Response by Mills & Reeve to the following consultation papers;
- Paying PGS
- Valuing Planning gain
- Changes to planning Obligations
The first “overview” section applies in relation to all three papers. There then follows a paper specific section.
1 It is quite clear, from the consultation papers and other published material, that there is still a good deal of ongoing/future work which is directly relevant to PGS and whether it can be “workable and effective”. Two examples are;
1.1 the 2007 CSR is exploring ways of improving the planning of local and regional infrastructure delivery.
1.2 There is to be further dialogue on transitional arrangements and even the PBR is ambiguous on this point. Paragraph 3.126 speaks of exemptions both for “development already in the planning process” and all planning permissions granted before an appointed date in the future. Are there intended to be two categories of exemption – or does the latter qualify the former?
2 The further work being undertaken or proposed on local and regional infrastructure delivery is particularly important, because the outcome of this work will have a direct bearing on the question of whether PGS can be “workable and effective”.
Specifically, in the consultation paper on “Changes to Planning Obligations” , we are asked to read the proposals in that paper “in parallel to those on the issue of revenue allocation and infrastructure delivery in the section on PGS in the 2006 pre-budget report”. If we turn to that section of the PBR the following points emerge;
2.1 At paragraph 3.102 of the PBR – “the Government will set out in a white paper in Spring 2007 its proposals in response to (Kate Barker’s) recommendations for improving the speed, responsiveness and efficiency in land use planning and taking forward Kate Barker and Rod Eddington’s proposals for the reform of major infrastructure planning”.
2.2 At paragraph 3.111 of the PBR – “the Government is committed to ensuring that its ambitious plans ……. are supported by the necessary investment in ….. infrastructure”. To address these issues, the Government has established a 2007 CSR policy review into supporting housing growth. This review had identified a number of key themes for further work including ….. improving infrastructure planning and delivery of the local and regional levels including measures to improve coordination and timeliness of delivery partners and mechanisms for front funding the provision of infrastructure”.
2.3 At paragraph 3.125 of the PBR – “PGS revenue allocation will need to be consistent with the 2007 CSR review into supporting housing growth. Robust local planning is critical to the efficient and effective delivery of infrastructure. The review is exploring options for improving infrastructure delivery planning at the local and regional level”.
Further, in the introduction to the analysis of the 2007 CSR published in November 2006, we read, at paragraph 1.34; “to inform further steps to ensure sustainable growth in employment ….. the Government is conducting a policy review to ensure that appropriate infrastructure will be provided to support housing and population growth”.
3 The timely delivery of infrastructure is a vital component of PGS because;
3.1 A range of stakeholders must have confidence in delivery – developers for the success of their developments and also local authorities and other agencies charged with the responsibility for delivering services which will be in part funded by PGS.
3.2 Good planning relies in no small part on the appropriate relationship between development and infrastructure and this relationship, or balance, can currently be fine tuned between the developer and the local planning authority through the section 106 agreement. With PGS, the development is separated away from some or much of the infrastructure provision.
3.3 Confidence in the delivery of necessary infrastructure will be an important factor in how the new system under PGS will be judged against the EIA regulations. There is the linked question of whether and to what extent Grampian conditions should be used in circumstances where, by virtue of PGS, the developer is removed from direct responsibility for the provision of infrastructure. If necessary infrastructure can be delivered in a timely way this will give confidence to the planning decision makers so that the use of Grampian conditions can be avoided in such cases.
3.4 When granting planning permission, local planning authorities must still be satisfied that the essential infrastructure requirements are addressed whether by developers through section 106 (but this will apply only to its more limited range) or by the public sector through other means.
4 Our purpose in setting out these comments in detail is to make the point that it is really too early to know if PGS can be workable and effective in the delivery context. Until all of this further work is done and analysed, there is insufficient evidence and information to inform the debate on this central issue.
5 Consulting on the details of how to pay PGS and how valuation will work will need to be done – but surely these have come along much too soon in the debate.
6 Another fundamental question which still seems to be unanswered is – what is PGS intended to pay for? Certainly the impression given to many of our clients and professional colleagues when the original consultation took place was that most social and other infrastructure would be paid for from PGS leaving section 106 to deal with site specific issues and (in view of the understandable desire to retain its provision as part of many new developments) affordable housing.
There might be, even if at a superficial level, a certain attraction in such a proposal because if affordable housing could be resolved (and the proposal for a “starting point” is helpful in this respect) along with other site specifics, one could pay PGS and get on with the development. Now, in the “Changes to Planning Obligations” paper, we see that there have been further thoughts on this and there are other matters, which previously might have been thought to be a point of principle to sit within the “PGS will cover” column, which might still need to form part of section 106 negotiations. These specifically are land transfer for schools and other community facilities and highway works beyond the immediate site access.
This leaves the reader asking the question “what exactly is PGS meant to pay for?” This central question should, we submit, be resolved before we look at the details on matters such as payment and valuation.
A significant issue arising from this paper is the potential for PGS liability to run with the land. Paragraph 6.8 suggests the liability may be transferred to a third party and gives two examples, seeking further suggestions. In property transactions, there may therefore arise a significant risk where a purchaser acquires land at the time when the full PGS liability has not been discharged.
The risks have not been clearly identified in the consultation paper because the consultation paper makes the circumstances of such liability the subject for further consultation and the risks are exacerbated by concerns about the extent of which the PGS register may be relied upon to indicate full discharge of any PGS liability. The Government should regard the lack of protection of bona fide purchasers as a clear flaw in the current proposals for PGS which will lead to market failure if not addressed.
Turning to some of the specific questions:
Q2 This paper suggests allowing 60 days for payment of the PGS liability after the issue of the PGS Start Notice. Would it be preferable to pay the PGS liability at the same time as filing the PGS return, to limit contact with HMRC?
The 60 day payment requirement is surprising. Although it is true that some section 106 contributions are made around the time of commencement of development, a great many are linked to occupation and this is confirmed in the “Valuing Planning Obligations” research published in 2006. The point is also relevant in light of paragraph B17 of circular 05/05. The proposed rules in relation to phasing will go part way towards resolving this but there will still be a gap between the current timing on payments and the position under PGS.
If phasing of PGS is only possible through phasing of developments via phased reserved matter applications, then this might lead to artificial phasing or at least applications for the same which would be unhelpful and wasteful of resources.
Q4 Do the proposed definitions of full planning permission clarify sufficiently what development will be liable to PGS and when the valuation dates will be?
The position is not sufficiently clear in relation to enforcement situations i.e. where development takes place without planning permission. It is not necessarily the case that a local planning authority would take steps to enforce e.g. if it would not, in the planning context, be expedient so to do.
Q5 What further information do you require in order to determine whether a planning permission will be liable to PGS and when the valuation dates will be?
We need to know what is proposed by way of transitional arrangements and the full detail of this should be published as soon as possible.
Q6 A PGS Start Notice is required before development may commence. Does the definition of commencement of development in TCPA 1990 require further clarification for PGS purposes?
The short answer to this is yes. Reliance is placed on section 56 TCPA 1990 but it should be noted that section 56 (1) is about initiation of development and is not related to the concept of development being “begun” which is what we mean by implementation. Commencement for PGS purposes could be linked to the carrying out of a material operation rather than being linked to the concept of implementation which, in the planning context, may, depending upon the conditions imposed and approvals required, require more than the carrying out of the material operation.
Q9 When might a PGS liability need to be transferred to another person?
Although it is valid to consider the transfer of PGS liability to another person e.g. in the event of death or insolvency, it is vital that bona fide purchasers have protection where they acquire after PGS has been paid but where there may be a demand for additional payment post acquisition. We fundamentally question why PGS should “run with the land” in this way, however. This would put PGS on a different footing to other taxes.
Q11 The Government recognises that allowing a 12 month period in which to challenge a PGS return would not give sufficient certainty to developers and the time limit for PGS will need to be substantially less than 12 months. What do you believe would be a reasonable time limit beyond which HMRC should no longer be able to amend a PGS return or open an intervention, provided full disclosure of the facts has been made by the developer?
A period of six weeks would be more appropriate here but in any event a bona fide purchaser must be protected.
Valuing Planning Gain
Because of the potentially significant delay between the valuation date and commencement of development, there will be a temptation, in times of falling markets, for additional planning applications to be made in order to update the valuations. This is understandable and perhaps to a large extent unavoidable but it may impact in terms of resources within local planning authorities.
Changes to Planning Obligations
Q1 Do you agree that a criteria-based approach to defining the scope of planning obligations is the best way forward? If not, what approach would you recommend?
The concept of the criteria based approach is attractive but there must be sufficient clarity within the legislation, supported by clear guidance so that the possibilities for disagreement are minimised. Clarity is in the interests of developers and LPAs alike and it should be recognised that the introduction of a criteria-based regime will give rise to the potential for judicial challenges e.g. where interested third parties seek to show that the criteria were wrongly applied with a development either under-providing in the section 106 obligation, or “paying for” its planning permission.
The starting point should be that section 106 obligations address only things not dealt with by PGS and this can be done simply. Authorities should settle a list of matters for which PGS would be used, and the 106 would not deal with those, but would deal with any other material matter. Any other approach would allow authorities to recover twice.
The approach described in the consultation paper, of listing what may be dealt with by section 106, would be difficult to apply and will lead to protracted negotiations. It also gives many opportunities to judicially review on the grounds that the section 106 obligation strayed outside the new boundaries. We believe that what is proposed, although superficially attractive, would in practice be over complex and unworkable.
Q2 Do you agree that the scaling back of planning obligations will not undermine the operation of EIAs for the reasons set out?
The scaling back of planning obligations need not undermine the operation of EIAs but much will depend upon the certainty of delivery of infrastructure and the confidence we can have in that. There is also an issue over the use of Grampian conditions. If there is confidence in infrastructure delivery then no Grampian conditions should be imposed in relation to that infrastructure as developers will not be in control of the infrastructure provision.
The imposition of Grampian conditions, in addition to PGS, would allow authorities to claim a second contribution to infrastructure which cannot be the intention.
Q3 Do you think that land for public or community facilities on large sites should be included in the scope of planning obligations in the future, or excluded? How should “large” sites be defined?
In the planning sense, it is advantageous if land for these facilities can be provided on large sites. However, this gives rise to a significant point of principle which we have rehearsed in the overview section of this consultation paper. A decision should be made as to what PGS is intended to cover.
In any event, if the decision is that large sites, however defined, should provide land for these facilities through the section 106 obligation, then, even taking into account the reduction in PV, large sites would pay proportionately more by way of overall provision than smaller sites.
Q4 Do you agree with the proposals to establish a clear statutory and policy basis for affordable housing contributions?
Q5 Do you agree with the proposals to establish a common quantum for such contributions?
This would be helpful in many cases but the implications across the country should be carefully examined.
Q6 Can you envisage any unintended consequences of the above approach?
Given that some local authorities now insist on provision at a higher level than the starting point, one consequence may be that, in overall terms, the provision of affordable housing reduces.
Q7 What common quantum would you recommend? What would be the impact of this option on a) development viability and b) affordable housing delivery?
We are in agreement with the starting point proposed in the paper provided that the opportunities for developers to make their case on viability is retained and we believe that greater use could be made of the commuted payment in lieu of on site provision for sites which, by their nature, may not able to provide affordable housing of the kind most in demand. For example, city centre apartment developments may be encouraged to go down the commuted sum route so that funds can be made available for affordable family homes elsewhere.
Q8 Do you agree that measures to implement Travel Plans and demand management measures directly related to the environment of the development site should remain within the scope of planning obligations?
Q9 Which of the options for developer contributions to transport infrastructure should the Government pursue in order best to balance the objectives of; managing demand for road transport; the need to ensure network improvements are provided in a timely manner; the need for transport impacts to be dealt with on a cumulative and strategic basis alongside other forms of infrastructure; and the need to create a scope for planning obligations which is sensible and consistent and does not lead to delay? Are there any other options?
This is a difficult question to answer without knowing the cost of PGS. Is it safe to assume that if Option B is chosen, PGS would be at a lower rate than if A were chosen? Given the fine balance between pros and cons we do not express a strong view on this question although Option A, we believe, has greater attraction.
Q10 Do you agree with the proposal to define the new scope for planning obligations for non road infrastructure i.e. those contributions required to allow “accessibility to access points”, but to exclude more strategic contributions or those which are better dealt with on a cumulative basis?
We do not believe that the answer to question 10 need follow or mirror what it pursued in relation to question 9. Developers should have the option , on a voluntary basis, to provide funding to overcome any transport difficulties in relation to their site. Option A would seem to deny that flexibility and may mean that sites which could be made more sustainable by a greater level of funding would not be able to come forward. The Option A approach seems to favour sites which are already served by the transport network.
Q11 Do you agree that in future all planning contributions, including towards highways works, should, if possible, be made under a single agreement, to which highways authorities would also be parties where relevant? Do you see any downsides to this approach?
Although this may have advantages where the section 278 highways element secures payment only, where highway works are to be delivered by the developer there will be inevitable delay at planning permission stage if the section 278 element is to be included in the section 106.
Q12 Do you agree with the proposal to reinforce the current policy presumption that planning obligations should only be used where it is not possible to use a planning condition, but not to provide for this in legislation?
Yes - but the position should be kept under review and it should be possible for the parties to agree that a particular matter could be included within section 106 rather than dealt with by way of condition.