In the Pre-Budget Report this week, the new Chancellor, Alistair Darling, abandoned proposals for the Planning Gain Supplement following extensive lobbying by the real estate industry. In its place he proposes a planning charge which can be levied by planning authorities to support the delivery of infrastructure in their area. It is not yet clear if this will be an optional charge to be levied on a case by case basis or a form of local development tax. Yvette Cooper, the planning minister has laid out the bones of the proposal. She said it will apply to all new developments. The following also applies. 

It will be subject to low de minimis thresholds, residential and commercial development will be liable to pay the planning charge.

Where appropriate local authorities will be able to use planning charges to supplement a negotiated agreement. Negotiated agreements will still be necessary to secure affordable housing and to address costs related to the specific development site.

Planning charges should be based on a costed assessment of the infrastructure requirements arising specifically out of the development contemplated by the development plan for the area (which comprises the regional spatial strategy and the local development framework), taking account of land values.

Planning charges should include contributions towards the costs of infrastructure of sub-regional and regional importance identified in development plans.

Planning charge policies in development plans will be tested through the development plan process, in consultation with developers, stakeholders and the community to ensure they support the viability of new development and levels of new housing required.

Our latest intelligence suggests however that each planning application will involve negotiations over how much planning charge the development will attract.

What are the likely practical issues on the planning charge? We see amount, double charging and ensuring that it is spent as the important points.

Amount - in the first place the Local Development Framework (LDF) will be important as it will define the infrastructure for which planning charge can be levied. Participation in the LDF process will be important with proper probing of the issues. Then the schemes will need to be costed and the figures apportioned appropriately among developments. Land value will be a factor - will this mean that more profitable schemes pay more? Valuation and costing evidence may be necessary either at the independent examination or on a scheme-by-scheme basis.

Double charging - authorities may not only levy the charge but also restrict development by planning agreements or Grampian conditions until the infrastructure is in place. In that case, any errors in calculation of the charge could be righted when the Grampian threshold is reached. While this may be of comfort to the authorities, developers may find themselves paying twice. This may be a matter for negotiation or legislation. Either way, care will need to be taken in environmental assessments where the infrastructure will need to be taken into account.

Spending the money - what safeguards will there be that the funds are spent, and spent in time for the development which is coming forward? Planning agreements deal with this by a refund mechanism. Will that be possible under the charge? Paradoxically, a Grampian approach makes it less likely that the infrastructure will be delivered on time as the adverse effect of the development will not occur if the Grampian threshold cannot be passed because the infrastructure has not been delivered.

What role for the planning agreement? Section 106 agreements are still envisaged by the Government to deal with affordable housing (one of the more difficult areas) and site-specific costs. Planning agreements could also play a useful role in ensuring the funds are spent.

Next steps - the Government intends to introduce a Planning Bill in November which will deal with the White Paper proposals including the new procedure for major infrastructure projects and the Infrastructure Planning Commission (see the last issue of Future Perfect? for a summary) and also the planning charge. The Government must first issue its summary of responses on the White Paper. It is likely that the planning charge parts will follow later.