28 Nov 2017
For those of you eagerly awaiting an update to our previous Community Infrastructure Levy (CIL) blog, SIT and LIsTen, the Government has - as previously promised - provided its initial recommendations in response to the CIL review in the Autumn Budget. For those not in the above category (CIL anoraks are apparently a niche group), planning obligations and CIL remain a significant consideration in the viability and deliverability of development, and therefore the Government’s stated first Budget objective of supporting more housebuilding.
The independent CIL Group, led by Liz Peace, prepared their report ‘A New Approach to Developer Contributions’ in October 2016 and this was released in February 2017 alongside the Housing White Paper. The Group’s report provided a number of recommendations, with the overarching objective of simplifying the levy, a laudable and welcome aim, but not an easy proposition.
We identified five headlines from the Review report in our February 2017 blog. So to what extent does the Government propose to take these on board?
A ‘new approach’ of ‘Local Infrastructure Tariff’ (LIT), ‘Strategic Infrastructure Tariff’ (SIT) and s106
LIT is not mentioned but the ‘3 tier’ CIL and planning obligation regime is been pursued through the introduction of SIT.
LIT rates linked to house sale prices
CIL indexation is to be linked to house price inflation, rather than CIL rates themselves. Whilst indexation is important – as highlighted by the Wandsworth/ Peabody case – this proposal does not get to the nub of the issue.
The CIL Group’s report recommendation to simplify CIL rates themselves has seemingly not been progressed. In fact the Government appears to want to do the opposite, proposing to consult on charging authorities having greater opportunities to vary CIL rates based on land use changes, so as to ‘better reflect the uplift in value’ - for example, higher CIL rates could be charged for the development of agricultural land for new homes, than say the residential development of industrial land.
Mandatory LIT charged on new development with no reliefs and exemptions
Silence on this proposal, as it currently stands.
Small developments only pay LIT and larger/strategic development would be able to negotiate s106 obligations, s106 pooling restrictions removed and potential offset LIT against s106 obligations
Pooling restrictions are to be removed… but only in ‘certain circumstances’ such as in low viability areas, or where significant development is planned on several large sites. The Government claims this will avoid ‘unnecessary complexity’.
However, the absence of the potential to offset LIT against s106 obligation contributions is a major omission. The current disconnect between strategic developments and associated infrastructure delivery seems likely to continue. In recommending offsetting, the CIL Group noted:
A further benefit of the combined LIT/Section 106 approach will be that large developments will be able to address, through the Section 106, not only the funding of the infrastructure but also the delivery of the infrastructure, which has been one of the failings of CIL.
SIT contributing to identified infrastructure projects similar to the current Mayoral CIL
SIT is to be taken forward with consultation on whether this should be used by Combined Authorities and planning point committees to fund both strategic infrastructure (as the Mayoral CIL does for Crossrail in London), and local infrastructure too.
So where does this leave us? Still facing uncertainty arising from ongoing issues with the detailed and technical workings of CIL; more clarity is certainly anticipated when DCLG launches the proposed consultation on taking these headline measures forward – and we hope, further CIL amendments that resolve day-to-day problems inherent in the current rules.
The Government’s measures are seeking to make the CIL regime encapsulate opportunities for land value capture, as evidenced by the proposal for more variance in CIL rates and the commitment to speed up the process of setting and revising CIL. The latter also recognises that the current two stage consultation process and evidence base requirements can present a time and cost barrier to charging authorities putting CIL in place. This particular proposal is to be commended and anything that can make the levy more responsive should be welcomed.
However, those dealing with CIL ‘on the ground’ will no doubt recognise the need for the CIL Regulations themselves to be more transparent, simplified and useable. Introducing greater ‘flexibility’ in terms of CIL rates (and the more extensive evidence base needed to support this) should be alongside streamlining the Regulations and simplifying how they are applied to development projects – a very difficult balance.
So CIL is here to stay for now and we await the consultation…
28 Nov 2017
Monday saw the long-awaited launch of the government’s Industrial Strategy. But you have to have some sympathy for Business Secretary Greg Clark – by mid-morning the headline writers had become somewhat distracted by news of a certain royal engagement. That’s a shame, because the Strategy is intended to be one of the government’s flagship policy initiatives and rightly deserves attention.
Further analysis of the Strategy’s key implications will follow from Lichfields, but in the meantime, here are 10 of its highlights:
It’s a long document, some 130 pages, as long as the consultation Green Paper which preceded it earlier this year. Whilst it contains an overview section of sorts, you wonder whether a punchy executive summary version might have been helpful to distil the essence of what the government is seeking to achieve and to help reach the widest audience. It was also accompanied by a set of other useful policy papers and analysis, including a review of the Catapult Network programme.
It is unashamedly an “industrial strategy”, a term which had until recently fallen out of fashion. The perceived failures of previous industrial strategies (recall DeLorean?) have lingered long in Whitehall’s collective memory. More recently, Vince Cable reintroduced the concept during his tenure as Secretary of State for Business, Innovation and Skills within the Coalition government. However, from very early on in her premiership, Theresa May had called for a “proper industrial strategy” to deal with the challenges of low productivity, regional disparities and, of course, Brexit.
The “10 pillars” set out in the Green Paper are now the “5 foundations”: ideas; people; infrastructure; business; and places. If the concepts are broadly similar, the rationalisation is probably helpful. It may also be that someone has dusted down HM Treasury’s five drivers of productivity framework that was widely applied in the 2000s, which is perhaps not surprising given that improving productivity is a core aim of the Strategy.
An independent Industrial Strategy Council will be established, comprised of investors, economists and academics from across the UK. This will operate alongside the Economy and Industrial Strategy Cabinet Committee, chaired by the Prime Minister, which will remain responsible for driving delivery across government. There is a real sense that government wants the Strategy to cut across all government departments – something recently advocated by Michael Heseltine – and shape policy-making at all levels.
It adds detail to some of the announcements trailed in last week’s Budget – see the Lichfields’ summary – for example the Transforming Cities Fund, further devolution deals and the Oxfordshire housing deal. It confirms how important the Industrial Strategy is intended to be in the policy hierarchy and as an agenda which binds together all of the government’s various initiatives to support economic growth across the UK - from funding to devolution to skills.
The Strategy avoids “picking winners” – rejected as part of the Green Paper – but does set out a clear agenda around sector deals, which act as partnerships between the government and industry on sector-specific issues and funding settlements. Just four are agreed (artificial intelligence, automotive, life sciences and construction), while others are in the works (creative, manufacturing and nuclear), and the challenge is there for other sectors to follow.
Local industrial strategies are now a defined deliverable to be brought forward by local enterprise partnerships and mayoral Combined Authorities. These are to be agreed with government, with the first to appear by March 2019 (anything else happening that month?). Areas with potential to drive wider regional growth, focusing on clusters of expertise and centres of economic activity, will be prioritised. Existing strategic economic plans and local economic strategies may need to be reframed or refreshed.
There’s some important detail in the Strategy. For example, there are indications that the government will broaden appraisal methodologies to ensure the full potential for infrastructure to support local economies over the long-term is given weight in decision-making. It also introduces a ‘rebalancing toolkit’ to improve the focus, quality and transparency of ‘rebalancing’ evidence in strategic business cases, particularly to support high value transport investments in less productive parts of the UK. I’ve recently experienced first-hand the importance of making the evidential case for just this type of infrastructure project.
There’s more specific recognition of the role of housing delivery in supporting the growth of local economies, something widely identified in consultation responses to the Green Paper. Interestingly, housing has already accounted for nearly 40% of National Productivity Investment Fund allocations made to date. The government reiterates that it wants to support places with ambitious and innovative plans to build additional homes where they are needed, and which will support wider economic growth.
There’s not much reference specifically to planning, other than in relation to housing delivery. That might be a missed opportunity, as after all, local planning authorities are also charged with meeting the needs of modern businesses and their supply chains, particularly where local advantages exist (albeit these are not always well understood). It will be interesting to see if government takes the opportunity to bring the Industrial Strategy firmly into the planning lexicon as part of the draft revised National Planning Policy Framework expected in Spring 2018.
There’s much else to consider and reflect on; watch this space for further analysis from Lichfields on the Strategy’s key implications.