Legal Viewpoint: Report sets new directions on infrastructure for growth

This month's Commons housing, communities and local government select committee land value capture inquiry report highlights ways the planning system can anticipate and recover the costs of infrastructure needed to deliver growth.

The report recognises, though not fully, the significant contribution already made from land value uplift to social goods. It recommends proper resourcing to allow councils to negotiate and simplification of the Community Infrastructure Levy (CIL). It encourages experiment with a more directive style of state development frameworks sometimes used in other countries.

It also tells us that planning obligations and CIL can work effectively to ensure that values properly reflect costs, that more can be achieved with more local authority resources, greater transparency and a stronger emphasis on local plans, and that political will matters. Restating these goals as government chews over its developer contributions consultation ahead of the Budget is great. Similarly, speeding up and simplifying compulsory processes is nice where it safeguards the rights of those affected, although the MPs’ recommended changes to the Land Compensation Act 1961 rules to limit hope value are not consistent with that.

The 1961 act rules, as recently amended, result from a search for fairness and pragmatism. The Town and Country Planning 1947 effectively enshrined the "established use value (EUV) only" principle and "gave rise to no end of difficulties", as the Court of Appeal noted in Myers v Milton Keynes Development Corporation [1974]. The 1961 act rules were then imposed to strike a balance, ignoring the statutory scheme but reflecting pre-existing hope value. The government reiterated in 2016 that reform this remained a core principle with reform of the "no scheme" assumption subsequently made by the Neighbourhood Planning Act 2017.

Drifting further into "pure" value capture through the planning system is, from past experience, likely to undermine legitimacy and delivery. More importantly, legal tinkering is unnecessary. The law already recognises that value expectations are adjusted by properly tested policies. Parkhurst Road Ltd v Secretary of State for Communities and Local Government [2018] emphasised that policy already requires land value to respect policy expectations, competitive returns and evidenced market value at the same time. It also made crystal clear that policies must be properly tested at examination if they are to be legitimately treated as the irreducible starting point for value expectation.

Ensuring that costs are not imposed outside the examination process through supplementary measures that are "a device to avoid scrutiny and independent examination" is therefore in the public interest. This is clear from R (McCarthy and Stone Retirement Lifestyles Ltd and Others) v Greater London Authority [2018] and R (Skipton Properties Ltd) v Craven District Council [2017].

If policy is properly established and consistently applied, accompanied by a properly tested CIL, the public loss raised in evidence to the committee is minimised. The incentive to bring land forward, recycle value and deploy equity to deliver growth without confiscation and delay is also preserved. The powers and rules to achieve good growth are there already. Summoning up the political will to experiment and intervene in some of the ways the report recommends – including reforming CIL - would be a better use of scarce resources and leadership than another legislative adventure.

Roy Pinnock is a partner at Dentons


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