Draft Community Infrastructure Levy (Amendment) Regulations 2012
The Committee consisted of the following Members:
John-Paul Flaherty, Committee Clerk
† attended the Committee
Community Infrastructure Levy (Amendment) Regulations
The regulations, which were laid before the House on 15 October, make a small number of technical amendments to the community infrastructure levy, which was introduced by the previous Government. If approved by the House, the regulations should come into effect in November.
The basic principle of CIL—I hope that you will forgive me for referring to it in such a way, Sir Alan, even though I detest such acronyms—is that it is fairer, faster, more certain and more transparent than the system of planning obligations. CIL will help to get the economy growing by supporting locally-led sustainable development and providing essential infrastructure.
CIL came into force in April 2010. It allows local authorities in England and Wales to raise funds from owners or developers of land undertaking new building projects in their area. The money can be used to fund a wide range of infrastructure that is needed as a result of development, including new or safer road schemes, flood defences, park improvements, green spaces and leisure centres. The regulations will improve the way in which CIL operates and correct unintended errors. The development industry and local authorities are supportive of the changes, especially those to ensure that developers are not charged the levy twice on the same development if they amend existing planning consent. The leading British developer Land Securities has announced that it will proceed with an estimated £350 million scheme in Victoria that will deliver 2,500 jobs as a result of the proposed changes.
The majority of the regulations amend the relationship between CIL and section 73 applications, which are used to change a condition attached to a planning consent. They are frequently used to make changes to a scheme. In legal terms, they are a new planning consent, and therefore trigger CIL liability under the existing regulations.
Section 73 consents are regularly used for very minor changes, such as a small change to a building appearance or a change to the opening hours of a retail unit. These amending regulations are quite clear that when the change does not alter the liability to CIL, only the original consent will be liable. They will ensure that when planning permission is granted under section 73
In transitional cases when the original planning permission was granted prior to a CIL charge being brought in, but when the section 73 application is granted following the introduction of CIL, the section 73 consent will trigger CIL only for any additional liability it introduces to the development. These changes ensure CIL works fairly and does not hold back development when conditions have changed.
The regulations make provision in relation to extensions to the life of a planning consent made under article 18 of the Town and Country Planning (Development Management Procedure) (England) Order 2010. Article 18 allows developers to apply to extend the life of consents granted prior to 1 October 2010, and we are ensuring that these extensions will not trigger CIL liability.
The regulations correct a technical error in the main CIL liability formula for sites involving both demolition and change of use. Currently, there is a risk that developers could be overcharged, so these amendments fix that problem. They also correct an error that means that social housing relief may be wrongly granted when a development includes retained housing, some of which will be used for social housing. They ensure that regulations around instalment policies set by the Mayor of London and London boroughs operate in a complementary way. They also allow CIL to be chargeable on development that is granted consent by neighbourhood development orders, including community right to build orders, and they make technical amendments to implement other changes introduced by the Localism Act 2011. The regulations will improve the operation of the community infrastructure levy to support development and growth, and I commend them to the Committee.
I accept that the regulations, as the Minister said, are made up mainly of technical changes arising because the formula for charging schedules under the community infrastructure levy did not work properly in a number of areas. My O-level maths was challenged by my attempts to work out whether the formula worked or not, but I did my best.
It is not for us to resist these corrections, but we have several questions about why certain provisions have been included and what action is being taken to support them. First, we think it is sensible that, under regulation 3(1), CIL will apply to neighbourhood development orders, but it must be borne in mind that the communities that will be involved in such an order cannot be expected to have the same expertise in CIL as their counterparts in the development sector. What is being done to make the implications of CIL clear to those groups and to explore any issues around CIL, particularly viability, before the referendum for a neighbourhood development order takes place?
I understand that regulation 3(2) will eliminate instances in which a developer seeks a change in planning obligations under section 73 of the Town and Country Planning Act 1990 and the application is treated as an entirely new and separate application, meaning that CIL is charged again. This is a clearly a tidying-up provision to remove the discrepancy, thus ensuring that developers pay only for what they actually deliver. Will the Minister clarify whether CIL will be charged on the original consent or on what is actually delivered? What will happen when developers have already paid too much CIL? Will they be reimbursed and, if so, who will bear the associated costs? Will he also clarify whether bureaucracy could increase and if local authorities’ essential resources to operate CIL effectively could be taken away?
Regulation 5 addresses the fact that the formula was wrong in the way it applied to new spaces, particularly those with existing multiple uses, and in its different treatment of the refurbishment of existing spaces and the creation of new ones. Will the Minister assure us that the regulations will correct the problem that led developers and business organisations such as London First to call for a review or even a postponement of CIL?
Regulation 6 is similar to regulation 5, but we note that it relates specifically to social housing relief. The explanatory note makes it clear that social housing relief may have been granted wrongly to a development including retained housing, some of which might be used for social housing purposes. Under the existing formula, it appears that it is possible that greater relief may be granted in some instances than should have been the case. Again, we need to know what will happen when too much relief has been granted. If the applications are still under consideration, or if they come back because of an amending clause, will the money be clawed back?
“Regulation 7 reflects changes made in the Localism Act 2011 by clarifying the ways charging authorities can apply CIL. This provides great flexibility and ensures CIL can be used to fund local infrastructure priorities.”
That sounds reasonable, but most of us were under the impression that that was what CIL was designed for. Will the Minister explain why the amendment is necessary? He seems to be making it clear that local authorities have discretion in how they use CIL. Are there limits upon what the local authority can levy? That is a genuine question, because we do not know why regulation 7 is included, as we thought that what it says had already been made clear in existing legislation. Have we missed something?
Having run through my main points on the regulations—the remaining regulations are about working through the formula changes, the need for which we accept—I shall return to a couple of points. I feel that I have to remind the Minister again that his Department has asked Lord Taylor to undertake a review of planning guidance, but once again, through these regulations, it is issuing more guidance. I am also concerned by the statement in paragraph 10.2 of the explanatory memorandum that no charity or voluntary body will be
Paragraph 12 of the explanatory memorandum says that CIL is to be reviewed five years after it came into effect. We know that that is the case, but unless the Minister has once again published something in the past hour to which my attention has not been drawn, will he say where we might find some more details about that?
Nick Boles: I congratulate the hon. Lady on her understanding of these complicated measures. As you can see, Sir Alan, I have a row of unbelievably intelligent officials to tell me what on earth is going on with these provisions, which that contain formulas of a complexity that I have not seen since I studied trigonometry a long time ago. I am in awe of the fact that the hon. Lady seems to have understood them immediately without the help of such officials.
Let me deal with some of the bigger points first. The regulations make technical changes as a response to issues that have arisen but, as the hon. Lady rightly said, there are further issues with CIL that London First and various organisations have pointed out. We are working intensively with the development and property industry, and with local government and the Local Government Association, to reach an agreement on a further set of changes, but those are not yet absolutely buttoned down. We did not want to wait before introducing these amendments, so there probably will be further clarifications—and, I admit, further guidance.
The hon. Lady is right to say that Lord Taylor is conducting a review of planning guidance with the aim of reducing the stock of guidance. Every Government—even Governments with Conservative and Liberal support, who do not believe in regulation—add to regulation, which is why it is important to carry out exercises to hack away some of the inherited stock and therefore ensure that people are not completely hamstrung by guidance.
The hon. Lady asked whether CIL will be on the original consent or on what is actually delivered. If the section 73 agreement changes the liability, it will be paid on the scheme that is delivered. If the developers have overpaid, regulations allow for repayment, but she will be aware that only seven authorities have introduced CIL, so we hope that there will be very few examples. Indeed, in most cases, developers have held back from introducing proposals because of that risk, which is one reason why we are making the changes.
I am advised that the provisions that are being introduced because of the Localism Act are very much technical changes that are intended just to bring CIL into line with specific provisions in the Act—they in no way change the intention. It has always been the case that local authorities decide their CIL charges, although they have to have a clear view of viability. Their proposals will be examined by the inspectorate, and they have to produce a list of the infrastructure that they will use
The hon. Lady asked about social housing relief and the changes attendant on it. Once the new regulations are in place, the new formula should be used. There are transitional provisions, and the formula will not apply if planning permission has already been granted. It would be unfair to claw back from developments if they have benefited from a higher relief than they would now be due, so we are trying to be reasonable on that point.
The hon. Lady asked what we were doing to support neighbourhoods in handling CIL if they are involved in neighbourhood development orders. We will be—I hate to admit this—issuing guidance to support people operating CIL. However, let me reassure her that CIL will be operated not by the neighbourhoods themselves, but by local authorities, which have the expertise in the levy—not least because they will have produced the CIL rates and delivered the list of infrastructure projects—and therefore should be pretty clear about what is going on.
My understanding is that charities will not be charged CIL, so if a charity is a developer itself, it will not be charged the levy. If charities are just advising a neighbourhood, the development might be charged if the body carrying it out does not have charitable status.
We will indeed review CIL after five years. I promise the hon. Lady that I have not published any papers behind her back. With regard to the consultation document that was discussed earlier today, I suspect she would have criticised me even more if I had not published it in advance of questions in the House. However, when possible, we will try to give her as much notice as possible.