Second Phase October 2007 to May 2010 - CIL replaces PGS

In January 2008 the first proposals were published for CIL (CLG, 2008) these still reflected the main justifications for the PGS, namely to capture increases in land value resulting from the granting of planning permission and that this should mitigate development impacts and provide infrastructure for communities, this was also set within a framework of making development more sustainable. The CIL was still also seen as a policy to “unlock development” and ensure more development is delivered, not just by funding infrastructure but also in providing more certainty to developers of what they may be expected to contribute. The reasons why new development should make a contribution were set out, based mainly on the research that most small and medium sized developments made no contribution and yet still impacted on

infrastructure requirements (Crook et al., 2008). Only large scale developments had s106 agreements negotiated and the time and costs involved precluded negotiations on smaller schemes. It was argued that the new CIL was therefore both fairer in spreading the burden more widely, but also by providing developers with more certainty on what they would be required to pay and speed up the planning system.

The support of various stakeholders to CIL was also set out; BPF, RICS and HBF were all quoted as supportive and that whilst the Planning Bill provided the overall powers, the details would be issued in regulations which would be discussed with the stakeholders. The CIL was also proposed to be a “Plan-led” policy very much tied into the LDF process, something very different to the previous proposals and also very much related to the infrastructure planning process as well. The ability of local authorities to use CIL income alongside other funding flexibly to fund infrastructure provision was also set out (CLG, 2008). Finally, the setting of the CIL rates was also discussed, again the link to the increases in land values resulting from the granting of planning consent was at the core of the thinking, and that if an affordable rate was set it would capture a proportion of the land value for infrastructure provision but also leave a sufficient incentive to develop. Some commentators had stated that this may

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not be the most appropriate indicator upon which to set the CIL rate and this would be discussed further before proposals came forward (CLG, 2008).

In August 2008 a longer document on CIL was issued by DCLG (DCLG, 2008b), and whilst much of it was similar to the January document, it did set out more details on the setting of the CIL rates. The link to infrastructure planning and to the funding of infrastructure to support growth were still key elements, but the uncertainty around the setting of the rate too high was also raised and the need to ensure that the process for setting the charge achieves the right balance (see paragraph 3.25) (DCLG, 2008b). A whole section was included titled “setting charges to reflect development viability”, if set at too high a level CIL would not be delivering its objective of helping to unlock development. The identification of the uplift in land value from the grant of planning permission was again suggested, but with reservations from some stakeholders. With alternative assessments of level of

developers profit or return on investment, impact on land supply or impact on delivery of the development plan proposed. There were proposals to develop a standard methodology, but acknowledged that several methodologies were already available that developers use to make development decisions on viability. The issue of skills within planning departments was also raised, although the Swindon Viability Study indicated that CIL as a policy could be delivered (DCLG, 2008b).

Also in August 2008 DCLG issued “common starting point for s106” (DCLG, 2008a) as changes to the s106 system was part of the proposed changes running alongside the CIL as envisaged by the Barker report. In fact the relationship between CIL and s106 was an important issue requiring clarification, identified by the Killian Petty Review of Planning System in November 2008 (DCLG, 2008c) and in the DCLG/NAO Planning for Homes; Speeding up planning applications for major housing

developments in England published on 11 December 2008 (NAO and DCLG, 2008).

Over 2009 there were several reports issued about how to respond to the credit crunch and the downturn in the market, in July 2009 the detailed proposals and draft regulations for CIL were consulted upon, with the summary of the responses

published in February 2010 (DCLG, 2010c). Much of this consultation was about the procedural detail of its implementation but one issue raised under the setting the CIL charge was a need for clarity as to what is intended by the term “economic viability of

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development” in Question 7. The relationship with s106 and its proposed scaling back was also an issue, especially as the introduction of CIL was a voluntary choice by LPAs, but scaling back s106 too far would put pressure on LPAs to introduce CIL (DCLG, 2010c).

Also in February 2010 DCLG introduced CIL: Final Impact Assessment (DCLG, 2010a) which would support the CIL regulations, the document suggested that CIL had several advantages over the s106 system, simplicity, predictability, transparency, fairness and efficiency. A major feature of CIL highlighted was the loosening of the relationship between a development and the amount charged, as the charge would be an average distributed evenly across a number of developments. It also offered LAs a flexible tool to secure finances to fund infrastructure, also the charge should not place at serious risk the development of an area, and finally the expectation remained that

“Ultimately, it is expected that the liability for CIL will fall on landowners, because developers would negotiate a discounted value for land when they put it to offset heir CIL liability” (DCLG, 2010a p10)

The CIL Guidance: Charge setting and charging schedule procedures were issued in March 2010 (DCLG, 2010b) and came into force on 6^th April 2010 and set out some detail on deciding the rate of CIL. The regulations set out that the charging authority must

“aim to strike what appears to the charging authority to be an appropriate balance between the desirability of funding infrastructure from CIL and the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across its area” (DCLG, 2010b p4)

The regulations introduced the “striking the balance”, the “area wide approach” and

“economic viability” of development all as parts of the calculation of the CIL rates,

“appropriate available evidence” was also required to support the draft charging schedule. Charging authorities should avoid setting a charge right up to the margin of economic viability across the vast majority of sites in their area, with for residential development the SHLAAs should inform their approach (DCLG, 2010b).

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What has become apparent is that the Barker report proposals for a tax on land value uplift have gradually changed to become a plan led levy linked to infrastructure

planning at a local level and based on an area wide economic viability assessment of development. Although the main effect is still anticipated to be a lowering of land values, as developers factor this into their negotiations with landowners, this is now less prominent than the need to secure funding for infrastructure still to support growth. The viability issue which was never really addressed in PGS as the rate was never calculated, is now at the centre of the whole CIL proposals. The challenge of the detailed implementation, of the valuation methodology which was a factor in the demise of the PGS is now emerging as an issue with CIL even in the early stages and with the apparent support of various stakeholders. Finally, the relationship between a reduced s106 and CIL is an issue, as is the relationship between the CIL and other policies to stimulate growth.