UK: Development Delivery - Ongoing Challenges

Last Updated: 30 April 2012
Article by Murray Shaw

The Scottish Government has repeatedly made clear that its prime purpose is to increase sustainable economic growth.  That has been the position since 2007.  The recent economic downturn which affects much of the world has only increased the emphasis on that objective.  The Government's Economic Strategy from 2011 in implementation of that primary objective set out priorities to accelerate economic recovery, create jobs and promote growth.

The Scottish Government see the planning system as an important enabling tool to deliver development which can help to create that growth. 

In general terms the development industry is a major factor in the Scottish economy.  The construction sector provides approximately 8% of GVA, provides 137,000 jobs or so (with more in the supply chain generally) and provides apprenticeships at a time when they are sorely needed.  High quality built space is equally important in attracting investment to Scotland. 

The development industry is however an industry that has been significantly adversely affected by the downturn ( Development – The Reality of Delivery).  The Scottish Government recognise this and have been looking at what can be done to assist industry generally.

On 30 December 2010 they published a research paper entitled "Development, Delivery and Viability".  This set out a number of key recommendations for further investigation. 

In June 2011 the Government published a paper entitled "The Potential of Development Charges in the Scottish Planning System".  This looked at a number of case example throughout the UK and abroad with a view to determining how up front physical infrastructure could be funded.  One of the key constraints on development is the ability to provide infrastructure which "unlocks" developments.  When significantly greater funding was available than is the position now, often that investment would be provided by developers themselves or through banks and other financial institutions.  That is not the position now.  Equally local authorities (leaving aside any legal issues and indeed restrictions on their borrowing powers) are simply not in a position to play a significant role given the very severe constraints there are on local authority funding.

The June 2011 report looked at various models and came to the view that further investigation was required in relation to what was entitled a "measured charges model" and a "negotiated model".  The negotiated model is essentially similar to the system which operates at the moment through the Section 75 route ( Section 75 & Other Planning Agreements), while the "measured charges model" is a system which relates funding to area Master Plans intended to deliver business and infrastructure requirements. 

Leading on the from the work which has been carried out previously the Government at the end of March as part of a number of documents they produced concerning further changes to the planning system produced a consultation paper entitled "Development Delivery Consultation 2012".

This consultation paper is divided into 3 sections:-

  1. Planning context and committed actions;
  2. Delivering development and developer contributions;
  3. Innovative approaches to development and infrastructure delivery.

Section (a) summarises a number of steps which the Scottish Government have in hand including their "stalled sites initiative", the revision of Circular 1/2010 entitled "Planning Agreements", producing standard templates to assist with unilateral obligations (introduced in terms of the 2006 planning legislation), seeking to further streamline and simplify the consents required to carry out development and providing resources to support all with a better understanding of development, economics and viability.

As part of the last of these, the Scottish Government have published 4 documents (to be followed up with further documents shortly) explaining development and development finance, providing information on development viability and providing information on economic growth and development sectors.  While these documents are relatively straightforward they are intended to assist in understanding development economics and viability (a skill which many developers think local authority planners do not have or fail to apply). 

Section (b) of the March 2012 consultation looks more generally about how the "Section 75" provisions operate.  Reference is made to the tests in Circular 1/2010.  The point is made that they need to negotiate agreed levels of contributions can cause uncertainty.  What the Scottish Government wants to understand is the extent of the uncertainty caused and what steps can be taken to minimise the consequences of that. 

The consultation paper seeks information.  There is of course a tension here.  Circular 1/2010 makes clear that where a development causes an issue or exacerbates an existing issue it may well be legitimate to seek a contribution for the developer (subject to all the various tests set out in the Circular being met).  The real issue however is the ability of a particular development to fund those requirements.  However most will accept it cannot be right for a development to take place if it creates significant adverse impacts or has an effect upon those which already exist.  That underlying difficulty is a fundamental one and one that Section (b) does not clearly address.

Section (c) of the consultation paper makes reference to innovative approaches to fund infrastructure.  The point is made that a number of Councils are looking at means to address such issues including Fife Council who have significant infrastructure requirements to facilitate the scale of development they hope to achieve.  TIFS (Tax Increment Funding Models) have been thought by some to be a sensible way forward – they have been used in other jurisdictions notably the United States.  A couple of Councils in Scotland have sought to use them but so far their effectiveness is to be proved.  The possibility of some sort of infrastructure levy has been promoted by some and the paper from June 2011 referred to above identified standard charges as potentially a way forward. 

The consultation paper seeks information about innovative approaches and their effectiveness and ask whether or not there would be support for the introduction of a Development Charge System (such as some form of roof tax tariff or infrastructure levy).

The overall economic position remains unclear.  For all those taking a slightly more optimistic view there remain many pessimistic views about the state of the economy and how long the current downturn is likely to remain.  The uncertainty over the past few weeks in relation to the economy in Spain does little to help the position.  The Scottish Government are and can only plan on the basis that the current difficulties will not disappear in the near future.  The need to identify a solution remains pressing.  The fact that the Government has been investigating this issue and consulting on it for over a year makes clear that in fact there is no easy solution.  Action following up on the current consultation is therefore what is important.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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