Confusion over planning charges

Copyright: David Lawson

First published: Property Week May 2008

Nobel Laureate Richard Feynman was a notorious practical joker, which has been blamed for his statement that: ‘If you think you understand quantum mechanics, you don't understand quantum mechanics.’   But he was making a very sharp observation that could be applied to the biggest change in planning for decades. Anyone who thinks they have a grip on the proposed Community Infrastructure Levy [CIL] is deluding themselves.

  The difference between physics and planning, however, is that even the experts accept their limitations. Someone deep in the heart of Whitehall may know what will happen when the latest version of a development charge comes in but everyone else is lost in a fog of uncertainty.  The long-awaited impact on property is unlikely to be clarified when enabling legislation is published this year. The true picture will emerge from complex regulations due in 2009 – providing rows expected in the House of Lords do not drag on too long.

   ‘I am struggling to find any comparative legislation with so much detail which has yet to be worked out,’ says Michael Gallimore, head of planning at lawyer Lovells.  The industry must take a full part in consultations later this year or face painful consequences, he told this year’s Henry Stewart Planning Briefing.

  Meanwhile, developers have to make a best guess at what they will face for schemes already on the drawing board, as some major changes are likely.  Many are banking on the government adopting something like tariffs being tested by various local authorities but these vary enormously and are not certain to apply.

  Development charges must also be laid out clearly in new local plans now being drafted but these are slipping well behind deadlines and could be still in the melting pot by the time CIL emerges.  No-one should assume there will be a single system for the whole country based on one of the current techniques, Peter Weatherhead, national head of planning at DTZ told the Henry Stewart Briefing. The Milton Keynes ‘roof tax’ model is limited because it is geared to greenfield development. Charging methods in the Thames Gateway are being touted as a clue to government thinking because the area is so closely managed by Whitehall but this, too, may be a false lead.  The system is distorted by the need to encourage development, so charges are nowhere near the real cost of infrastructure, says Whitehead. They also vary across the zone.

   Ashford is one of the few areas with existing planning permission for a major development – more than 1,000 homes - and a clear charging system. Tariffs drawn up in 2004 are based on ‘development units’. Each 100 homes equal one unit, with various benchmarks for commercial property. But the real world has intruded on such neat, forward-thinking strategy. Everything is on hold because of the rule that charges must be detailed in the local planning framework which, like dozens of areas across the country, is being constantly rewritten.  Local planners are struggling to understand exactly what ministers want. Inspectors have postponed a decision on Ashford’s core strategy four times as they ask for more information.

 One big fear is that the new system could be a mashup of old and new. The White Paper issued in January – which is still the only indication of current government thinking – suggests that CIL will not be mandatory, so local councils could opt for tariffs along the lines of existing Section 106 agreements.   But it is possible that developers could face two sets of negotiations running at the same time, says Gallimore:  S106 agreements for site-specific facilities and CIL for more general infrastructure contributions.

  The shadow of Planning Gain Supplement  [PGS] – supposedly dropped after objections by the property industry – also drifts around the fringes as developers try to work out potential obligations. Sections of the White paper mention clawback provisions for increases in land values. ‘There still seems to be confusion in the heart of government about whether this is a tax or charge mitigating the impact of development,’ says Weatherhead.

   Confusion could reign after the new system is in place, he adds. What will happen if the property market collapses? Will CIL charges be reduced to encourage development?  Will local authorities vary charges to discourage – or encourage – development? Do they have the skills to make the fine judgements which will have such a crucial impact? It may be an omen that the closest thing in science, quantum physics, is key to the study of black holes.