Appendix 3: Explanatory information
Draft Town and Country Planning (Fees for Applications
and Deemed Applications) (Amendment) (England) Regulations 2008
The Committee asked for advice from the Department
on the following questions: Did the 2005 fee increases achieve
cost recovery? If so, why have costs increased by 25% in the
3 years since, when general inflation is around 2 or 3% per annum?
If the 2005 increases did not achieve cost recovery, why not?
Why are the costs of the planning system increasing at such an
apparently uncontrolled rate?
The advice provided by the Department for Communities
and Local Government follows.
Background - Fee increase in 2005
1. Planning fees were last increased in April
2005. This included an approximate 15% increase for all fees,
and a significant increase in the maximum fee cap, to £50,000.
These combined changes aimed to increase total fee income by 39%
- the amount necessary to recover the then costs of fee-chargeable
development control, as estimated in 2003.
2. The actual increase in fees realised by local
planning authorities was only 18%, raising fee income of £197
million in 2004/05 to £232 million in 2005/06. This left
a shortfall of some 21% or approximately £42 million.
3. The 2005 increase did not achieve cost recovery
for two main reasons:
· the
proposed increase in 2005 was based on research undertaken in
2003; and
· the
income raised in 2005/06 reflects a downturn in applications in
numbers and in scale and in some respects the inability of local
authorities to match their costs workload.
Performance Improvement and higher costs
4. Over the past five years, Government has been
greatly concerned at the performance of local authority planning
services. This period saw the introduction of Best Value targets,
notably Best Value Performance Indicator 109 relating to the speed
of decision-making on applications. This setting of targets has
forced authorities to put more emphasis on their planning services,
many of which faced resource shortfalls and management deficits
that needed to be addressed. The requirements to meet the targets
set out in BVP 109 required local authorities to perform at higher
levels each year over the 5 year period to 2007/08.
5. This initiative has had some success. Average
performance across England has significantly improved with 85%
of LPAs met or surpassed the Government's target to decide 60%
of major applications within 13 weeks in the year ending September
2007. In order to maintain this performance improvement local
planning authorities need to be able to afford to employ and retain
enough qualified staff, with the right mix of experience and specialist
knowledge, hence an increase in the cost of the fee paying service.
Planning Costs and Fees, May 2007 (Research undertaken
by Arup)
6. Evidence presented in Planning Costs and Fees,
May 2007 (Research undertaken by Arup), sets out that the actual
fee income in 2005/6 was £232 million and suggests that the
costs of fee related development control is between £290m
and £365m in the same year. The higher of these figures reflects
a situation where overheads such as leave, training, sickness
and breaks are attributed to the development control service in
proportion to the current workload. This suggest a shortfall of
fee income of between £60m and £135million, based on
current costs, and would imply fee increases of up to 59% based
on the higher overhead assumption.
7. Had the 2005 increase achieved the projected
income, the shortfall in 2005/06 would have only been approximately
£16 million. This would have only required a fee increase
of approximate 6% to meet the current shortfall which would have
been in line with inflation.
8. The proposed increase as set out in the draft
SI before the Merits Committee would see an overall increase of
approximately 23%. This aims to ensure that the cost of the fee
paying development control service operates on a cost recovery
basis.
Supplementary questions
The Committee sought advice on the following supplementary
questions: Why did the Department not update the 2003 research
before deciding on the 2005 fee levels? If there was a "downturn
in applications in numbers and in scale", surely planning
authorities faced fewer costs in meeting the lower demand for
their services - so the shortfall should have been lower than
the 21% quoted? And how confident is the Department that the latest
proposed increases will indeed achieve cost recovery?
Supplementary advice
9. The 2003 research was comprehensive including
surveys with all local planning authorities; this takes a considerable
time to evaluate and put together to inform the consultation which
is undertaken prior to the fees going before Parliament, there
is always likely to be a time lag as a result.
10. In terms of the profile of applications,
this is actually complex because some categories of fee income
are relatively low (minor applications, e.g. householder applications);
if these applications increase or decrease in numbers then the
overall change to the average application cost is minimal. However,
where major applications fluctuate, then the average fee and the
income can change significantly. In 2004/05 there were only 18
thousand major applications, in 2005/06 there were over 19 thousand
and, although this is a small increase, these are the type of
applications that are difficult to deliver at cost recovery due
to the maximum fee payable (currently set at £50,000). Over
the same period there was also a significant downturn in minor
and other applications with some 120,000 less applications in
05/06; however, in many cases these smaller applications have
cross-subsidised the determination of larger scale applications.
Overall, the drop in minor/other applications, together with an
increase in the major applications has meant that the resources
for the fee paying element have not materialised.
11. Although as you say, if there are less applications
to determine (leaving the increase in major applications to one
side), this should be reflected in the cost of the service, as
mentioned, we have asked authorities to determine applications
more efficiently and within the timescales set. This has been
achieved as the statistics indicate; however, this is at a cost
to authorities. Furthermore, it is difficult for local authorities
to predict their overall application profile and this will be
based on previous year's profiles which dipped significantly in
2005/06; however, at the same time they need to ensure that they
have staff in place to deliver. Recruitment of planning officers
is extremely difficult; there is an overall shortage of experienced
planners, which the Department is working closely with a number
of bodies and universities to combat.
12. [We are] confident that the proposed increase,
which is aimed at a relatively small increase for householder
applications and 25% for all other categories, will help authorities
to achieve cost recovery. Raising the maximum fee to £250,000
will address the concern that the major applications, which take
significant resources to determine, should be determined on a
cost recovery basis. However, [we] should caveat this with the
fact that a significant change in the profile of applications
will change the profile on fee income. There has been more stability
between the number of planning applications received between 2005/06
and 2006/07. For the first 2 quarters of 2007/08 there is again
consistency albeit with a small increase of approximately 4% over
the 6 month period.
Department for Communities and Local Government
March 2008
| 
