Parliamentary Bulletin February 2008

Section 106 Agreements and the Community Infrastructure Levy

Section 106 agreements are one of the greatest political hot potatoes. Since their introduction in 1990 there has been dissatisfaction, on all sides, with the way these agreements have worked in practice. If a planning obligation is demanded, an applicant cannot appeal against it.

In 2004, in response to widespread expressions of dissatisfaction with the ways in which Section 106 was being implemented, the Secretary of State set out Government policy on the matter. 'The use of planning obligations must be governed by the fundamental principle that planning permission must not be bought and sold. It is therefore not legitimate for unacceptable development to be permitted because of the benefits or inducements offered by a developer which are not necessary to make the development acceptable in planning terms'.   The Government went on to say that it was 'not prepared to continue with a system variously described as opaque, slow, unfair, complex and reactive'.

In 2006 the view that the key problem is that Section 106 agreements are not legally enforceable, and are therefore seen as assistance to developers not communities, was given a boost by research from Sheffield Hallam University which calculated that for affordable housing, half of the intended £1.2 billion proceeds had been handed over. The same study also showed that councils had very poor processes for monitoring delivery of planning obligations.

Kate Barker, in her 2004 report, favoured infrastructure financing.   The Government rejected that suggestion and in the current legislation their solution is that Community Infrastructure Levy (CIL) will co-exist with planning obligations.

The Planning Bill empowers, but does not compel,   Local Authorities to impose a CIL.

Authorities which who choose not to use a CIL to fund local infrastructure can use planning obligations instead. In these cases planning obligations may be the only suitable tool to cover technical or non-financial matters. Developers will still have to negotiate directly with local planning authorities to deal with site-specific impacts e.g. archaeology or access roads.

Affordable housing will still be provided through negotiated planning obligations.

The Government intends to consult on whether a statutory boundary should be drawn between what is covered by a CIL and what is covered by negotiation.   For example, authorities might be prohibited from seeking contributions to the same infrastructure project through both CILs and planning obligations.   However, it could be that boundaries will be set locally rather than nationally.

The Government will encourage local planning authorities to impose any standard charges through the CIL rather than planning obligations.

HOW CILS WILL BE ESTABLISHED

In order to establish a CIL authorities will need to identify what infrastructure is needed and how much it will cost. They then need to work out what contribution each development should make to that cost.

In drawing up the proposals for infrastructure to be funded from the CIL, the Government may propose that as part of the development plan process the authority should :

• Have regard to the Regional Economic Strategy
• Have regard for the likely yield from the CIL given the anticipated development and likely development viability
• Only include items that have a reasonable prospect fo happening within the period covered by the development plan
• Prioritise those pieces of infrastructure likely to make the biggest contribution to sustainable development.

HOW CILS WILL BE FUNDED

C ILs cannot be used for general local authority expenditure, nor to remedy existing poor infrastructure. The funding bases for CILs are not in the Bill, but will be in regulations. At the time of writing there is little clarity about how CILs will be funded. In particular, there is argument about whether increased land values should be included in charging schedules.

I have concentrated on Section 106 and CILs because, whatever the state of the housing market, development of affordable housing remains a political priority for all parties. Sensitivities about Section 106 in local government are high. Councillors are acutely aware that they are open to accusations of not achieving sufficient gains, and, at the same time, they know how easily planning obligations can jeopardise developments which can not be secured in any other way. The openness of the Government's proposals means that this will be a subject of intense debate between and within each of the political parties at national and local levels.

From Yes Minister

Minister, two basic rules of government: Never look into anything which you don't have to. And never set up an enquiry unless you know in advance what it's findings will be.