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
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:
- insufficient funds might be generated for all
the benefits which the Government has in mind;
- some schemes might raise less tariff than under
currently negotiated arrangements, and in particular there would
be a risk of ending up with fewer affordable homes than are achieved
at present through the planning system; and
- many schemes would be allowed to proceed without
paying as much in tariffs as they could comfortably afford.
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."
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.
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. 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.
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
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'
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,"
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
133. We were heartened that Lord Falconer wishes
to consult on the details of the emerging scheme
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
This point was also made by the British Property Federation in
its submission to the Committee PGP47 Back
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
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