Budget 2017: Chancellor moots change to infrastructure levy to capture land value uplift

The government will consult on proposals to remove section 106 pooling restrictions in some circumstances and make changes to the Community Infrastructure Levy (CIL) to allow town halls to set rates which 'better reflect the uplift in land values between a proposed and existing use', today's Budget has announced.

Infrastructure: DCLG to launch consultation with detailed land value uplift proposals (picture: Highways England)
Infrastructure: DCLG to launch consultation with detailed land value uplift proposals (picture: Highways England)

The government had committed to respond in today’s Budget report to the recommendations of a CIL review panel, chaired by former British Property Federation chief executive Liz Peace.

The review's report, published in February, had proposed to remove CIL and replace it with a system that would see all development face a low-level charge, with no - or very few - exemptions, the removal of the need for an examination process, and a mandatory requirement placed on town halls to adopt the new mechanism.

The Budget document today indicates that the government will stop short of introducing the proposals set out in Peace’s review.

Instead, it says that the government will consult on "speeding up the process of setting and revising CIL to make it easier to respond to changes in the market". "This will include allowing a more proportionate approach than the requirement for two stages of consultation and providing greater clarity on the appropriate evidence base," the Budget document says.

The Budget also proposes to allow authorities to "set rates which better reflect the uplift in land values between a proposed and existing use". "Rather than setting a flat rate for all development of the same type (residential, commercial, etc), local authorities will have the option of a different rate for different changes in land use (agricultural to residential, commercial to residential, industrial to residential)," the document says.

CIL indexation rules could also be changed so that rates are pegged to house price inflation rather than build costs, the Budget document says. "This will reduce the need for authorities to revise charging schedules," the document adds. "This will ensure CIL rates keep up with general housing price infation and if prices fall, rates will fall too, avoiding viability issues."

The document also says that combined authorities and planning joint committees with statutory plan-making functions could be given the option to levy a "strategic infrastructure tariff", in the same way that the London mayoral CIL is providing funding towards Crossrail. The SIT would be additional to CIL, the document proposes.

Elsewhere, the Budget document says that, where an authority has adopted CIL, section 106 pooling restrictions could be removed "in certain circumstances such as where the authority is in a low viability area or where significant development is planned on several large strategic sites". "This will avoid the unnecessary complexity that pooling restrictions can generate," the document adds.


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