Planning Agreements and Positive Planning for Sustainable Communities in Scotland

1 Executive Summary

1.1 Planning Policy and Case Law

Consultations did not reveal a call for Section 75 provisions to be abandoned in the new Bill. There will continue to be a need for powers to restrict and regulate the use of land where this cannot be achieved by the use of conditions under presently applied tests. Nevertheless there is a strong body of opinion that the provisions of the Act and accompanying advice should be clarified. There is a case for Section 75 to be rewritten, to establish in law the tests set out in Circular policy. This would have the advantage of aiding consistency of application and possible misinterpretation by the Courts minimising the danger that in the future the Courts may again widen the gulf between law and policy.

The new Bill should retain planning agreement clauses. However these should be rewritten to explicitly set the parameters of necessity, proportionality and reasonableness as presently expressed in Circular 12/1996.

Circular 12/1996 would consequently require to be withdrawn and reissued.

1.2 Process and Procedure

There is little justification to change the approach. There continues to be no justification for the unnecessary duplication of conditions in agreements or for agreements to be recommended for the sole purpose of denying the applicant the availability of appeal or to aid enforcement. The tests set out in Circular 4/1998 should always be read in conjunction with Circular 12/1996.

The revised Circular should re emphasise the role of conditions as control measures of first resort and its inter relationship with Circular 4/1998

If it is concluded that a legal agreement is essential, legal advice should be taken as early as possible by all potential parties to confirm that a Section 75 is to be preferred compared to say a Section 69 agreement which avoids the complications of registry but which would not bind successors in title.

For example, it has become the practice between parties in the simplest of cases to conclude monetary transactions by exchange of correspondence, without recourse to a formal agreement.

The fundamental planning constraints and the potential need for an agreement to discharge them before an approval of planning permission can be granted should be established as early as possible in the planning process. Sufficient and appropriately experienced planning and legal resources should be allocated and dedicated particularly to complex agreements.

The new Bill should provide for the introduction of powers and provisions relating to the payment of unilateral obligations, arbitration, appeal, review and annulment.

1.3 Openness, Transparency and Public Participation

Heads of agreement should be clearly set out and justified in the officer's report to Committee in sufficient detail so that the applicant, Members, consultees, objectors can have confidence in the proposed boundaries of the agreement negotiations. The heads of agreement should not come as a surprise to the applicant at the Committee report stage (see above). There should have been prior discussions explaining and justifying the heads of agreement and an indication that there was every reason to believe that an agreement was capable of being concluded on the broad terms specified.

It has become the practice of some Councils not to agree to ring fence monetary contributions. In general an applicant/developer has every reason to expect a monitory contribution sought for a specific purpose to be applied to the delivery of that purpose, within an agreed timescale

Scottish Executive should incorporate these points in best practice advice.

It is appropriate that only the parties to the agreement negotiate planning agreements with no direct involvement by interested third parties ( e.g. objectors to the application or organisations representing them). However public confidence in the process could be improved as follows:

policy and procedure in respect of planning agreements should be specified in local plans, action plans and supplementary planning guidance as appropriate. (see later)
periodic information reports to Committee outlining progress with negotiations should be made
periodic reports to Committee following the conclusion of an agreement indicating the extent to which its terms have been implemented and proposals for enforcement.

Scottish Executive should incorporate these points in Regulations and best practice advice.

There is widespread support for more information about planning agreements to be made publicly available and that this information should be as full and complete as possible. There is a strong case, in accordance with the recommendations of the Nolan Committee for copies of concluded agreements to be placed on Part II of the Public Register of planning applications.

It is recommended that provision for this should be made in the new Bill and that detail should be prescribed in a revised GDPO.

1.4 Positive Planning and Sustainable Communities

Market Awareness in Planning
Resources and Skills
Development Planning

A planning profession, which is aware of the mechanisms of the marketplace, best serves positive planning for sustainable communities that is influences so much by the planning process and of the constraints within which the developer operates.

Planning must be adequately resourced to

a) deliver more effective and up to date development plans quicker; and
b) ensure that adequate and appropriately experienced planning, surveying and legal staff are devoted to complex applications where legal agreements are involved.

Consultancy work currently being undertaken for the Scottish Executive is examining issues relating to the resourcing of the planning system in Scotland. These issues should inform this work.

More effective partnership working between the public and private sectors and the planning schools in appropriate education and CPD opportunities could assist. The results of the Egan Review into planning skills will also be relevant.

The provision of infrastructure particularly when mitigating the cumulative development impacts of unrelated developments is one of the greatest challenges positive planning has to face. The research indicated no ready solution to this dilemma under present mechanisms. The provision of trunk/strategic road improvements, water services and to a lesser extent education are particularly difficult areas.

A combination of more effective development planning involving the active participation of infrastructure providers, better co ordination of budgets and the availability of revolving infrastructure funds managed by Trusts. This is a complex area and required a great deal of further research.

More effective development planning is the key to positive planning for sustainable communities. The future role of Action Plans may be particularly important in this regard as will the confirmation of a statutory obligation for infrastructure providers to engage in the process. The idea of Infrastructure Statements/ Annual Infrastructure Review documents is floated for further consideration.

1.5 Tariffs/Optional Charges and Taxation

I am not convinced that the case for the introduction of either standard tariffs or optional charges has yet been made in the face of the valid criticisms being made by a range of stakeholders in the context of the English Bill. Either mechanism needs to have its roots in the development plan and this would pose serious skills and resourcing issues for planning authorities. Even if these could be overcome the dynamics of planning would mean that rates would be would be difficult to set with any degree of confidence. The developer would be justified in being concerned that supplementary payments would therefore be demanded in agreement negotiations. The principles of certainty and speed of delivery would potentially be compromised.

I do not recommend that the new Bill should incorporate provisions relating to tariffs or optional charges as an alternative to other potential solutions.

This leaves an obvious funding gap to be bridged by means other than standardised tariffs or variable charges within a legislative approach, which reaffirms the principles of necessity, proportionality and reasonableness.

A range of taxation measures (betterment levy and land value taxation) have in the past been introduced by Governments and withdrawn by their successors. It is beyond the scope of this study to consider land taxation in any detail.

1.6 The Barker Review

As suggested by Barker, establishing the relationship between public sector front funding of infrastructure to the planning obligations mechanism is crucial to the success of an approach, which limits the scope of planning agreements. The review proposes a Community Infrastructure Fund and a Planning Gain Supplement. In principle these mechanisms would be compatible with the approach recommended in this report.

The Scottish Executive should consider the findings of the Barker Review in relation to the planning system in Scotland in general and to the new Bill in particular.

1.7 Planning Agreements and Affordable Housing

It can be argued the availability of Section 75 powers and the legitimacy afforded it by SPP 3 has led to the assumption that the planning system can deliver a solution to the affordable housing problem, almost by default.

However, it seems to me that, in applying the tests of Circular 12/1996, it is not at all clear that there is an obvious connection between the granting of planning permission for mainstream private housing and the obligation placed on the house builder to deliver an affordable housing contribution.

As an alternative to relying on the present haphazard approach linked to Section 75 powers the Irish model may offer a better option.

Establishing the relationships between the provision of affordable housing, development planning, housing policy and specific delivery commitments and responsibilities in legislation could offer the certainty to all parties, in particular the house builders and RSLs which the present haphazard approach in Scotland lacks.

These issues should be considered further in any proposed amendment to SPP3 and the Scottish Executive should consider clarifying the relationship between the planning system and the delivery of affordable housing in the new Planning Bill.

2 Study Brief and Research Methodology

Study Brief

2.1 In the context of the proposed Planning Bill for Scotland, this report considers how the planning system might provide for planning "agreements" / "obligations" /"gain" and advises on complementary issues of planning policy and best practice advice.

2.2 The work has been informed by: the objectives of the Scottish Executive in respect of sustainable development; by the agenda for modernising the Scottish planning system; by academic opinion; by previous research undertaken in Scotland for the Scottish Executive; reference to proposals in the "Options for Change" research; the context of the Planning and Compulsory Purchase Bill for England and Wales; the views of Scottish stakeholders; and appropriate international experiences.

2.3 The research has also considered planning agreements an appropriate means of facilitating the delivery of affordable housing. The findings will contribute to concurrent work being undertaken by the Scottish Executive in consultation with appropriate stakeholders.

Research Methodology

2.4 The research was undertaken between January and April 2004. The research methodology had 3 phases:

Context - Establishing an understanding of the issues with reference to extensive published research and in particular material prepared by or for ODPM. Reference was also made to recent experiences with legislative change in the Republic of Ireland.

Stakeholder Involvement - Meetings were held with those stakeholder groups who are most closely involved in negotiating, concluding enforcing and commenting on legal agreements. : local authority planning officials, house builders, professional bodies, pressure groups, academic institutions, lawyers and infrastructure providers Appendix 1 includes the letter of approach to stakeholders together with a short briefing paper. A list of stakeholder contacts is provided at Appendix 2. The project timescale did not allow for comprehensive surveys to be undertaken. However to stimulate debate a stakeholder questionnaire was circulated to those with whom meetings were held ( Appendix 3). Details of stakeholder meetings are outlined in Appendix 4.

It was stressed to stakeholders throughout that the research should not be viewed a formal Scottish Executive consultation exercise and that discussions were being held under the 'Chatham House Rules'. Consequently none of the comments contained in this report are reported attributed to individuals or organisations. Rather than devote a particular section of the report to the results of consultations they have been taken account in the analysis, conclusions ands recommendations.

Report - A draft report with recommendations was reviewed by a small short life Focus Group of stakeholders and by presentations within the Scottish Executive.

Report Presentation

2.5 The report outlines:

An overview of the legislation and the relationship which has developed between planning policy and case law and a review of the process and procedural issues arising and potential remedies
The application of Section 75 agreements to planning for sustainable communities as a possible framework for considering how a positive approach to planning might me assisted or otherwise by planning agreements
Planning agreements and development planning in Scotland
Tariffs and optional charges as potential models including reference to international approaches
The implications of the conclusions and recommendations of the Barker Review of Housing Supply including reference to possible role of fiscal measures
Planning agreements and affordable housing

3. Section 75 Agreements: policy, law and the case for change

The Powers

3.1 Section 75 of the Town and Country Planning (Scotland) Act 1997 ( Appendix 5) empowers planning authorities to enter into an agreement with any person with an interest in the land for the purpose of restricting or regulating the development or use of land.

3.2 Where necessary or expedient these agreements may contain financial provisions. When an agreement is registered in the Register of Sasines or the Land Register of Scotland its provisions run with the land and are then enforceable against successors in title. Therefore Section 75 agreements are bilateral contracts and can be enforced by the use of the remedies normally used for breach of contract.

3.3 There are a number of alternatives to using Section 75 powers according to circumstance.

3.4 Section 69 of the Local Government (Scotland) Act 1973 empowers local authorities to enter into agreements, which assists them in undertaking their statutory functions including the restricting and regulating the use of land and buildings. However it is mostly applied in situations where a one-off obligation is required involving a single third party. Where complex continuing obligations are involved, Section 75 powers may be more appropriate. Although enforceable between the parties to the agreement, it will not bind successors in title.

3.5 Section 48 of the Roads (Scotland) Act 1984 allows roads authorities to enter into agreements with third parties in respect of the provision and improvement of roads. These provisions therefore have narrow application and again are not binding on successors in title.

3.6 Section 8 of the Sewerage (Scotland) Act 1968 provides for an agreement to be entered into between an applicant and Scottish Water to allow for the connection of development to sewers and water treatment works, which are provided and maintained by Scottish Water. Again these agreements are not binding on successors in title. The Water Environment and Water Services (Scotland) Act 2003 updates this legislation (See below).

3.7 Section 20 of the Local Government in Scotland Act 2003 empowers a local authority to do anything that it considers is likely to promote the well being of its area and persons within that area or both. Under this power an authority can among other things enter into arrangements or agreements with any person for the benefit of the whole or part or the area of the local authority or all or some of the persons within it. However the power does not enable the authority to raise money by levying or imposing any form of tax or charge by borrowing or otherwise.

Policy and Case Law

3.8 In England and Wales the equivalent (yet contrasting) provisions to Section 75 are contained in Section 106 of the Town and Country Planning Act 1990 as amended by Section 12 of the Planning and Compensation Act 1991. Appendix 6 compares Scottish and English legislation and guidance as set out in Circulars. The most relevant differences are the provisions in England and Wales which enable developers to make unilateral undertakings where the local planning authority refuses to enter into an agreement which could remove an obstacle to the grant of planning permission; and the opportunity for appeal to the Secretary of State where a planning authority refuses to modify or discharge an agreement.

3.9 Case law (almost exclusively drawn from the English Courts) has confirmed, amongst other determinations that

the legal tests for the validity of planning agreements are the same as those for planning conditions (viz. must have a planning purpose; must fairly and reasonably relate to the development proposed; and must be reasonable in all other respects)
judicial review is an inappropriate means to challenge a planning agreement if the terms of the agreement have a proper planning purpose;
it is valid to seek financial contributions towards infrastructure costs if there is a direct relationship between the development and the infrastructure works;
the development plan can specify a requirement that a planning agreement be used to cover infrastructure costs;
a planning benefit is a material consideration if it has some connection, which is not de minimis with the proposed development.

3.10 The unlocking of community benefit, which may not have been part of the original planning proposal, from the accrued development value arising from the grant of planning permission has always been viewed with scepticism and criticism. The terms planning gain, contribution and planning/developer obligation are terms interchangeably used to convey the same principle but none are statutorily defined. The use of the term gain is perhaps the most unfortunate as it conveys the impression of contributions extending beyond the test of proportionality.

3.11 Section 75 with its powers to restrictandregulate the development and use of land implies both a negative obligation on the developer and a positive requirement placed on him by the authority to undertake the development in a particular way.

3.12 The scope for the use (or misuse) of Section 75 powers is therefore wide resulting from the following two approaches, both legitimised by the English Courts:

the agreement being a contract between the parties following a bargaining process; or
the agreement as a development control mechanism for the enhancement of the public authorities powers.

3.13 "Planning by agreement", as a negotiation in private, is viewed by many as the antithesis of an accountable regulatory planning process where adjudication takes place in public. In 1997 The Nolan Committee was asked by the Prime Minister to look at aspects of conduct in local government in England, Wales and Scotland. The Committee's report states that, for the above reason, the issue was the most intractable aspect of the planning system with which we have had to deal. Specifically the report recommended that:

a) The Department of the Environment (and the Scottish and Welsh Offices) should consider whether present legislation on planning obligations is sufficiently tightly worded to prevent planning permissions from being bought and sold; and
b) Local authorities should adopt rules on openness that allow planning agreements to be subject to discussion by members of the authority and the public. They should not restrict access to supporting documents except where justified by the requirements of commercial confidentiality, which should be interpreted narrowly.

3.14 Circular 12/1996 provides the Scottish Executives principal policy guidance on the use of planning agreements. Appendix 7 outlines the extent to which the use of Section 75 is referred to in other expressions of Scottish Executive policy.

3.15 The Circular (Paras. 4&5) indicates that

planning agreements have a limited but useful role to play in the development control process
they should only be sought where they are required to make a proposal acceptable in land use terms and overcome obstacles to the grant of planning permission
planning authorities should not treat an applicant's need for planning permission as an opportunity to obtain a benefit which is unrelated to the nature, scale and kind of the development proposed
the presence or absence of extraneous inducements or benefits should not influence the decision of the planning authority
unacceptable development should never be permitted because of the offer of unrelated benefits

3.13 An agreement should therefore

be for aplanning purpose
bear arelationship to the proposed development.
relate to the development in scale and kind ;
be reasonable .

3.14 Planning Purpose. The objective must relate to planning objectives or planning purposes viz. the use or development of land.

3.15 Relationship to the proposed development. It is not acceptable for planning authorities to attempt to extract benefits or payments from landowners/developers, which are unconnected with the proposed development. However to be valid, agreements need not be fairly and reasonably related to the proposed development but should nevertheless satisfy a sufficient relationship to qualify as a material consideration in determining the application.

3.15 Scale and kind. Extractions of excessive or extraneous contributions are strongly discouraged. The need for contributions should wholly or substantially arise from the proposed development. Councils are additionally warned about the potential financial consequences for developers of front loaded contributions and that this may prejudice or viability of a project and even result in it not progressing.

3.16 Reasonableness. An agreement should be needed to enable a development to go ahead. In other words it should be so directly related to the regulation of the development that the proposal should not be permitted without it. Any agreement should offset the loss of or impact on any amenity or resource, which is present on the site prior to the development taking place. In the case of financial payments, these should be required as a consequence of the development.

3.17 The interpretation of policy has been both clarified and to a certain extent confused by the Courts over time, illustrated by the following selection of landmark decisions:

1981 Newbury DC v Secretary of State for the Environment
This judgement found that conditions were required to be fairly and reasonably related to the permitted development but that this did NOT apply to Section 52 Agreements under the then T& CP Act 19….

1989 R v Gillingham BC ex parte Parkam
Roch J. stated "it would be undesirable to permit a practice whereby Section 52 agreements were entered into as a condition precedent to the granting of planning permission to achieve objectives other than planning objectives"

1991 Safeway Properties v Secretary of State for the Environment
Henry L.J. held that a "benefit disproportionate to the adverse planning impact of the development to which it was linked would not fairly and reasonably relate to that development"

1993 Plymouth City Council
Sainsbury and Tesco had obtained planning permission following offers of imaginative packages of benefits. Co op challenged the validity of the permissions as the decisions had been influenced by benefits that were not necessary to allow the developments to proceed. Court held that the benefits offered fairly and reasonably related to the developments and were material considerations

1994 Good v Epping Forest DC
Gibson L.J. held that an agreement had to serve a planning purpose and should not be unreasonable.

Tesco Stores Ltd v Secretary of State for the Environment
1994 Tesco application for a supermarket development was called in; Tesco offered £6.6m for new road scheme, more than was required to deal with the impact of the development; Sec of State refused planning permission as he considered that an obligation should be necessary, relevant and bear a direct relationship to the development; decision challenged on grounds that the Minister had failed to have regard to a material consideration viz. the planning obligation. The House of Lords concluded as follows:

A planning obligation was a material consideration if it was for a planning purpose, fairly related to the development and was not totally unreasonable
if an obligation was a material consideration it must be taken into account but it was a matter of discretion of the decision maker as to how much weight was given to it
if it (planning obligation) had some connection with the development that was not de minimis then regard must be had to it.

3.18 The judgement on the Tesco case has influenced the application of the Circulars both north and south of the border, although less so in Scotland. Councils have viewed it as a justification for attempting to obtain unreasonable and disproportionate "planning gains" on the basis that they have some tenuous connection with the development.

3.19 Accordingly, the manner in which the provisions of the Circular have been and continue to be interpreted in relation to case law is one, which causes confusion, uncertainty and suspicion.

Use of Planning Agreements

3.20 Research by Sheffield University for the RICS Foundation indicated that for the year ending June 1998 1.5% of all planning permissions in England and Wales include for Section 106 agreements. 17.6% of all major developments involved obligations and 26% of all major housing developments. Their survey indicated that during the 5 years 1993-1998 the proportion of planning permissions accompanied by agreements rose by 40%. It is suggested that at the time of the survey some 4000 agreements were concluded annually. 85% of local planning authorities in England and Wales had local plan policies, which related to planning obligations. The average cost of the obligations associated with a development in 1998 was £753,830 in the South of England and £148,370 in the North.

3.21 The 2001 research undertaken for the Scottish Executive was unable to provide a comprehensive Scottish picture on the use of agreements in Scotland. However the research team were able to conclude as follows:

In the period September 1996 to September 1999 there was a 77% increase in the use of agreements;
The majority of agreements related to residential developments with 26% of agreements linked to developments of less than 10 dwellings;
There was a vide variation across the country in the extent to which agreements were used. For example over the survey period September 1996-March 2000 Aberdeenshire and Aberdeen City Council alone accounted for 30% of all agreements concluded.

3.22 Statistical returns to the Scottish Executive from local authorities indicates that over the period April 1996 to September 2003

1746 agreements were concluded
the highest number of agreements were concluded by Aberdeenshire Council (258) followed by Aberdeen City (170), Argyll & Bute (158) and Edinburgh (148) in total representing 42% of all agreements concluded
Only 6 authorities concluded less than 10 agreements during this period (Clackmannanshire, Dundee City, East Renfrewshire, LLTNP, Midlothian (0), Moray and Shetland.
Edinburgh City concluded 66% of their agreements in period October 2001 - September 2003 representing by far the highest growth rate

3.23 The majority of agreements relate to residential developments but are used for a variety of purposes:

To control the phasing of development, particularly in larger multi use developments where a number of developers may be involved
To secure the restoration of land and its landscaping e.g. minerals developments
To secure the provision of new or the improvement/extension of existing community facilities such as schools, libraries, sports facilities, playing fields, recycling facilities, meeting places etc.
Provision and maintenance of open spaces
To secure on site and off site transport infrastructure including pedestrian and cycling facilities
The provision and implementation of Green Transport Plans and public transport facilities
To restrict the categories of goods for sale in retail developments
To restrict housing occupancy, particularly in relation to housing in rural areas
The delivery of "affordable housing"
The protection, improvement or management of buildings/sites of historic, architectural or archaeological merit
To secure the payment of sums of money in lieu of the delivery of contributions in kind.

Criticisms and possible remedies

3.24 In 2001, research into the use and effectiveness of planning agreements was undertaken on behalf of the Scottish Executive.

3.25 The research concluded that legislative change in relation to agreements could secure a delivery purpose (area-wide economic, physical and social benefits including mechanisms for delivering multiple land use projects involving multiple developers); and a funding purpose (transfer of funds from a developer to the public sector for agreed projects).

3.26 These objectives could be provided for by widening the scope of the existing Section 75 in the following ways:

the inclusion of review and annulment clauses and provisions for appeal to Scottish Ministers;
a publicly available register of all agreements;
the introduction of the right to enter into unilateral obligations
the express authority to transfer funds.

3.27 New legislation could possibly include formulae for securing financial contributions linked to the environmental or infrastructure impacts of development viz. some kind of development levy or impact fee.

3.28 The study concluded that any new approach would need to be linked to a relevant and up to date policy framework subject to public consultation. There would be a need to clearly set out the scope and purpose of any funding mechanism which, although relating to the proposed development, went beyond the boundaries of the site in question or which related to a wider agenda.

3.29 The potential impacts on infrastructure and other services by cumulative developments, which were not capable of co ordination through partnership or consortia mechanisms, deserved particular attention. "Infrastructure Trusts" could be a method of securing the scope of the agreement and ensure the receipt and disbursement of funds.

3.30 A revised Circular would be required to update policy and a statement of best practice would be welcomed.

3.31 "Options for Change-Research on the Content of a possible Planning Bill" built on the above research findings and offers the following propositions for further discussion:

Money Payments- The circumstances under which conditions with a financial element can be applied, as an alternative to the negotiation of a Section 75 Agreement should be clarified;
Tariffs - Can/should this controversial mechanism be legislated for whilst avoiding the obvious criticism that it represents a form of taxation?;
Unilateral Undertakings - Should there be a change to Scottish legislation to adopt the procedure provided for within Sec.106 of the English Act to allow an applicant to execute a unilateral undertaking that would overcome the obstacle of a planning authority refusing to enter into a Section 75 agreement?;
Infrastructure Trusts - There should be positive encouragement for trusts to be established where a structured approach is necessary to the accumulation and dispersion of contributions to the provision of infrastructure. In respect of major mixed land use and multi-developer/multi-ownership cases where ordered implementation is essential, how could trusts be made to be effective?;
Review of Agreements - Every agreement should contain a mandatory review clause. Appeal mechanisms should be introduced. Should Scottish Ministers or the Lands Tribunal receive and discharge the appeals?; and
Public Participation - Heads of agreement (under negotiation or completed) should be entered on the planning Register. However this may not be sufficient in itself to avoid criticism that the procedure lacks proper provision for public involvement.

3.32 The conclusions of these research reports are extremely helpful in beginning to address some of the core criticisms collated below. These criticisms were commonly mentioned at the stakeholder meetings and often discussed in research reports and journals. Taking forward some of the conclusions mentioned above each criticism has been accompanied by my recommendation for change.

i) uncertainty regarding the legitimate scope of agreements

This is obviously a fundamental matter of principle. Interpretations/misinterpretations (?) of the Tesco judgement have distorted the application of the strict "necessity" test outlined in policy. This coupled with public authorities ceasing to be the providers of infrastructure and other facilities has inevitably led Councils into a culture of assuming that developers should be in a position to contribute obligations including financial payments to a wide range of public facilities which do not always bear a proportionate relationship to the development proposed and meet the terms of policy.

Consultations did not reveal a call for Section 75 provisions to be abandoned in the new Bill. There will continue to be a need for powers to restrict and regulate the use of land where this cannot be achieved by the use of conditions under presently applied tests. Nevertheless there is a strong body of opinion that the provisions of the Act and and accompanying advice should be clarified. There is a case for Section 75 to be rewritten, to establish in law the tests set out in Circular policy. This would have the advantage of aiding consistency of application and possible misinterpretation by the Courts minimising the danger that in the future the Courts may again widen the gulf between law and policy.

Circular 12/1996 would consequently require to be withdrawn and reissued.

ii) the identification of the need for an agreement very late in the planning process and/or the late entry of new requirements by Councils

Developers see no reason why the fullest range of constraints including possible conditions and heads of agreement cannot be discussed with the planning authority earlier in the planning process. The need for an agreement need not come as a "surprise" to the applicant at the point of determination. However, in the case of complex applications the need for an agreement may only be obvious to parties following the submission and discussion of requested information, typically impact assessments of various kinds. Applications amended by the applicant following negotiation with the authority may result in fresh consultations and public participation. Reasonable delay in the process will result .

It has been indicated to me that development constraints, planning requirements and unreasonable demands for contributions are often raised without warning and sometimes without justification at the determination stage. This can be interpreted as an attempt to hold developer to ransom under the threat of refusing planning permission, knowing that it is not always in the applicant's interests to incur the delay and costs which would follow any refusal and subsequent appeal.

Applicants can avoid delay by appointing experienced consultants working as a team and engaging with the planning authority and their clients continuously from the pre application stage onwards.

Progress with negotiations can be assisted by the assignment, by all parties to the agreement, of appropriately experienced and motivated professionals. Dedicated teams or specialist officers can be identified and other workloads reassigned.

Such practices are inappropriate, unnecessary and can lead to the deterioration of relationships at a crucial stage in the negotiating process. Developers require as much certainty as possible about the financial impacts of their proposals as early as possible in the planning process, extending back to the development plan stage (see later).

Best practice advice in the form of a Planning Advice Note is recommended.

iii) the use of agreements where planning conditions would suffice

Circular 12/1996 advises local authorities to rely on conditions (particularly suspensive conditions) wherever possible and that agreements "have a limited but useful role to play in development control" There is little justification to change this approach and no justification for the unnecessary duplication of conditions in agreements or for agreements to be recommended for the sole purpose of denying the applicant the availability of appeal or to aid enforcement. Conditions can be varied much more readily than the terms of an agreement. The tests set out in Circular 4/1998 should always be read in conjunction with Circular 12/1996.

The revised Circular should re emphasise the role of conditions as control measures of first resort and its inter relationship with Circular 4/1998

iv) the introduction of the right of a developer to make a unilateral obligation

Provision for unilateral undertakings are not provided within the Scottish Act. They can be a useful means of a developer, if he considers that negotiations are unnecessarily protracted or where unreasonable demands are being met; making a unilateral undertaking to enter into a planning obligation at the time planning permission is granted. They are also potentially useful in appeal situations where a Reporter is minded to grant planning permission but where there are planning objections that are capable of being overcome by planning agreement between the applicant and the Council.

It is recommended that the new Bill incorporates provisions allowing applicants to make unilateral undertakings.

v) the lack of definition of and justification for the heads of agreement to be negotiated and the unreasonableness of authorities in refusing to agree to the ring fencing of contributions for the delivery of a particular "benefit" and/or their unreasonable refusal to agree to payback clauses

Scottish Executive should incorporate these points in best practice advice.

It has become the practice of some Councils not to agree to ring fence monetary contributions. In general applicant/developer has every reason to expect a monitory contribution sought for a specific purpose to be applied to the delivery of that purpose, within an agreed timescale. However, as in the Edinburgh example below, it may be entirely appropriate to accumulate a purse of small contributions to ensure that the funds are spent in the most economic way for the best possible community benefit.

However where funds have been accumulated and have not been spent within a specified time period clauses guaranteeing repayment with interest may be appropriate.

Ring fencing and payback arrangements should not be restrained by a Council's internal accounting arrangements.

In order to protect necessary flexibility it would not be appropriate to incorporate absolute provisions for ring fencing and payback in the Bill but to incorporate firm advice in Circular and Advice Note.

In respect of developer contributions to education provision, Edinburgh City Council's policy approach may be viewed as best practice. It appears to have been accepted by developers as a realistic approach, setting aside pro rata contributions from housing developments for the provision of school facilities later when the cumulative impacts of developments can be properly assessed. Relatively small contributions have been collected by exchange of letters prior to planning permission being granted. Per unit payments are index linked and have recently been reviewed in line with the Construction Prices Index. The need for formal Section 75 Agreements has therefore been avoided. The Council has however realised that in respect of larger developments a mismatch may in future arise between the need for a school and the accumulated contributions requiring the Council to step in to front fund any shortfall arising from the delivery of contributions lagging behind need and to protect the viability of the project.

This case illustrates the dilemma faced by Councils in matching capital expenditure programmes with community needs which directly resulting from the cumulative impact of new development (see later).

Edinburgh's approach should be referred to in best practice advice.

vi) the perceived lack of openness and transparency in the process where there is no public access to the negotiations and where the inputs and outcomes are often poorly publicised.

"Your Place, Your Plan" A White Paper on Public Involvement in Planning (Scottish Executive Development Department, March 2003) White Paper concluded that there is widespread support for more information about planning agreements to be made publicly available and that this information should be as full and complete as possible. There is a strong case for copies of concluded agreements to be placed on Part II of the Public Register of planning applications. Although the Register of Sasines can provide this information in respect of recorded agreements it is not particularly accessible for this purpose and does not cover unrecorded agreements.

The forthcoming Freedom of Information legislation may make this a necessity in any event.

It is recommended that provision for this should be made in the new Bill and that detail should be prescribed in a revised GDPO.

policy and procedure in respect of planning agreements should be specified in local plans and supplementary planning guidance as appropriate. (see later)
periodic information reports to Committee outlining progress with negotiations should be made

Reference in an Advice Note is appropriate.

where monitory payments and their management are concerned, it is particularly important that the public has confidence in the system of administration. Many English authorities have established the practice of publishing ( e.g. on the internet) comprehensive SPG/Advice Notes on obligations policy and practice. The following represents a selection:

South Shropshire
Royal Borough of Maidenhead
London Borough of Islington
Cambridgeshire

Oldham Borough Council is an example of an authority that publishes on its Web site (www.oldham.gov.uk) an annual financial monitoring statement detailing, for each agreement concluded, the amount of the contribution, its purpose, the pattern of expenditure, interest accruing, responsible department etc.

This practice could be replicated in Scotland where financial contributions require to be monitored and accounted for.

It is recommended that the new Bill should consider enabling Scottish Ministers to introduce secondary legislation to give statutory effect to this requirement. Reference in an Advice Note is also appropriate.

vii) Agreements take too long to prepare and conclude as legal documents

A major criticism levelled at the process is the lengths of time agreements take to prepare, negotiate and conclude. Where the need for an agreement can be identified early enough in the planning process, a skeletal planning terms agreement can be drawn up between parties and varied on a continuous basis whilst negotiations on the application take place. If it is found that conditions will suffice the draft agreement can be abandoned before it is concluded. Where the issues are clear at the plan making stage it may even be possible to specify these in the local plan. Legal 'conversion and fine tuning' need only take place once all planning parameters are agreed. There appears to be general support for the employment of standard clauses. Local authorities should be adequately resourced in their legal teams. There should be effective communication between lawyers for both parties and between the lead planners and their respective lawyers

Reference in an Advice Note is appropriate.

viii) The lack of mechanisms for arbitration and appeal

Negotiations should not be allowed to drag on indefinitely. If an agreement is not concluded within a period agreed by the parties in advance, independent arbitration should be available. The Lands Tribunal could be asked to intervene by any party to the agreement, but solely in respect of matters of valuation and the level of financial payments being challenged. To be effective the process would require to be completed without delay with the findings binding on all parties to the agreement.

Alternatively powers allowing for unilateral contributions could kick in after an agreed default period.

Matters of dispute relating to planning would fall outwith the remit of the Lands Tribunal. Accordingly Scottish legislation should align with its English counterpart and allow a specific statutory right of appeal to Scottish Ministers by either party after a period prescribed in the heads of agreement has elapsed. Again to be effective the process would require to be fast tracked ( e.g. under a hearings procedure) with the findings binding on both parties.

The Bill should incorporate appropriate provisions in respect of independent adjudication and appeal with Regulations and best practice advice relating to matters process and procedure.

ix) Agreements should contain provisions for periodic review and abandonment provisions

Consultations indicated support for this. Regulations should be introduced requiring that all agreements incorporate trigger points for joint review procedures and for the complete abandonment of the terms of an agreement by mutual consent of the parties.

3.33 These recommendations have related to the issues of legitimacy and process. However funding and delivery purposes for planning agreements raise fundamental issues which go to the heart of the purpose of planning as a positive vehicle for the delivery of economic, social and environmental objectives through sustainable development. These are considered in the next section of the report.

4. Planning agreements, and positive planning for sustainable communities

Policy Context

4.1 Consideration of the legal and procedural issues surrounding planning agreements falls short of a proper analysis of their relationship to the positive role which planning will be expected to play in the delivery of the Scottish Executive's economic, social and environmental objectives for Scotland.

4.2 The assumption has been made in this report that the delivery of sustainable development and sustainable communities will be taken forward as objectives of the planning system. By implication the planning system will be expected to play a more positive role than hitherto in the practicalities of delivering the sustainability agenda. The role of planning agreements and the extent to which they can assist the process deserve to be considered here.

Sustainable Communities

4.3 Sustainable development is the pursuit of a better quality of life for everyone, now and for future generations, has been defined in these terms:

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

4.4 The "Partnership Agreement" (Labour/Liberal Democrat Scottish Parliament Coalition, 2003) commits the administration to improving the quality of life for all in Scotland. Its High Level Commitments are

Growing the Scottish economy
Regenerating communities and securing a decent environment through the reform of planning laws with the intention that the involvement of communities would be strengthened, decisions would be speeded up, local views would be better reflected and quicker investment decisions would be made
Delivering good quality, sustainable and affordable housing for all.
Delivering sustainable development that puts environmental concerns at the heart of public policy and secures environmental justice for all of Scotland's communities.

4.5 SPP1 refers to the Scottish Executive's objectives in pursuit of sustainable development and as noted above it has been embodied into the Partnership Agreement. In England, the Planning and Compulsory Purchase Bill requires regional and local plans to be prepared with a view to contributing to the achievement of sustainable development. Draft PPG1 sets out in the Government's aspirations for a planning system, which will deliver sustainable communities and builds on previous Ministerial Statements on this theme.

4.6 To achieve the Government's wider macroeconomic, social and environmental objectives Draft PPG1 indicates that

…. the country needs a simpler, more flexible, more predictable, efficient and effective planning system that will deliver the quality development needed to secure sustainable communities. A positive, proactive approach to planning is needed to achieve this.

4.7 SPP1 already embodies these principles. Sustainable development requires co-ordinated action by the private, public and voluntary sectors. The planning system integrates policies and decision making through the influence, which it has over the location, design and phasing of development and over changes in the way land and buildings are used.

4.8 The delivery of sustainable communities relies on a planning system with a sound basis in implementation. This, in turn, implies an understanding of the relationship between planning and the marketplace and the responsible and effective use of planning agreements as a delivery mechanism.

The development process

4.9 Reductions in public expenditure have occurred since the 1980s with successive Governments curtailing the role of public authorities as providers of public infrastructure. Although the term "infrastructure" is not defined in statute, it may be taken to mean services in support of the development of land (viz. roads, drainage, schools, and other community facilities). In parallel, local housing authorities ceased to be the main direct providers of affordable housing. Fiscal restraint policies and privatisation have combined to create a funding gap which local authorities increasingly expect the private sector to fill.

4.10 In respect of the development process the planning system and its access to Section 75 powers has made it a uniquely attractive delivery mechanism. It can be argued that this is being achieved without a full appreciation of the implications for the market in land and property and consequently the achievement of long term planning objectives.

4.11 There is a defined relationship between the amount, which can realistically be obtained by a planning contribution, and land values. Contributions are normally deducted from the price paid by a developer for land and are therefore effectively paid for by the landowner. Consequently, developers normally try to pay a price for land, which is equivalent to its market value less the cost of complying with planning conditions or terms of planning agreements. The following simplistic residual land value model is used by way of illustration.

simplistic residual land value model by way of illustration

Market awareness, resources and skills for planning

4.12 A developer requires the highest possible degree of certainty about the financial impact of his proposal as early as possible in the planning process and ideally before he concludes a price for the land. Although they are rarely signatories to planning agreement landowners are important players in the process of development delivery. Where the level of contribution is abnormally high land may be withheld from the market frustrating the planning objectives of both developer and local authority. This is a particular risk in areas where land values are traditionally low and cannot bear unusually high levels of on cost by contribution. Perversely these may be the very areas where community infrastructure requirements are the greatest.

4.13 Consequently unrealistic positions and tensions can develop, negotiations become protracted and acrimonious. A point may be reached where the developer has to decide if it is in his interests to abandon the negotiations and the development with the abortive expense or to "bight the bullet", agree to deliver the negotiated settlement and move forward with the development. Developers are rarely in a position to abandon their development and this weakens their bargaining position. Although the developer has the option to appeal he is more likely to prefer to obtain the planning permission by meeting the demands and moving on with the development rather than face the cost of further delay caused by an appeal. A Reporter's decision may also raise new planning issues and will not necessarily result in the abandonment of the need for an agreement to be concluded before he/she is in a position to issue a decision. On the other hand the authority has to decide whether compromises are desirable or acceptable. The refusal of planning permission using the inability to reach agreement as a material consideration will delay the delivery of essential development.

4.14 There are contrasting schools of thought on the role of planning in this process. Some reject the notion that financial appraisal in either plan making or development control is an irrelevancy for planning. In this scenario, a planner's task is to assess physical and environmental impacts and should not be drawn into issues of land valuation and economic viability. Alternatively there are those who support the opinion that the environmental and social objectives of the planning system are best achieved through enhanced market awareness. In my view, the achievement of positive planning for sustainable communities, must be supported by the latter approach.

4.15 My consultations indicated strong support for the view that planning departments are poorly resourced (manpower and skills) and that this is a leading factor in the length of time taken to conclude agreements particularly in respect of major and complex applications.

Consultancy work for the Scottish Executive is currently examining issues relating to the resourcing of the planning system in Scotland. The staffing issues raised above should inform this work.

Sir John Egan's review into planning skills in England and Wales has been published. The overview of recommendations strongly acknowledges the need for a broader skills base for planning and closer collaboration between professional institutes, planners, developers and other professionals of the sustainable communities agenda is to be effectively delivered. The generality of the report, in my view underplays the need planners to possess at least a basic awareness of the marketplace within which they operate and have such a powerful role. The theme suggested by Egan should be taken forward in Scotland to address this and related issues.

Planning schools can help by ensuring that graduates receive the appropriate basic training. Employers should engage with planning schools, RTPI, RICS and the private sector to deliver specialist CPD opportunities to practitioners working in the fields of planning agreements.

Assessing Development Impacts

4.16 As indicated above, it is in the interest of both parties to establish possible heads of agreement as soon as possible in the planning process. It is clearly of benefit if the development plan were to contain definitive and unambiguous policy statements worded in such a way as to indicate the circumstances under which planning permission would be granted (rather than refused). Master planning and/or briefing exercise should play a complementary role prescribing the detail. The precise requirements for the provision and delivery of infrastructure, and community benefits related to the proposed development, including financial contributions could thereby be set out and subjected to consultation and public participation. In order to be effective such a process requires understanding, realism, co operative and partnership working. They should provide the highest possible degree of information and analysis relating to the economic, environmental and social impacts of a development and be clear about the measures necessary by condition or agreement to lift constraints and allow development to be implemented. The involvement of infrastructure providers in providing information and guidance is important throughout the plan making, pre application and determination stages. The role of effective development planning is considered below.

4.17 The conclusion of agreements can be particularly problematic where public infrastructure and community services ( e.g. strategic road improvements, drainage and education) must be provided, upgraded or extended in phase as unrelated developments build up a cumulative impact. There is often uncertainty as to whether an anticipated proposal will actually take place. How is a planning authority to equitably distribute contributions where there is no reliable mechanism available that can guarantee that a generous first developer in line can recover front funding from those who follow? My consultations indicated that this scenario poses great difficulties for both Councils and developers.

In order to retain the benefits of a flexible plan led planning system and to allow planning authorities to play a more effective and leading role in the delivery of infrastructure Councils should be given the powers of front funding and recovery. This will give developers are to have heightened certainty and confidence.

These issues are considered below in the context of the Barker Review.

4.18 In respect of major developments where either a formal consortium or loose association of developers are involved there is greater likelihood of success when a lead developer is identified and through whom the other developers negotiate their respective negotiating positions. However there can be difficulties if developers cannot agree among themselves on issues such as land apportionment, phasing and the distribution of contributions.

4.19 An additional difficulty lies in quantifying the proportion of contribution to necessary infrastructure and other impacts which bears a justifiable attachment to the development proposed from that which arises from existing community needs and which ought to be met from public funds. Further complications arise where declining population /economic activity in an area and the rationalisation of existing facilities has to be factored in. Developers feel aggrieved when they are asked to cover for this situation as well.

Water services

4.20 Development is being increasingly constrained by lack of capacity in the existing water and/or wastewater infrastructure. This is of particular concern to developers in the West of Scotland. The cost of overcoming these constraints before a connection is permitted can be so prohibitive as to render development unviable. These difficulties are compounded the other obligations a developer faces through the legal agreement process. Scottish Ministers agreed Scottish Water's current investment programme in 2001 following full public consultation (Quality and Standards II). This settlement sought to strike a balance between the following competing priorities

Capital improvements to counter historic under investment
Improvement of water quality standards
Meeting environmental standards required by legislation
Controlling charges to customers

4.21 The current legislation requires Scottish Water to provide a connection where it is practical to do so at "reasonable cost". The (housing) developer provides the infrastructure for the connection and Scottish Water pays them up to £1500 per property in lieu of reasonable cost. Therefore charge payers, whose number will be increased as a result of the development, indirectly meet the cost of connection. The Water Environment and Water Services Act 2003 places an obligation on the Scottish Executive to define "reasonable cost". Regulations are planned for 2005/2006 and current arrangements may be subject to review.

4.22 In preparation for the challenge is to put in place a more sustainable funding framework, which will accommodate new connection requests more efficiently, effectively and equitably. A working group of stakeholders is currently considering options in the context of the Q&S III 2004 settlement.

Strategic Transport Links (Road, Rail and Tram)

4.23 It is not surprising that planning authorities look to legal agreements to support the provision of new or upgraded strategic transport infrastructure by the use of planning agreements. In the case of Dundee the A85 Kingsway trunk road requires upgrading along its length. The need for improvement can only be partially attributed to planned housing and commercial developments which will have direct and indirect access but where there is little certainty about when this development will occur and if a practicable means of funding and recovery of contributions can be devised. The Scottish Executive and consultants are at present investigating alternative approaches.

4.24 The proposed Waverley Railway raises other issues. The works are intended to be supported by developer contributions either under the terms of Section 75 of the 1997 Act, Section 69 of the 1973 Act or Part 3 of the Local Government Act 2003. Clauses 37 and 38 of the Waverley Railway (Scotland) Bill provide that

a relevant planning agreement may include provision relating to, or to development supporting, or otherwise connected with the authorised works
the agreement can relate to works outwith the boundary of the planning authority concerned
developer contributions towards the costs of authorised works may be required
the contributions sought shall be no more than the authorised works
the extent of the time period relating to the contribution payments is restricted
the requirement for a developer contribution will not amount to the raising of money by means of a levy or imposition within the terms of Section 22(7) of the 2003 Act.
All contributions received will be applied for the purpose of providing the authorised works
If a developer contribution is not applied for the purpose of providing the authorised works within 12 months of its receipt then it will be repayable

4.25 It will be interesting to note how the policies of the Border's Local Plan soon to be published in draft interprets these requirements in respect of developments across the Borders which bear no direct physical relationship to the route but are located in settlements which may benefit indirectly over time from the economic benefits which the line may bring. If the new Bill introduces the tests of necessity, proportionality and reasonableness, as I suggest, there may be the risk that the level of payments recovered from developers cannot realise the levels of contribution presently anticipated under a liberal application of Circular 12/1996.

4.26 The City of Edinburgh Council is consulting on draft policy guidance on developer contributions which it is intended should be sought in relation to the Edinburgh Tram Project. The Council draws support for the methodology outlined in its draft guidance from the law, Circular 12.1996, SPP17 the adopted Structure Plan and various approved local plans. A tariff approach is to be adopted scaling the level of contribution to the size of a range of land use proposals within distance zones from the route of Lines 1 and 2 and from the proposed stops along the routes. A holistic approach is to be taken and flexibility is built in to account for particular site circumstances. Arrangements for monitoring, review and payback of any unexpended contributions within defined timescales are built in.

Minerals Developments

4.27 Attention is drawn to the Scottish Executive's consultation paper Monitoring and Enforcing Minerals Permissions October 2003. The Scottish Executive believes that the monitoring and appropriate enforcement of conditions attached to minerals permissions deserves particular attention and that there is a case for he associated costs to be borne by the operators and not the public under the "polluter pays" principle. Section 75 agreements are already in use by some planning authorities to secure contributions from operators towards the costs of monitoring and the appointment of external consultants, all within the tests imposed by Circular 12/1996.

4.28 Among other more detailed questions the consultation paper seeks confirmation that it would be inappropriate for such provisions to be made compulsory. As Section 75 agreements are entered into voluntarily they cannot therefore be made compulsory without specific legislative provision. It is proposed that the new Bill carries forward strengthened Section 75 provisions. These should give Councils adequate scope to conclude agreements covering the reasonable costs of monitoring and associate works proportionate to the scale of the development concerned. In relation to historic permissions where Section 75 agreements are either not in force or are ineffective, provision should be made for new or revised legal agreements, which would be retrospectively applied. Legal advice should be taken as to whether this would be a viable proposition.

4.29 The challenge therefore is to define a public infrastructure delivery model to replace the current arrangements, which are unsatisfactory for a number of reasons:

The lack of an ability by the public sector to deliver its traditional role of funding public infrastructure and facilities;
The perceived lack of an ability among public sector agencies to co ordinate delivery according to a predefined and agreed planning strategy;
The lack of clarity as to what is to be asked of developers and at times, why;
A perceived lack of understanding in the planning fraternity of the impact of unreasonable contributions on the viability of developments, particularly in depressed market situations;
The difficulties in apportioning equitable contributions for shared infrastructure/facilities among disparate developments over a lengthy period of time; and
The difficulties of apportioning contributions where the benefits of the facility will be felt by a community interest wider than just a particular development

4.30 The findings of the Barker review are helpful in this respect and there applicability to Scotland should be tested by the Scottish Executive. In addition, efficient and effective development planning has a key role to play in the delivery of sustainable communities.

Development Plans, Supplementary Planning Guidance, masterplans and briefs

4.31 Development planning plays an important role in providing the planning policy stance of authorities in relation to planning agreements. Most development plans (either Structure Plan, Local Plans or both) and to varying degrees of specificity, contains policies relating to planning agreements or developer contributions. Appendix 8 provides an overview.

4.32 Agreement policies (which do not relate specifically to affordable housing) fall into the following categories:

ii) general statements to the effect that where and if appropriate, Section 75 agreements will be sought in support of other policies/proposals of the plan, compliant with Circular 12/1996. These statements are often accompanied by a limited amount of reasoned justification or attachment to analysis;
iii) the requirement for a Sec. 75 agreement in relation to the delivery of a specific proposal or element of a proposal which does not relate to the comprehensive development of large or complex sites;
iv) Relatively detailed sophisticated statements of policy which list elements of infrastructure or community benefits which purport to relate to the scale and impact of a proposal and which are required to be provided before a development can proceed at all or advance when identified trigger points are reached. e.g.

Policy IMP1 of the adopted Midlothian Local Plan 2003 is a good example. The latter also includes a policy ( IMP 2) which indicates that, in addition to the essential infrastructure requirements set out in IMP1, contributions will be sought from housing developers towards facility deficiencies …identified within the community, and these are listed by settlement.

Policy Gen\3 of the Finalised Aberdeenshire Local Plan 2003 is drafted around the parameters set by Circular 12/1996, and refers to an Appendix of guidance attached to the plan which outlines the land use categories where contributions are likely to be necessary. This has been based on a settlement-by-settlement assessment of likely development impacts and tracks to negotiations with applicants on the basis of non-published schedule of contribution rates. A briefing note for developers is also available.

4.33 I could not find any local plan that has explicitly calculated and tabulated the infrastructure and community impacts of allocated development in financial terms. The Aberdeenshire approach comes closest and I gained the impression from talking to lawyers and house builders that they appreciated the degree of openness, clarity and certainty that the Aberdeenshire approach offers as a basis for sensible negotiations within the parameters of Circular 12/1996.

The 2002 Scottish Awards for Quality in planning recognised Aberdeenshire Council's community orientated developer contributions scheme. The judges found that it represented … an admirable example of innovation in a difficult area of planning and that the Council's approach had transformed the image of planning gain from a lottery to a fair and consistent means of securing contributions for essential community infrastructure from land values.

4.34 The Scottish Executive's consultation on modernising development planning offers the opportunity to test a wider role for development planning in this context. The consultation paper Making Development Plans Deliver Scottish Executive April 2004 expects City Region Plans ( CRPs) and Local Development Plans ( LDPs) not only to be prepared speedily but be focussed in their content and have a strong outcomes/delivery purpose.

4.35 It is proposed that the profile of development planning in this regard is to emphasised by:

Placing a statutory duty on key agencies to engage in development planning to encourage the alignment of capital programmes and for the timeous provision of information and opinions;
Ensuring greater uniformity in the way in which the business community is more formally involved in the plan making process to ensure that economic implications of development are fully recognised; and
Action Plans being prepared alongside, and in respect of, every CRP and LDP to set out a schedule for the delivery of the plan and would indicate an agreement in respect of this objective between public agencies and the private sector.

The CBI, Homes for Scotland and individual house builders indicated their concern that up to date development plans with a clear and focussed delivery purpose were crucial to an efficient and effective positive planning system. The Scottish Executive's consultation paper supports this view.

In respect of the inter relationship between development planning and the role of planning agreements the paper moves matters forward. This suggested approach indicates compatibility with a more market aware planning system. Nevertheless I do not envisage either category of plan going so far as to specifically calculate levels of impact in monitory terms and attempt to apportion these between public sector providers and the private sector

I would propose therefore that the respective roles of CRPs, LDPs and Action Plans are clarified with regard to the assessment and mitigation of individual and cumulative impacts of developments and the ways in which public agencies and the private sector can best respond in partnership.

In the next section of this report I look at the issue of tariffs and optional charges. Should the Scottish Executive decide to incorporate provisions relating to these in the new Bill a further enhanced role for development planning would be essential and this would require a further review of the development planning process?

4.36 The consultation paper does not elaborate on how it sees the relationship between Action Plans, masterplans and development briefs. In respect of development planning at present, masterplans and briefs play an important next step where it is not possible or appropriate for a local plan to encompass the level of detail appropriate to individual projects.

4.37 The adopted Shawfair Local Plan 2003 bases its detailed implementation chapter on the development of sustainable development that will involve substantial investment in infrastructure and other facilities. A combination of legal agreements, conditions a Development Masterplan and Development Manual (already in place; setting out land use principles) will back up the detailed policy context provided by the plan. The granting of outline permission for the comprehensive development covering the entire plan area will be contingent on the Council approving a Masterplan to be prepared by the landowner(s)/developer(s). Developers are encouraged in the plan to form consortia in order that applications can be co ordinated and apportion developer contributions and maximise the potential for delivering rationalised, cost-effective infrastructure.

4.38 Development Briefs are being used by The Highland Council in support of the Finalised Inverness Local Plan 2003. For example in the Inches and Milton of Leys Development Brief 2003 and the Firthview-Woodside Development Brief 2003 indicative developer contributions, as a basis for negotiation are calculated and apportioned between developers and set out in tabular format with explanatory text providing a reasoned justification. The briefs also include reference to a protocol which the Council has prepared and which include reference to arbitration procedures

4.39 It was put to me by planners, surveyors, developers and community interest groups that a combined approach to settlement/community planning at the draft local plan or development options stage of local plan preparation might be effective in a number of ways. Alternative distributions of land allocations, which cumulatively might exceed strategic requirements for the purposes of the exercise, can be assessed for infrastructure and environmental impacts, the potential for the delivery of community benefits and community acceptance. The direct and indirect costs of alternatives could be compared and informed decisions arrived at.

4.40 Engagement of all the relevant interests in a community together as opposed to individually at such an early stage in plan making would help build understanding, confidence and trust. Decisions on preferred strategies and individual allocations and obligations would be well informed and lessen the possibility for disagreements on fundamental principles as the local plan process progressed. Potential allocations would fall by the wayside as a negotiated local plan strategy developed but some sites may be "held in reserve" for discussion again as the plan is reviewed. Of course for such a model to be effective all parties to an agreed "compact" will have to be satisfied that the local planning authority will be in a position to deliver statutory permissions compatible with the approach and to do so with minimum delay, even in advance of local plan adoption where no material objections have been made

4.41 Plan monitoring and review could adopt a similar approach to ensure effective delivery and enforcement of commitments.

4.42 An approach similar to this is underway in West Lothian as a response to Structure Plan housing expectations and success here might inform best practice to be tested elsewhere. There may be similar examples elsewhere but which were not drawn to my attention.

The approaches adopted by Aberdeenshire, Midlothian and Highland Councils are clearly different and are suited to different and localised circumstances and are linked to the proposal above concerning the more effective use of local plans. These and similar examples will help to inform the debate on Making Development Plans Deliver and should be referred to in any best practice PAN on planning agreements. This need not await the preparation of a planning Bill and would be welcomed by both local authorities and developers.

The community compact approach to settlement planning as a means of assisting engagement of and communication between relevant parties in the local planning process is offered as a proposal for further consideration in the context of the Making Development Plans Deliver debate and in any best practice guidance on planning agreements.

5. Funding and Delivery: Tariffs, Optional Charges and Taxation

5.1 Appendix 9 outlines the chronology in respect of the UK Government's current proposals to introduce an optional charging mechanism in the Planning and Compulsory Purchase Bill and tabulates the perceived advantages and disadvantages of this kind of approach as identified by the ODPM itself and by consultees and commentators.

5.2 The first consultation paper (2001) was a reaction to the criticism acknowledged in the Green Paper that Section 106 agreements, like Section 75 Agreements, are complex; inconsistent in their application; difficult and expensive to agree and conclude; cause delays in the planning process; and are not sufficiently open to public scrutiny.

5.3 In introducing draft proposals for reform in the shape of tariffs the Government's objective was to promote sustainable development with particular reference to the delivery of affordable housing; and to achieve a wider range of outcomes than were set out in current policy (Circular 1/97). The mismatch, which existed between policy and the legislation as interpreted by the Courts, could thereby be redressed.

5.4 Local authorities would set standardised tariffs through the plan making process as a starting point for negotiations within a single obligation agreement. Councils would be expected to be flexible in the application of the tariffs in order that difficult sites would not be rendered uneconomic to develop or where sustainable development would be made unattractive.

5.5 Local Development Frameworks (local plans) would define the tariffs and set out the context for the disbursement of funds. Councils would introduce monitoring and accounting procedures and details would be placed on the Public Register ( Transparency).

5.6 Standardised contractual terms and model clauses, dispute resolution measures and timetables for concluding negotiations were proposed ( Speed).

5.7 In July 2002 however the Deputy Prime Minister announced that although there would be changes to the Section 106 obligations system to make it more transparent and simpler to operate, the Government did not propose to legislate for the standardised tariff approach but that new guidance replacing Circular 1/97 would be introduced.

5.8 However, at the Report stage of the passage of the Planning and Compulsory Purchase Bill through the House of Commons clauses (46-48) was introduced which provided for the retention of Section 106 negotiated obligations whilst adding new provisions to allow a developer to opt instead to make a financial contribution ( optional charge). Details would be prescribed by Regulation. The Government expects the majority of developers to take the optional charge route.

5.9 In parallel, a second consultation paper was issued which explained how the optional charge mechanism would operate in practice and invited comment. ODPM argued that the proposals would

Balance flexibility with speed and certainty;
Help achieve the objectives of sustainable development and enhance the quality of developments;
Lead to greater openness, accountability and transparency with the development plan being at the heart of the process and with the introduction of monitoring and accounting procedures;
Bring policy into line with case law by permitting charges to be payable for a range of both direct and indirect impacts of development;
Not significantly adversely affect house prices or commercial leases as it was assumed that the costs would be passed on to landowners and be reflected in the price paid for land;
Allow for the voluntary pooling of contributions between adjacent authorities to maximise their benefit;
Allow for charges to vary across different land uses and across different parts of an authority's area;
Offer increased financial certainty for both developers and Councils and lead to quicker and easier negotiations;
Offer both Councils and developers maximum flexibility in organising their financial arrangements; and
Lead to more effective and certain development planning by allowing for the more accurate costing of the impacts of development.

5.10 I have tabulated the opinions of key consultees in Appendix 10. The reaction to these arrangements was more mixed than those expressed in relation to the first consultation paper. In summary, consultees were

concerned that the "necessity test" was being removed in favour of a totally open ended arrangement for the extraction and distribution of charges. The mechanism looked more than ever like a tax.
concerned that the development planning process would not be robust and responsive enough to properly assess all relevant impacts of development and apportion them in a way that acknowledged changing circumstances and respond to variable economic conditions across an authorities area.
unsure whether there was a sufficient skills base available to Councils to develop charging policies which could withstand public scrutiny
concerned that the charge once set would provide a kind of perverse incentive to local authorities to grant planning permission on unsuitable sites in planning terms but which generated the highest charges
unsure how authorities would be able to pitch charges at the right level to minimise the risk of a mismatch between charges levied and actual costs at the point of development
supportive (local authorities) of the flexibility which would be available in attributing income from charging.
supportive of the capitalisation of ongoing commitments through the payment of a one off sum or the creation of trusts to manage endowments
in support of measures designed to speed up the conclusion of agreements
concerned (developers) that there would be variability between the charges scale option and the negotiated route if that was selected.

5.11 In response to these and other concerns the Government has clarified certain key points of principle as follows:

Where high site costs are involved and where applicants are unable to meet charges in full, then local communities should be willing to pay for such benefits from local or national taxation
Safeguards will be introduced to ensure that the charge is not used as an excuse to extract more benefit from applicants than is necessary to ensure the good planning of an authority's area and mitigate the impacts of development
The Government has agreed to consider further the proposal to align its policy tests with those applied by case law because it acknowledges that parties to agreements do not adequately adhere to the tests in Circular 1/97 and particularly that of "necessity".
The Government has issued a tender invitation to consultants to develop practice guidance.

5.12 However these commitments and the clarifications offered to their Lordships, in Committee, by Lord Rooker on behalf of the Government, has been insufficient to quell sustained criticism that the proposals still lack clarity in the way in which they are intended to be implemented. A coalition of planning and development interests in February 2004 offered to form a working Group with the Government to review the proposals in greater detail. In March 2004 the Government announced the establishment of a stakeholder advisory group that will report within a six-month period.

5.13 Uncertainty therefore continues to surround the practicalities of introducing reform via the route of tariffs or optional charging.

I am not convinced that the case for the introduction of either standard tariffs or optional charges has been made in the face of the valid criticisms being made by a range of stakeholders. Either mechanism needs to have its roots in the development plan and this would pose serious skills and resourcing issues for planning authorities. Even if these could be overcome the dynamics of planning would mean that rates would be would be difficult to set with any degree of confidence. The developer would be justified in being concerned that supplementary payments would therefore be demanded in agreement negotiations. The principles of certainty and speed of delivery would be compromised.

I do not recommend that the new Bill should incorporate provisions relating to tariffs or optional charges as an alternative to other potential solutions

5.14 In the 2001 consultation the Government tested and rejected three other options to the standardised tariff:

the enforcement of the strict "necessity test" - adherence would be a legal requirement, realigning case law with policy rather than vice versa; site by site flexibility would be assured; the criticisms of the Nolan Committee would be met. The scope and use of planning obligations would be severely restricted compared to established practice and impact costs which could not be tracked to a specific development on a specific site would have to be met by other means, presumably by local or national taxation or not confronted at all; in the circumstances of this option it would be difficult to see how affordable housing could be enabled by planning agreement in most cases. From the above it would appear that this option is again under review.

My assessment indicates that this option deserves further consideration in the context of the Scottish Planning Bill.

full negotiating flexibility within the law - Under revised guidance this option implies an unrestricted negotiating framework, the converse of a). Propriety issues would emerge. Unlikely to have the support of the business community.

impact fees - would replace the current planning obligations arrangements; a scale of charges known in advance relating to a defined range of wider costs linked to broader policy objectives e.g. to support infrastructure costs for incremental developments.

5.15 A range of fiscal and similar measures have from time to been considered and found wanting by successive Governments.

Measure	Assessment
Betterment Tax/Land Value Tax	A one off tax levied on the uplifted value of land resulting from the granting of planning permission; too high rate could result in land being withheld from the market; increased use of CPO powers could result; may not be popular as a replacement for locally negotiated solutions; potentially administratively complex; may not be able to guarantee adequate allocation arrangements from "the centre"; being offered by certain political groups in the context of the current review of local government finance by the Scottish Parliament.
Site Value Rating	An annual tax on the assessed value of land on the basis of potential value rather than current use value; has been advocated as a replacement for the Uniform Business rate and Council Tax as it would alter the distribution of tax burden between businesses and individuals; this type of land valuation would be difficult under current UK planning system (not enough certainty); no guarantee of significant increased revenues compared to present arrangements; potentially costly to administer.
Capital Gains Tax	Alternative to Betterment tax; income from the levy of a higher rate of CGT on profit from land sales; land would be withheld if rate too high; liability could be avoided by the phasing of land sales; local earmarking of funds may not be possible; goes against prevailing policy of simplifying CGT regime
Value Added Tax	Imposition of 17.5% tax on new house building on greenfield sites; advantage of supporting brownfield development (sustainability agenda); may be viewed as disproportionately penal on landowners (on whom it would be levied) in depressed areas where Greenfield development is being encouraged but where land is a relatively small proportion of development costs; no impact on house builder profits. Option of a smaller rate levy on ALL house building including conversions
Tax increment Financing	Future revenues from major strategic capital projects hypothecated and used as collateral for loans; currently being tested in major transport projects in London.
Local Business Rating (Business Improvement Districts	Local businesses voluntarily agree to pay increased business rate for measures to upgrade local business areas; pilot scheme understood to be underway in England
PFI	Widely used for major public projects e.g. schools, roads, hospitals; reduces need to raise additional public funds for expensive capital projects; commitment to rental payments over negotiated lifetime of project; difficult to apply to infrastructure projects.

5.16 The Barker Review 's Final Report, published on 17 March 2004 concluded that fiscal measures combined with targeted and dedicated public sector funding could work together with as key incentives for the market to respond to planning decisions in respect of housing land.

5.17 Barker's Review was established with a UK remit but the author has indicated that its general principles have a Scottish application. The Scottish Executive is considering whether the findings and recommendations as a whole have an application in Scotland especially if any adjustments made by ODPM in matters of housing, planning and fiscal policy.

5.18 Barker's most relevant conclusions in this regard are summarised in Appendix 11. Barker recognises that local government finance arrangements need to be adjusted to allow local authorities to better plan expenditure in relation to new programmed development before the full benefits of Council tax income from those developments feeds back into the system.

5.19 Barker has recognised that infrastructure providers need to involve themselves more in the plan making process in order that should be an acceptance of proposed development patterns and, consequently better co ordination of planned capital expenditure.

Consultations indicate that this is also an issue in Scotland. There is great concern that key infrastructure providers, especially Scottish Water do not appear to appreciate the significance of their not engaging fully in the plan making process and not fully appreciating the significance of relating their capital expenditure programming to planning objectives (see above). It is an issue to which the Scottish Executive is attaching priority in the discussions relating to Q&S III and in the Making Development Plans Deliver Consultation Paper.

The Bill should oblige infrastructure providers to engage in and contribute to the statutory planning process and to respond to consultations on individual planning applications.

Consideration should be given to whether Action Plans should include Infrastructure Statements outlining how essential utilities are to be phased and funded. This would inform policies relating to planning contributions. Annual Infrastructure Reviews could follow as joint statements of funding performance and intent by local authorities and other infrastructure providers.

5.20 Taking these two elements together Barker supports the establishment of a Community Infrastructure Fund to lever private sector capital for up front capital servicing costs with provisions for clawback. This would open up scope for more effective public/private sector partnership arrangements and allow for the ring fencing and targeting of contributions from both sectors. She also envisages a role for third parties in providing capital.

Barker establishes the relationship between restoring public sector front funding of infrastructure to the planning obligations mechanism is crucial to the success of an approach that limits the scope of planning agreements. The review proposes a Community Infrastructure Fund and a Planning Gain Supplement. In principle these mechanisms would be compatible with the approach recommended in this report.

The Scottish Executive should consider the findings of the Barker Review in relation to the planning system in Scotland in general and to the new Bill in particular.

5.21 Barker indicates that if the above arrangements were accepted then the provisions in Section 106 (developer obligations) could be scaled back, fulfilling the role of mitigating the direct impacts of individual developments and contributing to social housing only. Councils would not be allowed to extract development gain beyond these limits.

5.22 In this mechanism local authorities would be compensated from a share of what is termed a Planning Gain Supplement (or Supplementary Planning Contribution). The supplement would be paid at the point of planning permission by the developer and be in proportion to local land values to ensure equity. Individual rates would be known in advance and therefore the developer would be able to make deductions from price paid for land. The income generated would go direct to the authority. Transitional arrangements would be necessary to deal with cases where there has for example been land banking.

5.23 In general, the Barker Report finds that there is a strong case for the Government considering the use of tax measures to allow the community to share in the increase in development gains. However land value taxation in the form of a Betterment Levy and the application of VAT at the standard rate to new house building on greenfield sites, were both considered and found wanting.

5.24 Taxation is a matter reserved for the UK Parliament and a full analysis of the implication for the Scottish planning system of taxation changes is beyond the scope of this report.

A form of land taxation in support of the mitigation of community impacts beyond the scope of individual developments has attractions if it can be sufficiently distanced from planning purposes to avoid the accusation of planning permissions being bought and sold. This would open the door for the necessity/proportionality/reasonableness tests to be strictly applied to the planning proposal in respect of site related impacts; rates would be set and known in advance through non planning legislation and would have the attraction of being based on local land values.

Barker does not elaborate on how the tax income would be collected and shared.

Issues such as timing, and the strict application of funds by authorities to community needs resulting from the taxed development remain.

I do not consider that these proposals have any direct implications for the Planning Bill. However in the package of measures suggested in this report some form of land value taxation appropriately collected, distributed and allocated in such a way as essential community infrastructure and other benefits can be assuredly delivered at point of need may have a role to play. The Scottish Executive in considering the implications for Scotland of the Barker Review should look into these issues.

International Approaches

5.25 Appendix 12 summarises the diverse approaches of selected European countries and in Australia. Of particular note is the introduction, in the Republic of Ireland, of a three-tier system of charges. Schemes are locally approved by Council resolution following a period of public participation. Ministerial approval with amendments follows. This solution seems to be a modernising measure in a system which is not plan led and where there was no effective land management by the public sector; where there was a need for greater certainty and accountability in a system where planning conditions could require developer contributions. The Dublin City scheme was challenged in the Courts by the Construction Industry Federation for lacking specificity in the cumulative calculation of the costs of community and infrastructure costs. The action failed.

5.26 It is estimated that in 2002, the previous Irish levy system raised 151 Euro nationally. Under the new provisions it is estimated that 500-700 Euro will be collected. For new housing developments the per unit levies will range from 500 Euro to 16,000 Euro depending on the house type and location and will have an impact of imposing a 5% increase in sale prices. The economic implications of imposing too high a scale of levy has been recognised by several Irish Councils who have decided to reject officers recommendations and adopt a reduced scale of charges, risking a shortfall in budgets for infrastructure programmes.

5.27 In New South Wales, Australia there is a tradition of obtaining developer contributions either by monetary payment or in kind by way of condition imposed on the grant of planning permission. However the system was criticised in the 1980's because of the difficulties that Councils encountered in setting appropriate levels of individual contributions and the lack of an effective link between contributions funds and infrastructure planning. The nexus principle has been reinforced through time and contributions must be calculated on the proportionate relationship between the development funded and the service deficiency identified in local assessments of infrastructure needs and programmes. The principle has been backed up in the Courts.

5.28 In different ways the rational nexus principle also operates in France and USA.

6. Planning Agreements and "Affordable Housing"

6.1 It is not the purpose of this report to deal comprehensively with the issue of affordable housing and the planning system. A separate stakeholder Working Group is in place to consider this matter. The remit of this report is confined to the following questions:

ii) are Section 75 agreements satisfactory vehicles for facilitating the delivery of affordable housing?; and
iii) should planning policy and legislation be amended?

6.2 Successive Governments of the 1980s significantly reduced the role of local authorities as the providers of "affordable housing". Stock was sold off under the right to buy legislation and a range of responsibilities transferred to Registered Social Landlords supported by Communities Scotland (formerly Scottish Homes). This trend has been continued by more recent administrations.

6.3 The Odpm's planning policies in relation to the provision of affordable housing and in the use of planning conditions/agreements in this regard are given expression in PPG3: Housing (amendments are proposed in a consultation draft, January 2003) and in Circular 6/98.

6.4 The thrust of PPG 3 may be summarised as follows;

a community's need for a mix of housing types including affordable housing is a material consideration which should be taken into account in formulating development plan policies and in deciding planning applications involving housing
Local plans should approach the issue by

defining what is considered to be "affordable housing"
indicating how many affordable houses need to be provided
identifying suitable sites
indicating the intention to require an element of affordable housing to be provided on specific sites*

(* Proposed in consultation draft)

Refusal of planning permission could be justified (except in exceptional circumstances*) where the plan indicated that the provision of affordable housing is justified on any site.

(* Proposed in consultation draft)

Decisions should be transparent and accountable and all parties should know the full basis for planning decisions including planning obligations with copies of obligations agreements being placed on the statutory register.

6.5 Circular 6/98 contains more detailed complementary policy guidance on the use of planning obligations that have been carried forward unamended to the present version of PPG3.

6.6 The Circular, in summary provides as follows:

Planning obligations may be used, where justified to achieve the development and use of land in a way, that ensures that some of the housing built is occupied either initially or in perpetuity, only by people falling within particular categories of need for affordable housing
In drafting obligation agreements planning authorities need to be aware of the need to secure arrangements to cover all eventualities and for flexibility to enable or encourage the scheme to go ahead.
LAs should ensure that their action sin this regard are consistent with the terms of Circular 1/97
Obligations, with the co operation of all parties need not take an excessive amount of time to conclude
Obligations should not be used to control directly the detailed allocation of housing to nominated individuals nor be used to control matters such as tenure, the rent or purchase price payable by prospective occupiers, or ownership
Planning obligations should not include positively worded requirements to transfer interests in land
Care with wording is essential
The Circular suggests alternative approaches to concluding obligation agreements so suit certain typical circumstances

6.7 ODPM has reviewed the experience of authorities in England and Wales in delivering affordable housing through planning policy. The research confirmed the following:

Section 106 agreements are integral to the provision of affordable housing and almost invariably a permission for the development of a mixed tenure site will be accompanied by such an agreement
However experience in their use varies widely across England. At the time of the research only 30% of authorities in the North West had concluded a Section 106 agreement relating to affordable housing in the previous 2 years compared to 67% in the London Boroughs. 11% of responding authorities had used none.
Only 5 authorities had since 1998 used unilateral undertakings to deliver affordable housing
In most authorities it was the planning department rather than say the Housing Department which led the obligations negotiations
Effective communication between planning, housing and legal officials is of critical importance
Developers surveyed sympathised with planning officers placed at the centre of complex negotiations without adequate experience or training in negotiating skills
Contrary to the aspirations of the Circular agreements take a relatively long time to negotiate and agree (viz. from an average of 4.5 months in the West Midlands, to 7.3 months in the London Boroughs to 12 months in the South west)
There were complaints from both sides about lack of consistency of approach and attempts to renegotiate the heads of agreement already agreed by Committee
The research identified elements of best practice viz.

early discussions between developer and LA and the agreement to as many details as possible prior to Committee consideration and in particular details concerning tenure
the double tracking of agreement negotiations and the processing of the application to save time
standardised/model agreements could be used more particularly by less experienced authorities
the publication by Councils of supplementary planning guidance or best practice notes are recommended
promotion of a closer working relationship between, RSLs , planning authorities and developers with RSLs being parties to agreements wherever possible

6.8 In Scotland, SPP3: Planning for Housing supports the use of developer contributions to help the supply of affordable housing. Where there is evidence of a shortage of affordable housing, development plans should set out a policy, particularly in respect of areas of development pressure where land values are high or where a new settlement or major housing expansion, explaining how planning agreements are to used to deliver affordable housing.

6.9 For such a development plan policy mechanism to hold water it would need to satisfy the tests of necessity and proportionality as set out in Circular 12/1996. Para 84 of SPP 3 makes clear that these tests must be satisfied. Therefore to qualify as a material consideration some reliable relationship needs to be established between the requirement for a developer to contribute to the provision of non-market value housing or housing for rent/shared ownership in the context of a planning application for general housing for sale.

6.10 Authorities seek to establish such relationships in local plans with reference to housing needs assessments within local housing strategies. Where this is achieved then this can become a material consideration in the determination of applications for mainstream housing. Many authorities have prepared or are preparing supplementary planning guidance where the preparation of LNAs and LHS's were unavailable to support definitive provisions in adopted local plans. English caselaw confirms that these too can be held to be material planning considerations as these establish the necessary relationship between the application and the contribution required.

6.11 The need for affordable housing (and consequently the need for robust local plan policies) is most pressing in urban growth areas with high and rising land values where there tends to be the highest demand and where RSLs find the greatest difficulty in competing with the private sector for land purchase. However the inability for first time buyers to enter the market is rapidly spreading to most parts of Scotland and it is likely that most authorities who do not have a policy framework in place will be doing so in the near future.

6.12 Local plan/ SPG polcies in setting the framework planning agreements typically bear many of the following characteristics :

Negotiations with landowners/developers on both allocated and windfall sites and in some cases on very small sites ( e.g.< 10 units)
Authorities may choose not to apply SPG policies to sites already identified in local plans or where outline or full planning permission has already been granted except where prior agreement to the contrary has been reached with the landowner/developer.
Negotiations surround the dedication of a % of the unit output of the permission requirement for social and approved rental accommodation/shared ownership/low cost home ownership houses
Requirements are identified on a settlement by settlement basis or by defined areas dependent on localised needs
A sequential approach may be applied as follows : on- site land dedication at nil cost or at discounted cost to an RSL; provision of an alternative site in the developer's control where planning permission can be obtained or is already in place; commuted payments in lieu of provision where there is no convenient alternative site or where abnormal costs eg. site contamination remediation affects viability
Commuted payments in lieu of off site priovision normally equivalent to the difference between the original site's land value for open market housing and its value for afforedable housing , as set by a mutually agreed independent valuer
Where on site or off site provision is to be made the legal agreement will usually seek the transfer of land to an RSL at an "affordable housing land price" ie below open market value as mutually agreed or as set by an independent valuer
Where land so transferred is not developed for affordable housing within a mutually agreed period it may revert back to the developer for open market value housing
A varient may be for the developer to provide the affordable housing within the development site as specified in the agreement (say by the end of the build out period) and if not provided by a trigger point the land is to be offered to an RSL at nil or discounted value. If the RSL does not deliver the land reverts to the developer for mainstream housing

6.13 Consultations have raised the following comments/impressions :

Housebuilders find the nexus between their development and the demand for affordable housing difficult to comprehend.
The % requirements for affordable housing contributions specified in local plans and supplementary guidance can be variable and can be as high as 40%. This can adversely affect the viability of development in areas of low land value and on brownfield sites.
Housebuilders in principle are not averse to entering into partnerships (with RSLs) to deliver affordable housing or to make reasonable contributions in cash or kind (land) provided that the tests of Circular 12/1996 are consistently and equitably applied.
There can be inconsistency where an authority will reduce the affordable housing requirement in the course of negotiation where other contribution requirements are onerous.
I got the impression that many planning officers have similar feelings in the context of Circular 12/1996 retrictions which are enforced in other local plan policies unconnected with affordable housing and where SPP3 itself indicates at Para 84 that "…planning authorities should not use an applicant's need for planning permission to obtain a benefit which is unrelated in nature, scale or kind to the proposed development"
Housebuilders feel that these requirements represent little more than a development tax substituting for a function which was historically that of the public sector but which is no longer available to it. It is known that one authority's policy requires contributions to affordable housing from commercial, industrial and retail developments as well as from residential proposals!
Developers recognise that there is a need in the marketplace for housing priced at less than market value and that they are not averse to associating themselves in its provision and in partnership with RSLs …provided that the public funding element is realistic in terms of the land values operating in a particular area and that the delivery demands are reasonable in the context of other planning constraints applicable
The Government ought to adjust or suspend the right to buy in areas of chronic undersupply
Patterns of local authority land ownership and use should be reviewed to release underused non residential land for affordable housing use
Preparation of HNAs and LHAs are often out of step with local plan preparation leading to problems for the planning system in justifying aspirational poicies.
There is confusion as to whether it is appropriate for local plans to allocate land for "affordable housing" by a specific designation. To do so may bring the challenge that the planning system was exceeding its powers and in any event such allocations would be likely to depress land values and disuade the flow on land to the market but above all run contrary to the objective of creating a suitable housing mix in sustainable communities.
It has been suggested that the creation of an additional use class for "affordable housing" in the Use Classes Order may provide a possible solution and this is a matter that the Working Group will no doubt be considering.

6.14 I decided to see whether the most recent experiences in the Republic of Ireland may offer some assistance. The Planning and Development Act 2000 in Ireland (Part V Sections 94 -99) as originally enacted prescribed a direct association between the development plan, planning agreements, housing needs assessments and housing strategies as follows :

The development plan shall include a "….strategy for the purpose of ensuring that the proper planning and sustainable development of the area of the development plan provides for the housing of the existing and future population"
A Housing Strategy shall be included in the plan having regard to a housing needs assessment, with its content prescribed in the Act
The strategy shall specify a % not exceeding 20% of the land zoned for residential use for affordable housing having regard to a range of prescribed influences (supply/demend; house prices, incomes, mortgage interest rates and their inter relationships).
The development plan is also expected to ensure objectives to secure the implementation of the housing strategy in respect of affordable housing. And these can vary across the plan area.
Special transitional arrangements applied to planning permissions granted after Part V was introduced but before Housing Strategies had been prepared thus avoiding the need to meet Part V conditions. These permissions were deemed to expire two years after the grant of permission instead of the usual five.
The local authority (or appeals board) may require a condition of the grant of planning permission that the applicant or any person havijng an interest in the land enter into an agreement with the planning authority concerning the provision of land for affpordable housing. Such an agreement can provide for :

1) the transfer of land ownership; or
2) the building and subsequent transfer of housing on completion to either the local authority or a nominated RSL at a price determined on the basis of land and building costs as may be negotiated; or
3)the transfer of fully or partially serviced plots
4)details of the numbers of houses and their description

6.15 The agreement is required to include the authorities intentions regarding the provison of the affordable housing and "the views of the applicant in relation to the impact of the agreement on the development". Compensation is payable to owners where land is transferred. Disputes are referred to the appeals board for resolution with an independent property arbiter resolving on issues of compensation. Appeal provisions are included relating to the non conclusion of agreements within 8 weeks following imposition of such conditions.

6.16 Where land is transferred to the authority for affordable housing it is required to be suitably maintained pending construction. An authority can decide after land is transferred to it not to develop it for affordable housing can develop it for another purpose but must pay a market value sum into an account. ( to be used for ther provision of affordable howsing elsewhere in is area?).

6.17 A developer can apply to the Council for a Certificate absolving him from the requirement to provide affordable housing ( small sites <4 units or < 0.2 hectares). A certificate is refused if the applicant individually or "in concert with others" is already in receipt of a certificate within the past 5 years. Penalties apply for falsification of applications/declarations. Aggrieved applicants can appeal to the Courts.

6.18 The Act includes detailed provisions which control the sale and resale of affordable housing with any accrued value always reverting into an account ringfenced for affordable housing purposes.

6.19 However this legislation was amended within 2 years of its enactment. The Planning and Development (Amendment) Act 2002. The housebuilders were experiencing difficulties in respect of small or high value sites and with the funding of the management of high density flatted sites. The amendments introduced an option of off site provision on condition that this was delivered in the same broad neighbourhood or neighbourhood type. The possibility of commuted payments was also introduced. The exemption site size was changed from 0.2 hectares to 0.1 hecrtares.

6.20 The second principal amendment introduced by this legislation was in respect of the two year expiry rule on planning permissions. Consultations indicated that the supply of housing land had been adversely affected and that the Irish planning system lacked the ability to cope with the additional workload of reapplications. The rule was revoked and replaced with an opportunity for developers to "buy back" the balance of the usual 5 year planning permission in the form of a levy on house sales to be used by local authorities to fund social and affordable housing.

6.21 Recent research by TRIBAL HCH for the Scottish Executive assesses the possible application of the Irish model to a Scottish situation. The following deficiencies would require to be overcome :

i) the amount of time involved in negotiating agreements on a site by site basis
ii) the complexity of negotiations
iii) the uncertainty for the housebuilding industry about what demands will be on a specific site

In England and Wales PPG3 and Circular 6/98 between them seem to forge a plausible relationship between the planning process and the delivery of affordable housing by establishing that the community's need for a mix of housing types is a material consideration in determining planning applications. However, and despite the qualifications contained in Circular 1/97 about the legitimate use of obligations, it appears that this relationship has developed elasticity in its application and is now a generally legitimate means of procuring affordable housing.

It could also be argued the availability of Section 75 powers and the legitimacy afforded it by SPP 3 (but not as detailed nor as persuasive as that offered in PPG3/Circular 6/98) has led to the assumption that the planning system in Scotland as it stands is an effective means of delivering affordable housing or land for affordable housing.

It seems to me that, in applying the tests of Circular 12/1996, it is not at all clear that convincingly argued nexus exists between the granting of planning permission for mainstream private housing and the obligation being placed on the developer to deliver affordable housing contributions. However it will be for the Courts to decide on this issue.

In the wider review of the delivery of affordable housing it may be determined that changes to fiscal policy should be introduced following Barker to ensure that RSLs are able to better compete in the market for land and engage more meaningfully with house builders at the outset of a project or a series of projects in an area. In this model Section 75 arrangements would have a more general application.

However if it is decided that the planning system should play a leading role in ensuring the delivery of affordable housing then the Bill should incorporate provisions similar to those in the Irish model.

Establishing the relationships between the provision of affordable housing, development planning, housing policy and specific delivery commitments could offer the certainty to all parties, in particular the house builders and RSLs which the present haphazard approach lacks.

However, the challenge would be to reach a balance between the complexity of the prescription in the legislation and the time taken to negotiate agreements. Nevertheless

These issues should be considered further in any proposed amendment to SPP3 and the Scottish Executive should clarify the relationship between the planning system and the delivery of affordable housing in the new Planning Bill in the absence of any premptive Court judgement.

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