HERTFORDSHIRE COUNTY COUNCIL
POLICY AND RESOURCES CABINET PANEL
THURSDAY 15 OCTOBER2009 AT 2.00PM
THE COMMUNITY INFRASTRUCTURE LEVY
Joint Report of the Directors of Environment and Commercial Services and Performance and Resources
Authors: Jacqueline Nixon, Principal Planning Officer, Hertfordshire Property, Tel: 01992 588104
Jon Tiley, Forward PlanningTel: 01992 556292
Executive Members: David Lloyd and Derrick Ashley
1. Purpose of Report
1.1The purpose of this report is to inform members ofthe consultation document on detailed proposals and draft regulations for the proposed Community Infrastructure Levy(CIL) and to raise issues for discussion and the basis of a response to DCLG.
2. Summary
2.1This report sets out how CIL will impact upon the County Council if the draft regulations remain unchanged. It is considered that representations should be made to DCLG to seek clarification and amendment of the regulations document, with the aim that once in place itensures an effective and efficient infrastructure delivery vehicle.
3. Recommendation
3.1Members are asked to consider the issues identified and in this report and recommend to Cabinet that they authorise officers to respond to DCLG accordingly.
4.Background
4.1On 30 July 2009 the government released a consultation document on detailed proposals and draft regulations for the proposed CIL prior to both the proposals and regulations being finalised. The Consultation runsfor 12 weeks to 23rd October 2009. General views are being sought, including a response to a 54 point questionnaire.
4.2The government continues to view CIL along the lines of a statutory charge first mooted in the Housing Green Paper 2007 and expanded in the Planning Reform Bill 2007. and developed in further detail in guidance documents published in January and August 2008. A great deal of the content of the draft Regulations has already been debated over. CIL continues to be viewed as a discretionary charge on development set by local authorities, which is designed to help fund the infrastructure identified in development plans.
4.3The draft regulations define a link between the development planning system and CIL. Setting CIL will require the local planning authority to have undertaken infrastructure planning and the CIL will take this forward by identifying gaps in the funding required for necessary infrastructure to arrive at a charging schedule – the amount to be raised from CIL – having first given proper consideration to viability.
4.4The charging schedule will be a critical document, which will be subject to rigorous testing, public consultation and an inquiry before an independent person (ideally drawn from the planning inspectorate) resulting in a report binding on the charging authority. By proposing such an approach, the government is clearly signalling that the evidence base for the charging schedule should be as substantial as that required for development plan documents.
4.5The draft regulations and the consultation paper flesh out more of the details around various aspects of operating CIL: these include the basis of charging and payment.
4.6Further key features of the CIL guidance document are shown at Appendix 1.
5How will this affect Hertfordshire authorities?
5.1In terms of the Hertfordshire local authorities (and other public infrastructure service providers) the key issues relate to the overall effectiveness of the new CIL regime in delivering growth related infrastructure, and how straightforward the process of establishing and operating CIL will be.
5.2HertfordshireCounty Council and the districts commissionedthe Hertfordshire Infrastructure & Investment Strategy (HIIS) in 2008 and the interim findings were reported to the Planning and External Relations Committee in March 2009 and Cabinet in April 2009. The study which is almost complete sought to put forward early research and work to help the charging authorities in Hertfordshire to establish CIL, in terms of identifying potentially eligible infrastructure, looking at issues of viability and identifying potential charging levels in the County, and also highlighting potential problems in the implementation of CIL in a two tier County.
5.3As will be seen below, the introduction of CIL will involve significant shift in the way the Hertfordshire authorities define an approach to funding infrastructure.
5.4Some authorities have recently produced supplementary planning documents as in North Hertfordshire or guidance documents (e.g. the County Council’s ‘Planning Obligations Guidance- Toolkit for Hertfordshire’) to inform the use of planning obligations in development planning. Currently HCC officers are involved in negotiating planning obligations and contributions are paid from developers directly to the County Council. In the future under CIL, there will be a different approach. There will be more emphasis in providing evidence of strategic need and costs to develop a framework for a CIL at an early stage in the development planning process however the process of setting a CIL charge will lie with the districts. The proposals dictate that County Councils will not in the future have a role to play in collecting monies and it seems that the transfer of monies from the districts will not be a given. The method by which monies are handed over to County Councils is unclear.
6.Elements of CIL that require further consideration
6.1There are still a number of decisions the government needs to make before the Regulations are published. These include whether there is to be a national description of the unit of development that may be charged; any exemptions and whether there will be a facility for reducing the charge locally in exceptional circumstances; whether a discount should be offered for affordable housing development; the possibility of payment by instalments and/or payment in kind ;whether there should be restrictions in the use of planning obligations once CIL is introduced, including the potential for limiting them to the function of solely mitigating the impact of the development in question and writing a modified version of the necessity tests.
7.Potential issues
7.1In reviewing the draft CIL regulations, a number of issues emerge:-
Will CIL (when combined with other infrastructure funding sources) deliver all the infrastructure that is needed?
7.2The CIL document seems confident of the ability of CIL to help deliver all the growth related infrastructure that is needed, and is right to point to the relative inefficiency of the current system of planning obligations. The advantage with CIL is the encouragement it provides for long term infrastructure planning.However, CIL is not expected to be used to tackle the historic infrastructure deficit (which is likely to be a significant issue across the country, as indeed it is in Hertfordshire); additionally, there has been no attempt within the document to consider whether CIL and other funding sources will be sufficient to meet the cost of all infrastructure needed.
7.3The emerging conclusions from HIIS suggest that having considered the level of CIL that can realistically be charged in Hertfordshire, there is expected to be a ‘funding gap’ – the amount infrastructure costs will exceed combined public funding including CIL – of some £260m to 2031 (and this figure excludes the £2.41bn historic infrastructure deficit).
7.4Although the consultation document declines to put a figure on total CIL revenues, they are described as ‘an additional source of funding’ – the implication clearly being that it is expected to play a relatively modest role. Research undertaken as part of HIIS suggests however that CIL will need to be by far and away the most significant contributor to infrastructure funding – in fact, no less than 82% of the total infrastructure bill to 2031 will need to be funded by CIL if all needs are to be met.
7.5This is a long way from the idea that it will merely be ‘one of a number of funding sources’: it will be the main contributor. Any attempts to restrict CIL revenues (e.g. through discounts and exemptions) will have significant consequences.
7.6A more general concern is of course whether CIL revenues, combined with other funding sources, will meet the cost of all infrastructure needs: the emerging outcomes from the research undertaken in Hertfordshire as part of HIIS suggests that this is unlikely to be the case. Nevertheless, the work done on the HIIS indicates that on a per dwelling basis CIL could offer £18k towards strategic infrastructure which is substantially more than is received now through S106 (On average up to £7500 excluding works in kind).
Is there sufficient encouragement given to local authorities to work constructively together to oversee decisions on infrastructure investment and delivery?
7.7One of the key conclusions that is emerging from the HIIS study is the need for the Hertfordshire charging authorities (the district councils) to work collaboratively together to make collective decisions about the priorities for infrastructure investment, including setting priorities and determining the means and timing of delivery. One of the most persuasive reasons for doing this is the conclusion from HIIS that the charging authorities (the district councils) will be delivering only a relatively small proportion of the total infrastructure expenditure. In fact, it is estimated to be around 16%, meaning that around 84% of infrastructure will be delivered by organisations not responsible for setting, charging and collecting CIL – the County Council and others, charged with delivering the ‘big ticket’ items such as transport, education and health.
7.8This makes a very persuasive argument for a collaborative approach and, given the still very significant number of two tier local government arrangements, it might be expected that the draft regulations would be looking to promote or even require such arrangements to be put in place.
7.9Disappointingly, however, the Regulations have little to say about how such arrangements would work. Where joint committees are established or proposed (the closest to Hertfordshire being the Luton & South Bedfordshire Joint Planning & Transportation Committee) formal arrangements are proposed but beyond that, the consultation document has nothing to say about how charging authorities without such arrangements should work together with other authorities and infrastructure providers.It is therefore recommended that representations are made to DCLG to advise of the risks which exist to the delivery of strategic services, unless a greater role in the process is given to county councils.
What are the implications of proposals to curtail or restrict the use of planning obligations once CIL is introduced?
7.10The draft CIL Regulations consultation report signals that the government is minded to place restrictions on the use of planning obligations and, specifically, to limit their uses to the mitigation of the impact of the development in question and to the provision of affordable housing.
7.11The intention would be for there to be a transitional period of at least 2 years, implying that there will no restrictions put in place until April 2012 at the earliest. That said, it will almost certainly mean that the existing bespoke arrangements that authorities have established to secure contributions to infrastructure (e.g. the Hertfordshire Toolkit, North Herts & East Herts Planning Obligations SPDs) will have a limited future.
7.12The phasing out of so called ‘tariff’ style arrangements does raise some interesting questions. CIL is not intended to be obligatory, so will the government restrict the use of planning obligations to just those authorities introducing CIL, or all authorities? The latter course of action is the current recommendation and as such there will be serious consequences in funding of infrastructure for non CIL charging authorities. The county council will have no powers to coerce charging authorities to introduce CIL.
7.13A second concern is that two years is a relatively short timescale: it could potentially be the case that a number of authorities may not have adopted core strategies with CIL charging schedules in place by April 2012, so the question is whether the government will make allowance for this: if not, there will be again be significant issues if the intention for there to be a blanket restriction in the scope of planning obligations is realised.
7.14The new system offers more in the way of certainty, transparency, accountability and consistency over the current arrangements. In the short term at least, however, there are concerns about transitional arrangements which should be expressed.
Do the draft Regulations give a sufficient focus on delivery?
7.15Much of the document concerns itself with the justification for and mechanics of CIL, why it is needed and the practicalities of setting and collecting the charge. There is far less about the mechanisms for directing CIL revenues towards infrastructure projects.
7.16Whilst the document does explore the potential for pooling resources, there are a number of aspects which are not considered, but which are fundamental matters to be explored.These include the following issues:
What should be the detailed arrangements between charging authorities and infrastructure providers?
In any system for pooling revenues, how should investment priorities be established (not only between services but within services also)?
How would a pooled revenue system operate on a day to day basis?
How would transparency and accountability in expenditure be ensured?
7.18These are important questions for charging authorities and infrastructure service providers alike, and are issues that have been considered in full in the HIIS report. It would be extremely helpful for the Hertfordshire authorities to share the conclusions from this work with DCLG and others to ensure that the Regulations give proper consideration to this important area.
What are the specific issues around providing details of infrastructure schemes, costs and viability?
7.19The issues around the evidence expected to be required for infrastructure planning and viability are not as exacting as they might have been. In terms of identifying infrastructure, it is suggested that in defining the infrastructure that is required as well as the costs of such works, charging authorities are expected to show sufficient evidence to support their conclusions rather than precise schemes (the consultation document talks of ‘a selection of infrastructure types’) and detailed costs.
7.20Whilst initially this appears reassuring, there are potential concerns with taking such a broad brush approach. The HIIS study has involved over a year of detailed analysis of Hertfordshire’s infrastructure needs before requirements could be defined: anything less than a relatively intense examination of such requirements may lead to infrastructure needs being missed entirely, poorly defined or even wildly inaccurate. The dangers are that this opens up the potential for a CIL examiner to conclude that infrastructure planning is weak and therefore unsound.
7.21A different issue (although raising similar concerns) applies to viability testing. Here again, only broad brush testing is required, based on a selection of sites, with some suggestion of the need for a balance to be struck between the benefits of unlocking some sites through new infrastructure to be balanced against the potential for some sites to be rendered unviable through the proposed charge. The government will not, however, specify the proportion of development sites it considers will be acceptable for CIL to render unviable, so that unless this is addressed in the final Regulations this will be an issue around which the charging authorities will have to tread very carefully.
Proscribing tariff arrangements
7.22One of the important features of the draft regulations is the clear intention to proscribe the use of ‘tariff ‘style agreements. These have been introduced – and have been successfully operated - on an ad hoc basis in a number of locations (e.g. Milton Keynes, Swindon, and Cambridge). However the appropriateness of such arrangements (which tend to be flat rate contributions enshrined in s106 agreements) has been undermined by the Greenhithe appeal case (March 2009) where the Secretary of State concurred with the Planning Inspector that the flat rate contribution of £5,000/dwelling sought by the Kent Thameside Strategic Transport Tariff did not form part of the development plan and therefore could not be considered to comply with current national planning policy. Even if tariff arrangements are incorporated in the development plan they can be subject to potential challenge whereas CIL, as a statutory charge, cannot.
7.23The government has always viewed standard charges as an interim measure and now appears willing to confirm that tariff schemes will no longer be acceptable, requiring them to cease on the introduction of CIL.
Will proposals for the forward funding of infrastructure work?
7.24The government appears taken with the scope for innovative funding mechanisms and the potential for forward funding on the basis of future increases in the property tax base created through new infrastructure: it is keen to talk to local authorities and others and will explore potential pilots.
7.25Throughout the consultation document there is the evidence of a considerable willingness to encourage local authorities to work with other agencies to secure the provision of sub-regional infrastructure: the Regulations will allow charging authorities to spend money outside of their area and to pass CIL revenue to others, including to national bodies such as the Highways Agency. It seems that local authorities will be given the latitude to make whatever arrangements they consider appropriate without reference to central government.
7.26On the face of it, this seems a highly attractive proposition, particularly given the HIIS study suggests that the Hertfordshire authorities can expect to encounter a funding mismatch (of infrastructure costs over likely funding sources including CIL) of at least £260k over the period 2016 – 2021. The ability of a body like EEDA or the HCA stepping in to plug a funding hole could potentially be very useful.
7.27However, the problem is that CIL income is not guaranteed: what would happen if future CIL income streams were insufficient to repay the forward funding investment?
7.28Forward funding of infrastructure may be more advantageous if seen in the context of making a contribution to other identified sources of funding to deliver infrastructure, possibly in the context of the Regional Funding Allocation.
7.28Local authorities who decide to implement CIL and have a detailed understanding of future infrastructure requirements are likely to be better placed to take advantage of such opportunities
7.29In such circumstances the Hertfordshire authorities, whilst welcoming the potential for forward funding, might also wish to press for as much certainty as is possible that any CIL funding shortfalls will be addressed through other public funding programmes, particularly given that one of the advantages of the CIL process is that it will promote long term infrastructure planning, and thus give greater anticipation of future funding deficits.