taxation generally, but I want to draw into that group a number of people who have a specific interest in this area—people who work, people who develop land and people who build homes, but groups such as Shelter as well, who have other aspects to contribute. I’m eager to draw into that group people who do have experience in the area of—well, I’ve forgotten the word in Welsh, of course—in the process of regeneration. Adfywio—yes, thank you very much.

So, how will the group work? Well, I haven’t spoken to the group members yet. I think the intention is for us to have advice as a Government, and I’m sure there'll be a number of people in the group who usually come to give evidence in terms of the work that they do when the Assembly committees do their inquiries. But, I’m happy to talk to them if there are other possibilities for them to do some work to help the committees as well.

In terms of the stalled sites fund, just to say, as some Members know, that we have earmarked new funding to help those sites to come onto the market. 

Photo of Mark Drakeford Mark Drakeford Labour 5:25, 15 May 2018

There are sites in Wales that cannot yet be brought to market. They wouldn't be saleable in the state they're currently in, so the stalled sites fund is intended to help those who have possession of those sites to be able to do the necessary work that would allow them to be turned into profitable use. So, they are a couple of steps behind where a vacant land tax would come into things because, as I said in my statement, it is not the purpose of the vacant land tax to penalise anybody who is making every effort to bring a site that has the necessary permissions into profitable use. The stalled sites fund is for sites that are not yet in that condition, and we hope to create a sort of chain that will bring them to the market and to profitable use in due course.

I agree, again, with what Simon Thomas said about when the Assembly comes to consider a vacant land tax and we have the consultation results and so on: it will be important to put that in the wider context. And that's where the work that my colleague the Minister for Housing and Regeneration has embarked upon in an independent review of affordable housing, and how we do more in that area in future, comes in. That will help us to create that wider context in which this particular tool and the contribution that it can make can be properly assessed.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP 5:26, 15 May 2018

I welcome the statement, and I'm in the paradoxical position of very much being in favour of the devolution of the power to tax, but not actually very keen upon exercising it. It's a point I've made before that I'm in favour of tax competition because I think that it, in general, tends to go against increases in taxes around the United Kingdom. But I wonder whether this vacant land tax has been chosen because it's probably the least likely of all the possible taxes to affect more than a very small number of people. I think it's quite a good tax in that respect to choose in order to test the system, which I'm very much in favour of.

I have actually read the Welsh Government's 'Stalled Sites and S106 Agreements' document. It's not exactly a page turner, and it was not designed to be so, but what did strike me from that is how small is the number of instances that might be affected by this tax, if it's designed to pinpoint cases of land-banking where developers are deliberately sitting upon land that ought otherwise to be developed and which they could develop but they have decided not to do so. Of course, there are times when there is an incentive to do this. I well remember, as I'm sure the Cabinet Secretary himself does, in the early 1970s that there was a controversy about the Centre Point building in London owned by Harry Hyams, which was totally unoccupied for many, many years because the notional value of the building was greater as an unoccupied building with the potentiality of sale as such than if it had been full of offices paying rent. That was regarded as a scandal at that time, 40-odd years ago.

But the point I want to make in this respect is that, if we are to have a vacant land tax, it has to be sensitive to economic circumstances. The early 1970s was a period of rapidly rising, indeed unsustainable, property price rises. And immediately after that, in 1975, there was a collapse in the market and everything went into reverse. So, we have to be flexible enough to be able to cope with the circumstances because what is a scandal in one instance is just the unfortunate result of economic circumstances in another, and we don't want to, as the Cabinet Secretary has already said, find that businesses are unfairly penalised for not doing what is, at the time, impossible to do for a variety of reasons. 

He mentioned the Oliver Letwin study that is currently going on. Again, what strikes me about reading his letter is how narrowly focused that seems to be at the moment as well, because he's looking only at large sites for development at the moment, and in the course of that study he recognises that there are all sorts of economic or planning or technical reasons for those developments not being proceeded with. And in respect of the social housing aspect of this, again, because social housing under section 106 agreements is funded by successful sales of the rest of the development, if those properties can't be sold, then, of course, there is no money available to build the social housing.

So, this is a very complicated matrix that has to be understood and, therefore, I feel that if and when a tax is constructed it's going to involve a very complicated piece of legislation that actually applies in practice to only a very small number of potential instances. So, whilst I'm in favour of having a go at this—and I fully take the point that the Cabinet Secretary made that he is going to base his decisions on evidence; that's a very laudable statement to make—we will need, I think, a lot more evidence than is provided for in this stalled sites and section 106 agreements document, and we'll need to look at, I think, a large number of academic studies of what's happened in other parts of the world as well. So, I hope all that will be made available in a convenient form for Members of the Assembly to debate it, but I wish him well with his enterprise even though I will suspend judgment on what ultimately emerges. So, I can't promise him I'm going to support what he comes up with at the end of the day, but I'll certainly support the process.

Photo of Mark Drakeford Mark Drakeford Labour 5:31, 15 May 2018

Of course, I understand that the Member takes a different view on the part that taxation can best play in the way that we conduct our affairs. He is right to say that a vacant land tax was partly chosen because I didn't want to send an idea around the circuit that would overwhelm what is a very nascent process, and some of the other ideas we talked about are much more significant ideas, but I felt that we might not get the lessons from the new process if we found ourselves dealing with ideas that are themselves of considerably more significance.

The Oliver Letwin review: I'm not sure how much we will be able to draw from it for Wales, but I cited it because it has its genesis in the figures that Nick Ramsay helpfully quoted earlier and shows that the issue of permissions that have been granted and the work that the public has done in order to get land into that position isn't always matched by the use that those permissions are then put to, and it's not a Welsh-only issue.

Of course, Neil Hamilton is right to say that more evidence will be needed, and I tried to indicate in my statement that my aim is to use the period between now and when any power might be devolved to Wales to begin to build up that evidence base so that by the time we come to have a consultation and to look as to how those powers might be used we will have a much richer body of evidence ready to share with others to see how this might be taken forward.

Photo of Mike Hedges Mike Hedges Labour 5:33, 15 May 2018

Can I welcome the statement? Going back to the basis of taxation, we have two types of taxation, that which is there to raise revenue for public services, such as income tax, and then we have taxes that are behaviour taxes. And the Cabinet Secretary brought one of those in this year, which is the landfill disposals tax, which makes recycling cheaper than landfill disposal in order to get people to do good things and recycle, and if the landfill tax was set at a very low level then you wouldn't have people recycling at the level they are. And then, of course, you've got the sin taxes, like alcohol and tobacco, which are a mixture of the two. I put this very much into somewhere between the sin taxes of a mixture of the two and the landfill disposals tax, which is a behaviour tax. So, it's a behaviour tax plus: it's a behaviour tax that we hope will bring us some money as well. I wonder if the Cabinet Secretary accepts that as the way it's going forward. 

It needs to incentivise positive behaviour by increasing the cost of holding on to land. Far too many people hold on to land and just let the value go up, so they actually increase their book value of the land without actually doing anything with it, which is good for the companies but not good for our economy, and so I think it is important that we find some means by which we can get this land out into use. We're all aware of land banking and the slow release of land to keep housing supply well below housing demand in order to keep house prices artificially high and land values artificially high in order that landowners and the builders can increase their profits.

We know other countries are using tax to help address the problems, and we know what the Republic of Ireland has done—a vacant sites levy—and I think, if Ireland can do it, I see no reason why we cannot do it successfully. As the Cabinet Secretary also knows, of course, my personal preference was for an environment-type tax. If I'd been sat where he was, we'd have an environment tax rather than this, but I see nothing wrong with this as a way forward.

Can I just ask the Cabinet Secretary to solve a problem, which we're all going to get? Can he just confirm this will not be a tax on people's front gardens, which is what we're going to see opposition parties putting out in the future? It's not going to tax—. My front garden is not going to be taxed, your front garden is not going to be taxed, and nobody else's front garden is going to be taxed. It's going to be a tax—[Interruption.] It's going to be a tax on land that is there available to build on, with planning permission, that people are hanging on to in order to build book value and to control the release of land.

Photo of Mark Drakeford Mark Drakeford Labour 5:36, 15 May 2018

Mike Hedges regularly reminds us of the different purposes that taxation fulfils—from revenue raising to behaviour shaping—and he's right, this tax has some elements of both. In the Republic of Ireland, bringing in Nick Ramsay's question about lessons to learn, I remember being told by senior officials there that their first ambition was that the tax must raise sufficient revenue to cover the cost of the work involved in bringing about the behavioural change that the tax is intended to generate.

Mike is right: it's the windfall nature of rising land values that people find objectionable, when it is public investment in providing those permissions that causes the value of the land to rise. So, the public has made the effort, and yet it's the private individual who gets the gain, and that's what people find objectionable.

Of course, we did consider an environment tax—a plastics tax, as we were talking about it then. The reason that I decided not to use that as our first testing of the machinery was not for the reason that I mentioned to Mr Hamilton, that it could've overwhelmed the mechanics, but because the Chancellor announced in his autumn statement a call for evidence with a view to creating a UK-wide tax in this area. And I just knew, or felt I knew, that if I'd sent such a tax down the line to test our machinery the answer would have come straight back: 'Well, there's nothing we can do to give you an answer on that until the call for evidence has been completed.' So, we would've stalled the process at the very outset, and that's the reason why I decided in the end not to pursue that avenue.

As far as Mike Hedges's front garden and indeed my own Canton back yard are concerned, I can confirm that both are safe from a vacant land tax.

Photo of David Melding David Melding Conservative 5:38, 15 May 2018

I do think how we control the supply of land is a really important issue; I'm not convinced this is going to be a particularly productive way to do that, but I'm certainly open to evidence. There's a real public interest here—the greatest windfall, I should say to you, Minister, of course, is when land is zoned for building when it had a previous use, especially if the previous use was agricultural. And, you know, there is a real—. The biggest factor in high house prices is actually the price of land. So, there is a real public interest to have a more equitable system over some of these forces, which is why I quite like Oliver Letwin's more holistic examination of this particular area. But 7,600 homes could be built if all the current land plots were used and that's over a year's supply of housing at our current rate that we need to increase that.

I think a couple of Members—Neil Hamilton mentioned it directly—. We need a system, if we're going to go down this track, that is flexible enough to take account of market conditions because some people could get penalised in a downturn when they've got every intention, actually, of using the land productively, but, for whatever reason, cannot get all the capital together to undertake the building programme. And so I think (1) you could set the bar quite high; you could say that the tax only gets applied after 18 months or two years—you could do that, and that would give you time to assess market conditions—or, if you're going to do it after a year, have certain ways of being flexible, should market conditions require that. So, I think it is worth us looking at this, but, as I said, I'd like to reserve my position until we see further evidence. And, as you said, the model is used in some other countries, so I think a further examination of the situation there—particularly over how it does produce a more effective market, because I think that's really, really important. We could end up undermining the market at certain times if we're not careful.

Photo of Mark Drakeford Mark Drakeford Labour 5:40, 15 May 2018

I thank David Melding for what he said. He's absolutely right that there is a fundamental public interest in all of this. I give him an assurance that, when we come to do the detailed work on how a tax might be designed, we do not start out with the intention of penalising anybody who is making every effort to bring land into productive use. And there will be some quite sophisticated thinking that will need to be done to make sure that, as market conditions vary—and they vary in different parts of Wales already; it's not just the cycle, is it, it's the geography as well—we design any tax in a careful way to make sure that it captures those people who we want it to capture and it doesn't, in an unintentional way, end up penalising people who, in the way that you put it, have every intention of bringing that land into productive use.

Photo of Ann Jones Ann Jones Labour 5:41, 15 May 2018

Thank you. And, finally, Vikki Howells.

Photo of Vikki Howells Vikki Howells Labour

Diolch, Dirprwy Lywydd, and thank you, Cabinet Secretary. As you will know, this is an issue of real interest to me and was the subject of my short debate earlier in the year. So, I have two questions for you today.

Firstly, I note your comments about a vacant land tax incentivising positive behaviours, but do you agree with me that a central aim of it will also be to tackle the harmful behaviours associated with land banking? For example, I can think of numerous examples from my constituency where a piece of disused land, sometimes very sizeable, lies at the heart of a community and is kept in an appalling condition, impacting on community well-being. I quoted a constituent in my short debate who spoke of 11 years of hell living next to such a plot. In what way do you think the vacant land tax could be used as a lever to tackle these sorts of problems?

Secondly, Cabinet Secretary, I know you've also previously spoken about the importance of defining vacant land, saying this is key to both the operation of the tax and achieving the policy effect. In particular, I think it's important that derelict buildings, not just empty plots of land, which are often the community eyesores I alluded to earlier, are included in such a definition. Would you be able to provide us with an update on your thinking around this, please?

Photo of Mark Drakeford Mark Drakeford Labour 5:43, 15 May 2018

Well, Dirprwy Lywydd, I thank Vikki Howells for those questions. I was hoping that she might be called to speak on this statement, because I wasn't able to be here in the Chamber during the short debate, although I've read the transcript of it since, and the Member brings forward in that short debate compelling evidence of the impact that land lying derelict, which could be put to proper use, has on the wider community. And, in answering her questions, it gives me a chance just to re-emphasise a point I tried to make towards the end of my statement, which was that this is as much about regeneration and tackling dereliction as it is about housing issues as well. Because we know that land that lies there doing nothing doesn't just stand still, it becomes a target for things like fly-tipping and other forms of dereliction and that brings untold misery to those people who live nearby. In the worst examples—and some of these were cited to me in the Republic of Ireland—you then get a downward spiral in which people start leaving the area, where buildings now stand idle as well as land, and, before you know where you are, you have a whole street, which previously was in good and productive use, where people no longer wish to live. And that's why I said, in answering earlier questions, that applying a vacant land tax can be just as important a tool in relation to preventing that sort of dereliction and promoting regeneration. Because the other side of the coin of promoting good behaviours is to prevent harmful behaviours in the way that Vikki Howells said, and her interest in this topic and the contribution that she made in the short debate will definitely make an impact on our thinking as we take this idea forward.

Photo of Ann Jones Ann Jones Labour 5:45, 15 May 2018

Thank you very much, Cabinet Secretary.