That’s it then, we’re off, part 2

(… continued from That’s it then, we’re off, part 1 posted on 17 Mar 2016).

At the end of my last posting I accused the HS2 Select Committee of quitting its task before it had adequately discharged its duties, and promised that I would justify this charge. I said then that the Committee’s final report gave a “clear indication” of this; it is simply littered with loose ends that the Committee has failed to tie up.

I’m not alone in thinking this; I have found one authoritative voice who appears to agree with me. Jonathan Stott is managing director of Hamer Associates, a specialist property consultancy. In an article for Construction News, Mr Stott informs us that his firm represented “landowners and businesses affected by the [HS2] proposals” in the proceedings of the Select Committee and opines:

“For those who have been lobbying for changes or clarification of how they will be affected by the project, it was hoped that the committee’s report would deliver clear direction to HS2, providing certainty as to whether or not their arguments had been successful.”

In his view the Select Committee has failed to provide this clear direction and has, instead, “opted to allow a large number of unresolved issues to continue to spin”. He complains that the final report resorts to “pointing petitioners in the direction of the House of Lords select committee” to resolve these outstanding issues, and concludes that “for many long-suffering landowners and businesses, the longed-for certainty seems a long way away”.

Mr Stott has every justification for making this assessment; I have counted no fewer than ten instances in the final report where the prospect is suggested of taking outstanding issues to the Lords should they remain unresolved (see footnote 1).

The Committee’s evident reluctance to press for a resolution of issues where it has identified the potential for petitioners to be treated unfairly is, perhaps, well-illustrated by the position that it has taken over capital gains tax liability. This issue is explained succinctly in the final report (see footnote 2):

“Farmers whose land is compulsorily acquired by the Promoter may find themselves landed with a large and unwelcome capital gains tax liability if unable to reinvest the purchase proceeds in replacement land, premises or fixed plant within the normal ‘rollover relief’ periods. The size and scale of the HS2 project means that competition for replacement land will be intense, and real estate prices will probably increase. The estate of any farmer unfortunate enough to die while the purchase proceeds remain uninvested may also incur inheritance tax liability.”

The Committee expresses the opinion that “the likely intensity of competition for land along the HS2 route merits its treatment as a special case” and that it was looking to HM Treasury to extend the period to which rollover relief applies and “make it clear that the enhanced rollover relief periods will apply to all those whose land is acquired for the project”, suggesting that ten years would be a suitable period for such an extension (see footnote 3).

At least one Member of the Select Committee indicated that he was prepared to stand his ground on this issue. Sir Peter Bottomley expressed his view for the record of the Committee’s proceedings that he and his colleagues should “put the Government on notice” that the Committee would not be able to finish its deliberations “without hearing specifically either from a responsible person at HMRC or from a Treasury minister, as to how they’re going to deal with [this issue]”, which he believed the “Government need to face explicitly”. Some support for Sir Peter’s view – that it was at least a matter yet to be resolved at that stage, if not necessarily for the impact that this may have on the Committee’s deliberations – came from his Chairman, who quipped that the response that the Committee had received to its requests for reassurance from the Government were that “taxmen are reasonable people”, but that the Committee didn’t “wholly support that” proposition (see footnote 4).

I don’t know what you think, but this sounds to me like Sir Peter was making a threat to stage a strike similar to the action to which the Crossrail Select Committee found itself resorting in order to (successfully) persuade the Government to see things as it did (see footnote 5). It may have, at the very least, been the trigger that prompted the Chief Secretary to the Treasury, David Gauke MP, to write to the Chairman a few days later.

In his letter, Mr Gauke maintains that existing discretionary provisions will “ensure that many individuals affected by HS2 will not face an unexpected CGT bill”. He makes no specific promises to enhance the rollover relief periods for HS2, only that the Select Committee’s proposal will be “noted and considered” within the normal tax reviews that are carried out for the Budget and Autumn Statement. He warns, however that:

“… the Government will need to balance providing certainty for some individuals with other considerations, such as the impact on other projects and the extent to which the current provisions are sufficient.”

On the evidence of the final report, the Select Committee appears to have meekly accepted this noncommittal response – so no strike then! The report merely complains that the Committee “wished for greater certainty and clarity”, a sentiment that I am sure Jonathan Stott would echo.

(To be continued …)

Footnotes:

  1. See paragraphs 59, 101, 161, 167, 202, 251, 280, 304, 352 and 360 of the final report.
  2. See paragraph 361 of the final report.
  3. See paragraphs 362 and 364 of the final report.
  4. See paragraphs 176 and 180 of the transcript of the morning session of the HS2 Select Committee held on Wednesday 13th January 2016.
  5. As reported in my blog Lessons from history, part 11 (posted 15 Aug 2014).

 

 

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