There’s an "awful lot wrong" with the Community Infrastructure Levy (CIL), says Liz Peace, whose review into the development tariff was published alongside this month’s Housing White Paper. Speaking to Planning, the former British Property Federation chief executive said that the mechanism had been implemented in a more complicated way than was envisaged by the policy-makers. She added that the levy has not raised as much funding as anticipated, "has spawned a whole industry", and more development is exempt from the charge than had been intended.
However, despite concluding that CIL "is not fulfilling the original intention of providing a faster, fairer, simpler, more certain and more transparent way of ensuring that all development contributes something towards cumulative infrastructure need", the review panel headed by Peace stopped short of the "kill CIL" recommendation sought by some property professionals. Instead, it proposes that the system is reformed.
Under the proposals put forward in the panel’s report, CIL would be replaced with a twin-track system. All developments would be subject to a "streamlined low-level tariff", which the report names the Local Infrastructure Tariff (LIT). Larger developments would be subject to an additional section 106, in an acknowledgment that the largest and most complex developments "require a bespoke approach to their specific infrastructure needs", the report adds. Peace said that the proposals would "keep the principle of CIL, but massively streamline the system".
Practitioners will have to wait another six months, however, to find out how the government intends to respond to the review’s findings. The Housing White Paper said that the government will respond to the review and "make an announcement" in the Autumn Budget.
For Peace, one of the key benefits of the system recommended by the review panel is that the proposals would "get away from this massive CIL industry that has grown up". The report recommends that housing developments of ten units or fewer would face no section 106 contributions, and pay only a LIT fee. Peace points to figures showing that 85 per cent of all applications in England in 2015 were for schemes of this size. "You would be taking the bulk of planning applications out of the complex CIL system," she said.
Peace added that the review’s proposal to introduce a nationally-prescribed "standardised methodology" for setting rates under the LIT system, combined with a recommendation to do away with CIL’s "complex examination process", would mean that local authorities will not have to go through "complicated arguments" with the development industry over viability when setting their charges. At the moment, she said, "you almost have an arms race between local authorities and developers". The review’s proposals would "sweep all that away", Peace added.
Graham Jones, the Planning Officers Society (POS)’s CIL and infrastructure planning specialist, said that a charge setting system that avoids examination would be "quicker, less expensive, and would short-circuit the difficulties authorities have in getting charges up and running". However, Matthew Spilsbury, director at consultancy Turley, counters that the existing CIL examination process is currently not sufficiently robust and, if anything, it should be strengthened. He believes that developers will continue to contest charges. Stephen Ashworth, partner at law firm Dentons, agrees. "It’ll end up being just as much of a debate," he said.
Peace said that the review panel’s analysis suggested that local planning authorities would "get either the same or more" funding under the proposed system compared to CIL. While the LIT rate would be set at a lower level than CIL tariffs, the LIT would be applied to more development, with fewer exemptions, she said. Peace added that the panel had concluded that the new system should be mandatory for local authorities, with an opt out only where the cost of collection is not justified by the receipts collected. The panel’s report states that benefits to a local authority of a simpler alternative to CIL "which cuts out all the burden of rate setting and collecting but which, in most cases, collects a similar amount of money" should encourage rapid adoption.
However, Spilsbury said that areas where CIL is unviable would face the same situation under LIT. He said he had concerns over how the system would work in the North, where CIL coverage is patchy (see map, below). "If CIL was unviable, LIT is going to also be unviable," he said.
The review proposes that LIT should eventually replace CIL completely and a final cut-off date should be fixed in order to "prevent drift in implementation". "2020 would seem a logical date to aim for since that is the end of the current Parliament," the review says. Experts agree that the detail of the transitional arrangements will be crucial to ensure that the introduction of the new system does not slow development. Spilsbury warned that, if developers believe that they could face lower payments under the new system than under CIL, "you’ll end up with development slowing down ... the government needs to be alive to the threat". Independent planning adviser Gilian Macinnes, a member of the review panel, agrees that caution is required. "The last thing the government wants to happen is for people to say they won’t pursue development at the moment because there might be a better fiscal environment if they don’t," she said.
With the review’s recommendations now in the public domain, but the government’s view of the proposals unclear, charging authorities face a dilemma over whether push ahead with work on preparing or reviewing CIL charging schedules. "We are going to have to wait for another six months," said POS’ Jones. "During that time, there will be a hiatus, with local authorities not wanting to put their hard pressed resources into something that may not be with us in the future." However, Macinnes and Ashworth advise authorities to press ahead with work on CIL. They say that the timescales involved with putting in place a new system are likely to be lengthy. "If I was a local authority, I’d assume that CIL will be with us for a long time," said Ashworth.
Colette McCormack, partner at law firm Winckworth Sherwood, said that, whatever the outcome of the review, the government should act soon to iron out glitches in the regulations that are currently causing practitioners difficulties. "Regardless of what happens, those CIL regulations need amending, even in the short-term," she said.
Five More Proposed Changes To The Levy
1. Pooling restrictions removed
Under existing rules, councils are only able to pool up to five section 106 contributions to pay for any one project. But the review recommends these restrictions are removed completely. "For the biggest schemes, most applicants would rather deliver onsite infrastructure through section 106, but find the pooling restrictions nerve-racking," said CIL review panel member Gilian Macinnes.
2. Payment in kind process made easier
The review recommends that, for larger developments, it should be possible under the proposed system for section 106 infrastructure to be delivered "in kind" on site, and that the Local Infrastructure Tariff (LIT) contribution should also be able to be delivered via in kind provision. Colette McCormack, partner at law firm Winckworth Sherwood, said the CIL regulations make provision for payments in kind, but they are not often used because they are "complex".
3. Reversal of existing floorspace credit
Where development involves demolition or change of use, current rules allow existing floorspace to be offset against a CIL charge. But the review says that the exemption is one of the "biggest contributors to complexity and cost in managing the CIL process". In future, when a development involves replacement of a building, or a change of use, the LIT should be charged on gross floor space, the review recommends. "It could result in high costs for conversions and the redevelopment of brownfield sites," warned Matthew Spilsbury, director at consultancy Turley.
4. Powers for councils to borrow against future levy income
Many local authority submissions to the review called for the ability to be able to borrow against future CIL income, the panel’s report says. It "strongly" recommends that the government addresses "as a matter of priority" how best funds might be made available to town halls to support upfront infrastructure needs. It adds that if borrowing is not considered appropriate, other options could be considered.
5. Mayoral infrastructure tariffs for combined authorities
The review says that there is a "good case" for enabling combined authorities to collect a "mayoral-type CIL", described as a Strategic Infrastructure Tariff (SIT), as a contribution to a small number of major pieces of infrastructure. The report says that the tariff would have to take into account town halls’ own Local Infrastructure Tariffs (LITs). Turley’s Spilsbury said that the proposal would be problematic in Greater Manchester, where some councils have not introduced CIL due to viability concerns. "To suggest you could introduce a LIT and apply a SIT on top of that, I can’t see how that is going to work," he said.
Map: CIL status
Use the map below to view the status of your local council's Community Infrastructure Levy (CIL) proposals.
The map above was last updated on 4 January 2017 and is based on CIL data compiled for Planning's CIL Watch blog. Gaps appear where local authorities have yet to publish CIL proposals for consultation. For full data, including details of retail and commercial rates, as well as links to charging schedule documents, visit Planning's 'Who's Charging What?' page here. National Parks are not displayed on this map. They are separate charging authorities - local authorities are not the charging authority for land within a National Park's boundary.
Green: Local authority already charging CIL
Yellow: Examination report published
Orange: Charging schedule submitted for examination
Blue: Draft charging schedule published for consultation
Red: Preliminary draft charging schedule published for consultation
Liz Peace, the chair of the government's CIL review panel, will speak at next month's National Planning Summit. Click here for further details.