• Development Intelligence

Planning White Paper – The hidden incentive for local authorities

Image taken from Planning White Paper

Buried in the Planning White Paper, Planning for the Future, is a little noticed provision. And it’s a good one. Or at least in DI’s experience, it could be.

Before DI became independent in 2011, we were owned by an American company. And thus our chairman spent considerable time in this previous era working on US planning projects. (They don’t call them that over there as ‘planning’ is a term they do not really use).

Now the US and UK systems are very different indeed, in many ways. But one of the key features of the US system is that money is the first and most prominent argument for an applicant to win planning consent. The narrative is made by stacking up all the financial benefits for the relevant local authority: planning gain yes, but much more importantly the equivalent of future council tax and business rates, which importantly local authorities in the US generate themselves, keep for themselves and then decide how to spend themselves. Ipso facto, many US local authorities are keen on granting consents because it gives them more funding to spend on their pet projects.

This is of course very different in the UK. Councillors and officers see no immediate financial incentive to grant anything at all. In fact it’s the reverse: they see infrastructure impacts and costs, as well as NIMBY voter noise, which makes them often much less likely to vote in favour of anything much.

Buried in the White Paper at paragraph 1.19 is an interesting impact of the new Infrastructure Levy (IL) – the proposed replacement for s106 and CIL. In essence IL would be a sales tax on a development’s final value, valued at consent but paid at occupation (can’t see any arguments happening about that concept at all!). Local authorities would forward fund infrastructure by borrowing from central Government against future IL revenues making it a sort of TIF. Moreover, the White Paper promises that councils will be given “greater powers to determine how developer contributions are used”.

Now if that worked and came into being, it could be quite interesting. It means that proactive, forward thinking councils – like their US counterparts – would quickly work out that to get more funding, they need to deliver more consents that generate IL. Potentially an interesting development but let’s see what actually transpires.