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Community infrastructure levy

02 April 2008

One of the Government’s new planning objectives as set out in the Planning Bill, unveiled on 27 November 2007, is the introduction of the so called “Community Infrastructure Levy”.

This is the latest attempt by the Government to speed up the delivery of development sites, whilst at the same time ensuring that local planning authorities maximise the recovery of financial contributions from developers towards the provision of infrastructure required as a result of proposed development.

If brought into force, CIL will apply to all planning applications with few, if any, exemptions. Although widely reported as being a replacement for the unpopular “Planning Gain Supplement”, the Levy is in fact the Government’s “preferred option” leaving the possibility (however unlikely) of a PGS comeback at some point in the future.

For now, however, commercial developers as well as local planning authorities will need to get to grips with the proposals and will have the opportunity in the next few months to digest and comment on the detailed CIL proposals as they emerge. The Government has been keen to stress that unlike PGS (which sought to set a “national” and inflexible land tax based on the “uplift” in the value of land) CIL will focus on the need for LPAs to set and recover a fair and reasonable financial contribution from  landowners and developers towards infrastructure at a local level.

To bring transparency to the process, LPAs will be required to identify specific infrastructure requirements in their Development Plan Documents (presumably by way of
Supplementary Planning Documents) and to calculate the appropriate Levy on the basis of the cost of provision of such infrastructure. The Government is determined that CIL should not be a “blank cheque” set at a level which discourages development and appropriate checks and balances are likely to be put in place in the draft Regulations which hopefully will be issued in the Autumn.

The Levy itself will be calculated at the time that planning permission is granted and be payable by the owner of the land with the benefit of the planning permission upon
commencement of development. The Bill includes sanctions in the event of non-payment, ranging from interest and fines for late payment to the potentially disastrous (for the developer) suspension or loss of the planning permission which is the subject of the Levy.

Initial reaction to the CIL proposals has been mixed. Although it has been generally welcomed as a better option than PGS, there are still a certain number of “unknowns” which hopefully will be clarified once the draft Regulations are issued. These “unknowns” include uncertainty over the definition of “infrastructure” for the purposes of the Levy, whether and to what extent allowance will be made for the increased costs associated with brownfield development, the basis on which the Levy will be calculated and what information will be available to owners and commercial developers to challenge the amount proposed as a Levy in the SPD.

Other issues include how the Levy will interact with the current system of Section 106 Agreements and Section 278 Highway Agreements and what safeguards will be put in place to avoid duplication of payments towards infrastructure.

The Government has tried to allay some of these concerns by the publication on 25 January 2008 of a supplementary information document relating to the Levy. However, that document still defers to the need to await the draft Regulations on a number of outstanding points and confirms that the Government will continue to carry out further consultation with all relevant stakeholders in the meantime.

There is, however, one interesting point that arises from the supplementary document referred to above. It would appear that each local planning authority will be given the option whether to introduce the Community Infrastructure Levy in their particular area. For those that do not, the Government suggeststhat the existing Section 106 agreement
system will remain in place. Given the obvious staff resource issues associated with introducing the Levy, it will be interesting to see whether and how many LPAs will choose to voluntarily introduce the Levy in any event.

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Tim Willis

Associate
T: 08700 86 4095
I: +44 (0)121 335 4095
E: tim.willis@shoosmiths.co.uk