Select Committee on Transport, Local Government and the Regions Thirteenth Report

Planning Obligations

104. The Government published alongside the Planning Green Paper proposals to change the current planning obligations system which it said was unpredictable, time consuming, expensive, opaque and unaccountable, and operated unevenly between different developments and different authorities.[78]

The Government's Proposals

  105. The Government proposes to change significantly the purposes of legal agreements in planning (planning obligations) between developers and local authorities, and to extend considerably the occasions on which such agreements could be needed. At present, legal agreements are used primarily to overcome obstacles to development which cannot be resolved by conditions on planning permissions, notably arrangements for resolving problems away from the site of the planning application, providing for cash payments rather than specified actions, controlling the occupancy of development, or limiting the goods that can be sold from a site.

106. The Government's proposes that in future planning obligations should meet additional objectives to:

107. The principal vehicle for delivering these benefits will be a system of tariffs. There would be amounts of money payable by the developer and known in advance, rather than negotiated, for any particular size and type of development. Applicants proposing a much wider range of developments than at present would be expected to enter into legal agreements, so that tariff payments would be widely applicable. The details of the developments which would incur tariffs, how much and under what circumstances, would be left to local choice through the new Local Development Frameworks.

108. The Government also proposes to improve the procedures for reaching legal agreements. There should be greater certainty for developers about what would be expected from them, greater clarity of procedure so that conclusions can be reached quickly and with reduced legal costs, and greater transparency for all concerned (including the public). The Government proposes to improve the practical operation of the planning obligation system by:

  • making documents publicly available;
  • local authority monitoring of agreements and accounting for income;
  • efficiency in handling applications accompanied by planning agreements;
  • encouraging the use of standard terms in planning agreements wherever practicable;
  • a dispute resolution mechanism.


  109. The proposals brought a diverse response. The local authorities and the Royal Town Planning Institute gave it qualified support. The Royal Town Planning Institute argued that the new scheme would improve the process by providing greater clarity and openness but it accepted that further detailed work is required before the approach can be implemented. The Association of London Government and other local authorities suggested that tariffs would give greater certainty about what would be expected from schemes.

110. On the other hand, many organisations highlighted major problems with implementing the proposals. These focussed on:

111. The Committee considers that the Government's proposals and submissions on them fall broadly into two categories:

  • procedural aspects which are aimed at clarifying and speeding up the planning obligations system; and
  • funding aspects which are aimed at improving the quality of development and local planning as a whole.

Below we evaluate the proposals under these headings.

Procedures for clarifying and speeding up the planning obligation system

  112. The Government's proposals on how the new tariff system would work in detail are sketchy in the Green Paper. The contribution they would make to meeting the Government's objectives for speed and clarity in development control depend on how they are implemented. This section briefly examines some of the key issues.

113. The details of a tariff system would be difficult to decide upon in the first instance, even if the package was then clear and transparent to implement. The Royal Institution of Chartered Surveyors argued: "A sophisticated system would be required, better able to take into account areas where there are low property values, where development is economically marginal and where there is a need to maximise brownfield sites." Lord Falconer accepted that the ability to pay a tariff would vary from one area to another due to different land values, and between sites with different characteristics in the same area, such as greenfield and brownfield sites.

114. A new income stream for local authorities would arise from tariffs, and some submissions, such as that by the Association of London Authorities, feared that this could prompt the clawing back by Government of other grants to local authorities, negating the benefit of the additional money raised. Lord Falconer reassured us that he did not expect any change in the present system whereby gains to local authorities from planning agreements are outside the formula for assessing local authority spending requirements. However, this would not necessarily cover other sources of assistance such as funds from the Housing Corporation. The Association of London Government suggested that if substantial amounts of money raised by tariff were used for affordable housing, the Housing Corporation might adjust downwards its grant levels in those local authorities more able to raise funds through tariffs. Furthermore, there is a risk that intentions change over time.

115. Planning obligations at present must be directly connected with the development permitted. The Government's proposals would change this, with tariff payments being generated for a variety of purposes which need have no functional relationship with the development permitted. For example, concern has been expressed before about the drift towards planning obligations funding local benefits with only tenuous connections with the development, and with developers being arm-twisted to provide the benefits in return for the permission. The Nolan Committee on Standards in Public Life advocated a stronger constraining of planning obligations to those circumstances in which they were legally required to enable development to proceed - a 'necessity' test. The Government's proposals have been criticised for dropping this test, by the British Property Federation and the Royal Institution of Chartered Surveyors.

116. One worry is that local authorities could be swayed to permit inappropriate development in order to secure the tariff, especially as the Government proposes that all tariffs should be retained locally. The implied result, of buying planning permission and planning control becoming part of the revenue-raising system, could be worse than the current negotiated arrangements.

117. There is uncertainty about the levels at which tariffs will be set. If they were set at a low level then:

118. Alternatively, if tariffs were set at a high level, more development could be expected to be choked off altogether by the tariff burden. Prospective developers might delay investment in the hope that a future change of policy would revise tariff levels downwards. The Town and Country Planning Association suggested to us that "if society takes more than about 20 per cent of the uplift in land value, landowners will simply hold back land hoping for the wind to change."[79]

119. There is some uncertainty about the treatment of site-related costs needed to overcome practical obstacles to development under the tariff system. The Royal Institution of Chartered Surveyors asked whether the tariffs would be additional to the costs of overcoming the site-related problems, or whether site-related costs would be paid for out of the tariff. If tariffs are additional to negotiations on site-related costs, and negotiated agreements therefore continue, there is a risk that the procedural problems which tariffs were designed to remedy, especially delay, will simply continue.[80]

120. The additional tariff could discourage development on precisely those more difficult sites where the Government is trying hardest to achieve investment, such as derelict sites needing regeneration. That problem could be addressed by reducing across the board the level of tariff payable, but that in turn would prompt the difficulties of low revenue noted above. Alternatively, some classes or areas of development could be free of tariff or it might be paid at a reduced rate introducing foreseeable complexity and endless special pleading.

121. There were differing views about what the funds raised by tariffs should be spent on. The National Housing Federation asked for as much as possible to be spent on affordable housing, in line with the Government's proposals, whereas the Association of London Government does not wish money to be spent exclusively that way.[81] More fundamentally, there are objections, especially from developers, to new development being asked to carry the burden of extensive costs for public benefit. The House Builders' Federation, for example, argued that house builders cannot be expected to foot the bill for the country's long term investment in social housing.[82]

122. Depending on the uses of the tariff raised, there is a risk that the tax would be inequitable. This arises because each authority would have the right to keep all its tariff for local use though it could be shared with neighbouring authorities to tackle cross-boundary issues. Those areas capable of raising more money would have more to spend on public services, whilst areas with weaker land values would not have as much. The British Urban Regeneration Association argued that the tariff system could be regressive creating "north-south inequalities and boundary effects."[83] It suggested that there should be sufficient flexibility for the transfer across boundaries from richer to poorer areas.

123. There is a clear case for local variation in tariff levels to reflect ability to pay the tariff from land values, but there is a risk that the choice offered to local authorities on when and from whom to raise tariff, how much, and when to waive it, all risk creating local incentives in pursuit of ulterior motives. For example, tariffs could be set to discourage or encourage development overall compared with neighbouring authorities, or to discourage necessary but locally undesirable facilities, as the National Housing Federation argued to us. The Government has promised guidelines within which local authorities will be required to exercise these choices.

  124. The Government's proposals for tariffs would replace one form of complexity with another. Instead of site by site negotiated solutions after the submission of planning applications, enormous effort would be required to establish the basis for tariffs around the country, authority by authority, at the forward planning stage.

125. There is a danger that the change to the tariff system will affect the Government's grant to local authorities.

126. However, the Government's other proposals (see points above) for improving the practical operation of the planning obligation system would tackle many of these objectives without the need for changing the whole basis of the system. We recommend that the Government introduces those procedural changes first as outlined above, and only revisits more radical options for reforming the planning obligations system to improve its speed and transparency if significant problems remain in five years' time.

Funding an improved built environment

  127. The Government's proposals extend well beyond procedural reform. The tariff is seen as a mechanism for requiring development to fund a range of new objectives. Both the sources and the applications of the funds need investigation.

128. The source of the funds which will pay a tariff is assumed by the Government to be the increase in land value which arises when planning permission is given for a higher value use. Tariffs are therefore a tax on development value.

129. The purposes to which the funds will be applied take the purposes of planning well beyond good land use and into the realms of revenue raising. There is a fundamental risk that the integrity of the planning system will be put at risk by local authorities having a stronger eye on the receipts from the tariff than the merits of development proposals.

130. There is also a question of equity. It is argued that only those local problems which are the consequence of high land values should be addressed by tariff, since, on that basis, tariff would be recycled in direct proportion to the scale of the land value problem. As the provision of affordable housing is the only intended beneficiary of tariff which falls into this category, we support the principle in the consultation paper on Reforming Planning Obligations that "the affordable housing element may represent a large proportion of the overall tariff" (para. 4.19).

131. The Government needs to undertake substantially more work to demonstrate that funding affordable housing by tariff rather than by the current system of negotiation will clearly produce significantly more affordable housing.

132. Taken together, there remain too many loose ends in the proposals for the Government to proceed with tariffs without considerable further thought. Professor Grant from Cambridge University's Department of Land Economy told us that the Government's plans are not clearly spelt out. "This is a document which advances headline ideas, rather than offers reasoned argument,"[84] he says. He points out that it fails to set out criteria by which tariffs would be set. If there are to be reductions or waivers, it will be important to ensure that the criteria and the machinery are spelt out in the tariff negotiations and not left to individual negotiations. He says that detailed procedures will need to be spelt out for rights of consultation, participation, objection or hearing.

133. We were heartened that Lord Falconer wishes to consult on the details of the emerging scheme[85] and on the Government's advice to local authorities, but, nevertheless, feel that the proposal to introduce a tariff requires considerable further development before the Committee can take a view on whether it is workable.

78   Reforming Planning Obligations: a Consultation Paper - delivering fundamental change DTLR December 2001 Back

79   PGP36 Back

80   This point was also made by the British Property Federation in its submission to the Committee PGP47 Back

81   The Chartered Institute of Housing (PGP39) suggested that councils would be given more flexibility in their use of private sector contributions but that the amount allocated to affordable housing could be reduced. Back

82   McCarthy & Stone (PGP13) fundamentally opposed the very principle behind the tariff "that a developer should pay for wider community benefits that bear no relation to his development." It suggested that the consumer would pay with higher house prices. Back

83   PGP48 Back

84   PGP64 Back

85   Q864 Back

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