UK: Planning Gain – The Future?

Last Updated: 25 March 2008
Article by Murray Shaw

The whole topic of "planning gain" (in the widest sense) has been somewhat confused recently.  While it has been recognised that there are issues to be addressed the doubts over whether or not we were to have a Planning Gain Supplement or not has caused a lack of clarity and certainty.

In Scotland we are in reality no further forward.  We currently await a clear statement from the Scottish Government as to how they propose to proceed.  It was interesting to note that in the draft SPP3 which was published in January there is reference to a review being undertaken of the framework relating to planning agreements in general terms.  Specific comment however is made to the effect that the Scottish Government "believe it is right in principle that the public should benefit from the uplift in value of land due to the grant of planning permission".  That language is certainly consistent with the adoption of some of the principles which underlay the proposed (but now abandoned) Planning Gain Supplement. 

Matters have moved on however in England where the Communities and Local Government Department have published a discussion paper on "The Community Infrastructure Levy" which is in effect the successor to the Planning Gain Supplement.  This has been published in the context of the Planning Bill which is currently before the Westminster Parliament.  The Bill proposes extensive changes to the planning system in England and makes provision for the "Community Infrastructure Levy" (in Part 10 of the Bill).  The drafting of that part of the Bill really provides for the actual implementation of the levy to be effected through regulations.  The discussion paper which has emerged really sets out the detail of what is intended. 

It is worth noting that that link between the levy and a belief that the grant of planning permission results in an increase in land value appears to remain.  Paragraph 4 comments that the grant of planning permission has an impact on the local community but also means that the "value of the land may rise".  The intention behind the levy is to ensure that the impacts which are created are mitigated as appropriate.  The increase in the value of land appears to mean that, so far as any Government is concerned, the levy can be implemented without taking away any incentive to develop.  While there has been general support for the levy this link is likely to cause concern.  The paper anticipates some of the issues in that regard notably in paragraph 59 and indicates there will be further discussions with the development industry about whether this link is in fact appropriate.

It is equally clear from the paper that the levy will not replace the need for the developer to address the direct impacts that will result from a specific development in the immediate area.  Paragraph 64 makes clear that Section 106 Agreements (the equivalent of Section 75 Agreements) will remain an appropriate tool to address site specific issues such as education and affordable housing. 

It appears that the levy will primarily address major infrastructure difficulties.  Having said that paragraph 15 makes clear that while transport and strategic infrastructure issues are important other issues may need to be addressed to maintain or provide adequate facilities in a locality to ensure that development is appropriate.  Reference is specifically made to facilities such as schools, parks, health centres and perhaps most topically flood defences.  Paragraph 37 makes clear that the infrastructure to which the levy will relate will be subject to a wide definition "which encompasses what might be considered social and environmental infrastructure such as schools and parks". 

As part of the justification reference is made to examples of standard charging schemes found in England in places such as Horley and Warrington.  Scotland of course does not have any comparable schemes.  It will therefore be particularly interesting to see whether the same route is to be followed in Scotland.

The intention appears to be that local authorities need to assess the cost of "infrastructure that is need to support the development of the area" and as a consequence of that identify the appropriate levy.  Specifically the paper indicates the applicable English guidance that ought to be taken into account in identifying what needs to be addressed.  Councils are to have regard to the likely yield from the levy but in calculating the levy only to take into account "items that have a reasonable prospect of happening within the period covered by the Development Plan".  It appears therefore that the levy is to be Plan related.

It is made clear that the levy should not be used for general local authority expenditure nor to remedy pre-existing deficiencies except to the extent they will be aggravated by new development.  Possibly confusingly however it is made clear that the levy does not need to be spent on new facilities but can be used on upgrading existing facilities. 

There is no specific guidance about the rate of the levy.  Obviously the level of a levy is likely to be a matter of practical concern.  The paper does acknowledge however that if the levy becomes too large in relation to the uplift in land value then it may have a negative effect on development.  Specifically in calculating the levy Councils are to take into account other costs including notably the level of affordable housing contributions required.  It appears to be intended that the levy is to be "dynamic" being altered to take account of market conditions and development priorities.  It is not immediately clear how this will operate in practice especially if tied to a Development Plan which will have a life span for a number of years and a vision that may be longer. 

It is proposed that the levy should be payable at the point of commencement of development.  That also appears to be the date at which the amount to be paid will be identified.  In effect this means that if outline planning permission or planning permission in principle is obtained the developer may not know the likely costs that will have to be borne at that time.  This in turn is likely to have an impact upon how deals are structured, particularly for those developers who deal in land rather than develop land.  There may also be an issue there for developers in relation to when they acquire title to land and what provisions may need to be put in place to ensure that the levy is borne by the land owner who presumably stands to benefit from the perceived increased in land value.  These issues are likely to cause considerable practical concern.  The paper does however appear to envisage that the levy may be paid by instalments.

One issue which is addressed is the consequence of failing to pay the levy.  There is a suggestion that this failure might result in a legal requirement to halt development and the liability to make payment may equally be capable of registration.  It is likely that whatever system is adopted in England will need careful consideration if a similar system is to be brought forward in Scotland given the differences in land ownership and land rights north of the border.  The Bill also provides that the failure to pay is a criminal offence.  Again the issues which arise from any default in making payment are likely to have an impact upon developers and land deals are likely to have to take this into account.

It is quite clear that the Government south of the border intends to continue detailed discussions with the development industry.  Already concerns have been expressed about what is intended, through the principle of a levy still appears to have general support.

It seems difficult to see that the system north of the border will be radically different from that south of the border.  If it is that is likely to mean that there may be a "skewing" about where development takes place.  Given the attitude of the present Scottish Government to economic development and the importance it places upon it, it seems inconceivable that they would want to put unnecessary obstacles in the way of development.  Having said that there is clearly a balance to be struck between the desire to see development carried through and the infrastructure required to ensure that it can be carried through.  While NPF2 identified that national developments may well benefit from additional funding there is a considerable need for infrastructure to be put in place to allow developments below the level of national developments to occur. 

The message in Scotland must be "watch this space".

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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