Rachel Sykes analyses the impact on local authorities of the latest changes to the Community Infrastructure Levy regime that came into force at the beginning of September.
The seventh amendment to the original Community Infrastructure Regulations 2010 in the space of nine years came into force on 1 September 2019; Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 (Amendment Regulations).
We consider in more detail below the key changes for local authorities to the operation of the Community Infrastructure Levy (CIL) in England. This will focus on changes to the process for adopting or amending charging schedules, the removal of Regulation 123 Lists and pooling restrictions, placing monitoring fees on a statutory footing and the introduction of annual Infrastructure Funding Statements.
CIL is essentially a planning charge on new development which is to be used by local authorities (as charging authorities) to help with delivery of infrastructure within their areas. Before a charging authority is able to levy CIL it must first produce and publish a charging schedule that sets out the levy rates for different types of development within its area.
Prior to the most recent changes, the procedure for adopting or amending a charging schedule was lengthy. A charging authority was required to prepare a preliminary draft charging schedule for consultation. The charging authority then had to take any representations into account before publishing its draft charging schedule for a further (minimum four week) consultation. Only then could the charging schedule be submitted for independent examination.
The figures show that 164 out of the 343 local authorities across England had adopted charging schedules by July 2019. The government's consultation response on reforming developer contributions (Consultation Response) notes that local authorities have suggested that resource constraints can affect their willingness to introduce or review charges. The fairly lengthy procedure for adopting charging schedules may have made it less attractive to authorities to introduce CIL in their area. In so far as that was one of the contributing reasons why there has not been full uptake of CIL by local authorities, the Amendment Regulations seek to streamline the process for charging schedules. The requirement to produce a preliminary draft charging schedule has been removed. Charging authorities are now only required to produce one draft charging schedule and carry out one round of consultation in relation to it. This is likely to be welcomed.
While the four-week minimum consultation period has been removed, the amended Planning Practice Guidance (PPG) states that where authorities are introducing CIL for the first time, or making significant changes, the expectation is that consultation will be for a minimum period of 4 weeks. The PPG also states that examiners must consider whether charging authorities have given adequate time for consultation. Given this, the removal of the minimum time period may not be as beneficial as it might first appear as that 4-week period could be seen as a starting point for an adequate time period for consultation.
The Amendment Regulations introduce a new requirement that charging authorities must invite representations on the draft charging schedule from certain persons and/or bodies as they consider appropriate, including local businesses, and bodies which represent the interests of local businesses. While the charging authority has discretion over who it chooses to seek representations from, this is an additional requirement. It is not clear what examiners will be looking for when considering this requirement as part of independent examination of the charging schedule.
It will be interesting to see whether these changes to the process will lead to an increase in uptake of CIL.
Regulation 123 and pooling restrictions
Although not mandatory, the government was keen for CIL to be the preferred method for collecting developer contributions and wanted to see a greater number of authorities adopting CIL. To drive the uptake of CIL the government introduced the so-called 'pooling restriction' on 1 April 2015. This had the effect that a planning obligation could not constitute a reason for a local planning authority (LPA) granting planning permission where the obligation would provide for the funding of infrastructure which was already on the authority's Regulation 123 list of infrastructure to be funded by CIL receipts.
Essentially LPAs were prevented from collecting more than five separate planning obligations towards one project or type of infrastructure.
LPAs and developers sought to circumvent the pooling restriction by either ensuring planning obligations were more specific, or ensuring the types of infrastructure on the Regulation 123 list were very specific.
That the pooling restrictions could generate uncertainty and delay and lead to otherwise acceptable planning applications being refused permission was acknowledged in the Consultation Response. The Amendment Regulations have revoked Regulation 123, thereby removing the requirement for an infrastructure list and lifting the pooling restriction altogether.
Lifting the restriction on pooling contributions should now give charging authorities more flexibility to fund infrastructure; they will be able to use both CIL and section 106 contributions to fund the same item of infrastructure. A criticism long directed at CIL was that while it worked well on smaller developments it failed to fund infrastructure relating to the larger, more strategic sites. Lifting the restriction is aimed at addressing this.
As the restriction was introduced in part to prevent 'double dipping', the Consultation Response acknowledges the concern over potential for a developer to now be required to pay for a piece of infrastructure twice. The government does not propose to do anything about this now stating that "the reforms to increase transparency provide a more appropriate mechanism for considering how the Levy and planning obligations are used together than the regulatory restrictions, which were found to create barriers to development".
It is worth bearing in mind that the tests relating to planning obligations in Regulation 122 remain. This should make it difficult to justify a planning obligation as meeting the test of being necessary to make the development acceptable and/or related to the development in scale and kind, if the same developer is already being required to pay a CIL contribution to fund the same piece of infrastructure.
Regulation 122 has been amended to make clear local authorities may include monitoring fees within section 106 agreements and that these do not need to meet the tests of being necessary to make the development acceptable in planning terms or of being directly related to the development. Placing monitoring fees on a statutory footing removes some of the uncertainty around charging such fees following the case of Oxfordshire County Council v Secretary of State for Communities and Local Government and Another  EWHC (Admin).
Nevertheless, monitoring fees must fairly and reasonably relate in scale and kind to the development and must not exceed the authority's estimate of the cost of monitoring the development for the lifetime of the planning obligations. The updated PPG includes some further suggestions as to how monitoring fees may be set; as a fixed percentage of an individual obligation, or a fixed monetary amount per obligation. The PPG also states that authorities may use other methods to set monitoring fees, but suggests that authorities could consider setting a cap to ensure that any fees are not excessive.
Annual Infrastructure Funding Statements
The revocation of Regulation 123 means that the requirement for an infrastructure list has also gone. Instead, under Regulation 121A, local authorities (not just charging authorities) will have to publish annual Infrastructure Funding Statements (IFS) by 31 December in each calendar year, with the first such statement to be produced by 31 December 2020.
The annual IFS must set out a list of projects or types of infrastructure which will, or may be, wholly or partly funded by CIL. Additionally the IFS must also include reports on CIL and section 106 planning obligations in relation to the previous financial year, including details of how much money has been raised through developer contributions and how it has been allocated and/or spent. This also includes reporting on monitoring fees received by way of check and balance on the amounts being asked for.
The new annual IFS is designed to encourage transparency to ensure it is clear how CIL and planning obligations are being spent. Arguably the requirement places a greater burden on local authorities in practice.
The statutory requirement to report on planning obligations will also apply to LPAs which are not also charging authorities and have not adopted CIL.
At present there is no penalty for not producing an annual IFS, though it cannot be ruled out that one may be introduced at a later date if authorities fail to produce IFSs.
There have been a number of perceived problems with CIL since its introduction in 2010 and the original regulations have been amended a number of times in order to try and address these.
The latest changes have been made after lengthy consultation with local authorities, private sector organisations, neighbourhood planning bodies and interest groups.
The simplification of the consultation process for adopting or amending CIL charging schedules is positive and may encourage more local authorities to think about adopting CIL. Although the updated PPG states that it is for charging authorities to decide how they wish to consult in relation to charging schedules and that charging authorities are best placed to decide how to consult, it will be interesting to see how much flexibility authorities will have in practice. Or whether authorities will adopt a 'belt and braces' approach given that the examiner will consider consultation as part of independent examination of any charging schedule.
Lifting the pooling restriction is an important change which should help with ensuring the necessary infrastructure is delivered. It allows authorities more flexibility in funding infrastructure. Whether the combination of CIL receipts and planning obligations together will make it easier to deliver infrastructure required for larger strategic sites remains to be seen. Time will also tell whether the new reporting requirements will provide the requisite transparency to prevent the fears of renewed 'double dipping' manifesting.
The requirement on authorities to publish a Regulation 123 infrastructure list has been revoked. However the requirement to include a list of infrastructure projects on which it is intended CIL will be spent lives on through the introduction of the annual IFS, albeit there is no linked penalty for failure to produce one. The IFS will also require more work from authorities that are now statutorily required to monitor and report on collection, allocation and spending of developer contributions receive not just under CIL, but also as planning obligations.