No Kill for CIL : Insights from Asserson's Planning Team

24 Nov 2017

Introduced in 2010, CIL was meant to provide a “faster, fairer, more certain and transparent means of collecting developer contributions to infrastructure than individually-negotiated Section 106 planning obligations”. However, in practice a combination of the complexity of the regulations, wide exemptions and payments being sought under both CIL and Section 106 agreements has created a flawed and frustrating mechanism.

The government appeared to agree, and in 2015 commissioned a full report from a CIL review panel, chaired by former British Property Federation chief executive Liz Peace. The report concluded that CIL was not working as intended and recommended its replacement with a hybrid system of a low-level Local Infrastructure Tariff (LIT) for all developments coupled with Section 106 agreements for larger developments, removing the need for an examination process.

The government committed to responding to the report in Wednesday’s Budget. However, rather than putting its weight behind adopting the report’s recommendations, the Budget has danced around taking concrete action, choosing only to consult on reforms.

Yet more consultation?

This is unfortunately the limit of the government’s current plans. The Budget sets out a list of measures that the DCLG will consult on with “detailed proposals”. The chosen few are:

• Removing Section 106 pooling restrictions towards a single piece of infrastructure in areas where either CIL is adopted, the local authority is in a low viability area or significant development is planned on strategic sites. This was recommended by the CIL report and makes sense. However, the lack of clear demarcations around Section 106 to prevent subjecting a development to both CIL and Section 106 payments will lead to higher risks of “double dipping” and will need to be strictly managed.
• “Speeding up” the process of setting and revising CIL, including a “more proportionate” approach than the requirement for two stages of consultation, as suggested by the CIL review panel, as well as delivering “greater clarity” on the appropriate evidence base.
• Allowing authorities to set charging rates based on the uplift in land values between a proposed and existing land use, as opposed to a flat rate for all development of the same type. This means that an authority could impose one rate on a residential development built on former industrial land and an entirely different rate on the same development, built on originally agricultural land. This proposal could open up a whole can of worms, particularly given the track record of imprecision in the drafting of CIL charging schedules (should ‘residential’ CIL rates cover hotels, care homes, student accommodation, hostels etc.?) and the difficulty on some sites in determining their actual use. It is also important to note that the government want to retain all the protections for viability, such as the examination in public.
• Changing indexation of CIL rates to house price inflation, rather than build costs. This is a positive proposal and will be welcome news to developers. It will help to avoid viability issues through tracking the rise and fall in property values and reduce the need for councils to revise charging schedules, creating more certainty on rates.
• Giving Combined Authorities and planning joint committees with statutory plan-making functions the option to levy a Strategic Infrastructure Tariff (SIT). SIT will mimic the London Mayoral CIL for funding Crossrail, widely considered a successful introduction of CIL. This was recommended in the CIL report, but the Budget suggests that SIT would be additional to, rather than a replacement of, CIL. This does nothing to address the ingrained problems of CIL and will only add to the costs of regional developments outside of London.

So we beat on…

For a mechanism introduced only seven years ago, CIL has been plagued with issues over its short life. The concept of CIL is a fundamentally sound idea: collecting a relatively small contribution from all development to improve local infrastructure. However, continuous amendments and consultations to an already complex system, coupled with slow and inconsistent uptake by local authorities, has led to what Peace’s review panel condemned as a “failure to achieve the original aims of CIL”.

While plans to “speed up” the CIL system are welcome, the Budget announcements do beg the question: what was the point of commissioning a panel of experts to review CIL if their primary advice was to be disregarded? The latest Budget provides no commitment to action any reform. Instead it skirts around the main issue and incorporates only the more minor recommendations made in an effort to patch up this poorly built vessel for collecting contributions. Surely it is time to bite the bullet and abandon ship in favour of a better model?