Property and business owners suffering from compulsory purchase on the HS2 rail route have been dealt a further blow from the Government after it has reneged on a commitment to penalise companies like HS2 Ltd for taking land and failing to pay compensation on time.
The CLA which represents landowners, farmers and rural businesses has received a letter from the Ministry of Housing, Communities and Local Government stating it has commissioned a review into plans to impose a penal rate of interest on late compensation payments. With the deadline for HS2 Ltd to start taking land fast-approaching, the CLA says the failure to ensure a meaningful penalty for acquiring authorities who do not pay compensation on time reneges on the commitment to make the compulsory purchase system clearer, fairer and faster.
The previous government committed to introduce a rate of 8% above the Bank of England base rate for late compensation and set an improved rate of interest of 2% above base rate on the balance outstanding after the date of entry. Currently, interest is paid at 0.5% below base rate on all claims.
CLA President Tim Breitmeyer said: “People affected by projects like HS2 have already suffered serious disruption to their businesses and lives. It is simply not right to take any persons property and fail to pay them. If they do not receive timely compensation they need to borrow in order to relocate or reinvest. This puts them under immediate financial pressure and makes it impossible to move on and rebuild lives and businesses.
“The Government committed to making the system fairer. This open-ended review means the reforms risk failing to deliver meaningful change in the behaviour of acquiring authorities as promised. Without a punitive rate of interest in place they have no incentive to change their practices, which are characterised by delays and late payments.
“Reneging on this promise significantly undermines the chance of fair payments not just for those affected by HS2 but by all large national infrastructure projects.”
The letter received by the CLA says that following further reflection “on the possible unintended consequences of the previously proposed rates” the Government needs to consider “potential gaming risks” before finalising its approach. The CLA says this is a risk it does not recognise, and is disappointed the Ministry states it will “engage further with stakeholders to review the interest rate arrangements, for compensation outstanding after the date of entry and advance payments of compensation paid late.”
The CLA President has written to Housing Minister Dominic Rabb calling on him to reconsider the review and implement the rates of interest alongside other reforming measures due to come into force on 6 April 2018 and before HS2 Ltd begins the process of acquiring land from July onwards.
He writes: “With significant infrastructure projects due to commence in the coming years it is vital that we have a compulsory purchase system which provides a fair balance between land and property owners and acquiring authorities.”
Click here to read a copy of the letter from the Ministry of Housing, Communities and Local Government.
Click here to read the letter from the CLA President to Housing Minister Dominic Rabb.